EXHIBIT 10.41
LIMITED LIABILITY COMPANY AGREEMENT
OF
PRIME/▇▇▇▇▇▇▇ DEVELOPMENT COMPANY, L.L.C.
Dated as of March 30, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
LIMITED LIABILITY COMPANY AGREEMENT OF
PRIME/▇▇▇▇▇▇▇ DEVELOPMENT COMPANY, L.L.C.
TABLE OF CONTENTS
PAGE
I. DEFINED TERMS ................................................... 1
1.01 Defined Terms ....................................... 1
1.02 Other Defined Terms: ................................ 15
1.03 Tax Matters Terms ................................... 15
1.04 Definitive Joint Venture Agreement .................. 15
II. ORGANIZATION ................................................... 15
2.01 Formation ........................................... 15
2.02 Name and Principal Place of Business ................ 15
2.03 Term ................................................ 16
2.04 Registered Agent, Registered Office and Foreign
Qualification ....................................... 16
2.05 Purpose ............................................. 16
III. MEMBERS ....................................................... 17
3.01 Admission of Members ................................ 17
3.02 Limitation on Liability ............................. 17
3.03 Prime Retail ........................................ 17
IV. CAPITAL ........................................................ 18
4.01 Initial Capital Contributions ....................... 18
4.02 Development Costs Contributions ..................... 19
4.03 Deficit Contributions ............................... 19
4.04 Capital Contributions and Remedies .................. 20
4.05 Capital Accounts .................................... 20
4.06 No Further Capital Contributions .................... 21
V. INTERESTS IN THE COMPANY ........................................ 21
5.01 Percentage Interests ................................ 21
5.02 Return of Capital ................................... 21
5.03 Ownership ........................................... 21
5.04 Waiver of Partition; Nature of Interests in the
Company ............................................. 21
VI. ALLOCATIONS AND DISTRIBUTIONS .................................. 22
6.01 Allocations ......................................... 22
6.02 Distributions ....................................... 22
PAGE
VII. MANAGEMENT .................................................... 23
7.01 Management .......................................... 23
7.02 Meetings of Members ................................. 27
7.03 Managing Member ..................................... 29
7.04 Services and Fees ................................... 32
7.05 Duties and Conflicts ................................ 34
7.06 Company Expenses .................................... 34
7.07 Change in Control ................................... 35
7.08 Actions Requiring Member Approval ................... 35
VIII. CALL OPTIONS ................................................. 36
8.01 Call Option ......................................... 36
8.02 Sale Contract; Closing .............................. 39
8.03 Termination of Other Agreements ..................... 44
8.04 Power of Attorney ................................... 44
IX. BOOKS AND RECORDS .............................................. 45
9.01 Books and Records ................................... 45
9.02 Accounting and Fiscal Year .......................... 45
9.03 Reports ............................................. 45
9.04 The Company Accountant .............................. 47
9.05 Reserves ............................................ 47
9.06 The Budget and Operating Plan ....................... 47
9.07 Project Plan ........................................ 48
X. TRANSFER OF INTERESTS ........................................... 49
10.01 No Transfer of Interests ........................... 49
10.02 Permitted Transfers of Interests ................... 49
10.03 Transferees ........................................ 50
10.04 Admission of Additional Members .................... 50
XI. EXCULPATION AND INDEMNIFICATION ................................ 51
11.01 Exculpation ........................................ 51
11.02 Indemnification .................................... 51
XII. DISSOLUTION AND TERMINATION ................................... 52
12.01 Dissolution ........................................ 52
12.02 Termination ........................................ 53
12.03 Liquidating Member ................................. 54
XIII. DEFAULT BY MEMBER ............................................ 54
13.01 Events of Default .................................. 54
PAGE
13.02 Effect of Event of Default ......................... 55
XIV. MISCELLANEOUS ................................................. 56
14.01 Covenants, Representations and Warranties of the
Members ............................................ 56
14.02 Further Assurances ................................. 58
14.03 Notices ............................................ 58
14.04 Governing Law ...................................... 59
14.05 Attorney Fees ...................................... 60
14.06 Captions ........................................... 60
14.07 Pronouns ........................................... 60
14.08 Successors and Assigns ............................. 60
14.09 Extension Not a Waiver ............................. 60
14.10 Creditors Not Benefited ............................ 60
14.11 Recalculation of Interest .......................... 60
14.12 Severability ....................................... 61
14.13 Entire Agreement ................................... 61
14.14 Publicity .......................................... 61
14.15 Counterparts ....................................... 61
14.16 Confidentiality: ................................... 61
14.17 Time of the Essence ................................ 62
14.18 Venue .............................................. 62
14.19 Waiver of Jury Trial ............................... 63
APPENDICES
Appendix A Tax Matters .......................................... A-1
Appendix B Common Unit Recipient Certifications ................. B-1
Exhibit 1 Legal Description for the Company Property
Exhibit 2 Preliminary Budget and Operating Plan
LIMITED LIABILITY COMPANY AGREEMENT
OF
PRIME/▇▇▇▇▇▇▇ DEVELOPMENT COMPANY, L.L.C.
This LIMITED LIABILITY COMPANY AGREEMENT ("AGREEMENT") of PRIME/▇▇▇▇▇▇▇
DEVELOPMENT COMPANY, L.L.C. is made and entered into as of March 30, 1998, by
and between ▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C., an Illinois limited liability company,
("▇▇▇▇▇▇▇"), and PRIME GROUP REALTY, L.P., a Delaware limited partnership
("PRIME GR"), as Members.
WHEREAS, the managing general partner of Prime GR is Prime Group Realty
Trust, a Maryland real estate investment trust ("GR"), which is a reporting
company (a "Reporting Company") under the Securities Exchange Act of 1934 and
subject to federal and state laws, including Code provisions, governing real
estate investment trusts; and
WHEREAS, ▇▇▇▇▇▇▇ has succeeded to all of the right, title and interest of
J. ▇▇▇▇ ▇▇▇▇▇▇▇ Development Company, an Illinois corporation ("▇▇▇▇▇▇▇ ▇▇"), as
purchaser of the Company Property under that certain Purchase and Sale
Agreement dated March 11, 1998, by and between ▇▇▇▇▇▇▇ ▇▇ and LaSalle National
Bank, as trustee under trust agreement known as Trust No. 121550 as amended
("Purchase Contract").
WHEREAS, ▇▇▇▇▇▇▇ and Prime GR desire to form a limited liability company
under the Delaware Act (as hereinafter defined) upon the terms set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINED TERMS
1.01 DEFINED TERMS: As used in this Agreement, the following terms have
the meanings set forth below:
"70% CALL OFFER" means a Call Offer made after the 70% Leasing Condition
has been satisfied and before the 90% Leasing Condition has been satisfied.
"90% CALL OFFER" means a Call Offer made after the 90% Leasing Condition
has been satisfied.
"70% LEASING CONDITION" means 70% Actual Occupancy of the office space of
the Building.
"90% LEASING CONDITION" means 90% Actual Occupancy of the office space of
the Building.
"ACQUISITION COSTS" means an amount equal to the sum of (i) the purchase
price of the Company Property of $19.259 million, (ii) closing costs and
Acquisition Loan fees with respect thereto and (iii) amounts set forth in the
initial Budget and Operating Plan for preapproved pre-development costs and
Company Property operating costs through the date of the Construction Loan
Opening, which amount shall be $22.345 million or such other amount as is
provided therefor in the Budget and Operating Plan.
"ACQUISITION LOAN" means that certain mortgage loan by LaSalle National
Bank, Chicago, Illinois, to the Company in the principal amount of $13.5
million and secured by the Company Property.
"ACTUAL LEASES" means leases executed pursuant to this Agreement as of
the applicable date.
"ACTUAL OCCUPANCY" means that portion of the rentable square feet of the
office space of the Building which is subject to Actual Leases, expressed as a
percentage.
"ADDITIONAL CAPITAL CONTRIBUTION" has the meaning set forth in Section
4.01(c).
"ADJUSTED CAPITAL ACCOUNT DEFICIT" has the meaning set forth in Appendix
A.
"AFFILIATE" means, with respect to any Person, (a) any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person, or (b) any other Person owning or controlling 25% or more of
the outstanding voting interests of such Person, or (c) any officer, director,
general partner or managing member of such Person, or (d) any other Person
which is an officer, director, general partner, managing member or holder of
25% or more of the voting interests of any other Person described in clauses
(a) through (c) of this definition.
"AGREEMENT" has the meaning set forth in the introductory paragraph
hereof.
"APPROVED BY MEMBERS", "ACTION BY MEMBERS", "DECISION BY MEMBERS" and "AS
DETERMINED BY MEMBERS" and each expression of similar import refers to and
require a formal action of Members taken at a meeting of Members or otherwise
having the effect of an action of Members taken at a meeting of Members.
"▇▇▇▇▇▇▇" has the meaning set forth in the introductory paragraph hereof.
"▇▇▇▇▇▇▇ ▇▇" has the meaning set forth in the introductory paragraph
hereof.
"BOOK BASIS" has the meaning set forth in Appendix A.
"BUDGET AND OPERATING PLAN" means the consolidated budget and
comprehensive Operating Plan most recently approved by the Members with regard
to the Company Property, covering the Company's anticipated operations, and
including the Project Plan, if any.
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"BUILDING" means the approximately 20 story building to be developed by
the Company on the site of the Company Property pursuant to the Budget and
Operating Plan, which will be comprised of approximately 150,000 square feet
of retail space on three levels fronting State Street, approximately 800,000
square feet of office space fronting on Dearborn Street, and an underground
parking garage containing approximately 280 stalls, all as approved by the
Members.
"BUSINESS DAY" means any weekday in which national banks having their
principal place of business in Chicago, Illinois are required or permitted to
be open.
"CALL OFFER" has the meaning set forth in Section 8.01.
"CALL OFFER CONDITION" means the 70% Leasing Condition or the 90% Leasing
Condition, as applicable.
"CALL OFFER DATE" means the date on which a Call Offer is delivered to
▇▇▇▇▇▇▇.
"CALL OFFEREE" has the meaning set forth in Section 8.01.
"CALL OFFEROR" has the meaning set forth in Section 8.01.
"CALL OFFER PRICE" means (i) with respect to a 90% Call Offer, Net
Capitalized SNOI (90%) and (ii) with respect to a 70% Call Offer, the sum of
Net Capitalized SNOI (70%) and the Unleased Space Value.
"CAPITAL ACCOUNT" means the separate account maintained for each Member
under Section 4.05.
"CAPITAL CONTRIBUTION" means, with respect to any Member, any Initial
Capital Contribution, Additional Capital Contribution, Development Costs
Contribution or Deficit Contribution made by such Member to the Company
pursuant to this Agreement.
"CAPITAL EXPENDITURES" means the cash amount of any capitalizable
expenditure (as determined in accordance with GAAP) with respect to any Actual
Lease or Projected Lease and projected to occur after the Call Offer Date
including, without limitation, tenant improvements, leasing commissions and
concessions.
"CAPITALIZED SNOI (90%)" means an amount equal to the result obtained by
dividing (i) SNOI (90%) by (ii) .085
(viz., Capitalized SNOI (90%) = SNOI (90%) ).
----------
.085
"CAPITALIZED SNOI (70%)" means an amount equal to the result obtained by
dividing (i) SNOI (70%) by (ii) .085
(viz., Capitalized SNOI (70%) = SNOI (70%) ).
----------
.085
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"CAPITALIZED SNOI (UNLEASED SPACE)"means an amount equal to the result
obtained by dividing (i) SNOI (Unleased Space) by (ii) .085
(viz., Capitalized SNOI (Unleased Space) = SNOI (Unleased Space) ).
---------------------
.085
"CASH COLLATERAL" shall mean any of the following provided by Prime GR
and accepted by a Lender to secure Construction Loan Obligations: (i) cash,
debt instruments issued or guaranteed by the United States or its agencies or
instrumentalities and maturing within six months or less from the date of
acquisition; (ii) commercial paper rated P-1 or A-1 on the date of acquisition
and maturing within six months or less from the date of acquisition; (iii)
overnight time deposits (whether or not insured); (iv) interest bearing
deposits in domestic and foreign branches of United States commercial banks
having capital and surpluses of at least $250,000,000; (v) money market mutual
funds with assets of at least $750,000,000, substantially all of which assets
consist of obligations of the type described in the foregoing clauses; (vi)
similar quality short term investments; and (vii) any other collateral
accepted by a Lender therefor.
"CERTIFICATE OF FORMATION" has the meaning set forth in Section 2.01.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON UNITS" has the meaning set forth in Section 8.01(c).
"COMPANY" means the limited liability company formed pursuant to the
Certificate of Formation and operated pursuant to the terms of this Agreement.
"COMPANY ACCOUNTANT" has the meaning set forth in Section 9.04.
"COMPANY ASSETS" means any real estate asset or other property (real,
personal, intangible or mixed) owned by or leased to the Company, including,
without limitation, the Company Property.
"COMPANY MINIMUM GAIN" has the meaning set forth in APPENDIX A.
"COMPANY PROPERTY" means the approximately 66,768 square foot vacant land
parcel bounded by State, Dearborn, ▇▇▇▇▇ and Marble Place in Chicago,
Illinois, legally described in EXHIBIT 1 to this Agreement, and all other
Company Assets and rights of the Company associated therewith.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 14.16(a).
"CONSTRUCTION COMMENCEMENT" means the date, on or after the Construction
Loan Opening, on which construction of the Building commences and construction
continues in ▇▇▇▇▇▇▇, provided the necessary permits have been issued for the
Project by each governmental agency from which a permit is required to
commence construction in ▇▇▇▇▇▇▇ of the Building.
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"CONSTRUCTION LOAN" means one or more mortgage loans to the Company for
the construction of the Project and refinancing the Acquisition Loan, secured
by the Company Property, on terms and conditions, including interest, fees and
other costs, approved by the Members, and pursuant to which the Lender has
committed and is bound to lend to the Company an aggregate amount not less
than 75% of the Development Costs. The Construction Loan shall be
non-recourse to each Member except to the extent, if any, otherwise agreed to
by such Member.
"CONSTRUCTION LOAN COMMITMENT" means the commitment of the Lender to make
the Construction Loan.
"CONSTRUCTION LOAN OBLIGATIONS" means any monetary obligation of the
Company or the Company Property to a Lender with respect to a Construction
Loan.
"CONSTRUCTION LOAN OPENING" means the date on which all conditions for
the initial draw or advance under the Construction Loan have been satisfied
with the sole exception of receipt by the Company of any requisite portion of
the Development Costs Contribution.
"CONTRIBUTION CONDITION" means the (i) Company has entered into
definitive loan documents relating to the Construction Loan, (ii) Construction
Loan Opening has occurred, and (iii) the Project has satisfied the Preleasing
Condition.
"CURRENT BUDGET AND OPERATING PLAN" means the Budget and Operating Plan
in effect for the current calendar year.
"DEFAULT CONTRIBUTION" has the meaning set forth in Section
13.01(b)(iii).
"DEFICIT CONTRIBUTION" has the meaning set forth in Section 4.03.
"DEFICIT SHORTFALL" has the meaning set forth in Section 4.03(a).
"DELAWARE ACT" means the Delaware Limited Liability Company Act, as
amended from time to time.
"DEVELOPMENT COSTS" means an amount equal to the excess of (i) the sum of
(A) the Acquisition Costs and (B) the total costs of development and
stabilization of the Company Property, as set forth in the Project Plan,
including (I) all hard costs such as, without limitation, shell and core
costs, skybridge costs, hard cost contingency and the costs of tenant
improvements and (II) all soft costs related to development support services,
including, without limitation, architectural and engineering costs, attorney
and accounting costs, consultant and professional fees and expenses, surveys
and appraisals, permits and utility connection fees, space planning, title and
escrow costs, credit enhancement, insurance costs and expenses, costs and
expenses for bonds, debt service payments, Building artwork, technical service
costs, leasing commissions, promotions and advertising costs, pre-opening
costs, real estate taxes, financing fees, development management costs,
opening expenses, all fees set forth in Section 7.04(a) herein
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payable during development and stabilization, any other site costs which are
not hard costs, and any soft cost contingency, over (ii) an amount equal to
the aggregate proceeds from tax incentive financing actually received by the
Company or paid on behalf of the Company or the Project with respect to
expenditures identified in the Project Plan.
"DEVELOPMENT COSTS COMMITMENT" means an amount equal to the excess, if
any, of (i) the Development Costs over (ii) an amount equal to the sum of (A)
the outstanding balance, if any, of the Acquisition Loan, and (B) the amount
of the Construction Loan Commitment (less any portion of clause (A) which will
be repaid by borrowings pursuant to the Construction Loan Commitment).
"DEVELOPMENT COSTS CONTRIBUTION" has the meaning set forth in Section
4.02(a).
"DISCOUNTED CAPITAL EXPENDITURES" means the total of all Lease-Related
Capital Expenditures over the remaining terms of the applicable Actual Leases
or Projected Leases after discounting each Lease-Related Capital Expenditure
from all months in which such Capital Expenditures will be made to the Call
Offer Date at a discount rate of 11.76%.
"DISCOUNTED FREE RENT" means the total of all Free Rent over the
remaining terms of the applicable Actual Leases or Projected Leases after
discounting each Free Rent item from all months in which such Free Rent will
be allowed to the Call Offer Date at a discount rate of 11.76%.
"DISCOUNTED NONREIMBURSABLE EXPENSES" means the total of all
Nonreimbursable Expenses over the remaining terms of the applicable Actual
Leases or Projected Leases after discounting each Nonreimbursable Expense from
all months in which such Nonreimbursable Expense will be incurred to the Call
Offer Date at a discount rate of 11.76%.
"EVENT OF DEFAULT" has the meaning set forth in Section 13.01.
"EXPENSES" has the meaning set forth in APPENDIX A.
"FREE RENT" means (i) any and all rent abatements which will be allowed
to tenants under the Actual Leases and/or Projected Leases which give rise to
the Projected Revenues utilized to determine the applicable Capitalized SNOI
(i.e., 90%, 70% or Unleased Space) and (ii) any and all Stated Rents under
such Actual Leases or Projected Leases which will not be received for the
period from the Call Offer Date through the date on which payment of such
Stated Rents commences.
"GAAP" means United States generally accepted accounting principles which
are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of
Certified Public Accountants in existence as of the relevant date.
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"GUARANTEE CONTRIBUTION" means the lesser of (i) the aggregate amount of
the Prime Guarantees or (ii) an amount equal to the excess of (A) the maximum
amount of the Construction Loan Commitment over (B) 75% of the Development
Costs.
"GUARANTEE PAYMENT" means any payment under any guarantee or letter of
credit which is a Guarantee Contribution, or any transfer of Cash Collateral,
which payment or transfer is made or used to satisfy all or any portion of the
Construction Loan Obligations.
"IMMEDIATE FAMILY" has the meaning set forth in Section 7.07.
"INDEMNIFIED PARTY" has the meaning set forth in Section 11.02.
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section
4.01.
"INITIAL MEMBERS" means Members ▇▇▇▇▇▇▇ and Prime GR.
"INTEREST" means, with respect to any Member at any time, all of the
right, title and interest of such Member in the Company at such time,
including, without limitation, its limited liability company interest as
defined in the Delaware Act and the right of such Member to any and all of the
benefits to which such Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all of the terms
and provisions of this Agreement.
"LEASE-RELATED CAPITAL EXPENDITURES" means any and all Capital
Expenditures projected in the Budget and Operating Plan or the Unleased Space
Projection or set forth in Actual Leases, as applicable, to occur after the
Call Offer Date and required or intended to generate the Projected Revenues
utilized in calculating the applicable Capitalized SNOI.
"LEASE UP SCHEDULE" has the meaning set forth in Section 8.01(b).
"LENDER" means one or more lenders of the Construction Loan.
"LIQUIDATING MEMBER" means the Member designated as such by the Members
from time to time; provided, however, that any Member that causes the
dissolution of the Company under Section 12.01(e) or with respect to which an
Event of Default has occurred shall not serve as the Liquidating Member.
"LOSS" has the meaning set forth in APPENDIX A.
"MAJOR DECISION" has the meaning set forth in Section 7.01(a).
"MANAGING MEMBER" has the meaning set forth in Section 7.03(a) hereof.
"MEMBER" means ▇▇▇▇▇▇▇, Prime GR and/or any other Person which is
admitted as a Member of the Company from time to time in accordance with this
Agreement and applicable
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law (including any Affiliate of any of the ▇▇▇▇▇▇▇ or Prime GR to which an
Interest in the Company has been Transferred or assigned pursuant to the terms
of this Agreement). Except with respect to actions, decisions and resolutions
expressly stated herein to require the approval of the Members or of a
particular Member, Members shall have the right to participate in and control
the business and affairs of the Company only to the extent provided in Article
VII.
"MEMBER MINIMUM GAIN" has the meaning set forth in APPENDIX A.
"MEMBER NONRECOURSE DEBT" has the meaning set forth in APPENDIX A.
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in APPENDIX A.
"MEMBER REPRESENTATIVE" has the meaning set forth in Section 7.02(a).
"NECESSARY EXPENSES" means all expenditures which are (A) with respect to
an Additional Capital Contribution, Acquisition Costs currently or within the
subsequent sixty (60) day period due and payable and/or (B) with respect to a
Development Costs Contribution, Development Costs currently or within the
subsequent thirty (30) day period due and payable. In each case such
expenditures shall be in accordance with, and in amounts not exceeding,
corresponding amounts specified in a Current Budget and Operating Plan for
such thirty (30) or sixty (60) day period.
"NET CAPITALIZED SNOI" means the excess of (i) Capitalized SNOI (90%),
Capitalized SNOI (70%) or Capitalized SNOI (Unleased Space), as applicable,
over (ii) the sum of the corresponding Discounted Free Rent, Discounted
Nonreimbursable Expenses, and Discounted Capital Expenditures.
"NET CASH FLOW" means, for any period, the excess of (a) Revenues for
such period over (b) Expenses for such period.
"NET LOSS" has the meaning set forth in Appendix A.
"NET OPERATING INCOME" means, for any period, the difference between
Projected Revenues and Projected Expenses for such period.
"NET PROFIT" has the meaning set forth in Appendix A.
"NON-CONTRIBUTING MEMBER" has the meaning set forth in Section 4.04(b).
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Appendix A.
"NONREIMBURSABLE EXPENSES" means the excess of (i) all Projected Expenses
for each month after the Call Offer Date over (ii) all expense and tax
reimbursements for such month to be derived from the Actual Leases or
Projected Leases on which Capitalized SNOI is based.
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"NOTICES" has the meaning set forth in Section 14.03.
"OFFEREE VALUE" has the meaning set forth in Section 8.01(c).
"OPERATING PLAN" means the overall and annual consolidated strategic and
comprehensive operating plan with regard to the Company Property and the
Company's anticipated operations as most recently approved by the Members.
"OTHER MEMBER" has the meaning set forth in Section 4.04(b).
"PARTIALLY ADJUSTED CAPITAL ACCOUNT" has the meaning set forth in
APPENDIX A.
"PAYOUT PERCENTAGES" means with regard to each Member, the percentages
set forth below opposite its name in the circumstances described below:
(i) Until such time as each of the Members shall have received
aggregate distributions pursuant to Sections 6.02 and Appendix A,
Section 3.3 (other than on account of Priority Deficit Contributions
and the preferred return thereon provided for herein) less than or
equal to their aggregate Capital Contributions made to the Company and
a 12% cumulative annual preferred return compounded quarterly on the
average daily balance of their unreturned aggregate Capital
Contributions, the Payout Percentages of the Members shall be the same
as and in accordance with their then-current Percentage Interests at
the time of such distribution.
(ii) Then, until such time as Prime GR shall have received
aggregate distributions pursuant to Sections 6.02 and Appendix A,
Section 3.3 (other than on account of Priority Deficit Contributions
and the preferred return thereon provided for herein) equal to its
aggregate Capital Contributions made to the Company, and an 18%
cumulative annual preferred return compounded quarterly on the average
daily balance of its unreturned aggregate Capital Contributions, the
Payout Percentages of the Members shall be as follows:
MEMBER PAYOUT PERCENTAGES
▇▇▇▇▇▇▇ 20%
Prime GR 80%
(iii) Then, until such time as Prime GR shall have received
aggregate distributions pursuant to Sections 6.02 and APPENDIX A,
Section 3.3 (other than on account of Priority Deficit Contributions
and the preferred return thereon provided for herein) equal to its
aggregate Capital Contributions made to the Company, and a 22%
cumulative annual preferred return compounded quarterly on the average
daily balance of its unreturned aggregate Capital Contributions, the
Payout Percentages of the Members shall be as follows:
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MEMBER PAYOUT PERCENTAGES
▇▇▇▇▇▇▇ 30%
Prime GR 70%
(iv) Then, until such time as ▇▇▇▇▇▇▇ shall have received the
return of his aggregate Default Contributions made to the Company, the
Payout Percentages of the Members shall be as follows:
MEMBER PAYOUT PERCENTAGES
▇▇▇▇▇▇▇ 100%
Prime GR 0%
(v) Thereafter, the Payout Percentages of the Members shall be
as follows:
MEMBER PAYOUT PERCENTAGES
▇▇▇▇▇▇▇ 40%
Prime GR 60%
"PERCENTAGE INTEREST" means, with respect to each Member, the ratio of
the total Capital Contributions made by such Member to the total Capital
Contributions made by all Members at any time The initial Percentage
Interest of each Member is as follows:
MEMBER PERCENTAGE INTEREST
▇▇▇▇▇▇▇ 14.65%
Prime GR 85.35%
"PERMITTED DELAY" means the period of time that an Initial Member shall
be materially delayed or hindered in, or in any material way prevented from
the performance required hereunder by reason of fire or other casualty,
accidents, unavailability of fuel, power, supplies or materials, industry-wide
strikes, lockouts, or labor troubles (including legal or illegal picketing),
failure of power, riots, insurrection, war, acts of God, adverse weather
conditions (excluding weather conditions the occurrence of which from time to
time is not exceptional for Chicago, Illinois), any abnormal delay by
governmental authorities in issuing permits not through the fault of the
Managing Member, governmental restrictions or actions which are not now in
effect or applied, or other reason of like nature, not the fault of the
Initial Member delayed in performing work or doing acts, provided if the
Initial Member seeking an extension of time does not deliver
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written notice of such proposed Permitted Delay to the other Initial Member
within ten (10) days of the event causing the proposed Permitted Delay, the
commencement of such Permitted Delay shall be deemed to be the date upon which
such notice was actually delivered.
"PERSON" means any individual, partnership, corporation, limited
liability company, trust or other entity.
"PLANS AND SPECIFICATIONS" means the plans and specification for the
development of the Project as most recently approved by the Members.
"PREDEVELOPMENT SHORTFALL" has the meaning set forth in Section 4.01(c).
"PRELEASING CONDITION" means the required level of preleasing of the
office and retail portions of the Building on terms and conditions approved by
the Members.
"PRELIMINARY BUDGET AND OPERATING PLAN" has the meaning set forth in
Section 9.06(a).
"PRIME GR" has the meaning set forth in the introductory paragraph.
"PRIME GUARANTEES" means all guarantees, letters of credit and Cash
Collateral, and any substitutions or replacements therefor, which have been
provided by Prime GR in lieu of all or a portion of its Development Costs
Contributions, and which secure or otherwise guarantee or assure the repayment
of Construction Loan Obligations.
"PROFIT" has the meaning set forth in Appendix A.
"PROJECT" means the development of the Company Property by the Company
pursuant to the Budget and Operating Plan and the Plans and Specifications.
"PROJECT COMPLETION DEFAULT SCHEDULE" means the schedule identified as
such in the most recently approved Project Plan, if any, of the Company, which
sets forth the outside date (including a reasonable contingency period) by
which Substantial Completion is projected to have occurred as well as various
interim dates (including a reasonable contingency period) by which specific
phases of the construction of the Building and development of the Project are
projected to occur, subject to extension for Permitted Delay. Each such date
is an "Outside Completion Date."
"PROJECT LEASING DEFAULT SCHEDULE" means the schedule identified as such
in the most recently approved Project Plan, if any, setting forth the outside
dates (including a reasonable contingency period) (each an "Outside Leasing
Target Date") by which 50%, 70%, and 90% of the rentable square feet of the
office and retail space of the Building is projected to have been leased
pursuant to executed leases approved by the Members, subject to extension for
Permitted Delay. The Outside Leasing Target Date (including a reasonable
contingency period), for the
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leasing of 90% of such rentable space shall be eighteen (18) months after
Substantial Completion, subject to extension for Permitted Delay.
"PROJECT PLAN" means the construction and development plan for the
Project pursuant to the Plans and Specifications, including a budget for all
Development Costs based on actual contracts or bids approved by the Members
and costs of financing shown in the Construction Loan Commitment. After
approval by the Members, the Project Plan shall form a part of the Budget and
Operating Plan.
"PROJECTED EXPENSES" means for any period an amount equal to the sum of
all cash operating expenses of the Company Property projected in the Budget
and Operating Plan to be expended by the Company including, without
limitation, (A) utilities, (B) maintenance and repairs, (C) administrative
costs, (D) management and leasing fees, (E) cleaning, (F) security, (G)
insurance and (H) real estate taxes, personal property taxes and sales taxes,
provided that for purposes of calculating SNOI (Unleased Space), Projected
Expenses shall be zero ($0). Projected Expenses shall be calculated without
any deductions for debt service (including interest), depreciation or
amortization of the Company Property, any capitalized expenditure (as
determined in accordance with GAAP), any fees, commissions, expenses or
allowances payable to any member or Affiliate (other than the portion of the
management and leasing fees which is at market rates) or other non-cash
charges.
"PROJECTED LEASES" means the leases of retail and office space and
Storage Space of the Unleased Space on the terms projected in the Unleased
Space Projection.
"PROJECTED REVENUES" means for any period an amount equal to total gross
cash revenues projected in the Budget and Operating Plan to be received from
the Company Property for such period, including (A) the total amount payable
by all tenants, licensees, concessionaires and others occupying or having a
right to use or occupy any portion of the Company Property, including, but not
limited to, Stated Rents (B) parking fees, service income, utility and
telephone service fees. Stated Rents contained in the Budget and Operating
Plan for any space which became subject to Actual Leases subsequent to
preparation of the Budget and Operating Plan shall be replaced in calculating
Projected Revenues by the Stated Rents under such Actual Leases; provided for
purposes of calculating SNOI (Unleased Space), Projected Revenues from the
Unleased Space shall be as stated in the Unleased Space Projection.
"PROPERTY" means the Company Property or any other real estate asset
owned by the Company and all other Company Assets and rights associated with
such real estate asset.
"READILY MARKETABLE SECURITIES" means those securities that (a) are (i)
debt or equity securities of or other interests in any Person that are traded
on a national security exchange, reported on by the National Association of
Securities Dealers Automated Quotation System or otherwise actively traded
over the counter or (ii) debt securities of an issuer that has debt or equity
securities that are so traded or so reported on and that a nationally
recognized securities firm has agreed to make a market in and (b) are not
subject to restrictions on transfer as a result
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of any applicable contractual provisions or the provisions of the Securities
Act of 1933, as amended.
"REASONABLE PERIOD" has the meaning set forth in Section 13.01(c).
"RESERVE ACCOUNTS" has the meaning set forth in Section 9.05 hereof.
"REVENUES" has the meaning set forth in Appendix A.
"SALE" has the meaning set forth in Section 10.05(a).
"SHORTFALL" has the meaning set forth in Section 4.02.
"STABILIZED NET OPERATING INCOME" or "SNOI" means:
(i) With respect to a 90% Call Offer ("SNOI (90%)"), Net
Operating Income for the twelve (12) full calendar month period
following the Call Offer Date for which Projected Revenues have been
determined based on:
(A) Occupancy assumed to be the greater of Actual Occupancy or Target
Occupancy;
(B) Stated Rents from Actual Leases in place of any corresponding
amounts in the Budget and Operating Plan;
(C) For office space up to Target Occupancy and not covered by Actual
Leases, Stated Rents assumed to be the same average Stated Rents as
provided in Actual Leases of office space;
(D) For any retail space up to Target Occupancy and not covered by
Actual Leases, Stated Rents assumed to be the same average Stated
Rents as provided in Actual Leases of retail space; and
(E) For any Storage Space up to Target Occupancy and not covered by
Actual Leases, Stated Rents assumed to be the same average Stated
Rents as provided in Actual Leases of storage space.
(F) Projected Expenses as set forth in the Budget and Operating Plan
but on a fully grossed up basis.
(ii) With respect to a 70% Call Offer ("SNOI (70%)"), Net
Operating Income for the twelve (12) full calendar month period
following the Call Offer Date for which Projected Revenues have been
determined based on (A) Stated Rents from Actual Leases in place of
any corresponding amounts in the Budget and Operating Plan, (B) the
inclusion of no Projected Revenues with respect to any Unleased Space,
and (C)
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Projected Expenses as set forth in the Budget and Operating Plan but
on a fully grossed up basis.
(iii) Net Operating Income based on the Projected Revenues and
Projected Expenses set forth in the Unleased Space Projection with
respect to Unleased Space, ("SNOI (Unleased Space)").
"STATED RENT" means the stated annual rent (including base and percentage
and expense and tax reimbursements) under Actual Leases or Projected Leases,
as applicable, without deduction for rent abatements, for the twelve (12) full
calendar month period commencing for each lease the later of the Call Offer
Date or the date rents actually become payable under the lease.
"STORAGE SPACE" shall mean dedicated storage space (excluding unleased
office and retail space).
"SUBSTANTIAL COMPLETION" means the shell and core of the Building has
been completed substantially in accordance with the Plans and Specifications,
as certified to by the Project architect and tenant improvement work has
commenced.
"TARGET ACCOUNT" has the meaning set forth in APPENDIX A.
"TARGET OCCUPANCY" means 95% of the rentable square feet of each of the
retail, office and storage space of the Building.
"TAX BASIS" has the meaning set forth in APPENDIX A.
"TAX MATTERS PARTNER" has the meaning set forth in APPENDIX A.
"TRANSFER" has the meaning set forth in Section 10.01.
"TRANSFEREE" has the meaning set forth in Section 10.01.
"TRANSFER DOCUMENTS" has the meaning set forth in Section 10.06(b).
"TREASURY REGULATION" and "TREAS. REG." has the meaning set forth in
APPENDIX A.
"UNLEASED SPACE" means that portion of rentable retail, office and
storage space of the Building not subject to Actual Leases as of the Call
Offer Date (but excluding therefrom the last 5% projected to be leased in the
Lease-Up Schedule of the rentable office, retail and storage space of the
Building).
"UNLEASED SPACE PROJECTION" has the meaning set forth in Section 8.01(b).
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"UNLEASED SPACE VALUE" means the amount therefor determined as provided
in Section 8.01(b)(iii).
1.02 OTHER DEFINED TERMS: As used in this Agreement, unless otherwise
specified, (a) all references to Sections, Articles, Exhibits, Schedules or
paragraphs are to Sections, Articles, Exhibits, Schedules or paragraphs of
this Agreement, (b) "hereof" and "herein" refers to this Agreement in its
entirety and (c) each accounting term has the meaning assigned to it in
accordance with GAAP.
1.03 TAX MATTERS TERMS: Additional terms used herein are defined in
Appendix A, Tax Matters.
1.04 DEFINITIVE JOINT VENTURE AGREEMENT: This Agreement represents the
"definitive joint venture agreement executed and delivered" pursuant to the
penultimate paragraph of that certain letter agreement by and between Prime GR
and ▇▇▇▇▇▇▇ ▇▇ dated March 11, 1998 ("Letter Agreement").
II. ORGANIZATION
2.01 FORMATION: The Members hereby agree to form the Company as a
limited liability company under and pursuant to the Delaware Act, upon and
subject to the terms and conditions set forth in this Agreement. Prime GR or
any other Person authorized by Prime GR or approved by the Members is hereby
authorized and directed to form the Company by filing a certificate of
formation of the Company (the "Certificate of Formation") in the office of the
Secretary of State of the State of Delaware. ▇▇▇▇▇▇▇ or any other Person
authorized by ▇▇▇▇▇▇▇ or approved by the Members is hereby authorized to file
and record any amendments to the Certificate of Formation and such other documen
ts as may be required or appropriate under the Delaware Act or the laws of any
other jurisdiction in which the Company may conduct business or own property.
2.02 NAME AND PRINCIPAL PLACE OF BUSINESS: (a) The name of the Company
is set forth on the cover page to this Agreement. The Members may change the
name of the Company from time to time and may adopt one or more fictitious
names for use by the Company. All business of the Company shall be conducted
under such name, and title to all assets of the Company shall be held in such
name.
(b) The principal place of business and office of the Company shall be
initially located at the offices of the Managing Member, c/o J. ▇▇▇▇ ▇▇▇▇▇▇▇
Development Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The Members may from time to time change such principal office and
place of business or may change or establish such additional offices or places
of business of the Company as it may deem necessary or appropriate for the
operation of the Company's business.
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2.03 TERM: The term of the Company shall commence on the date of the
filing of the Certificate of Formation pursuant to the Delaware Act and shall
continue in existence perpetually, unless sooner terminated by the Members or
further extended by the unanimous agreement of the Members, pursuant to the
provisions of this Agreement.
2.04 REGISTERED AGENT, REGISTERED OFFICE AND FOREIGN QUALIFICATION: The
name of the Company's registered agent for service of process shall be
Corporation Service Company, and the address of the Company's registered agent
and the address of the Company's registered office in the State of Delaware
shall be Corporation Service Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. Such agent and such office may be changed from time to time by the
Members. ▇▇▇▇▇▇▇ or any other Person authorized by ▇▇▇▇▇▇▇ or approved by the
Members, is hereby authorized, for the purpose of authorizing or qualifying
the Company to do business in any state, territory or dependency of the United
States in which it is necessary or expedient for the Company to transact
business, to do any and all acts and things necessary to obtain from such
state, territory or dependency any such authorization or qualification,
including any filing or recording deemed necessary for or by Prime GR.
2.05 PURPOSE: (a) The purpose of the Company shall be:
(i) To acquire, own, manage, develop, operate, finance, refinance,
lease, sell and otherwise deal with and dispose of part or all of the
Company Property;
(ii) To acquire, own, manage, develop, operate, finance, refinance,
lease, sell and otherwise deal with and dispose of part or all of any
other Property or Company Assets as determined appropriate by the
Members;
(iii) To construct and contract for and supervise all work necessary
or appropriate for construction of any improvements on the Property
and/or the Parcels (including any and all improvements ancillary
thereto) as determined appropriate by the Members; and
(iv) To conduct all activities reasonably necessary or desirable to
accomplish the foregoing purposes.
(b) The Company shall not engage in any other business or activity or
acquire any Property other than the Company Property without the approval of
the Members.
(c) The Members acknowledge and agree that the financial statements of
the Company may be required by GAAP and/or the Securities and Exchange
Commission to be consolidated at all times or from time to time with the
financial statements of Prime GR and Prime GR Trust. Accordingly, the books
and records of the Company and the financial reports required to be prepared
and furnished to the Members and/or Members pursuant to Section 9.03 shall be
prepared in accordance with GAAP and all other standards applicable to Prime
GR Trust as a Reporting Company.
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III. MEMBERS
3.01 ADMISSION OF MEMBERS: ▇▇▇▇▇▇▇ and Prime GR are hereby admitted as
members of the Company and shall be shown as such on the books and records of
the Company. Except as expressly permitted by this Agreement, no other Person
shall be admitted as a member of the Company, and no additional Interests
shall be issued, without the approval of the Members.
3.02 LIMITATION ON LIABILITY: Except as otherwise expressly provided in
the Delaware Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company, and no Member shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a member of the Company. Except as otherwise expressly
provided in the Delaware Act, the liability of each Member shall be limited to
the amount of capital contributions required to be made by such Member in
accordance with the provisions of this Agreement, but only when and to the
extent the same shall become due pursuant to the provisions of this Agreement.
3.03 PRIME RETAIL: The Members agree to develop the Company Property as
three (3) separately saleable parcels, one for the parking, one for the retail
space and one for the office space (whether by means of a so-called horizontal
subdivision or by submission of the Company Property to a condominium regime),
and that notwithstanding anything to the contrary contained herein Prime GR
may assign its Interest in the Company to an entity (the "Venture") wholly
owned by Prime GR and/or its Affiliates and Prime Retail, L.P. ("Retail")
and/or its Affiliates, provided that Prime GR shall notify ▇▇▇▇▇▇▇ of its
intention to do so on or before June 1, 1998.
(a) In the event Prime GR assigns its Interest to the Venture, the Venture
shall be deemed to be an Initial Member and shall have all of the rights and
obligations of Prime GR arising hereunder.
(b) In the event the Venture exercises a Call Offer as provided in
Section 8.01, the equity interests to be paid for ▇▇▇▇▇▇▇'▇ Interest shall be
a combination of Common Units and operating partnership units of Retail
("Retail Units"), such that the value of the Retail Units shall bear the same
proportion to the value of the Common Units as the "profit" (calculated as
hereinafter provided) attributable to the retail space in the Building bears
to the "profit" attributable to the office space in the Building. For
purposes of this Section 3.03, the profit attributable to the retail or office
space in the Building shall be equal to the difference between (i) the Net
Capitalized SNOI attributable to the income from the retail or office space
and associated parking, as applicable, less (ii) the portion of Development
Costs allocable to the retail or office space and associated parking, as
applicable. If the Members are unable to agree upon an allocation of
Development Costs between the office space and the retail space, such
allocation shall be made by the general contractor and the architect for the
Project, whose allocation shall be binding upon the Members.
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IV. CAPITAL
4.01 INITIAL CAPITAL CONTRIBUTIONS: (a) Simultaneously with the full
execution of this Agreement, ▇▇▇▇▇▇▇ shall contribute or cause to be
contributed to the Company (i) all of ▇▇▇▇▇▇▇'▇ right, title, and interest in
and to the Company Property (including, without limitation, all of ▇▇▇▇▇▇▇
DC's interest therein and the $500,000 paid by ▇▇▇▇▇▇▇ ▇▇ as ▇▇▇▇▇▇▇ money
under the Purchase Contract), (ii) all of ▇▇▇▇▇▇▇'▇, ▇▇▇▇▇▇▇ DC's and either
of their Affiliates' right, title, and interest in and to any reports, work
product, due diligence, test results, analyses and other evaluations regarding
the Company Property (the "Reports") (which Reports shall be deemed to have no
value), and (iii) $500,000 in cash. The Members agree that, on the date
hereof, the agreed fair market value of the contributions described in
subsection (i) above (net of any debt and other liabilities and expenses to
which such contribution is subject or which the Company is assuming) is equal
to $500,000. Upon making all of the Capital Contributions provided for in
this Section 4.01(a), ▇▇▇▇▇▇▇'▇ Capital Account shall be credited with an
amount equal to $1,000,000 (its "Initial Capital Contribution").
(b) Simultaneously with the full execution of this Agreement, Prime GR
shall contribute or cause to be contributed to the Company pursuant to this
Section 4.01, (i) all of Prime GR's right, title and interest in and to the
Company Property (including, without limitation, all of Prime GR's $500,000
▇▇▇▇▇▇▇ money payment under the Purchase Contract), (ii) all of Prime GR's
right, title, and interest in and to any reports, work product, due diligence,
test results, analyses and other evaluations regarding the Company Property,
if any (which shall be deemed to have no value), and (iii) $5,325,000.00 in
cash. The Members agree that, on the date hereof, the agreed fair market
value of the contributions described in subsection (i) above (net of any debt
and other liabilities and expenses to which such contributions are subject or
which the Company is assuming) is equal to $500,000. Upon making all of the
Capital Contributions provided for in this Section 4.01(b), Prime GR's Capital
Account shall be credited with an amount equal to $5,825,000.00.
(c) If at any time or from time to time after May 31, 1998, and prior to
the earlier of (i) October 1, 1999 and (ii) satisfaction of the Contribution
Condition, additional funds are required by the Company to meet the
obligations or needs of the Company as shown in the Current Budget and
Operating Plan, including, without limitation, to satisfy any operating
deficit, and there are not sufficient reserves held by the Company or
available cash flow of the Company as shown in such Current Budget and
Operating Plan (a "Predevelopment Shortfall"), the Members (or, in the case of
Necessary Expenses included in any Predevelopment Shortfall, any Member) may
(but shall not be obligated to) request Prime GR to make a further Capital
Contribution ("Additional Capital Contribution") in the amount of such
Predevelopment Shortfall. If so requested by the Members (or, in the case of
Necessary Expenses included in any Predevelopment Shortfall, by any Member),
Prime GR shall, within five (5) business days thereafter, contribute the
amount of the applicable Predevelopment Shortfall subject to the limits set
forth in Section 4.01(d). Only one Additional Capital Contribution may be
requested during any 60 day period.
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(d) The aggregate amount of all Capital Contributions made by Prime GR
pursuant to this Section 4.01 and not returned shall not at any time exceed
$7,500,000 (its "Initial Capital Contribution").
4.02 DEVELOPMENT COSTS CONTRIBUTIONS: (a) If at any time or from time
to time, subsequent to the satisfaction of the Contribution Condition and
prior to Substantial Completion, additional funds are required by the Company
to meet the obligations or needs of the Company as shown in the Current Budget
and Operating Plan, including, without limitation, to satisfy any operating
deficit or to construct any improvements or alter any improvements on the
Company Property and there are not sufficient reserves held by the Company or
available cash flow of the Company as shown in such Current Budget and
Operating Plan (a "Shortfall") and in a draw request under the Construction
Loan or a request for funding prepared by the Managing Partner which contains
substantially the same information and documentation that would be required to
request a draw under the Construction Loan, which draw request or request for
funding shall have been approved by Prime GR, which approval shall not be
unreasonably withheld or delayed, not less than five (5) business days prior
to any corresponding request of Prime GR to make a Development Costs
Contribution; the Members (or, in the case of Necessary Expenses included in
any Shortfall, any Member) may (but shall not be obligated to) request Prime
GR to make a further Capital Contribution ("Development Costs Contributions")
in the amount of such Shortfall. If so requested by the Members (or, in the
case of Necessary Expenses included in any Shortfall, by any Member), Prime GR
shall, within five (5) business days thereafter, contribute the amount of the
applicable Shortfall subject to the limits set forth in Section 4.02(b). Only
one Development Costs Contribution may be requested during any thirty (30) day
period.
(b) The aggregate amount of all Capital Contributions made by Prime GR
pursuant to this Section 4.02 and not returned shall not exceed at any time
its Development Costs Commitment. Any excess from time to time of Prime GR's
Capital Contributions over its Development Costs Commitment shall be refunded
to the extent of available Net Cash Flow as provided in Section 6.02(b).
(c) For the purpose of determining the amount of Development Costs
Contributions made by Prime GR pursuant to this Section 4.02, upon the
election of Prime GR in its sole discretion and, subject to the provisions of
Section 6.02(d), the amount of any Guarantee Contribution by Prime GR shall be
treated as if it were a cash contribution pursuant to Section 4.04(a). Any
reduction in the amount of Prime GR's Guarantee Contribution shall result in a
corresponding reduction in the amount deemed to have been made by Prime GR as
a Capital Contribution.
4.03 DEFICIT CONTRIBUTIONS: (a) If at any time or from time to time
additional funds are required by the Company to meet any obligations or needs
of the Company shown in a Current Budget and Operating Plan, including,
without limitation, to satisfy any operating deficit or to construct any
improvements or alter any improvements on the Company Property, and there are
not sufficient reserves held by the Company or available cash flow of the
Company as shown in such Current Budget and Operating Plan, and no Capital
Contribution therefor can be required under Sections 4.01 or 4.02 (a "Deficit
Shortfall"), the Members or any Member may (but shall
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not be obligated to) request that the Members make contributions in cash
("Deficit Contributions") in the amount of such Deficit Shortfall. If so
requested by the Members (or, in the case of Necessary Expenses included in
any Deficit Shortfall, by any Member), each Member may, but shall not be
required to, within fifteen (15) business days thereafter contribute its pro
rata share (based upon the relative Percentage Interests then in effect) of
the amount of the applicable Deficit Shortfall.
4.04 CAPITAL CONTRIBUTIONS AND REMEDIES: (a) Except as otherwise
provided in Section 4.01(a), Section 4.01(b), Section 4.02(c) or Section
6.02(d), all Capital Contributions shall be made by wire transfer of funds to
the Company account designated by the Members.
(b) If any Member (the "Non-Contributing Member") fails to timely make
any Capital Contribution (or any portion thereof) (a "Failed Contribution")
requested or required by Sections 4.01, 4.02 or 4.03 hereof, and any other
Member (the "Other Member") has made any share required by it to be made of
such Capital Contribution, if any, then the Other Member will have the
following rights and/or remedies:
(i) If the Failed Contribution was an Additional Capital Contribution
or a Development Costs Contribution, the Company or ▇▇▇▇▇▇▇ (acting
alone) on behalf of the Company may exercise any and all rights and
remedies available at law or in equity to enforce Prime GR's
obligation to make such Failed Contribution or for damages suffered or
incurred by ▇▇▇▇▇▇▇ or the Company by reason of the default by Prime
GR;
(ii) If the Failed Contribution was a Deficit Contribution, the Other
Member, as its sole and exclusive remedy, may cause any one (but only
one) of the following actions to be taken by delivery of notice to
such effect to the Company and the Non-Contributing Member;
(A) The Other Member may contribute the Non-Contributing
Member's pro rata share of such requested Deficit Contribution (in
which case, if such Failed Contribution is subsequently made by the
Non-Contributing Member, it shall be paid over by the Company to the
Other Member); or
(B) The Other Member may withdraw its share of such requested
Deficit Contribution.
(c) Each Member acknowledges and agrees that the other Members would not
be entering into this Agreement were it not for (i) the Members agreeing to
make the Capital Contributions provided for in Section 4.01, 4.02 and 4.03 of
this Agreement, and (ii) the remedy provisions in this Section 4.04.
4.05 CAPITAL ACCOUNTS: A Capital Account shall be maintained for each
Member in the manner set forth in Article II of APPENDIX A. The provisions of
APPENDIX A are intended to comply with the requirements of Treas. Reg. Section
signed 1.704-1(b)(2)(iv) with respect to
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substantial economic effect, and shall be interpreted and applied accordingly.
Subject to the foregoing, the determination of Capital Account and Adjustments
by the Tax Matters Partner shall be presumptively correct.
4.06 NO FURTHER CAPITAL CONTRIBUTIONS: Except as expressly provided in
this Agreement or with the prior written consent of the Members, no Member
shall be required or entitled to contribute any other or further capital to
the Company, nor shall any Member be required or entitled to loan any funds to
the Company. No Member will have any obligation to restore any negative or
deficit balance in its Capital Account upon liquidation or dissolution of the
Company, and any such negative or deficit balance shall not be deemed an asset
of the Company.
V. INTERESTS IN THE COMPANY
5.01 PERCENTAGE INTERESTS: The Percentage Interests of the Members may
be adjusted only as set forth in this Agreement.
5.02 RETURN OF CAPITAL: No Member shall be liable for the return of the
Capital Contributions (or any portion thereof) of any other Member, it being
expressly understood that any such return shall be made solely from the assets
of the Company. No Member shall be entitled to withdraw or receive a return
of any part of its Capital Contributions or Capital Account, to receive
interest on its Capital Contributions or Capital Account or to receive any
distributions from the Company, except as expressly provided for in this
Agreement or under applicable law.
5.03 OWNERSHIP: All assets of the Company (including the Company
Property) shall be owned by the Company, subject to the terms and provisions
of this Agreement.
5.04 WAIVER OF PARTITION; NATURE OF INTERESTS IN THE COMPANY: Except as
otherwise expressly provided for in this Agreement, each of the Members hereby
irrevocably waives any right or power that such Member might have:
(a) To cause the Company or any of its assets to be partitioned;
(b) To cause the appointment of a receiver for all or any portion of the
assets of the Company;
(c) To compel any sale of all or any portion of the assets of the
Company pursuant to any applicable law; or
(d) To file a complaint, or to institute any proceeding at law or in
equity, to cause the termination, dissolution or liquidation of the Company.
Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 5.04, and without such waivers no
Member would have entered into this
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Agreement. No Member shall have any interest in any specific assets of the
Company (including the Company Property). The interests of all Members in
this Company are personal property.
VI. ALLOCATIONS AND DISTRIBUTIONS
6.01 ALLOCATIONS: For each Company taxable year or portion thereof, Net
Profit and Net Loss shall be allocated as provided in APPENDIX A.
6.02 DISTRIBUTIONS: Except as provided in Section 3.3 of APPENDIX A,
the Company shall make quarterly distributions of Net Cash Flow (to the extent
and if available) to the Members in the following manner and order of
priority:
(a) First, an amount of such Net Cash Flow shall be distributed
(in the order and priority set forth below) to the Members until each
of the Members has received distributions of Net Cash Flow, pursuant
to this Section 6.02(a) and Section 3.3 of APPENDIX A, in an aggregate
amount (for the current period and all previous periods) equal to the
sum of (i) the aggregate of its Deficit Contributions made pursuant to
this Agreement and (ii) a 22% cumulative annual preferred return
(unless waived or reduced by the Member entitled to receive it, in
such Member's sole discretion and without implying any obligation to
waive or reduce such preferred return) compounded quarterly on the
average daily balance of its aggregate unreturned Deficit
Contributions made pursuant to this Agreement (with distributions made
pursuant to clause (i) and clause (ii) hereof deemed to be made first
with respect to the return described in clause (ii) hereof and then
with respect to the aggregate Deficit Contributions described in
clause (i) hereof). Amounts distributable under this Section 6.02(a)
shall be distributed to the Members in the reverse order in which such
aggregate Deficit Contributions were made; that is, the most recent
Deficit Contributions made pursuant to this Agreement, together with
the corresponding cumulative 22% annual preferred return, shall be
returned or paid first to the Members having made such Deficit
Contribution, and then, the next most recent Deficit Contribution,
together with the cumulative 22% annual preferred return thereon,
shall be returned or paid to the Members having made such Deficit
Contribution, etc.; and
(b) Thereafter, an amount of the remaining Net Cash Flow equal
to the amount, if any, by which Prime GR's total Capital Contributions
made and not returned exceed its Development Costs Commitment;
(c) Thereafter, any remaining Net Cash Flow shall be distributed
to the Members in accordance with and in proportion to their
respective Payout Percentages, determined as of the moment each dollar
of such distribution is made (as the same may vary from time to time
as each dollar of such Net Cash Flow is distributed to the Members).
Any distributions made pursuant to this Section 6.02(c) or Appendix A,
Section 3.3, shall be deemed to be made first with respect to the
cumulative annual preferred return components and then with respect to
the return of the applicable Capital Contribution.
-22-
(d) Any distribution to Prime GR representing a return of a
Capital Contribution which is a Guarantee Contribution comprised of
Cash Collateral shall be paid to Prime GR only upon the absolute
assignment (subject to the interest therein of the Lender) to the
Company by Prime GR of all or that portion of such Cash Collateral
having a value equal to the value of such distribution. Any
distribution to Prime GR representing a return of a Capital
Contribution which is a Guarantee Contribution not comprised of Cash
Collateral must, in Prime GR's sole discretion, either (i) be applied
to the Construction Loan secured by such Guarantee Contribution or
otherwise paid as a Guarantee Payment, (ii) be retained by the Company
as a cash Capital Contribution or (iii) be paid into an escrow created
by Prime GR to secure its obligation to fund the guarantee or letter
of credit comprising such Guarantee Contribution, which escrow shall
continue until the earlier to occur of (A) payment of such amount to
the Lender as a Guarantee Payment or (B) any claim with respect to
such guarantee or letter of credit of the Lender or with respect to
any Construction Loan against the Member has terminated, whereupon the
escrowed amount shall be paid to the Company as a Cash Contribution of
the Member. Any such distribution to Prime GR representing a return
of a Capital Contribution in the form of a Guarantee Contribution
shall reduce Prime GR's Capital Contributions. Any amount paid
pursuant to this Section 6.02(d) as a Cash Contribution of the Member
shall, if appropriate pursuant to this Section 6.02 or Section 3.3 of
Appendix A, thereupon be distributed to the Members.
(e) Any preferred return payable to Prime GR with respect to
Guarantee Contributions pursuant to Section 6.02(c) shall be reduced
by the amount of interest paid by the Company on a portion of the
Construction Loan equal to the amount of such Guarantee Contribution
for the period with respect to which such preferred return is due and
by any additional financing fees or other charges paid by the Company
therefor.
(f) Returns of Capital Contributions pursuant to Section 6.02(c)
shall be deemed to be made to a Member first with respect to any
Capital Contributions of such Member that are not Guarantee
Contributions and then with respect to such Member's Guarantee
Contributions. Preferred returns on Capital Contributions made to the
Company will, in each case, be calculated from the actual date of
contribution.
VII. MANAGEMENT
7.01 MANAGEMENT: (a) Except as otherwise expressly provided in this
Agreement, the business and affairs of the Company shall be vested in and
controlled by the Members. The Members shall act by means of and through
their authorized representatives appointed in writing pursuant to Section 7.02
("Member Representatives"). Each Member Representative appointed by a Member
shall act as agent for and under the sole and exclusive direction and control
of such Member and shall be free to represent the views and positions of such
appointing Member. All decisions made with respect to the management and
control of the Company and approved by the Members (except only for any
decisions which by the express terms of this Agreement require the approval of
either of the Members) shall be binding on the Company and all Members. The
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Members shall delegate certain managerial functions to the Managing Member,
who shall be responsible for performing, or for causing to be performed, such
duties as described in Section 7.03 hereof. The Members may also delegate in
writing such other of their powers, duties, responsibilities and management
functions as they may from time to time determine to the Managing Member, any
other Member, or any officer, employee or agent of any Member or the Company.
Except as otherwise expressly provided in this Agreement or as otherwise
approved by the Members or otherwise approved or provided for in the Budget
and Operating Plan, the Managing Member shall have the sole authority to
authorize and approve all matters pertaining to the Company's business, other
than the following matters (each a "Major Decision"):
(i) The making of any decision and the implementing of any decision
to acquire any Property (including without limitation the Company
Property); committing to make or increase any non-refundable deposit
in connection with the acquisition of any Property (or allowing any
refundable deposit to become non-refundable); the execution and
delivery of any agreement, contract, binding letter of intent or other
document or instrument to purchase any Property; any assignment (in
whole or in part) of any such agreement, contract, letter of intent or
other document or instrument; the taking of any action required or
permitted to be taken thereunder (including, without limitation,
approval of proposed third party costs in connection with any due
diligence and closing costs, and approval of structural/engineering
and environmental reports, in each case prior to closing) or any
decision to terminate any such agreement, contract, letter of intent
or other document or instrument (the Members agree that no Member will
be paid any acquisition fee with regard to the Company's purchase of
any Property), provided, that the Members hereby approve the
acquisition of the Company Property, the assignment of the benefits
and assumption by the Company of the obligations of the purchaser
under the Purchase Contract, entering into the Acquisition Loan, and
the payment of the "Purchase Price", "Closing Costs", "Financing
Costs" and "Due Diligence Costs" set forth in the Preliminary Budget
and Operating Plan, Exhibit 2 hereto, in amounts not to exceed the
amounts shown thereon and subject to upon presentation of actual
invoices and statements therefor;
(ii) The making of any decision to develop, rehabilitate or construct
any improvements upon any Property (or any material variation of any
decision previously approved by the Members); the expending of any
funds in connection with any such activity except to the extent
specifically provided for or contemplated in a Current Budget and
Operating Plan and the selection of any general contractor therefor
other than ▇▇▇▇▇-Diesel, unless in each case, the same has been
previously approved by the Members;
(iii) The approval of all plans and specifications, including without
limitation the Plans and Specifications and design, architectural
finishes and engineering specifications, relating to the construction
of or alteration of any improvements on the Company Property or any
other Property or material changes or modifications to such Plans and
Specifications;
-24-
(iv) The approval of all condominium declarations, air rights
agreements, operating agreements, easements, covenants, conditions,
restrictions and other documents which will benefit or burden the
Company Property or any other Property and the approval of all
applications for or other formal correspondence relating to a
modification of the zoning for the Company Property or any other
Property;
(v) Any financing or refinancing of any Property and the use of any
proceeds thereof, including, without limitation, interim and permanent
financing, including any loan to finance part or all of the costs or
expenses of any development or construction activities to be
undertaken with regard to any Property, and any other financing or
refinancing of the operations of the Company, any modification,
extension, renewal or any recasting thereof and each draw or advance
request thereunder, provided Prime GR shall have the exclusive right
and authority to select the interest rate option to be selected by the
Company from time to time under any Acquisition Loan or Construction
Loan and, further provided, either Member may elect to extend the term
of the Acquisition Loan for six (6) months at the Company's expense
and on the terms provided in the Acquisition Loan documents.
(vi) Any sale, transfer or other disposition of all or any material
portion of any Property; (vii) The approval of any Budget and
Operating Plan and any amendments or modifications thereto;
(vii) The approval of any Budget and Operating Plan and any amendments
or modifications thereto;
(viii) The making of any expenditure or incurring of any obligation
by or on behalf of the Company not shown in, or that varies from or is
not specifically included in or contemplated under, a Current Budget
and Operating Plan;
(ix) To determine whether to request any Additional Capital
Contribution, Deficit Contribution or Development Costs Contribution
pursuant to Sections 4.01, 4.02 or 4.03 (other than for Necessary
Expenses included in any Shortfall, Predevelopment Costs Shortfall or
Deficit Shortfall);
(x) Any lease of any portion of any Property over 10,000 square feet
or for a term greater than five (5) years, including renewal options,
or any amendment or modification thereto or termination thereof; and
any other lease, or any termination thereof, which is not in
accordance with lease guidelines for such Property included in the
Current Budget and Operating Plan;
(xi) The establishment of reserves, determination of the amount of
available Net Cash Flow and, except as otherwise provided in Section
6.02 or Section 3.3 of APPENDIX A, making of distributions to Members;
-25-
(xii) The institution of any legal proceedings in the name of the
Company, settlement of any legal proceedings against the Company and
confession of any judgment against the Company or any property of the
Company;
(xiii) The possession or use of any Property (including any portion
of any Property) for other than Company purposes;
(xiv) Any issuance or sale by the Company of any securities or of
additional interests in the Company, any merger, consolidation or
other business combination transaction involving the Company or other
monetization transaction or activities;
(xv) (A) The filing of any voluntary petition in bankruptcy on behalf
of the Company, (B) the consenting to the filing of any involuntary
petition in bankruptcy against the Company, (C) the filing of any
petition seeking, or the consenting to, reorganization or relief under
any applicable federal or state law relating to bankruptcy or
insolvency, on behalf of the Company, (D) the consenting to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company, or a substantial part of
the Property of the Company, (E) the making of any assignment for the
benefit of creditors on behalf of the Company, (F) the admission in
writing of the Company's inability to pay its debts generally as they
become due or (G) the taking of any action by the Company in
furtherance of any such action;
(xvi) The entering into of any asset or property management agreement
or leasing agreement with regard to the Company, or any Property, or
any other agreement anticipating a payment or receipt by the Company
not contemplated in the Budget and Operating Plan, aggregating in
excess of $50,000 to a single Person or related Persons or having a
term in excess of one year (unless terminable by the Company on thirty
(30) or fewer days notice);
(xvii) The engagement of any sales or placement agent or broker not
expressly permitted hereunder for the disposition, financing or
refinancing of any Property;
(xviii) Except to the extent otherwise provided herein, the entering
into or consummation of any transaction or arrangement with any Member
or any Affiliate of any Member, or any other transaction involving an
actual or potential conflict of interest;
(xix) Except to the extent otherwise provided herein, determining the
amount of overhead and other reimbursements or any compensation
payable to any Member or any of its Affiliates pursuant to the terms
hereof or any separate agreement between the Company and a Member or
any of its Affiliates;
-26-
(xx) The appointment of the Company Accountant or any change in the
Company Accountant or the selection of any other auditor or
independent accounting firm for the Company or the making of any
decision to change any other auditor or independent accounting firm of
the Company;
(xxi) Except as otherwise provided in Section 7.04(a), the making of
any decision, taking any action or providing any consent or approval
with regard to any property management or leasing agreement or any
development or construction management agreement with any Member or
any one or more of its Affiliates;
(xxii) The approval, determination or any other action expressly
reserved to the Members under this Agreement, including, without
limitation, any modification, amendment, or renewal of any matter
previously requiring the approval of the Members.
(b) Anything herein to the contrary notwithstanding, in the case of a
default under any Acquisition Loan, Construction Loan, or other loan to the
Company, Prime GR may immediately in its sole discretion make a Capital
Contribution or take any other action on behalf of the Company it deems
appropriate to cure such default.
(c) No Member, other than the Initial Members, shall have any right or
power to participate in or have any control over the Company business, affairs
or operations or to act for or to bind the Company in any matter whatsoever
and no Member other than the Initial Members shall be required or permitted to
consent to, acquiesce in, vote on or approve any action or act taken or
decision made by the Members, except as otherwise specifically provided in
this Agreement.
(d) The Members acknowledge that Prime GR Trust, the managing general
partner of Prime GR, is a Maryland real estate investment trust ("REIT"), and
the Members authorize and direct the Managing Member to formulate, and the
Members shall approve, each Budget and Operating Plan in a manner that
recognizes the status of Prime GR Trust as a REIT and the income, asset and
operating requirements of the Code which are applicable to a REIT (the "REIT
Requirements"). The Budget and Operating Plan will include leasing guidelines
consistent with the REIT Requirements and no action shall be taken which
knowingly contravenes the REIT Requirements unless consented to by Prime GR.
7.02 MEETINGS OF MEMBERS: (a) Each of the Initial Members shall appoint
one or more individuals as representatives ("Member Representatives") who are
authorized to act on behalf of the Member with respect to meetings of Members
and any approvals of Members or such Member required hereunder. The initial
Member Representatives appointed by ▇▇▇▇▇▇▇ shall be J. ▇▇▇▇ ▇▇▇▇▇▇▇. The
initial Member Representatives appointed by Prime GR shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. Each of the Members may, by written notice to the
other, remove any Member Representative appointed by such Member and appoint a
substitute therefor; provided, however, that any new Member Representative
appointed by any Member must either (i) be a partner, member, officer,
director or employee of such Member or of an
-27-
Affiliate of such Member or (ii) be approved by a Member Representative
appointed by the other Initial Member, such approval not to be unreasonably
withheld.
(b) The presence of Member Representatives of each of the Initial
Members shall constitute a quorum for transaction of business at any meeting
of the Members, provided that if only one of the Initial Members is
represented at said meeting, such Member represented at such meeting may
adjourn the meeting at any time without further notice. The act or
affirmative vote of Member Representatives of both Initial Members shall be
the act of the Members.
(c) Any action required to be taken at a meeting of the Members or any
other action which may be taken at a meeting of the Members may be taken
without a meeting if a consent in writing, setting forth the action so taken,
is signed by a Member Representative of each Initial Member. Any such consent
signed by both the Initial Members shall have the same effect as an act of a
majority (in number) of the Members at a properly called and constituted
meeting of the Members at which all of the Members were present and voting.
(d) Member Representatives may participate in and act at meetings of the
Members through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in such meeting shall constitute attendance in
person at the meeting of the person or persons so participating.
(e) The Members shall meet from time to time no less frequently than
quarterly, but as often as necessary or desirable to carry out its management
functions. Meetings shall be held at the principal offices of the Company
unless otherwise agreed. A Member Representative of the Managing Members
shall prepare an agenda for each such meeting and shall distribute the same to
each of the Members at least three (3) business days in advance of any such
meeting (for review and comment). Any Initial Member may convene a meeting of
Members upon at least three (3) business days' prior notice to the other
Members specifying the date, time and place of proposed meeting, the agenda
for the meeting and any documents proposed to be approved at the meeting
(unless such notice is waived in writing). A written record of all meetings
of the Members, and all decisions made by them, shall be made by the Member
Representative appointed by the Initial Members as Secretary of the Members,
and kept in the records of the Company and shall be initialed or signed by at
least one Member Representative of each Initial Member. Minutes and/or
resolutions of the Members, when initialed or signed by both Members, shall be
binding and conclusive evidence of the decisions reflected therein and any
authorizations granted thereby and the waiver of any agenda or notice
requirements with respect thereto.
(f) Except as otherwise determined by the Members, no Member or Member
Representative shall be entitled to receive any salary or other remuneration
or expense reimbursement from the Company for his services as a Member or
Member Representative.
(g) Except as otherwise agreed by the Members, the Initial Members shall
meet weekly to review the status of the Project at the principal offices of
the Company or such other location as is agreed upon. Each Initial Member
shall use its best efforts to cause a Member
-28-
Representative or a partner, member, executive officer or director of such
Member or of an Affiliate of such Member to attend each weekly meeting. No
such weekly meeting shall constitute a meeting of the Members unless with
respect to such meeting the agenda and notice requirements of Section 7.02(e)
shall have been complied with.
7.03 MANAGING MEMBER: (a) The Members may designate one of the Members
to act as the managing member of the Company ("Managing Member") to implement
the decisions of the Members. Subject to the provisions of Section 7.01 and
the other provisions of this Agreement, the Managing Member shall (i) conduct
the business of the Company on a day-to-day basis in accordance with the
Budget and Operating Plan and such other guidelines as shall be adopted by the
Members and in accordance with the standard of care required of prudent and
experienced third-party developers and/or asset managers, as the case may be,
performing similar functions, in accordance with customary industry standards,
(ii) perform the duties assigned to it hereunder and (iii) carry out all
decisions and resolutions of the Members. The initial Managing Member shall
be ▇▇▇▇▇▇▇, which shall remain the Managing Member until changed by action of
the Members or unless ▇▇▇▇▇▇▇ is terminated as the Managing Member pursuant to
Section 7.03(e) hereof. In the event that ▇▇▇▇▇▇▇ or any other Person should
resign or be removed as the Managing Member, Prime GR may (but shall be under
no obligation to) appoint a replacement thereof (including itself, or any
third-party at such rates of compensation as it shall reasonably determine
appropriate). Subject to the limitations set forth in this Agreement (including
, without limitation, the required approval for Major Decisions) and the
guidelines adopted by the Members, the Managing Member, on behalf of the
Company, shall have the power and authority to enter into contracts and leases
on behalf of the Company in accordance with the Current Budget and Operating
Plan approved by the Members, to make expenditures as are required to
implement a Current Budget and Operating Plan, but only to the extent that any
such expenditures and amounts required to be paid by the Company under such
contracts, leases and other instruments and documents are not in excess of the
limitations provided for in Section 7.01(a) (unless such excess has been
approved by the Members). The Managing Member shall have no power or
authority to authorize or approve any Major Decision or to take any material
action with regard thereto, unless the same has been approved by the Members.
The Managing Member shall not be entitled to receive any fees or other
compensation in respect of its activities as the Managing Member except as
otherwise provided in Section 7.04.
(b) In addition to and without limiting any other duties set forth in
this Agreement, the Managing Member shall:
(i) Oversee the operations and management on a day-to-day basis of
any and all of the assets which comprise the Company Property in
accordance with the Budget and Operating Plan;
(ii) Take all proper and necessary actions reasonably required to
cause the Company and all third parties at all times to perform and
comply with the provisions (including, without limitation, any
provisions requiring the expenditure of funds by the Company) of any
loan commitment, partnership agreement, agreement, mortgage, lease, or
other contract, instrument or agreement to which
-29-
the Company is a party or which affects any Company Property or the
operation thereof, other than contracts, instruments or agreemen ts to
which the Managing Member or its Affiliate is a party;
(iii) Pay in a timely manner all non-disputed operating expenses of
the Company and all non-disputed taxes, assessments, charges and fees
payable in connection with the ownership, use and occupancy of the
Company Property, in accordance with the terms of a Current Budget and
Operating Plan or as otherwise provided herein;
(iv) Obtain and maintain insurance coverage on all of the Company
Property as required by the Members, with insurers selected by Prime
GR and, if feasible and more favorable to the Company, under plans
covering Prime GR and for its Affiliates; and pay all non-disputed
taxes, assessments, charges and fees payable in connection with the
ownership, use and occupancy of the Company Property in accordance
with a Current Budget and Operating Plan;
(v) Deliver to the other Members promptly upon the receipt or sending
thereof, copies of any material correspondence with any governmental
authority and copies of all notices, reports, communications, and
other material correspondence between the Company and (A) any landlord
or tenant under any lease, (B) any lender under any mortgage loan, (C)
any holder of a mortgage affecting all or any portion of any Company
Property or which relates to any existing or pending default
thereunder or to any financial or operational information required by
such Person; or (D) any Person relating to any monetary or material
non-monetary default under any material agreement to which the Company
is a party;
(vi) Prepare and deliver to all the Members monthly status reports
and other information necessary to fully advise and apprise the
Members of the status of any acquisitions of, dispositions of, leasing
of, and development activities for, or proposed acquisitions of,
dispositions of, leasing of, and development activities for any
Property and of any proposed amendments (including any variation in
proposed expenditures) to the Budget and Operating Plan (which updates
and status reports, if approved by the Members, are "Status Reports").
Such Status Reports shall include such additional information as shall
be reasonably requested by any Member and shall be delivered to the
Members as soon as reasonably practicable after the end of each such
monthly period, but in any event no later than the 5th business day
following the end of such period.
(vii) Maintain, or cause to be maintained, the books and records
provided for in Article IX and promptly deliver to the other Members
the reports, financial statements and other information provided for
in Article IX hereof;
(viii) If the Managing Member subcontracts with third parties or any
of its Affiliates for the performance, as its agent, of any of the
services to be performed
-30-
by the Managing Member, supervise and oversee the performance of the
services performed by such third parties or Affiliates (in the event
of any such subcontract, references in this Agreement to actions taken
or to be taken by the Managing Member shall include actions taken or
to be taken by such subcontractors), provided that any such delegation
or other subcontracting must be approved in writing in advance by the
Members; and
(ix) Advising the Members as far in advance as reasonably foreseeable
with regard to the amount and timing of any Capital Contributions
which may be required by the Company or necessary to the operations of
the Company.
(c) To the extent that any of the duties of the Managing Member
described in Section 7.03(b) require the expenditure of funds or the incurring
of obligations on behalf of the Company, unless the Members shall have
expressly directed the Managing Member otherwise:
(i) the approval of any Budget and Operating Plan by the Members
shall constitute the authorization and approval of the Managing Member
to expend such funds and incur such obligations in accordance with
such Budget and Operating Plan; provided, that for each major line
item set forth in such Budget and Operating Plan, the Managing Member
is authorized to expend an amount in excess of the budgeted amount not
to exceed in the aggregate for each line item the lesser of $10,000
and 10% of such line item; and
(ii) without regard to amounts set forth in any Budget and Operating
Plan or whether any Budget and Operating Plan has been approved, the
Managing Member is hereby authorized to expend funds for emergency
repairs or other immediately necessary expenditures to avoid material
harm to the value of any Company Property.
(d) Without limiting the authority of the Managing Member pursuant to
Section 7.03(b) above, prior to making any expenditure or incurring any
obligation on behalf of the Company, the Managing Member may require the
Members to certify that such expenditure or obligation has been approved by
the Members.
(e) In addition, the Company shall reimburse the Managing Member for any
out-of-pocket costs incurred by the Managing Member but only to the extent
such expenditures were approved by the Members pursuant to Section 7.02(a).
(f) Notwithstanding anything to the contrary contained in this
Agreement, the Managing Member shall not be obligated to make any expenditures
or advance any funds on behalf of the Company except from the accounts of
funds of the Company, nor shall the Managing Member be obligated to perform
its duties and obligations hereunder if Company funds are not available in
amounts required to perform such duties and obligations. In addition, the
Managing Member shall not, without the prior approval of the Members, unless
previously approved or specifically
-31-
provided for in a Current Budget and Operating Plan or in this Agreement, take
any action constituting a Major Decision.
7.04 SERVICES AND FEES: (a) ▇▇▇▇▇▇▇ and Prime GR will be paid by the
Company the following fees in connection with the Project:
(i) A development fee equal to $3.6 million will be divided equally
between ▇▇▇▇▇▇▇ and Prime GR and paid in equal monthly installments
during the projected period of construction, commencing with the
Construction Loan Opening;
(ii) A construction supervision fee equal to 1% of hard construction
costs (both base building and tenant improvements costs), net of
reasonable amounts paid to any third-party construction managers or
supervisors, will be divided equally between ▇▇▇▇▇▇▇ and Prime GR and
paid in equal monthly installments during the projected period of
construction, commencing with the Construction Loan Opening (all such
third-party construction managers and supervisors and all senior
employees of a Member to whom it delegates base building or tenant
improvements construction supervision are subject to the approval of
the Members, which approval shall not unreasonably be withheld);
(iii) Leasing commissions at market rates, net of market commissions
paid to outside brokers and of market salaries and commissions paid to
inside brokers employed by ▇▇▇▇▇▇▇, all of such commissions and
salaries to be approved by the Members (which approval shall not be
unreasonably withheld or delayed), will be divided equally between
▇▇▇▇▇▇▇ and Prime GR for a term of five (5) years commencing April 1,
1998, and paid at such times as leasing commissions are customarily
paid;
(iv) A management fee of $1.00 per square foot per annum of the
rentable area of the office and retail portions of the Building
(exclusive of salaries for the property manager, assistant property
manager, administrative assistant and accountant, which shall be paid
by the Company in addition to such management fee) will be divided
equally between ▇▇▇▇▇▇▇ and Prime GR for a term of five (5) years
commencing on Substantial Completion and paid at the intervals such
fees are customarily paid to third-party managers;
(v) All fees earned by either Member relating to the construction of
tenant improvements in the Company Property will be shared equally
between Prime GR and ▇▇▇▇▇▇▇, including any construction supervision
fee which is paid by a tenant;
(vi) A project manager's fee equal to $1.8 million shall be payable
to ▇▇▇▇▇▇▇ at the rate of $100,000 per month for the eighteen month
period commencing with the Construction Loan Opening; and
-32-
(vii) Prime GR shall receive a fee equal to 2%, annualized and
payable monthly in arrears, of the aggregate outstanding amount (not
to exceed $3.5 million for the purposes of calculating such fee) of
the Prime Guarantees it shall have provided from time to time to
secure repayment of any Acquisition Loan; and
(viii) Any other fees, not set forth above, earned or received at any
time by either ▇▇▇▇▇▇▇ or Prime GR, or Affiliates of either of them,
with respect to the Company Property or the Project, shall be divided
equally between ▇▇▇▇▇▇▇ and Prime GR.
(b) Prime GR, Prime Group Realty Services Inc., or an Affiliate of Prime
GR or The Prime Group, Inc. shall manage the Company Property for a term
commencing upon Substantial Completion and continuing for five (5) years
thereafter, pursuant to a written management agreement with the Company
("Management Agreement"), which shall provide for the fees set forth in
paragraph (a)(iv) above and otherwise be on customary terms and conditions
satisfactory to the Members.
(c) ▇▇▇▇▇▇▇, or an Affiliate of ▇▇▇▇▇▇▇ of which J. ▇▇▇▇ ▇▇▇▇▇▇▇ is the
sole managing and voting member or has substantially all the management
authority, shall be the exclusive leasing agent for the Company Property for a
Term commencing April 1, 1998 and continuing for five (5) years thereafter,
pursuant to a written leasing agency agreement with the Company ("Leasing
Agency Agreement"), which shall provide for the fees set forth in paragraph
(a)(iii) above and otherwise be on customary terms and conditions satisfactory
to the Members.
(d) Notwithstanding the generality of the foregoing, any such Management
Agreement or Leasing Agency Agreement with a Member or one or more of its
Affiliates will at all times be immediately terminable by any Member on behalf
of the Company (without penalty or fee) upon (i) the sale of the Company
Property, (ii) the transfer of all of the Interests in the Company or of the
Members other than a permitted Transfer, (iii) the expulsion, bankruptcy or
dissolution of such Member (or the occurrence of any such event to any
Affiliate of such Member which is a party to such agreement), (iv) the
occurrence of any Change in Control with regard to such Member (or the
occurrence of any such event with regard to any Affiliate of such Member which
is a party to such agreement), (v) the violation of the transfer restrictions
contained herein by such Member or any of its Affiliates, or (vi) such Member,
or any one or more of its Affiliates which is a party to such agreement (in
its capacity as a service provider under either the management or leasing
agreements with the Company), has been grossly negligent in the performance of
its duties under such agreement or has taken any action or failed to take any
action which constitutes fraud, bad faith or willful misconduct .
(e) Any agreements with any Member or an Affiliate of any Member must be
approved by the Members, and, except as otherwise provided in this Agreement,
no fees or compensation will be paid by the Company to any Member or any of
its Affiliates, unless the same has been approved by the Members or
specifically contemplated in the Budget and Operating Plan.
(f) In addition and notwithstanding the foregoing provisions of this
Section 7.04, the Members may determine that it is appropriate for the Company
to enter into agreements with one
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or more third parties to sell or provide other professional services with
respect to any Company Property or the Company, which agreements shall be
subject to the approval of the Members. The fees for services from such third
parties shall not exceed the prevailing competitive fees being charged for
such services for similar properties in the market where the subject Company
Property is located.
(g) ▇▇▇▇▇▇▇ may delegate to ▇▇▇▇▇▇▇ ▇▇ the performance of (but not the
responsibility for) any or all of its duties hereunder as Managing Member so
long as no event occurs with respect to ▇▇▇▇▇▇▇ ▇▇ which if it occurred with
respect to ▇▇▇▇▇▇▇ would constitute a Change of Control under Section 7.07
hereof.
7.05 DUTIES AND CONFLICTS: (a) The Members and their respective
officers, employees and Affiliates shall devote such time to the Company
business as they deem to be necessary or desirable in connection with their
respective duties and responsibilities hereunder. Except as otherwise
provided in this Agreement or as otherwise agreed to by the Members or as
approved by the Members, no Member nor any member, partner, shareholder,
officer, director, employee, agent or representative of any Member shall
receive any salary or other remuneration for its services rendered pursuant to
this Agreement.
(b) Each of the Members recognizes that each of the other Members and
its members, partners, shareholders, officers, directors, employees, agents,
representatives and Affiliates, have or may in the future have other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Company and that except as hereinafter
provided each of the other Members and its members, partners, shareholders,
officers and directors, employees, agents, representatives and Affiliates, are
entitled to carry on such other business interests, activities and
investments. Each of the Members may engage in or possess an interest in any
other business or venture of any kind, independently or with others,
including, without limitation, owning, financing, acquiring, leasing,
promoting, developing, improving, operating, managing and servicing real
property on its own behalf or on behalf of other entities with which any of
the Members is affiliated or otherwise, each of the Members may engage in any
such activities, whether or not competitive with the Company, without any
obligation to offer any interest in such activities to the Company or to the
other Members. Neither the Company nor the other Members shall have any
right, by virtue of this Agreement, in or to such activities, or the income or
profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.
7.06 COMPANY EXPENSES: The Company shall be responsible for paying, and
shall pay, all direct fees, costs and expenses related to the business of the
Company to the extent approved by the Members or otherwise authorized by this
Agreement ("Approved Company Costs"), including: (i) acquiring, holding,
owning, developing and operating the Company Property, (ii) all fees payable
under Section 7.04, and (iii) all costs of financing, fees and expenses of
attorneys, financial advisors, accountants, appraisers, brokers and engineers,
and all other fees, costs and expenses directly attributable to the business
and operations of the Company. In the event any such Approved Company Costs
are or have been paid by any Member, such Member shall be entitled to be
reimbursed for such payment. Notwithstanding anything in this
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Agreement to the contrary, in no event shall the Company have any obligation
to pay or reimburse any Member for (a) any direct or indirect general overhead
expense of such Member or (b) the costs and expenses relating to any
employees, staff or other internal personnel necessary to conduct the
day-to-day operations of the Member or provide the financial reporting of the
Company or to oversee the operations of any Company Property, except as
expressly otherwise provided in the Leasing Agreement or the Management
Agreement or (c) any travel expenses, unless the same has been specifically
approved by the Members or is expressly authorized in this Agreement or a
Current Budget and Operating Plan.
7.07 CHANGE IN CONTROL: For purposes of this Agreement, a Change in
Control of shall occur if at any time any of the following occur:
(a) J. ▇▇▇▇ ▇▇▇▇▇▇▇ (or an entity wholly owned and controlled by him)
ceases to (i) have substantially all the management authority of ▇▇▇▇▇▇▇ or
(ii) together with his Immediate Family, own at least a 51% equity and voting
interest in and control ▇▇▇▇▇▇▇;
(b) J. ▇▇▇▇ ▇▇▇▇▇▇▇ or his Immediate Family transfers all or any portion
of their respective interests in ▇▇▇▇▇▇▇ to any person or entity other than
transfers to their Immediate Family or to Affiliates of ▇▇▇▇▇▇▇;
(c) ▇▇▇▇▇▇▇ is dissolved, terminated or liquidated or merged,
consolidated or reorganized into or with another corporation or other legal
person other than an entity controlled by J. ▇▇▇▇ ▇▇▇▇▇▇▇ and his Immediate
Family to an extent which would satisfy paragraph (a) above if such entity
were ▇▇▇▇▇▇▇; or
(d) ▇▇▇▇▇▇▇ sells all or substantially all of its assets to any other
person or entity other than an entity controlled by J. ▇▇▇▇ ▇▇▇▇▇▇▇ and his
Immediate Family.
For purposes of this Agreement, the term "Immediate Family" shall mean
and refer to any spouse, ex-spouse, ancestors, lineal descendants and the
brothers and sisters of such persons, any trust established for the benefit of
any of them or any other legal entity owned and controlled exclusively by
them, or the estate or legal representatives of any such person that is
deceased.
7.08 ACTIONS REQUIRING MEMBER APPROVAL: Notwithstanding any other
provision of this Agreement, the unanimous affirmative vote or unanimous
written consent of all Members shall at all times be required to approve the
following matters:
(a) Except as otherwise provided in Section 13.02, the dissolution or
winding up of the Company;
(b) The merger or consolidation of the Company; and
(c) Amendments to this Agreement.
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VIII. CALL OPTIONS
8.01 CALL OPTION: At any time after Substantial Completion and
satisfaction of the applicable Call Offer Condition, Prime GR (the "Call
Offeror") shall have the right to make an offer as described below (the "Call
Offer") to ▇▇▇▇▇▇▇ (the "Call Offeree") as set forth below:
(a) The Call Offer shall (i) be in writing, signed by the Call Offeror
and delivered to ▇▇▇▇▇▇▇ and the Company Accountant and (ii) specify whether
it is a 90% Call Offer or a 70% Call Offer.
(b) (i) If the Call Offer is a 70% Call Offer, a proposed Unleased
Space Projection shall be prepared by the Members (or by each Member if they
cannot agree as herein provided) containing the following projections required
to determine the Unleased Space Value (without duplication of the
corresponding revenue and expense items utilized in calculating Net
Capitalized SNOI (70%)):
(A) Projected Revenues from the Projected Leases for the
twelve (12) full calendar month period following the Call
Offer Date consisting solely of Stated Rent;
(B) Free Rent which will be allowed or incurred in connection
with the Projected Leases;
(C) Lease-Related Capital Expenditures which will be incurred
in connection with Projected Leases;
(D) A Schedule for dates of execution and commencement of
each Projected Lease ("Lease-Up Schedule"); and
(E) Based on the Lease-Up Schedule, Nonreimbursable Expenses.
(ii) The Unleased Space Projection and each component thereof shall
be based on (A) reasonable lease-up timing projections and (B)
reasonable estimates of Stated Rents which will be provided for in the
Projected Leases when leased in arms-length transactions between a
willing landlord and willing tenants in the office space markets
existing as of the Call Offer Date, after due consideration to the (C)
the size, location, area, view and amenities of the Unleased Space,
(D) the rents under and history of leasing of the Building space
covered by Actual Leases as of the Call Offer Date, (E) the
availability of similar space in comparable locations and buildings in
the City of Chicago central business district ("CBD"), (F) the recent,
current and reasonably expected demand for similar space by
prospective tenants and (G) Free Rent and Lease-Related Capital
Expenditures recently, currently, and which over the near term may
reasonably be expected with respect to such similar space;
(iii) Based on the Unleased Space Projection, Capitalized SNOI
(Unleased Space) shall be determined. Based on the Free Rent,
Capitalized Expenditures and Nonreimbursable
-36-
Expenditures projected in the Unleased Space Projection, Net
Capitalized SNOI (Unleased Space) shall be determined, which
calculated amount shall be the "Unleased Space Value".
(iv) The "Unleased Space Projection" shall be approved and "Unleased
Space Value" shall be determined as herein above provided (A) in one
or more meetings by the Initial Members within thirty (30) days of the
Call Offer Date, in which meetings the Initial Members shall use their
best efforts to reach an agreement, or (B) if no such agreement shall
be reached by the end of such thirty (30) day period ("Unleased Space
Valuation Date"), by binding arbitration as herein below in this
Section 8.02(b) provided (in which case the Unleased Space Valuation
Date shall be deferred to the thirtieth (30th) day after the date a
final Unleased Space Value is established).
(v) If as of the original Unleased Space Valuation Date, no Unleased
Space Value has been agreed upon by the Initial Members, each of the
Initial Members shall, on or before such date, give written notice to
the other specifying the name, address and professional qualifications
of the person designated to act as arbitrator on its behalf. Within
ten (10) days thereafter (A) the two (2) arbitrators shall select a
third arbitrator and notify the Initial Members thereof and (B) within
five (5) days after such notification, each of the Initial Members
shall provide the third arbitrator with its proposed Unleased Space
Projections containing such Initial Member's determination of the
Unleased Space Value ("Proposed Unleased Space Projection"), together
with the basis upon which such Initial Member calculated Unleased
Space Value, including the following items:
1. Lease-Up Schedule
2. Projected Revenues of Unleased Space
3. Stabilized Net Operating Income (Unleased Space)
4. Capitalized SNOI (Unleased Space)
5. Lease-Related Capital Expenditures relating to Unleased Space
6. Free Rent relating to Unleased Space
7. Nonreimbursable Expenses relating to Unleased Space
8. Discounted Capital Expenditures
9. Discounted Free Rent
10. Discounted Nonreimbursable Expenses
(vi) All arbitrators appointed shall be MAI Members of the American
Institute of Real Estate Appraisers with not less than ten (10) years
of experience in the appraisal of improved commercial, office building
real estate in the CBD, and be devoting substantially all of their
time to professional appraisal work at the time of appointment, and be
in all respects impartial and disinterested. Each arbitrator shall be
exculpated and indemnified by the Company to the same extent as
Members pursuant to Article XI hereof.
(vii) The decision of the third arbitrator shall be given within a
period of sixty (60) days after the appointment of such third
arbitrator, who shall notify the Initial Members in
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writing of his or her determination of which proposed Unleased Space
Value, either that prepared by ▇▇▇▇▇▇▇ or that prepared by Prime GR,
more closely approximates the third arbitrator's professional opinion
of the accurate Unleased Space Value, which proposal shall thereupon
be the Unleased Space Projection and the Unleased Space Value set
forth herein shall be the Unleased Space Value for the purpose of
determining the Call Offer Price. The third arbitrator shall select
the Unleased Space Value of either ▇▇▇▇▇▇▇ or Prime GR and associated
Unleased Space Value, and shall not have discretion to specify an
Unleased Space Value other than one of the two Unleased Space Values
submitted by ▇▇▇▇▇▇▇ and Prime GR.
(viii) Each party shall pay the fees and expenses of the arbitrator
appointed by or on behalf of such party and the reasonable fees and
expenses of the third arbitrator shall be borne equally by both
parties. If either Initial Member fails to appoint its arbitrator or
deliver its Proposed Unleased Space Projection to the third arbitrator
within the times above specified, the Proposed Unleased Space
Projection of the other Initial Member shall set the Unleased Space
Value. If the two (2) arbitrators so selected cannot agree on the
selection of the third arbitrator within the time above specified,
then either party, on behalf of both parties, may request appointment
of such third arbitrator by application to any Judge of the Circuit
Court of the County of ▇▇▇▇, State of Illinois, upon ten (10) days'
prior written notice to the other party of such intent.
(c) The Company Accountant shall, within 10 calendar days of the later
of the Call Offer Date or the Unleased Space Valuation Date, (i) calculate the
Call Offer Price and (ii) determine and notify the Members of the amount the
Call Offeree would receive as a Member on account of its respective Interest
and any loans made by such Member to the Company if all Company assets were
sold for the Call Offer Price, all liabilities of the Company (including any
loans by any Member to the Company) were paid in full, and the remaining
proceeds were distributed to the Members in accordance with Section 3.3 of
APPENDIX A (the "Offeree Value"). Prime GR shall purchase all of ▇▇▇▇▇▇▇'▇
right, title and interest in and to its Interest and in any loans to the
Company for a cash purchase price equal to the Offeree Value, in the form of
limited partnership units in Prime GR ("Common Units"), for which purpose the
value of a Common Unit shall be equal to the average closing price on the New
York Stock Exchange of the common stock of Prime GR Trust into which the
Common Units are convertible ("Common Stock") for the 20 trading days
immediately preceding the Closing. The Common Units shall be exchangeable at
▇▇▇▇▇▇▇'▇ option into unrestricted Common Stock, registered under the
Securities Act of 1933, at any time which is more than six months after the
Closing (the "Restricted Period"), provided ▇▇▇▇▇▇▇ may elect by notice to
Prime GR at or prior to Closing to cause the Restricted Period to be extended
six (6) additional months to one calendar year. ▇▇▇▇▇▇▇ shall execute at
closing or shall be deemed to have executed and shall comply with the terms of
the Common Unit Recipient Certifications in a form substantially identical to
APPENDIX B hereto.
(d) Within five (5) business days of being notified of the Offeree Value
by the Company Accountant, Prime GR shall deposit in escrow with a bank or
other financial institution selected by it, as escrowee, an ▇▇▇▇▇▇▇ money
deposit in cash in an amount equal to (i) 5% multiplied by (ii) the Offeree
Value to be paid in connection with such purchase, and, if Prime GR fails to
close
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such purchase as provided in this Section 8.01, then ▇▇▇▇▇▇▇ may retain such
deposit and exercise any other rights or remedies available at law or in
equity, including the rights set forth in Article XIII. At Closing upon
receipt of the Common Units, ▇▇▇▇▇▇▇ shall return or cause the return of such
deposit to Prime GR.
(e) Each Member shall be entitled to enforce its rights under this
Section 8.01 and the Sale Contract created pursuant to Section 8.02 by
specific performance. If Prime GR defaults, and fails to cure within any
applicable cure period, under this Section 8.01 or the Sale Contract, Prime GR
shall have no further right to make any Call Offer.
(f) Prime GR may freely assign its rights and obligations pursuant to
this Section 8.01 to an Affiliate by delivering notice of such assignment to
▇▇▇▇▇▇▇, provided that Prime GR shall remain liable for any and all
obligations of its assignee, as if Prime GR had not assigned its rights
pursuant to this Section 8.01(f).
(g) Notwithstanding anything to the contrary herein contained, Prime GR
shall have no further right to make any Call Offer more than one year after
the later to occur of (i) the date the 90% Leasing Condition is satisfied or
(ii) the date notice thereof has been provided by ▇▇▇▇▇▇▇ to Prime GR.
(h) Prime GR Trust and Prime GR shall execute an acknowledgment to
▇▇▇▇▇▇▇ confirming that upon the exchange of ▇▇▇▇▇▇▇'▇ Common Units, ▇▇▇▇▇▇▇'▇
Prime GR Trust Common Stock shall be covered by, and ▇▇▇▇▇▇▇ shall be the
beneficiary of, Prime GR Trust's Registration Right Agreement dated as of
December 15, 1997.
8.02 SALE CONTRACT; CLOSING: (a) Upon delivery of the notice of
Offeree Value and/or Offeror Value by the Company Accountant pursuant to
Section 8.01(c), a binding sale contract for the purchase and sale of
▇▇▇▇▇▇▇'▇ Interest under Section 8.01 ("Sale Contract") shall exist between
▇▇▇▇▇▇▇ and Prime GR, which Sale Contract shall have the terms and provisions
set forth in Section 8.01 and this Section 8.02.
(b) The closing ("Closing") of any purchase and sale under Section 8.01
(each a "Sale") will be held at the Company's principal office and shall take
place no later than the date which is 90 calendar days after the later of the
Call Offer Date and the Unleased Space Valuation Date. All transfer, stamp
and recording taxes imposed on the transfer, and all other closing costs shall
be allocated 50% to ▇▇▇▇▇▇▇ and 50% to Prime GR. At Closing all of ▇▇▇▇▇▇▇'▇
Interest shall be transferred and assigned by ▇▇▇▇▇▇▇ to Prime GR pursuant to
such stock powers, bills of sale, assignments, consents and other instruments
of transfer in such form as may reasonably be required by ▇▇▇▇▇▇▇. Each of
▇▇▇▇▇▇▇ and Prime GR shall use their best efforts in good faith to cause all
of the conditions to Closing to be satisfied.
(c) ▇▇▇▇▇▇▇ shall covenant and warrant at Closing as follows, all of
which shall survive the Closing:
(i) ▇▇▇▇▇▇▇ is and will be as of the Closing duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all the requisite
-39-
power and authority to enter into and carry out the Sale Contract
according to its terms
(ii) The execution, delivery and performance of the Sale Contract and
of each of the closing documents has been duly authorized and approved
by ▇▇▇▇▇▇▇ and constitutes a legal and binding obligation of ▇▇▇▇▇▇▇,
enforceable in accordance with its terms, except as may be limited by
bankruptcy and other laws affecting creditors' rights generally.
(iii) There is no litigation, proceeding or investigation pending, or
to the knowledge of ▇▇▇▇▇▇▇, threatened against or affecting ▇▇▇▇▇▇▇
or the Members of ▇▇▇▇▇▇▇ that might affect or relate to the validity
of the Sale Contract or any action taken or to be taken pursuant
thereto.
(iv) There is no tax lien, whether imposed by any federal, state,
local or other tax authority, outstanding against the assets,
properties or business of ▇▇▇▇▇▇▇.
(v) ▇▇▇▇▇▇▇'▇ Interest is free from any lien, encumbrance or
restriction (including, but not limited to, any liens, encumbrances or
restrictions arising in connection with senior or other indebtedness
owed by ▇▇▇▇▇▇▇ or any of its Affiliates), except for any lien,
encumbrance or restriction created by Prime GR or expressly approved
by it in connection with the Sale or securing obligations of the
Company approved by the Members. Subject to the foregoing exception,
▇▇▇▇▇▇▇ shall provide Prime GR with releases (in appropriate form for
filing, if applicable) of any liens, encumbrances or restrictions.
Either Prime GR or ▇▇▇▇▇▇▇ may cause the Purchase Price or a portion
thereof to be applied to any lien, encumbrance or restriction not
permitted hereunder which may be discharged by the payment of money.
(vi) That at any reasonable time and from time to time after the
Closing, ▇▇▇▇▇▇▇ will do all such further things as Prime GR may
reasonably request to perfect the transfer and delivery to Prime GR or
to its successors or assigns or to aid or assist in collecting and
reducing to possession any and all of ▇▇▇▇▇▇▇'▇ Interest.
(d) Prime GR and Prime GR Trust shall covenant and warrant at Closing as
follows, all of, which shall survive the Closing:
(i) Prime GR is and will be as of the Closing duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all the requisite power and authority to enter into and carry
out the Sale Contract according to its terms.
(ii) The execution, delivery and performance of the Sale Contract and
of each of the closing documents has been duly authorized and executed
by Prime GR and constitutes a legal and binding obligation of Prime
GR, enforceable in accordance
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with its terms, except as may be limited by bankruptcy and other laws
affecting creditors' rights generally.
(iii) There is no litigation, proceeding or investigation pending, or
the knowledge of Prime GR, threatened against or affecting Prime GR or
the partners of Prime GR that might affect or relate to the validity
of the Sale Contract or any action taken or to be taken pursuant
thereto, or that might have a material adverse effect on the business
or operations of Prime GR.
(iv) Prime GR Trust and Prime GR have filed or caused to be filed all
federal, state, local, foreign and other tax returns, reports,
information returns and statements required to be filed by them. Prime
GR Trust and Prime GR have paid or caused to be paid all taxes
(including interest and penalties) that are shown as due and payable
on such returns or claimed by any taxing authority to be due and
payable with respect to such returns, except those which are being
contested by them in good faith by appropriate proceedings and in
respect of which adequate reserves are being maintained on their books
in accordance with generally accepted accounting principles
consistently applied. Prime GR Trust and Prime GR do not have any
material liabilities for taxes other than those incurred in the
ordinary course of business and in respect of which adequate reserves
are being maintained by them in accordance with generally accepted
accounting principles consistently applied. Federal and state income
tax returns for Prime GR Trust and Prime GR have not been audited by
the Internal Revenue Service or state authorities. No deficiency,
assessment with respect to, or proposed adjustment of, Prime GR
Trust's or Prime GR's federal, state, local, foreign or other tax
returns is pending or, to the best of the Prime GR's knowledge,
threatened. There is no tax lien, whether imposed by any federal,
state, local or other tax authority, outstanding against the assets,
properties or business of Prime GR Trust or Prime GR.
(v) Prime GR has delivered to ▇▇▇▇▇▇▇ a complete and correct copy of
(i) the certificate of limited partnership and bylaws of Prime GR, and
(ii) the Prime GR Partnership Agreement (hereinafter defined), in each
case, as amended.
(vi) Prime GR has previously made available to the Contributor
complete and correct copies of: (i) the annual report on Form 10-K for
Prime GR Trust; (ii) all quarterly reports on Form 10-Q for Prime GR
Trust for each quarter in 1998 and 1999; (iii) definitive proxy
statement for Prime GR Trust for 1998; (iv) current report on Form
8-K for Prime GR Trust for 1998; and (v) any other form, report,
schedule and statement and filed by Prime GR Trust for 1998 with the
SEC under the Exchange Act, since January 1, 1998 (collectively, the
"SEC Documents"). As of their respective dates, each of the SEC
Documents complied in all material respects with the requirements of
the Exchange Act to the extent applicable to such SEC Document, and
none of such SEC Documents (as of their respective dates) contained an
untrue statement of a material fact required to be stated
therein
-41-
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except as
the same was corrected or superseded in a subsequent document duly
filed with the SEC, that has been delivered to the Contributor. Prime
GR Trust has timely filed all reports and made all filings required to
be filed under the Exchange Act with the SEC under the rules and
regulations of the SEC.
(vii) The Partnership Agreement provides for each Common Unit to
receive a distribution equal to the cash and non-cash dividends or
distributions payable upon a share of Prime GR Trust common stock.
(viii) Prime GR agrees to use the "traditional method" under Section
704(c) of the U.S. Internal Revenue Code to adjust for discrepancies
between the agreed-upon value of the various components of the Company
Property (or for any property received in exchange for the Company
Property in a like-kind exchange) and the adjusted tax basis of such
components.
(ix) Prime GR Trust has been organized in conformity with the
requirements for qualification as a real estate investment trust under
the Internal Revenue Code of 1986 (the "Code") and its method of
operation is expected to enable it to continue to satisfy the
requirements for taxation as a real estate investment trust under the
Code for the fiscal year ending December 31, 1998 and in the future.
Prime GR covenants and agrees that it shall use its commercially
reasonable efforts to cause Prime GR Trust to continue to be taxed as
a real estate investment trust under the Code unless the Board of
Trustees of Prime GR Trust determines that it is in the best interests
of the shareholders of Prime GR Trust to be taxed otherwise.
(x) Prime GR is classified as a partnership and not as an association
(or publicly traded partnership) taxable as a corporation for federal
income tax purposes."
(xi) That at any reasonable time and from time to time after the
Closing, Prime GR and Prime GR Trust will do all such further things
as ▇▇▇▇▇▇▇ may reasonably request to perfect the transfer and delivery
to ▇▇▇▇▇▇▇ or to its successors or assigns, of the Commons Units and
exchange of the Common Units for Prime GR Trust common stock.
(xii) Prime GR agrees that it will, or, it will cause any entities
controlled by Prime GR, in each case that hold an interest in the
Company Property or any portion thereof or other property of Prime GR
or its Affiliates, nonrecourse liabilities in an amount which is
sufficient to enable ▇▇▇▇▇▇▇ to avoid recognizing gain as a result of
a deemed distribution of money to ▇▇▇▇▇▇▇ relating to Common Units
owned by ▇▇▇▇▇▇▇.
-42-
(e) The obligation of the Prime GR to purchase ▇▇▇▇▇▇▇'▇ Interest shall
be subject to satisfaction on the date of the Closing (the "Closing Date") of
each of the following conditions unless waived in writing by the Purchaser:
(i) The warranties and representations of ▇▇▇▇▇▇▇ set forth in
Section 8.02(c) shall be true in all material respects at and as of
the Closing.
(ii) All the agreements and conditions to be performed or satisfied
by ▇▇▇▇▇▇▇ under the Sale Contract at or prior to the Closing shall
have been duly performed or satisfied.
(iii) The Seller shall have delivered to the Purchaser releases of
any liens or security interests as provided in Subsection 8.02(c)(i).
(iv) No third party action, suit or proceeding shall be pending
before any court or governmental body seeking relief in connection
with this Agreement or seeking to restrain or prohibit the
consummation of the Sale.
(v) An opinion of a nationally recognized law firm acting as counsel
for ▇▇▇▇▇▇▇ reasonably acceptable in form and content to Prime GR to
the effect that:
(A) ▇▇▇▇▇▇▇ is duly existing in good standing under the laws of
its state of organization with full power and authority to carry on
its businesses; and
(B) The Sale Contract constitutes the valid, binding and
enforceable obligation of ▇▇▇▇▇▇▇.
(f) The obligation of ▇▇▇▇▇▇▇ to sell ▇▇▇▇▇▇▇'▇ Interest shall be
subject to satisfaction on the Closing Date of each of the following
conditions unless waived in writing by ▇▇▇▇▇▇▇.
(i) The warranties and representations of Prime GR set forth in
Section 8.03(d) shall be true in all material aspects at and as of the
Closing.
(ii) All the agreements and conditions to be performed or satisfied
by Prime GR under the Sale Contract at or prior to the Closing shall
have been duly performed or satisfied.
(iii) No third party action, suit or proceeding shall be pending
before any court or governmental body seeking relief in connection
with this Agreement or seeking to restrain or prohibit the
consummation of the Sale.
(iv) An opinion of a nationally recognized law firm acting as counsel
for the Prime GR and Prime GR Trust reasonably acceptable in form and
content to ▇▇▇▇▇▇▇ to the effect that:
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(A) Prime GR Trust has been organized in conformity with
the requirements for qualification as a real estate investment trust
under the Code and currently qualifies to be taxed as such;
(B) Prime GR Trust is classified as a partnership and not
as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes; and
(C) The Sole Contract constitutes the valid, binding and
enforceable obligation of Prime GR.
(v) Evidence of organization, existence and authority of Prime GR and
Prime GR Trust and the authority of each person executing documents on
behalf of each, reasonably satisfactory to Contributor;
8.03 TERMINATION OF OTHER AGREEMENTS: If ▇▇▇▇▇▇▇'▇ Interest is
purchased under this Article VIII, all other agreements with ▇▇▇▇▇▇▇ or its
Affiliates shall be terminated; provided, ▇▇▇▇▇▇▇'▇ right to receive the fees
provided in Section 7.04(a) shall not be affected by the purchase of ▇▇▇▇▇▇▇'▇
Interest under this Article VIII.
8.04 POWER OF ATTORNEY: In the event that ▇▇▇▇▇▇▇ under Section 8.01 or
8.02 shall have failed or refused, within five (5) business days after receipt
of a notice from any of the other Members requesting such Call Offeree to
execute, acknowledge and deliver such documents, or cause the same to be done,
as shall be required to effectuate the provisions of Section 8.01 or 8.02,
then Prime GR may execute, acknowledge and deliver such documents for, on
behalf of and in the stead of ▇▇▇▇▇▇▇, and such execution, acknowledgment and
delivery by Prime GR shall be for all purposes effective against and binding
upon ▇▇▇▇▇▇▇ as though such execution, acknowledgment and delivery had been by
▇▇▇▇▇▇▇, provided Prime GR shall have provided ▇▇▇▇▇▇▇ with at least five days
prior written notice of its intention to utilize the provisions of this
Section 8.04. Each Member does hereby irrevocably constitute and appoint each
other Member as the true and lawful attorney-in-fact of such Member and the
successors and assigns thereof, in the name, place and stead of such Member or
the successors or assigns thereof, as the case may be, to execute, acknowledge
and deliver such documents (other than any documents transferring Common
Units) in the event such Member is ▇▇▇▇▇▇▇ under the circumstances
contemplated by this Section 8.04. It is expressly understood, intended and
agreed by each Member, for such Member and its successors and assigns, that
the grant of the power of attorney to any other Member pursuant to this
Section 8.04 is coupled with an interest, is irrevocable and shall survive the
death, dissolution, termination or legal incompetency, as applicable, of such
granting Member, or the assignment of the Interest of such granting Member, or
the dissolution of the Company.
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IX. BOOKS AND RECORDS
9.01 BOOKS AND RECORDS: The Managing Member shall maintain, or cause to
be maintained, at the expense of the Company, in a manner customary and
consistent with good accounting principles, practices and procedures, a
comprehensive system of office records, books and accounts (which records,
books and accounts shall be and remain the property of the Company) in which
shall be entered fully and accurately each and every financial transaction
with respect to the operations of the Company and the ownership and operation
of the Company Property. Books, records, bills, receipts and vouchers shall
be maintained on file by or under control of the Managing Member. The
Managing Member shall maintain or cause said books and accounts to be
maintained in a safe manner and separate from any records not having to do
directly with the Company or any Company Property. The Managing Member shall
cause audits to be performed and audited statements and income tax returns to
be prepared as required by Section 9.03. Such books and records of account
shall be prepared and maintained by and under the supervision of the Managing
Member at the principal place of business of the Company or such other place
or places as may from time to time be determined by the Members. Each Member
or its duly authorized representative shall have the right to inspect, examine
and copy such books and records of account at the Company's office during
reasonable business hours.
9.02 ACCOUNTING AND FISCAL YEAR: The books of the Company shall be kept
on the accrual basis and the Company shall report its operations for tax
purposes on the accrual method. The taxable year of the Company shall end on
December 31 of each year, unless a different taxable year shall be required by
the Code.
9.03 REPORTS: (a) The Managing Member shall prepare at the Company's
expense the financial reports and other information that the Members may
determine are appropriate, including those provided for in Section 7.03(b).
In any event, the Managing Member shall prepare or cause to be prepared at the
expense of the Company and furnish to each of the Members: (i) within ten
(10) calendar days, preliminary, and within sixty (60) calendar days after the
close of each fiscal year of the Company, a final balance sheet of the Company
dated as of the end of the fiscal year, together with a related statement of
income and expense, statement of cash flow and statement of changes in
Members' capital for the Company for the fiscal year and information for the
fiscal year as to the balance in each Member's Capital Account, and all other
information reasonably required by each Member, all of which final financial
statements shall be prepared in accordance with GAAP and certified to by the
Managing Member as being, to the best of its knowledge, true and correct, and
all of which shall be audited and certified in the customary manner by the
Company Accountant (which firm shall provide such balance sheet, statement of
income and expense, statement of cash flow, statement of changes in Members'
capital and other information in draft form to the Members for review prior to
finalization and certification thereof); (ii) within ten (10) calendar days,
preliminary, and withing twenty (20) calendar days after the close of each
fiscal quarter of the Company (other than the last fiscal quarter in any
fiscal year), final balance sheet of the Company dated as of the end of and
for the fiscal quarter, together with a related statement of income and
expense, statement of cash flow and statement of changes in Members' capital
for the fiscal quarter and information for the fiscal quarter as to the
balance in each Member's Capital Account, and all other information, including
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a market update, reasonably required by each Member, all of which shall be
prepared in accordance with GAAP and certified to by the Managing Member as
being, to the best of its knowledge, true and correct; and (iii) within ten
(10) days after the end of each calendar month, an income statement (with
budget variance explanations), statement of cash flow, a sales, marketing and
development activity report indicating details with regard to any progress
made in connection with the sale, marketing or development of each Company
Property (including a report of development expenditures, with budget variance
explanations), marketing programs, sales contracts or construction contracts
or letters of intent received, entered into or closed or terminated, new
leases, renewals, extensions and terminations, and a report of capital
expenditures and land acquisition activity (if any), each for the previous
calendar month, and an accounts receivable aging report and insurance
certificate status report, each dated as of the end of the previous calendar
month. The Managing Member will also furnish to each Member, at the expense
of the Company, copies of all reports required to be furnished to any lender
of the Company at the same time furnished to the lender. Commencing July 1,
1998, the Managing Member shall, within 30 days after the end of each calendar
half-year, prepare and deliver or cause to be prepared and delivered, at the
expense of the Company to the Members for approval semi-annual updates of the
current year Budget and Operating Plan prepared by the Managing Member for
review and approval by the Members within 60 days after the end of each
calendar half-year; it is specifically understood by the Members that the
Managing Member by preparing such projections will not be deemed to be
representing or warranting or guaranteeing that the projected returns on the
Members' investments set forth therein will be attained, in whole or in part.
In addition, promptly after the end of each fiscal year the Managing Member
will use its good faith, commercially reasonable efforts to have the Company
Accountant prepare and deliver to each Member a report setting forth in
sufficient detail all such information and data with respect to business
transactions effected by or involving the Company during the fiscal year as
will enable the Company and each Member to timely prepare its federal, state
and local income tax returns in accordance with the laws, rules and
regulations then prevailing. The Managing Member will use commercially
reasonable efforts to have the Company Accountant also prepare federal, state
and local tax returns required of the Company, submit those returns to the
Members for its approval no later than 30 calendar days prior to the date
required for the filing thereof (including any extensions granted) and will
file the tax returns after they have been approved by the Members. In the
event the Members shall not desire or be able to approve any such tax return
prior to the date required for the filing thereof (including any extensions
granted), the Managing Member will timely obtain an extension of such date if
such extension is available under applicable law. To the extent required by
the Members, the Managing Member shall be required to prepare and submit any
and all reports required pursuant to this Agreement using such on-line
electronic data transmission system as required by the Members. The failure
of the Managing Member to deliver within the required time frame the financial
statements or tax returns required above shall, at Prime GR's sole election,
be grounds for termination of ▇▇▇▇▇▇▇'▇ rights and obligations under Section
9.01 and this Section 9.03 and to effect their transfer to Prime GR to perform
or cause to be performed at the expense of the Company.
(b) All decisions as to accounting principles shall be made by the
Members, subject to the provisions of this Agreement.
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9.04 THE COMPANY ACCOUNTANT: The Company shall retain as the regular
accountant and auditor for the Company (the "Company Accountant") a
nationally-recognized accounting firm designated by the Members. The fees and
expenses of the Company Accountant shall be a Company expense. The initial
Company Accountant shall be Ernst & Young, Chicago, Illinois, until such time
as the Members shall elect to change such Company Accountant.
9.05 RESERVES: The Members, in their discretion and subject to such
conditions as they shall determine, may establish reserves for the purposes
and requirements as it may deem appropriate (the "Reserve Accounts"). Such
Reserve Accounts will be increased by any deposits thereto from time to time
of amounts of the revenues of the Company from operations, the net proceeds
from capital transactions, and contributions and other sources, before any
distributions of such amounts to the Members, as determined reasonably
necessary by the Members. Such Reserve Accounts may, with the approval of the
Members, be charged with any expenditure for the acquisition of any Company
Property, the operation of the Company or any Company Property, the maintenance
or repair of any item and the purchase, acquisition, repair, maintenance or
construction of items at or on any Company Property and any contingent,
unforeseen or other liabilities or obligations of the Company, whether such
items are treated as current expense deductions or as capital expenditures
under GAAP. Nothing contained in this Section 9.05 shall in any way limit or
restrict the right of the Members to use other assets or funds of the Company
(other than deposits to the Reserve Accounts) for any such expenditures.
9.06 THE BUDGET AND OPERATING PLAN: (a) A preliminary budget and
operating plan for the calendar year 1998 ("Preliminary Budget and Operating
Plan") is attached as EXHIBIT 2 to this Agreement. The Preliminary Budget and
Operating Plan is hereby approved by the Members solely with respect to total
Acquisition Costs of $22.345 million, "Closing Costs", "Financing Costs", "Due
Diligence Costs", and Revenue and Expense items shown therein for the period
of March 30, 1998 through May 31, 1998 (subject in each case to the
requirements of Section 7.01(a)(i)). The remaining budget projections for
1998 and 1999 therein are good faith estimates only and subject to revision
and approval in the final Budget and Operating Plan for the calendar year 1998
to be prepared and adopted as provided in Section 9.06(b) below.
(b) The proposed form of initial Budget and Operating Plan for the
calendar year 1998 shall be prepared by the Managing Member within 30 days
after the date hereof and made available for review by the Members in draft
form for review and approval. Thereafter, the parties shall work diligently
and in good faith to approve the Budget and Operating Plan prior to June 1,
1998.
(c) For each year thereafter, the Budget and Operating Plan shall be
prepared in proposed form by the Managing Member and submitted in draft form
to the Members for approval no later than November 1 of each calendar year
with respect to the following calendar year, which approval shall not be
unreasonably withheld or delayed.
(d) The proposed form of Project Plan shall be prepared by the Managing
Members when the information requisite to the preparation of such Project Plan
is available, and made
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available for review by the Members in draft form for review and approval.
Thereafter, the parties shall work diligently and in good faith to approve the
Project Plan.
(e) The Managing Member shall review the Budget and Operating Plan in
light of developments since its approval by the Members and, no later than May
1 of each fiscal year commencing with 1999, submit any proposed revisions in
draft form to the Capital Members for approval. The Members shall use their
best efforts to approve an amended Budget and Operating Plan for the current
fiscal year or reapprove the existing Budget and Operating Plan on or before
June 30 of each such year.
(f) Each proposed form of Budget and Operating Plan shall set forth on a
monthly basis all anticipated income, capital contributions, operating
expenses, proposed and/or actual debt service terms and payments and capital
and other costs and expenses of each Company Property and for the Company
(including, without limitation, a projected 12 month expense budget, portions
of the Company Property to be developed, along with detailed development
budgets therefor, and beginning sixty (60) days prior to anticipated
Substantial Completion, a 12 month and 36 month capital plan and a 60-month
strategic operating plan), all of which will be based on the strategic and
comprehensive business plan designed to maximize the Net Operating Income of
the Company. In formulating the comprehensive Operating Plan, to the extent
reasonably feasible at the time of preparation thereof, the Managing Member
will develop strategies regarding plans for development, preparation and
release of all promotional and advertising material relating to all of the
Company Property or concerning the Company, and selection of legal counsel,
accountants, structural and environmental engineers and appraisers for the
Company to efficiently implement the Budget and Operating Plan. The Budget
and Operating Plan will include a comprehensive update of the initial
projections with regard to each Company Property and the Company. Until such
time as the Budget and Operating Plan for each Property and for the Company
for any fiscal year has been approved by the Members, the Managing Member
shall have no authority or power to enter into any contract or lease on behalf
of the Company or expend Company funds other than to the extent specifically
approved by the Members.
(g) The Managing Member will also consider and make recommendations to
the extent it deems the same appropriate regarding the amendment,
modification, alteration, change, cancellation, or prepayment of any
indebtedness evidenced by any mortgage loan presently or hereafter affecting
any Company Property, and procurement of title insurance and other insurance
for the Company, or decrease or vary the insurance carried by or on behalf of
the Company. Prior to closing the sale of any Company Property, the Managing
Member will consider and make recommendations regarding the amendment,
modification, alteration and change of any existing Budget and Operating Plan
to take into account the acquisition or sale of such Company Property. No
amendment, modification, alteration, change, etc. of any Budget and Operating
Plan will be effective until the same has been approved by the Members.
9.07 PROJECT PLAN: Each Budget and Operating Plan approved or
reapproved by the Members subsequent to approval by the Members of Plans and
Specifications, actual contracts or bids for all Development Costs, and costs
of financing as shown in the Construction Loan
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Commitment, shall include a Project Plan. In addition to a Pro Forma Project
Development and Construction Completion Schedule and a Pro Forma Leasing
Schedule, the Project Plan shall include a Project Completion Default Schedule
and a Project Leasing Default Schedule, which default schedules shall remain
in effect until amended by the Members, either as part of a new or modified
Budget and Operating Plan or otherwise. The Project Plan shall further
include the Projected Revenues and Projected Expenses of the Company Property
through projected Actual Occupancy of 95%, which projections shall be updated
each time the Budget and Operating Plan is updated.
X. TRANSFER OF INTERESTS
10.01 NO TRANSFER OF INTERESTS: (a) Except as expressly permitted or
contemplated by this Agreement, no Member may sell, assign, give, hypothecate,
pledge, encumber or otherwise transfer ("Transfer") all or any portion of its
Interest, whether directly or indirectly, without the written consent of the
other Members (which may be withheld or granted in the sole discretion of such
other Members).
(b) Any Transfer in contravention of this Article X shall be null and
void. No Member, without the prior written consent of the other Members,
shall resign from the Company except as a result of such Member's involuntary
dissolution or final adjudication as a bankrupt or in connection with a
permitted Transfer.
10.02 PERMITTED TRANSFERS OF INTERESTS: (a) Prime GR, from time to
time and in its sole discretion, without the consent of any other Member, may
sell or assign its Interest in whole or in part to any Affiliate of Prime GR
or any entity directly or indirectly controlling, controlled by or under
common control with Prime GR, or any of its Affiliates, including any
co-investment partnerships or limited liability companies formed to co-invest
alongside Prime GR. In connection with any permitted transfer by Prime GR, it
will have the absolute right to designate such transferee as a Member.
(b) ▇▇▇▇▇▇▇, from time to time in its sole discretion, without the
consent of any other Member, may sell or assign its Interest in whole or in
part to any Affiliate of ▇▇▇▇▇▇▇ or any entity directly or indirectly
controlling, controlled by or under common control with ▇▇▇▇▇▇▇ or any member
of the Immediate Family of J. ▇▇▇▇ ▇▇▇▇▇▇▇. In connection with any permitted
Transfer by ▇▇▇▇▇▇▇, it will have the absolute right to designate such
transferee as a Member. Any Transfer shall be subject to any rights of Prime
GR thereupon or thereafter to make a Call Offer pursuant to Article VII, for
which purpose all references to ▇▇▇▇▇▇▇'▇ Interest shall include all Interests
subject to such Transfer.
(c) Any permitted Transfer shall not relieve the transferor of any of
its obligations hereunder. Notwithstanding any Transfer and except as
provided in Section 3.03, Prime GR and ▇▇▇▇▇▇▇ shall at all times remain the
Initial Members hereunder and have all of the Initial Members' rights, duties
and obligations including, without limitation, the sole right to appoint
Member Representatives. Notwithstanding anything to the contrary contained in
this Agreement,
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no transfer of all or any part of any Interest shall be made if, as a result
thereof, any income of the Company will be subject to corporate tax. Nothing
contained in this Article X shall prohibit a Transfer indirectly of any
interest in the Company if a direct Transfer would otherwise be permitted
under this Section 10.02. Subject to Section 10.03, any transferee pursuant
to this Section 10.02 shall become a substitute Member of the Company. Each
Member and its permitted transferees shall be treated as one Member for all
purposes of this Agreement. The provisions of this Section 10.02 will not
apply to or be deemed to authorize or permit any collateral transfer of, or
grant of a security interest in, a Member's interest in the Company, or in any
Company Property (which transfer or grant shall be subject to the other
provisions of this Agreement).
10.03 TRANSFEREES: No transferee of all or any portion of any Interest
shall be admitted as a Member unless (a) such Interest is transferred in
compliance with the applicable provisions of this Agreement, (b) such
transferee shall have furnished evidence of satisfaction of the requirements
of Section 10.02 reasonably satisfactory to the remaining Members, and (c)
such transferee shall have executed and delivered to the Company such
instruments necessary to effectuate the admission of such transferee as a
Member and to confirm the agreement of such transferee to be bound by all of
the terms and provisions of this Agreement with respect to such Interest. At
the request of the remaining Members, each such transferee shall also cause to
be delivered to the Company, at the transferee's sole cost and expense, a
favorable opinion of legal counsel reasonably acceptable to the Company, to
the effect that (i) such transferee has the legal right, power and capacity to
own the Interest proposed to be transferred, (ii) such Transfer does not
violate any provision of any partnership agreement or limited liability
company agreement in which the Company owns an interest, or any loan
commitment or any mortgage, deed of trust or other security instrument
encumbering all or any portion of any Company Property and known to such
counsel, and (iii) such Transfer does not result in any income of the Company
being subject to corporate tax. As promptly as practicable after the
admission of any Person as a Member, the books and records of the Company
shall be changed to reflect such admission. All reasonable costs and expenses
incurred by the Company in connection with any Transfer of any Interest and,
if applicable, the admission of any transferee as a Member shall be paid by
such transferee.
10.04 ADMISSION OF ADDITIONAL MEMBERS: (a) No person may be admitted as
an additional Member of the Company (in contrast with admission as a
substitute Member in connection with a permitted Transfer or pursuant to
Section 3.03) without the unanimous consent of all Members, which consent may
be given or withheld in the sole discretion of the Members.
(b) Any additional Member admitted to the Company shall execute and
deliver documentation in form satisfactory to the Members accepting and
agreeing to be bound by this Agreement, and such other documentation as the
Members shall require in order to effect such person's admission as an
additional Member. The admission of any person as an additional Member shall
become effective on the date upon which the name of such person is recorded on
the books and records of the Company following the consent of the Members to
such admission.
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XI. EXCULPATION AND INDEMNIFICATION
11.01 EXCULPATION: No Member (and no member of a Member, general or
limited partner of any Member, shareholder, member or other holder of an
equity interest in such Member or officer or director or employee of any of
the foregoing) shall be liable to the Company or to any other Member for
monetary damages for any losses, claims, damages or liabilities arising from
any act or omission performed or omitted by it arising out of or in connection
with this Agreement or the Company's business or affairs; provided however,
such act or omission was taken in good faith, within the scope of authority
granted to such Person, and was not attributable in whole or in part to such
Member's or Person's fraud, bad faith, wilful misconduct or gross negligence.
11.02 INDEMNIFICATION: (a) The Company shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each Member,
each member of the Members and each general or limited partner of any Member,
shareholder, member or other holder of any equity interest in such Member or
any officer, director or employee of any of the foregoing (collectively, the
"Indemnified Party"), against any losses, claims, damages or liabilities to
which such Indemnified Party may become subject in connection with any matter
arising out of or incidental to any act performed or omitted to be performed
by any such Indemnified Party in connection with this Agreement or the
Company's business or affairs; provided however, that such act or omission was
taken in good faith, was within the scope of authority granted to such Member
or applicable Indemnified Party, and was not attributable in whole or in part
to such Indemnified Party's fraud, bad faith, wilful misconduct or gross
negligence. If an Indemnified Party becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter arising out
of or in connection with this Agreement or the Company's business or affairs,
the Company shall reimburse such Indemnified Party for its reasonable legal
and other reasonable out-of-pocket expenses (including the cost of any
investigation and preparation) as they are incurred in connection therewith,
provided that such Indemnified Party shall promptly repay to the Company the
amount of any such reimbursed expenses paid to it if it shall ultimately be
determined that such Indemnified Party was not entitled to be indemnified by
the Company in connection with such action, proceeding or investigation. If
for any reason (other than the bad faith, fraud, gross negligence or willful
misconduct of such Indemnified Party) the foregoing indemnification is
unavailable to such Indemnified Party, or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and such Indemnified Party on the
other hand or, if such allocation is not permitted by applicable law, to
reflect not only the relative benefits referred to above but also any other
relevant equitable considerations. Any indemnity under this Section 11.02(a)
shall be paid solely out of and to the extent of Company assets and shall not
be a personal obligation of any Member and in no event will any Member be
required or permitted without the consent of all the other Members, to
contribute additional capital under Section 4.03 to enable the Company to
satisfy any obligation under this Section 11.02.
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(b) Each Member shall indemnify and hold harmless the Company and each
of the other Members from and against any and all claims, demands,
liabilities, costs, damages, expenses and causes of action of any nature
whatsoever arising out of or incidental to (i) any act performed by or on
behalf of any such Member (including acts performed as the Managing Member) or
its Member Representative which is not performed in good faith and within the
scope of authority conferred upon such Member or its Member Representative
under this Agreement, (ii) the fraud, bad faith, wilful misconduct or gross
negligence of such Member or its Member Representative, or (iii) the breach by
the Company of any of its representations and warranties made under any
purchase, loan or other agreement entered into in connection with the
acquisition, development or sale of any Company Property, which breach was the
result of information or other matters provided and certified to the Company
by such Member or was the result of information about or matters relating to
such Member provided by such Member. Notwithstanding the foregoing, no Member
shall indemnify the Company hereunder from any claims, demands, liabilities,
costs, damages, expenses or causes of action to the extent the same are
recovered (or recoverable if made) by the Company under any policies of
insurance carried by the Company.
(c) The provisions of this Section 11.02 shall survive for a period of
four years from the date of dissolution of the Company, provided that (i) if
at the end of such period there are any actions, proceedings or investigations
then pending, an Indemnified Party may so notify the Company and the Members
at such time (which notice shall include a brief description of each such
action, proceeding or investigation and the liabilities asserted therein) and
the provisions of this Section 11.02 shall survive with respect to each such
action, proceeding or investigation set forth in such notice (or any related
action, proceeding or investigation based upon the same or similar claim)
until such date that such action, proceeding or investigation is finally
resolved, and (ii) the obligations of the Company under this Section 11.02
shall be satisfied solely out of Company assets.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the obligations of the Company or any Member under this Section
11.02 (i) shall be in addition to any liability which the Company or such
Member may otherwise have and (ii) inure to the benefit of each Indemnified
Party and any successors, assigns, heirs and personal representatives of such
Persons.
XII. DISSOLUTION AND TERMINATION
12.01 DISSOLUTION: The Company shall be dissolved and its business
wound up upon the earliest to occur of any of the following events:
(a) The sale, condemnation or other disposition of all the assets of the
Company and the receipt of all consideration therefor;
(b) The election to dissolve the Company under Section 13.02(a);
(c) The expiration of the period set forth in Section 2.03;
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(d) The determination of the Members to dissolve the Company;
(e) The resignation, expulsion, bankruptcy or dissolution of any Member
or the occurrence of any other event that terminates the continued membership
of any Member in the Company, unless, within 90 days after such event, each of
the remaining Members elects in writing (i) to continue the business of the
Company and (ii) if applicable, to appoint a new Managing Member; or
(f) At the sole election of Prime GR at any time after September 30,
1999 that the Contribution Condition remains not satisfied.
Without limitation on, but subject to, the other provisions hereof, the
assignment of all or any part of a Member's Interest permitted hereunder will
not result in the dissolution of the Company. Except as otherwise
specifically provided in this Agreement, each Member agrees that, without the
consent of the other Members, no Member may withdraw from or cause a voluntary
dissolution of the Company. In the event any Member withdraws from or causes
a voluntary dissolution of the Company in contravention of this Agreement,
such withdrawal or the causing of a voluntary dissolution shall not affect
such Member's liability for obligations of the Company.
12.02 TERMINATION: In all cases of dissolution of the Company, the
business of the Company shall be wound up and the Company terminated as
promptly as practicable thereafter, and each of the following shall be
accomplished:
(a) The Liquidating Member shall cause to be prepared a statement
setting forth the assets and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to all of the
Members.
(b) The Company Property shall be liquidated by the Liquidating Member
as promptly as possible, but in an orderly, businesslike and commercially
reasonable manner and subject to the provisions of the Operating Plan then in
effect or a liquidating plan approved by the Members. The Liquidating Member
may distribute Company Property in kind, only with the consent of the Members.
(c) The proceeds of sale and all other assets of the Company shall be
applied and distributed as follows and in the following order of priority:
(i) To the payment of (A) the debts and liabilities of the Company
(including any outstanding amounts due on any indebtedness encumbering
the Company Property, or any part thereof) and (B) the expenses of
liquidation.
(ii) To the setting up of any reserves which the Liquidating Member
and the Members shall determine to be reasonably necessary for
contingent, unliquidated or unforeseen liabilities or obligations of
the Company or any Member arising out of or in connection with the
Company. Such reserves may, in the discretion of the
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Liquidating Member, be paid over to a national bank or national title
company selected by it and authorized to conduct business as an
escrowee to be held by such bank or title company as escrowee for the
purposes of disbursing such reserves to satisfy the liabilities and
obligations described above, and at the expiration of such period as
the Liquidating Member may reasonably deem advisable, distributing any
remaining balance as provided in Section 12.02(c)(iii); provided,
however, that, to the extent that it shall have been necessary, by
reason of applicable law or regulation, to create any reserves prior
to any and all distributions which would otherwise have been made
under Section 12.02(c)(i) and, by reason thereof, a distribution under
Section 12.02(c)(i) has not been made, then any balance remaining
shall first be distributed pursuant to Section 12.02(c)(i).
(iii) The balance, if any, to the Members in accordance with Section
3.3 of APPENDIX A.
12.03 LIQUIDATING MEMBER: The Liquidating Member is hereby irrevocably
appointed as the true and lawful attorney in the name, place and stead of each
of the Members, such appointment being coupled with an interest, to make,
execute, sign, acknowledge and file with respect to the Company all papers
which shall be necessary or desirable to effect the dissolution and
termination of the Company in accordance with the provisions of this Article
XII; provided, however, the Liquidating Member shall have no authority or
right to make, execute, sign, acknowledge, or file any papers which result in
personal liability to any individual Member without the express consent of
such Member. Notwithstanding the foregoing, each Member, upon the request of
the Liquidating Member, shall promptly execute, acknowledge and deliver all
such documents, certificates and other instruments as the Liquidating Member
shall reasonably request to effectuate the proper dissolution and termination
of the Company, including the winding up of the business of the Company.
XIII. DEFAULT BY MEMBER
13.01 EVENTS OF DEFAULT: With respect to each of the following events
of default which is not cured (including, without limitation, by the breaching
Member reimbursing the Company for the resulting damage or loss) within a
Reasonable Period, the Member indicated shall have committed an "Event of
Default":
(a) A material violation or breach by a Member of any of the provisions
of this Agreement (other than a violation or breach of Section 4.02 or Section
4.03) causing material damage or loss to the Company.
(b) ▇▇▇▇▇▇▇ shall have committed an Event of Default if:
(i) One or more of the Outside Leasing Target Dates set forth in the
Project Leasing Default Schedule has not been met;
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(ii) One or more of the Outside Completion Dates set forth in the
Project Completion Default Schedule has not been met;
(iii) The Project is not completed within the amounts set forth as
line items in the Budget and Operating Plan, after application of
applicable contingency amounts, provided (A) any permanent savings
effected under any line item in the Budget and Operating Plan may
offset expenditure overruns in other line items upon notice (by
▇▇▇▇▇▇▇ to Prime GR) of such savings and the basis therefor and of
▇▇▇▇▇▇▇'▇ intention to reallocate from the savings budget item to the
overrun budget item; (B) ▇▇▇▇▇▇▇ may elect to permanently waive all
or a portion of the fees due or to become due it pursuant to Section
7.04 prior to Substantial Completion to offset and eliminate all or a
portion of a cost overrun; and (C) ▇▇▇▇▇▇▇ ▇▇ may contribute
additional capital to the Company to offset and eliminate all or a
portion of a cost overrun ("Default Contribution").
(iv) The Contribution Condition is not satisfied on or before
September 30, 1999; or
(v) Any default shall occur under any Acquisition Loan, Construction
Loan, or other Loan of the Company, other than such a default arising
by reason of a default hereunder by Prime GR, for which there is no
cure period or which is not cured within the applicable cure period;
provided, however, that if such default does not result from a default
by ▇▇▇▇▇▇▇ hereunder, then the remedy set forth in Section
13.02(b)(iii) shall not be applicable.
(c) As used herein, a "Reasonable Period" means:
(i) With respect to any Event of Default which is a monetary default
or referred to in Section 13.01(b)(v), three (3) business days;
(ii) With respect to any Event of Default referred to in Section
13.01(a) other than a monetary default, a period of thirty (30)
calendar days after the defaulting Member receives written notice of
its default from a non-defaulting Member; provided, however, that if
such breach can be cured but cannot reasonably be cured within such
30-day period, the period shall continue, if such defaulting Member
commences to cure the breach within such 30-day period, for so long as
such defaulting Member diligently prosecutes the cure to completion up
to a maximum of 120 calendar days (including the initial 30-day
period).
(iii) With respect to any Event of Default referred to in Section
13.01(b), a period of five (5) business days after ▇▇▇▇▇▇▇ receives
notice of such Event of Default from a non-defaulting Member.
13.02 EFFECT OF EVENT OF DEFAULT: Upon the occurrence of an Event of
Default by any Member, the non-defaulting Member shall have the right, at any
time within 120 days after
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the date written notice of the default is provided or received by such
non-defaulting Member and prior to its complete curing, upon giving written
notice of such election (the "Default Notice Date") (provided such Event of
Default is continuing through the Default Notice Date), to take any one or
more of the following actions (in addition to any other remedies or actions
provided for in this Agreement):
(a) Other than with respect to any Event of Default referred to under
Section 13.01(b), dissolve the Company.
(b) If the defaulting Member is ▇▇▇▇▇▇▇ or any Member who has received
an Interest from ▇▇▇▇▇▇▇, then:
(i) ▇▇▇▇▇▇▇ shall, upon the Default Notice Date, be terminated as
Managing Member;
(ii) after the Default Notice Date, all Major Decisions and all other
actions of the Members shall be deemed approved, and shall be binding
on all Members if approved by Prime GR notwithstanding the objection
or failure to approve such Major Decision or such other actions by any
other Member;
(iii) any right to fees of ▇▇▇▇▇▇▇ which will accrue or otherwise
become due subsequent to the Default Notice Date will terminate (other
than the right to receive the fees provided in Section 7.04(a)(iv)
during that portion, if any, of the term provided for therein that
Prime GR or any Affiliate of Prime GR owns Prime GR's Interest in the
Company, or the Company or Prime GR or any Affiliate thereof owns the
Company Property); and
(iv) the Leasing Agency Agreement shall terminate as of the Default
Notice Date.
(c) Other than with respect to any Event of Default referred to under
Section 13.01(b), pursue any other right or remedy available at law or in
equity.
The default of any Member hereunder shall not relieve any other Member from
its agreements, liabilities, and obligations hereunder.
XIV. MISCELLANEOUS
14.01 COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE MEMBERS: (a)
Each Member represents and warrants to the other Members as follows:
(i) It is duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation with all requisite power and
authority to enter into this Agreement and to conduct the business of
the Company.
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(ii) This Agreement constitutes the legal, valid and binding
obligation of the Member enforceable in accordance with its terms,
subject to the application of principles of equity and laws governing
insolvency and creditors' rights generally.
(iii) Any consents or approvals required from any governmental
authority or other person or entity for the Member to enter into this
Agreement and the Company have been obtained. All limited liability
company, corporate or partnership action on the part of the Member
necessary for the authorization, execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby, have been duly taken.
(iv) The execution and delivery of this Agreement by the Member, and
the consummation of the transactions contemplated hereby, does not
conflict with or contravene the provisions of its organizational
documents or any agreement or instrument by which it or its properties
are bound or any law, rule, regulation, order or decree to which it or
its properties are subject.
(v) The Member has not retained any broker, finder or other
commission or fee agent, and no such person has acted on its behalf in
connection with the acquisition of any Company Property or the
execution and delivery of this Agreement other than the Persons
identified in the Preliminary Plan and Budget, who are entitled to
fees in connection therewith not to exceed the amount stated therefor
under "Financing Costs".
(vi) Each Member is acquiring its interest in the Company for
investment, solely for its own account, with the intention of holding
such interest for investment and not with a view to, or for resale in
connection with, any distribution or public offering or resale of any
portion of such interest within the meaning of the Securities Act of
1933 (the "Securities Act") or any other applicable federal or state
security law, rule or regulation ("Security Laws").
(vii) Each Member acknowledges that it is aware that its interest in
the Company has not been registered under the Securities Act or under
any other Security Law in reliance upon exemptions contained therein.
Each Member understands and acknowledges that its representations and
warranties contained herein are being relied upon by the Company, the
other Members and the constituent owners of such other Members as the
basis for exemption of the issuance of interest in the Company from
registration requirements of the Securities Act and other Security
Law. Each Member acknowledges that the Company will not and has no
obligation to register any interest in the Company under the
Securities Act or other Security Laws.
(viii) Each Member acknowledges that prior to its execution of this
Agreement, it received a copy of this Agreement and that it examined
this document or caused this document to be examined by its
representative or attorney. Each Member
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does hereby further acknowledge that it or its representative or
attorney is familiar with this Agreement, and with the business and
affairs of the Company, and that except as otherwise specifically
provided in this Agreement, it does not desire any further information
or data relating to the Company, the Company Property or to the other
Members. Each Member does hereby acknowledge that it understands that
the acquisition of its interest in the Company is a speculative
investment involving a high degree of risk and does hereby represent
that it has a net worth sufficient to bear the economic risk of its
investment in the Company and to justify its investing in a highly
speculative venture of this type.
(b) Prime GR represents and warrants to ▇▇▇▇▇▇▇ that it is a Delaware
limited partnership currently existing pursuant to that certain Amended and
Restated Agreement of Limited Partnership dated as of November 17, 1997, as
amended (the "Prime GR Partnership Agreement"), and that certain Certificate
of Limited Partnership filed with Secretary of State of Delaware on March 19,
1997, (the "Prime GR Certificate of Limited"). The aforementioned Prime GR
Partnership Agreement and Prime GR Certificate of Limited Partnership have not
been terminated and continue to be in full force and effect. The managing
general partner of Prime GR is Prime Group Realty Trust, a Maryland real
estate investment trust. All necessary consents or authorizations required
for Prime GR to enter into this Agreement have been obtained or will be
obtained prior to the execution and delivery of this Agreement.
(c) ▇▇▇▇▇▇▇ represents and warrants to Prime GR that it is an Illinois
limited liability company currently existing pursuant to that certain
Operating Agreement of ▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C. dated as of March 24, 1998, as
amended. All necessary consents or authorizations required for ▇▇▇▇▇▇▇ to
enter into this Agreement have been obtained prior to the execution and
delivery of this Agreement.
(d) Each Member agrees to indemnify and hold harmless the Company and
each other Member and their officers, directors, shareholders, partners,
members, employees, successors and assigns from and against any and all loss,
damage, liability or expense (including costs and attorneys fees) which they
may incur by reason, or in connection with, any breach of the foregoing
representations and warranties by such Member and all such representations and
warranties shall survive the execution and delivery of this Agreement and the
termination and dissolution of Prime GR, ▇▇▇▇▇▇▇ and/or the Company.
14.02 FURTHER ASSURANCES: Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further instruments and documents, and
do all such other acts and things as may be required by law, or as may be
required to carry out the intent and purposes of this Agreement.
14.03 NOTICES: All notices, demands, consents, approvals, requests or
other communications which any of the parties to this Agreement may desire or
be required to give hereunder (collectively, "Notices") shall be in writing
and shall be given by (a) personal delivery, (b) facsimile transmission or (c)
a nationally recognized overnight courier service for overnight delivery, fees
prepaid, addressed as follows:
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If to ▇▇▇▇▇▇▇: J. ▇▇▇▇ ▇▇▇▇▇▇▇ Development Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: 312/558-3845
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: 312/701-7711
If to Prime GR: c/o Prime Group Realty Trust
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: 312/917-0460
with a copy to: Prime Group Realty Trust
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: 312/917-1684
with an additional copy to: ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ P.C. ▇▇▇▇▇▇, Esq.
Facsimile No.: 312/782-8585
Any Member may designate another addressee (and/or change its address) for
Notices hereunder by a Notice given pursuant to this Section 14.03. A Notice
sent in compliance with the provisions of this Section 14.03 shall be deemed
given on the date of (i) receipt or refusal to accept personal delivery by the
addressee, (ii) facsimile transmission, provided electronic confirmation has
been received by the sender or (iii) the Business Day following the date of
delivery to such overnight courier.
14.04 GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois applicable to agreements
made and to be performed wholly within that State, except to the extent that
the laws of the State of Delaware
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may require certain provisions hereof and the Members' performance hereunder
to be governed by Delaware law.
14.05 ATTORNEY FEES: If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof, reasonable attorneys' fees and costs as fixed by
the court shall be included in such judgment.
14.06 CAPTIONS: All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way
define, limit, extend, or describe the scope of this Agreement or the intent
of any provision in this Agreement.
14.07 PRONOUNS: All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, and neuter, singular and plural, as the
identity of the party or parties may require.
14.08 SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the parties hereto and, except as otherwise provided herein and subject to
the restrictions on transfers herein, their respective executors,
administrators, legal representatives, heirs, successors and assigns.
14.09 EXTENSION NOT A WAIVER: No delay or omission in the exercise of
any power, remedy or right herein provided or otherwise available to a Member
or the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgence
granted to a Member hereunder shall not otherwise alter or affect any power,
remedy or right of any other Member or of the Company, or the obligations of
the Member to whom such extension or indulgence is granted.
14.10 CREDITORS NOT BENEFITED: Nothing contained in this Agreement is
intended or shall be deemed to benefit any creditor of the Company or any
Member, and no creditor of the Company shall be entitled to require the
Company or the Members to solicit or accept any Deficit Contribution for the
Company or to enforce any right which the Company or any Member may have
against any Member under this Agreement or otherwise.
14.11 RECALCULATION OF INTEREST: If any applicable law is ever
judicially interpreted so as to deem any distribution, contribution, payment
or other amount received by any Member or the Company under this Agreement as
interest and so as to render any such amount in excess of the maximum rate or
amount of interest permitted by applicable law, then it is the express intent
of the Members and the Company that all amounts in excess of the highest
lawful rate or amount theretofore collected be credited against any other
distributions, contributions, payments or other amounts to be paid by the
recipient of the excess amount or refunded to the appropriate Person, and the
provisions of this Agreement immediately be deemed reformed, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the payment of the fullest amount
otherwise required
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hereunder. All sums paid or agreed to be paid that are judicially determined
to be interest shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the term of such obligation so that
the rate or amount of interest on account of such obligation does not exceed
the maximum rate or amount of interest permitted under applicable law.
14.12 SEVERABILITY: In case any one or more of the provisions contained
in this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and other application thereof shall not
in any way be affected or impaired thereby.
14.13 ENTIRE AGREEMENT: This Agreement, together with all Appendices
and Exhibits, contains the entire agreement between the parties relating to
the subject matter hereof, and all prior agreements relative hereto which are
not contained herein are terminated, including without limitation the Letter
Agreement. Amendments, variations, modifications or changes herein may be
made effective and binding upon the Members by, and only by, the setting forth
of the same in a document duly executed by each Member, and any alleged
amendment, variation, modification or change herein which is not so documented
shall not be effective as to any Member.
14.14 PUBLICITY: The parties agree that no Member or any of its
advisors shall issue any press release or otherwise publicize or disclose the
terms of this Agreement or the proposed terms of any acquisition of any
Property, without the consent of the Members, except as such disclosure may be
made in the course of normal reporting practices by any Member to its members,
shareholders or partners or as otherwise required by law (and prior to any
such disclosure the disclosing Member will notify the other Members and
provide them with a copy of the proposed disclosure and an opportunity to
approve such disclosure before the disclosure is made).
14.15 COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which together
shall constitute but one and the same agreement.
14.16 CONFIDENTIALITY: (a) The terms of this Agreement, the identity
of any person with whom the Company may be holding discussions with respect to
any investment, acquisition, disposition or other transaction, and all other
business, financial or other information relating directly to the conduct of
the business and affairs of the Company or the relative or absolute rights or
interests of any of the Members (collectively, the "Confidential Information")
that has not been publicly disclosed pursuant to authorization by the Members
is confidential and proprietary information of the Company, the disclosure of
which would cause irreparable harm to the Company and the Members.
Accordingly, each Member represents that it has not and agrees that it will
not and will direct its members, shareholders, partners, directors, officers,
agents, advisors and Affiliates not to, disclose to any Person any
Confidential Information or confirm any statement made by third Persons
regarding Confidential Information until the Company has publicly disclosed
the Confidential Information pursuant to authorization by the Members and
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has notified each Member that it has done so; provided, however, that any
Member (or its Affiliates) may disclose such Confidential Information if
required by law (it being specifically understood and agreed that anything set
forth in a registration statement or any other document filed pursuant to law
will be deemed required by law, and provided that before making any disclosure
of Confidential Information required by law (other than disclosures required
of Prime GR Trust as a Reporting Company) the disclosing Member will notify
the other Members and provide them with a copy of the proposed disclosure and
an opportunity to comment thereon before the disclosure is made) or necessary
for it to perform any of its duties or obligations hereunder or in any
property management agreement to which it is a party covering any Company
Property or necessary for the Managing Member to carry out its duties
hereunder or in connection with any Transfer permitted under this Agreement.
(b) Subject to the provisions of Section 14.16(a), each Member agrees
not to disclose any Confidential Information to any Person (other than a
Person agreeing to maintain all Confidential Information in strict confidence
or a judge, magistrate or referee in any action, suit or proceeding relating
to or arising out of this Agreement or otherwise), and to keep confidential
all documents (including, without limitation, responses to discovery requests)
containing any Confidential Information. Each Member hereby consents in
advance to any motion for any protective order brought by any other Member
represented as being intended by the movant to implement the purposes of this
Section 14.16, provided that, if a Member receives a request to disclose any
Confidential Information under the terms of a valid and effective order issued
by a court or governmental agency and the order was not sought by or on behalf
of or consented to by such Member, then such Member may disclose the
Confidential Information to the extent required if the Member as promptly as
practicable (i) notifies each of the other Members of the existence, terms and
circumstances of the order, (ii) consults in good faith with each of the other
Members on the advisability of taking legally available steps to resist or to
narrow the order, and (iii) if disclosure of the Confidential Information is
required, exercises its good faith efforts to obtain a protective order or
other reliable assurance that confidential treatment will be accorded to the
portion of the disclosed Confidential Information that any other Member
designates. The cost (including, without limitation, attorneys' fees and
expenses) of obtaining a protective order covering Confidential Information
designated by such other Member will be borne by the Company.
(c) The covenants contained in this Section 14.16 will survive the
Transfer of the Interest of a Member and the termination of the Company.
14.17 TIME OF THE ESSENCE: Time is of the essence of each and every
obligation to be performed by a Member in any capacity pursuant to this
Agreement.
14.18 VENUE: Each of the Members consents to the jurisdiction of any
court in the City of Chicago, ▇▇▇▇ County, Illinois for any action arising out
of matters related to this Agreement. Each of the Members waives the right to
commence an action in connection with this Agreement in any court outside of
Chicago, Illinois.
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14.19 WAIVER OF JURY TRIAL: EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.
[Signatures begin on next page.]
[The rest of this page left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the introductory paragraph hereof.
▇▇▇▇▇ ▇▇▇▇▇▇▇:
▇▇▇▇▇ ▇▇▇▇▇▇▇ L.L.C.., an Illinois limited liability company
By: /s/ J. ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
J. ▇▇▇▇ ▇▇▇▇▇▇▇
Manager
PRIME GR:
PRIME GROUP REALTY, L.P., a Delaware limited partnership
By: Prime Group Realty Trust, a Maryland real estate investment
trust, its managing general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Title: PRESIDENT OFFICE DIV.
---------------------------------
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APPENDIX A
TAX MATTERS
This Appendix is attached to and is a part of the Limited Liability
Company Agreement dated as of March 30, 1998 (the "Agreement") of
Prime/▇▇▇▇▇▇▇ Development Company, L.L.C. (the "Company"). The provisions of
this Appendix A are intended to comply with the requirements of Treas. Reg.
Section 1.704-1(b) (2) (iv) and Treas. Reg. Section 1.704-2 with respect to
maintenance of capital accounts and partnership allocations, and shall be
interpreted and applied accordingly.
I. DEFINED TERMS
1.1 DEFINED TERMS. For purposes of this Appendix, the capitalized terms
listed below shall have the meanings indicated. Capitalized terms not listed
below and not otherwise defined in this Appendix shall have the meanings
specified in the Agreement.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member for
any taxable year of the Company, the deficit balance, if any, in such Member's
Capital Account as of the end of such taxable year, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts that such Member
is obligated to restore or is deemed obligated to restore as described
in the penultimate sentences of Treasury Regulation Section
1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"BOOK BASIS" means, with respect to any asset of the Company, the
adjusted basis of such asset for federal income tax purposes; provided,
however, that (a) if any asset is contributed to the Company, the initial Book
Basis of such asset shall equal its fair market value on the date of
contribution (as agreed to by the Members), and (b) if the Capital Accounts of
the Members are adjusted pursuant to Treasury Regulation Section 1.704-1(b) to
reflect the fair market value of any asset of the Company, the Book Basis of
such asset shall be adjusted to equal its respective fair market value as of
the time of such adjustment (as agreed to by the Members), in accordance with
such Treasury Regulation. The Book Basis of all assets of the Company shall
be adjusted thereafter by depreciation as provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(g) and any other adjustment to the basis of such
assets other than depreciation or amortization.
"COMPANY MINIMUM GAIN" means "partnership minimum gain" as defined in
Treasury Regulation Section 1.704-2(d).
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"EXPENSES" means, for any period, the sum of the total gross cash
expenditures of the Company during such period, including without limitation
(a) all cash operating expenses (including all fees, commissions, expenses and
allowances paid to any third party or paid or reimbursed to any Member or any
of its Affiliates pursuant to any contract or otherwise as permitted
hereunder), (b) all debt service payments including debt service on loans made
to the Company by the Members or any of their Affiliates, (c) all expenditures
which are treated as Capital Expenditures (as distinguished from expense
deductions) under generally accepted accounting principles, (d) all real
estate taxes, personal property taxes and sales taxes, (e) all deposits to the
Company's Reserve Accounts pursuant to Section 9.05 of the Agreement, and (f)
all costs and expenditures related to any acquisition, sale, disposition,
financing, refinancing, monetization or securitization of any Company
Property, provided, however, that Expenses shall not include (i) any payment
or expenditure to the extent (A) the sources of funds used for such payment or
expenditure are not included in Revenues or (B) such payment or expenditure is
paid out of any Company Reserve Account, (ii) any expenditure properly
attributable to the liquidation of the Company, or (iii) non-cash expenses
such as depreciation or amortization.
"LOSS" means, for each taxable year or other period, an amount equal to
the Company's items of taxable deduction and loss for such year or other
period, determined in accordance with Section 703(a) of the Code (including
all items of loss or deduction required to be stated separately under Section
703(a)(1) of the Code), with the following adjustments:
(a) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Loss, will be
considered an item of Loss;
(b) Loss resulting from any disposition of any assets of the
Company (including any Property) with respect to which gain or loss is
recognized for federal income tax purposes will be computed by
reference to the Book Basis of such property, notwithstanding that the
adjusted Tax Basis of such property may differ from its Book Basis;
(c) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there will be taken into account depreciation for the taxable
year or other period as determined in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(g);
(d) Any items of deduction and loss specially allocated pursuant
to Section 3.2 shall not be considered in determining Loss; and
(e) Any decrease to Capital Accounts as a result of any
adjustment to the Book Basis of Company assets pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of
Loss.
"MEMBER MINIMUM GAIN" means the Company's "partner nonrecourse debt
minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2).
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"MEMBER NONRECOURSE DEBT" means "partner nonrecourse debt" as defined in
Treasury Regulation Section 1.704-2(b)(4).
"MEMBER NONRECOURSE DEDUCTIONS" means "partner nonrecourse deductions" as
defined in Treasury Regulation Section 1.704-2(i)(2).
"NET LOSS" means, for any period, the excess of items of Loss over items
of Profit, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 3.2.
"NET PROFIT" means, for any period, the excess of items of Profit over
items of Loss, if applicable, for such period determined without regard to any
items of Profit or Loss allocated pursuant to Section 3.2.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury Regulation
Section 1.704-2.
"PARTIALLY ADJUSTED CAPITAL ACCOUNT" means, with respect to any Member
for any taxable year of the Company, the Capital Account balance of such
Member at the beginning of such year, adjusted for all contributions and
distributions during such year and all special allocations pursuant to Section
3.2 with respect to such year but before giving effect to any allocations
pursuant to Section 3.1.
"PROFIT" means, for each taxable year or other period, an amount equal to
the Company's taxable income and gain for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items
of income and gain required to be stated separately under Section 703(a)(1) of
the Code), 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 Profit or Loss
will be added to taxable income;
(b) Gain resulting from any disposition of any assets of the
Company (including any Property) with respect to which gain or loss is
recognized for federal income tax purposes will be computed by
reference to the Book Basis of such property, notwithstanding that the
adjusted Tax Basis of such property may differ from its Book Basis;
(c) Any items specially allocated pursuant to Section 3.2 shall
not be considered in determining Profit; and
(d) Any increase to Capital Accounts as a result of any
adjustment to the Book Basis of Company assets pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of
Profit.
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"REVENUES" means, for any period, the sum of the total gross cash
revenues received by the Company during such period, including all receipts of
the Company from (a) proceeds from the sale or disposition of all or any
portion of any assets of the Company (including any Company Property) or the
issuance or sale by the Company of any securities or additional interests in
the Company, (b) rent (including additional rent and percentage rent) paid to
the Company, (c) concessions, (d) expense reimbursements, (e) condemnation or
casualty proceeds related to the condemnation of or casualty loss with regard
to all or any portion of the assets of the Company (including any Company
Property) (including any and all insurance awards with regard thereto), (f)
proceeds from rent or business interruption insurance, if any, (g) funds made
available to the extent such funds are withdrawn from the Company's Reserve
Accounts and deposited into the Company's operating accounts, (h) proceeds
from the financing, refinancing, monetization or securitization of the Company
or any assets of the Company (including any Company Property) (or any interest
therein), and (i) any distributions received by the Company, provided,
however, that Revenues shall not include any revenue or receipt realized by
the Company incident to the liquidation of the Company.
"TARGET ACCOUNT" means, with respect to any Member for any taxable year
of the Company, the excess of (a) an amount (which may be either a positive
balance or a negative balance) equal to the hypothetical distribution (or
contribution) such Member would receive (or contribute) if all assets of the
Company, including cash, were sold for cash equal to their Book Basis (taking
into account any adjustments to Book Basis for such year), all liabilities
allocable to such assets were then satisfied according to their terms (except
that if the nonrecourse liabilities secured by an asset exceed the Book Basis
of such asset, such calculation shall be made assuming that the asset were
transferred to the lender in satisfaction of the debt) and all remaining
proceeds from such sale were distributed pursuant to Section 6.02 (the
"Hypothetical Distribution Amount") over (b) such Member's share of Company
Minimum Gain and Member Minimum Gain immediately prior to such sale.
Notwithstanding the foregoing, unless the allocation is made pursuant to
Section 3.1(b), the Hypothetical Distribution Amount shall assume that amounts
distributable pursuant to Section 6.02(a)(ii) is zero.
"TAX BASIS" means, with respect to any asset of the Company, the adjusted
basis of such asset for federal income tax purposes as determined in
accordance with the Code.
"TAX MATTERS PARTNER" has the meaning set forth in Section 4.3.
"TREASURY REGULATION" and "TREAS. REG." means, with respect to any
referenced provision, such provision of the regulations of the United States
Department of the Treasury or any successor provision.
1.2 OTHER DEFINED TERMS. As used in this Appendix, unless otherwise
specified, (a) all references to Sections or paragraphs are to Sections or
paragraphs of this Appendix, (b) the terms "hereof" and "herein" refer to the
Agreement in its entirety, and (c) each accounting term has a meaning assigned
to it in accordance with GAAP.
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II. CAPITAL
2.1 CAPITAL ACCOUNTS: A separate Capital Account will be maintained for
each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).
Consistent therewith, the Capital Account of each Member will be determined
and adjusted as follows:
(a) Each Member's Capital Account will be credited with:
(i) Any contributions of cash made by such Member to the capital of
the Company, including any Guarantee Payment, plus the Book Basis of
any property contributed by such Member to the capital of the Company
(net of any liabilities to which such property is subject or which are
assumed by the Company);
(ii) The Member's distributive share of Net Profit, Profit, and items
thereof; and
(iii) Any other increases required by Treasury Regulation Section
1.704-1(b)(2)(iv).
(b) Each Member's Capital Account will be debited with:
(i) Any distributions of cash made from the Company to such Member
plus the fair market value of any property distributed in kind to such
Member (net of any liabilities to which such property is subject or
which are assumed by such Member), including any reimbursement from
any source of any Guarantee Payment;
(ii) The Member's distributive share of Net Loss, Loss, and items
thereof; and
(iii) Any other decreases required by Treasury Regulation Section
1.704-1(b)(2)(iv).
The provisions of this Section 2.1 relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder and will be
interpreted and applied in a manner consistent with those provisions.
2.2 BOOK BASIS ADJUSTMENTS: The Book Basis of all assets will be
adjusted to equal their respective fair market values upon the events set
forth in Treasury Regulation Section 1.704-1(b)(2) (ii)(f)(5)(i) and (ii).
2.3 TIMING OF ADJUSTMENTS. Each Investing Member's Capital Account
will normally be adjusted as of the end of each taxable year of the Company;
provided, however, that the Capital Accounts may be adjusted more frequently
if circumstances otherwise make it advisable in the judgment of the Tax
Matters Partner. All adjustments will be made in accordance with the terms of
the Agreement.
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III. ALLOCATIONS AND DISTRIBUTIONS
3.1 ALLOCATIONS: For each Company taxable year or portion thereof, Net
Profit and Net Loss shall be allocated (after all allocations pursuant to
Section 3.2 have been made) as follows:
(a) Except as provided in Section 3.1(b), Net Profit or Net Loss
shall be allocated to make the Partially Adjusted Capital Accounts of
the Members equal, as nearly as possible, their respective Target
Accounts.
(b) All items comprising Winding Up Profit and Loss shall be
allocated in such a manner so as to cause the Partially Adjusted
Capital Accounts of the Members to equal, as nearly as possible, their
respective Target Accounts.
3.2 SPECIAL ALLOCATIONS AND COMPLIANCE WITH SECTION 704(b): The
following special allocations shall, except as otherwise provided, be made in
the following order:
(a) Notwithstanding any other provision of this Article III, if
there is a net decrease in Company Minimum Gain or in any Member
Minimum Gain during any taxable year of the Company, prior to any
other allocation pursuant hereto, such Member shall be specially
allocated items of Company Profit for such year (and, if necessary,
subsequent years) in an amount and manner required by Treasury
Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The items to be so
allocated shall be determined in accordance with Treasury Regulation
Section 1.704-2.
(b) Any Member who receives a distribution pursuant to clause
(ii) of Section 6.02(a) shall be allocated items of Profit until the
aggregate amount allocated pursuant to Section 3.2(b) for all periods
is equal to the aggregate amounts therefor distributed pursuant to
Section 6.02(a)(ii).
(c) Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a
negative balance in his or its Capital Account shall be allocated
items of Profit sufficient to eliminate such increase or negative
balance caused thereby, as quickly as possible, to the extent required
by such Treasury Regulation.
(d) Nonrecourse Deductions for any taxable year of the Company
or other period shall be allocated (as nearly as possible) under
Treasury Regulation Section 1.704-2 to the Members, pro rata in
proportion to their respective Percentage Interests.
(e) Any Member Nonrecourse Deductions for any taxable year of
the Company or other period shall be allocated to the Member that
made, or guaranteed or is otherwise liable with respect to the loan to
which such Member Nonrecourse Deductions are attributable in
accordance with principles under Treasury Regulation Section
1.704-2(i).
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(f) No allocation of Loss shall be made to any Member if, as a
result of such allocation, such Member would have an Adjusted Capital
Account Deficit. Any such disallowed allocation shall be made to the
Members entitled to receive such allocation under Treasury Regulation
Section 1.704 in proportion to their respective Percentage Interests.
3.3 DISTRIBUTIONS IN LIQUIDATION: Upon the dissolution and winding-up
of the Company, the proceeds of sale and other assets of the Company distributab
le to the Members under Section 12.02(c)(iii) shall be distributed, not later
than the latest time specified for such distributions pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(b)(2) to the Members in accordance with
their respective positive Capital Account balances (after adjustment to
reflect the allocations pursuant to this Article III and Article VI of the
Agreement). With the approval of the Members, a pro rata portion of the
distributions that would otherwise be made to the Members under the preceding
sentence may be distributed to a trust established for the benefit of the
Members for the purposes of liquidating Company assets, collecting amounts
owed to the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company arising out of or in connection with the Company.
The assets of any trust established under this Section 3.3 will be distributed
to the Members from time to time by the trustee of the trust upon approval of
the Members in the same proportions as the amount distributed to the trust by
the Company would otherwise have been distributed to the Members under this
Agreement.
IV. TAX MATTERS
4.1 TAX ALLOCATIONS. (a) Except as otherwise provided in Section
4.1(b), all items of income, gain, loss, deduction and credit of the Company
shall be allocated to the Members for federal, state and local income tax
purposes as nearly as possible in the same manner as the corresponding
allocation of each such item for purposes of determining the Capital Accounts
of the Members.
(b) In accordance with Section 704(c) of the Code and the applicable
Treasury Regulations thereunder, income, gain, loss, deduction and tax
depreciation, amortization or depletion with respect to any asset contributed
to the capital of the Company, or with respect to any asset which has a Book
Basis different than its Tax Basis, shall, solely for federal income tax
purposes, be allocated among the Members so as to take into account any
variation between the Tax Basis of such asset to the Company and the Book
Basis of such asset. The Members may select any reasonable method or methods
for making such allocations, including without limitation, any method
described in Treasury Regulation Section 1.704-3(b), (c) or (d).
4.2 TAX MATTERS: The Members intend for the Company to be treated as a
partnership under the Code. The Members shall make all applicable elections,
determinations and other decisions under the Code, including, without
limitation, the deductibility of a particular item of expense and the
positions to be taken on the Company's tax return, and shall approve the
settlement or compromise of all audit matters raised by the Internal Revenue
Service affecting the Members generally. The Members shall each take
reporting positions on their respective federal, state and local income tax
returns consistent with the positions determined for the
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Company by the Members. The Managing Member shall cause all federal, state
and local income and other tax returns to be timely filed by the Company.
4.3 TAX MATTERS PARTNER: Prime GR shall be the tax matters ("Tax
Matters Partner") partner within the meaning of Section 6231(a)(7) of the Code
and, subject to Section 4.2, shall exercise all rights, obligations and duties
of a tax matters partner under the Code. The Members may in its discretion
designate any other Member as a substitute or alternative tax matters partner
by written notice thereof to all Members. The Tax Matters Partner shall
diligently prosecute any disputes between the Company and the Internal Revenue
Service, but shall not engage in any action or settlement regarding such
dispute without the approval of the Members.
4.5 NOTICE OF TAX EXAMINATIONS. Any Member receiving advice that the
Internal Revenue Service intends to examine any income tax return of the
Company shall promptly notify the Company.
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▇▇▇▇▇▇▇▇ ▇
COMMON UNIT RECIPIENT CERTIFICATIONS
No later than one (1) business day prior to the Call Offer closing date,
each recipient of Common Units pursuant to this Agreement (each such recipient
is referred to herein as a "Common Unit Recipient") shall execute and deliver
to Prime GR a written statement wherein it shall represent, warrant and
covenant as follows:
(A) Such Common Unit Recipient is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Such Common Unit Recipient understands the
risks of, and other considerations relating to, its acquisition of the Common
Units. Such Common Unit Recipient, by reason of its business and financial
experience, together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with respect to its
investment in the Common Units, (i) has such knowledge, sophistication and
experience in financial and business matters and in making investment
decisions of this type, that it is capable of evaluating the merits and risks
of an investment in Common Units of Prime GR and of making an informed
investment decision, (ii) is capable of protecting its own interests in
connection with its acquisition of Common Units or has engaged representatives
or advisors to assist such Common Unit Recipient in protecting its interests
in connection with its acquisition of Common Units and (iii) is capable of
bearing the economic risk of such investment in Common Units.
(B) The Common Units to be issued to such Common Unit Recipient will be
acquired by such Common Unit Recipient for its own account for investment only
and not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein until
and unless the Common Units are exchanged for Common Shares of Prime Group
Realty Trust (the "Trust"), following the six months lock-up period applicable
to the Common Units, in accordance with the Partnership Agreement of Prime
GR. Such Common Unit Recipient shall confirm that all documents, instruments,
records and books pertaining to investment in Common Units of Prime GR and
requested by such Common Unit Recipient have been made available or delivered
to such Common Unit Recipient. Such Common Unit Recipient has had an
opportunity to ask questions of and receive answers from Prime GR, or from a
person or persons acting on Prime GR's behalf, concerning Prime GR, the terms
and conditions of the transaction contemplated by this Agreement and such
Common Unit Recipient's acquisition of Common Units. Such Common Unit
Recipient has relied upon, and is making its investment decisions, solely upon
such information as has been provided to such Common Unit Recipient by the
Operating Partnership and such Common Unit Recipient has not relied upon any
other information, literature or any oral communications. Such Common Unit
Recipient was not formed for the specific purpose of acquiring an interest in
Prime GR.
(C) Such Common Unit Recipient acknowledges that (i) the Common Units to
be issued to such Common Unit Recipient have not been registered under the
Securities Act or state securities laws by reason of a specific exemption or
exemptions from registration under the
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Securities Act and applicable state securities laws, (ii) Prime GR's reliance
on such exemptions is predicated in part on the accuracy and completeness of
the representations and warranties of the Common Unit Recipient contained
herein, (iii) such Common Units, therefore, cannot be resold unless registered
under the Securities Act and applicable state securities laws, or unless an
exemption from registration is available, (iv) there is no public market for
such Common Units and (v) Prime GR has no obligation or intention to register
such Common Units for resale under the Securities Act or any state securities
laws or to take any action that would make available any exemption from the
registration requirements of such laws. Such Common Unit Recipient, hereby
acknowledges that because of the restrictions on transfer or assignment of
such Common Units to be issued hereunder which are set forth in this Agreement
and in Prime GR Partnership Agreement, such Common Unit Recipient may have to
bear the economic risk of the investment commitment evidenced by this
Agreement and any Common Units acquired hereby for an indefinite period of
time, and that the Common Units by their terms will not be exchangeable at the
request of the holder thereof for Common Shares of the Trust prior to the
passage of six full calendar months after their issuance.
(D) The address of such Common Unit Recipient's residence or principal
place of business, as applicable, shall be set forth, together with a
statement as to whether such Common Unit Recipient has any present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which its present principal place of business or
residence, as applicable, is sited.
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EXHIBIT 1
LEGAL DESCRIPTION FOR THE COMPANY PROPERTY
▇▇▇▇ ▇, ▇, ▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇ LYING EAST OF THE EAST LINE OF
DEARBORN STREET, (EXCEPTING THEREFROM THE NORTH 9 FEET OF SAID LOTS
TAKEN FOR ALLEY) IN BLOCK 141 IN SCHOOL SECTION ADDITION TO CHICAGO IN
SECTION 16, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL
MERIDIAN, IN ▇▇▇▇ COUNTY, ILLINOIS.
Common Address of Property: THE ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Tax Identification Number(s): 17-16-213-012-0000
17-16-213-013-0000
17-16-213-014-0000
17-16-213-015-0000
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