UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-13589
PRIME GROUP REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 36-4173047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 917-1300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At November 11, 1999, 15,135,827 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
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<PAGE>
PRIME GROUP REALTY TRUST
FORM 10-Q
Index
Page
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998.............................................. 3
Consolidated Statements of Income for the Three Months
Ended September 30, 1999 and 1998.............................. 4
Consolidated Statements of Income for the Nine Months
Ended September 30, 1999 and 1998.............................. 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998.............................. 6
Notes to Consolidated Financial Statements....................... 7-15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 15-28
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 29
PART II: OTHER INFORMATION
Item 1. Legal Proceedings................................................ 30
Item 2. Changes in Securities and Use of Proceeds........................ 30
Item 3. Defaults Upon Senior Securities.................................. 30
Item 4. Submission of Matters to a Vote of Security Holders.............. 30
Item 5. Other Information................................................ 30
Item 6. Exhibits and Reports on Form 8-K................................. 30
Signatures
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIME GROUP REALTY TRUST
Consolidated Balance Sheets
(000's omitted, except share data)
(Unaudited)
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land........................................ $ 137,231 $ 139,505
Building and improvements................... 681,951 655,154
Tenant improvements......................... 30,233 48,372
------------ ------------
849,415 843,031
Accumulated depreciation.................... (31,572) (24,756)
------------ ------------
817,843 818,275
Property under development.................. 141,471 51,376
------------ ------------
959,314 869,651
Mortgage note receivable...................... 77,149 63,270
Cash and cash equivalents..................... 10,173 46,500
Tenant receivables, net....................... 12,473 7,288
Restricted cash escrows....................... 118,052 53,820
Deferred rent receivable...................... 8,314 39,062
Deferred costs, net........................... 22,985 32,891
Loans receivable from services company........ 6,171 7,055
Other......................................... 21,679 44,977
------------ ------------
Total assets.................................. $ 1,236,310 $ 1,164,514
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable........................ $ 513,513 $ 518,718
Credit facilities............................. 15,637 -
Bonds payable................................. 74,450 74,450
Accrued interest payable...................... 2,610 2,440
Accrued real estate taxes..................... 36,814 29,657
Accounts payable and accrued expenses......... 27,678 26,068
Liabilities for leases assumed................ 3,242 4,792
Dividends payable............................. 8,104 8,080
Other......................................... 8,409 4,523
------------ ------------
Total liabilities............................. 690,457 668,728
Minority interests:
Operating Partnership....................... 168,869 144,781
Other....................................... 1,000 1,000
Series A - Cumulative Convertible Redeemable
Preferred Shares............................ 39,667 -
Shareholders' equity:
Series B - Cumulative Redeemable Preferred
Shares.................................... 40 40
Series A - Cumulative Convertible Preferred
Shares.................................... - 20
Common Shares............................... 151 151
Additional paid-in capital.................. 320,386 360,017
Retained (distributions in excess of)
earnings.................................. 15,740 (10,223)
------------ ------------
Total shareholders' equity.................... 336,317 350,005
------------ ------------
Total liabilities and shareholders' equity.... $ 1,236,310 $ 1,164,514
============ ============
<FN>
See notes to consolidated financial statements
</FN>
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<TABLE>
PRIME GROUP REALTY TRUST
Consolidated Statements of Income
(000's omitted, except share data)
(Unaudited)
<CAPTION>
Three Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUE
Rental........................................ $ 32,474 $ 28,050
Tenant reimbursements......................... 12,620 9,488
Mortgage note interest........................ 1,707 1,415
Other......................................... 2,995 2,298
------------ ------------
Total revenue................................. 49,796 41,251
EXPENSES
Property operations........................... 11,958 8,817
Real estate taxes............................. 7,221 6,869
Depreciation and amortization................. 8,744 6,611
Interest...................................... 10,899 7,615
General and administrative.................... 1,665 1,651
------------ ------------
Total expenses................................ 40,487 31,563
------------ ------------
Income before gain on sales of real estate,
minority interests and extraordinary item... 9,309 9,688
Gain on sales of real estate.................. 48,125 -
------------ ------------
Income before minority interests and
extraordinary item.......................... 57,434 9,688
Minority interests............................ (22,499) (2,704)
------------ ------------
Income before extraordinary item.............. 34,935 6,984
Extraordinary loss on extinguishment of
debt, net of minority interests of $576...... (829) -
------------ ------------
Net income.................................... 34,106 6,984
Net income allocated to preferred
shareholders................................ (3,037) (2,950)
------------ ------------
Net income available to common shareholders... $ 31,069 $ 4,034
============ ============
Net income available per weighted-average
common share of beneficial interest
- basic..................................... $ 2.05 $ 0.26
============ ============
Net income available per weighted-average
common share of beneficial interest
- diluted................................... $ 2.04 $ 0.26
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
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<TABLE>
PRIME GROUP REALTY TRUST
Consolidated Statements of Income
(000's omitted, except share data)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUE
Rental........................................ $ 98,806 $ 69,525
Tenant reimbursements......................... 39,005 27,889
Mortgage note interest........................ 4,817 4,429
Other......................................... 9,159 5,083
------------ ------------
Total revenue................................. 151,787 106,926
EXPENSES
Property operations........................... 33,205 20,758
Real estate taxes............................. 26,370 19,101
Depreciation and amortization................. 25,382 18,186
Interest...................................... 32,822 22,091
Loss on land development option............... 600 -
General and administrative.................... 5,472 4,695
------------ ------------
Total expenses................................ 123,851 84,831
------------ ------------
Income before gain on sales of real
estate, minority interests and
extraordinary items......................... 27,936 22,095
Gain on sales of real estate.................. 52,482 -
------------ ------------
Income before minority interests and
extraordinary items......................... 80,418 22,095
Minority interests............................ (29,247) (7,022)
------------ ------------
Income before extraordinary items............. 51,171 15,073
Extraordinary loss on extinguishment of debt,
net of minority interests of $576 in 1999
and $375 in 1998............................ (829) (525)
------------ ------------
Net income.................................... 50,342 14,548
Net income allocated to preferred
shareholders................................ (9,067) (4,991)
------------ ------------
Net income available to common shareholders... $ 41,275 $ 9,557
============ ============
Net income available per weighted-average
common share of beneficial interest
- basic..................................... $ 2.73 $ 0.65
============ ============
Net income available per weighted average
common share of beneficial interest
- diluted................................... $ 2.72 $ 0.65
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
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<TABLE>
PRIME GROUP REALTY TRUST
Consolidated Statements of Cash Flows
(000's omitted, except share data)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 50,342 $ 14,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of costs for leases assumed
(included in rental revenue)............. 736 852
Interest income and development fees added
to mortgage note receivable principal.... (1,553) -
Depreciation and amortization.............. 25,382 18,186
Gain on sales of real estate............... (52,482) -
Net gain on treasury lock terminations..... (615) -
Loss on land development option............ 600 -
Equity in loss (earnings) of
unconsolidated investments............... 617 (144)
Minority interests......................... 29,247 7,022
Extraordinary items, net................... 829 525
Changes in operating assets and liabilities:
Increase in tenant receivables............ (6,009) (805)
Increase in deferred rent receivable...... (1,845) (1,053)
Decrease (increase) in other assets....... 8,316 (6,414)
Increase in accrued interest payable...... 170 728
Increase in accrued real estate taxes..... 16,878 13,921
(Decrease) increase in accounts payable
and accrued expenses.................... (3,645) 999
Decrease in liabilities for leases
assumed................................. (1,197) (968)
(Decrease) increase in other liabilities... (291) 6,261
------------ ------------
Net cash provided by operating activities..... 65,480 53,658
INVESTING ACTIVITIES
Expenditures for real estate and equipment.... (298,939) (281,974)
Net proceeds from sales of real estate........ 150,121 -
Leasing costs................................. (5,501) (2,174)
Additional advances on mortgage note
receivable.................................. (12,326) (2,079)
Increase in restricted cash escrows........... (64,232) (46,575)
Repayments (loans) from services company...... 884 (2,779)
------------ ------------
Net cash used in investing activities......... (229,993) (335,581)
FINANCING ACTIVITIES
Financing costs............................... (3,793) (19,520)
Deposits returned on treasury lock
agreements.................................. 15,256 -
Proceeds from mortgage notes payable.......... 168,700 291,656
Net proceeds from (repayment of) credit
facilities.................................. 15,637 (20,300)
Repayment of mortgage notes payable........... (32,389) (84,611)
Repayment of mortgage note payable
- affiliate................................. - (3,984)
Contributions from minority interest - other.. - 1,000
Distributions to minority interests
- Operating Partnership..................... (10,537) (8,641)
Proceeds from the sale of Series B
- preferred shares.......................... - 94,369
Series A - preferred shares transaction fee... (400) -
Proceeds from the sale of common shares....... - 47,194
Common stock repurchases...................... - (4,013)
Dividends paid to Series B - preferred
shareholders................................ (6,750) (641)
Dividends paid to Series A - preferred
shareholders................................ (2,230) (1,745)
Dividends paid to common shareholders (15,308) (12,672)
------------ ------------
Net cash (used in) provided by financing
activities.................................. 128,186 278,092
------------ ------------
Net decrease in cash and cash equivalents..... (36,327) (3,831)
Cash and cash equivalents at beginning of
period...................................... 46,500 11,969
------------ ------------
Cash and cash equivalents at end of period.... $ 10,173 $ 8,138
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
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<TABLE>
PRIME GROUP REALTY TRUST
Consolidated Statements of Cash Flows
(000's omitted, except share data)
(Unaudited)
During the nine months ended September 30, 1999, the Company sold the following
assets and liabilities (see Note 5 - Recent Developments):
<CAPTION>
Nine Months Ended
September 30,
-----------------
1999
-----------------
<S> <C>
Real estate, net........................................ $ 261,754
Tenant receivables, net................................. 824
Deferred rent receivable................................ 32,593
Deferred costs, net..................................... 13,121
Mortgage notes payable.................................. (205,109)
Accrued real estate taxes............................... (9,721)
-----------------
Net assets sold......................................... 93,462
Proceeds from sales of real estate...................... 150,121
-----------------
Total gain on sales of real estate...................... 56,659
Less gain deferred...................................... (4,177)
-----------------
Gain recognized on sales of real estate................. $ 52,482
=================
</TABLE>
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PRIME GROUP REALTY TRUST
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated and combined financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto included in Prime Group Realty
Trust's annual report on Form 10-K for the year ended December 31, 1998 as filed
with the Securities and Exchange Commission on March 31, 1999 ("Form 10-K").
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
2. FORMATION OF THE COMPANY
Prime Group Realty Trust (the "Company") was organized in Maryland on July 21,
1997 to continue the business of The Prime Group, Inc. and certain of its
affiliates. The Company intends to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended, for Federal income
tax purposes.
The Company is the managing general partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Operating Partnership") and owns all of the
preferred units and 58.6% and 59.4% of the common units of the Operating
Partnership issued at September 30, 1999 and December 31, 1998, respectively.
Each common unit entitles the Company to receive distributions from the
Operating Partnership. Distributions declared or paid to holders of common
shares and preferred shares are based upon such distributions the Company
receives with respect to its common units and preferred units.
3. INCOME TAXES
Commencing with the period ended December 31, 1997, the Company elected to be
taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT,
the Company generally will not be subject to federal income tax to the extent
that it distributes at least 95% of its REIT taxable income to its shareholders.
REITs are subject to a number of organizational and operational requirements. If
the Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates.
4. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
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5. RECENT DEVELOPMENTS
During the period from January 1, 1999 through September 30, 1999, the Company
acquired and sold the following office and industrial properties, and parcels of
land (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources" for a further description
of the debt terms):
<TABLE>
<CAPTION>
ACQUISITION
NET COST/SALES
RENTABLE PRICE MORTGAGE
SQ. FT./ (IN MILLIONS) DEBT MONTH
PROPERTY LOCATION ACRES (1) (IN MILLIONS) ACQUIRED/SOLD
- ------------------- -------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ACQUIRED:
Office:
33 West Monroe Chicago, IL 846,759 $ 101.3 $ 65.0 January
Street (2)
National City Cleveland, OH 766,965 105.0 63.6 February
Center (3),(4)
800-810 Jorie Oak Brook, IL 190,829 29.5 21.0 August
Blvd (5)
Industrial:
901 Technology Libertyville, IL 68,824 4.1 - January
Way (4),(6)
300 Craig Place Hillside, IL 163,070 8.6 6.5 July
(7)
43-47 Hintz Road Wheeling, IL 310,156 9.7 6.0 September
(8)
--------------- --------------- ---------------
2,346,603 $ 258.2 $ 162.1
=============== =============== ===============
Land:
Carol Stream Carol Stream, IL
Land (6),(9) 24.1 Acres $ 3.2 - April
Aurora III (10) Aurora, IL 13.5 Acres 0.9 - July
300 West Monroe Chicago, IL 1.4 Acres 55.9 $ 28.0 July
Street & 25 and
77 South Wacker
Drive (11)
--------------- --------------- ---------------
Total Land Acquired 39.0 Acres $ 60.0 $ 28.0
=============== =============== ===============
SOLD:
Office:
941-961 Weigel Elmhurst, IL 123,077
Drive
Industrial:
300 Craig Place Hillside, IL 163,070
306-310 Era Drive Northbrook, IL 36,495
515 Huehl Road/ Northbrook, IL 201,244
500 Lindberg
Road
555 Huehl Road Northbrook, IL 74,000
1301 Ridgeview McHenry, IL 217,600
Drive
3818 Grandville/ Gurnee, IL 345,232
1200 Northwestern
801 Technology Way Libertyville, IL 68,824
901 Technology Way Libertyville, IL 68,824
1001 Technology Libertyville, IL 212,831
Way
---------------
Total Office &
Industrial Sold
(12),(13) 1,511,197 $ 89.5 $ 63.2 July
=============== =============== ===============
Land:
180 Kehoe Blvd. Carol Stream, IL 7.5 Acres $ 1.0 - July
(14)
=============== =============== ===============
50% of Common Interest:
77 W. Wacker Drive Chicago, IL 944,556 (15) (15) September
(15)
=============== =============== ===============
Portion of an Office Property:
122 S. Michigan Chicago, IL 161,710 $ 15.0 - April
(16)
=============== =============== ===============
</TABLE>
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(1) Acquisition cost includes cash paid at closing plus prorations and accrued
real estate taxes.
(2) This acquisition was partially funded by the proceeds of a $65.0 million
mortgage loan initially bearing interest at LIBOR plus 2.0% increasing to
LIBOR plus 2.15% in 1/2000, requiring monthly interest only payments, and
maturing 1/2002.
(3) The Company partially funded the acquisition costs with $30.0 million in
advances from its credit facilities and the assumption of two notes of
$52.9 million and $8.7 million, with actual interest rates of 8.50% and
7.55%, respectively. These interest rates were in excess of the market rate
at the acquisition date, which we estimated to be 6.75%. As a result, we
have recorded an additional $2.0 million of principal to reflect the
imputed interest rate of 6.75% over the term of the notes.
(4) These properties were acquired from minority interest unit holders of the
Operating Partnership or their affiliates, and, in the case of National
City Center, an affiliate of the employer of a board member and, in the
case of 901 Technology Way, an affiliate of an officer of the Company.
(5) This acquisition was funded by the proceeds of a $21.0 million mortgage
loan bearing interest at LIBOR plus 2.0%, requiring monthly principal and
interest payments, maturing 8/2002 and a portion of the proceeds from the
sale of the properties referred to in note 13 below, as this property was
identified as a replacement property under the tax-deferred exchange trust.
(6) Approximately 7.5 acres of the Carol Stream Land (180 Kehoe Blvd.) was sold
on July 8, 1999 and 901 Technology Way was sold on July 14, 1999. See
descriptions of sold properties for information regarding disposition of
these parcels.
(7) This property was purchased from a board member who is also a minority
interest unit holder of the Operating Partnership. The $6.5 million of debt
was assumed by the Company upon acquisition of the property and repaid in
full upon sale of the property (see note 13 below).
(8) This acquisition was funded by the proceeds of a $6.0 million mortgage loan
bearing interest at LIBOR plus 2.25%, requiring monthly interest only
payments, maturing 9/2002 and a portion of the proceeds from the sale of
the properties referred to in note 13 below, as this property was
identified as a replacement property under the tax-deferred exchange trust.
(9) This property was acquired from a board member, who is also a minority
interest unit holder in the Operating Partnership, for a total of $3.1
million in common units and $0.1 million in cash. These acquisitions were
consummated pursuant to the Operating Partnership's 1998 commitment
(subsequently extended to 1999) under land purchase obligations established
at the Company's initial public offering.
(10) The Company has contracts that require it to purchase 132.7 acres over a
three to five year period. Certain minimum installment payments are
required; however, the timing of purchases is at the Company's discretion.
This purchase is a part of these contracts.
(11) This property was acquired with two acquisition mortgage loans in the
amounts of $4.0 million and $24.0 million and a portion of the proceeds
from the sale of the properties in note 13 below. The $4.0 million loan
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is collateralized by the parcel located at 25 and 77 South Wacker Drive,
matures on November 1, 2001, and bears interest at (a) until the funding of
a construction loan for the 300 West Monroe Street parcel, the Prime Rate
plus 0.5%, and (b) thereafter at LIBOR plus 2.75% and has been guaranteed
by the Operating Partnership. The $24.0 million loan is collateralized by
the adjacent parcel located at 300 West Monroe Street, matures on May 1,
2000, bears interest at the Prime Rate plus 0.5% and has been guaranteed by
the Company and the owner of the 25 and 77 South Wacker Drive parcel. The
25 and 77 South Wacker Drive property also has been pledged as collateral
for the $24.0 million loan. The 25 and 77 South Wacker Drive property had
been identified as a replacement property under the tax-deferred exchange
trust discussed in note 13 below.
(12) Mortgage debt represents the amount of debt repaid on or before the sale or
assumed by the purchaser. The extraordinary loss on extinguishment of debt
for the nine months ended September 30,1999 includes the write off of
unamortized deferred financing fees of $0.5 million.
(13) These properties were sold in a single transaction with a total sales price
of $89.5 million, resulting in a gain of approximately $4.2 million. As
part of the sale, the Company agreed to assume responsibility for leasing
two of the properties for five years, once the existing tenants' leases
expire in 2000 and 2001. The Company's total lease obligation is reduced as
existing tenants renew their leases or as new leases from third parties are
executed for space in the properties. As a result of these commitments, the
gain has been deferred and is included in other liabilities until the
tenants either renew their leases or are replaced. The gain may be reduced
by any obligations the Company may incur as a result of these commitments.
In order to defer the taxable gain on this transaction, net sales proceeds
of $26.7 million were deposited at closing into a tax-deferred exchange
trust for reinvestment in future property purchases.
(14) Prime Group Realty Services, Inc., an unconsolidated affiliate, constructed
an office/warehouse facility on this parcel and sold it to the purchaser
concurrently with the Company's sale of the land. This affiliate leased the
land from the Company during the portion of the construction period in
which the Company owned the land.
(15) On September 30, 1999, the Company sold a 50% common interest for $22.0
million and a $66.0 million preferred interest (providing a cumulative
preferred return of 9.5% per annum) in this property. The remaining 50%
common interest will be accounted for using the equity method of
accounting. Prior to the closing of the transaction, the existing $170.0
million non-recourse first mortgage was refinanced with a new $170.0
million non-recourse first mortgage. The extraordinary loss on
extinguishment of debt for the nine months ended September 30, 1999
includes the write off of unamortized deferred financing fees of $0.9
million. The new mortgage loan bears interest at LIBOR plus 1.25%,
requiring interest only payments from time to time and annual principal
payments, maturing 9/2004. The sale resulted in a gain of $48.5 million for
the nine months ended September 30, 1999 representing the net proceeds in
excess of net book volume as of September 30, 1999. As a result, the book
basis of the remaining 50% common interest is $0 for financial reporting
purposes. In order to defer the taxable gain on this transaction, net
proceeds of $84.9 million were deposited into a tax-deferred exchange trust
for reinvestment in future property purchases. The Company must identify a
replacement property or properties within 45 days of this closing and close
on the acquisition(s) within 180 days. The Company has identified IBM
Plaza, an office building located in Chicago, Illinois as a replacement
property. See further discussion below.
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<PAGE>
(16) On April 19, 1999, the Company sold approximately 161,710 net rentable
square feet of its 122 South Michigan Avenue office building to
National-Louis University (NLU) for a gross sales price of $14.95 million
and consideration, net of commission, closing costs and a $1.1 million
capital improvement allowance, of $12.1 million. As part of this sale, NLU
has also acquired an undivided 31.56% interest in certain common areas of
the property. The Company continues to own the remaining 350,659 net
rentable square feet of the building and is responsible for the management
of the entire property. The sale resulted in a gain of $4.0 million for the
nine months ended September 30, 1999.
On July 22, 1998, the Company entered into a purchase agreement, with an
affiliate of an investor in the Operating Partnership and an affiliate of the
employer of a board member to acquire two office buildings, IBM Plaza (a
1,354,354 square foot office building located in the Chicago central business
district) and National City Center in Cleveland, Ohio for an aggregate purchase
price of approximately $357.0 million. On February 4, 1999, the Company entered
into an amended option agreement with the sellers of IBM Plaza and an amended
purchase agreement with the sellers of National City Center (see above). The
option allowed the Company to purchase IBM Plaza for $238.0 million (including
an $8.0 million non-refundable option payment) plus reimbursement of tenant
improvements and leasing commissions expended for new tenants executing leases
after February 15, 1999. On September 30, 1999, the Company exercised its option
to acquire IBM Plaza and intends to close on the purchase before December 20,
1999, the outside closing date under the amended option agreement. Concurrent
with the exercise of its option, the Company paid a $3.5 million earnest money
deposit into a joint order escrow and funded $0.9 million to the seller for a
portion of a tenant improvement allowance provided to an affiliated company in
connection with the affiliate's leasing of 30,314 square feet of space in IBM
Plaza. This property was identified as a replacement property under the
tax-deferred exchange trust discussed in note 15 above and its purchase will be
partially funded from the sale proceeds.
On February 8, 1999, the Company signed a contract with a buyer pursuant to
which the Company will construct and sell to the buyer an approximately
1,032-space parking garage, including approximately 4,000 square feet of retail
space, on approximately 22,000 square feet of a 61,302 square foot parcel of
land that the Company owns in the Chicago central business district (see Note 11
regarding acquisition of this parcel). The sales price of the completed garage
is expected to be approximately $36.0 million, plus the value of any of the
retail space leased by the Company at the time of sale up to a maximum of $1.75
million. In addition, the Company is entitled to receive an additional $1.0
million from the buyer if, within 15 years after the sale of the parking garage
to the buyer, the Company substantially completes construction of an office
building on the land containing at least 800,000 square feet of office space,
which is occupied by at least one tenant who is not affiliated with the Company.
The Company intends to construct an office building on the land, which it will
lease to third parties. The land parcel for the office building could not be
obtained without obtaining the land for the parking garage and in order to
construct an office building, parking must be provided pursuant to current
zoning requirements.
In March 1999, the option period for a parcel adjacent to one of our development
property sites lapsed. The Company has recorded the related non-refundable
option price of $0.6 million as a loss on land development option in the
consolidated statement of income for the nine months ended September 30, 1999.
On March 1, 1999, the Company terminated a $160.0 million treasury lock
agreement due to changes in terms and timing of the purchase of an office
building as a result of an amended purchase agreement. This resulted in
approximately $0.6 million on deposit related to the treasury lock agreement
being forfeited at the time of termination. On May 11, 1999, the Company
terminated a $170.0 million treasury lock agreement due to changes in timing of
-12-
<PAGE>
a planned future securitization of a currently outstanding $170.0 million loan
related to the 77 West Wacker Drive building. The termination resulted in a net
settlement and gain upon termination of $1.2 million. The net gain of $0.6
million from the two terminations has been included as a net gain in other
income in the statement of income for the nine months ended September 30, 1999.
During the nine months ended September 30, 1999, the Company received net cash
settlements of approximately $15.2 million related to both treasury lock
agreements.
On April 13, 1999, the Company modified the terms of the Company's Series A
preferred shares. Under the original terms, the holders of the Series A
preferred shares had certain conversion rights if for two consecutive quarters
(1) the ratio of the Company's debt plus nonconvertible preferred shares divided
by its total market capitalization exceeded 65% or (2) its fixed charges
coverage ratio fell below 1.4. The new agreement eliminates the debt-to-market
capitalization covenant. In exchange, the holders of the Series A preferred
shares were granted the future right to cause the redemption of their shares at
a price of $20.00 per share upon 120 days' prior written notice, which
redemption may occur during the period beginning January 15, 2002 and ending
January 15, 2004. The Series A preferred shares will continue to pay an annual
dividend of $1.50 per share and will continue to be convertible into common
shares on a one for one basis. The Company made a $0.4 million one-time payment
as part of this transaction, which will be amortized, using the straight-line
method, through January 15, 2002 as a preferred dividend. All 2,000,000
outstanding shares of the Company's Series A preferred shares have been
reclassified to redeemable equity at their aggregate redemption price of $40.0
million, net of the unamortized transaction fee, in the consolidated balance
sheet.
Under the provisions of one of the credit facilities, the Company is obligated
to maintain interest rate contracts on a portion of its variable rate
indebtedness. The Company entered into an interest rate cap agreement in July,
1999 with a financial institution for an original notional amount of $150.0
million at 7.0% during the period from July 1 to October 1, 1999. On November 1,
1999 the Company entered into an interest rate collar agreement for the period
from November 1, 1999 through September 30, 2002 with a financial institution
for an original notional amount of $170.0 million . The interest rate ceiling
under the agreement is based on a LIBOR index rate of 7.75% and the interest
rate floor is based on a LIBOR index rate of 5.62%. This agreement satisfies the
Company's obligation to maintain interest rate contracts under the provisions of
one of the credit facilities.
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
available per weighted-average common share of beneficial interest for the three
months and nine months ended September 30, 1999 and 1998 (in thousands, except
share and per share amounts):
-13-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Income before gain on sale
of real estate, minority
interests, extraordinary
items, and preferred
distributions...................... $ 9,309 $ 9,688 $ 27,936 $ 22,095
Minority interests.................. (2,595) (2,704) (7,734) (7,022)
Net income allocated to
preferred distributions............ (3,037) (2,950) (9,067) (4,991)
------------ ----------- ------------ ------------
Income before gain on sales of real
estate and extraordinary items..... 3,677 4,034 11,135 10,082
Gain on sales of real estate, net
of minority interests.............. 28,221 - 30,969 -
Extraordinary loss on extinguishment
of debt, net of minority interests. (829) - (829) (525)
------------ ----------- ------------ ------------
Numerator for earnings per share
- income available to common
shares............................. $ 31,069 $ 4,034 $ 41,275 $ 9,557
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Denominator:
Denominator for basic earnings
per share - weighted average
common shares..................... 15,135,727 15,535,023 15,134,434 14,771,655
Effect of dilutive securities:
Employee stock options.......... 118,089 - 64,529 -
------------ ----------- ------------ ------------
Denominator for diluted earnings
per share - adjusted weighted
-average common shares and
assumed conversions............... 15,253,816 15,535,023 15,198,963 14,771,655
============ =========== ============ ============
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Basic earnings available to
common shares per weighted
average common shares:
Income before gain on sales of
real estate and extraordinary
items............................. $ 0.24 $ 0.26 $ 0.74 $ 0.69
Gain on sales of real estate, net
of minority interests............. 1.86 - 2.04 -
Extraordinary loss on
extinguishment of debt, net of
minority interests................ (.05) - (.05) (.04)
------------ ----------- ------------ ------------
Net income available per
weighted-average common
share of beneficial
interest - basic.................. $ 2.05 $ 0.26 $ 2.73 $ 0.65
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Diluted earnings available
to common shares per
weighted average common
shares:
Income before gain on
sales of real estate and
extraordinary items............... $ 0.24 $ 0.26 $ 0.73 $ 0.69
Gain on sales of real estate,
net of minority interests......... 1.85 - 2.04 -
Extraordinary loss on
extinguishment of debt,
net of minority interests......... (.05) - (.05) (.04)
------------ ----------- ------------ ------------
Net income available per
weighted average common
share of beneficial
interest - diluted................ $ 2.04 $ 0.26 $ 2.72 $ 0.65
============ =========== ============ ============
</TABLE>
-15-
<PAGE>
Options to purchase 1,120,333 of the Company's common shares were excluded in
the computation of diluted earnings available to common shares for the three
months and nine months ended September 30, 1999 because the effect would be
antidilutive.
The Company had 10,679,616 and 10,289,245 weighted-average common units
outstanding during the three months ended September 30, 1999 and 1998,
respectively, of which 9,441,368 and 9,067,210, respectively, may be converted
(on a one for one basis) into common shares at the option of the unit holders.
The Company had 10,513,243 and 10,273,902 weighted-average common units
outstanding during the nine months ended September 30, 1999 and 1998,
respectively, of which 9,421,964 and 9,067,210, respectively, may be converted
into common shares at the option of the unit holders. The convertible common
units were not included in the computation of diluted earnings per share because
the conversion would be antidilutive.
The Company had 2,000,000 Series A convertible preferred shares outstanding
during the three months and nine months ended September 30, 1999 and 1998 which
were not included in the computations of diluted earnings per share because the
conversion would be antidilutive.
7. SEGMENT REPORTING
The following summarizes the Company's historical segment operating results for
the three months and nine months ended September 30, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
Three months ended September 30, 1999
--------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue....................... $ 43,316 $ 6,159 $ 321 $ 49,796
Total expenses...................... 24,369 3,553 12,565 40,487
------------ ----------- ------------ ------------
Income (loss) before minority
interests, gain on sales of
real estate and extraordinary
item.............................. 18,947 2,606 (12,244) 9,309
FFO adjustments:
Real estate depreciation and
amortization.................... 6,547 1,475 8,022
Amortization of costs for leases
assumed......................... 245 - - 245
Straight-line rental revenue
adjustments..................... (513) (122) - (635)
Gain on treasury lock termination. - - - -
Net income allocated to
preferred shareholders......... - - (3,037) (3,037)
------------ ----------- ------------ ------------
Funds from operations $ 25,226 $ 3,959 $ (15,281) $ 13,904
============ =========== ============ ============
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30, 1999
--------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue....................... $ 33,475 $ 6,497 $ 1,279 $ 41,251
Total expenses...................... 18,395 3,844 9,324 31,563
------------ ----------- ------------ ------------
Income (loss) before minority
interests, gain on sales of real
estate and extraordinary item..... 15,080 2,653 (8,045) 9,688
FFO adjustments:
Real estate depreciation and
amortization.................... 4,613 1,494 - 6,107
Amortization of costs for leases
assumed......................... 286 - - 286
Straight line rental revenue
adjustments...................... (364) (167) - (531)
Net income allocated to preferred
shareholders..................... - - (2,950) (2,950)
============ =========== ============ ============
Funds from operations $ 19,615 $ 3,980 $ (10,995) $ 12,600
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1999
--------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue....................... $ 128,554 $ 20,781 $ 2,452 $ 151,787
Total expenses...................... 72,741 12,215 38,895 123,851
------------ ----------- ------------ ------------
Income (loss) before minority
interests, gain on sales of real
estate and extraordinary items..... 55,813 8,566 (36,443) 27,936
FFO adjustments:
Real estate depreciation
and amortization............... 18,545 4,898 23,443
Amortization of costs for leases
assumed........................ 736 - - 736
Straight-line rental revenue
adjustments..................... (1,589) (256) - (1,845)
Net gain on treasury lock
terminations.................... - - (615) (615)
Loss on land development option... - - 600 600
Net income allocated to preferred
shareholders.................... - - (9,067) (9,067)
============ =========== ============ ============
Funds from operations $ 73,505 $ 13,208 $ (45,525) $ 41,188
============ =========== ============ ============
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1999
--------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue....................... $ 85,516 $ 19,185 $ 2,225 $ 106,926
Total expenses...................... 46,719 10,858 27,254 84,831
------------ ----------- ------------ ------------
Income (loss) before minority
interests, gain on sales of real
estate and extraordinary items..... 38,797 8,327 (25,029) 22,095
FFO adjustments:
Real estate depreciation and
amortization..................... 12,708 4,247 - 16,955
Amortization of costs for leases
assumed.......................... 852 - - 852
Straight line rental revenue
adjustments...................... (431) (622) - (1,053)
Net income allocated to preferred
shareholders..................... - - (4,991) (4,991)
============ =========== ============ ============
Funds from operations $ 51,926 $ 11,952 $ (30,020) $ 33,858
============ =========== ============ ============
</TABLE>
The following summarizes the Company's segment assets and activity as of
September 30, 1999 and December 31, 1998 and for the nine months ended September
30, 1999 and 1998:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Segment assets:
Office..................................... $ 937,762 $ 841,818
Industrial................................. 151,754 186,817
Corporate/Operating Partnership............ 146,794 135,879
------------ ------------
Total consolidated assets $ 1,236,310 $ 1,164,514
============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Expenditures for real estate:
Office..................................... $ 267,306 $ 279,102
Industrial................................. 23,358 2,475
Corporate/Operating Partnership............ 8,215 397
------------ ------------
Total expenditures for real estate $ 298,879 $ 281,974
============ ============
</TABLE>
-18-
<PAGE>
8. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying unaudited Pro Forma Condensed Consolidated Statements of
Operations of the Company are presented as if, at January 1, 1998, (i) the
Company had completed the 1998 sales of its common shares and Series B preferred
shares and used the net proceeds to acquire preferred units and common units of
the Operating Partnership and (ii)the Operating Partnership acquired various
office and industrial properties (eight properties acquired in 1998 and six
properties acquired in 1999) with cash and debt proceeds. The unaudited Pro
Forma Condensed Consolidated Statements of Operations should be read in
conjunction with the historical financial statements contained in the Company's
Form 10-K. In management's opinion, all adjustments necessary to reflect the
effects of the transactions described above have been made.
The unaudited Pro Forma Condensed Consolidated Statements of Operations of the
Company are not necessarily indicative of what the actual results of operations
would have been assuming the transactions described above had occurred at the
dates indicated above, nor do they purport to present the future results of
operations of the Company.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Total revenue (in thousands).................. $ 128,864 $ 125,811
============ ============
Net income available to common
Shareholders (in thousands)................... $ 10,128 $ 7,330
============ ============
Earnings per diluted common share............. $ 0.67 $ 0.50
============ ============
</TABLE>
-19-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a fully-integrated real estate company providing property management,
leasing, marketing, acquisition, development, redevelopment, construction,
finance and other related services. We intend to qualify as a REIT for federal
income tax purposes. Through the Operating Partnership, we own 26 office
properties containing an aggregate of approximately 7.5 million net rentable
square feet, 40 industrial properties containing an aggregate of approximately
5.0 million net rentable square feet, one retail center and one parking
facility. The properties are located primarily in the Chicago metropolitan area.
In addition, we own a mortgage on an office property containing 728,406 net
rentable square feet and a 50% common equity interest in an office property
containing 944,456 net rentable square feet. We also own approximately 248.2
acres of developable land and rights to acquire more than 261.2 additional acres
of developable land which management believes could be developed with
approximately 11.0 million rentable square feet of additional office and
industrial space.
In terms of net rentable square feet, at September 30, 1999, approximately 79.6%
of our office properties and 85.3% of our industrial properties are located in
the Chicago metropolitan area in prime business locations within established
business communities. The properties located in the Chicago metropolitan area
account for approximately 85.6% of our total rental and tenant reimbursement
revenue for the nine months ended September 30, 1999. Our remaining office
properties are located in the Cleveland, Ohio; Nashville, Tennessee; Knoxville,
Tennessee; and Milwaukee, Wisconsin metropolitan areas, and our remaining
industrial properties are located in the Columbus, Ohio metropolitan area. We
intend to continue to invest in the acquisition, development and redevelopment
of office and industrial properties primarily located in the Chicago
metropolitan area.
We intend to access multiple sources of capital to fund future acquisition and
development activities. These capital sources may include undistributed cash
flow, borrowings under credit facilities, proceeds from the issuance of
long-term, tax-exempt bonds, joint venture arrangements and other debt or equity
securities and other bank and/or institutional borrowings. There can be no
assurance that any such financing will be obtained.
CAUTIONARY STATEMENTS
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with our Consolidated
Financial Statements and Notes thereto contained herein. Statements contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," including without limitation the "Year 2000" discussion, include
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which reflect management's current view with
respect to future events and financial performance. Such forward-looking
statements are subject to certain risks and uncertainties; including, but not
limited to, the effects of future events on our financial performance; the risk
that we may be unable to finance our planned acquisition and development
activities; risks related to the industrial and office industry in which our
properties compete, including the potential adverse impact of external factors
such as inflation, consumer confidence, unemployment rates and consumer tastes
and preferences; risks associated with our development activities, such as the
potential for cost overruns, delays and lack of predictability with respect to
the financial returns associated with these development activities; the risk of
a potential increase in market interest rates from current rates; risks
associated with real estate ownership, such as the potential adverse impact of
changes in the local economic climate on the revenues and the value of our
properties; and risks associated with the impact of the Year 2000 issue on the
processing of date-sensitive information by our computerized information systems
-20-
<PAGE>
as well as our tenants and vendors. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of September
30, 1999.
Among the facts about which we have made assumptions are the following:
o future economic conditions which may impact the demand for office space and
tenant ability to pay rent, either at current or increased levels;
o prevailing interest rates;
o the extent of any inflation on operating expenses;
o our ability to reduce various expenses as a percentage of revenues;
o our continuing ability to pay amounts due to our preferred shareholders
prior to any distribution to our common shareholders; and
o the continuing availability of our credit facilities.
In addition, historical results and percentage relationships set forth herein
are not necessarily indicative of future operations.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 1999, to the Three Months
Ended September 30, 1998.
In analyzing the operating results for the quarter ended September 30, 1999, the
changes in rental and reimbursable income, property operating expenses, real
estate taxes and depreciation and amortization from 1998 are due principally to
the addition of a full three months of operating results for the six properties
acquired in the second quarter of 1998 and the addition of operating results for
the three properties acquired during the first and third quarters, respectively,
of 1999.
For the three months ended September 30, 1999, rental revenue increased $4.4
million, or 15.8%, to $32.5 million (including lease termination revenue of $1.0
million), tenant reimbursement income increased $3.1 million, or 33.0%, to $12.6
million, other revenue increased $0.7 million (including signage rights income
of $0.5 million) to $3.0 million, or 30.3%, property operating expenses
increased $3.1 million, or 35.6%, to $12.0 million, real estate tax expense
increased $0.3 million or 5.1%, to $7.2 million and depreciation and
amortization increased $2.1 million, or 32.2%, to $8.7 million in each case as
compared to the three months ended September 30, 1998. These gains are partially
offset by the lack of 2.5 months of operations for nine industrial properties
and one office property sold on July 14, 1999. For the corresponding 2.5 months
in 1998 these sold properties had revenue of $1.3 million, tenant reimbursement
income of $0.4 million, property operating expenses of $0.1 million, real estate
tax expense of $0.3 million and depreciation and amortization of $0.2 for the
three months ended September 30, 1999.
Rental revenue, tenant reimbursement income and other revenue for properties
held in both periods decreased $0.6 million for the three months ended September
30, 1999, primarily due to a decrease in termination revenue. Corresponding
property operating expenses decreased by $1.7 million, primarily due to a
reduction in real estate tax expense. Depreciation and amortization increased
$1.1 million for the three months ended September 30, 1999 primarily due to
increased tenant improvement depreciation.
Mortgage note interest income increased $0.3 million, or 20.6% to $1.7 million
for the three months ended September 30, 1999 compared to the same period in
1998, due to additional advances and accrued interest on the first mortgage note
held encumbering the office property known as 180 North LaSalle.
-21-
<PAGE>
Interest expense increased $3.3 million, or 43.1%, to $10.9 million during the
three months ended September 30, 1999 compared to the same period in 1998. The
increase was principally due to new mortgages obtained on certain of the
properties which were acquired in 1999 and in the fourth quarter of 1998.
General and administrative expense remained consistent for the three months
ended September 30, 1999 compared to the same period in 1998.
Gain on sales of real estate increased $48.1 million for the three months ended
September 30, 1999, due to the sale of properties as more fully described in
"Notes to Consolidated Financial Statements-Recent Developments."
Income allocated to minority interests increased $19.8 million, or 732.2% to
$22.5 million for the three months ended September 30, 1999, due to an increase
in income before minority interests and extraordinary item of $47.7 million, or
492.8% to $57.4 million. The increase in income before minority interests and
extraordinary item is due to a gain of $48.1 million on the sale of real estate,
and additional properties acquired in 1999 and the fourth quarter of 1998 and
the effects they had on the revenue and expenses described above. The
extraordinary loss on extinguishment of debt, net of minority interests,
increased $0.8 million for the three months ended September 30, 1999, due to the
write-off of unamortized deferred financing fees related to mortgage debt repaid
upon the sale of properties as more fully described in "Notes to Consolidated
Financial Statements - Recent Developments."
Net income increased $27.1 million, or 388.3% to $34.1 million for the three
months ended September 30, 1999, due to the changes in revenue, expenses, gain
on sales of real estate, minority interest and extraordinary loss on
extinguishment of debt described above.
Comparison of the Nine Months Ended September 30, 1999, to the Nine Months Ended
September 30, 1998.
For the nine months ended September 30, 1999, the changes in rental and
reimbursable income, property operating expenses, real estate taxes and
depreciation and amortization from the same period in 1998 are due principally
to a full nine months of operating results for eight properties acquired in the
first half of 1998 and the additional operating results for the three and four
properties acquired during the first and third quarters, respectively, of 1999.
For the nine months ended September 30, 1999, rental revenue increased $29.3
million, or 42.1%, to $98.8 million (including lease termination revenue of $5.1
million), tenant reimbursement income increased $11.1 million, or 39.9%, to
$39.0 million, other revenue increased $4.1 million or 80.2%, to $9.2 million,
property operating expenses increased $12.4 million, or 60%, to $33.2 million,
real estate tax expense increased $7.3 million, or 38.1%, to $26.4 million, and
depreciation and amortization increased $7.2 million, or 39.6%, to $25.4
million, in each case as compared to the nine months ended September 30, 1998.
These gains are partially offset by the lack of 2.5 months of operations for
nine industrial properties and one office property sold on July 14, 1999. For
the corresponding 2.5 months in 1998 these sold properties had revenue of $1.3
million, tenant reimbursements income of $0.4 million, property operating
expenses of $0.1 million, real estate tax expense of $0.3 million and
depreciation and amortization of $0.2 million. Included in other revenue is the
net gain on the termination of treasury lock agreements of $0.6 million for the
nine months ended September 30, 1999, due to events described in "Notes to
Consolidated Financial Statements-Recent Developments."
Rental revenue, tenant reimbursement income and other revenue for properties
held in both periods increased $2.5 million for the nine months ended September
30, 1999, primarily due to eight properties acquired during the nine months
ended September 30, 1998, being owned during the entire nine months ended
September 30, 1999, and increased occupancy and rental rates at the other
-22-
<PAGE>
properties. Corresponding property operating expenses decreased $0.4 million and
primarily due to a reduction in real estate tax expense. Depreciation and
amortization increased $2.2 million for the nine months ended September 30,
1999, primarily due to the eight properties acquired during the nine months
ended September 30, 1998, being owned during the entire nine months ended
September 30, 1999.
Mortgage note interest income increased $0.4 million, or 8.8%, to $4.8 million
for the nine months ended September 30, 1999, compared to the same period in
1998, due to the additional advances on the first mortgage note held encumbering
the office property known as 180 North LaSalle.
Interest expense increased $10.7 million, or 48.6%, to $32.8 million during the
nine months ended September 30, 1999, compared to the same period in 1998. The
increase was principally due to new mortgages obtained on certain of the
properties which were acquired in 1999 and in the fourth quarter of 1998.
General and administrative expense increased $0.8 million, or 16.5% to
$5.5 million for the nine months ended September 30, 1999, compared to the same
period in 1998, reflecting costs related to the growth of the Company.
Gain on sale of real estate increased $52.5 million for the nine months ended
September 30, 1999, compared to the same period in 1998, due to the sale of
properties as more fully described in "Notes to Consolidated Financial
Statements-Recent Developments."
Income allocated to minority interests increased $22.2 million, or 316.5% to
$29.2 million for the nine months ended September 30, 1999, compared to the same
period in 1998, due to an increase in income before minority interests of $58.3
million, or 264.0% to $80.4 million. The increase in income before minority
interests and extraordinary item was principally due to a net gain of $0.6
million on the termination of two treasury lock agreements, gain on the sale of
real estate of $52.5 million and additional properties acquired in 1999 and the
fourth quarter of 1998 and the effects they had on the revenue and expenses
described above.
The extraordinary loss on extinguishment of debt, net of minority interests,
increased $0.8 million for the nine months ended September 30, 1999, due to the
write-off of unamortized deferred financing fees related to mortgage debt repaid
upon the sale of properties as more fully described in "Notes to Consolidated
Financial Statements Recent Developments."
Net income increased $35.8 million, or 246.0%, to $50.3 million for the nine
months ended September 30, 1999, compared to the same period in 1998, due to the
changes in revenue, expenses, gain on sales of real estate, minority interests
and extraordinary loss on extinguishment of debt described above.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL CASH FLOWS. We had net cash provided by operating activities of
$65.5 million and $53.7 million for the nine months ended September 30, 1999 and
1998, respectively. The $11.8 million increase is primarily due to a $35.8
million increase in net income, a $7.2 million increase in depreciation and
amortization expense, a $0.6 million increase in loss on land development
option, a $0.8 million increase in the equity in loss of unconsolidated
affiliate, a $22.2 million increase in income allocated to minority interests, a
$14.7 million decrease in other assets, a $0.6 million decrease in accrued
interest, and a $2.9 million increase in accrued real estate taxes, offset by a
$52.5 million increase in gain on sale of real estate, a $0.6 million increase
in gain on treasury lock terminations, a $0.3 million increase in extraordinary
items, a $1.6 million increase in interest income and development costs added to
the mortgage note receivable principal, a $5.2 million increase in tenant
receivables, a $0.8 million increase in deferred rent receivable, a $4.6 million
decrease in accounts payable and accrued expenses, a $0.2 million decrease in
liabilities for leases assumed and a $6.6 million decrease in other liabilities.
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<PAGE>
The primary uses of cash for investing activities during the nine months ended
September 30, 1999, included: (i) costs associated with the development and
construction of four office buildings and one industrial facility aggregating
231,896 square feet and 242,088 square feet, respectively, which are expected to
be available for occupancy during the fourth quarter of 1999 or early first
quarter of 2000; (ii) costs associated with the build-out of tenant space; and
(iii) costs for pre-development activities associated with future developments.
We had net cash used in investing activities of $ 230.0 million and $335.6
million for the nine months ended September 30, 1999 and 1998, respectively. The
$105.6 million decrease in net cash used in investing activities from the nine
months ended September 30, 1998, through the nine months ended September 30,
1999, was primarily due to a $17.7 million increase in restricted cash escrows
and a $3.7 million net repayment of loans from the services company, a $17.0
million increase in expenditures for real estate and equipment, principally
related to property acquisitions and development, offset by a $150.1 million
increase in proceeds from the sales of real estate, a $10.2 million increase in
advances on the mortgage note receivable and a $3.3 increase in leasing costs.
The primary uses of cash for financing activities during the nine months ended
September 30, 1999, were (i) principal repayments on notes payable of $32.4
million, (ii) preferred and common stock distributions of $24.3 million, (iii)
distributions to minority interests (including distributions to limited partners
of the Operating Partnership) of $10.5 million, and (iv) financing costs of $3.8
million. Such uses were partially offset by proceeds from new borrowings of
$184.3 million and $15.3 million of deposits returned on treasury lock
agreements. We had net cash provided by financing activities of $128.2 million
and $278.1 million for the nine months ended September 30, 1999 and 1998,
respectively. The $149.9 million decrease in net cash provided by financing
activities from the nine months ended September 30, 1998, through the nine
months ended September 30, 1999, was due to, (i) a $15.7 million decrease in
financing costs, (ii) a $15.3 million increase in deposits recovered on treasury
lock agreements, (iii) $35.9 million in net proceeds from the credit facilities,
(iv) a $56.2 million decrease in the repayment of mortgage notes payable, offset
by a $123.0 million decrease in proceeds from mortgage notes payable, (v) a $1.0
million decrease in contributions from minority interests, (vi) a $94.4 million
decrease in net proceeds from the sale of Series B preferred shares, a $47.2
million decrease in net proceeds from a private placement and (vii) a $11.1
million increase in distributions to preferred shareholders, common shareholders
and minority interests.
LIQUIDITY. Net cash provided from operations represents the primary source
of liquidity to fund distributions, debt service and recurring capital costs. In
order to qualify as a REIT for federal income tax purposes, we must distribute
95% of our taxable income (excluding capital gains) annually. Accordingly, we
currently intend to continue to make, but are not contractually bound to make,
regular quarterly distributions to holders of our common shares/units and our
preferred shares. We have established annual distribution rates as follows:
$1.35 per annum per common share/unit, 7.5% per annum ($1.50 per share) for each
Series A preferred share and 9% per annum ($2.25 per share) for each Series B
preferred share.
CREDIT FACILITIES. Our credit facilities, with a maximum loan availability
totaling $85.0 million as of September 30, 1999, have been provided by various
financial institutions, and are collateralized by first mortgages on certain
properties owned by the Operating Partnership. Subject to our compliance with
the applicable loan covenants, the credit facilities may be used to provide
funds for acquisitions and development activities and to provide the replacement
letters of credit for our $26.9 million of tax-exempt bonds. As of September 30,
1999, $15.6 million was drawn on credit facilities and $26.9 million was used to
provide letters of credit for our tax-exempt bonds, leaving an aggregate of
$42.5 million unused. Effective October 22, 1999, we amended one of the credit
facilities, reducing its maximum loan availability to $35.0 million and
effective November 5, 1999, we amended the other credit facility, increasing its
maximum loan availability by $2.0 million, concurrent with an additional
borrowing of $2.0 million. These amendments reduced the maximum loan
availability to $47.0 million.
-24-
<PAGE>
PROPERTY SALES. On April 19, 1999, we sold approximately 161,710 net
rentable square feet of our 122 South Michigan Avenue office building to NLU for
a gross sales price of $14.95 million and consideration, net of commission,
closing costs and a capital improvement allowance, of $12.1 million. As part of
this sale, NLU also acquired an undivided 31.56% interest in certain common
areas of the property. We continue to own the remaining 350,659 net rentable
square feet of the building and are responsible for the management of the entire
property. The sale resulted in a gain of $4.0 million for the nine months ended
September 30, 1999.
On July 8, 1999, we sold approximately 7.5 acres of land to Antunes Properties,
L.L.C. for a purchase price of $1.0 million. Prime Group Realty Services, Inc.,
an unconsolidated affiliate, constructed an office/warehouse facility on this
parcel and sold it to Antunes Properties, L.L.C. This affiliate leased the land
from the Company during the portion of the construction period in which the
Company owned the land. In order to defer the taxable gain on this transaction,
net proceeds of $1.0 million were deposited into a tax-deferred exchange trust
for reinvestment in future property purchases.
On July 14, 1999, we sold nine industrial properties and one office property in
a single transaction with a total purchase price of $89.5 million. In order to
defer the taxable gain on this transaction, net sales proceeds of $26.7 million
were deposited into a tax-deferred exchange trust for reinvestment in future
property purchases. Four replacement properties were identified under the
tax-deferred exchange trust; three of these properties have been acquired as of
September 30, 1999 and we estimate that the acquisition of the fourth property
will close in late November or early December, 1999.
On September 30, 1999, we sold a 50% common interest in the 77 West Wacker Drive
property for $22.0 million and a $66.0 million preferred interest (providing a
cumulative preferred return of 9.5% per annum) in this property. The remaining
50% common interest will be accounted for using the equity method of accounting.
Prior to the closing of the transaction, the existing $170.0 million
non-recourse first mortgage was refinanced with a new $170.0 million
non-recourse first mortgage. The new mortgage loan bears interest at LIBOR plus
1.25%, requiring interest only payments from time to time and annual principal
payments, maturing 9/2004. The sale resulted in a gain of $48.5 million for the
nine months ended September 30, 1999. In order to defer the taxable gain on this
transaction, net proceeds of $84.9 million were deposited into a tax-deferred
exchange trust for reinvestment in future property purchases. We must identify
replacement property within 45 days of this closing and close on the
acquisition(s) within 180 days. We have identified IBM Plaza, Chicago, IL as a
potential replacement property.
INDEBTEDNESS. We have financed a portion of our acquisitions with proceeds
from mortgage notes payable from various financial institutions, with fixed and
variable interest rates and maturities from 1999 through 2013. We believe that
our properties have excess value that may be utilized for additional borrowings
or debt securitizations.
Under the provisions of one of the credit facilities, we are obligated to
maintain interest rate contracts on a portion of our variable rate indebtedness.
We entered into an interest rate cap agreement in July, 1999 with a financial
institution for an original notional amount of $150.0 million at 7.0% during the
period from July 1 to October 1, 1999. On November 1, 1999 the Company entered
into an interest rate collar agreement for the period from November 1, 1999
through September 30, 2002 with a financial institution for an original notional
amount of $170.0 million . The interest rate ceiling under the agreement is
based on a LIBOR index rate of 7.75% and the interest rate floor is based on a
LIBOR index rate of 5.62%. This agreement satisfies our obligation to maintain
interest rate contracts under the provisions of one of the credit facilities.
-25-
<PAGE>
In connection with our recent acquisitions, development, and refinancings, we
obtained the following new indebtedness during the nine months ended September
30, 1999:
<TABLE>
<CAPTION>
Original Principal
Balance (In
Millions) Maturity
Collateral (1),(2) Location Interest Rate Date
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
33 West Monroe Chicago, IL $ 65.0 LIBOR + 2.0% 1/02
increasing to
2.15% in 1/00
National City Center (3),(4) Cleveland, OH 63.6 6.75% 4/01
122 S. Michigan Chicago, IL 14.0 LIBOR + 3.0% 5/04
National City Center (5) Cleveland, OH 10.0 LIBOR + 4.5% 1/00
25 and 77 South Wacker (6) Chicago, IL 4.0 (7) 11/01
300 West Monroe (6) Chicago, IL 24.0 Prime Rate + 0.5% 5/00
Pine Meadows (three one-story buildings) Libertyville, IL
(6) (8) LIBOR + 2.25% 2/01
Pine Meadows (one three-story building) Libertyville, IL
(6) (9) LIBOR + 2.50% 2/01
2000 USG Drive (6) Libertyville, IL
(10) LIBOR + 2.25% 2/01
800-810 Jorie Blvd. (3) Oak Brook, IL 21.0 LIBOR + 2.0% 8/02
43-47 Hintz Rd. (3),(6) Wheeling,IL 6.0 LIBOR + 2.25% 9/02
77 W. Wacker Drive (11) Chicago, IL 170.0 LIBOR + 1.25% 9/04
<FN>
(1) All of the loans are subject to various financial and other operating
covenants and are collateralized by mortgages on the properties, unless
otherwise indicated.
(2) Interest is payable monthly, with principal due at maturity, unless
otherwise indicated.
(3) Principal and interest payable monthly through maturity.
(4) Consists of two assumed notes of $52.9 million and $8.7 million, with
actual interest rates of 8.50% and 7.55% respectively. These interest rates
were in excess of the market rate at the acquisition date, which we
estimated to be 6.75%. As a result, we have recorded an additional $2.0
million of principal to reflect the imputed interest rate of 6.75% over the
term of the notes.
(5) This loan is collateralized by a pledge of a portion of the ownership
interests in the entity that owns the property. At the Company's election,
the interest rate is either (a) the Prime Rate plus 3.25% or (b) LIBOR plus
4.5%. A loan modification agreement extended the maturity date from 10/99
to 1/00. Other loan terms remained substantially unchanged.
(6) These loans have been guaranteed by the Company. The $24.0 million 300 West
Monroe loan has also been guaranteed by the owner of the 25 and 77 South
Wacker Drive property, such guaranty is secured by a second mortgage on the
25 and 77 South Wacker Drive property. The Pine Meadows and 2000 USG Drive
loans are cross-collateralized and cross-defaulted. The 43-47 Hintz Rd.
loan guaranty is limited to $1.5 million.
(7) Until the funding of a construction loan related to the 300 West Monroe
parcel, the Prime Rate plus 0.5%, and thereafter LIBOR plus 2.75%.
(8) A $8.7 million construction loan commitment, of which $2.9 million has been
disbursed as of September 30, 1999.
(9) A $9.4 million construction loan commitment, of which $2.7 million has been
disbursed as of September 30, 1999.
(10) A $6.3 million construction loan commitment, of which $4.4 million has been
disbursed as of September 30, 1999.
(11) Refinancing of a mortgage loan of equal amount. The new loan provides for
annual amortization during the term.
</FN>
</TABLE>
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<PAGE>
DEBT REPAYMENTS. Our aggregate indebtedness was $603.6 million and $593.2
million at September 30, 1999, and December 31, 1998, respectively. At September
30, 1999, such indebtedness had a weighted average maturity of 7.8 years and
bore interest at a weighted average interest rate of 7.2% per annum. At
September 30, 1999, $308.1 million, or 51.0%, of such indebtedness bore interest
at fixed rates and $295.5 million, or 49.0% of such indebtedness, including
$74.5 million of tax-exempt bonds, bore interest at variable rates.
In connection with the sale of nine industrial properties and one office
property on July 14, 1999, mortgage debt of $63.2 million was repaid with sales
proceeds, or assumed by the purchaser.
In connection with the sale of a 50% common interest in 77 W. Wacker Drive on
September 30, 1999, $170.0 million of debt was transferred to a newly formed
unconsolidated joint venture. Therefore, the indebtedness is no longer included
in the Company's consolidated financial statements.
FUTURE DEBT AND EQUITY OFFERINGS. We filed a shelf registration statement
on Form S-3 with the Securities and Exchange Commission, which was declared
effective on June 8, 1999, to register up to $500.0 million of our equity and
debt securities for future sale at prices and on terms to be determined at the
time of offering.
CAPITAL IMPROVEMENTS. Our properties require periodic investments of
capital for tenant-related capital improvements. During 1998, our tenant
improvements and leasing commissions averaged $18.04 per square foot of newly
leased office space, $3.85 per square foot of renewal leased office space, and
$4.53 per square foot of newly leased industrial space. Our estimated annual
cost of recurring tenant improvements and leasing commissions is approximately
$8.6 million based upon average annual square feet for leases expiring during
the years ending December 31, 1999 and 2000. Our cost of general capital
improvements to our properties averages approximately $3.0 million annually
based upon an estimate of $0.26 per square foot.
LIQUIDITY REQUIREMENTS. We expect to meet our short-term liquidity
requirements through net cash provided by operations, additional debt financings
and/or joint ventures, and refinancings of maturing debt. We expect to meet our
long-term liquidity requirements for the funding of property development,
property acquisitions, tenant improvements and other non-recurring capital
improvements through a combination of net cash from operations, long-term
secured and unsecured indebtedness (including our credit facilities), joint
ventures, property sales and the issuance of additional equity and debt
securities. There can be no assurance that we will be successful in obtaining
the required amount of funds for these items or that the terms of capital
raising activities, if any, will be as favorable as we have experienced in prior
periods. The terms of the credit facilities and our preferred shares impose
restrictions on our ability to incur indebtedness and issue additional preferred
shares.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds from Operations, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), an alternative
measure of performance of an equity REIT. Funds from Operations is defined by
NAREIT to mean net income (loss) determined in accordance with GAAP, excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization (other than amortization of deferred financing
costs and depreciation of non-real estate assets) and after adjustment for
unconsolidated partnerships and joint ventures. We believe that in order to
facilitate a clear understanding of the combined historical operating results of
the Company, Funds from Operations should be examined in conjunction with net
income as presented in the unaudited financial statements included elsewhere in
this Form 10-Q. The following table represents the unaudited calculation of our
Funds from Operations for the three months and nine months ended September 30,
1999 and 1998:
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<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
--------------------------- ---------------------------
(IN THOUSANDS) 1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income allocated to common
Shareholders................................. $ 31,069 $ 4,034 $ 41,275 $ 9,557
Adjustments to reconcile to Funds from
Operations:
Real estate depreciation and amortization.. 8,022 6,107 23,443 16,955
Amortization of costs for leases assumed... 245 286 736 852
Straight-line rental revenue............... (635) (531) (1,845) (1,053)
Gain on sale of real estate................ (48,125) - (52,482) -
Net gain on treasury lock terminations..... - (615) -
Loss on land development option............ - - 600 -
Minority interests......................... 22,499 2,704 29,247 7,022
Extraordinary loss......................... 829 - 829 525
------------ ------------ ------------ ------------
Funds from Operations (1) $ 13,904 $ 12,600 $ 41,188 $ 33,858
============ ============ ============ ============
</TABLE>
(1) We compute Funds from Operations in accordance with standards established
by the Board of Governors of NAREIT in its March 1995 White Paper (with the
exception that we report rental revenues on a cash basis (e.g., based on
contractual lease terms), rather than a straight-line GAAP basis, which we
believe results in a more accurate presentation of its actual operating
activities), which may differ from the methodology for calculating Funds
from Operations used by other certain office and/or industrial REITs and,
accordingly, may not be comparable to such other REITs. As a result of our
reporting rental revenues on a contractual basis, contractual rent
increases may cause reported Funds from Operations to increase. Further,
Funds from Operations does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
repayment obligations, or other commitments and uncertainties. Funds from
Operations should not be considered as an alternative to net income (loss),
as an indication of our performance or to cash flows as a measure of
liquidity or the ability to pay dividends or make distributions.
IMPACT OF YEAR 2000
OVERVIEW OF Y2K PROBLEM
The Year 2000 or "Y2K" problem refers to the inability of many existing computer
programs to properly recognize a year that begins with "20" instead of the
familiar "19." If left uncorrected, many computer programs having time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. The failure to accurately recognize the year 2000 and other key dates
could result in a variety of problems from day miscalculation to the failure of
entire systems.
THE YEAR 2000 PROGRAM
In mid 1998, we formed a Year 2000 committee for the purpose of creating a
program (the "Program") to identify, understand and address the myriad of issues
associated with the Y2K problem. Our committee is comprised of representatives
from senior management and various departments including accounting, legal,
operations, and information systems. Due to the wide ranging implications of the
Y2K problem, management decided to carry out the Program in multiple phases over
the remainder of 1999. What follows is a description of the activities that have
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<PAGE>
been or are expected to be conducted in each phase of the Program, including a
summary of the results obtained to date and a time table for completion.
Although many of the phases of the Program are being carried out simultaneously,
the various phases will be discussed separately.
PHASE ONE - ASSESSING OUR Y2K READINESS
The initial step in assessing our Y2K readiness consisted of conducting a study
to identify any systems that were date sensitive and, accordingly, could have
potential Y2K problems. The study included an examination of information
technology and non-information technology systems at our home and area offices
and at our properties. The initial step of identifying systems has been
completed by our information services department, property managers and building
engineers through a combination of physical inspections, information interviews
with our employees and contact with vendors.
After identifying systems that could have a potential Y2K problem, we determined
which of the systems actually have Y2K issues. Much of the required information
is within the exclusive control of our vendors and manufacturers, who are being
contacted through standard form letters and telephone calls requesting
information. Our property managers are each responsible for gathering
information on the Y2K compliance of specific property systems. In addition to
examining our systems for compliance, we continue to assess the progress of the
Building Owners and Managers Association ("BOMA") and other industry leaders
that are monitoring the compliance efforts of the major utility and
telecommunications companies. The following is a summary of the Phase One
results obtained to date.
BUILDING MANAGEMENT SYSTEMS
We have identified three categories of building management systems in which we
have the most exposure to potential Y2K problems. These categories include:
o Building automation (e.g. energy management, HVAC, fire and life safety)
o Security card access
o Elevator
In late 1998, our property staff began gathering data on the equipment in all of
our buildings. By the end of the second quarter of 1999, a preliminary Y2K
compliance study of the building management systems outlined above was completed
for all our buildings. Where necessary, we have made modifications, upgrades or
replacements to address significant issues identified during the study.
INFORMATION SYSTEMS
We have identified five categories of information systems in which we have the
most exposure to potential Y2K Problems. These categories include:
o Accounting and property management
o Network operating systems
o Desktop hardware and software
o Secondary systems
o Telecommunication systems
ACCOUNTING AND PROPERTY MANAGEMENT
We recently replaced or upgraded our remaining accounting and property
management systems that were not Y2K compliant.
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<PAGE>
NETWORK OPERATING SYSTEMS
We believe that network operating servers are currently compliant.
DESKTOP SOFTWARE
We have reviewed all of our desktop systems and software applications, and
believe that they are compliant.
SECONDARY INFORMATION SYSTEMS
Our "secondary" information systems include, but are not limited to: human
resources, fixed-asset systems, and forecasting modeling software, which
provides projections on property returns and other items. We also reviewed
internally developed software, such as our budget program and tenant-services
system. We have reviewed all of our secondary information systems and feel these
systems are Y2K compliant.
TELECOMMUNICATION SYSTEMS
We found that some of our telecommunication systems were not Y2K compliant. We
have assessed these systems and, where material, replaced, modified or upgraded
these systems as appropriate, with the exception of one property location where
the system will be replaced by the end of 1999.
PHASE TWO - DETERMINING THE COST OF ACHIEVING Y2K READINESS AND IMPLEMENTING THE
Y2K ACTION PLAN
We initiated a comprehensive corporate wide plan in mid-1998 to review our
financial and operational systems. The Company has utilized both internal and
external resources and operating equipment for Year 2000 modifications. The
total cost of the Y2K project is estimated at $0.5 million and is being funded
principally through operating cash flows. To date, the Company has incurred
approximately $0.3 million related to all phases of the Y2K project.
Approximately $0.2 million is attributed to the purchase of new software and
operating equipment, which has been capitalized. The remaining $0.1 million
relates to repair of hardware and software which has been expensed.
PHASE THREE - ASSESSING OUR RISKS OF NON-COMPLIANCE
We do not believe that the impact of the Y2K problem will have a material
adverse effect on our financial condition and results of operations. Such belief
is based on our analysis of the risks related to both our own potential Y2K
problems discussed above and our assessment of the Y2K problems of our vendors,
suppliers and customers.
FAILURE OF BUILDING MANAGEMENT SYSTEMS
We believe that the Y2K risks to our financial condition and operation
associated with a failure of building management systems is immaterial due to
the fact that each of our properties has, for the most part, an individual
building management system. Accordingly, a Y2K problem that is experienced at
one building should have no effect on our other buildings. In addition, based
upon our study results received to date, we believe that we will have sufficient
time to correct those system problems within our control before the year 2000.
We have completed our analysis and testing and have taken corrective action,
where appropriate.
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<PAGE>
In the event we do experience a failure of essential building management systems
at one or more of our buildings, whether due to a failure of one of our systems
or an interruption of utilities, management believes that the individual tenant
leases will protect us from claims of constructive eviction or other remedies
that could result in a termination of lease rights. It is also our belief that
most of our leases eliminate, limit or quantify the rights of a tenant to
receive an abatement under such circumstances. Although there is always a risk
of claims being brought on a non-contractual basis (e.g. in tort), it is our
belief that our efforts to identify and solve Y2K problems will minimize such
risk. We have also attempted to allocate the risk of non-compliance to the
vendors and manufacturers of the building management and information systems by
establishing standard riders and addenda to be attached to new contracts for
systems using time sensitive data.
FAILURE OF INFORMATION SYSTEMS
Since our major source of income is rental payments under long term leases, the
failure of key information systems is not expected to have a material adverse
effect on our financial condition and results of operations. Even if we were to
experience problems with the information systems, the payment of rent under the
leases would not be excused. In addition, we expect to correct those information
system problems within our control before the year 2000, thereby minimizing or
avoiding the increased cost of correcting problems after the fact.
THE Y2K PROBLEMS OF OUR VENDORS
The success of our business is not closely tied to the operations of any one
manufacturer, vendor or supplier. Accordingly, if any of our manufacturers,
vendors or suppliers ceases to conduct business due to Y2K related problems, we
expect to be able to contract with alternate providers without experiencing any
material adverse effect on our financial condition and results of operations.
THE Y2K PROBLEMS OF OUR CUSTOMERS
Due to our broad customer/tenant base, the success of our business is not
closely tied to the success of any particular tenant. Accordingly, we believe
that there should not be a material adverse effect on our financial condition
and results of operations if any one of our tenants ceases to conduct business
(and pay rent) due to Y2K related problems.
DOOMSDAY SCENARIO
We are aware that it is generally believed that the world's Y2K problem, if
uncorrected, may result in an economic crisis of global proportions. We are
unable to determine whether such predictions are true or false. As mentioned
above, we expect that the nature of our income (rent from good credit tenants
under long-term leases) should serve as a hedge against any short term
disruptions of business. However, if the doomsday scenarios prove true, we
assume that all companies (including ours) will experience the effects in one
way or another.
PHASE FOUR - DEVELOPING CONTINGENCY PLANS
We have contingency plans in the event that certain systems fail as a result of
Y2K related problems. These contingency plans involve, among other actions,
manual workarounds, alternative vendors/suppliers, and adjusting staffing
strategies.
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<PAGE>
INFLATION
Substantially all of our office and industrial leases require tenants to pay, as
additional rent, a portion of any increases in real estate taxes and operating
expenses over a base amount. In addition, many of the office and industrial
leases provide for fixed increases in base rent or indexed escalations (based on
the Consumer Price Index or other measures). We believe that the expense
reimbursements and contractual rent increases described above will offset
inflationary increases in expenses, in part.
As of September 30, 1999, approximately $295.5 million of our outstanding
indebtedness (including our credit facilities) was subject to interest at
floating rates, and future indebtedness may also be subject to floating rate
interest.
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<PAGE>
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For our mortgage notes receivable, mortgage notes payable,
credit facilities and bonds payable, the table presents principal cash flows,
including principal amortization, and related weighted-average interest rates by
expected maturity dates as of September 30, 1999.
<TABLE>
Interest Rate Sensitivity
Principal amount by Expected Maturity
Average Interest Rate
<CAPTION>
1999 2000 2001 2002 2003 Thereafter Total
----------------------------------------------------------------------------------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Mortgage notes receivable (1) - - - - - $ 77.1 $ 77.1
Fixed rate - - - - - 9.64%
Liabilities:
Mortgage notes payable (2):
Fixed rate $ 1.4 $ 5.7 $62.3 $ 3.8 $4.0 $229.7 $306.9
Average interest rate 7.18% 7.13% 7.26 7.26% 7.25% 7.25%
Variable rate $ .1 $57.5 $58.3 $91.1 - $ 14.0 $221.0
Average interest rate (3) 7.78% 7.78% 7.92% 8.59% 8.38% 8.38%
Bonds payable (2):
Variable rate - - - - - $ 74.5 $ 74.5
Average interest rate (3) - - - - - 5.2%
Obligations under capital leases:
Imputed rate $ .1 $ .2 $ .2 $ .6 $ .1 - $ 1.2
Average interest rate 6.90% 6.90% 6.90% 6.69% 4.84% -
<FN>
(1) See Note 2 to our consolidated financial statements in our Form 10-K for
the year ended December 31, 1998, for additional information.
(2) See Note 4 to our consolidated financial statements in our Form 10-K for
the year ended December 31, 1998, for additional information. The bonds are
credit enhanced with letters of credit provided under credit facilities,
which expire in November 2000 and March 2002.
(3) Based upon the rates in effect at September 30, 1999, the weighted-average
interest rate on our mortgage notes payable, credit facilities, and bonds
payable were 7.4%, 7.4%, and 5.2%, respectively. If interest rates on our
variable rate debt increased by one percentage point, our annual interest
expense would increase by approximately $3.0 million.
</FN>
</TABLE>
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<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material developments with respect to legal proceedings occurred during the
period covered by this quarterly report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
- --------------------------------------------------------------------------------
3.1 Amendment No. 25 to the Amended and Restated Agreement of Limited
Partnership dated as of July 14, 1999.
3.2 Amendment No. 26 to the Amended and Restated Agreement of Limited
Partnership dated as of July 15, 1999.
3.3 Amendment No. 27 to the Amended and Restated Agreement of Limited
Partnership dated as of August 16, 1999.
3.4 Amendment No. 28 to the Amended and Restated Agreement of Limited
Partnership dated as of September 15, 1999.
3.5 Contribution Agreement dated as of September 30, 1999 by and between 77 W.
Wacker Limited Partnership and The State Teachers Retirement System of Ohio
with attached Amended and Restated Operating Agreement.
3.6 Loan Agreement dated as of September 30, 1999 between 77 West Wacker
Limited Partnership ("Borrower") and Westdeutsche Immobilienbank ("Agent"
or "Lender") and Landesbank Schleswig-Holstein ("Lender") and Landesbank
Saar Girozentrale ("Lender") and DSL Bank ("Lender").
12.1 Computation of ratios of earnings to combined fixed charges and preferred
share distributions.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated July 14, 1999, (filed on July 29, 1999; File No. 001-13589)
relating to the sale of nine industrial properties and one office property.
Form 8-K dated July 15, 1999, (filed on July 29, 1999; File No. 001-13589)
relating to the purchase of a parcel of land.
Form 8-K dated September 30, 1999, (filed on October 15, 1999; File No.
001-13589) relating to the sale of a 50% interest in one property.
-34-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME GROUP REALTY TRUST
------------------------
Registrant
Date: November 12, 1999 /s/ Richard S. Curto
----------------- --------------------
Richard S. Curto
President and Chief Executive Officer
Date: November 12, 1999 /s/ William M. Karnes
----------------- ----------------------
William M. Karnes
Executive Vice President and
Chief Financial Officer
-35-
AMENDMENT NO. 25 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 25 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of July
14, 1999 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that Contribution Agreement, dated as of October 20,
1997, by and among The Prime Group, Inc., an Illinois corporation, Prime Group
Realty Trust, a Maryland real estate investment trust, Prime Group Realty, L.P.,
a Delaware limited partnership and the Contributors named therein (the
"Agreement"), the Partnership agreed to purchase one property in Hillside,
Illinois (the "Property")upon the fulfillment of certain conditions;
WHEREAS, the conditions of the Agreement having been fulfilled, the
Partnership is acquiring the Property in return for issuing Common Units of
Limited Partner Interest to The Nardi Group, L.L.C.; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON UNITS.
(a) PGRT, as Managing General Partner and on behalf of the Partnership, hereby
accepts from The Nardi Group, L.L.C. the grant of all of its right, title and
interest in the Property, a legal description of which is attached hereto as
Exhibit 1, as a Capital Contribution in exchange for 120,551 Common Units of
Limited Partner Interest which are hereby issued by the Partnership to The Nardi
Group, L.L.C. pursuant to Section 4.3.C of the Limited Partnership Agreement,
and which are evidenced by Common Unit Certificate No. 48 of the Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to The
Nardi Group, L.L.C. pursuant to this Section 2 shall have the same terms and
provisions as the Common Units of Limited Partner Interest issued by the
Partnership on November 17, 1997 except that the Exchange Rights relating
thereto may be exercised only after the first (1st) anniversary of their
issuance (as opposed to November 17, 1998).
-1-
<PAGE>
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of Exhibit A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated Exhibit A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended to the
extent necessary to effect the matters contemplated by this Amendment. Except as
specifically provided for hereinabove, the provisions of the Limited Partnership
Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment shall not
operate (i) as a waiver of any provision, right or obligation of the Managing
General Partner, the other General Partner or any Limited Partner under the
Limited Partnership Agreement except as specifically set forth herein or (ii) as
a waiver or consent to any subsequent action or transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
[signature page follows]
-2-
<PAGE>
AMENDMENT NO. 25 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
-------------------------
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ Jeffrey A. Patterson
------------------------------------
Name: Jeffrey A. Patterson
-----------------------------------
Title: Executive Vice President
-----------------------------------
LIMITED PARTNERS:
-----------------
Each Limited Partner hereby executes
this Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ Jeffrey A. Patterson
---------------------------------
Name: Jeffrey A. Patterson
-------------------------------
Title: Executive Vice President
------------------------------
-3-
<PAGE>
As to Section 1 hereof,
ACKNOWLEDGED AND AGREED:
THE NARDI GROUP, L.L.C., a
Delaware limited liability company
By: /s/ Stephen J. Nardi
-------------------------------
Name: Stephen J. Nardi
----------------------------
Title: President & CEO
----------------------------
-4-
<PAGE>
EXHIBIT A*
Partners, Number of Units and Capital Contributions
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
**
Prime Group Realty Trust 15,136,488
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
927,100 $ 18,542,000
The Nardi Group, L.L.C.
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $ 4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman 388,677 $ 7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $ 195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
- ---------------------------------------
* As amended by Amendment No. 25 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Carolyn B. Hadesman 54,544 $ 1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $ 576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $ 144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $ 1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $ 2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-6-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Prime Group VI, L.P. 304,097 $ 6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 108,348 $ 1,600,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 5,216 $ 104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John, as Trustee of the
Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-7-
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT BY
ADDITIONAL LIMITED PARTNER
Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Reference is made to that certain Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P., dated as of November 17, 1997 (as
amended, the "Partnership Agreement"). All terms used as defined terms and not
otherwise defined herein shall have the meaning ascribed thereto in the
Partnership Agreement. The Partnership is issuing and delivering 120,551 Common
Units to the undersigned in connection with the purchase from the undersigned of
one property in Hillside, Illinois. The undersigned acknowledges and agrees that
it is an express condition of the Partnership Agreement that an Additional
Limited Partner assume all of the obligations under the Partnership Agreement
with respect to the Common Units.
The undersigned hereby represents, warrants, covenants to, and agrees
with, the Partnership, the Managing General Partner and each Limited Partner as
follows:
(i) the undersigned has received and reviewed a copy of the
Partnership Agreement;
(ii) the undersigned desires to become an Additional Limited Partner
in the Partnership in accordance with the terms of the
Partnership Agreement;
(iii)the undersigned, by execution hereof, accepts and agrees that it
is bound by all of the terms and provisions of the Partnership
Agreement, including without limitation the provisions of Section
2.4 and the restrictions on transfer set forth in Article 11 of
the Partnership Agreement;
(iv) the undersigned assumes all of the obligations of an Additional
Limited Partner pursuant to the Partnership Agreement with
respect to the Common Units issued to the undersigned;
(v) the Partnership Agreement shall be binding on and enforceable
against the undersigned as a Limited Partner in accordance with
its terms;
(vi) the undersigned is an "accredited investor" within the meaning of
Rule 501(a) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The undersigned understands the
risks of, and other considerations relating to, its acquisition
of the Common Units. The undersigned, by reason of its business
and financial experience, together with the business and
financial experience of those persons, if any, retained by it to
represent or advise it with respect to its investment in the
Common Units, (i) has such knowledge, sophistication and
experience in financial and business matters and in making
investment decisions of this type, that it is capable of
evaluating the merits and risks of an investment in Common Units
of the Partnership and of making an informed investment decision,
(ii) is capable of protecting its own interests in connection
with its acquisition of Common Units or has engaged
representatives or advisors to assist the undersigned in
protecting its interests in connection with its acquisition of
Common Units and (iii) is capable of bearing the economic risk of
such investment in Common Units.
-8-
<PAGE>
(vii)The Common Units to be issued to the undersigned are acquired by
the undersigned for its own account for investment only and not
with a view to, or with any intention of, a distribution or
resale thereof, in whole or in part, or the grant of any
participation therein until and unless the Common Units are
exchanged for Common Shares of the Trust following the one year
lock-up period applicable to the Common Units, in accordance with
the Partnership Agreement. The undersigned hereby confirms that
all documents, instruments, records and books pertaining to
investment in Common Units of the Partnership and requested by
the undersigned have been made available or delivered to the
undersigned. The undersigned has had an opportunity to ask
questions of and receive answers from the Partnership, or from a
person or persons acting on the Partnership's behalf, concerning
the Partnership, the terms and conditions of the transaction
contemplated by this Acknowledgment and Agreement and the
undersigned's acquisition of Common Units. The undersigned has
relied upon, and is making its investment decisions solely upon,
such information as has been provided to the undersigned by the
Partnership, and the undersigned has not relied upon any other
information, literature or any oral communications. The
undersigned was not formed for the specific purpose of acquiring
an interest in the Partnership.
(viii) The undersigned acknowledges that (i) the Common Units to be
issued to the undersigned have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities
Act and applicable state securities laws, (ii) the Partnership's
reliance on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of the
undersigned, (iii) such Common Units, therefore, cannot be resold
unless registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available, (iv) there is no public market for such Common Units
and (v) the Partnership has no obligation or intention to
register such Common Units for resale under the Securities Act or
any state securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws. The undersigned hereby acknowledges that because of
the restrictions on transfer or assignment of such Common Units
to be issued which are set forth in this Acknowledgment and
Agreement and in the Partnership Agreement, the undersigned may
have to bear the economic risk of the investment commitment
evidenced by this Acknowledgment and Agreement and any Common
Units acquired as contemplated by this Acknowledgment and
Agreement for an indefinite period of time, and that the Common
Units by their terms will not be exchangable at the request of
the holder thereof for Common Shares of the Company prior to the
first (1st) anniversary of their issuance.
(ix) The address of the undersigned's principal place of business is
set forth below. The undersigned does not have any present
intention of becoming a resident of any country, state or
jurisdiction other than the country and state in which its
present principal place of business is sited.
-9-
<PAGE>
The undersigned has duly executed and delivered this Acknowledgment and
Agreement by Additional Limited Partner as of the 14th day of July, 1999.
THE NARDI GROUP, L.L.C.
c/o Stephen J. Nardi
4100 Madison Street
Hillsdale, Illinois 60162
Name: /s/ Stephen J. Nardi
------------------------------------
Its: President & CEO
------------------------------------
By acceptance hereof, Prime Group Realty Trust, as Managing General Partner
of the Partnership, approves and accepts the admittance of The Nardi Group,
L.L.C., a Delaware limited liability company, as an Additional Limited Partner
in Prime Group Realty, L.P., having the number of Common Units set forth above.
PRIME GROUP REALTY TRUST
By: /s/ Jeffrey A. Patterson
--------------------------------------
Name: Jeffrey A. Patterson
-------------------------------
Its: Executive Vice President
-------------------------------
Date: July 14, 1999
-------------------------------
-10-
AMENDMENT NO. 26 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 26 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of July
15, 1999 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on July 15, 1999;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on July 15, 1999; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
-1-
<PAGE>
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON UNITS.
(a) PGRT, as Managing General Partner and on behalf of the Partnership, hereby
accepts the grant of the rights consisting of the First Option during the
twentieth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
6129.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 49 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to HG
pursuant to this Section 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on November
17, 1997 except that (i) the Exchange Rights relating thereto may be exercised
at any time after December 15, 1999 (as opposed to November 17, 1998) and (ii)
such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of Exhibit A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated Exhibit A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended to the
extent necessary to effect the matters contemplated by this Amendment. Except as
specifically provided for hereinabove, the provisions of the Limited Partnership
Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment shall not
operate (i) as a waiver of any provision, right or obligation of the Managing
General Partner, the other General Partner or any Limited Partner under the
Limited Partnership Agreement except as specifically set forth herein or (ii) as
a waiver or consent to any subsequent action or transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
[signature page follows]
-2-
<PAGE>
AMENDMENT NO. 26 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ Jeffrey A. Patterson
--------------------------------------
Name: Jeffrey A. Patterson
-----------------------------------
Title: Executive Vice President
----------------------------------
LIMITED PARTNERS:
-----------------
Each Limited Partner hereby executes this
this Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ Jeffrey A. Patterson
---------------------------------
Name: Jeffrey A. Patterson
-----------------------------
Title: Executive Vice President
-----------------------------
-3-
<PAGE>
EXHIBIT A*
Partners, Number of Units and Capital Contributions
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
Prime Group Realty Trust 15,136,488 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
927,100 $ 18,542,000
The Nardi Group, L.L.C.
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $ 4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman 388,677 $ 7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $ 195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $ 1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
- ---------------------------------------
* As amended by Amendment No. 26 to the Amendment and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
-4-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Cynthia Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $ 576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $ 144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $ 1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $ 2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $ 6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 114,477 $ 1,700,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Ray R. Grinvalds 5,216 $ 104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John, as Trustee of the
Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-6-
AMENDMENT NO. 27 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 27 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of August
16, 1999 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on August 16, 1999;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on August 16, 1999; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
-1-
<PAGE>
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON UNITS.
(a) PGRT, as Managing General Partner and on behalf of the Partnership, hereby
accepts the grant of the rights consisting of the First Option during the
twenty-first month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
5,954.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 50 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to HG
pursuant to this Section 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on November
17, 1997 except that (i) the Exchange Rights relating thereto may be exercised
at any time after December 15, 1999 (as opposed to November 17, 1998) and (ii)
such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of Exhibit A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated Exhibit A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended to the
extent necessary to effect the matters contemplated by this Amendment. Except as
specifically provided for hereinabove, the provisions of the Limited Partnership
Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment shall not
operate (i) as a waiver of any provision, right or obligation of the Managing
General Partner, the other General Partner or any Limited Partner under the
Limited Partnership Agreement except as specifically set forth herein or (ii) as
a waiver or consent to any subsequent action or transaction.
Section 4. Applicable Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
[signature page follows]
-2-
<PAGE>
AMENDMENT NO. 27 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
-------------------------
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ W. Michael Karnes
-----------------------------------
Name: W. Michael Karnes
-----------------------------------
Title: Executive Vice President
-----------------------------------
LIMITED PARTNERS:
-----------------
Each Limited Partner hereby executes this
Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ W. Michael Karnes
------------------------------------
Name: W. Michael Karnes
------------------------------------
Title: Executive Vice President
------------------------------------
-3-
<PAGE>
EXHIBIT A*
Partners, Number of Units and Capital Contributions
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
Prime Group Realty Trust 15,136,488 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
927,100 $ 18,542,000
The Nardi Group, L.L.C.
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $ 4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman 388,677 $ 7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $ 195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $ 1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
- ---------------------------------------
* As amended by Amendment No. 27 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
-4-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Cynthia Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $ 576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $ 144,020
c/o Ms. Frances S.
Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $ 1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $ 2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $ 6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 120,431 $ 1,800,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Preferred Units Contribution
- ------------------------ --------------- ------------
Ray R. Grinvalds 5,216 $ 104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John, as Trustee of the
Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-6-
AMENDMENT NO. 28 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 28 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
September 15, 1999 by Prime Group Realty Trust, a Maryland real estate
investment trust ("PGRT"), as the Managing General Partner of Prime Group
Realty, L.P., a Delaware limited partnership (the "Partnership"), and on behalf
of the other Partners (as hereinafter defined). Capitalized terms used but not
otherwise defined herein shall have the meanings given to such terms in the
Amended and Restated Agreement of Limited Partnership of the Partnership, dated
as of November 17, 1997, by and among PGRT and the other parties signatory
thereto, as amended thereafter (as so amended, the "Limited Partnership
Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership Agreement,
the Managing General Partner may raise all or any portion of Additional Funds
required by the Partnership for the acquisition of additional properties by
accepting additional Capital Contributions, including the issuance of Common
Units for Capital Contributions that consist of property or interests in
property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of December
15, 1997 by and between H Group LLC, a Delaware limited liability company
("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among other
things, to grant to the Partnership an option (the "First Option") to exchange
the Underlying Option (as defined in the Exchange Agreement) for 220,000 Common
Units of Limited Partner Interest (subject to adjustment pursuant to the terms
of the Exchange Agreement), which grant of the First Option contemplated the
transfer by the Partnership to HG of 5,000 Common Units of Limited Partner
Interest on the date thereof and, subject to the terms of the First Option,
5,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement) on the 15th day of each month thereafter
(each such transfer a "First Option Maintenance Transfer") for such number of
months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of the
First Option set forth in the Exchange Agreement and desires to effect the First
Option Maintenance Transfer due on September 15, 1999;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement to
reflect the increase in outstanding Common Units resulting from the issuance of
Common Units to HG in connection with the First Option Maintenance Transfer due
on September 15, 1999; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
-1-
<PAGE>
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON UNITS.
(a) PGRT, as Managing General Partner and on behalf of the Partnership, hereby
accepts the grant of the rights consisting of the First Option during the
twenty-second month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
6125.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 51 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest issued to HG
pursuant to this Section 1 shall have the same terms and provisions of the
Common Units of Limited Partner Interest issued by the Partnership on November
17, 1997 except that (i) the Exchange Rights relating thereto may be exercised
at any time after December 15, 1999 (as opposed to November 17, 1998) and (ii)
such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of Exhibit A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated Exhibit A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be amended to the
extent necessary to effect the matters contemplated by this Amendment. Except as
specifically provided for hereinabove, the provisions of the Limited Partnership
Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
-2-
<PAGE>
AMENDMENT NO. 28 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
MANAGING GENERAL PARTNER:
-------------------------
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: /s/ Jeffrey A. Patterson
-------------------------------------
Name: Jeffrey A. Patterson
----------------------------------
Title: Executive Vice President
----------------------------------
LIMITED PARTNERS:
-----------------
Each Limited Partner hereby executes this
Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: /s/ Jeffrey A. Patterson
-------------------------------
Name: Jeffrey A. Patterson
-----------------------------
Title: Executive Vice President
-----------------------------
-3-
<PAGE>
EXHIBIT A*
Partners, Number of Units and Capital Contributions
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
Prime Group Realty Trust 15,136,488 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
927,100 $ 18,542,000
The Nardi Group, L.L.C.
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $ 4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman 388,677 $ 7,773,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Grandville/Northwestern 9,750 $ 195,000
Management Corporation
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Carolyn B. Hadesman 54,544 $ 1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
- ---------------------------------------
* As amended by Amendment No. 28 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
-4-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Cynthia Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 28,805 $ 576,100
511 Lynn Terrace
Waukegan, IL 60085
Grandville Road Property, Inc. 7,201 $ 144,020
c/o Ms. Frances S. Shubert
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $ 1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $ 2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $ 6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 126,556 $ 1,900,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-5-
<PAGE>
EXHIBIT A - CONT'D
Partners, Number of Units and Capital Contributions
Number of Capital
Limited Partners (Cont'd) Common Units Contribution
- ------------------------ ------------ ------------
Ray R. Grinvalds 5,216 $ 104,320
217 Deer Valley Drive
Barrington, IL 60010
Warren H. John, as Trustee of the
Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B
Suite 3900 Preferred
Chicago, IL 60601 Units
Attn: Richard S. Curto
James F. Hoffman
- ---------------------------------------
** This amount shall be inserted by the Managing General Partner.
-6-
CONTRIBUTION AGREEMENT
Dated as of
September 30, 1999
By and Between
77 WEST WACKER LIMITED PARTNERSHIP
and
OTR
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS..................................................... 1
Section 1.1 Specific Definitions................................... 1
Section 1.2 Terms Generally........................................ 8
ARTICLE II TERMS OF THE TRANSACTION....................................... 8
Section 2.1 Formation of the Joint Venture......................... 8
Section 2.2 Deposit................................................ 8
Section 2.3 Cash Contribution to the LLC........................... 8
Section 2.4 Instruments of Transfer and Conveyance................. 9
Section 2.5 77 WWLP Contribution................................... 9
Section 2.6 Debt Financing of Property............................. 9
Section 2.7 Title Policy........................................... 10
Section 2.8 Extinguishment of Existing Debt........................ 11
Section 2.9 Distribution to 77 WWLP................................ 11
ARTICLE III INSPECTION.................................................... 11
Section 3.1 Due Diligence; Indemnity. ............................ 11
Section 3.2 Delivery of Property Information by 77 WWLP and Prime.. 12
Section 3.3 Title and Survey....................................... 13
Section 3.4 Objection Notice....................................... 13
Section 3.5 Intentionally deleted.................................. 14
Section 3.6 Intentionally deleted.................................. 14
Section 3.7 Tenant Estoppels....................................... 14
Section 3.8 Air Rights Lease....................................... 15
ARTICLE IV OPERATIONS AND RISK OF LOSS.................................... 15
Section 4.1 Ongoing Operations..................................... 15
Section 4.2 Damage................................................. 16
Section 4.3 Condemnation........................................... 17
ARTICLE V CLOSING......................................................... 17
Section 5.1 Closing................................................ 17
Section 5.2 Conditions to the Parties' Obligations to Close........ 17
Section 5.3 Deliveries by 77 WWLP in Escrow........................ 21
Section 5.4 OTR's Deliveries in Escrow............................. 22
Section 5.5 LLC's Deliveries in Escrow............................. 23
Section 5.6 Closing Statements..................................... 23
Section 5.7 Possession............................................. 23
Section 5.8 Delivery of Books and Records.......................... 23
ARTICLE VI PRORATIONS; COSTS.............................................. 24
Section 6.1 Prorations. ........................................... 24
Section 6.2 Post-Closing Corrections............................... 26
Section 6.3 Utilities.............................................. 26
Section 6.4 Service Contracts...................................... 26
Section 6.5 Costs.................................................. 26
Section 6.6 Sales, Transfer, and Documentary Taxes................. 26
Section 6.7 Utility Deposits....................................... 26
Section 6.8 Sales Commissions...................................... 26
Section 6.9 Wages. Intentionally deleted.......................... 26
Section 6.10 Tenant Improvements and Allowances..................... 26
ARTICLE VII REPRESENTATIONS AND WARRANTIES................................ 27
Section 7.1 Representations and Warranties of 77 WWLP.............. 27
Section 7.2 OTR's Representations and Warranties................... 31
Section 7.3 Survival of Representations and Warranties............. 31
-i-
<PAGE>
PAGE
----
ARTICLE VIII DEFAULT AND REMEDIES......................................... 31
Section 8.1 Default by 77 WWLP..................................... 31
Section 8.2 OTR's Default.......................................... 32
Section 8.3 Other Expenses......................................... 32
ARTICLE IX INDEMNIFICATION................................................ 32
Section 9.1 Indemnity of 77 WWLP................................... 32
Section 9.2 LLC's Indemnity........................................ 32
Section 9.3 Procedure.............................................. 32
Section 9.4 Survivability.......................................... 32
ARTICLE X MISCELLANEOUS................................................... 33
Section 10.1 Parties Bound. ........................................ 33
Section 10.2 Headings. ............................................. 33
Section 10.3 Invalidity; No Waiver.................................. 33
Section 10.4 Governing Law. ........................................ 33
Section 10.5 Survival............................................... 33
Section 10.6 No Third Party Beneficiary............................. 33
Section 10.7 Entirety and Amendments................................ 34
Section 10.8 Time. ................................................. 33
Section 10.9 Confidentiality........................................ 33
Section 10.10 Attorneys' Fees........................................ 34
Section 10.11 Notices................................................ 34
Section 10.12 Construction........................................... 34
Section 10.13 Calculation of Time Periods............................ 35
Section 10.14 Information and Audit Cooperation...................... 35
Section 10.15 Execution in Counterparts.............................. 35
Section 10.16 Exculpation............................................ 35
Section 10.17 Further Assurances..................................... 35
Section 10.18 Bulk Sales............................................. 35
Section 10.19 Notification of Certain Matters........................ 36
Section 10.20 Termination............................................ 36
Section 10.21 Procedure and Effect of Termination.................... 36
Section 10.22 Remedies Cumulative; Equitable Relief.................. 36
Section 10.23 Waiver of Compliance; Consents......................... 37
Section 10.24 Intentionally deleted.................................. 37
Section 10.25 Waiver of Jury Trial................................... 37
Section 10.26 Like Kind Exchange..................................... 37
Section 10.27 Sprinkler Heads........................................ 37
Section 10.28 Holidays............................................... 38
EXHIBITS
Exhibit A - Commission Schedule.................................... 39
Exhibit B-1 - Description of Property Subject to Appurtenances....... 40
Exhibit B-2 - Description of Land.................................... 42
Exhibit C - Management Agreement................................... 46
Exhibit D - Operating Agreement.................................... 47
Exhibit E - Management Office Furniture & Equipment
Furniture List.......................................
APPENDICES
Appendix 2.2 - Escrow Agreement....................................... 47
Appendix 2.6 - Loan Terms............................................. 50
Appendix 2.7(1) - Reinsurers of Title Policy.......................... 51
Appendix 2.7(2) - Owner's Policy......................................
Appendix 2.7(3) - Conditions Precedent to Title Policy
Performable by 77 WWLP............................ 52
Appendix 3.2 - Description of Property Information.................... 54
Appendix 3.4 - Delinquent Tax Letter Agreement ....................... 55
Appendix 3.7 - Tenant Estoppels....................................... 56
-ii-
<PAGE>
PAGE
----
APPENDICES (CONT'D)
Appendix 3.8 - Ground Lessor Estoppel.................................
Appendix 5.3(b) - Form of Deed........................................ 57
Appendix 5.3(c) - Form of Bill of Sale and Assignment................. 62
Appendix 5.3(d) - Tenant and Vendor Notices........................... 70
Appendix 5.3(f) - Form of FIRPTA Affidavit............................ 72
Appendix 6.1(e) - Leasing Commissions Payable by 77 WWLP.............. 74
Appendix 6.10(a)- 77 WWLP TI Obligations.............................. 75
Appendix 6.10(b)- LLC TI Obligations.................................. 76
Appendix 7.1(c) - Lease Defaults...................................... 77
Appendix 7.1(o) - Litigation.......................................... 78
Appendix 10.11 - Notice Addresses.................................... 79
-iii-
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS Contribution Agreement (this "Agreement"), is entered as of September
30, 1999, by and between 77 WEST WACKER LIMITED PARTNERSHIP, a limited
partnership organized under the laws of Illinois ("77 WWLP"), and OTR, an Ohio
general partnership, acting on behalf of and legally binding the State Teachers
Retirement System of Ohio ("STRBO"), an instrumentality of the State of Ohio
(such partnership, acting on behalf of STRBO, "OTR"), with reference to the
following.
RECITALS:
A. 77 WWLP holds title to certain real property located in Chicago, Cook
County, Illinois commonly known as 77 West Wacker Drive, at which is located a
50 story Class A office building with an area of approximately 944,556 net
rentable square feet, a health club facility with an area of approximately
12,288 square feet located on an air rights parcel adjacent to such building, a
restaurant with an area of approximately 4,800 square feet and 45 parking
spaces.
B. 77 WWLP and OTR desire for 77 WWLP to form 77 West Wacker Drive, L.L.C.,
a limited liability company organized under the laws of Delaware (the "LLC").
C. Subsequent to formation of the LLC, the parties wish for the following
to occur: (i) 77 WWLP to transfer to the LLC all of the real property and
related personal property to which it holds title; (ii) the LLC to borrow the
principal amount of $170,000,000 from an institutional lender on the terms more
specifically provided in Appendix 2.6 hereof; (iii) the LLC to pay the existing
indebtedness of 77 WWLP secured by 77 WWLP's property; (iv) following payment of
such existing indebtedness and at the same time as or following such
contribution, distribution and borrowing, OTR to contribute to the LLC
$66,000,000 as preferred equity yielding a nine and one-half percent (9?%) per
year cumulative return; (v) following payment of such existing indebtedness and
at the same time as or following such borrowing, OTR to contribute to the LLC
$22,000,000; (vi) the LLC to pay in cash to 77 WWLP as a distribution an amount
equal to the amount contributed to the LLC by OTR, (vii) 77 WWLP to assign or
distribute its membership interest in the LLC to Prime Group Realty L.P., a
limited partnership organized under the laws of Delaware ("Prime") and, to the
extent required by Lender, another affiliate of Prime; (viii) following payment
of such existing indebtedness and at the same time as or following such
borrowing, OTR and Prime to enter into an Amended and Restated Operating
Agreement governing the LLC substantially in the form of Exhibit D attached
hereto and incorporated herein; and (ix) following payment of such existing
indebtedness and at the same time as or following such contribution,
distribution and borrowing, OTR to receive a membership interest in the LLC.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements of each party,
respectively, set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 SPECIFIC DEFINITIONS. Terms with initial capital letters used
herein shall have the meanings ascribed to them below.
"77 WWLP Contribution" shall mean the contribution of the Property to the
LLC as provided herein, free, clear and unencumbered except for the Permitted
Exceptions.
"77 WWLP Contribution Value" shall mean $110,000,000, as such amount may be
adjusted in accordance with Article VI.
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"Action(s)" shall mean any litigation or proceeding of any nature, whether
at law or in equity, before any court, arbitrator, arbitration panel or
Governmental Authority.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the Person
specified. For the purpose of this definition, "control" means the ability to
direct or cause the direction of the management or affairs of a Person, whether
through the direct or indirect ownership of voting interests, by contract or
otherwise.
"Agreement" shall mean this Contribution Agreement, including the exhibits
attached hereto.
"Air Rights Lease" shall mean a certain lease dated March 7, 1991 between
American National Bank and Trust Company, as Trustee under trust agreement dated
November 26, 1985 and known as Trust Number 66121, as landlord, and 77 WWLP, as
Tenant, and recorded as Document Number 91119739 in the office of the Recorder
of Cook County, Illinois.
"Air Rights Parcel" shall mean a certain parcel of property leased to 77
WWLP pursuant to the Air Rights Lease.
"Appurtenances: shall mean the interest of the tenant under the Air Rights
Lease on, in or appurtenant to the Air Rights Parcel and the rights of the party
named 77 West Wacker Limited Partnership pursuant to the Parking Agreement in
the Transportation Building, including those affecting the property described in
Exhibit B-1 attached hereto and incorporated herein and any and all right, title
and interest of 77 WWLP in and to all intangible property that is now or
hereafter used in connection with the operation, ownership, maintenance,
management or occupancy of the Air Rights Parcel or the Appurtenant
Improvements, including without limitation, any and all of the following: plans
and specifications for the Air Rights Parcel or the Appurtenant Improvements,
including as built plans, unexpired warranties, guaranties, indemnities and
claims against third parties; contract rights related to the construction,
operation, repair, renovation, ownership or management of such Air Rights Parcel
or Appurtenant Improvements; pending permit or approval applications as well as
existing permits, approvals and licenses (to the extent assignable); insurance
proceeds or condemnation awards to the extent provided in Sections 4.2 or 4.3 of
this Agreement; marketing and promotional brochures related to the Air Rights
Parcel or the Appurtenant Improvements; and books and records pertaining to the
Air Rights Parcel or the Appurtenant Improvements.
"Appurtenant Improvements" shall mean the interests of the tenant under the
Air Rights Lease to all buildings, improvements, fixtures, structures, parking
areas and landscaping located on, in or appurtenant to the Air Rights Parcel, if
any, including the health club and the skywalks.
"Bill of Sale and Assignment" shall mean an agreement to be entered into
between 77 WWLP and the LLC pursuant to which the LLC assumes certain
Liabilities pertaining to the Property, and 77 WWLP transfers to the LLC all of
its right, title and interest in, to and under the Property.
"Brokers" means BT Alex. Brown and Jones Lang LaSalle.
"Capital Contribution" means, in the case of OTR, the OTR Contribution, and
in the case of 77 WWLP, the 77 WWLP Contribution.
"Cleanup" shall mean all actions required by Environmental Laws with
respect to the Property to: (a) clean up, remove, treat or remediate Hazardous
Materials in the indoor or outdoor environment; (b) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
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endanger public health or welfare or the indoor or outdoor environment; (c)
perform studies and investigations and monitoring and care; or (d) respond to
any government requests for information or documents in any way relating to
clean up, removal, treatment or remediation or potential clean up, removal,
treatment or remediation of Hazardous Materials in the workplace or outdoor
environment.
"Closing" shall have the meaning set forth in Section 5.1.
"Closing Date" shall mean a date on or before September 30, 1999, as such
date may be extended as provided in Section 3.4.
"Closing Documents" shall mean the documents that the parties are required
to deliver in Article V.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission Schedule" means the schedule attached to this Agreement as
Exhibit A and incorporated herein.
"CCRs" shall have the meaning set forth in Section 3.8.
"Debt" shall mean the obligation of the LLC to repay the Loan and the other
obligations of the LLC under the Loan Documents.
"Deposit" shall mean $500,000 deposited by OTR with the Escrow Agent as
provided in Section 2.2, together with any interest or other earnings on such
$500,000.
"Due Diligence Period" shall mean the period from the date of this
Agreement through 11:59 p.m. (E.D.T.) on the Effective Date.
"Effective Date" shall mean the date on which each party to this Agreement
shall have executed and delivered it to each other.
"Employment Laws" shall mean all federal, state, local and municipal Laws
in effect at or prior to the Effective Date relating to employees, dependent
contractors and independent contractors and their employment, or rendition of
services, including but not limited to those laws relating to taxation, health,
labor, labor-management relations, occupational health and safety, pay equity,
employment equity or discrimination, employment standards, benefits and workers'
compensation.
"Endorsements" shall mean, (i) owner's comprehensive, (ii) non-imputation,
and (iii) those endorsements forming a part of the proforma policy of title
insurance attached as Appendix 2.7(2) hereto.
"Environmental Laws" shall mean all applicable Laws relating to pollution
of the environment or protection of the environment, including, without
limitation, Laws relating to Releases or threatened Releases of Hazardous
Material into the environment (including, without limitation, ambient air,
surface water, groundwater, land, soil, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, Release, transport or handling of Hazardous Material, and all
laws and regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.
"Environmental Permit" shall mean any permit, license, registration, waste
identification number, variance or other authorization of any Governmental
Authority relating to the business or operations of 77 WWLP or the Property
required by any Environmental Law.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall mean Chicago Title Insurance Company.
"Escrow Agreement" shall mean the Escrow Agreement to be entered into by
and among Prime, 77 WWLP, OTR and Chicago Title Insurance Company, as Escrow
Agent, to be funded with the Deposit, substantially in the form of Appendix 2.2
attached hereto and incorporated herein.
"Existing Debt" means the indebtedness of 77 WWLP to Existing Lender and
the obligations of 77 WWLP to Existing Lender under the Existing Mortgage.
"Existing Lender" means the holder of the Existing Mortgage and the
indebtedness, the repayment of which the Existing Mortgage secures.
"Existing Mortgage" means a certain mortgage and related documents
currently encumbering the Property securing the indebtedness of 77 WWLP to
Lehman Brothers Holdings, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.2 and
Appendix 3.2.
"Governmental Authority" shall mean any federal, state or local
governmental department, court, commission, board, bureau, agency, taxing
authority or instrumentality having jurisdiction over the Property.
"Hazardous Materials" shall mean all or any of the following substances
defined or listed in, or otherwise classified pursuant to, any applicable
Environmental Laws as "contaminants," "hazardous substances," "hazardous
materials," "hazardous wastes," "pollutants," "toxic substances" or any other
formulation intended to define, list or classify substances by reason of their
adverse or deleterious properties including but not limited to the following:
(a) oil, petroleum or petroleum derived substances, natural gas, natural gas
liquids or synthetic gas and drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil, natural
gas or geothermal resources; (b) any flammable substances, explosives or any
radioactive materials; (c) underground storage tanks, whether empty or
containing any substance; (d) asbestos in any form that is or could become
friable; (e) polychlorinated biphenyls or any electrical equipment which
contains any oil or dialectic fluid containing polychlorinated biphenyls; and
(f) all substances defined as "hazardous substances, oils, pollutants or
contaminants" in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. ? 300.5, or defined as such by, or regulated as such under, any
Environmental Law.
"Improvements" shall mean all buildings, improvements, fixtures,
structures, parking areas and landscaping located on or in the Land.
"Intangible Property" shall mean all right, title and interest of 77 WWLP
in and to all intangible personal property owned by 77 WWLP and now or hereafter
used in connection with the operation, ownership, maintenance, management, or
occupancy of the Real Property, including, without limitation, any and all of
the following: trade names and trademarks associated with such Real Property,
including; the plans and specifications for the Improvements, including as-built
plans; unexpired warranties, guarantees, indemnities and claims against third
parties; contract rights related to the construction, operation, repair,
renovation, ownership or management of such Real Property; pending permit or
approval applications as well as existing permits, approvals and licenses (to
the extent assignable); insurance proceeds and condemnation awards to the extent
provided in Sections 4.2 or 4.3 of this Agreement; marketing and promotional
brochures and materials for the Property; trade names and trademarks pertaining
to the Property; and books and records relating to the Property.
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"Knowledge" with respect to any particular representation or warranty
contained in this Agreement, shall mean the actual knowledge of Jeffrey A.
Patterson, James Runnion and/or Scott McKibben.
"Land" shall mean the land described in Exhibit B attached hereto and
incorporated herein and all and singular the rights, benefits, privileges,
easements, tenements, hereditaments, and appurtenances thereon or in any wise
appertaining to the Land, including any and all mineral rights, development
rights, water rights and the like; and all right, title, and interest of 77 WWLP
in and to all strips and gores and any land lying in the bed of any street, road
or alley, open or proposed, adjoining the Land, if any.
"Laws" shall mean statutes, common laws, rules, ordinances, regulations,
codes, licensing requirements, orders, writs, judgments, injunctions, decrees,
licenses and permits of any Governmental Authority.
"Lender" means collectively the lenders making the Loan as contemplated in
Appendix 2.6 attached hereto, including Westdeutsche Immobilien Bank, a German
banking association, as a lender and as agent for all of such lenders, as
contemplated in Appendix 2.6 attached hereto.
"Leases" shall mean, as to the Property, all leases, subleases or other
agreements pursuant to which any Person has the right to occupy space in the
Improvements (including leases made after the date hereof as permitted by this
Agreement), but excluding the Air Rights Lease and any sublease or occupancy
agreement pertaining to the Air Rights Parcel.
"Lease Assignment" shall mean the assignment of leases and rents pursuant
to which the LLC pledges the leases and rents of the Property in order to secure
its obligation to repay the Loan.
"Liabilities" shall mean debts, liabilities, commitments, obligations,
duties and responsibilities of any kind and description, whether absolute,
accrued, contingent, monetary or nonmonetary, direct or indirect, known or
unknown or matured or unmatured or of any other nature.
"Lien" shall mean with respect to the Real Property, the following: any
mortgage, pledge, restriction, security interest, claim, charge, adverse
interest in property, lease, lien or other encumbrance of any kind, including
any property interest or title of any vendor, lessor, lender or other secured
party under any conditional sale contract or title retention contract, and in
the case of securities or equity interests, any put, call or similar right of a
third party with respect to such securities or equity interests.
"LLC" shall mean 77 West Wacker Drive, L.L.C., a Delaware limited liability
company.
"Loan" shall mean the borrowing contemplated by the LLC from the Lender in
the principal amount of $170,000,000.
"Loan Documents" shall mean the documents evidencing or securing the
indebtedness to repay the Loan.
"Management Agreement" shall mean a certain Management Agreement between
the LLC and Prime to be entered into at Closing, in the form of Exhibit C
attached hereto and incorporated herein.
"Manager" shall mean Prime, Prime Group Realty Services, Inc., a
corporation organized under the laws of Maryland, or an Affiliate of either.
"Material damage" or "materially damaged" shall have the meaning set forth
in Section 4.2.
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"Mortgage" shall mean the mortgage and security agreement encumbering the
Property to secure the obligation of the LLC to repay the Loan.
"Notice Addresses" shall mean the addresses set forth in Appendix 10.11, as
the same may be changed in accordance with Section 10.11.
"Objection Notice" shall have the meaning set forth in Section 3.4.
"Operating Agreement" shall mean the Amended and Restated Operating
Agreement of the LLC between Prime and OTR, or between 77 WWLP and OTR, as the
case may be, substantially in the form attached hereto as Exhibit D and
incorporated herein.
"OTR Contribution" shall have the meaning provided in Section 2.3.
"OTR Representative" shall have the meaning provided in Section 3.1.
"Parking Agreement" means a certain Parking Agreement dated October 22,
1991 among 77 WWLP and American National Bank and Trust Company of Chicago, not
personally but as trustee under trust agreement dated June 18, 1981 and known as
trust number 52947 and North Loop Transportation Center Limited Partnership.
"Permitted Exceptions" shall mean:
(a) Liens for taxes not yet due and payable;
(b) tenants as tenants in possession only under the Leases without any
option to purchase or right of first refusal with respect to the Property
or any portion thereof (other than rights of first offer or first refusal
to lease office space at the Property or similar rights);
(c) exceptions approved by OTR as provided in Section 3.4;
(d) exceptions shown in the Pro Forma Title Policy attached hereto as
Appendix 2.7(2); and
(e) the Lien of the Loan Documents securing the Loan.
"Person" shall mean any natural person, corporation, limited liability
company, general partnership, limited partnership, joint venture, union,
association, court, agency, government, tribunal, instrumentality, commission,
arbitrator, board, bureau or other entity or authority.
"Personal Property" shall mean all right, title and interest of 77 WWLP in
and to all tangible personal property owned by 77 WWLP described in Exhibit E
attached hereto and incorporated herein and heretofore, now or hereafter used in
connection with the operation, ownership, maintenance, management, or occupancy
of the Real Property, but "Personal Property" shall not mean personal property
owned by tenants of the Property pursuant to Leases, or personal property that
is (i) not required for the use or operation of the Real Property or the
Appurtenant Improvements and (ii) is owned by Manager or owned by the operators
of the health club located in the Air Space Parcel or the parking garage
included in the Improvements.
"Property" shall mean the Real Property, the Leases, the Rents, the
Personal Property, the Intangible Property and the Service Contracts.
"Property Information" means the documents, materials and information
specified in Appendix 3.2 attached hereto and incorporated herein.
"Property Value" means $280,000,000, as such amount may be adjusted in
accordance with Article VI hereof.
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"Real Property" shall mean the Land and the Improvements.
"Rents" shall mean all income from the Real Property, including without
limitation, all fixed or base rent, percentage rent, additional rent or other
amounts payable by tenants under Leases with respect to operating expenses,
taxes or other charges under the Leases but excluding rent payable pursuant to
the Air Rights Lease, amounts payable pursuant to the Parking Agreement and
revenue of the health club operation located in the Air Rights Parcel.
"Release" shall mean any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, soil and surface or subsurface strata) or into
or out of any property, including the movement of Hazardous Material through or
in the air, soil, surface water, groundwater or property, if applicable
Environmental Laws would require the effect of any of the same on the
environment to be remedied or reported to a Governmental Authority.
"Service" shall mean the Internal Revenue Service of the United States.
"Service Contracts" shall mean all service contracts and other contracts,
agreements or instruments relating to the ownership, use, management or
operation of the Property, including equipment leases or any other lease in
which 77 WWLP is lessee, but excluding the Leases.
"Subsidiary" shall mean with respect to a Person any corporation or other
entity the majority of the voting stock or other equity interest of which is
owned, directly or indirectly, beneficially or of record, by such Person, or
which is otherwise controlled, directly or indirectly, by such Person.
"Supplemental Property Information" means any additional documents
furnished to OTR in accordance with Section 3.2 hereof during the Due Diligence
Period.
"Survey" shall mean the survey of the Real Property prepared by a surveyor
licensed in the jurisdiction in which the Real Property is located, a plat of
which 77 WWLP has previously delivered to OTR, to which plat such surveyor has
appended a certificate pursuant to which such surveyor certifies to OTR, the
Title Company and the LLC that the survey accurately depicts the Property as of
a date subsequent to the Effective Date.
"Tax Return" shall mean any return, report, document, declaration or other
information or filing (including any related or supporting information) filed or
required to be filed with any taxing authority or jurisdiction with respect to
Taxes.
"Title Commitment" shall mean a commitment for an ALTA Form 1970 owner's
title insurance policy for the Real Property in the initial amount of $10,000
(which shall be increased at Closing to $280,000,000) covering title to the Real
Property on or after the date of this Agreement, showing 77 WWLP as the owner of
the Fee Real Property and the rights of the tenant under the Air Rights Lease.
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall mean an ALTA Owner's Policy (1970 Form) of title
insurance issued by the Title Company as of the date and time of the recording
of the Deed, in form and substance the same as the pro forma policy of title
insurance attached hereto as Appendix 2.7(2).
Section 1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
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be deemed to be followed by the phrase "without limitation" even if not followed
actually by such phrase unless the context expressly provides otherwise. Unless
otherwise expressly defined, terms defined in this Agreement shall have the same
meanings when used in any Appendix, Exhibit or Schedule and terms defined in any
Appendix, Exhibit or Schedule shall have the same meanings when used in this
Agreement or in any other Appendix, Exhibit or Schedule. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The phrase "made available" in this Agreement shall mean that the information
referred to has been made available by the party in question. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the Effective Date.
References to "dollars" or "$" in this Agreement shall mean United States
dollars.
ARTICLE II
TERMS OF THE TRANSACTION
Section 2.1 FORMATION OF THE JOINT VENTURE. At least three (3) business
days prior to Closing, 77 WWLP shall prepare, sign, and file with the Secretary
of State of Delaware the Articles of Organization of the LLC. At Closing, 77
WWLP and OTR, or Prime and OTR, as the case may be, shall execute and deliver
counterparts of the Operating Agreement, provided that the conditions precedent
to the performance of such obligations are satisfied or waived as provided
herein.
Section 2.2 DEPOSIT. Within five (5) business days after the end of the Due
Diligence Period, OTR shall deposit the Deposit with the Escrow Agent.
Contemporaneously with the execution of this Agreement, OTR, 77 WWLP and the
Escrow Agent shall execute the Escrow Agreement substantially in the form of
Appendix 2.2 attached hereto and incorporated herein. The Deposit shall be held
and disbursed as provided in the Escrow Agreement. At Closing, the full amount
of the Deposit shall be (i) disbursed to the LLC and (ii) credited against the
OTR Contribution.
Section 2.3 CASH CONTRIBUTION TO THE LLC.
(a) At Closing, OTR shall contribute to the LLC cash in the amount of
$88,000,000 (the "OTR Contribution"), as such amount may be adjusted in
Article VI hereof, provided that the conditions precedent to the
performance of such obligation are satisfied or waived as provided herein,
upon the terms set forth herein.
(b) In exchange for the OTR Contribution to the LLC, OTR shall receive
at Closing a membership interest in the LLC as provided for and set forth
in the Operating Agreement.
Section 2.4 INSTRUMENTS OF TRANSFER AND CONVEYANCE. In order to effect the
formation of the LLC and the OTR Contribution as contemplated by Sections 2.1
and 2.3, on the Closing Date, 77 WWLP and OTR shall execute and deliver, or
cause to be executed and delivered, in escrow to the Escrow Agent, dated the
Closing Date, subject only to Permitted Exceptions, the Closing Documents and
funds that each, respectively, is required to deliver as more particularly
provided in Article V.
Section 2.5 77 WWLP CONTRIBUTION.
(a) At or before the Closing, 77 WWLP shall transfer to the LLC by
delivery of the Assignment and Deed as provided in Section 5.3 hereof good
and marketable title to the Property and the Appurtenances and the
Appurtenant Improvements, free, clear and unencumbered except for the
Permitted Exceptions, the Existing Mortgage and otherwise upon the terms
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set forth herein. At or before the Closing, 77 WWLP shall satisfy the
Existing Debt as provided in Section 2.8 hereof.
(b) In exchange for the 77 WWLP Contribution, 77 WWLP shall have the
right to receive at Closing a membership interest in the LLC as provided
for and set forth in the Operating Agreement. Contemporaneous with the
distributions specified in Section 2.9, 77 WWLP shall assign to Prime, and
if required by Lender, an Affiliate of Prime, its right, title and interest
in 77 WWLP's right to membership in the LLC, and 77 WWLP shall cause Prime
to assume all and singular, the obligations of 77 WWLP under the Operating
Agreement, whether such performance was due prior or subsequent to such
assignment.
Section 2.6 DEBT FINANCING OF PROPERTY. 77 WWLP and OTR intend that they
will authorize, empower and direct the LLC (i)(a) to borrow $170,000,000 to
finance in part the LLC from Lender and (b) agree to repay the Loan on the terms
set forth in Appendix 2.6 attached hereto and incorporated herein or (ii) to
accept title to the Property subject to the lien of the Loan Documents and to
assume the obligations of 77 WWLP under the Loan Documents accruing from and
after Closing.
77 WWLP and OTR shall cooperate with each other during the Due Diligence
Period to obtain the Loan on the terms set forth in Appendix 2.6 and otherwise
reasonably satisfactory to each of OTR and Prime. 77 WWLP shall notify OTR from
time to time of its progress in obtaining such Loan commitment and negotiating
the terms of the Loan Documents and shall respond to requests from OTR for
information on such progress.
If the proposed commitment of Lender to make the proposed Loan, the
proposed Loan and the Loan Documents contain and effect economic terms of the
Loan set forth in Appendix 2.6 and if the terms of the Loan Documents do not
contain noneconomic terms materially adverse to either 77 WWLP or OTR, 77 WWLP
and OTR shall authorize, direct and empower the LLC either (i) to obtain the
Loan and to execute and deliver the Loan Documents in favor of Lender at Closing
or (ii) to accept title to the Property subject to the lien of the Loan
Documents and to assume the obligations of 77 WWLP under the Loan Documents
accruing from and after Closing. At least five (5) days prior to the Closing
Date, 77 WWLP shall furnish to OTR copies of all of the proposed Loan Documents
and notify OTR whether the proposed Loan Documents provide for a Loan effecting
the economic terms set forth in Appendix 2.6 and do not provide for noneconomic
terms materially adverse to 77 WWLP.
If OTR determines that the proposed Loan Documents (i) do not provide for a
Loan effecting the economic terms set forth in Appendix 2.6 or (ii) provide
noneconomic terms materially adverse to OTR, OTR shall elect in writing to (i)
terminate this Agreement or (ii) raise objections by providing notice thereof.
If OTR does not give such notice within five days after receipt from 77 WWLP of
the proposed Loan Documents OTR shall be deemed to have terminated this
Agreement. If OTR notifies 77 WWLP of any such objections, 77 WWLP shall
exercise reasonable efforts for two (2) business days following such notice to
cause such objections to be removed or corrected. If necessary, the Closing Date
shall be extended to permit 77 WWLP to use such two (2) business day period. If
despite such reasonable efforts, 77 WWLP is unable to cause such objections to
be removed or corrected to OTR's reasonable satisfaction within such two (2)
business day period, then OTR may elect on or prior to the date that is twenty
(20) days following the date that it gave notice of such objections to (i)
terminate this Agreement or (ii) accept the proposed Loan Documents as to which
it had previously objected without the removal or correction of the objections
that 77 WWLP has been unable to remove or correct. If OTR so elects to terminate
or accept, such election shall be OTR's sole and exclusive remedy under this
Agreement, at law or in equity with respect to such objection.
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If 77 WWLP is unable, prior to the Closing Date, to negotiate with Lender
the terms of Loan Documents that (i) provide for a Loan effecting the economic
terms set forth in Appendix 2.6 from Lender and (ii) do not provide noneconomic
terms materially adverse to 77 WWLP, despite reasonable efforts to do so, 77
WWLP may elect to terminate this Agreement by written notice to OTR, given on or
before the Closing Date.
The obligations of the LLC to repay the Loan and the other obligations of
the LLC under the Loan Documents are sometimes referred to herein collectively
as the "Debt".
Section 2.7 TITLE POLICY. (a) 77 WWLP shall do those things specified in
the following Section 2.7(b) in order to induce the Title Company to issue to
the LLC at the Closing, or irrevocably commit in writing at Closing to deliver
within fifteen (15) days following Closing, the Title Policy meeting the
following requirements:
(i) the effective time of the Title Policy shall be the date and time
of recording of the Deed;
(ii) the amount of the Title Policy shall be $280,000,000;
(iii) the insured under the Title Policy shall be the LLC;
(iv) the Title Policy shall be reinsured with direct access
reinsurance agreements satisfactory to OTR, 77 WWLP and Prime by the
reinsurers identified in Appendix 2.7(1) with the limits of liability set
forth in Appendix 2.7(1); and
(v) the Title Policy shall be in the same form as the proforma policy
of title insurance attached hereto as Appendix 2.7(2) attached hereto and
incorporated herein.
(b) 77 WWLP shall:
(i) request Title Company to issue the Title Policy;
(ii) cause the satisfaction of the conditions precedent set forth in
the Title Commitment and the Endorsements included in it to Title Company's
liability to issue the Title Policy pursuant to the Title Commitment that
are more particularly described in Appendix 2.7(3) attached hereto and
incorporated herein; and
(iii) perform 77 WWLP's obligations hereunder.
Section 2.8 EXTINGUISHMENT OF EXISTING DEBT. At or prior to Closing,
provided that the conditions precedent provided in Section 5.2 hereof to 77
WWLP's duty to perform its obligations under Sections 5.1 and 5.3 hereof are
satisfied or waived by 77 WWLP, including the disbursement of the proceeds of
the Loan to the LLC and the LLC's making such proceeds available for the
satisfaction of the Existing Debt, 77 WWLP shall satisfy in full the Existing
Debt, pursuant to a payoff letter obtained by it with respect to the Existing
Debt satisfactory to the Title Company and, within thirty (30) days following
Closing, shall obtain a full and complete release in reasonable form of the
Property the Appurtenances and the Appurtenant Improvements from the Lien of the
Existing Mortgage. For such purpose, 77 WWLP may use the proceeds of the Loan.
If the payoff letter is incorrect, and the Existing Debt is not satisfied in
full, 77 WWLP shall immediately satisfy the Existing Debt in full at its expense
upon receiving written notice that it has not satisfied the Existing Debt in
full. If excess funds are paid to the holder of the Existing Debt, 77 WWLP shall
be entitled to pursue, collect and keep recovery of any such excess payment.
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Section 2.9 DISTRIBUTION TO 77 WWLP. At Closing, provided that the
Existing Debt has been paid in full in accordance with the payoff letter
obtained from the holder of the Existing Debt contemplated in Section 2.9 and
the Title Policy is issued, 77 WWLP and OTR shall authorize and empower the LLC
to distribute the proceeds of the OTR Contribution to 77 WWLP or as directed by
77 WWLP except for an amount of the OTR Contribution equal to the fees payable
as financing fees in connection with the obtaining of the Loan (the "Financing
Fees"). At Closing, 77 WWLP and OTR shall authorize and empower the LLC to
distribute an amount of the OTR Contribution equal to the amount of the
Financing Fees to the person or persons entitled to the payment of the Financing
Fees.
ARTICLE III
INSPECTION
Section 3.1 DUE DILIGENCE; INDEMNITY. OTR shall have the Due Diligence
Period in which to examine, inspect, and investigate the Property, the
Appurtenances and the Appurtenant Improvements and the proposed transaction and,
in OTR's sole and absolute judgment and discretion, to determine whether the
Property and the proposed transaction is satisfactory to OTR.
Upon reasonable advance notice to 77 WWLP and subject to the rights of
tenants under Leases, OTR and its agents, employees and representatives,
contractors, architects and other parties designated by OTR ("OTR's
Representative") shall, during the term of this Agreement, have reasonable
access during normal business hours to the Property, the Appurtenances and the
Appurtenant Improvements and all books and records for the Property that are in
the possession or control of 77 WWLP or its agents or managers for the purpose
of conducting analyses, surveys, architectural, engineering, geotechnical and
environmental inspections and tests (including reasonable intrusive inspection
and sampling after prior written notice to 77 WWLP and in the presence of
Manager), and any other inspections, studies, or tests reasonably required by
OTR after prior written notice to 77 WWLP and in the presence of Manager. OTR
shall have the right to conduct a "walk-through" of the Property, the
Appurtenances and the Appurtenant before Closing, subject to the rights of
tenants under Leases and accompanied by Manager. In the course of its
investigations, OTR may make inquiries, in the manner described below, to the
Manager, Lender, and, in the manner described below, the following tenants: R.R.
Donnelley & Son Company, Jones Day Reavis & Pogue LLP, and Everen Securities,
Inc.
OTR shall keep the Property, the Appurtenances and the Appurtenant
Improvements free and clear of any liens arising out of such entry and
inspection and will indemnify, defend, and hold 77 WWLP, its partners, officers,
directors, agents and employees, harmless from all such liens and any claims
asserted by third parties against 77 WWLP, or its partners, officers, directors,
agents or employees (other than those arising out of the negligence or willful
misconduct of 77 WWLP) to recover for personal injury or property damage as a
result of OTR's Representatives' entry onto the Property, the Appurtenances and
the Appurtenant Improvements. If any inspection or test damages the Property,
OTR at its sole cost will restore the Property, the Appurtenances and the
Appurtenant Improvements to the condition they were in immediately prior to any
such inspection or test in a manner reasonably satisfactory to 77 WWLP. OTR's
obligations under this Section 3.1 shall survive the termination of this
Agreement and, if applicable, the Closing.
During the fourteen (14) day period following the Effective Date, 77 WWLP
shall schedule and reschedule, if necessary, meetings among representatives of
77 WWLP and OTR and representatives of the following tenants under Leases having
responsibility on behalf of such tenants for such Leases: (i) R.R. Donnelley &
Son Company, (ii) Jones Day Reavis & Pogue LLP, and (iii) Everen Securities,
Inc. The purpose of such meetings is to give representatives of OTR the
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opportunity to interview such tenants concerning their Leases and the Property
as part of OTR's due diligence.
If (i) such meetings do not occur within fourteen (14) days following the
Effective Date or (ii) if OTR is not satisfied in its sole discretion with such
meetings, OTR may on or before the expiration of such fourteen (14) day period
either (a) terminate this Agreement by notice to 77 WWLP or (b) raise objections
by providing notice thereof. If OTR does not give 77 WWLP notice that it has no
objections within such fourteen (14) day period, OTR shall be deemed to have
terminated the Agreement. If OTR notifies 77 WWLP of any such objections, 77
WWLP shall have the option, but not the obligation, within ten (10) days after
delivery of such notice to remove or cause to be corrected OTR's objections. If
77 WWLP fails or refuses to cause such objections to be removed or corrected to
OTR's satisfaction during within such ten (10) day period, then OTR may elect on
or prior to the date that is twenty (20) days following the date that it gave
notice of such objections to (i) terminate this Agreement or (ii) accept the
Property regardless of such objections and proceed to Closing without deduction
from the OTR Contribution or reduction of the 77 WWLP Contribution Value. If OTR
so elects to terminate or accept this Agreement, such election shall be OTR's
sole and exclusive remedy under this Agreement, at law or in equity with respect
to such objection. If OTR makes no such election during such twenty (20) day
period, OTR shall be deemed to have elected to terminate this Agreement.
Section 3.2 DELIVERY OF PROPERTY INFORMATION BY 77 WWLP AND PRIMe. In order
to assist OTR with its inspection and review of the Property, the Appurtenances
and the Appurtenant Improvements, 77 WWLP shall, within five (5) business days
after the date of this Agreement, provide, to the extent not previously
provided, to OTR true, correct and complete copies of the items set forth on
Appendix 3.2 to this Agreement with respect to the Property, the Appurtenances
and the Appurtenant Improvements (collectively, the "Property Information"),
except that copies of the items marked (1) need not be delivered to OTR.
Instead, OTR, at its option may inspect and copy such items upon request during
the Due Diligence Period or otherwise prior to Closing. If any such item is not
in possession or control of 77 WWLP or its agents or managers, or reasonably
capable of being generated by 77 WWLP or its agents or managers, 77 WWLP shall
provide to OTR a written certification to that effect. During the term of this
Agreement, 77 WWLP shall provide OTR with any document described above as and
when it comes into the possession or control of 77 WWLP or its agents or
managers, or is produced by 77 WWLP or its agents or managers after the initial
delivery of the Property Information. Without limiting the foregoing, 77 WWLP
shall make all other documents, files and information concerning the Property in
the possession or control of 77 WWLP or its agents or managers, available for
OTR's inspection and copying at the office of Prime or such other location as
shall be mutually agreed by the parties. OTR acknowledges receipt of such of the
Property Information as is set forth in Appendix 3.2 to this Agreement.
Section 3.3 TITLE AND SURVEY. Within ten (10) days after OTR acknowledges
receipt of such of the Property Information as is set forth in Appendix 3.2(b)
to this Agreement, 77 WWLP shall, at its cost and expense, order to be prepared
and delivered to OTR with respect to the Property, the Appurtenances and the
Appurtenant Improvements: (i) the Title Commitment, (ii) to the extent not
previously delivered to OTR true, complete and legible copies of all documents
referenced in the Title Commitment, (iii) the Survey and (iv) UCC searches
performed by a search company reasonably acceptable to OTR, with respect to 77
WWLP, from the Secretary of State of Illinois and from the County Recorder in
which the Property is located and, if other than Illinois, from the Secretary of
State in the state in which the chief executive office of Prime and 77 WWLP is
located. OTR acknowledges receiving the Title Commitment and copies of the
documents referenced in it.
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Section 3.4 OBJECTION NOTICE. If OTR is not satisfied in its sole
discretion with any of its inspections, reviews or with any other matter
concerning any or all of the Property, the Appurtenances and the Appurtenant
Improvements or the proposed transaction, OTR may, on or prior to the expiration
of the Due Diligence Period, either (i) terminate this Agreement by notice to 77
WWLP, or (ii) raise certain objections with respect to the Property by providing
notice in writing thereof (the "Objection Notice"). The Objection Notice shall
specify which matters (the "Objections") OTR does not find satisfactory. If OTR
does not provide an Objection Notice or a notice stating that it has no
Objections prior to the end of the Due Diligence Period, OTR shall be deemed to
have terminated this Agreement.
If OTR timely provides an Objection Notice, 77 WWLP shall have the option,
but not the obligation within ten (10) days after delivery of such Objection
Notice to remove or cause to be corrected to OTR's satisfaction, all of such
Objections. In all cases, provided that the conditions to the obligations of 77
WWLP set forth in Section 5.2 are met, 77 WWLP shall be obligated at Closing to
fully discharge (i) all Liens (other than the Lien of nondelinquent taxes) of a
definite and ascertainable amount and (ii) liens of a definite and ascertainable
amount (other than the lien of nondelinquent taxes and any Permitted
Appurtenance Liens (as defined in this Section 3.4)) encumbering the
Appurtenances or the Appurtenant Improvements to the extent that any of (i) or
(ii) (exclusive of (a) the Existing Mortgage and (b) any Permitted Appurtenance
Liens) represent a charge or charges of $250,000 or less in the aggregate and
result from the intentional acts of 77 WWLP, that are not specifically assumed
by the LLC or accepted by OTR in writing and (ii) the Existing Mortgage.
For the purpose of this Agreement, Permitted Appurtenance Liens shall mean
the following: (i) liens that are subordinate to the rights of the tenant under
the Air Space Lease; (ii) liens that are subordinate to the rights of the entity
named 77 West Wacker Limited Partnership under the Parking Agreement; (iii) the
lien of a certain mortgage dated May 1, 1987 and recorded in the office of the
Recorder of Cook County, Illinois on May 12, 1987 as Document Number 87254852;
and (iv) the lien of taxes currently delinquent encumbering the area beneath the
Air Rights Parcel, provided that such lien is a Permitted Appurtenance Lien only
if at Closing 77 WWLP executes and delivers to OTR the letter agreement, a copy
of which is attached hereto as Appendix 3.6 and incorporated herein (the
"Delinquent Tax Letter Agreement"). For the purpose of this Agreement, the
Disapproved Encumbrances are (i) the Existing Mortgage and (ii) Liens and liens
specified in the immediately preceding grammatical paragraph that 77 WWLP is
obliged to discharge fully at Closing. 77 WWLP shall not have any obligation to
remove or cause to be corrected any Objection except for Disapproved
Encumbrances.
If 77 WWLP fails or refuses to cause the Objections to be removed and
corrected to OTR's satisfaction within such ten (10) day period, then OTR may
elect, on or prior to the date and time that is twenty (20) days after the
delivery of the Objection Notice, at 5:00 p.m., E.D.T., to (i) terminate this
Agreement, or (ii) accept the Property subject to any Objections (other than the
Disapproved Encumbrances, which 77 WWLP must discharge as provided earlier in
this Section 3.4) and proceed to Closing. If OTR elects to terminate or accept
this Agreement with respect to an Objection that is not so removed or corrected
and that is not a Disapproved Encumbrance, such election shall be OTR's sole and
exclusive remedy under this Agreement, at law or equity with respect to such
Objection. If OTR makes no such election during such twenty (20) day period to
terminate or so to accept the Property subject to any Objections, OTR shall be
deemed to have elected to terminate this Agreement.
If after the expiration of the Due Diligence Period, the Title Company
revises the Title Commitment or the surveyor revises the Survey to add or modify
exceptions, or to add or modify conditions to the issuance of any of the
Endorsements, then, unless OTR elects by notice to Prime to accept such
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exceptions or conditions within five (5) days after being notified thereof, then
this Agreement shall be deemed terminated. If, within such five (5) day period,
OTR notifies 77 WWLP that it objects to such new matters (the "Post-Commitment
Objection Notice") then 77 WWLP will have the option, but not the obligation
within ten (10) days after delivery of such Post-Commitment Objection Notice to
remove or cause to be corrected, or to commit to remove or cause to be corrected
prior to Closing, to OTR's satisfaction, all of such new matters (except for
Disapproved Encumbrances, which 77 WWLP must discharge as provided earlier in
this Section 3.4). If 77 WWLP fails or refuses to cause such new matters (other
than Disapproved Encumbrances, which 77 WWLP must discharge as provided earlier
in this Section 3.4) to be removed or corrected to OTR's satisfaction, or to
become legally obliged to remove or cause to be corrected such matters to OTR's
satisfaction (other than Disapproved Encumbrances) prior to Closing, in either
event within such ten (10) day period, then OTR may elect, as its sole and
exclusive remedy under this Agreement, at law or in equity, on or prior to the
date and time that is ten (10) days after the delivery of the Post-Commitment
Objection Notice, at 5:00 p.m., E.D.T., to (i) terminate this Agreement or (ii)
accept the Property subject to such new matters and proceed to Closing. If OTR
so elects to terminate or accept this Agreement, such election shall be OTR's
sole and exclusive remedy under the Agreement, at law or in equity with respect
to such matter arising after the expiration of the Due Diligence Period (except
for Disapproved Encumbrances, which 77 WWLP must discharge as provided earlier
in this Section 3.4). If OTR makes no such election within such ten (10) day
period to terminate or so to accept the Property subject to such new matters,
OTR shall be deemed to have elected to terminate this Agreement.
If necessary, the Closing Date shall be extended the number of days
necessary to give effect to the notice and cure periods set forth in this
Section 3.4.
If OTR terminates this Agreement as provided in this Section 3.4 or if this
Agreement is deemed terminated pursuant to this Section 3.4, the Deposit shall
be immediately returned to OTR, and no party shall have any further obligations
hereunder, except as specifically set forth in this Agreement.
Section 3.5 Intentionally deleted.
Section 3.6 Intentionally deleted.
Section 3.7 TENANT ESTOPPELS. OTR shall not be obliged to perform its
obligations at Closing unless the following condition is satisfied: at least two
(2) business days prior to the Closing, the LLC and OTR receive duly executed
estoppel certificates from (i) Jones Day Reavis & Pogue, (ii) Everen Securities,
Inc., (iii) R.R. Donnelley & Sons Company, and (iv) other tenants under Leases
that collectively comprise not less than (a) ninety-five percent (95%) of the
rentable square feet of the Property or, (b) if duly executed estoppel
certificates are received from each tenant occupying at least one entire floor
of the Improvements, eighty-five percent (85%) of the rentable square feet of
the Property. Such estoppels shall be in the forms set forth in Appendix 3.7
attached hereto and incorporated herein (the "Tenant Estoppels"). The Tenant
Estoppels must be (i) dated no earlier than thirty (30) days prior to the
Closing, (ii) consistent in all material respects with the Leases and the
statements of the tenants in the tenant interviews conducted as contemplated in
Section 3.1 and (iii) be consistent with the following statements: (a) the Lease
is in full force and effect; (b) except as disclosed in Appendix 7.1(a), neither
77 WWLP nor the tenant is in default under the Lease; (c) except as disclosed in
Appendix 7.1(c), the tenant has not asserted, and the tenant has no, defenses or
offsets to rent accruing after the Closing Date; (d) except as set forth in
Appendices 6.10(a), 6.10(b), or 7.1(c) hereto, all of the landlord's obligations
to construct tenant improvements or reimburse the tenant for tenant improvements
under the Lease have been paid or performed in full; and (e) except as set forth
in the Lease, all concessions (other than any unexpired rent abatement set forth
in the Lease) from the landlord have been paid and performed in full.
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Prime and 77 WWLP shall have provided OTR with copies of the Tenant
Estoppels for OTR's review and comment before delivering the Tenant Estoppels to
tenants. Prime and 77 WWLP shall use the following efforts to obtain the Tenant
Estoppels from all tenants under Leases in a timely manner: (i) 77 WWLP shall
mail proposed Tenant Estoppels to each tenant of the Property; and (ii) 77 WWLP
shall follow up telephonically once every three business days prior to Closing
to encourage such tenants to execute and deliver such Tenant Estoppels. If the
required Tenant Estoppels are not timely delivered to OTR, or if any Tenant
Estoppel either does not meet the foregoing requirements or discloses any facts
inconsistent with the Leases and objectionable to OTR in its reasonable
discretion, OTR may elect on or before the earlier of (i) one (1) day prior to
the Closing Date or (ii) ten (10) days following receipt of the relevant Tenant
Estoppel, to either: (i) terminate this Agreement by delivering written notice
to Prime one (1) day prior to Closing, in which event the Deposit shall be
promptly returned to OTR, and neither party shall have any further obligations,
except as specifically set forth herein; or (ii) waive the satisfaction of this
condition and proceed with Closing. If OTR fails to make such election at least
one day prior to the Closing Date, OTR shall be deemed to have elected to
terminate this Agreement.
Section 3.8 AIR RIGHTS LEASE. OTR shall not be liable to perform its
obligations at Closing unless the following condition is satisfied: prior to
Closing, 77 WWLP shall deliver to OTR an estoppel certificate addressed to OTR
and the LLC, in the form attached as Appendix 3.8 and incorporated herein, or if
not in such form, in such form as is otherwise reasonably satisfactory to OTR,
from the landlord under the Air Rights Lease.
ARTICLE IV
OPERATIONS AND RISK OF LOSS
Section 4.1 ONGOING OPERATIONS. From the Effective Date through the Closing
Date:
(a) OPERATION OF PROPERTY. 77 WWLP shall maintain the Property in
substantially its current condition and in compliance with all
applicable laws and regulations. 77 WWLP shall maintain the
Appurtenances and the Appurtenant Improvements in substantially the
current condition of each, and in the condition required by the Air
Rights Lease. Except as necessary to comply with the preceding
sentence, 77 WWLP shall not make any material alterations to the
Property, the Appurtenances or the Appurtenant Improvements or any
portion thereof without OTR's prior written consent. 77 WWLP shall
perform its obligations under all Leases, Service Contracts and other
agreements that may affect the Property, the Appurtenances or the
Appurtenant Improvements.
(b) NEW CONTRACTS. 77 WWLP shall not amend, terminate, exercise
any rights or options under, grant concessions regarding, or enter
into any contract or agreement that will be an obligation affecting
the Property, the Appurtenances or the Appurtenant Improvements or
binding on the LLC after Closing (other than a Lease, as to which
Section 4.1(g) applies), except contracts entered into in the ordinary
course of business that are terminable without cause or penalty on
30-days' notice, without OTR's prior consent.
(c) LISTINGS AND OTHER OFFERS. 77 WWLP shall not list the
Property, the Appurtenances or the Appurtenant Improvements with any
broker other than the Brokers or otherwise make or accept any offers
to sell all or any part of the Property, the Appurtenances or the
Appurtenant Improvements, engage in any discussions or negotiations
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with any third party with respect to the sale or other disposition of
the Property, the Appurtenances or the Appurtenant Improvements or
enter into any contracts or agreements (whether binding or not)
regarding any disposition of all or any part of the Property, the
Appurtenances or the Appurtenant Improvements.
(d) REMOVAL AND REPLACEMENT OF TANGIBLE PERSONAL PROPERTY. 77
WWLP shall not remove any Personal Property except as may be required
for necessary repair or replacement or on account of obsolescence of
such Personal Property. Any such repair and replacement shall be of
equal quality and quantity as existed as of the time of its removal.
(e) MAINTENANCE OF INSURANCE. 77 WWLP shall carry its insurance
in effect as set forth in the Property Information, or equivalent
substitute insurance, through the Closing Date.
(f) MAINTENANCE OF PERMITS. 77 WWLP shall maintain (or cause to
be maintained) in existence all licenses, permits and approvals
necessary or reasonably appropriate to the ownership, operation or
improvement of the Property, the Appurtenances or the Appurtenant
Improvements.
(g) LEASING. 77 WWLP shall not amend, terminate, grant
concessions regarding, or enter into any Lease of space in excess of
10,000 square feet of net rentable area without OTR's prior written
consent. OTR shall not unreasonably withhold or delay its consent. If
OTR fails to object or otherwise reply to a request for consent by
Prime or 77 WWLP within five (5) business days after receipt of (i)
any such request by Prime or 77 WWLP and (ii) all information
requested by OTR that is reasonably required in order to make an
informed decision, OTR shall be deemed to have consented to such
proposed action. OTR acknowledges and agrees that the economic terms
of the Leases provided in the memorandum from Scott McKibben to Steve
Huber attached to Appendix 6.1(e) are satisfactory to OTR and that OTR
consents to the entering of Leases to the proposed tenants set forth
in such memorandum provided such Leases contain the economic terms set
forth in such memorandum and are substantially in the form of the
standard form of Lease contained in the Property Information.
Section 4.2 DAMAGE. 77 WWLP shall bear risk of loss to the Property, the
Appurtenances and the Appurtenant Improvements from the Effective Date to and
including the Closing Date. 77 WWLP shall promptly give OTR written notice of
any damage to the Property, the Appurtenances or the Appurtenant Improvements
describing such damage, stating whether such damage and loss of rents is covered
by insurance and the estimated cost of repairing such damage. In the event of
any material damage (described below) to or destruction of the Property the
Appurtenances or the Appurtenant Improvements or any portion thereof, OTR may,
at its option, by notice to 77 WWLP given within ten (10) business days after 77
WWLP provides the above described notice to OTR (and if necessary the Closing
Date shall be extended to give OTR the full ten (10) business day period to make
such election): (i) terminate this Agreement, in which event the Deposit shall
be immediately returned to OTR, or (ii) proceed under this Agreement, in which
event 77 WWLP shall cause any insurance proceeds (including any rent loss
insurance applicable to any period on and after the Closing Date) due as a
result of such damage or destruction to be paid to the LLC, and the LLC shall
assume responsibility for such repair. If OTR fails to timely make such election
to terminate or proceed, OTR shall be deemed to have elected to terminate this
Agreement with respect to the Property as provided above. If OTR elects (ii)
above, OTR may extend the Closing Date for up to an additional 30 day period in
which to obtain insurance settlement agreements with the insurers of 77 WWLP. 77
WWLP will cooperate with OTR in obtaining the insurance proceeds and such
agreements from the insurers of 77 WWLP. If the Property, the Appurtenances or
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the Appurtenant Improvements are not materially damaged, then OTR shall not have
the right to terminate this Agreement, but 77 WWLP shall commence and diligently
pursue the repair of the damage before the Closing using the insurance proceeds
in a manner reasonably satisfactory to OTR, or, if such repairs cannot
reasonably be completed before the Closing, at Closing 77 WWLP shall (i)
contribute to the LLC any and all insurance proceeds received by it on account
of such damage that 77 WWLP has not expended to make such repairs and (ii)
assign to the LLC all of 77 WWLP's rights in, to and under any insurance
policies covering such damage and proceeds thereof payable on account of such
damage, in which event, the LLC shall thereafter complete such repair. "Material
damage" and "materially damaged" means damage that (x) in OTR's reasonable
estimation exceeds $5,000,000 to repair, (y) entitles any tenant occupying in
excess of 10,000 net rentable square feet to terminate its Lease, or (z) in
OTR's reasonable estimation, will take longer than 120 days to repair.
Section 4.3 CONDEMNATION. If from and after the Effective Date to and
including the Closing Date, 77 WWLP obtains Knowledge that any proceedings in
eminent domain are contemplated, threatened or instituted by any body having the
power of eminent domain with respect to the Property, the Appurtenances or the
Appurtenant Improvements or any portion thereof, 77 WWLP shall notify OTR in
writing. OTR may, at its option, by notice to 77 WWLP given within ten (10)
business days after 77 WWLP notifies OTR of such proceedings (and if necessary
the Closing Date shall be extended to give OTR the full ten (10) business day
period to make such election): (i) terminate this Agreement, in which event the
Deposit shall be immediately returned to OTR, or (ii) proceed under this
Agreement. If OTR elects (ii) above, 77 WWLP shall, at the Closing, assign to
the LLC its entire right, title and interest in and to any condemnation award in
which event, the LLC shall thereafter assume responsibility for any necessary
repair. During the pendency of this Agreement OTR and 77 WWLP shall jointly
negotiate and otherwise deal with the condemning authority in respect of such
matter. If OTR fails to timely make such election, OTR shall be deemed to have
elected to terminate this Agreement as provided above.
ARTICLE V
CLOSING
Section 5.1 CLOSING. The consummation of the transactions contemplated
herein ("Closing") shall occur on the Closing Date through an escrow with the
Escrow Agent at the offices of the Escrow Agent in Chicago, Illinois. The
parties shall, and shall cause the LLC to, execute supplemental escrow
instructions as may be appropriate to enable Escrow Agent to cause compliance
with the terms of this Agreement, so long as such instructions are not in
conflict with this Agreement. Such instructions shall provide that if the Escrow
Agent has authority from the other parties to disburse funds and deliver
documents of all parties delivered into escrow with Escrow Agent on the Closing
Date, the Escrow Agent shall disburse all such funds and deliver all such
documents concurrently. The transactions described herein shall be closed by
means of concurrent delivery of the documents of title, transfer of interest,
delivery of the Title Policy, disbursement of the Loan proceeds and payment of
the OTR Contribution and satisfaction of the Existing Debt, customarily referred
to as a "New York Style" closing.
Section 5.2 CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE.
(a) MUTUAL CONDITIONS. In addition to all other conditions set forth
herein, no party shall be liable to perform its obligations at Closing
unless one of the following conditions is satisfied: (i) Lender disburses
the proceeds of the Loan to 77 WWLP prior to Closing or (ii) Lender
disburses the proceeds of the Loan to the LLC at Closing.
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(b) OTR CONDITIONS. OTR shall not be liable to perform its obligations
at Closing unless as of the Closing Date:
(i) no notice shall have been issued after the expiration of the
Due Diligence Period of any violation or alleged violation of any Law,
including building code (but excluding possible sprinkler head
violations, as to which Section 10.27 applies), with respect to the
Property, the Appurtenances or the Appurtenant Improvements the cost
of which to correct, alone or with other such violations in the
aggregate, would reasonably exceed $250,000 and which has not been
corrected to the satisfaction of the issuer of the notice;
(ii) at Closing 77 WWLP shall not be in material default under
any agreement to be assigned to, or obligation to be assumed by, the
LLC under this Agreement;
(iii) the Leases shall be in full force and effect and no
material default or claim by landlord or tenant shall exist or have
arisen under any Leases that was not specifically disclosed in the
initial Rent Roll and no tenant leasing space in excess of 10,000 net
rentable square feet shall have initiated or had initiated against it
any insolvency, bankruptcy, receivership or other similar proceeding;
(iv) the representations and warranties of 77 WWLP contained
herein shall be true and correct in all material respects, without
giving effect to Knowledge based qualifications;
(v) as of the Closing Date, 77 WWLP shall have performed its
obligations hereunder; and
(vi) no moratorium, statute, order, regulation, ordinance or
judgment of any court or Governmental Authority has been enacted,
adopted, issued or initiated since the Effective Date that would
materially and adversely affect the Property;
(vii) the Property, the Appurtenances and the Appurtenant
Improvements are delivered to the LLC at Closing free and clear of any
occupants or rights to possession other than those of tenants under
the Leases, the Loan Documents and the Permitted Exceptions;
(viii) the Title Company has issued or irrevocably and
unconditionally committed to issue the Title Policy within fifteen
(15) days following Closing;
(ix) 77 WWLP shall have delivered all other documents and other
deliveries required in this Agreement;
(x) no circumstance has occurred since the end of the Due
Diligence Period that would permit OTR to terminate this Agreement
under Section 4.2 or Section 4.3, as to which Section 4.2 and Section
4.3, respectively, govern;
(xi) 77 WWLP shall have entered into a Lease of 2,122 net
rentable square feet of space on the 40th floor of the Improvements
with Peregrin Capital as lessee for a term of five years commencing
October 1, 1999 on a net basis at a base rent of $23 per square foot,
increasing $1 per square foot on each anniversary of the commencement
of the term (the "Peregrin Lease") that is substantially in the
standard form of Lease included in the Property Information (the
"Standard Lease Form");
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(xii) 77 WWLP shall have provided evidence reasonably
satisfactory to OTR that the total tenant finish costs and leasing
commissions incurred by 77 WWLP for the Peregrin Lease will not exceed
$40 per square foot of net rentable area leased pursuant to the
Peregrin Lease, or to the extent that the costs and commissions
incurred by 77 WWLP exceed such amount, Prime is legally obliged to
indemnify the LLC and hold it harmless from such excess;
(xiii) 77 WWLP shall have entered into a modification of the
Lease with Zevnik & Horton as lessee pursuant to which (i) the lessee
leases an additional 5,958 square feet of net rentable area on the
33rd floor of the Improvements for a term commencing on July 1, 2000
on a net basis at a base rent of $20 per square foot, increasing 35?
per square foot on each anniversary of the commencement of the term
(the "Z&H Expansion") and that is substantially in the Standard Lease
Form;
(xiv) 77 WWLP shall have entered into an extension of the Lease
with Zevnik & Horton pursuant to which the term of such lease is
extended from July 1, 2000 through June 30, 2003 at a base rent of $20
per square foot, increasing 35? per square foot each July 1 (the "Z&H
Lease Extension") and that is substantially in the Standard Lease
Form;
(xv) 77 WWLP shall have provided evidence reasonably satisfactory
to OTR that no tenant finish costs shall be incurred in connection
with the Z&H Expansion or the Z&H Extension and that leasing
commissions for the same shall not exceed $2.85 per square foot, or to
the extent that the costs and commissions incurred by 77 WWLP exceed
such amount, Prime is legally obliged to indemnify the LLC and hold it
harmless from such excess;
(xvi) 77 WWLP shall have entered into a modification (the "MWBB
Modification") of the lease with McGuire Woods Battle & Booth LLP
("MWBB") pursuant to which the space leased is expanded by 22,617 net
rentable square feet on the 44th floor of the Improvements effective
February 1, 2000, the term of the lease to MWBB is extended to January
31, 2010, the Lease is on a net rent basis, at a base rent of $21.50
per square foot, increasing on each February 1 by 65? per square foot
and that is substantially in the Standard Lease Form;
(xvii) 77 WWLP shall have provided evidence reasonably
satisfactory to OTR that no tenant finish costs shall be incurred in
connection with the MWBB Modification and that leasing commissions for
the costs and commissions shall not exceed $8.55 per square foot or to
the extent that the same incurred by 77 WWLP exceed such amount, Prime
is legally obliged to indemnify the LLC and hold it harmless from such
excess;
(xviii) 77 WWLP shall have entered into a lease of 3,155 rentable
square feet on the 41st floor of the Improvements with Carvill as
lessee (the "Carvill Lease") for a term of five years commencing on
October 1, 1999 on a net basis at a base rent of $23.00 per square
foot, increasing 75? per square foot on each October 1 that is
substantially in the Standard Lease Form;
(xix) 77 WWLP shall have provided evidence reasonably
satisfactory to OTR that tenant finish costs and leasing commissions
incurred for the Carvill Lease shall not exceed $13.94 per square
foot, or, to the extent that the costs and commissions incurred by 77
WWLP exceed such amount, that Prime is legally obliged to indemnify
and hold harmless the LLC from such excess;
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(xx) 77 WWLP shall have entered into alternate arrangements for
the sub-leasing of the space demised to it pursuant to the Air Rights
Lease satisfactory to OTR so that OTR shall not receive unrelated
business income in connection with such space;
(xxi) 77 WWLP shall cause Prime to undertake liability for and
indemnify the LLC against the obligations of 77 WWLP under Section 29
of the Lease to Jones Day Reavis & Pogue LLP ("Jones Day") to
indemnify Jones Day against liability in connection with its lease of
space at 225 West Washington Street, Chicago, Illinois;
(xxii) good, indefeasible, marketable and insurable fee simple
absolute title to the Property, free, clear and unencumbered except
for the Permitted Exceptions, and otherwise on the terms set forth
herein, shall have vested in the LLC or been tendered by 77 WWLP to
the LLC;
(xxiii) good, marketable and insurable title to the Appurtenances
and the Appurtenant Improvements, free, clear and unencumbered except
for the Permitted Exceptions (including any Permitted Appurtenance
Liens as defined in Section 3.4) and otherwise on the terms set forth
herein shall have vested in the LLC or been tendered by 77 WWLP to the
LLC; and
(xxiv) all other conditions to OTR's obligations to proceed to
Closing which are set forth in this Agreement are satisfied.
(c) 77 WWLP CONDITIONS. 77 WWLP shall not be liable to perform its
obligations at Closing unless, as of the Closing Date:
(i) all of OTR's representations and warranties hereunder are
true and correct in all material respects;
(ii) OTR has performed all of its covenants hereunder required to
be performed on or before Closing;
(iii) OTR has tendered payment of the OTR Contribution;
(iv) OTR has delivered all documents and other deliveries
required of it under this Agreement; and
(v) no notice shall have been issued after the expiration of the
Due Diligence Period of any violation or alleged violation of any law,
including building codes (but excluding possible sprinkler head
violations, as to which Section 10.27 applies), the cost of which to
correct, alone or with other such violations in the aggregate, would
reasonably exceed $250,000, except that in no event shall this
condition apply in the case of any such violation that 77 WWLP
intentionally caused to occur;
(vi) OTR has authorized the LLC to distribute to or on behalf of
77 WWLP (A) the amount provided in Section 2.9 and (B) an amount, not
in excess of the sum of (I) the principal amount of $170,000,000 and
(II) an amount equal to one month of interest on the Existing Debt, in
order to satisfy the Existing Debt in full;
(vii) no moratorium, statute, order, regulation, ordinance or
judgment of any court or Governmental Authority has been enacted,
adopted, issued or initiated since the Effective Date that would
materially and adversely affect the Property; and
(viii) all other conditions to 77 WWLP's obligations to proceed
to Closing which are set forth in this Agreement are satisfied.
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(d) APPROVAL OF PRIME LENDERS. Neither 77 WWLP nor OTR shall be liable
to perform their respective obligations at Closing if 77 WWLP gives notice
to OTR that 77 WWLP has been unable to obtain approval on or before the
fourteenth (14th) day following execution of this Agreement of the lenders
providing a line of credit to Prime or Prime Group Realty Trust, a Maryland
real estate investment trust (the "REIT"), to the transaction contemplated
by this Agreement, and 77 WWLP gives notice to OTR prior to 5:00 pm,
Central Daylight Time within such fourteen (14) day period that such
lenders have not so approved such transaction. If such notice is given or
if this Agreement terminates pursuant to Section 2.6, the last grammatical
paragraph of Section 3.1 or Section 3.7, (i) the Deposit shall be paid to
OTR, and (ii) 77 WWLP shall pay to OTR the lesser of (A) $100,000 and (B)
the aggregate amount of costs and expenses incurred by OTR to third parties
in connection with negotiating this Agreement, performing its obligations
under it and exercising its rights and powers under it (the "Due Diligence
Expenses"). 77 WWLP shall pay such amount to OTR within thirty (30) days
following OTR's furnishing to 77 WWLP of evidence reasonably substantiating
the incurring of Due Diligence Expenses.
(e) FAILURE OF CONDITION. So long as a party is not in default in the
performance of any obligation hereunder, if any condition to such party's
obligation to perform obligations at Closing set forth in this Agreement
has not been satisfied as of the Closing Date, such party may, in its sole
discretion, (i) terminate this Agreement, by delivering written notice to
the other parties on or before the Closing Date, (ii) elect to extend the
time available for the satisfaction of such condition by up to a total of
10 business days or (iii) elect on or before the Closing Date to close,
notwithstanding the non-satisfaction of such condition, in which event such
party shall be deemed to have waived any such condition. If such party
elects to proceed pursuant to clause (ii) above, and such condition remains
unsatisfied after the end of such extension period, then, at such time,
such party may elect to proceed pursuant to either clause (i) or (iii)
above. Any failure to timely elect to proceed under clauses (i), (ii) or
(iii) above, shall be deemed an election to proceed under clause (i) above.
In the event of a termination pursuant to this section, the Deposit shall
be returned to OTR.
Section 5.3 DELIVERIES BY 77 WWLP IN ESCROW. At least one business day
prior to the Closing Date, 77 WWLP shall deliver in escrow to the Escrow Agent
or outside of escrow to OTR the following and in the case of the following that
are documents, each duly executed and, where appropriate, in recordable form and
notarized:
(a) OPERATING AGREEMENT. A counterpart of the Operating Agreement
executed by Prime;
(b) DEED. A special warranty deed substantially in the form attached
hereto as Appendix 5.3(b) and incorporated herein, executed and
acknowledged by 77 WWLP in its individual capacity, conveying to the LLC
good, indefeasible, marketable and insurable fee absolute simple title to
the Real Property, subject only to the Permitted Exceptions (the "Deed");
(c) BILL OF SALE AND ASSIGNMENT. A counterpart of the Bill of Sale and
Assignment in the form of Appendix 5.3(c) attached hereto (the
"Assignment"), executed and acknowledged by 77 WWLP in its individual
capacity vesting in the LLC good title to the property described therein
free of any claims except for Permitted Exceptions;
(d) NOTICE TO TENANTS AND VENDORS. A notice to each tenant in the form
attached as Appendix 5.3(d) attached hereto and incorporated herein as well
as a notice to each vendor under the Service Contracts in the form attached
as Appendix 5.3(d) attached hereto and incorporated herein;
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(e) STATE LAW DISCLOSURES. Such disclosures and reports as are
required by applicable state and local law in connection with the
conveyance of real property;
(f) FIRPTA. An affidavit of 77 WWLP (the "FIRPTA Affidavit")
substantially in the form of Appendix 5.3(f) attached hereto and
incorporated herein. If 77 WWLP fails to provide the necessary affidavit
and/or documentation of exemption on the Closing Date, the LLC shall
proceed in accordance with the withholding provisions imposed by Section
1445 of the Internal Revenue Code of 1986, as amended;
(g) TENANT ESTOPPELS. Tenant Estoppels satisfying the conditions in
Section 3.7;
(h) GROUND LESSOR'S ESTOPPEL. The ground lessor's estoppel as provided
in Section 3.8;
(i) AUTHORITY. Evidence of the existence, organization and authority
of 77 WWLP and of the authority of the persons executing documents on
behalf of 77 WWLP reasonably satisfactory to OTR, the Escrow Agent and the
Title Company;
(j) DELINQUENT TAX LETTER AGREEMENT. A counterpart of the Delinquent
Tax Letter Agreement.
(k) TITLE DOCUMENTS. The documents specified in Appendix 2.7(3);
(l) PRIME UNDERTAKING. An undertaking in writing executed by Prime in
favor of the LLC and OTR, reasonably satisfactory to OTR, pursuant to which
Prime agrees to perform those obligations of 77 WWLP that survive the
Closing, including without limitation, the obligations of 77 WWLP (i) to
satisfy in full the Existing Indebtedness and to obtain a release of the
Existing Mortgage as provided in Section 2.8 herein, (ii) provided in the
Delinquent Tax Letter Agreement, (iii) to pay Leasing Commissions and TI
Obligations as provided in Sections 6.1(e) and 6.10 herein and, (iv) if
required in Section 10.27, to replace sprinkler heads at the Property as
provided in Section 10.27 herein;
(m) MANAGEMENT AGREEMENT. A counterpart of the Management Agreement
executed by the Manager;
(n) OPINION. the opinion of Winston & Strawn as to the due
authorization and execution by 77 WWLP of the documents that 77 WWLP are
required by this Agreement to deliver that is reasonably satisfactory to
OTR; and
(o) OTHER DELIVERIES. Such other documents, certificates and
instruments reasonably necessary in order to effect the transactions
described herein, including without limitation, transfer tax declarations,
broker lien waivers, bulk sale clearances and any documents necessary to
comply with any applicable environmental transfer disclosure laws and any
other Closing deliveries required to be made by or on behalf of 77 WWLP as
provided in this Agreement.
Section 5.4 OTR'S DELIVERIES IN ESCROW. (a) Documents. At least one
business day prior to the Closing Date, OTR shall deliver in escrow to the
Escrow Agent or outside of escrow to Prime or 77 WWLP the following, each duly
executed and, where appropriate, in recordable form and notarized:
(i) OPERATING AGREEMENT. A counterpart of the Operating Agreement
executed by OTR;
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(ii) DELINQUENT TAX LETTER AGREEMENT. A counterpart of the
Delinquent Tax Letter Agreement;
(iii) OPINION. The opinion of Taft, Stettinius & Hollister LLP as
to the due authorization and execution by OTR of the documents that
OTR is required by this Agreement to deliver that is reasonably
satisfactory to 77 WWLP; and
(iv) OTHER DELIVERIES. Such other documents, certificates and
instruments reasonably necessary in order to effect the transaction
described herein and any other closing deliveries required to be made
by or on behalf of OTR as provided in this Agreement.
(b) FUNDS. On the Closing Date, OTR shall deliver in escrow to the
Escrow Agent the OTR Contribution.
Section 5.5 LLC'S DELIVERIES IN ESCROW. (a) Except as specified below, at
least one business day prior to the Closing Date, each of 77 WWLP and OTR shall
or if Prime is or shall be a member of the LLC, as of Closing, 77 WWLP shall
cause Prime to, and OTR shall, execute counterparts of the following as members
on behalf of the LLC and shall deliver them in escrow to the Escrow Agent:
(i) LOAN DOCUMENTS. The Loan Documents in the form required by
Lender and approved by OTR and 77 WWLP, unless the Loan Documents are
executed and delivered prior to Closing, in which event, an assumption
of the Loan Documents, if any, required by Lender and reasonably
satisfactory to OTR and 77 WWLP, except that if this Agreement
terminates pursuant to Section 2.6 hereof, neither OTR nor 77 WWLP
shall have any such obligation;
(ii) BILL OF SALE AND ASSIGNMENT. Counterpart of Bill of Sale and
Assignment;
(iii) STATE LAW DISCLOSURES. Such disclosures and reports as are
required by applicable state and local law in connection with the
conveyance of real property;
(iv) MANAGEMENT AGREEMENT. A counterpart of the Management
Agreement; and
(v) OTHER DELIVERIES. Such other documents, certificates and
instruments reasonably necessary in order to effect the transactions
described herein, including any documents reasonably necessary to
cause the Title Company to issue a loan policy of title insurance to
Lender insuring the lien of the Loan Documents (except that OTR shall
not be obliged to sign any counterpart of any such document).
(b) FUNDS. On the Closing Date, OTR and 77 WWLP shall each authorize
and empower the LLC to deliver the proceeds of the Loan in escrow to the
Escrow Agent to the extent not already delivered in escrow to the Escrow
Agent by Lender.
Section 5.6 CLOSING STATEMENTS. At least one business day prior to the
Closing Date, 77 WWLP and OTR shall deposit with the Escrow Agent closing
statements for the Property consistent with this Agreement executed by 77 WWLP
in its individual capacity and by 77 WWLP and OTR on behalf of the LLC.
Section 5.7 POSSESSION. 77 WWLP shall deliver possession of the Property,
the Appurtenances and the Appurtenant Improvements to the LLC at the Closing.
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Section 5.8 DELIVERY OF BOOKS AND RECORDS. Pursuant to the Management
Agreement, subsequent to Closing, Prime shall retain at its offices the original
documents and instruments assigned to the LLC pursuant to the Assignment; copies
or originals of all books and records of account, copies of correspondence with
tenants and suppliers, receipts for deposits, unpaid bills and other papers or
documents that pertain to the Property, the Appurtenances or the Appurtenant
Improvements; all advertising materials, booklets, keys and other items, if any,
pertaining to the Property, the Appurtenances or the Appurtenant Improvements;
and, if in the possession or control of Prime or 77 WWLP, the original
"as-built" plans and specifications and all other available plans and
specifications.
ARTICLE VI
PRORATIONS; COSTS
Section 6.1 PRORATIONS. Not less than three (3) business days prior to
Closing, 77 WWLP shall provide to OTR such information and verification
reasonably necessary to support the prorations under this Section 6.1. The items
in this Section 6.1 shall be prorated between 77 WWLP and the LLC as of the
close of business on the day immediately preceding the Closing Date, the Closing
Date being a day of income and expense to the LLC. 77 WWLP shall pay to the LLC
at Closing the amount, if any, by which credits in favor of the LLC shall exceed
credits in favor of 77 WWLP. 77 WWLP and OTR shall authorize and empower the LLC
at Closing to pay to 77 WWLP at Closing the amount, if any, by which credits in
favor of 77 WWLP shall exceed credits in favor of the LLC.
(a) TAXES AND ASSESSMENTS. OTR and 77 WWLP acknowledge and agree that
the tenants are obliged under the Leases to pay substantially all of any
accrued but unpaid ad valorem real property taxes and assessments ("Taxes")
in accordance with the Leases. Accordingly, no adjustment shall be made in
respect of such Taxes incurred by LLC or 77 WWLP.
(b) COLLECTED RENT. At Closing, any Rent and other income under Leases
collected by 77 WWLP before Closing that applies to any period after
Closing shall be prorated so that the LLC shall receive a credit in the
amount equal to the product of such Rent and other income and a fraction,
the numerator of which is the number of days in the period covered by such
payment from and after the day of Closing and the denominator of which is
the total number of days in the period covered by such payment. Uncollected
rent and other uncollected income shall not be prorated at Closing. After
Closing, 77 WWLP and OTR shall cause the LLC to apply all rent and income
collected by the LLC from a tenant, whether through a normal collection
effort, litigation, or otherwise, first to such tenant's current monthly
rental and then to arrearages in the reverse order in which they were due,
remitting to 77 WWLP, after deducting collection costs, any balance
properly allocable to 77 WWLP's period of ownership. 77 WWLP and OTR shall
authorize, empower and direct the LLC to bill and use commercially
reasonable efforts to collect such rent arrearages in the ordinary course
of business, but the LLC need not engage a collection agency or take legal
action to collect any rent arrearages. 77 WWLP shall not have the right to
seek collection of any rents or other income applicable to any period
before the Closing, except that 77 WWLP may use collection efforts against
Cafe Baci that do not involve litigation or interference with Cafe Baci's
possession of the space currently leased to it at the Property. Except as
otherwise provided in this Section 6.1(b), any Rents or other income
received by 77 WWLP after Closing which are owed to the LLC shall be held
in trust and remitted to the LLC promptly after receipt for allocation and
disbursement as provided in this Section 6.1. Any Rents or settlement
amounts received by 77 WWLP or the LLC from Cafe Baci for a period prior to
Closing belong to 77 WWLP.
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(c) OPERATING EXPENSE PASS-THROUGHS. This subparagraph shall apply to
any additional rent (collectively, "Operating Expense Pass-Throughs")
payable under the Leases to cover taxes, insurance, utilities, maintenance
and other operating costs and expenses (collectively "Operating Expenses")
incurred by the owner of the Property in connection with the ownership,
operation, maintenance and management of the Property. OTR and 77 WWLP
acknowledge and agree that the tenants at the Property are obliged under
the Leases to pay substantially all of the Operating Expenses in accordance
with the Leases. Accordingly, no adjustment shall be made in respect of
Operating Expenses incurred by the LLC or 77 WWLP, and, at Closing, 77 WWLP
shall pay to the LLC an amount equal to the amount of Operating Expense
Pass-throughs that it has collected prior to Closing that it has not used
to pay Operating Expenses prior to Closing.
(d) TENANT DEPOSITS. At Closing, 77 WWLP shall transfer to the LLC all
tenant security deposits (and interest thereon if required by law or
contract to be earned thereon). At Closing, 77 WWLP shall initiate transfer
to the LLC of any letters of credit furnished as tenant security deposits
and thereafter diligently pursue such transfer. As of Closing, the LLC
shall assume 77 WWLP's obligations related to tenant security deposits, but
only to the extent that they are transferred as provided in this Section
6.1(d).
(e) LEASING COMMISSIONS. On or before the date that the same become
due and payable, 77 WWLP shall pay in full those leasing commissions
specified in Appendix 6.1(e) attached hereto and incorporated herein that
77 WWLP is to pay. Leasing commissions arising in connection with any
renewal or expansion rights under Leases that are properly exercisable
after the date of this Agreement and disclosed in the Commission Schedule,
if any, shall be the LLC's obligation to pay as and when due. The LLC shall
pay these leasing commissions specified in Exhibit A that the LLC is to
pay.
(f) OTHER REVENUES AND INCOME AND OTHER EXPENSES. At Closing, any and
all revenues and income in connection with the operation at the Property,
the Appurtenances or the Appurtenant Improvements not otherwise covered in
this Article VI and collected by or on behalf of 77 WWLP before the Closing
and applicable to the LLC's period of ownership shall be prorated between
77 WWLP and the LLC so that 77 WWLP receives the same to the extent they
accrued and are allocable with respect to the period of its ownership of
the Property and the LLC receives the same to the extent that they accrued
and are allocable with respect to the period of its ownership of the
Property, the Appurtenances or the Appurtenant Improvements. At Closing,
any and all expenses in connection with the operation of the Property the
Appurtenances or the Appurtenant Improvements paid by 77 WWLP before
Closing, not otherwise covered in this Article VI, and applicable to the
LLC's period of ownership of the Property, the Appurtenances or the
Appurtenant Improvements shall be prorated between 77 WWLP so that 77 WWLP
pays for such expenses to the extent that they accrued and are allocable to
the period of its ownership of the Property, the Appurtenances or the
Appurtenant Improvements and the LLC pays for such expenses to the extent
that they accrued and are allocable with respect to the period of its
ownership of the Property, the Appurtenances or the Appurtenant
Improvements. If any such amount cannot be determined at Closing, such
payment shall be based upon an estimate. In addition, (i) 77 WWLP shall
promptly remit or cause to be remitted to the LLC any such revenues and
income not covered in this Article VI and collected by 77 WWLP after
Closing that are applicable to the LLC's period of ownership, and (ii) 77
WWLP and OTR shall authorize, empower and direct the LLC to remit or cause
to be remitted to 77 WWLP such revenues and income not otherwise covered in
this Article VI collected by the LLC after Closing that are applicable to
77 WWLP's period of ownership. In addition, 77 WWLP shall pay its prorata
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share of any such expenses in connection with the operation of the
Property, the Appurtenances or the Appurtenant Improvements not otherwise
covered by this Article VI within ten (10) days following written notice
from the LLC that such amount is due to the extent that the LLC pays for
any such expense that is applicable to 77 WWLP's period of ownership.
(g) INTEREST ON THE DEBT. Interest accrued and unpaid on the Debt
prior to Closing shall be a credit in favor of the LLC. Interest paid on
the Debt prior to Closing with respect to the day of Closing and thereafter
shall be a credit in favor of 77 WWLP.
Section 6.2 POST-CLOSING CORRECTIONS. 77 WWLP, in its individual capacity,
on the one hand, and the LLC, on the other, shall be entitled to a post-Closing
adjustment for any incorrect proration or adjustment, whether made at Closing or
within one year thereafter, including any payments or adjustments made pursuant
to this Article VI, provided such adjustment is claimed by such party within one
year after Closing. No expense related to the ownership or operation of the
Property, the Appurtenances or the Appurtenant Improvements shall be charged to
or paid or assumed by OTR or the LLC under this Agreement, other than those
obligations expressly assumed by the LLC.
Section 6.3 UTILITIES. OTR and 77 WWLP acknowledge and agree that the
tenants are obliged under the Leases to pay for substantially all of the
utilities consumed at the Property in accordance with the Leases. Accordingly,
no adjustment shall be made in respect of the expense of such utilities incurred
by the LLC or 77 WWLP.
Section 6.4 SERVICE CONTRACTS. OTR and 77 WWLP acknowledge and agree that
the tenants are obliged under the Leases to pay substantially all of the charges
incurred by 77 WWLP under Service Contracts in accordance with the Leases.
Accordingly, no adjustment shall be made in respect of the expenses incurred by
the LLC or 77 WWLP under the Service Contracts.
Section 6.5 COSTS. OTR shall pay (i) one-half of the Escrow Agent?s escrow
fee, closing charges, and any cancellation fee, (ii) the cost of the Title
Policy and the Endorsements, and (iii) the costs associated with OTR's due
diligence activities. 77 WWLP shall pay (i) one-half of the Escrow Agent's
escrow fee, closing charges and any cancellation fee, (ii) the cost of the
Survey, and (iii) all recording fees or other charges incurred in connection
with the recording of the Deed and clearing title, including without limitation
any prepayment or release fees. Each party shall be responsible for its own
attorney's and other professional fees.
Section 6.6 SALES, TRANSFER, AND DOCUMENTARY TAXES. 77 WWLP shall pay all
sales, gross receipts, compensating, stamp, excise, documentary, transfer, deed
or similar taxes and fees imposed in connection with this transaction under
applicable state, county or local Law. 77 WWLP in its individual capacity shall,
and 77 WWLP or Prime and OTR, as members of the LLC, shall authorize, empower
and direct the LLC to execute any applicable city, county and state transfer tax
returns or other declarations.
Section 6.7 UTILITY DEPOSITS. 77 WWLP shall transfer to the LLC at Closing
any deposits with utility companies that are transferable.
Section 6.8 SALES COMMISSIONS. 77 WWLP, on the one hand, and OTR, on the
other, represent and warrant each to the other that they have not dealt with any
real estate broker, sales person or finder in connection with this transaction
other than Brokers. If Closing occurs, 77 WWLP shall pay Brokers in accordance
with its separate agreement with Brokers. Brokers are independent contractors
and are not authorized to make any agreement or representation on behalf of
either party. Except as expressly set forth above, in the event of any claim for
broker's or finder's fees or commissions in connection with the negotiation,
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execution or consummation of this Agreement or the transactions contemplated
hereby, each party shall indemnify, defend and hold harmless the other parties
from and against any such claim based upon any actual or alleged statement,
representation or agreement of such party. This provision shall survive any
termination of this Agreement and the Closing.
Section 6.9 WAGES. Intentionally deleted.
Section 6.10 TENANT IMPROVEMENTS AND ALLOWANCES. Tenant improvement
expenses (including all hard and soft construction costs, whether payable to the
contractor or the tenant), tenant allowances, moving expenses and other
out-of-pocket costs that are the obligation of the landlord under Leases ("TI
Obligations") shall be allocated between 77 WWLP, in its individual capacity, on
the one hand, and the LLC, on the other hand, in accordance with this Section
6.10.
(a) EXISTING TI OBLIGATIONS. 77 WWLP shall pay all TI Obligations that
are specified as obligations of 77 WWLP in Appendix 6.10(a) attached hereto
and incorporated herein to the obligee of such TI Obligations as and when
the same are due.
(b) OTHER TI OBLIGATIONS. The LLC shall pay all TI Obligations that
are specified as obligations of the LLC in Appendix 6.10(b) attached hereto
and incorporated herein to the obligee of such TI Obligations as and when
the same are due.
(c) Intentionally deleted.
(d) ASSIGNMENT OF CONTRACTS. If tenant improvement work required under
any Lease is not complete at Closing, 77 WWLP shall at Closing assign the
architect, contractor and other agreements relating to such improvements to
the LLC, and the LLC shall assume obligations under such agreements
occurring from and after Closing, except for payment obligations of 77 WWLP
set forth in Section 6.10(a). Such assignment shall be in form and
substance reasonably acceptable to OTR and shall be accompanied by consents
to such assignment from the parties obligated under such agreements.
(e) CHANGE ORDERS. 77 WWLP shall not agree to any change orders or
additions to tenant improvements or changes in the scope of work or
specifications with respect to TI Obligations that the LLC must assume
under Section 6.1(d) without OTR's prior written approval if (i)
modification of the Lease to which such TI Obligations pertain would
require OTR's approval under this Agreement or (ii) such modification would
require OTR's approval under the Operating Agreement, if the same were in
effect.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1 REPRESENTATIONS AND WARRANTIES OF 77 WWLP. As a material
inducement to OTR to execute this Agreement and consummate this transaction, 77
WWLP represents and warrants to OTR that:
(a) ORGANIZATION AND AUTHORITY. 77 WWLP has been duly organized and is
validly existing under the laws of the state under which it is organized,
and is in good standing and qualified to do business in Illinois. 77 WWLP
has the full right and authority and, except as provided in Section 5.2(d),
has obtained any and all consents required to enter into this Agreement,
all of the documents to be delivered by 77 WWLP at the Closing and to
consummate or cause to be consummated the transactions contemplated hereby.
At Closing, 77 WWLP shall have obtained any and all consents required to
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enter this Agreement, all of the documents to be delivered by 77 WWLP at
the Closing and to consummate or cause to be consummated the transactions
contemplated hereby. This Agreement has been, and all of the documents to
be delivered by 77 WWLP at the Closing will be, authorized and properly
executed and constitute, or will constitute, as appropriate, the valid and
binding obligation of 77 WWLP, enforceable in accordance with their terms.
(b) CONFLICTS AND PENDING ACTIONS OR PROCEEDINGS. There is no
agreement to which either 77 WWLP is a party or, to the Knowledge of 77
WWLP, which is binding on 77 WWLP which is in conflict with this Agreement
other than the Existing Mortgage or as provided in Section 5.2(d). At
Closing, there shall be no agreement to which 77 WWLP is a party, or to the
Knowledge of 77 WWLP which is binding on 77 WWLP which is in conflict with
this Agreement. Except as disclosed in the Property Information or the
Supplemental Property Information, there is no action or proceeding pending
or, to 77 WWLP's Knowledge, threatened in writing against 77 WWLP or
relating to the Property, the Appurtenances or the Appurtenant
Improvements, and no basis exists for any such action or proceeding to the
extent that the same could result in a claim against the LLC or a claim
against the Property, the Appurtenances or the Appurtenant Improvements
sounding in contract (as opposed to tort). 77 WWLP has not received any
written notice that any condemnation, eminent domain or similar proceedings
are pending or threatened with regard to the Property, the Appurtenances or
the Appurtenant Improvements. Except as disclosed in the Title Commitment,
77 WWLP has not received any written notice and has no Knowledge of (i) any
pending or threatened Liens, special assessments or impositions to be made
against the Property, (ii) any pending or threatened special assessments or
impositions to be made against the Appurtenances or the Appurtenant
Improvements that would not be subordinate to the rights of 77 WWLP therein
(other than the lien of taxes not yet due and payable), or (iii) any liens
against the Appurtenances or the Appurtenant Improvements that would not be
subordinate to the rights of 77 WWLP therein (other than the lien of taxes
not yet due and payable or as may be set forth in Appendix 2.7(2)).
(c) LEASES. The documents constituting the Leases that are delivered
to OTR pursuant to Section 3.2 are true, correct and complete copies of all
of the Leases affecting the Property, the Appurtenances or the Appurtenant
Improvements including any and all amendments and guarantees. Except as set
forth in the Property Information, the Supplemental Property Information
and Appendix 6.1(e), there are no leasing or other fees or commissions due,
nor will any become due, in connection with any Lease or any renewal or
extension or expansion of any Lease, and no understanding or agreement with
any party exists as to payment of any leasing commissions or fees regarding
future leases or as to the procuring of tenants. To 77 WWLP's Knowledge the
Leases are in full force and effect. Neither 77 WWLP nor, to the Knowledge
of 77 WWLP and except as disclosed in Appendix 7.1(c) attached hereto and
incorporated herein or in the Tenant Estoppels, are 77 WWLP or any of the
tenants in default under the Leases. To the Knowledge of 77 WWLP, except as
disclosed in Appendix 7.1(c) attached hereto and incorporated herein or the
Tenant Estoppels, no tenants have asserted nor are there any defenses or
offsets to rent accruing after the Closing Date. Except as set forth in
Appendix 6.10(a), Appendix 6.10(b) and Appendix 7.1(c) attached hereto and
incorporated herein, all of the landlord's obligations to construct tenant
improvements or reimburse the tenants for tenant improvements under the
Leases have been paid and performed in full, and except as set forth in the
Leases or the Tenant Estoppels, all concessions (other than any unexpired
rent abatement set forth in the Leases) from the landlord under the Leases
have been paid and performed in full. Except for the Existing Mortgage and
collateral assignments being fully released at Closing, 77 WWLP has not
assigned or pledged the Leases or Rents or any interest therein.
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(d) SERVICE CONTRACTS. The list of Service Contracts delivered to OTR
pursuant to this Agreement is true, correct, and complete as of its date.
The documents constituting the Service Contracts that are delivered to OTR
as a part of the initial Property Information and the Supplemental Property
Information are true, correct and complete copies of all the Service
Contracts affecting the Property, the Appurtenances or the Appurtenant
Improvements. Neither 77 WWLP nor, to the Knowledge of 77 WWLP, any other
party is in material default under any Service Contract.
(e) FINANCIAL STATEMENTS. The Financial Statements delivered to OTR
pursuant to this Agreement show all items of income and expense (operating
and capital) incurred in connection with the ownership, operation, and
management of the Property, the Appurtenances and the Appurtenant
Improvements for the periods indicated and are true, correct, and complete
in all material respects.
(f) PERMITS, LEGAL COMPLIANCE, AND NOTICE OF DEFECTS. To its
Knowledge, 77 WWLP has all licenses, permits and certificates necessary for
the use and operation of the Property, the Appurtenances and the
Appurtenant Improvements including, without limitation, all certificates of
occupancy necessary for the occupancy of the Property, the Appurtenances
and the Appurtenant Improvements all of which are in full force and effect.
77 WWLP has not taken or failed to take any action that would result in
their revocation, or received any written notice of an intention to revoke
any of them. To the Knowledge of 77 WWLP, neither the Property, the
Appurtenances or the Appurtenant Improvements nor the use thereof violates
any Law or any covenants or restrictions encumbering the Property, the
Appurtenances or the Appurtenant Improvements. To the Knowledge of 77 WWLP,
except as disclosed in the Property Information and the Supplemental
Property Information, there are no material physical defects in the
Improvements or the Appurtenant Improvements. Except to the extent, if any,
specified in the Property Information or the Supplemental Property
Information, 77 WWLP has not received any written notice from any insurance
company or underwriter and has no Knowledge of any defects that would
materially adversely affect the insurability of the Property, the
Appurtenances or the Appurtenant Improvements or cause an increase in
insurance premiums. 77 WWLP has not received written notice from any
Governmental Authority or other person of, and has no Knowledge of any
violation of zoning, building, fire, health, environmental, Law (including
those respecting the Americans with Disabilities Act), or any restriction,
condition, covenant or consent in regard to the Property, the Appurtenances
or the Appurtenant Improvements or any part thereof which have not been
corrected to the satisfaction of such Governmental Authority.
(g) ENVIRONMENTAL. 77 WWLP has no Knowledge of the presence or Release
of Hazardous Materials on or from the Property, the Appurtenances or the
Appurtenant Improvements such that applicable Environmental Law requires
the remedy of the effect on the environment of such presence or release, or
of any violation of Environmental Laws related to the Property, the
Appurtenances or the Appurtenant Improvements. To the Knowledge of 77 WWLP,
no tenant or other occupant has manufactured, introduced, Released or
discharged from or onto the Property, the Appurtenances or the Appurtenant
Improvements any Hazardous Materials such that applicable Environmental Law
requires the remedy of the effect on the environment of the same. To the
Knowledge of 77 WWLP, no tenant or other occupant has used the Property,
the Appurtenances or the Appurtenant Improvements or any part thereof for
the generation, treatment, storage, handling or disposal of any Hazardous
Materials such that applicable Environmental Law requires the remedy of the
effect on the environment of the same. There are no underground storage
tanks located on the Property, the Appurtenances or the Appurtenant
Improvements. 77 WWLP has furnished to OTR a true, correct and complete
copy of all Environmental Assessments and/or studies pertaining to the
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Property, the Appurtenances or the Appurtenant Improvements in the
possession or control of either. To the Knowledge of 77 WWLP, no additional
environmental assessments or studies exist with respect to the Property,
the Appurtenances or the Appurtenant Improvements.
(h) DISCLOSURE. Other than this Agreement, the documents delivered at
Closing pursuant hereto, the Permitted Exceptions, the Service Contracts,
the Leases, the Air Rights Lease, the Parking Agreement, the agreements
pertaining to the health club in the Air Rights Parcel and any other
contracts or agreements included in the Property Information or the
Supplemental Property Information, there are no contracts or agreements of
any kind relating to the Property, the Appurtenances or the Appurtenant
Improvements to which 77 WWLP, or its agents or affiliates is a party and
which would be binding on either or both of the LLC or the Property, the
Appurtenances or the Appurtenant Improvements after Closing. 77 WWLP has
delivered to OTR or made available to OTR for inspection all written
materials in the possession or control of 77 WWLP which contain information
or disclose facts or conditions that would have a material adverse impact
on the use, operation or marketability of the Property, the Appurtenances
or the Appurtenant Improvements. Copies of Property Information and
Supplemental Property Information delivered to OTR pursuant to Section 3.2
hereof are or will be true, correct and complete copies. 77 WWLP has no
Knowledge of any material inaccuracy or omission in the Property
Information or Supplemental Property Information delivered as contemplated
in Section 3.2 or in that certain Memorandum dated August 5, 1999 from
Scott McKibben to Stephen Huber attached to Appendix 6.1(e).
(i) Intentionally deleted.
(j) DISTRIBUTIONS AND DISCLOSURES. To the Knowledge of Prime and 77
WWLP, all obligations, disclosures, consents and distributions in
connection with the contribution of the Property, the Appurtenances or the
Appurtenant Improvements that under applicable law or any applicable, valid
and binding agreements are required to be performed, given or made or
received with respect to any person or entity that directly or indirectly
holds an interest in 77 WWLP shall be, and at Closing shall have been,
performed, given and made.
(k) Intentionally deleted.
(l) Intentionally deleted.
(m) Intentionally deleted.
(n) Intentionally deleted.
(o) LITIGATION. To the Knowledge of 77 WWLP, except as set forth in
Appendix 7.1(o) attached hereto and incorporated herein, no pending or
threatened (in writing) litigation or governmental proceeding affects 77
WWLP or the Property, the Appurtenances or the Appurtenant Improvements.
(p) Intentionally deleted.
(q) GOVERNMENTAL ACTIONS. 77 WWLP has not received any written notice
that any rent controls or governmental moratoria affecting the Property,
the Appurtenances or the Appurtenant Improvements are threatened, pending
or proposed.
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(r) BANKRUPTCY MATTERS. To the Knowledge of 77 WWLP, no tenant under
any Lease of more than 10,000 square feet of net rentable area has made a
general assignment for the benefit of creditors, filed any voluntary
petition in bankruptcy or suffered the filing of an involuntary petition by
its creditors, suffered the appointment of a receiver to take possession of
substantially all of its assets, suffered the attachment or other judicial
seizure of substantially all of its assets, admitted its inability to pay
its debts as they come due, or made an offer of settlement, extension or
composition to its creditors generally.
(s) Intentionally deleted.
(t) Intentionally deleted.
(u) INSURANCE. 77 WWLP carries insurance with respect to the Property,
the Appurtenances or the Appurtenant Improvements required to be carried by
the owner of the Property. All such insurance is in full force and effect.
To the Knowledge of 77 WWLP, the Property, the Appurtenances and the
Appurtenant Improvements materially comply with all requirements of each
such policy, and 77 WWLP has not received from any of the insurers
thereunder any written notice requiring work or suggesting that any
material work be performed at the Property, the Appurtenances or the
Appurtenant Improvements. To the Knowledge of 77 WWLP, there are no defects
or inadequacies in the Property, the Appurtenances or the Appurtenant
Improvements that would adversely affect the insurability of the same or
cause the imposition of extraordinary premiums therefor or create or be
likely to create a hazard, excessive maintenance costs or material
operating deficiencies, except as disclosed in the Property Information or
the Supplemental Property Information.
(v) KNOWLEDGE. James Runnion has been the person responsible for
managing the Property, the Appurtenances and the Appurtenant Improvements
for 77 WWLP since the completion of the Improvements and the Appurtenant
Improvements.
(w) EMPLOYEES. 77 WWLP has no employees.
(x) PERSONAL PROPERTY. The Personal Property includes the personal
property necessary to operate the Property, the Appurtenances and the
Appurtenant Improvements in the manner currently operated.
Section 7.2 OTR'S REPRESENTATIONS AND WARRANTIES. As a material inducement
to 77 WWLP to execute this Agreement and consummate this transaction, OTR
represents and warrants to 77 WWLP that:
(a) ORGANIZATION AND AUTHORITY. OTR has been duly organized and is
validly existing as an Ohio partnership. OTR has the full right and
authority and has obtained any and all consents required to enter into this
Agreement and to consummate or cause to be consummated the transactions
contemplated hereby. This Agreement has been, and all of the documents to
be delivered by OTR at the Closing will be, authorized and properly
executed and constitute, or will constitute, as appropriate, the valid and
binding obligation of OTR, enforceable in accordance with their terms.
(b) CONFLICTS AND PENDING ACTION. No agreement to which OTR is a party
or which to OTR's Knowledge is binding on OTR conflicts with this
Agreement. No action or proceeding is pending or, to OTR's Knowledge,
threatened against OTR which challenges or impairs OTR's ability to execute
or perform its obligations under this Agreement.
Section 7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in this Article 7 are made as of the date of this
Agreement and are remade as of the Closing Date and shall not be deemed to be
merged into or waived by the instruments of Closing, but shall survive the
Closing except as otherwise specifically provided in this Agreement. Subject to
the terms and provisions of Section 10.19 hereof, the representations in Section
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7.1(a) through (f) and (h), and Section 7.2 shall survive the Closing for a
period of eighteen (18) months, unless a suit is filed within such period
alleging the inaccuracy of such representations or warranties, in which event
such representations and warranties alleged in such suit to be inaccurate shall
survive until the final resolution of such suit. The representations in Section
7.1(g) shall survive the Closing for a period of seven (7) years, unless a suit
is filed within such period alleging the inaccuracy of such representations or
warranties, in which case such representations and warranties shall survive
until the final resolution of such suit.
ARTICLE VIII
DEFAULT AND REMEDIES
Section 8.1 DEFAULT BY 77 WWLP. If this transaction fails to close as a
result of default by 77 WWLP in the performance of its obligations hereunder or
any representation or warranty of 77 WWLP is inaccurate (all conditions to the
obligations of 77 WWLP having been satisfied or waived) (herein, a "default"),
the Escrow Agent shall return the Deposit to OTR. In addition, OTR shall be
entitled to the remedy of specific performance. OTR shall not be entitled to any
other remedy if this transaction fails to close as a result of 77 WWLP's
default.
Section 8.2 OTR's DEFAULT. If this transaction fails to close as a result
of the failure of OTR to perform its obligations hereunder or any representation
or warranty of OTR is inaccurate (herein a "default") (all conditions to OTR's
obligations having been satisfied or waived), then the sole remedies of 77 WWLP
in such event shall be (i) to terminate this Agreement or (ii) to the remedy of
specific performance. 77 WWLP shall not be entitled to any other remedy if this
transaction fails to close as a result of OTR's default.
Section 8.3 OTHER EXPENSES. If this Agreement is terminated due to the
default of a party, then the defaulting party shall pay any fees due to the
Escrow Agent for holding the Deposit and any fees due to the Title Company for
cancellation of the Title Commitment, and the Deposit shall be paid to OTR.
ARTICLE IX
INDEMNIFICATION
Section 9.1 INDEMNITY OF 77 WWLP. 77 WWLP shall indemnify, defend and hold
the LLC and OTR harmless from any liability, claim, demand, loss, expense or
damage (collectively, "loss") that is: suffered by, or asserted by any third
party against the LLC or OTR arising from any act or omission of 77 WWLP, its
respective agents, employees or contractors or otherwise arising out of the
ownership or operation of the Property, the Appurtenances and the Appurtenant
Improvements arising or occurring prior to the Closing, except that the LLC
shall not be entitled to indemnification with respect to matters as to which the
LLC is specifically obliged pursuant to this Agreement, any document delivered
at Closing, or under Section 9.2 to indemnify 77 WWLP.
Section 9.2 LLC'S INDEMNITY. 77 WWLP and OTR shall take all necessary acts
as members of the LLC to authorize and empower the LLC to agree to, and shall
direct the LLC to indemnify, defend and hold 77 WWLP harmless of and from any
loss that is: suffered by, or asserted by any third party against, 77 WWLP
arising from any act or omission of the LLC, its agents, employees or
contractors or otherwise arising out of the ownership or operation of the
Property, the Appurtenances and the Appurtenant Improvements first arising or
occurring on or after Closing, except that 77 WWLP shall not be entitled to
indemnification with respect to matters as to which 77 WWLP in its individual
capacity is specifically obliged pursuant to this Agreement, any document
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delivered at Closing or under Section 9.1 to indemnify the LLC or OTR and except
that the LLC shall have no liability to indemnify 77 WWLP in connection with the
obligations of Lessor under Section 29 of the Lease to Jones Day Reavis & Pogue
LLP.
Section 9.3 PROCEDURE. The following provisions govern all actions for
indemnity under this Article 9 and any other provision of this Agreement.
Promptly after receipt by an indemnitee of notice of any claim, such indemnitee
will, if a claim in respect thereof is to be made against the indemnitor,
deliver to the indemnitor written notice thereof and the indemnitor shall have
the right to participate in and, if the indemnitor agrees in writing that it
will be responsible for any costs, expenses, judgments, damages, and losses
incurred by the indemnitee with respect to such claim, to assume the defense
thereof, with counsel mutually satisfactory to the parties. An indemnitee shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnitee, if the indemnitee reasonably believes that representation of
such indemnitee by the counsel retained by the indemnitor would be inappropriate
due to actual or potential differing interests between such indemnitee and any
other party represented by such counsel in such proceeding. The failure of
indemnitee to deliver written notice to the indemnitor within a reasonable time
after indemnitee receives notice of any such claim shall relieve such indemnitor
of any liability to the indemnitee under this indemnity only if and to the
extent that such failure is prejudicial to the indemnitor's ability to defend
such action, and the omission so to deliver written notice to the indemnitor
will not relieve it of any liability that it may have to any indemnitee other
than under this indemnity. If an indemnitee settles a claim without the prior
written consent of the indemnitor, then the indemnitor shall be released from
liability with respect to such claim unless the indemnitor has unreasonably
withheld such consent.
Section 9.4 SURVIVABILITY. The obligations of the parties under this
Article 9 shall survive the Closing.
ARTICLE X
MISCELLANEOUS
Section 10.1 PARTIES BOUND. No party may assign this Agreement without the
prior written consent of the other, and any such prohibited assignment shall be
void, except that concurrent with Closing, 77 WWLP may assign to an
"intermediary," as such term is contemplated under regulations issued by the
Service to implement Section 1031 of the Code, any right of 77 WWLP under this
Agreement to payment that 77 WWLP may deem necessary so that 77 WWLP may try to
take advantage of Section 1031 of the Code in connection with the transfer of
the Property to the LLC. Neither OTR nor the LLC shall have any liability to 77
WWLP in any way connected with the attempt by 77 WWLP to take advantage of
Section 1031 of the Code in connection with the transfer of the Property, the
Appurtenances or the Appurtenant Improvements. OTR shall cooperate with 77 WWLP
in effecting such exchange. OTR shall not be obliged to incur any liability or
expense in order to perform such cooperation obligation. Except as limited by
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties.
Section 10.2 HEADINGS. The article and paragraph headings of this Agreement
are for convenience only and in no way limit or enlarge the scope or meaning of
the language hereof.
Section 10.3 INVALIDITY; NO WAIVER. If any portion of this Agreement is
held invalid or inoperative, then so far as is reasonable and possible the
remainder of this Agreement shall be deemed valid and operative, and, to the
greatest extent legally possible, effect shall be given to the intent manifested
by the portion held invalid or inoperative. The failure by either party to
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enforce against the other any term or provision of this Agreement shall not be
deemed to be a waiver of such party's right to enforce against the other party
the same or any other such term or provision in the future.
Section 10.4 GOVERNING LAW. This Agreement shall, in all respects, be
governed, construed, applied, and enforced in accordance with the law of the
state of Illinois.
Section 10.5 SURVIVAL. The provisions of this Agreement that contemplate
performance after the Closing, the obligations of the parties not fully
performed at the Closing and not expressly waived in writing in connection with
the Closing or specifically deemed to have been waived in accordance with this
Agreement, and all indemnities set forth in this Agreement shall survive the
Closing and shall not be deemed to be merged into or waived by the instruments
delivered at Closing.
Section 10.6 NO THIRD PARTY BENEFICIARY. This Agreement is not intended to
give or confer any benefits, rights, privileges, claims, actions, or remedies to
any person or entity (other than the LLC) as a third party beneficiary,
designee, or otherwise.
Section 10.7 ENTIRETY AND AMENDMENTS. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
Section 10.8 TIME. Time is of the essence in the performance of this
Agreement.
Section 10.9 CONFIDENTIALITY. No party shall make or authorize the LLC to
make any public announcement or other disclosure of this Agreement or any
information related to this Agreement to outside brokers or third parties,
before or after the Closing, without the prior written specific consent of all
the parties, except that a party or the LLC may make disclosure of this
Agreement to its lenders, creditors, officers, employees and agents as necessary
to perform its obligations hereunder or to the extent required by applicable
Laws.
Notwithstanding the foregoing, this confidentiality provision shall not
apply to information: (a) that is as of the date of this Agreement or hereafter
enters the public domain (other than in violation of this Agreement), (b) that
is compelled to be disclosed by law or a court or other binding order, and (c)
any information required to be disclosed to any governmental bodies and/or
regulatory agencies, including, without limitation, the Securities and Exchange
Commission. Further, Prime, 77 WWLP and OTR shall each have the right to (i)
disclose the existence of this Agreement and the contents hereof to (1) its
partners, advisers, underwriters, analysts, employees, affiliates, officers,
directors, consultants, potential lenders, tenants and investors, counsel and
accountants (and the employees and agents of such parties) provided that the
disclosing party advises such persons of the confidential nature of this
Agreement and the transaction contemplated hereby, and (2) analysts covering
OTR, Prime, 77 WWLP (or its partners), as applicable, or the REIT industry, and
(ii) file any applicable forms with the Securities and Exchange Commission that
accurately reflect such factual information pertaining to the Property and the
transaction contemplated hereby that 77 WWLP determines to be necessary or
prudent in complying with 77 WWLP's legal disclosure obligations.
Section 10.10 ATTORNEYS' FEES. Should any party employ attorneys to enforce
any of the provisions hereof, the party against whom any final judgment is
entered shall pay the prevailing party all reasonable costs, charges, and
expenses, including attorneys' fees and costs, expended or incurred in
connection therewith.
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Section 10.11 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be served on the parties at the addresses set forth in
Appendix 10.11. Any such notices shall be either (a) sent by overnight delivery
using a nationally recognized overnight courier, in which case notice shall be
deemed delivered one business day after deposit with such courier, or (b) sent
by personal delivery, in which case notice shall be deemed delivered upon
receipt or refusal to accept delivery. A party's address may be changed by
written notice to the other party, except that no notice of a change of address
shall be effective until actual receipt of such notice. Copies of notices are
for informational purposes only, and a failure to give or receive copies of any
notice shall not be deemed a failure to give notice. Notices given by counsel to
OTR shall be deemed given by OTR and notices given by counsel to the 77 WWLP
shall be deemed given by 77 WWLP.
Section 10.12 CONSTRUCTION. The parties acknowledge that the parties and
their counsel have reviewed and revised this Agreement and the documents to be
executed at the Closing and agree that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement, the documents to be
delivered at Closing or any exhibits or amendments thereto.
Section 10.13 CALCULATION OF TIME PERIODS. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included at, unless such last day is
a Saturday, Sunday or legal holiday for national banks in Illinois, in which
event the period shall run until the end of the next day which is neither a
Saturday, Sunday, or legal holiday. The last day of any period of time described
herein shall be deemed to end at 5 p.m. E.D.T.
Section 10.14 INFORMATION AND AUDIT COOPERATION. At OTR's or the LLC's
request, at any time before or within two years following the Closing, 77 WWLP
shall provide to any independent auditor designated by OTR or the LLC access to
the books and records of the Property.
Section 10.15 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original. All
of such counterparts shall constitute one Agreement. To facilitate execution of
this Agreement, the parties may execute and exchange by telephone facsimile
counterparts of the signature pages.
Section 10.16 EXCULPATION. (a) This Agreement is executed by certain
general partners of OTR, not individually, but solely on behalf of, and as the
authorized nominee and agent for The State Teachers Retirement Board of Ohio
("STRBO"), and in consideration for entering into this Agreement, 77 WWLP hereby
waives any rights to bring a cause of action against the individuals executing
this Agreement on behalf of OTR (except for any cause of action based upon lack
of authority or fraud), and all persons dealing with OTR must look solely to
STRBO's assets for the enforcement of any claim against OTR, 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 STRBO.
(b) This Agreement is executed by certain individuals, not
individually, but solely on behalf of, and as the authorized representative
for 77 WWLP and its general partners. OTR hereby waives any rights to bring
a cause of action against the individuals executing this Agreement on
behalf of 77 WWLP (except for any cause of action based upon lack of
authority or fraud), and all persons dealing with 77 WWLP must look solely
to the assets of 77 WWLP and its general partner and such general partner's
general partner for the enforcement of any claim against 77 WWLP, 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
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agents of (i) 77 WWLP or (ii) the general partner of 77 WWLP or such
general partner's general partners.
Section 10.17 FURTHER ASSURANCES. In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by each party
at Closing, each party shall perform, execute and deliver, but without any
obligation to incur any additional liability or expense, on or after the Closing
any further deliveries and assurances as may be reasonably necessary to
consummate the transactions contemplated hereby or to further perfect the
conveyance, transfer and assignment of the Property to the LLC.
Section 10.18 BULK SALES. If any applicable provisions of law require that
any state or local taxation authorities be notified of the transactions
contemplated herein, or if clearance is required of such authorities, each in
order to permit the transfer of the Property, the Appurtenances and the
Appurtenant Improvements as contemplated herein without liability to 77 WWLP for
any state or local taxes required to be paid or collected by 77 WWLP prior to
the Closing Date, a condition precedent to the obligations of OTR hereunder
shall be that all such notification and clearance requirements shall have been
complied with and OTR and the LLC shall have received the requisite clearances
and releases from further liability or the amount included on any bulk sales
form shall have been withheld from amounts payable to 77 WWLP. 77 WWLP shall,
within ten (10) days after the date hereof, make all filings necessary to obtain
such clearances and shall contemporaneously provide OTR with copies of all such
filings.
Section 10.19 NOTIFICATION OF CERTAIN MATTERS. 77 WWLP shall give prompt
notice to OTR upon becoming aware of, and OTR shall give prompt notice to 77
WWLP upon becoming aware of, (a) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (b) any material failure of 77 WWLP
or OTR, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder. The delivery of any
notice pursuant to this Section 10.19 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
If OTR becomes aware of the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Closing, OTR shall immediately notify 77 WWLP of such event
or information, and if OTR nonetheless performs its obligations under Article 5
of this Agreement and acquires a membership interest in the LLC, OTR shall be
deemed to have waived all claims resulting from any such untruth or inaccuracy,
and 77 WWLP shall not be liable to OTR for damages as a result of any such
untruth or inaccuracy. 77 WWLP shall have the burden of proving that OTR was
aware on or before Closing of the occurrence or non-occurrence of any such
event.
Section 10.20 TERMINATION. This Agreement may be terminated and abandoned
at any time prior to the Closing:
(a) By the mutual written consent of 77 WWLP and OTR; and
(b) In the circumstances otherwise specified elsewhere in this
Agreement.
Section 10.21 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement contemplated in Section 10.20
hereof:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated
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hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same;
(b) All confidential information received by any party hereto with
respect to the business of any other party or its subsidiaries shall be
held in confidence as provided in Section 10.9; and
(c) the Deposit shall be returned to OTR.
Section 10.22 REMEDIES CUMULATIVE; EQUITABLE RELIEF. Except as otherwise
provided in Article VIII and elsewhere in this Agreement, all rights and
remedies which any party may be entitled to exercise under this Agreement may be
exercised cumulatively, successively, and without prejudice to any other rights
and remedies to which such party may be entitled, at law or in equity. Without
limitation of the foregoing, the parties hereto agree that irreparable damage to
OTR and 77 WWLP would occur in the event that the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, both OTR and 77 WWLP shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which OTR or
77 WWLP is entitled at law or in equity.
Section 10.23 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise
specifically provided in this Agreement, any failure of Prime and 77 WWLP, on
the one hand, or OTR, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by OTR or 77 WWLP,
respectively, only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereof, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 10.23.
Section 10.24 Intentionally deleted.
Section 10.25 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.26 LIKE KIND EXCHANGE.
(a) OTR agrees to cooperate with Prime and 77 WWLP, as described in
subsection (b) below, to accommodate the desire of 77 WWLP to treat the
transfer of the Property, the Appurtenances and the Appurtenant
Improvements and distribution to 77 WWLP contemplated by this Agreement as
part of a tax deferred exchange by 77 WWLP under Section 1031 of the Code;
however, OTR and 77 WWLP acknowledge and agree that OTR shall have no
responsibility for the tax treatment to 77 WWLP or Prime.
(b) In order to accommodate 77 WWLP, OTR agrees that (i) consistent
with Section 10.26(a) hereof, it shall make payment of, as requested by 77
WWLP, to the person or persons designated by 77 WWLP, which person will be
intended to be a "qualified escrow" or "qualified trust" for purposes of
Section 1.031(k)-1(g)(3) of the Treasury Regulations, and (ii) as requested
by 77 WWLP, OTR will consent to the assignment of this Agreement on or
after the date hereof to a person, who is intended to be a "qualified
intermediary" for purposes of Section 1.1031(k)-1(g)(3) of the Treasury
Regulations. Notwithstanding such assignment, 77 WWLP shall remain jointly
and severally liable for performance of the obligations of 77 WWLP
hereunder and for the representations and warranties of 77 WWLP made
hereunder.
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Section 10.27 SPRINKLER HEADS. 77 WWLP shall obtain on or before December
31, 1999 a letter from a testing laboratory reasonably satisfactory to OTR and
recognized by Underwriter's Laboratories to the effect that such laboratory does
not recommend that any further action (other than ordinary repair and
maintenance) is necessary to address issues raised by the type of sprinkler
heads currently installed in the fire suppression system in the Improvements and
the Additional Improvements. If 77 WWLP is unable to obtain such letter by such
date, 77 WWLP at its sole cost and expense shall replace such sprinkler heads
with sprinkler heads as to which 77 WWLP receives a letter as contemplated in
the previous sentence as soon as reasonably possible and in any event on or
before September 30, 2000. The obligations of 77 WWLP under this section 10.27
shall survive Closing.
OTR acknowledges and agrees that 77 WWLP may pursue claims and recoveries
at its expense relating to the sprinkler heads. Any such recovery that it
receives shall be the sole property of 77 WWLP, and not that of the LLC or OTR.
Section 10.28 HOLIDAYS. Whenever under the terms and provisions 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.
77 WEST WACKER LIMITED PARTNERSHIP
By Prime Group Realty, L.P., a limited partnership
organized under the laws of Delaware, its general
partner
By Prime Group Realty Trust, a real estate
investment trust organized under the laws of
Maryland, its managing general partner
By: /s/ Jeffrey A. Patterson
------------------------------------------------
Name: Jeffrey A. Patterson
---------------------------------------------
Title: Executive Vice President
---------------------------------------------
OTR
By: /s/ Stephen A. Mitchell
------------------------------------------------
Stephen A. Mitchell, general partner
------------------------
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EXHIBIT A
---------
LEASING COMMISSIONS AFTER CLOSING - OBLIGATIONS OF LLC
------------------------------------------------------
The LLC shall pay the following leasing commission:
- --------------------------- --------- ---------------- ---------------------
Tenant RSF Leasing Comm/RSF Leasing Commissions
- --------------------------- --------- ---------------- ---------------------
A. Zevnich & Horton 22,067 $ 2.85 $ 62,891
B. McGuire Woods Bottle 22,617 $ 8.55 $ 193,375
& Boothe LLP Expansion
--------- ------------
Total 44,684 $ 256,266
The LLC pays all commissions due and payable to leasing brokers in connection
with extension and/or renewal of Leases following the Closing Date, except as
provided in Appendix 6.1(e) to the contrary.
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EXHIBIT B-1
-----------
PROPERTY SUBJECT TO APPURTENANCES
---------------------------------
TO THE EXTENT OF ANY INCONSISTENCY BETWEEN THE LEGAL DESCRIPTIONS SHOWN IN
APPENDIX 2.7(2) AND THIS EXHIBIT B-1, THAT SHOWN IN THE APPENDIX SHALL CONTROL.
THE LEASEHOLD ESTATE CREATED BY THE INSTRUMENT HEREIN REFERRED TO AS THE LEASE,
EXECUTED BY: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE
UNDER TRUST AGREEMENT DATED NOVEMBER 26, 1985 AND KNOWN AS TRUST NUMBER 66121,
AS LESSOR, AND 77 WEST WACKER LIMITED PARTNERSHIP, AN ILLINOIS LIMITED
PARTNERSHIP AS LESSEE, DATED MARCH 7, 1991, WHICH LEASE WAS RECORDED MARCH 18,
1991 AS DOCUMENT 91119739 WHICH DEMISED PARCEL 7 FOR A TERM OF YEARS AS SET
FORTH THEREIN, AND DEMISES THE "APPURTENANT RIGHTS" SET FORTH IN PARCEL B OF
EXHIBIT 'B' TO SAID LEASE OVER PARCEL 10 FOR SAID TERM, SAID PARCELS 7 AND 10
BEING DESCRIBED AS FOLLOWS:
PARCEL 7:
THE PROPERTY AND SPACE WHICH LIES BETWEEN HORIZONTAL PLANES WHICH ARE +50.63
FEET AND +80.63 FEET, RESPECTIVELY ABOVE THE CHICAGO CITY DATUM, AND WHICH IS
ENCLOSED BY VERTICAL PLANES EXTENDING UPWARD FROM THE BOUNDARIES, AT THE SURFACE
OF THE EARTH, OF THAT PART OF BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO, IN THE
SOUTHEAST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD
PRINCIPAL MERIDIAN, BOUNDED AND DESCRIBED AS FOLLOWS:
ALL OF SUB-LOTS 1 TO 7 AND THE ALLEY IN THE ASSESSOR'S DIVISION OF LOT 5 IN
BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO; ALSO, LOT 6 (EXCEPT THE EAST 20.00
FEET THEREOF) IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO ALL IN THE SOUTHEAST
1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL
MERIDIAN, IN COOK COUNTY, ILLINOIS.
PARCEL 10:
THAT PART OF THE LAND DESCRIBED BELOW WHICH IS DEMISED AS APPURTENANT RIGHTS IN
THE LEASE NOTED ABOVE:
THAT PART OF THE LAND DESCRIBED BELOW WHICH IS DEMISED AS APPURTENANT RIGHTS IN
THE LEASE NOTED ABOVE:
THAT PART OF BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHEAST 1/4 OF
SECTION 9, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE THIRD PRINCIPAL MERIDIAN,
BOUNDED AND DESCRIBED AS FOLLOWS:
ALL OF SUB-LOTS 1 TO 7, AND THE ALLEY IN THE ASSESSOR'S DIVISION OF LOT 5 IN
BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO; ALSO LOT 6 (EXCEPT THE EAST 20.00 FEET
THEREOF) IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO; ALL IN THE SOUTHEAST 1/4
OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN,
EXCEPT THAT PART WHICH LIES BETWEEN HORIZONTAL PLANES, WHICH ARE 50.63 FEET AND
80.63 FEET, RESPECTIVELY, ABOVE CHICAGO DATUM.
I. RIGHT TO PART 169 CARS ON THOSE PORTIONS OF PARCEL 11B, AS SET FORTH IN
PARKING AGREEMENT DATED OCTOBER 22, 1991 AND RECORDED APRIL 17, 1992 AS DOCUMENT
92280477 AMONG AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO AS TRUSTEE
UNDER TRUST AGREEMENT DATED JUNE 18, 1991 AND KNOWN AS TRUST NUMBER 52947, 77
WEST WACKER LIMITED PARTNERSHIP, AND OTHERS, SAID PARCEL 11 BEING DESCRIBED, AS
FOLLOWS:
PARCEL 11:
11A. ALL OF SUBLOTS 1 TO 7 AND THE ALLEY IN ASSESSOR'S DIVISION OF LOT 5 IN
BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO;
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ALSO
LOT 6 (EXCEPT THE EAST 20 FEET THEREOF) IN SAID BLOCK 17;
ALSO
ALL OF SUB-LOTS 1 TO 8 IN THE SUBDIVISION OF LOT 8 IN SAID BLOCK 17 ALL IN THE
SOUTHEAST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
ALSO
THE NORTH 111.00 FEET OF THE EAST 1/2 OF LOT 7 (AS SUCH EAST 1/2 IS MEASURED
ALONG THE SOUTH LINE OF LOT 7), LYING ABOVE A HORIZONTAL PLANE HAVING AN
ELEVATION OF +22.00 FEET ABOVE CHICAGO CITY DATUM;
THE SOUTH 16.00 FEET OF THE NORTH 127.00 FEET OF THE EAST 1/2 OF LOT 7 (AS SUCH
EAST 1/2 IS MEASURED ALONG THE SOUTH LINE OF LOT 7), LYING ABOVE A HORIZONTAL
PLANE HAVING AN ELEVATION OF +14.66 FEET ABOVE CHICAGO CITY DATUM;
THAT PART OF THE EAST 1/2 OF LOT 7 (AS SUCH EAST 1/2 IS MEASURED ALONG THE SOUTH
LINE OF LOT 7) EXCEPT THE NORTH 127.00 FEET THEREOF, LYING ABOVE A HORIZONTAL
PLANE HAVING AN ELEVATION OF +12.66 FEET ABOVE CHICAGO CITY DATUM;
THE EAST 20 FEET OF LOT 6 AND THE WEST 1/2 OF LOT 7 (AS SUCH WEST 1/2 IS
MEASURED ALONG THE SOUTH LINE OF LOT 7), LYING ABOVE A HORIZONTAL PLANE HAVING
AN ELEVATION OF +29.00 FEET ABOVE CHICAGO CITY DATUM;
ALL IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO IN THE SOUTHEAST 1/4 OF SECTION
9, TOWNSHIP 39 NORTH RANGE 10, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK
COUNTY, ILLINOIS.
11B. LOT 27 IN LOOP TRANSPORTATION CENTER SUBDIVISION OF PART OF BLOCK 18 IN
ORIGINAL TOWN OF CHICAGO IN THE SOUTHEAST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH,
RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
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EXHIBIT B-2
-----------
Description of Land
-------------------
TO THE EXTENT OF ANY INCONSISTENCY BETWEEN THE LEGAL DESCRIPTIONS SHOWN IN
APPENDIX 2.7(2) AND THIS EXHIBIT, THAT SHOWN IN THE APPENDIX SHALL CONTROL.
PARCEL 1:
LOT 3 (EXCEPT THE EAST 20.50 FEET THEREOF); TOGETHER WITH THE NORTH 1.00 FOOT OF
THE ORIGINAL 18-FOOT ALLEY LYING SOUTH OF AND ADJOINING THE SOUTH LINE OF SAID
LOT 3 IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO IN SECTION 9, TOWNSHIP 39
NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
AND
LOT 1 TO 9, BOTH INCLUSIVE, IN THE SUBDIVISION OF LOT 4; TOGETHER WITH THE NORTH
1.50 FEET OF THE ORIGINAL 18-FOOT ALLEY LYING SOUTH OF AND ADJOINING THE SOUTH
LINE OF SAID SUBDIVISION OF LOT 4 IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO IN
SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN
COOK COUNTY, ILLINOIS.
PARCEL 2:
THAT PART OF THE WEST 1/2 OF NORTH GARVEY COURT (SAID NORTH GARVEY COURT BEING
THE WEST 1/2 OF LOT 2 AND THE EAST 20.50 FEET OF LOT 3; TOGETHER WITH THE NORTH
1.00 FOOT OF THE ORIGINAL 18-FOOT ALLEY LYING SOUTH OF AND ADJOINING THE SOUTH
LINE OF THE AFORESAID PARTS OF LOTS 2 AND 3; THE SOUTH OF SAID 1.00 FOOT STRIP,
BEING THE NORTH LINE OF WEST HADDOCK PLACE AS ESTABLISHED BY ORDINANCE PASSED
SEPTEMBER 17, 1852) LYING ABOVE AN INCLINED PLANE HAVING AN ELEVATION OF +17.26
FEET ABOVE THE CHICAGO CITY DATUM, MEASURED ALONG THE NORTH LINE OF BLOCK 17 AND
HAVING AN ELEVATION OF +21.23 FEET ABOVE THE CHICAGO CITY DATUM, MEASURED ALONG
THE NORTH LINE OF WEST HADDOCK PLACE ALL IN BLOCK 17, (AS VACATED BY THE CITY OF
CHICAGO IN AN ORDINANCE PASSED MARCH 21, 1990 AND RECORDED APRIL 11, 1990 AS
DOCUMENT 90164868), IN THE ORIGINAL TOWN OF CHICAGO IN SECTION 9, TOWNSHIP 39
NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
PARCEL 4:
THAT PART OF WEST HADDOCK PLACE AS ESTABLISHED BY ORDINANCE PASSED SEPTEMBER 17,
1852; TOGETHER WITH THE SOUTH 1.50 FEET OF THE ORIGINAL 18-FOOT ALLEY LYING
NORTH OF AND ADJOINING THE NORTH LINE OF LOT 1 IN THE ASSESSOR'S DIVISION OF LOT
5 IN BLOCK 17; ALSO, THE SOUTH 1.00 FOOT OF SAID ORIGINAL 18-FOOT ALLEY LYING
NORTH OF AND ADJOINING THE NORTH LINE OF LOT 6 IN BLOCK 17, ALL TAKEN AS ONE
TRACT, LYING WEST OF THE SOUTHERLY EXTENSION OF THE WEST LINE OF THE EAST 20.50
FEET OF LOT 3 IN SAID BLOCK 17 AND LYING EAST OF THE WEST LINE OF BLOCK 17 AND
ITS EXTENSIONS, (AS VACATED BY THE CITY OF CHICAGO IN AN ORDINANCE PASSED MARCH
21, 1990 AND RECORDED APRIL 11, 1990 AS DOCUMENT 90164868) IN THE ORIGINAL TOWN
OF CHICAGO IN SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
EASEMENT APPURTENANT TO AND FOR THE BENEFIT OF PARCELS 1, 2, AND 4 CREATED BY
THE GRANT OF EASEMENT RECORDED AS DOCUMENT 90164870 AS AMENDED BY DOCUMENT
91096330 FOR INGRESS, EGRESS, CONSTRUCTION, USE AND MAINTENANCE OF A PLAZA
WALKWAY OVER PARCELS 3 AND 5, SAID PARCELS 3 AND 5 BEING DESCRIBED AS FOLLOWS:
PARCEL 3:
THAT PART OF THE EAST 1/2 OF NORTH GARVEY COURT (SAID NORTH GARVEY COURT BEING
THE WEST 1/2 OF LOT 2 AND THE EAST 20.50 FEET OF LOT 3; TOGETHER WITH THE NORTH
1.00 FOOT OF THE ORIGINAL 18-FOOT ALLEY LYING SOUTH OF AND ADJOINING THE SOUTH
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LINE OF THE AFORESAID PARTS OF LOTS 2 AND 3, THE SOUTH LINE OF SAID 1.00 FOOT
STRIP BEING THE NORTH LINE OF WEST HADDOCK PLACE AS ESTABLISHED BY ORDINANCE
PASSED SEPTEMBER 17, 1852) LYING ABOVE AN INCLINED PLANE HAVING AN ELEVATION OF
+17.26 FEET ABOVE THE CHICAGO CITY DATUM, MEASURED ALONG THE NORTH LINE OF BLOCK
17 AND HAVING AN ELEVATION OF +21.23 FEET ABOVE THE CHICAGO CITY DATUM, MEASURED
ALONG THE NORTH LINE OF WEST HADDOCK PLACE AND LYING BELOW AN INCLINED PLANE
HAVING AN ELEVATION OF 47.26 FEET ABOVE CHICAGO CITY DATUM, MEASURED ALONG THE
NORTH LINE OF SAID BLOCK 17 AND HAVING AN ELEVATION OF +51.23 FEET ABOVE CHICAGO
CITY DATUM, MEASURED ALONG THE NORTH LINE OF WEST HADDOCK PLACE, ALL IN BLOCK 17
IN THE ORIGINAL TOWN OF CHICAGO, IN SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST
OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
PARCEL 5
THAT PART OF WEST HADDOCK PLACE AS ESTABLISHED BY ORDINANCE PASSED SEPTEMBER 17,
1852; TOGETHER WITH THE SOUTH 1.00 FOOT OF THE ORIGINAL 18-FOOT ALLEY LYING
NORTH OF AND ADJOINING THE NORTH LINE OF THE WEST 1/2 OF LOT 7 AND THE NORTH
LINE OF THE EAST 20.50 FEET OF LOT 6 ALL TAKEN AS ONE TRACT LYING EAST OF THE
SOUTHERLY EXTENSION OF THE WEST LINE OF THE EAST 20.50 FEET OF LOT 3 IN BLOCK 17
IN THE ORIGINAL TOWN OF CHICAGO, LYING WEST OF THE SOUTHERLY EXTENSION OF THE
EAST LINE OF THE WEST 1/2 OF LOT 2 IN SAID BLOCK 17, LYING ABOVE AN INCLINED
PLANE, HAVING AN ELEVATION OF +21.23 FEET ABOVE CHICAGO CITY DATUM, MEASURED
ALONG THE NORTH LINE OF WEST HADDOCK PLACE AFORESAID, AND HAVING AN ELEVATION OF
+21.72 FEET ABOVE CHICAGO CITY DATUM, MEASURED ALONG THE SOUTH LINE OF THE
ORIGINAL 18-FOOT ALLEY AFORESAID, AND LYING BELOW AND INCLINED PLANE, HAVING AN
ELEVATION OF +71.23 FEET ABOVE CHICAGO CITY DATUM, MEASURED ALONG THE NORTH LINE
OF WEST HADDOCK PLACE AFORESAID, AND HAVING AN ELEVATION OF +71.72 FEET ABOVE
CHICAGO CITY DATUM, MEASURED ALONG THE SOUTH LINE OF THE ORIGINAL 18-FOOT ALLEY
AFORESAID, ALL IN SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
EASEMENTS FOR SUPPORT AS CREATED BY GRANT OF EASEMENT RECORDED AS DOCUMENT
90164870 AS AMENDED BY DOCUMENT 91096330 OVER PARCEL 6, SAID PARCEL 6 BEING
DESCRIBED AS FOLLOWS:
PARCEL 6:
THAT PART OF GARVEY COURT DEPICTED IN EXHIBIT "B" OF THE GRANT OF EASEMENT
RECORDED AS DOCUMENT 90164870 AS AMENDED BY DOCUMENT 91096330.
RECIPROCAL EASEMENT AGREEMENT DATED DECEMBER 5, 1990 AND RECORDED AS DOCUMENT
91092145 MADE BY AND BETWEEN CHICAGO TITLE AND TRUST COMPANY, AS TRUSTEE UNDER
TRUST AGREEMENT DATED NOVEMBER 12, 1986 AND KNOWN AS TRUST NO. 1088617 AND 77
WEST WACKER LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP, FOR A JOINT
ACCESS STAIRWAY CONNECTING THE TWO PARTIES' PROPERTY AS SPECIFICALLY DESCRIBED
IN SAID INSTRUMENT OVER PARCEL 8, SAID PARCEL 8 BEING DESCRIBED AS FOLLOWS:
PARCEL 8:
THAT PORTION OF THE LAND DESCRIBED BELOW (THE STAIRWAY LAND) SUBJECT TO THE
EASEMENT SET FORTH ABOVE: LOT 1 AND THE EAST 1/2 OF LOT 2 IN BLOCK 17 OF THE
ORIGINAL TOWN OF CHICAGO IN SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST OF THE
THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
AND
A STRIP OF LAND LYING SOUTH OF AND ADJOINING LOT 1 AND THE EAST 1/2 OF LOT 2 IN
BLOCK 17 OF THE ORIGINAL TOWN OF CHICAGO BOUNDED ON THE NORTH BY THE SOUTH LINE
OF SAID LOTS AND ON THE SOUTH BY THE NORTH LINE OF PUBLIC ALLEY AS NARROWED BY
ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF CHICAGO PASSED SEPTEMBER 17,
1852, ALL IN COOK COUNTY, ILLINOIS.
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EASEMENTS OVER PARCEL 9 AS SET FORTH IN AGREEMENT BY AND AMONG AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE UNDER TRUST AGREEMENT DATED
NOVEMBER 26, 1985 AND KNOWN AS TRUST NUMBER 66121, 200 NORTH DEARBORN
PARTNERSHIP, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE
UNDER TRUST AGREEMENT DATED DECEMBER 19, 1989 AND KNOWN AS TRUST NUMBER 11025-08
AND 77 WEST WACKER LIMITED PARTNERSHIP, DATED DECEMBER 31, 1990 AND RECORDED
MARCH 18, 1991 AS DOCUMENT 91119736, FOR WALL OPENINGS; USING, CONSTRUCTING,
MAINTAINING, REPAIRING, RECONSTRUCTING AND RENEWING THE PLAZA, AND EXTENDING AND
CONTINUING THE PLAZA; AND FOR "WALL WORK" AS THEREIN DEFINED, SAID PARCEL 9
BEING DESCRIBED AS FOLLOWS:
PARCEL 9
THAT PORTION OF THE LAND DESCRIBED BELOW (THE WALL LAND) SUBJECT TO THE
EASEMENTS SET FORTH ABOVE: ALL OF SUB-LOTS 1 TO 7 AND THE ALLEY IN THE
ASSESSOR'S DIVISION OF LOT 5 IN BLOCK 17 IN THE ORIGINAL TOWN OF CHICAGO; ALSO
LOT 6 (EXCEPT THE EAST 20.00 FEET THEREOF) IN BLOCK 17 IN THE ORIGINAL TOWN OF
CHICAGO ALL IN THE SOUTHEAST 1/4 OF SECTION 9, TOWNSHIP 39 NORTH, RANGE 14, EAST
OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
SUPPORT AND INGRESS AND EGRESS EASEMENTS AS CREATED BY AGREEMENT DATED OCTOBER
22, 1991, AND RECORDED MARCH 26, 1992, AS DOCUMENT 92199746 AMONG AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE UNDER TRUST AGREEMENT
DATED JUNE 18, 1991, AND KNOWN AS TRUST NUMBER 52947, AND OTHERS OVER THOSE
PORTIONS OF PARCELS 11A AND 11B, WHICH ARE SET FORTH IN SAID AGREEMENT; SAID
PARCEL 11 BEING DESCRIBED IN EXHIBIT B-1 TO THIS CONTRIBUTION AGREEMENT.
CONSTRUCTION, REPAIR, SUPPORT, AND INGRESS AND EGRESS EASEMENTS AS CREATED BY
AGREEMENT DATED OCTOBER 22, 1991, AND RECORDED NOVEMBER 12, 1991 AS DOCUMENT
91591893 AMONG AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE
UNDER TRUST AGREEMENT DATED NOVEMBER 26, 1985, KNOWN AS TRUST NUMBER 66121M AND
OTHERS OVER THOSE PORTIONS OF PARCEL 11A, WHICH ARE SET FORTH IN SAID AGREEMENT,
SAID PARCEL 11 BEING DESCRIBED IN EXHIBIT B-1 TO THIS CONTRIBUTION AGREEMENT.
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EXHIBIT C
---------
Management Agreement
--------------------
77 WWLP and OTR shall negotiate the terms of the Management Agreement for
fourteen (14) days following the Effective Date. If 77 WWLP and OTR are unable
to reach agreement on the form of the Management Agreement by such time, this
Agreement shall be deemed to have terminated.
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EXHIBIT D
---------
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
77 WEST WACKER DRIVE, L.L.C.
Dated as of September 30, 1999
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TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................... 1
Section 1.1 Certain Definitions.................................... 1
ARTICLE II FORMATION..................................................... 6
Section 2.1 Formation of Company................................... 6
Section 2.2 Name of Company........................................ 6
Section 2.3 Purposes and Objectives................................ 6
Section 2.4 Term................................................... 6
Section 2.5 Principal Place of Business............................ 6
ARTICLE III REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS............. 7
Section 3.1 Representations of the Members......................... 7
3.1.1 Due Organization....................................... 7
3.1.2 Authorization.......................................... 7
3.1.3 Effect of this Agreement............................... 7
3.1.4 Litigation............................................. 8
Section 3.2 Indemnification by 77 WWLP............................. 8
ARTICLE IV CAPITAL CONTRIBUTIONS......................................... 8
Section 4.1 Capital Account........................................ 8
4.1.1 Establishment of Capital Accounts...................... 8
Section 4.2 Capital Contributions.................................. 8
4.2.1 Members' Initial Contributions......................... 8
4.2.2 Other Contributions.................................... 9
Section 4.3 Consequences of Default in the Payment of Capital
Contributions........................................ 9
4.3.1 Non-Recourse........................................... 9
4.3.2 Withdrawal of Contribution............................. 9
4.3.3 Other Alternatives..................................... 9
Section 4.4 Return of Capital...................................... 10
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS.................................. 11
Section 5.1 Cash Distribution...................................... 11
Section 5.2 Distributions of Distributable Cash.................... 11
Section 5.3 Net Sale or Refinancing Proceeds....................... 11
Section 5.4 Allocations of Profit.................................. 12
Section 5.5 Losses................................................. 12
ARTICLE VI ACCOUNTING, TAXATION, AND OTHER MATTERS....................... 12
Section 6.1 Company Taxable Year................................... 12
Section 6.2 Location of Records; Inspection........................ 13
Section 6.3 Books of Account....................................... 13
Section 6.4 Reports................................................ 13
Section 6.5 Taxation............................................... 13
Section 6.6 Tax Returns and Audits................................. 16
Section 6.7 Other Reports.......................................... 16
Section 6.8 Bank Accounts; Investments............................. 17
Section 6.9 Insurance.............................................. 17
Section 6.10 Record Retention....................................... 17
Section 6.11 UBTI................................................... 17
ARTICLE VII MANAGEMENT OF THE COMPANY.................................... 19
Section 7.1 Administrative Member.................................. 19
Section 7.2 Duties of Administrative Member; Agents................ 20
Section 7.3 Major Decisions........................................ 20
Section 7.4 Non-Delegation......................................... 21
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ARTICLE VIII OTHER BUSINESS.............................................. 22
Section 8.1 Prime.................................................. 22
Section 8.2 OTR.................................................... 23
ARTICLE IX TRANSFERABILITY............................................... 23
Section 9.1 General................................................ 23
Section 9.2 Transferee Not Member in Absence of Consent............ 24
Section 9.3 Sale of Membership Interest............................ 24
Section 9.4 Change of Control...................................... 25
ARTICLE X DISSOLUTION AND TERMINATION.................................... 25
Section 10.1 Dissolution............................................ 25
Section 10.2 Continuance of Company................................. 25
Section 10.3 Termination............................................ 26
Section 10.4 Activities During Wind Up.............................. 26
Section 10.5 Liquidation............................................ 26
ARTICLE XI NO WAIVER..................................................... 27
ARTICLE XII NO RIGHT TO PARTITION........................................ 27
ARTICLE XIII GENERAL..................................................... 27
Section 13.1 Entirety of Agreement.................................. 27
Section 13.2 Notices................................................ 27
Section 13.3 Further Assurances..................................... 29
Section 13.4 Applicable Law and Choice of Forum..................... 29
Section 13.5 Counterparts........................................... 29
Section 13.6 Headings............................................... 29
Section 13.7 Waiver................................................. 29
Section 13.8 Pronouns and Plurals................................... 29
Section 13.9 Force Majeure.......................................... 29
Section 13.10 Section Numbers........................................ 30
Section 13.11 Notice of Litigation................................... 30
Section 13.12 Severability........................................... 30
Section 13.13 No Drafting Presumption................................ 30
Section 13.14 Third-Party Beneficiaries.............................. 30
Section 13.15 Remedies............................................... 30
Section 13.16 Designation of Forum and Consent to Jurisdiction....... 30
Section 13.17 Waiver of Jury Trial................................... 31
Section 13.18 Binding Agreement...................................... 31
Section 13.19 Exculpation............................................ 31
Section 13.20 Like Kind Exchange..................................... 31
Section 13.21 Performance/Holiday.................................... 32
EXHIBIT A Loan Agreements
EXHIBIT B Determination of Fair Market Value
EXHIBIT C Property Description
EXHIBIT D Property Management and Leasing Agreement
EXHIBIT E Annual Plans
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AMENDED AND RESTATED
OPERATING AGREEMENT
This Amended and Restated Operating Agreement ("Agreement") is entered into
as of the 30th day of September, 1999 (the "Effective Date"), between OTR, an
Ohio general partnership acting as nominee on behalf of and legally binding on
THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO ("OTR"), an instrumentality of the
State of Ohio, and PRIME GROUP REALTY, L.P. ("Prime"), a limited partnership
organized under the laws of the State of Illinois, both of which are 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 "77WWLP" means 77 West Wacker Limited Partnership, an Illinois
limited partnership.
1.1.2 "77WWLP Contributed Assets" means all assets contributed by
77WWLP to the Company pursuant to the Contribution Agreement.
1.1.3 "Act" means the Delaware Limited Liability Company Act.
1.1.4 "Additional Capital Contributions" shall have the meaning set
forth in Section 4.2.2.
1.1.5 "Administrative Member" shall have the meaning set forth in
Section 7.1.
1.1.6 "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.
1.1.7 "Annual Plans" shall have the meaning set forth in Section
7.2(b).
1.1.8 "Capital Account" shall have the meaning set forth in Section
4.1.
1.1.9 "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 Interest in the
Company held by such Member.
1.1.10 "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, (ii) receipt of an
installment of the outstanding principal amount of or interest on purchase
money obligations accepted by the Company on any sale or other disposition
of all or substantially all of the Company's assets, (iii) any damage to or
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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 "City Agreement" means that certain restated redevelopment
agreement dated September 30, 1987 between the City of Chicago and Baird
and Warner-Higginbottom-Stein & Company Venture as amended, modified and
supplemented as of the date hereof.
1.1.11 "Code" means the Internal Revenue Code of 1986, as amended, or
any successor or replacement statute.
1.1.12 "Common Equity" shall initially be $22,000,000 for each Member.
1.1.13 "Company" means the limited liability company formed pursuant
to this Agreement.
1.1.14 "Contributing Member" shall have the meaning set forth in
Section 4.3.
1.1.15 "Contribution Agreement" means the Contribution Agreement dated
as of September 30, 1999, among OTR and 77WWLP.
1.1.16 "Depreciation" means for each Company taxable 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.
1.1.17 "Distributable Cash" shall have the meaning set forth in
Section 5.1.
1.1.18 "Distribution Date" means the date which is twenty (20) days
after the end of each month.
1.1.19 "Effective Date" means September 30, 1999, which is the date
closing occurs pursuant to Section 5.1 of the Contribution Agreement.
1.1.20 "Fair Market Value" means the value of the Property as
determined pursuant to Exhibit B hereto.
1.1.21 "Interest" or "Percentage Interest" means the ownership
interest of each Member in the Company and shall include its right to share
in income, gain, profits, losses and expense and to receive distributions
of Company assets pursuant to this Agreement. Immediately after the
distribution set forth in the first sentence of Section 5.1 and the
contribution of the 77WWLP Contributed Assets and the OTR Contributed
Assets, the respective Interests of the Members shall be:
OTR 50%
Prime 50%
1.1.22 "Loan Agreements" means the loan documents set forth in Exhibit
A.
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1.1.23 "Lock Out Period" shall have the meaning set forth in Section
9.3.
1.1.24 "Member" means each party executing this Agreement and their
successors and assigns who are admitted pursuant to the terms of this
Agreement.
1.1.25 "Net Sale or Refinancing Proceeds" shall mean the net proceeds
remaining from any Capital Transaction (including any interest received
under any purchase money obligations accepted by the Company on any sale or
other disposition of Company assets) 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, and the setting aside of any reserves for
creditors as reasonably determined by the Administrative Member.
1.1.26 "Non-Contributing Member" shall have the meaning set forth in
Section 4.3.
1.1.27 "OTR Contributed Assets" means the cash contributed by OTR to
the Company pursuant to the Contribution Agreement.
1.1.28 "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.
1.1.29 "Preferred Equity" means $66,000,000 of OTR's Capital
Contribution less cumulative distributions pursuant to Section 5.3.2.
1.1.30 "Priority Return" means an annual cumulative, compounded, nine
and one-half percent (9-1/2%) preferred return on the Preferred Equity.
1.1.31 "Profits" and "Losses" and reference to any item of income,
gain, loss or deduction thereof mean, for each Company taxable year, an
amount equal to the Company's taxable income or loss for such Company
taxable 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
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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 recover
deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such
Company taxable 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.
1.1.32. "Property" means the fifty story Class A office building
located at the southeast corner of West Wacker Drive and North Clark Street
in Chicago, Illinois and containing approximately 944,556 net rentable
square feet of office space, an approximately 12,288 square foot health
club facility in an air rights parcel adjacent to the Property, an
approximately 4,800 square foot cafeteria style restaurant, 45 indoor
parking spaces, certain air rights and the benefits of a parking rights
agreement and a skywalk agreement more fully described in Exhibit C hereto.
1.1.33. "Property Management and Leasing Agreement" means the
agreement set forth in Exhibit D hereto.
1.1.34. "Readjusted Equity" shall mean the Common Equity of the
Members restated to reflect the Fair Market Value of the Property.
1.1.35. "Regulations" mean the temporary and final income tax
regulations promulgated under the Code from time to time.
ARTICLE II
FORMATION
Section 2.1 FORMATION OF COMPANY. The Company was formed as a limited
liability company pursuant to the Act, effective August 9, 1999. The original
Member now desires to admit OTR as a Member, to distribute its interest to Prime
(its sole member), to confirm Prime as a Member as a result of such
distribution, to withdraw as a Member itself as a result of such distribution
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 77 West
Wacker Drive, L.L.C. The Administrative Member shall cause a certificate of
formation that complies with the requirements of the Act to be properly filed
with the Delaware Secretary of State. 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.
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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 77 West Wacker Drive, Suite 3900, Chicago, Illinois
60601 or such other location as the Administrative Member shall determine. 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, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
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.
3.1.3 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
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effect on the ability of such Member to perform its obligations under this
Agreement and the transactions contemplated hereby, except in the case of
(b) and (c) as to which requisite waivers or consents have been obtained.
3.1.4 Litigation. There is no action, suit or proceeding pending or,
to the knowledge of such Member, threatened against such Member which, if
adversely determined could, individually or in the aggregate, reasonably be
expected to materially and adversely affect the ability of such Member to
perform its obligations under this Agreement.
3.2 INDEMNIFICATION BY PRIME. Prime shall indemnify OTR for any and all
expenses, costs and liability with respect to activity of the Company which have
accrued prior to the Effective Date of this Amended and Restated Operating
Agreement of the Company.
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 initial Capital Contributions and as reasonably determined by
the Administrative Member 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 the Administrative Member in writing) of
any property distributed to such Member by the Company (including without
limitation the distribution to 77WWLP 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' Initial Contributions
(a) 77WWLP has contributed to the Company all of its right, title
and interest in and to the 77WWLP Contributed Assets. 77WWLP was
credited with a Capital Contribution equal to $110,000,000, as such
amount may be adjusted in accordance with the Contribution Agreement,
such amount representing the net fair market value of the 77WWLP
Contributed Assets.
(b) OTR has contributed on the date hereof to the Company the OTR
Contributed Assets. OTR shall be credited with a Capital Contribution
equal to $88,000,000, as such amount may be adjusted in accordance
with the Contribution Agreement, such amount representing the amount
of the OTR Contributed Assets. This Capital Contribution shall be made
in accordance with the terms and provisions of the Contribution
Agreement.
(c) 77WWLP Interest was then transferred to Prime with Prime
succeeding to 77WWLP Capital Account.
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4.2.2 Other Contributions. If additional capital is required by the
Company as determined unanimously by the Members, the Members shall make
such additional capital contributions (the "Additional Capital
Contribution") in proportion to their respective Interests.
Section 4.3 CONSEQUENCES OF FAILURE TO PAY CAPITAL CONTRIBUTIONS. If any
Member (the "Non Contributing Member") fails to make any Capital Contribution,
or any portion thereof, which such Member is required to make pursuant to this
Agreement within 30 days after agreement to make Additional Capital
Contributions, then the Lock Out Period shall expire and the other Member (the
"Contributing Member") may make such Capital Contribution, or such portion
thereof which the Non-Contributing Member has failed to make, and the
Contributing Member shall have the following remedies as its sole and exclusive
remedies under the Agreement, at law and in equity:
4.3.1 NON-RECOURSE. The Contributing Member may exercise any and all rights
and remedies provided in this Agreement, but not any other remedies that are
available at law or in equity, to enforce the Non-Contributing Member's
obligation to make such Capital Contributions or for damages suffered or
incurred by the Contributing Member or the Company by reason of the failure of
the Non-Contributing Member to contribute. Notwithstanding anything to the
contrary contained in this Agreement, no assets of the Non-Contributing Member
other than its Interest shall be subject to any lien or recourse as a result of
the failure of such Non-Contributing Member to make such unpaid Capital
Contributions.
4.3.2 WITHDRAWAL OF CONTRIBUTION. In the case of any failure to timely make
any Capital Contribution, the Contributing Member may withdraw its share of such
requested Capital Contribution by delivery of notice to such effect to the
Company and the Non-Contributing Member.
4.3.3 OTHER ALTERNATIVES. In the case of any failure to timely make any
Capital Contribution, as an alternative to the remedies provided for above in
Section 4.3.2, any Contributing Member may contribute the Non-Contributing
Member's share of such requested Capital Contributions, and the Contributing
Member may elect treatment of its contribution on behalf of the Non-Contributing
Member pursuant to clause (a) or (b), below, by delivery of notice of such
election to the Company and the Non-Contributing Member.
(a) Loan: A Contributing Member may treat such contribution as a loan
to the Non-Contributing Member, in which event the Non-Contributing Member
shall be indebted to the Contributing Member in the principal amount equal
to the Capital Contribution made by such Contributing Member on behalf of
the Non-Contributing Member, which loan shall bear interest at the lesser
rate of fifteen percent (15%) per annum or the maximum rate the
Contributing Partner is permitted to charge by law, compounded monthly,
which loan shall be due and payable in full on the third anniversary after
the funding of such Capital Contribution or greater period as the
Contributing Member may specify in its notice subject however to the terms
of Section 4.3.1. Any Contributing Member having elected to treat its
contribution as a loan pursuant to this clause (a) may change its election
after such third anniversary, by written notice to the Non-Contributing
Member, to elect treatment under clause (b) below.
(b) Squeeze-Down: A Contributing Member may elect to decrease (but not
below zero) the Percentage Interest of the Non-Contributing Member pursuant
to this clause (b). If the Contributing Member so elects, the Member's
Percentage Interest shall thereafter by determined for the Non-Contributing
Member by dividing its Readjusted Equity by the total Readjusted Equity and
the applicable Additional Capital Contribution of the Contributing Member
and for the Contributing Member by dividing the sum of its Readjusted
Equity and the applicable Additional Capital Contribution by the sum of the
total Readjusted Equity and the applicable Additional Capital Contribution.
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Section 4.4 RETURN OF CAPITAL. No Member shall have any personal liability
for the repayment of the Capital Contributions of any Member except as otherwise
provided in this Article IV. 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 OTR Contributed Assets have been
distributed to 77WWLP or its Assignee pursuant to Section 13.20 hereof. Subject
to Section 13.20 hereto, such contribution and distribution shall be treated for
federal and state income tax purposes as a cash contribution by OTR to the
Company followed by a part sale, part capital contribution by 77WWLP of the
77WWLP Contributed Assets to the Company. 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 Agreements and other expenses, liabilities of
the Company then due and payable and after establishment of such reserves as the
Administrative Member may reasonably determine for specific purposes (the
"Distributable Cash"). 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. Distributable Cash as of
each Distribution Date shall be distributed as follows:
5.2.1 First, to OTR until the cumulative distributions to OTR for the
current and all prior Company taxable years pursuant to this Section 5.2.1,
and Section 5.3.1 equals the Priority Return; and
5.2.2 The balance, if any, shall be distributed to the Members,
pro rata, in accordance with their Percentage Interests.
Section 5.3 NET SALE OR REFINANCING PROCEEDS. Except as otherwise provided
herein or upon dissolution and termination 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 OTR until the cumulative distributions to OTR for the
current and all prior Company taxable years pursuant to this Section 5.3.1
and Section 5.2.1 equals the Priority Return;
5.3.2 Second, to OTR until the cumulative distributions to OTR for the
current and all prior Company taxable years pursuant to this Section 5.3.2
equals the Preferred Equity; and
5.3.3 The balance, if any shall be distributed to the Members, pro
rata in accordance with their Percentage Interest.
Section 5.4 ALLOCATIONS OF PROFIT. Except as otherwise provided herein,
Profits of the Company shall be allocated in the following order of priority:
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5.4.1 First, to the Members in proportion to the cumulative unreversed
Losses allocated to each Member pursuant to Section 5.5.3 until the
cumulative Profit allocated pursuant to this Section 5.4.1 are equal to the
cumulative Losses allocated to such Members under Section 5.5.3 for all
prior Company taxable years;
5.4.2 Second, to OTR, in an amount equal to the excess, if any, of the
Priority Return as of the end of such Company taxable year over the
cumulative allocations of Profit allocated pursuant to this Section 5.4.2
(net of allocations of Losses made to OTR under Section 5.5.2) made to OTR
for all prior Company taxable years; and
5.4.3 The balance, if any, to each Member, pro rata, in accordance
with such Member's Interest.
Section 5.5 LOSSES. Except as otherwise provided herein, Losses of the
Company shall be allocated in the following order and priority:
5.5.1 First, to each Member in accordance with such Member's Interest
until the cumulative Losses allocated pursuant to this Section 5.5.1 for
the current and all prior Company taxable years equals the cumulative
Profits, if any, allocated pursuant to Section 5.4.3 for all prior Company
taxable years;
5.5.2 Second, to OTR, until the cumulative Losses allocated to OTR
pursuant to this Section 5.5.2 for the current and all prior Company
taxable years equals the cumulative Profits allocated pursuant to Section
5.4.2 for all prior Company taxable years; and
5.5.3 The balance, if any, shall be allocated fifty percent (50%) to
OTR and fifty percent (50%) to Prime.
ARTICLE VI
ACCOUNTING, TAXATION, AND OTHER MATTERS
Section 6.1 COMPANY TAXABLE YEAR. The taxable year of the Company shall be
the calendar year. The first taxable year of the Company shall begin on the date
hereof and end on December 31, 1999.
Section 6.2 LOCATION OF RECORDS; INSPECTION. The books, records and
accounts for the Company shall be kept and maintained at the principal office of
the Administrative Member. 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 taxable year and in any event within the time specified below, the
Administrative Member shall cause to be prepared on both a cash and 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 taxable year a report
containing financial statements of the Company including a statement of
each Member's Capital Account. The costs of such report shall be paid by
the Company.
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6.4.2 As soon as practical but in no event later than one hundred
twenty (120) days following the end of such Company taxable 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 taxable year, including (a) the amount of Capital
Contributions credited to each Member's Capital Account during such Company
taxable year, (b) any distributions received by a Member during such
Company taxable 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 taxable year.
6.4.3 Such other reports and information as either Member shall
reasonably request.
Section 6.5 TAXATION.
6.5.1 The parties intend that the Company shall be treated as a
partnership for federal, state and local income and other tax purposes. The
Members agree to cooperate in the taking of all action, 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 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
taxable year, 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 charge back" 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 during a Company taxable year there is a net decrease in
partner nonrecourse debt minimum gain (as determined in accordance
with Regulations Section 1.704-2(i)(3)), 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 taxable 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 taxable 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.
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(d) If the allocation of any item of loss or deduction for any
Company taxable year would cause or increase a deficit balance in the
Capital Account of any Member as of the end of such Company taxable
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, but not cause such deficit Capital Account to such other
Member, and (b) thereafter, in accordance with Section 5.5.3. 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 (i)
whether the allocation of any item of loss or deduction for a Company
taxable year would cause or increase a deficit balance in the Capital
Account of any Member as of the end of such Company taxable 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
6.5.2, 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 taxable 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
6.5.2 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
6.5.2 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 6.5.2 had not occurred.
(i) In any Company taxable year in which the Company is
liquidated pursuant to Article V, items of income, gain, loss and
deduction shall, to the extent necessary, be reallocated between
Members in order to permit the liquidating distributions made under
Sections 10.5.3 and 10.5.4.
(j) 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
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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. 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.
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. If requested by a
Member not less than fifteen (15) 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 the Members for review and comments. In addition, not less than
thirty (30) 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. Prime 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. Without the written consent of all of the
Members, the tax matters partner, in its capacity as such, shall not 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 taxable year of the
Company.
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 Agreements, 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 at banks selected by the Administrative Member. All
funds of every kind and nature received by the Company, including Capital
Contributions, loan proceeds and operating receipts, shall be deposited in
such bank accounts. The Administrative Member shall give the Members
written notification of the banks at which Company bank accounts are
maintained. Signatories for such accounts shall be authorized from time to
time in writing by the Administrative Member.
(b) The Company may make such investments as are approved by the
Administrative Member provided 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.
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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. UBTI. Notwithstanding anything to the contrary contained in
other Sections of this Agreement, the Administrative Member agrees to use
commercially reasonable efforts not to do any of the following:
(a) enter into any contract for the acquisition or improvement of real
property where the price for such acquisition or improvement is not a fixed
amount determined as of the date of the acquisition or the completion of
such improvement;
(b) incur any indebtedness with respect to the Property the amount of
which, or of any other amount payable with respect to such indebtedness, or
the time for making any payment of any such amount, depends, in whole or in
part, on any revenue, income or profits derived from the Property;
(c) subject to the exception in Section 514(c)(9)(G) of the Code,
lease the Property or any part thereof to the Person selling the Property
to the Company or to any Person related to the selling Person within the
meaning of Section 267(b) or 707(b) of the Code;
(d) knowingly lease the Property or any part thereof;
(i) to any person who is related, within the meaning of Section
4975(e)(2)(C), (E), or (G) of the Code, to OTR; or
(ii) to any person who is related, within the meaning of Section
4975(e)(2)(F) or (H) of the Code, to any person described in Section
6.11(d)(i) above;
(e) enter into any lease or arrangement with respect to the Property
or any part thereof;
(i) which would provide for rent or other compensation for use or
occupancy of the Property that depends in whole or in part upon the
income or profits derived by any person from the leased property
(other than an amount based upon a fixed percentage or percentages of
receipts or sales;
(ii) under which fifty percent (50%) or more of the total rent
receivable by the Company would be attributable to incidental personal
property within the meaning of Section 512(b) of the Code.
(f) incur any indebtedness with respect to the Property from a person
described in Section 6.11(c) hereof or knowingly incur any indebtedness
with respect to the Property from a person described in Section 6.11(d)
hereof; or
(g) following the date of this Agreement, knowingly take any action,
or permit any action to be taken, that would subject any Affiliate of OTR
to the tax on unrelated business taxable income under Section 511, et seq.
of the Code ("UBTI") unless in each case OTR has consented in writing to
any transaction that might cause such tax to be imposed. If OTR refuses to
consent in writing to a particular transaction, and such refusal causes the
Administrative Member to violate any provision of this Agreement other than
this Section 6.11, then such violation shall not constitute a breach of
this Agreement. Upon OTR's refusal to consent, OTR shall have the rights
set forth below in this Section 6.11.
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The Administrative Member shall use commercially reasonable efforts to
comply with such other requirements in connection with the avoidance of UBTI by
OTR or any Affiliate of OTR as OTR's counsel may reasonably request in writing
from time to time, but under no circumstances shall the Administrative Member be
required to comply with such requirements if doing so would have a material
adverse effect on the Administrative Member or Prime; provided, however, upon
the Administrative Member's failure to comply with such requirements, the Lock
Out Period shall terminate in one hundred twenty (120) days from OTR's refusal
to consent. Because the provisions of this Section 6.11 are for the benefit of
OTR, only OTR shall have the right, exercisable in its sole discretion, to
approve the waiver of the application of this Section 6.11 to any incident or
transaction (and no other Member shall have the right to approve or otherwise
affect such waiver). Any instrument purporting to be such a waiver shall be
invalid unless it is signed by OTR. Any such waiver shall not constitute a
permanent waiver of this Section 6.11 and shall apply only to the incident or
transaction specified in the waiver; and any subsequent or similar incident or
transaction shall require another waiver as specified above. Notwithstanding
anything herein to the contrary, if any provision of the Code or Regulations (as
written as of the date of this Agreement) is amended, superseded, or otherwise
modified such that any lease agreement, loan agreement or other arrangement
(including this Agreement) existing as of the date of this Agreement violates,
or causes the Administrative Member to violate, the provisions of the first
sentence of this Section 6.11, any adverse consequence shall be born entirely by
OTR; provided, however, the Administrative Member agrees to notify OTR of any
known violation as soon as possible and to use commercially reasonable efforts
to attempt to cure such violation, but under no circumstances shall the
Administrative Member be required to cure any such violation if it would have a
material adverse effect on the Administrative Member or Prime.
ARTICLE VII
MANAGEMENT OF THE COMPANY
Section 7.1 ADMINISTRATIVE MEMBER. The Administrative Member initially
means Prime and thereafter any successor manager as may be appointed by 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 that both
Members shall have approved in writing, 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 in complete
compliance 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
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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 supervision 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 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
objections to same within 45 days after receipt of such Annual Plans. Prior
to approval by the Members of the Annual Plans 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. 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 E.
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 their Percentage
Interest:
(i) change the purposes of the Company as set forth in Section
2.3, or take any action which is inconsistent with such purposes;
(ii) obligate the Company as guarantor, endorser, surety or
accommodation party except as provided in the Loan Agreements;
(iii) except as provided in the Annual Plans, cause the Company
to incur or refinance any indebtedness;
(iv) assign, transfer, pledge, compromise or release any claims
of or debts in amounts in excess of $200,000 due the Company except on
payment in full;
(v) 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;
(vi) except as provided in Article IX, admit any Person as a
Member to the Company;
(vii) allow the Company to enter into any lease (A) in which the
lessee's two year average net worth is not equal to or greater than
the amount which is ten (10) times the estimated total rent obligation
of the prospective lessee; (B) in which lessee shall not have been in
business at least five (5) years; (C) in which the area of the
premises to be leased is in excess of one full floor of the Property;
or (D) which contains terms which materially differ from the Annual
Leasing Plan then in effect;
(viii) initiate any renovation, alteration or redevelopment of
the Property or any single capital expenditure item in excess of
$200,000, except as included in the Annual Capital Plan then in effect
or to address a need of the Company in an emergency;
(ix) 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);
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(x) determine not to enforce any material lease of the Property;
(xi) list the Property for sale;
(xii) make a direct or indirect transfer of an Interest in the
Company except as otherwise permitted in this Agreement;
(xiii) file for bankruptcy; or
(xiv) sell the Property.
Section 7.4 NON-DELEGATION. Each Member shall indemnify and hold harmless
the other Member and the Company against any and all claims that my 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 Article VII of 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.
ARTICLE VIII
OTHER BUSINESS
Section 8.1 PRIME. 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.
Notwithstanding the foregoing, and except as provided in this Article in
connection with Permitted Activities (as defined hereinafter), Prime, an
Affiliate or the property manager shall not have any discussions with the
following three (3) tenants ( the "3 Tenants") of the Property: (i) Jones Day
Reavis & Pogue, (ii) Everen Securities, Inc., and (iii) R.R. Donnelley & Sons
Company, about leasing space in any other building in the downtown Chicago loop
controlled by Prime (and which Prime or an Affiliate has some direct ownership)
if such discussions also involve relocation of any one or more of such tenants
from the Property.
The foregoing restrictions shall not be construed to prohibit Prime, an
Affiliate or the property manager from engaging in the ordinary course of
business discussions regarding building services, repairs and maintenance items
and other ordinary day-to-day tenant inquiries including limited discussions in
response to a direct inquiry by or on behalf of such tenant regarding space
needs (so long as OTR receives notice of such discussions within ten (10) days
of such discussions) or the following activities (collectively, the "Permitted
Activities") with any one or more of the 3 Tenants following written
notification to OTR that such activities would be taking place: (i) discussions
during the last thirty (30) months of the lease term regarding space needs,
including, but not limited to, discussions and negotiations regarding relocation
to other properties, and entering into lease agreements with such tenant at any
other properties, (ii) substantive negotiations in response to a direct inquiry
by or on behalf of such tenant regarding space needs, including discussions and
negotiations regarding relocation opportunities at any time from one or more of
the 3 Tenants or their respective lease or tenant representative, including
entering into lease agreements with such tenant for space at any other property,
(iii) discussions regarding additional space needs (in addition to space
required at the Property), including discussions and negotiations regarding
opportunities at other properties owned by Prime, or (iv) discussions regarding
space needs at any other time if Prime, an Affiliate or the property manager
reasonably believes in good faith that as a result of such discussions that it
will have lease opportunities with any tenant or prospective tenants of similar
credit worthiness which will not materially reduce the market value of the
Property based on then current market conditions.
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Section 8.2 OTR. 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.
Notwithstanding the foregoing, and except as provided in this Article in
connection with Permitted Activities, OTR shall not have any discussions with
the 3 Tenants about leasing space in any other building in the downtown Chicago
loop controlled by OTR (and which OTR or an Affiliate has some direct ownership)
if such discussions also involve relocation of any one or more of such tenants
from the Property.
The foregoing restrictions shall not be construed to prohibit OTR from
engaging in the ordinary course of business discussions regarding building
services, repairs and maintenance items and other ordinary day-to-day tenant
inquiries including limited discussions in response to a direct inquiry by or on
behalf of such tenant regarding space needs (so long as Prime receives notice of
such discussions within ten (10) days of such discussions) or the Permitted
Activities with any one or more of the 3 Tenants following written notification
to Prime that such activities would be taking place.
ARTICLE IX
TRANSFERABILITY
Section 9.1 GENERAL. Except as otherwise provided in this Agreement, no
Member may sell, assign, exchange (collectively "sell" or "sale") 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. 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. If any Member pledges or otherwise
encumbers its Membership Interest as security for repayment of a liability, any
such pledge or hypothecation 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 ?18-702 of the
Act.
Section 9.2 TRANSFEREE NOT MEMBER IN ABSENCE OF CONSENT. Notwithstanding
anything contained herein to the contrary, a Transferring Member may only sell
its Membership Interest to a Transferee which is not a Member immediately prior
to the sale upon: (i) 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 Company 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 each 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; and (v) 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
Operating Agreement shall be voidable at the option of the Company. No transfer
of a Member's Interest 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.
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Section 9.3 SALE OF MEMBERSHIP INTEREST. At any time after September 30,
2001 (the period prior to such date hereinafter referred to as the "Lock Out
Period") either OTR or Prime (the "Initiating Member") may, by notice to the
other, require the other (the "Responding Member") to elect either (x) to
purchase all (but not less than all) of the Initiating Member's Interest in the
Company, or (y) to sell to the Initiating Member all (but not less than all) of
the Responding Member's Interest in the Company, in either case at a price and
terms set forth in such notice. Upon receipt of such notice, the Responding
Member receiving such notice shall notify the Initiating Member within one
hundred twenty (120) days whether the Responding Member elects so to purchase or
sell. If the Responding Member does not notify the Initiating Member of the
Responding Member's election in such 120-day period, the Responding Member shall
be deemed to have elected to sell. The purchasing party shall pay for the other
Member's Interest in cash. The closing will be held at the principal offices of
the Company within sixty (60) days after the Responding Member has notified (or
been deemed to have notified) the Initiating Member of the Responding Member's
election. The purchasing Member agrees to cooperate with the selling Member to
have the sale structured as a like kind exchange under Section 1031 of the Code
if the selling Member so requests.
Section 9.4 CHANGE OF CONTROL. If Prime Group enters into an agreement for
merger, consolidation, reorganization or similar transaction with another
entity, and if immediately following the effective date of such merger,
consolidation or similar transaction ("Transaction Effective Date") the majority
of the Board of Directors of Prime is comprised of persons who were not members
of the Board of Directors or employees of Prime immediately preceding such
Transaction Effective Date, then the Lock Out Period shall expire on the 180th
day following the Transaction Effective Date.
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;
(b) the bankruptcy or dissolution of a Member or the occurrence of any
other event that terminates the continued membership of a Member in the
Company; or
(c) any other event causing dissolution of a limited liability company
under the Act.
Section 10.2 CONTINUANCE OF COMPANY. Notwithstanding the foregoing
provisions of Section 10.1, upon the occurrence of an event described in Section
10.1(b) with respect to a Member (the "Withdrawing Member"), the other Member
shall have the right to continue the business of the Company. Such right can be
exercised only if the Member that is not the Withdrawing Member consents in
writing, within 90 days after the occurrence of the event described in Section
10.1(b), to continue the business of the Company. If the right to continue the
business of the Company is exercised, the Withdrawing Member shall no longer be
a Member of the Company but shall continue to be entitled to the distributions
such Member would otherwise be entitled to receive if it was not a Withdrawing
Member. If the Member that is not the Withdrawing Member does not consent to
continue the Company, the right of the Members to continue the business of the
Company shall expire, the Administrative Member shall file a statement of intent
to dissolve, and the Company's affairs shall be wound up by the Administrative
Member.
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Section 10.3 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 10.4 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.
Section 10.5 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:
10.5.1 In payment of all liabilities of the Company to creditors other
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;
10.5.2 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;
10.5.3 To OTR until the cumulative distributions to OTR for the
current and all prior Company taxable years pursuant to Sections 5.2.1,
5.3.1 and this Section 10.5.3 equals the Priority Return;
10.5.4 To OTR until the cumulative distributions to OTR for the
current and all prior Company taxable years pursuant to Section 5.3.2 and
this Section 10.5.4 equals the Preferred Equity; and
10.5.5 To the Members in accordance with the positive Capital Accounts
of the Members.
No Member with a negative balance in its Capital Account shall be liable to the
Company or any other Member for the amount of such negative balance upon winding
up and liquidation.
ARTICLE XI
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.
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ARTICLE XII
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 XIII
GENERAL
Section 13.1 ENTIRETY OF AGREEMENT. This Agreement, together with the
Contribution Agreement and Property Management and Leasing 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 13.2 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.
77 Wacker Drive, Suite 3900
Chicago, IL 60601
Attention: President
With a copy to:
Prime Group Realty, L.P.
77 Wacker Drive, Suite 3900
Chicago, IL 60601
Attention: General Counsel
With a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Il 60601
Attention: William J. Ralph
If to OTR:
The State Teachers Retirement
System of Ohio
275 East Broad Street
Columbus, OH 43215-3771
Attention: Director, Real Estate Assets
With a copy to:
Taft, Stettinius & Hollister, L.L.P.
1800 Firstar Tower
425 Walnut Street
Cincinnati, Ohio 45202-3957
Attention: Edward D. Diller
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<PAGE>
(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 or (ii) sent via a nationally recognized overnight
courier shall be deemed delivered one business day after deposit with such
courier.
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 13.2. Each of the Members agrees
to give such designated notice to any designated Affiliate.
Section 13.3 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 13.4 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 13.5 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 13.6 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 13.7 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 13.8 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 13.9 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.
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<PAGE>
Section 13.10 SECTION NUMBERS. Unless otherwise indicated, references to
Section numbers are to Sections of this Agreement.
Section 13.11 NOTICE OF LITIGATION. Either Member that becomes aware of any
litigation pending against the Company 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 13.12 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 13.13 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 13.14 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 13.15 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 13.16 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 13.17 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 13.18 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 13.19 EXCULPATION.
(a) OTR. This Agreement is executed by certain general partners of
OTR, not individually, but solely on behalf of, and as the authorized
nominee and agent for The State Teachers Retirement Board of Ohio
("STRBO"), and in consideration for entering into this Agreement, Prime and
77WWLP hereby waive any rights to bring a cause of action against the
individuals executing this Agreement on behalf of OTR (except for any cause
of action based upon lack of authority or fraud), and all persons dealing
with OTR must look solely to STRBO's assets for the enforcement of any
claim against OTR, 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 STRBO.
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<PAGE>
(b) Prime. This Agreement is executed by certain individuals, not
individually, but solely on behalf of, and as the authorized representative
for 77 WWLP and its general partners. OTR hereby waives any rights to bring
a cause of action against the individuals executing this Agreement on
behalf of 77 WWLP (except for any cause of action based upon lack of
authority or fraud), and all persons dealing with 77 WWLP must look solely
to the assets of 77 WWLP and its general partner and such general partner's
general partner for the enforcement of any claim against 77 WWLP, 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) 77 WWLP or (ii) the general partner of 77 WWLP or such
general partner's general partners.
Section 13.20 LIKE KIND EXCHANGE.
(a) The Company and OTR agree to cooperate with 77WWLP, as described
in subsection (b) below, to accommodate the desire of 77WWLP to treat the
Capital Contribution and distribution to 77WWLP contemplated by Section
4.2.1(a) and 5.1 as part of a tax deferred exchange by 77WWLP under Section
1031 of the Code; however, OTR and 77WWLP acknowledge and agree that the
Company and OTR shall have no responsibility for the tax treatment to
77WWLP and all cost, expenses and liabilities will be borne by 77WWLP.
(b) In order to accommodate 77WWLP, the Company agrees that (i)
consistent with Section 13.20(a) hereof, it shall make payment, as
requested by 77WWLP, to the person or persons designed by 77WWLP, which
person will be intended to be a "qualified escrow" or "qualified trust" for
purposes of Section 1.1031(k)-1(g)(3) of the Regulations, and (ii) as
requested by 77WWLP, the Company will consent to the assignment of this
Agreement on or after the date hereof to a person, who is intended to be a
"qualified intermediary" for purposes of Section 1.1031(k)-1(g)(3) of the
Regulations.
Section 13.21 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.
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.
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty, L.P., its
general partner
By: Prime Group Realty Trust, its
managing partner
By: /s/ Jeffrey A. Patterson
-----------------------------------------
PRIME GROUP REALTY, L.P.
By: Prime Group Realty Trust, its managing
partner
By: /s/ Jeffrey A. Patterson
-----------------------------------------
OTR
By: /s/ Stephen A. Mitchell
-----------------------------------------
General Partner
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<PAGE>
Exhibit "A"
LOAN AGREEMENTS
Intentionally Deleted
-72-
<PAGE>
Exhibit "B"
DETERMINATION OF FAIR MARKET VALUE
(i) "FAIR MARKET VALUE" shall mean the purchase price that a willing and able
buyer would pay, and a willing seller would accept, in an arm's length
transaction, for the Property, all as determined as of the date of the election
by the Contributing Member in Section 4.3.
(ii) Within thirty (30) days after Non-Contributing Member receives the
Contributing Member's notice of election to decrease the Non-Contributing
Member's Percentage Interest, the Contributing Member will Notify
Non-Contributing Member in writing of its estimate of the Fair Market Value. If
Non-Contributing Member does not object to such estimate in writing within
thirty (30) days after receiving the Contributing Member's estimate of Fair
Market Value, such estimate shall be deemed to be the Fair Market Value for
purposes of this provision. If Non-Contributing Member does object to such
estimate in writing within thirty (30) days after receiving the Contributing
Member's estimate of Fair Market Value, the parties will negotiate in good faith
to agree on Fair Market Value. If the parties fail to agree on the Fair Market
Value within thirty (30) days after the date that Contributing Member receives
Non-Contributing Member's notice of objection, the determination of Fair Market
Value will be determined by appraisal in accordance with the same appraisal
procedure outlined in this Exhibit "B".
(iii) If the Fair Market Value is to be determined by appraisal, within ten (10)
days after the expiration of the 30-day negotiation period referred to in
paragraph (ii) above, Contributing Member and Non-Contributing Member will each
appoint an independent appraiser who is a member of the American Institute of
Real Estate Appraisers ("MAI") and who has had a minimum of ten (10) years' of
experience in valuation of high rise office buildings in the Chicago
marketplace, and shall deliver written notice of the name of such appraiser to
the other party. If only one of Contributing Member or Non-Contributing Member
so delivers such written notice of the name of such an appraiser, then such
appraiser will be deemed to be a mutually acceptable appraiser who will act as
the third appraiser described below. If neither Contributing Member nor
Non-Contributing Member so delivers such written notice of the name of an
appraiser to the other party, then either party may petition the appropriate
federal court sitting in Illinois to appoint the third appraiser described
below. If two appraisers are so named by the parties, then the two appraisers
will meet within 15 days after the date on which the notice of the second of
such appraisers is so given, and such appraisers will select a third appraiser,
who also meets the qualification requirements of the first two appraisers, and
who has not acted previously in any capacity for either Non-Contributing Member
or Contributing Member, and will deliver written notice of the name of such
third appraiser to the parties within such 15 day period. If such two appraisers
have not so delivered written notice of such third appraiser within such 15 day
period, then either party may petition the appropriate federal court sitting in
Illinois to appoint such third appraiser.
(iv) Within forty-five (45) days after such third appraiser is so named or
appointed (including a sole appraiser deemed to be the third appraiser as
provided above), Non-Contributing Member and Contributing Member will each
deliver to the third appraiser Non-Contributing Member's and Contributing Member
respective estimates of the Fair Market Value. Such estimates will be delivered
to such third appraiser in sealed packages, and such package may contain such
supporting data as the party delivering such estimate desires. If such estimates
are within one and one-half percent (1 1/2%) of each other then Fair Market
Value shall be equal to the average of the two estimates. If only one of
Non-Contributing Member or Contributing Member so delivers such estimate to the
third appraiser within such time, then the estimate so delivered will be deemed
to be the Fair Market Value. If neither Non-Contributing Member nor Contributing
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Member deliver such estimate to the third appraiser within such time, then the
estimate first delivered to the third appraise thereafter will be deemed to be
the Fair Market Value. Within thirty (30) days after the delivery of such
estimates by Non-Contributing Member and Contributing Member, the third
appraiser will make a determination as to which of the Non-Contributing Member's
or Contributing Member's estimate of Fair Market Value is closest to the Fair
Market Value. The third appraiser may not substitute any other estimate of Fair
Market Value, may not average the estimates of Fair Market Value estimated by
Non-Contributing Member and Contributing Member, and may not alter in any manner
the estimate of Fair Market Value made by either Non-Contributing Member or
Contributing Member (it is the parties' intent that appraisal under this
paragraph will be a so called "baseball" appraisal under which the third
appraiser must select either the Non-Contributing Member's estimate of Fair
Market Value or Contributing Member's estimate of Fair Market Value, as such
estimates are submitted to the third appraiser by the parties). Non-Contributing
Member and Contributing Member will pay the fee of the appraiser each selected
and each shall pay 50% of the fee of the third appraiser.
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EXHIBIT E
---------
Management Office Furniture & Equipment Furniture List
77 West Wacker
Chicago
Intentionally Deleted
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APPENDIX 2.2
------------
Escrow Agreement
CHICAGO TITLE AND TRUST COMPANY
STRICT JOINT ORDER #1 ESCROW TRUST INSTRUCTIONS (EARNEST MONEY)
---------------------------------------------------------------
ESCROW TRUST NO.: D2 099064809 DATE: August __, 1999
To: Chicago Title and Trust Company, Escrow Trustee:
Customer Identifications
Seller: 77 West Wacker Limited Partnership, an Illinois limited partnership
Purchaser: OTR, an Ohio general partnership, acting on behalf of The State
Teachers Retirement System of Ohio
Property Address: 77 W. Wacker Drive, Chicago, IL
Project Reference:
Proposed Disbursement Date: September 30, 1999
Deposits:
- ---------
1. The sum of $500,000 by OTR representing EARNEST MONEY
Delivery of Deposits:
- ---------------------
The above-referenced escrow trust deposits ("deposits") are deposited with the
escrow trustee to be delivered by it only upon the receipt of a joint order of
the undersigned or their respective legal representatives or assigns.
In no case shall the above-mentioned deposits be surrendered except upon the
receipt of an order signed by the parties hereto, their respective legal
representatives or assigns, or in obedience to the court order described below.
Billing Instructions:
- ---------------------
Escrow trust fee will be billed as follows: one-half to Seller and one-half to
Purchaser.
An annual maintenance fee, as determined by the then current rate schedule, will
commence the Effective Date.
PLEASE NOTE: The escrow trust fee for these joint order escrow trust
instructions is due and payable within 30 days from the projected disbursement
date (which may be amended by joint written direction of the parties hereto). In
the event no projected disbursement date is ascertainable, said escrow trust fee
is to be billed at acceptance and is due and payable within 30 days from the
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<PAGE>
billing date. Chicago Title and Trust Company, at its sole discretion, may
reduce or waive the escrow trust fee for these joint order escrow instructions
in the event the funds on deposit herein are transferred to or disbursed in
connection with sale escrow trust instructions or an agency closing transaction
established at Chicago Title.
Investment:
- -----------
Deposits made pursuant to these instructions may be invested on behalf of any
party or parties hereto; provided that any direction to escrow trustee for such
investment shall be expressed in writing and contain the consent of all parties
to this escrow, and also provided that escrow trustee is in receipt of the
taxpayer's identification number and investment forms as required. Escrow
trustee will, upon request, furnish information concerning its procedures and
fee schedules for investment.
In the event the escrow trustee is requested to invest deposits hereunder,
Chicago Title and Trust Company is not to be held responsible for any loss of
principal or interest which may be incurred as a result of making the
investments or redeeming said investment for the purposes of these escrow trust
instructions.
Direction Not to Invest/Right to Commingle:
- -------------------------------------------
Except as to deposits of funds for which escrow trustee has received express
written direction concerning investment or other handling the parties hereto
direct the escrow trustee NOT to invest any funds deposited by the parties under
the terms of this escrow and waive any rights which they may have under Section
2-8 of the Corporate Fiduciary Act (205 ILCS 620/2-8) to receive interest on
funds deposited hereunder. In the absence of an authorized direction to invest
funds, the parties hereto agree that the escrow trustee shall be under no duty
to invest or reinvest any such funds at any time held by it hereunder; and,
further, that escrow trustee may commingle such funds with other deposits or
with its own funds in the manner provided for the administration of funds under
said Section 2-8 and may use any part or all of such funds for its own benefit
without obligation to any party for interest or earnings derived thereby, if
any. Provided, however, nothing herein shall diminish escrow trustee's
obligation to apply the full amount of such funds in accordance with the terms
of these escrow instructions.
Compliance With Court Order:
- ----------------------------
The undersigned authorize and direct the escrow trustee to disregard any and all
notices, warnings or demands given or made by the undersigned (other than
jointly) or by any other person. The said undersigned also hereby authorize and
direct the escrow trustee to accept, comply with, and obey any and all writs,
orders, judgments or decrees entered or issued by any court with or without
jurisdiction; and in case the said escrow trustee obeys or complies with any
such writ, order, judgment or decree of any court, it shall not be liable to any
of the parties hereto or any other person, by reason of such compliance,
notwithstanding any such writ, order, judgment or decree be entered without
jurisdiction or be subsequently reversed, modified, annulled, set aside or
vacated. In case the escrow trustee is made a party defendant to any suit or
proceedings regarding this escrow trust, the undersigned, for themselves, their
heirs, personal representatives, successors, and assigns, jointly and severally,
agree to pay to said escrow trustee, upon written demand, all costs, attorney's
fees, and expenses incurred with respect thereto. The escrow trustee shall have
a lien on the deposit(s) herein for any and all such costs, fees and expenses.
If said costs, fees and expenses are not paid, then the escrow trustee shall
have the right to reimburse itself out of the said deposit(s).
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Execution:
- ----------
These escrow trust instructions are governed by and are to be construed under
the laws of the state of Illinois. The escrow trust instructions, amendments or
supplemental instructions hereto, may be executed in counterparts, each of which
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
For Seller: For Purchaser:
Name: WINSTON & STRAWN Name: TAFT, STETTINIUS & HOLLISTER
LLP
By: WILLIAM J. RALPH By: EDWARD D. DILLER
Address: 35 W. Wacker Drive Address: 1800 Firstar Tower
Suite 4200 425 Walnut Street
Chicago, IL 60601 Cincinnati, OH 45202
Phone: (312)558-5600 Phone: (513) 357-5313
Fax: (312)558-5700 Fax: (513) 381-0205
Signature:___________________ Signature:__________________________
Accepted: Chicago Title and Trust Company, as Escrow Trustee
By:__________________________ Date:_______________________________
NANCY CASTRO
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APPENDIX 2.6
------------
Loan Terms
The loan terms shall be the same as set forth in the attached letter from
Armin Gemmerich of Westdeutsche Immobilien Bank to The Prime Group dated May 10,
1999, as modified by letter dated August 9, 1999 by Louis G. Conforti to Dirk
Richolt, and except (i) that no interest rate cap agreement shall be obtained,
or if one is obtained, it shall be obtained at no cost to OTR and (ii) interest
shall be payable at a floating rate equal to LIBOR plus 125 basis points, or
LIBOR plus 135 basis points during such period as the ratio of outstanding
principal balance of the Debt to the value of the Property exceeds 65%.
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<TABLE>
APPENDIX 2.7(1)
---------------
PROPOSED DISTRIBUTION -- 77 WEST WACKER
<CAPTION>
- -------------- ------------ ------------ ------------ ------------ ------------ ------------
Company Primary Secondary Share Tertiary Share Total
- -------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CTIC 14,000,000 40,000,000 0.25641 25,000,000 0.22727 79,000,000
Ticor 20,000,000 0.12821 19,000,000 0.17273 39,000,000
SUTIC 10,000,000 0.06410 17,000,000 0.15455 27,000,000
CT&T 5,000,000 0.04545 5,000,000
Commonwealth 24,000,000 0.15385 11,000,000 0.10000 35,000,000
FATCO 24,000,000 0.15385 11,000,000 0.10000 35,000,000
Old Republic 15,000,000 0.09615 10,000,000 0.09091 25,000,000
Stewart 23,000,000 0.14744 12,000,000 0.10909 35,000,000
- -------------- ------------ ------------ ------------ ------------ ------------ ------------
Totals 14,000,000 156,000,000 1.00000 110,000,000 1.00000 280,000,000
- -------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
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APPENDIX 2.7(3)
---------------
1. ALTA Statement executed by 77 WWLP.
2. GAP executed by 77 WWLP.
3. Affidavit that to the best of 77 WWLP's knowledge no known violations or
restrictions of record executed by 77 WWLP.
4. Survey.
5. Non-Imputation Affidavit and Indemnity Agreement executed by 77 WWLP re
Non-Imputation Endorsement.
6. Personal Undertaking re: Mechanic's Liens executed by Prime.
7. Property Manager Lien Waiver.
8. Payoff Letter and to follow Closing:
(a) Mortgage Release;
(b) UCC Termination.
9. Ground Lessor Estoppel.
10. Deed from 77 WWLP to LLC.
11. 77 WWLP Corporate Documents:
(a) Partnership Agreement and Amendments;
(b) Good Standing Certificate.
12. LLC Documents:
(a) certification from the Illinois and Delaware Secretary of State that
LLC has properly filed its Articles of Organization;
(b) a copy of the Articles of Organization, together with any amendments
thereto;
(c) a copy of the Operating Agreement, if any, together with any
amendments thereto;
(d) a list of incumbent managers or of incumbent members if managers have
not been appointed; and
(e) certification that no event of dissolution has occurred.
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13. Transfer Declaration and Water Certificate to be executed by 77 WWLP:
(a) For OTR Equity Investment:
1) State of Illinois Green Sheet;
2) Cook County; and
3) City of Chicago.
Note: City and County Stamps to be obtained by Title Company.
(b) For transfer from 77 WWLP to LLC:
1) City of Chicago.
Note: No Water Certificate required by Title Company because no stamps since no
consideration
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<PAGE>
APPENDIX 3.2
1. Title Insurance Endorsement
2. Most current Title Report, including full copies of all exceptions and
exhibits
3. Legal Description
4. Most recent "As Built" survey showing locations of all improvements,
easements, parking spaces and lot size
5. Easements, Covenants, and Restrictions
6. Plans and Specifications
7. Soils Report
8. All existing Environmental Assessments or Impact Report/Certifications
9. Copies of all Leases, including amendments, and work letters
10. Building Insurance Certificates (as applicable)
(a) Liability
(b) Property
(c) Boiler and Machinery
(d) Flood/Earthquake
(e) Rental and Business Interruption
11. Building Certificate of Occupancy and Final Completion Certificate
12. Service Contracts
13. Construction and other warranties (still in effect)
14. Tax Parcel ID Number
15. Property Tax Statements for the last two years
16. Financial Statements of 77 WWLP and the Property for the year 1998
17. Association Rules and Regulations, if applicable, and 1998 dues or
assessment
18. Leasing Agreement and Property Management Agreement
19. Files concerning any litigation associated with the Property, currently
pending, or active within the last three years (1)
20. Tenant Correspondence Files (1)
21. Names and telephone numbers for Owner's contact personnel
22. Current Rent Roll
23. Tenant financial information in Owner's possession
24. As schedule of any tenants currently in default
25. Fitness center operating agreement and extensions
26. Lease abstracts
27. Parking agreement
28. Collateral agreement summary page
29. Leasing prospects
30. Property condition assessment checklist
31. Standard lease agreement
32. June 1999 (current) rent billing
33. Three-year occupancy history
34. Three year tenant improvement summary
35. Downtown market studies/reports
36. Stacking plan
37. Development cost schedule
38. 1999 operating budget
39. Monthly income statements - January 1999 - May 1999 (YTD)
40. Monthly check registers - January 1999 - May 1999
41. Monthly bank statements - January 1999 - May 1999
42. 1998 CAM pool and expenses pool reconciliations
43. June 1999 (current) aged receivables report
44. Summary of Security Deposits
45. Wacker Drive improvement memorandum
Notes: Items marked (1) need not be physically delivered to OTR. OTR may inspect
and copy such items upon request.
To the extent that an item does not exist, 77 WWLP will furnish a written
statement to that effect.
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APPENDIX 3.4
------------
[DRAFT]
September __, 1999
Mr. Stephen Huber
OTR, Acting on Behalf of
the State Teachers Retirement of Ohio
275 East Broad Street
Columbus, OH 43215-3771
Re: Contribution Agreement Between OTR and 77 West Wacker Limited
Partnership Dated as of September __, 1999; Tax P.I.N. #17-09-422-010
Dear Mr. Huber:
This letter agreement, when fully signed, modifies the Contribution
Agreement referred to above. Words with initial capital letters used in this
letter agreement without definition shall have the meanings ascribed to them in
the Contribution Agreement. 77 WWLP has been advised that a portion of the real
property taxes relating to the two-story building located below the Air Rights
Parcel for the year 1997 are unpaid and that a tax sale occurred on April 2,
1999.
This letter confirms the understanding of 77 WWLP and OTR concerning the
effect of such tax sale on the rights of the lessee under the Air Rights Lease
(the Lease executed by 77 WWLP and American National Bank and Trust Company of
Chicago, not personally, but solely as Trustee under Trust No. 66121, as Lessor,
and 77 West Wacker Limited Partnership dated March 7, 1991 (recorded 3/18/91 as
Document No. 91119739)).
If at any time, to the knowledge of 77 WWLP, the purchaser of the parcel
identified as Tax Parcel Identification Number 17-09-422-010 (the "Ground") or a
third party asserts that such tax sale has limited or impaired in any fashion
the obligations of the lessor under the Air Rights Lease (or the correlative
rights of the LLC under the Air Rights Lease), whether by initiating a lawsuit,
seeking a permit to demolish the support for the Air Rights Parcel, using self
help to impair rights of the LLC under the Air Rights Lease, asserting such
impairment in response to a request from the LLC under the Air Rights Lease for
an estoppel certificate, or otherwise, 77 WWLP shall notify OTR. Within fifteen
(15) days following receipt of such notice, OTR may elect for either 77 WWLP, on
behalf of the LLC, or the LLC itself, to initiate (or defend, as the case may
be) a proceeding (a "Proceeding") for injunctive and declaratory relief to the
effect that such tax sale has not impaired the obligations of the lessor under
the Air Rights Lease or the correlative rights of the LLC under the Air Rights
Lease.
If OTR elects for 77 WWLP to initiate or defend a Proceeding on behalf of
the LLC, 77 WWLP shall on behalf of the LLC vigorously assert the LLC's rights
under the Air Rights Lease, its rights of quiet enjoyment, its claim for an
easement by necessity, and any other legal and equitable rights and remedies
that the LLC might have, except for the right to compensatory damages, as to
which OTR must consent as provided herein in order for 77 WWLP to assert such
right. At OTR's election, which shall be made at the same time as the election
whether to initiate or defend a Proceeding, 77 WWLP or the LLC, as the case may
be, shall pay the cost of such appearance and contest, and be liable for the
liabilities and obligations, if any, incurred in such Proceeding by the 77 WWLP
or the LLC. In no event in any such Proceeding shall 77 WWLP seek compensatory
-84-
<PAGE>
damages for the loss of any rights of the LLC under the Air Rights Lease
resulting from the sale of the Ground at such tax sale, without the prior
written consent of the LLC, exercising its sole and absolute discretion.
If OTR has elected for 77 WWLP (as opposed to the LLC) to initiate or
defend a Proceeding, in the event of any recovery by the LLC, the LLC shall pay
the amount of such recovery to 77 WWLP.
At any time and from time to time, at the request of OTR, the LLC shall,
and 77 WWLP and its successors and assigns, shall authorize and empower the LLC
to, request an estoppel certificate pursuant to the Air Rights Lease from the
holder of title to the Ground.
Very truly yours,
77 West Wacker Limited Partnership
By Prime Group Realty, L.P., a Delaware
limited partnership, its managing
general partner
By Prime Group Realty Trust, a Maryland
real estate investment trust, its
managing general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
OTR agrees as provided in the foregoing letter.
OTR
By:______________________________________
Name:____________________________________
Title:___________________________________
-85-
<PAGE>
APPENDIX 3.7
------------
Tenant Estoppel Certificates
Intentionally Deleted
-86-
<PAGE>
APPENDIX 5.3(b)
---------------
Form of Deed
SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED is made as of the ______ day of ______________,
1999, by 77 WEST WACKER LIMITED PARTNERSHIP (the "Grantor"), having an address
at 77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601, to 77 WEST WACKER
DRIVE, L.L.C. (the "Grantee"), the tax mailing address of which is 77 West
Wacker Drive, Suite 3900, Chicago, Illinois 60601.
Grantor, for and in consideration of the sum of Ten Dollars ($10.00) and
other valuable consideration, receipt of which is hereby acknowledged, and
pursuant to proper authority, hereby Grants, Bargains, Sells and Conveys unto
Grantee and its successors and assigns, all right, title and interest of Grantor
in the following described property (collectively the "Property").
a. The real property described on Exhibit A attached hereto and made a
part hereof (the "Land").
b. All buildings, improvements, fixtures, structures, parking areas and
landscaping on the Land;
c. All and singular the rights, benefits, privileges, easements,
tenements, hereditaments and appurtenances thereon or in any matter
appertaining to such Land, including any and all mineral rights,
development rights, water rights and the like;
d. All right, title and interest of Grantor in and to all strips and
gores and any land lying in the bed of any street, road or alley, open
or proposed, adjoining such Land;
e. The interest of the tenant in a certain parcel (the "Air Rights
Parcel") pertaining to the air space more particularly described in
Parcel [ ] in Exhibit A attached hereto and incorporated herein
pursuant to a certain Lease dated March 7, 1991, between American
National Bank and Trust Company, as trustee under Trust Agreement
dated November 26, 1985 and known as Trust Number 66121, as landlord,
and 77 West Wacker Limited Partnership, an Illinois limited
partnership, as Tenant, and recorded as Document Number 9119739 in the
office of the Recorder of Cook County, Illinois (the "Air Rights
Lease") and the interest of the party identified as 77 West Wacker
Limited Partnership, an Illinois limited partnership, in a certain
Parking Agreement (the "Parking Agreement") dated October 21, 1991
among American National Bank and Trust Company of Chicago, not
personally but as trustee under trust agreement dated June 18, 1991
and known as trust number 52947, North Loop Transportation Center
Limited Partnership and 77 West Wacker Limited Partnership (such
rights being referred to as the "Appurtenances") pertaining to the
property more particularly described in Parcel [ ] in Exhibit A
attached hereto and incorporated herein; and
(f) The right, title and interest of the tenant under the Air Rights Lease
to buildings, improvements, fixtures and structures on, in or
appurtenant to the Air Rights Parcel.
TO HAVE AND TO HOLD the Property in fee simple unto Grantee and its
successors, heirs and assigns, forever.
-87-
<PAGE>
Grantor has not done or suffered to be done anything whereby the Property
is or may be encumbered or charged, except for those matters set forth in
Exhibit B attached hereto and incorporated herein (the "Permitted
Encumbrances"). Grantor shall warrant and defend the Property against all
persons lawfully claiming, or to claim the Property, by, through or under
Grantor, subject to the Permitted Encumbrances.
IN WITNESS WHEREOF, said Grantor has caused this instrument to
be duly executed and delivered by its duly authorized officer, as of the day and
year first above written.
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty, L.P., a Delaware
limited partnership, its general partner
By: Prime Group Realty Trust, a Maryland
real estate investment trust, its
managing general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
STATE OF ________________ )
) SS:
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this ______ day of
_________________, 1999 by ___________________, the ___________________ of Prime
Group Realty Trust, a real estate investment trust organized under the laws of
Maryland, managing general partner of Prime Group Realty, L.P., a limited
partnership organized under the laws of Delaware, general partner of 77 WEST
WACKER LIMITED PARTNERSHIP, a limited partnership organized under the laws of
Illinois, on behalf of the trust and such partnerships.
_________________________________________
Notary Public
-88-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
-89-
<PAGE>
EXHIBIT B
---------
[Insert Schedule B of proforma title policy attached as Appendix 2.7(2)]
-90-
<PAGE>
STATEMENT BY GRANTOR AND GRANTEE
The grantor or his agent affirms that, to the best of his knowledge, the name of
the grantee shown on the deed or assignment of beneficial interest in a land
trust is either a natural person, an Illinois corporation or foreign corporation
authorized to do business or acquire and hold title to real estate in Illinois,
a partnership authorized to do business or acquire and hold title to real estate
in Illinois, or other entity recognized as a person and authorized to do
business or acquire and hold title to real estate under the laws of the State of
Illinois.
77 WEST WACKER LIMITED PARTNERSHIP
Dated____________________, 1999 Signature:_______________________________
Grantor or Agent
Subscribed and sworn to before me by the
said____________________________________
this______________ day of _________ ,
1999
________________________________________
Notary Public
The grantee or his agent affirms and verifies that the name of the grantee shown
on the deed or assignment of beneficial interest in a land trust is either a
natural person, an Illinois corporation or foreign corporation authorized to do
business or acquire and hold title to real estate in Illinois, a partnership
authorized to do business or acquire and hold title to real estate in Illinois,
or other entity recognized as a person and authorized to do business or acquire
and hold title to real estate under the laws of the State of Illinois.
77 WEST WACKER DRIVE, L.L.C.
Dated____________________, 1999 Signature:_______________________________
Grantee or Agent
Subscribed and sworn to before me by the
said____________________________________
this______________ day of __________,
1999
________________________________________
Notary Public
NOTE:Any person who knowingly submits a false statement concerning the identity
of a grantee shall be guilty of a Class C misdemeanor for the first offense
and of a Class A misdemeanor for subsequent offenses.
[Attach to deed or ABI to be recorded in Cook County, Illinois, if exempt under
provisions of Section 4 of the Illinois Real Estate Transfer Tax Act.]
-91-
<PAGE>
APPENDIX 5.3(c)
---------------
BILL OF SALE AND OMNIBUS ASSIGNMENT
This Bill of Sale and Omnibus Assignment (this "Assignment") is made as of
the ______ day of _______________, 1999 by and between 77 WEST WACKER LIMITED
PARTNERSHIP ("Contributor"), a limited partnership organized under the laws of
Illinois, and 77 WEST WACKER DRIVE, L.L.C., a limited liability company
organized under the laws of Delaware ("LLC").
R E C I T A L S:
- - - - - - - -
A. This Bill of Sale and Omnibus Assignment is executed and delivered
pursuant to that certain Contribution Agreement (as amended, the "Contribution
Agreement") dated as of August _____, 1999, between Contributor and LLC in which
Contributor agreed to contribute to LLC the real property described in Schedule
1 attached hereto (the "Land").
B. All terms with initial capital letters that are used but not defined
herein shall have the same meanings ascribed to such terms in the Contribution
Agreement.
1. ASSIGNMENT AND ASSUMPTION. For good and valuable consideration,
Contributor hereby sells, assigns, conveys and contributes to LLC, and LLC
hereby accepts:
(a) LEASES. The Leases set forth on the Rent Roll attached hereto
as Schedule 2;
(b) PERSONAL PROPERTY. All Personal Property, including without
limitation such items, if any, specifically identified on Schedule 3
attached hereto;
(c) INTANGIBLE PROPERTY. All Intangible Property; and
(d) SERVICE CONTRACTS. All Service Contracts, if any, described
in Schedule 4 attached hereto; and
(e) APPURTENANCES AND APPURTENANT IMPROVEMENTS. All Appurtenances
and Appurtenant Improvements.
2. ASSUMPTION. LLC hereby assumes:
(a) All of Contributor's obligations under the Leases arising
from and after Closing, other than those excepted in Schedule 5
attached hereto, but as to Contributor's obligations with regard to
security deposits and other deposits, only to the extent the security
deposits have been transferred or credited to LLC;
(b) All of the obligations of Contributor under Service Contracts
arising from and after Closing; and
(c) All of the obligations of Contributor under the Appurtenances
arising from and after Closing.
3. WARRANTY. Contributor represents and warrants to LLC that it has
not done or suffered to be done anything whereby the property described
above is or may be encumbered or charged, except for those arising under
the Permitted Exceptions. Contributor shall warrant and defend the
above-described property unto LLC, its successors and assigns, against any
person or entity claiming, or to claim, the same or any part thereof by,
from, or through Contributor, subject only to the Permitted Exceptions.
-92-
<PAGE>
4. COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original,
and all of such counterparts shall constitute one Agreement. To facilitate
execution of this Agreement, the parties may execute and exchange by
telephone facsimile counterparts of the signature pages.
CONTRIBUTOR:
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty, L.P., a Delaware
limited partnership, its general partner
By: Prime Group Realty Trust, a Maryland
real estate investment trust, its
managing general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
LLC:
77 WEST WACKER DRIVE, L.L.C.
By: Prime Group Realty, L.P., a Delaware
limited partnership, its member
By: Prime Group Realty Trust, a Maryland
real estate investment trust,its managing
general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
And By: OTR, an Ohio general partnership,
acting on behalf of the State Teachers
Retirement Systems of Ohio, an
instrumentality of the State of Ohio, its
member
By:______________________________________
Name:____________________________________
Title:___________________________________
-93-
<PAGE>
SCHEDULE 1
----------
LEGAL DESCRIPTION
-----------------
-94-
<PAGE>
SCHEDULE 2
----------
TENANTS
-------
-95-
<PAGE>
SCHEDULE 3
----------
PERSONAL PROPERTY
-----------------
-96-
<PAGE>
SCHEDULE 4
----------
SERVICE CONTRACTS
-----------------
-97-
<PAGE>
SCHEDULE 5
----------
EXCEPTED OBLIGATIONS
--------------------
1. Obligations of lessor under Section 29 of Lease in favor of Jones, Day,
Reavis & Pogue LLP.
-98-
<PAGE>
APPENDIX 5.3(d)
---------------
TENANT AND VENDOR NOTICES
-------------------------
[TENANT]
September __, 1999
VIA CERTIFIED MAIL/RRR
- ----------------------
______________________
______________________
______________________
Re: 77 West Wacker, Chicago
-----------------------
Dear Tenant:
You are hereby advised that the above-referenced property in which you are
a tenant was transferred and your lease was assigned and transferred effective
as of the date of this letter to 77 West Wacker Drive, L.L.C. (the "Company").
Your security deposit and advance rental, if any, have been transferred to the
Company.
All future checks for rent and other charges should be made payable to:
77 West Wacker Drive, L.L.C.
and forwarded to:
LaSalle National Bank
135 South LaSalle Street
Chicago, IL 60674-3806
Attention: Dept. ______
If Overnight:
LaSalle National Bank
200 West Monroe Street, Suite 200
Chicago, IL 60674-3806
Attention:_____________
Building-related correspondence and notices to Landlord should be forwarded
to:
Prime Group, L.P.
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attention:_____________
77 WEST WACKER LIMITED PARTNERSHIP
By: ________________________________
Name: Jeffrey A. Patterson
Its: Executive Vice President
-99-
<PAGE>
[VENDOR]
September __, 1999
VIA CERTIFIED MAIL/RRR
- ----------------------
______________________
______________________
______________________
Re: 77 West Wacker, Chicago
-----------------------
Ladies and Gentlemen:
This is to advise you that the above-referenced property was transferred to
77 West Wacker Drive, L.L.C. (the "Company"). As part of the transfer, your
contract has been assigned to the Company, and any goods, services or utilities
supplied to the property subsequent to the date of this letter shall be for its
account. All future invoices and correspondence and andy and all Notices to the
Company should be sent to the Company's property manager at the following
address:
Prime Group Realty, L.P.
c/o ____________________
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty, L.P.
Its: General Partner
By: Prime Group Realty Trust
Managing General Partner
By: ________________________
Name: Jeffrey A. Patterson
Its: Executive Vice President
-100-
<PAGE>
APPENDIX 5.3(f)
---------------
Form of FIRPTA Affidavit
FIRPTA Affidavit
Section 1445 of the Internal Revenue Code of 1986, as amended, provides
that a transferee of a United States real property interest must withhold tax if
the transferor is a foreign person. To inform the Transferee (hereinafter
defined) that withholding of tax is not required upon the disposition of a
United States real property interest by 77 WEST WACKER LIMITED PARTNERSHIP, an
Illinois limited partnership (the "Transferor") to 77 WEST WACKER DRIVE, L.L.C.,
a Delaware limited liability company (the "Transferee"), the undersigned, being
first duly sworn upon oath, does hereby depose and say, and does hereby certify
the following on behalf of the Transferor:
1. The undersigned is the _________________ of Prime Group Realty Trust
("REIT"), a Maryland real estate investment trust, which is the managing general
partner of Prime Group Realty, L.P. ("OP"), a Delaware limited partnership which
is the general partner of the Transferor and is familiar with the business of
the Transferor;
2. The Transferor is not a foreign person; that is, the Transferor is not a
nonresident alien, a foreign corporation, foreign partnership, foreign trust or
foreign estate (as all such terms are defined in the Internal Revenue Code of
1986, as amended, and United States Treasury Department Income Tax Regulations
in effect as of the date hereof);
3. The Transferor is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Illinois;
4. The Transferor's United States employer identification number is
____________;
5. The Transferor's office address and principal place of business is 77
West Wacker Drive, Suite 3900, Chicago, Illinois 60601; and
6. This certificate and affidavit is made to induce the Transferee to
consummate the transactions contemplated by the Transferor and Transferee.
The Transferor understands that this affidavit and certificate may be
disclosed to the United States Internal Revenue Service by the Transferee and
that any false statement contained herein could be punished by fine,
imprisonment, or both.
Under penalties of perjury, the undersigned declares that he has examined
this affidavit and certificate, and to the best of the undersigned's knowledge
and belief, it is true, correct and complete. The undersigned further declares
that he has authority to sign this affidavit and certificate on behalf of the
Transferor.
-101-
<PAGE>
This affidavit and certificate is executed and delivered as of the ______
day of _____________, 1999.
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty, L.P.,
a Delaware limited partnership,
its general partner
By: Prime Group Realty Trust, a Maryland
real estate investment trust, its
managing general partner
By:______________________________________
Name:_______________________________
Title:______________________________
STATE OF ______________ )
) SS
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me the _____ day of
______________, 1999 by _________________________, _________________ of Prime
Group Realty Trust, a real estate investment trust organized under the laws of
Maryland, managing general partner of Prime Group Realty, L.P., a limited
partnership organized under the laws of Delaware, general partner of 77 WEST
WACKER LIMITED PARTNERSHIP, a limited partnership organized under the laws of
Illinois on behalf of the trust and such partnerships.
_________________________________________
Notary Public
My Commission Expires:___________________
-102-
<PAGE>
APPENDIX 6.1(e)
---------------
Leasing Commissions Payable by 77 WWLP or Prime Following Closing Date
77 WWLP shall be liable to pay as provided in Section 6.1(e) the leasing
commissions incurred in connection with the Leases identified in section 1(a)
through (j) of the attached Memorandum dated August 5, 1999 from Scott McKibben
to Steve Huber (as summarized below), excluding, however, any commissions
relating to the exercise of extensions or options to renew in the future, if
any.
- ---------------------- ------------ ---------------- -------------------
Tenant RSF Leasing Comm/RSF Leasing Commissions
- ---------------------- ------------ ---------------- -------------------
Castle Creek 4,822 $ 7.27 $ 35,051
TDRC 6,697 $ 6.04 $ 40,419
McGuire Wood Expansion 950 $ 1.62 $ 1,537
McGuire Wood Expansion 15,671 $ 1.50 $ 23,507
Microsoft 2,424 $ 4.53 $ 10,993
Marakon 1,424 $ 3.25 $ 4,630
USA Broadcasting 6,729 $ 6.23 $ 41,898
Jones Day 4,991 $ 1.30 $ 6,489
PGRT 2,685 $ 1.50 $ 4,028
Peregrin Capital 2,122 $ 1.50 $ 3,183
Carvill 3,155 $ 4.75 $ 14,987
- ---------------------- ------------ ---------------- -------------------
Total Prime Obligation 51,670 $ 3.61 $ 186,723
- ---------------------- ------------ ---------------- -------------------
-103-
<PAGE>
APPENDIX 6.10(a)
77 WWLP or Prime TI Obligations
77 WWLP shall pay for all TI Obligations incurred in connection with the
Leases identified in section 1(a) through (h) of the August 5, 1999 Memorandum
attached to Appendix 6.1(e) (as summarized below).
- ---------------------- ------------ ---------------- -------------------
Tenant RSF Leasing Comm/RSF Leasing Commissions
- ---------------------- ------------ ---------------- -------------------
Castle Creek 4,822 $ 30.00 $ 144,660
TDRC 6,697 $ 35.50 $ 237,744
McGuire Wood Expansion 950 $ 0.00 $ 0
Microsoft 2,424 $ 20.00 $ 48,480
Marakon 1,424 $ 24.00 $ 34,176
USA Broadcasting 6,729 $ 8.57 $ 57,650
Jones Day 4,991 $ 30.00 $ 149,730
PGRT 2,685 $ 55.00 $ 147,675
Peregrin Capital 2,122 $ 40.00 $ 84,880
Carvill 3,155 $ 10.00 $ 31,550
- ---------------------- ------------ ---------------- -------------------
Total Prime Obligation 35,999 $ 26.02 $ 936,545
- ---------------------- ------------ ---------------- -------------------
-104-
<PAGE>
APPENDIX 6.10(b)
----------------
LLC TI Obligations
- --------------------------------------------------------------
Tenant RSF TI/RSF TI
- --------------------------------------------------------------
RR Donnelly $100,000
Note:RR Donnelly is entitled to a $100,000 tenant improvement allowance after
July, 2002.
-105-
<PAGE>
APPENDIX 7.1(c)
---------------
Tenant Defaults
- ---------------- ------------ ------------ ----------------
Tenant RSF $ in Arrears Date Due
- ---------------- ------------ ------------ ----------------
Cafe Baci 4,819 $ 144,373.00 1/1/96 - 9/1/98
Castle Creek 4,822 $ 13,422.00 2/4/99 - 2/28/99
- ---------------- ------------
Total Defaults $ 157,795.00
- ---------------- ------------
-106-
<PAGE>
APPENDIX 7.1(o)
---------------
Litigation
Intentionally Deleted
-107-
<PAGE>
APPENDIX 10.11
--------------
Notice List
77 WWLP and Prime: OTR
- ------------------ ---
Jeffrey A. Patterson
Executive Vice President Director, Real Estate Assets
and Chief Investment Officer The State Teachers Retirement System of Ohio
Prime Group Realty Trust 275 East Broad Street
77 West Wacker, Suite 3900 Columbus, OH 43215-3771
Chicago, IL 60601 Direct Dial: (614) 227-4090
Direct Dial: (312) 917-4230
with a copy to:
Outside Counsel
---------------
Edward D. Diller, Esq.
with a copy to: Taft, Stettinius & Hollister LLP
1800 Firstar Tower
In-House Counsel: 425 Walnut Street
- ----------------- Cincinnati, OH 45202-3957
James Hoffman Direct Dial: (513) 381-2838
Senior Vice President
and General Counsel
Prime Group Realty Trust
77 West Wacker, Suite 3900
Chicago, IL 60601
Direct Dial: (312) 917-4237
-108-
LOAN AGREEMENT
Between
77 WEST WACKER LIMITED PARTNERSHIP
having an address at
c/o Prime Group Realty Trust
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
("Borrower")
-and-
WESTDEUTSCHE IMMOBILIENBANK
having an address at
Wilhelm Theodor
Romheld Strasse 24,
55130 Mainz
Federal Republic of Germany
("Agent" or "Lender")
-and-
LANDESBANK SCHLESWIG-HOLSTEIN
having an address at
Martensdamm 6
24103, Kiel
Federal Republic of Germany
("Lender")
-and-
LANDESBANK SAAR GIROZENTRALE
having an address at
Ursulinenstr. 2
66111 Saarbrucken
Federal Republic of Germany
("Lender")
-and-
DSL BANK
having an address at
Kennedyallee 62-70
53175 Bonn
Federal Republic of Germany
("Lender")
(each Lender together with Agent "Lenders")
Dated: as of September 30, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1 DEFINITIONS
Section 1.1 Definitions................................................. 1
ARTICLE 2 THE LOAN
Section 2.1 Loan........................................................ 17
Section 2.2 Conditions Precedent........................................ 17
Section 2.3 Interest.................................................... 21
Section 2.4 The Note.................................................... 21
Section 2.5 The Mortgage and Collateral................................. 21
Section 2.6 Default Rate................................................ 22
Section 2.7 Repayment of Loan........................................... 22
Section 2.8 Prepayments................................................. 23
Section 2.9 Funding Loss................................................ 23
Section 2.10 Taxes....................................................... 24
Section 2.11 Payments.................................................... 25
Section 2.12 Distribution to Lenders..................................... 25
Section 2.13 Increased Costs; Overriding Events.......................... 26
Section 2.14 Commitment Fee.............................................. 28
Section 2.15 Arrangement Fee............................................. 28
Section 2.16 Lending Office.............................................. 28
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
Section 3.1 Good Standing of Borrower and its General Partners.......... 28
Section 3.2 Authority of Borrower....................................... 28
Section 3.3 Authorizations.............................................. 29
Section 3.4 Binding Agreement........................................... 29
Section 3.5 Litigation.................................................. 29
Section 3.6 No Conflicts................................................ 29
Section 3.7 Financial Conditions........................................ 29
Section 3.8 Employee Benefit Plans...................................... 30
Section 3.9 Governmental Plan........................................... 30
Section 3.10 Investment Company.......................................... 30
Section 3.11 Hazardous Materials......................................... 30
Section 3.12 Solvency.................................................... 30
Section 3.13 Borrower's Address.......................................... 31
Section 3.14 Foreign Person.............................................. 31
Section 3.15 Bankruptcy.................................................. 31
Section 3.16 Compliance with Laws........................................ 31
Section 3.17 Utility Service............................................. 31
Section 3.18 Access...................................................... 32
Section 3.19 Insurance................................................... 32
Section 3.20 Rent Roll................................................... 32
Section 3.21 No Reliance on Agent or Lenders............................. 32
ARTICLE 4 AFFIRMATIVE AND NEGATIVE COVENANTS
Section 4.1 Affirmative Covenants....................................... 33
Section 4.2 Negative Covenants.......................................... 40
-i-
<PAGE>
PAGE
----
ARTICLE 5 DEFAULT
Section 5.1 Events of Default........................................... 44
Section 5.2 Remedies.................................................... 45
Section 5.3 Remedies Cumulative and Concurrent.......................... 45
Section 5.4 Waiver, Delay or Omission................................... 45
Section 5.5 Indemnity................................................... 45
ARTICLE 6 LIMITED RECOURSE OBLIGATIONS
Section 6.1 Limited Recourse............................................ 48
ARTICLE 7 THE AGENT
Section 7.1 Performance by Agent........................................ 50
Section 7.2 Actions..................................................... 50
Section 7.3 Nonliability of Agent and Lenders........................... 50
Section 7.4 Authorization and Action.................................... 51
Section 7.5 Withholding Exemption Certificates.......................... 53
Section 7.6 Agent's Reliance, Etc....................................... 53
ARTICLE 8 MISCELLANEOUS
Section 8.1 Fees and Expenses........................................... 54
Section 8.2 Cumulative Rights and No Waiver............................. 54
Section 8.3 Notices..................................................... 55
Section 8.4 Severability................................................ 55
Section 8.5 Binding Effect.............................................. 55
Section 8.6 Execution in Counterparts................................... 55
Section 8.7 Time of the Essence......................................... 55
Section 8.8 Immunity.................................................... 55
Section 8.9 Governmental Regulation of Lender........................... 56
Section 8.10 Modification, Waiver, Consent............................... 56
Section 8.11 Entire Agreement............................................ 56
Section 8.12 Assignment.................................................. 56
Section 8.13 Applicable Law.............................................. 57
Section 8.14 Usury....................................................... 57
Section 8.15 Consent to Jurisdiction..................................... 58
Section 8.16 Monies...................................................... 58
Section 8.17 Jury Trial.................................................. 58
EXHIBIT A Cash Collateral Agreement (Ratio Reserve)
EXHIBIT B Description of Land
EXHIBIT C Leases
EXHIBIT D Permitted Encumbrances
EXHIBIT E Principal Repayment Schedule
EXHIBIT F Designation Notice
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LOAN AGREEMENT
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This Loan Agreement (this "Agreement") is made and entered into as of this
30th day of September 1999, by and between 77 WEST WACKER, LIMITED PARTNERSHIP,
a limited partnership organized and existing under the laws of the State of
Illinois ("Borrower"), and WESTDEUTSCHE IMMOBILIENBANK, a banking institution
organized under the laws of the Federal Republic of Germany, having an address
at Wilhelm Theodor Romheld Strasse 24, 55130 Mainz, Federal Republic of Germany,
individually and as agent (including any of its successors and assigns, "Agent")
for LANDESBANK SCHLESWIG-HOLSTEIN, a banking institution organized under the
laws of the Federal Republic of Germany, having an address at Martensdamm 6,
24103, Kiel, Federal Republic of Germany, LANDESBANK SAAR GIROZENTRALE, a
banking institution organized under the laws of the Federal Republic of Germany,
having an address at Ursulinenstr. 2, 66611 Sarrbrucken, Federal Republic of
Germany, DSL BANK, a banking institution organized under the laws of the Federal
Republic of Germany, having an address at Kennedyallee 62-70, 53175 Bonn,
Federal Republic of Germany, and such other co-lenders as may exist from time to
time (collectively with Agent, "Lenders" and each individually, "Lender").
W I T N E S S E T H:
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WHEREAS, Borrower owns fee title to the Premises and leasehold interest in
the Leasehold; and
WHEREAS, Borrower and Lenders have agreed, among other things, for the
Lenders to make a loan to Borrower in the aggregate principal amount of One
Hundred Seventy Million Dollars ($170,000,000.00) (the "Loan") evidenced by the
certain Promissory Note from Borrower to Lenders dated as of the date hereof, in
the amount of ONE HUNDRED SEVENTY MILLION DOLLARS ($170,000,000.00) (the "Note")
subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and each Lender agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS.
Terms used but not defined in the Agreement shall have the respective
meanings ascribed to them below:
"Acceptable Letter of Credit" means a letter of credit issued (or
confirmed) by a Qualified Bank to the Agent as provided for in Section 4.1(h)
hereof (i) providing for presentation and payment at such Qualified Bank's main
office or a branch office, in either case which is acceptable to the Agent (it
being agreed that a New York main or branch office of a Qualified Bank shall be
acceptable to the Agent for this purpose); (ii) in respect of which Borrower may
not provide any collateral to, or for the benefit of, the issuer of such letter
of credit if, as a result of such collateralization, the rights of the Lenders,
or any assignee of such, would or would likely be adversely affected by the
application of any bankruptcy or insolvency law applicable to Borrower; (iii) in
respect of which the issuer shall expressly waive any rights of subrogation;
(iv) which shall be payable in Dollars; (v) having an expiry date at least one
year from the date of issuance and containing automatic renewal provisions (and
providing that such letter of credit may be drawn 20 days prior to the
expiration thereof unless renewed, replaced or extended prior thereto); (vi)
entitling the beneficiary thereof to assign its interest therein to a transferee
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of the Agent without the consent of the Borrower or the issuer of such letter of
credit, and requiring the issuer of such letter of credit, after the date of any
such transfer and upon the request of such transferee, to issue a new letter of
credit in favor of such transferee in exchange for such issuer being released
from its obligations under the letter of credit in favor of the transferring
Agent; (vii) governed by the Uniform Customs and Practice for Documentary
Letters of Credit (the "Uniform Customs"), and to the extent not addressed by
the Uniform Customs, governed by New York law, and containing an express waiver
of Section 5-112 of New York Uniform Commercial Code (or any similar or
replacement provision therefor); and (viii) containing the letter of credit
issuer's agreement that, if an event of "force majeure" shall occur, the
expiration date of the letter of credit shall be extended to a date that is at
least 30 days following the time the force majeure ceases to exist.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person.
"Agent's Address" means Westdeutsche ImmobilienBank, Wilhelm Theodor
Romheld Strasse 24, 55130 Mainz, Federal Republic of Germany, Attention: Dr.
Jurgen Gerber or Mr. Armin Gemmerich, Telecopier Number: +49 6131 928 308 or
such other office Agent designates from time to time by written notice to
Borrower.
"Annual Installment Payment" has the meaning set forth in Section 2.7
hereof.
"Applicable Margin" shall be (i) 1.25% or (ii) in the event that the Loan
to Value Ratio shall exceed 65% on any LTV Determination Date (as hereinafter
defined), 1.35% until the occurrence of a LTV Determination Date on which the
Loan to Value Ratio shall be equal to or less than 65%, at which time the
Applicable Margin will be 1.25%.
"Appraisal" has the meaning set forth in Section 4.1(g) hereof.
"Asbestos" means any hydrated mineral silicate separable into commercially
usable fibers, including, but not limited to, chrysolite (serpentine), amosite
(cummingtonite-grunerite), crocidolite (riebecktite), tremolite, anthophylite
and actinolite. "Asbestos-containing Material" means any material which contains
1% or more Asbestos by weight.
"Assignment of Contracts and Authorizations" means that certain Assignment
of Contracts and Authorizations between Borrower and Lenders executed on the
Closing Date.
"Assignment of Leases and Rents" means that certain Assignment of Leases
and Rents between Borrower and Lenders executed on the Closing Date.
"Borrower's Address" means:
c/o Prime Group Realty Trust
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Jeffrey A. Patterson and Louis G. Conforti
with a copy to
c/o Prime Group Realty Trust
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: General Counsel
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"Business Day" means any day other than a Saturday or Sunday on which
commercial banks are open for domestic and international business (including
dealings in dollar deposits) in New York City, USA, Chicago, Illinois, USA, and
Mainz, Federal Republic of Germany.
"Cash Collateral Account (Central Account)" means the interest-bearing,
U.S. Dollar depository account maintained by Borrower with LaSalle National Bank
(or a comparable account at another bank in New York City or Chicago, Illinois
that is reasonably acceptable to Agent), for the purpose of holding certain cash
deposits made by Manager, Borrower or the tenants under the Leases, in
connection with or pursuant to the payment of Rent by tenants under the Leases,
which cash deposits shall be pledged to Agent as collateral for the Loan
pursuant to the Cash Collateral Agreement (Central Account).
"Cash Collateral Account (Ratio Reserve)" means the interest-bearing, U.S.
Dollar depository account maintained by Borrower with LaSalle National Bank (or
a comparable account at another bank in New York City or Chicago, Illinois that
is reasonably acceptable to Agent), for the purpose of holding certain cash
deposits made by Borrower pursuant to Section 4.1(g) hereof, which cash deposits
shall be pledged to Agent as collateral for the Loan pursuant to the Cash
Collateral Agreement (Ratio Reserve).
"Cash Collateral Account (Tenant Allowance Reserve)" means the
interest-bearing, U.S. Dollar depository account maintained by Borrower with
LaSalle National Bank (or a comparable account at another bank in New York City
that is reasonably acceptable to Agent), for the purpose of holding certain cash
deposits made by Borrower pursuant to Section 4.1(h) hereof, which cash deposits
shall be pledged to Agent as collateral for the Loan pursuant to the Cash
Collateral Agreement (Tenant Allowance Reserve).
"Cash Collateral Agreement (Central Account)" means that certain Cash
Collateral Agreement (Central Account) between Borrower and Agent executed on
the Closing Date.
"Cash Collateral Agreement (Ratio Reserve)" means a Cash Collateral
Agreement (Ratio Reserve) between Agent and Borrower in the form substantially
the same as that attached hereto as Exhibit A.
"Cash Collateral Agreement (Tenant Allowance Reserve)" means that certain
Cash Collateral Agreement (Tenant Allowance Reserve) between Agent and Borrower
executed on the Closing Date.
"Cash Expenditures" means the aggregate costs paid by Borrower in the
ordinary course of maintaining and operating the Premises (determined in
accordance with the cash method of accounting), including (i) installments of
principal and interest payable by Borrower to Agent or Lenders pursuant to the
terms of the Loan Documents, (ii) Operating Expenses, (iii) Income Taxes, (iv)
repayments of Qualified Loans, (v) all costs and expenses incurred by Borrower
for capital improvements to the Premises, other than Tenant Improvement/Leasing
Commission Costs made in accordance with the Loan Documents, (vi) Tenant
Improvement/Leasing Commission Costs, (vii) deposits in the Cash Collateral
Account (Tenant Allowance Reserve) and (viii) amounts with respect to any of the
items set forth in clauses (ii) - (vi) above which, in Borrower's reasonable
judgment, are of a magnitude that merits the establishment of reserves for the
payment thereof over a period of no less than two months.
"Cash Receipts" means all income of any kind received by, or on behalf of,
Borrower from the Premises (determined in accordance with the cash method of
accounting), including all fixed rent, percentage rent, escalation payments,
storage income, tenant work order income, cost recoveries and similar operating
income items whether or not derived from the Leases.
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"Closing" means the time of the execution and delivery hereof by Borrower
and Lenders and the funding of the Loan.
"Closing Date" means the date of Closing.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"Collateral" means (i) the Mortgaged Property (as defined in the Mortgage),
(ii) the Cash Collateral Account (Central Account), and (iii) any collateral
delivered to Agent in accordance with Sections 4.1(g) and 4.1(h) hereof,
inclusive, including, but not limited to, the Cash Collateral Account (Ratio
Reserve) and the Cash Collateral Account (Tenant Allowance Reserve).
"Control" (including the terms "controlling", "controlled by" and "under
common control with") of a Person means the possession, direct or indirect, of
the power to vote 50% or more of the outstanding equity securities or other
ownership interests of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of the
outstanding equity securities or other ownership interests, by contract or
otherwise.
"Debt Service" shall mean, with respect to any period, any and all interest
and scheduled payments of principal required to be made under the Loan Documents
during such period; provided, however, that for the purpose of calculating the
Debt Service Coverage Ratio payments of principal required shall be deemed to be
on the basis of a thirty (30) year amortization schedule in lieu of the actual
amortization schedule required under the Loan Documents.
"Debt Service Coverage Ratio" or "DSCR" shall mean with respect to any
twelve (12) month period ending on December 31 (or with respect to the calendar
year in which the Loan is made, such shorter period ending on December 31,
1999), the ratio of Net Operating Income (excluding tenant improvement costs and
leasing commissions) for such twelve (12) month period to Debt Service for such
twelve (12) month period as evidenced in the financial statements to be provided
to Agent by Borrower pursuant to Section 4.1(a)(i) and (iv) (hereinafter
referred to as the "DSCR Financial Statements"). If applicable, at any time that
Agent is in possession of collateral that has been delivered to it by or on
behalf of Borrower in accordance with Sections 4.1(g) and 4.1(h), the "Debt
Service Coverage Ratio" shall be calculated as if the amount of Net Operating
Income for the period in question included the value of the collateral so
delivered to Agent.
"Default Rate" has the meaning set forth in Section 2.6 hereof.
"DSCR Determination Date" has the meaning ascribed thereto in Section
4.1(g) hereof.
"DSCR Financial Statements" has the meaning ascribed thereto in the
definition of Debt Service Coverage Ratio.
"Environmental Indemnity Agreement" means that certain Environmental
Indemnity Agreement between Borrower and Lenders executed on the Closing Date.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, writ, judgment, injunction,
decree or judicial or mandatory agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials applicable to the Premises or the Leasehold or their
management, use or operation.
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"Environmental Site Assessment" means that certain Phase I Environmental
Site Assessment 77 West Wacker Drive, Chicago, Illinois 60601 for 77 West Wacker
Limited Partnership, Project Number 3157.190 prepared by Hygienetics
Environmental Services, Inc., 10 South Riverside Plaza, Chicago, Illinois 60606,
dated July 13, 1999.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Event(s) of Default" has the meaning set forth in Section 5.1 hereof.
"Fiscal Year" means a fiscal year of Borrower ending on December 31 in any
calendar year or such other fiscal year as Borrower may select from time to time
in accordance with the terms of this Agreement.
"Fixtures" means all property and equipment now owned or hereafter acquired
by Borrower and now or hereafter located under, on or above the Premises or the
Leasehold and owned by Borrower, whether or not permanently affixed, which to
the fullest extent permitted by applicable law in effect from time to time shall
be deemed fixtures and a part of the Premises or the Leasehold.
"Floating Rate" means, for any LIBOR Interest Period, at Borrower's
election, indicated by telephonic notice, followed by written confirmation,
given by Borrower to Agent no later than 11:00 a.m. New York City time, at least
three (3) LIBO Business Days prior to the commencement date of the first or next
succeeding LIBOR Interest Period, LIBOR plus the Applicable Margin.
"Foreign Person" has the meaning set forth in Section 3.14 hereof.
"GAAP" or "Generally Accepted Accounting Principles" shall mean accounting
principles as generally accepted in the United States and as set forth in
statements of the Financial Accounting Standards Board and/or in the Opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, or such other accounting principles as may be mutually agreed by
Lender and Borrower.
"Governmental Authority(ies)" means any (federal, state, county, municipal
or other government) governmental department, commission, board, bureau, court,
agency or any instrumentality of any of them having jurisdiction over Borrower,
the Premises and/or the Leasehold.
"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, writ, injunction, franchise, permit,
certificate, license, authorization, or other mandatory direction or requirement
of any Governmental Authority now existing or hereafter enacted, adopted,
promulgated, entered, or issued applicable to the Premises, the Leasehold
Premises or Borrower.
"Grace Period" means the period from and after the Maturity Date, until,
and including, the Grace Period Termination Date.
"Grace Period Termination Date" means September 29, 2005.
"Guaranty" means the Guaranty provided by Prime and/or OSTRS, as the case
may be, pursuant to Section 4.1(h) hereof, of Borrower's obligations to make the
deposits to the Cash Collateral Account (Tenant Allowance Reserve) as provided
in Section 4.1(h) hereof, such Guaranty providing that in the event that
Borrower fails to make the required deposits into the Cash Collateral Account
(Tenant Allowance Reserve), the guarantor under the Guaranty shall either pay
the portion of the Required Amount then outstanding into the Cash Collateral
Account (Tenant Allowance Reserve) or to Agent, as Agent shall instruct.
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"Hazardous Material" means any flammable explosives, radioactive materials,
Asbestos, and any chemical, petroleum products, or other man-made materials with
hazardous or carcinogenic toxic characteristics, including, without limitation,
any substances defined as or included in the definition of "hazardous
substances", "hazardous waste", "hazardous materials", "toxic substances",
"contaminants", or other similar terms, by any federal, state or local
environmental statute, regulation or ordinance presently or hereafter in effect,
as such statute, regulation or ordinance may be amended from time to time.
"Impositions" means all (i) real estate and personal property taxes and
other taxes and assessments, public or private; utility rates and charges
including those for water and sewer; all other governmental and non-governmental
charges and any interest or costs or penalties with respect to any of the
foregoing; and charges for any public improvement, general and special, ordinary
and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever
that at any time prior to or after the execution of the Loan Documents may be
assessed against Borrower and levied or imposed upon the Premises and the
Leasehold Premises or the rents or income received therefrom, or any use or
occupancy thereof which become due and payable during the term of the Loan, (ii)
other taxes, assessments, fees and governmental and non-governmental charges
levied imposed or assessed upon or against Borrower which become due and payable
during the term of the Loan and (iii) taxes levied or assessed upon the Mortgage
and the Note which become due and payable during the term of the Loan (other
than (a) income, gross receipts, franchise, gift, inheritance and similar taxes
imposed upon Lenders or any tax imposed in lieu of or as a direct substitute for
any such income, gross receipts and similar taxes, (b) any taxes levied or
assessed in connection with a Lender's transfer of all or any part of its
interest in the Loan, except any transfer taxes imposed on the initial transfer
of interests in the Loan by Agent within twelve (12) months of the Closing Date
by any federal, state or local government in the United States of America and
(c) taxes imposed by the Federal Republic of Germany).
"Improvements" has the meaning specified in the Mortgage.
"Income Taxes" means all federal, state and local income taxes payable
(including installment and estimated payments in respect thereof), directly or
pursuant to a tax allocation agreement or successor agreement, by Borrower or
its direct and indirect partners with respect to the taxable income derived or
received from the Premises and the Leasehold Premises.
"Institution" means (a) a commercial bank organized under the laws of the
United States, or any State thereof, or a commercial bank organized under the
laws of another country, in any case having a net worth in excess of
$500,000,000, any holding company thereof and any affiliate having a net worth
in excess of $500,000,000 of any such holding company; (b) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having a net worth in excess of $250,000,000, any holding
company thereof and any affiliate having a net worth in excess of $250,000,000
of any such holding company; and (c) any insurance company, pension fund or
investment fund having a net worth in excess of $500,000,000. Nothing in clauses
(a) through (c) of the immediately preceding sentence to the contrary, each
Lender shall be deemed an "Institution".
"JV Agreement" means that certain Amended and Restated Operating Agreement,
to be entered into by OSTRS and Prime and approved by Agent, relating to the
ownership of the Premises.
"Land" means the real property more particularly described in Exhibit B
attached hereto and by this reference made a part hereof.
"Laws" means all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, determinations,
awards and court orders of any federal, state, municipal or local government,
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Governmental Authority, regulatory agency or authority applicable to Borrower,
the Leasehold and/or the Premises by 77 West Wacker Drive, L.L.C. (the "JV").
"Leasehold" means Borrower's leasehold interest in that certain premises
(the "Leasehold Premises") located adjacent to the Premises, pursuant to that
certain Lease (the "Air Rights Lease"), dated as of March 7, 1991, by and
between American National Bank and Trust Company of Chicago as T/u/T 66121, as
landlord, and Borrower, as tenant. The parties hereto acknowledge and agree that
Borrower does not own a fee interest in the Leasehold Premises and is not
subject to or obligated in any way with respect to such fee interest, except as
otherwise set forth in the Air Rights Lease.
"Leases" means any and all leases, subleases, licenses, concessions or
grants of other possessory interest now or hereafter in force, oral or written,
covering or affecting the Premises or the Leasehold Premises, or any part
thereof, including, without limitation, the leases set forth on Exhibit C hereto
(true and complete copies of which have been delivered to the Agent prior to the
date hereof).
"Lending Office" shall mean:
For Agent, in its capacity as Lender:
Wilhelm Theodor Romheld Strasse 24
55130 Mainz
Federal Republic of Germany
Attention: Dr. Jurgen Gerber or Mr. Armin Gemmerich
For LANDESBANK SCHLESWIG-HOLSTEIN:
Martensdamm 6
24103 Kiel
Federal Republic of Germany
Attention: Stefan Kolle
For LANDESBANK SAAR GIROZENTRALE
Ursulinenstr. 2
66111 Sarrbrucken
Federal Republic of Germany
Attention: Mr. Hoffmann
For DSL BANK:
Kennedy allee 62-70
53175 Bonn
Federal Republic of Germany
Attention: Horst Willemse
or such other office as each of the above mentioned Lenders, on any other
Lender, shall designate from time to time by written notice to Borrower and
Agent given at least three (3) Business Days prior to the effective date of such
notice.
"LIBO Business Day" means a day other than (i) Saturday, (ii) Sunday, or
(iii) a day on which commercial banks in New York City, United States of
America, London, England or Mainz, Germany are required by law to close.
"LIBO Reserve Percentage" means the percentage representing the reserve
requirement applicable to Eurocurrency Liabilities pursuant to Regulation D of
the Board of Governors of the Federal Reserve System (or any successor thereto).
In determining the LIBO Reserve Percentage, Agent shall take into account any
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transitional adjustment or phase-in provisions of the reserve requirements
otherwise applicable to Eurocurrency Liabilities during the applicable LIBOR
Interest Period, and, in the event of any change or variation in the reserve
requirements during the applicable LIBOR Interest Period, Agent may use any
reasonable averaging or attribution methods which it deems appropriate. The
determination by Agent of any applicable LIBO Reserve Percentage shall be
conclusive, absent manifest error. Failure by Agent to take into account the
LIBO Reserve Percentage when calculating interest due with respect to the
outstanding indebtedness of the Loan shall not constitute, whether by course of
dealing or otherwise, a waiver by Agent of its right to collect such amounts for
any future period.
"LIBOR" means, as to the outstanding indebtedness owed hereunder with
respect to the applicable LIBOR Interest Period, (a) the rate per annum equal to
the offered rate for deposits in United States dollars for the applicable LIBOR
Interest Period and for the amount comparable to the then outstanding
indebtedness of the Loan, which appears on Dow Jones Markets Service (formerly
known as Telerate) display page 3750 as of 11:00 a.m. (London time) two (2) LIBO
Business Days prior to the first day of such LIBOR Interest Period (the
"Determination Date") divided by (b) one minus the LIBO Reserve Percentage. "Dow
Jones Markets Service display page 3750" means the display designated as "page
3750" on the Dow Jones Markets Service (or such other page as may replace page
3750 on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for U.S. Dollar
deposits). If such rate does not appear on Dow Jones Markets Service page 3750
as of approximately 11:00 a.m. (London time) on the Determination Date, the
LIBOR for the LIBOR Interest Period will be reasonably determined by Agent in
good faith on a customary commercial basis on the basis of the offered rates for
deposits in U.S. Dollars for an amount comparable to the then outstanding
indebtedness of the Loan for the same period of time as such LIBOR Interest
Period that are offered by four (4) major banks in the London interbank market
at approximately 11:00 a.m. (London time) on the Determination Date. Agent will
request that the principal London office of each of the four (4) major banks
provide a quotation of its U.S. Dollar deposit offered rate. If at least two (2)
such quotations are provided, the LIBOR will be the arithmetic mean of the
quotations. If fewer than two (2) quotations are provided as requested, the
LIBOR will be reasonably determined by Agent in good faith on a customary
commercial basis on the basis of the rates quoted for loans in U.S. Dollars to
leading European banks for amounts comparable to the then outstanding
indebtedness of the Loan for the same period of time as such LIBOR Interest
Period offered by major banks in New York City at approximately 11:00 a.m. (New
York time) on the Determination Date. If at least two (2) such rates are so
provided, the LIBOR will be the arithmetic mean of the quotations. If fewer than
two (2) rates are provided, the LIBOR which was used to determine the last LIBOR
in effect shall be deemed to be the LIBOR.
"LIBOR Interest Period" means, for any outstanding indebtedness of the
Loan, the time during which the applicable Floating Rate is in effect with
respect to such amount and shall mean the period commencing, (i) in the case of
the first LIBOR Interest Period on the Closing Date, and (ii) with respect to
any subsequent LIBOR Interest Periods, on the last day of the immediately
preceding LIBOR Interest Period, and ending, in each case, at the option of
Borrower, as provided below, thirty (30), sixty (60), ninety (90) or one hundred
and eighty (180) days thereafter; provided, however, that whenever the last day
of any LIBOR Interest Period would otherwise occur on a day other than a LIBO
Business Day, the last day of such LIBOR Interest Period shall be extended to
occur on the next succeeding LIBO Business Day, provided further that if such
extension would cause the last day of such LIBOR Interest Period to occur in the
next following calendar month, the last day of such LIBOR Interest Period shall
occur on the immediately preceding LIBO Business Day.
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"Lien" means, for purposes of this Agreement and with respect to any asset,
any mortgage, deed of trust, lien, pledge, charge, security interest or other
encumbrance of any kind in respect of such asset, including without limitation
any right or arrangement with any creditor to have its claim satisfied out of
such asset, or the proceeds therefrom, prior to the general creditors of the
owner thereof.
"Loan Documents" means all instruments and agreements executed and
delivered, or to be executed and delivered by Borrower, to Agent and/or Lenders
in connection with the Loan, each in form and substance acceptable to Agent in
its reasonable discretion. By way of example, but not limitation, such documents
shall include (i) the Note, (ii) the Mortgage, (iii) this Agreement, (iv) the
Environmental Indemnity Agreement, (v) the Cash Collateral Agreement (Central
Account) and (vi) all such other instruments as Agent in its reasonable
discretion shall require.
"Loan to Value Ratio" means the percentage which results from a fraction,
the numerator of which shall be equal to the then outstanding principal amount
of the Loan minus the value of any collateral that has been delivered by or on
behalf of Borrower to Agent in accordance with Sections 4.1(g) and 4.1(h)
hereof, and the denominator of which shall be equal to the appraised value of
the Premises(as determined by the most recent Appraisal as of the date such
ratio is being computed).
"LTV Determination Date" means the date of any Appraisal delivered to Agent
pursuant to Section 4.1(g) hereof or obtained by Agent pursuant thereto.
"Majority Lenders" means, at any time, Lenders owed more than sixty-six and
two- thirds percent (66_%) of the then aggregate unpaid principal amount of the
Loan.
"Management Agreement" means the Asset and Property Management Agreement,
dated as of the Closing Date, between Borrower and Manager.
"Manager" means Prime Group Realty, L.P., Prime Group Realty Services, Inc.
or another Affiliate of Borrower or any other Person retained by Borrower as its
property manager and approved by Agent with respect to the Premises and the
Leasehold Premises in accordance with the terms of the Loan Documents. "Maturity
Date" means September 29, 2004.
"Mortgage" means the Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing dated as of the date hereof by Borrower in favor of
Lenders.
"Mortgage Insurance Policy" means a final, marked commitment of title
insurance containing such coverages as Agent reasonably deems necessary, with
all general survey exceptions deleted, on forms of, and issued by, Chicago Title
Insurance Company and/or such other title insurance companies as may be
reasonably acceptable to Agent insuring the priority of the Lien on the Land and
the improvements created by the Mortgage.
"Net Cash Flow" means, for any period, the excess of Cash Receipts over
Cash Expenditures.
"Net Operating Income" shall include the Operating Income accrued by
Borrower for the applicable calendar year less all Operating Expenses in
connection with the operation of the Premises, all the foregoing being in
accordance with Generally Accepted Accounting Principles.
"Operating Expenses" means, with respect to any period, all operating
expenses of the Premises including costs incurred for utilities, repairs,
maintenance, security, cleaning, salaries and payroll, administrative,
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marketing, legal and other professional services, management fees payable to
Manager, real estate taxes and insurance premiums and such other expenses as are
determined in accordance with Generally Accepted Accounting Principles
consistently applied, except depreciation associated with the Premises.
"Operating Income" means, with respect to any period, all of the Rents (as
hereinafter defined), revenues and income under the Leases (but specifically
excluding security deposits unless and to the extent same are used to cure
defaults) and/or arising from the use or enjoyment of all or any portion of the
Premises and all other amounts received which, in accordance with Generally
Accepted Accounting Principles, are required to be included in Borrower's
financial statement as operating income of the Premises.
"Opinion of Borrower's Counsel" means an opinion of counsel of Borrower,
Winston & Strawn, in form and substance reasonably satisfactory to Agent and
Agent's counsel.
"Organizational Documents" means (i) with respect to any Person that is a
corporation, the certificate of incorporation or charter and by-laws of such
Person, (ii) with respect to any Person that is a partnership, the partnership
agreement and, if a limited partnership, certificate of limited partnership of
such Person, and (iii) with respect to any Person that is a limited liability
company, the articles of organization and the operating agreement of such
Person.
"OSTRS" means OTR, an Ohio general partnership, acting on behalf of and
legally binding the State Teachers Retirement System of Ohio, an instrumentality
of the State of Ohio.
"Other Taxes" mean any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from
payment made hereunder or under the Note or from the execution, delivery or
recording of, or otherwise with respect to, this Agreement, the Note or the
Mortgage imposed by the United States or any state thereof (including any
political subdivision or taxing authority thereof), other than (i) income, gross
receipts, franchise, inheritance, gift and similar taxes imposed upon Lenders or
any tax imposed in lieu of and as a direct substitute for any such income, gross
receipts, and similar taxes and (ii) any taxes levied or assessed in connection
with a Lender's transfer of all or any part of its interest in the Loan, except
any transfer taxes imposed on the initial transfer of interests in the Loan by
Agent within twelve (12) months of the Closing Date by any federal, state or
local government in the United States of America.
"Permitted Encumbrances" means those matters listed in Exhibit D attached
hereto and made a part hereof, to which the interest of Borrower in the Premises
is permitted to be subject.
"Permitted Transferee" means a corporation, partnership, limited
partnership or limited liability company, that is not a Foreign Person and is
Controlled by Prime or OSTRS or both (or is under common control by Prime or
OSTRS or both).
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Permitted Exceptions" means (a) Liens in favor of Lender, (b) Permitted
Prior Exceptions, (c) Leases to which Lender has provided its consent (or is
otherwise deemed to have given) pursuant to Section 4.1(r) hereof and (d) other
matters expressly approved by Lender in writing which are subject and
subordinate to the Lien.
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"Permitted Prior Exceptions" means (a) general ad valorem real property
taxes which are not delinquent, (b) Special Taxes which are not delinquent, and
(c) such other matters as Lender shall expressly approve in writing as
"Permitted Prior Exceptions" for purposes of this Agreement.
"Personal Property" means tangible personal property and Fixtures,
including building materials and supplies, furnishings, equipment and other
"Goods" (as defined in the Mortgage) owned by Borrower, but excluding
construction equipment of a type intended for use in connection with other
projects.
"Premises" means the Land together with all of the improvements constructed
thereon, Fixtures and equipment and Personal Property located thereon and used
in connection with the ownership or operation thereof.
"Prime" means Prime Group Realty, L.P., a limited partnership organized
under the laws of the State of Delaware.
"Prime Rate" means the per annum rate of interest publicly announced from
time to time by Westdeutsche ImmobilienBank at Mainz, Germany as its "Prime
Rate".
"Qualified Bank" means with respect to the issuance of any letter of credit
pursuant to the Loan Documents, a commercial bank (i) which can issue such
letter of credit in an amount which, after giving effect to the issuance of such
letter of credit, does not exceed the Agent's credit and country exposure
limits, and (ii) whose Dollar-denominated long-term senior unsecured debt
obligations are rated at or above A by Moody's and A by S&P.
"Qualified Loan" has the meaning set forth in Section 4.2(m).
"Reinvestment Rate" shall mean the yield on actively traded "On The Run"
United States Treasury securities having interest payable semi-annually or the
LIBOR corresponding to the appropriate LIBOR Interest Period, if applicable, and
having a maturity date corresponding to the period from the day preceding the
date of the applicable prepayment through (i) the Tenth Anniversary Date (if
such prepayment is made prior to the Tenth Anniversary Date); (ii) the
applicable LIBOR Interest Period (if such prepayment is made before the
conclusion of the selected LIBOR Interest Period) or (iii) the Maturity Date (if
such prepayment is made after the Tenth Anniversary Date) as reported by
Bloomberg Financial Markets Commodities News screen USD, provided, however, that
if the Maturity Date is not the same as the maturity date of an actively traded
"On The Run" United States Treasury security, such yield shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
yields of actively traded "On The Run" Treasury securities having a maturity
closest to the Maturity Date as reported by Bloomberg Financial Markets
Commodities News screen USD or the equivalent screen provided by Bloomberg
Financial Markets Commodities News (or any nationally recognized publicly
available on-line source for similar market data in the United States reasonably
selected by Agent).
"Rents" means all of the rents, royalties, issues, revenues, income,
profits and other benefits now or hereafter arising from the Premises and the
Leasehold Premises and the occupancy, use and enjoyment thereof.
"Rent Roll" has the meaning set forth in Section 3.20 hereof.
"Repayment Amount" has the meaning set forth in Section 2.7 hereof.
"Restraint" means any change (including introduction) after the date of
this Agreement in any applicable law, rule, regulation, guidelines or directive
including, without limitation, those of the United States and the Federal
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Republic of Germany, or the interpretation thereof (having the force of law), by
any governmental authority, central bank or comparable agency, and compliance by
Lenders with any request or directive (having the force of law) to be issued
after the date of this Agreement of any such authority, bank or agency.
"Right of Others" means, as to any property in which a Person has an
interest, any legal or equitable claim or other interest (other than a Lien but
including a leasehold interest, a right of first refusal in connection with sale
of the Premises or a right of repossession or removal) in or with respect to
such property held by any other Person, and any option or right held by any
other Person to acquire any such claim or other interest or any Lien in or with
respect to such property.
"Solvent" and "Solvency" mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay such debts
and liabilities as they mature and (d) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small capital. For
purposes of this Agreement, the amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that is likely to
become an actual or matured liability.
"Special Tax" means, as to any property, (a) any special assessment or
other Tax which is or may become a Lien affecting such property, other than
general ad valorem real property taxes, and (b) any assessment, improvement,
community facilities or other special taxing district in or into which such
property is or may be located or incorporated or under which any special
assessment or other Tax which is or may become a Lien affecting such property is
or may be imposed.
"Taxes" means any and all present or future taxes, levies, impositions,
deductions, charges or withholdings imposed by the United States or any state
thereof (including any political subdivision or taxing authority thereof), and
all liabilities with respect thereto; provided, however, that "Taxes" shall not
include (i) income, gross receipts and similar taxes imposed upon Lenders or any
tax imposed in lieu of and as a direct substitute for any such income, gross
receipts and similar taxes and (ii) any taxes levied or assessed in connection
with a Lender's transfer of all or any part of its interest in the Loan.
"Tenant" means, as to any Lease, the tenant, lessee, sublessee or licensee
under such Lease.
"Tenant Improvement/Leasing Commission Costs" means, collectively, all
costs and expenses incurred by Borrower for tenant improvement work, tenant work
allowances or other capital improvements and allowances required pursuant to any
Lease, and any leasing commissions and other costs, expenses and allowances
incurred by Borrower in connection with the leasing of all or a portion of such
tenant improvements pursuant to a Lease.
"Term" means the period from and after the Closing Date until, and
including, the Maturity Date or, if applicable, the Grace Period Termination
Date.
"Title Company" means Chicago Title Insurance Company and/or such other
title insurance companies as may be reasonably acceptable to Agent insuring the
priority of the Lien on the Land and the Improvements created by the Mortgage.
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"to the best of Borrower's knowledge" (and similar expressions) shall be
construed as meaning to the actual knowledge, after reasonable due inquiry, of
Borrower's Executive Vice President and General Counsel, or Associate General
Counsel after direct inquiry of the building manager and other officers of
Borrower having any relevant involvement in the operation of the Premises and
the Leasehold Premises.
"Trust" means Prime Group Realty Trust, a Maryland real estate investment
trust, the managing general partner of Prime.
ARTICLE 2
THE LOAN
Section 2.1 LOAN.
The Loan granted under this Agreement shall be in the aggregate amount of
ONE HUNDRED SEVENTY MILLION DOLLARS ($170,000,000.00) (the "Loan Amount") and
shall be used for the sole purpose of the Borrower refinancing the existing
financing on the Premises.
Upon satisfaction of the conditions precedent to Lenders' obligation to
advance the Loan pursuant to this Agreement, all funds to be advanced hereunder
shall be advanced by each Lender to Agent in the amount set forth opposite its
signature on the signature page attached hereto. Agent and the other Lenders
shall advance the Loan Amount to the Title Company's escrow account on the
Closing Date for payment by direction of Agent or Agent's counsel to repay the
existing financing on the Premises, with any excess proceeds to be disbursed to
Borrower. The obligation of each Lender under this Section 2.1(b) shall be
several and not joint.
Section 2.2 CONDITIONS PRECEDENT.
The obligations of Lenders hereunder are subject to the condition that
Agent shall have received, at or prior to the Closing, all of the following
documents in form and substance satisfactory to Agent:
a certificate of Borrower signed by a duly authorized officer of the
managing general partner of Borrower, dated as of the Closing Date, stating that
the following statements are true:
the representations and warranties contained in the Loan Documents are
correct on and as of the Closing Date, before and after giving effect to
the making of the Loan by Lenders and to the application of the proceeds
therefrom, as though made on and as of such date; and
to the best of Borrower's knowledge, no material event has occurred
and is continuing, or would result from the making of the Loan by Lenders
or from the application of the proceeds therefrom, that constitutes an
Event of Default;
certified copies of the resolutions of the Board of Directors of the Trust
or similar governing body, as applicable, of the general partner of Borrower
approving the Loan, this Agreement, the Note and each other Loan Document to
which it is or is to be a party, and of all documents evidencing other necessary
partnership or corporate action and governmental and other third party approvals
and consents, if any, with respect to the Loan, this Agreement, the Note and
each other Loan Document;
a copy of the Organizational Documents of Borrower and the general partner
of Borrower, in each case together with each amendment thereto, and, in the case
of the certificate of limited partnership of Borrower and the certificate of
incorporation of the general partner of Borrower, certified (as
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of a date reasonably near the Closing Date) by the Secretary of State of the
jurisdiction of its formation or incorporation as being a true and correct copy
thereof;
a copy of a certificate of the Secretary of State of the jurisdiction of
its incorporation, dated reasonably near the Closing Date, certifying that
Borrower and the general partner of Borrower are duly incorporated or formed and
in good standing under the laws of the State of the jurisdiction of their
respective organization;
a copy of a certificate of the Secretary of State of the State of Illinois,
dated reasonably near the Closing Date, stating that Borrower and the general
partner of Borrower are duly qualified and in good standing in such State;
a notarized certificate of a Secretary or Assistant Secretary of the
general partner of Borrower certifying the names and true signatures of the
officers of the Trust, authorized to sign this Agreement, the Note and each
other Loan Document to which they are or are to be parties and the other
documents to be delivered hereunder and thereunder;
in connection with the security interests granted pursuant to the Mortgage:
copies of financing statements, delivered by Borrower to Title Company
for filing under the Uniform Commercial Code of the State of Illinois, as
well as any other jurisdictions deemed necessary or desirable by Agent,
covering the Collateral and fixtures described in the Mortgage,
completed requests for information, dated on or before the Closing
Date, listing the financing statements referred to in clause (A) above and
all other effective financing statements filed in the jurisdictions
referred to in clause (A) above that name Borrower as debtor, together with
copies of such other financing statements,
evidence of the completion of all other recordings and filings of or
with respect to the security interest granted pursuant to the Mortgage that
Agent may deem necessary or desirable in order to perfect and protect the
Liens created thereby, and
evidence that all other action that Agent may deem reasonably
necessary or desirable in order to perfect and protect the first priority
liens and security interests created under the Mortgage has been taken;
the Mortgage in form and substance satisfactory to Agent and duly executed
by Borrower in recordable form, together with:
evidence that counterparts of the Mortgage have been duly executed and
delivered for recording to the Title Company on or before the Closing Date
in such form as Agent may deem necessary or desirable in order to create a
valid first and subsisting Lien on the property described therein in favor
of Agent and that provision has been made for the payment of all filing and
recording taxes and fees,
a fully paid Mortgage Insurance Policy, in form and substance, with
endorsements and in an amount acceptable to, Agent, issued and reinsured by
the Title Company, insuring the Mortgage to be a valid first and subsisting
Lien on the Premises and the Leasehold described therein, free and clear of
all defects (including, but not limited to, mechanics' and materialmen's
Liens) and encumbrances, excepting only Permitted Encumbrances, and
providing for such other affirmative insurance (including endorsements for
mechanics' and materialmen's Liens) and such coinsurance and direct access
reinsurance as Agent may deem reasonably necessary or desirable,
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a survey of the Premises, certified to Agent and the issuer of the
Mortgage Insurance Policy in a manner satisfactory to Agent, acceptable to
Agent,
an Appraisal of the Premises and the Leasehold indicating an open
market value of at least $243,000,000, a forced sale value of at least
$170,000,000 and otherwise in form and substance satisfactory to Agent,
an engineering report and such other reports as Agent has requested
with respect to the Premises, in form and substance and from professional
firms acceptable to Agent,
such consents and agreements of lessors, if any, and other third
parties, and such estoppel letters and other confirmations, as Agent may
deem reasonably necessary or desirable,
evidence of the insurance required by the terms of the Mortgage,
evidence that all other action that Agent may deem reasonably
necessary or desirable in order to create valid first and subsisting Liens
on the Premises and the Leasehold Premises has been taken, and
original copies of all mortgage notes being assigned to Agent (or, if
the same were not available, lost note affidavits, reasonably acceptable to
Agent with respect thereto), together with all assignments, consolidations,
splitters, spreaders, extensions and modifications thereto, to the extent
being recorded in connection herewith, in form for recordation in Chicago,
Illinois;
the Environmental Indemnity Agreement, duly executed by Borrower;
the Cash Collateral Agreement (Central Account), duly executed;
the Cash Collateral Agreement (Tenant Allowance Reserve), duly executed;
the Assignment of Contracts and Authorizations, duly executed;
the Assignment of Leases and Rents, duly executed;
the Note, duly executed;
this Agreement, duly executed;
the Environmental Site Assessment;
a certified copy of the Management Agreement;
the Management Subordination Agreement, duly executed;
a favorable Opinion of Borrower's Counsel;
copies of notices to be sent to each tenant at the Premises and the
Leasehold Premises regarding the designation of Agent as an insured/loss
payee/mortgagee in accordance with the Mortgage;
Subordination, Non-Disturbance and Attornment Agreements with respect to
the Major Tenants, in form and substance acceptable to Agent;
Estoppel Certificates (as hereinafter defined) from (i) R.R. Donnelley &
Sons, Inc., Everen Securities, Inc. and Jones Day, Reavis & Pogue,
Attorneys-at-Law (the "Major Tenants") and (ii) any other tenants under the
Leases, demising in the aggregate under clauses (i) and (ii), sixty-six and
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two-thirds percent (66_%) of the rentable square footage of the Premises.
Notwithstanding the foregoing, Borrower will provide to Agent, Estoppel
Certificates for all tenants for which Borrower received Estoppel Certificates
from Seller pursuant to the Purchase Agreement. As used in this Agreement, an
"Estoppel Certificate" means an estoppel certificate in form and substance
acceptable to Agent which (i) is dated not more than (y) forty-five (45) days
prior to the Closing Date with respect to the Major Tenant, and (z) sixty (60)
days prior to the Closing Date with respect to the balance of the Estoppel
Certificates.
financial statements as requested by Agent certified as of the Closing Date
and a certificate of an officer of the Trust stating no material adverse change
in the financial condition of Borrower, Prime and the Trust has occurred from
the date the financial statements were prepared;
certified copies of the Leases and Rent Roll;
payment of Commitment Fee and Arrangement Fee required to be paid hereunder
pursuant to Sections 2.14 and 2.15, respectively; and
any other documents as may reasonably be requested by Agent in Agent's
reasonable discretion.
Section 2.3 INTEREST.
During the Term and, if applicable, the Grace Period, the Loan shall bear
interest on the outstanding principal amount thereof from time to time at a rate
per annum equal to the Floating Rate.
During the Term, Borrower shall pay to Agent interest on the Loan on the
last day of each applicable LIBOR Interest Period.
If applicable, during the Grace Period (if Borrower elects the Grace Period
Option pursuant to Section 2.7 hereof), Borrower shall pay to Agent interest on
the Loan on the last day of each applicable LIBOR Interest Period.
All interest on the Loan (including interest at the Default Rate) shall be
calculated on an actual/360-day basis (including the first day but excluding the
last day).
Borrower may elect (i) thirty (30), (ii) sixty (60), (iii) ninety (90) or
(iv) one hundred and eighty (180) day LIBOR Interest Periods. In the event that
Borrower fails to so designate the LIBOR Interest Period at least three (3) LIBO
Business Days before the next succeeding LIBOR Interest Period, Agent shall
automatically designate on Borrower's behalf a ninety (90) day LIBOR Interest
Period.
Time shall be of the essence with respect to the time periods set forth in
this Section 2.3 hereof.
Section 2.4 THE NOTE.
The Loan by Lenders to Borrower shall be evidenced by the Note.
Section 2.5 THE MORTGAGE AND COLLATERAL.
The Note and all other obligations under the Loan Documents shall be
secured by the Collateral. Upon the Closing of this Agreement and the execution
of the Note, Borrower will cause the Mortgage to be registered or recorded in
such a manner and in such a place as may be required in order to publish notice
of and fully protect the lien or security interest of Lenders in the Premises
and the Leasehold.
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Section 2.6 DEFAULT RATE.
Any overdue principal or interest on the Loan shall bear interest, payable
upon demand, for each day from and including the date which is one (1) day after
payment thereof was due but excluding the date of actual payment at a rate per
annum equal to the lesser of the maximum interest rate permitted under
applicable law or a rate equal to the sum of 3.0% plus the Prime Rate (the
"Default Rate").
After the occurrence and during the continuance of an Event of Default, the
Loan shall bear interest at the Default Rate.
Section 2.7 REPAYMENT OF LOAN.
The outstanding principal balance of the Loan shall be repaid in annual
installments beginning September 30, 2000 as set forth in Exhibit E (on each
respective date set forth in Exhibit E, each an "Annual Installment Payment").
The remaining outstanding principal balance and any other indebtedness payable
to Agent or Lenders under the Loan Documents shall be due and payable on the
Maturity Date if no Grace Period is entered into or on the Grace Period
Termination Date, as the case may be.
If Borrower fails to make any Annual Installment Payment on the date on
which such payment is due, then, in addition to interest payable pursuant to
Section 2.3 or Section 2.6 hereof and notwithstanding that Borrower may have
exercised the Grace Period Option, Agent may, at its option, withdraw any
remaining funds from the Cash Collateral Account (Central Account) and apply the
same to amortize all or a portion of the Loan then due and owing.
Notwithstanding the foregoing, Borrower may exercise an option (the "Grace
Period Option") extending the Term for the period from and after the Maturity
Date to and including the Grace Period Termination Date (such period, the "Grace
Period") by providing notice of such exercise (the "Designation Notice") to
Agent, on or before the date that is thirty (30) days before the Maturity Date.
A Designation Notice once given shall be irrevocable. The exercise of the Grace
Period Option shall only be available in the event that no monetary Event of
Default shall have occurred and be continuing or no default of Borrower under
any material contract instrument or agreement to which Borrower is a party or by
which Borrower or any of its properties or assets may be bound or to which any
may be subject, which default might have a material adverse effect upon the
business, operations, properties, assets or conditions (financial or otherwise)
of Borrower shall have occurred and be continuing. The condition set forth in
the immediately preceding sentence must be satisfied on the Maturity Date. In
the event that Borrower exercises the Grace Period option, during the Grace
Period all free cash flow will be deposited in the Cash Collateral Account
(Central Account) and will be governed pursuant to Section 4 of the Cash
Collateral Agreement (Central Account)
Section 2.8 PREPAYMENTS.
Borrower shall have the option on not less than ten (10) Business Days'
prior written notice to Agent to prepay the Loan in whole or in part at any time
and from time to time, provided, however, that any such prepayment shall be
accompanied by accrued interest on the principal amount being prepaid to, but
excluding, the date of such prepayment plus the Prepayment Premium, if any,
determined pursuant to Section 2.9 hereof and any other amounts then due and
payable under the Loan Documents.
In addition to the foregoing, in the event that Borrower prepays all or any
part of the principal amount of the Loan, Borrower shall also pay the following
amount to Agent (the "Early Payment Premium") in addition to any other amounts
required to be paid by Borrower to Agent pursuant to this Section 2.8 in
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connection with a prepayment of principal under the Loan: (i) before or on the
first (1st) anniversary of the Closing Date, unless such prepayment is made in
order to avoid additional liability under or pursuant to the requirements of
Section 2.10 hereof and/or Section 2.13 hereof, an amount equal to 2.0% of the
principal amount so prepaid; (ii) after the first (1st) anniversary of the
Closing Date but before or on the fifty-seventh (57th) month anniversary of the
Closing Date, unless such prepayment is made in order to avoid additional
liability under or pursuant to the requirements of Section 2.10 and/or Section
2.13 hereof, an amount equal to 1.0% of the principal amount so prepaid; and
(iii) thereafter, an amount equal to 0.0% of the principal amount so prepaid.
Notwithstanding anything to the contrary herein above set forth, payment of the
Early Payment Premium shall not be required in connection with a prepayment
pursuant to Sections 2.13 or 8.14 hereof or Sections 3, 6, 13 or 14 of the
Mortgage.
Except for prepayments made pursuant to Sections 6 and 3(d) of the
Mortgage, any prepayment made pursuant to this Section 2.8 must be made in
minimum amount of One Million Dollars ($1,000,000) and in One Hundred Thousand
Dollar ($100,000) increments thereafter, for each such prepayment, not including
any Prepayment Premium or other costs associated with such prepayment which
shall be in addition to the amount so prepaid. Prepayment of principal will be
applied in inverse order to all payments required to be made hereunder. Any
amounts prepaid hereunder may not be reborrowed.
Section 2.9 FUNDING LOSS.
Borrower shall indemnify Agent and Lenders against any actual,
out-of-pocket third party costs resulting solely and directly from Borrower
prepaying (including but not limited to as permitted under Section 2.8 hereof,
but excluding scheduled payments of principal pursuant to the Note and payments
deemed made pursuant to Section 8.14 hereof) all or any portion of the principal
of the Loan before the Maturity Date. For purposes of the foregoing indemnity,
such loss shall be deemed to be the lesser of (i) the actual swap termination
costs incurred by Agent (if the Floating Rate was determined by Agent through
the execution of one or more third party swap agreements) and (ii) any loss
arising from the reemployment of funds (such lesser amount, the "Prepayment
Premium"). As used in the preceding sentence, the "loss arising from the
reemployment of funds" shall mean the excess, if any, of (a) the aggregate
present value as of the date of such prepayment of the sum of (i) each dollar
being prepaid and (ii) the amount of interest at the Floating Rate (but
excluding the Applicable Margin), that would have been payable in respect of
such Loan amount being prepaid if such prepayment had not been made and the Loan
were repaid in full before the Maturity Date, determined by discounting such
amounts at a rate equal to the applicable Reinvestment Rate from the respective
dates from which they would have been payable over (b) the amount of the Loan
being prepaid. If the applicable Reinvestment Rate is equal to or higher than
the Floating Rate (excluding the Applicable Margin), the Prepayment Premium
shall be zero. The Prepayment Premium, if any, payable by Borrower pursuant to
the terms hereof, shall include such amount or amounts, as calculated by Agent
in good faith, as shall compensate Agent for any out-of-pocket loss, cost or
expense incurred by Agent for terminating or unwinding any "forward swap",
"hedging agreement" or other contractual arrangement entered into by Agent with
a third party in order to commit to provide the Floating Rate to be applicable
for the Grace Period, pursuant to Section 2.3 hereof. Agent will use its
reasonable best efforts to mitigate, to the greatest extent possible, such
losses and expenses by reversing or unwinding any swap, forward swap, hedging
arrangement or other contractual arrangement relating to the Loan and/or
reinvesting any funds paid, prepaid or deposited by Borrower in a reverse swap
or another manner so as to reduce or eliminate the amount of any such loss or
expense.
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A certificate of Agent prepared in good faith and setting forth in
reasonable detail the basis for the determination of any cost and expense and
the computation of the amount thereof, shall, absent manifest error, be
presumptive evidence of such cost and expense and amount.
All amounts due under this Section 2.9 shall be payable by the Borrower
within ten (10) days of demand by Agent.
Section 2.10 TAXES.
Any and all payments by the Borrower under this Agreement and the Note
shall be made free and clear of and without deduction for Taxes. If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the Note to Agent:
the sum payable shall be increased as may be necessary so that after
making all required deductions (including but not limited to deductions
applicable to additional sums payable under this provision) Agent receives
an amount equal to the sum it would have received had no such deductions
been made; and
the Borrower shall pay to the relevant taxation authority or other
authority the full amount deducted in accordance with applicable law.
In addition to the payment of Taxes, the Borrower agrees to pay prior to
delinquency all Other Taxes, which Other Taxes may be repaid in installments if
so permitted under applicable Laws.
The Borrower hereby indemnifies Lenders for the full amount of Taxes and
Other Taxes on amounts payable under this Section 2.10 which are paid by Lenders
and for any actual liability (including but not limited to penalties, interest
and expenses) arising in connection therewith whether or not such Taxes, Other
Taxes or liabilities were correctly or legally asserted, unless due to Lenders'
gross negligence or wilful misconduct. Agent shall notify Borrower immediately
after Agent learns of such Taxes, Other Taxes or liabilities, but Agent's
failure to so notify Borrower shall not limit Borrower's obligations under this
Section 2.10. Lenders agree to use their reasonable efforts to minimize amounts
due hereunder (including, without limitation, making any filings that are
necessary to maintain Lenders' respective exemptions from withholding tax and
assigning their respective interests in the Loan to a branch that is eligible
for such exemption, provided such efforts are not otherwise disadvantageous to
the respective Lenders). This indemnity shall be fully performed within thirty
(30) days from the date Agent makes written demand therefor.
Upon request by Agent, within thirty (30) days after the date of any
payment of Taxes or Other Taxes, Borrower will furnish to Agent the original or
a certified copy of a receipt or a copy of a check evidencing payment thereof or
other evidence reasonably satisfactory to Agent.
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
2.10 shall survive the termination of this Agreement and the payment in full of
the Note (subject to applicable statutes of limitation).
Section 2.11 PAYMENTS.
All payments of principal, interest and/or any other amounts in connection
with the Loan are to be made by Borrower without set-off or counterclaim to the
order of Agent to the account of Agent as from time to time certified by Agent
in writing to Borrower in U.S. Dollars in immediately available (same day) funds
not later than 11:00 a.m. (New York City time) on the date such payment is due.
If any payment would otherwise be due on a day which
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is not a Business Day, then such payment shall be due on the next succeeding
Business Day, and interest shall accrue up to but not including such next
succeeding Business Day. All amounts received hereunder by Agent shall be deemed
received for the benefit of Lenders.
Borrower hereby authorizes Agent, if and to the extent payment due by
Borrower under any Loan Document is not made when due under any Loan Document,
to charge from time to time against any and all of Borrower's accounts with
Agent any amount so due.
Section 2.12 DISTRIBUTION TO LENDERS.
When Agent receives current funds, in payment of principal, interest or any
other sums due hereunder, on or prior to 11:00 a.m. (New York City time) on any
Business Day, then, on such date, Agent will notify Lenders of the same and will
distribute like funds by wire transfer of immediately available funds to the
Lenders ratably to such accounts at such places as have been designated by the
respective Lenders in writing from time to time. If such funds are received
after 11:00 a.m. (New York City time) on any Business Day, then Agent shall
distribute such funds no later than the next succeeding Business Day. Upon
Agent's receipt of any other amounts payable by Borrower or any other Persons,
for items other than principal or interest, Agent shall promptly cause the
payment to be applied in accordance with this Agreement. Unless Agent shall have
received notice from Borrower prior to the date on which any payment is due to
Lenders hereunder that Borrower will not make such payment in full, Agent may
assume that Borrower has made such payment in full to Agent on such date and
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent Borrower shall not have so made such payment in full to Agent,
each Lender shall repay to Agent forthwith on demand the portion of such amount
distributed to such Lender for which Agent did not in fact receive payment from
or on account of Borrower together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender makes
such repayment to Agent, at the Floating Rate. Borrower shall not be liable for
Agent's failure to make such distributions to Lenders.
Section 2.13 INCREASED COSTS; OVERRIDING EVENTS.
In the event of the imposition of any Restraint which shall prohibit or
restrict the making or maintaining of the Loan or the charging of interest
thereon, Borrower agrees that Agent shall have the right in good faith:
to comply with any such Restraint and to require the conversion of the
Floating Rate to an alternative interest rate (if available or
determinable) (Agent shall use its reasonable best efforts to provide
Borrower with a rate of interest commensurate to the Floating Rate or a
rate of interest consistent with loans and borrowers of a similar type);
to permit compliance with such Restraint; or
if an alternative interest rate is not available or determinable, to
require repayment in full of the outstanding principal amount of the Loan
together with accrued interest thereon on the earlier of:
immediately, if Lenders may not lawfully continue to fund and
maintain the Loan to such day; provided, however, in the event
Borrower cannot make such immediate payment, Borrower will not be
required to pay interest at the Default Rate for a period of one
hundred eighty (180) days from the date of such request by Agent;
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sixty (60) days after written notice (notified by telecopy or
telex) to Borrower to repay the Loan in full, or such longer period
(not to exceed one hundred eighty (180) days) after the date of such
written notice as may be reasonably required for Borrower to repay the
Loan in full.
In the event of the imposition of any Restraint which shall make it
impossible or unlawful for Lenders to give effect to or to maintain any of their
obligations under this Agreement (except as noted in (a) above), then except as
provided in Section 2.13(c) hereof, Agent may give notice of such fact to
Borrower whereupon Lenders' obligations hereunder shall immediately terminate
and Borrower shall, within sixty (60) days after receipt of such notice (or
within such shorter period as may be specified in the relevant Restraint
thereof) or such longer period (not to exceed one hundred eighty (180) days) as
may be reasonably required for Borrower to repay the Loan in full) repay Agent
in full the outstanding principal amount of the Loan together with accrued
interest thereon and any other charges due to Lenders hereunder, excluding the
Early Prepayment Premium and, in respect of a Restraint based on a change of the
laws of the Federal Republic of Germany, excluding the Prepayment Premuim.
If a Restraint requires that any Lender transfer the Loan from the
jurisdiction in which it was originally made or then currently held to an office
of such Lender in another jurisdiction and the transfer shall:
impose, modify or deem applicable any liquidity, reserve, capital
adequacy, special deposit or similar requirement against any assets of,
deposits with or for the account of, or loans by such Lender (or its
Lending Office), or
impose on such Lender (or its Lending Office) any other conditions
with respect to this Agreement (other than Taxes, Other Taxes or other
liabilities covered by Section 2.10 hereof),
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of giving effect to the terms of this Agreement or of
agreeing to make or making, funding or maintaining the Loan, then in lieu of
Section 2.13(b) hereof, upon notification of such amount by Agent, Borrower
shall either (i) promptly reimburse Agent for such actual, out-of-pocket
increased costs or (ii) prepay the entire outstanding principal of the Loan and
any interest accrued thereon (in which event, the Early Prepayment Premium shall
not be due). Lenders shall use their commercially reasonable efforts to minimize
additional amounts due hereunder (including, without limitation, making any
filings that are necessary to minimize or eliminate the effect of the Restraint
and assigning their respective interests in the Loan to a branch or other Lender
to which the Restraint is not applicable).
A certificate prepared in good faith setting forth the basis for the
determination of the facts, or the increased costs as noted in Subsection (a),
(b) and (c) immediately above, submitted by Agent to Borrower shall, absent
manifest error, be presumptive evidence of such actual, out-of-pocket increased
costs.
Section 2.14 COMMITMENT FEE.
Borrower shall pay to Agent on the Closing Date for the account of Lenders
a non-refundable commitment fee in the amount of EIGHT HUNDRED FIFTY THOUSAND
DOLLARS ($850,000), that being 0.50% of $170,000,000.
Section 2.15 ARRANGEMENT FEE.
Borrower shall pay to each of Agent and MCM Consulting Group on the Closing
Date for each of their own account, a non-refundable arrangement fee in the
amount of FOUR HUNDRED TWENTY FIVE THOUSAND DOLLARS ($425,000).
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Section 2.16 LENDING OFFICE.
The Loan shall be made by each Lender from the office identified as its
Lending Office hereunder or from such other branch or affiliate of each such
Lender as each such Lender may designate to Borrower and Agent in writing as its
Lending Office.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lenders, as of the date hereof, that:
Section 3.1 GOOD STANDING OF BORROWER AND ITS GENERAL PARTNERS.
Borrower is a limited partnership and is organized and existing and in good
standing under the laws of the State of Illinois. Prime is a limited
partnership, organized, existing and in good standing under the laws of the
State of Delaware, and is qualified to do business in Illinois. The Trust is a
real estate investment trust, organized, existing and in good standing under the
laws of the State of Maryland.
Section 3.2 AUTHORITY OF BORROWER.
Borrower has full power and authority to purchase and own the Premises, to
enter into this Agreement, to make the borrowings under this Agreement, to
execute and deliver the Loan Documents, and to incur and perform the obligations
provided for in the Loan Documents, all of which have been duly authorized by
all proper and necessary action. Except for those consents or approvals already
obtained, no consent or approval of any Governmental Authority is required on
the part of Borrower as a condition to the validity or performance of any Loan
Documents.
Section 3.3 AUTHORIZATIONS.
All authorizations, consents, approvals, registrations, exemptions and
licenses with or from Governmental Authorities which are necessary for the
borrowing, the execution and delivery of all Loan Documents, and Borrower's
performance under all Loan Documents have been effected or obtained and are in
full force and effect.
Section 3.4 BINDING AGREEMENT.
The Note and all other Loan Documents as executed and delivered
concurrently with this Agreement for value received, constitute, the valid and
legally binding obligations of Borrower enforceable in accordance with their
terms, subject only as to enforcement, bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
Section 3.5 LITIGATION.
There are no proceedings or investigations pending against Borrower or, to
the best knowledge of Borrower, threatened before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, if determined adversely to the interests of Borrower would have a
material adverse effect on the business, Premises, Leasehold Premises, condition
(financial or otherwise) or operations of Borrower or its general partner.
Section 3.6 NO CONFLICTS.
There is no statute, regulation, rule, order or judgment, and no provision
of any mortgage, deed of trust, indenture, contract or agreement to which
Borrower is a party which would prohibit, conflict with or in any way prevent
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the execution, delivery or carrying out of the terms of any Loan Documents by
Borrower in any material manner.
Section 3.7 FINANCIAL CONDITIONS.
The financial statements heretofore delivered to Agent fairly present the
financial condition of Borrower, as of the dates and for the periods referred
to, and have been prepared in accordance with Generally Accepted Accounting
Principles consistently applied throughout the periods involved. There have been
no material adverse changes in the business, Premises, Leasehold Premises,
condition (financial or otherwise) or operations of Borrower which would
materially, adversely affect Borrower's ability to comply with its obligations
under the Loan Documents.
Section 3.8 EMPLOYEE BENEFIT PLANS.
Borrower (a) is not and will not be an "employee benefit plan" as defined
in Section 3(3) of ERISA, which is subject to Title I of ERISA, and the assets
of Borrower do not and will not constitute "plan assets" of one or more such
plans for purposes of Title I of ERISA, and (b) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
"governmental plans".
Section 3.9 GOVERNMENTAL PLAN.
Borrower is not and will not be a "governmental plan" within the meaning of
Section 3(32) of ERISA and transactions by or with Borrower are not and will not
be subject to state statutes applicable to Borrower regulating investments of
and fiduciary obligations with respect to governmental plans.
Section 3.10 INVESTMENT COMPANY.
Borrower is not (i) an "investment company", an "affiliated person" of,
"promoter" or "principal" underwriter for or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other Law that purports to restrict or
regulate its ability to borrow money. The making and funding of the Loan by
Lenders, the application of the proceeds and repayment thereof by Borrower and
the consummation of the transactions contemplated by this Agreement and the
other Loan Documents will not violate any Law, including, without limitation,
any provision of such Acts or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
Section 3.11 HAZARDOUS MATERIALS.
Neither Borrower nor its general partner is undertaking, and has not
completed, either individually or together with other potentially responsible
parties, any investigation or assessment (other than investigations and/or
assessments made in connection with the Environment Site Assessment) or remedial
or response action relating to any actual or threatened release, discharge or
disposal of Hazardous Materials at the Premises or the Leasehold Premises in
violation of applicable laws, either voluntarily or pursuant to the order of any
Governmental Authority or the requirements of any Environmental Law; and, to
Borrower's knowledge, all Hazardous Materials generated, used, treated, handled
or stored at, or transported to or from, the Premises or the Leasehold Premises
have been disposed of in a manner not reasonably expected to result in material
liability to Borrower or any of its limited partners.
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Section 3.12 SOLVENCY.
Borrower and its general partner is Solvent.
Section 3.13 BORROWER'S ADDRESS.
The location of Borrower's and its general partner's principal place of
business and chief executive office is as follows:
77 West Wacker Drive
_ Prime Group Realty Trust
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Prime Group Realty, L.P.
77 West Wacker Drive
Chicago, Illinois 60601
Section 3.14 FOREIGN PERSON.
Neither Borrower nor its general partners are a "foreign person" (a
"Foreign Person") within the meaning of ss. 1445(f)(3) of the Code.
Section 3.15 BANKRUPTCY.
No bankruptcy, reorganization or insolvency proceedings are pending or
contemplated either by Borrower or, to the best of Borrower's knowledge, against
Borrower (or, if Borrower is a partnership or a limited liability company, any
of its general partner(s) or managing member(s)).
Section 3.16 COMPLIANCE WITH LAWS.
To the best of Borrower's knowledge, the Premises, the Leasehold Premises
and the current intended use thereof by Borrower comply in all material respects
with all applicable restrictive covenants, zoning ordinances, subdivision and
building codes, flood disaster laws, health and occupational laws having
jurisdiction over the Premises and the Leasehold Premises. The Premises
constitutes one or more separate tax parcels for purposes of ad valorem
taxation. To the best of Borrower's knowledge, the Premises and the Leasehold
Premises do not require any rights over, or restrictions against, other property
in order to comply with any of the aforesaid Laws which have not been obtained
and provided to Agent or its counsel for its review and approval.
Section 3.17 UTILITY SERVICE.
All utility services necessary and sufficient for the full use, occupancy
and operation of the Premises and the Leasehold Premises for their intended
purposes are available to the Premises and the Leasehold Premises, as
applicable, including water, storm sewer, sanitary sewer, gas, electric, cable
and telephone facilities, through public rights-of-way or perpetual private
easements approved by Agent.
Section 3.18 ACCESS.
All streets, curb cuts and driveways necessary for access to and full use,
occupancy, operation and disposition of the Premises have been completed, have
been dedicated to and accepted by the appropriate municipal authority and are
open and available to the Premises and the Improvements without further
condition or cost to Borrower.
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Section 3.19 INSURANCE.
As of the date of this Agreement, all insurance required by the terms of
the Mortgage is in full force and effect and none of the premiums payable
therefore have been financed.
Section 3.20 RENT ROLL.
Borrower has delivered a true, correct and complete schedule (a "Rent
Roll") of all Leases affecting the Premises and the Leasehold Premises as of the
date hereof reasonably satisfactory to Agent and its counsel, which information
thereon is accurate in respect of each Lease, and Borrower has delivered to
Agent and its counsel for its review and approval true, correct and complete
copies of all Leases described in the Rent Roll.
Section 3.21 NO RELIANCE ON AGENT OR LENDERS.
Borrower is a sophisticated owner, operator, developer, manager and
investor in real estate and its decision to enter into this Loan is based upon
its own independent expert evaluation of the terms, covenants, conditions and
provisions of the Loan Documents and such other matters, materials and market
conditions and criteria which Borrower and such parties deemed relevant.
Borrower and its Affiliates have not relied in entering into this Agreement, the
Loan or the other Loan Documents upon any oral or written information,
representation, warranty or covenant from Lenders, or any of its
representatives, employees, Affiliates or agents other than the representations
and warranties, if any, of Lenders contained herein. Borrower, on behalf of
itself and its Affiliates, further acknowledges that no employee, agent or
representative of Lenders have been authorized to make, and that Borrower and
its Affiliates have not relied upon, any statements, representations, warranties
or covenants other than those specifically contained in this Agreement and in
the other Loan Documents. Without limiting the foregoing, Borrower acknowledges
that Lenders have made no representations or warranties as to the Loan or the
Premises (including, without limitation, the cash flow of the Premises, the
value, marketability, condition or future performance thereof, the existence,
status, adequacy or sufficiency of the Leases, the tenancies or occupancies of
the Premises, or the sufficiency of the cash flow of the Premises, to pay all
amounts which may become due from time to time pursuant to the Loan).
ARTICLE 4
AFFIRMATIVE AND NEGATIVE COVENANTS
Section 4.1 AFFIRMATIVE COVENANTS.
So long as Borrower may borrow hereunder and until payment in full of the
Note and all sums borrowed under this Agreement and performance of all other
obligations of Borrower under this Agreement and the Loan Documents, Borrower
shall do the following:
Furnish to Agent:
as soon as available but in no event more than one hundred twenty
(120) days after the close of Borrower's fiscal year, a copy of the annual
audit report relating to Borrower in reasonable detail satisfactory to
Agent and prepared in accordance with Generally Accepted Accounting
Principles by Ernst & Young or other certified independent public
accountants reasonably satisfactory to Agent, together with financial
statements consisting of a balance sheet as of the end of such fiscal year
and statements of income and cash flows of Borrower for such year;
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as soon as available but in no event more than one hundred twenty
(120) days after the close of the Trust's fiscal years, a copy of the
annual financial statement relating to the Trust, in reasonable detail
satisfactory to Agent and prepared in accordance with Generally Accepted
Accounting Principles, together with financial statements consisting of a
balance sheet as of the end of such fiscal year and statements of income
and cash flows of the Trust for such year.
promptly upon receipt thereof, copies of any reports and management
letters submitted to Borrower by such accountants in connection with any
annual or interim audit of the books of Borrower;
within forty-five (45) days after June 30 of each calendar year during
the term of the Loan, an updated Rent Roll, semi-annual leasing status
reports and unaudited financial statements for the Premises certified by an
officer of the Trust;
within forty-five (45) days after December 31 of each calendar year
during the term of the Loan, an updated Rent Roll and semi-annual leasing
status reports for the Premises certified by an officer of the Trust; and
such financial, statistical and general information, readily available
to or producible by Borrower, as Agent may reasonably request.
Pay all of its indebtedness as and when the same shall come due, provided
Borrower may contest any of the same as long as such contest is pursued in good
faith and with due diligence and does not adversely affect Lenders.
Satisfy and comply in all material respects with all Governmental
Requirements applying to and affecting the Premises and the Leasehold Premises
and shall obtain and maintain in full force and effect until the Loan has been
repaid in full all necessary licenses, permits and similar matters with respect
to the Premises and the Leasehold Premises, all without cost or expense to
Lenders where failure to do so would result in a material adverse effect on the
business, Premises, Leasehold Premises, condition (financial or otherwise) or
operations of Borrower, it being understood that Borrower may contest any of
same as long as such contest is pursued in good faith and with due diligence and
does not adversely affect Lenders. Immaterial violations which Borrower is
proceeding to cure and which do not result in a Lien being created on the
Premises or the Leasehold shall not cause Borrower to be in default of this
Section 4.1(c).
Permit Agent or its representative and any Governmental Authority, upon
reasonable notice, to visit and inspect the Premises or the Leasehold Premises
at any time during normal business hours and at all other reasonable times;
provided, however, that all such visits and inspections shall be scheduled so as
to cause minimal disruption to the business and operation of Borrower, Leasehold
Premises and Premises. Agent hereby acknowledges and agrees that all such rights
to visit and inspect are subject to any and all limitations and/or restrictions
of tenants or other occupants now or hereafter in the Premises or the Leasehold
Premises.
Give prompt written notice to Agent of:
any action or proceeding instituted by or against Borrower in any
court or by any Governmental Authority, or of any such proceedings of which
Borrower obtains actual knowledge threatened against Borrower, which action
or proceeding may have a material adverse effect upon the business,
operations, Premises, Leasehold, assets or conditions (financial or
otherwise), of Borrower; and
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any other action, event or condition of any nature known to Borrower
or of which it should have knowledge which constitutes an Event of Default,
or a default of Borrower under any material contract instrument or
agreement to which Borrower is a party or by which Borrower or any of its
properties or assets may be bound or to which any may be subject, which
default may have a material adverse effect upon the business, operations,
properties, assets or conditions (financial or otherwise), of Borrower.
Deliver to Agent all items, documents, writings, reports and information
reasonably required by Agent to consummate the Loan.
During the term of the Loan, cause the Debt Service Coverage Ratio to be
not less than 1.25/1.00 as at any December 31 (each such date, a "DSCR
Determination Date"). If, as at any DSCR Determination Date during the term of
the Loan, the Debt Service Coverage Ratio is less than as required in the
preceding sentence (any DSCR Determination Date with respect to which the Debt
Service Coverage Ratio is less than as required, a "DSCR Failure Date"), the
same shall not constitute an Event of Default hereunder if within five (5)
Business Days after delivery to Agent of the DSCR Financial Statements relating
to such DSCR Failure Date, Borrower shall cause all Net Cash Flow and/or any
funds then available in the Cash Collateral Account (Central Account) to be
deposited in the Cash Collateral Account (Ratio Reserve), which shall be created
pursuant to the Cash Collateral Agreement (Ratio Reserve) then entered into by
Borrower and Agent, until such time as the DSCR equals or is greater than
1.50/1.00. Any cash or other collateral delivered to Agent or deposited in the
Cash Collateral Account (Ratio Reserve) in accordance with this Section 4.1(g)
shall constitute "Collateral" for all purposes under this Agreement. In the
event that the first sentence of this Section 4.1(g) is breached, upon request
by Agent, Borrower shall deliver to Agent, at Borrower's own cost and expense,
within sixty (60) days of said request, an M.A.I. appraisal, reasonably
satisfactory in form and scope to Agent, prepared by an appraiser, selected by
Borrower and reasonably satisfactory to Agent (an "Appraisal") of the Premises
and the Leasehold. Notwithstanding and in addition to the provisions of the
immediately preceding sentence, Agent, at its own cost and expense, may obtain
an Appraisal once each calendar year. The parties hereto acknowledge and agree
that no results of an Appraisal shall alter any right, liability or obligation
set forth in any Loan Document.
Concurrently with the deposit of any cash or other collateral with
Agent pursuant to Sections 4.1(g) and 4.1(i) hereof, deliver to Agent such
agreements and other documents and instruments necessary to grant Agent a
perfected first priority security interest in such deposits including but
not limited to an executed Cash Collateral Agreement (Ratio Reserve), and
Cash Collateral Agreement (Tenant Allowance Reserve). Any cash or other
collateral so deposited shall be held in an interest-bearing account in
trust and applied by Agent in accordance with the Loan Documents as
security for the payment of any sums due or to become due by Borrower under
the Loan Documents. Upon the satisfaction in full of all of Borrower's
obligations under the Loan Documents and the Debt Service Coverage Ratio
being not less than 1.50/1.00 as at any DSCR Determination Date without
regard to the Collateral delivered to Agent pursuant to Section 4.1(g),
Agent shall, within five (5) days after receipt by Agent of the written
request of Borrower, pay or return to Borrower the cash or collateral
heretofore deposited with any interest accrued thereon.
In addition to the foregoing, at any time during the term of the Loan,
Borrower may request that Agent release any cash or collateral previously
delivered to Agent pursuant to Section 4.1(g) hereof (each such request, a
"Collateral Release Request"). Each Collateral Release Request shall be
delivered to Agent in writing, together with (x) a current Rent Roll and
(y) a projected cash flow statement with respect to the Premises for the
ensuing 12-month period (which cash flow statement shall reflect any recent
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leasing activity with respect to the Premises), each certified by an
officer of the Trust, and (z) any other financial statements or documents
reasonably requested by Agent. If, in Agent's reasonable judgment, the Debt
Service Coverage Ratio for the ensuing 12-month period is likely to be
equal to or greater than 1.50/1.00 within five (5) days after receipt by
Agent of the applicable Collateral Release Request, Agent will release to
Borrower any cash or collateral previously delivered to Agent pursuant to
Section 4.1(g) hereof.
Deposit to the Cash Collateral Account (Tenant Allowance Reserve) the sum
of $1,500,000 (the "Tenant Allowance Reserve") semi-annually commencing on April
1, 2000 and on the 1st of each October and April thereafter (each a "Deposit
Date"), until the Maturity Date such that, upon the Maturity Date, the Cash
Collateral Account (Tenant Allowance Reserve) shall have $15,000,000 on deposit
(the "Required Amount"); provided, however, that in the event that any of the
Major Tenants renews or extends the term of its applicable Lease, the Cash
Collateral Account (Tenant Allowance Reserve) shall be reduced pro rata, and any
such funds released from escrow shall promptly be paid to Borrower. As an
alternative to the requirements of the previous sentence, Borrower may, at any
time during the term of the Loan, deposit, on any Deposit Date, into the Cash
Collateral Account (Tenant Allowance Reserve) an amount not less than $750,000
(any such amount, a "Deposit Amount"), so long as Borrower also provides to
Agent (1) an Acceptable Letter of Credit and/or (2) a Guaranty, the amounts
represented by the instruments indicated in clauses (1) and (2) of this sentence
to equal not less than the difference between $1,500,000 and the Deposit Amount.
Furthermore, and subject to the second sentence of this Section 4.1(i), if
Borrower exercises the Grace Term Option, Borrower shall deposit into the Cash
Collateral Account (Tenant Allowance Reserve) such sums as are necessary to
provide the Required Amount to be on deposit in the Cash Collateral Account
(Tenant Allowance Reserve). Notwithstanding anything to the contrary set forth
previously in this Section 4.1(i), Borrower will have the right to withdraw
funds on deposit in the Cash Collateral Account (Tenant Allowance Reserve) for
Tenant Improvement/Leasing Commission Costs in respect of the Major Tenants from
time to time in accordance with the terms of the Cash Collateral Agreement
(Tenant Allowance Reserve) (including, without limitation, the releasing of any
portion of the Premises currently leased to a Major Tenant) upon the
satisfaction of the following terms and conditions: (i) no Event of Default has
occurred and is continuing, and (ii) any amounts so withdrawn will be applied
only to the payment of Tenant Improvement/Leasing Commission Costs in respect of
the Major Tenants, and Borrower shall have delivered to Agent a duly executed
officer's certificate of the Trust confirming the foregoing and Borrower will
deliver, or will have previously delivered, to Agent a copy of the fully
executed Lease or the amendment to the Lease, or the final draft thereof, to
which such Tenant Improvement/Leasing Commission Costs relate (or, in lieu
thereof, a summary of the material terms of such lease, with a full copy to be
delivered within thirty (30) days). In the event that funds are withdrawn
pursuant to the immediately preceding sentence, the security for such funds
shall be released as applicable, in the following order: first, the Guaranty, if
any, and second, the Acceptable Letter of Credit, if any.
Operate the Premises and the Leasehold at all times as a first class "A"
office building in accordance with all applicable Laws, cause the Premises and
the Leasehold to be managed by the Manager in accordance, in all material
respects, with the terms of the Management Agreement, perform and cause Manager
to observe all the terms and provisions of the Management Agreement to be
performed or observed by it in all material respects, maintain the Management
Agreement in full force and effect and enforce the Management Agreement in
accordance with its terms in all material respects, in each case subject to the
provisions of Section 4.2(h) hereof. Notwithstanding the foregoing or anything
in Section 4.2(h) hereof, if the Management Agreement is terminated in
accordance with the terms hereof, any successor manager selected hereunder by
Agent or Borrower to manage the Premises shall be recognized in the City of
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Chicago as a first-class manager of a stature at least comparable, in Agent's
reasonable judgment, to the preceding Manager, or a qualified (in Agent's
reasonable judgment) independent office building management company managing
similar buildings. Any agreement between Borrower and the new Manager shall be
subject to Agent's prior written approval (which approval shall not be
unreasonably withheld, conditioned or delayed) provided that (a) in Agent's
reasonable judgment such agreement is no more favorable to the new Manager and
no less favorable to Agent than the Management Agreement with the preceding
Manager; and (b) the new Manager enters into an agreement to subordinate its
management fees in the same form as the preceding Manager or in such other form
as Agent shall have approved in Agent's reasonable discretion.
Pay and discharge before the same shall become delinquent, (i) all
Impositions imposed upon or that become a Lien upon the Premises; provided,
however, that Borrower shall not be required to pay or discharge any such
Imposition that is being contested in good faith and by proper proceedings and
as to which appropriate reserves are being maintained in accordance with the
provisions of and as provided by this Agreement, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable against its
other creditors and the enforcement thereof is not stayed pending resolution of
the subject contest.
Comply, and require all tenants in accordance with their applicable Leases
and other Persons operating or occupying the Premises or the Leasehold Premises
to comply, in all material respects, except as may be permitted by and provided
in this Agreement, with all applicable Environmental Laws and Environmental
Permits; obtain and renew all Environmental Permits necessary for its
operations, the Leasehold Premises and the Premises, if any, and to the extent
required by any Environmental Law, conduct any investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other action
necessary to remove from the Premises or the Leasehold Premises, as applicable,
and clean up all Hazardous Materials which are reasonably expected to result in
material liability to Borrower, in accordance with the requirements of all
Environmental Laws; provided, however, that Borrower shall not be required to
undertake any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect to such
circumstances.
Preserve and maintain its existence, legal structure, legal name, rights
(charter and statutory), permits, licenses, approvals, privileges and
franchises; provided, however, that Borrower shall not be required to preserve
any right, permit, license, approval, privilege or franchise if Borrower shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of Borrower, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to Borrower or Lenders and on the
condition that Borrower notifies Agent in writing of any such change, promptly
thereafter.
[Intentionally Omitted]
To the extent required by Environmental Law, establish and maintain an
operations and maintenance program with respect to any Asbestos and
Asbestos-containing Materials located at the Premises or the Leasehold Premises,
which operations and maintenance program shall comply with all applicable Laws,
conform in all material respects to applicable guidelines established by any
Governmental Authority and otherwise be designed in all material respects to
incorporate all prudent and reasonable safeguards in order to minimize any
health risk to patients, residents, employees and guests at the Premises and the
Leasehold Premises from the presence of Asbestos or Asbestos-containing
Material.
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Maintain or cause to be maintained the Premises and the Leasehold Premises
in good order, repair and operating condition, ordinary wear and tear and the
occurrence of any casualty or condemnation excepted, make or cause to be made
promptly, when necessary, all necessary repairs, restorations, renewals,
replacements, additions and improvements thereto, interior and exterior,
structural and nonstructural, foreseen and unforeseen, or otherwise necessary to
ensure that the same shall not in any way be diminished or impaired in any
material respect, and not cause or knowingly allow the Premises or the Leasehold
Premises to be wasted.
Keep the Premises and the Leasehold Premises equipped as now operated and
will replace all worn out or obsolete equipment in order to maintain and operate
the Premises as a first class "A" building and comply with all Laws; provided,
however, that Borrower shall not be required to replace any equipment if
Borrower shall determine that such replacement is no longer necessary or
desirable in the conduct of the business of Borrower and that the
non-replacement of such equipment does not adversely affect, in any material
respect, Borrower or Lenders.
Cause all Leases, and all amendments, renewals and extensions thereof, to
(i) provide for rental rates and terms which, in Borrower's reasonable judgment,
are comparable to existing local market rates and terms, (ii) be arms-length
transactions and (iii) be written on the standard form of lease, which is hereby
approved by Agent without material changes therefrom, (or, with respect to any
amendment, renewal or extension of an existing Lease, on the form of such
existing Lease). Upon request, Borrower shall furnish Agent with executed copies
of all Leases (including any amendments or modifications). No material changes
may be made to Agent-approved standard form of lease without the prior written
consent of Agent, which consent shall not be unreasonably withheld, conditioned
or delayed. Without Lender's prior consent (which consent shall not be
unreasonably withheld, conditioned or delayed), Borrower shall not (i) amend or
terminate any Lease with any Tenant whose Lease or Leases demise in the
aggregate at least 30,000 square footage of the rentable square footage of the
Premises, (ii) amend or terminate any Lease with any Tenant so as to cause a
material adverse effect on the Net Operating Income and (iii) enter into any new
Lease which demises in the aggregate at least 45,000 square footage of the
rentable square footage of the Premises. Within ten (10) Business Days of
receipt by Lender of written notification by Borrower to Lender of Lender's need
to provide its consent pursuant to this Section 4.1(r), Lender shall provide
Borrower with its written consent, which consent shall not be unreasonably
withheld, conditioned or delayed, or objection, and stating the reason for such
objection. If such consent or objection is not received by Borrower within the
time frame provided for in the previous sentence, Lender's consent to the
specific request shall be deemed granted, provided that such consent shall not
be deemed granted after the occurrence and during the continuance of any Event
of Default.
Use all reasonable efforts to obtain, within ninety (90) days of the
Closing Date, Subordination, Non-Disturbance and Attornment Agreements (the
"SNDAs") with respect to the Leases from each Tenant in favor of Agent, in form
and substance acceptable to Agent; provided, however, that a Tenant's failure to
execute an SNDA pursuant to the terms of such Tenant's Lease shall not be deemed
to be a default of Borrower under this Section 4.1(s).
Now and in the future remain Solvent and pay its debts from its assets as
the same shall be due and payable unless such debts are contested by Borrower in
good faith, and such contest is pursued continually and diligently.
Do, will do or caused to be done all things necessary to preserve its
limited partnership status and/or existence.
Maintain its books, records and bank accounts separate from those of its
Affiliates and any constituent party.
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Be, and at all times hold itself out to the public as a legal entity
separate and distinct from any other entity (including any Affiliate of
Borrower, any constituent party or any Affiliate of any constituent party).
Now and in the future maintain its assets in such a manner that it will not
be costly or difficult to segregate, ascertain or identify its individual assets
from those of any constituent party or any Affiliate of any constituent party,
or any other Person.
Except for security deposits paid or payable to Borrower by tenants under
the Lease, pay or cause to be paid in the Lockbox (as defined in the Cash
Collateral Account (Central Account)) or the Cash Collateral Account (Central
Account) all Rents.
Prior to the date hereof, and from time to time upon the reasonable request
of Lender, the Borrower shall deliver to Lender, in form and substance
satisfactory to Lender, such endorsements to the Mortgage Insurance Policy and
such preliminary title reports and other title or lien searches (including UCC
searches) and tax service contracts as Lender may reasonably require from time
to time.
Prior to the date that is thirty (30) days after the date hereof, cause
there to be executed by an unrelated third-party an interest rate hedge
guaranty, acceptable to Agent, indemnifying Lenders against interest that
accrues on the Loan at an annual rate in excess of 9%. Until such time as the
guaranty described in the immediately preceding sentence is in place, Prime
shall be personally liable for and guaranty to Lenders the interest that accrues
on the Loan at an annual rate in excess of 9%.
Section 4.2 NEGATIVE COVENANTS.
Until payment in full of the Note and all sums borrowed under this
Agreement and performance of all other obligations of Borrower under this
Agreement and the Loan Documents, Borrower shall not do the following:
Mortgage, pledge, grant or permit to exist a security interest in or a lien
upon any of its assets now owned or hereafter acquired, without first obtaining
the written consent of Agent which consent cannot be unreasonably withheld,
conditioned or delayed; provided, however, that Borrower may contest any Lien
upon on its assets as long as such contest is pursued in good faith and with due
diligence and does not materially adversely affect Lenders. Notwithstanding the
aforementioned, Borrower may enter into such equipment financing contracts,
installment sales contracts and the like in order to finance the reasonable
day-to-day equipment needs of Borrower at the Premises.
Institute or cause to be instituted, by an issuer or underwriter of, or be
a party to any public offering with respect to the Premises within the meaning
of the Securities Act of 1933 and the Securities and Exchange Act of 1934.
Make distributions (other than distributions to the partners comprising
Borrower, as required in Borrower's partnership agreement, and for Income
Taxes), if the Debt Service Coverage Ratio for the preceding calendar year is
less than 1.25/1.00. Distributions for Income Taxes are expressly permitted at
all times. At any time that the Debt Service Coverage Ratio is equal to or
greater than 1.25/1.00, Borrower shall have the right to distribute all amounts
that it has previously retained pursuant to the requirements of this Section
4.2(c).
Enter into or suffer to exist any agreement prohibiting or conditioning the
creation or assumption of any Lien upon any of its property or assets other than
in favor of Lenders; provided, however, that Borrower may contest any such lien
upon on its property or assets as long as such contest is pursued in good faith
and with due diligence and does not adversely affect Lenders.
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Make any material change in the nature of its business as carried on at the
date hereof or engage in any business or activity other than the ownership,
operation and maintenance of the Premises and the Leasehold Premises, and
activities incidental thereto.
Guarantee payment of any obligation of any Person or pledge its assets for
the benefit of any third party, including the general partner, principal or
Affiliate of Borrower, as the case may be.
File or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
Without Agent's prior consent (which consent shall not be unreasonably
withheld, conditioned or delayed): (i) cancel or terminate the Management
Agreement or consent to or accept any cancellation or termination thereof except
as permitted under the JV Agreement, (ii) amend or otherwise modify, in any
material respect, the Management Agreement, (iii) waive any material default
under or breach of the Management Agreement, or (iv) agree in any manner to any
other amendment, modification or change of any material term or condition of the
Management Agreement, in each case of each of clauses (i) through (iv)
inclusive, if such action would materially and adversely impair the interest or
rights of Lenders. Agent's withholding of its consent to a new property manager
shall not be deemed to be unreasonable if the new property manager, in Agent's
sole reasonable determination, is not a generally recognized manager of
first-class office buildings in Chicago.
[Intentionally Omitted]
Change its Fiscal Year unless such change would not adversely affect or
alter in any material respect the calculation of Debt Service Coverage Ratio
pursuant to this Agreement.
Now or in the future own any encumbered asset or property other than (i)
the Premises and the Leasehold Premises, and (ii) incidental personal property
necessary for the ownership or operation of the Premises and the Leasehold
Premises.
Except as expressly provided in this Agreement, enter into any agreement to
borrow funds, including the entering into of equipment financing contracts,
installment sales contracts, sale-lease back transactions or the like, from any
party without the prior approval of Agent. Notwithstanding the preceding
sentence or other provision of this Agreement or any other Loan Document,
Borrower may, at any time and from time to time without Agent's prior approval:
Obtain additional financing necessary for the reasonable day-to-day
operations of the Premises and the Leasehold; provided that (A) projected
Net Cash Flow is sufficient to repay such amounts when they become due and
(B) such debt (w) includes customary repayment and amortization schedules,
(x) is unsecured, (y) is at all times subordinated to the lien of the
Mortgage and (z) cannot be terminated and the term thereof accelerated
(other than by repayment and satisfaction in full of same) prior to the
repayment and satisfaction in full of the indebtedness created hereunder;
or
Borrow funds from one or more direct or indirect partners of Borrower
and/or any of their respective Affiliates; provided that such debt (x) is
unsecured, (y) is at all times subordinated to the lien of the Mortgage and
(z) cannot be terminated and the term thereof accelerated (other than by
repayment and satisfaction in full of same) prior to the repayment and
satisfaction in full of the indebtedness created hereunder.
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Any indebtedness described in (i) to (ii), a "Qualified Loan". Except as
expressly provided in this Agreement, Borrower shall not incur any further
indebtedness or other obligations, other than in the ordinary course of
business, without the prior approval of Agent, which approval Agent may grant or
withhold in its sole discretion.
Now or in the future make any loans or advances to any third party
(including any constituent party or any affiliate of Borrower, or any
constituent party thereof), other than tenants that are not Affiliates of
Borrower in connection with Leases relating to the Premises and the Leasehold
Premises and tenant improvements thereunder.
Amend, modify or otherwise change the partnership certificate, partnership
agreement of Borrower in a manner which would adversely affect Borrower's
existence as a single purpose entity.
Seek the dissolution or winding up, in whole or in part, of Borrower or any
of its general partners.
Commingle the funds and other assets of Borrower with those of any
constituent party thereof, any Affiliate, or any constituent party, or any other
Person.
Now or in the future, hold itself out to be responsible for the debts or
obligations of any other Person.
Cause, permit or allow the partition of the Premises.
Without the prior written consent of Lender, which consent or the denial
thereof shall be in Lender's sole and absolute discretion, make a change in the
Control of Borrower or sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer all or any part of the Premises. So long as there is no
change in control of Borrower in contravention of the first sentence of this
Section 4.2(s), Borrower, Prime and/or OSTRS, as the case may be, shall each be
permitted to transfer its direct or indirect interests in Borrower to a
Permitted Transferee, it being understood that OSTRS only may become a
transferee of an interest of Prime or Borrower if Agent has received (i)
notification from OSTRS that OSTRS agrees to the provisions set forth in Section
6.1 hereof; (ii) an executed assumption agreement, acceptable to Agent,
evidencing the JV's full assumption of Borrower's obligations under the Loan
Documents; (iii) an executed copy of the JV Agreement and any management
agreement that shall supersede the Management Agreement, each certified by the
Trust as being true and complete; and (iv) a duly executed subordination
agreement substantially in the form of the Management Subordination Agreement.
Install or otherwise use or acquire for use in connection with the
Collateral any Personal Property (including replacement Personal Property
pursuant to clause (C) below) which is not owned or leased by Borrower free and
clear of all Liens (including conditional sale contracts) and Rights of Others
(other than Permitted Exceptions) or which is not a part of the Collateral, or
(ii) cause or permit the removal from the Premises or the Leasehold Premises of
any Personal Property of the Borrower which is installed or otherwise used or
acquired for use in connection with the Collateral, except that so long as no
Event of Default has occurred and is continuing, this clause (t) shall not
prohibit (A) the temporary removal of Personal Property for repairs in the
ordinary course of business, (B) the removal of Personal Property of
insignificant value which is not reasonably necessary or appropriate to the
efficient operation of the Premises or the Leasehold Premises, as the case may
be, or (C) the removal of obsolete, defective or worn out Personal Property
which has been replaced by other Personal Property of equal or greater
suitability and value which is intended for the same purpose. Upon the removal
of any Personal Property in compliance with clauses (B) or (C) above, the
Borrower shall be permitted to transfer or otherwise dispose of such Personal
Property as the Borrower may determine.
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ARTICLE 5
DEFAULT
Section 5.1 EVENTS OF DEFAULT.
The term "Event of Default" as used herein shall mean the occurrence or
happening, at any time and from time to time, of any one or more of the
following which shall include by definition the expiration of any period of
grace or right to cure provided therein, provided there has been satisfied any
requirement in connection therewith for the giving of notice, lapse of time, or
happening of any further condition, event or act:
if an Event of Default occurs under the Mortgage (as defined in Section 22
thereof) after expiration of any period of grace or right to cure provided
therein, provided there has been satisfied any requirement in connection
therewith for the giving of notice, lapse of time, or happening of any further
condition, event or act;
if Borrower shall fail to pay any portion of the Debt, including, but not
limited to, principal (including, without limitation, any Annual Installment
Payment), interest, fees or other amounts payable to Agent under the Loan
Documents within five (5) days after Borrower receives written notice from Agent
that such payment is overdue;
if Borrower shall fail to comply with the provisions of Sections 4.1(g) and
4.1(h) hereof, within the time periods provided for therein;
if Borrower fails to duly and promptly observe, perform and discharge any
covenant, term, condition or agreement contained in the Loan Documents, other
than any default described in the other paragraphs of this Section 5.1, and such
failure is not curable, or if curable such failure continues for a period of
thirty (30) days after written notice thereof from Agent to Borrower, provided
if such failure is not curable in thirty (30) days Borrower shall have such
additional time as is reasonably necessary in the good faith opinion of Agent
after consultation with Borrower to cure provided that such cure is being
diligently pursued;
if any representation or warranty made by Borrower herein or any statement
or representation made in any certificate, report or opinion delivered in
connection herewith or in any of the Loan Documents, shall prove to have been
incorrect in any material respect on the date as of which made (provided that if
such misrepresentation or breach of warranty is capable of being cured, Borrower
shall have a period of thirty (30) days from the date Borrower receives written
notice from Agent or, if such misrepresentation or breach of warranty is not
curable within thirty (30) days, Borrower shall have such additional time as is
reasonably necessary in the good faith opinion of Agent after consultation with
Borrower to cure provided that such cure is being diligently pursued); and
If (i) Borrower shall be in default beyond any notice, grace or cure period
under any other mortgage or security agreement covering any part of the Premises
and the Leasehold Premises whether it be superior or junior in lien to the
Mortgage, or (ii) subject to Borrower's right to contest as provided in the Loan
Documents, the Premises or the Leasehold becomes subject to any mechanic's,
materialman's or other lien (except a lien for local real estate taxes and
assessments not then due and payable unless contested by Borrower in good faith,
and such contest is pursued continually and with diligence) and such lien is not
removed within thirty (30) days after Agent delivers notice thereof to Borrower.
Section 5.2 REMEDIES.
Upon an Event of Default, Agent may, at its option, use any, some or all of
the following remedies, concurrently or consecutively.
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(a) Agent may declare all principal, interest and other amounts outstanding
on the Loan immediately due and payable. Borrower expressly waives a
presentment, notice, demand and protest of any kind.
(b) Agent may exercise any and all of its rights and remedies provided at
law and under the Note, Mortgage and any other Loan Documents.
Section 5.3 REMEDIES CUMULATIVE AND CONCURRENT.
No right, power or remedy of Agent as provided in this Agreement or in any
of the Loan Documents is intended to be exclusive of any other right, power, or
remedy of Agent, but each and every such right, power or remedy shall be
cumulative and concurrent and in addition to any other right, power or remedy
available to Agent now or hereafter existing at law or in equity and may be
pursued separately, successively or concurrently at the sole discretion of
Agent. The failure of Agent to exercise any such right, power or remedy shall in
no event be construed as a waiver or release thereof.
Section 5.4 WAIVER, DELAY OR OMISSION.
No waiver of any Event of Default hereunder shall extend to or affect any
subsequent or any other Event of Default then existing, or impair any rights,
powers or remedies consequent thereon, and no delay or omission of Agent to
exercise any right, power or remedy shall be construed to waive any such Event
of Default or to constitute acquiescence therein.
Section 5.5 INDEMNITY.
Borrower hereby agrees that it will defend, indemnify and hold harmless
each Lender, and each of its affiliates, officers, directors, partners,
participants, employees and agents (each, an "Indemnified Party") from and
against, and shall reimburse the affected Indemnified Party for, any and all
actual, out-of-pocket losses, claims, damages, costs, expenses (including
reasonable attorney fees' and expenses), liabilities, fines, penalties and
charges arising out of claims made by Persons other than the Indemnified Parties
(collectively, the "Losses"), which are or may be imposed, or sustained by such
Indemnified Party by reason of (a) ownership of the Mortgage, the Premises, the
Leasehold Premises or any interest therein or receipt of any Rents therefrom;
(b) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Premises, the Leasehold Premises or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) any use, nonuse or condition in, on or about
the Premises, the Leasehold Premises or any part thereof or on adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(d) any failure on the part of Borrower to perform or comply with any of the
terms of the Loan Documents; (e) performance of any labor or services or the
furnishing of any materials or other property in respect of the Premises, the
Leasehold Premises or any part thereof; (f) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance or Asbestos on, from, or affecting the Premises, the
Leasehold Premises or any other property; (g) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related
to any Hazardous Substance or Asbestos on, from, or affecting the Premises or
the Leasehold Premises; (h) any lawsuit brought or threatened, settlement
reached, or government order relating to any Hazardous Substance or Asbestos on,
from, or affecting the Premises or the Leasehold Premises; (i) any violation of
the Environmental Laws, which are based upon or in any way related to any
Hazardous Substance or Asbestos on, from, or affecting the Premises or the
Leasehold Premises including, without limitation, the costs and expenses of any
remedial action in accordance with Laws, reasonable attorney and consultant
fees, investigation and laboratory fees, court costs, and litigation expenses;
(j) any failure of the Premises or the Leasehold Premises to comply with any
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Laws in all material respects; (k) any representation or warranty made in this
Loan Agreement, the Note, the Mortgage or the other Loan Documents being false
or misleading in any material respect as of the date such representation or
warranty was made; (l) any claim by brokers, finders or similar persons claiming
to be entitled to a commission in connection with any Lease or other transaction
involving the Premises, the Leasehold Premises or any part thereof under any
legal requirement or any liability asserted against Lenders with respect
thereto; and (m) the claims of any lessee of all or any portion of the Premises,
the Leasehold Premises or any person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease, except to the extent
that (i) such Losses resulted from the gross negligence or willful misconduct of
such Indemnified Party or (ii) in the case of the foregoing clauses (f) through
(i), Mortgagor establishes that such Losses resulted from Hazardous Materials
being placed on, above or under the Premises or the Leasehold Premises only
subsequent to any foreclosure by Agent or acceptance by Agent of a deed in lieu
of foreclosure with respect to the Premises or the Leasehold Premises. In case
any such claim, action or proceeding (a "Claim") is brought against an
Indemnified Party in respect of which indemnification may be sought by such
Indemnified Party pursuant hereto, Agent shall give prompt written notice
thereof to Borrower, which notice shall include all documents and information in
the possession of or under the control of Agent and such Indemnified Party
relating to such Claim and shall specifically state that indemnification for
such Claim is being sought under this Section 5.5; provided, however, that the
failure of Agent to so notify Borrower shall not limit or affect such
Indemnified Party's rights to be indemnified pursuant to this Section 5.5 except
to the extent Borrower is materially prejudiced by such failure. Upon receipt of
such notice of Claim (together with such documents and information from Agent
and such Indemnified Party), Borrower shall, at its sole cost and expense, in
good faith defend any such Claim with counsel reasonably satisfactory to Agent
(it being understood that counsel selected by Borrower's insurance carrier shall
be deemed to be acceptable to Agent and the Indemnified Party, provided such
insurer is an insurer under an insurance policy provided by Borrower pursuant to
the Loan Documents or otherwise was accepted by Agent as an insurer (a
"Qualified Insurer")), which counsel may, without limiting the rights of Agent
and such Indemnified Party pursuant to the next succeeding sentence of this
Section 5.5, also represent Borrower in such investigation, action or
proceeding. In the alternative, such Indemnified Party may elect to conduct its
own defense through counsel of its own choosing and at the reasonable expense of
Borrower, if (A) such Indemnified Party reasonably determines that the conduct
of its defense by Borrower could be materially prejudicial to its interests, (B)
Borrower refuses to defend, or (C) Borrower shall have failed, in such
Indemnified Party's reasonable judgment, to defend the Claim in good faith
(unless, in the case of each of clauses (A), (B) and (C), such Claim is being
defended by a Qualified Insurer). Borrower may settle any Claim against such
Indemnified Party without such Indemnified Party's consent, provided (i) such
settlement is without any liability, cost or expense whatsoever to such
Indemnified Party, (ii) the settlement does not include or require any admission
of liability or culpability by such Indemnified Party under any federal, state
or local statute or regulation, whether criminal or civil in nature and (iii)
Borrower obtains an effective written release of liability for such Indemnified
Party from the party to the Claim with whom such settlement is being made, which
release must be reasonably acceptable to such Indemnified Party, and a dismissal
with prejudice with respect to all claims made by the party against such
Indemnified Party in connection with such Claim. Agent and such Indemnified
Party shall reasonably cooperate with Borrower, at Borrower's sole cost and
expense, in connection with the defense or settlement of any Claim in accordance
with the terms hereof. If Borrower refuses to defend any Claim or fails to
defend such Claim in good faith (other than a Claim that is being defended by a
Qualified Insurer) and such Indemnified Party elects to defend such Claim by
counsel of its own choosing, Borrower shall be responsible for any good faith
settlement of such Claim entered into by such Indemnified Party. If such
Indemnified Party reasonably determines that the conduct of its defense by
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Borrower or a Qualified Insurer (whichever is defending such claim) would be
materially prejudicial to its interests and elects to defend such Claim by
counsel of its own choosing, Borrower shall be responsible for any reasonable
settlement of such Claim entered into by such Indemnified Party. Except as
provided in the preceding two (2) sentences, no Indemnified Party may pay or
settle any Claim and seek reimbursement therefor under this Section 5.5. Nothing
contained herein shall be construed as requiring Agent or any Indemnified Party
to expend funds or incur costs to defend any Claim in connection with the
matters for which Agent or any Indemnified Party is entitled to indemnification
pursuant to this Section 5.5. The obligations of Borrower hereunder shall
specifically include the obligation to expend its own funds, to incur costs in
its own name and to perform all actions as may be necessary to protect Agent or
any Indemnified Party from the necessity of expending its own funds, incurring
cost or performing any actions in connection with the matters for which each
Lender is entitled to indemnification hereunder. Any obligation of the Borrower
under clauses (f), (g), (h) and (i) of this Section 5.5 shall terminate upon the
earlier of (i) the tenth (10th) anniversary of the conveyance or assignment of
the Premises and the Leasehold pursuant to a judicial sale in any foreclosure
action or by assignment in lieu of foreclosure and (ii) repayment in full of the
outstanding principal balance and any other indebtedness payable to Agent or
Lenders under the Loan Documents.
ARTICLE 6
LIMITED RECOURSE OBLIGATIONS
Section 6.1 LIMITED RECOURSE.
Subject to the qualifications below in this Section 6.1, Lenders shall not
enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note, the Mortgage, this Loan Agreement or the
other Loan Documents by an action or proceeding wherein a money judgment shall
be sought against Borrower or any direct or indirect partner, member,
shareholder, principal, director, employee, officer or affiliate of Borrower,
except that Agent may bring a foreclosure action, an action for specific
performance or any other appropriate action or proceeding to enable Lenders to
enforce and realize upon the Note, the Mortgage, this Loan Agreement, the other
Loan Documents, and the interests in the Premises and any other collateral given
to Lenders pursuant to the Mortgage, and the other Loan Documents; provided,
however, that, except as specifically provided in this Section 6.1, any judgment
in any such action or proceeding shall be enforceable against Borrower only to
the extent of Borrower's interest in the Premises and in any other collateral
given to Lenders. Agent, by accepting the Note, the Mortgage, this Loan
Agreement and the other Loan Documents, and Lenders, by becoming Lenders
hereunder, agree that they shall not sue for, seek or demand any deficiency
judgment against Borrower or any direct or indirect partner, member,
shareholder, principal, director, employee, officer or affiliate of Borrower, in
any such action or proceeding, under or by reason of or under or in connection
with the Mortgage, this Loan Agreement, the other Loan Documents or the Note.
The provisions of this paragraph shall not, however, (a) constitute a waiver,
release or impairment of any obligation evidenced or secured by the Mortgage,
this Loan Agreement, the other Loan Documents or the Note; (b) impair the right
of Agent to name Borrower as a party in any action or suit for foreclosure and
sale under the Mortgage; (c) affect the validity or enforceability of any
guaranty made in connection with the Mortgage, this Loan Agreement, the Note or
the other Loan Documents; and (d) impair the right of Agent to obtain the
appointment of a receiver. Nothing herein shall be deemed to be a waiver of any
right which Agent may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the full amount of
the Loan secured by the Mortgage or to require that all collateral shall
continue to secure all of the debt owing to Lenders in accordance with the Note,
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the Mortgage, this Loan Agreement and the other Loan Documents. Notwithstanding
the foregoing provisions of this Section 6.1 or any other provision in the Loan
Documents, Borrower and Prime, but not any other direct or indirect partner,
member, shareholder, principal, director, employee, officer or affiliate of
Borrower, shall be fully liable for:
all actual, out-of-pocket losses suffered and liabilities and expenses
incurred by Lenders relating to fraud or intentional misrepresentation by
Borrower in connection with the loan evidenced by the Loan Documents;
the physical waste of the Premises or the Leasehold Premises by Borrower,
or any failure to maintain, repair or restore any part of the Premises or the
Leasehold Premises as may be required by the Mortgage, this Loan Agreement or
any of the other Loan Documents so as to constitute physical waste;
the breach of provisions in the Mortgage concerning Environmental Laws,
Hazardous Substances and Asbestos and any indemnification of Lenders therein;
the removal or disposal of any portion of the Premises or the Leasehold
Premises in violation of the terms of the Loan Documents after the occurrence
and during the continuance of an Event of Default under the Note, the Mortgage,
this Loan Agreement or any other Loan Documents;
the misapplication or conversion of Borrower of (i) any insurance proceeds
paid by reason of any loss, damage or destruction to the Premises or the
Leasehold Premises, (ii) any awards or other amounts received in connection with
the condemnation of all or a portion of the Premises or the Leasehold Premises,
or (iii) rents, issues, profits, proceeds, accounts, or other amounts received
by Borrower after the occurrence and during the continuance of an Event of
Default under the Note, the Mortgage, this Loan Agreement or the other Loan
Documents, except when applied with the written consent of Agent or to pay
Operating Expenses incurred or paid to Agent or Lenders as Debt Service or
otherwise;
the costs (including reasonable attorneys' fees and disbursements) incurred
by Lenders in connection with the collection or enforcement of the Loan;
failure to pay Taxes, assessments, charges for labor or materials or other
charges that create liens on any portion of the Premises or the Leasehold
Premises for which Borrower is assessee unless contested in good faith, such
contest being pursued with due diligence and continually;
any actual, out-of-pocket loss, damage, expense or liability incurred by
Lenders arising out of Borrower's failure to obtain Agent's prior written
consent to any sale, conveyance, alienation, mortgage, encumbrance, pledge or
other transfer of the Premises or the Leasehold or any part thereof;
any security deposits collected with respect to the Premises that are not
delivered to Agent upon a foreclosure of the Premises or action in lieu thereof,
except to the extent previously applied in accordance with the respective Leases
(as defined in the Mortgage); and
all of the terms and provisions of the Environmental Indemnity Agreement
and any indemnification of Lenders set forth therein.
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ARTICLE 7
THE AGENT
Section 7.1 PERFORMANCE BY AGENT.
If an Event of Default shall have occurred and be continuing, Agent shall
have the right, but not the duty, without limitation upon any of Agent's rights
pursuant hereto, to perform in good faith the obligations of Borrower which are
the subject of the Event of Default, in which event Agent shall endeavor to give
notice to Borrower of Agent's performance, and Borrower agrees to pay to Agent,
within five (5) days of demand therefor, all actual and reasonable costs and
expenses incurred by Agent in connection therewith, including without limitation
reasonable attorneys' fees, together with interest from the date of expenditure
at the Default Rate, if an Event of Default shall have given rise to such
expenditure; provided, however that Borrower shall not be obligated to reimburse
Agent for costs and expenses incurred by Agent pursuant to this Section 7.1 due
to Agent's gross negligence or willful misconduct. Upon demand by Agent, each of
the Lenders shall promptly advance to Agent in immediately available funds its
ratable portion of the funds expended by Agent in curing such Event of Default
together with interest thereon at the Default Rate from the date of Agent's
payment through the date prior to the date on which such advance is received by
Agent. Agent will disburse to each Lender such Lenders' ratable share of any
fees or charges paid or advanced to Agent by Borrower (i) pursuant to Sections
2.14 and 8.12 hereof and/or (ii) pursuant to Section 11(c) of the Mortgage.
Section 7.2 ACTIONS.
If Agent shall have reasonable cause to believe that any action or
proceeding related to the Premises or the Leasehold may, if adversely
determined, have a material adverse effect upon the rights or interests of Agent
and/or Lenders under this Agreement or any of the other Loan Documents, Agent,
after any applicable notice to Borrower shall have the right to commence, appear
in and defend such action or proceeding, and in connection therewith Agent may
pay necessary expenses, employ counsel, and pay reasonable attorneys' fees.
Borrower agrees to pay to Agent, within five (5) days after demand therefor by
Agent, all actual and reasonable costs and expenses incurred by Agent in
connection therewith, including without limitation reasonable attorneys' fees,
together with interest from the date of expenditure at the Default Rate, if an
Event of Default shall have given rise to such action or proceeding. Borrower's
obligations to repay such expenses shall be secured by the Loan Documents.
Section 7.3 NONLIABILITY OF AGENT AND LENDERS.
Borrower acknowledges and agrees that:
by accepting or approving anything required to be observed, performed,
fulfilled or given to Agent or Lenders pursuant to the Loan Documents, including
any certificate, statement of profit and loss or other financial statement,
survey, appraisal, lease or insurance policy, neither Agent nor Lenders shall be
deemed to have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof, and
such acceptance or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by Agent;
neither Agent nor Lenders undertake nor assume any responsibility or duty
to Borrower to select, review, inspect, supervise, pass judgment upon or inform
Borrower of any matter in connection with the Premises or the Leasehold and
Borrower shall rely entirely upon its own judgment with respect to such matters,
and any review, inspection, supervision, exercise of judgment or supply of
information to Borrower by Agent or Lenders in connection with such matters is
for the protection of Agent and/or Lenders only and neither Borrower nor any
third party is entitled to rely thereon; and
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except to the extent caused by a Lender's gross negligence or willful
misconduct, neither Agent nor any Lender shall be directly or indirectly liable
or responsible for any loss, claim, cause of action, liability, indebtedness,
damage or injury of any kind or character to any person or property arising from
any construction on, or occupancy or use of, any of the Premises or the
Leasehold Premises, including without limitation any loss, claim, cause of
action, liability, indebtedness, damage or injury caused by, or arising from:
(i) any defect in any building, structure, grading, fill, landscaping or other
improvements thereon or in any on-site or off-site improvement or other facility
therein or thereon; (ii) any act or omission of Borrower, the parties comprising
Borrower or any of Borrower's agents, employees, independent contractors,
licensees or invitees; (iii) any accident in or on the Premises or the Leasehold
Premises or any fire, flood or other casualty or hazard thereon; (iv) the
failure of Borrower, any of Borrower's licensees, employees, invitees, agents,
independent contractors or other representatives to maintain the Premises and
the Leasehold Premises in a safe condition; and (v) any nuisance made or
suffered on any part of the Premises or the Leasehold Premises.
Section 7.4 AUTHORIZATION AND ACTION.
Each Lender hereby appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Documents as are
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto, including but not limited to (i) all actions
set forth in Section 59 of the Mortgage or any similar provision of any other
Loan Document and (ii) except if an Event of Default has occurred or is
continuing hereunder, any and all actions related to the Cash Collateral Account
(Central Account), Cash Collateral Account (Ratio Reserve), if any, Cash
Collateral Account (Tenant Allowance Reserve), if any, and any other cash
collateral accounts required to be made hereunder, including but not limited to,
the release of monies or other collateral deposited or delivered to Agent
pursuant thereto. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Note), Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders;
provided, however, that Agent shall not be required to take any action which
exposes Agent to personal liability or which is contrary to this Agreement or
applicable law. Agent agrees to give to each Lender prompt notice of each notice
given to it by Borrower pursuant to the terms of the Loan Documents.
By their execution of this Agreement, all of the Lenders hereby delegate,
authorize and direct Agent to act on their behalf in all respects in connection
with the Loan Documents and the making of the Loan and agree with Borrower that
Borrower shall only be required to deal with Agent and each of the Lenders shall
be bound by any acts of Agent.
Except as otherwise expressly provided in this Agreement, Agent (i) shall
take all such actions hereunder and under the other Loan Documents which are not
inconsistent with the terms hereof or thereof as the Majority Lenders shall
instruct and (ii) shall not take any material actions hereunder or under the
Loan Documents contrary to the instructions of the Majority Lenders. Any
provision of this Agreement which grants to Agent the right to make a decision
at its sole discretion or in its reasonable judgment or at its option or any
other similar provision is intended, unless the context shall clearly require
otherwise, to apply only to relations between Borrower and Agent and the
respective rights and obligations of Borrower and Agent hereunder and shall not
apply to the relations between Agent and the Lenders or the respective rights
and obligations of Agent and the Lenders hereunder.
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Promptly after Agent acquires actual knowledge thereof, Agent will give
written notice to each Lender of any lien on the Premises or the Leasehold or
default under this Agreement or any of the other Loan Documents. Agent agrees to
consult with Lenders in respect of any remedial action to be taken in respect of
any such default and shall act in accordance with any decision of the Majority
Lenders. Agent agrees that during a period of forty-five (45) days from Agent's
notice to Lenders of any such default, Agent will not take any such material
remedial action without the prior agreement of the Majority Lenders unless in
Agent's good faith judgment it is necessary to take more prompt remedial action
within such period, with or without the agreement of the Majority Lenders, in
order to preserve any collateral for the payment of the Loan or substantive
rights or remedies under any of the Loan Documents. Agent shall advise Lenders
from time to time of such remedial action as Agent shall have taken. All losses
and expenses incurred by Agent in connection with the Loan, the enforcement
thereof or the realization of the security therefor shall be borne by the
Lenders in accordance with their ratable interest in the Loan, and Lenders will,
upon request, reimburse Agent for their ratable shares of any expenses incurred
by Agent in connection with any such default, any advances made to pay taxes or
insurance or otherwise to preserve the lien of the Mortgage or to preserve and
protect the Premises or the Leasehold (provided, however, that Agent shall not
advance sums in excess of the principal amount of the Mortgage), any other
expenses incurred in connection with the enforcement of the Mortgage and any
expenses incurred by Agent in connection with the consummation of the Loan not
paid or provided for by Borrower.
Agent shall, in making any Major Decision, act upon the direction of the
Majority Lenders; provided, however, that without the consent of all of the
Lenders, Agent shall not, except as expressly provided for in Section 7.4(a),
Section 7.4(c) or Section 7.4(d) hereof, make or consent to any modification of
the Loan or the Loan Documents, release any security for the Loan, or release
any Person from liability in connection with the Loan under any guaranty or
otherwise. As used herein, "Major Decision" means any decision to exercise any
material rights or remedies under the Loan Documents, or which would alter or
amend the terms of, or security for, the Loan in any material respect including
the interest rate on the Loan). The provisions of this subsection are solely for
the benefit of the Lenders and Agent and shall not create any rights in
Borrower.
If Agent shall be prohibited by Law from continuing to act as agent with
respect to the Loan, then, subject to Borrower's approval (which approval shall
not be unreasonably withheld, conditioned or delayed), the Majority Lenders
shall (and at any time may) designate another Lender to perform the obligations
and exercise the rights of Agent hereunder. The successor Agent shall assume
such obligations in writing and from and after Borrower's receipt of a copy of
notice of such replacement and receipt of a copy of such assumption the
successor Agent shall be the sole Agent hereunder and the term "Agent" shall
thereafter refer to such successor.
Section 7.5 WITHHOLDING EXEMPTION CERTIFICATES.
Concurrently with the disbursement of proceeds of the Loan and concurrently
with (and as a condition precedent to) the sale of any participation interest in
the Loan or assignment of all or any portion of the Loan, Agent shall deliver to
Borrower via facsimile two completed copies of United States Internal Revenue
Service Form 1001 or Form 4224, as applicable, or the successor applicable form,
with respect to each Lender (or, in the case of any sale of a participation
interest or assignment of all or any portion of the Loan, the applicable
purchaser or assignee) certifying that such Lender (or, if applicable, purchaser
or assignee) is entitled to receive payments under the Loan without deduction or
withholding of any United States federal income taxes. Each Lender shall further
deliver to Borrower two (2) copies of such Form 1001 or Form 4224, as
applicable, or the successor applicable form, at least thirty (30) days before
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the date that any such form expires or becomes obsolete or immediately after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Borrower, in each case certifying that such Lender is
entitled to receive payments under the Loan without deduction or withholding of
any United States federal income taxes.
Section 7.6 AGENT'S RELIANCE, ETC.
Agent shall administer this Agreement and the other Loan Documents and
service the Loan in accordance with the terms and conditions of this Agreement
and with the same degree of care as Agent would use in servicing a loan of
similar size and type held for its own account, provided, however, that none of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent: (i) may consult with
legal counsel (including counsel for Borrower), independent public accountants
and other experts selected and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations (whether written or oral) made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of Borrower or to inspect either the Premises, the
Leasehold or the books and records of Borrower; (iv) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; and (v) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
ARTICLE 8
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES.
Borrower agrees to pay all actual, out-of-pocket expenses of Agent
(including the reasonable fees and expenses of its counsel) in connection with
the Loan, the preparation of this Agreement and any amendments or supplements,
the enforcement of any provision of this Agreement or any amendment or
supplement and the collection of Note and/or the foreclosure of any Lien, and/or
Mortgage, and/or the enforcement of this Agreement through all trial and
appellate levels, whether such fees or expenses arise before proceedings are
commenced or after entry of a final judgment; provided, however, that Borrower
shall not be required to pay more than $10,000 (in total) for Agent's travel and
out-of-pocket expenses incurred in the preparation of the Loan Documents and the
closing of the contemplated transaction. Borrower hereby authorizes Agent to
utilize the proceeds of the Loan to satisfy any and all of the costs and
expenses referred to herein and no further direction or authorization from
Borrower shall be necessary to warrant disbursements in payment of the
foregoing, and all such disbursements shall earn interest as provided in the
Note and shall be secured by the Mortgage.
Section 8.2 CUMULATIVE RIGHTS AND NO WAIVER.
Each and every right granted to Agent hereunder or under any other Loan
Documents delivered hereunder or in connection herewith, or allowed by law or
equity, including but not limited to these rights exercisable in connection with
an Event of Default, shall be cumulative and may be exercised from time to time.
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No failure on the part of Agent to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial exercise
by Agent of any right preclude any other or future exercise thereof or the
exercise of any other right.
Section 8.3 NOTICES.
Unless expressly contained herein, all notices given hereunder shall be
given in accordance with the terms of the Mortgage.
Section 8.4 SEVERABILITY.
In case any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
Section 8.5 BINDING EFFECT.
This Agreement shall be binding upon and shall inure to the benefit of the
respective permitted successors and assigns of Borrower, Agent and Lenders;
provided, however, that Borrower may not assign any of its rights hereunder,
except as permitted in this Agreement or in the Loan Documents.
Section 8.6 EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument.
Section 8.7 TIME OF THE ESSENCE.
Time is of the essence in matters pertaining to this Agreement.
Section 8.8 IMMUNITY.
Agent's commitment to make this Loan hereunder shall not at any time be
subject or liable to attachment or levy at the suit of any creditor of Borrower
or any agent, contractor, subcontractor or supplier of Borrower. All third
parties' rights shall be and are subordinate and inferior to Lenders' interest
and lien under the terms of the Mortgage and this Agreement. Agent and Lenders
shall not be liable to third parties for services, labor, materials, Fixtures,
equipment and other personal property employed upon, furnished or delivered to
the Premises or the Leasehold Premises, and further as to such third parties,
Agent shall be under no obligation to adhere to the requirements herein imposed
as conditions for the advance of Loan funds which requirements are expressly
intended to be for the sole and exclusive benefit of Agent.
Section 8.9 GOVERNMENTAL REGULATION OF LENDER.
Lenders are subject to various Governmental Authorities and the laws, rules
and regulations enacted, adopted and promulgated by them. To the extent that
Lenders' power and authority to perform the obligations on the part of Lenders
to be performed under this Agreement, now or hereafter, may be limited or
regulated hereby, Lenders are hereby excused from such performance.
Section 8.10 MODIFICATION, WAIVER, CONSENT.
Any modification or waiver or any provision of this Agreement or any
consent to any departure by Borrower therefrom shall not be effective unless the
same is in writing and signed by an authorized officer of Agent, and then such
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modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose given. Any notice to or demand on Borrower not
specifically required of Agent hereunder shall not entitle Borrower to any other
or further notice or demand in the same, similar, or other circumstances unless
specifically required hereunder.
Section 8.11 ENTIRE AGREEMENT.
The Loan Documents contain the entire agreement between the parties hereto
and there are no promises, agreements, conditions, undertakings, warranties and
representations, whether written or oral, express or implied, between the
parties hereto other than as set forth in the Loan Documents.
Moreover, in the event of a conflict between the terms of another Loan
Document and this Agreement, the terms of the document which shall either
enlarge the interest of Lenders in the Premises and the Leasehold, grant to
Lenders greater financial security in the Premises and the Leasehold and/or
assure repayment by Borrower of all sums due hereunder in full shall control.
Section 8.12 ASSIGNMENT.
(a) Borrower may not assign this Agreement or any of its rights or
obligations hereunder without the prior approval of Agent except as provided in
this Agreement or in the other Loan Documents.
(b) Borrower and each Lender acknowledges and agrees that Agent may, and
shall have the right without Borrower's or any Lender's consent to, sell
participation interests in, or to assign, its interest in the Loan, or any
portion thereof, subject to Section 7.5 hereof, to any Institution and upon any
assignment by Agent, Agent shall be relieved of any liability hereunder and
under any Loan Document to the extent of the amount so assigned; provided,
however, Agent shall give ten (10) days prior notice of such assignment to
Borrower (together with a completed copy of Form 1001 or Form 4224, as
applicable, with respect to the proposed assignee). Borrower and Agent
acknowledge that any Lender (other than Agent) may, and shall have the right,
subject to Agent's prior written consent, and ten (10) days prior written notice
to Borrower (together with a completed copy of Form 1001 or Form 4224, as
applicable, with respect to the proposed assignee) to assign (but not sell any
participation interests in) its entire interest (but not a portion thereof) to
any Institution, and upon any assignment by such Lender, such Lender shall be
relieved of any liability hereunder or under any other Loan Document; provided,
further, that no such sale or assignment shall result in a material increase in
Borrower's obligations, costs or liabilities hereunder or a material reduction
in Borrower's rights and remedies. The parties to each such assignment shall
execute and deliver to Agent, for its acceptance and recording in the Agent's
Register, Agent's form of assignment and acceptance agreement, together with a
processing and recordation fee of $2,500, which fee shall cover Agent's cost in
connection with the assignments under this Agreement. If an Event of Default has
occurred and is continuing, Borrower's consent to any assignment or
participation to any party whatsoever shall not be required and all parties
hereto agree to promptly execute and file an amendment to this Agreement
reflecting any such assignment. Borrower agrees to execute within ten (10) days
after request therefor is made by Agent, any documents and/or estoppel
certificates reasonably requested by Agent in connection with such participation
or assignment, without charge; provided that such documents and/or estoppel
certificates do not expand the liability or obligations of Borrower or reduce
assignee's or participant's obligations or reduce Borrower's rights and
remedies. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party thereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
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Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement,
and such Lender assignor shall cease to be a party hereto. The Agent shall
maintain a register (the "Agent's Register") showing the identity of the Lenders
from time to time.
Section 8.13 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois.
Section 8.14 USURY.
Nothing herein, nor any transaction related hereto or thereto, shall be
construed or so operate as to require Borrower to pay interest at a greater rate
than is lawful under applicable law. Should any interest or other charges paid
by Borrower in connection with all advances made to Borrower under this
Agreement result in the computation or earning of interest in excess of the
maximum lawful rate of interest which is legally permitted under applicable law,
then any and all such excess shall be, and the same is hereby, waived by Agent,
and any and all such excess shall be, at Agent's option, be returned to Borrower
or credited against and in reduction of the balance due under the indebtedness,
and the portion of such excess which exceed the balance due under this Agreement
and the Note evidencing the indebtedness, shall be returned by Agent to
Borrower.
Section 8.15 CONSENT TO JURISDICTION.
Borrower, Agent and Lenders each hereby irrevocably submit to the exclusive
jurisdiction and venue of any state or federal court sitting in Chicago,
Illinois for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement or the Note or the Mortgage and/or the Loan
Document.
Section 8.16 MONIES.
All references to monies in this Agreement shall be deemed to mean lawful
monies of the United States of America.
Section 8.17 JURY TRIAL.
AGENT, LENDERS AND BORROWER HEREBY KNOWINGLY AND INTENTIONALLY WAIVE THE
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDERS EXTENDING
CREDIT TO BORROWER. FURTHER, BORROWER, HEREBY CERTIFIES THAT NO REPRESENTATIVE
OR AGENT OF AGENT, NOR AGENT'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT AGENT WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, this Agreement was executed and delivered the day and
year first above written.
BORROWER:
77 WEST WACKER LIMITED PARTNERSHIP
By: Prime Group Realty L.P., its general
partner
By: Prime Group Realty Trust, its managing general partner
By: /s/ Jeffrey A. Patterson
--------------------------------
Name: Jeffrey A. Patterson
-------------------------
Title: Executive Vice President
-------------------------
For purposes of Sections 4.1(aa) and 6.1
hereof only:
PRIME GROUP REALTY, L.P.
By: Prime Group Realty Trust, its
managing general partner
By:/s/ Jeffrey A. Patterson
---------------------------------
Name: Jeffrey A. Patterson
-----------------------------
Title: Executive Vice President
-----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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AGENT AND LENDER:
WESTDEUTSCHE IMMOBILIENBANK
MAXIMUM US$125,000,000 By: /s/ Armin Gemmerich
-------------------------------------
Name: Armin Gemmerich
-------------------------------
Title: Vice President
-------------------------------
By: /s/ Andreas Schwab
-------------------------------------
Name: Andreas Schwab
--------------------------------
Title: Assistant Vice President
--------------------------------
LENDER:
LANDESBANK SCHLESWIG-HOLSTEIN
US$[27,500,000] By: /s/ Benno Mokwinski
-------------------------------------
Name: Benno Mokwinski
--------------------------------
Title: Executive Vice President
--------------------------------
By: /s/ Ursula Kemphausen
-------------------------------------
Name: Ursula Kemphausen
--------------------------------
Title: Senior Vice President
--------------------------------
LENDER:
LANDESBANK SAAR GIROZENTRALE
US$[25,000,000] By: /s/ Hans Porter
-----------------------------------
Name: Hans Porter
--------------------------------
Title: Vice President
--------------------------------
By: /s/ Dirk Hoffmann
-------------------------------------
Name: Dirk Hoffmann
--------------------------------
Title: Vice President
--------------------------------
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LENDER:
DSL BANK
US$[20,000,000] By: /s/ H. Willemse
-----------------------------------
Name: H. Willemse
--------------------------------
Title: Senior Vice President
--------------------------------
By: /s/ R. Fuchs
-------------------------------------
Name: R. Fuchs
--------------------------------
Title: FVP
--------------------------------
-48-
<PAGE>
EXHIBIT A
Cash Collateral Agreement (Ratio Reserve)
-----------------------------------------
Intentionally Deleted
-49-
<PAGE>
EXHIBIT B
Description of Land
-------------------
Intentionally Deleted
-50-
<PAGE>
EXHIBIT C
Leases
------
Intentionally Deleted
-51-
<PAGE>
EXHIBIT D
Permitted Encumbrances
----------------------
All those encumbrances set forth on Schedule B to that certain title policy of
Chicago Title Insurance Company dated as of the date hereof, No. 007822406,
covering 77 West Wacker Drive, Chicago, Illinois.
-52-
<PAGE>
EXHIBIT E
Principal Repayment Schedule
----------------------------
September 30, 2000 $4,000.000
September 30, 2001 $4,000.000
September 30, 2002 $4,500.000
September 30, 2003 $5,000.000
September 30, 2004 $5,000.000
-53-
<TABLE>
EXHIBIT 12.1
PRIME GROUP REALTY TRUST AND THE PREDECESSOR
STATEMENTS REGARDING COMPUTATION OF RATIOS OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED SHARE DISTRIBUTIONS
(Dollars in Thousands)
<CAPTION>
Prime Group Realty Trust - Historical
---------------------------------------------------------------------------------------
Period
from
November 17,
Three months ended Nine months ended Year 1997
September 30, September 30, ended through
--------------------------- --------------------------- December 31, December 31,
1999 1998 1999 1998 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before preferred share
distributions and minority
interests per the consolidated
financial statements............ $ 56,029 $ 9,688 $ 79,013 $ 21,195 $ 30,866 $ 1,427
Interest expense.................. 10,899 7,615 32,822 22,091 30,901 1,680
Amortization of debt issuance
costs........................... 646 422 1,739 1,061 1,230 140
------------ ------------ ------------ ------------ ------------ ------------
Earnings............................ $ 67,574 $ 17,725 $ 113,574 $ 44,347 $ 62,997 $ 3,247
============ ============ ============ ============ ============ ============
Fixed charges:
Interest expense.................. $ 10,899 $ 7,615 $ 32,822 $ 22,091 $ 30,901 $ 1,680
Capitalization of interest
expense......................... 2,519 958 5,513 1,422 2,498 -
Amortization of debt issuance
costs........................... 646 422 1,739 1,061 1,230 140
Preferred share distributions..... 3,037 2,950 9,067 4,991 7,971 345
------------ ------------ ------------ ------------ ------------ ------------
Total fixed charges................. $ 17,101 $ 11,945 $ 49,141 $ 29,565 $ 42,600 $ 2,165
============ ============ ============ ============ ============ ============
Ratio of earnings to combined
fixed charges and preferred
share distributions............... 3.95 1.48 2.31 1.50 1.48 1.50
============ ============ ============ ============ ============ ============
Excess of earnings to combined
fixed charges and preferred
share distributions............... $ 50,473 $ 5,780 $ 64,433 $ 14,782 $ 20,397 $ 1,082
============ ============ ============ ============ ============ ============
Funds from operations:
Funds from operations............ $ 13,904 $ 12,600 $ 41,188 $ 33,858 $ 46,762 $ 3,619
Interest expense................. 10,899 7,615 32,822 22,091 30,901 1,680
Amortization of debt issuance
costs.......................... 646 422 1,739 1,061 1,230 140
Preferred share distributions.... 3,037 2,950 9,067 4,991 7,971 345
------------ ------------ ------------ ------------ ------------ ------------
Adjusted funds from operations...... $ 28,486 $ 23,587 $ 84,816 $ 62,001 $ 86,864 $ 5,784
============ ============ ============ ============ ============ ============
Fixed charges:
Interest expense................. $ 10,899 $ 7,615 $ 32,822 $ 22,091 $ 30,901 $ 1,680
Capitalization of interest
expense........................ 2,519 958 5,513 1,422 2,498 -
Amortization of debt issuance
costs.......................... 646 422 1,739 1,061 1,230 140
Preferred share distributions.... 3,037 2,950 9,067 4,991 7,971 345
------------ ------------ ------------ ------------ ------------ ------------
Total fixed charges................. $ 17,101 $ 11,945 $ 49,141 $ 29,565 $ 42,600 $ 2,165
============ ============ ============ ============ ============ ============
Ratio of funds from operations to
combined fixed charges and
preferred share distributions..... 1.67 1.97 1.73 2.10 2.04 2.67
============ ============ ============ ============ ============ ============
Excess of funds from operations to
combined fixed charges and
preferred share distributions..... $ 11,385 $ 11,642 $ 35,675 $ 32,436 $ 44,264 $ 3,619
============ ============ ============ ============ ============ ============
</TABLE>
-1-
<PAGE>
<TABLE>
PRIME GROUP REALTY TRUST AND THE PREDECESSOR
STATEMENTS REGARDING COMPUTATION OF RATIOS OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED SHARE DISTRIBUTIONS
(Dollars in Thousands)
<CAPTION>
Predecessor - Historical
---------------------------------------------------------
Period from
January 1,
1997, through Year ended December 31,
November 16, ------------------------------------------
1997 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings:
Loss before preferred share
distributions and minority
interests per the combined
financial statements............ $ (29,050) $ (31,417) $ (29,576) $ (22,062)
Interest expense.................. 34,417 37,217 36,234 33,387
Amortization of debt issuance
costs........................... 630 594 1,148 714
------------ ------------ ------------ ------------
Earnings $ 5,997 $ 6,394 $ 7,806 $ 12,039
============ ============ ============ ============
Fixed charges:
Interest expense.................. $ 34,417 $ 37,217 $ 36,234 $ 33,387
Capitalization of interest
expense......................... - - - -
Amortization of debt issuance
costs........................... 630 594 1,148 714
Preferred share distributions..... - - - -
------------ ------------ ------------ ------------
Total fixed charges................. $ 35,047 $ 37,811 $ 37,382 $ 34,101
============ ============ ============ ============
Ratio of earnings to combined fixed
charges and preferred share
distributions..................... - - - -
============ ============ ============ ============
Deficit of earnings to combined
fixed charges and preferred
share distributions............... $ (29,050) $ (31,417) $ (29,576) $ (22,062)
============ ============ ============ ============
Funds from operations:
Funds from operations............. $ (14,461) $ (17,367) $ (12,733) $ (12,930)
Interest expense.................. 34,417 37,217 36,234 33,387
Amortization of debt issuance
costs........................... 630 594 1,148 714
Preferred share distributions..... - - - -
------------ ------------ ------------ ------------
Adjusted funds from operations...... $ 20,586 $ 20,444 $ 24,649 $ 21,171
============ ============ ============ ============
Fixed charges:
Interest expense.................. $ 34,417 $ 37,217 $ 36,234 $ 33,387
Capitalization of interest
expense......................... - - - -
Amortization of debt issuance
costs........................... 630 594 1,148 714
Preferred share distributions..... - - - -
------------ ------------ ------------ ------------
Total fixed charges $ 35,047 $ 37,811 $ 37,382 $ 34,101
============ ============ ============ ============
Ratio of funds from operations to
combined fixed charges and
preferred share distributions..... - - - -
============ ============ ============ ============
Deficit of funds from operations to
combined fixed charges and
preferred share distributions..... $ (14,461) $ (17,367) $ (12,733) $ (12,930)
============ ============ ============ ============
</TABLE>
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,173
<SECURITIES> 0
<RECEIVABLES> 104,107
<ALLOWANCES> 0
<INVENTORY> 162,716 <F1>
<CURRENT-ASSETS> 0
<PP&E> 990,886
<DEPRECIATION> (31,572)
<TOTAL-ASSETS> 1,236,310
<CURRENT-LIABILITIES> 256,726 <F2>
<BONDS> 643,267
0
40
<COMMON> 151
<OTHER-SE> 336,126
<TOTAL-LIABILITY-AND-EQUITY> 1,236,310
<SALES> 0
<TOTAL-REVENUES> 204,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 120,276 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,822
<INCOME-PRETAX> 50,342
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (829)
<CHANGES> 0
<NET-INCOME> 50,342
<EPS-BASIC> 2.73
<EPS-DILUTED> 2.72
<FN>
<F1> Amount includes restricted cash escrows ($118,052), net deferred costs
($22,985), and other assets ($21,679).
<F2> Amount includes accrued interest payable ($2,610), accrued real estate
taxes ($36,814), accounts payable and accrued expenses ($27,678),
liabilities for leases assumed ($3,242), dividends payable ($8,104), other
liabilities ($8,409) and minority interests of ($169,869).
<F3> Amount includes property operations ($33,205), real estate taxes
($26,370), depreciation and amortization ($25,382), loss on land
development option ($600), general and administrative expense ($5,472) and
minority interests allocation ($29,247).
</FN>
</TABLE>
