1
EXHIBIT 10.2
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT, dated as of February 27, 1998, is entered into
by and between APOLLO REAL ESTATE INVESTMENT FUND III, L.P., a Delaware limited
partnership ("Apollo"), and NEW VALLEY CORPORATION, a Delaware corporation ("New
Valley").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, on the date hereof, the parties thereto have entered into the
Amended and Restated Western Realty Development LLC Limited Liability Company
Agreement (the "LLC Agreement"), dated as of February 20, 1998, by and among
Western Realty Development LLC, a Delaware limited liability company (the
"Delaware LLC"), Apollo, New Valley and BrookeMil Ltd., a Cayman Islands company
(the "Company");
WHEREAS, on the date hereof, Apollo has made a loan (the "Loan") of
$11,000,000 to the Delaware LLC pursuant to a Promissory Note dated February 27,
1998 (the "Note");
WHEREAS, to secure the payment obligations of the Delaware LLC under
the Note, Apollo has requested that New Valley pledge to it the 10,483 shares of
Common Stock (the "Shares") of the Company owned by New Valley, which Shares
constitute 99.1% of the outstanding Common Stock of the Company; and
WHEREAS, Apollo would be unwilling to extend the Loan absent the pledge
to it of the Shares and other items of Collateral described below, and New
Valley and the Delaware LLC will derive direct and indirect benefits from the
transactions contemplated by the LLC Agreement and the Note;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. SECURITY AGREEMENT
1.1 SECURITY INTEREST IN THE COLLATERAL
(a) In order to secure the due and punctual payment (whether
at maturity or by acceleration) of any amount that the Delaware LLC is obligated
to pay under the Note, New Valley hereby pledges, assigns, transfers, sets over
and delivers to Apollo and grants for the benefit of Apollo a security interest
in and to all of the following in which New Valley may now or hereafter have any
right, title or interest:
2
(i) the Shares;
(ii) all certificates and instruments representing
the Shares identified on Annex 1 hereto and
all other shares of capital stock of the
Company now or hereafter owned by New Valley;
(iii) all cash, securities, distributions and other
property at any time and from time to time
received, receivable or otherwise distributed
in respect of or in exchange for any or all
of the foregoing; and
(iv) all proceeds of any of the property of New
Valley described in clauses (i-iii) above
(all of the property described in the
foregoing clauses (i)-(iv) is hereinafter
referred to as the "Collateral").
(b) The Shares and all certificates and instruments
representing such Shares and all other property constituting Collateral pledged
by New Valley hereunder shall be forthwith transferred and delivered by New
Valley to Apollo Real Estate Advisors III, L.P., the general partner of Apollo
(the "Representative"), located at Two Xxxxxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx
00000 duly endorsed in blank or accompanied by undated stock powers duly
executed in blank in accordance with the provisions of Section 8-106(b)(1) of
the Uniform Commercial Code as in effect in the State of New York (the "UCC").
In addition, on the date of execution of this Pledge Agreement, the Company
hereby acknowledges notice of this Pledge Agreement and the Company agrees to
make a notation on its Register of Members of this Pledge Agreement, and New
Valley agrees to take such other action as Apollo shall deem reasonably
necessary or appropriate to duly record the lien created hereunder in the
Collateral. In addition, at the request of Apollo, New Valley shall give,
execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement, or other papers that may be necessary or
desirable (in the reasonable judgment of Apollo) to create, preserve, perfect or
validate the security interest and lien granted pursuant hereto or to enable
Apollo to exercise and enforce its rights hereunder. All securities and other
certificated property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for the Shares or other items
of Collateral (collectively with the Shares, the "Property"), shall also be
transferred and delivered to the Representative when received.
1.2 VOTING RIGHTS; DISTRIBUTIONS; ETC.
(a) So long as no Event of Default (as defined below) shall
have occurred and be continuing Apollo agrees that:
(i) Except as set forth in paragraph (b) below, New
Valley shall be solely and exclusively entitled to
exercise any and all voting, consensual and other
rights and powers relating or pertaining to the
2
3
Collateral or any part thereof that New Valley may
now or hereafter have as the owner of the Shares for
any purpose not inconsistent with the terms of this
Agreement, provided that for purposes of Section
8-106 of the UCC Apollo shall exercise such rights at
the direction of New Valley; and
(ii) New Valley shall be solely and exclusively entitled
to receive and retain dividends and other
distributions payable upon the Shares.
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of New Valley to direct Apollo in the exercise of the
voting, consensual and other rights and powers which New Valley is entitled to
exercise pursuant to subparagraph (i) of paragraph (a) above and to receive the
dividends and other distributions which New Valley is authorized to receive and
retain pursuant to subparagraph (ii) of paragraph (a) above shall cease and
Apollo shall have the sole and exclusive right and authority to exercise such
voting, consensual and other rights and powers and to receive such dividends and
other distributions, and any such dividends and other distributions received by
New Valley shall immediately be paid over to Apollo. Any and all money and other
property paid over to or received by Apollo pursuant to the provisions of this
paragraph (b) shall be retained by Apollo as part of the Collateral and be
applied in accordance with the provisions hereof.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 TITLE TO SHARES
New Valley hereby represents and warrants that it owns good and
marketable title to the Shares, free and clear of any liens, charges,
encumbrances or security interests of any kind whatsoever, and that the Shares
are not subject to any restriction on alienation or transfer, in each case,
other than this Agreement. New Valley covenants to defend the right, title and
interest of New Valley in and to the Shares against the claims and demands of
all persons whatsoever. New Valley hereby represents, warrants and covenants
that New Valley is currently, or shall be, the only owner of the Shares and that
New Valley does not, and will not have, outstanding rights, options, warrants,
conversion rights or other commitments or agreements for the purchase or
acquisition of the Shares.
2.2 NO TRANSFER
New Valley covenants not to sell, assign, transfer or otherwise dispose
of, or grant any option with respect to, or pledge or otherwise encumber (other
than the lien created hereby), any of the Shares, other Collateral or any
interest therein, unless (i) it obtains the prior written consent of Apollo, or
(ii) the Note Termination Date (as hereinafter defined) has occurred, as
specified in the Note Termination Notice (as hereinafter defined) sent to the
Company. In
3
4
furtherance of the foregoing, the Company acknowledges and agrees that it will
not cause or permit any transfer of the Shares to any person, other than Apollo
or a person designated by Apollo upon a foreclosure of the pledge and security
interest granted hereby, without the prior written consent of Apollo until such
time as the Note Termination Notice has been delivered to it.
2.3 CORPORATE ORGANIZATION AND AUTHORITY
New Valley represents and warrants that:
(a) it is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has full corporate
power and authority to own its assets and to transact its business as now
conducted, is in good standing under the laws of those jurisdictions in which
the business conducted or the assets owned or leased by it makes qualification
to do business as a foreign corporation necessary and has its "chief executive
office" (within the meaning of Section 9-103 of the UCC) at 000 X.X. Xxxxxx
Xxxxxx, 00xx Xxxxx, Xxxxx, Xxxxxxx;
(b) this Agreement has been duly executed and delivered by New
Valley and constitutes a legal, valid and binding obligation of New Valley,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity;
(c) the execution, delivery and performance by New Valley of
this Agreement (i) will not violate any provision of any law applicable to New
Valley or to any of its assets, (ii) will not violate any provisions of the
Restated Certificate of Incorporation or By-laws of New Valley, and (iii) will
not violate any provisions of, or constitute a default under, or result in the
creation or imposition of any lien (other than the lien created hereby) on any
of the properties, revenues or assets of New Valley pursuant to the provisions
of any applicable law, contract, agreement or other undertaking to which New
Valley is a party or which purports to be binding upon New Valley or upon any of
its assets; and
(d) no consent or authorization of, or other act by or in
respect of, any governmental authority, and no consent of any person is required
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or the perfection of the security interest
granted hereunder.
2.4 INDEBTEDNESS AND OTHER OBLIGATIONS OF BROOKEMIL
During the effectiveness of this Agreement, New Valley will not permit
BrookeMil to incur indebtedness, issue guarantees or assume any contingent
obligations to pay money in an
4
5
amount which exceeds $100,000 in the aggregate outstanding at any given time
without the prior written consent of Apollo.
3. EVENT OF DEFAULT
For purposes of this Agreement an "Event of Default" shall exist
hereunder on the tenth (10) Business Day after Apollo shall have given New
Valley written notice of the occurrence of an Event of Default under Section
2.1(a) of the Note (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body or otherwise); provided, however,
that no Event of Default shall occur for purposes of this Agreement if, during
such ten (10) Business Day period, the Delaware LLC or New Valley shall have
cured such Event of Default (for the avoidance of doubt, no payment of the
principal amount of the Note which has become due solely as a result of such
Event of Default shall be required to cure an Event of Default).
4. REMEDIES UPON DEFAULT
4.1 RIGHTS UNDER THE UNIFORM COMMERCIAL CODE
If any Event of Default shall have occurred and be continuing, Apollo
shall have the right to exercise any and all rights and remedies of a secured
party upon default under the UCC.
4.2 SALE OF THE COLLATERAL
(a) In addition to the aforesaid rights and remedies under the Uniform
Commercial Code, upon the occurrence and during the continuance of an Event of
Default, Apollo may, to the extent permitted by law, sell the Collateral, or any
part thereof, at any public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, as Apollo
shall deem appropriate. Apollo shall be authorized at any such sale (to the
extent it deems it advisable to do so, in its sole discretion) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral then being sold for their own account for
investment and not with a view to the distribution or resale thereof, and upon
consummation of any such sale Apollo shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely and free
from any claim or right on the part of New Valley. At any such sale Apollo may
bid for or purchase, free from any right of redemption on the part of New Valley
(all said rights being also hereby waived and released), all or any part of the
Collateral offered for sale, and Apollo may, upon compliance with the terms of
the sale, hold, retain and dispose of such property without further
accountability therefor.
5
6
(b) Apollo shall give New Valley at least ten (10) days' written notice
of the intention of Apollo to make any such public or private sale or sale at
any broker's board or on any securities exchange. Such notice, in case of public
sale, shall state the time and place fixed for such sale and, in the case of
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
(c) Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Apollo may fix in the
notice of such sale.
(d) At any such public or private sale, the Collateral or part thereof
to be sold may be sold in one lot as an entirety or in separate parcels, as
Apollo may in its sole discretion determine.
(e) Apollo shall not be obligated to make any sale of Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. Apollo may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may
without further notice be made at the time and place to which the same shall
have been so adjourned.
(f) As an alternative to exercising its rights under the Uniform
Commercial Code or the power of sale herein conferred upon it, Apollo may
proceed by a suit or suits at law or in equity to foreclose on and to sell the
Collateral or any portion thereof pursuant to a judgment decree of a court or
courts of competent jurisdiction.
4.3 APPLICATION OF PROCEEDS OF SALE AND OTHER CASH RECEIVED
The proceeds of sale of Collateral sold pursuant to Section 4.2 and
cash constituting Collateral received under Section 1.2(b) shall be applied by
Apollo as follows:
FIRST: to the payment of the costs and expenses of such sale, including
the out-of-pocket expenses of Apollo and the fees and out-of-pocket expenses of
legal advisers employed by Apollo in connection therewith, and to the payment of
all advances made by Apollo hereunder and the payment of all reasonable costs
and expenses incurred by Apollo in connection with the administration and
enforcement of this Agreement;
SECOND: to the payment in full of the Note; and
THIRD: the balance (if any) of such proceeds to New Valley, the
successors or assigns of New Valley, or as a court of competent jurisdiction may
direct.
6
7
5. OTHER PROVISIONS
5.1 TERMINATION
The parties hereto agree that, on the earlier to occur of (i) the date
on which payment of any and all amounts due and payable by the Delaware LLC
under the Note is made to Apollo and (ii) the date on which the Note is
converted, in accordance with Section 2.4(b) of the LLC Agreement, into the
Class A Interests (as defined therein) issued to Apollo (such earlier date, the
"Note Termination Date"), the Collateral shall be released from the pledge of
this Agreement and returned to the possession of New Valley and no longer
constitute Collateral under this Agreement. On the Note Termination Date, or
immediately thereafter, Apollo shall (x) reassign and redeliver, or cause to be
reassigned or redelivered, without recourse to or warranty by Apollo and at the
expense of New Valley and together with appropriate instruments of reassignment
and release, to New Valley, against receipt, such of the Collateral (if any) as
shall not have been sold or otherwise applied by Apollo pursuant to the terms
hereof and not theretofore reassigned and redelivered to New Valley or such
person or persons as New Valley may have designated, which Collateral (if any)
shall not have been encumbered by Apollo, and (y) deliver to each of New Valley
and the Company a notice stating that the Note has been cancelled, the Note
Termination Date under this Agreement has occurred, and that the Collateral has
been released from the security interest under this Agreement (the "Note
Termination Notice").
5.2 FURTHER ASSURANCES
New Valley agrees to do such further acts and things, and to execute
and deliver such additional conveyances, assignments, agreements and instruments
as Apollo may at any time reasonably request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm onto Apollo its
rights, powers and remedies hereunder.
5.3 CERTAIN WAIVERS, ETC.
(a) No delay on the part of Apollo in exercising any power of sale,
lien, option or other right hereunder, and no notice or demand which may be
given to or made upon the Delaware LLC with respect to any power of sale, lien,
option or other right hereunder, shall constitute a waiver thereof, or limit or
impair the right of Apollo to take any action or to exercise any power of sale,
lien, option or any other right under this Agreement or otherwise, nor shall any
single or partial exercise thereof, or the exercise of any power, lien, option
or any other right under this Agreement, or otherwise, preclude any other or
further exercise thereof all without notice or demand, nor shall any of the same
prejudice Apollo's rights against the Delaware LLC in any respect.
7
8
(b) Each and every remedy of Apollo shall, to the extent permitted
by law, be cumulative and shall be in addition to any other remedy given
hereunder or now or hereafter existing at law or in equity or by statute.
(c) Apollo shall have no duty or obligation to satisfy the
indebtedness secured hereby out of any other property, or pursuant to any other
pledge, undertaking or security relating to such indebtedness and may realize on
the Collateral and/or any other security available to it in such order or
concurrently as it may see fit and Apollo will not be required to take any
recourse against the Delaware LLC or any other person or persons before
realizing on the Collateral.
5.4 EXPENSES
New Valley shall pay Apollo on a full indemnity basis all costs and
expenses (a) incurred by Apollo in realizing upon any of the Collateral and (b)
paid or incurred by Apollo in enforcing or attempting to enforce its rights
hereunder, which costs and expenses shall include the reasonable fees and
expenses of legal advisers and counsel to Apollo. The obligation of New Valley
hereunder to make such payments to Apollo shall constitute obligations secured
by the Collateral.
5.5 ENTIRE AGREEMENT; AMENDMENT
This Agreement, the Note, the LLC Agreement and the documents referred
to herein and therein constitute the entire agreement of the parties with
respect to the subject matter hereof and shall supersede any prior expressions
of intent or understanding with respect to this transaction. In the event of any
conflict or inconsistency between this Agreement and any other agreement
governing or otherwise relating to the Shares, the terms of this Agreement shall
control. This Agreement may be amended but only by an instrument in writing
signed by the party or parties to be bound or burdened by such amendment.
5.6 ASSIGNMENT, SUCCESSORS AND ASSIGNS
No assignment of this Agreement or any right or obligation hereunder
whatsoever shall be made by Apollo or New Valley.
8
9
5.7 APPLICABLE LAW
The provisions of this Agreement and all rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of New York, United States of America, without reference to its conflict
of laws rules.
5.8 JURISDICTION
Apollo and New Valley agree that any legal action or proceedings
arising out of or in connection with this Agreement may be brought in any court
of the State of New York located in New York County or the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Agreement, Apollo and New Valley hereby submit to and accept
with regard to any such action or proceeding, each for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts and waive any objection which such party may now or hereafter have to any
such court as the venue for any such proceeding on the ground that it may
constitute any forum non-conveniens. The agreement set forth in this Section 5.8
is given solely for the benefit of the parties hereto and such agreement is not
intended to and shall not inure to the benefit of any other person.
5.9 NOTICES
Any notice, communication or demand to be given or made by or to New
Valley or Apollo pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given or made as of the date of receipt and shall be
delivered personally or mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by overnight courier or sent by telecopy, to New
Valley or Apollo at the following addresses or telecopy numbers (or at such
other address or telecopy number for New Valley or Apollo as shall be specified
by like notice):
(a) if to Apollo:
Apollo Real Estate Investment Fund III, L.P.
c/o Apollo Real Estate Advisors III, L.P.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopy: 000-000-0000
Attention: Xxxx X. Xxxxxx
(b) if to New Valley:
New Valley Corporation
000 X.X. Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
9
10
Telecopy: 000-000-0000
Attention: X. Xxxxxx Xxxxxxxx, III
Vice President and
Chief Financial Officer
5.10 INVALIDITY
Any provision hereof prohibited by or unlawful or unenforceable under
any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without affecting or impairing the remaining provisions of this
Agreement which shall remain in full force and effect. In the event that any
provision of this Agreement or of any document executed pursuant hereto shall be
deemed to be invalid or become invalid, the parties hereto shall substitute for
such invalid provision a new provision which serves the purpose of the invalid
provision to the best possible extent.
5.11 HEADINGS AND COUNTERPARTS
The headings of this Agreement are for the purpose of reference only,
and shall not limit or otherwise affect any of the terms hereof. This Agreement
may be executed in counterparts and any single counterpart or set of
counterparts signed, in either case, by all the parties thereto shall be deemed
to be an original, and all such counterparts when taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
APOLLO REAL ESTATE INVESTMENT NEW VALLEY CORPORATION
FUND III, L.P.
By: Apollo Real Estate Advisors III,
L.P., its General Partner
By: Apollo Real Estate Capital Advisors III,
Inc., its General Partner
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
----------------------------- ---------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxxxx X. Xxxxxx
Title: Vice President Title: Executive Vice President
10
11
Acknowledged and agreed this 27th day of February, 1998.
BROOKEMIL LTD.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
11
12
ANNEX A TO THE PLEDGE AGREEMENT
Certificate No. 5 Representing 10,483 Ordinary Shares of BrookeMil Ltd.
12
