EXHIBIT 10.1
OPERATING AGREEMENT
OF
MONTAUK BATTERY REALTY, LLC
GLOSSARY OF TERMS
"AAA" shall have the meaning ascribed to it in Section 8.3(e).
"ACQUIRED ENTITY" shall have the meaning ascribed to it in
Section 8.3(h) hereof.
"AFFILIATE" shall have the meaning ascribed to it in Section
6.3(c) hereof.
"AGREED VALUE" shall have the meaning ascribed to it in Section
15.2 hereof.
"APPRAISED VALUE" shall have the meaning ascribed to it in
Section 8.3(e) hereof.
"APPROVALS" shall have the meaning ascribed to it in the
Recitals.
"B&H" shall have the meaning ascribed to it in the Recitals.
"BA" shall have the meaning ascribed to it in the Recitals.
"BANKRUPT MEMBER" shall have the meaning ascribed to it in
Section 15.4 hereof.
"BOARD" shall have the meaning ascribed to it in the Recitals.
"BODIES" shall have the meaning ascribed to it in Section 19.8
hereof.
"BUDGETS" shall have the meaning ascribed to it in Section
8.3(a) hereof.
"▇▇▇▇ III" shall have the meaning ascribed to it in the
Recitals.
"CAPITAL PERCENTAGE INTEREST" shall have the meaning ascribed
to it in Section 6.1 hereof.
"CERTIFICATE" shall have the meaning ascribed to it in Section
15.2 hereof.
"CHANGE IN CONTROL" shall have the meaning ascribed to it in
Section 13.1 hereof.
"CHIEF EXECUTIVE OFFICER" shall have the meaning ascribed to it
in the Recitals.
"CODE" shall have the meaning ascribed to it in Section 6.2
hereof.
"COMPANY" shall have the meaning ascribed to it in the
Recitals.
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"COMPANY VALUATION" shall have the meaning ascribed to it in
Section 15.2 hereof.
"CONVERSION RIGHT" shall have the meaning ascribed to it in
Section 14.6 hereof.
"COVENANT PERIOD" shall have the meaning ascribed to it in
Section 18 hereof.
"▇▇▇▇▇▇" shall have the meaning ascribed to it in the
Recitals.
"DECEASED SHAREHOLDER" shall have the meaning ascribed to it
in Section 15.1 hereof.
"DISPOSITION" shall have the meaning ascribed to it in Section
13.1 hereof.
"DIVISION" shall have the meaning ascribed to it in Section
8.2 hereof.
"DTHY" shall have the meaning ascribed to it in the preface.
"ERISA" shall have the meaning ascribed to it in Section 19.14
hereof.
"EXERCISE NOTICE" shall have the meaning ascribed to it in
Section 14.2 hereof.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to it
in Section 19.10 hereof.
"FRANCHISE NOTE" shall have the meaning ascribed to it in
Section 13.1 hereof.
"HAMPTONS" shall have the meaning ascribed to it in the
Recitals.
"▇▇▇▇▇▇" shall have the meaning ascribed to it in the Preface.
"▇▇▇▇▇▇ EMPLOYMENT AGREEMENT" shall have the meaning ascribed
to it in Section 8.2 hereof.
"▇▇▇▇▇▇ INSURANCE" shall have the meaning ascribed to it in
Section 11 hereof.
"JUSSAM" shall have the meaning ascribed to it in the
Recitals.
"▇▇▇▇▇▇" shall have the meaning ascribed to it in Section 8.1
hereof.
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"LIEN" shall have the meaning ascribed to it in Section 13.3
hereof.
"LLCL" shall have the meaning ascribed to it in the Recitals.
"LOAN AGREEMENT" shall have the meaning ascribed to it in
Section 6.3(e) hereof.
"▇▇▇▇▇▇" shall have the meaning ascribed to it in Section 8.1
hereof.
"MANAGER" shall have the meaning ascribed to it in the
Recitals.
"MATERIAL/SERVICE AGREEMENTS" shall have the meaning ascribed
to it in Section 19.17(a) hereof.
"MEMBER(S)" shall have the meaning ascribed to it in the
preface.
"MEMBER LOAN(S)" shall have the meaning ascribed to it in
Section 7.1 hereof.
"NAME CHANGE" shall have the meaning ascribed to it in Section
13.1 hereof.
"NEW VALLEY MORTGAGE" shall have the meaning ascribed to it in
the Preface.
"NEW VALLEY MORTGAGE UNRETURNED INITIAL CAPITAL CONTRIBUTIONS"
shall have the meaning ascribed to it in Section 6.4 hereof.
"NON-PURCHASING MEMBER" shall have the meaning ascribed to it
in Section 14.2 hereof.
"NOTICE OF INTENT TO SELL" shall have the meaning ascribed to
it in Section 14.1 hereof.
"NV" shall have the meaning ascribed to it in the preface.
"NV UNRETURNED INITIAL CAPITAL CONTRIBUTIONS" shall have the
meaning ascribed to it in Section 6.4 hereof.
"OFFERED INTEREST" shall have the meaning ascribed to it in
Section 14.1 hereof.
"OFFERED SHARES" shall have the meaning ascribed to it in
Section 14.1 hereof.
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"OFFEROR" shall have the meaning ascribed to it in Section
14.1 hereof.
"PARENT" shall have the meaning ascribed to it in Section 13.1
hereof.
"PARTNERSHIP" shall have the meaning ascribed to it in the
Recitals.
"PE" shall have the meaning ascribed to it in the Recitals.
"PERMITS" shall have the meaning ascribed to it in Section
19.8 hereof.
"PERSON" shall have the meaning ascribed to it in Section 13.4
hereof.
"PREA" shall have the meaning ascribed to it in Section 8.4(d)
hereof.
"PREFERRED" shall have the meaning ascribed to it in the
Recitals.
"PREFSA" shall have the meaning ascribed do it in the Preface.
"PREFSA RESTRICTED PERIOD" shall have the meaning ascribed to
it in Section 18 hereof.
"PREFSA UNRETURNED CAPITAL CONTRIBUTIONS" shall have the
meaning ascribed to it in Section 6.4 hereof.
"PROFITS OR LOSSES" shall have the meaning ascribed to it in
Section 6.2 hereof.
"PURCHASING MEMBER" shall have the meaning ascribed to it in
Section 14.6 hereof.
"RANGELEY" shall have the meaning ascribed to it in the
Recitals.
"REMAINING MEMBERS" shall have the meaning ascribed to it in
Section 14.1 hereof.
"RESERVES" shall have the meaning ascribed to it in Section
6.8 hereof.
"RESTRICTED INDIVIDUAL" shall have the meaning ascribed to it
in Section 18 hereof.
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"RESTRICTIVE PERIOD" shall have the meaning ascribed to it in
Section 18 hereof.
"SALE" shall have the meaning ascribed to it in Section 8.4(c)
hereof.
"SCHEDULED CONTRACTS" shall have the meaning ascribed to it in
Section 19.17(c).
"SECOND EXERCISE NOTICE" shall have the meaning ascribed to it
in Section 14.2 hereof.
"SELLING MEMBER" shall have the meaning ascribed to it in
Section 14.1 hereof.
"SELLING SHAREHOLDER" shall have the meaning ascribed to it in
Section 14.1 hereof.
"SHAREHOLDER(S)" shall have the meaning ascribed to it in
Section 13.1 hereof.
"SHARES" shall have the meaning ascribed to it in Section 13.1
hereof.
"TAX DISTRIBUTION" shall have the meaning ascribed to it in
Section 6.10 hereof.
"TAX MATTERS MEMBER" shall have the meaning ascribed to it in
Section 8.6 hereof.
"TERMINATING DIVISION" shall have the meaning ascribed to it
in Section 15.5 hereof.
"THIRD PARTY" shall have the meaning ascribed to it in Section
17.2 hereof.
"VALUATION DATE" shall have the meaning ascribed to it in
Section 15.2 hereof.
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OPERATING AGREEMENT OF
MONTAUK BATTERY REALTY, LLC
AGREEMENT, made as of the 17th day of December, 2002, among DTHY
REALTY, INC., a New York corporation ("DTHY"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), NEW
VALLEY REAL ESTATE CORPORATION, a Delaware corporation ("NV"), NEW VALLEY
MORTGAGE CORPORATION, a Delaware corporation ("New Valley Mortgage"), and THE
PRUDENTIAL REAL ESTATE FINANCIAL SERVICES OF AMERICA, INC., a California
corporation ("Prefsa") (DTHY, ▇▇▇▇▇▇, NV, New Valley Mortgage and Prefsa are
also each individually referred to herein as a "Member" and collectively as the
"Members"). W I T N E S S E T H:
WHEREAS, B&H Associates ("B&H" or the "Partnership") is a New York
partnership doing business as The Prudential Long Island Realty;
WHEREAS, the Partnership may have previously been, or may hereafter be,
converted to a New York limited liability company known as B&H Associates of NY,
LLC, which in accordance with Section 1007 of the New York Limited Liability
Company Law ("LLCL") is, in any event, the same entity that existed before the
conversion and all references herein to "B&H" or the "Partnership" shall be
deemed to apply to B&H Associates of NY, LLC;
WHEREAS, DTHY, NV, ▇▇▇▇ Affiliates, Inc., a New York corporation
("BA"), Rangeley Lakes Corp., a New York corporation ("Rangeley"), and Jussam
Associates, LLC, a New York limited liability company ("Jussam"), were the
former partners in B&H;
WHEREAS, B&H of the Hamptons, LLC ("Hamptons") is a New York limited
liability company;
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WHEREAS, DTHY, NV, BA, Rangeley and Jussam were the former members of
Hamptons;
WHEREAS, PE Title Agency, LLC ("PE") is a New York limited liability
company;
WHEREAS, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇ III ("▇▇▇▇ III") and ▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇") were the former members of PE;
WHEREAS, ▇▇▇▇ Enterprises, Ltd., a New York corporation d/b/a Preferred
Empire Mortgage Company ("Preferred"), is a New York corporation engaged in the
mortgage brokerage business;
WHEREAS, Herman, Cusano, ▇▇▇▇ III and New Valley Mortgage were the
shareholders of Preferred;
WHEREAS, simultaneous with the execution hereof, the Partnership is
redeeming the interests of BA, Rangeley and Jussam in the Partnership; Hamptons
is redeeming the interests of BA, Rangeley and Jussam in Hamptons; PE is
redeeming the interests of ▇▇▇▇ III and ▇▇▇▇▇▇ in PE; and Preferred is redeeming
the interest of ▇▇▇▇ III in Preferred;
WHEREAS, Preferred and ▇▇▇▇▇▇ are parties to an agreement pursuant to
which upon obtaining certain approvals from the New York State Banking
Department (the "Approvals") Preferred will redeem the interest of ▇▇▇▇▇▇ in
Preferred;
WHEREAS, simultaneous with the execution hereof, ▇▇▇▇▇▇ is selling her
entire interest in PE to NV;
WHEREAS, simultaneous with the execution hereof, DTHY is selling a
portion of its interest in B&H to NV;
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WHEREAS, simultaneous with the execution hereof, each of DTHY and NV
are transferring their respective interests in each of the Partnership, Hamptons
and PE to the Montauk Battery Realty, LLC (the "Company");
WHEREAS, simultaneous with the execution hereof, ▇▇▇▇▇▇ and New Valley
Mortgage are agreeing to convey their interests in Preferred to the Company upon
obtaining the Approvals;
WHEREAS, the Members desire to conduct business as members of a limited
liability company pursuant to the laws of the State of New York;
WHEREAS, the Members desire that the business and affairs of the
Company and the Divisions shall generally be managed by a Board of Managers (the
"Board") comprised of four (4) managers (each a "Manager" and, collectively, the
"Managers"), except with respect to certain decisions set forth herein which the
Board has determined shall be reserved to the Chief Executive Officer of the
Company (the "Chief Executive Officer"), all as hereinafter described;
WHEREAS, the Board desires that ▇▇▇▇▇▇ shall be the Chief Executive
Officer;
NOW THEREFORE, in consideration of the mutual covenants, conditions and
representations set forth herein, the parties hereto hereby agree as follows:
1. NAME. The name of the Company is Montauk Battery Realty, LLC. The
Company may also do business under any other assumed name as the Board may
select. The Members have caused, or will hereafter cause, to be filed with the
Department of State of the State of New York the Articles of Organization for
the Company and shall hereafter satisfy all other requirements of the LLCL to
conduct the business of the Company in the State of New York.
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2. OFFICE. The principal office of the Company is 110 ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place or places as the
Board shall hereafter designate.
3. BUSINESS. The business of the Company is to own all of the interests
in B&H, Hamptons and PE. It is also contemplated that (i) the Company will own a
majority interest in Preferred; (ii) B&H will operate a real estate brokerage
business in Queens; and (iii) a new entity will be formed by the Company which
will operate a real estate brokerage business in Brooklyn and Manhattan. The
Company may also own interests in other entities to be formed in the future. The
business of the Company shall also be to (i) enter, perform and carry out
contracts or take action of any kind necessary to, in connection with, or
incidental to the accomplishment of the foregoing, (ii) engage in any other
lawful act or activity as the Board, by unanimous vote of the Managers, shall
determine, and (iii) from time to time, to do any one or more of the things and
acts set forth herein and any lawful act or activity for which companies may be
formed under LLCL as the Board, by unanimous vote of the Managers, shall
determine.
4. TERM. The term of the Company commenced upon the filing of the
Articles of Organization and shall continue until terminated as hereinafter
provided.
5. CAPITAL CONTRIBUTIONS.
5.1 The capital contributions to the Company required of each of the
Members shall be as follows:
(a) Upon execution hereof (i) DTHY and NV shall each
contribute its respective interests in each of the Partnership and
Hamptons to the Company, and (ii) NV shall contribute its interest in
PE to the Company. Upon the receipt by Preferred of the Approvals,
▇▇▇▇▇▇ and New Valley Mortgage shall contribute their respective
interests in Preferred to the
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Company. It is agreed that for the purpose of establishing
capital account balances of the Members, the aggregate value of the
contributions being made by DTHY and ▇▇▇▇▇▇ pursuant to this Section
5.1(a) is $6,608,258 and that DTHY and ▇▇▇▇▇▇, collectively, shall
receive a 40.01% interest in the Company as a result of such
contribution. It is agreed that for the purpose of establishing capital
account balances of the Members, the aggregate value of the
contributions being made by NV and New Valley Mortgage pursuant to this
Section 5.1(a) is $7,158,258 and that NV and New Valley Mortgage,
collectively, shall receive a 43.34% interest in the Company as a
result of such contribution.
(b) Upon execution hereof, NV shall make a capital
contribution of One Million One Hundred Thousand ($1,100,000) Dollars
to the Company payable by bank check or wire transfer, in exchange for
which NV shall receive a 6.66% interest in the Company.
(c) Upon the execution hereof, Prefsa shall make a capital
contribution of One Million Six Hundred Fifty Thousand ($1,650,000)
Dollars to the Company payable by bank check or wire transfer, in
exchange for which Prefsa shall receive an 9.99% interest in the
Company.
(d) After giving effect to the foregoing, each of the Members
shall have an initial capital account in the Company as set forth on
Schedule 5.1(d) attached hereto and made a part hereof.
5.2 An individual capital account shall be maintained for each
Member in accordance with normal tax and accounting procedures.
5.3 Unless otherwise stated herein, no interest shall be paid
by the Company on the capital contributions of the Members and no
Member shall, except as otherwise provided herein, have the right to
withdraw from the Company, or demand a refund or return of, its capital
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contribution, or demand property other than cash.
5.4 The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of capital accounts are intended
to comply with Treasury Regulation Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulation. In
the event the accountants for the Company shall determine that it is
prudent to modify the manner in which the capital accounts, or any
debits or credits thereto, are computed in order to comply with such
Regulation, such modification may be made, provided that it is not
likely to have a material effect on the amounts distributable to any
Member pursuant to this Agreement. There shall be an adjustment to the
amounts debited or credited to capital accounts with respect to (a) any
property contributed to the Company or distributed to the Members and
(b) any liabilities that are secured by such contributed or distributed
property or that are assumed by the Company or the Members, in the
event the Board shall determine such adjustments are necessary or
appropriate pursuant to Treasury Regulation Section 1.704-1(b) (2)
(iv). The Board also shall make other adjustments in the event
unanticipated events might otherwise cause this Agreement not to comply
with Treasury Regulation Section 1.704-1(b).
5.5 No Member shall, at any time, have any obligation to the
Company or to any other Member to restore or contribute any deficit
balance in its capital account.
6. PROFITS AND LOSSES AND DISTRIBUTIONS.
6.1 The capital percentage interest of each Member (the
"Capital Percentage Interest") shall be as follows:
DTHY 31.94%
▇▇▇▇▇▇ 8.07%
NV 41.93%
New Valley Mortgage 8.07%
Prefsa 9.99%
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6.2 Profits or Losses of the Company shall be allocated to
each of the Members in proportion to their respective Capital
Percentage Interests. For purposes hereof, "Profits and Losses" are
defined to be, for each fiscal year or other period, an amount equal to
the Company's taxable income or loss for such year or period,
determined in accordance with Section 703(a) of the Internal Revenue
Code of 1986, as amended (the "Code") (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
(a) Any income of the Company that is exempt from
Federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition, shall
be subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is
recognized for Federal income tax purposes shall be computed
by reference to the gross asset value (its fair market value)
of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its gross asset value;
and
(d) Notwithstanding any other provision of this
definition, any items which are specially allocated to a
Member shall not be taken into account in computing Profits or
Losses.
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6.3 The Company shall collect its revenues and pay its normal
operating expenses (including, but not limited to, the debt service
payments, Tax Distributions (as such term is hereinafter defined) and
excess cash flow sweep to the extent the same is required to be paid to
Prefsa) as the same become due. Thereafter, all funds available for
distribution by the Company, whether resulting from cash flow generated
by operations, or from any other source (other than a sale of all or
substantially all of the assets of the Company) shall be paid or
distributed, at such times and in such amounts as determined in
accordance with Section 6.8, in the following order of priority:
(a) First, to pay any accrued and unpaid interest due
on any Member Loans;
(b) Then, in the event there remains outstanding any
Member Loans due to DTHY and/or ▇▇▇▇▇▇ as listed on Schedule
7.4 hereto, (i) to DTHY and/or ▇▇▇▇▇▇, as a principal payment
thereof, provided that (ii) to the extent NV or New Valley
Mortgage has Unreturned Initial Capital Contributions (as
hereinafter defined) there shall simultaneously be distributed
to NV and New Valley Mortgage, collectively, as a return of
capital, an amount equal to the amount paid to ▇▇▇▇▇▇ pursuant
to clause (i) of this Section 6.3(b) and (iii) to the extent
Prefsa has Unreturned Capital Contributions (as hereinafter
defined) there shall simultaneously be distributed to Prefsa,
as a return of capital, an amount which bears the same ratio
to the amount paid to NV and New Valley Mortgage,
collectively, pursuant to clause (ii) of this Section 6.3(b)
as the Capital Percentage Interest of Prefsa bears to the
aggregate Capital Percentage Interests of NV and New Valley
Mortgage;
(c) Then, in the event there remains outstanding any
other Member Loans, to the Members (or their Affiliates (as
such term is hereinafter defined)) to which
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Member Loans are outstanding in the relative proportion of the
outstanding principal amount of all such Member Loans (for the
purposes hereof, "Affiliate" means any Person (as such term is
hereinafter defined) directly or indirectly controlling or
controlled by, or under direct or indirect common control
with, another Person. A Person shall be deemed to control
another Person for the purposes of this definition if the
first Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies
of the second Person, whether through the ownership of voting
securities, common directors, trustees or officers, by
contract or otherwise);
(d) Then, to the Members in proportion to their
Capital Percentage Interests.
(e) Notwithstanding the foregoing, payments and
distributions under Section 6.3(b), (c) and (d) may be limited
to twenty percent (20%) of the Excess Cash Flow of the
Company, as such term is defined in that certain Loan and
Security Agreement between Prefsa and the Company and certain
other parties dated as of the date hereof (the "Loan
Agreement") to the extent required pursuant to the terms of
the Loan Agreement.
6.4 For the purposes of this Agreement, NV's Unreturned
Initial Capital Contributions are defined to be NV's aggregate
contributions to B&H as reflected in the books and records of B&H less
the aggregate of all distributions to NV from B&H or from the Company
pursuant to Section 6.3(b) hereof (either directly or as a result of
the application of Section 6.6(d)). For the purposes of this Agreement,
New Valley Mortgage's Unreturned Initial Capital Contributions are
defined to be New Valley Mortgage's aggregate contributions to
Preferred as reflected in the books and records of Preferred less the
aggregate of all distributions to New Valley Mortgage from Preferred or
from the Company pursuant to Section 6.3(b) hereof
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(either directly or as a result of the application of Section
6.6(d)). For the purposes of this Agreement, Prefsa's Unreturned
Capital Contributions are defined to be the amount of Prefsa's
contributions made to the Company pursuant to Section 5.1(b) hereof
less the aggregate of all distributions to Prefsa from the Company,
pursuant to Section 6.3(b) hereof (either directly or as a result of
the application of Section 6.6(d)). Schedule 6.4 sets forth the amount
of NV's Unreturned Initial Capital Contributions, New Valley Mortgage's
Unreturned Initial Capital Contributions and the amount of any Member
Loans due DTHY and/or ▇▇▇▇▇▇ as of the execution and delivery hereof
after giving effect to any loan payments and distributions made
immediately prior thereto.
6.5 To the extent that amounts that are payable or
distributable under Section 6.3(a) or Section 6.6(c) of this Agreement
to Members (or their Affiliates) to pay interest due under Member Loans
are insufficient to pay all of the outstanding interest then due under
all Member Loans, the total amount being paid or distributed shall be
allocated among all Members (or their Affiliates) to which interest on
Member Loans is due in the proportion that the interest due each Member
(or its Affiliate) bears to the total amount of interest due all
Members (or their Affiliates) on Member Loans. To the extent that
amounts that are payable or distributable under Section 6.3(c) or
Section 6.6(e) of this Agreement to Members (or their Affiliates) to
pay principal due under Member Loans are insufficient to pay all of the
outstanding principal of all Member Loans, the total amount being paid
or distributed shall be allocated among all Members (or their
Affiliates) to which Member Loans are due in the proportion that the
principal amount due to each Member (or its Affiliates) for its Members
Loans bears to the total principal amount due all Members (or their
Affiliates) for all Member Loans.
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6.6 Notwithstanding Section 6.3, the net cash proceeds from
the sale of all or substantially all of the assets of the Company or
from the liquidation of the Company following, or in connection with, a
dissolution of the Company which is not reinvested or retained by the
Company for the continuation of the business thereof, shall be paid or
distributed in the following order or priority:
(a) First, to pay any debts or liabilities of the
Company other than any indebtedness due in connection with
Member Loans;
(b) Then, to establish any reserves which the Board
deems reasonably necessary to provide for any contingent or
unforeseen liabilities or obligations of the Company, provided
however, that at the expiration of such period of time as the
Board may deem advisable, the balance of such reserve
remaining after the payment of such contingencies shall be
distributed in the manner hereinafter in this Section 6.6 set
forth;
(c) Then, to pay any accrued and unpaid interest due
on any Member Loans;
(d) Then, as set forth in Section 6.3(b); and
(e) Then, as set forth in Section 6.3(c);
(f) Then, to the Members, in an amount equal to the
aggregate positive capital account balances, in proportion to
their positive capital account balances after taking into
account income and loss allocations for the Company's taxable
year during which dissolution occurs; and
(g) Then, to the Members in proportion to their
Capital Percentage Interests.
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6.7 In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account
of any variation between the adjusted basis of such property to the
Company for Federal income tax purposes and its initial gross asset
value (computed in accordance with the terms set forth herein).
In the event the gross asset value of any Company asset is
adjusted in accordance with the terms set forth herein, subsequent
allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of
such asset for Federal income tax purposes and its gross asset value in
the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.
Any elections or other decisions relating to such allocations
shall be made by the Board in any manner that reasonably reflects the
purpose and intention of this Agreement.
6.8 Unless otherwise determined by the Board, by a unanimous
vote of the Managers, and subject to (i) any restrictions imposed by
the Company's institutional lenders and (ii) the maintenance by the
Company of such working capital reserves (the "Reserves") as shall be
reasonably required for the operations of the Company as reasonably
determined by the Board, by the vote of a majority of the Managers, the
Company shall make distributions pursuant to Section 6.3 of the cash
flow generated by operations, or from any other source (other than a
sale of all or substantially all of the assets of the Company) for each
year. Subject to clause (i) above, to the extent that the amount of
such cash flow for any year, less the Reserves, has not been
distributed to the Members pursuant to Section 6.3 (whether in the form
of periodic distributions or the Tax Distribution), the Company shall
make a distribution on June 1 of each
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year, to the extent of the then available cash on hand, equal
to the previously undistributed cash flow for the prior year.
6.9 The Members incorporate by reference a "qualified income
offset" provision as described in Section 1.704-1(b)(ii)(d) of the
Treasury Regulations and the "minimum gain chargeback" requirement of
Section 1.704-2(f) and Section 1.704-2(i)(4) of the Treasury
Regulations.
6.10 For any year that the Company has taxable income, to the
extent of available cash on hand on or about March 31 of the subsequent
year, the Company shall make distributions to the Members, if and to
the extent necessary, so that the aggregate of all distributions (other
than Member Loan payments and distributions under Section 6.3(b)) for
the most recent year then ended is an amount equal to the tax liability
of the Members arising from the taxable income of the Company for such
year assuming for this purpose that each Member was paying the maximum
federal and New York State individual tax rates in effect for such year
for married individuals (the "Tax Distribution"). For purposes of this
provision, unless otherwise agreed, all distributions (other than
Member Loan payments and distributions under Section 6.3(b)) made on or
before April 15 of any year shall be deemed to relate to the prior
year, and all distributions (other than Member Loan payments and
distributions under Section 6.3(b)) made after April 15 of any year
shall be deemed to be made for the year in which made. Notwithstanding
the foregoing, no Member shall be entitled to a Tax Distribution until
such Member has been allocated Profits for any tax year in the
aggregate since the inception of the Company to offset the amount of
any Losses taken by any Member for any previous tax years in the
aggregate since the inception of the Company.
13
7. ADDITIONAL CAPITAL AND MEMBER LOANS.
7.1 In the event the Board, by a unanimous vote of the
Managers, determines that the Company needs additional capital, other
than what is available from outside lenders, it may authorize the
making of one or more loans by Members (or their Affiliates) to the
Company (each a "Member Loan" and collectively the "Member Loans"). The
terms "Member Loan" and "Member Loans" shall also include the loans
described in Section 7.2 and Section 7.4. The Member Loans made under
this Section 7.1 shall be made in such amounts and in such proportions
as the Board, by a unanimous vote of the Managers, shall determine,
provided that (a) no Member shall at any time be required to make a
Member Loan and (b) each Member that desires to participate in a Member
Loan shall in each instance be entitled to participate, in the minimum,
to the extent of its Capital Percentage Interest of each Member Loan.
7.2 Notwithstanding Section 7.1, any Member that in good faith
believes the Company is in need of additional capital for valid
business purposes may, without the approval of the Board, make a Member
Loan to the Company in an amount not in excess of $250,000 provided
that no Member may make such a unilateral Member Loan to the Company
more than twice in any calendar year.
7.3 All Member Loans shall bear interest at one and one-half
(1 1/2%) percent above the prime rate as published in the Wall Street
Journal, as adjusted from time to time, and shall be repaid to the
Members in accordance with Sections 6.3, 6.5 and/or 6.6.
7.4 It is agreed that certain loans to the Partnership
previously made by DTHY and/or ▇▇▇▇▇▇ shall for all purposes be treated
as Member Loans to the Company and the Company hereby assumes the
obligation to repay such Member Loans in accordance with the terms
hereof. Such Member Loans, the date of the making of such Member Loans
and the
14
outstanding principal amount and the accrued interest due
thereunder are identified on Schedule 7.4 attached hereto and made a
part hereof. Such Member Loans are the Member Loans referred to in
Section 6.3(b). The accrued and unpaid interest due as of the date
hereof with respect to such Member Loans shall be deemed added to the
principal and shall hereafter bear interest and be repaid as set forth
in Section 7.3. Any prior oral or written agreement to the contrary
concerning such Member Loans shall be deemed amended by the terms
hereof.
8. MANAGEMENT OF BUSINESS.
8.1 Except as otherwise set forth in this Agreement, the
Company shall generally be managed by the Board. The Board shall be
comprised of four Managers. ▇▇▇▇▇▇ and DTHY, collectively, shall have
the right to designate one Manager, NV and New Valley Mortgage,
collectively, shall have the right to designate two Managers and Prefsa
shall have the right to designate one Manager. Each of the Members
hereby makes the following initial designation of its Manager(s) to
serve on the Board:
DTHY and ▇▇▇▇▇▇ - ▇▇▇▇▇▇
NV and New Valley Mortgage - ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
Prefsa - ▇▇▇▇▇ Ghoroghchi
The designated Manager of each of the Members may be changed
by such Member upon the approval of all of the Managers, provided that
such approval shall not be unreasonably withheld or delayed. Each of
the Members hereby agrees that ▇▇▇▇▇▇ ▇▇▇▇▇ is approved as a
replacement Manager designation for ▇▇▇▇▇ Ghoroghchi so long as, to the
extent required, he obtains any requisite approvals of the New York
State Banking Department. No Member shall have the right to change the
Manager designation of any other Member. Each Manager shall hold his or
her office until the earlier of his or her resignation, death,
permanent disability,
15
change by the Member who has the right to designate such Manager or
removal by a unanimous vote of the Managers (excluding the Manager who
is the subject of such vote), provided that the Managers shall only be
permitted to vote to remove a Manager if such Manager in question has
committed theft, gross negligence or fraud with respect to the
operation of the Company. In the event any Manager shall cease to be a
Manager in accordance with the previous sentence, a successor Manager
shall be promptly designated by the Member whose interest was
represented by such affected Manager. Further, it is hereby expressly
acknowledged and agreed that, except for any transferees of the
interests of the original Members of the Company (▇▇▇▇▇▇, DTHY, NV, New
Valley Mortgage and Prefsa) approved in accordance with the terms
hereof, no new member of the Company shall have the right to designate
a Manager to serve on the Board.
8.2 The Board has determined that ▇▇▇▇▇▇ shall be the Chief
Executive Officer of the Company and each of the Divisions (as defined
below). Subject to the employment agreement between ▇▇▇▇▇▇ and the
Company, dated as of the date hereof (the "▇▇▇▇▇▇ Employment
Agreement"), the balance of this Article 8 and except as otherwise
provided herein, the full and exclusive right, power and authority to
make day-to-day and operating decisions and manage the day-to-day and
general operations and affairs of the Company and all of the operating
divisions of the Company, including B&H, Hamptons, the real estate
operations intended to be known as Prudential Manhattan Realty,
Preferred, PE and any other division hereafter established
(collectively the "Divisions") with all the rights and powers generally
conferred by law, or necessary, advisable or consistent in connection
therewith shall be vested in the Chief Executive Officer. The Chief
Executive Officer may cause the Company and/or the Divisions to retain
agents, contractors and employees to assist her. Further, nothing
contained herein shall prohibit the Company from lending money to or
receiving money or other
16
distributions from the Divisions or subsidiaries of the Company, and
any decision to do any of the foregoing shall be made exclusively by
the Chief Executive Officer without the approval of the Board. In all
respects the Chief Executive Officer shall use her best efforts to
follow the Budgets (as hereinafter defined) approved by the Board as
hereinafter provided. The Chief Executive Officer shall not be
permitted to authorize any expenditure resulting in a deviation from
said Budgets of more than 10% with respect to any one line item therein
without the approval of the Board, by a vote of a majority of the
Managers; however, notwithstanding the foregoing, or Section 8.3(b),
the Chief Executive Officer shall be permitted to reallocate related
Budget items without the approval of a majority of the Managers of the
Board.
8.3 Subject to Section 8.4, any decisions otherwise reserved
in this Agreement to the Board shall be made by the vote of a majority
of the Managers, unless otherwise expressly provided herein.
Additionally, the Board, by a vote of a majority of the Managers, shall
be required to:
(a) approve the operating budget and any amendments
thereto (collectively, the "Budgets") for the Company and/or
each Division for each fiscal year;
(b) approve any expenditures resulting in a deviation
from any of the Budgets of more than 10% with respect to any
line item therein;
(c) hire, fire or retain the Chief Executive Officer
or otherwise take action with respect to any employment
agreement of the Chief Executive Officer;
(d) issue certain membership interests in the Company
or a Division in accordance with Sections 17.1 and 17.2;
(e) approve and enter into a transaction to sell a
Division, or all or substantially all of the assets of a
Division, to a Member or an Affiliate of a Member so long as
17
the purchase price therefor is within 10% of the "Appraised
Value." If all of the Managers approve a proposed sale at a
stated price, then no appraisal shall be necessary. If,
however, a majority (but not all) of the Managers approve a
proposed sale, then the Appraised Value shall be determined by
having three business appraisals prepared, one by the minority
Manager not approving such sale, one by the majority Managers
approving the sale and a third by an independent appraiser
approved by each side, or if none, appointed by the American
Arbitration Association in New York, New York (the "AAA"). The
average of the two appraisals that are closest in value to one
another shall be the Appraised Value;
(f) approve the acquisition of another entity
("Acquired Entity"), except if the purchase price for such
Acquired Entity is less than $500,000, in which event, the
Chief Executive Officer may make this decision without the
need for Board approval; and
(g) determine the amount of bonus compensation and/or
bonus pools for employees of the Company and/or the Divisions;
provided, however, that no Manager shall be entitled to vote
on any such bonus compensation for such Manager or for the
Member whose interest he or she represents, or for an
Affiliate or family member of such Manager or Member;
provided, further, the foregoing clause shall not be construed
to prevent any Manager from voting on an entire bonus pool in
which such Manager or the Member whose interest he or she
represents or an Affiliate or family member of such Manager or
the Member participates.
8.4 Notwithstanding Sections 8.2 and 8.3, the
following decisions and actions shall require the approval of
the Board, by unanimous vote of the Managers:
(a) unless done in accordance with Section 8.3(e),
the decision to sell a Division, or substantially all of the
assets of a Division;
18
(b) to approve the liquidation and/or dissolution of
the Company in accordance with Section 12;
(c) to approve the sale, exchange, lease, refinance
or other transfer (each a "Sale") of all, or substantially
all, of the assets of the Company, provided that with respect
to an arms' length sale to an unaffiliated third party only,
if all of the other Managers on the Board vote in favor of
such sale, but the Manager on the Board representing Prefsa's
interest in the Company votes against such Sale, the Company
shall have the option of proceeding with the Sale and
acquiring Prefsa's entire interest in the Company (the
exercise of such option to be determined by the Board, by
unanimous vote of the Managers excluding the Manager
representing Prefsa's interest in the Company) at the price
offered to the Company pursuant to the Sale offer multiplied
by Prefsa's Capital Percentage Interest with such purchase
price being payable in accordance with the same payment terms
offered pursuant to the Sale offer;
(d) prior to the expiration of any Division's then
current franchise term (1) to approve the termination by such
Division as a Prudential Real Estate Affiliates, Inc. ("PREA")
franchisee or (2) to approve the decision to become a
franchisee of any other real estate brokerage firm or
association other than PREA; provided that if the termination
is permitted by the terms of the franchise agreement with
PREA, the approval of decisions provided by clause (1) and/or
(2) above may be made by a vote of a majority of the Board;
(e) to approve the release of any officer or director
(or former officer or director) of the Company or any of its
subsidiaries (or any of their predecessors in interest) from
any non-competition obligations;
(f) to approve and enter into transactions with
Members, Restricted Individuals or their Affiliates or family
members, subject to Section 8.3(e) hereof;
19
(g) to compromise any liability for capital
contributions or distributions;
(h) to make any modifications to the capital accounts
of any Members not otherwise provided by this Agreement;
(i) to elect not to follow generally accepted
accounting principles with respect to the accounting of the
Company and its Divisions or subsidiaries;
(j) to elect not to conduct an annual audit of the
Company's financial statements on a consolidated basis;
(k) to purchase any real property (provided that if
the Manager representing Prefsa's interest in the Company
votes against any purchase of any such real property, then
▇▇▇▇▇▇ and/or NV shall be entitled to purchase such property
individually or through their Affiliates and, if appropriate,
lease such property to the Company or a Division on an arm's
length basis);
(l) to make an assignment for the benefit of the
creditors of the Company or to file a voluntary bankruptcy
petition;
(m) to commit any act which makes it impossible to
carry on the business of the Company;
(n) to issue additional membership interests in the
Company or any Division not otherwise contemplated by the
terms of this Agreement;
(o) to establish a new Division; and
(p) to approve the incurrence of indebtedness by the
Company or a Division or subsidiary other than in the ordinary
course of its business consistent with normal business
practices.
20
8.5 Reference herein to a "vote" of the Board or any similar
expression shall not be deemed to require an actual meeting where the
Managers are in the same room and all such votes may be accomplished
through written agreement or through telephonic or "on-line" meetings
of the Board. In no event shall a Manager be entitled to grant any
proxy in respect of his or her voting rights hereunder. Unless
otherwise agreed upon by the Board, by unanimous vote of all Managers,
at least one meeting of the Board shall be held during each quarter
during every year of the existence of the Company. Any Manager may call
a meeting of the Board by providing the Company and each other Manager
with no less than five business days notice of such meeting, and such
notice of meeting shall state the time, place and purpose of such
meeting. For the purposes of determining whether there is a majority of
the Managers under any provision of this Agreement that so requires, a
majority of the Managers shall at all times be three of the four
Managers provided for herein, except that in the event that the NV and
New Valley Mortgage designated Managers are precluded from voting on
bonus matters pursuant to Section 8.3(g)(1) hereof, then a majority of
the Managers shall require the vote or approval of both of the other
Managers.
8.6 Notwithstanding anything contained herein to the contrary,
▇▇▇▇▇▇ is hereby authorized to act as the "Tax Matters Member" of the
Company as that term is defined in Section 6231(a)(7) of the Code and
in such regulations as may be promulgated pursuant thereto, and to take
such action and exercise such rights, powers and duties as "Tax Matters
Member" of the Company as contemplated by the Code (all at the cost and
expense of the Company), including, without limitation, keeping all
Members informed of, and forwarding copies of, notices with respect to
all administrative and judicial proceedings for the adjustment at the
Company level of Company items; consenting to extensions relating to
the tax returns filed for
21
the Company; participating in administrative and judicial
proceedings, including appeals, relating to the Company's tax returns
or its tax liabilities; and entering into settlement agreements with
respect to tax proceedings involving the Company's tax returns which
will bind those Members who are parties to this Agreement. The Tax
Matters Member shall not be allowed to change any tax elections if any
such desired new tax election would be detrimental to the interests of
any of the then current Members; if any such proposed new tax election
would be detrimental to the interests of the then current Members of
the Company, the Board shall approve such new tax elections, provided
that no such election shall be made which could have an adverse effect
upon any Member without such adversely affected Member's consent. The
Board, by unanimous vote, may change the Tax Matters Member.
9. BOOKS AND RECORDS.
9.1 The fiscal year of the Company shall end on December 31.
9.2 Proper accounting records of all Company business shall be
kept and open to inspection of any of the Members, or their designee or
legal representative, at all reasonable times. The Company shall
maintain its accounting records and shall report for income tax
purposes on the accrual basis of accounting. The Company shall use its
best efforts to furnish each Member with a complete accounting of the
affairs of the Company together with such appropriate information as
may be required by each Member for the purpose of preparing its income
tax return, within 90 days after the end of each year. All matters of
accounting for which there is no provision in this Agreement are to be
governed by generally accepted accounting principles applied on a
consistent basis. The Company shall cause to have its financial
statements, on a consolidated basis, audited by an independent
accounting firm on an annual
22
basis. The unanimous vote of the Managers shall be required to
change or select the Company's independent accounting firm.
9.3 The books and records of the Company shall be kept at the
principal place of business of the Company, or in such other place as
may be agreed upon by the Board.
10. BANKING. All funds of the Company shall be deposited in
its name in such bank account or accounts as shall be designated by the
Company. All withdrawals therefrom are to be made on checks or other
authorized forms of withdrawal signed or authorized by the Chief
Executive Officer and/or such individual(s) as are approved by the
Board, by a vote of a majority of the Managers.
11. INSURANCE. Except as provided for below, the Company, in
its discretion, may obtain, at the cost and expense of the Company,
key-man life insurance with respect to the Chief Executive Officer,
Managers and/or the principals of any Member naming the Company as
beneficiary of the policies. All Members agree, to the extent
necessary, to cause their principals to cooperate in the obtaining of
any such life insurance. In addition to the foregoing, with respect to
DTHY and ▇▇▇▇▇▇ only, promptly following the date hereof, the Company
will obtain and maintain, at the cost and expense of the Company, life
insurance in the minimum amount of Twelve Million Dollars ($12,000,000)
on the life of ▇▇▇▇▇▇, naming such person(s) as ▇▇▇▇▇▇ shall designate
as the beneficiary of such policies ("▇▇▇▇▇▇ Insurance"). The ▇▇▇▇▇▇
Insurance shall be increased from time to time so that the amount
thereof is not less than the Agreed Value of ▇▇▇▇▇▇'▇ and DTHY's
interests in the Company or if there is no Agreed Value, the
approximate value of such interests in the Company as determined by the
Board, by vote of all of the Managers (excluding the Manager
representing the interests of ▇▇▇▇▇▇ and DTHY) and shall be utilized
for the purposes described in Section 15.3.
23
12. VOLUNTARY TERMINATION.
12.1 The Company may be dissolved and terminated at any time
upon the decision to do so by the Board, in which event the Board shall
proceed with reasonable promptness to liquidate the business of the
Company. The proceeds of such liquidation shall be applied and
distributed in the order of priority set forth in Section 6.6.
12.2 In liquidating the assets of the Company, if a decision
is made to sell Company assets, then such assets shall be sold at such
price and on such terms as the Board shall in good faith determine are
fair and equitable. Any Member, or any Company, corporation, limited
liability company, or other entity in which they, or any of them, are
in any way interested, may purchase such assets at such sale.
Alternatively, the Board may determine not to sell the tangible assets
of the Company but may distribute all or any part of them in kind to
the Members upon liquidation.
12.3 A reasonable amount of time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to permit the sale of Company property
on favorable prices or terms.
12.4 No Member shall have the right or power to demand
property other than cash from the Company.
13. RESTRICTIONS UPON DISPOSITIONS OF, AND LIENS AGAINST,
INTERESTS IN THE COMPANY AND SHARES.
13.1 No Member nor any shareholder of any Member (shareholders
of any Member are collectively referred to as "Shareholders" and are
each individually a "Shareholder") shall, for value or otherwise, make
a sale, assignment, transfer or other disposition (collectively, the
"Disposition") of (i) all or any part of any membership interest in
24
the Company, except that, subject to the remainder of this
Article 13, Prefsa can transfer its membership interest in the Company
to a Prefsa Affiliate in connection with any merger, consolidation,
business combination, restructuring or other reorganization affecting
Prefsa, or (ii) the shares of a Member (shares of any Member are
collectively referred to as "Shares" and are each individually a
"Share") or of any beneficial interest therein, now or hereafter owned
by such Shareholder, except as permitted by and in accordance with the
provisions of Articles 14, 15 or 16 of this Agreement or with the
approval of the Board, by vote of all of the Managers (excluding the
Manager representing such affected membership interest in the Company),
in each case, upon receipt, if necessary, of the requisite New York
State Banking Department approval. Provided that, (x) clause (i) above
shall not be applicable to a Disposition of the membership interests in
the Company from NV to New Valley Mortgage or from either NV or New
Valley Mortgage to another direct or indirect wholly-owned subsidiary
of New Valley Corporation and (y) clause (ii) above shall not be
applicable to the Shareholders or the Shares of NV, New Valley Mortgage
or Prefsa so long as, in the case of any events under clause (x) or
(y), such Disposition does not result in a violation of any federal or
state law, including any regulations promulgated by the New York State
Banking Department, or otherwise cause the Company or any Division to
be in violation of any license it holds, and any such Disposition is
done in compliance with the franchise agreement to which the Company or
any Division is a party. Notwithstanding the foregoing, in the event
that (i) PREA franchises are no longer being issued under the name
"Prudential" (a "Name Change") or (ii) there is a Change in Control (as
such term is hereinafter defined) of Prefsa, PREA or any entity that
through the chain of title, directly or indirectly, controls Prefsa or
PREA (a "Parent"), the Company shall have the option to purchase the
interest of Prefsa in the Company at the then current Agreed Value of
the Prefsa interest pursuant to the terms of Section 15.6 hereof;
provided that, in the event the Company elects to exercise such option
to purchase, the Company shall concurrently with the closing of
25
such purchase, pay, or cause to be paid, in full all indebtedness owing
to Prefsa (but not that certain promissory note made payable by the
Company to PREA in the original principal amount of $3,300,000 (the
"Franchise Note")) pursuant to the Loan Agreement. For the purposes
hereof, a "Change in Control" shall mean:
(1) The transfer, through one transaction or a series of
related transactions, either directly or indirectly, or through one or
more intermediaries, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of
25% or more of either the then outstanding shares of common stock or
the combined voting power of the then outstanding voting securities of
Prefsa, PREA or a Parent entitled to vote generally in the election of
directors, or the last of any series of transfers that results in the
transfer of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934) of 25% or more
of either the then outstanding shares of common stock or the combined
voting power of the then outstanding voting securities of Prefsa, PREA
or a Parent entitled to vote generally in the election of directors,
except that any such transfer may be made to any Affiliate of Prefsa or
PREA without such transfer being considered a Change in Control;
(2) Approval by the shareholders of Prefsa, PREA or a Parent
of a merger or consolidation, with respect to which persons who were
the shareholders of Prefsa, PREA or a Parent immediately prior to such
merger or consolidation do not, immediately thereafter, own more than
25% of the combined voting power entitled to vote generally in the
election of directors of the merged or consolidated company's then
outstanding voting securities, except if Prefsa, PREA or a Parent is
merged or consolidated with an existing Affiliate of Prefsa, PREA or
such Parent, or there is a liquidation or dissolution of Prefsa or PREA
where the assets of Prefsa or PREA are distributed to an existing
Parent or the sale of all or substantially all of the assets of Prefsa
or PREA to an existing Affiliate of Prefsa or PREA;
26
(3) The transfer, through one transaction or a series of
related transactions, of more than 50% of the assets of Prefsa, PREA or
a Parent, or the last of any series of transfers that results in the
transfer of more than 50% of the assets of Prefsa, PREA or a Parent,
except for any transfer to an Affiliate of Prefsa or PREA, which shall
not be considered a Change in Control. For purposes of this paragraph,
the determination of what constitutes more than 50% of the assets of
Prefsa, PREA or a Parent shall be determined based on the most recent
financial statement prepared by Prefsa's, PREA's (or such entity's
applicable Parent's) independent accountants; or
(4) During any calendar year, individuals who at the beginning
of such year constituted the board of directors of Prefsa or PREA and
any new director or directors whose election by the board of directors
was approved by a vote of a majority of the directors then still in
office who either were directors at the beginning of the year or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof provided.
13.2 The Company shall not recognize as valid or give effect
to any Disposition of any interests in the Company or any Shares, or
any interest therein, upon the books of the Company unless and until
the Member or Shareholder desiring to make such Disposition shall have
complied with each of the provisions of this Agreement.
13.3 No Member or Shareholder shall create any mortgage, lien,
pledge, security interest, charge, claim, restriction (other than
restrictions on Disposition pursuant to applicable federal and state
securities laws or as provided for in this Agreement), subscription,
option, warrant, right, call, commitment, hypothecation and encumbrance
of any nature whatsoever (collectively, the "Lien") on or with respect
to any interest in the Company or Shares
27
now or hereafter held by such Member or Shareholder, except
with the approval of the Board. This provision shall not apply to
restrict or prevent a Shareholder of NV, New Valley Mortgage or Prefsa
from creating or imposing a Lien against the Shares of NV, New Valley
Mortgage or Prefsa, respectively.
13.4 It shall be a condition precedent to any Disposition
permitted by Article 13 or Article 16 hereof that each third party
individual or entity (the "Person") shall execute and deliver to each
Member a legally enforceable agreement expressly assuming all of the
terms, conditions and covenants of this Agreement as they relate to the
transferor, and such other documents as the Company may reasonably
require, whereupon the Person shall have all of the rights and
obligations of the transferor hereunder.
14. DISPOSITION OF SHARES SUBSEQUENT TO BONA FIDE OFFER.
14.1 Except as otherwise provided in Sections 13.1 and 14.6
and Article 15 hereof, if, at any time, a Member (the "Selling Member")
or any Shareholder (or a Shareholder of a company that owns an
interest, directly or indirectly, in a Member) (the "Selling
Shareholder") desires to make a Disposition of all, or any part, of
its, his or her interest (including any beneficial interests) in the
Company (the "Offered Interest") or Shares (the "Offered Shares"), now
or hereafter owned by it, him or her, to any third party individual or
entity person (the "Offeror") pursuant to a BONA FIDE offer, it, he or
she shall give written notice of its or his intention to do so (the
"Notice of Intent to Sell") to the Company and the other Members (the
"Remaining Members") (which in turn shall give such notice and any
other notices provided for under this Agreement to their respective
Shareholders) which notice shall specify the name of the Offeror, the
Capital Percentage Interest in the Company comprising the Offered
Interest or the number of Offered Shares which the Selling Shareholder
proposes to sell,
28
the price for the Offered Interest or for the Offered Shares,
and all other material terms and conditions of the proposed
transaction. The Remaining Members and the Company shall then have the
option to purchase all, but not less than all, of the Offered Interest
or the Offered Shares, as applicable, on the same terms as are
contained in the BONA FIDE offer in accordance with Sections 14.2 and
14.3 below. This Article 14 shall not apply to any disposition of
Shares by any Shareholder of NV, New Valley Mortgage or Prefsa.
14.2 Subject to the provisions of Section 14.5 hereof, each
Remaining Member, upon written notice given to each of the Selling
Member or Selling Shareholder, as applicable, the other Remaining
Members and the Company (an "Exercise Notice") within thirty (30) days
after receipt by the Remaining Members of the Notice of Intent to Sell,
shall be entitled to purchase, on a PRO RATA basis, all or any portion
of the Offered Interest or Offered Shares. In the event, however, that
any Remaining Member shall elect not to acquire all or any part of its
PRO RATA portion of the Offered Interest or Offered Shares or fails to
give timely the requisite notice set forth herein (the "Non-Purchasing
Member"), then, subject to the provisions of Section 14.5 hereof, the
other Remaining Members shall have the right to purchase, on a PRO RATA
basis among all such other Remaining Members, all or any part of that
portion of the Offered Interest or Offered Shares allocated to the
Non-Purchasing Member which the Non-Purchasing Member elected not to
acquire, which right shall be exercised by a Remaining Member's
indication of its desire to do so in a second written notice (the
"Second Exercise Notice") given to each of the Selling Member or the
Selling Shareholder, as applicable, the other Remaining Members and the
Company within 45 days after receipt of the Notice of Intent to Sell.
Such Second Exercise Notice shall specify the Remaining Member=s desire
to purchase up to a specified amount of the Offered Interest or number
of additional Offered Shares. Any Remaining Member who so
29
indicates such desire in the Second Exercise Notice shall be
entitled to purchase such additional Offered Interest or Offered
Shares, subject to the provisions of Section 14.5 hereof and any PRO
RATA rights of other Remaining Members.
14.3 The Company shall be entitled to purchase all, but not
less than all, of the Offered Interest or Offered Shares, if any, not
purchased by the Remaining Members pursuant to Section 14.2 above, upon
written notice, given no later than sixty (60) days following its
receipt of the Notice of Intent to Sell, to the Selling Member or
Selling Shareholder and each of the Remaining Members who timely
executed and delivered an Exercise Notice. The decision of the Company
to purchase any of the Offered Shares as provided for in this Section
14.3 shall be made by the Board, by unanimous vote of all the Managers,
excluding the Manager representing the interest of the Selling Member.
14.4 The closing for any purchase and sale of the Offered
Interest or Offered Shares shall take place within seventy-five (75)
days following receipt by the Remaining Members and the Company of the
Notice of Intent to Sell.
14.5 Notwithstanding the foregoing, if the Remaining Members
and the Company shall not have elected to purchase, in the aggregate,
all of the Offered Interest and Offered Shares in accordance with
Sections 14.2 or 14.3 above, then the Selling Member or Selling
Shareholder shall thereupon be free to dispose of all, but not less
than all, of the Offered Interest or Offered Shares to the Offeror in
accordance with the terms of the BONA FIDE offer, provided that the
Offeror, as a condition precedent to the purchase of such Offered
Interest or Offered Shares, executes and delivers to the Company and
each Member a legally enforceable agreement expressly assuming all of
the terms, conditions and covenants of this Agreement, and such other
documentation as the Company may reasonably require, whereupon the
Offeror shall
30
have all of the rights and obligations of the Selling Member
or the Selling Shareholder with respect to the Offered Interest or
Offered Shares. If all of the Offered Interest or Offered Shares are
not disposed of in accordance with the terms of the BONA FIDE offer to
the Offeror within a period of one hundred twenty (120) days after the
Selling Member or Selling Shareholder gives the Notice of Intent to
Sell, then the Offered Interest or Offered Shares may not thereafter be
sold without compliance again with the provisions of this Article 14.
14.6 Immediately upon purchasing Offered Shares, the Member
which purchased such shares (the "Purchasing Member") and/or the
Company (if it purchased Offered Shares) shall be entitled to convert
the Offered Shares into an interest in the Company (the "Conversion
Right"). If the Purchasing Member or the Company exercises such
Conversion Right, the Member whose shares are the Offered Shares shall
immediately redeem that number of Offered Shares of the electing
Purchasing Member or the Company in exchange for an interest of such
Member in the Company. The interest in the Company to be assigned by
such Member to the Purchasing Member shall be the product of: (i) a
ratio the numerator of which is the number of Offered Shares purchased
by the Purchasing Member or the Company and the denominator of which is
the total number of Shares that are issued and outstanding as of the
date of the Notice of Intent to Sell of the Member whose shares are the
Offered Shares, multiplied by (ii) the Capital Percentage Interest as
of the date of the Notice of Intent to Sell of the Member whose Shares
are the Offered Shares. Upon a Purchasing Member's conversion of an
interest in a Member to an interest in the Company, the Capital
Percentage Interest of the Member whose shares are the Offered Shares
shall be decreased and the Capital Percentage Interest of the
Purchasing Member increased by the amount calculated in accordance with
the foregoing formula. To the extent that the Company has purchased the
Offered Shares, upon the exercise of
31
its Conversion Right, the Capital Percentage Interest of the Member
whose shares are the Offered Shares shall be decreased in accordance
with the foregoing formula, while each Member's Capital Percentage
Interest (including the Member whose shares are the Offered Shares)
shall be similarly increased in proportion to each Member's relative
Capital Percentage Interest at the time of conversion (after giving
effect to the decrease in the Capital Percentage Interest of the Member
whose shares are the Offered Shares in accordance with the foregoing
formula and any increase in the Capital Percentage Interest of any
Member that has elected to purchase some of the Offered Shares
simultaneous with the Company's purchase of Offered Shares).
Notwithstanding the foregoing, all parties agree to implement an
alternative method of converting shares purchased pursuant to a right
of first refusal to an interest in the Company if such alternative
method accomplishes the same result with diminished legal or tax
consequences to the parties with no adverse impact upon the cooperating
parties.
15. PURCHASE OF INTEREST OF A MEMBER UPON THE OCCURRENCE OF
CERTAIN EVENTS.
15.1 In the event of the death of ▇▇▇▇▇▇ (a "Deceased
Shareholder"), then the interests in the Company of DTHY and ▇▇▇▇▇▇
shall be purchased by the Company for the greater of (i) the amount of
the ▇▇▇▇▇▇ Insurance or (ii) the Agreed Value in accordance with the
following.
15.2 The "Agreed Value" for a Member's interest in the Company
purchased by the Company pursuant to Article 15 hereof shall be equal
to the "Company Valuation", as determined in accordance with this
Section 15.2, multiplied by such Member's Capital Percentage Interest.
The "Company Valuation" shall be determined as of the date of the death
of the Deceased Shareholder in the event of the death of ▇▇▇▇▇▇, or as
of the date of the event giving rise to the right or obligation to
purchase the interest of a Member hereunder (in either
32
case, the "Valuation Date"), and shall be the Company Valuation set
forth in the most recent Certificate of Valuation (a "Certificate")
executed and agreed to by 97% or more of all of the Members, so long as
such Certificate was not executed more than fifteen months prior to the
Valuation Date. To determine the Company Valuation, the Members shall
review the historical performance of the Company, project the
anticipated future performance of the Company, review similar
information for competitive companies of comparable size and otherwise
use its best efforts to determine the Company Valuation. The first such
Certificate shall be executed as of the date hereof and attached hereto
as Schedule 15.2. The Members shall endeavor to execute a new
Certificate on or before April 30 of each year or more frequently, as
the Members may determine. Each such Certificate shall remain in effect
for a period of fifteen (15) months from the date of execution thereof,
unless superseded prior thereto by a new Certificate. In the event, as
of a Valuation Date, there is no Certificate then in effect, the
Company Valuation shall not be determined by reference to the most
recent Certificate but instead shall be determined, as of the end of
the calendar month immediately preceding the Valuation Date, by a panel
of three appraisers, one of whom shall be designated by the Estate of
the Deceased Shareholder (in the event of the death of ▇▇▇▇▇▇) or by
the Member whose interest is being purchased, one by the Company (in
the event of the death of ▇▇▇▇▇▇, neither DTHY nor the Estate of the
Deceased Shareholder, shall be entitled to vote for these purposes and,
otherwise, the Member whose interest is being purchased shall not be
entitled to vote for these purposes), and the third shall be an
appraiser appointed by the AAA. The average of the two appraised values
closest to one another shall be conclusive and binding on the parties
hereto (the third appraised value ignored) with regard to the
determination of Company Valuation pursuant to this Article 15 and
shall be
33
deemed to be a Certificate for purposes of this Agreement. The
Company Valuation shall not include the value of any life insurance
proceeds received or receivable by the Company.
15.3 The closing of the purchase of an interest in the Company
being acquired under this Article 15 shall take place within 120 days
following the Valuation Date. To the extent that the Company maintains
life insurance (other than key-man life insurance for the benefit of
the Company) on the life of a Deceased Shareholder (i.e. the ▇▇▇▇▇▇
Insurance), then the amount of the proceeds of such life insurance
policy(ies) shall be considered a down payment toward the purchase of
the Member's interest being acquired by the Company under this Article
15. To the extent the amount of the life insurance proceeds is less
than the purchase price for the interest of the Member(s) being
acquired by the Company or if there are no life insurance proceeds, the
purchase price or the balance of the purchase price (as the case may
be) shall be payable in one hundred twenty (120) equal monthly
installments with interest at one and one-half (1 1/2%) percent in
excess of the prime rate of interest as published in the Wall Street
Journal (as adjusted from time to time), the first payment being due at
the above-referenced closing. The payment of the deferred portion of
the purchase price shall be evidenced by a promissory note providing
for acceleration in the event of default or in the event of a sale of
all or substantially all of the assets of the Company or the
dissolution of the Company and shall be secured by a pledge of, or
security interest in, the interest in the Company being acquired from
the Estate of the Deceased Shareholder. To the extent that the life
insurance proceeds of the ▇▇▇▇▇▇ Insurance exceed the purchase price
for the Member's interest being acquired by the Company, the
beneficiaries named therein shall be entitled to retain such excess.
15.4 In the event of the filing of a voluntary bankruptcy
petition by a Member, or the filing of an involuntary bankruptcy
petition against a Member that is not dismissed within
34
sixty (60) days of filing (in either case such Member hereinafter
referred to as a "Bankrupt Member"), the Company shall have the option,
but not the obligation, to purchase the interest of the Bankrupt Member
in the Company for a purchase price equal to 75% of the Agreed Value,
at a closing and otherwise pursuant to the payment terms described in
Section 15.3.
15.5 In the event that at the end of its franchise term
(whether by expiration, termination or otherwise), any Division that is
a PREA franchisee (the "Terminating Division") elects to become the
franchisee of any other real estate brokerage firm or association other
than PREA, the Company will purchase the interest of Prefsa in the
Company at its then Agreed Value determined in accordance with Section
15.2 hereof, except that the Valuation Date shall be the expiration
date of such franchise agreement with PREA, and, if a panel of
appraisers is needed, one of the appraisers shall be designated by
Prefsa instead of the Estate of the Deceased Shareholder. The closing
for the purchase of Prefsa's interest in this event shall take place on
the later of (i) the first business day after the expiration of such
current PREA franchise term or (ii) the date of execution of a
franchise agreement with a real estate brokerage firm or association
other than PREA, and the purchase price for Prefsa's interest shall be
paid in cash in full at the closing. Subject to the other provisions
hereof (including the requirement for an immediate buy-out upon an
affiliation with a real estate brokerage firm or association other than
PREA as provided for herein), in the event that a Terminating Division
elects not to become the franchisee of any real estate brokerage firm
or association at the end of its franchise term, but is offered a
renewal franchise agreement from PREA, the Company will purchase the
interest of Prefsa in the Company in accordance with the provisions set
forth above in this Section 15.5, except that the closing of the
purchase of Prefsa's interest shall take place on a date determined by
the Company within three (3) years of the date of the expiration of the
franchise agreement
35
with PREA (and the purchase price for Prefsa's interest shall
be paid in cash in full at the closing) and the Valuation Date shall be
the expiration date of the franchise agreement with PREA for such
Terminating Division. Further, subject to the other provisions hereof
(including the requirement for an immediate buy-out upon an affiliation
with a real estate brokerage firm or association other than PREA as
provided for herein) in the event that a Terminating Division elects
not to become the franchisee of any real estate brokerage firm or
association at the end of its franchise term, and is not offered a
renewal franchise agreement from PREA, the Company will purchase the
interest of Prefsa in the Company in accordance with the provisions set
forth above in this Section 15.5, except that (I) the closing of the
purchase of Prefsa's interest shall take place on a date determined by
the Company within three (3) years of the date of the expiration or
termination of the franchise agreement with PREA, (II) the Valuation
Date shall be the expiration or termination date of the franchise
agreement with PREA for such Terminating Division and (III) the
purchase price for Prefsa's interest in the Company shall be payable in
thirty-six (36) equal monthly installments with interest at one and
one-half percent above the prime rate of interest as published in the
Wall Street Journal (as adjusted from time to time), the first payment
being due at the above-referenced closing. The payment of the deferred
portion of the purchase price shall be evidenced by a promissory note
providing for acceleration in the event of default or in the event of a
sale of all or substantially all of the assets of the Company or the
dissolution of the Company and shall be secured by a pledge of, or
security interest in, the interest in the Company being acquired from
Prefsa. The decision of the Company as to when to purchase the interest
of Prefsa during the three (3) year periods provided for above shall be
made by the Board, by unanimous vote of the Managers, excluding the
Manager representing Prefsa's interest in the Company.
36
15.6 In the event of the occurrence of (i) a Name Change or
(ii) a Change in Control of Prefsa or PREA, as provided by Section
13.1, the Company shall have the option to purchase the interest of
Prefsa in the Company at its then Agreed Value determined in accordance
with Section 15.2 hereof, except that the Valuation Date shall be the
date of the Name Change or the Change in Control of Prefsa or PREA,
and, if a panel of appraisers is needed, one of the appraisers shall be
designated by Prefsa instead of the Estate of the Deceased Shareholder.
The decision of the Company to exercise the option provided for in this
Section 15.6 shall be made by the Board, by unanimous vote of the
Managers, excluding the Manager representing Prefsa's interest in the
Company. The closing for the purchase of Prefsa's interest in this
event, should the Company elect to purchase Prefsa's interest, shall
take place 120 days following the date of (i) the Name Change or (ii)
the Change in Control of Prefsa or PREA. The purchase price for
Prefsa's interest in this event shall be paid in cash in full at the
closing. Concurrent with such closing, and in addition to payment of
the foregoing purchase price, the Company shall pay, or cause to be
paid, in full any amounts then outstanding to Prefsa under the Loan
Agreement (but not the Franchise Note). To the extent that the Company
has the option to purchase the equity interest of Prefsa in the Company
in accordance with the foregoing provisions of this Section 15.6, the
Company hereby agrees that ▇▇▇▇▇▇ and/or DTHY have the option to
purchase Prefsa's equity interest in the Company in the event of the
foregoing on the terms set forth in this Section 15.6 prior to the
Company, provided that ▇▇▇▇▇▇ and/or DTHY has the ability to pay the
purchase price for such equity interest.
16. DISSOLUTION OR DISTRIBUTION BY DTHY OR ▇▇▇▇▇▇.
Notwithstanding Articles 13 or 14, (i) DTHY shall be entitled to
distribute or otherwise effectuate a Disposition of its interest in the
Company, whether the same is done in connection with, or without
relation to, a
37
dissolution of DTHY, but only if the interest of DTHY in the
Company is distributed or transferred to ▇▇▇▇▇▇ and/or a family limited
partnership of which ▇▇▇▇▇▇ is the general partner and/or a limited
liability company of which ▇▇▇▇▇▇ is the controlling managing member,
and (ii) ▇▇▇▇▇▇ shall be entitled to distribute or otherwise effectuate
a Disposition of her interest in the Company to a family limited
partnership of which ▇▇▇▇▇▇ is the general partner and/or a limited
liability company of which ▇▇▇▇▇▇ is the controlling managing member.
17. BONUS DISTRIBUTION AND ISSUANCE OF INTERESTS TO KEY
PERSONNEL.
17.1 Upon the approval of the Board, by the vote of a majority
of the Managers, the Company shall have the right to issue, or cause to
be issued, at any time, additional interests in the Company or in any
Division, as compensation to employees, provided that (i) no Member nor
any Shareholder or Affiliate of such Member (including any Restricted
Individual, as hereinafter defined) nor a family member of such
Shareholder or a Restricted Individual shall receive any interest in
the Company or in any Division without the approval of 97% in interest
of all of the Members; (ii) the maximum amount of interests in the
Company or any Division that may be issued as such compensation during
the entire term of the Company, in the aggregate, is ten percent (10%)
of the total outstanding interests in the Company or any Division and
(iii) no interest in the Company may be issued under this provision
which would have the effect of causing (a) the aggregate of the Capital
Percentage Interests of NV and New Valley Mortgage to be less than 50%
without the written approval of the NV and New Valley Mortgage
designated Managers and (b) the aggregate of the Capital Percentage
Interests of ▇▇▇▇▇▇ and DTHY to be less than 40.01% without the written
approval of the ▇▇▇▇▇▇ and DTHY designated Manager. Further, there
shall be no voting rights whatsoever attached to any
38
of the interests in the Company or in any Division or any entity owned
in whole or controlled by the Company issued pursuant to this Section
17.1.
17.2 Upon the approval of the Board, by the vote of a majority
of the Managers, the Company may sell interests in the Company or a
Division to third parties that are not an Affiliate of any Member, a
Restricted Individual nor a family member of any such Persons (a "Third
Party") in connection with the employment of such Third Party by the
Company or a Division or subsidiary thereof at such price and upon such
terms and conditions as the Board, by vote of a majority of the
Managers, shall determine, provided that no such sale shall take place
so as to cause the aggregate Capital Percentage Interests in the
Company (i) of NV and New Valley Mortgage to be less than 50% without
the written approval of the NV and New Valley Mortgage designated
Managers and (ii) of ▇▇▇▇▇▇ and DTHY to be less than 40.01% without the
written approval of the ▇▇▇▇▇▇ and DTHY designated Manager. In the
event that the Board, by vote of a majority of the Managers, determines
to sell an interest in the Company to a Third Party but is unable to
because of the referenced restriction relating to either (i) NV and New
Valley Mortgage or (ii) ▇▇▇▇▇▇ and DTHY, then Prefsa hereby agrees to
sell a portion of its interest in the Company to such Third Party
provided that, in no event shall Prefsa be required to sell if such
sale would have the effect of causing the Capital Percentage Interest
of Prefsa to be less than 7.99%. The price paid to Prefsa in connection
with any such sale shall be an amount equal to the pro rata amount of
its capital contribution to the Company relating to the portion of the
interest being sold, plus an eleven percent per annum simple return
through the date of the closing on such pro rata contribution amount.
Additionally, with respect to any sale taking place two years or more
from the date hereof, Prefsa shall have the right to demand that the
purchase price be the Agreed Value as determined pursuant to Section
15.6 hereof exclusive
39
of any amounts owed to Prefsa under the Loan Agreement or any
other amounts of indebtedness owed to Prefsa by the Company. In the
event that (I) Prefsa has sold a portion of its interest in the Company
to one or more Third Parties pursuant to the above so as to cause
Prefsa's Capital Percentage Interest to be 7.99% and (II) thereafter
the Board, by a vote of a majority of the Managers, determines to sell
interests in the Company to Third Parties, Prefsa shall have the right
to require that NV and New Valley, collectively, and ▇▇▇▇▇▇ and DTHY,
collectively, each proportionately sell interests in the Company to
such Third parties so as to reduce their respective Capital Percentage
Interests to 48% (with respect to NV and New Valley Mortgage,
collectively) and to 38.01% (with respect to ▇▇▇▇▇▇ and DTHY,
collectively) prior to the Company selling interests which would have
the effect of diluting all Members. Nothing herein shall require NV,
New Valley Mortgage, ▇▇▇▇▇▇ or DTHY to sell interests in the Company at
a price less than that for which Prefsa would be required to sell its
interest pursuant to this Section 17.2. Further, there shall be no
right to designate a Manager to the Board attached to any of the
interests in the Company sold pursuant to this Section 17.2.
18. RESTRICTIVE COVENANT AND NON-SOLICITATION. It is
understood and agreed that each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇, as the
designated representatives on the Board of DTHY, NV and New Valley
Mortgage (each such individual is hereinafter referred to as a
"Restricted Individual"), shall have access to the Company's privileged
and confidential information essential to the Company's business and
shall have gained competitive benefit as a result of being a Member or
a principal shareholder of a Member and/or an employee of the Company.
Therefore, each Restricted Individual agrees that so long as each is a
shareholder of a Member of the Company, or directly a Member in the
Company, or a member of her or his immediate family or an entity in
which she or he is an officer, director, employee of, consultant for or
5% or
40
greater (directly or indirectly) shareholder of, is a Shareholder of a
Member or is directly a Member in the Company, and for an additional
period of two (2) years thereafter (such additional period being the
"Covenant Period" and, together, with the membership period, the
"Restrictive Period"), she or he shall not, directly or indirectly,
whether individually or as a principal, shareholder, member, officer,
employee, partner, director, agent of or consultant for any entity, (i)
provide consulting services to, be employed by, engage or participate
in, or own 5% or more of, any business that is engaged in the same type
of business as the Company, or any of its Divisions or subsidiaries,
and which is located in, or does business in, any of the counties of
Nassau, Suffolk, Queens or New York, or any other county in which the
Company, directly or through its Divisions or subsidiaries, then does
business, (except that nothing shall prevent (x) New Valley
Corporation, or any of its subsidiaries or Affiliates, from buying,
owning, operating, leasing, developing, subdividing, marketing, selling
or otherwise investing in or dealing with real property for its own
account or the account of any entity in which it has a direct or
indirect equity interest as opposed to acting as a broker or (y) ▇▇▇▇▇▇
from engaging in business related to the development or sale of
insurance or insurance-related products consistent with the business as
is currently conducted by ▇▇▇▇▇▇); (ii) cause or seek to persuade any
employee, customer, agent or supplier of the Company to discontinue the
status, employment or relationship of such person or entity with the
Company or to become employed in any activity competitive with the
business of the Company or with the business of any of the entities
owned by the Company or in which the Company owns an interest; (iii)
cause or seek to persuade any prospective business contact of the
Company to determine not to enter into a business relationship with
Company; or (iv) hire or retain any employee or agent of the Company;
provided that (I) in the event that ▇▇▇▇▇▇'▇ employment with the
Company is terminated
41
without cause, then the Covenant Period applicable to ▇▇▇▇▇▇
shall only be one (1) year and (II) in the event of a sale of all or
substantially all of the assets of the Company or all of the Divisions
of the Company that are in the real estate brokerage business or other
sale of the entire business of the Company to a Third Party (provided
any such sale is done in accordance with the terms of this Agreement)
or a dissolution of the Company, there shall be no Covenant Period and
the Restricted Period (and the Prefsa Restricted Period described
below) shall terminate upon the consummation of such sale or
dissolution. Prefsa also agrees, so long as it is directly a Member of
the Company, indirectly a Member in the Company, or any of its
shareholders or Affiliates are Members in the Company, and for an
additional period of two (2) years thereafter (the "Prefsa Restricted
Period"), to be bound by the provisions of clauses (ii), (iii) and (iv)
above, except, after the end of B&H's current franchise agreement with
PREA, Prefsa may engage in activities described in clauses (ii), (iii)
and (iv) above indirectly through Prefsa's affiliations with third
parties as a franchisor, lender or equity partner, however, under no
circumstances may Prefsa directly engage in the activities described in
clauses (ii), (iii) and (iv) above during the Prefsa Restricted Period.
The provisions contained in this Section 18 are made specifically for
the benefit of the Members and are not made for, and may not be
enforced by, any of the creditors of the Company, except Prefsa.
19. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
makes the following representations and warranties in order to induce
Prefsa to enter into this Agreement, acknowledges that Prefsa is
entering into this Agreement in reliance on such representations and
warranties and further acknowledges that the Company shall be
responsible to Prefsa for the truth and accuracy of such
representations and warranties:
42
19.1 VALID EXISTENCE. The Company is a limited liability
company duly organized and validly existing under the laws of the State
of New York. The Company has the requisite power to carry on its
business as now conducted and to own its assets. The Partnership is a
duly licensed real estate broker in the State of New York and does not
do business, nor is it qualified to do business, in any other
jurisdiction.
19.2 COMPANY INTEREST. Other than as contemplated by this
Agreement, there are no commitments to which the Company is a party, or
by which it is bound, calling for the issuance, sale or other
disposition of any interests in the Company and there are no
outstanding rights for the purchase of interests in the Company.
19.3 CONSENTS. Other than with regard to certain licensing
issued by the State of New York, no filings with or consents of
governmental or other regulatory agencies, foreign or domestic, or of
other parties are required to be made or received by or on the part of
the Company to enable it to enter into and carry out this Agreement and
the transactions contemplated hereby.
19.4 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has
the requisite power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Company and no other proceedings on the part of the
Company are necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
This Agreement constitutes the valid and binding obligation of the
Company and is enforceable against the Company in accordance with its
terms.
43
19.5 NO BREACH. Neither the execution and delivery of this
Agreement nor compliance by the Company with any of the provisions
hereof nor the consummation of the transactions contemplated hereby
will:
(a) other than certain loan, or loan related,
documents with Fleet Bank, the Partnership's Amended and
Restated Partnership Agreement or the Amended and Restated
Subscription and Shareholders' Agreement of Preferred,
violate, conflict with or result in the breach of the terms of
any agreement, indenture, instrument or other document to
which the Company, the Partnership or Preferred is a party or
by which any of their respective assets are bound or terminate
or result in the termination of any such agreement or
instrument or result in the cancellation, modification,
revocation or suspension of any rights of the Company, the
Partnership or Preferred thereunder;
(b) violate any judgment, order, injunction, decree
or award against, or binding upon, the Company, the
Partnership or Preferred; or
(c) violate any law or regulation of any jurisdiction
relating to the Company, the Partnership or Preferred.
19.6 LITIGATION. Other than as set forth on Schedule 19.6,
there are no actions, suits or proceedings in which the Company,
Partnership or Preferred is a defendant, and in which a judgment or
decision against the Company, the Partnership or Preferred could have a
material adverse effect on the Company, the Partnership or Preferred,
which are pending or, to the knowledge of the Company, threatened; and
there is no order, injunction, award or decree outstanding against any
of the Company, the Partnership or Preferred which either individually
or in the aggregate could have a material adverse effect on the
Company, the Partnership or
44
Preferred; and to the Company's knowledge, there exists no
basis for any such action, suit, proceeding, order, injunction, award
or decree.
19.7 COMPLIANCE WITH LAW. Neither the Company, the Partnership
nor Preferred is in violation of any law, regulation, ordinance, order,
injunction, decree, award, or other requirement of any governmental or
other regulatory body, court or arbitrator relating to their respective
businesses, the violation of which would have a material adverse effect
on their respective businesses.
19.8 PERMITS AND LICENSES. The Partnership and Preferred each
have all permits, licenses, certificates, registrations and approvals
(collectively, "Permits") from all Federal, state, local and foreign
governmental and other regulatory bodies (collectively, "Bodies")
required to carry on their respective businesses as presently
conducted; all such Permits are in full force and effect and there is
no action pending or, to the knowledge of the Company, threatened, to
suspend or cancel any of such Permits. Each of the Partnership and
Preferred is in compliance in all material respects with all
requirements, standards and procedures of the Bodies which have issued
such Permits.
19.9 TAXES. All taxes, including, without limitation, income,
property, sales, use, utility, excise, value added, employees'
withholding, social security and unemployment taxes imposed by the
United States, any state, locality or any foreign country, or by any
other taxing authority, which have or may become due or payable by the
Company, the Partnership and Preferred, have been paid in full subject
only to potential claims by appropriate government authorities to the
contrary which would be contested, in good faith; and all tax returns
required to be filed by the Partnership and Preferred have been timely
filed or a valid extension therefor has been timely filed. No
deficiency notice is proposed, or to the knowledge of the Company,
45
threatened against either the Partnership or Preferred. Other
than the New York State audit of the Partnership for the periods
December 1, 1993 to August 31, 1994 and September 1, 1996 to November
30, 1997, the tax returns of the Partnership and Preferred have not
been audited within the past three years.
Neither the Internal Revenue Service nor any state, local or
other taxing authority has proposed any additional taxes, interest or
penalties with respect to either the Partnership or Preferred or any of
their respective operations or businesses; there are no pending or
threatened tax claims or assessments; and there are no pending or
threatened tax examinations by any taxing authorities. Neither the
Partnership nor Preferred has given any waivers of rights (which are
currently in effect) under applicable statutes of limitations with
respect to the federal income tax returns for any fiscal year. Neither
the Partnership nor Preferred is a party to, or bound by, any tax
indemnity, tax sharing or tax allocation agreements.
19.10 FINANCIAL STATEMENTS. The audited financial statements
of each of the Partnership, Hamptons and Preferred, for the fiscal year
ended December 31, 2001 and the unaudited financial statements of each
of the Partnership, Hamptons and Preferred for the period ended October
31, 2002 (the "Financial Statements"), copies of which are attached as
Schedule 19.10 hereto, (i) are true, correct and complete, (ii) are in
accordance with the respective books and records of the Partnership,
Hamptons and Preferred (except that all Members are aware that Hamptons
has, to date, generally accounted for its operations as a separate
entity, separate and apart from the Partnership, and no representation
is made concerning the appropriateness of the use of such separate
accounting methods), (iii) fairly present the respective financial
position of the Partnership, Hamptons and Preferred as of such dates
and the respective results of operations of the Partnership, Hamptons
and Preferred for such year and period and (iv) have been prepared
46
in accordance with generally accepted accounting principals
consistently applied. As of October 31, 2002, neither the Partnership,
Hamptons nor Preferred had any liabilities, commitments or obligations
of a material nature, whether absolute, accrued, contingent or
otherwise, not either shown and adequately provided for in the
Financial Statements or disclosed herein.
19.11 ADVERSE DEVELOPMENTS. Since October 31, 2002, (i) the
business of each of the Partnership, Hamptons and Preferred has been
conducted only in the ordinary course, (ii) there have been no material
adverse changes in the business of any of the Partnership, Hamptons or
Preferred and the Company does not know of any development or
threatened development of a nature which could be reasonably expected
to have a materially adverse effect upon the business of the
Partnership, Hamptons or Preferred and (iii) there has been no damage,
destruction or loss or other occurrence or development, whether or not
insured against, which, either singly or in the aggregate, materially
adversely affects, and the Company has no knowledge of any threatened
occurrence or development which could reasonably be expected to
materially adversely affect, the condition (financial or otherwise),
assets, liabilities, business, operations, affairs or prospects of any
of the Partnership, Hamptons or Preferred, except as disclosed on
Schedule 19.6.
19.12 REAL PROPERTY. Schedule 19.12 attached hereto sets forth
a brief description of all real properties which are leased to either
the Partnership, Hamptons or Preferred and the terms of the respective
leases, including the identity of the lessor, the rental rate and other
charges, and the term of the lease. Neither the Partnership, Hamptons
or Preferred owns outright the fee simple title in and to any real
property. Except for the leases described as "MONTHLY" or "EXPIRED,"
the real property leases described in Schedule 19.12 that relate to the
leased properties described therein are now in full force and effect,
are enforceable in
47
accordance with their terms and no condition exists and no
event has occurred which, with or without the passage of time or the
giving of notice or both, constitutes a default under any of such
leases and all amounts due and payable thereunder have been paid.
19.13 OWNERSHIP OF ASSETS. Other than as set forth on Schedule
19.13, each of the Partnership, Hamptons and Preferred owns outright,
and has good and marketable title to, all of its respective assets,
free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature
whatsoever. There are no agreements, options, commitments or
understandings with, of or to, any person to acquire any of either of
the Partnership's, Hampton's or Preferred's assets or any rights or
interest therein. Each of the Company's subsidiaries owns all of the
assets that each such subsidiary owned respectively immediately prior
to the execution of this Agreement.
19.14 EMPLOYMENT RELATIONS AND BENEFIT PLANS. (a) Each of the
Partnership and Preferred is in compliance with all Federal, state and
other applicable laws, rules and regulations respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and neither has engaged in any unfair labor practice which, in
any of the foregoing cases, could have a materially adverse effect on
the respective business of the Partnership or Preferred; (b) there is
not pending, or to the knowledge of the Company, threatened, any unfair
labor practice charge or complaint against the Partnership or Preferred
by or before the National Labor Relations Board or any comparable state
agency or authority; (c) no grievance which might have an adverse
effect on the Partnership or Preferred or the conduct of their
respective businesses, nor any arbitration proceeding arising out of or
under any collective bargaining agreement, is pending and no claim
therefor has been asserted; (d) no litigation, arbitration,
administrative proceeding or governmental investigation is now pending,
and, to the
48
knowledge of the Company, no person or party has made any
claim or has threatened litigation, arbitration, administrative
proceeding or governmental investigation against either the Partnership
or Preferred arising out of any law relating to discrimination against
employees or employment practices; (e) Schedule 19.14 attached hereto
includes a list of all of the "pension" and "welfare" benefit plans
(within the respective meanings of sections 3(2) and 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by each of the Partnership and Preferred or to which either
of them makes employer contributions with respect to their respective
employees, a complete and correct copy of each of which is available to
Prefsa. There are no vested and unfunded benefits under any such plans;
(f) all contributions required to be made by either the Partnership or
Preferred under law or required under the pension plans have been made
by either the Partnership or Preferred; and (g) each of the Partnership
and Preferred has satisfied in all material respects all reporting and
disclosure requirements applicable to it under ERISA, and the
Department of Labor and Internal Revenue Service regulations
promulgated thereunder, with respect to the pension and welfare plans.
19.15 CONDUCT OF BUSINESS. Other than as disclosed on Schedule
19.15 hereto, since October 31, 2002, neither the Partnership, Hamptons
nor Preferred has: (i) created or incurred any liability in excess of
$150,000 (absolute, accrued, contingent or otherwise) except unsecured
current liabilities incurred in the ordinary course of business
consistent with past practice; (ii) mortgaged, pledged or subjected to
any lien or otherwise encumbered any of its respective assets, tangible
or intangible; (iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute, accrued, contingent or
otherwise) other than current liabilities shown on the Financial
Statements as of October 31, 2002 and taxes and current liabilities
incurred since October 31, 2002 in the ordinary course of business or
under contracts
49
or agreements entered into in the ordinary course of business (other
than as a result of any default or breach of, or penalty under, any
such contracts or agreements); (iv) waived, released or compromised any
claims or rights of substantial value, or experienced any labor trouble
(including, without limitation, any actual or threatened strike or
lock-out) or lost, or been threatened with the loss of, any key
employees or any substantial number of employees; (v) entered into any
settlement, compromise or consent for an amount in excess of $50,000
with respect to any claim, proceeding or investigation; (vi) sold,
assigned, transferred, leased or otherwise disposed of any of its
respective assets, tangible or intangible, or canceled any debts or
claims except, in each case, for fair consideration in the ordinary
course of business (it being understood that the disposition of any
asset or cancellation of any debt or claims carried on the books at
more than $150,000 shall be deemed not to be a disposition or
cancellation in the ordinary course of business); (vii) except for
payments made in connection with the redemption of the interests of BA,
Rangeley and Jussam and the simultaneous payments or distributions to
DTHY and NV, declared or paid any dividends, or made any other
distribution on or in respect of, or directly or indirectly purchased,
retired, redeemed or otherwise acquired any shares of its capital
stock, paid any principal due under any notes (other than the required
amortization payments under the Fleet Loans) or opened accounts or paid
any amount (other than salaries) or transferred any asset to any holder
of any interest in the Partnership, Hamptons or Preferred; (viii)
become bound by any contract or commitment or renewed, extended,
amended, modified or terminated any contract or commitment which in any
one case involved an amount in excess of $150,000 (or in the aggregate
an amount in excess of $300,000) other than in the ordinary course of
business; (ix) issued or sold any interest in either the Partnership,
Hamptons or Preferred, except as contemplated by this Agreement; (x)
except for certain bonuses being paid
50
to ▇▇▇▇ III, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ as set forth on
Schedule 19.15(x) attached hereto and made a part hereof, paid or
agreed to pay, other than in the ordinary course of business,
conditionally or otherwise, any bonus, extra compensation, pension or
severance pay to any of the Members or their Shareholders, whether
under any existing profit sharing, pension or other plan or otherwise;
(xi) entered into any transaction not in the ordinary course of
business (except for transactions contemplated by this Agreement) (it
being understood that the acquisition of a real estate brokerage office
shall be considered to be in the ordinary course of business); (xii)
changed any of their respective accounting methods or principles used
in recording transactions on their respective books or records or in
preparing the Financial Statements (except for treating the operations
of the Hamptons' offices on a combined basis with the rest of the
Partnership's operations whereas the Partnership had previously
reported such operations separately); or (xiii) entered into any
contract or commitment to do any of the foregoing.
19.16 ACCOUNTS RECEIVABLE. Intentionally left blank.
19.17 MATERIAL/SERVICE AGREEMENTS; OTHER CONTRACTS. Other than
as reflected on the Financial Statements, and other than as may arise
under or relate to the Franchise Agreement(s) between B&H, Hamptons and
PREA, or the real estate leases to which either the Partnership,
Hamptons or Preferred is a party, and except as which may arise in the
ordinary course of business:
(a) Schedule 19.17(a) sets forth a complete list with
regard to each of the Partnership, Hamptons and Preferred of
(i) all bids, applications or proposals submitted by or
in-behalf of the Partnership, Hamptons or Preferred to provide
materials or services with a valuation of $200,000 or more to
any Person and for which the award, approval or selection is
pending, and (ii) all contracts or agreements for the
provision of materials or services with a
51
valuation of $200,000 or more to which the Partnership,
Hamptons or Preferred is a party and which has not yet been
performed in full (the items referred to in the foregoing
clauses (i) and (ii) being herein collectively called the
"Material/Service Agreements"). All of such Material/Service
Agreements are fully performable by the Partnership, Hamptons
or Preferred, as applicable, in compliance with their terms.
No grounds exist for the termination or cancellation of any
Material/Service Agreement by the other party thereto.
Schedule 19.17(a) sets forth for each Material/Service
Agreement: (i) the customer and (ii) the remaining revenue to
be earned.
(b) Except as disclosed in Schedule 19.17(b) hereto
or as disclosed in Schedule 19.17(a), neither the Partnership,
Hamptons nor Preferred is a party to or bound by any oral or
written contracts, obligations or commitments with respect to
any of the following:
(i) contract, commitment or arrangement involving, in
any one case, $200,000 or more;
(ii) other than relating to leases, office equipment
and machinery, a contract with a term of, or requiring
performance, more than one year from its date;
(iii) lease or lease purchase agreement, conditional
sale or title retention agreement, indenture, security
agreement, credit agreement, pledge or option with respect to
any property, real or personal (tangible or intangible), in
any capacity;
(iv) commitment, contract or undertaking for the
purchase or use of services, materials, supplies, inventory,
machinery or equipment and involving more than $200,000;
(v) employment contracts, undertakings,
understandings or arrangements with employees, except for an
employment agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the
52
▇▇▇▇▇▇ Employment Agreement and certain employment
understandings with regional and/or office managers of the
Partnership (the Company has previously delivered to Prefsa a
true, correct and complete copy of the ▇▇▇▇▇▇ Employment
Agreement and the Company will deliver to Prefsa a true,
correct and complete copy of an employment agreement between
Preferred and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ upon its execution);
(vi) contract or agreement with any labor union or
other collective bargaining group;
(vii) note, loan, credit or financing agreement or
other contract for money borrowed, and all related security
agreements and collateral documents, including any agreement
for any commitment for future loans, credit or financing;
(viii) guarantees;
(ix) contract or understanding regarding any capital
expenditures in excess of $200,000;
(x) distribution or advertising agreement;
(xi) partnership, shareholder or operating agreement
or contract with any Member or any Affiliate of a Member other
than this Agreement other than the Amended and Restated
Subscription and Shareholder's Agreement for Preferred and the
Operating Agreement for Hamptons;
(xii) contract, commitment or arrangement which would
restrain the Partnership, Hamptons or Preferred from engaging
or competing in any business or to maintain the
confidentiality of any matter (other than various
non-disclosure agreements relating to certain potential
business deals that the Partnership or Preferred was
investigating);
(xiii) contract, commitment or arrangement not made
in the ordinary course of business; and
(xiv) license, franchise or royalty agreement other
than those franchise agreements with PREA.
(c) The Partnership, Hamptons or Preferred, as
applicable, has delivered or has made available or will
hereafter make available to Prefsa correct and complete copies
of all of the contracts, agreements and other documents listed
in Schedules 19.17(a) and (b) hereto and all amendments
thereto and any waivers granted thereunder as well as the
Fleet loan documents and the real estate leases referred to in
the first sentence of this Section 19.17 (the "Scheduled
Contracts"). (Certain basic Fleet loan documents are attached
as Schedule 19.17(c), while all other Fleet loan documents
have been or will be made available to Prefsa). No unresolved
disputes are pending or, to the best of the Company's
knowledge, are threatened under or in respect of any such
Scheduled Contracts.
Except as described in Schedules 19.17 hereto, all
Scheduled Contracts described in such Schedules 19.17 are
valid and enforceable in accordance with their respective
terms, except as the enforcement thereof may be subject to or
limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect and subject to the
application of equitable principles and the availability of
equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or
condition contained therein, any existing default by either
the Partnership, Hamptons or Preferred, as applicable, or, to
the Company's knowledge, by any other party, or any event
which with notice, lapse or time, or both, would constitute a
default and which, individually or in the aggregate, could
reasonably be expected to have a material adverse
53
effect on the condition (financial or otherwise),
business, operations, affairs or prospects of either the
Partnership, Hamptons or Preferred, as applicable.
20. ARBITRATION. Any controversy, difference or dispute
between the parties arising out of or relating to the matters set forth
in this Agreement shall be submitted to and decided by arbitration
before the American Arbitration Association in Nassau or Suffolk
County, New York, in accordance with the rules of such association. Any
award granted as a result of any such arbitration shall be binding upon
the parties and judgment upon the award so rendered may be entered in
any court of competent jurisdiction. The American Arbitration
Association is authorized to award that the losing party shall bear the
costs of the proceeding if it deems appropriate. Each of the parties
hereby consents to the jurisdiction of the American Arbitration
Association in Nassau County and Suffolk County, New York with respect
to the foregoing matters.
21. NOTICES. Any notice required or given with respect to this
Agreement shall be valid and effective when delivered by registered or
certified mail return receipt requested or by receipted overnight
delivery (e.g. Federal Express) or by hand to the address as set forth
below. Any party hereto may change such address by notice given to the
Company and the Members in accordance with this Article 21.
If to the Company:
Montauk Battery Realty, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
54
If to DTHY and/or ▇▇▇▇▇▇:
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
If to NV and/or ▇▇▇▇▇▇:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Kramer, Coleman, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to New Valley Mortgage and/or ▇▇▇▇▇▇:
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Kramer, Coleman, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to Prefsa:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
With a copy to:
55
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS; NO ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective Legal Representatives, successors and assigns;
provided, however, that, except as expressly provided for herein, no
party hereto may assign this Agreement without the prior written
consent of 97% in interest of the Members.
22.2 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly in such State.
All parties consent to the jurisdiction of the state and federal courts
located within the State of New York.
22.3 ENTIRE AGREEMENT. This Agreement (together with any
schedules and exhibits hereto), and those certain letter agreements of
even date herewith regarding the Company, set forth the entire
agreement and understanding of the parties in respect of the subject
matter hereof and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof.
22.4 AMENDMENT AND MODIFICATION; NO WAIVER. Except as
otherwise provided herein, this Agreement may be amended or modified
only by a written instrument executed by a 97% in interest of the
Members or, in the case of a waiver, by the party waiving compliance,
provided that no amendment that would adversely affect any Member shall
be effective with respect to such Member without such Member's written
consent. The failure of a
56
party at any time or times to require performance of any provisions
hereof shall in no manner affect the party's right at a later time to
enforce the same. No waiver by any party of the breach of any term
contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such breach or of the breach of any other
term of this Agreement.
22.5 AMENDMENT AND RENEWAL. Reference to this Agreement herein
shall include any amendment or renewal hereof.
22.6 SEVERABILITY. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and only to the
extent such provision shall be held to be invalid or unenforceable and
shall not in any way affect the validity or enforceability of the other
provisions hereof, all of which provisions are hereby declared
severable, and this Agreement shall be carried out as if such invalid
or unenforceable provision or portion thereof was not embodied herein.
22.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement. The headings in
this Agreement are solely for the convenience of the parties, and are
not intended to and do not limit, construe or modify any of the terms
and conditions hereof.
22.8 HEADINGS. The headings or captions in this Agreement are
for convenience and reference only and do not in any way modify,
interpret or construe the intent of the Parties or affect any of the
provisions of this Agreement.
22.9 EQUITABLE RELIEF. The Parties agree that, since an
interest in the Company or a Member (other than NV, New Valley Mortgage
or Prefsa) cannot be readily purchased or sold in the open market, and
since, for that reason among others, the non-defaulting parties will
57
be irreparably damaged in the event of a breach or threatened
breach hereof, this Agreement shall be specifically enforceable. Should
any dispute arise concerning the transfer of an interest in the Company
or a Member (other than NV, New Valley Mortgage or Prefsa) an
injunction may be issued restraining any Disposition pending the
determination of such controversy.
22.10 APPLICABILITY OF PROVISIONS. All of the provisions of
this Agreement shall apply to all Shares owned by any Shareholder at
the time of the execution of this Agreement, any Shares hereafter
issued and exchanged therefor as a result of any reorganization,
recapitalization or otherwise, and any additional Shares issued to a
Shareholder by reason of a stock dividend or increase in outstanding
Shares or otherwise.
22.11 ALIENATION. Except as provided in this Agreement, upon
the alienation by a Member of all its interest in the Company owned or
held by it in accordance with the provisions hereof, such Member shall
have no further rights or privileges under this Agreement or otherwise
be deemed a party hereto or bound hereby.
22.12 VOTING. Each Manager agrees that, so long as he or she
shall be the representative of a holder or owner of any interest in the
Company entitled to vote, he or she will vote to effectuate and
implement all of the terms and provisions of this Agreement.
22.13 GENDER. All references to the masculine or neuter gender
shall likewise apply to the other as well as to the feminine gender
where applicable.
22.14 FUTURE OPPORTUNITIES. Any business opportunity coming to
the Company directly resulting from, or relating to, the business of
the Company, the Partnership, Hamptons, the business operating as
Prudential Manhattan Realty, PE or Preferred, or any other entity in
which the Company has an interest, shall, to the extent not taken
advantage of by the Company, the Partnership, Hamptons, the business
operating as Prudential Manhattan Realty, PE
58
or Preferred, be made available to each Member in proportion
to each Member's Capital Percentage Interest (as adjusted from time to
time in accordance with the terms hereof) provided that each Member
desiring to participate in such opportunity is willing to commit to his
proportionate share of the capital requirements for such opportunity as
determined by a majority of the Members choosing to participate.
22.15 SURVIVAL OF REPRESENTATIONS. All representations and
warranties made in this Agreement, by any party hereto, shall survive
solely for a period of one year from the date hereof.
22.16 TERMINATION OF ▇▇▇▇▇▇ BY THE COMPANY. In the event that
▇▇▇▇▇▇ is not an employee of the Company due to the termination of her
employment with the Company by the Company, then DTHY and ▇▇▇▇▇▇ shall
collectively have the right, at their option, to initiate negotiations,
in good faith, with the Company to sell their respective interests in
the Company back to the Company. If DTHY and ▇▇▇▇▇▇ exercise such right
and the Company does not offer to buy such interests back at a price
equal to, or greater than the Agreed Value (calculated pursuant to
Section 15 hereof) of such interests, with the Valuation Date being the
date of the closing of such purchase of the interest by the Company
(the purchase price shall be payable over no more than four years),
then the restrictive covenant provisions of Article 18 shall no longer
apply to ▇▇▇▇▇▇. Provided that if ▇▇▇▇▇▇ shall begin to compete with
the Company, she and her entity (DTHY) shall lose their right to
designate a manager to the Board and each of ▇▇▇▇▇▇ and DTHY shall have
no further rights to participate in any management decisions hereunder,
whether under Article 8 or otherwise.
[Rest of Page Intentionally Left Blank; Signature Pages Follow]
59
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DTHY REALTY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
______________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
NEW VALLEY REAL ESTATE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
NEW VALLEY MORTGAGE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
PRUDENTIAL REAL ESTATE FINANCIAL
SERVICES OF AMERICA, INC.
By: /s/ ▇▇▇▇▇ Ghoroghchi
--------------------------------
▇▇▇▇▇ Ghoroghchi
As to the Restrictive Covenant and Non-Solicitation
provision and Articles 20, 21 and 22 only
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60
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AS MANAGERS:
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61
