INCOME TARGET AGREEMENT
Exhibit
10.7
THIS
INCOME TARGET AGREEMENT (this “Agreement”), is dated as of January 5, 2006,
by and among ▇▇▇▇▇▇▇ MO MANAGER, LLC, a Delaware limited liability company
(the
“Manager”), MACQUARIE OFFICE II, LLC, a Delaware limited liability company
(“MOF”), ▇▇▇▇▇▇▇ PROPERTIES, L.P., a Maryland limited partnership (“▇▇▇▇▇▇▇”),
and ▇▇▇▇▇▇▇ MACQUARIE OFFICE LLC, a Delaware limited liability company (the
“Company”). Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the LLC Agreement (as defined
below).
W I T N E S S E T H
:
WHEREAS,
the Manager, MOF and ▇▇▇▇▇▇▇ have entered into that certain First Amended and
Restated Limited Liability Company Agreement, dated as of October 26, 2005,
and
amended and restated as of January 5, 2006, (as amended or restated from
time to time, the “LLC Agreement”), of the Company;
WHEREAS,
in connection with entering into the LLC Agreement, the Manager, MOF and ▇▇▇▇▇▇▇
have agreed that $7,500,000 of the distribution paid to ▇▇▇▇▇▇▇ pursuant to
Section 3.1(c) of the LLC Agreement will be deposited into an escrow account
(such amount, the “Income Support Escrow”); and
WHEREAS,
the distribution of the Income Support Escrow is contingent upon confirmation
of
certain assumptions made by ▇▇▇▇▇▇▇ about future net operating income
attributable to the Projects, other than the SG Project (each as defined in
the
LLC Agreement) (the "Applicable Projects") and therefore, will be distributed
in
accordance with this Agreement.
NOW,
THEREFORE, in consideration of the premises hereof, and the mutual promises,
obligations and agreements contained herein, the parties hereto, intending
to be
legally bound, do hereby agree as follows:
ARTICLE
I
ESTABLISHMENT
OF ESCROW ACCOUNT
The
parties shall establish an escrow account for the Income Support Escrow within
30 days after the date of this Agreement (the “Escrow Account”). The Manager
shall serve as escrow agent of the Escrow Account. The Escrow Account shall
be
invested in cash equivalents
or
other
low risk investments. ▇▇▇▇▇▇▇ shall be the owner of the Escrow Account and
interest on the Escrow Account shall be disbursed to ▇▇▇▇▇▇▇ (and allocated
to
▇▇▇▇▇▇▇ for income tax purposes) when and as the Income Support Escrow is
distributed to any of the parties hereunder.
ARTICLE
II
DISTRIBUTIONS
OF INCOME SUPPORT ESCROW
2.1 Year
1
Income Target.
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(a)
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In
the event that the actual NOI (as defined below) of the Applicable
Projects for each of the quarters ending March 31, June 30, September
30
or December 31 (each a “Year 1 Quarter”) of the year ended December 31,
2006 (“Year 1”) is less than US$18,967,500 (the “Year 1 Quarter Target
NOI”), an amount equal to the difference between the Year 1 Quarter Target
NOI and the actual NOI of the Applicable Projects for the such Year
1
Quarter, multiplied by 0.80, shall be payable to MOF as of the last
day of
such Year 1 Quarter, and shall be distributed to MOF from the Escrow
Account on the 15th
day after the last day of each such Year 1 Quarter, but in no event
shall
the aggregate amount of such distributions for each of the Year 1
Quarters
be greater than US$7,500,000; provided, that in the event the aggregate
amount of the actual NOI allocable to MOF for each of the Year 1
Quarters
plus any payments received by MOF for the first three Year 1 Quarters
pursuant to this Section
2.1(a)
is
greater than US$60,696,000, MOF shall not be entitled to any distribution
with respect to the Year 1 Quarter ending December 31, 2006, and
MOF shall
repay to the Escrow Account an amount equal to the lesser of
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(i) any
distributions it has received pursuant to this Section
2.1(a)
for any
of the Year 1 Quarters ending March 31, 2006, June 30, 2006 or September 30,
2006 and
(ii) (A)
the
sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
of
the Year 1 Quarters, plus (2) any payments received by MOF for the first three
Year 1 Quarters pursuant to this Section
2.1(a),
minus
(B) US$60,696,000.
2
Account
to the extent that the Escrow Account is not sufficient to distribute any
amounts due to MOF pursuant to Section
2.2(a)
or
Section
2.3(a).
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(c)
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For
purposes of this Agreement, "NOI" means, with respect to any Applicable
Project for any period, the total rental income and other income
(without
deduction for rent abatements to the extent of reserves therefore)
from
the operation of such Applicable Project for such period, after deducting
all expenses and other proper charges incurred by the Company in
connection with the operation and maintenance of such Applicable
Project
during such period, including, without limitation, management fees,
real
estate taxes and bad debt expenses, but before payment or provision
for
debt service charges, income taxes and depreciation, amortization
and
other non-cash expenses, in each case for such period, all as determined
in accordance with United States generally accepted accounting
principles.
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2.2 Year
2
Income Target.
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(a)
|
In
the event that the actual NOI of the Applicable Projects for each
of the
quarters ending March 31, June 30, September 30 or December 31 (each
a
“Year 2 Quarter”) of the year ended December 31, 2007 (“Year 2”) is less
than US$19,350,000 (the “Year 2 Quarter Target NOI”), an amount equal to
the difference between the Year 2 Quarter Target NOI and the actual
NOI of
the Applicable Projects for such Year 2 Quarter, multiplied by 0.80,
shall
be payable to MOF as of the last day of such Year 2 Quarter, and
shall be
distributed to MOF from the Escrow Account on the 15th
day after the last day of each such Year 2 Quarter, but in no event
shall
the aggregate amount of such distributions for each of the Year 2
Quarters
plus the aggregate amount of distributions made to MOF for the Year
1
Quarters pursuant to Section
2.1(a)
(taking into account any repayments MOF is required to pay the Escrow
Account pursuant thereto) be greater than US$7,656,000; provided,
that in
the event the aggregate amount of the actual NOI allocable to MOF
for each
of the Year 2 Quarters plus any payments received by MOF for the
first
three Year 2 Quarters pursuant to this Section
2.2(a)
is
greater than US$61,920,000, MOF shall not be entitled to any distribution
with respect to the Year 1 Quarter ending December 31, 2007, and
MOF shall
repay to the Escrow Account an amount equal to the lesser
of
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(i) any
distributions it has received pursuant to this Section
2.2(a)
for any
of the Year 2 Quarters ending March 31, 2007, June 30, 2007 or September 30,
2007 and
(ii) (A)
the
sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
of
the Year 2 Quarters, plus (2) any payments
3
received
by MOF for the first three Year 2 Quarters pursuant to this Section
2.2(a),
minus
(B) US$61,920,000.
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(b)
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To
the extent funds remain available for distribution from the Escrow
Account
after the distributions set forth in Section
2.1,
on the 15th
day following the end of Year 2, an amount equal to US$2,500,000
less the
aggregate amount of the distribution made to MOF for each Year 2
Quarter
pursuant to Section
2.2(a)
(taking into account any repayments MOF is required to pay the Escrow
Account pursuant thereto) shall be distributed to ▇▇▇▇▇▇▇ from the
Escrow
Account; provided that ▇▇▇▇▇▇▇ hereby agrees and covenants to repay
and
guaranty such amount (plus, without duplication of the amount set
forth in
the parenthetical in Section 2.1(b) up to an additional $156,000)
to the
Escrow Account to the extent that the Escrow Account is not sufficient
to
distribute any amounts due to MOF pursuant to Section
2.3(a).
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2.3 Year
3
Income Target.
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(a)
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In
the event that the actual NOI of the Applicable Projects for each
of the
quarters ending March 31, June 30, September 30 or December 31 (each
a
“Year 3 Quarter”) of the year ended December 31, 2008 (“Year 3”) is less
than US$20,035,000 (the “Year 3 Quarter Target NOI”), an amount equal to
the difference between the Year 3 Quarter Target NOI and the actual
NOI of
the Applicable Projects for such Year 3 Quarter, multiplied by 0.80,
shall
be payable to MOF as of the last day of such Year 3 Quarter, and
shall be
distributed to MOF from the Escrow Account on the 15th
day after the last day of each such Year 3 Quarter, but in no event
shall
the aggregate amount of such distributions for each of the Year 3
Quarters
plus the aggregate amount of distributions made to MOF for the Year
1
Quarters pursuant to Section
2.1(a)
and for the Year 2 Quarters pursuant to Section
2.2(a)
(in each case taking into account any repayments MOF is required
to pay
the Escrow Account pursuant thereto) be greater than US$7,656,000;
provided, that in the event the aggregate amount of the actual NOI
allocable to MOF for each of the Year 3 Quarters plus any payments
received by MOF for the first three Year 3 Quarters pursuant to this
Section
2.3(a)
is
greater than US$64,112,000, MOF shall not be entitled to any distribution
with respect to the Year 3 Quarter ending December 31, 2008, and
MOF shall
repay to the Escrow Account an amount equal to the lesser
of
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(i) any
distributions it has received pursuant to this Section
2.3(a)
for any
of the Year 3 Quarters ending March 31, 2008, June 30, 2008 or September 30,
2008 and
(ii) (A)
the
sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
of
the Year 3 Quarters, plus (2) any payments
4
received
by MOF for the first three Year 3 Quarters pursuant to this Section
2.3(a),
minus
(B) US$64,112,000.
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(b)
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In
the event that the NOI of the Applicable Projects for the one-year
period
ended December 31, 2008 is greater than US$80,140,000 (the “Year 3 Target
NOI”), and distributions were previously made from the Escrow Account
to
MOF pursuant to Section
2.2(a)
(taking into account any repayments MOF is required to pay the Escrow
Account pursuant thereto), an amount equal to the lesser of (x) the
amounts previously distributed to MOF from the Escrow Account pursuant
to
Section
2.2(a),
(y) an amount equal to the product of (i) 0.80 and (ii) the difference
between the Year 3 Target NOI and the actual NOI of the Applicable
Projects for Year 3 and (z) $760,000, shall be paid by MOF to ▇▇▇▇▇▇▇
on
January 20, 2009.
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2.4 Payment
of Remaining Funds.
Any
portion of Income Support Escrow that is not paid or distributed to MOF or
▇▇▇▇▇▇▇ pursuant to Section
2.1,
Section
2.2
or
Section
2.3
of this
Agreement shall be paid to ▇▇▇▇▇▇▇ out of the Escrow Account on January 30,
2009.
2.5 Treatment
of Income Support Payments.
Any
portion of the Income Support Escrow paid to MOF pursuant Section 2.1, Section
2.2, or Section 2.3 of this Agreement shall be deemed to be capital
contributions to the Company by ▇▇▇▇▇▇▇. Items of deduction shall be specially
allocated to ▇▇▇▇▇▇▇ in an amount equal to such capital contributions.
ARTICLE
III
MISCELLANEOUS
3.1 Amendments.
This
Agreement may not be amended, altered or modified except by a writing signed
by
all the parties hereto.
3.2 Binding
Provisions.
The
covenants and agreements contained herein shall be binding upon, and inure
to
the benefit of, the successors and permitted assigns of the respective parties
hereto. No other person shall have any rights or remedies
hereunder.
3.3 Severability.
Each
provision of this Agreement shall be considered separable and if for any reason
any provision or provisions hereof are determined to be illegal or invalid
and
contrary to any existing or future law, such illegality or invalidity shall
not
impair the operation of, or affect, those portions of this Agreement which
are
legal and valid.
3.4 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be an
original and all of which together shall constitute one agreement binding on
all
parties hereto, notwithstanding that all the parties may not have signed the
same counterpart.
5
3.5 Applicable
Law.
This
Agreement shall be construed and enforced in accordance with the laws of the
State of Delaware applicable to agreements to be performed solely within the
State of Delaware.
3.6 Complete
Agreement.
This
Agreement, together with the exhibits which are incorporated as if expressly
set
forth herein, constitutes the entire agreement between the parties and
supersedes all agreements, representations, warranties, statements, promises
and
understandings, whether oral or written, with respect to the subject matter
hereof, and neither party hereto shall be bound by nor charged with any oral
or
written agreements, representations, warranties, statements, promises or
understandings not specifically set forth in this Agreement or the exhibits
hereto.
3.7 Notices.
Any
Notification (as defined in the LLC Agreement) to any party with respect to
any
matter relating to this Agreement shall be sent in the manner set forth in
the
LLC Agreement.
6
IN
WITNESS WHEREOF, this Agreement has been executed by each of the parties hereto
as of the date of this Agreement set forth above.
▇▇▇▇▇▇▇
MACQUARIE OFFICE, LLC,
a
Delaware limited liability company
By: ▇▇▇▇▇▇▇
MO Manager, LLC,
a
Delaware limited liability company,
its
manager
By:▇▇▇▇▇▇▇
Properties, L.P.,
a
Maryland limited partnership,
its
sole
member
By:▇▇▇▇▇▇▇
Properties, Inc.,
a
Maryland corporation,
its
general partner
By: /s/ ▇▇▇▇
Lammas
Name:
▇▇▇▇
Lammas
Its Senior
Vice
President
▇▇▇▇▇▇▇
PROPERTIES, L.P.,
a
Maryland limited partnership
By:
▇▇▇▇▇▇▇ Properties, Inc.,
a
Maryland corporation,
its
general partner
By: /s/ ▇▇▇▇
Lammas
Name:
▇▇▇▇
Lammas
Its Senior
Vice
President
MACQUARIE
OFFICE II LLC,
a
Delaware limited liability company
By:
Macquarie Office (US) Corporation,
a
Maryland corporation,
its
manager
By:
/s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇
Name:
▇▇▇▇ ▇.
▇▇▇▇▇▇
Its
Vice
President
▇▇▇▇▇▇▇
MO MANAGER, LLC
a
Delaware limited liability company
By:▇▇▇▇▇▇▇
Properties, L.P.,
a
Maryland limited partnership,
its
sole
member
By:▇▇▇▇▇▇▇
Properties, Inc., a Maryland corporation, its general partner
By: /s/ ▇▇▇▇
Lammas
Name:
▇▇▇▇
Lammas
Its Senior
Vice
President