BRH IV-C AGREEMENT TOTAL RETURN SWAP AGREEMENT
EXHIBIT
12
BRH
IV-C AGREEMENT
THIS TOTAL RETURN SWAP
AGREEMENT (this “Swap
Agreement”), dated as of October 25, 2010, is by and among Brookfield US
REP TRS LLC, a Delaware limited liability company (“Party A”) and Brookfield REP
Investments IV-C LLC, a Delaware limited liability comp any (“Party B”, and together with
Party A, the “Parties”)
and, solely with respect to Section 8 hereof,
Brookfield Asset Management Inc., an Ontario corporation (the “Guarantor”).
RECITALS:
WHEREAS, Party A is an indirect,
wholly-owned subsidiary of Brookfield Asset Management, Inc., an Ontario
Corporation;
WHEREAS, Party B is a member of the
Consortium to which certain investors will subscribe and make a capital
commitment;
WHEREAS, Party B is governed by that
certain Amended and Restated Limited Liability Company Agreement, dated as of
October 25, 2010 (as the same may be amended or restated from time to time, the
“Party B Agreement”);
and
WHEREAS, Party A and Party B desire to
enter into a total return swap (the “Swap”) in connection with the
acquisition by Party A of a portion of the Investment in accordance with that
certain purchase agreement between Party A and REP Investments LLC, a Delaware
limited liability company (“REP”).
NOW, THEREFORE, in consideration of the
mutual promises and agreements made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
1. Definitions. All
capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Party B Agreement.
2. Transactions as of the Trade
Date.
(a) Obligations of Party
A. As of the date of the Closing (as defined in the
Restructuring Proposal) (such date, the “Trade Date”), Party A shall
acquire Party B’s Consortium Percentage Interest in the Shares, GGO Shares, New
Warrants and GGO Warrants (as each such term is defined under the Restructuring
Proposal) and any additional securities or other property (other than cash)
received in respect of any of the foregoing as a result of any dividend,
distribution, stock split, recapitalization, exchange or other event
(collectively, the “Securities”).
(b) Obligations of Party
B. As of the Trade Date, Party B shall deposit cash collateral
with Party A in an amount equal to the product of (A) the Purchase Price
(as defined in the Restructuring Proposal) multiplied by
(B) Party B’s Consortium Percentage Interest (such product, the “Collateral
Amount”).
3. Payments. Party
A shall pay to Party B 100% of any cash payments (including, without limitation,
ordinary dividends, capital gain dividends and returns of capital distributions)
received by Party A in respect of the Securities, in each case as soon as
reasonably practicable following receipt thereof.
4. Settlement
Terms.
(a) Transfer or Disposition of
Securities. Party A shall not transfer or dispose of any
portion of the Securities except at the express direction of Party B, which
Party B may direct in whole or in part at any time, subject to the terms of the
Party B Agreement and any other applicable contractual limitations.
(b) Net Cash
Settlement.
(i) Upon
any disposition of all or a portion of the Securities for an amount of net cash
proceeds equal to or greater than the Collateral Amount attributable to the
Securities being disposed, Party A shall (A) pay to Party B any excess of such
net cash proceeds over the Collateral Amount attributable to such Securities
being disposed and (B) return to Party B the portion of the Collateral Amount
attributable to such Securities.
(ii) Upon
the disposition of all or a portion of the Securities for an amount of net cash
proceeds less than the Collateral Amount attributable to the Securities being
disposed, Party A shall return to Party B (i) the Collateral Amount attributable
to the Securities being disposed reduced by (ii) the
difference between such Collateral Amount and the net cash proceeds received
from the disposition of such Securities.
(c) In-Kind
Settlement. Party B may elect at any time, in its sole
discretion, to settle all or any portion of the Swap in kind. To the
extent Securities are transferred in connection with an in-kind settlement, the
Collateral Amount deposited by Party B with Party A in respect of such
Securities shall be retained by and solely for the benefit of Party
A.
5. Exercise of Voting and
Control Rights. Party A shall not exercise any voting or other
control rights in respect of the Securities except as and to the extent
expressly directed by Party B.
6. Tax
Treatment. The Parties agree to treat Party B as the recipient
of all income or gain received in respect of or upon the disposition of the
Securities for U.S. federal income tax purposes, and shall prepare and file any
and all U.S. federal income tax returns and reports and shall withhold and pay
all U.S. federal income and withholding taxes on that basis.
7. Termination. This
Swap Agreement shall terminate upon the settlement, pursuant to Section 4, of all of
the Securities.
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8. BAM
Guarantee.
(a) Guarantee. The
Guarantor hereby unconditionally and irrevocably guarantees to Party B the
prompt payment and performance of all of Party A’s obligations under Sections 2(a), 3, 4 and 5 (collectively, the
“Obligations”).
(b) Guarantee to the Maximum
Extent Permitted by Law. The liability of the Guarantor
hereunder is an absolute and unconditional guarantee of payment and performance
as and when due, and not of collection. The liability of the
Guarantor hereunder is several from and independent of the Obligations that are
hereby guaranteed and of the liabilities of any other parties to the maximum
extent permitted by law; provided, however, that
notwithstanding anything herein to the contrary in no event will Party B be
entitled to more than the full payment to which it is entitled as set forth in
Sections 2(a),
3, 4 and 5 herein (plus any
costs of enforcement as set forth in Section 8(d)
below). The Guarantor’s liability hereunder may be enforced against
the applicable Guarantor after nonpayment or nonperformance by Party A of any of
the Obligations without requiring Party B to resort to any other Person
(including, without limitation, Party A) or any other right, remedy or
collateral; provided, however, that Party B
shall give Party A and the Guarantor not less than ten (10) business days prior
notice prior to enforcing its rights hereunder against the
Guarantor.
(c) Waivers. The
Guarantor hereby waives notice of acceptance of the guarantee described herein,
and all presentment, demand, protest, notice of protest and notices of default
or dishonor of any obligation guaranteed hereby and all other surety defenses
generally. No extension of time or other indulgence or release of
liability or collateral granted by Party B to Party A will release or affect the
obligations of the Guarantor hereunder and no act, omission or delay on the part
of Party B in exercising any rights hereunder or in taking any action to collect
or enforce payment of any of the Obligations shall be a waiver of any such right
or release or affect the Obligations. The rights of Party B pursuant
to this Section
8 shall not be impaired by any bankruptcy, insolvency, arrangement,
assignment for the benefit of creditors, reorganization or other debtor relief
proceedings under any federal or state law, whether now existing or hereafter
enacted, with respect to Party A or the Guarantor or if for any other reason
Party A has no legal obligation to discharge any of the
Obligations.
(d) Costs of
Enforcement. The Guarantor agrees to indemnify Party B for all
reasonable out-of-pocket costs and expenses, including, without limitation,
attorneys’ fees and costs (whether or not legal action be instituted) incurred
or paid by Party B in enforcing this guarantee.
(e) Term. This
guarantee shall be effective as of the date first above written and shall remain
in full force and effect until such time as the Obligations have been satisfied
or terminated in accordance with this Swap Agreement.
(f) No Other
Beneficiaries. The provisions of this guarantee are solely for
the benefit of Party B. Nothing in this Section 8, express or
implied, is intended or shall be construed to give any other Person any legal or
equitable right, remedy or claim under or in respect of this guarantee or any
provision contained herein.
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9. Miscellaneous.
(a) Notices. All
notices or other communications to be given hereunder to a Member shall be in
writing and shall be sent by delivery in person, by courier service, by
electronic mail transmission or telecopy addressed as follows or such other
address as may be substituted by notice as herein provided:
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(i)
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If
to Party A:
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Brookfield
US REP TRS LLC
c/o
Brookfield Asset Management Inc.
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Attention: ▇▇▇▇▇▇
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Telephone: (▇▇▇)
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Electronic
Mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
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(ii)
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If
to Party B:
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Brookfield
REP Investments IV-C LLC
c/o
Brookfield Asset Management Inc.
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Attention: ▇▇▇▇▇▇
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Electronic
Mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
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(iii)
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If
to the Guarantor:
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Brookfield
Asset Management Inc.
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Attention: ▇▇▇▇▇▇
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Telephone: (▇▇▇)
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Electronic
Mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
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(b) Successors and
Assigns. The provisions of this Swap Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the Parties hereto. The rights and obligations of Party A under this
Swap Agreement may be assigned only with the prior written consent of Party
B. The rights and obligations of Party B under this Swap Agreement
may be assigned only in connection with a Transfer of Interests permitted by or
otherwise made in accordance with the provisions of the Party B
Agreement.
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(c) Further
Assurances. Each Party hereby agrees to take or cause to be
taken such further actions, to duly execute and deliver or cause to be executed
and delivered such further agreements, assignments, instructions, documents and
instruments as may be necessary or as may be reasonably requested by any Party
in order to fully effectuate the purposes, terms and conditions of this Swap
Agreement.
(d) Amendment. Neither
this Swap Agreement nor any provision hereof may be changed, modified, amended,
restated, waived, supplemented, discharged, canceled or terminated orally or by
any course of dealing or in any other manner other than by an agreement by each
Party.
(e) No Third Party
Beneficiaries. Except
as expressly set forth in Section 8(f), it is
understood and agreed among the Parties that this Swap Agreement and the
agreements made herein are made expressly and solely for the benefit of the
Parties hereto, and that no other Person shall be entitled or be deemed to be
entitled to any benefits or rights hereunder, nor be authorized or entitled to
enforce any rights, claims or remedies hereunder or by reason
hereof.
(f) Applicable
Law. This Swap Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflict of laws. Each Party hereby agrees that any legal action
or proceeding with respect to or in connection with this Swap Agreement shall,
to the fullest extent permitted by applicable law, be brought and maintained
exclusively in the courts of the State of Delaware or in the United States
District Court for the District of Delaware, and by execution hereof each Party
irrevocably submits to the jurisdiction of such courts for the purposes of any
such action or proceeding, and irrevocably agrees to be bound by any judgment
rendered by any such court in connection with such action or
proceeding. Each Party hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any such action or proceeding brought in any such
court and any claim that any such action or proceeding has been brought in an
inconvenient forum.
(g) Waiver of Jury
Trial. Each of the Parties hereto waives trial by jury in any
litigation, suit or proceeding between them in any court with respect to, in
connection with or arising out of this Swap Agreement, or the validity,
interpretation or enforcement thereof
(h) Counterparts. This
Swap Agreement may be executed in counterparts, each one of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
(i) Construction. The
captions used in this Swap Agreement are for convenience only and shall not
affect the meaning or interpretation of any of the provisions of this Swap
Agreement. As used herein, the singular shall include the plural, the
masculine gender shall include the feminine and neuter, and the neuter gender
shall include the masculine and feminine, unless the context otherwise
requires. The words “hereof’, “herein”, and “hereunder”, and words of
similar import, when used in this Swap Agreement shall refer to this Swap
Agreement as a whole and not to any particular provision of this Swap
Agreement. The use of the word “including” is not intended to be
limiting in any respect and shall be interpreted as “including, without
limitation.” This Swap Agreement is among financially sophisticated
and knowledgeable parties and is entered into by the parties in reliance upon
the economic and legal bargains contained herein and shall be interpreted and
construed in a fair and impartial manner without regard to such factors as the
party who prepared, or caused the preparation of, this Swap Agreement or the
relative bargaining power of the parties. Without limiting the
generality of the foregoing, the doctrine of contra proferentem shall not
have any application to the construction of this Swap Agreement.
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(j) Severability. If
any term or provision of this Swap Agreement or the application thereof to any
Person or circumstances shall be held invalid or unenforceable, then the
remaining terms and provisions hereof and the application of such term or
provision to Persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby.
(k) Entire
Agreement. This Agreement shall constitute the entire
agreement among the Parties with respect to the subject matter hereof and
supersede any prior agreement or understanding among or between them with
respect to such subject matter.
[Remainder
of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the
Parties hereto have executed this Swap Agreement as of the date first above
written.
PARTY A:
Brookfield
US REP TRS LLC
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By:
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Brookfield
US Corporation
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By:
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/s/
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Name:
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Title:
Vice President
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PARTY B:
Brookfield
REP Investments IV-C LLC
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By:
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Brookfield
Asset Management Private Institutional Capital Adviser (Canada) L.P., its
managing member
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By:
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Brookfield
Private Funds Holdings Inc., its general
partner
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By:
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/s/
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Name:
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Title:
Vice President
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By:
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/s/
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Name:
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Title:
Vice President
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Solely with respect to Section
8:
GUARANTOR:
Brookfield Asset Management,
Inc.
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By:
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/s/
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Name:
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Title:
Senior Managing
Partner
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