EXHIBIT NO. 99.3
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
DEARBORN CENTER, L.L.C.
Dated as of October 8, 2003
TABLE OF CONTENTS
ARTICLE I DEFINITIONS...................................................1
Section 1.1 Certain Definitions.....................................1
ARTICLE II formation.....................................................8
Section 2.1 Formation of Company....................................8
Section 2.2 Name of Company.........................................8
Section 2.3 Purposes and Objectives.................................8
Section 2.4 Term....................................................8
Section 2.5 Principal place of Business.............................8
ARTICLE III REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS..............9
Section 3.1 Representations of the Members..........................9
Section 3.2 Effect of this Agreement................................9
Section 3.3 Litigation.............................................10
ARTICLE IV CAPITAL CONTRIBUTIONS........................................10
Section 4.1 Capital Account........................................10
Section 4.2 Capital Contributions..................................10
Section 4.3 Contributions of Invested Capital......................11
Section 4.4 Return of Capital......................................12
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS................................12
Section 5.1 Cash Distribution......................................12
Section 5.2 Distributions of Distributable Cash....................13
Section 5.3 Net Sale or Refinancing Proceeds.......................13
Section 5.4 Allocations of Profit..................................14
Section 5.5 Losses.................................................14
ARTICLE VI ACCOUNTING, TAXATION, AND OTHER MATTERS......................15
Section 6.1 Company Fiscal Year....................................15
Section 6.2 Location of Records; Inspection........................15
Section 6.3 Books of Account.......................................15
Section 6.4 Reports................................................15
Section 6.5 Taxation...............................................16
Section 6.6 Tax Returns and Audits.................................18
Section 6.7 Other Reports..........................................19
Section 6.8 Bank Accounts; Investments.............................19
Section 6.9 Insurance..............................................19
Section 6.10 Record Retention.......................................20
Section 6.11 The Company Accountant.................................20
Section 6.12 Delegation of Responsibility...........................20
ARTICLE VII MANAGEMENT OF THE COMPANY....................................20
Section 7.1 Administrative Member..................................20
Section 7.2 Duties of Administrative Member; Agents................21
Section 7.3 Major Decisions........................................21
Section 7.4 Non-Delegation.........................................23
Section 7.5 Prime Assumed Obligations..............................23
Section 7.6 REIT Compliance........................................23
ARTICLE VIII OTHER BUSINESS...............................................25
Section 8.1 Conflicts of Interest..................................25
Section 8.2 German Interests.......................................25
ARTICLE IX TRANSFERABILITY..............................................26
Section 9.1 General................................................26
Section 9.2 Notwithstanding the foregoing, no consent shall
be required if the Transferee is an Affiliate
of the Transferor......................................26
Section 9.3 Permitted Transfers....................................26
Section 9.4 Transferee Not Member in Absence of Consent............26
ARTICLE X DISSOLUTION AND TERMINATION..................................27
Section 10.1 Dissolution............................................27
Section 10.2 Termination............................................27
Section 10.3 Activities During Wind Up..............................27
Section 10.4 Liquidation............................................27
ARTICLE XI PURCHASE OPTIONS.............................................28
Section 11.1 Prime Purchase Option..................................28
Section 11.2 UST Purchase Option....................................29
Section 11.3 General Conditions.....................................30
Section 11.4 Enforcement............................................31
Section 11.5 Continuation of Options................................31
ARTICLE XII NO WAIVER....................................................31
ARTICLE XIII NO RIGHT TO PARTITION........................................32
ARTICLE XIV GENERAL......................................................32
Section 14.1 Entirety of Agreement..................................32
Section 14.2 Notices................................................32
Section 14.3 Further Assurances.....................................33
Section 14.4 Applicable Law and Choice of Forum.....................33
Section 14.5 Counterparts...........................................33
Section 14.6 Headings...............................................34
Section 14.7 Waiver.................................................34
Section 14.8 Public Announcements...................................34
Section 14.9 Pronouns and Plurals...................................34
Section 14.10 Force Majeure..........................................34
Section 14.11 Section Numbers........................................34
Section 14.12 Notice of Litigation...................................35
Section 14.13 Severability...........................................35
Section 14.14 No Drafting Presumption................................35
Section 14.15 Third-Party Beneficiaries..............................35
Section 14.16 Remedies...............................................35
Section 14.17 Designation of Forum and Consent to Jurisdiction.......35
Section 14.18 Waiver of Jury Trial...................................35
Section 14.19 Binding Agreement......................................35
Section 14.20 Exculpation............................................35
Section 14.21 Performance/Holidays...................................36
Section 14.22 Prime TIF Advance......................................36
EXHIBIT A Loan Documents
EXHIBIT B Annual Plans
EXHIBIT C Restricted Services
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
This Amended and Restated Limited Liability Company Agreement
("Agreement") is entered into as of the 8th day of October, 2003 (the "Effective
Date"), between UST XI DEARBORN, LTD. ("UST"), a limited partnership organized
under the laws of the State of Florida, and PRIME GROUP REALTY, L.P. ("Prime"),
a limited partnership organized under the laws of the State of Delaware, both of
which are sometimes referred to as the "Members" and individually as a "Member."
In consideration of the mutual promises contained herein the Members agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. Without limitation of the applicability of
other defined terms used herein, the following terms shall have the following
meanings when used in this Agreement:
1.1.1 "Act" means the Delaware Limited Liability Company Act.
1.1.2 "Additional Capital Contributions" shall have the meaning set forth
in Section 4.2.2.
1.1.3 "Administrative Member" shall have the meaning set forth in Section
7.1.
1.1.4 "Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with another Person, with control in such
context meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of another, whether
through the ownership of voting securities, by contract or otherwise.
1.1.5 "Annual Plans" shall have the meaning set forth in Section 7.2(b).
1.1.6 "Bank One" shall have the meaning set forth in Section 11.3.5.
1.1.7 "Bank One Lease" shall have the meaning set forth in Section 11.3.5.
1.1.8 "Bank One First Offer Rights" shall have the meaning set forth in
Section 11.3.5.
1.1.9 "Bank One Rights" shall have the meaning set forth in Section 11.3.5.
1.1.10 "Capital Account" shall have the meaning set forth in Section 4.1.1.
1.1.11 "Capital Contribution" means, with respect to any Member, the amount
of money and the initial fair market value of any property (other than money),
net of the amount of any debt to which such property is subject, contributed to
the Company with respect to the Membership Interest in the Company held by such
Member. The Capital Contributions of the Members on the date of this Agreement
are detailed in Section 4.2.1 of this Agreement.
1.1.12 "Capital Transaction" shall mean (a) any event or Company
transaction (other than receipt of a Capital Contribution) not in the ordinary
course of the Company's business, including (i) a sale or other disposition of
all or substantially all of the Property, and (ii) any damage to or
condemnation, destruction or loss of all or any portion of the Company's assets
resulting in receipt by the Company of condemnation awards or insurance proceeds
on the basis of actual or constructive total loss (other than business
interruption insurance proceeds), in excess of the amounts, if any, of such
awards or proceeds applied to the acquisition or reconstruction of Company
assets; and (b) any financing or refinancing of all or substantially all of the
Company's assets or of indebtedness of the Company.
1.1.13 "City Agreement" means that certain Dearborn Center Redevelopment
Agreement dated August 1, 2002 between the City of Chicago and the Company as
amended, modified and supplemented as of the date hereof.
1.1.14 "Code" means the Internal Revenue code of 1986, as amended, or any
successor or replacement statute.
1.1.15 "Company" means Dearborn Center, L.L.C., a Delaware limited
liability company.
1.1.16 "Company Accountant" shall have the meaning set forth in Section
6.11.
1.1.17 "Company Accounts" shall have the meaning set forth in Section 6.8.
1.1.18 "Contribution Agreement" means the Contribution Agreement dated as
of August 4, 2003, as amended by that certain First Amendment to Contribution
Agreement, dated as of August 18, 2003, as amended by that certain Second
Amendment to Contribution Agreement, dated as of August 29, 2003, and as further
amended by that certain Third Amendment to Contribution Agreement, dated as of
October 8, 2003, between ▇▇▇▇ and Prime, which has been assigned by ▇▇▇▇ to UST.
1.1.19 "Current Leases" shall mean, for purposes of determining the
purchase price under the Prime Purchase Option or the UST Purchase Option, as
applicable, all signed leases for space in the Property; provided, however, that
Current Leases shall not include any lease for which a tenant has notified the
Company in writing that such tenant is terminating the lease pursuant to a
termination clause included in such lease.
1.1.20 "Depreciation" means for each Company fiscal year or other period,
an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for Federal income tax purposes with respect to an asset for
such year or other period, except that if an asset of the Company is reflected
on the books of the Company at a book value that differs from the adjusted tax
basis of such asset pursuant to Section 1.704-1(b) (2) (iv) (d) or 1.704-1(b)
(2) (iv) (f) of the Regulations, depreciation, amortization, or other cost
recovery deductions shall be computed for book purposes with respect to such
asset pursuant to Section 1.704-1(b)(2)(iv)(g) of the Regulations.
1.1.21 "Distributable Cash" shall have the meaning set forth in Section
5.1.
1.1.22 "Distribution Date" means each date on which a distribution of
Distributable Cash is to be made pursuant to Section 5.1.
1.1.23 "Effective Date" means, October 8, 2003, which is the date the
closing occurs pursuant to Section 12.1 of the Contribution Agreement.
1.1.24 "Initial Invested Capital" means the Invested Capital of the Members
on the date of this Agreement. The Initial Invested Capital of the Members on
the date of this Agreement is set forth in Section 4.3(a) of this Agreement.
1.1.25 "Invested Capital" means and includes the UST Invested Capital or
the Prime Invested Capital, as applicable.
1.1.26 "Invested Capital Threshold" shall mean the amount that must be
received by UST to return to UST the UST Invested Capital plus a return on the
UST Invested Capital in effect from time to time of 12.5% compounded annually,
after taking into account all prior distributions made to UST, if any, under
Sections 5.2 and 5.3 of this Agreement.
1.1.27 "Leasing Condition" shall have the meaning set forth in Section
4.3(b).
1.1.28 "Loan" and "Loans" means, as applicable, and as existing from time
to time during the term of this Agreement, any indebtedness for borrowed money
secured by the Property (or the Membership Interests) and approved in writing by
UST and Prime including, without limitation, the loan contemplated by the Loan
Documents.
1.1.29 "Loan Documents" means the loan documents set forth in Exhibit A and
the Loan contemplated thereby. As Loans are entered into, paid off, refinanced,
or otherwise terminated, Exhibit A shall be amended by the Members so that it
continues to reflect a current list of all Loans.
1.1.30 "Major Decision" and "Major Decisions" shall have the meanings set
forth in Section 7.3.
1.1.31 "Member" means each party executing this Agreement and their
successors and assigns who are admitted pursuant to the terms of this Agreement.
1.1.32 "Membership Interests" means all rights and interests of the Members
of the Company including, without limitation, the right to participate in the
management of the Company to the extent expressly provided in this Agreement.
Immediately after the distribution described in Section 5.1 of this Agreement
and the contribution of the Prime Contributed Assets, the respective Membership
Interests of the Members shall be:
------------------------------------------------- ------------------------------
UST 70%
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------------------------------------------------- ------------------------------
Prime 30%
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1.1.33 "Net Sale or Refinancing Proceeds" shall mean the net proceeds
remaining from any Capital Transaction after providing for the payment of all
costs and expenses related thereto, the payment for any capital expenditures or
expenses for which such proceeds are to be used, the satisfaction of any debt,
the funding of any required escrows and reserves, and the setting aside of any
reserves for creditors as determined jointly by UST and Prime.
1.1.34 "Operating Capital" shall have the meaning set forth in Section
4.2.1.
1.1.35 "Person" means an individual, corporation, limited liability
company, general partnership, limited partnership, voluntary association, joint
stock company, business trust, joint venture, proprietorship, or other legal
entity, however constituted.
1.1.36 "Prime Assumed Obligations" shall have the meaning set forth in
Section 7.5.
1.1.37 "Prime Capital Transaction Priority Return" means, for the Company
fiscal year in which a Capital Transaction described in Section 5.3 occurs, a
ten percent (10%) preferred simple return (i.e., not compounded or cumulative)
on the Prime Invested Capital for such fiscal year, prorated for partial fiscal
years.
1.1.38 "Prime Combined Priority Return" means the sum of the Prime Capital
Transaction Priority Return and the Prime Priority Return.
1.1.39 "Prime Dearborn" means Prime Dearborn, L.L.C., a Delaware limited
liability company.
1.1.40 "Prime Contributed Assets" means all assets (including, without
limitation, cash contributions) contributed or deemed contributed by Prime to
the Company pursuant to the Contribution Agreement including, without
limitation, the Property.
1.1.41 "Prime Invested Capital" means the total amount of Prime's Initial
Invested Capital and Required Additional Invested Capital (at the time the
relevant distribution or determination is made), less any prior distributions of
the net proceeds of Capital Transactions made to Prime at the time such
distribution or determination is made by the Company, but not reduced by the
distributions to Prime contemplated by the first sentence of Section 5.1 below.
1.1.42 "Prime Option Period" shall have the meaning set forth in Section
11.1.1.
1.1.43 "Prime Purchase Option" shall have the meaning set forth in Section
11.1.
1.1.44 "Prime Priority Return" means an annual, simple (i.e., not
compounded or cumulative), ten percent (10%) preferred return on the Prime
Invested Capital determined at the time the relevant distribution is made,
prorated for partial fiscal years.
1.1.45 "Proceeds Advance" means a payment by UST or the Company, as the
case may be, of any portion of the Proceeds (as defined in the Bank One Lease)
due and payable by Prime to Bank One in connection with the Bank One Rights.
Neither UST nor the Company shall have the right to make a Proceeds Advance
unless and until Prime fails to pay the Proceeds (or applicable portion thereof)
to Bank One in accordance with the terms and conditions of the Bank One Lease.
1.1.46 "Profits" and "Losses" and reference to any item of income, gain,
loss or deduction thereof mean, for each Company fiscal year, an amount equal to
the Company's taxable income or loss for such Company fiscal year, determined in
accordance with Code Section 703(a) (but including in taxable income or loss,
for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 702(a)), with the following
adjustments:
i. any income of the Company exempt from Federal income tax
and not otherwise taken into account in computing Profits
or Losses pursuant to this definition shall be added to
such taxable income or loss;
ii. any expenditures of the Company described in Code Section
705(a)(2)(B) (or treated as expenditures described in Code
Section 705(a)(2)(B) pursuant to Regulations Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account
in computing Profits or Losses pursuant to this definition
shall be subtracted from such taxable income or loss;
iii. in the event the gross fair market value of any Company
asset is adjusted in accordance with the Regulations, the
amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
iv. gain or loss resulting from any disposition of any asset
of the Company with respect to which gain or loss is
recognized for Federal income tax purposes shall be
computed by reference to the gross fair market value of
the asset disposed of, notwithstanding that the adjusted
tax basis of such asset differs from its gross fair market
value;
v. in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such Company fiscal year or other period;
vi. to the extent an adjustment to the adjusted tax basis of
any Property is required pursuant to Regulations Section
1. 704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts, the amount of such
adjustment shall be treated either as an item of gain (if
the adjustment increases the basis of the asset) or an
item of loss (if the adjustment decreases the basis of the
asset) in respect of such asset and shall be taken into
account for purposes of computing Profits and Losses; and
vii. notwithstanding any other provision of this definition of
"Profits" and "Losses," any items which are specially
allocated pursuant to Section 6.5 hereof shall not be
taken into account.
1.1.47 "Pro Forma Net Operating Income" means, for the period in question,
the amount by which Projected Gross Receipts exceed Projected Operating
Expenses.
1.1.48 "Projected Gross Receipts" means, for the period in question, an
amount equal to the total gross cash revenues projected for the Company for such
period, including (a) the total amount payable by all tenants, licensees,
concessionaires and others occupying any portion of the Property including, but
not limited to, all rents, pro rata shares of taxes, common area charges and
other additional rental charges under Current Leases, less an allowance for
uncollectibles of 1.5% of the annual rent under all Current Leases with tenants
that do not have an investment grade credit rating; and (b) parking fees,
service income, income under the City Agreement, utility and telephone service
fees. With respect to the rents projected to be received under Current Leases,
(i) all rent allowances and concessions payable to tenants shall be counted as
paid, and (ii) the projected rent payable under any Current Lease for any
partial year shall be annualized.
1.1.49 "Projected Operating Expenses" means, for the period in question, an
amount equal to the sum of all cash operating expenses projected to be expended
by the Company for such period including, without limitation, for (a) utilities,
(b) maintenance and repairs, (c) administrative costs (excluding the UST
Administrative Fee and administrative costs not associated with the operation of
the Property, such as Company accounting and tax preparation fees), (d)
management fees, (e) cleaning, (f) security, (g) insurance and (h) real estate
taxes, personal property taxes and sales taxes. Project Expenses shall be
calculated without any deductions for debt service (including interest),
depreciation, amortization or other non-cash expenses and any capitalized
expenditure (as determined in accordance with generally accepted accounting
principles).
1.1.50 "Property" means the thirty-seven story office building located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in Chicago, Illinois and containing approximately
1,536,751 rentable square feet of space, consisting of approximately 1,441,402
rentable square feet of office space, 95,349 rentable square feet of retail
space and approximately 190 parking spaces located in an underground parking
garage. In addition, there is approximately 24,218 square feet of lower level
storage space.
1.1.51 "Property Management and Leasing Agreement" means the agreement in
the form attached as Exhibit II to the Contribution Agreement.
1.1.52 "Property Manager" means Prime Group Realty Services, Inc., a
Maryland corporation.
1.1.53 "Protected REIT" means Prime Group Realty Trust, a Maryland real
estate investment trust.
1.1.54 "Regulations" mean the temporary and final income tax regulations
promulgated under the Code from time to time.
1.1.55 "REIT" means a real estate investment trust.
1.1.56 "Required Additional Invested Capital" means (a) with respect to
UST, the $9,800,000 ▇▇▇▇ Earnout (as defined in the Contribution Agreement),
which UST shall be required to contribute to the Company as an additional
contribution of Invested Capital upon satisfaction of the Leasing Condition; and
(b) with respect to Prime, the $4,200,000 PGRLP Earnout (as defined in the
Contribution Agreement), which shall be treated as an additional contribution of
Invested Capital by Prime to the Company upon satisfaction of the Leasing
Condition.
1.1.57 "Sharing Capital Ratios" means the percentages in which Members
participate in, and bear, certain Company items. The Sharing Capital Ratios of
the Members are as follows:
------------------------------------------------- ------------------------------
UST 50%
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------------------------------------------------- ------------------------------
Prime 50%
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1.1.58 "Syndication" shall have the meaning set forth in Section 8.2.
1.1.59 "Transferee" shall have the meaning set forth in Section 9.1.
1.1.60 "Transferor" shall have the meaning set forth in Section 9.1.
1.1.61 "Uniform Commercial Code" shall mean the Uniform Commercial Code of
the State of Delaware, as the same may be amended from time to time.
1.1.62 "UST Administrative Fee" means the monthly $50,000 fee payable to
UST by the Company for the performance of its services as Administrative Member.
The UST Administrative Fee will have priority over distributions to be made to
the Members under this Agreement and shall be paid on a pari passu basis with
management fees and leasing commissions due to the Property Manager under the
Property Management and Leasing Agreement, but shall not have priority over any
other payments and reimbursements due under the Property Management and Leasing
Agreement including, without limitation, leasing commissions payable to
cooperating brokers. Notwithstanding the foregoing, during the period that the
Property Manager's "Management Fees" (as defined in the Property Management and
Leasing Agreement) are subordinated to the UST Priority Return, the foregoing
provision providing for the UST Administrative Fee to be paid on a pari passu
basis with the Management Fees due to the Property Manager shall not apply to
the extent that any of the Management Fees are delayed or not paid solely
because of such subordination.
1.1.63 "UST Capital Transaction Priority Return" means, for the Company
fiscal year in which a Capital Transaction described in Section 5.3 occurs, a
ten percent (10%) preferred simple return (i.e., not compounded or cumulative)
on the UST Invested Capital for such fiscal year, prorated for partial fiscal
years.
1.1.64 "UST Combined Priority Return" means the sum of the UST Capital
Transaction Priority Return and the UST Priority Return.
1.1.65 "UST Contributed Assets" means the cash contributed by UST to the
Company pursuant to the Contribution Agreement.
1.1.66 "UST Invested Capital" means the aggregate amount of UST's Initial
Invested Capital and UST's Required Additional Invested Capital (at the time the
relevant distribution or determination is made), less any prior distributions of
the proceeds of Capital Transactions made to UST at the time of such
distribution or determination is made by the Company.
1.1.67 "UST Priority Return" means an annual, simple (i.e., not compounded
or cumulative), ten percent (10%) preferred return on the UST Invested Capital
determined at the time the relevant distribution is made, prorated for partial
fiscal years.
1.1.68 "UST Option Period" shall have the meaning set forth in Section
11.2.1.
1.1.69 "UST Purchase Option" shall have the meaning set forth in Section
11.2.
1.1.70 "▇▇▇▇" means ▇▇▇▇ Chicago, L.C., a Florida limited liability
company.
ARTICLE II
FORMATION
Section 2.1 Formation of Company. The Company was formed as a limited
liability company pursuant to the Act, effective September 27, 2000. In
connection with the transactions contemplated by the Contribution Agreement,
Prime Dearborn has distributed all of its Membership Interests in the Company to
Prime and confirmed Prime as a Member of the Company and withdrawn as a Member
of the Company. Prime, as the sole Member of the Company as a result of the
distribution by Prime Dearborn, now desires to admit UST as a Member and to
confirm, amend and restate the Agreement in its entirety. The rights,
privileges, liabilities and obligations of the Members shall be as provided in
the Act, except as herein expressly stated to the contrary in this Agreement.
Section 2.2 Name of Company. The name of the Company shall be Dearborn
Center, L.L.C. In the future, the Administrative Member shall execute such
further documents (including amendments to the articles of organization) and
take such further action as shall be appropriate or necessary to comply with the
requirements of law for the formation and operation of a limited liability
company in all states and counties where the Company elects to carry on its
business.
Section 2.3 Purposes and Objectives. The purposes of the Company shall be
to engage primarily in the ownership, leasing and operation of the Property in
accordance with the terms and provisions of this Agreement and to engage in such
other activities as may be related, incident or ancillary thereto.
Section 2.4 Term. The Company shall commence as of the date hereof and
continue in existence in perpetuity, or until terminated in accordance with the
terms of this Agreement.
Section 2.5 Principal place of Business. The principal place of business of
the Company shall be at the office of the Administrative Member at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other location where the
Administrative Member's principal office shall be located from time to time. The
Administrative Member shall give reasonable prior written notice of any change
in such principal place of business to the Members. The name and address of the
registered agent in Delaware is Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The name and address of the
registered agent of the Company in Illinois is Prime Group Realty, L.P. c/o
Prime Group Realty Trust, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: General Counsel. Prime shall promptly send a copy of any
notice received by Prime in its capacity as registered agent of the Company in
Illinois to the other Members of the Company.
ARTICLE III
REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS
Section 3.1 Representations of the Members. Each Member represents and
warrants to the other:
3.1.1 Due Organization. Such Member is duly organized, validly existing and
in good standing under the laws of the state of its organization and has the
requisite power and authority (a) to carry on its business as presently
conducted and to own or hold under lease its properties, where the failure to
have such power and authority would have a material adverse effect on its
ability to perform its obligations under this Agreement, and (b) to enter into
and perform its obligations under this Agreement.
3.1.2 Authorization. The execution, delivery and performance by such Member
of this Agreement have been duly authorized by all necessary action on the part
of such Member. This Agreement has been duly authorized, executed and delivered
by such Member and is a legal, valid and binding obligation of such Member,
enforceable against such Member in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, liquidation, moratorium or similar laws affecting creditors' or
lessors' rights generally and except as the application of general equitable
principles may limit the availability of certain remedies.
Section 3.2 Effect of this Agreement. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby nor
compliance by such Member with any of the provisions hereof, will: (a) conflict
with or result in a breach of any provision of the constituent documents of such
Member; (b) require the approval or consent of, or filing or registration with,
any foreign, Federal, state, local or other governmental or regulatory body or
the approval or consent of any other Person the failure of which to make or
obtain would have a material adverse effect on the ability of such Member to
perform its obligations under this Agreement; (c) violate any provision of any
law or regulation or violate, breach or, with the giving of notice or passage of
time, constitute an event of default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which such Member is a party, or by which it may be bound,
which violation, breach or default (or right of termination, cancellation or
acceleration) would have a material adverse effect on the ability of such Member
to perform its obligations under this Agreement and the transactions
contemplated hereby except, in the case of clause (c), as to which requisite
waivers or consents have been obtained.
Section 3.3 Litigation. There is no action, suit or proceeding pending or,
to the knowledge of such Member, threatened against such Member or any of its
Affiliates which, if adversely determined could, individually or in the
aggregate, reasonably be expected to materially and adversely affect such
Member's authority to enter into this Agreement or the enforceability of this
Agreement with respect to such Member.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Account.
4.1.1 Establishment of Capital Accounts. A capital account (the "Capital
Account") shall be established and maintained for each Member. The Capital
Account of each Member shall be (a) credited with any income of the Company
allocated to such Member pursuant to the terms of this Agreement and the amount
of cash and net fair market value (as set forth in Section 4.2 for the Capital
Contributions and as mutually agreed by Prime and UST in writing for any
subsequent Capital Contributions) of any property contributed by such Member
under this Agreement; (b) debited with the amount of cash and the net fair
market value (as reasonably determined by Prime and UST in writing) of any
property distributed to such Member by the Company (including without limitation
the distributions to Prime described in Section 5.1 hereto) and with any
deductions, losses and expenditures of the Company allocated to such Member
pursuant to the terms of this Agreement, and (c) otherwise kept in conformance
with Regulations Sections 1.704-1(b) and 1.704-2.
Section 4.2 Capital Contributions. The Members shall make the following
Capital Contributions to the Company:
4.2.1 Members' Capital Contributions.
(a) Prime has contributed to the Company on the date hereof (i) all of its
right, title and interest in and to the Prime Contributed Assets, and (ii)
$600,000 in cash to the capital of the Company, representing Prime's share of
the $2,000,000 capital contribution required by Section 8.3 of the Contribution
Agreement and further described in Section 4.2.1(c) below. Prime has been
credited with a total Capital Contribution equal to $49,800,000, as such amount
may be adjusted in accordance with the Contribution Agreement and this
Agreement, such amount representing the net fair market value of the Prime
Contributed Assets including, without limitation, the PGRLP Earnout, after the
distribution to Prime contemplated by the first sentence of Section 5.1 of this
Agreement.
(b) UST has contributed to the Company on the date hereof (i) the UST
Contributed Assets, and (ii) $1,400,000 in cash to the capital of the Company,
representing UST's share of the $2,000,000 capital contribution required under
Section 8.3 of the Contribution Agreement and further described in Section
4.2.1(c) below. UST has been credited with a total Capital Contribution equal to
$116,200,000, as such amount may be adjusted in accordance with the Contribution
Agreement and this Agreement, such amount representing the $1,400,000 cash
contribution plus the amount of the UST Contributed Assets as of the date of
this Agreement which shall include, for this purpose, UST's obligation to make
the contribution of Required Additional Invested Capital pursuant to Section
4.3(b) below. This Capital Contribution is being made in accordance with the
terms and provisions of the Contribution Agreement.
(c) In connection with the transactions contemplated by the Contribution
Agreement and the execution and delivery of the Loan Documents, UST and Prime
each have contributed their respective shares (70% for UST and 30% for Prime) of
a $2,000,000 capital contribution to the Company required by Section 8.3 of the
Contribution Agreement to pay for closing costs and adjustments payable in
connection with the Loan Documents and the establishment of a reserve for
operating capital of the Company (the "Operating Capital"), and such cash
contributions shall constitute Capital Contributions under this Agreement. The
Members agree that the Operating Capital will not be considered as Distributable
Cash under this Agreement and will be disbursed to the Members, if at all, only
in connection with a Capital Transaction.
4.2.2 Other Contributions. If additional capital is required by the Company
as determined by the unanimous vote of Members, the Members shall make such
additional capital contributions (the "Additional Capital Contribution") in the
following proportions: 70% by UST and 30% by Prime.
Section 4.3 Contributions of Invested Capital. Prime and UST shall be
required to make or be deemed to have made the following contributions of
Invested Capital:
(a) On the date of this Agreement, (i) UST shall be credited with an
initial contribution of Invested Capital in the amount of $106,400,000
representing ESA's initial cash contributions to the Company including the
contribution required by Section 8.3 of the Contribution Agreement, and (ii)
Prime shall be credited with an initial contribution of Invested Capital in the
amount of $45,600,000, representing a portion of net fair market value of the
Prime Contributed Assets after the distribution to Prime contemplated by the
first sentence of Section 5.1 of this Agreement and the capital contribution
required by Section 8.3 of the Contribution Agreement.
(b) On or before the later of five (5) business days after the satisfaction
of the leasing conditions contained in Section 1.17 of the Contribution
Agreement (the "Leasing Condition") and thirty (30) days notice to UST, UST
shall contribute cash to the Company in the amount of the UST Required
Additional Invested Capital, the UST Required Additional Invested Capital
Contribution shall be immediately distributed to Prime without any reduction in
Prime's Invested Capital and UST shall be credited with an additional
contribution to Invested Capital equal to $9,800,000.
(c) Upon satisfaction of the Leasing Condition, Prime, in recognition of
the contributions of the Prime Contributed Assets and the satisfaction of the
Leasing Condition will be credited with an additional contribution to Invested
Capital of $4,200,000, such amount representing the net fair market value of the
contributions of the Prime Contributed Assets associated with the satisfaction
of the Leasing Condition.
(d) If the Leasing Condition is satisfied and UST fails to contribute its
Required Additional Invested Capital, then (i) UST's Capital Account shall be
reduced by $9,800,000 until UST makes or is deemed to have made the contribution
of Required Additional Invested Capital, (ii) the UST Administrative Fee shall
be paid to Prime until such time as the full amount of the Required Additional
Invested Capital (inclusive of such payments) is contributed or deemed
contributed by UST, and/or (iii) Prime may seek to enforce its rights under the
Earnout Guarantee (as defined in the Contribution Agreement). If Prime exercises
its rights under the Earnout Guarantee and Estein & Associates, Ltd. pays to
Prime the UST Required Additional Invested Capital, then UST shall be credited
with an additional contribution to its Invested Capital in the amount of
$9,800,000 at the time of such payment.
Section 4.4 Return of Capital. Except as expressly provided in this
Agreement, no Member shall have any personal liability for the repayment of the
Capital Contributions of any Member. No Member shall be entitled to the
withdrawal or return of its Capital Contributions except to the extent, if any,
that distributions made pursuant to this Agreement or upon the winding up of the
Company may be considered as such by operation of law, and then only to the
extent provided for in this Agreement. Except as set forth in Article V, no
Member shall have priority over any other Member either as to the return of
capital or as to profits, losses or distributions or be entitled to receive any
interest on its Capital Contributions or to receive or demand any property from
the Company other than cash.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
Section 5.1 Cash Distribution. The Company has distributed $105,000,000 to
Prime or its assignee pursuant to this Agreement and the Company will distribute
an amount equal to the UST Required Additional Invested Capital to Prime
pursuant to this Agreement without reduction in Prime's Invested Capital. All
subsequent distributions shall be made from cash of the Company remaining after
repayment of all amounts then due and payable pursuant to the Loan Documents and
other expenses, liabilities of the Company then due and payable including,
without limitation, amounts payable under the Property Management and Leasing
Agreement and the UST Administrative Fee, and after establishment of such
reserves as the Administrative Member may reasonably determine for specific
anticipated purposes (the "Distributable Cash"). In addition to amounts excluded
from Distributable Cash by the Company pursuant to the preceding sentence,
Distributable Cash shall exclude security and other deposits under leases,
advance payments of rent not due and payable for the period in question, amounts
payable by tenants under leases but payable by the Company to third parties
including, without limitation tax and operating expense reimbursements,
management fees (subject, however, to the subordination provisions contained in
Section 8(c) of the Management and Leasing Agreement), the UST Administrative
Fee, amounts necessary to fund debt service in the Loan for the period in
question and capital expenditures contemplated by the Annual Capital Plan for
the applicable fiscal year. During the existence of the Company, no Member shall
be entitled to receive as distributions from the Company any asset of the
Company other than cash.
Section 5.2 Distributions of Distributable Cash. The Administrative Member
shall distribute or cause to be distributed all Distributable Cash as of each
Distribution Date as follows:
5.2.1 first, on a monthly basis, to UST until the distributions to UST for
the current Company fiscal year pursuant to this Section 5.2.1 equals the UST
Priority Return for such fiscal year;
5.2.2 next, to Prime until the distributions to Prime for the current
Company fiscal year pursuant to this Section 5.2.2 equals the Prime Priority
Return for such fiscal year (this distribution also will be made monthly if the
Administrative Member reasonably determines that there will be sufficient funds
available for the balance of such fiscal year so that Prime will be entitled to
the portion of the Prime Priority Return then being distributed); and
5.2.3 next, the balance, if any, shall be distributed to the Members after
the financial statements for such fiscal year have been audited, pro rata, in
accordance with their Sharing Capital Ratios.
Section 5.3 Net Sale or Refinancing Proceeds. Except as otherwise provided
herein or upon dissolution and termination of the Company under Article X, the
Administrative Member shall cause the Company to distribute all Net Sale or
Refinancing Proceeds not later than five (5) business days after the closing
date of the Capital Transaction(s) giving rise to such proceeds to the Members
in the following order and priority:
5.3.1 First, to UST until the distributions to UST under this Section 5.3.1
for the Company fiscal year in which the Capital Transaction occurs equals the
UST Capital Transaction Priority Return for such fiscal year;
5.3.2 next, to UST until the UST Invested Capital as of the date of the
Capital Transaction has been reduced to zero;
5.3.3 next, to Prime until the distributions to Prime under this Section
5.3.3 for the Company fiscal year in which the Capital Transaction occurs equals
the Prime Capital Transaction Priority Return for such fiscal year;
5.3.4 next, to Prime until the Prime Invested Capital as of the date of the
Capital Transaction has been reduced to zero;
5.3.5 next, the balance, if any shall be distributed to the Members, pro
rata in accordance with their Sharing Capital Ratios; and
5.3.6 Notwithstanding anything to the contrary contained in this Section
5.3:
(a) if UST fails to contribute all or any portion of the UST Required
Additional Invested Capital, then all amounts to be distributed to UST under
this Section 5.3 shall be deemed distributed to UST, but shall be paid to Prime
until such time as Prime has received the full $9,800,000 distribution required
by Section 4.3(b) of this Agreement from any source contemplated by Section
4.3(b) and (d) of this Agreement, and UST shall receive a credit to its Capital
Account and a credit to its Invested Capital with respect to all amounts paid to
Prime from any such source (up to $9,800,000);
(b) if UST makes a Proceeds Advance, then all amounts to be distributed to
Prime under this Section 5.3 shall be deemed distributed to Prime under this
Section 5.3, but shall be paid to UST until such time as UST has received the
full amount of the Proceeds Advance; and
(c) if the Company makes a Proceeds Advance, then all amounts to be
distributed to Prime under this Section shall be deemed distributed to Prime
under this Section 5.3 before any other distribution to Prime, but shall be
retained by the Company and then will be redistributed by the Company in
accordance with this Section 5.3.
Section 5.4 Allocations of Profit. Except as otherwise provided herein,
Profits of the Company shall be allocated for Federal income tax purposes in the
following order of priority:
5.4.1 First, to the Members in proportion to the cumulative Losses
previously allocated to each Member pursuant to Section 5.5.4 until the
cumulative Profit allocated pursuant to this Section 5.4.1 equals the cumulative
Losses allocated to such Members under Section 5.5.4 for all prior Company
fiscal years;
5.4.2 Second, to UST and Prime in proportion to the UST Combined Priority
Return and Prime Combined Priority Return, as applicable, until the cumulative
Profit allocated to each pursuant to this Section 5.4.2 for all Company fiscal
years is equal to the UST Combined Priority Return and Prime Combined Priority
Return, respectively, for all Company fiscal years;
5.4.3 Third, to UST, until the Profit allocated pursuant to this Section
5.4.3 equals the cumulative Losses allocated to UST pursuant to Section 5.5.3
for all Company fiscal years; provided, however, any Losses allocated pursuant
to this Section 5.4.3 for any fiscal year shall not exceed the UST Invested
Capital at the end of such fiscal year;
5.4.4 Fourth, to Prime, until the Profit allocated pursuant to this Section
5.4.4 equals the cumulative Losses allocated to Prime pursuant to Section 5.5.2
for all Company fiscal years; provided, however, any Losses allocated pursuant
to this Section 5.4.4 for any fiscal year shall not exceed the Prime Invested
Capital at the end of such fiscal year; and
5.4.5 The balance to each Member, pro rata, in accordance with such
Member's Sharing Capital Ratio.
Section 5.5 Losses. Except as otherwise provided herein, Losses of the
Company shall be allocated for Federal income tax purposes in the following
order:
5.5.1 First, to each Member in accordance with such Member's Sharing
Capital Ratio until the cumulative Losses allocated to such Member pursuant to
this Section 5.5.1 for all Company fiscal years equals the cumulative Profits
allocated to such Member pursuant to Section 5.4.5 for all Company fiscal years;
5.5.2 Second, to Prime, until the Prime Invested Capital is reduced to
zero;
5.5.3 Third, to UST, until the UST Invested Capital is reduced to zero; and
5.5.4 The balance to each Member, pro rata, in accordance with such
Member's Sharing Capital Ratio.
ARTICLE VI
ACCOUNTING, TAXATION, AND OTHER MATTERS
Section 6.1 Company Fiscal Year. The fiscal year of the Company shall be
the calendar year.
Section 6.2 Location of Records; Inspection. The books, records and
accounts for the Company shall be kept and maintained at such location as the
Administrative Member shall determine. Each Member, at its own expense and upon
reasonable notice, shall have the right and power to examine and inspect, or
cause to be examined and inspected, at any and all reasonable times, the books,
records and accounts of the Company and any tax returns prepared for the Company
prior to the filing thereof.
Section 6.3 Books of Account. The books of account for the Company shall be
maintained by the Administrative Member on an accrual basis in accordance with
generally acceptable accounting principles.
Section 6.4 Reports. As soon as practicable following the end of each
Company fiscal year and in any event within the time specified below, the
Administrative Member shall cause to be prepared on an accrual basis and
delivered to each Member:
6.4.1 As soon as practical but in no event later than one hundred twenty
(120) days following the end of such Company fiscal year a report containing
audited financial statements of the Company including a balance sheet, income
statement and Statement of Member's Equity prepared in accordance with generally
accepted accounting principles, which shall include a statement of each Member's
Capital Account and each Member's Invested Capital Account. The costs of such
reports shall be paid by the Company.
6.4.2 As soon as practical but in no event later than one hundred twenty
(120) days following the end of such Company fiscal year (or such later time as
the Administrative Member shall permit), a report containing information
regarding changes to the Capital Account of each Member during such Company
fiscal year, including (a) the amount of Capital Contributions credited to each
Member's Capital Account during such Company fiscal year, (b) any distributions
received by a Member during such Company fiscal year under this Agreement, and
(c) any items, such as Profits or Losses from the Company's activities,
allocated to each Member's Capital Account during such Company fiscal year. The
foregoing information may be delivered to the Members in the form of a Form
1065, Schedule K-1 and any attachments thereto.
6.4.3 The Administrative Member also shall cause to be prepared and
delivered to Prime such monthly, quarterly and annual reports and returns for
the Company, which shall include such information as may be reasonably necessary
for any of the Members to prepare and file on a timely basis any monthly,
quarterly or annual reports or returns required to be filed by the applicable
Member with the Securities and Exchange Commission, the Internal Revenue Service
or other governmental bodies and such other reports and information as either
Member shall reasonably request or as are required by the Property Management
and Leasing Agreement. In the case of Prime, such reports shall include all
information reasonably required by Prime to enable the Protected REIT to
determine that it has satisfied all applicable requirements relating to REITs
generally or the Protected REIT specifically. Further details regarding the
reports and information to be provided shall be contained in the Property
Management and Leasing Agreement. If the Property Management and Leasing
Agreement is terminated, any replacement agreement will contain the reporting
requirements included in the Property Management and Leasing Agreement.
Notwithstanding the foregoing, so long as an Affiliate of Prime is the Property
Manager and is performing reporting and accounting services pursuant to the
Property Management and Leasing Agreement, the Administrative Member shall not
be deemed liable for failing to deliver such reports and returns in a timely
fashion if the delay in delivering the applicable report or return is due to a
delay caused by the Property Manager.
Section 6.5 Taxation.
6.5.1 The Company shall be a partnership for Federal, state and local
income and other tax purposes. The Members agree to cooperate in the taking of
all actions, including the amendment of this Agreement and the execution of
other documents, if required, to qualify for and receive such tax treatment.
6.5.2 The Members agree and intend that the payments to Prime or its
assignee described in the first sentence of Section 5.1 are a reimbursement by
the Company of preformation expenditures of Prime and shall be treated as a
distribution to Prime for income tax purposes as provided in Treasury Regulation
Section 1.707-4(d).
6.5.3 Notwithstanding the provisions of Section 5.3:
(a) If there is a net decrease in "partnership minimum gain" (within the
meaning of Regulations Section 1.704-2(d)) for a Company fiscal year (except as
a result of conversion or refinancing of indebtedness of the Company, certain
capital contributions or revaluation of the Company's property as further
outlined in Regulations Sections 1.704-2(d)(4), (f)(2) or (f)(3)), then, there
shall be allocated to each member items of income and gain for that year (and,
if necessary, for succeeding years) equal to that Member's share of the net
decrease in minimum gain (within the meaning of Regulations Section
1.704-2(g)(2)). The foregoing is intended to be a "minimum gain chargeback"
provision as described in Regulations Section 1.704-2(f) and shall be
interpreted and applied in all respects in accordance with that Regulations
Section.
(b) If there is a net decrease in partner nonrecourse debt minimum gain (as
determined in accordance with Regulations Section 1.704-2(i)(3) for a Company
fiscal year (other than due to the conversion, refinancing or other change in
the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of property of the
Company as further outlined in Regulations Section 1.704-2(i))4)), then, in
addition to the amounts, if any, allocated pursuant to the preceding paragraph,
any Member with a share of that partner nonrecourse debt minimum gain
(determined in accordance with Regulations Section 1.704-2(i)(5)) as of the
beginning of the Company fiscal year shall be allocated items of income and gain
for that year (and, if necessary, for succeeding years) equal to that, Member's
share of the net decrease in such partner nonrecourse minimum gain. The
foregoing is intended to be a "chargeback of partner nonrecourse debt minimum
gain" as required by Regulations Section 1.704-2(i)(4) and shall be interpreted
and applied in all respects in accordance with such Regulations Section.
(c) If during any Company fiscal year of the Company a Member unexpectedly
receives an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), which causes or increases a
deficit balance in the Member's Capital Account in excess of that which the
Member is obligated to restore or deemed obligated to restore pursuant to the
penultimate sentence of Regulation Sections 1.704-2(g) and 1.704-2(i), there
shall be allocated to such Member items of income and gain (consisting of a pro
rata portion of each item of Company income, including gross income, and gain
for such year) in an amount and manner sufficient to eliminate such deficit
balance as quickly as possible. The foregoing is intended to be a "qualified
income offset" provision as described in Regulations Section
1.704-1(b)(2)(ii)(d), and shall be interpreted and applied in all respects in
accordance with such Regulations Section.
(d) If the allocation of any item of loss or deduction for any Company
fiscal year would cause or increase a deficit balance in the Capital Account of
any Member as of the end of such Company fiscal year in excess of that which the
Member is obligated to restore or deemed obligated to restore pursuant to the
penultimate sentence of Regulation Sections 1.704-2(g) and 1.704-2(i), then, to
the extent the allocation of such item of loss or deduction would have such
effect, it shall instead be allocated (a) first, to the other Member to the
extent that such allocation reduces such other Member's Capital Account to zero,
and (b) thereafter, in accordance with Section 5.5.4. For purposes of this
paragraph (d), a Member's Capital Account shall not be reduced for items listed
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) for purposes of
determining whether the allocation of any item of loss or deduction for a
Company fiscal year would cause or increase a deficit balance in the Capital
Account of any Member as of the end of such Company fiscal year, and (ii) the
amount of items of loss or deduction that can be specially allocated pursuant to
this paragraph (d) to the other Member without reducing such other Member's
Capital Account below zero.
(e) Notwithstanding anything to the contrary in this Section 6.5.3, any
item of deduction, loss, or Code Section 705(a)(2)(B) expenditure that is
attributable to "partner nonrecourse debt" shall be allocated in accordance with
the manner in which the Members bear the economic risk of loss for such debt
(determined in accordance with Regulations Section 1.704-2(i)).
(f) Beginning in the first fiscal year in which there are allocations of
"nonrecourse deductions" (as described in Section 1.704-2(b) of the Regulations)
and throughout the full term of the Company such deductions shall be allocated
to the Members as part of the Profit or Losses allocated for such period.
(g) All recapture of income tax deductions resulting from the sale or
disposition of Company property shall be allocated to the Member or Members to
whom the deduction that gave rise to such recapture was allocated hereunder to
the extent that such Member is allocated any gain from the sale or other
disposition of such property.
(h) Any credit or charge to the Capital Account of a Member pursuant to
paragraphs (a), (b), (c), (d), (e) or (f) of this Section 6.5.3 shall be taken
into account by computing subsequent allocations of Profits and Losses, so that
the net amount of any items charged or credited to Capital Accounts pursuant to
Sections 5.4 and 5.5 and pursuant to paragraphs (a), (b), (c), (d), (e) and (f)
of this Section 6.5.3 shall, to the extent possible, be equal to the net amount
that would have been allocated to the Capital Account of each Member pursuant to
the provisions of Sections 5.4 and 5.5 if the special allocations required by
paragraphs (a), (b), (c), (d), (e) and (f) of this Section 6.5.3 had not
occurred.
(i) In accordance with Section 704 (c) of the Code and the applicable
Regulations thereunder, income, gain, loss, deduction and tax depreciation with
respect to any property contributed to capital of the Company, or with respect
to any property which has a book basis different than its adjusted tax basis,
shall, solely for Federal income tax purposes be allocated between the Members
so as to take into account any variation between the adjusted tax basis of such
property to the Company and the book basis of such property using the
"traditional method with curative allocations" as described in Regulations
Sections 1.704-3(b) and (c). All items of Company income, gain, loss, deduction
and any other allocation otherwise provided for shall be divided between the
Members in the same priority in proportion as they share gain, income, or loss,
as the case may be for such year.
(j) The Members agree that liabilities for purposes of Code Section 752
shall be allocated among the Members in proportion to the Members' Sharing
Capital Ratios.
Section 6.6 Tax Returns and Audits. The Administrative Member shall prepare
or cause to be prepared and timely file (after giving effect to all extension
periods) all Federal, state and local income and other tax returns and reports
as may be required as a result of the business of the Company. Not less than
fifteen (15) business days prior to the date (as extended) on which the Company
intends to file its Federal income tax return or any state income tax return,
the return proposed to be filed by the Administrative Member shall be furnished
to Prime for its review and written approval. In addition, not more than ten
(10) days after the date on which the Company actually files its Federal income
tax return or any state income tax return, a copy of the return so filed by the
Administrative Member shall be furnished to the Members. The Members agree that
an election under Code Section 754 shall be filed with the first Federal income
tax return of the Company. The Administrative Member is hereby designated the
tax matters partner under Section 6231 of the Code. The Administrative Member
shall promptly notify the Members if any tax return or report of the Company is
audited or if any adjustments are proposed by any governmental body. In
addition, the Administrative Member shall promptly furnish to the Members
periodic reports, not less often than quarterly, concerning the status of any
such proceeding and shall deliver to each of the Members copies of any and all
correspondence, notices or other information received by the Administrative
Member or the Company from any governmental body. Without the written consent of
all of the Members, the tax matters partner, in its capacity as such, shall not
(a) extend the period to file any Federal, state or local income or other tax
returns or reports, extend the statute of limitations, file a request for
administrative adjustment, file suit concerning any tax refund or deficiency
relating to any Company administrative adjustment or enter into any settlement
agreement relating to any Company item of income, gain, loss, deduction or
credit for any Company fiscal year of the Company, and/or (b) take any position
in any Federal, state or local tax return or report that could adversely affect
the status of the Protected REIT as a REIT or take a reporting position that
would cause any of the income of the Company to not be treated as qualifying
income under Code Section 856(c).
Section 6.7 Other Reports. The Administrative Member shall prepare and
file, or cause to be prepared and filed, all reports prescribed by any other
commission or governmental agency having jurisdiction over the business or
properties of the Company or required by the Loan Documents, the costs of which
shall be paid by the Company.
Section 6.8 Bank Accounts; Investments.
(a) The Administrative Member shall cause the Company to open and maintain
bank accounts, money market accounts and other accounts at banks and financial
institutions selected by the Administrative Member, acting reasonably (the
"Company Accounts"). All funds of every kind and nature received by the Company,
including Capital Contributions, loan proceeds and operating receipts, shall be
deposited in the Company Accounts. The Administrative Member shall give the
Members written notification of the banks at which the Company Accounts are
maintained. Signatories for the Company Accounts shall be authorized from time
to time in writing by the Administrative Member acting reasonably and shall
include, with respect to the operating account of the Company, the Property
Manager. The Administrative Member shall make payments from the Company Accounts
in accordance with the Loan Documents and will fund the operating account of the
Company for use by the Manager pursuant to the Management and Leasing Agreement
from amounts available in the Company Accounts. The amounts to be funded to the
operating account from funds available in the Company Accounts for use by the
Property Manager include all amounts required to be paid in accordance with the
Annual Plans, the Property Management and Leasing Agreement and such other
agreements to which the Company is a party. The Administrative Member also will
make distributions pursuant to the terms and conditions of this Agreement. The
Administrative Member agrees that such distributions include the distribution to
the Members of all of the Company's Distributable Cash, which distributions
shall be made in accordance with the terms and conditions of Article V of this
Agreement.
(b) The Company may make such investments as are approved by UST and Prime
so long as such investments are not prohibited by any Member's organizational
documents; provided, however, that such investments shall not preclude the
timely distribution of Distributable Cash as set forth in Article V; and
provided, further, that any investment of working capital shall not preclude the
timely payment of Company obligations when and as due.
Section 6.9 Insurance. The Administrative Member shall determine the type
and levels of insurance coverage to be obtained and maintained by the Company to
protect the Company's properties and businesses against loss and liability,
which may be provided under blanket policies obtained by the Administrative
Member or Prime, and which also may cover other properties in which the
Administrative Member, Prime and/or their respective Affiliates and/or other
related parties have interests.
Section 6.10 Record Retention. The Administrative Member shall cause all
records that are required under this Agreement or under any other agreement
entered into pursuant to this Agreement to be retained by the Company for such
period of time as required by Law, but in no event for less than seven years.
Section 6.11 The Company Accountant. The Company shall retain Ernst & Young
LLP as the regular accountant, tax accountant and auditor for the Company (the
"Company Accountant"). Subject to Section 7.6(c), the fees and expenses of the
Company Accountant shall be a Company expense. The Administrative Member may
unilaterally terminate the engagement of Ernst & Young LLP as the Company
Accountant at any time after the Effective Date upon thirty (30) days' prior
written notice to Prime (which notice shall provide the specific reasons
underlying the Administrative Member's decision) and such notice to Ernst &
Young LLP as may be required by the terms and conditions of its engagement
letter or agreement. Within such thirty (30) day period, the Members shall
appoint a replacement for Ernst & Young LLP, which shall be one of the five
largest (unless the Members otherwise mutually agree) nationally recognized
accounting firms (exclusive of Ernst & Young LLP) in the United States. Such
appointment shall be effective upon the expiration of the notice period for
termination in the Ernst & Young LLP engagement letter or agreement, if any.
Thereafter, the replacement Company Accountant so appointed shall serve as the
Company Accountant until such time as the Members shall mutually agree to change
such Company Accountant.
Section 6.12 Delegation of Responsibility. The Administrative Member shall
have the right to delegate the responsibility for the performance of its
obligations under Sections 6.1, 6.2, 6.3, 6.4, 6.6, 6.7 and 6.9 to the Property
Manager pursuant to and to the extent provided in the Property Management and
Leasing Agreement.
ARTICLE VII
MANAGEMENT OF THE COMPANY
Section 7.1 Administrative Member. The Administrative Member initially
means UST and thereafter any successor manager (who must also be a Member) as
may be appointed by the unanimous vote of the Members. Subject to the express
limitations set forth in this Agreement and the Property Management and Leasing
Agreement, the Administrative Member shall have (a) the full, complete and
exclusive authority and discretion to manage the operations and affairs of the
Company and to make all decisions regarding the business of the Company, (b) all
the rights and powers of a Administrative Member under the Act, and (c) all
authority, rights and powers in the management of the Company business to do any
and all acts and things necessary, proper, appropriate, advisable, incidental or
convenient to effectuate the purposes of this Agreement. Any action taken by the
Administrative Member on behalf of the Company, other than a Major Decision as
provided in Section 7.3, which shall require the written approval of both
Members (except expressly provided in Section 7.3), shall constitute the act of
and shall serve to bind the Company. In dealing with the Administrative Member
acting on behalf of the Company, no Person shall be required to inquire into the
authority of the Administrative Member to bind the Company, and such Persons
dealing with the Company shall be entitled to rely conclusively on the power and
authority of the Administrative Member.
Section 7.2 Duties of Administrative Member; Agents.
(a) The Administrative Member shall cause the affairs of the Company to be
conducted in an efficient and businesslike manner and, to the extent within the
Administrative Member's reasonable control, in compliance in all material
respects with the City Agreement. The Administrative Member shall perform its
duties as a Administrative Member in good faith, in a manner it reasonably
believes to be in or not opposed to the best interests of the Company and with
the care that an ordinary prudent person in a similar position would use under
similar circumstances. The Administrative Member may, by written instrument and
at the expense of the Company, delegate all or any of its powers, rights and
obligations hereunder and may appoint, employ, contract or otherwise deal with
any Person for the transaction of business of the Company, which Person may,
under the supervision and/or direction of the Administrative Member, perform any
acts or services for the Company as the Administrative Member may approve.
(b) Each year the Administrative Member shall cause the Property Manager
pursuant to the Property Management and Leasing Agreement to prepare an Annual
Operating Budget, Annual Leasing Plan and Annual Capital Plan ("Annual Plans")
for approval by the Members, which approval shall not be unnecessarily
conditioned or delayed. A Member shall be deemed to have approved such Annual
Plans unless such Member shall have stated its reasonably specific and detailed
objections to same within 30 days after receipt of such Annual Plans. If the
Annual Plans for any fiscal year are not approved prior to the commencement of
such fiscal year, the appropriate provisions of the prior versions of such
Annual Plans shall remain in effect with the dollar amounts increased by the
Consumer Price Index ("CPI") for the most recently completed calendar year until
the new Annual Plans are approved. The CPI shall be the CPI-U index published by
the U.S. Bureau of Labor Statistics (All Urban Consumers, All Items, All Areas,
1984-86 = 100) or any successor index. The initial Annual Plans are attached
hereto as Exhibit B.
Section 7.3 Major Decisions. The Administrative Member shall not have the
authority to take any of the following actions on behalf of the Company without
the prior written approval of all Members without regard to the relevant size of
their Membership Interests:
(i) obligate the Company as maker, guarantor, endorser, surety or
accommodation party except as provided in the Loan Documents;
(ii) except as provided in the Annual Plans, cause the Company to incur or
refinance any indebtedness;
(iii) assign, transfer, pledge, compromise or release any claims of or
debts in amounts in excess of $200,000 due the Company in the aggregate in any
fiscal year, except on payment in full;
(iv) enter into any contract or agreement between the Company and any
Affiliate of the Administrative Member which is not on terms at least as
favorable to the Company as an arms-length transaction;
(v) except as provided in Article IX, admit any Person as a Member to the
Company;
(vi) allow the Company to enter into any new lease or to modify or
terminate any existing lease;
(vii) initiate any renovation, alteration or redevelopment of the Property
or any capital expenditures in excess of $200,000 in the aggregate in any fiscal
year, except as included in the Annual Capital Plan then in effect or to address
a need of the Company in an emergency or to make tenant improvements pursuant to
an approved lease or to provide funds to pay for tenant improvements in the
amounts set forth in an approved lease;
(viii) enter into any property management or leasing agreement (except
commission agreements with an unrelated third party brokers in connection with
leasing in the ordinary course of business and the Property Management and
Leasing Agreement), or amend or modify in any material respect the Property
Management and Leasing Agreement or any other agreement which requires approval
under this clause;
(ix) list the Property or any portion thereof for sale;
(x) file for bankruptcy;
(xi) sell or otherwise transfer or convey the Property;
(xii) with respect to the Annual Operating Budget, make expenditures in
excess of any line item in the Annual Operating Budget to the extent such
increased expenditures (a) exceed the amount of the applicable line item by more
than five percent (5%) of such line item; or (b) exceed the total aggregate
amount of all line items in the Annual Operating Budget by more than one percent
(1%); and provided that Administrative Member also may authorize any expenditure
necessary to preserve life or the Property in an emergency or where prompt
action is required (provided that Administrative Member shall notify the other
Member of such expenditure as soon as practical thereafter), whether or not such
expenditures exceed the limitations set forth above;
(xiii) make or change any election under the Code, except as otherwise
provided in this Agreement;
(xiv) issue any press release on behalf of the Company or the Property
other than new leasing announcements or as may be required by applicable law; or
(xv) enter into any other joint venture, partnership or other joint
enterprise;
(xvi) terminate the Property Management and Leasing Agreement, except as
expressly permitted therein; or
(xvii) any change in the fiscal year of the Company.
Section 7.4 Non-Delegation. Each Member shall indemnify and hold harmless
the other Member and the Company against any and all claims that may be asserted
against the other Member or the Company arising out of or relating to
unauthorized actions that such Member or any Affiliate of such Member has
purported to take on behalf of the other Member or the Company, or both. Except
as expressly set forth in this Agreement or specifically approved by the
Members, neither any Member nor the Administrative Member shall have the
unilateral authority to act for or to bind the Company.
Section 7.5 Prime Assumed Obligations. Pursuant to Section 10.3 of the
Contribution Agreement, Prime agreed to pay various pre-closing obligations of
the Company, and pursuant to Section 12.4 of the Contribution Agreement, Prime
has agreed to deposit certain funds into the Existing Tenant Improvements and
Citadel Cash Flow Escrow (as defined in the Contribution Agreement) for the
purpose of securing certain obligations of the Company that Prime has assumed in
connection with the Contribution Agreement (collectively, the "Prime Assumed
Obligations"). Notwithstanding anything to the contrary in this Agreement
(including without limitation, Article VI of this Agreement, the Company shall
take all actions requested by Prime (in Prime's sole discretion and at Prime's
sole cost and expense) in connection with Prime's satisfaction of the Prime
Assumed Obligations including, without limitation: (a) releasing or directing
the escrowee to release any funds deposited pursuant to the Existing Tenant
Improvements and Citadel Cash Escrow Agreement for the purposes set forth
therein; (b) taking any actions with respect to the Bank One Rights, including
any settlement or litigation or arbitration with respect thereto; (c) taking any
actions with respect to Section 43 of the Citadel Lease (as defined in the
Contribution Agreement) including any subleases of space leased by Citadel (as
defined in the Contribution Agreement) at the building located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇; (d) taking any actions with respect to the
general contractor and subcontractors who constructed the Property, including
any settlements or litigation or arbitration with respect thereto; (e)
settlement of any obligations for which Prime assumed responsibility under
Section 10.3 of the Contribution Agreement; (f) taking any actions with respect
to remaining landlord obligations under the Existing Leases (as defined in the
Contribution Agreement) for payment of tenant improvement construction
allowances and brokerage commissions including any settlements or litigation or
arbitration; and (g) taking any actions with respect to enforcing the landlord's
rights under Existing Leases which accrue prior to the closing under the
Contribution Agreement and, in addition, enforcement of Bank One's obligations
under the Bank One Lease to pay its proportionate share of real estate taxes due
and payable in 2003 and/or Citadel's obligations under the Citadel Lease to pay
its proportionate share of real estate taxes due and payable in 2003.
Section 7.6 REIT Compliance.
(a) The Protected REIT is a REIT and is subject to the provisions of
Sections 856 through and including 860 of the Code. So long as the Protected
REIT owns, directly or indirectly, any Membership Interest in the Company, then,
notwithstanding any other provision of this Agreement other than Section 7.6(b):
(i) any services described on Exhibit C attached hereto that would
otherwise cause any rents from a lease to be excluded from treatment as
rents from real property pursuant to Section 856(d)(2)(c)of the Code shall
be provided by either (1) an independent contractor (as described in
Section 856(d)(3) of the Code) with respect to the Protected REIT and from
whom neither the Company nor the Protected REIT derives or receives any
income or (2) a taxable REIT subsidiary of the Protected REIT as described
in Section 856(c) of the Code;
(ii) the Company shall not furnish or render services to tenants or
other persons, and shall not manage or operate the Property, other than
through the Property Manager or its replacement;
(iii) except for a taxable REIT subsidiary of the Protected REIT, the
Company shall not own, directly or indirectly or by attribution (in
accordance with attribution rules referred to in Section 856(d)(5) of the
Code), in the aggregate more than 10% of the total value of all classes of
stock or more than 10% of the total voting power (or, with respect to any
such person which is not a corporation, an interest of 10% or more in the
assets or net profits of such person) of a lessee or sublessee of all or
any part of the Property or of any other assets of the Company except in
each case with the specific written approval of Prime;
(iv) except for securities of a taxable REIT subsidiary of the
Protected REIT, the Company shall not own or acquire, directly or
indirectly or by attribution, securities representing more than 10% of the
total value or the total voting power of the outstanding securities of any
issuer or own any other asset (including a security) which would cause the
Protected REIT to fail the asset test of Section 856(c)(4)(B) of the Code;
(v) leases may contain a percentage rent clause based upon gross
receipts of the tenant, however, the leases or subleases of all or any part
of the Property shall not provide for rents based in whole or in part on
the income or profits (within the meaning of Code Section 856(d)(2)(A))
derived by any tenant or subtenant from all or any part of the Property;
(vi) rents under a lease or sublease of all or any part of the
Property attributable to personal property leased or subleased under or in
connection with such lease or sublease shall not exceed 15% of the total
rents payable under or in connection with such lease or sublease for each
taxable year;
(vii) except as approved by Prime, permit the Company to sell, convey,
transfer or dispose of any property described in Code Section 1221(a)(1),
which is not foreclosure property;
(b) Notwithstanding anything to the contrary in Section 7.6(a) hereof,
during the period that the Property Manager is affiliated with the Protected
REIT:
(i) Property Manager at the discretion of Prime, need not be an
independent contractor (as described in Section 856(d)(3) of the Code) with
respect to the Protected REIT; and
(ii) Rents from the Property attributable to the lease of space to the
Property Manager at the discretion of Prime need not be rents from real
property within the meaning of Section 856(d) of the Code with respect to
the Protected REIT.
(c) At any time during which Prime is not the Administrative Member of the
Company, Prime may, from time to time but no more frequently than quarterly,
make inquiry of counsel of its choice to determine whether any material changes
in the provisions of Section 856 through and including Section 860 of the Code
have occurred requiring changes to Section 7.6(a) and Section 7.6(b) of this
Agreement. The Administrative Member, at the request of Prime and no more
frequently than quarterly, shall forward to the Property Manager questionnaires
prepared by Prime and reasonably acceptable to the Administrative Member that
are relevant to the determination of whether any income generated by the
Property would violate the terms of Section 7.6(a) of this Agreement. The
Administrative Member shall use its commercially reasonable efforts to insure
that such questionnaires are completed and returned to Prime within thirty (30)
calendar days after such questionnaires are received by the Administrative
Member. Prime may, from time to time, notify the Administrative Member, in
reasonable detail, as to any material changes in the provisions or
interpretations of Section 856 through and including Section 860 of the Code
that have occurred requiring changes to Section 7.6(a) and Section 7.6(b) of
this Agreement and what changes Prime reasonably believes are necessary to be
made to Section 7.6(a) and Section 7.6(b) of this Agreement as a result of such
material changes. Upon receipt of notice from Prime or counsel designated by
Prime as to the changes required to be made to Section 7.6(a) and Section 7.6(b)
of this Agreement, Section 7.6(a) and Section 7.6(b) of this Agreement shall be
amended by the Members to incorporate such changes. Prime shall pay all
reasonable third party out of pocket costs and expenses incurred by the Company
in connection with actions taken by the Company to comply with this Section
7.6(c), which would not otherwise be incurred by the Company in connection with
the regular preparation of reports, accounting information, tax information or
Company audits.
ARTICLE VIII
OTHER BUSINESS
Section 8.1 Conflicts of Interest. Except as may be expressly provided in
this Agreement, nothing herein shall limit or restrict the ability of any Member
to engage in any business activity, whether or not directly or indirectly
competitive with the business of the Company, or whether or not such activity
may be an opportunity of a nature that the Company would undertake.
Section 8.2 German Interests. Prime acknowledges that UST may syndicate in
Germany ownership interests in UST, but not any Membership Interests (the
"Syndication"). UST hereby agrees to indemnify, defend and hold harmless Prime
and the Company from and against any and all claims, liabilities, damages,
expenses (including reasonable attorneys' fees) and losses which either or both
of Prime or any of its Affiliates or related parties or the Company may incur by
reason of or related to the Syndication.
ARTICLE IX
TRANSFERABILITY
Section 9.1 General. Except as otherwise provided in this Agreement, no
Member (in this context, a "Transferor") may sell, assign, exchange or pledge
(collectively "sell" or "sale"), whether directly or indirectly, all or any part
of its Membership Interest to a transferee (a "Transferee") without the prior
written consent of the other Member which may be withheld in its sole
discretion. For purposes of this Agreement, a sale or transfer shall be deemed
to occur with respect to UST if, at any time during the term of this Agreement,
(a) Estein Management Corporation is not the manager of ▇▇▇▇ and/or ▇▇▇▇ is not
the general partner of UST, or (b) a controlling interest in either of such
entities shall be sold, exchanged or otherwise transferred.
Section 9.2 Notwithstanding the foregoing, no consent shall be required if
the Transferee is an Affiliate of the Transferor. Transferor shall not be
released from its obligations in the event of such sale. Each Member hereby
acknowledges the reasonableness of the restrictions on sale of such interests
imposed by this Agreement (including this Article IX) in view of the Company's
purposes and the relationship of the members. Accordingly, the restrictions on
sale contained herein shall be specifically enforceable. In addition to and not
in limitation of the foregoing, no Member may pledge or otherwise encumber its
Membership Interest as security for repayment of a liability (except in
connection with the Loan Documents), without the prior written consent of the
other Member, which may be withheld in its sole discretion. Any such pledge or
hypothecation consented to by the other Member shall be made pursuant to a
pledge or hypothecation agreement that requires the pledgee or secured party to
be bound by all the terms and conditions of this Article IX. The restrictions on
transfer contained in this Article IX are intended to comply (and shall be
interpreted consistently) with the restrictions on transfer set forth in the
ss.18-702 of the Act.
Section 9.3 Permitted Transfers. Notwithstanding anything to the contrary
in this Article IX, Prime may, without the consent of any Member or the Company,
transfer or sell its Membership Interests in connection with any merger,
consolidation, reorganization, sale, liquidation or other similar transaction
with respect to Prime, any of its partners, Affiliates or related parties.
Section 9.4 Transferee Not Member in Absence of Consent. Without limiting
the requirements of Section 9.1 above, a Transferor may only sell its Membership
Interest to a Transferee which is not a Member immediately prior to the sale
upon: (i) except in connection with a transfer or sale pursuant to Section 9.3,
the reasonable determination of legal counsel to the Company that the sale is
exempt from the registration requirements of the Securities Act of 1933 and
applicable state securities laws and does not jeopardize any exemption from such
laws on which the Company had previously relied in selling Membership Interests;
(ii) the reasonable determination of legal counsel to the Administrative Member
that the sale will not adversely affect the status of the Company for tax
purposes or the status of the Company as a limited liability company under
applicable laws; (iii) the reasonable determination of counsel to the
Administrative Member that the sale will not cause a violation of any applicable
law or regulation binding upon it; (iv) the Transferee's written agreement to be
bound by the terms of this Agreement including, without limitation, the Prime
Purchase Option and the UST Purchase Option; and (v) the Transferor's or the
Transferee's agreement to pay all reasonable expenses of the Company in
connection with the transfer. Any attempted or purported sale in contravention
of the terms of this Agreement shall be voidable at the option of the Company
upon the vote of only the non-transferring member. No transfer of a Member's
Membership Interests shall be effective unless and until written notice
(including the name and address of the proposed transferee or donee and the date
of such transfer) has been provided to the Company and the non-transferring
Member.
ARTICLE X
DISSOLUTION AND TERMINATION
Section 10.1 Dissolution. The Company shall continue until dissolved by any
of the following events:
(a) the unanimous written consent of the Members; or
(b) any other event causing dissolution of a limited liability company
under the Act.
Section 10.2 Termination. After an event occurs that requires a winding up
as described in this Article X, the Company will continue in existence until the
winding up and liquidation of its business as described in this Article X is
completed. When the winding up is completed, the Company will terminate.
Section 10.3 Activities During Wind Up. After the date as of which winding
up is required, the Company shall not enter into any contract or undertake any
business not then subject to contract or which is not related to the winding up
of the Company. Upon winding up, a proper accounting shall be made of the
Company's assets, liabilities, and operations from the date of the last previous
accounting to the date as of which winding up is required. The Profits and
Losses realized subsequent to the date as of which winding up is required shall
be allocated in accordance with Article V and proper adjustments made to the
Capital Account of each Member. Profits and Losses realized on the sale of any
Company asset in the process of winding up shall be allocated as provided in
Article V. Assets not sold will be valued at their fair market value and gain or
loss allocated as provided in Article V as if they had been sold at their fair
market value. Except as and in the manner provided with respect to the UST
Required Additional Invested Capital, no Member shall have any obligation to
restore any deficit in such Member's Capital Account, and such deficit shall not
be considered a debt owed to the Company or to any other person.
Section 10.4 Liquidation. As soon as the actions contemplated by preceding
sections of this Article have been completed, the cash and other assets of the
Company shall be applied or distributed in the following order of priorities:
10.4.1 In payment of all liabilities of the Company to creditors other than
the Members. If any liability is contingent, or uncertain in amount, a reserve
equal to the maximum amount to which the Company could reasonably be held liable
will be established. Upon the satisfaction or other discharge of such
contingency, the amount of the reserve not needed, if any, will be distributed
in accordance with the balance of this Section;
10.4.2 To the Members in payment of any amounts outstanding to any of the
Members in payment of any loans made by the Members to the Company; and
10.4.3 To the Members, in accordance with Section 5.3 of this Agreement.
ARTICLE XI
PURCHASE OPTIONS
Section 11.1 Prime Purchase Option. Prime is hereby granted the option to
purchase all of the Membership Interests of UST subject to and on the terms and
conditions set forth in this Section 11.1 (the "Prime Purchase Option").
11.1.1 Prime shall have the right to exercise the Prime Purchase Option at
any time on or between the 180th day and the 150th day (the "Prime Option
Period") prior to the maturity of the Loan made to the Company pursuant to the
terms of the Loan Documents. Prime shall exercise the Prime Option, if at all,
by providing written notice to UST at any time during the Prime Option Period.
11.1.2 The purchase price for the UST Membership Interests shall be equal
to the greater of (a) the value of the UST Membership Interests in the Company,
determined based upon a deemed sale of the Property (and as if the proceeds of
such sale were distributed pursuant to Section 5.3) at a value calculated using
the Pro Forma Net Operating Income of the Company for the twelve (12) month
period commencing on the date that is one (1) month prior to the maturity date
of the Loan, divided by a capitalization rate of eight and one-half percent
(8.5%), less the actual amount of all unpaid tenant improvement allowances and
rental allowances for any Current Lease (with no double counting), to the extent
such amounts have not been placed in escrow by the Company in connection with
any such Current Lease, or (b) the UST Invested Capital Threshold.
11.1.3 If Prime exercises the Prime Purchase Option, it will deposit with
Near North National Title Insurance Corporation ▇▇▇▇▇▇▇ money in the amount of
$6,000,000. The ▇▇▇▇▇▇▇ money shall be deposited within two (2) business days
after the date Prime exercises the Prime Purchase Option. The ▇▇▇▇▇▇▇ money
shall be applied to the purchase price at the closing of the acquisition by
Prime of the UST Membership Interests. The ▇▇▇▇▇▇▇ money shall be non-refundable
if the acquisition by Prime of the UST Membership Interests fails to close as a
result of a default by Prime.
11.1.4 The closing of the acquisition by Prime of the UST Membership
Interests under this Section 11.1 will occur on the date that is ninety (90)
days prior to the maturity date of the Loan made to the Company pursuant to the
Loan Documents.
11.1.5 The Prime Purchase Option and the acquisition by Prime of the UST
Membership Interests also shall be subject to the applicable terms and
conditions set forth in Section 11.3 below.
Section 11.2 UST Purchase Option. If Prime does not timely exercise the
Prime Purchase Option or if Prime exercises the Prime Purchase Option, but fails
to close on the transaction contemplated thereby (except as a result of a
default by UST thereunder) then UST shall have the option to purchase all of the
Membership Interests of Prime subject to and on the terms and conditions set
forth in this Section 11.2 (the "UST Purchase Option").
11.2.1 UST shall have the right to exercise the UST Purchase Option as
follows: (a) if Prime exercises the Prime Purchase Option but fails to close
(except as a result of default by UST), then UST may exercise the UST Purchase
Option by giving written notice to Prime of such exercise on or before the day
that is seventy- five (75) days after the date on which the acquisition by Prime
of the UST Membership Interests was scheduled to close under Section 11.1 above;
or (b) if Prime does not timely exercise the Prime Purchase Option, then UST may
exercise the UST Purchase Option by giving written notice to Prime of such
exercise no later than ten (10) days after the ninetieth (90th) day prior to the
maturity of the Loan made to the Company pursuant to the Loan Documents (either
of such periods, the "UST Option Period").
11.2.2 The purchase price for the Prime Membership Interests shall be equal
to the value of the Prime Membership Interests in the Company, determined based
upon a deemed sale of the Property (and as if the proceeds of such sale were
distributed pursuant to Section 5.3) at a value calculated using the Pro Forma
Net Operating Income of the Company for the twelve (12) month period commencing
on the date that is one (1) month prior to the maturity date of the Loan,
divided by a capitalization rate of eight and one-half percent (8.5%), less the
actual amount of all unpaid tenant improvement allowances and rental allowances
for any Current Lease (with no double counting), to the extent such amounts have
not been placed in escrow by the Company in connection with any such Current
Lease.
11.2.3 If UST exercises the Prime Purchase Option, UST will deposit with
Near North National Title Insurance Corporation ▇▇▇▇▇▇▇ money in the amount of
$2,000,000. The ▇▇▇▇▇▇▇ money shall be deposited within two (2) business days
after the date UST exercises the UST Purchase Option. The ▇▇▇▇▇▇▇ money shall be
applied to the purchase price at the closing of the acquisition by UST of the
Prime Membership Interests. The ▇▇▇▇▇▇▇ money shall be non-refundable if the
acquisition by UST of the Prime Membership Interests fails to close as a result
of a default by UST.
11.2.4 The closing of the acquisition by UST of the Prime Membership
Interests under this Section 11.2 will occur on the date that is (a) if Prime
exercises the Prime Purchase Option but fails to close (except as a result of a
default by UST), the closing of the acquisition of the Prime Membership
interests shall be sixty (60) days after the date UST exercises the UST Purchase
Option, but in no event later than the maturity date of the Loan made to the
Company pursuant to the Loan Documents as the same may be extended by the holder
of the Loan, which extension shall in no event be for a period of more than
thirty (30) days; or (b) if Prime fails to timely exercise the Prime Purchase
Option, the closing of the acquisition of the Prime Membership Interests shall
be on or before the maturity date of the Loan made to the Company pursuant to
the Loan Documents.
11.2.5 The UST Purchase Option and the acquisition by UST of the Prime
Membership Interests also shall be subject to the applicable terms and
conditions set forth in Section 11.3 below.
Section 11.3 General Conditions. In addition to the other conditions and
requirements set forth in Sections 11.1 or 11.2 above, as applicable, the
acquisition by Prime of the UST Membership Interests or the acquisition by UST
of the Prime Membership Interests, as applicable, shall be subject to the
following general conditions and requirements:
11.3.1 Except as otherwise provided in this Section 11.3, the Member that
acquires the Membership Interests in any transaction contemplated by this
Article XI shall pay all closing costs incurred in connection with such
transaction including, without limitation, title insurance premiums, survey
costs, transfer taxes and legal fees and costs incurred by the Company, as
distinct from the Members. Each Member shall bear its own attorneys' fees and
costs incurred in any such transaction.
11.3.2 In connection with any transaction contemplated by this Article XI,
then, notwithstanding anything contained in this Agreement to the contrary, the
acquiring Member shall, as a condition to closing, cause the transferring Member
and any of its Affiliates having recourse liability (whether arising out of
guaranties, indemnities, letters of credit or otherwise) with respect to any
Loan outstanding at the time of the closing to be released therefrom with
respect to all obligations and liabilities arising after the closing date;
provided, however, that if the acquiring Member is not able to obtain a release
with respect to some or all of such recourse obligations, then the acquiring
Member and the Company shall execute and deliver to the transferring Member an
indemnity agreement in form and substance reasonably acceptable to the
transferring Member pursuant to which the acquiring Member and the Company will,
jointly and severally, indemnify, defend and hold harmless the transferring
Member from any and all losses, costs, damages, claims, liabilities and
obligations (including, without limitation, reasonable legal fees and expenses)
incurred or asserted against the transferring Member with respect to any such
recourse liabilities and obligations that are not so released.
11.3.3 The closing of any transaction contemplated by this Article XI shall
be held at the principal place of business of the Company or at such other place
as the parties may mutually agree.
11.3.4 At the closing, (a) the transferring Member shall assign to the
acquiring Member or its designee the transferring Member's Membership Interest
in accordance with the instructions of the acquiring Member and shall execute
and deliver to the acquiring Member all documents that may be reasonably
required to give effect to the disposition and acquisition of such Membership
Interests, in each case free and clear of all liens, claims and encumbrances
(other than any liens and encumbrances with respect to the then existing Loan,
if such Loan is not repaid at the time of the closing); and (b) the acquiring
Member shall pay to the transferring Member in cash the consideration for the
transferring Member's Membership Interests.
11.3.5
(a) The parties acknowledge that, pursuant to the terms and conditions of
that certain Office Lease dated January 24, 2000 (as the same has been amended
prior to the date hereof and as the same may hereafter be amended or modified,
the "Bank One Lease") between the Company (as successor in interest to
Prime/▇▇▇▇▇▇▇ Development Company, L.L.C.) and Bank one, NA ("Bank One"), Bank
One was granted certain rights and options in connection with the sale or
refinancing of the Property (the rights and options granted to Bank One in
Sections 39 and 41 of the Bank One Lease are herein referred to as the "Bank One
Rights").
(b) If any transaction contemplated by this Article XI is deemed to have
triggered the right of first offer (the "Bank One First Offer Rights") in favor
of Bank One (as contemplated by Section 39 of the Bank One Lease), then the
Company and the Members shall comply with the terms and conditions of Sections
39 and 41 of the Bank One Lease in connection with any such transaction.
(c) Pursuant to the terms and conditions of the Contribution Agreement,
Prime has agreed to pay all Proceeds (as defined in the Bank One Lease) payable
to Bank One in connection with any sale or refinancing of the Building. Prime
agrees that, to the extent the Proceeds are not paid to Bank One prior to the
date of this Agreement, Prime shall continue to be liable for the payment of the
Proceeds and any other liability to Bank One under Section 41 of the Bank One
Lease in accordance with the terms and conditions of the Bank One Lease and
Section 12.4 of the Contribution Agreement and the documents referred to in
Section 12.4 of the Contribution Agreement.
Section 11.4 Enforcement. The Members agree that the remedy at law for
breach of the Members obligations in Sections 11.1, 11.2 and 11.3 (other that
Section 11.3.5) is inadequate in view of (a) the complexities and uncertainties
in measuring the actual damages to be sustained by reason of the failure of a
member to comply with its obligations, and (b) the unique nature of the
Company's business and the Member's relationships. Accordingly, each of such
obligations shall be, and is hereby expressly made, enforceable by specific
enforcement.
Section 11.5 Continuation of Options. If neither Prime nor UST exercises
its Purchase Option under this Agreement during the term of the Loan made
pursuant to the Loan Documents in effect on the date hereof, then the parties'
Purchase Options shall continue in effect in connection with the Loan obtained
by the Company to refinance the Loan made pursuant to the Loan Documents, which
shall be for a term of not less than five (5) years, if available (but not any
other Loan made thereafter), with such replacement Loan being deemed to be the
Loan referred to in this Article XI.
ARTICLE XII
NO WAIVER
The failure of either Member to enforce any provision of this Agreement
or right granted hereby shall not in any way be construed to be a waiver of such
provision or right, nor in any way affect the validity of this Agreement or any
part thereof, or limit, prevent, or impair the right of either Member
subsequently to enforce such provisions or exercise such right in accordance
with its terms.
ARTICLE XIII
NO RIGHT TO PARTITION
The Members expressly waive and release any right to have the Company's
assets partitioned or sold for the period during which the Company shall remain
in existence.
ARTICLE XIV
GENERAL
Section 14.1 Entirety of Agreement. This Agreement, together with the
Contribution Agreement, the Property Management and Leasing Agreement and any
other agreements specifically referred to in this Agreement, reflects the whole
and entire agreement among the Members with respect to the subject matter herein
and supersedes all previous agreements and understandings among the Members, and
may be amended, restated, or supplemented only by the written agreement of all
Members.
Section 14.2 Notices. Unless otherwise specifically provided in this
Agreement, any written notice or other communication given pursuant to this
Agreement shall be sufficiently delivered if delivered personally (including
delivery by a nationally recognized express delivery service) or mailed by
registered or certified mail:
(a) to each of the Members at the address set forth below or at such other
address as may be designated from time to time by a Member by written notice to
the other Member and. to the Company:
If to Prime:
Prime Group Realty, L.P.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to:
Prime Group Realty, L.P.
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to:
Jenner & Block
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to UST:
Estein & Associates USA, Ltd.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇ Ciklin ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇'▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
(b) to the Company at the principal office of the Company or such other
address as may be designated from time to time by written notice to each of the
Members.
A notice (i) sent via hand delivery shall be deemed delivered upon
receipt or refusal of delivery, (ii) sent via a nationally recognized overnight
courier shall be deemed delivered one business day after deposit with such
courier, or (iii) sent via registered or certified mail shall be deemed
delivered three business days after deposit with the United States Postal
Service.
Any Member may request that copies of notices be given to an Affiliate
of the Member at the address designated by such Member by written notice to the
other Member and to the Company; provided, however, that any failure to give
such notice shall not affect the validity of any notice given to the Member or
to the Company in accordance with this Section 14.2. Each of the Members agrees
to give such designated notice to any designated Affiliate.
Section 14.3 Further Assurances. Each Member agrees to execute and deliver
all such other and additional instruments and documents and to do such other
acts and things as may be reasonably necessary more fully to effectuate the
Company and carry on the Company business in accordance with this Agreement.
Section 14.4 Applicable Law and Choice of Forum. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware, except that any conflict of laws rule of such jurisdiction which would
require reference to the laws of some other jurisdiction shall be disregarded.
Section 14.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
Section 14.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 14.7 Waiver. No waiver or default by either Member in the
performance of any provision, condition, or requirement herein shall be deemed
to be a waiver of, or in any manner release the other Member from, performance
of any other provision, condition, or requirement herein, nor shall such waiver
be deemed to be a waiver of, or in any manner a release of, the other Member
from future performance of the same provision, condition, or requirement. Any
delay or omission of either Member to exercise any right hereunder shall not
impair the exercise of any such right, or any similar right, accruing to it
thereafter. The failure of either member to perform its obligations hereunder
shall not release the other Member from the performance of such obligation.
Section 14.8 Public Announcements. No party to this Agreement shall issue
any press release, public disclosure or public announcement of any kind
concerning this Agreement or the leasing activities or other transactions
entered into or negotiated by or contemplated by or on behalf of the Company
during the term of this Agreement without prior consultation with and approval
of the other party, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, (a) UST or its Affiliates may conduct press
interviews, issue press releases and make public announcements regarding such
matters in Germany only; provided that neither UST nor its Affiliates discloses
any material non-public information that has not been previously publicly
disclosed by the Company in the United States, and (b) Prime and/or the
Protected REIT may make any public statement or filing which either of them
reasonably believes to be required or desirable under applicable securities laws
or in connection with any securities offering or registration by Prime and/or
the Protected REIT, or customarily disclosed by Prime or the Protected REIT in
its or their periodic public filings, or as may be requested or required by the
New York Stock Exchange or other securities market.
Section 14.9 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular form of nouns, pronouns, and verbs
shall include the plural and vice versa.
Section 14.10 Force Majeure. If either Member is rendered unable, wholly or
in part, by force majeure to carry out its obligations under this Agreement,
other than the obligation to make money payments, the obligations of such
Member, so far as they are affected by such force majeure, shall be suspended
during the continuance of such force majeure. The term "force majeure," as used
herein, shall mean an act of God, strike, lockout, or other industrial
disturbance, act of public enemy, war, blockade, public riot, lightning, fire,
storm, flood, explosion, governmental restraint, unavailability of equipment or
supplies, and any other cause, whether of the kind specifically enumerated above
or otherwise, which is not reasonably within the control of such Member. The
requirement that any force majeure shall not be reasonably within the control of
such Member shall not require settlement of strikes, lockouts, or other labor
difficulty by such Member, contrary to its wishes; and all such difficulties
shall be handled entirely at the discretion of such Member.
Section 14.11 Section Numbers. Unless otherwise indicated, references to
Section numbers are to Sections of this Agreement.
Section 14.12 Notice of Litigation. Either Member that becomes aware of any
litigation pending against the Company (other than personal injury litigation
and similar types of litigation instituted against the Company and tendered to
the Company's insurance carrier for resolution) shall give timely notice of such
to the Company and the other Member. Additionally, any Member against which any
litigation is filed in its capacity as a Member shall give the other Member and
the Company timely notice of such litigation.
Section 14.13 Severability. Any provision of this Agreement prohibited by
applicable law shall be invalid to the extent of such prohibition and severed
from this Agreement unless it is determined by the Members by unanimous vote
that such prohibition invalidates the purpose or intent of this Agreement, in
which case the Company shall be dissolved and its business and affairs wound up,
liquidated, and terminated.
Section 14.14 No Drafting Presumption. No presumption shall operate in
favor of or against any Party hereto as a result of any responsibility that any
Party may have had for drafting this Agreement.
Section 14.15 Third-Party Beneficiaries. The representations, warranties,
covenants, and obligations of the Parties hereto are made for the express
benefit of the Parties hereto, and Persons that are not express signatories
hereto are not intended to have, nor shall have, the benefit of, or any right to
seek enforcement or recovery under, any of such covenants or obligations.
Section 14.16 Remedies. Except as otherwise expressly provided in this
Agreement, all rights and remedies under this Agreement are cumulative and in
addition to other rights or remedies under this Agreement or any applicable law.
Section 14.17 Designation of Forum and Consent to Jurisdiction. The parties
hereto (a) designate the United States District Court for the Northern District
of Illinois as the forum where all matters pertaining to this Agreement may be
adjudicated, and (b) by the foregoing designation, consent to the exclusive
jurisdiction and venue of such court for the purpose of adjudicating all matters
pertaining to this Agreement.
Section 14.18 Waiver of Jury Trial. As a specifically bargained inducement
for each other party to enter into this Agreement, each of the parties hereto
waives any right it may have to have a jury participate in resolving any dispute
arising out of or related to this Agreement, the Contribution Agreement and the
Property Management and Leasing Agreement. Instead, any such disputes resolved
in court shall be resolved in a bench trial without a jury.
Section 14.19 Binding Agreement. This Agreement shall be binding upon all
parties hereto, their successors and assigns, and shall inure to the benefit of
the parties hereto, their successors and assigns.
Section 14.20 Exculpation.
(a) UST. This Agreement is executed by certain general partners of UST, not
individually, but solely on behalf of, and as the authorized nominee and agent
for UST, and in consideration for entering into this Agreement, Prime hereby
waives any rights to bring a cause of action against the individuals executing
this Agreement on behalf of UST (except for any cause of action based upon lack
of authority or fraud), and all persons dealing with UST must look solely to
UST's assets for the enforcement of any claim against UST, and the obligations
hereunder are not binding upon, nor shall resort be had to the private property
of any of the trustees, officers, directors, employees or agents of UST.
(b) Prime. This Agreement is executed by certain individuals, not
individually, but solely on behalf of, and as the authorized representative for
Prime and its general partners. UST hereby waives any rights to bring a cause of
action against the individuals executing this Agreement on behalf of Prime
(except for any cause of action based upon lack of authority or fraud), and all
persons dealing with Prime must look solely to the assets of Prime and its
general partner and such general partner's general partner for the enforcement
of any claim against Prime, and the obligations hereunder are not binding upon,
nor shall resort be had to the private property of any of the trustees,
officers, directors, employees or agents of (i) Prime or (ii) the general
partner of Prime or such general partner's general partners.
Section 14.21 Performance/Holidays. Whenever under the terms of this
Agreement the time for performance falls upon a Saturday, Sunday or legal
holiday, such time for performance shall be extended to the next business day.
Section 14.22 Prime TIF Advance. Notwithstanding anything to the contrary
contained in this Agreement, the Members hereby agree as follows:
(a) In the event the City of Chicago (the "City") determines that the
Company has failed to comply with Section 10.02 of the City Agreement and
requires a cash payment to be made to the City under said Section 10.02 (as
opposed to offsetting payments to be made by the City under the City Note, as
defined in the City Agreement), Prime shall promptly loan the Company the funds
required to be paid to the City (the funds loaned by Prime to the Company shall
be hereinafter referred to as the "Prime TIF Advance"). In no event shall the
Prime TIF Advance exceed the principal amount of $587,771, and any payments
required by the City pursuant to Section 10.02 of the City Agreement in excess
of such amount shall be made by Prime directly to the City. Upon receipt of the
funds made pursuant to the Prime TIF Advance, the Company shall pay the City
said funds in order to satisfy its obligation under Section 10.02 of the City
Agreement.
(b) The Prime TIF Advance shall be repaid solely out of the payments
received by the Company pursuant to the City Note, whereby all such amounts
received by the Company shall first be applied to the full repayment of the
Prime TIF Advance, plus interest on such amount at the rate of ten percent (10%)
per annum. The Prime TIF Advance shall be subordinate to all third party
indebtedness of the Company, including without limitation, the first mortgage
loan made by Landesbank Hessen-Thuringen Girozentrale. In addition, the Prime
TIF Advance shall be subordinate to the UST Priority Return, for the period in
which any amounts under the City Note are paid, except Prime shall in all events
be entitled to all remaining disbursements under the City Note (up to the amount
of the Prime TIF Advance less any amount by which the original principal amount
of the City Note was less than $9,412,229, plus accrued interest on such amount)
when the remaining amounts to be paid under the City Note equal the amount of
the Prime TIF Advance plus accrued interest, so that the City Note is not fully
paid by the City without Prime being repaid the Prime TIF Advance plus accrued
interest.
IN WITNESS WHEREOF, the Members have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
PRIME:
PRIME GROUP REALTY, L.P.
By: Prime Group Realty Trust, a Maryland
real estate investment trust,
its managing partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Its: Co-President
UST:
UST XI DEARBORN, LTD.
By: ▇▇▇▇ Chicago, L.C., a Florida
limited liability company,
its general partner
By: Estein Management Corporation,
a Florida corporation,
its manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Exhibit A
LOAN DOCUMENTS
[INTENTIONALLY OMITTED]
Exhibit B
ANNUAL PLANS
[INTENTIONALLY OMITTED]
Exhibit C
RESTRICTED SERVICES
o Services provided in parking garage (i.e. car wash, valet and car
maintenance)
o Concierge services
o Ticket services
o Accounting of bookkeeping for tenant
o Centralized office services
o Office suites for temporary occupancy
o Safety and security in tenant space
o Design of specialized security systems for tenant space
o Escort security
o Advertising on temporary structures
o Key replacement
o Lockout type services
o Lock changing
o Cleaning and maintenance in tenant space
o Painting in tenant space
o Light bulb replacement in tenant space
o Construction in tenant space
o Interior design or decorating
o Exercise facility (may rent space from building only)
o Instructors/Trainers in exercise facility
o Repairing personal property of tenant
o Day care of child-care services
o Tailoring communications for unique use of tenant
o Any other services that are rendered to the tenant, primarily for the
convenience of the tenant, and not customarily rendered in connection
with the lease of space for occupancy only.