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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
--------------------
PRIME GROUP REALTY TRUST
(Name of Issuer)
COMMON SHARES OF BENEFICIAL INTEREST,
PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
74158J 10 3
(CUSIP Number)
ROBERT J. RUDNIK, ESQ.
C/O THE PRIME GROUP, INC.
77 WEST WACKER DRIVE
SUITE 4200
CHICAGO, IL 60601
(312) 917-1500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
With a copy to:
WAYNE D. BOBERG, ESQ.
BRIAN T. BLACK, ESQ.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, IL 60601
(312) 558-5600
SEPTEMBER 11, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e); 13d-1(f) or 13d-1(g), check the following
box: |_|
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SCHEDULE 13D
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CUSIP No. 74158J 10 3
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- -------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Michael W. Reschke
- -----------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
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3. SEC USE ONLY
- -----------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO, BK, PF, AF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
- ------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- ----------------------------- ------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER - 360,166
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH
------------------------------------------------
8. SHARED VOTING POWER - 8,322,990
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9. SOLE DISPOSITIVE POWER -360,166
------------------------------------------------
10. SHARED DISPOSITIVE POWER -8,322,990
- ----------------------------- ------------------------------------------------
2
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- ------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Mr. Reschke individually beneficially owns 360,166 Common Shares of
Beneficial Interest, par value $0.01 per share ("Common Shares"), of Prime
Group Realty Trust (the "Issuer") which number includes 102,388 Common Shares
held directly by Mr. Reschke and options to acquire 257,778 Common Shares.
Mr. Reschke may be deemed to share beneficial ownership of: (i) the 304,097
Common Units of Limited Partner Interests of Prime Group Realty, L.P., a
Delaware limited partnership ("Common Units"), which Common Units are
exchangeable on a one-for-one basis for Common Shares at any time (or, at the
Issuer's election, cash of equivalent value), directly held by Prime Group
VI, L.P., an Illinois limited partnership ("PG-VI"), by virtue of his
ownership of an approximate 50.75% equity interest in PGLP, Inc., an Illinois
corporation ("PGLPI"), which is the managing general partner of PG-VI, (ii)
the 74,000 Common Shares directly held by Prime Group Limited Partnership, an
Illinois limited partnership ("PGLP"), by virtue of his capacity as managing
general partner of PGLP and (iii) the 7,944,893 Common Units directly held by
Primestone Investment Partners, L.P., a Delaware limited partnership
("Primestone"), by virtue of his ownership of an approximate 50.75% equity
interest in The Prime Group, Inc., an Illinois corporation ("PGI"), which is
the Administrative Member of PG/Primestone, L.L.C., a Delaware limited
liability company ("PG LLC"), which is the managing general partner of
Primestone.
- ------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Mr. Reschke individually beneficially owns 360,166 Common Shares, which
number includes 102,388 Common Shares held directly by Mr. Reschke and
options to acquire 257,778 Common Shares, which, assuming the exercise of the
options, constitute approximately 2.3% of the outstanding Common Shares. Mr.
Reschke may be deemed to share beneficial ownership of the: (i) 304,097
Common Units directly held by PG-VI which, assuming exchange of such Common
Units for Common Shares, constitute approximately 1.9% of the outstanding
Common Shares, by virtue of his ownership of an approximate 50.75% equity
interest in PGLPI, which is the general partner of PG-VI, (ii) 74,000 Common
Shares directly held by PGLP, which constitute approximately 0.5% of the
outstanding Common Shares, by virtue of his position as managing general
partner of PGLP and (iii) 7,944,893 Common Units directly owned by Primestone
which, assuming exchange of such Common Units for Common Shares, constitute
approximately 33.6% of the outstanding Common Shares, by virtue of his
ownership of an approximate 50.75% equity interest in PGI which is the
Administrative Member of PG LLC, which is the managing general partner of
Primestone.
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14. TYPE OF REPORTING PERSON - IN
- ------------------------------------------------------------------------------
3
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SCHEDULE 13D
- ------------------------------------------------------
CUSIP No. 74158J 10 3
- ------------------------------------------------------
- ------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITES ONLY)
Primestone Investment Partners, L.P.
- ------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
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3. SEC USE ONLY
- ------------------------------------------------------------------------------
4. SOURCE OF FUNDS
BK, OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
- ------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, United States of America
- ----------------------------- ------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER - 7,944,893
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH
------------------------------------------------
8. SHARED VOTING POWER - 0
------------------------------------------------
9. SOLE DISPOSITIVE POWER - 7,944,893
------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- ------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,944,893 Common Units of Prime Group Realty, L.P., a Delaware
limited partnership ("Common Units"), which Common Units are
exchangeable on a one-for-one basis for Common Shares of the
Issuer, $0.01 par value per share, at any time (or, at the
Issuer's election, cash of equivalent value).
- ------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
The 7,944,893 Common Units directly held by Primestone
Investment Partners, L.P. represent an approximate 33.6%
equity interest in the Issuer assuming exchange of such Common
Units for Common Shares.
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14. TYPE OF REPORTING PERSON - PN
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4
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SCHEDULE 13D
- ------------------------------------------------------
CUSIP No. 74158J 10 3
- ------------------------------------------------------
- ------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITES ONLY)
PG/Primestone, L.L.C.
- ------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
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3. SEC USE ONLY
- ------------------------------------------------------------------------------
4. SOURCE OF FUNDS
AF
- ------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
- ------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, United States of America
- ------------------------------------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER - 0
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH
------------------------------------------------
8. SHARED VOTING POWER - 7,944,893
------------------------------------------------
9. SOLE DISPOSITIVE POWER - 0
------------------------------------------------
10. SHARED DISPOSITIVE POWER - 7,944,893
- ------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
PG/Primestone, L.L.C., the managing general partner of
Primestone Investment Partners, L.P., may be deemed to share
beneficial ownership of the 7,944,893 Common Units of Prime
Group Realty, L.P., a Delaware limited partnership ("Common
Units"), which Common Units are exchangeable on a one-for-one
basis for Common Shares of the Issuer, $0.01 par value per
share, at any time (or, at the Issuer's election, cash of
equivalent value).
- ------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
SHARES |_|
- ------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
PG/Primestone, L.L.C., the managing general partner of
Primestone Investment Partners, L.P., may be deemed to share
beneficial ownership of the 7,944,893 Common Units directly
held by Primestone Investment Partners, L.P. which represent
an approximate 33.6% equity interest in the Issuer assuming
exchange of such Common Units for Common Shares.
- ------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - OO
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5
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SCHEDULE 13D
- ------------------------------------------------------
CUSIP No. 74158J 10 3
- ------------------------------------------------------
- ------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITES ONLY)
The Prime Group, Inc.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
OO
- ------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
- ------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- ------------------------------------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER - 0
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH
------------------------------------------------
8. SHARED VOTING POWER - 7,944,893
------------------------------------------------
9. SOLE DISPOSITIVE POWER - 0
------------------------------------------------
10. SHARED DISPOSITIVE POWER - 7,944,893
- ------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
The Prime Group, Inc., the administrative member of
PG/Primestone, L.L.C., the managing general partner of
Primestone Investment Partners, L.P., may be deemed to share
beneficial ownership of the 7,944,893 Common Units of Prime
Group Realty, L.P., a Delaware limited partnership ("Common
Units"), which Common Units are exchangeable on a one-for-one
basis for Common Shares of the Issuer, $0.01 par value per
share, at any time (or, at the Issuer's election, cash of
equivalent value).
- ------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- ------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
The Prime Group, Inc., the administrative member of
PG/Primestone, L.L.C., the managing general partner of
Primestone Investment Partners, L.P., may be deemed to share
beneficial ownership of the 7,944,893 Common Units directly
held by Primestone Investment Partners, L.P. which represent
an approximate 33.6% equity interest in the Issuer assuming
exchange of such Common Units for Common Shares.
- ------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - CO
- ------------------------------------------------------------------------------
6
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Item 1. SECURITY AND ISSUER.
This Schedule 13D relates to Common Shares of Beneficial
Interest, par value $0.01 per share ("Common Shares"), of Prime Group Realty
Trust, a Maryland real estate investment trust (the "Issuer"). All references
in this Schedule 13D to the beneficial ownership of Common Shares in
connection with any Reporting Person or any other person assumes exchange of
all options or Common Units (as defined below) held or beneficially owned by
such Reporting Person or other person for Common Shares. The principal
executive offices of the Issuer are located at 77 West Wacker Drive, Suite 3900,
Chicago, Illinois 60601.
Item 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by each of Michael W. Reschke, an
individual and a citizen of the United States of America ("Reschke"), Primestone
Investment Partners, L.P., a Delaware limited partnership ("Primestone"),
PG/Primestone L.L.C., a Delaware limited liability company ("PG LLC"), and The
Prime Group, Inc., an Illinois corporation ("PGI"). The principal business of
Primestone is to hold Common Units of limited partner interest of Prime Group
Realty, L.P., a Delaware limited partnership and the entity through which the
business and operations of the Issuer are conducted. The principal business of
PG LLC is to act as the managing general partner of Primestone. The principal
business of PGI is the ownership, development and management of, and investment
in, directly or indirectly, real estate.
Reschke owns an approximate 50.75% equity interest in PGI
which is the Administrative Member of PG LLC, which is the managing general
partner of Primestone. Reschke is the President, Chairman and Chief Executive
Officer and a member of the Board of Directors of PGI and the President and a
member of the Board of Directors of PGLP, Inc., an Illinois corporation
("PGLPI"). Reschke is also the Chairman of the Board of Trustees of the
Issuer, a publicly traded real estate investment trust engaged in the
acquisition, development, finance, construction, leasing, marketing,
renovation and property management of office and industrial properties, the
Chairman of the Board and a member of the Board of Directors of each of
Brookdale Living Communities, Inc., a publicly traded Delaware corporation
involved in the ownership, development and operation of senior independent
and assisted living facilities, and Prime Retail, Inc., a publicly traded
real estate investment trust involved in the ownership, development and
management of factory outlet centers, and a member of the Board of Directors
of Horizon Group Properties, Inc., a publicly traded real estate investment
trust involved in the ownership, development and management of factory outlet
centers. The principal business of PGLPI is the ownership, development and
management of, and investment in, directly or indirectly, real estate.
The business address of Reschke and the address of the
principal business and principal office of Primestone, PG LLC and PGI are:
c/o The Prime Group, Inc., 77 West Wacker Drive, Suite 4200, Chicago,
Illinois 60601.
BRE/Primestone Investment Management L.L.C., a Delaware
limited liability company ("BRE/PIM") is also a general partner of
Primestone. The members of BRE/PIM are as follows: Blackstone Real Estate
Partners II L.P., a Delaware limited partnership ("BREP II"), Blackstone Real
Estate Partners II.TE.1 L.P., a Delaware limited partnership ("TE1"),
Blackstone Real Estate Partners II.TE.3 L.P., a Delaware limited partnership
("TE3"), Blackstone Real Estate Partners II.TE.4 L.P., a Delaware limited
partnership ("TE4"), Blackstone Real Estate Partners II.TE.5 L.P., a Delaware
limited partnership ("TE5"), Blackstone Real Estate Partners II.R
(Primestone), a New York partnership ("BREP II.R (Primestone)"), Blackstone
Real Estate Investors (Primestone) II Inc., a Delaware corporation ("BREIP
II"), and Blackstone Real Estate Holdings II L.P., a Delaware limited
partnership ("BREH II"). Blackstone Real Estate Associates II L.P., a
Delaware limited partnership ("BREA II") is the general partner of BREP II,
TE1, TE3, TE4, TE5 and BREP II.R (Primestone). BREA II is also the general
partner of the controlling shareholders of BREIP II. Blackstone Real Estate
Management Associates II L.P., a Delaware limited partnership ("BREMA II") is
the general partner of BREA II and BREH. BREA II L.L.C., a Delaware limited
liability company ("BREA II LLC") is the general partner of BREMA II. John G.
Schreiber, an individual ("Schreiber"), is the general partner of BREA II.
Peter G. Peterson, an individual
7
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("Peterson"), and Stephen A. Schwarzman, an individual ("Schwarzman"), are
the founding members of BREA II L.L.C. The foregoing entities and individuals
specified in this paragraph shall be referred to collectively as "Blackstone".
The principal business of BRE/PIM is to act as a general
partner of Primestone. The principal business of each of BREP II, TE1, TE3,
TE4, TE5 and BREH II is to make real estate-related investments. The
principal business of BREP II.R (Primestone) and BREIP II is to act as a
member in BRE/PIM and BRE/Primestone Investment L.L.C., a Delaware limited
liability company ("BRE/PI") which is a limited partner in Primestone. The
principal business of BREA II is to act as the general partner of BREP II,
TE1, TE3, TE4, TE5, BREP II.R (Primestone) and certain other real
estate-related investment entities. The principal business of BREMA II is to
act as the general partner of BREA II and BREH II. The principal business of
BREA II LLC is to act as the general partner of BREMA II. The principal
business address of each of BRE/PIM, BREP II, TE1, TE3, TE4, TE5, BREP II.R
(Primestone), BREIP II, BREH II, BREA II, BREMA II and BREA II LLC is 345
Park Avenue, 31st Floor, New York, New York 10154.
Schreiber is a United States citizen, and his present
principal occupation or employment is making real estate-related investments.
The principal business address of Schreiber is Schreiber Investments, 1115
East Illinois Road, Lake Forest, Illinois 60045.
Peterson and Schwarzman are United States citizens and the
founding members, and serve as the Chairman and President, respectively, of
BREA II LLC. Peterson's principal occupation or employment is serving as
Chairman of The Blackstone Group L.P. ("TBG"), an investment banking firm
based in New York. Schwarzman's principal occupation or employment is serving
as the President and CEO of TBG. Peterson and Schwarzman also serve as the
founding members of each of Blackstone Group Holdings L.L.C. ("BGH"), which
is the general partner of Blackstone Group Holdings L.P., a limited partner
of TBG, Blackstone Management Associates II L.L.C. and Blackstone Management
Partners L.L.C. The principal business address of each of Peterson and
Schwarzman is 345 Park Avenue, 31st Floor, New York, New York 10154.
Unless otherwise indicated below, the business address of
each person listed below is:
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
The following table sets forth the name and the principal
occupation or employment of each director and executive officer (except
Reschke (see above)) of PGI and of each executive officer of BRE/PIM, as
applicable:
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
- ---- ---------------------------------------------
<S> <C>
Robert J. Rudnik (A)............ Executive Vice President/General Counsel and
Secretary of PGI; Vice President and
Secretary of PGLPI; Executive Vice
President, General Counsel and Secretary of
Brookdale Living Communities, Inc.
Gary J. Skoien.................. Executive Vice President of PGI; Vice
President of PGLPI; Chairman of the Board,
President and Chief Executive Officer of
Horizon Group Properties, Inc.
Ray R. Grinvalds (A)............ Senior Vice President/Asset and Development
Management of PGI; Vice President of PGLPI
</TABLE>
8
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<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
- ---- ------------------------------------------
<S> <C>
Mark K. Cynkar.................. Senior Vice President/Chief Financial
Officer of PGI; Vice President of PGLPI
Bohdan P. Hirniak............... Vice President/Land Development Division of PGI
Warren H. John (A).............. Vice President of PGI; Vice President and
Assistant Secretary of PGLPI
Robert E. Lemke................. Vice President/Single Family Housing of PGI
Paul A. Roehri.................. Vice President/Director of Accounting of PGI; Vice President of PGLPI
Glenn D. Reschke (A)............ President, Chief Operating Officer and Acting Chief Executive Officer of Prime Retail, Inc.
c/o Prime Retail, Inc.
100 E. Pratt Street
Baltimore, MD 21202
Edward J. John (A) ............. Orthodontist
1420 N. Arlington Heights Rd.
Arlington Heights, IL 60004
Peter G. Peterson (B) .......... Chariman fo the Board of BRE/PIM
Stephen A. Schwarzman (B) ...... President of BRE/PIM
Thomas J. Saylak (B) ........... Senior Managing Director and Vice President of BRE/PIM
Kenneth C. Whitney (B) ......... Managing Director and Vice President of BRE/PIM
Gary Sumers (B) ................ Managing Director and Vice President of BRE/PIM
John Z. Kukral (B) ............. Senior Managing Director and Vice President of BRE/PIM
Steven Orbuch (B) .............. Vice President and Assistant Secretary of BRE/PIM
Dennis J. McDonagh (B) ......... Vice President and Controller of BRE/PIM
Michael A. Puglisi (B) ......... Vice President, Treasurer and Secretary of BRE/PIM
</TABLE>
- ---------------------------
(A) Director of PGI
(B) Address: c/o BRE/Primestone Investment Management L.L.C.,
345 Park Avenue, 31st Floor, New York, NY 10154.
All of the executive officers and directors of PGI and
BRE/PIM are citizens of the United States of America.
During the last five years, none of Reschke, Primestone, PG
LLC, PGI, BRE/PIM, BREP II, TE1, TE3, TE4, TE5, BREP II.R (Primestone), BREIP
II, BREH II, BREA II, BREMA II, BREA II LLC, Peterson, Schreiber, Schwarzman,
nor any of the executive officers or directors of PGI, which is the
Administrative Member of PG LLC, which is the managing general partner of
Primestone, nor any of the executive officers or directors of BRE/PIM (i) has
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the Formation Agreement, dated as of November 17,
1997 (the "Formation Agreement"), among the Issuer, Prime Group Realty, L.P., a
Delaware limited partnership (the "Operating Partnership"), Prime Group Realty
Services, Inc., a Maryland corporation, PGI, Prime Group Limited Partnership, an
Illinois limited partnership ("PGLP"), and Jeffrey A. Patterson, and in
connection with the Company's initial public offering of its Common Shares on
November 17, 1997, PGI, PGLP and certain of their affiliates contributed to the
Operating Partnership (i) their ownership interest in certain property-owning
partnerships, (ii) their right to purchase the subordinate mortgage encumbering
a certain property from third party lenders, (iii) their rights to acquire
certain third parties' ownership interests in
9
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certain property-owning partnerships and (iv) substantially all of the assets
and liabilities relating to their office and industrial development, leasing
and management business. In exchange for this contribution, PGI (and certain
of its affiliates) and PGLP received 3,375,000 and 90,000 Common Units from
the Operating Partnership, respectively. The Formation Agreement is
identified as Exhibit 1 hereto and is incorporated herein by reference. On
January 16, 1998, PGLP transferred 37,259 and 5,216 of its Common Units to
Warren H. John and Ray R. Grinvalds, respectively. On December 18, 1998, PGLP
contributed its remaining 47,525 Common Units to PG-VI.
Pursuant to the Contribution Agreement, dated as of October
20, 1997 (the "Contribution Agreement"), among PGI, BRE/PI and BRE/PIM,
Primestone was formed. PGI contributed to Primestone the 3,375,000 Common
Units it received from the Operating Partnership pursuant to the Partnership
Agreement as described above. BRE/PIM and BRE/PI contributed $45 million to
Primestone. Pursuant to a Credit Agreement, dated as of November 17, 1997 (the
"Credit Agreement"), between Primestone and Prudential Securities Credit
Corporation, Primestone borrowed $40.0 million and used such $40.0 million
and the $45.0 million contributed to it by BRE/PIM and BRE/PI to purchase an
aggregate of 4,569,893 Common Units from the Operating Partnership. The
Credit Agreement is identified as Exhibit 2 hereto and is incorporated herein
by reference.
In addition, in various purchases during the period from
May 15, 1998 to December 31, 1998, Reschke acquired an aggregate of 95,000
Common Shares on the open market at an aggregate price of $1,690,835.05.
Reschke also received from the Issuer a grant of (i) 1,388 Common Shares
which vested on January 15, 1999, (ii) 1,387 Common Shares which vested on
January 15, 2000, (iii) 6,634 Common Shares (3,318 of which vested on January
15, 2000 and 3,316 of which will vest on January 15, 2001), (iv) 5,179 Common
Shares which vest in four equal annual installments beginning on January 15,
2000, (v) an option to purchase 175,000 Common Shares, at an exercise price
of $20.00 per share, which vests in three equal annual installments beginning
on November 17, 1998, (vi) an option to purchase 48,611 Common Shares at an
exercise price of $14.00 per share, which vested in its entirety on
January 15, 1999, (vii) an option to purchase 35,000 Common Shares at an
exercise price of $14.00 per Common Share, which vests in four equal annual
installments beginning on January 15, 1999, (viii) an option to purchase
62,500 Common Shares at an exercise price of $13.188 per Common Share, which
vested in its entirety on January 15, 2000 and (ix) an option to purchase
50,000 Common Shares at an exercise price of $13.188 per Common Share, which
vests in four equal annual installments beginning on January 15, 2000, in
each case pursuant to the Issuer's Share Incentive Plan.
PG-VI acquired 47,525 Common Units from PGLP as described
above. On February 8, 1999, PG-VI acquired 256,572 Common Units from H Group,
LLC for an aggregate price of $3,848,580 with funds obtained from the sale of
other securities it had held. Finally, in various purchases in December 1998,
PGLP acquired 74,000 Common Shares for an aggregate price of $1,065,775 using
funds available in its margin account with its broker.
Item 4. PURPOSE OF TRANSACTION.
Primestone acquired the Common Units for investment
purposes and to facilitate the formation of the Issuer. Reschke acquired his
Common Shares for investment purposes. PGI acquired the Common Units it
contributed to Primestone for investment purposes and to facilitate the
formation of the Issuer. Neither PG LLC nor Blackstone has directly acquired
any securities of the Issuer or the Operating Partnership.
Reschke and PGI intend to acquire, directly or indirectly,
additional securities of the Issuer on the open market from time to time for
investment purposes. Except as stated in the previous
10
<PAGE>
sentence, neither Reschke, Primestone, PG LLC, PGI nor Blackstone has any
current plans or proposals which relate to or would result in the types of
transactions set forth in clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Reschke directly beneficially owns 360,166 Common
Shares, which number includes 102,388 Common Shares and options to acquire
257,778 Common Shares which, assuming the exercise of the options, constitute
approximately 2.3% of the outstanding Common Shares. By virtue of (i) his
ownership of an approximate 50.75% equity interest in PGLPI (the managing
general partner of PG-VI), (ii) his capacity as managing general partner of
PGLP and (iii) his ownership of an approximate 50.75% equity interest in PGI
which is the Administrative Member of PG LLC, which is the managing general
partner of Primestone, Reschke may be deemed to share beneficial ownership of
the 304,097 Common Units directly held by PG-VI, the 74,000 Common Shares
directly held by PGLP and the 7,944,893 Common Units directly held by
Primestone which, assuming exchange of such Common Units for Common Shares
and including PGLP's 74,000 Common Shares, would constitute approximately
34.8% of the total outstanding Common Shares.
Primestone directly holds 7,944,893 Common Units which,
assuming exchange of such Common Units for Common Shares, would constitute
approximately 33.6% of the total outstanding Common Shares.
Neither PG LLC nor PGI directly holds any Common Shares. By
virtue of its position as the managing general partner of Primestone, PG LLC
may be deemed to share beneficial ownership of the 7,944,893 Common Units
directly held by Primestone which, assuming exchange of such Common Units for
Common Shares, would constitute approximately 33.6% of the total outstanding
Common Shares as of the date hereof. By virtue of its position as the
Administrative Member of PG LLC, PGI may be deemed to have the shared power
to vote or to direct the vote and to dispose or direct the disposition of,
and thereby beneficially own, the 7,944,893 Common Shares (or 33.6% of the
outstanding Common Shares as of the date hereof) that PG LLC may be deemed to
beneficially own.
BRE/PIM directly holds no Common Shares. By virtue its
position as a general partner of Primestone, BRE/PIM may be deemed to share
beneficial ownership of the 7,944,893 Common Units directly held by
Primestone which, assuming exchange of such Common Units for Common Shares,
would constitute approximately 33.6% of the total outstanding Common Shares
as of the date hereof.
BREP II, TE1, TE3, TE4, TE5, BREP II.R (Primestone), BREIP
II and BREH II (collectively, the "Blackstone Members") are members of
BRE/PIM. By virtue of their positions as members of BRE/PIM, each Blackstone
Member may be deemed to have the shared power to vote or to direct the vote
and to dispose or direct the disposition of, and thereby beneficially own,
the 7,944,893 Common Shares (or 33.6% of the outstanding Common Shares as of
the date hereof) that BRE/PIM may be deemed to beneficially own.
Because BREA II is the general partner of each of the
Blackstone Members (other than BREH II and BREIP II), BREA II may be deemed
to have the shared power to vote or to direct the vote and to dispose or
direct the disposition of, and thereby beneficially own, the 7,944,893 Common
Shares (33.6% of the outstanding Common Shares as of the date hereof) that
the Blackstone Members may be deemed to beneficially own. Because BREMA II is
the general partner of BREA II and BREH II , BREMA II may be deemed to have
the shared power to vote or to direct the vote and to dispose or direct the
disposition of, and thereby beneficially own, the 7,944,893 Common Shares
(33.6% of the outstanding Common Shares as of the date hereof) that each of
BREA II and BREH II may be deemed to beneficially own. Because BREA II LLC is
the general partner of BREMA II, BREA II LLC may be deemed to have the shared
power to vote or to direct the vote and to dispose or direct the disposition
of, and thereby
11
<PAGE>
beneficially own, the 7,944,893 Common Shares (33.6% of the outstanding
Common Shares as of the date hereof) that BREMA II may be deemed to
beneficially own.
Because of the requirement that any disposition of an
investment (directly or indirectly) by entities to which BREA II serves as
general partner requires the approval of Schreiber, Schreiber may be deemed
to have the shared power to dispose or direct the disposition of, and thereby
beneficially own, the 7,944,893 Common Shares (33.6% of the outstanding
Common Shares as of the date hereof) that BREA II may be deemed to
beneficially own.
Because of their ability to control BREA II LLC, Peterson
and Schwarzman may be deemed to have the shared power to vote or to direct
the vote and to dispose or direct the disposition of, and thereby
beneficially own, the 7,944,893 Common Shares (33.6% of the outstanding
Common Shares as of the date hereof) that BREA II LLC may be deemed to
beneficially own.
(b) Reschke has the sole power to direct the vote and
disposition of 360,166 Common Shares directly beneficially owned by Reschke,
assuming exercise of his options. Primestone has the sole power to direct the
vote and disposition of the 7,944,893 Common Units directly held by
Primestone. None of PG LLC, PGI or Blackstone has the sole power to direct
the vote and disposition of any Common Shares or Common Units.
By virtue of his (i) ownership of an approximate 50.75%
equity interest in PGLPI (the managing general partner of PG-VI), (ii)
capacity as managing general partner of PGLP and (iii) ownership of an
approximate 50.75% equity interest in PGI which is the Administrative Member
of PG LLC, which is the managing general partner of Primestone, Reschke may
be deemed to share the power to direct the vote and disposition of the
304,097 Common Shares beneficially owned by PG-VI (assuming exchange of
PG-VI's Common Units for Common Shares), the 74,000 Common Shares directly
held by PGLP and the 7,944,893 Common Shares beneficially owned by Primestone
(assuming the exchange of Primestone's Common Units for Common Shares).
By virtue of its position as managing general partner of
Primestone, PG LLC may be deemed to share the power to vote or to direct the
vote and dispose or direct the disposition of the 7,944,893 Common Shares
beneficially owned by Primestone (assuming exchange of Primestone's Common
Units for Common Shares.)
By virtue of its position as Administrative Member of PG
LLC, PGI may be deemed to share the power to vote or direct the vote and
dispose or direct the disposition of the 7,944,893 Common Shares that PG LLC
may be deemed to beneficially own.
By virtue of its position as a general partner of
Primestone, BRE/PIM may be deemed to share the power to vote or to direct the
vote and dispose or direct the disposition of the 7,944,893 Common Shares
beneficially owned by Primestone (assuming the exchange of Primestone's
Common Units for Common Shares).
By virtue of their position as members of BRE/PIM, the
Blackstone Members may be deemed to share the power to vote or to direct the
vote and dispose or direct the disposition of the 7,944,893 Common Shares
that BRE/PIM may be deemed to beneficially own.
By virtue of its position as the general partner of each of
the Blackstone Members (other than BREH II and BREIP II), BREA II may be
deemed to share the power to vote or to direct the vote and dispose or direct
the disposition of the 7,944,893 Common Shares that the Blackstone Members
(other than BREH II and BREIP II) may be deemed to beneficially own.
12
<PAGE>
By virtue of its position as the general partner of BREA II
and BREH II, BREMA II may be deemed to share the power to vote or to direct
the vote and dispose or direct the disposition of the 7,944,893 Common Shares
that BREA II and BREH II may be deemed to beneficially own.
By virtue of its position as the general partner of BREMA
II, BREA II LLC may be deemed to share the power to vote or to direct the
vote and dispose or direct the disposition of the 7,944,893 Common Shares
that BREMA II may be deemed to beneficially own.
Because of the requirement that any disposition of an
investment (directly or indirectly) by entities to which BREA II serves as
general partner requires the approval of Schreiber, Schreiber may be deemed
to share the power to vote or to direct the vote and dispose or direct the
disposition of the 7,944,893 Common Shares that BREA II may be deemed to
beneficially own.
Because of their ability to control BREA II LLC, Peterson
and Schwarzman may be deemed to share the power to vote or to direct the vote
and dispose or direct the disposition of the 7,944,893 Common Shares that
BREA II LLC may be deemed to beneficially own.
(c) Neither Reschke, Primestone, PG LLC, PGI,
Blackstone, nor, to the best of their knowledge, any of the executive
officers or directors of PGI or BRE/PIM, has effected any transaction in
securities of the Company during the past 60 days.
(d) Other than LaSalle National Bank, a national
banking association ("LaSalle"), pursuant to the terms and conditions of a
Pledge Agreement, dated as of December 18, 1998 (as amended, the "Pledge
Agreement"), by and between PG-VI and LaSalle, pursuant to which PG-VI has
pledged to LaSalle its 47,525 Common Units, and Prudential Securities Credit
Corporation ("PSCC"), pursuant to the terms and conditions of a Pledge and
Security Agreement, dated as of November 17, 1997 (the "Security Agreement"),
between PSCC and Primestone, pursuant to which Primestone has pledged to PSCC
all of its 7,944,893 Common Units, no person is known to have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, securities of the Issuer (or securities exchangeable for
securities of the Issuer) held by Reschke, PGI, PG LLC, Primestone or
Blackstone, except for Reschke, PGI, PG LLC, Primestone or Blackstone.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Pursuant to the terms and conditions of the Registration
Rights Agreement, dated as of November 17, 1997 (the "Registration Rights
Agreement"), by and among the Company, Edward S. Hadesman Trust dated May 22,
1992, Grandville/Northwestern Management Corporation, an Illinois
corporation, Carolyn B. Hadesman Trust dated May 21, 1992, Lisa Hadesman 1991
Trust, Cynthia Hadesman 1991 Trust, Tucker B. Magid, Frances S. Shubert,
Grandville Road Property, Inc., an Illinois corporation, Sky Harbor
Associates, an Illinois limited partnership, Primestone, PGLP and Jeffrey
Patterson (collectively, the "Investors"), the Company granted demand and
incidental registration rights to the Investors for the registration under
the Securities Act of 1933, as amended, of Common Shares issuable upon
exchange of the Common Units owned by the Investors. Accordingly, the resale
of such Common Shares has been registered by the Company pursuant to an
effective Registration Statement (Registration No. 333-64973).
13
<PAGE>
On January 16, 1998, PGLP transferred 37,259 and 5,216 of
its Common Units to Warren H. John and Ray R. Grinvalds, respectively.
Pursuant to the Assignment and Assumption Agreement, dated as of December 18,
1998 (the "Assignment and Assumption Agreement"), between PGLP and PG-VI,
PGLP assigned its remaining 47,525 Common Units to PG-VI. In connection with
the Loan Agreement, dated as of December 18, 1998 (the "Loan Agreement"),
between PG-VI and LaSalle, PG-VI pledged its 47,525 Common Units to LaSalle,
pursuant to the terms of the Pledge Agreement, dated as of December 18, 1998
(as amended, the "Pledge Agreement"), between PG-VI and LaSalle, in order to
secure its obligations under the Loan Agreement.
Pursuant to the Registration Rights Agreement, dated as of
December 15, 1997, between the Issuer, Prime Group Realty, L.P. and H Group
L.L.C., the Issuer granted to H Group L.L.C. certain demand registration
rights. Pursuant to the Assignment Agreement, dated as of February 8, 1999
(the "Assignment Agreement"), between PG-VI and H Group L.L.C., a Delaware
limited liability company, PG-VI purchased 256,572 Common Units, with their
corresponding registration rights, from H Group L.L.C. for an aggregate
purchase price of $3,848,580. Pursuant to the First Amendment to Loan
Documents, Consent and Limited Release, dated as of January 29, 1999 between
PG-VI and LaSalle ("First Amendment to Loan Documents"), LaSalle consented to
the pledge by PG-VI of such 256,572 Common Units as replacement collateral
under the Pledge Agreement.
The Amended and Restated Agreement of Limited Partnership
of Prime Group Realty, L.P., dated as of November 17, 1997 (as amended, the
"Partnership Agreement"), among the Issuer, the Nardi Group, L.L.C., a
Delaware limited liability company, and the Limited Partners, as defined
therein, sets for the exchange rights applicable to the Common Units issued
in connection with the formation and initial public offering of the Issuer
and contains certain customary restrictions on transfer applicable to holders
of the Common Units.
The Agreement of Limited Partnership of Primestone
Investment Partners, L.P., dated as of November 17, 1997 (the "Primestone
Agreement"), among PG/Primestone, L.L.C., a Delaware limited liability
company, BRE/Primestone Investment Management L.L.C., a Delaware limited
liability company, and BRE/Primestone Investment L.L.C., a Delaware limited
liability company, sets forth the ability of PG/Primestone, L.L.C., as the
managing general partner of Primestone, to control the Common Units directly
owned by Primestone. Mr. Reschke has the ability to control PG/Primestone,
L.L.C. by virtue of his controlling interest in PGI, the Administrative
Member of PG/Primestone, L.L.C.
Pursuant to the Lock-Up Agreement, dated as of November 11,
1997 (the "Lock-Up Agreement"), between Primestone and Prudential Securities
Incorporated, Primestone agreed not to, without the consent of Prudential
Securities Incorporated on behalf of the underwriters for the Issuer's
initial public offering, exchange 4,569,893 of its Common Units until
November 11, 1998 nor exchange its remaining 3,375,000 Common Units until
November 11, 1999.
Pursuant to the Security Agreement, Primestone pledged its
Common Units to PSCC in order to secure its obligations under the Credit
Agreement.
Each of the Formation Agreement, the Registration Rights
Agreement and the Partnership Agreement, as amended, are identified as
Exhibits 1, 3 and 8-35, respectively, and incorporated herein by reference.
The Credit Agreement, Loan Agreement, Assignment and Assumption Agreement,
Pledge Agreement, First Amendment to Loan Documents, certain amendments to
the Partnership Agreement, Primestone Agreement, Lock-Up Agreement, Security
Agreement and a Joint Filing Statement are attached hereto as Exhibits 2, 4,
5, 6, 7, and 36-45, respectively, and incorporated herein by reference.
14
<PAGE>
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 1 Formation Agreement, dated as of November 17, 1997, among the
Issuer, Prime Group Realty, L.P., a Delaware limited
partnership, Prime Group Realty Services, Inc., a Maryland
corporation, PGI, PGLP, and Jeffrey A. Patterson, as filed as
an exhibit to the Company's Annual Report on Form 10-K (No.
1-13589) for the year ended December 31, 1997 and incorporated
by reference herein
Exhibit 2 Credit Agreement, dated as of November 17, 1997, between
Primestone and Prudential Securities Credit Corporation
Exhibit 3 Registration Rights Agreement, dated as of November 17, 1997,
among the Issuer, Edward S. Hadesman Trust Dated May 22, 1992,
Grandville/Northwestern Management Corporation, an Illinois
corporation, Carolyn B. Hadesman Trust Dated May 22, 1992,
Lisa Hadesman 1991 Trust, Cynthia Hadesman 1991 Trust, Tucker
B. Magid, Frances S. Shubert, Grandville Road Property, Inc.,
an Illinois corporation, Sky Harbor Associates, an Illinois
limited partnership, Primestone, PGLP and Jeffrey A.
Patterson, as filed as an exhibit to the Company's Annual
Report on Form 10-K (No. 1-13589) for the year ended December
31, 1997 and incorporated herein by reference
Exhibit 4 Loan Agreement, dated as of December 18, 1998, between LaSalle
National Bank and Prime Group VI, L.P.
Exhibit 5 Assignment and Assumption Agreement, dated as of December 18,
1998, between Prime Group Limited Partnership and Prime Group
VI, L.P.
Exhibit 6 Pledge Agreement, dated as of December 18, 1998, between
LaSalle National Bank and Prime Group VI, L.P.
Exhibit 7 First Amendment to Loan Documents, Consent and Limited
Release, dated as of January 29, 1999, between LaSalle
National Bank and PG-VI
Exhibit 8 Amended and Restated Agreement of Limited Partnership of Prime
Group Realty, L.P., dated as of November 17, 1997, between the
Issuer, the Nardi Group, L.L.C., a Delaware limited liability
company, and the Limited Partners (as defined therein), as
filed as an exhibit to the Issuer's Annual Report on Form 10-K
(No. 1-13589) for the year ended December 31, 1997 and
incorporated herein by reference
Exhibit 9 Amendment No. 1 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
December 15, 1998, as filed as an exhibit to Amendment No. 1
to the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 10 Amendment No. 2 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
December 15, 1998, as filed as an exhibit to Amendment No. 1
to the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
15
<PAGE>
Exhibit 11 Amendment No. 3 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
January 15, 1998, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 12 Amendment No. 4 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
February 13, 1998, as filed as an exhibit to Amendment No. 1
to the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 13 Amendment No. 5 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
March 13, 1998, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 14 Amendment No. 6 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
March 25, 1998, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 15 Amendment No. 7 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
April 15, 1998, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-11 (No.
333-51599) and incorporated herein by reference
Exhibit 16 Amendment No. 8 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
May 15, 1998, as filed as an exhibit to Amendment No. 2 to the
Issuer's Registration Statement on Form S-11 (No. 333-51599)
and incorporated herein by reference
Exhibit 17 Amendment No. 9 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
June 5, 1998, as filed as an exhibit to the Issuer's Quarterly
Report on Form 10-Q (No. 1-13589) for the quarterly period
ended June 30, 1998 and incorporated herein by reference
Exhibit 18 Amendment No. 10 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
June 15, 1998, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended June 30, 1998 and incorporated herein by
reference
Exhibit 19 Amendment No. 11 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
July 15, 1998, as filed as an exhibit to Post-Effective
Amendment No. 1 to the Issuer's Registration Statement on Form
S-11 (No. 333-51935) and incorporated herein by reference
Exhibit 20 Amendment No. 12 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
August 14, 1998, as filed as an exhibit to Post-Effective
Amendment No. 1 to the Issuer's Registration Statement on Form
S-11 (No. 333-51935) and incorporated herein by reference
16
<PAGE>
Exhibit 21 Amendment No. 13 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
September 15, 1998, as filed as an exhibit to Amendment No. 1
to Post-Effective Amendment No. 1 to the Issuer's Registration
Statement on Form S-11 (No. 333-51935) and incorporated herein
by reference
Exhibit 22 Amendment No. 14 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
October 15, 1998, as filed as an exhibit to Amendment No. 2 to
the Issuer's Registration Statement on Form S-3 (No.
333-64973) and incorporated herein by reference
Exhibit 23 Amendment No. 15 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
November 16, 1998, as filed as an exhibit to Amendment No. 1
to the Issuer's Registration Statement on Form S-3 (No.
333-64973) and incorporated herein by reference
Exhibit 24 Amendment No. 16 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
December 15, 1998, as filed as an exhibit to Post-Effective
Amendment No. 3 to the Issuer's Registration Statement on Form
S-3 (Registration No. 333-51935) and incorporated herein by
reference
Exhibit 25 Amendment No. 17 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
January 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended March 31, 1999, and incorporated herein by
reference
Exhibit 26 Amendment No. 18 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
February 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended March 31, 1999 and incorporated herein by
reference
Exhibit 27 Amendment No. 19 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
March 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended March 31, 1999 and incorporated herein by
reference
Exhibit 28 Amendment No. 21 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
April 15, 1999, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-3 (No.
333-70369) and incorporated herein by reference
Exhibit 29 Amendment No. 22 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
April 22, 1999, as filed as an exhibit to Amendment No. 1 to
the Issuer's Registration Statement on Form S-3 (No.
333-70369) and incorporated herein by reference
Exhibit 30 Amendment No. 23 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
May 15, 1999, as filed as an exhibit to Amendment No. 1 to the
Issuer's Registration Statement on Form S-3 (No. 333-70369)
and incorporated herein by reference
17
<PAGE>
Exhibit 31 Amendment No. 24 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
June 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended June 30, 1999 and incorporated herein by
reference
Exhibit 32 Amendment No. 25 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
July 14, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended September 30, 1999 and incorporated herein by
reference
Exhibit 33 Amendment No. 26 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
July 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended September 30, 1999 and incorporated herein by
reference
Exhibit 34 Amendment No. 27 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
August 16, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended September 30, 1999 and incorporated herein by
reference
Exhibit 35 Amendment No. 28 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
September 15, 1999, as filed as an exhibit to the Issuer's
Quarterly Report on Form 10-Q (No. 1-13589) for the quarterly
period ended September 30, 1999 and incorporated herein by
reference
Exhibit 36 Amendment No. 29 to the Amended and Restated Agreement of
Limited Partnership, of Prime Group Realty, L.P., dated as of
October 15, 1999
Exhibit 37 Amendment No. 30 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
November 15, 1999
Exhibit 38 Amendment No. 31 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
December 15, 1999
Exhibit 39 Amendment No. 32 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
December 30, 1999
Exhibit 40 Amendment No. 33 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
January 15, 2000
Exhibit 41 Amendment No. 34 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P., dated as of
February 15, 2000
Exhibit 42 Agreement of Limited Partnership of Primestone Investment
Partners, L.P., dated as of November 17, 1997, between
PG/Primestone, L.L.C., a Delaware limited liability company,
BRE/Primestone Investment Management L.L.C., a Delaware
limited liability company, and BRE/Primestone Investment
L.L.C., a Delaware limited liability company
Exhibit 43 Lock-Up Agreement, dated as of November 11, 1997, between
Primestone and Prudential Securities Incorporated
18
<PAGE>
Exhibit 44 Pledge and Security Agreement, dated as of November 17, 1997,
between Primestone Investment Partners, L.P. and Prudential
Securities Credit Corporation
Exhibit 45 Joint Filing Statement, dated March 8, 2000, by each of
Michael W. Reschke, The Prime Group, Inc., PG/Primestone,
L.L.C. and Primestone Investment Partners, L.P.
Information with respect to each of the Reporting Persons is
given solely by such Reporting Person, and no Reporting Person
has responsibility for the accuracy or completeness of the
information supplied by another Reporting Person. Any
disclosures made hereunder with respect to persons other than
the Reporting Persons are made on information and belief after
making appropriate inquiry. Pursuant to Rule 13d-4 under the
Exchange Act of 1934, as amended (the "Exchange Act"), each of
the Reporting Persons declares that the filing of this
statement shall not be construed as an admission that such
Reporting Person is, for the purposes of Section 13(d) or
13(g) of the Exchange Act, the beneficial owner of any of the
securities covered by this statement.
</TABLE>
19
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Schedule 13D is true,
complete and correct.
/s/ Michael W. Reschke
----------------------------------
Michael W. Reschke
Dated: March 8, 2000
20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its
knowledge and belief, the undersigned certifies that the information set
forth in this Schedule 13D is true, complete and correct.
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/Primestone, L.L.C.,
its managing general partner
By: The Prime Group, Inc.,
its Administrative Member
By: /s/ Michael W. Reschke
------------------------------
Name: Michael W. Reschke
Title: President
Dated: March 8, 2000
21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its
knowledge and belief, the undersigned certifies that the information set
forth in this Schedule 13D is true, complete and correct.
PG/PRIMESTONE, L.L.C.
By: The Prime Group, Inc.,
its Administrative Member
By: /s/ Michael W. Reschke
------------------------------
Name: Michael W. Reschke
Title: President
Dated: March 8, 2000
22
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its
knowledge and belief, the undersigned certifies that the information set
forth in this Schedule 13D is true, complete and correct.
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
------------------------------
Name: Michael W. Reschke
Title: President
Dated: March 8, 2000
23
<PAGE>
Exhibit 2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
between
PRIMESTONE INVESTMENT PARTNERS L.P.
and
PRUDENTIAL SECURITIES CREDIT CORPORATION
Dated as of
November 17, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1.
<S> <C>
DEFINITIONS
Section 1.01. CERTAIN DEFINED TERMS ...................................1
ARTICLE 2.
THE LOAN
Section 2.01. THE LOAN ................................................10
Section 2.02. THE LOAN; PROCEDURE FOR BORROWING .......................10
Section 2.03. RATE OF INTEREST; CALCULATION OF INTEREST ...............11
Section 2.04. MANDATORY PREPAYMENTS ...................................11
Section 2.05. OPTIONAL PREPAYMENTS ....................................12
Section 2.06. PAYMENTS ................................................13
Section 2.07. USE OF LOAN PROCEEDS ....................................13
Section 2.08. FEES ....................................................13
Section 2.09. INCREASED COSTS .........................................13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01. ORGANIZATION AND POWERS .................................14
Section 3.02. POWER AND AUTHORIZATION .................................14
Section 3.03. PERMITS; COMPLIANCE WITH LAWS ...........................15
Section 3.04. NO LEGAL BAR ............................................15
Section 3.05. LITIGATION ..............................................15
Section 3.06. SOLVENCY ................................................16
Section 3.07. THE COLLATERAL ..........................................16
Section 3.08. CAPITALIZATION AND CORPORATE STRUCTURE ..................16
Section 3.09. NO DEFAULT ..............................................16
Section 3.10. TAXES ...................................................16
Section 3.11. [RESERVED] ..............................................17
Section 3.12. ERISA; LABOR RELATIONS ..................................17
Section 3.13. CORRECT INFORMATION .....................................17
Section 3.14. INVESTMENT COMPANY ACT ..................................17
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Section 3.15. MARGIN REGULATIONS ......................................18
ARTICLE 4.
CONDITIONS PRECEDENT
Section 4.01. CONDITIONS PRECEDENT TO EFFECTIVENESS; FUNDING ..........18
ARTICLE 5.
AFFIRMATIVE COVENANTS
Section 5.01. MAINTENANCE OF EXISTENCE AND PROPERTIES .................20
Section 5.02. [RESERVED] ..............................................20
Section 5.03. PUNCTUAL PAYMENT ........................................20
Section 5.04. PAYMENT OF LIABILITIES ..................................20
Section 5.05. COMPLIANCE WITH LAWS ....................................20
Section 5.06. PAYMENT OF TAXES, ETC. ..................................21
Section 5.07. FINANCIAL STATEMENTS AND OTHER INFORMATION ..............21
Section 5.08. ACCOUNTS AND REPORTS ....................................23
Section 5.09. INSPECTION; AUDIT .......................................23
Section 5.10. UCC FILINGS .............................................23
Section 5.11. REGISTRATION RIGHTS .....................................23
ARTICLE 6
NEGATIVE COVENANTS
Section 6.01. INDEBTEDNESS ............................................24
Section 6.02. LIENS ...................................................24
Section 6.03. FUNDAMENTAL CHANGES .....................................24
Section 6.04. DISPOSITIONS OF ASSETS ..................................24
Section 6.05. DIVIDENDS AND REDEMPTIONS ...............................24
Section 6.06. CERTAIN OTHER TRANSACTIONS ..............................25
Section 6.07. TRANSACTIONS WITH AFFILIATES AND CERTAIN OTHER PERSONS ..25
Section 6.08. FISCAL YEAR .............................................25
Section 6.09. ERISA ...................................................25
Section 6.10. REGULATIONS G. T. U and X ...............................25
Section 6.11. BORROWER PARTNERSHIP AGREEMENT ..........................25
</TABLE>
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<TABLE>
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ARTICLE 7.
[RESERVED]
ARTICLE 8.
EVENTS OF DEFAULT
Section 8.01. EVENTS OF DEFAULT .......................................26
Section 8.02. REMEDIES UPON AN EVENT OF DEFAULT .......................28
ARTICLE 9
MISCELLANEOUS
Section 9.01. NOTICES .................................................29
Section 9.02. SURVIVAL OF THIS AGREEMENT ..............................31
Section 9.03. INDEMNITY ...............................................31
Section 9.04. COSTS, EXPENSES AND TAXES ...............................31
Section 9.05. FURTHER ASSURANCES ......................................33
Section 9.06. AMENDMENT AND WAIVER ....................................33
Section 9.07. REMEDIES CUMULATIVE .....................................34
Section 9.08. MARSHALING, RECOURSE TO SECURITY: PAVEMENTS SET ASIDE ...34
Section 9.09. SETOFF ..................................................34
Section 9.10. BINDING EFFECT ..........................................35
Section 9.11. APPLICABLE LAW ..........................................35
Section 9.12. CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF OF JURY TRIAL .................................35
Section 9.13. INCONSISTENCIES .........................................35
Section 9.14. PERFORMANCE OF OBLIGATIONS ..............................36
Section 9.15. ASSIGNMENT; PARTICIPATION ...............................36
Section 9.16. CONFIDENTIALITY .........................................36
Section 9.17. CONSTRUCTION ............................................36
Section 9.18. ENTIRE AGREEMENT; BINDING EFFECT ........................37
Section 9.19. SEVERABILITY ............................................37
Section 9.20. HEADINGS ................................................37
Section 9.21. EXECUTION OF COUNTERPARTS ...............................37
Section 9.22. LIMITATION OF LIABILITY .................................37
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EXHIBITS:
Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Pledge Agreement
Exhibit D Form of Notice of Optional Prepayment
Exhibit E Form of Opinion of Borrower's Counsel
SCHEDULES:
Schedule 3.02 Consents
Schedule 3.04 Legal Bar
Schedule 3.05 Litigation
Schedule 3.07 Principal Places of Business
Schedule 3.08 Capitalization
Schedule 6.07 Permitted Transactions
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of November 17, 1997 (this "AGREEMENT")
between Primestone Investment Partners L.P., a Delaware limited partnership
(the "BORROWER") and Prudential Securities Credit Corporation, a Delaware
corporation (the "LENDER").
WITNESSETH
WHEREAS, the Borrower has requested that the Lender extend certain
financial accommodations of up to the amount of the Commitment (as defined
below) to the Borrower in connection with the financing of the acquisition by
the Borrower of certain OP Units (as defined below); and
WHEREAS, the Lender is willing to extend the financial accommodations
contemplated hereby to the Borrower on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1.
DEFINITIONS
Section 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" mean any (i) officer, director, shareholder, member or
partner of the Borrower, (ii) Person that directly or indirectly controls, is
controlled by, or is under common control with the Borrower and (iii) Person
in which 10% or more of the ownership interest of such Person is owned by a
shareholder, member or partner of the Borrower. For purposes of this
definition, "control" of a person means the possession, directly or
indirectly, of the power to direct or cause the direction of its management
and policies, whether through the ownership of voting capital stock, by
contract or otherwise, and the terms "controlled" and "common control" shall
have correlative meanings. In no event shall the Lender be deemed to be an
Affiliate of the Borrower.
"AGREEMENT" and "CREDIT AGREEMENT" means this Credit Agreement, as the
same from time to time may be amended, modified, supplemented, extended or
restated.
"APPLICABLE MARGIN" means one hundred and fifty (150) basis points.
<PAGE>
"AUTHORIZED OFFICER" shall mean (i) with respect to any Person that is a
corporation, the president, any vice president, the treasurer or the chief
financial officer of such Person, (ii) with respect to any Person that is a
partnership, an Authorized Officer of a general partner of such Person or
(iii) with respect to any Person, such other representative of such Person
that is approved by Lender in writing. No Persons shall be deemed to be an
Authorized Officer unless named on a certificate of incumbency of such Person
delivered to the Lender on the Closing Date.
"AUTHORIZED PERSON" means such individuals designated in writing by the
Borrower as being authorized by the he Borrower to provide the Lender with any
and all notices required to be made hereunder by the Borrower, which
authorizations shall remain in full force and effect, and may be conclusively
relied on by the Lender in all circumstances, until the Lender actually
receives a written notice form the Borrower stating otherwise.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
101 ET SEQ.), as amended from time to time, and any successor statute.
"BORROWER" has the meaning set forth in the preamble hereto, and
includes its successors and assigns.
"BORROWER PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of the Borrower dated as of November 14, 1997, as it may from
time to time be amended, modified or supplemented.
"BORROWER PERCENTAGE INTEREST" shall have the meaning set forth for the
term "PERCENTAGE INTEREST" in the Borrower Partnership Agreement.
"BORROWING DATE" means, with respect to the Loan, the Business Days on
which the Lender makes the Loan pursuant to a Notice of Borrowing given
pursuant to Section 2.02(b)(i) hereof.
"BUSINESS DAY" means any day on which dealings in currencies and between
banks may be carried on in New York, New York, other than a Saturday or
Sunday or any other day on which banks in New York, New York are authorized
or required by law to close.
"CLOSING DATE" means November 17, 1997, the date on which the Loan
Documents are executed and delivered and all conditions precedent set forth in
Article 4 have been satisfied. The closing will take place at such place as
the Lender may determine.
"COLLATERAL" means all property and interest in property in or against
which the owner thereof shall have granted, or purported to have granted, a
security interest or Lien in favor of the Lender under the Loan Documents as
security for the Obligations of the Borrower to the Lender, including without
limitation the Pledged Shares.
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"COLLATERAL DOCUMENTS" means the Pledge Agreement and the UCC financing
statements delivered in connection therewith.
"COLLATERAL STOCK VALUE" means, at any date with respect to the Pledged
Shares, the product of (i) the per share price of the REIT Stock at the close
of trading on a trading exchange or stock market for such REIT Stock on the
immediately preceding Business Day, as reported by such exchange or stock
market, and (ii) the number of shares of Pledged Shares then held by or
pledged to the Lender. If the REIT Stock is not then traded on an exchange
or stock market or if such closing price is not available in THE WALL STREET
JOURNAL, EASTERN EDITION, the Collateral Stock Value shall be the average per
share price of the REIT Stock quoted to the Lender by three (3) (or any
lesser number if three (3) are not available) national brokerage firms
selected by the Lender in its sole and absolute discretion (including without
limitation PSI). If no such quotes are available, such Collateral Stock
Value shall be determined by the Lender in its sole and absolute discretion.
"COMMITMENT" means the lesser of (i) an amount which would cause a
thirty percent (30%) aggregate loan-to-value ratio as of the Borrowing Date
as determined by the Lender or (ii) $40,000,000.
"CONSENTS" shall mean, collectively, each of the Consents to Assignment
from (i) the REIT, (ii) Prime and (iii) the Primestone Partners, dated as of
the Closing Date.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement among
BRE/Primestone Investment Management L.L.C., BRE/Primestone Investment L.L.C.
and The Prime Group, Inc. dated as of October 20, 1997.
"DEFAULT" means any event which is, or with the lapse of time or giving
of notice, or both, would be, an Event of Default.
"DOLLARS" and "$" means lawful money of the United States of America.
Any reference in this Agreement to payment in "Dollars" or "$" means payment
in Dollars funds immediately available for use by the Lender in New York, New
York.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means each Person (as defined in Section 3(9) of
ERISA) that is a member of any "controlled group" (as defined in Section
4001(14) of ERISA) that includes the Borrower.
"ERISA TERMINATION EVENT" means (i) any Reportable Event, (ii) the
withdrawal of the Borrower or any of its ERISA Affiliates from a Plan during
a Plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a
Plan or to treat any Plan amendment as a termination under Section 4041 of
3
<PAGE>
ERISA, (iv) any Plan amendment or the occurrence of any event that
constitutes a "partial termination" (within the meaning of Section 411(d)(3)
of the IRC) with respect to any Plan, (v) the institution of proceedings to
terminate a Plan or the appointment of a trustee by the PBGC pursuant to
Section 4044 of ERISA or (vi) any event or condition that might constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"EVENT OF DEFAULT" means any event specified as such in Section 8.01
hereof.
"EXPIRATION DATE" means November 17, 2000.
"FISCAL QUARTER" means each of the four periods of three months of each
year, ending on the last day of each March, June, September and December,
which in the aggregate constitute a Fiscal Year.
"FISCAL YEAR" means the fiscal year ending on December 31.
"GAAP" means generally accepted accounting principles (i) in the United
States of America as in effect from time to time set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of the Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination, and (ii) which are
consistently applied in form and substance.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INDEBTEDNESS" means (without duplication), with respect to any Person,
all obligations, contingent and otherwise, which, in accordance with GAAP,
would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person as at any date at which
the amount thereof is to be determined, but in any event and as well
including, the Note, all other amounts due under the Loan Documents, any
contingent obligations arising due to all guarantees, endorsements (other
than endorsements for collection or deposits in the ordinary course of
business), all obligations in respect of any swap, cap, floor, collar or
other similar transaction and all other contingent obligations whether or not
in respect of any Indebtedness of others, deferred taxes and accrued
obligations, all liabilities secured by any mortgage, pledge or lien existing
on property owned or acquired subject to such mortgage, pledge or lien, whether
or not the liability secured thereby shall have been assumed, and all lease
obligations.
"INTEREST PERIOD" shall mean the period from the date of this Agreement
to but excluding the 30th day thereafter, and thereafter each successive
30-day period. If any Interest Period would begin or end on a date which is
not a Business Day, such Interest Period shall
4
<PAGE>
begin or end, as the case may be, on the next succeeding Business Day and any
Interest Period that would extend beyond the Expiration Date shall end on the
Expiration Date. Lender may, in its discretion, select Interest Periods of
one day for any day on or after the Note shall have become due and payable in
accordance with the terms hereof.
"IPO" means the initial public offering of the REIT Stock on SEC Forms
S-11, registration number 333-33547.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"KNOWLEDGE" means, with respect to any Person, what such Person knows or
should have known, in each case, after due inquiry.
"LENDER" has the meaning given to it in the preamble of this Agreement,
and its successors, participants and assigns (including any Person who
becomes a holder of the Note).
"LENDER'S OFFICE" means the Lender's principal office at One New York
Plaza, New York, New York 10292.
"LIBOR RATE" with respect to each Interest Period, shall mean for any
day, as determined by Lender, the interest rate per annum offered for
deposits in Dollars for the Interest Period in the London interbank market
for a period equal to the Interest Period which appears on Telerate Page 3750
or such other page as may replace Telerate Page 3750 on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying such rate (collectively, "TELERATE
PAGE 3750") as of 11:00 A.M. London time on the second Business Day prior to
any such date. If the Interest Period is of a duration falling between the
Interest Periods for which such rates appear on Telerate Page 3750, the LIBOR
Rate shall be the rate determined by interpolation between the rates for the
next shorter and the next longer Interest Periods for which such rate appears
on Telerate Page 3750, as determined by Lender, whose determination shall be
conclusive in the absence of manifest error. In the event that (i) more than
one such LIBOR Rate is provided, the average of such rates shall apply or
(ii) no such LIBOR Rate is published, then the LIBOR Rate shall be determined
from such comparable financial reporting company as Lender, in its
discretion, shall determine.
"LIEN" means, with respect to any Person, (i) any lien (including,
without limitation, any statutory lien), mortgage, hypothecation, privilege,
security interest, pledge, encumbrance, charge (general or special, floating
or fixed) or conditional sale or other title retention arrangement
(including, without limitation, the rights of a lessor under a capital lease
to the property leased thereunder) or other security interest of any kind upon
any property or assets of any character of such Person, whether now owned or
hereafter acquired by such Person, or upon the income or profits therefrom,
(ii) the transfer, pledge or assignment by such Person of any of its property
or assets for the purpose of subjecting the same to the payment of any
indebtedness of such Person or others in priority to the payment by such
Person of its general
5
<PAGE>
creditors, (iii) any sale, assignment, pledge or other transfer by such
Person of its accounts receivable, contract rights, general intangibles or
chattel paper with recourse, and (iv) any agreement to give or do any of the
foregoing.
"LOAN" means the loan made pursuant to Section 2.02(a) hereof.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note, the
Pledge Agreement, the Consents, the Borrower's completed Form FR G-3 and any
and all other agreements, instruments or documents now or hereafter
evidencing or otherwise relating to the Loan and/or the other Loan Documents.
"MATERIAL ADVERSE CHANGE" of the Borrower or its Subsidiaries means a
material adverse change in the business, financial condition, assets,
properties or operations of the Borrower or its Subsidiaries.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events
which (i) would have any material adverse effect whatsoever upon the
validity or enforceability of this Agreement, the Note or any other Loan
Document, (ii) is or would reasonably be expected to have a material adverse
effect on the business, condition (financial or other), assets, prospects,
properties or operations of the Borrower or its Subsidiaries, Prime or the
REIT, as the case may be and as applicable, (iii) would materially impair any
party's ability to fulfill its respective obligations under the terms and
conditions of the Loan Documents to which it is a party, or (iv) would
materially impair the Lender's rights in or to, or have a material adverse
effect on, the Collateral.
"NOTE" means the promissory note issued by the Borrower, evidencing the
Loan and delivered pursuant to Section 2.02(b)(ii) hereof, as the same may be
from time to time amended, modified, supplemented or extended.
"NOTICE OF BORROWING" has the meaning given to it in Section 2.02(b)(i)
hereof.
"NOTICE OF OPTIONAL PREPAYMENT" has the meaning given to it in Section
2.05 hereof.
"OBLIGATIONS" means, as to the Borrower, all liabilities, obligations
and Indebtedness of the Borrower to the Lender of any and every kind and
nature (including, without limitation, principal payments, interest, charges,
expenses, attorneys' fees, maintenance, commitment and other fees chargeable
to the Borrower by the Lender and future advances made to or for the benefit
of such Person), whether arising under this Agreement, under any of the Loan
documents, under any refinancing or modification of the credit facilities
provided under this Agreement or any of the Loan Documents, pursuant to any
arrangement, agreement or understanding hereafter among the Borrower and the
Lender, whether now or hereafter owing, arising, due or payable from the
Borrower to the Lender, whether before or after the filing of a proceeding
under the Bankruptcy Code by or against the Borrower, regardless of how
evidenced,
6
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created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, including, without limitation, obligations or
guarantees of performance or payment.
"OP UNITS" shall mean units representing limited partnership interests in
Prime issued by Prime pursuant to the Prime Partnership Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERMITS" shall have the meaning set forth in Section 3.03 hereof.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PLAN" means any "Employee Benefit Plan" (as defined in Section 3(3) of
ERISA) as covered by any provision of ERISA and as maintained, or otherwise
contributed to, or at any time during the five calendar year period
immediately preceding the date of this Agreement was maintained or otherwise
contributed to, by the Borrower or an ERISA Affiliate of the Borrower for the
benefit of the employees of the Borrower or an ERISA Affiliate of the Borrower.
"PLEDGE AGREEMENT" means the Pledge and Security Agreement of the
Borrower dated as of the Closing Date in favor of the Lender, in the form of
EXHIBIT C hereto, as it may from time to time be amended, modified or
supplemented.
"PLEDGED MARKETABLE EQUITY SECURITIES" has the meaning set forth in
Section 2.04(a) hereof.
"PLEDGE SHARES" shall have the meaning set forth in the Pledge
Agreement.
"PRIME" shall mean Prime Group Realty, L.P., a Delaware limited
partnership.
"PRIME PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Agreement of Limited Partnership of Prime dated as of November 17, 1997, as
it may from time to time be amended, modified or supplemented.
"PRIME PARTNERSHIP INTEREST" shall have the meaning set forth for the
term "PERCENTAGE INTEREST" in the Prime Partnership Agreement, as it may from
time to time be amended, modified or supplemented.
"PRIMESTONE PARTNER" means each of the partners of the Borrower which
are each of PG/Primestone, L.L.C., in its capacity as general partner,
BRE/Primestone Investment
7
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Management L.L.C., PG/Primestone, L.L.C., in its capacity as limited partner,
and BRE/primestone Investment L.L.C.
"PROHIBITED TRANSACTION" means any "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975 of the IRC) with respect to
any Plan for which transaction no statutory exemption is nov available.
"PSI" means Prudential Securities Incorporated, a Delaware corporation,
and its successors and assigns.
"REGISTRATION DATE" means the first Business Day on or after the first
anniversary of the Closing Date.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Closing Date among the REIT, Prime, the Borrower, The Prime
Group, Inc. and the other investors party thereto, as it may from time to
time be amended, modified or supplemented.
"REGULATIONS D, G, T, & and/or X" means Regulations D, G, T, U and/or X
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"REGULATORY CHANGE" means the introduction of, or any change in, United
States federal, state or local laws or regulations (including Regulation D)
or treaties or foreign laws or regulations after the date hereof or the
adoption or making after such date of any interpretations, directives,
guidelines or requests applying generally to a class of banks and/or
financial institutions, including the Lender, of or under any United States
federal, state, or local rules or regulations or any treaties or foreign laws
or regulations (whether or not having the force of law) by any court or
monetary or Governmental Authority charged with the interpretation or
administration thereof.
"REIT" means Prime Group Realty Trust, a Maryland real estate investment
trust.
"REIT STOCK" means the common shares of beneficial interest of the REIT.
"REPORTABLE EVENT" means any "reportable event" described in Section
4043(b) of ERISA with respect to which the 30-day notice requirement set
forth in Section 4043(a) of ERISA has not been waived by the PBGC that occurs
or has occurred in connection with any Plan.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"SECURITIES" means all shares, options, membership interests,
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, limited liability company, partnership or
equivalent entity, whether voting or non-voting, including,
8
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without limitation, common stock, preferred stock, warrants, convertible
debentures and all agreements, instruments and documents convertible, in
whole or in part, into any one or more of or all of the foregoing.
"SUBSIDIARY" means, with respect to any Person, and corporation, limited
liability company, partnership or equivalent entity of which more than 50% of
the outstanding Securities having ordinary voting power to elect or appoint
a majority of the Board of Directors, managers, general partners or
equivalent positions of such corporation, limited liability company,
partnership or equivalent entity is at the time directly or indirectly owned
by such Person, or by one or more other Subsidiaries of such Person.
"UCC" shall mean the applicable Uniform Commercial Code, as amended from
time to time.
Section 1.02. ACCOUNTING AND BANKING TERMS. All accounting and banking
terms not specifically defined herein shall be construed in the case of
accounting terms, in accordance with GAAP and, in the case of banking terms,
in accordance with general practice among commercial banks and financial
institutions in New York, New York.
Section 1.03. DISCRETION. Whenever it is provided in this Agreement or
in any of the Loan Documents that (i) the Lender exercises any right given to
it to approve or disapprove, (ii) any arrangement or term is to be
satisfactory to the Lender, or (iii) any other decision or determination is
to be made by the Lender, the decision of the Lender to approve or
disapprove, all decisions that arrangements or terms are satisfactory or not
satisfactory and all other decisions and determinations made by the Lender,
shall be in the sole and absolute discretion of the Lender and shall be final
and conclusive, except as may be otherwise expressly and specifically
provided herein; PROVIDED, HOWEVER, that to the extent Lender assigns fifty
percent (50%) or greater of the Loan to any entity which is not an affiliate
of Lender, the "sole and absolute discretion" standard set forth above (or
where otherwise set forth herein) shall be deemed to be "reasonable
discretion" with respect to the Lender after giving effect to such assignment.
ARTICLE 2.
THE LOAN
Section 2.01. THE LOAN. Subject to the terms and conditions hereinafter
set forth, the Lender agrees to make available to the Borrower, subject to
Article 4 hereof, on a one-time basis, a Loan on the Closing Date, in an
aggregate principal amount which will not exceed the Commitment.
Section 2.02. THE LOAN; PROCEDURE FOR BORROWING. (a) Subject to the
terms and conditions hereof, the Lender agrees to make a Loan to the Borrower
from the Lender's Office, as provided in this Agreement in an aggregate
principal amount requested by the Borrower in the
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Notice of Borrowing (as defined below) which will not exceed the Commitment.
The Loan shall mature on the Expiration Date and bear interest for the period
from the Borrowing Date thereof to the date of payment in full thereof on the
unpaid principal amount thereof from time to time outstanding at the
applicable interest rates per annum determined and payable as specified in
Section 2.03 hereof.
(b) (i) The Loan shall be made upon notice, given by an
Authorized Person of the Borrower to the Lender not later than 11:00 a.m.
(New York City time) on the second (2nd) Business Day prior to the requested
Borrowing Date (a "NOTICE OF BORROWING"). Such notice shall be made by
telecopy or telephone, confirmed immediately in writing, by delivery of a
Notice of Borrowing, in the form of EXHIBIT B hereto, specifying therein (A)
the requested Borrowing Date, (B) the aggregate amount of the Loan requested
to be made, which amount shall not be greater than the Commitment or less
than $100,000 and (C) that the use of such proceeds shall be as set forth in
Section 2.07 hereof. Upon fulfillment of the applicable conditions set forth
herein, the Lender will make the Loan available to the Borrower by disbursing
such proceeds as an authorized Person of the Borrower may instruct the Lender
in advance in writing.
(ii) The obligation of the Borrower to pay the principal of and
interest on the Loan shall be evidenced by the Note in favor of the Lender
duly executed and delivered by the Borrower in the form of EXHIBIT A hereto.
The Note shall (A) be payable to the order of the Lender, (B) be in a stated
principal amount equal to the Loan and be payable in the principal amount of
the Loan evidenced thereby, (C) be stated to mature (and the Loan shall be
repayable) in full on the Expiration Date, and (D) be entitled to the
benefits of this Agreement. At the time of the Loan, and upon each
prepayment of principal of the Loan, the Lender shall, and is hereby
authorized to, make a notation on the schedule annexed to and constituting a
part of the Note, and any such notation shall be conclusive and binding for
all purposes absent manifest error; PROVIDED, HOWEVER, that the failure by
the Lender to make any such notation shall not affect the obligations of the
Borrower under the Note or this Agreement.
Section 2.03. RATE OF INTEREST; CALCULATION OF INTEREST. (a) The Loan
shall bear interest on the unpaid principal amount thereof from the date the
Loan is extended to the Borrower until such principal amount is paid in full
at a rate or rates per annum determined in accordance with this Section 2.03.
The Borrower shall pay interest on the unpaid amount of the Loan at the rate
per annum equal to the sum of (i) the LIBOR Rate in effect from time to time
applicable to each Interest Period, plus (ii) the Applicable Margin, payable
in arrears on each of February 28, May 31, August 31 and November 30
(PROVIDED, HOWEVER, that the first interest payment date shall be on February
28, 1998) and ending on the date the principal amount of the Loan shall be
paid or prepaid, to the extent of the interest accrued on the principal
amount of the Loan so paid or prepaid.
(b) From and after the occurrence of any Event of Default under Section
8.01 hereof, and for so long as such Event of Default shall continue (after
as well as before judgment), the unpaid principal amount of the Loan and any
other amount then due and payable but not yet
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paid hereunder shall bear interest at a rate per annum equal to the then
interest rate of such outstanding Loan determined in accordance with clause
(a) above PLUS two hundred (200) basis points per annum, payable on demand.
Overdue interest shall be compounded and bear interest, to the extent
permitted by law, on each date for payment of interest on the Loan hereunder.
The Borrower shall pay a late charge of two and one-half percent (2 1/2%) of
each payment not paid within ten (10) days after the date upon which such
payment was due (which amount the Borrower and the Lender agree is a fair and
reasonable estimate of the Lender's damages in light of all of the facts and
circumstances as of the date of this Agreement). Such late charge shall be
due and payable by the Borrower concurrently with the late payment for which
such charge is assessed hereunder.
(c) Interest shall be calculated on a basis of a 360-day year
for the actual number of days elapsed during the Interest Period on the
balance outstanding during such Interest Period.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrower under this Agreement and the Note shall be
subject to the limitation that payments of interest shall not be required to
the extent that receipt thereof would be contrary to provisions of law
applicable to the Lender limiting rates of interest which may be charged or
collected by the Lender. If the Borrower pays the Lender interest in excess
of the maximum amount permitted by applicable law, such excess shall be
applied in reduction of the principal balance of the Note, and any remaining
excess shall be refunded to the Borrower.
Section 2.04. MANDATORY PREPAYMENTS. (a) MARGIN MAINTENANCE CALL.
(i) Until the shelf registration statement referred to in Section 5.11 has
been filed and declared effective, if the Lender, or PSI as the Lender's
agent, in its reasonable discretion determines at any time that the aggregate
amount of the "EQUITY" (defined as the Collateral Stock Value minus the
outstanding Loan balance) falls to below sixty percent (60%) of the
Collateral Stock Value, then the Lender, or PSI as the Lender's agent, will
give notice (oral followed by written confirmation provided that any failure
on the part of Lender to so confirm shall not in any manner release Borrower
from any obligations hereunder) to the Borrower of a margin maintenance call,
and the Borrower will, no later than 3:00 p.m. (prevailing local time in New
York City) on the second (2nd) Business Day after such margin maintenance
call, either: (A) make a mandatory prepayment of principal and interest to
the Lender equal to the amount necessary to cause the aggregate amount of the
equality to equal or exceed seventy percent (70%) of the Collateral Stock
Value, in the aggregate; or (B) pledge and convey to the Lender readily
marketable securities, other than REIT Stock, that are acceptable to the
Lender in its sole and absolute discretion (collectively, "PLEDGED MARKETABLE
EQUITY SECURITIES") in such amount as necessary to cause the aggregate amount
of the equity to equal or exceed seventy percent (70%) of the Collateral
Stock Value. Any Pledged Marketable Equity Securities pledged to the Lender
shall be free and clear of any Liens or encumbrances of a similar nature and
shall be delivered together with stock powers executed in blank and any
waivers or certifications necessary to demonstrate that the representations
and warranties in Article 3 hereof are true and correct with respect to such
Pledged Marketable Equity Securities.
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(ii) After the shelf registration statement
referred to in Section 5.11 has been filed and declared effective,
if the aggregate amount of equity (as defined in subsection (a) (i)
(above) falls below sixty percent (60%), a margin maintenance call
will be issued and must be met no later than 3:00 p.m. (prevailing
local time in New York City) on the second (2nd) Business Day after
such margin maintenance call. If said margin call is not met to
bring the equity back to sixty percent (60%) or greater of the
Collateral Stock Value, the Lender shall be entitled to exchange
twice the number of Op Units into REIT Stock which if exchanged into
REIT stock and sold would bring the equity back to 60% of the
Collateral Stock Value. If the aggregate amount of the equity falls
below fifty-five percent (55%), a second margin call will be issued
and shall be met by 3:00 p.m. (prevailing local time in New York
City) on the next Business Day. If said second margin call is not met,
the corresponding number of shares of REIT Stock will be sold to
satisfy said second margin call. Any proceeds from such sale shall be
applied to the Loan so that the aggregate amount of equity is not
less than fifty-five percent (55%). For the purpose of this
Agreement, "corresponding number" shall mean the minimum number of
REIT Stock, required to be sold so that after giving effect to such
sale, the percentages set forth herein required to be maintained
shall be met.
(b) SALE OF COLLATERAL. On each date after the Closing
Date on which the Borrower receives any proceeds from selling of the
Collateral, the Borrower shall prepay the outstanding Loan in the amount
equal to one hundred percent (100%) of such proceeds.
Section 2.05. OPTIONAL PREPAYMENTS. The Borrower may, upon at
least two (2) Business Days prior notice to the Lender, voluntarily prepay
the Loan in whole at any time or in part from time to time, with accrued
interest to the date of such prepayment on the amount prepaid but without
other premiums or penalties, in an amount not less than $100,000 or, if the
principal amount of Loan is less than $100,000, all of such lesser amount.
Each such notice shall be made by an Authorized Person of the Borrower by
telecopy or telephone, confirmed immediately in writing, by delivery of a
Notice of Optional Prepayment, substantially in the form of EXHIBIT D hereto,
specifying therein (i) the proposed date of such prepayment, and (ii) the
aggregate amount of the Loan therein proposed to be prepaid.
Section 2.06. PAYMENTS. All payments (including prepayments)
to be made by the Borrower under this Agreement shall be made by wire
transfer to the Lender, in Dollars and in immediately available funds, at
such place or places as the Lender may from time to time designate by written
notice to the Borrower. All payments to be made hereunder by the Borrower
shall be made without setoff, counterclaim or defense. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the
applicable rate during such extension; PROVIDED, HOWEVER, that no such
payments of the Loan shall extend beyond the Expiration Date.
Section 2.07. USE OF LOAN PROCEEDS. The Borrower shall use
the proceeds of the Loan solely to purchase the OP units as set forth in
Section 3.1 of the Contribution Agreement.
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Section 2.08. FEES. (a) Borrower shall pay Lender a
non-refundable, non-creditable up-front fee of $400,000 which shall be
payable on the Closing Date.
(b) Borrower shall pay Lender a non-refundable,
non-creditable additional fee of $100,000 which shall be payable on the first
anniversary of the Closing Date.
Section 2.09. INCREASED COSTS. If any Regulatory Change: (a)
subjects the Lender to any tax of any kind whatsoever with respect to this
Agreement, the Note or the Loan or changes the basis of taxation of payments
to the Lender of principal, interest, commitment fees, or any other amount
payable hereunder in any of the foregoing (except for changes in any rate of
tax on the net income of the Lender); (b) imposes, modifies or holds
applicable to the Lender (or any corporation controlling the Lender) any
reserve or capital adequacy requirements or liquidity ratios or requires the
Lender (or any corporation controlling the Lender) to make special deposits
against or in respect of assets or liabilities of, deposits with or for the
account of, or credit extended by, the Lender; or (c) imposes on the Lender
any other condition affecting this Agreement, the Note or the Loan; and the
result of any of the foregoing is (i) to increase the cost to the Lender of
making or maintaining the Loan or to reduce any amount received or receivable
by the Lender hereunder, (ii) to require the Lender (or any corporation
controlling the Lender) to make any payment to any fiscal, monetary,
regulatory or other authority calculated on or by reference to any amount
received or receivable by the Lender under this Agreement or the Note, or
(iii) to reduce the rate of return on the Lender's capital as a consequence
of its obligations hereunder to a level below that which the Lender could
have achieved but for such adoption, change or compliance (taking into
consideration the Lender's policies with respect to capital adequacy), in any
case by an amount deemed by the Lender to be material, then, in any such
case, the borrower shall, within ten (10) days pay the Lender (or such
corporation controlling the Lender), on its written demand, any additional
amount necessary to compensate the Lender (or such corporation) for such
additional cost, reduced amount receivable or reduction in rate of return
with respect to this Agreement, the Note or the Loan, together with interest
on such amount from the date demanded until payment in full thereof at the
rate per annum applicable to Loan, calculated on the basis of a 360-day year
for the actual days elapsed. If the Lender becomes entitled to claim any
additional amount pursuant to this Section 2.09, the Lender shall, within ten
(10) days, submit to the Borrower a certificate as to any additional amount
payable pursuant to the first sentence of this Section 2.09, which amount
shall be, absent manifest error, presumed to be correct; PROVIDED, HOWEVER,
that the determination thereof is made on a reasonable basis. In determining
such amount, the Lender shall use any reasonable averaging and attribution
methods.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and
to extend the financial accommodations hereunder, the Borrower hereby
represents and warrants to the Lender that:
Section 3.01. ORGANIZATION AND POWERS. Each of the Borrower
and Prime is a limited partnership duly formed and existing and in
good standing under the laws of the state of its organization. Each of the
Borrower and Prime is duly qualified to do business as a foreign entity and is
in good standing in each jurisdiction (other than the state of its
organization) in which the conduct of its business or the ownership or
operation of its properties or assets makes such qualification necessary,
except where the failure to so qualify would not have a Material Adverse
Effect. Each of the Borrower and Prime has full power and authority to own
its properties and assets and carry on its business as now conducted. The
REIT is a real estate investment trust duly organized and validly existing
and in good standing under the laws of the State of Maryland. The REIT is a
"real estate investment trust", as such term is defined in Section 856 of the
IRC. The REIT is a fully-integrated, self-administered and self-managed "real
estate investment trust" and is listed on the New York Stock Exchange. The
REIT is duly qualified to do business as a foreign corporation or entity and
is in good standing in each jurisdiction (other than the state of its
incorporation or organization) in which the conduct of its business or the
ownership or operation of its properties or assets makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect. The REIT has full power and authority to own its properties
and assets and carry on its business as now conducted.
Section 3.02. POWER AND AUTHORIZATION. The Borrower has full
power, right and legal authority to execute, deliver and perform its
obligations under this Agreement, the Note and such of the other Loan
Documents to which it is a party. The Borrower has taken all partnership and
other actions necessary to authorize the execution and delivery of, and the
performance of its obligations under such documents and to make borrowings by
the Borrower under this Agreement, as the case may be. This Agreement, the
Note and such of the other Loan Documents to which it is a party,
constitute legal, valid and binding obligations of the Borrower enforceable
against it in accordance with their respective terms subject to the effect of
any applicable bankruptcy, insolvency, reorganization or moratorium or
similar laws affecting the rights of creditors generally. Other than as set
forth on SCHEDULE 3.02 hereof, no consent of any person, and no consent,
license, approval or authorization, or registration or declaration with, any
Governmental Authority, which has not been obtained, taken or made (other
than the financing statements and filings required to be filed pursuant to
this Agreement and the Loan Documents, which have been delivered to the
Lender for filing on the Closing Date), is required in connection with the
execution, delivery or performance by the Borrower of this Agreement, the
Note or the other Loan Documents to which it is a party, or the making of
borrowings by the Borrower of this Agreement.
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Section 3.03. PERMITS; COMPLIANCE WITH LAWS. The Borrower has
all permits, licenses and governmental franchises and other authorizations
from all Governmental Authorities (collectively, the "Permits")
that are necessary to own and operate its business as presently being
conducted and as contemplated to be conducted immediately after the Closing
Date, except those permits, licenses and governmental franchises and
authorizations the failure to possess would not have a Material Adverse Effect.
All such Permits are valid and subsisting and in full force and effect. The
Borrower is in compliance with the terms of such Permits and all statutes,
laws, ordinances, governmental rules or regulations (including applicable
environmental laws) and all judgments, orders or decrees (federal, state,
local or foreign) to which it is subject, except for violations of which
would not have a Material Adverse Effect.
Section 3.04. NO LEGAL BAR. The execution, delivery and
performance by the Borrower of this Agreement, the Note and such of the other
Loan Documents to which it is a party, and the making of borrowings hereunder
by the Borrower, other than as set forth on SCHEDULE 3.04 hereof and except
for such violations or contravention of which would not have a Material
Adverse Effect, do not and will not (i) violate or contravene any provisions
of any existing law, statute, rule, regulation or ordinance or charter
document, (ii) violate or contravene any provision of any order or decree of
any court or Governmental Authority to which the Borrower or any of its
properties or assets are subject, (iii) violate or contravene any provision
of any mortgage, indenture, security agreement, contract, undertaking or
other agreement or instrument to which the Borrower is a party or which
purports to be binding upon either of it or any of its properties or assets,
or (iv) result in the creation or imposition of any Lien on any of the
properties of the Borrower (other than as created pursuant to the Loan
Documents) pursuant to the provisions of any mortgage, indenture, security
agreement, contract, undertaking or other agreement or instrument.
Section 3.05. LITIGATION. There are not judgments or any
litigation or administrative proceedings of or before any court or
Governmental Authority now pending, nor, to the knowledge of the Borrower,
are any such litigation or proceedings now threatened, against the Borrower
or any of its properties, involving an individual claim in excess of $100,000
or claims in the aggregate in excess of $250,000 which, in each case, are not
covered by insurance, except as disclosed in SCHEDULE 3.05.
Section 3.06. SOLVENCY. Immediately after giving effect to
each of the financing transactions contemplated hereby on and after each
Borrowing Date, the Borrower is solvent. For purposes of this Section 3.06,
the term "solvent" means that, at the time of said determination, (i) the
fair value of such Person's assets exceeds the aggregate sum of its
liabilities (including, without limitation, contingent liabilities), (i) such
Person is able to pay its debts as they mature, (ii) the property owned by
such Person has a value in excess of the total aggregate sum required to pay
its debts, and (iii) such Person has capital sufficient to carry on its
business.
Section 3.07. THE COLLATERAL. The chief place of business and
chief executive office of the Borrower, and the offices where the Borrower
keeps its books and records concerning any of the Collateral are located at
the addresses specified on SCHEDULE 3.07. The Borrower
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owns the Collateral in which it has granted a security interest and Lien in
favor of the Lender pursuant to the Loan Documents, free and clear of any
Lien, security interest charge or encumbrance, except as otherwise expressly
permitted by Section 6.02 or as set forth in Section 3.08 hereof. All financing
statements and filings required to be filed, and all related required fees
and taxes, have been delivered to the Lender for filing and recording, and
all other steps required to be taken have been taken, so that upon proper
filing and recording in the proper offices Lender shall have, a valid,
perfected, first priority continuing and enforceable security interest in and
Lien on the Collateral and such security interest and Lien ranks prior to any
other security interest in or Lien upon the Collateral.
Section 3.08. CAPITALIZATION AND CORPORATE STRUCTURE. (i) The
Borrower Percentage Interests of each Primestone Partner are set forth in
SCHEDULE 3.08 and (ii) the Prime Partnership Interest of the Borrower is set
forth on SCHEDULE 3.08. Except (A) as set forth in the Prospectus included in
the registration statement filed by the REIT and declared effective by the
SEC, (B) the exchange rights set forth in the Prime Partnership Agreement and
(C) the Borrower Partnership Agreement, Declaration of Trust of the REIT or
the Prime Partnership Agreement, there are no (x) outstanding subscriptions,
warrants, options, convertible securities, or other rights (contingent or
other), or commitments therefor, to subscribe for, purchase or acquire any
Securities of the Borrower, Prime or the REIT, (y) agreements to pay any
dividends on any such Securities, except in accordance with Section 6.05
hereof or (z) agreements to distribute to any holders of such Securities any
properties or assets of the Borrower. The Borrower has no Subsidiaries nor is
it a partner in any partnership, joint venture or other similar entity.
Section 3.09. NO DEFAULT. The Borrower is not in default (as
defined in the applicable agreement or obligation) in any respect in the
payment or performance (i) of any of its obligations for the payment of
money, or (ii) under any franchise, license or leasehold interest and no
default has occurred and is continuing, except, in each case, for defaults
that would not have a Material Adverse Effect.
Section 3.10. TAXES. The Borrower has timely filed, or caused
to be filed, all federal, state, local and foreign tax returns that are
required to be filed by it and has paid, or caused to be paid, all taxes,
assessments, interest and penalties thereon, on or before the due dates
thereof, unless such tax, assessment, charge, levy, claim is actively being
contested in good faith by appropriate proceedings and there has been set
aside on the books of such Person adequate reserves in accordance with GAAP
applied with respect thereto. There are no material claims pending, or, to
the knowledge of the Borrower, proposed or threatened against the Borrower
for past federal, state or local taxes, except those, if any, as to which
proper reserves, determined in accordance with GAAP, are reflected in the
most recent financial statements. All such tax reports or returns fail
reflect the taxes of the Borrower for the periods covered thereby. No
Internal Revenue Service or other tax audit of the Borrower has occurred, is
pending or, to the knowledge of the Borrower, threatened, and the results of
any completed audits are properly reflected in the financial statements.
Section 3.11. (RESERVED).
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Section 3.12. ERISA; LABOR RELATIONS. No Reportable Event has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. The present value of all accrued benefits under each Plan
maintained by the Borrower or any ERISA Affiliate (based on those assumptions
used to fund the Plans) did not, as of the last annual valuation date prior
to the date on which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such accrued benefits. There
are no multiemployer plans. Neither the Borrower nor any of its ERISA
Affiliates has had a complete or partial withdrawal from any multiemployer
plan. The present value (determined using actuarial and other assumptions
which are reasonable in respect of the benefits provided and the employees
participating) of the liability of the Borrower and each ERISA Affiliate for
post retirement benefits to be provided to their current and former employees
under Plans which are welfare benefit plans (as defined in Section 3 (1) of
ERISA) does not, in the aggregate, exceed the assets under all such Plans
allocable to such benefits. The Borrower is not a party to any collective
bargaining agreement.
Section 3.13. CORRECT INFORMATION. The information, exhibits
and reports furnished in writing by the Borrower and the Primestone Partners
to the Lender in connection with the negotiation and preparation of this
Agreement and the other Loan Documents are true and correct and do not
contain any omissions or misstatements of fact that would make the statements
contained therein misleading or incomplete in any material respect, which
omissions or misstatements could have, individually or in the aggregate, a
Material Adverse Effect. There is no fact now known to the Borrower and the
Primestone Partners that has not been disclosed to the Lender that materially
adversely affects the management, business, assets, prospects, properties,
operations or condition (financial or other) of the Borrower.
Section 3.14. INVESTMENT COMPANY ACT. The Borrower is not an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or
subject to any other statute that regulates the incurring of Indebtedness.
Section 3.15. MARGIN REGULATIONS. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
"margin stock" or "margin securities" (within the meaning of Regulation G);
none of the Obligations or liabilities of the Borrower are secured, directly
or indirectly, by "margin stock" or "margin securities", and no part of the
proceeds of any extension of credit hereunder will be used for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any
margin stock" or "margin securities", in each case, in a manner which would
breach or contravene any of Regulations G, T, U, or X.
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ARTICLE 4.
CONDITIONS PRECEDENT
Section 4.01. CONDITIONS PRECEDENT TO EFFECTIVENESS; FUNDING.
The obligations of the Lender to execute and deliver this Agreement and to
make the Loan on the Borrowing Date are subject to the fulfillment of the
following conditions precedent. The Lender shall have received on or before
the Borrowing Date each of the following documents and instruments, each
dated such date, in form and substance satisfactory to the Lender.
(a) the Lender shall have received a Notice of Borrowing
required by Section 2.02(b) hereof within two (2) Business Days of the
relevant Borrowing Date;
(b) a certificate of an Authorized Officer of the Borrower,
dated as of the Closing Date, certifying (i) that attached thereto are true
and complete copies of the partnership action authorizing the execution,
delivery and performance of the Loan Documents by the Borrower and the
borrowings hereunder by the Borrower, (ii) that such partnership action is in
full force and effect without modification as of such date, and (iii) as to
the incumbency and signatures of the Authorized Officer executing the Loan
Documents to which such Person is a party;
(c) (i) copies of the constitutive governing documents of
the Borrower, certified as of a recent date; (ii) certificates of said
Secretary of State to the due organization, existence and good standing of
the Borrower, as of a recent date; (iii) certificates of good standing of the
Secretary of State of each jurisdiction in which the Borrower is qualified to
do business; and (iv) a certificate of an Authorized Officer of the Borrower
dated the Closing Date, certifying (A) that attached thereto are true,
correct and complete copies of the constitutive governing documents as is in
effect on the date of such certification, and (B) that such constitutive
governing documents have not been amended since the date of the last amendment
thereto furnished pursuant to clause (i) above;
(d) the applicable Loan Documents and all UCC financing
statements required by the Collateral Documents are duly executed by all the
parties thereto (other than the Lender);
(e) evidence that all actions necessary or, in the opinion
of the Lender and its counsel, desirable, to create and perfect the security
interests and other Liens granted under the Loan Documents, have been duly
taken and that there are no security interests senior to the security
interests granted in favor of the Lender;
(f) a legal opinion of counsel to the Borrower covering
those items set forth in EXHIBIT E hereto, together with such other opinions
as the Lender may reasonably request;
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(g) such consents, approvals or acknowledgments with respect to such of the
transactions hereunder as may be necessary or as the Lender or its counsel may
deem appropriate;
(h) (RESERVED];
(i) a certificate showing that, at the time of the Closing Date and after
giving effect to the initial funding hereunder and the consummation of all other
transactions contemplated by this Agreement and the Loan Documents, (i) the
representations and warranties contained in this Agreement and in the other Loan
Documents shall be true and correct on and as of such date and no representation
made or information supplied to the Lender shall have proven to be inaccurate or
misleading in any material respect; and (ii) no Event of Default or Default
shall have occurred; and the Lender shall have received a certificate of the
Borrower signed on its behalf by an Authorized Officer that (A) no Material
Adverse Change has occurred since September 30, 1997; (B) no litigation or
administrative proceeding of or before any court or governmental body or agency
in excess of $100,000 individually or $250,000 in the aggregate is pending or
threatened against the Borrower or any of its properties which could be
reasonably be expected to have a Material Adverse Effect; (C) the Borrower is in
compliance with all pertinent federal, state and local laws, rules and
regulations, including, without limitation, those with respect to ERISA and all
applicable environmental laws, except where the violation of which would not
have a Material Adverse Effect; and (D) none of the Borrower, any Primestone
Partner, Prime, the REIT nor any of their Subsidiaries, shall be the subject of
any bankruptcy, reorganization, insolvency or similar proceeding;
(j) payment in full of all amounts then due and payable under the terms of
this Agreement, including, without limitation, (i) all of the fees payable to
the Lender pursuant to this Agreement, and (ii) all of the Lender's
out-of-pocket expenses (including, without limitation, the reasonable fees and
disbursements of the Lender's counsel);
(k) such other and further documents as the Lender and its counsel may
have reasonably requested and all legal matters incident to this Agreement, the
transactions contemplated hereby and the Loan shall be reasonably satisfactory
to the Lender and its counsel; and
(l) the IPO shall have been consummated, no stop order under Section 8 of
the Securities Act of 1933 suspending the effectiveness of the registration
statement for the IPO shall have been issued by the SEC, and the REIT Stock
shall have been approved for listing on the New York Stock Exchange
("EXCHANGE"), and the Exchange shall not have suspended trading in the REIT
Stock.
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ARTICLE 5.
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from and after the date of
execution of this Agreement and so long as any amount of the Loan is not
indefeasibly repaid in full, the Borrower shall comply with each of the
following covenants:
Section 5.01. MAINTENANCE OF EXISTENCE AND PROPERTIES. The Borrower shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence and continue to conduct its business, as now and
proposed to be conducted. The Borrower shall (1) do or cause to be done all
things necessary to preserve and keep in full force and effect all of its
rights, franchises and intellectual property, and comply with all laws
applicable to it, except for violations thereof which would not have a Material
Adverse Effect.
Section 5.02. (RESERVED].
Section 5.03. PUNCTUAL PAYMENT. The Borrower shall duly and punctually pay
the principal of and interest on the Note and any other amount due under this
Agreement or any of the Loan Documents to which it is a party, including,
without limitation, the amounts payable under Section 2.08 hereof within any
grace period provided herein.
Section 5.04. PAYMENT OF LIABILITIES. The Borrower shall pay and discharge
in the ordinary course of business, where applicable, all of its obligations and
liabilities (including, without limitation, tax liabilities and other
governmental charges), except where the same may be diligently contested in good
faith by appropriate proceedings, and maintain in accordance with GAAP
appropriate reserves for any of the same.
Section 5.05. COMPLIANCE WITH LAWS. The Borrower shall observe and comply
with all applicable laws, statutes, rules, regulations or other requirements
having the force of law, including, without limitation, all applicable
environmental laws to the extent failure to so comply could have a Material
Adverse Effect.
Section 5.06. PAYMENT OF TAXES, ETC. The Borrower shall pay and discharge
all lawful taxes, assessments, and governmental charges or levies imposed upon
it, or upon its income or profits, or upon any of its properties, before the
same shall become in default or within ten (10) days thereafter, as well as all
lawful claims for labor, materials, and supplies which, if unpaid, might become
a Lien or charge upon such property or any part thereof within ten (10) days
thereafter, as well as all lawful claims for labor, materials, and supplies
which, if unpaid, might become a Lien or charge upon any of its properties or
any part thereof within ten (10) days of such claims being due and payable;
PROVIDED, HOWEVER, that no such tax, assessment, charge, levy, claim need be
paid and discharged so long as the validity thereof shall be diligently
contested in good faith by appropriate proceedings and there shall have been
set aside on the
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books of the Borrower adequate reserves in accordance with GAAP applied with
respect thereto, but such tax, assessment, charge, levy, or claim shall be paid
before the property subject thereto shall be sold to satisfy any Lien which had
attached as security therefor.
Section 5.07. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower
shall furnish to the Lender, in form and substance acceptable to the Lender and
at the Borrower's expense:
(a) within ninety (90) days after the end of each Fiscal Year, (i) audited
consolidated balance sheets of the Borrower and its Subsidiaries as at the end
of such Fiscal Year and the related audited consolidated statements of income
and changes in financial position of the Borrower and its Subsidiaries for such
Fiscal Year, prepared in accordance with GAAP, including consolidated financial
reports with all related schedules and notes attached thereto, setting forth, in
each case, in comparative form, corresponding figures from the preceding Fiscal
Year, all in reasonable detail, prepared by management and audited by and with
an unqualified opinion of, nationally recognized independent certified public
accountants reasonably satisfactory to the Lender, together with a statement
stating whether or not such accountants have any knowledge that the Borrower and
its Subsidiaries is then or has been in violation of any covenants pertaining to
this Agreement or pertaining to any other debt covenant of the Borrower or its
Subsidiaries and that, to their knowledge, no event has occurred which, with the
passage of time or the giving of notice or both, would constitute any such
violation and (ii) a certificate of an Authorized Officer that no Default or
Event of Default is then occurring;
(b) within forty-five (45) days after the end of each Fiscal Quarter,
quarterly unaudited consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of such Fiscal Quarter and the related unaudited
consolidated statements of income and changes in financial position of the
Borrower and its Subsidiaries for such Fiscal Quarter, prepared in accordance
with GAAP and certified as to accuracy and completeness by an Authorized Officer
of the Borrower;
(c) within ten (10) days of any revision to any of the financial statements
referred to in clauses (a) or (b) above, such financial statements, as revised;
(d) upon request from Lender, within ten (10) days, true, complete and
correct copies of all federal, state, local and foreign tax returns that are
required to be filed by the Borrower, including, without limitation, all related
schedules and annexes to such tax returns;
(e) as soon as available, a true copy of any "management letter" or other
communication to the Borrower, its officers, general partners, managers or
members by its accountants regarding matters which arose or were ascertained
during the course of the audit and which said accountants determined ought to
be brought to management's attention;
(f) copies of any notices delivered to it by Prime or the REIT;
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(g) immediately upon any officer, director, general partner, manager or
member of the Borrower obtaining knowledge (i) of any condition or event which
constitutes a Default or Event of Default, (ii) of any condition or event which
would have a Material Adverse Effect, (iii) of any condition or event giving
rise to any rights of a Primestone Partner under, or any notice delivered
pursuant to, Section 9.5 of the Borrower Partnership Agreement, (iv) that any
Person has given any notice to the Borrower or, to its knowledge, taken any
other action with respect to a claimed default or event or condition of the type
referred to in clauses (f), (g) and (j) of Section 8 hereof, or (v) to its
knowledge, of the institution of any litigation involving claims against the
Borrower equal to or greater than $100,000 with respect to any single cause of
action or $250,000 with respect to the aggregate of all causes of action or any
adverse determination in any litigation involving a potential liability to the
Borrower equal to or greater than $100,000 with respect to any single cause of
action or $250,000 with respect to the aggregate of all causes of action (which,
in all such cases, are not covered by insurance), an officers' certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such claimed Default, Event of Default, event or condition, and what
action, if any, the Borrower has taken, is taking or proposes to take with
respect thereto;
(h) immediately upon the Borrower becoming aware of the occurrence of (i)
the occurrence or expected occurrence of any Reportable Event with respect to
any Plan, or any withdrawal from, or the termination, reorganization or
insolvency of any multiemployer plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower, or any ERISA
Affiliate or any multiemployer plan with respect to the withdrawal from, or the
terminating, reorganization or insolvency of, any Plan;
(i) promptly (i) notify Lender of any amendment to the Borrower Partnership
Agreement, (ii) provide the Lender with the full text of any such amendment and
(iii) provide the Lender with a copy of the Borrower Partnership Agreement, as
so amended; and
(j) as soon as practicable, such other information concerning the financial
affairs and condition (financial or otherwise) of the Borrower, Prime (to the
extent available to Borrower), the REIT (to the extent available to Borrower) or
the Collateral as the Lender may from time to time reasonably request.
Section 5.08. ACCOUNTS AND REPORTS. The Borrower shall keep accurate
records and books of account at its principal place of business in which
complete, accurate and correct entries shall be made of all dealings or
transactions in relation to its businesses and affairs, as applicable, and the
Collateral.
Section 5.09. INSPECTION; AUDIT. The Borrower shall permit any authorized
representative designated by the Lender, upon reasonable advance notice, to
visit, inspect and audit its properties and condition, including its books and
records (and to make copies thereof), and to discuss its affairs, finances and
accounts with its officers, general partners, managers, members or directors,
employees, auditors, legal counsel and agents at such reasonable times and
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as often as may be reasonably requested by the Lender, which visit, inspection
and audit shall be at the expense of the Lender unless a Default or Event of
Default shall have occurred and not been cured at the time of the commencement
of such visit, inspection or audit, in which case such visit, inspection and
audit shall be at the expense of the Borrower.
Section 5.10. UCC FILINGS. Within thirty (30) days of the Closing Date,
the Borrower will deliver to the Lender UCC search reports evidencing UCC
filings made in each jurisdiction required in the Collateral Documents.
Section 5.11. REGISTRATION RIGHTS. The Borrower shall not amend the
Registration Rights Agreement.
ARTICLE 6.
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, from and after the date
of execution of this Agreement and so long as any Loan is not indefeasibly
repaid in full, the Borrower shall comply with each of the following
covenants:
Section 6.01. INDEBTEDNESS. The Borrower shall not directly or indirectly,
create, incur, assume or otherwise become or remain liable with respect to any
Indebtedness that is secured by or imposes any limitation on any Collateral,
other than Indebtedness of the Borrower to the Lender incurred pursuant to this
Agreement or the other Loan Documents.
Section 6.02. LIENS. The Borrower shall not directly or indirectly, create,
incur, assume or permit to exist any Lien on or with respect to any of the
Collateral, whether now owned or hereafter acquired, except Liens arising under
the Loan Documents in favor of the Lender.
Section 6.03. FUNDAMENTAL CHANGES. The Borrower shall not change its
capital structure, enter into any merger or consolidation, or liquidate, wind-up
or dissolve.
Section 6.04. DISPOSITIONS OF ASSETS. The Borrower shall not assign, sell,
lease or otherwise dispose of, whether by sale, merger, consolidation,
liquidation, dissolution, abandonment or otherwise, any of the Collateral unless
the proceeds thereof are used to repay all or a portion of the Obligations
pursuant to Section 2.04 (b) hereof.
Section 6.05. DIVIDENDS AND REDEMPTIONS. Upon the occurrence and
continuance of a Default or an Event of Default, the Borrower shall not: (i)
declare, pay or make any dividend or other distribution of assets, properties,
cash, rights, obligations or Securities on account of any shares of its
Securities, including, without limitation, by redemption, purchase, retirement
or other acquisition, except as otherwise consented to in advance in writing by
the Lender; or (ii)
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make any payment, prepayment or retirement of Indebtedness (including, without
limitation, intercompany advances or loans made to Borrower by its partners) of
the Borrower other than (a) payments pursuant to this Agreement and the other
Loan Documents, (b) scheduled payments made in accordance with the terms of such
Indebtedness, and (c) payments of trade debt made in the ordinary course of
business. Upon the occurrence and continuance of a Default or an Event of
Default, the Borrower shall not directly or indirectly, purchase, redeem or
retire or otherwise acquire any shares of its Securities or any debt securities
issued by it.
Section 6.06. CERTAIN OTHER TRANSACTIONS. The Borrower shall not enter into
any transaction that has a Material Adverse Effect on the Collateral or which
prohibits the Borrower from pledging, encumbering or granting a security
interest in the Collateral, whether now owned or hereafter acquired.
Section 6.07. TRANSACTIONS WITH AFFILIATES AND CERTAIN OTHER PERSONS. The
Borrower shall not directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease, or
exchange of any property and guarantees and assumptions of obligations of an
Affiliate) with any stockholder, officer, director, employee, partner, member or
Affiliate of the Borrower, other than (i) the making of, and payment of
principal and interest on, intercompany transfers, advances and loans; (ii)
transactions on an arms-length basis on terms no less favorable to the Borrower
than if such Affiliate was not an Affiliate of the Borrower; (iii) the payment
of salary and other customary compensation for a similarly situated business of
its directors, officers and employees in the ordinary course of its business;
(iv) management and leasing agreements which are entered into in the ordinary
course of the Borrower's business, are consistent with existing similar
agreements of the Borrower and are customary in the industry; (v) the
transaction described on SCHEDULE 6.07 hereto, (vi) transactions between the
Borrower and its Subsidiaries that are entered into in the ordinary course of
business and consistent with past practice and (vii) transactions consented to
in advance in writing by the Lender, in its reasonable discretion.
Section 6.08. FISCAL YEAR. The Borrower shall not change its Fiscal Year.
Section 6.09. ERISA. The Borrower shall not be or become obligated to PBGC
in excess of $100,000 or be or become obligated to the Internal Revenue Service
with respect to excise or other penalty taxes provided for in Section 4975 of
the IRC in excess of $100,000. The Borrower shall not seek any waiver from the
minimum funding standard set forth under Section 302 of ERISA or Section 412 of
the IRC or engage in any material Prohibited Transaction with respect to any
Plan.
Section 6.10. REGULATIONS G. T. U AND X. The Borrower shall not apply,
directly or indirectly, any part of the proceeds of the Loan for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any "margin
security" as defined in Regulation G or for the purpose of reducing or retiring
any Indebtedness which was originally incurred for any such purpose, in each
case, in violation of Regulation G, T, U or X.
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Section 6.11. BORROWER PARTNERSHIP AGREEMENT. The Borrower shall not permit
the amendment of the Borrower Partnership Agreement in any manner.
ARTICLE 7.
[RESERVED]
ARTICLE 8.
EVENTS OF DEFAULT
Section 8.01. EVENTS OF DEFAULT. Each of the following events or
conditions shall constitute an Event of Default under this Agreement:
(a) the Borrower shall (i) fail to pay when due any principal (including
mandatory prepayments) of any Loan or (ii) fail to pay any interest on any Loan
or any other amount due and payable hereunder or with respect to any Loan
(excluding the fee payable pursuant to Section 2.08(b)) when due and such
default shall have continued unremedied for three (3) days;
(b) any representation, warranty or statement given in this Agreement or in
any other Loan Document by any party thereto (other than the Lender) or in any
certificate, opinion, report, financial statement or other written statement
furnished at any time pursuant to this Agreement shall prove to be or have been
untrue or misleading in any material respect as of the date on which it is made
or deemed to be made;
(c) (i) the Borrower shall fail to perform, keep or observe in any respect
any covenant or condition contained in Sections 5.01, 5.03, 5.06, 5,07, 5.08,
5.09, 5.10 and 5.11 hereof or Article 6 hereof, (ii) the Borrower shall fail
to perform, keep or observe in any respect any covenant or condition contained
in Section 5.04 (provided such obligations and liabilities referred to in
Section 5.04 are accelerated) hereof and such failure contained in this clause
(ii) shall not be cured to the Lender's reasonable satisfaction within five (5)
days after the occurrence of such failure, or (iii) the Borrower shall fail to
perform, keep or observe in any respect any covenant or condition contained in
Section 5.04 (provided such obligations and liabilities referred to in Section
5.04 are not accelerated) and 5.05 hereof and such failure contained in this
clause (iii) shall not be cured to the Lender's reasonable satisfaction within
fifteen (15) days after the occurrence of such failure;
(d) the Borrower or any other party to a Loan Document (other than the
Lender) shall fail to perform, keep or observe in any respect any other term,
provision, condition, covenant, waiver, warranty or representation contained in
this Agreement or in any other Loan Document to which it is a party that is
required to be performed, kept or observed by the Borrower or any party to a
Loan Document, other than the Lender, and the same, if curable, shall
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not be cured to the Lender's satisfaction within ten (10) days after the
occurrence of such failure, unless the Borrower is diligently working to cure
such failure and such failure has not resulted in a Material Adverse Effect, in
which case no Event of Default shall occur with respect thereto until thirty
(30) days after the occurrence of such failure;
(e) (i) the Lender shall not have at any time first priority perfected
Liens and security interests in all of the Collateral, (ii) any of the Loan
Documents shall at any time for any reason cease to be in full force and
effect or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by any of the parties thereto
(other than the Lender), or (iii) any of such parties shall deny that it has
any or any further liability or obligation thereunder at a time when it in
fact does have such liabilities or obligations thereunder;
(f) the Borrower shall fail to (a) pay all or any portion of any
Indebtedness in excess of $100,000 (other than the Obligations) when due
(whether by stated maturity, required prepayment, acceleration, demand or
otherwise) after the expiration of any applicable grace periods; or (b) perform
or observe any term, covenant or condition to be performed on its part or to be
observed under any agreement or instrument relating to such Indebtedness, when
required to be performed or observed.
(g) the Borrower permits one or more judgments against it in excess of
$100,000, individually, and $250,000, in the aggregate, to remain unstayed,
unbonded or not discharged for a period of more than thirty (30) days, unless
such judgment is being contested in good faith and the Borrower has established
reserves in accordance with GAAP that are satisfactory to the Lender;
(h) any of the operations or business of the Borrower, Prime or the REIT is
suspended, other than in the ordinary course of its business, which has a
Material Adverse Effect;
(i) the Borrower, Prime or the REIT commences any case, proceeding or other
action relating to it in bankruptcy or seeking reorganization, liquidation,
dissolution, winding-up, arrangement, composition, compromise, readjustment of
its debts or any other relief under any bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement, composition, compromise, readjustment of
debt or similar act or law of any jurisdiction, now or hereafter existing, or
consents to; approves of, or acquiesces in, any such case, proceeding or other
action, or applies for a receiver, trustee or custodian for itself or for all or
a substantial part of its properties or assets, or makes an assignment for the
benefit of creditors, or fails generally to pay its debts as they mature or
admits in writing its inability to pay its debts as they mature, or is
adjudicated insolvent or bankrupt;
(j) there is commenced against the Borrower, Prime or the REIT any case or
proceeding or any other action is taken against the Borrower, Prime or the REIT
in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up,
arrangement, composition, compromise, readjustment of its debts or any other
relief under any bankruptcy, insolvency,
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reorganization, liquidation, dissolution, arrangement, composition, compromise,
readjustment of debt or similar act or law of any jurisdiction, now or hereafter
existing; or there is appointed a receiver, trustee or custodian for the
Borrower, Prime or the REIT or for all or a substantial part of their respective
properties or assets; or there is issued a warrant of attachment, execution or
similar process against any substantial part of the properties or assets of the
Borrower, Prime or the REIT, and any such event continues for thirty (30) days
undismissed, unstayed, unbonded or undischarged;
(k) (i) the Borrower engages in any Prohibited Transaction involving any
Plan; (ii) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA) exists with respect to any Plan; (iii) a Reportable Event occurs with
respect to, or proceedings commence to have a trustee appointed, or a trustee is
appointed, to administer or to terminate, any Plan, which Reportable Event or
institution of proceedings is likely to result in the termination of such Plan
for purposes of Title IV of ERISA and, in the case of a Reportable Event, the
continuance of such Reportable Event unremedied for 10 days after notice of such
Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or
the continuance of such proceedings for ten (10) days after commencement
thereof, as the case may be; (iv) the Borrower or any of its Subsidiaries fully
or partially withdraws from any multiemployer Plan; PROVIDED HOWEVER, that any
event or condition described in any of clauses (i) through (iv) of this
paragraph (k) shall not constitute an Event of Default unless such event or
condition, together with all other such events or conditions (if any), is likely
to subject the Borrower to any tax, penalty or other liabilities in the
aggregate material in relation to the management, business, properties, assets,
operations or condition (financial or other) of the Borrower or such Subsidiary;
or (v) any Plan terminates for purposes of Title IV of ERISA, or PBGC institutes
proceedings for the involuntary termination of any Plan, in either case, with a
vested unfunded liability of $100,000 or more;
(l) there shall occur a cessation of a substantial part of the business of
the Borrower, Prime or the REIT for a period which significantly affects the
Borrower's, Prime's or the REIT's capacity to continue its business; or the
Borrower, Prime or the REIT shall suffer the loss or revocation of any license
or Permit now held or hereafter acquired by such Person which is necessary to
the continued or lawful operation of a part of its business that would have a
Material Adverse Effect; or the Borrower, Prime or the REIT shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any part of its business affairs for a period which
would have a Material Adverse Effect; or
(m) a Material Adverse Change shall have occurred.
Section 8.02. REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default
shall have occurred and be continuing, the Lender may by notice to the Borrower
(i) declare the commitment of the Lender to make the Loan hereunder to be
terminated, whereupon the same shall forthwith terminate, and/or (ii) declare
the Loan, all interest thereon, any accrued and unpaid fees and all other
amounts payable hereunder or in respect of the Loan to be forthwith due and
payable, whereupon they shall become and be forthwith due and payable, without
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presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by each of the Borrower. Notwithstanding the foregoing,
upon the occurrence of any Event of Default described in Sections 8.01(i) or (j)
above, the commitment of the Lender to make the Loan shall automatically be
terminated and the Loan, all interest thereon and all accrued and unpaid fees
and all other amounts payable hereunder or in respect of the Loan shall
immediately become due and payable, without any requirement on the part of the
Lender to give notice, or make declaration, of any kind regarding such Event of
Default and without presentment, demand, protest or any other requirement on the
part of the Lender, all of which are hereby expressly waived by the Borrower.
ARTICLE 9.
MISCELLANEOUS
Section 9.01. NOTICES. All notices, consents, demands or other
communications hereunder shall be in writing and shall be conclusively deemed to
have been received and shall be effective, except as explicitly otherwise noted,
(i) on the day on which delivered if delivered personally, or transmitted by
telecopier (followed by a mailed written confirmation), (ii) on the next
Business Day if delivered by a nationally recognized overnight courier (such as
Federal Express), or (iii) five (5) Business Days after the date on which the
same is mailed by certified United States mail, postage prepaid, return receipt
requested, and shall be addressed:
(a) in the case of the Borrower, to:
Primestone Investment Partners, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
Telecopier No.: (312) 917-1511
With a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: General Counsel
Telecopier No.: (312) 917-1511
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With a copy to:
BRE/Primestone Investment Management L.L.C.
c/o Blackstone Real Estate Advisors
345 Park Avenue
New York, New York 10154
Attention: Steven Orbuch
Telecopier No.: (212) 754-8730
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Telecopier No.: (312) 558-5700
(b) in the case of the Lender, to:
Prudential Securities Credit Corporation
One New York Plaza
New York, New York 10292
Attention: Mr. Richard K. Gupta
Telephone No.: (212) 778-5751
Telecopier No.: (212) 778-4586
With copies to:
Prudential Securities Incorporated
One Seaport Plaza
27th Floor
New York, New York 10292
Attention. Ms. Erika Walters-Engemann
Telecopier No.: (212) 214-7678
With additional copies (other than copies of any Notice of Borrowing)
to:
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Mr. Geoffrey Bedrosian
Telecopier No.: (212) 778-3194
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Skadden, Arps, Slate Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Greg Milmoe, Esq.
Telecopier No.: (212) 735-2000
or at such other address as the party giving such notice shall have been advised
of in writing for such purpose by the party to which the same is directed.
Section 9.02. SURVIVAL OF THIS AGREEMENT. Subject to the last sentence
of Section 9.03, all covenants, agreements, representations and warranties made
herein, or in the Loan Documents or in any certificate delivered pursuant hereto
or thereto shall survive the execution by the Borrower and delivery to the
Lender of this Agreement, the Note and the other Loan Documents and the making
of the Loan hereunder, and shall continue in full force and effect so long as
any part of the Loan remains outstanding and unpaid.
Section 9.03. INDEMNITY. The Borrower agrees to defend, protect,
indemnify and hold harmless the Lender and each of its affiliates (as defined in
rule 405 under the Securities Act) controlling persons (as defined in Section 15
of the Securities Act), officers, directors, employees, agents, attorneys and
consultants (collectively called the "INDEMNITEES") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees incurred in connection with any action or proceeding
between or among the Borrower and any Indemnitee or between any Indemnitee and
any third party or otherwise, whether or not relating to any investigative,
administrative or judicial proceeding and whether or not such Indemnitees shall
be designated a party thereto), imposed on, incurred by, or asserted against
such Indemnitees (whether direct, indirect, special, consequential, punitive or
treble and whether based on any federal, state or local, or foreign, laws or
other statutory regulations, including, without limitation, applicable
environmental laws, securities and commercial laws and regulations, under common
law or at equitable cause, or on contract or otherwise) in any manner relating
to or arising out of this Agreement or any of the Loan Documents, or any act,
event or transaction related or attendant thereto or contemplated hereby, or any
action or inaction by any Indemnitee under or in connection therewith, any
commitment of the Lender hereunder, or the making of the Loan, or the management
of the Loan, or the use or intended use of the proceeds of any Loan, advance or
other financial accommodation provided hereunder, or any ERISA liabilities, or
the use or intended use of the Collateral or any accident or injury occurring on
any of the Borrower's properties, or the payment of any brokerage commission to
anyone in connection with funding the Loan, or any misrepresentation made by
the Borrower to the Lender in the Loan Documents, including, in each such
case, any allegation of any such matters, whether meritorious or not
(collectively, the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that the
Borrower shall not have any obligation to any Indemnitee hereunder with
respect to Indemnified Matters directly caused by or resulting primarily from
the willful misconduct or gross negligence of such Indemnitee. This Section
9.03 shall survive the payment in full of all amounts due and payable under
this
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Agreement or any of the Loan Documents and the full satisfaction of all other
Obligations of the Borrower.
Section 9.04. COSTS, EXPENSES AND TAXES. (a) The Borrower agrees to pay
on demand (i) all reasonable out-of-pocket costs and expenses incurred by the
Lender in connection with the preparation, execution, delivery, filing or
recording of this Agreement, each of the Loan Documents, and any other
documents, instruments or agreements which may be delivered in connection with
this Agreement (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Lender, and local counsel who may be
retained by said counsel, provided such local counsel expenses are incurred in
connection with the transactions contemplated by this Agreement and consummated
prior to, on or shortly after the Closing Date or upon the occurrence of a
Default or Event of Default) with respect thereto and with respect to advising
the Lender as to its rights and responsibilities under this Agreement, (ii) all
costs and expenses in connection with all third party reports, the audit,
appraisal, valuation, investigation, and the creation, perfection, priority or
protection of the Lender's Liens against the Collateral, including, without
limitation, all costs and expenses to pay or discharge taxes, Liens, security
interests or other encumbrances levied, placed or threatened against the
Collateral, (iii) all out-of-pocket costs and expenses in connection with the
audits, inspections and investigations conducted pursuant to Section 5.09
hereof, and (iv) all costs and expenses (including, without limitation, the
reasonable fees and expenses of the Lender's counsel) of the Lender in
connection with the enforcement of this Agreement and each of the Loan Documents
and such other documents, instruments or agreements which may be delivered in
connection with this Agreement.
(b) Any and all payments by the Borrower under this Agreement or the
Note shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of the Lender,
taxes imposed on or in respect of its income (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Lender,
(i) the sum payable shall be increased as may be necessary so that, after making
all required deductions (including deductions applicable to additional sums
payable under this Section 9.04), the Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. If a Tax credit is received by the Lender for any Taxes deducted
or withheld by the Borrower or paid or remitted by the Lender in accordance
with this section 9.04(b) and in respect of which additional amounts have
been paid by the Borrower under this section 9.04(b) then, to the extent that
such Tax credit has been received and utilized by the Lender, the Lender
shall forthwith pay to the Borrower an amount equal to such Tax credit,
provided that such amount shall not exceed the additional amounts paid by the
Borrower to the Lender under this section 9.04(b).
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(c) The Borrower further agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or similar
levies which arise in connection with the execution and delivery of this
Agreement, any of the Loan Documents or any of the other instruments, documents
or agreements executed and/or delivered in connection herewith or therewith, or
any payment made hereunder or in connection herewith (hereinafter collectively
referred to as "OTHER TAXES").
(d) The Borrower shall indemnify the Lender for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable by the Borrower under this
Section 9.04) paid by the Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor. A certificate as to any additional amount payable to
the Lender under this Section 9.04 submitted to the Borrower by the Lender shall
show in reasonable detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be final, conclusive and
binding upon each of the parties hereto.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 9.04 shall survive the payment in full of all amounts due and
payable under this Agreement or any of the Loan Documents and the full
satisfaction of all other Obligations of the Borrower.
Section 9.05. FURTHER ASSURANCES. (a) At any time and from time to
time, upon the request of the Lender, the Borrower shall execute, deliver and
acknowledge, or cause to be executed, delivered and acknowledged, such further
documents and instruments (including without limitation, any and all forms
required by the Federal Reserve Board) and do such other acts and things as the
Lender may reasonably request in order to effect fully the intent and purposes
of this Agreement and the Loan Documents, and any other agreements, instruments
and documents delivered pursuant hereto or in connection with the making of the
Loan, in proper form for recording and otherwise in form and substance
reasonably satisfactory to the Lender and its counsel.
(b) The Borrower agrees that from time to time, at its expense, it
shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or appropriate, or that the
Lender may reasonably request, in order to create, evidence, perfect or preserve
any security interest or Lien granted or purported to be granted hereby or by
any Loan Document or to enable the Lender to exercise and enforce its rights
and remedies hereunder or under any Loan Document with respect to any
Collateral.
Section 9.06 AMENDMENT AND WAIVER. No amendment or waiver of any
provision of this Agreement or any of the Loan Documents to which the Lender
is a party, nor any consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be
32
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effective only in the specific instance and for the purpose for which given;
PROVIDED, HOWEVER, that no amendment, waiver or consent, shall, unless in
writing and signed by all holders of the Note do any of the following: (i)
increase the Commitment, (ii) reduce the principal of, or premiums or interest
on, the Note or the fees payable in accordance with Section 2.08 hereunder,
(iii) postpone any date fixed for any payment of principal of, or interest on,
the Note or such funding fee or any other amount due hereunder or under any Loan
Document to any holder of the Note, or waive any default in the payment of
principal, interest or any other amount due hereunder or under any Loan Document
to which such holder of the Note is a party, (iv) release any portion of the
Collateral, or (v) amend this Section 9.06 or any other provision requiring the
consent of all of the holders of the Note. No failure on the part of the Lender
or any holder of the Note to exercise, and no delay in exercising, any right,
power or privilege hereunder or under any of the Loan Documents shall operate as
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
Section 9.07. REMEDIES CUMULATIVE. This Agreement, the Loan Documents
and the Obligations of the Borrower hereunder and thereunder are in addition to
and not in substitution for any other obligations of the Borrower or security
interests granted by the Borrower now or hereafter held by the Lender and shall
not operate as a merger of any contract or debt or suspend the fulfillment of or
affect the rights, remedies or powers of the Lender in respect of any such
obligation or security interest held by the Lender for the fulfillment thereof.
The rights and remedies provided in this Agreement and in any Loan Document are
cumulative and not exclusive of any other rights or remedies provided by law.
Section 9.08. MARSHALING, RECOURSE TO SECURITY: PAYMENTS SET ASIDE. The
Lender shall not be under any obligation to marshal any assets in favor of the
Borrower or any other party or against or in payment of any or all of the
Obligations of the Borrower to the Lender hereunder or under the Loan Documents
or otherwise. Recourse to security shall not be required at any time. To the
extent that the Borrower makes a payment or payments to the Lender, or the
Lender enforces its security interests or exercises its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and reinstated and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
Section 9.09. SETOFF. In addition to any rights and remedies of the
Lender now or hereafter provided by law, the Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived
by the Borrower to the extent permitted by applicable law, on the occurrence
and during the continuation of any Event of Default to setoff and apply
against any Obligation, whether matured or unmeasured, of the Borrower, any
amount owing
33
<PAGE>
from the Lender to the Borrower, at or at any time after the happening of any
such Event of Default, and such right of setoff may be exercised by the Lender
against the Borrower or against any trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, receiver or execution, judgment or
attachment creditor, notwithstanding the fact that such right of setoff shall
not have been exercised by the Lender before the making, filing or issuance, or
service on the Lender of, or of notice of, any such event or proceeding.
Section 9.10. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower and the Lender, and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns; PROVIDED, HOWEVER, that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lender. For the purposes of this
Section 9.10, an assignment shall be deemed to include the voluntary or
involuntary sale, conveyance or transfer of the Borrower's Securities (or
(excluding any transfer of limited partner interest in the members of
BRE/Primestone Investment Management L.L.C. or BRE/Primestone Investment L.L.C.)
the Securities of any corporation directly or indirectly controlling the
Borrower by operation of law or otherwise) or the creation or issuance of a new
stock by which an aggregate of more than ten percent (10%) of the Borrower's
Securities shall be vested in a party or parties who are not now shareholders.
Section 9.11. APPLICABLE LAW. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the substantive law of the State of New York,
without regard to its choice of law provisions.
Section 9.12. CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF
JURY TRIAL. All judicial proceedings brought against the Borrower or the Lender
with respect to this Agreement or any Loan Document may be brought in any state
or federal court of competent jurisdiction situated in the Borough of Manhattan
in the City and the State of New York and, by its execution and delivery of this
Agreement, the Borrower accepts, for itself and in connection with its
properties, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement or any of the Loan Documents
from which no appeal has been taken or is available. The Borrower irrevocably
consents to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to its notice address specified in Section 9.01
hereof, such service to become effective five (5) Business Days after such
mailing. THE BORROWER AND THE LENDER HEREBY KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. Nothing herein shall
affect the right of the Lender to serve process in any other manner permitted
by law.
34
<PAGE>
Section 9.13. INCONSISTENCIES. This Agreement and each of the Loan
Documents shall be construed to the extent reasonable to be consistent, one with
the other, but to the extent that the terms and conditions of this Agreement or
any other Loan Document are actually inconsistent with the terms and conditions
of any Loan Document, the terms and conditions of this Agreement shall govern.
Section 9.14. PERFORMANCE OF OBLIGATIONS. The Borrower acknowledges and
agrees that the Lender may, but shall have no obligation to, make any payment or
perform any act required of the Borrower under this Agreement or any Loan
Document or take any other action which the Lender in its discretion deems
necessary or desirable to protect or preserve the Collateral, including, without
limitation, any action to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threaten to be placed on any
Collateral.
Section 9.15. ASSIGNMENT; PARTICIPATION. The Lender may assign (by
novation or otherwise) or participate all or a proportionate part of its rights,
obligations and interests in the Loan and its rights hereunder and under the
Loan Documents without restriction. The Lender may, prior to or after the
execution of this Agreement syndicate the Loan with one or more financial
institutions, who will become parties to this Agreement, in which case the
Lender will be the sole and exclusive agent for such other financial
institutions upon such terms and conditions as the Lender deems appropriate. The
Borrower hereby agrees to reasonably cooperate with the Lender, at the Lender's
expense, to effect assignments and/or participations made with respect hereto.
Section 9.16. CONFIDENTIALITY. The Lender shall maintain the
confidential nature of, and shall not use or disclose, any of the Borrower's
confidential financial information, without first obtaining the Borrower's
written consent, which consent shall not be unreasonably withheld or delayed.
Nothing in this Section 9.16 shall require the Lender to obtain the consent of
the Borrower, before exercising any of its rights under the Loan Documents upon
the occurrence of a Default or Event of Default. The obligations of the Lender
shall in no event apply to: (i) providing information about the Loan or any
party to any Loan Document to PSI or any actual or potential assignee or
participant contemplated in Section 9.15 hereof; (ii) any situation in which
the Lender, in the sole and absolute discretion of the Lender, is required by
law or required or requested by any governmental, regulatory or supervisory
authority or official to disclose information; PROVIDED, HOWEVER, that Lender
will give Borrower notice thereof if permitted to do so by the requesting
authority; (iii) providing information to counsel to the Lender in connection
with the transactions contemplated by the Loan Documents, (iv) providing
information to independent auditors retained by the Lender; (v) any information
that is in or becomes part of the public domain otherwise than through a
wrongful act of the Lender or any employees or agents thereof; (vi) any
information that is in the possession of the Lender prior to receipt therof
from the Borrower or any other Person known to the Lender to be acting on
behalf of the Borrower, (vii) any information that is independently developed
by the Lender; and (viii) any information that is disclosed to the Lender by a
third party that has no obligation of confidentiality with respect to the
information disclosed.
35
<PAGE>
Section 9.17. CONSTRUCTION. The parties hereto acknowledge that each
party and its counsel have reviewed this Agreement and each of the Loan
Documents and 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 or any of the Loan Documents.
Section 9.18. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, taken
together with all of the Loan Documents and all certificates and other documents
delivered by the Borrower to the Lender, embodies the entire agreement and,
except as otherwise contemplated herein, supersedes all prior agreements,
written and oral, relating to the subject matter hereof.
Section 9.19. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 9.20. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 9.21. EXECUTION OF COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
Section 9.22. LIMITATION OF LIABILITY. No claim may be made by the
Borrower or any other Person against the Lender or its Affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan Documents, or any
act, omission or event occurring in connection herewith or therewith; and the
Borrower hereby waives, releases and agrees not to sue upon any claim for any
and all special, indirect, consequential, punitive or treble damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
36
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/PRIMESTONE, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: /s/ Ray Grinvalds
-------------------------------
Name: Ray Grinvalds
Title: Vice President
By: BRE/PRIMESTONE INVESTMENT
MANAGEMENT L.L.C. its general
partner
By: /s/ Steven Orbuch
-------------------------------
Name: Steven Orbuch
Title: VP and Assistant
Secretary
37
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
PRIMESTONE INVESTMENT PARTNERS L.P.
By: PG/Primestone, L.L.C.,
its general partner
By:
------------------------------
Name:
Title:
By: BRE/PRIMESTONE Investment
Management, L.L.C., its
general partner
By:
------------------------------
Name:
Title:
PRUDENTIAL SECURITIES CREDIT CORPORATION
By: /s/ George D. Morgan
------------------------------
Name: George D. Morgan, III
Title: VICE PRESIDENT
38
<PAGE>
FORM OF
PROMISSORY NOTE
$40,000,000.00 November__, 1997
New York, New York
FOR VALUE RECEIVED, PRIMESTONE INVESTMENT PARTNERS L.P., a Delaware
limited partnership (the "BORROWER"), promises to pay to the order of
PRUDENTIAL SECURITIES CREDIT CORPORATION, a Delaware corporation (the "LENDER"),
on the Expiration Date specified in the Credit Agreement dated as of the
date hereof between the Borrower and the Lender (as it may be amended,
modified, supplemented or restated from time to time, the "CREDIT AGREEMENT";
capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to them in the Credit Agreement), at the office of the Lender
located at c/o Prudential Securities Credit Corporation, One New York Plaza,
New York, New York 10292, or at such other place as the Lender may specify from
time to time, in lawful money of the United States of America and in
immediately available funds, the principal sum of the lesser of (a) FORTY
MILLION AND 00/100 DOLLARS ($40,000,000.00),or (b) the aggregate unpaid
principal amount of the Loan made by the Lender to the Borrower pursuant to
Section 2.02 of the Credit Agreement. The Borrower further promises to pay
interest in like money and funds to the Lender at its office specified above on
the unpaid principal amount of the Loans from and including the date thereof
until payment in full at the rate or rates and on the dates determined in
accordance with the terms of Section 2.03 of the Credit Agreement. The Lender
is hereby authorized to record the date, type, amount, interest rate and
duration of each Interest Period of the Loan evidenced by this Note and the
date and amount of each payment or prepayment of principal hereof on the
schedule annexed hereto and made a part hereof, or on a continuation thereof
which shall be attached hereto and made a part hereof, and any such notation
shall be conclusive and binding for all purposes absent manifest error;
PROVIDED HOWEVER that failure by the Lender to make any such notation shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the payment thereof shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
This Note is the Note referred to in the Credit Agreement and is entitled
to the benefits thereof and is subject to optional and mandatory prepayment in
whole or in part as provided therein.
The Borrower shall use all of the proceeds of the Loan in accordance with
Section 2.07 of the Credit agreement.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note may be
declared to be or may
<PAGE>
automatically become immediately due and payable as provided in the Credit
Agreement.
Presentment for payment, demand, notice of dishonor, protest, notice of
protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as otherwise
expressly provided in the Credit Agreement.
Notwithstanding any provisions contained herein or in the Credit
Agreement to the contrary, the indebtedness evidenced by this Note shall not be
subordinated to (i) claims of any trade creditors of the Borrower or (ii) in
right of payment to the payment of any existing or future unsecured
indebtedness of the Borrower.
The obligations of the Borrower to make payments when due of any amount
owing under this Note are entitled to the befits of collateral security
provided for in the Pledge Agreement and the other Loan Documents.
This Note and the rights and obligations of the parties hereunder shall
be governed by, and construed and interpreted in accordance with, the
substantive law of the State of New York, without regard to its choice of law
provisions.
THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND IRREVOCABLY WAIVES (a)
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE, AND (b)
ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOR OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS NOTE IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the Borrower has signed this Note as of the date
first set forth above.
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/PRIMESTONE, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: _________________________________________
Name: Ray Grinvalds
Title: Vice President
By: BRE/PRIMESTONE INVESTMENT
MANAGEMENT L.L.C. its general partner
By: BLACKSTONE REAL ESTATE PARTNERS
II, L.P., its Member
By: BLACKSTONE REAL ESTATE
ASSOCIATES II, L.P., its general partner
By: BLACKSTONE REAL ESTATE
MANAGEMENT ASSOCIATES II, L.P.
its general partner
By: BREA II L.L.C., its general partner
By: __________________________________________
Name: Steven Orbuch
Title: Vice President and Assistant
Secretary
<PAGE>
Exhibit B
NOTICE OF BORROWING
Prudential Securities Credit Corporation
New York Plaza
New York, New York 10292
Attention: Mr. Richard K. Grupta
Re: PRIMESTONE INVESTMENT PARTNERS l.P. CREDIT AGREEMENT
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of
November 17, 1997 between Primestone Investor Partners L.P., a Delaware limited
partnership (the "BORROWER") and Prudential Securities Credit Corporation, a
Delaware corporation (the "CREDIT AGREEMENT"). Capitalized terms used herein
but not otherwise defined herein shall have the meanings ascribed to them in
the Credit Agreement. The undersigned Borrower, by signature of the Authorized
Person below hereby gives you irrevocable notice pursuant to Section 2.02(b)(i)
of the Credit Agreement that the Borrower hereby requests the Loan under the
Credit Agreement, and in that connection set forth below the information
relating to such Loan (the "PROPOSED LOAN") as required by Section 2.02(b)(i)
of the Credit Agreement:
(i) The request Borrowing Date of the Proposed Loan is
November 17, 1997;
(ii) The aggregate amount of the Proposed Loan is $40,000,000;
and
(iii) The proceeds of such Loan shall be used as set forth in
Section 2.07 of the Credit Agreement.
The Borrower hereby certifies that the above statements and the
following statements are true on the date hereof, and will be true on the date
of the Proposed Loan, before and after giving effect thereto and to the
application of the proceeds therefrom:
(A) All of the representations and warranties contained in
Article 3 of the Credit Agreement and in each of the Loan Documents and the
information set forth in the schedules thereto are true and correct as of the
date hereof;
(B) No Default or Event of Default exists as of the date hereof
or of the Requested Borrowing Date or will result from the Proposed Loan; and
1
<PAGE>
(C) The Borrower is in compliance with all of the terms and
conditions of the Credit Agreement, the Note and each other Loan Documents to
which it is a party.
Very truly yours,
PRIMESTONE INVESTMENT PARTNERS L.P.
By: P.G./Primestone, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: ____________________________________
Name: Ray Grinvalds
Title: Vice President
2
<PAGE>
Exhibit C
FORM OF
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "AGREEMENT") dated as of November 17, 1997
made by Primestone Investment Partners L.P., a Delaware limited partnership
(the "PLEDGOR"), and Prudential Securities Credit Corporation, a Delaware
corporation (the "LENDER").
W I T N E S S E T H:
WHEREAS, the Pledgor has entered into an Amended and Restated Agreement
of Limited Partnership (including, without limitation, all exhibits thereto, as
amended, supplemented or otherwise modified from time to time, the "PARTNERSHIP
AGREEMENT") of Prime Group Realty, L.P., a Delaware limited partnership
("PRIME") dated as of the date hereof among Prime Group Realty Trust, a
Maryland real estate investment trust (the "REIT") and The Nardi Group, L.L.C.,
a Delaware limited liability company, as the General Partners and the Persons
whose names are set forth on Exhibit A thereto, as the Limited Partners;
WHEREAS, pursuant to the Partnership Agreement the Pledgor is the
beneficial and record owner of the number of certificated limited partnership
interests issued by Prime pursuant to the Partnership Agreement identified on
Schedule I hereto (the "OP UNITS", and the OP Units together with the REIT
Stock (as defined below) collectively, the "PLEDGED SHARES");
WHEREAS, pursuant to the Partnership Agreement the Pledgor has the right,
subject to certain conditions, to exchange each OP Unit for one common share of
the REIT or, at the option of the REIT, cash equal to the fair market value of
such common share of the REIT at the time of exchange;
WHEREAS, the Pledgor has entered into the Credit Agreement dated as of
the date hereof (as the same may from time to time be amended, extended,
supplemented, restated or otherwise modified or replaced, the "CREDIT
AGREEMENT"; terms used herein, and not otherwise defined herein, are used with
the meanings ascribed to them in the Credit Agreement) between the Pledgor and
the Lender pursuant to which the Lender has agreed to make a loan to the
Pledgor in an amount no greater than the Commitment; and
WHEREAS, as a condition precedent to the Lender's entering into the
Credit Agreement, the Lender has required the Pledgor to grant, assign and
pledge, and the Pledgor has agreed to grant, assign and pledge, to the Lender a
continuing first priority security interest in and to all its rights, title and
interests in the Pledged Collateral (as hereinafter defined) to secure all of
the obligations of the Pledgor to the Lender under the Credit Agreement, the
Note and the other Loan Documents.
NOW, THEREFORE, Pledgor, intending to be bound hereby, in consideration
of the premises hereof, in order to induce the Lender to provide the Loan under
and in accordance with the terms of the Credit Agreement and for other good and
valuable consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, hereby agrees with, and for the
benefit of, the Lender as follows:
SECTION 1. PLEDGE. Pledgor hereby pledges and assigns to the Lender and
grants to the Lender a continuing first and prior security interest in all of
its rights, title and interests in and to, whether now owned or existing or
hereafter acquired or arising:
(i) Prime, including without limitation, the OP Units;
(ii) all common shares issued by the REIT in exchange for the OP Units
("REIT STOCK");
(iii) all payments due or to become due to the Pledgor arising out of,
as a result of or in connection with the OP Units, whether as distributions of
cash or property or otherwise and all of Pledgor's rights arising out of, as a
result of or in connection with the Pledged Shares, whether now existing or
hereafter arising or acquired, to exercise all voting, consensual and other
powers of ownership pertaining to the Pledge Shares (including, without
limitation, to make determinations, to exercise any election (including,
without limitation, election of remedies) or option, to give or receive any
notice, consent, amendment, waiver or approval), together with full power and
authority to demand, receive, enforce, collect or give receipt for any of the
foregoing, to enforce or execute any checks or other instruments or orders, to
file any claims and to take any action which, in the opinion of the Lender, may
be necessary or advisable in connection with any of the foregoing;
(iv) (a) that certain Registration Rights Agreement dated as of
November 17, 1997 (as the same may from time to time be amended, supplemented,
restated or modified, the "REGISTRATION RIGHTS AGREEMENT") among the REIT,
Prime, The Prime Group, Inc., Primestone Investment Partners L.P. and the other
investors named therein and (b) the Partnership Agreement, (the Partnership
Agreement together with the Registration Rights Agreement collectively, the
"ASSIGNED AGREEMENTS"), including, without limitation, (1) all rights of the
Pledgor to receive moneys due and to become due under or pursuant to the
Assigned Agreements, (2) all rights of the Pledgor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, (3) claims of the Pledgor for damages arising out of or for breach
of or default under the Assigned Agreements, (4) the right of the Pledgor to
terminate the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (5) the right of
the Pledgor to exchange OP Units into REIT Stock, including, without
limitation, all income, cash, dividends or other distributions received
therefrom; and
(v) all proceeds and any replacements of any of the foregoing;
all of the foregoing being herein referred to as the "PLEDGED COLLATERAL."
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
indefeasible payment of all liabilities, obligations and indebtedness of any
and every kind and nature heretofore, now or hereafter owing, arising, due or
payable from the Pledgor to the Lender pursuant to the Credit Agreement, the
Note and all other Loan Documents to which it is a party,
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however evidenced, created, incurred, acquired or owing, whether for principal,
interest, fees, indemnification, expenses or otherwise, whether primary or
secondary, direct or indirect, joint or several, contingent or fixed, or
otherwise, including the expenses of preparing for and selling any and all of
the Pledged Collateral and the reasonable attorneys' fees and legal expenses
incurred in connection therewith by the Lender and including, without
limitation, obligations of performance, now or hereafter given by Pledgor to
the Lender and whether or not evidenced by promissory notes or other evidence
of indebtedness (all such obligations and liabilities being hereinafter
collectively referred to as the "OBLIGATIONS"). The Pledgor and the Lender
hereby agree that they intend the security interest hereby granted to attach
upon the execution of this Agreement.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. (a) Should any of the Pledged
Collateral at any time be represented or evidenced by a certificate or
instrument, such certificates or instruments shall be endorsed, delivered to
and held by or on behalf of the Lender pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Lender. Upon the day after the maturity of the Loan (if the
Obligations have not been paid in full) or upon the occurrence of an Event of
Default under the Credit Agreement and/or the other Loan Documents (any such
event being an "ACCELERATION DEFAULT"), the Lender shall have the right, at any
time in its discretion and without notice to the Pledgor, to transfer to or to
register in the name of the Lender or any of its nominees any or all of the
Pledged Collateral. In addition, the Lender shall have the right at any time to
exchange certificates or instruments representing or evidencing the Pledged
Collateral for certificates or instruments of smaller or larger denominations.
(b) The books and records of Prime shall be marked to reflect the
transfer of the Pledged Collateral and/or the pledge and security interests
granted to the Lender under this Agreement, as applicable.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to the Lender as follows:
(a) The OP Units have been, and the REIT Stock upon the exchange of
the OP Units for the appropriate number of REIT Stock, will be duly authorized
and validly issued, are fully paid and non-assessable and represent, on the
Closing Date, the percentage of the issued limited partnership interests of
Prime as is set forth on SCHEDULE I hereto; and, except as set forth in the
REIT's most current registration statement filed with the SEC and in Section
3.08 of the Credit Agreement, no warrants, subscription rights or options are
outstanding with respect to the Pledged Shares.
(b) Other than as set forth in Section 3.08 of the Credit Agreement,
it is the legal and beneficial owner of the OP Units as indicated on SCHEDULE I
hereto, free and clear of any Liens, adverse claims, security interests,
options or other charges or encumbrances, except for the security interests
created by this Agreement.
(c) The pledge of the Pledged Collateral pursuant to this Agreement,
together with the delivery to the Lender of the certificates evidencing the OP
Units and the filing of the
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appropriate financing statements, create a valid and perfected continuing first
priority Lien and security interest in the Pledged Collateral, securing the
indefeasible payment and performance of the Obligations.
(d) Other than as set forth in Section 3.08 of the Credit Agreement,
no authorization, consent, approval or other action by, and no notice to or
filing with, any Governmental Authority, regulatory body or other Persons is
required to be obtained or made by Pledgor either (i) for the pledge by Pledgor
of the Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgor, or (ii) for the exercise
by the Lender of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Agreement,
subject to applicable state and federal securities laws.
(e) Other than as set forth in Section 3.08 of the Credit Agreement,
there are no restrictions on the transfer of the Pledged Collateral, except
such, if any, as are imposed by operation of law. Other than as set forth in
Section 3.08 of the Credit Agreement, Pledgor has the right to transfer the
Pledged Collateral free of any Liens or encumbrances and without the consent of
the creditors of the Pledgor (other than the Lender), any persons or any
Governmental Authority whatsoever.
(f) Other than as set forth in Section 3.08 of the Credit Agreement,
neither the execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the compliance with or performance of
the terms and conditions of this Agreement by Pledgor is prevented by, limited
by, conflicts with or will result in the breach or violation of or a default
under the terms, conditions or provisions of (i) the by-laws or the certificate
of incorporation (or an equivalent organizational document) of such Pledgor,
Prime or the REIT or any agreement among the partners of Prime, (ii) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement or other agreement or instrument to which
such Pledgor is a party or by which it is bound or to which any of Pledgor's
property or assets is subject, or (iii) any provision of law, any order of any
court or administrative agency or any rule or regulation applicable to such
Pledgor or any of its properties, subject to applicable state and federal
securities laws.
(g) Pledgor has full power, right and legal authority to execute,
deliver and perform its obligations under this Agreement and has taken all
partnership and other actions necessary to authorize the execution and delivery
of, and the performance of its obligations hereunder.
(h) This Agreement constitutes the legal, valid and binding
obligation of Pledgor, enforceable in accordance with its terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization or moratorium
or similar laws affecting the rights of creditors generally.
(i) Any assignee of all or any portion of the Pledged Collateral is
entitled to receive payments with respect thereto without any defense,
counterclaim, setoff, abatement, reduction, recoupment or other claim arising
out of the actions of Pledgor.
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(j) There are no actions, suits or proceedings (whether or not
purportedly on behalf of Pledgor) pending or, to the knowledge of Pledgor,
threatened affecting Pledgor that involve the Pledged Collateral, this
Agreement, the Credit Agreement, the Note or any of the other Loan Documents.
(k) Each Assigned Agreement, a true and complete copy of which has
been furnished to the Lender, has been duly authorized, executed and delivered
by Prime and the REIT and, to Pledgor's best knowledge, the other parties
thereto, has not been amended or otherwise modified, is in full force and
effect and is binding upon and enforceable against all parties thereto in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting the rights
of creditors generally. There exists no default under each Assigned Agreement
by any party thereto. Each of the REIT, Prime, and the Primestone Partners has
executed and delivered to the Lender a consent to the assignment of the
Assigned Agreement pursuant to the Credit Agreement.
SECTION 5. FURTHER ASSURANCES. Pledgor hereby agrees that at any time and
from time to time, at its expense, Pledgor will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
reasonably necessary or desirable and whether or not requested by Lender, or
that the Lender may reasonably request, in order to perfect and protect any
Lien or security interest granted or purported to be granted hereby or to
enable the Lender to exercise and enforce its rights and remedies hereunder,
subject to applicable state and federal securities laws, with respect to any
Pledged Collateral. Pledgor agrees that at any time and from time to time, upon
the written request of the Lender and at the cost and expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver any and all instruments
and documents and take such action as the Lender deems necessary.
SECTION 6. VOTING RIGHTS; DISTRIBUTIONS, ETC. (a) So long as no
Acceleration Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement, the Credit
Agreement or any other Loan Document to which Pledgor is a party;
PROVIDED, HOWEVER, that (a) Pledgor shall not vote for or consent to, any
amendment, supplement, restatement or modification to the Partnership
Agreement without the prior written consent of the Lender and (b) Pledgor
shall not exercise any other voting right without giving the Lender prior
written notice whenever Pledgor shall exercise or refrain from exercising
any such voting or other consensual right if such action would have a
Material Adverse Effect on the value of the Pledged Collateral or any part
thereof.
(ii) Pledgor shall be entitled to receive and retain any and all
distributions, income, dividends and interest paid in respect of the
Pledged Collateral; PROVIDED, HOWEVER, that any and all:
(A) income, dividends and distributions paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral;
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(B) income, dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of contributed capital or capital surplus; and
(C) all amounts paid, payable or otherwise distributed in
respect of redemption of, or in exchange for, any Pledged
Collateral,
shall be forthwith delivered to the Lender to hold as, Pledged Collateral
and shall, if received by Pledgor, be received in trust for the benefit of
the Lender, be segregated from the other property or funds of Pledgor, and
be forthwith delivered to the Lender as Pledged Collateral in the same
form as so received (with all necessary endorsements).
(iii) The Lender shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to
exercise the voting and other rights which it is entitled to exercise
pursuant to clause (i) above and to receive the distributions, income,
dividends, or interest payments which it is authorized to receive and
retain pursuant to clause (ii) above.
(b) Upon the occurrence and during the continuance of an Acceleration
Default:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) hereof and to receive the income, dividends
and interest payments which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) hereof shall cease, and all such
rights shall thereupon become vested in the Lender who shall thereupon
have the sole right to exercise such voting and other consensual rights
and to receive and hold as Pledged Collateral such income, dividends and
interest payments.
(ii) All income, dividends and interest payments which are received
by Pledgor contrary to the provisions of clause (i) of this Section 6(b)
shall be received in trust for the benefit of the Lender, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Lender as Pledged Collateral in the same form as so received
(with all necessary endorsements).
SECTION 7. TRANSFERS AND OTHER LIENS; ADDITIONAL INTERESTS. (a) Pledgor
hereby agrees that it will not (i) sell or otherwise transfer or dispose of, or
grant any interest in or option with respect to, any of the Pledged Collateral,
or (ii) create or permit to exist any Lien, security interest, or other charge
or encumbrance upon or with respect to any of the Pledged Collateral, except for
the security interests under this Agreement or as permitted by Section 3.08 of
the Credit Agreement.
(b) The Pledgor shall at its expense:
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(i) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements in full force and effect, enforce the Assigned Agreements in
accordance with their respective terms; and
(ii) furnish to the Lender promptly upon receipt thereof copies of
all notices, requests and other documents received by the Pledgor under or
pursuant to the Assigned Agreements, and from time to time (A) furnish to
the Lender such information and reports regarding the Assigned Agreements
as the Lender may reasonably request and (B) upon request of the Lender
make to any other party to the Assigned Agreements such demands and
requests for information and reports or as the Pledgor is entitled to make
thereunder.
(c) The Pledgor shall not:
(i) cancel or terminate the Assigned Agreements or consent to or
accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements;
or
(iv) take any other action in connection with the Assigned
Agreements which would impair the value of the interest or rights of the
Pledgor thereunder or which would impair the interest or rights of the
Lender.
SECTION 8. LITIGATION RESPECTING THE PLEDGED COLLATERAL. In the
event any action, suit or other proceeding at law, in equity, in arbitration or
before any court, administrative agency or other authority involving or
affecting the Pledged Collateral becomes known to or is contemplated by the
Pledgor, Pledgor shall give the Lender immediate notice thereof.
SECTION 9. LENDER APPOINTED ATTORNEY-IN-FACT. (a) Pledgor hereby
appoints the Lender (and any officer or agent of the Lender with full power
of substitution and revocation) Pledgor's true and lawful attorney-in-fact,
coupled with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in the
Lender's discretion to (i) if an Acceleration Default occurs and is
continuing, take any action and to execute any instrument which the Lender
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, (A) to receive, endorse and collect all
instruments made payable to Pledgor representing any income, dividend or
other distribution in respect of the Pledged Collateral or any part or
proceeds thereof and to give full discharge for the same; (B) to transfer the
Pledged Collateral, in whole or in part, to the name of the Lender or such
other Person or Persons as the Lender may designate, or to cause the Pledged
Shares to be transferred on the books of Prime to the name of the Lender;
(C) take possession of and endorse any one or more checks, drafts, bills of
exchange, money orders or any other documents received on account of the
Pledged Collateral; (D) collect, sue for and give acquittances for moneys due
on account of the foregoing; withdraw any claims, suits, or proceedings
pertaining to or arising
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out of the foregoing; (E) take any other action contemplated by this Agreement;
and (F) sign, execute, acknowledge, swear to, verify, deliver, file, record and
publish any one or more of the foregoing, and (ii) at any time execute and
record or file on behalf of Pledgor any evidence of a security interest
contemplated by this Agreement and any refilings, continuations or extensions
thereof.
(b) The powers of attorney which shall be granted pursuant to Section 9(a)
hereof and all authority thereby conferred shall be granted and conferred solely
to protect the Lender's interests in the Pledged Collateral and shall not impose
any duty upon the attorney-in-fact to exercise such powers. Such powers of
attorney shall be irrevocable prior to the indefeasible payment and performance
in full of the Obligations and shall not be terminated prior thereto or affected
by any act of the Pledgor or by operation of law, including, but not limited to,
dissolution, liquidation, wind-up, death, disability or incompetency of any
Person, the termination of any trust, or the occurrence of any other event, and
if the Pledgor should become bankrupt, insolvent, or come under the direct
regulation of similar laws which affect the rights of creditors generally or any
other event should occur before the indefeasible payment and performance in full
of the Obligations and termination of the Credit Agreement, the Note and the
other Loan Documents, such attorney-in-fact shall nevertheless be fully
authorized to act under such powers of attorney as if such event had not
occurred and regardless of notice thereof.
SECTION 10. LENDER MAY PERFORM. If Pledgor fails to perform any agreement
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the expenses of the Lender incurred in connection therewith shall
be payable by the Pledgor under Section 13 hereof.
SECTION 11. REASONABLE CARE. The Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Lender accords its own property, it being
understood that the Lender shall not have any responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Lender has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
SECTION 12. REMEDIES UPON ACCELERATION DEFAULT.
(a) If any Acceleration Default shall have occurred and be continuing:
(i) The Lender may notify the obligors or other parties, if any,
interested in any items of Pledged Collateral of the interests of the
Lender therein and of any action proposed to be taken with respect
thereto, and inform any of those parties that all payments otherwise
payable to the Pledgor with respect thereto shall be made to the Lender
until the Loan has been indefeasibly paid in full;
(ii) The Lender may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the
Uniform Commercial Code in effect
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in the State of New York at that time (the "CODE"), and the Lender may
also, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at any of the Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable. Pledgor hereby
agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Lender shall not be obligated to
make any sale of Pledged Collateral regardless of notice of sale having
been given. The Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned;
(iii) Any cash held by the Lender as Pledged Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection
from, or other realization upon all or any part of the Pledged Collateral
may, in the discretion of the Lender, be held by the Lender as collateral
for, and thereafter applied (after payment of any amounts payable to the
Lender pursuant to Section 13 hereof) in whole or in part by the Lender
against, all or any part of the Obligations in such order as the Lender
shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the indefeasible payment in full of all the
Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus; and
(iv) The Lender may otherwise use or deal from time to time with the
Pledged Collateral, in whole or in part, in all respects as if the Lender
were the outright owner thereof.
(b) Except as set forth in Section 12(a)(iii) hereof, the Lender shall
have the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, teletransmitted or hand delivered to the Pledgor at least
five (5) days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Lender shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by and in accordance
with subsection (a) above and shall apply the full proceeds in accordance with
the provisions of this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this Section
12 shall confer on the Lender any rights or privileges that are not permissible
under applicable law.
(e) In connection with the provisions of this Agreement, Pledgor from time
to time shall promptly execute and deliver, or cause to be executed and
delivered, to the Lender such documents and instruments, and shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Lender shall deem necessary or desirable to enable it to exercise any of the
rights with respect to the Pledged Collateral granted to it pursuant to this
Agreement.
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SECTION 13. EXPENSES. The Pledgor will, upon demand, pay to the Lender the
amount of all reasonable out-of-pocket expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the Lender may
incur in connection with (i) the perfection, custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (ii) the exercise or enforcement of any of the rights of the Lender
hereunder, (iii) the failure by the Pledgor to perform or observe any of the
provisions hereof, or (iv) any actual or attempted sale, assignment of rights or
interests, or exchange of, or any enforcement, collection, compromise or
settlement respecting the Pledged Collateral or any other property or money held
hereunder, or (v) any other action taken by the Lender hereunder whether
directly or as attorney-in-fact pursuant to the power of attorney herein
conferred, and all such expenses shall be deemed a part of the Obligations for
all purposes of this Agreement and the Lender may apply the Pledged Collateral
or any other property or money held hereunder to payment of or reimbursement of
itself for such expenses. The Pledgor shall pay all such expenses on demand,
together with interest thereon from the date the expense is paid or incurred by
the Lender at an interest rate equal to that under the Note (computed on the
basis of the actual number of days elapsed over a 360-day year).
SECTION 14. WAIVERS AND AMENDMENTS, ETC. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the Lender
shall be deemed to constitute a waiver of any power, right or remedy hereunder,
nor shall any single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other power, right or remedy. Any waiver or
consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Lender at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its rights
at a later time to enforce any such provision. No notice to or demand on a party
in any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Lender
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Lender be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof." This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 15. NOTICES. Each notice to, and each demand upon, the Pledgor by
the Lender relating to this Agreement and each notice to, and each demand upon,
the Lender by the Pledgor relating to this Agreement, shall specifically refer
to this Agreement, and shall be in writing and shall be conclusively deemed
to have been received and shall be effective except as explicitly noted
hereinabove (i) on the day on which delivered if delivered personally, or
transmitted by telecopier (followed by a mailed written confirmation), (ii) on
the next Business Day if delivered by a nationally recognized overnight courier
(such as Federal Express), or (iii)
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five (5) Business Days after the date on which the same is mailed by certified
United States mail postage prepaid, return receipt requested and shall be
addressed:
(a) in the case of the Pledgor, to:
Primestone Investment Partners L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
Telecopier No.: (312) 917-1511
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Telecopier No.: (312) 558-5700
With a copy to:
BRE/Primestone Investment Management L.L.C.
c/o Blackstone Real Estate Advisors
345 Park Avenue
New York, New York 10154
Attention: Steven Orbuch
Telephone No.: (212) 935-2626
Telecopier No.: (212) 754-8730
(b) in the case of the Lender, to:
Prudential Securities Credit Corporation
One New York Plaza
New York, New York 10292
Attention: Mr. Richard K. Gupta
Telephone No.: (212) 778-5751
Telecopier No.: (212) 778-4586
With copies to:
Prudential Securities Incorporated
One Seaport Plaza
27th Floor
New York, New York 10292
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Attention: Ms. Erika Walters-Engemann
Telecopier No.: (212) 214-7678
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Mr. Geoffrey Bedrosian
Telecopier No.: (212) 778-3194
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Greg Milmoe, Esq.
Telecopier No.: (212) 735-2000
or at such other address as the party giving such notice shall have been advised
of in writing for such purpose by the party to which the same is directed.
SECTION 16. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing perfected and first priority Lien and security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
indefeasible payment in full or performance of the Loan, (ii) be binding upon
Pledgor, its successors and assigns and (iii) inure to the benefit of the Lender
and its successors, transferees and assigns. Upon the indefeasible payment in
full or performance of the Loan, Pledgor shall be entitled to the return at its
out-of-pocket expense, if any, of such of the Pledged Collateral as shall not
have been sold or otherwise applied pursuant to the terms of this Agreement
and/or applicable law.
SECTION 17. SEVERABILITY. In the event that any provision of this
Agreement shall be determined to be superseded, invalid or otherwise
unenforceable pursuant to applicable law, such determination shall not affect
the validity of the remaining provisions of this Agreement, and the remaining
provisions of this Agreement shall be enforced as if the invalid provision were
deleted.
SECTION 18. SURVIVAL OF REPRESENTATIONS, ETC. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Credit Agreement, the Note and the other
Loan Documents have been indefeasibly paid in full. This Agreement shall remain
and continue in full force and effect without regard to any modification,
execution, renewal, amendment or waiver of any provision of any of the Credit
Agreement, the Note or any other Loan Document.
SECTION 19. TERMINATION AND MISCELLANEOUS PROVISIONS. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
indefeasibly paid and satisfied. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors, and
assigns. Section headings used herein are for convenience only and shall not
affect the meaning or construction of any of the provisions
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hereof. This Agreement may be executed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 20. ENTIRE AGREEMENT. This Agreement, the Credit Agreement and the
other Loan Documents contain the entire agreement of the parties and supersedes
all other agreements, understandings and representations, oral or otherwise,
between the parties with respect to the matters contained herein.
SECTION 21. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 22. DISCLOSURE; LIMITATION OF LIABILITY. No claim may be made by
Pledgor or any other Person against the Lender or its affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan Documents, or any
act, omission or event occurring in connection herewith or therewith; and
Pledgor hereby waives, releases and agrees not to sue upon any claim for any and
all special, indirect, consequential, punitive or treble damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/PRIMESTONE, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By:
-------------------------------
Name:
Title:
By: BRE/PRIMESTONE INVESTMENT
MANAGEMENT L.L.C. its general partner
By: BLACKSTONE REAL ESTATE PARTNERS II,
L.P., its Member
By: BLACKSTONE REAL ESTATE
ASSOCIATES II, L.P., its general partner
By: BLACKSTONE REAL ESTATE
MANAGEMENT ASSOCIATES II, L.P.,
its general partner
By: BREA II L.L.C., its general partner
By:
-------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this
Pledge and Security Agreement to be duly executed and delivered as of the date
first above written.
PRIMESTONE INVESTMENT PARTNERS L.P.
By: PG/Primestone, L.L.C.,
its general partner
By:
-------------------------------
Name:
Title:
By: BRE/Primestone Investment Management, L.L.C.,
its general partner
By:
-------------------------------
Name:
Title:
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By:
-------------------------------
Name:
Title:
15
<PAGE>
EXHIBIT D
FORM OF NOTICE OF OPTIONAL PREPAYMENT
Prudential Securities Credit Corporation
New York Plaza
New York, New York 10292
Attention: Mr. Richard K. Gupta
Re: PRIMESTONE INVESTMENT PARTNERS L.P. CREDIT AGREEMENT
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of
November __, 1997 between Primestone Investor Partners L.P., a Delaware limited
partnership (the "BORROWER" ) and Prudential Securities Credit Corporation, a
Delaware corporation (the "CREDIT AGREEMENT"), capitalized terms used herein but
not otherwise defined herein shall have the meanings ascribed to them in the
Credit Agreement.
The undersigned Borrower, by signature of the Authorized Person
below hereby gives you irrevocable notice pursuant to Section 2.05 of the Credit
Agreement that it hereby elects to prepay an aggregate principal amount of
$ of the Loan on [insert date], together with accrued interest and unpaid
fees under the Credit Agreement, if any, to the date of such prepayment on
the amount prepaid.
Very truly yours,
PRIMESTONE INVESTMENT PARTNERS L.P.
By: PG/PRIMESTONE, L.L.C.,
Its general partner
By: THE PRIME GROUP, INC.
Its Administrative Member
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF OPINION OF BORROWER'S COUNSEL
[W&S letterhead]
November __, 1997
PRUDENTIAL SECURITIES CREDIT CORPORATION
One New York Plaza
New York, NY 10292
Ladies and Gentlemen:
We have acted as special counsel to (i) Primestone Investment
Partners L.P., a Delaware limited partnership (the "Borrower"), (ii) Prime Group
Realty Trust, a Maryland real estate investment trust (the "REIT"), (iii)
PG/Primestone, L.P., a Delaware limited liability company ("PG") and (iv) Prime
Group Realty L.P., a Delaware limited partnership (the "Operating Partnership")
in connection with the preparation, execution and delivery of the following
documents, each dated as of the date hereof:
(a) credit Agreement (the "Credit Agreement") between the Borrower and
Prudential Securities Credit Corporation ("Lender");
(b) Note from Borrower to the order of Lender in principal amount of
$40,000,000 (the "Note");
(c) Pledge and Security Agreement between Borrower and Lender (the
"Pledge Agreement");
(d) Consent to Assignment of PG (the "PG Consent");
(e) Consent to Assignment of the REIT; and
(f) Consent to Assignment by the Operating Partnership (the "OP
Consent").
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 2
The documents described in the foregoing clauses (a)-(f) are collectively
referred to herein as the "Loan Documents." Unless otherwise indicated,
capitalized terms used by not defined herein shall have the respective
meanings set forth in the Credit Agreement. This opinion is furnished to you
pursuant to Section 4.01(f) of the Credit Agreement.
In connection with this opinion letter, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Credit Agreement executed by each party thereto;
(ii) each other Loan Document executed by each party thereto; (iii) unfiled
copy of the financing statement (the "Financing Statement"), a copy of which
is attached hereto, naming the Borrower as debtor and the Lender as secured
party; we understand such financing statement will be filed in the Office of
the Secretary of State of the State of Illinois (such office, the "Filing
Office"); and (iv) resolutions adopted by (A) the members of the general
partners of the Borrower for themselves and as general partner of the
Borrower, and (B) the Board of Trustees of the REIT for itself and as general
partner of the Operating Partnership. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such
records of PG, the Borrower, the REIT and the operating Partnership and such
agreements, certificates of public officials, certificates of officers or
representatives of PG, the Borrower, the REIT and the Operating Partnership
and others, and such other agreements, documents, instruments, certificates
and records, and such matters of law, as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures (other than those of the
Borrower, PG, the REIT and the Operating Partnership), the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Borrower, the
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 3
Operating Partnership and PG, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof. As to any facts material to the opinions
expressed herein which we did not independently establish or verify, we have
relied upon oral or written statements and representations of officers and other
representatives of PG, the Borrower, the REIT, the Operating Partnership and
others.
Whenever in our opinions we indicate that the existence or
absence of facts is based on our knowledge or awareness, we are referring to
the current actual knowledge of Winston & Strawn attorneys who have given
substantive attention to matters concerning the Borrower and PG during the
course of our representation of the Borrower and PG in connection with the
transactions contemplated by the Credit Agreement.
Based upon and subject to the foregoing and to the further
qualifications set forth in subsequent portions of this opinion letter, we
are of the opinion that:
(i) the REIT has been duly formed and is validly existing as a
real estate investment trust in good standing under the laws of the
State of Maryland and is duly qualified to transact business as a
foreign business trust and is in good standing under the laws of all
other jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where
the failure to be so qualified does not subject the REIT and the
Subsidiaries (as hereinafter defined) taken as a whole, to a material
liability or disability. The Operating Partnership has been duly
organized and is validly existing as a limited partnership in good
standing under the laws of the State of Delaware and is duly qualified
to transact business as a foreign limited partnership and is in good
standing under the laws of all other jurisdictions where the ownership
or leasing of its properties or the conduct of its business requires
such
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 4
qualification, except where the failure to be so qualified does not
subject the REIT and the Subsidiaries, taken as a whole, to a material
liability or disability. The entities of the REIT identified on EXHIBIT
A hereto are defined collectively as the "Subsidiaries;
(ii) the REIT has the requisite real estate investment trust
power to own or lease its properties and conduct its business described
in the Registration Statement on Form S-11 (Registration No. 333-33547),
as amended through November 10, 1997, and the Operating Partnership has
the requisite partnership power to enter into the Loan Documents to
which it is a party and to perform its obligations thereunder;
(iii) PG has been duly formed and is validly existing as a
limited liability company in good standing under the laws of the State
of Delaware. PG is qualified to do business in the State of Illinois.
(iv) PG and the Operating Partnership each has the requisite
limited liability company or partnership power and authority,
respectively, to execute and deliver the Loan Documents to which it is a
party and to perform its obligations thereunder. The execution and
delivery of the OP Consent and, with respect solely to PG, the PG
Consent, has been duly authorized by all necessary limited partnership
or limited liability company action, respectively, by the Operating
Partnership and PG and the Loan Documents to which PG or the Operating
Partnership is a party have been duly executed and delivered by such
party.
(v) The OP Units have been duly authorized and are validly
issued. The Borrower is the record owner of the OP Units.
(vi) The execution and delivery by PG of the Loan Documents to
which it is a party will not result in (i) any violation of its
Certificate of Formation or its Operating
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 5
Agreement, any Federal or Illinois statute or the Delaware Limited
Liability Company Act, or any rule or regulation issued pursuant to
any Federal or Illinois statute or the Delaware Limited Liability
Company Act, or any order applicable to PG and known to us issued by any
court or governmental agency or body, or (ii) a default under or the
creation of any lien upon any of the property of PG pursuant to the
terms of any agreement or instrument identified in SCHEDULE 1 hereto.
(vii) No consent, approval, authorization, order, filing,
registration or qualification of or with any Federal or Illinois
governmental agency or body or any Delaware governmental agency or body
acting pursuant to the Delaware Limited Liability Company Act is
required for the execution and delivery by PG of the Loan Documents to
which it is a party.
(viii) The execution and delivery by the Borrower of the Loan
Documents to which it is a party will not result in (i) any violation of
its Certificate of Limited Partnership or limited partnership agreement,
any Federal or Illinois statute or the Revised Uniform Limited
Partnership Act of the State of Delaware, or any rule or regulation
issued pursuant to any Federal or Illinois statute or the Revised
Uniform Limited Partnership Act of the State of Delaware, or any order
applicable to the Borrower and known to us issued by any court or
governmental agency or body, or (ii) assuming the waiver executed by
Prudential Securities Incorporated as representative of the Underwriters
is effective to waive any breach of the Lock Up Agreement (as defined on
Schedule 2) a default under or the creation of any lien upon any of the
property of the Borrower (other than as contemplated by the Loan
Documents) pursuant to the terms of any agreement or instrument
identified in SCHEDULE 2 hereto to which our knowledge constitutes the
only material agreements of the Borrower other than the Loan Documents.
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 6
(ix) Assuming that (i) the Uniform Commercial Code as adopted by
the State of Illinois would be the applicable law governing the
perfection of the pledge of the OP Units and Assigned Agreements (as
defined in the Pledge Agreement), (ii) the Borrower's Chief Executive
Office is located in Illinois, (iii) that the OP Units and Assignment
Agreements are not (A) dealt in or traded on a securities exchange or in
securities markets, (B) investment company securities, (C) held in a
securities account and (D) instruments and (iv) the Lender has a valid
and enforceable pledge of and security interest in the OP Units and
Assigned Agreements, then such interest would be perfected by the filing
in the Filing Office.
(x) The Financing Statement in the appropriate form for filing
in the Filing Office.
(xi) The Borrower is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
We are admitted to the practice of law in the state of Illinois and,
except as set forth in the following paragraph, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of Illinois, the
federal laws of the United States of America, the Revised Uniform Limited
Partnership Act of the State of Delaware and the Limited Liability Company Act
of the State of Delaware.
In rendering the opinions set forth in paragraphs (i) and (ii) we
have, with your consent, relied as to matters involving the application of the
laws of the State of Maryland solely on the opinion letter of Miles &
Stockbridge, a Professional Corporation, a copy of which is attached hereto. To
the extent that our opinions expressed herein are based on such opinion letter
of Miles & Stockbridge, such opinions are subject to the limitations,
qualifications and assumptions expressly set forth in such opinion letter of
Miles & Stockbridge as if set forth herein in their entirety.
<PAGE>
Prudential Securities Credit Corporation
November 17, 1997
Page 7
Our opinions set forth in this letter are based upon the facts in
existence and laws in effect on the date hereof and we expressly disclaim any
obligation to update our opinions herein, regardless of whether changes in such
facts or laws come to our attention after the delivery hereof.
This opinion letter is solely for your benefit in connection with
the execution and delivery of the Credit Agreement. This opinion letter may not
be relied upon in any manner by any other person and may not be used,
circulated, quoted, filed with a governmental agency or otherwise referred to
for any other purpose without our express prior written permission.
Very truly yours,
<PAGE>
SCHEDULE 1
1. Limited Liability Company Agreement of PG/Primestone, L.L.C.
<PAGE>
SCHEDULE 2
1. Limited Partnership Agreement of Primestone Investment
Partners, L.P.
2. Registration Rights Agreement by and among Primestone Investment Partners,
L.P., Prime Group Realty Trust and the other investors signatory thereto.
3. Limited Partnership Agreement of Prime Group Realty, L.P.
4. Lock Up Agreement in favor of Prudential Securities Incorporated (the "Lock
Up Agreement").
<PAGE>
EXHIBIT A
SUBSIDIARIES OF PRIME GROUP REALTY TRUST
AND
PRIME GROUP REALTY, L.P.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
State of Jurisdiction
of Incorporation or % Owned (1)
Organization
- -----------------------------------------------------------------------------------
<S> <C> <C>
1990 Algonquin Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
2010 Algonquin Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
555 Huehl Road, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
Libertyville Tech Way, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
3818 Grandville, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
306 Era Drive, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
1301 Ridgeview Drive, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
515 Huehl Road, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
455 Academy Drive, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
801 Technology Way, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
1051 N. Kirk Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
4211 Madison Street, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
200 E. Fullerton, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
350 Randy Road, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
4300 Madison Street, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
370 Carol Lane, L.L.C Delaware 100
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------
State of Jurisdiction
of Incorporation or % Owned (1)
Organization
- -----------------------------------------------------------------------------------
<S> <C> <C>
388 Carol Lane, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
941 Weigel Drive, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
342 Carol Lane, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
343 Carol Lane, L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
371 N. Gary Avenue, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
350 N. Mannheim Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
1600 167th Street, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
1301 E. Tower Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
4343 Commerce Court, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
11039 Gage Avenue, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
11045 Gage Avenue, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
1401 S. Jefferson, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
4100 Madison Street, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
4160 Madison Street, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
550 Kehoe Blvd., L.L.C. Delaware 100
- -----------------------------------------------------------------------------------
280 Shuman Blvd., Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
Prime Columbus Delaware 100
Industrial, L.L.C.
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------
State of Jurisdiction
of Incorporation or % Owned (1)
Organization
- -----------------------------------------------------------------------------------
<S> <C> <C>
1669 Woodfield Road, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
Enterprise Drive, Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
475 Superior Avenue Delaware 100
L.L.C.
- -----------------------------------------------------------------------------------
77 West Wacker Limited Illinois 100
Partnership
- -----------------------------------------------------------------------------------
Nashville Office Tennessee 100
Building I, Ltd.
- -----------------------------------------------------------------------------------
Porfessional Plaza, Tennessee 100
Ltd.
- -----------------------------------------------------------------------------------
Centre Square II, Ltd. Tennessee 100
- -----------------------------------------------------------------------------------
Old Kingston Tennessee 100
Properties, Ltd.
- -----------------------------------------------------------------------------------
Triad Parking Company, Tennessee 100
Ltd.
- -----------------------------------------------------------------------------------
Arlington Heights I, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Arlington Heights II, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Arlington Heights III, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Enterprise Center VII, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Enterprise Center VIII, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Enterprise Center IX, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
Enterprise Center X, Illinois 100
L.P.
- -----------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------
State of Jurisdiction
of Incorporation or % Owned (1)
Organization
- ------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Center I, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
Enterprise Center II, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
Enterprise Center III, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
Enterprise Center IV, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
Enterprise Center V, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
Enterprise Center VI, Illinois 100
L.P.
- ------------------------------------------------------------------------------------
East Chicago Enterprise Illinois 100
Center Limited
Partnership
- -------------------------------------------------------------------------------------
Hammond Enterprise Illinois 100
Center Limited
Partnership
- -------------------------------------------------------------------------------------
Kemper/Prime Industrial Illinois 100
Partners
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 3.02
Consents
None
<PAGE>
Schedule 3.04
Legal Bar
Amended and Restated Agreement of Limited Partnership of Prime Group Realty,
L.P.
<PAGE>
Schedule 3.05
Litigation
None
<PAGE>
Schedule 3.07
Principal Places of Business
Primestone Investment Partners, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
<PAGE>
Schedule 3.08
Capitalization
Borrower Partnership Interests
BRE/Primestone Investment Management LLC - 1% General Partnership Interest
BRE/Primestone Investment LLC - 39% Limited Partnership Interest
PG/Primestone, L.L.C. - 1% General Partnership Interest
PG/Primestone, L.L.C. - 59% Limited Partnership Interest
Prime Percentage Interest of Borrower - 35.5% Limited Partnership Interest
<PAGE>
Schedule 6.07
Permitted Transaction
As set forth in Section 6.5 of the Borrower Partnership Agreement.
<PAGE>
Exhibit 4
LOAN AGREEMENT
BETWEEN
PRIME GROUP VI, L.P.,
an Illinois limited partnership
AND
LASALLE NATIONAL BANK,
a national banking association
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND DETERMINATIONS. . . . . . . . . . . . . . . . . . . . . 1
1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 TIME PERIODS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 LENDER'S DISCRETION. . . . . . . . . . . . . . . . . . . . . . . 7
1.6 BORROWER'S KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . 7
1.7 MARKET PRICE ADJUSTMENTS.. . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 REVOLVING LOAN . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.1 AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.2 PROCEDURE FOR BORROWING. . . . . . . . . . . . . . . . . . . . . 8
2.2 DISBURSEMENT OF LOAN ON CLOSING DATE . . . . . . . . . . . . . . 8
2.3 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.1 INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.2 INTEREST PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.3 INTEREST COMPUTATION . . . . . . . . . . . . . . . . . . . . . . 9
2.3.4 MAXIMUM INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 PRINCIPAL PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5.1 VOLUNTARY PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . 9
2.5.2 MANDATORY PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . 10
2.6 LIBOR OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6.1 OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6.2 NOTICE PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6.3 NOTICE IRREVOCABLE . . . . . . . . . . . . . . . . . . . . . . . 11
2.6.4 FAILURE TO PROVIDE NOTICE OF CONTINUATION. . . . . . . . . . . . 11
2.7 INTEREST PERIODS . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 SPECIAL PROVISIONS GOVERNING LIBOR LOANS . . . . . . . . . . . . 11
2.8.1 DETERMINATION OF INTEREST RATE . . . . . . . . . . . . . . . . . 11
2.8.2 INTEREST RATE UNASCERTAINABLE, INADEQUATE OR UNFAIR. . . . . . . 12
2.9 ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 LIBOR RATE TAXES . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11.1 ADDITIONAL PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 13
2.11.2 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 DEFAULT RATE . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.13 METHOD OF PAYMENT; GOOD FUNDS. . . . . . . . . . . . . . . . . . 13
2.14 DEPOSIT TO BORROWER'S ACCOUNT. . . . . . . . . . . . . . . . . . 13
-i-
<PAGE>
ARTICLE 3
NOTE AND SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4
CONDITIONS OF FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 INITIAL ADVANCE. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 ALL REVOLVER ADVANCES. . . . . . . . . . . . . . . . . . . . . . 16
4.2.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 16
4.2.2 PERFORMANCE; NO DEFAULT. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 16
5.1 BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 PARTNERS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . 16
5.3 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 NECESSARY ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 BINDING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 BORROWER'S SECURITIES. . . . . . . . . . . . . . . . . . . . . . 17
5.7 TITLE TO PROPERTY; LIENS . . . . . . . . . . . . . . . . . . . . 17
5.8 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 17
5.9 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 CONFLICTING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 17
5.11 COMPLIANCE WITH APPLICABLE LAWS. . . . . . . . . . . . . . . . . 18
5.12 APPLICATION OF CERTAIN LAWS AND REGULATIONS. . . . . . . . . . . 18
5.12.1 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . . 18
5.12.2 HOLDING COMPANY ACT. . . . . . . . . . . . . . . . . . . . . . . 18
5.13 MARGIN REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . 18
5.14 NO MISREPRESENTATION . . . . . . . . . . . . . . . . . . . . . . 18
5.15 NO AFFILIATION . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.16 REGISTRATION EFFECTIVE . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 LEGAL EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . 19
6.2 INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION OF BORROWER . . . . . 19
6.3.1 ANNUAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 19
6.3.2 NOTICE OF DEFAULTS; LOSS . . . . . . . . . . . . . . . . . . . . 20
6.3.3 NOTICE OF SUITS, ADVERSE EVENTS. . . . . . . . . . . . . . . . . 20
6.3.4 COVENANT COMPLIANCE CERTIFICATE; BORROWING BASE CERTIFICATE. . . 20
6.3.5 OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 FINANCIAL INFORMATION OF PRIME RETAIL, INC. AND PGRT . . . . . . 21
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6.5 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS . . . . . . . . 21
6.6 GENERAL PARTNER. . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 FINANCIAL STATEMENTS OF GUARANTOR. . . . . . . . . . . . . . . . 22
ARTICLE 7
NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 8
DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 22
8.1.1 DEFAULT IN PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 22
8.1.2 BREACH OF COVENANTS AND CERTAIN OTHER PROVISIONS . . . . . . . . 23
8.1.3 BREACH OF WARRANTY . . . . . . . . . . . . . . . . . . . . . . . 23
8.1.4 ACCELERATION OF ANY INDEBTEDNESS . . . . . . . . . . . . . . . . 23
8.1.5 BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1.6 JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1.7 NON-PERFORMANCE OF GUARANTY, ETC.. . . . . . . . . . . . . . . . 24
8.1.8 INVALIDITY OF PLEDGE AGREEMENT, ETC. . . . . . . . . . . . . . . 24
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS . . . . . . . . . . . . . 25
8.3 REMEDIES ON DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 25
8.3.1 ENFORCEMENT OF SECURITY INTERESTS. . . . . . . . . . . . . . . . 25
8.3.2 OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 APPLICATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . 25
8.4.1 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4.2 BORROWER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 26
8.4.3 SURPLUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 9
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 10
EXPENSES AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 CLOSING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 ATTORNEY'S FEES AND OTHER FEES AND EXPENSES. . . . . . . . . . . 26
10.2.1 FEES AND EXPENSES FOR PREPARATION OF LOAN DOCUMENTS. . . . . . . 26
10.2.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF LOAN
DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3.1 BROKERAGE FEES . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3.2 OPERATION OF COLLATERAL; JOINT VENTURERS . . . . . . . . . . . . 27
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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11.2 SURVIVAL OF LOAN AGREEMENT . . . . . . . . . . . . . . . . . . . 28
11.3 FURTHER ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 TAXES AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.5 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.7 MODIFICATION OF LOAN DOCUMENTS . . . . . . . . . . . . . . . . . 29
11.8 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.9 SALE OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 29
11.10 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 29
11.11 REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . 29
11.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 30
11.13 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.14 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . 30
11.15 WAIVER OF RIGHT TO JURY TRIAL. . . . . . . . . . . . . . . . . . 30
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LOAN AGREEMENT
THIS LOAN AGREEMENT is dated as of December 18, 1998, by and between
PRIME GROUP VI, L.P., an Illinois limited partnership ("Borrower"), and
LASALLE NATIONAL BANK, a national banking association ("Lender").
R E C I T A L S:
A. Borrower desires to obtain a revolving line of credit from
Lender in the maximum principal amount of $25,000,000 (the "Loan") to
refinance certain indebtedness and for working capital purposes for Borrower
and its affiliates. The Loan is to be secured by a lien on certain securities
owned by Borrower and is to be guaranteed by a limited partner of Borrower.
B. Lender is willing to furnish such revolving line of credit
subject to the terms and conditions set forth herein.
NOW, THEREFORE, it is agreed as follows:
ARTICLE 1
DEFINITIONS AND DETERMINATIONS
1.1 DEFINITIONS. As used in this Loan Agreement and in the other
Loan Documents, unless otherwise expressly indicated herein or therein, the
following terms shall have the following meanings (such meanings to be
applicable equally both to the singular and plural terms defined):
ACCOUNTANTS: Ernst & Young LLP or such other independent certified
public accounting firm selected by Borrower and reasonably satisfactory
to Lender.
AIMCO: Apartment Investment and Management Company, a Maryland
corporation that qualifies as a real estate investment trust.
AIMCO SHARES: The common stock, $0.01 par value per share, of
AIMCO.
AVAILABLE BORROWING BASE: the lesser of (i) $25,000,000 and
(ii) 50% of the Fair Market Value of the Collateral.
BORROWER'S OBLIGATIONS: (i) any and all Indebtedness due or to
become due, now existing or howsoever arising of Borrower to Lender
pursuant to the terms of this Loan Agreement or pursuant to any other
Loan Document, and (ii) the performance of the covenants of Borrower
contained in the Loan Documents.
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BORROWER'S SECURITIES: See Section 5.6.
BREAK COSTS: See Section 2.10.
BROOKDALE: Brookdale Living Communities, Inc., a Delaware
corporation.
BROOKDALE SHARES: the shares of common stock, $0.01 par value per
share, of Brookdale.
BUSINESS: the business of directly or indirectly acquiring,
developing, operating, managing and financing real estate or interests
therein, or investing in, or holding securities of, entities engaged in
such business.
BUSINESS DAY: any day other than a Saturday, Sunday or other day
on which banks in Chicago, Illinois, or London, England, are closed.
CLOSING: as defined in Article 9.
CLOSING DATE: as defined in Article 9.
CODE: the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
COLLATERAL: the securities, cash and other property in which
Lender is granted the Security Interests pursuant to the Pledge
Agreement.
COMMITMENT: $25,000,000.
DEFAULT: any event or condition which, with the giving of notice
or the lapse of time, or both, would become an Event of Default.
DEFAULT RATE: 3% plus the Floating Rate applicable from time to
time to the outstanding principal balance of the Loan.
DEFAULT PERIOD: a period of time commencing on the date that an
Event of Default has occurred and ending on the date that such Event of
Default is cured or waived.
EVENT OF DEFAULT: any of the Events of Default set forth in
Section 8.1.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
FAIR MARKET VALUE OF THE COLLATERAL: as of any date the same is
to be calculated, (i) as to the Prime Retail Partnership Units, the
product of the Market Price of Prime Retail,
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Inc. Shares for such date multiplied by the number of Prime Retail
Inc. Shares into which the Prime Retail Partnership Units may be
converted, (ii) as to the Prime Group Realty Partnership Units, the
product of the Market Price of PGRT Shares for such date multiplied by
the number of PGRT Shares into which the Prime Group Realty
Partnership Units may be converted, (iii) as to the Brookdale Shares,
the Market Price of the Brookdale Shares multiplied by the number of
Brookdale Shares, and (iv) as to the AIMCO Shares, the Market Price of
the AIMCO Shares multiplied by the number of AIMCO Shares.
FIXED RATE: for any Interest Period, a fixed interest rate per
annum, which rate shall be equal to the LIBOR Rate applicable to such
Interest Period plus 2.50%.
FLOATING RATE: 1/2% + the Prime Rate in effect from time to time.
The Floating Rate shall change automatically and immediately as and when
the Prime Rate shall change, without notice to Borrower.
GAAP: generally accepted accounting principles as in effect from
time to time, which shall include the official interpretations thereof by
the Financial Accounting Standards Board, consistently applied.
GOOD FUNDS: United States Dollars available to Lender in federal
funds at or before 1:00 p.m. Chicago time on a Business Day.
GOVERNMENTAL BODY: any foreign, federal, state, municipal or
other government, or any department, commission, board, bureau, agency,
public authority or instrumentality thereof or any court or arbitrator.
GUARANTOR: The Prime Group.
GUARANTY: the Continuing Unconditional Guaranty, substantially in
the form of Exhibit A, issued by Guarantor.
INDEBTEDNESS: all liabilities, obligations and reserves,
contingent or otherwise, which, in accordance with GAAP, would be
reflected as a liability on a balance sheet, including, without
duplication: (i) all Indebtedness for Borrowed Money, (ii) all
obligations under conditional sales or other title retention agreements,
(iii) all obligations secured by any Lien upon Property, (iv) all
guaranties and other contingent obligations, including, without
limitation, letters of credit, and (v) all obligations under operating
leases.
INDEBTEDNESS FOR BORROWED MONEY: without duplication, all
Indebtedness (i) in respect of money borrowed, (ii) evidenced by a note,
debenture or other like written obligation to pay money, including,
without limitation, all of Borrower's Obligations,
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(iii) in respect of rent or hire of Property under capitalized leases
or for the deferred purchase price of Property or (iv) in respect of
obligations under conditional sales or other title retention
agreements, and all guaranties of any and all of the foregoing.
INTEREST PERIOD: as defined in Section 2.7.
INTEREST RATE DETERMINATION DATE: the date on which Lender
determines the Fixed Rate applicable to a requested LIBOR Loan or the
continuation thereof, which shall be the second Business Day prior to the
first day of the Interest Period applicable to such LIBOR Loan.
LIBOR LOAN: each portion of the Loan that is bearing interest at
an applicable Fixed Rate.
LIBOR RATE: with respect to any LIBOR Loan for the applicable
Interest Period, the per annum rate of interest equal to the quotient
obtained by dividing (i) the average per annum interest rate at which
deposits in United States dollars are generally offered in the London
Interbank Market at 11:00 a.m. London, England time, on the Interest Rate
Determination Date, for a period equal to such Interest Period and in the
amount of such LIBOR Loan, by (ii) the difference between 100% and any
applicable reserve requirements (rounded upward to the nearest whole
multiple of 1/100th of one percent per annum) including, without
limitation, any applicable maximum reserve requirements for "Eurocurrency
Liabilities" under Regulation D of the Board of Governors of the Federal
Reserve System (or any similar reserves under any successor regulations).
LIBOR RATE TAXES: as defined in Section 2.11.1.
LIEN: any mortgage, pledge, assignment, lien, charge, encumbrance
or security interest of any kind, or the interest of a vendor or lessor
under any conditional sale agreement, capitalized lease, or other title
retention agreement.
LOAN: the revolving loan in the maximum principal amount of
$25,000,000 to be made by Lender from time to time to Borrower in
accordance with the terms set forth in Section 2.2.
LOAN AGREEMENT: this Loan Agreement and any amendments or
supplements hereto.
LOAN DOCUMENTS: (i) Loan Agreement, (ii) Note, (iii) Pledge
Agreement, (iv) Guaranty, (v) appropriate Uniform Commercial Code
financing statements, and (vi) such other instruments and documents as
Lender may require to evidence and perfect the Security Interests granted
pursuant to the Pledge Agreement.
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MARKET PRICE: for any date shall be deemed to be (i) so long as
the Prime Shares, the AIMCO Shares and the Brookdale Shares are quoted on
a national securities exchange or the National Association of Securities
Dealers Automated Quotations ("NASDAQ") National Market System, the
reported closing sales price per share for such security on such date as
reported on such national securities exchange or NASDAQ, or, if there
were no reported sales transactions on that date, the reported closing
sales price per share for such security for the most recent Business Day
(within the previous ten Business Days) on which sales transactions are
reported, or (ii) if there were no reported transactions on a national
securities exchange or on NASDAQ on that date or within the previous ten
Business Days or if the Prime Shares and/or AIMCO Shares and/or Brookdale
Shares are no longer being quoted on a national securities exchange or on
NASDAQ, then as to those securities, zero.
MATERIAL ADVERSE EFFECT: any changes or effects, as the case may
be, that individually or in the aggregate are or can reasonably be
expected to be materially adverse to (i) the ability of Borrower or
Guarantor, or either of them, as the case may be, to fulfill any
covenants or to perform any of their respective obligations under this
Loan Agreement or the other Loan Documents, or (ii) the Lender's rights
to foreclose on the Collateral or convert any of the Partnership Units
into any Prime Shares.
MATURITY DATE: December 31, 2000 or such earlier date on which
the Commitment is reduced to zero or otherwise terminated pursuant to the
terms of this Loan Agreement.
NOTE: the Revolving Note, substantially in the form of Exhibit B,
executed by Borrower to evidence the maximum amount of the Loan.
PARTNERSHIP UNITS: collectively, Prime Retail Partnership Units
and the Prime Group Realty Partnership Units.
PERSON: any individual, firm, corporation, limited liability
company, business enterprise, trust, association, joint venture,
partnership, governmental body or other entity, whether acting in an
individual, fiduciary or other capacity.
PGLP, INC.: PGLP, Inc., a Illinois corporation.
PGRT: Prime Group Realty Trust, a Maryland real estate investment
trust.
PGRT SHARES: shares of common stock, $0.01 par value per share,
of PGRT.
PLEDGE AGREEMENT: the Pledge Agreement, in the form of Exhibit C,
by and between Borrower and Lender.
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PRIME GROUP REALTY OPERATING PARTNERSHIP: Prime Group Realty,
L.P., a Delaware limited partnership.
PRIME GROUP REALTY PARTNERSHIP UNITS: units of partnership
interest in the Prime Group Realty Operating Partnership.
PRIME GROUP REALTY REGISTRATION RIGHTS AGREEMENT: that certain
Registration Rights Agreement, dated November 17, 1997, by and among
PGRT, Prime Group Realty Operating Partnership, Prime Group Limited
Partnership, Primestone Investment Partners, L.P., a Delaware limited
partnership, and the other investors named therein.
PRIME LOAN: each portion of the Loan that is bearing interest at
the Floating Rate.
PRIME RATE: the per annum rate of interest announced or published
publicly from time to time by Lender at its principal place of business
in Chicago, Illinois, as its prime or equivalent rate of interest, which
rate is not necessarily the lowest rate of interest charged by Lender
with respect to commercial loans.
PRIME RETAIL, INC.: Prime Retail, Inc., a Maryland corporation
that has qualified for treatment as a real estate investment trust.
PRIME RETAIL, INC. REGISTRATION STATEMENT: that certain
registration statement number 333-65617, relating to 8,505,472 Prime
Retail Inc. Shares.
PRIME RETAIL, INC. SHARES: shares of common stock, $0.01 par
value per share, of Prime Retail, Inc.
PRIME RETAIL OPERATING PARTNERSHIP.: Prime Retail, L.P., a
Delaware limited partnership.
PRIME RETAIL PARTNERSHIP UNITS: units of partnership interest in
the Prime Retail Operating Partnership.
PRIME RETAIL REGISTRATION RIGHTS AGREEMENT: that certain
Registration Rights Agreement, dated June 15, 1998, by and among Prime
Retail, Inc., Prime Retail, L.P. and the other investors named therein.
PRIME SHARES: collectively, Prime Retail, Inc. Shares and PGRT
Shares.
PRINCIPAL BALANCE: the unpaid principal balance of the Loan
outstanding from time to time.
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PROPERTY: as to any Person, all types of real, personal or mixed
property and all types of tangible or intangible property owned by such
Person.
REVOLVER ADVANCE: any advance of the Loan made in accordance with
the terms set forth in Section 2.1.
SEC: the U.S. Securities and Exchange Commission.
SECURITY INTERESTS: the Liens in the Collateral granted to Lender
pursuant to the Pledge Agreement.
THE PRIME GROUP: The Prime Group, Inc., an Illinois corporation.
1.2 TIME PERIODS. In this Loan Agreement and the other Loan
Documents, in the computation of periods of time from a specified date to a
later specified date (i) the word "from" means "from and including", (ii) the
words "to" and "until" each mean "to, but excluding" and (iii) the words
"through", "end of" and "expiration" each mean "through and including". All
references in this Loan Agreement and the other Loan Documents to "month",
"quarter" or "year" shall be deemed to refer to a calendar month, quarter or
year.
1.3 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed, all accounting determinations hereunder shall be made
and all financial statements required to be delivered pursuant hereto shall be
prepared in accordance with GAAP.
1.4 REFERENCES. All references in this Loan Agreement to "Article",
"Section", "subsection", "subparagraph", "clause" or "Exhibit", unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
1.5 LENDER'S DISCRETION. Whenever the terms "satisfactory to Lender",
"determined by Lender", "acceptable to Lender", "Lender shall elect", "Lender
shall request" or similar terms are used in this Loan Agreement, except as
otherwise specifically provided in this Loan Agreement, such terms shall mean
satisfactory to, at the election of, determined by, acceptable to or requested
by, as applicable, Lender in its sole and absolute discretion.
1.6 BORROWER'S KNOWLEDGE. Any statements, representations or
warranties which are based upon the knowledge of Borrower shall be deemed to
have been limited to the knowledge, made after due inquiry by Michael W.
Reschke, President of PGLP, Inc., the managing general partner of Borrower, and
President, Chairman and Chief Executive Officer of The Prime Group, Inc., and
Mark K. Cynkar, Vice President and Treasurer of PGLP, Inc., the managing general
partner of Borrower and the Senior Vice President and Chief Financial Officer of
The Prime Group, or, if such persons are not then serving Borrower in their
present capacities, their successors., with respect to the matter in question.
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1.7 MARKET PRICE ADJUSTMENTS. In the event of a stock dividend, stock
split or combination or other reduction in the number of issued and outstanding
Brookdale shares, AIMCO shares and/or Prime Shares, as to such affected
securities, any applicable Market Price per share specified in this Loan
Agreement shall be proportionately and appropriately adjusted to reflect such
dividend, split or combination or other reduction.
ARTICLE 2
LOAN AND TERMS OF PAYMENT
2.1 REVOLVING LOAN.
2.1.1 AMOUNT. The Loan is a revolving loan which shall be made
available to Borrower by Lender from time to time on and after the
Closing Date in the maximum amount outstanding at any one time in the
amount of the Commitment; provided, however, that the aggregate principal
amount of the Loan which shall be outstanding hereunder at any time shall
not exceed the Available Borrowing Base. Subject to the limitations set
forth in this Article 2, from the Closing Date through the Maturity Date,
Borrower may reborrow all or any Revolver Advance which is repaid or
prepaid.
2.1.2 PROCEDURE FOR BORROWING. Each Revolver Advance shall be
made on any Business Day by Lender after Borrower has made an irrevocable
written or telephonic request to Lender for a Revolver Advance, provided,
however, if such request is received by Lender after 12:00 p.m., Chicago
time, on a Business Day, such request shall be deemed to have been made
on the next Business Day. If such Revolver Advance is to bear interest
at the Floating Rate, then such Revolver Advance shall be made on the
same Business Day as the date such request is made or deemed to have been
made; if such Revolver Advance is to bear interest at the Fixed Rate in
accordance with the terms of Sections 2.6 and 2.7 below, then such
Revolver Advance shall be made on the third Business Day following the
date such request is made or deemed to have been made. The amount of
such Revolver Advance shall not be less than $100,000, subject to the
additional restrictions set forth in Section 2.1.1 and Section 2.6.1.
Each request for a Revolver Advance shall be deemed a certification by
Borrower that no Default or Event of Default exists or will be created if
the requested Revolver Advance is made. Lender shall not be obligated to
make any Revolver Advance if (i) a Default or Event of Default exists or
will be created if the requested Revolver Advance is made, or (ii) after
making such Revolver Advance, the outstanding aggregate principal amount
of the Loan will exceed the Available Borrowing Base at such time.
2.2 DISBURSEMENT OF LOAN ON CLOSING DATE. Provided (i) no Default or
Event of Default shall be in existence on the Closing Date and (ii) all of the
terms and conditions set forth in Article IV below shall have been satisfied, on
the Closing Date and subject to the provisions
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of Section 2.1.1 above, Lender shall advance to Borrower such amount of the
Loan as Borrower shall request.
2.3 INTEREST. Borrower's Obligations shall bear interest computed and
payable as follows:
2.3.1 INTEREST RATE. The principal balance of the Loan
outstanding from time to time shall bear interest at a per annum rate
equal to the Floating Rate in effect from time to time, subject to the
LIBOR option in Section 2.6.
2.3.2 INTEREST PAYMENTS. Accrued and unpaid interest on the
Principal Balance of the Loan shall be due and payable monthly in arrears
on the first Business Day of each month, commencing February 1, 1999;
provided, however, that accrued and unpaid interest on each LIBOR Loan
shall also be due and payable in arrears on the last day of the Interest
Period applicable to such LIBOR Loan.
2.3.3 INTEREST COMPUTATION. Interest shall be: (a) computed on
the basis of a year consisting of 360 days and (b) payable for the actual
number of days during the period for which interest is being charged.
2.3.4 MAXIMUM INTEREST. Notwithstanding any provision to the
contrary herein contained, Lender shall not collect a rate of interest on
any obligation or liability due and owing by Borrower to Lender in excess
of the maximum contract rate of interest permitted by applicable law.
Lender and Borrower have agreed that the interest laws of the State of
Illinois shall govern the relationship between them, but in the event of
a final adjudication to the contrary, Borrower shall be obligated to pay
to Lender only such interest as then shall be permitted by the laws of
the state found to govern the contract relationship between Lender and
Borrower. All interest found in excess of that rate of interest allowed
and collected by Lender shall be applied to the Principal Balance in such
manner as to prevent the payment and collection of interest in excess of
the rate permitted by applicable law.
2.4 PRINCIPAL PAYMENTS. The outstanding Principal Balance of the Loan
shall be paid in full not later than the Maturity Date.
2.5 PREPAYMENT.
2.5.1 VOLUNTARY PREPAYMENT. All or a portion of the Principal
Balance of the Loan may be prepaid at any time without premium or
penalty, PROVIDED that Borrower shall also pay, with such prepayment, all
Break Costs incurred by Lender, if any. All prepayments of the Loan
pursuant to this subsection 2.5.1 shall be accompanied by the payment of
any accrued and unpaid interest on the portion of the Principal Balance
being
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prepaid to the date on which Lender is in receipt of Good Funds, and
any other sums which are due and payable pursuant to the terms of the
Loan Documents.
2.5.2 MANDATORY PREPAYMENT. If, as of 3:30 p.m., Chicago time, on
any Business Day, the outstanding Principal Balance of the Loan exceeds
the amount of the Available Borrowing Base on such Business Day then, not
later than 3:00 p.m., Chicago time, on the next Business Day, Borrower
shall either (i) repay the amount of such excess without notice or demand
or (ii) pledge to the Lender collateral, cash or cash equivalents
(acceptable to the Lender) in such amount sufficient to eliminate such
excess. Any payment made pursuant to this subsection 2.5.2 shall be
accompanied by accrued interest on the amount paid through the date on
which Lender is in receipt of Good Funds and in the case of LIBOR Loans,
all Break Costs. Such payment shall first be applied to the Floating
Loan and then to the LIBOR Loans.
2.6 LIBOR OPTION.
2.6.1 OPTION. Subject to the provisions of Sections 2.7 and 2.8,
Borrower shall have the option (i) to request that a Revolver Advance be
made at the Fixed Rate rather than the Floating Rate, (ii) to convert at
any time the interest rate charged on all or any part of the Principal
Balance of the Loan from the Floating Rate to a Fixed Rate; or (iii) upon
the expiration of any Interest Period applicable to a LIBOR Loan, to
continue all or any portion of the same as a LIBOR Loan, and the
succeeding Interest Period of such continued LIBOR Loan shall commence on
the expiration date of the Interest Period applicable thereto; PROVIDED,
that no portion of the outstanding Loan may be continued as, or be
converted into, a LIBOR Loan when any Event of Default or Default has
occurred and is continuing. Any Revolver Advance to be made at a Fixed
Rate and any partial conversion of the Loan to a Fixed Rate or
continuation of the Loan at a Fixed Rate under this Section shall be in a
minimum amount of $100,000, and in integral multiples of $100,000 in
excess of that amount.
2.6.2 NOTICE PROCEDURE. If Borrower requests that a Revolver
Advance bear interest at the Fixed Rate or if Borrower desires to convert
all or a portion of the Loan to a LIBOR Loan or to continue all or any
portion of a LIBOR Loan as a LIBOR Loan, Borrower shall notify Lender no
later than 12:00 p.m. (Chicago time) on the third Business Day prior to
the aforementioned request or the proposed conversion or continuation
date. Each notice shall specify (i) the proposed Revolver Advance
disbursement date or the conversion or continuation date (which shall be
a Business Day), as applicable, (ii) the principal amount of the
applicable Revolver Advance or the principal amount of the Loan to be
converted to or continued as a LIBOR Loan, as applicable, and (iii) the
requested Interest Period. In lieu of delivering the above-described
notice, Borrower may give Lender telephonic notice of any proposed LIBOR
Loan or the conversion or continuation of a LIBOR Loan by the time
required under this Section; PROVIDED, that such notice is confirmed in
writing by delivery or fax to Lender of
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such notice in no event later than 4:00 p.m. (Chicago time) on the
date of such telephonic notice.
2.6.3 NOTICE IRREVOCABLE. Notice of any proposed LIBOR Loan or of
conversion to a LIBOR Loan or continuation of a LIBOR Loan (or telephonic
notice in lieu thereof) shall be irrevocable and Borrower shall be bound
in accordance with the terms of such notice.
2.6.4 FAILURE TO PROVIDE NOTICE OF CONTINUATION. If notice of the
continuation of a LIBOR Loan is not delivered by Borrower in a timely
manner, the amount of such LIBOR Loan shall bear interest at the Floating
Rate as of the termination date of the applicable Interest Period and
shall no longer bear interest at the Fixed Rate unless it is thereafter
converted to a new LIBOR Loan in the manner described above.
2.7 INTEREST PERIODS. By giving notice as required hereunder,
Borrower shall have the option, subject to the other provisions of this Section,
to specify a one-, two-, three-, four-, five- or six-month interest period (each
an "Interest Period") during which all or a portion of the Loan shall bear (or,
if already a LIBOR Loan, continue to bear) interest at the LIBOR Rate. The
determination of Interest Periods shall be subject to the following provisions:
(a) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the
immediately preceding Interest Period expires;
(b) If any Interest Period would otherwise expire on a day which
is not a Business Day, the Interest Period shall be extended to expire on
the next succeeding Business Day (unless the next succeeding Business Day
is in the next calendar month, in which event the Interest Period shall
expire on the immediately preceding Business Day);
(c) Borrower may not select an Interest Period which terminates
later than the Maturity Date;
(d) There shall be no more than four (4) Interest Periods with
respect to the Loan in effect at any one time.
2.8 SPECIAL PROVISIONS GOVERNING LIBOR LOANS.
2.8.1 DETERMINATION OF INTEREST RATE. On the Interest Rate
Determination Date, Lender shall determine (which determination shall,
absent manifest error, be presumptively correct) the Fixed Rate that
shall apply to the subject LIBOR Loan and shall promptly give notice
thereof to Borrower. If on any Interest Rate Determination Date Lender
is unable to obtain the applicable LIBOR Rate quotations, Lender shall
give
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Borrower prompt notice thereof and such requested LIBOR Loan shall
automatically become a Prime Loan and shall bear interest at the
Floating Rate.
2.8.2 INTEREST RATE UNASCERTAINABLE, INADEQUATE OR UNFAIR. If,
with respect to any Interest Period, (i) any change occurs in any
applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law or
governmental rule, legislation or order) affecting the interbank
Eurodollar market for such Interest Period, or (ii) other circumstances
affecting the interbank Eurodollar market for such Interest Period
results in the then applicable Fixed Rates not adequately reflecting the
cost to Lender of making or funding the LIBOR Loans, Lender shall give
notice thereof to Borrower, whereupon until Lender has determined that
the circumstances giving rise to such inadequacy no longer exist, (A) the
right of Borrower to elect to have any portion of the Loan bear interest
based upon the Fixed Rate shall be suspended for such Interest Period,
and (B) each outstanding LIBOR Loan shall bear interest at the Floating
Rate commencing on the last day of the then current Interest Period
therefor, notwithstanding any prior election by Borrower to the contrary.
2.9 ILLEGALITY. In the event that on any date Lender shall have
reasonably determined that the making or continuation of any LIBOR Loan has
become unlawful by compliance by Lender in good faith with any law, governmental
rule, regulation or order of any Governmental Body, then Lender shall promptly
give notice to Borrower of that determination. Upon the giving of such notice,
Borrower's right to request of Lender and Lender's obligation to make LIBOR
Loans shall be immediately suspended to the extent specified in such notice, and
if any LIBOR Loans are then outstanding, each such LIBOR Loan shall immediately
become a Prime Loan and shall commence bearing interest at the Floating Rate.
If Lender determines at any time following its giving of the aforementioned
notice that Lender may lawfully make LIBOR Loans of the type(s) referred to in
such notice, Lender shall promptly give notice to Borrower of such
determination, whereupon Borrower's right to request of Lender and Lender's
obligation to make LIBOR Loans of such type shall be restored.
2.10 COMPENSATION. Borrower shall indemnify Lender, within five (5)
Business Days following Borrower's receipt of the written statement described
below, for all losses, expenses and liabilities (including, without limitation,
any loss or expense incurred by reason of liquidation or reemployment of
deposits or other funds acquired by Lender to fund or maintain Lender's LIBOR
Loans to Borrower) which Lender may sustain (i) if such LIBOR Loans are not made
when requested due to Borrower's actions or inactions, (ii) if any prepayment of
any LIBOR Loan occurs for any reason on a date which is not the last day of the
applicable Interest Period, or (iii) as a consequence of any required conversion
of the interest rate applicable to a LIBOR Loan to a Floating Rate, (such
losses, expenses and liabilities being collectively referred to as "Break
Costs"). Lender shall promptly deliver to Borrower a written statement as to
such Break Costs, which statement shall be rebuttably presumed correct. The
maximum amount of any indemnification under this Section 2.10 shall not exceed
the interest which would have been payable for the balance of the applicable
Interest Period for the aforesaid LIBOR Loans.
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2.11 LIBOR RATE TAXES. Borrower agrees that:
2.11.1 ADDITIONAL PAYMENTS. Borrower shall pay, prior to the date
on which penalties attach thereto, all present and future stamp and other
taxes, levies, or costs and charges whatsoever imposed, assessed, levied
or collected on or in respect of the Loan solely as a result of the
interest rate being determined by reference to the LIBOR Rate or any
payments of principal, interest or other amounts made on or in respect of
a Loan made to Borrower when the interest rate is determined by reference
to the LIBOR Rate (all such taxes, levies, costs and charges being herein
collectively called "LIBOR Rate Taxes"); PROVIDED HOWEVER, that LIBOR
Rate Taxes shall not include income or franchise taxes imposed by any
jurisdiction (except that Borrower shall be liable for the payment of the
amount of any additional net income or franchise taxes attributable to
payments made by Borrower pursuant to this Section).
2.11.2 INDEMNITY. Borrower shall indemnify Lender against, and
reimburse Lender within five (5) days after Lender's written demand for,
any LIBOR Rate Taxes paid by Lender. Lender shall provide Borrower with
appropriate receipts for any payments or reimbursements made by Borrower
pursuant to this Section as a result of the Loan.
2.12 DEFAULT RATE. During a Default Period, the Principal Balance
shall bear interest at the Default Rate.
2.13 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made by
Borrower pursuant to the Loan Documents shall be delivered to Lender at 135
South LaSalle Street, Chicago, Illinois 60603, or to such other address as
Lender shall notify Borrower. Payment shall not be deemed to have been received
by Lender until Lender is in receipt of Good Funds.
2.14 DEPOSIT TO BORROWER'S ACCOUNT. Lender may, at its option, deposit
the proceeds of the Loan into a working capital account maintained by Borrower
with Lender and shall have the right to debit such account (or any other account
or deposit maintained or made by Borrower with Lender) from time to time for any
of Borrower's Obligations that are due and payable.
ARTICLE 3
NOTE AND SECURITY
3.1 NOTE. The Loan shall be evidenced by the Note.
3.2 SECURITY. All Borrower's Obligations shall be secured by the
Pledge Agreement.
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ARTICLE 4
CONDITIONS OF FUNDING
Lender's obligation to make any Revolver Advance shall be subject to the
satisfaction of all of the following conditions in a manner, form and substance
reasonably satisfactory to Lender:
4.1 INITIAL ADVANCE. The obligation of the Lender to make the initial
Revolver Advance is, in addition to the conditions precedent specified in
Section 4.2, subject to the following being delivered to Lender, each duly
authorized and executed:
(a) the Loan Documents;
(b) a certificate of the general partner of Borrower,
certifying on the Closing Date:
(i) the certificate of limited partnership of Borrower,
certified by the Secretary of State of the state of organization
of Borrower, as of a date within the month in which the Closing
Date occurs; and
(ii) the agreement of limited partnership of Borrower;
(c) a certificate of the general partner of each of Prime Group
Operating Partnership and Prime Group Realty Operating Partnership,
certifying on the Closing Date:
(i) the certificate of limited partnership of such
partnership, certified by the Secretary of State of the state of
organization of such partnership, as of a date within the month in
which the Closing Date occurs; and
(ii) the agreement of limited partnership of such
partnership;
(d) a certificate of the Secretary or Assistant Secretary of
PGLP, Inc. and The Prime Group, certifying on the Closing Date:
(i) the certificate or articles of incorporation, and all
amendments thereto, of such Person, certified by the Secretary of
State of the state of organization of such Person, as of a date
within the month in which the Closing Date occurs;
(ii) the by-laws, and all amendments thereto, of such
Person;
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(iii) Copies of the resolutions of such Person approving
and authorizing the execution, delivery and performance by such
Person (as to PGLP, Inc., in its own capacity or in its capacity
as managing general partner of Borrower) of the Loan Documents to
be executed or delivered by it (or, as to PGLP, Inc., by Borrower)
hereunder; and
(iv) the names and true signatures of the officers of such
Person authorized to execute, deliver and perform, as applicable,
the Loan Documents to be executed or delivered by it hereunder;
(e) a certificate of existence, as of a date within the month
in which the Closing Date occurs, from the Secretary of State of the
state of organization for each of (i) Borrower, (ii) Prime Retail
Operating Partnership, and (iii) Prime Group Realty Operating
Partnership;
(f) a good standing certificate, as of a date within the month
in which the Closing Date occurs, from the Secretary of State of the
state of incorporation for each of (i) PGLP, Inc. and (ii) The Prime
Group;
(g) opinions of counsel for Borrower and Guarantor, in form and
substance satisfactory to Lender;
(h) a borrowing base certificate (as described in
Section 6.3.4);
(i) all filings of Uniform Commercial Code Financing Statements
and all other recordings and actions necessary to perfect and maintain
the Security Interests as first, valid and perfected liens and security
interests in the Collateral shall have been filed or taken and
confirmation thereof received;
(j) all necessary consents under each of (i) the agreement
of limited partnership for the Prime Retail Operating Partnership and
the Prime Group Realty Operating Partnership (the "Partnership
Agreements"), and (ii) the Prime Group Realty Registration Rights
Agreement and the Prime Retail Registration Rights Agreement approving
(1) the transactions contemplated by the Loan Documents, including,
but not limited to, the pledge of the Partnership Units under the
Pledge Agreement; (2) the exercise of Lender's rights hereunder and
under the Pledge Agreement upon the occurrence of any Event of
Default; (3) the admission of Lender as a limited partner of the Prime
Retail Operating Partnership and the Prime Group Realty Operating
Partnership upon foreclosure of the Collateral; (4) the exchange of
the Prime Retail Partnership Units for Prime Retail, Inc. Shares, (5)
the exchange of the Prime Group Realty Partnership Units for PGRT
Shares, (6) the registration of such PGRT Shares with the SEC as
provided under the Prime Group Realty Registration Rights Agreement,
(7) the registration of the Prime Retail, Inc. Shares with the SEC as
provided under the Prime
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Retail Registration Rights Agreement, and (8) the ability of Lender to
become a party to the Prime Retail, Inc. Registration Rights Agreement;
(k) payment of all amounts for fees and expenses owning to
Lender under this Loan Agreement; and
(l) such other instruments, documents, certificates, consents,
waivers and opinions necessary to consummate the transactions
contemplated in this Loan Agreement and in the other Loan Documents, or
as Lender may reasonably request.
4.2 ALL REVOLVER ADVANCES. The obligation of Lender to make any
Revolver Advance is subject to the following further conditions precedent that:
4.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Borrower and Guarantor, as the case may be, set forth in
this Loan Agreement and the other Loan Documents shall be true and
correct in all material respects as of the date such Revolver Advance is
made, except for any representation or warranty limited by its terms to a
specific date and taking into account any disclosures made in writing
pursuant to the terms of this Loan Agreement.
4.2.2 PERFORMANCE; NO DEFAULT. Borrower shall have performed and
complied with all agreements and conditions contained in the Loan
Documents to be performed by or complied with prior to such Revolver
Advance and no Event of Default of Default then exists.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
5.1 BORROWER. Borrower is a limited partnership duly formed and
validly existing under the laws of the State of Illinois. The Borrower is duly
qualified in each jurisdiction in which the failure to so qualify could have a
Material Adverse Effect on Borrower. The Borrower has full power and authority
to execute and deliver the Loan Documents and to perform its obligations
hereunder and thereunder. The agreement of limited partnership of Borrower, as
amended, a copy of which has been furnished to Lender, is true, correct and
complete.
5.2 PARTNERS OF BORROWER. The managing general partner of Borrower is
PGLP, Inc. and the limited partners of Borrower are Prime Group II, L.P., an
Illinois limited partnership, Prime Group Limited Partnership, an Illinois
limited partnership, The Prime Group, and Prime International, Inc., an Illinois
corporation. PGLP, Inc. is a duly formed corporation, validly
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existing and in good standing in the State of Illinois and qualified to do
business in each jurisdiction in which failure to do so would have a Material
Adverse Effect on PGLP, Inc.
5.3 AUTHORITY. No consent or approval of, or other action by, any
partner, Governmental Body or any other Person, which has not already been
obtained, is required to be obtained by Borrower to authorize, or is required to
be obtained by Borrower in connection with the execution, delivery and
performance of, the Loan Documents, or is required as a condition to the
validity or, subject to the terms of the Partnership Agreements, enforceability
of the Security Interests or any of the Loan Documents.
5.4 NECESSARY ASSETS. Borrower owns all of the assets necessary to
operate and maintain the operations of the Business.
5.5 BINDING AGREEMENTS. This Loan Agreement and the other Loan
Documents, when executed and delivered, will constitute the valid and legally
binding obligations of Borrower, and will be enforceable against Borrower in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
equitable principles.
5.6 BORROWER'S SECURITIES. As of the Closing Date, Borrower owns
3,576,933 Brookdale Shares, 104,632 Prime Retail Partnership Units, 115,000
AIMCO Shares, and 47,525 Prime Group Realty Partnership Units (collectively, the
"Borrower's Securities").
5.7 TITLE TO PROPERTY; LIENS. Borrower shall have good and marketable
title to all of the Collateral free and clear of all Liens. The applicable Loan
Documents create a valid and perfected Lien in the Collateral described therein.
5.8 FINANCIAL STATEMENTS. The financial statements previously
delivered to Lender present fairly the financial condition and the results of
the operations of Borrower and Guarantor as of the dates and for the periods
indicated therein.
5.9 LITIGATION. To the knowledge of Borrower, there are no actions,
suits, arbitration proceedings or claims pending or threatened at law or in
equity or before any Governmental Body which, if adversely determined, could
have a Material Adverse Effect on Borrower or Guarantor. As of the Closing
Date, to the knowledge of Borrower, there are no proceedings pending or
threatened which call into question the validity or enforceability of any of
this Loan Agreement or the other Loan Documents or any of the transactions
contemplated hereby or thereby.
5.10 CONFLICTING AGREEMENTS. Borrower is not in default under any
agreement to which it is a party or by which Borrower or any of its Property is
bound, the effect of which default has resulted in the termination of such
agreement and such termination will have a Material Adverse
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Effect on Borrower. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Body which has not been obtained,
given or made by Borrower is required for the due execution, delivery and
performance by Borrower of any of the Loan Documents. No provision of any
mortgage, indenture, contract or agreement to which Borrower is a party
conflicts with, or requires any consent which has not already been obtained
or is anticipated to be obtained as described above, or in any way would
prevent the execution, delivery or performance of the terms of, any of the
Loan Documents. Neither the execution, delivery, or carrying out of the
terms of the Loan Documents will constitute a default under, or result in the
creation or imposition of, or obligation to create, any Lien upon the
Property of Borrower pursuant to the terms of any such mortgage, indenture,
contract or agreement. Neither the execution and deliver by Borrower of the
Loan Documents, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof will violate any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Borrower, except where such violation could not reasonably be
expected to have a Material Adverse Effect.
5.11 COMPLIANCE WITH APPLICABLE LAWS. Borrower is not in default in
respect of any judgment, order, writ, injunction, decree or decision of any
Governmental Body, which default would have a Material Adverse Effect on
Borrower. Borrower is in compliance in all material respects with all
applicable statutes and regulations of all Governmental Bodies, a violation of
which would have a Material Adverse Effect on Borrower.
5.12 APPLICATION OF CERTAIN LAWS AND REGULATIONS.
5.12.1 INVESTMENT COMPANY ACT. Borrower is not an "investment
company," or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
5.12.2 HOLDING COMPANY ACT. Borrower is not a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended.
5.13 MARGIN REGULATIONS. None of the transactions contemplated by this
Loan Agreement or any of the other Loan Documents, including the use of proceeds
of the Loan, will violate or result in a violation of Section 7 of the Exchange
Act, or any regulations issued pursuant thereto, including, without limitation,
Regulations T, U and X.
5.14 NO MISREPRESENTATION. To Borrower's knowledge, no representation
or warranty contained herein and no certificate, information or report furnished
or to be furnished by Borrower in connection with any of the Loan Documents or
any of the transactions contemplated hereby or thereby contains or will contain
a misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements contained herein or
therein not misleading in the light of the circumstances under which such
statements were made.
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To Borrower's knowledge, there is no fact which has not expressly been
disclosed to Lender in writing, or so far as Borrower reasonably can foresee,
that will have a Material Adverse Effect on Borrower or Guarantor.
5.15 NO AFFILIATION. Borrower and AIMCO are not "affiliates" as
that term is defined in the Securities Act of 1933, as amended.
5.16 REGISTRATION EFFECTIVE. The Prime Retail, Inc. Registration
Statement, with respect to the Prime Retail, Inc. Shares issuable upon
conversion of the Prime Retail Partnership Units, has been declared effective
under the Securities Act of 1933, as amended, and to Borrower's knowledge, no
"stop order" suspending the effectiveness of the Prime Retail, Inc.
Registration Statement has been issued, nor has any proceeding for the
issuance of such an order been initiated or threatened.
ARTICLE 6
AFFIRMATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full,
Borrower agrees:
6.1 LEGAL EXISTENCE; GOOD STANDING. Borrower shall maintain its
existence in its jurisdiction of organization and maintain its qualification
in any jurisdiction in which failure to be so qualified would have a Material
Adverse Effect. The Guarantor shall maintain its existence and remain in
good standing in its jurisdiction of incorporation and in any jurisdiction in
which failure to be so qualified would have a Material Adverse Effect.
6.2 INSPECTION. Borrower will permit representatives of Lender to
visit its offices to examine its books and records and Accountants' reports
relating thereto, and to make copies or extracts therefrom, and to discuss
its business and affairs with its employees, all at reasonable times, upon
reasonable prior notice, and, at all reasonable times and upon reasonable
prior notice, to examine and inspect its Property and to meet and discuss the
business and its affairs with the Accountants.
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION OF BORROWER.
Borrower will maintain a system of accounting in accordance with GAAP and
furnish to Lender:
6.3.1 ANNUAL STATEMENTS. As soon as available and in any event
within 120 days after the close of each fiscal year, a copy of (a) the
balance sheet of Borrower as of the end of such year, and (b) the
statements of income and cash flow of Borrower for such year, setting
forth in each case (beginning with the 1998 financial statements) in
comparative form the corresponding figures for the preceding year, all in
reasonable detail, and in each case audited by the Accountants. Such
annual statements shall be
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accompanied by a report of the Accountants which states that in making
the audit of the financial statements of Borrower, nothing of a
financial or accounting nature came to the attention of the
Accountants that caused them to believe that Borrower was not in
compliance with the terms, covenants, provisions, or conditions of any
of the Loan Documents or that there shall have occurred a condition or
event that constitutes an Event of Default (or, if applicable,
specifying in such certificate the nature and status of any instances
of non-compliance or Events of Default), and which is otherwise in a
form reasonably satisfactory to Lender.
6.3.2 NOTICE OF DEFAULTS; LOSS. Immediate written notice if: (i)
any Indebtedness aggregating in excess of $3,000,000 of Borrower or
Guarantor is declared or shall become due and payable prior to its
declared or stated maturity (other than regularly scheduled payments), or
called and not paid when due, (ii) the holder of any note, or other
evidence of Indebtedness, certificate or security evidencing any such
Indebtedness aggregating in excess of $3,000,000 of Borrower or Guarantor
has the right to declare such Indebtedness due and payable prior to its
stated maturity, (iii) there shall occur and be continuing a Default or
Event of Default, accompanied by a certified statement of an authorized
officer of PGLP, Inc., as managing general partner of Borrower, or an
authorized officer of Guarantor setting forth what action Borrower or
Guarantor, as the case may be, proposes to take in respect thereof, or
(iv) any event shall occur causing loss or depreciation in the value of
assets having a Material Adverse Effect upon the business or operations
of Borrower or Guarantor, including the amount or the estimated amount of
any such loss or depreciation or adverse effect.
6.3.3 NOTICE OF SUITS, ADVERSE EVENTS. Prompt written notice of:
(i) any citation, summons, subpoena, order to show cause or other order
naming Borrower or Guarantor a party to any proceeding involving in
excess of $3,000,000 and include with such notice a copy of such
citation, summons, subpoena, order to show cause or other order, (ii) any
lapse or other termination of any material license, permit, franchise,
agreement or other authorization issued to Borrower or Guarantor by any
Governmental Body or any other Person, (iii) any refusal by any
Governmental Body or any other Person to renew or extend any such
material license, permit, franchise, agreement or other authorization and
(iv) any dispute between Borrower or Guarantor and any Governmental Body
or any other Person, which lapse, termination, refusal or dispute
referred to in clauses (ii) or (iii) above or in this clause (iv) may
have a material adverse effect on the financial condition, operations,
business, prospects or Property of Borrower or Guarantor.
6.3.4 COVENANT COMPLIANCE CERTIFICATE; BORROWING BASE
CERTIFICATE. On or before the 20th day after the end of each calendar
quarter, a compliance certificate in a form reasonably satisfactory to
Lender stating whether Borrower is in compliance with the terms,
covenants, provisions and conditions of the Loan Documents and
specifying any condition or event that constitutes an Event of Default
set forth in Article 8 hereof,
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together with any supporting documentation reasonably requested by
Lender. On the date of each requested Revolver Advance, and on or
before the 5th day after the end of each month, a borrowing base
certificate in a form reasonably satisfactory to Lender setting forth
the calculation of the Available Borrowing Base as of the close of
business of the business day immediately preceding the date of such
Revolver Advance or as of the end of the preceding month, as
applicable.
6.3.5 OTHER INFORMATION. Such other information and reports
relating to the past, present or future financial condition, operations,
plans and projections of Borrower as Lender reasonably may request from
time to time.
6.4 FINANCIAL INFORMATION OF PRIME RETAIL, INC. AND PGRT. Borrower
shall furnish to the Bank:
6.4.1 as soon as available, but in no event more than five (5)
Business Days after request by Lender, a copy of each quarterly report on
Form 10-Q filed by Prime Retail, Inc., PGRT, Brookdale and AIMCO with the
SEC;
6.4.2 as soon as available, but in no event more than five (5)
Business Days after request by Lender, a copy of any annual report on
Form 10-K filed by Prime Retail, Inc., PGRT, Brookdale or AIMCO with the
SEC.
6.4.3 as soon as available, but in any event no more than five
(5) Business Days after request by Lender, any other report filed by
Prime Retail, Inc., PGRT, Brookdale or AIMCO with the SEC under
Section 13 of the Exchange Act, and any definitive proxy material filed
by such Person with the SEC under Section 14 of the Exchange Act.
6.5 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS. Borrower will
file, all on a timely basis, all reports, applications, documents, instruments
and information required to be filed pursuant to all rules, regulations or
requests of any Governmental Body or other Person having jurisdiction over the
operation of Borrower, including, but not limited to, such of the Loan Documents
as may be required to be filed with any such Governmental Body or other Person
pursuant to applicable rules and regulations promulgated by such Governmental
Body or other Person, unless the failure to file would not reasonably be
expected to have a Material Adverse Effect.
6.6 GENERAL PARTNER. PGLP, Inc. or a "Prime Group Entity" at all times
shall remain the general partner of Borrower. As used herein, a "Prime Group
Entity" shall mean (i) PGLP, Inc., (ii) The Prime Group, (iii) any person in
which The Prime Group or PGLP, Inc. has a beneficial ownership of 51% or more of
the voting interests in such person, (iv) any entity controlling, controlled by
or under common control with, The Prime Group or PGLP, Inc., or (v) any entity
in which The Prime Group or PGLP, Inc., or officers, directors and employees of
The Prime Group or PGLP, Inc. own, directly or indirectly, a controlling
interest.
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6.7 FINANCIAL STATEMENTS OF GUARANTOR. Borrower will cause Guarantor
to furnish to Lender as soon as available and in any event within 180 days after
the close of each fiscal year, a copy of Guarantor's (a) balance sheet as of the
end of such year, and (b) statements of income and cash flow for such year,
setting forth in each case (beginning with the 1998 financial statements) in
comparative form the corresponding figures for the preceding year, all in
reasonable detail, and in each case audited by the Accountants.
ARTICLE 7
NEGATIVE COVENANTS
Borrower shall not:
7.1 Engage in any business other than the Business or otherwise
materially change the nature of the Business of Borrower as it exists on the
Closing Date.
7.2 Amend, modify or waive any term or provision of Borrower's
certificate of limited partnership or agreement of limited partnership in a
manner that would have a Material Adverse Effect.
7.3 Sell, lease, assign, transfer, pledge, hypothecate or otherwise
dispose of or grant any security interest in any of Borrower's Securities
pledged as Collateral, except as permitted by Section 5.7.
7.4 Consent to any alteration or modification of any provision
affecting the Partnership Units, which alteration or modification would have a
Material Adverse Effect.
ARTICLE 8
DEFAULT AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default under the Loan Documents:
8.1.1 DEFAULT IN PAYMENT. If Borrower shall fail to pay all or
any portion of Borrower's Obligations on or before the fifth Business Day
following the date on which the same become due and payable.
22
<PAGE>
8.1.2 BREACH OF COVENANTS AND CERTAIN OTHER PROVISIONS.
(a) If Borrower shall fail to observe or perform any covenant
or agreement made by Borrower contained in Article VI (except for
Sections 6.1 and 6.5) or in Article VII.
(b) If Borrower shall fail to observe or perform any covenant
or agreement (other than those referred to in subparagraph (a) above)
made by Borrower in any of the Loan Documents, and such failure shall
continue for a period of 30 days after the earlier of (i) the written
notice of such failure is given to Borrower by Lender or (ii) the date
Borrower shall have actual knowledge of such failure; PROVIDED, HOWEVER,
that if such default is of a nature that it cannot be cured within thirty
(30) days and Borrower commences and diligently proceeds to cure such
default, such cure period shall be extended for such period of time as
required to cure such default but in no event more than thirty (30)
additional days.
(c) Any alterations, modifications or amendments are made to
the certificate or articles of incorporation of either Prime Retail, Inc.
or PGRT or to any other agreement that would adversely alter in any
material manner the rights afforded to holders of Collateral consisting
of (i) Prime Retail Partnership Units in the Second Amended and Restated
Agreement of Limited Partnership of Prime Retail, L.P., as further
amended, or (ii) Prime Group Realty Partnership Units in the Amended and
Restated Agreement of Limited Partnership of Prime Group Realty, L.P., as
further amended, to convert such Partnership Units into Prime Shares.
8.1.3 BREACH OF WARRANTY. Any representation or warranty made by
Borrower or Guarantor in or pursuant to any of the Loan Documents to
which Borrower or Guarantor is a party or in any instrument or document
furnished in compliance with the Loan Documents shall prove to be false
or misleading in any material respect as of the date on which made.
8.1.4 ACCELERATION OF ANY INDEBTEDNESS. If Borrower or Guarantor
at any time shall be in default (as principal or guarantor or other
surety) in the payment of any principal of or premium or interest on any
Indebtedness for Borrowed Money in excess of $3,000,000 (other than
Borrower's Obligations) and in each case such default has resulted in an
acceleration of the maturity of such Indebtedness for Borrowed Money
which is not paid promptly upon acceleration.
8.1.5 BANKRUPTCY.
(a) If Borrower or Guarantor or, to the extent, and for so long
as, the shares or limited partnership units of such Person (or, in the
case of Prime Retail, Inc. and PGRT, shares of limited partnership units
that are exchangeable into shares of such Person) have
23
<PAGE>
been pledged to Lender as security for the Loan, the Prime Retail
Operating Partnership, the Prime Group Realty Operating Partnership,
Prime Retail, Inc., PGRT, Brookdale or AIMCO shall (i) generally not
be paying, or admit in writing its inability to pay, its debts as they
become due, (ii) file, or consent, by answer or otherwise, to the
filing against any of such entities, of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy or
insolvency under the laws of any jurisdiction, (iii) make an
assignment for the benefit of creditors, (iv) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers for, or for any substantial part of the Property owned
by any of such entities, (v) be adjudicated insolvent, or (vi) take a
corporate action to authorize any of the foregoing.
(b) If any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of Borrower or Guarantor or,
to the extent, and for so long as, the shares or limited partnership
units of such Person (or, in the case of Prime Retail, Inc. and PGRT,
shares of limited partnership units that are exchangeable into shares of
such Person) have been pledged to Lender as security for the Loan, the
Prime Retail Operating Partnership, the Prime Group Realty Operating
Partnership, Prime Retail, Inc., PGRT, Brookdale or AIMCO, a custodian,
receiver, trustee or other officer with similar powers with respect to
any of such Persons, or with respect to any substantial part of the
Property belonging to Borrower or such Person, or if an order for relief
shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of any of such entities, or if any petition for
any such relief shall be filed against any of such entities and such
order or petition shall not be dismissed within 90 days.
8.1.6 JUDGMENTS. If there shall exist final judgments against
Borrower or Guarantor which shall have been outstanding for any period
of 30 days or more from the date of the entry thereof and shall not have
been discharged in full or stayed pending appeal and if the aggregate
amount thereof exceeds $3,000,000.
8.1.7 NON-PERFORMANCE OF GUARANTY, ETC. Guarantor shall fail
(subject to any applicable notice, cure or grace period) to comply with
or to perform in any material respect any covenant set forth in the
Guaranty, Guarantor (or any Person by, through or on behalf of Guarantor)
shall contest in any manner the validity, binding nature or
enforceability of the Guaranty, or the Guaranty shall cease to be in full
force and effect.
8.1.8 INVALIDITY OF PLEDGE AGREEMENT, ETC. The Pledge Agreement
shall cease to be in full force and effect, any party thereto (other than
Lender) shall fail (subject to any applicable notice, cure or grace
period) to comply with or to perform in any material respect any
applicable provision of the Pledge Agreement promptly upon request of the
Lender (or, if such noncompliance or nonperformance would result in the
non-perfection of a material portion of the Collateral granted to the
Lender under the Pledge Agreement,
24
<PAGE>
at any time regardless of whether the Lender has made any such
request), or any Person (other than the Lender) party to the Pledge
Agreement (or any Person by, through or on behalf of such Person party
thereto) shall contest in any manner the validity, binding nature of
enforceability of the Pledge Agreement, as applicable.
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS. Upon the occurrence of:
(a) any Event of Default described in clauses (ii), (iii), (iv)
and (v) of subsection 8.1.5(a) or described in Section 8.1.5(b), all of
Borrower's Obligations at that time outstanding automatically shall
mature and become due and payable and Borrower's right to request
additional Revolver Advances shall immediately terminate, or
(b) any other Event of Default, Lender, at any time, (unless
such Event of Default shall have been cured by Borrower or waived by
Lender) at its option, may declare all of Borrower's Obligations due and
payable, whereupon Borrower's Obligations immediately shall mature and
become due and payable and Borrower's right to request additional
Revolver Advances shall immediately terminate,
all without presentment, demand, protest, or notice, all of which hereby are
waived.
8.3 REMEDIES ON DEFAULT. If any of Borrower's Obligations have been
accelerated pursuant to Section 8.2, Lender, at its option, may:
8.3.1 ENFORCEMENT OF SECURITY INTERESTS. Enforce its rights and
remedies under the Loan Documents in accordance with their respective
terms.
8.3.2 OTHER REMEDIES. Enforce any of the rights or remedies
granted to Lender under any other Loan Document and any other rights or
remedies accorded to Lender at equity or law, by virtue of statute or
otherwise.
8.4 APPLICATION OF FUNDS. Any funds received by Lender pursuant to
the exercise of any rights accorded to Lender pursuant to, or by the operation
of any of the terms of, any of the Loan Documents, including, without
limitation, insurance proceeds, condemnation proceeds or proceeds from the sale
of Collateral, shall be applied by Lender in the following order of priority:
8.4.1 EXPENSES. First, to the payment of (i) all fees and
expenses, including, without limitation, reasonable attorney's fees,
court costs, fees of appraisers, title charges, costs of maintaining and
preserving the Collateral, costs of sale, and all other costs incurred by
the Lender in exercising any rights accorded to the Lender pursuant to
the Loan Documents or by applicable law and (ii) all Liens superior to
the Liens of Lender, except such superior Liens subject to which any sale
of the Collateral may have been made;
25
<PAGE>
8.4.2 BORROWER'S OBLIGATIONS. Next to the payment of Borrower's
Obligations in such order as Lender may determine; and
8.4.3 SURPLUS. Any surplus, to the Person or Persons entitled
thereto.
ARTICLE 9
CLOSING
The closing of the Loan (the "Closing") shall be on the date hereof (the
"Closing Date"), and the Closing shall take place on such date provided all
conditions for the Closing as set forth in this Loan Agreement have been
satisfied. The Closing shall occur at such place as the parties hereto shall
agree.
ARTICLE 10
EXPENSES AND INDEMNITY
10.1 CLOSING FEE. The Borrower shall pay to Lender on the Closing Date
hereof the sum of $250,000, which may be paid out of Borrower's initial
borrowing under the Loan.
10.2 ATTORNEY'S FEES AND OTHER FEES AND EXPENSES. Whether or not any
of the transactions contemplated by this Loan Agreement shall be consummated,
Borrower agrees to pay to Lender on demand all fees paid or expenses incurred by
Lender in connection with the transactions contemplated hereby and in connection
with any amendments, modifications or waivers (whether or not the same become
effective) under or in respect of any of the Loan Documents, including, without
limitation:
10.2.1 FEES AND EXPENSES FOR PREPARATION OF LOAN DOCUMENTS. All
reasonable fees, expenses and disbursements (including without
limitation, charges for required lien searches, reproduction of
documents, long distance telephone calls and overnight express carriers)
of counsel retained by Lender in connection with the preparation and
negotiation of any of the Loan Documents or any amendments, modifications
or waivers hereto or thereto (whether or not the same become effective).
10.2.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF
LOAN DOCUMENTS. Any reasonable attorneys' fees and expenses or other
costs or expenses incurred by Lender in connection with the enforcement
or collection against Borrower or Guarantor of any provision of any of
the Loan Documents, and in connection with or arising out of any
litigation, investigation or proceeding instituted by any Governmental
Body or any other Person with respect to any of the Loan Documents,
whether or not suit is instituted, including, but not limited to, such
costs or expenses arising from the
26
<PAGE>
enforcement or collection against Borrower, of any provision of any of
the Loan Documents in any state or federal bankruptcy or
reorganization proceeding.
10.3 INDEMNITY. Borrower hereby agrees to indemnify and save Lender
harmless from the following:
10.3.1 BROKERAGE FEES. The fees, if any, of brokers and finders
incurred by Borrower.
10.3.2 OPERATION OF COLLATERAL; JOINT VENTURERS. Any loss, cost,
liability, damage or expense (including reasonable attorneys' fees and
expenses) incurred in connection with the ownership, operation or
maintenance of the Collateral, the construction of Lender and Borrower as
having the relationship of joint venturers or partners or the
determination that Lender or Borrower has acted as agent for the other.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. Any notices, communications and waivers under this Loan
Agreement shall be in writing and shall be (i) delivered in person, (ii) mailed,
postage prepaid, either by registered or certified mail, return receipt
requested, (iii) by overnight express carrier, or (iv) by facsimile
transmission, addressed in each case as follows:
To Lender: LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attn: John C. Hein
Facsimile No.: (312)904-6691
With copy to: Schwartz, Cooper, Greenberger & Krauss
180 North LaSalle Street, Suite 2700
Chicago, Illinois 60601
Attn: Robert A. Smoller, Esq.
Facsimile No.: (312) 782-8416
27
<PAGE>
To Borrower: Prime Group VI, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900 (Suite 4200 after
February 1, 1999)
Chicago, Illinois 60601
Attn: Michael W. Reschke
Facsimile No.: (312)917-1511
With copies to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg, Esq.
Facsimile No.: (312)558-5700
And to: The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attn: Robert J. Rudnik, Esq.
Facsimile No.: (312)917-8442
or to any other address as to any of the parties hereto, as such party shall
designate in a written notice to the other party hereto. All notices sent
pursuant to the terms of this Section shall be deemed received (i) if personally
delivered, then on the date of delivery, (ii) if sent by overnight, express
carrier, then on the next federal banking day immediately following the day
sent, (iii) if sent by registered or certified mail, then on the earlier of the
third federal banking day following the day sent or when actually received, or
(iv) if sent by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received.
11.2 SURVIVAL OF LOAN AGREEMENT. All covenants, agreements,
representations and warranties made in this Loan Agreement and in the
certificates delivered pursuant hereto shall survive the making by Lender of the
Loan and the execution and delivery to Lender of the Note and of all other Loan
Documents and shall continue in full force and effect so long as any of
Borrower's Obligations remain outstanding, unperformed or unpaid.
11.3 FURTHER ASSURANCE. From time to time, Borrower shall execute and
deliver to Lender such additional documents as Lender may require to carry out
the purposes of the Loan Documents and to protect Lender's rights thereunder.
11.4 TAXES AND FEES. Should any tax (other than taxes based upon the
net income of Lender), recording or filing fees become payable in respect of any
of the Loan Documents, or any amendment, modification or supplement thereto,
Borrower agrees to pay the same to Lender
28
<PAGE>
promptly after demand, but in no event after 15 Business Days from the date
of demand, together with any interest or penalties thereon and agrees to hold
Lender harmless with respect thereto.
11.5 SEVERABILITY. In the event that any provision of this Loan
Agreement is deemed to be invalid by reason of the operation of law, or by
reason of the interpretation placed thereon by any administrative agency or any
court, this Loan Agreement shall be construed as not containing such provision,
and the invalidity of such provision shall not affect the validity of any other
provisions hereof, and any and all other provisions hereof which otherwise are
lawful and valid shall remain in full force and effect.
11.6 WAIVER. No delay on the part of Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege hereunder shall preclude other
or further exercise thereof, or be deemed to establish a custom or course of
dealing or performance between the parties hereto, or preclude the exercise of
any other right, power or privilege.
11.7 MODIFICATION OF LOAN DOCUMENTS. No modification or waiver of any
provision of any of the Loan Documents shall be effective unless the same shall
be in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on Borrower in any case shall entitle Borrower to any other or further notice or
demand in the same, similar or other circumstances.
11.8 CAPTIONS. The headings in this Loan Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
11.9 SALE OF INTEREST. Borrower may not sell, assign or transfer
this Loan Agreement or any portion thereof, including, without limitation,
Borrower's right, title, interest, remedies, powers, and/or duties hereunder
or thereunder. Borrower hereby consents to Lender's sale, assignment,
transfer or other disposition of this Loan Agreement or of any portion hereof
or thereof, at any time or times after an Event of Default has occurred,
including, without limitation, Lender's right, title, interest, remedies,
powers, and/or duties hereunder or thereunder. Borrower hereby consents to
Lender's participation of this Loan Agreement at any time prior to an Event
of Default so long as Lender retains at least a 50% participating interest in
this Loan Agreement. Borrower acknowledges and agrees that any and all such
assignees or participants may be provided with information concerning
Borrower, its operations, business and financial condition and this Loan
Agreement which have been or would be provided to Lender.
11.10 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
11.11 REMEDIES CUMULATIVE. All rights and remedies of Lender pursuant
to this Loan Agreement, any other Loan Documents or otherwise, shall be
cumulative and non-exclusive, and
29
<PAGE>
may be exercised singularly or concurrently. One or more successive actions
may be brought against Borrower as often as Lender deems advisable, until all
of Borrower's Obligations are paid and performed in full.
11.12 ENTIRE AGREEMENT. This Loan Agreement and the other Loan
Documents executed prior or pursuant hereto constitute the entire agreement
between the parties hereto with respect to the transactions contemplated
hereby or thereby and supersede any prior agreements, whether written or
oral, relating to the subject matter hereof.
11.13 APPLICABLE LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF
ILLINOIS (OTHER THAN CHOICE OF LAW PROVISIONS), UNLESS OTHERWISE PROVIDED
THEREIN.
11.14 JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LOAN DOCUMENTS SHALL BE LITIGATED IN THE CIRCUIT COURT
OF COOK COUNTY, ILLINOIS, OR THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS OR, IF LENDER INITIATES SUCH ACTION, ANY COURT
IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS
JURISDICTION. BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF
SUCH COURTS. BORROWER WAIVES ANY CLAIM THAT CHICAGO, ILLINOIS OR THE
NORTHERN DISTRICT OF ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH
IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY LENDER,
OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER, OF ANY
ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
11.15 WAIVER OF RIGHT TO JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN
DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE PARTIES AGREE THAT
ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
11.16 NON-RECOURSE. Notwithstanding anything to the contrary
contained herein, Lender agrees that no limited partner, agent, director,
officer or employee of Borrower shall be
30
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personally liable to Lender for the payment of the Loan or performance of any
of Borrower's Obligations or any other obligations hereunder, under the Note
or under any of the other Loan Documents, or with respect to the Loan, and
recourse hereunder, under the Note and under any other Loan Documents
(including, without limitation, with respect to the representations and
warranties contained herein or therein) shall be limited to the Collateral.
It is understood that the preceding sentence shall not (i) in the event of
any malfeasance, such as fraud, misappropriation of funds or intentional
misrepresentation, estop Lender from instituting or prosecuting a legal
action or proceeding or otherwise making a claim against the Person or
Persons committing such malfeasance, or (ii) constitute a waiver, release or
discharge of any of Borrower's Obligations, and the same shall continue until
paid or discharged in full.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
31
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This Loan Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date
first set forth above.
PRIME GROUP VI, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation,
as managing general partner
By: /s/ Robert J. Rudnik
--------------------------
Name: Robert J. Rudnik
--------------------------
Title: Vice President
--------------------------
LASALLE NATIONAL BANK, a national banking
association
By: /s/ John C. Hein
----------------------------
Name: John C. Hein
----------------------------
Title: First VP
----------------------------
<PAGE>
Exhibit 5
ASSIGNMENT AND ASSUMPTION
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Prime Group Limited Partnership, an Illinois
limited partnership .("ASSIGNOR"), does hereby assign, transfer and convey to
Prime Group VI, L.P., an Illinois limited partnership ("ASSIGNEE"), 47,525
common units held as a Limited Partner in Prime Group Realty, L.P., a
Delaware limited partnership (the "COMMON UNITS"), standing in the name of
Assignor with any and all right, title and interest in any property, both
real and personal, to which the Common Units relate, and any other rights,
privileges and benefits appertaining thereto, including, without limitation,
all rights of Assignor in and to any distributions with respect to such
Common Units made after the date hereof. All terms used as defined terms and
not otherwise defined herein shall have the meaning ascribed thereto in the
Amended and Restated Agreement of Limited Partnership of Prime Group Realty,
L.P. dated as of November 17, 1997 (as amended, the "PARTNERSHIP AGREEMENT") .
This Assignment and Assumption is made subject to all of the terms and
conditions of the Partnership Agreement, and Assignee, by execution of this
Assignment and Assumption, agrees to abide by and be bound by all of the terms
and conditions of the Partnership Agreement, as now in effect or hereafter
amended, in the place and stead of Assignor, as such terms and conditions relate
to the Common Units. Assignee hereby accepts the assignment and transfer and
expressly assumes any and all duties, obligations and liabilities arising from
and after the date of this Assignment and Assumption with respect to or in
connection with the Common Units under the Partnership Agreement or otherwise.
Assignor hereby represents and warrants to Assignee that it has full
power under the Partnership Agreement to enter into this Assignment and
Assumption, that this Assignment is being made in compliance with the
Partnership Agreement, that it has good, valid and marketable title to the
Common Units, free and clear of all liens, and that the Common Units have not
otherwise been conveyed, sold, transferred, encumbered, pledged, hypothecated
or assigned. Except as expressly set forth herein, this Assignment and
Assumption is made without representation or warranty.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and
Assumption as of the 18th day of December, 1998.
ASSIGNOR:
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
----------------------------------
Michael W. Reschke
Its: Managing General Partner
ASSIGNEE:
PRIME GROUP VI, L.P.
By: PGLP, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
----------------------------------
Its: President
---------------------------------
<PAGE>
ACKNOWLEDGMENT BY SUBSTITUTED 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 undersigned is an assignee of 47,525 Common Units
formerly owned by Prime Group Limited Partnership, an Illinois limited
partnership ("ASSIGNOR"). The undersigned acknowledges that it is an express
condition of the Partnership Agreement that a Permitted Transferee assume all of
the obligations of the transferor Limited Partner under the Partnership
Agreement with respect to the transferred Common Units.
The undersigned represents, warrants and covenants to the Partnership, the
General Partner and each Limited Partner as follows:
(i) the undersigned has received and reviewed a copy of the
Partnership Agreement;
(ii) the undersigned is a Permitted Transferee pursuant to the terms of
the Partnership Agreement;
(iii) the undersigned desires to become a Substituted Limited Partner in
the Partnership in accordance with the terms of the Partnership
Agreement;
(iv) the undersigned, by execution hereof, accepts and agrees to be
bound by all of the terms and provisions of the Partnership
Agreement, including without limitation the restrictions on
transfer in Article 11;
(v) the undersigned assumes all of the obligations of Assignor
pursuant to the Partnership Agreement with respect to the Common
Units transferred to the undersigned; and
(vi) the Partnership Agreement shall be binding on and enforceable
against the undersigned as a Limited Partner in accordance with
its terms.
<PAGE>
The undersigned has duly executed and delivered this Acknowledgment by
Substituted Limited Partner as of the 18th day of December, 1998.
PRIME GROUP VI, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
By: PGLP, INC.
MANAGING GENERAL PARTNER
BY: /s/ Robert J. Rudnik
---------------------------
ITS: Vice President
---------------------------
By acceptance hereof, Prime Group Realty Trust, as General Partner of the
Partnership, approves and accepts the admittance of Prime Group VI, L.P., an
Illinois limited partnership, as a Limited Partner in Prime Group Realty, L.P.,
having the number of Common Units set forth above.
PRIME GROUP REALTY TRUST
By:
-------------------------------------
Name:
------------------------------
Its:
-------------------------------
Date:
------------------------------
<PAGE>
Exhibit 6
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT"), dated as of December 18,
1998, is by and between PRIME GROUP VI, L.P., an Illinois limited partnership
(the "PLEDGOR"), and LaSalle National Bank (the "PLEDGEE").
W I T N E S S E T H
WHEREAS, the Pledgor and the Pledgee are parties to that certain
Loan Agreement, dated as of December 18, 1998, as it may be amended from time to
time (the "LOAN AGREEMENT"), pursuant to which the Pledgee has agreed to extend
loans and certain other financial accommodations to the Pledgor;
WHEREAS, the Pledgor presently owns 115,000 shares of class A
common stock, $0.01 par value per share ("AIMCO STOCK"), of Apartment
Investment and Management Company, a Maryland corporation that qualifies as a
real estate investment trust ("AIMCO"), 3,576,933 shares of common stock, $0.01
par value per share ("BROOKDALE STOCK"), of Brookdale Living Communities, Inc.,
a Delaware corporation ("BROOKDALE"), 104,632 Common Units of partnership
interest ("PRIME RETAIL PARTNERSHIP UNITS") in Prime Retail, L.P., a Delaware
limited partnership ("PRIME RETAIL OPERATING PARTNERSHIP") and 47,525 Common
Units of partnership interest ("PRIME GROUP REALTY PARTNERSHIP UNITS") in Prime
Group Realty, L.P., a Delaware limited partnership ("PRIME GROUP REALTY
OPERATING PARTNERSHIP"). Collectively, the AIMCO Stock, the Brookdale Stock,
the Prime Retail Partnership Units and the Prime Group Realty Partnership Units
are referred to herein as the "PRIME SECURITIES";
WHEREAS, pursuant to the Third Amended and Restated Agreement of
Limited Partnership of the Prime Retail Operating Partnership dated as of
October 15, 1998 (as amended, modified or restated from time to time, the "PRIME
RETAIL PARTNERSHIP AGREEMENT"), the Prime Retail Partnership Units may be
exchanged one share of Prime Retail Partnership Units for one share of common
stock, par value $0.01 per share ("PRIME RETAIL STOCK"), of Prime Retail, Inc.,
a Maryland corporation that has qualified for treatment as a real estate
investment trust ("PRIME RETAIL, INC.");
WHEREAS, pursuant to the Amended and Restated Agreement of Limited
Partnership of the Prime Group Realty Operating Partnership dated as of November
17, 1998 (as amended, modified or restated from time to time, the "PRIME GROUP
REALTY PARTNERSHIP AGREEMENT"), the Prime Group Realty Partnership Units may be
exchanged one unit of Prime Group Realty Partnership Units for one share of
common stock, par value $0.01 per share ("PRIME GROUP REALTY STOCK"), of Prime
Group Realty Trust, a Maryland corporation that has qualified for treatment as a
real estate investment trust ("PGRT");
<PAGE>
WHEREAS, the Pledgor has agreed to grant the Pledgee a security
interest in the AIMCO Stock and the Brookdale Stock (collectively, the "PLEDGED
SHARES"), and the Prime Retail Partnership Units and the Prime Group Realty
Partnership Units (collectively, the "PLEDGED UNITS"), more fully described on
Schedule I.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the Pledgor hereby
agrees as follows:
1. PLEDGE. The Pledgor hereby pledges to the Pledgee, and
grants to the Pledgee a security interest in, the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares now owned by the Pledgor and the
certificates, if any, representing such Pledged Shares, and all
dividends, cash, securities, instruments, rights and other property from
time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of such Pledged Shares;
(b) the Pledged Units now owned by the Pledgor and the
certificates, if any, representing such Pledged Units, the Pledgor's
interest in the capital, income, profits and distributions of the Prime
Retail Operating Partnership and the Prime Group Realty Operating
Partnership attributable to such Pledged Units, and all other cash,
securities, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of the Pledged Units;
(c) all additional shares of Prime Securities and other
securities acquired by the Pledgor in any manner with respect to the
Pledged Shares and the Pledged Units (including, but not limited to,
Prime Retail Stock for which Prime Retail Partnership Units are
exchanged, and Prime Group Realty Shares for which Prime Group Realty
Partnership Units are exchanged), and the certificates, if any,
representing such additional securities (any such additional securities
shall constitute part of the Pledged Shares or the Pledged Units, as the
case may be, under and as defined in this Agreement), and all dividends,
cash, instruments, subscription warrants, securities and any other rights
and options and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
securities; and
(d) all other property hereafter delivered to the Pledgee in
substitution for, as proceeds of, or in addition to any of the foregoing
and all certificates, instruments and documents representing or
evidencing such property, and all cash, securities, interest, dividends,
rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for or
upon conversion of any or all thereof.
2. SECURITY FOR OBLIGATIONS. The Pledged Collateral secures the
payment of all of the Pledgor's "Borrower's Obligations", as such term is
defined in the Loan Agreement, to the Pledgee,
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whether for principal, interest, fees, expenses or otherwise, and all
obligations of the Pledgor now or hereafter existing under this Agreement (such
Borrower's Obligations under the Loan Agreement and all such obligations of the
Pledgor now or hereafter existing under this Agreement being referred to herein
as the "OBLIGATIONS").
3. DELIVERY OF PLEDGED COLLATERAL.
(a) All certificates, instruments or documents, if any,
representing or evidencing the Pledged Collateral shall be delivered to
and held by or on behalf of the Pledgee pursuant hereto and shall be in
suitable form for transfer by delivery, shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. In the event any or all of the
Pledged Collateral are evidenced by a book entry, Pledgor shall execute
and deliver to Pledgee such documents as are required by Pledgee to
create and perfect a security interest in such uncertificated Pledged
Collateral. In addition, the Pledgee shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger
denominations.
(b) Pledgor shall, and shall cause other appropriate parties
under Section 8-313 and 8-321 of the Uniform Commercial Code as in effect
on the date hereof in the State of Illinois (the "CODE") to, mark it or
their books and records with the numbers and face amounts of all
uncertificated securities evidencing the Pledged Shares and/or the
Pledged Units, as applicable, and all rollovers and replacements therefor
to reflect the security interests granted pursuant to Section 2 hereof.
Pledgor shall provide Pledgee and shall cause other persons to provide
Pledgee with written confirmation of the security interest in such
uncertificated securities. Pledgor shall take, and shall cause all other
necessary persons to take, all action necessary or appropriate to create,
perfect and maintain a first perfected priority lien in such
uncertificated securities in favor of Pledgee. In the event that
subsequent to the date hereof, the Pledged Shares and/or Pledged Units,
as applicable, are evidenced by certificates, Pledgor will promptly
deliver such certificates to Pledgee, together with an assignment duly
endorsed in blank for transfer.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Brookdale Stock and the Pledged Units have been duly
authorized and validly issued and are fully paid and nonassessable. The
Prime Retail Stock to be issued upon the conversion of the Prime Retail
Partnership Units, and the Prime Group Realty Stock to be issued upon the
conversion of the Prime Group Realty Partnership Units, has been duly
authorized and will be, upon conversion, fully paid and nonassessable.
(b) The Pledgor is, or at the time of any future delivery,
pledge, assignment or transfer will be, the legal and beneficial owner of
the Pledged Collateral, free and clear of any lien, security interest,
pledge, warrant, option, purchase agreement, shareholders' agreement,
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restriction, redemption agreement or other charge, encumbrance or
restriction of any nature on the Pledged Collateral (except for the lien
created by this Agreement, the restrictions imposed by the agreements
listed on Schedule II hereto, completed copies of which have been
delivered to Pledgor, and the liens permitted by the Loan Agreement),
with full right to deliver, pledge, assign and transfer the Pledged
Collateral to the Pledgee as Pledged Collateral hereunder.
(c) The Brookdale Stock was acquired and fully paid for by an
affiliate of the Pledgor on ________________, ____ in a transaction
exempt from the registration provisions of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(d) The AIMCO Stock was acquired and fully paid for by an
affiliate of the Pledgor on ________________, ____ in a transaction
exempt from the registration provisions of the Securities Act.
(e) Subject to compliance with the agreements listed on
Schedule II hereto, the Pledged Units can be exchanged at any time at the
rate of one unit of Prime Retail Partnership Unit for one share of Prime
Retail Stock, and one unit of Prime Group Realty Partnership Unit for one
share of Prime Group Realty Stock.
(f) Upon (i) filing of the UCC financing statements, forms of
which are attached hereto as Exhibit A, with the Secretary of State of
Illinois and the Secretary of State of Maryland, (ii) execution and
delivery of the Acknowledgment and Consent, dated as of even date
herewith, among Pledgor, Prime Retail Operating Partnership, Prime
Retail, Inc. and Pledgee, (iii) execution and delivery of the
Acknowledgment and Consent, dated as of even date herewith, among
Pledgor, Prime Group Realty Operating Partnership, PGRT, Prudential
Securities Incorporated and Pledgee, and (iv) possession by Pledgee of
the certificates representing the Pledged Collateral, the pledge of the
Pledged Collateral pursuant to this Agreement will create a valid,
perfected and first security interest in the Pledged Collateral, securing
the payment of the Obligations. All other filings, registrations,
recordings and other actions necessary or desirable to create, perfect
and protect such security interest have been duly taken, and such
security interests are entitled to all of the rights, priorities and
benefits afforded by the Code or other relevant law as enacted in any
relevant jurisdiction which relates to perfected security interests.
(g) Except as otherwise set forth in paragraph (g) above, no
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either
(i) for the pledge by the Pledgor of the Pledged Collateral pursuant to
this Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor, or (ii) for the exercise by the Pledgee of the
voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement (except as
may be required in connection with a disposition of such Pledged
Collateral by laws affecting the offering and sale of securities
generally).
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(h) The Pledgor has full power and authority to enter into this
Agreement and has the right to pledge and grant a security interest in
the Pledged Collateral as provided by this Agreement.
5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver, or cause to be executed and delivered, all certificates, stock
powers, proxies, assignments, instruments and documents; and will take all
further action that may be reasonably necessary or desirable, or that the
Pledgee may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Pledgee to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral and to carry out the provisions and purposes hereof.
6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) Except as set forth below, so long as no Event of Default
(as hereinafter defined):
(i) The Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent
with the terms of this Agreement or the Loan Agreement; PROVIDED,
HOWEVER, that the Pledgor shall not exercise nor shall it refrain
from exercising any such right if such action or inaction could
have a material adverse effect on the value of the Pledged
Collateral or upon the rights of the Pledgee to effectively
realize upon the security afforded by such Pledged Collateral.
(ii) The Pledgor shall be entitled to receive and retain
any and all dividends and interest paid in respect of the Pledged
Shares and all distributions paid in respect of the Pledged Units,
PROVIDED HOWEVER, that any and all
(1) dividends, interest and distributions paid or
payable other than in cash in respect of, and
instruments and other property received, receivable
or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(2) dividends and other distributions paid or payable in
cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or
dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus
resulting from a sale or refinancing of any
property, and
(3) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged
Collateral,
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<PAGE>
shall be Pledged Collateral, shall be forthwith delivered to the
Pledgee to hold as Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Pledgee,
be segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Pledgee as Pledged Collateral in the
same form as so received (with any necessary endorsement).
(b) Except as set forth below, upon the occurrence (and during
the continuance) of an Event of Default (as hereinafter defined):
(i) All rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) (but only after an Event of
Default) and to receive the dividends and interest payments and
distributions which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) shall cease, and all such
rights shall thereupon become vested in the Pledgee which shall
thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral
such dividends and interest payments and distributions;
(ii) All dividends and interest payments and
distributions which are received by the Pledgor contrary to the
provisions of paragraph (i) of this Section 6(b) shall be received
in trust for the benefit of the Pledgee, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over to the
Pledgee as Pledged Collateral in the same form as so received
(with any necessary endorsements); and
(iii) The Pledgor shall execute and deliver (or cause to
be executed and delivered) to the Pledgee all such proxies and
other instruments as the Pledgee may (reasonably) request for the
purpose of enabling the Pledgee to exercise the voting and other
rights which it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends or interest payments or
distribution which it is authorized to receive pursuant to
paragraph (ii) above.
7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. The Pledgor
agrees that it will not (i) sell, assign, transfer, convey, exchange, pledge,
hypothecate or otherwise dispose of, or grant any option, warrant, right,
contract or commitment with respect to, any of the Pledged Collateral without
the prior written consent of the Pledgee, or (ii) create or permit to exist any
lien, security interest, pledge, proxy, purchase arrangement, restriction,
redemption agreements, shareholders' agreement or other charge or encumbrance
upon or with respect to any of the Pledged Collateral, except for the lien
created by this Agreement, restrictions imposed by the agreements listed on
Schedule II hereto and liens permitted by the Loan Agreement.
8. APPLICATION OF PROCEEDS OF SALE OR CASH HELD AS COLLATERAL. All
proceeds from the sale of Pledged Collateral sold pursuant to this Agreement
and/or the cash held as Pledged
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<PAGE>
Collateral hereunder shall be (a) retained by the Pledgee as cash collateral
for the Obligations, or (b) at the election of the Pledgee, applied by the
Pledgee as follows:
FIRST: to payment of the costs and expenses of such sale,
including the out-of-pocket expenses of the Pledgee, including the reasonable
fees and out-of-pocket expenses of counsel employed in connection therewith, and
to the payment of all advances made by the Pledgee for the account of the
Pledgor hereunder, and the payment of all costs and expenses incurred by the
Pledgee in connection with the administration and enforcement of this Agreement,
to the extent that such advances, costs and expenses shall not have been
reimbursed to the Pledgee;
SECOND: to the payment of interest accrued and unpaid, if
any, on any of the Obligations to and including the date of such application and
then to the payment or prepayment of principal of any of the Obligations and
then to the payment of the balance of the Obligations in such order as Pledgee
may determine in its sole discretion; and
THIRD: the balance, if any, of such proceeds shall be paid
to the Pledgor, or its successors or assigns, or as a court of competent
jurisdiction may direct.
9. THE PLEDGEE APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
appoints the Pledgee as the Pledgor's attorney-in-fact, with full authority in
the place and stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time after giving notice to Pledgee in the Pledgee's discretion to
take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, (i) to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same and (ii) to exercise all rights, including
conversion rights, with respect to such Pledged Collateral.
10. THE PLEDGEE MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Pledgee may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Pledgee incurred in
connection therewith shall be payable by the Pledgor under Section 17.
11. REASONABLE CARE. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral;
PROVIDED, HOWEVER, that upon the Pledgor's instruction, the Pledgee shall use
reasonable efforts to take such action as the Pledgor directs the Pledgee to
take with respect to calls, conversions, exchanges, maturities, tenders, rights
against other parties or other similar matters
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<PAGE>
relative to the Pledged Collateral, but failure of the Pledgee to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Pledgee to preserve or protect any rights with
respect to the Pledged Collateral against prior parties, or to do any act with
respect to preservation of the Pledged Collateral not so requested by the
Pledgor, shall be deemed a failure to exercise reasonable care in the custody or
preservation of the Pledged Collateral.
12. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents
to the Pledgee that the Pledgor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends or distributions, reorganization or other exchanges, tender offers
and voting rights), and the Pledgor agrees that the Pledgee shall have no
responsibility or liability for informing the Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto.
13. EVENTS OF DEFAULT; REMEDIES UPON AN EVENT OF DEFAULT.
(a) The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT" by Pledgor under this Agreement:
(i) there occurs (and is continuing) an Event of Default
under and as defined in the Loan Agreement;
(ii) the Pledged Shares and the Pledged Units shall not
be exchangeable for shares of Prime Retail Stock or Prime Group
Realty Stock as set forth in (and subject to the conditions in
Section 4(e) hereof.
(iii) the Pledgor fails to perform or observe any material
term, covenant (after 5 day written notice) or agreement contained
in this Agreement on its part to be performed or observed, or any
representation or warranty made by the Pledgor in this Agreement
shall be untrue or misleading in any material respect as of the
date with respect to which such representation or warranty was
made;
(iv) a notice of lien, levy or assessment is filed or
recorded with respect to all or a substantial part of the Pledged
Collateral, and such lien, levy or assessment is not released,
discharged or removed within thirty (30) days from the date it is
filed or recorded, except for a lien, levy or assessment which
relates to current taxes not yet due and payable or a lien
permitted by the Loan Agreement; and
(v) all or a substantial part of the Pledged Collateral
is attached, seized, subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors.
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(b) If any Event of Default shall have occurred (and be
continuing), the Pledgee shall have, in addition to all other rights
given by law or by this Agreement, the Loan Agreement or otherwise, all
of the rights and remedies with respect to the Pledged Collateral of a
secured party under the Code in effect in the State of Illinois at that
time, and the Pledgee may, without notice and at its option, transfer or
register the Pledged Collateral or any part thereof on the books of the
issuer thereof into the name of the Pledgee or the Pledgee's nominee(s),
with or without any indication that such Pledged Collateral is subject to
the security interest hereunder. In addition, with respect to any
Pledged Collateral which shall then be in or shall thereafter come into
the possession or custody of the Pledgee, the Pledgee may sell or cause
the same to be sold at any broker's board or at public or private sale,
in one or more sales or lots, at such price or prices as the Pledgee may
deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Pledged
Collateral so sold shall thereafter hold the same absolutely, free from
any claim, encumbrance or right of any kind whatsoever, except for
claims, encumbrances or rights that may arise without the knowledge or
consent of the Pledgor. Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on a
recognized market, the Pledgee will give the Pledgor reasonable notice of
the time and place of any public sale thereof, or of the time after which
any private sale or other intended disposition is to be made. Any sale
of the Pledged Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property similar
to the Pledged Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is
mailed to the Pledgor as provided in Section 20 below, at least five (5)
days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted
by law, waived. The Pledgee may, in its own name or in the name of a
designee or nominee, buy any of the Pledged Collateral at any public sale
and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable attorneys' fees and expenses) of,
or incident to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of Pledged
Collateral. In view of the fact that federal and state securities laws
may impose certain restrictions on the method by which a sale of the
Pledged Collateral may be effected after an Event of Default, the Pledgor
agrees that upon the occurrence or existence of any Event of Default, the
Pledgee may, from time to time, attempt to sell all or any part of the
Pledged Collateral by means of a private placement, restricting the
prospective purchasers to those who can make the representations and
agreements required of purchasers of securities in private placements.
In so doing, the Pledgee may solicit offers to buy the Pledged
Collateral, or any part of it, for cash, from a limited number of
investors deemed by the Pledgee in its judgment, to be responsible
parties who might be interested in purchasing the Pledged Collateral, and
if the Pledgee solicits such offers from not less than three (3) such
investors, then the acceptance by the Pledgee of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method
of disposition of the Pledged Collateral.
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In addition, upon the occurrence (and during the continuance) of
an Event of Default, all rights of the Pledgor to exercise the voting and
other rights which it would otherwise be entitled to exercise and to
receive cash dividends and interest payments, shall cease, and all such
rights shall thereupon become vested in the Pledgee as provided in
Section 6.
14. SECURITIES LAWS. Pledgor hereby acknowledges and confirms that
Pledgee may be unable to effect a public sale of any or all of the Pledged
Shares and the Pledged Units by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire any of the
Pledged Shares and Pledged Units for their own respective accounts for
investment and not with the view to the distribution or resale thereof. Pledgor
further acknowledges and confirms that any such private sale may result in
prices or other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner, and the Pledgee shall be under no obligation to take any steps in order
to permit the Pledged Shares and Pledged Units to be sold at a public sale. The
Pledgee shall be under no obligation to delay a sale of any of the Pledged
Shares and Pledged Units for any period of time necessary to permit any issuer
thereof to register such Pledged Shares and Pledged Units for public sale under
the Securities Act or under applicable state securities laws.
15. AUTHORITY OF THE PLEDGEE. The Pledgee shall have and be entitled
to exercise all such powers hereunder as are specifically delegated to the
Pledgee by the terms hereof, together with such powers as are incidental
thereto. The Pledgee may execute any of its duties hereunder by or through
agents or employees. Neither the Pledgee, nor any director, officer, agent or
employee of the Pledgee, shall be liable for any action taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct. The Pledgor hereby agrees to
indemnify and hold harmless the Pledgee and/or any such director, officer, agent
or employee from and against any and all liability incurred by any of them,
hereunder or in connection herewith, unless such liability shall be due to its
or their own gross negligence or willful misconduct.
16. TERMINATION. This Agreement shall terminate after the time when
all the Obligations have been fully paid and performed, at which time the
Pledgee shall reassign and redeliver (or cause to be reassigned and redelivered)
to the Pledgor, or to such person or persons as the Pledgor shall designate,
against receipt, such of the Pledged Collateral (if any) as shall not have been
sold or otherwise applied by the Pledgee pursuant to the terms hereof and shall
still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or warranty by the Pledgee and at the expense of the Pledgor.
17. EXPENSES. The Pledgor agrees to reimburse the Pledgee promptly
after demand for any and all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the Pledgee may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the registration of the Pledged Collateral, (iii)
the
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exercise or enforcement of any of the rights of the Pledgee hereunder, or
(iv) the failure by the Pledgor to perform or observe any of the provisions
hereof.
18. SECURITY INTEREST ABSOLUTE. All rights of the Pledgee and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Loan
Agreement or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from
the Loan Agreement;
(iii) any exchange, surrender, release or non-perfection
of any other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any of the
Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgor
in respect of the Obligations or of this Agreement.
19. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Pledgee, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
20. NOTICES. Any notice required or desired to be served, given or
delivered hereunder shall be in writing (including facsimile transmission), and
shall be deemed to have been validly served, given or delivered upon the earlier
of (a) personal delivery to the address set forth below (b) in the case of
mailed notice, two (2) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or in the
case of notice by Federal Express or other reputable overnight courier service,
one (1) day after delivery to such courier service, and (c) in the case of
facsimile transmission, upon transmission with confirmation of receipt,
addressed to the party to be notified as follows:
If to the Pledgor: Prime Group VI, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900 (Suite 4200 after February 1, 1999)
Attn: Michael W. Reschke
Facsimile Number: (312)917-1511
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With a copies to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg, Esq.
Facsimile Number: (312)558-5700
And to: The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Attn: Robert J. Rudnik, Esq.
Facsimile Number: (312)917-8442
If to the Pledgee: LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60603
Attention: John C. Hein
Facsimile Number: (312) 904-6691
With a copy to: Schwartz, Cooper, Greenberger & Krauss, Chartered
180 North LaSalle Street, Suite 2700
Chicago, Illinois 60601
Attention: Robert A. Smoller, Esq.
Facsimile Number: (312) 782-8416
or to such other address as any of the parties may hereafter designate for
itself by written notice to the other parties in the manner herein prescribed.
21. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) be binding
upon the Pledgor, its successors and assigns, and (ii) inure to the benefit of
the Pledgee and its successors, transferees and assigns.
22. WAIVERS. To the extent permitted by applicable law, the Pledgor
waives presentment and demand for payment of any of the Obligations, protest and
notice of dishonor or default with respect to any of the Obligations, and all
other notices to which the Pledgor might otherwise be entitled, except as
otherwise expressly provided herein or in the Loan Agreement.
23. WAIVER OF JURY TRIAL. The Pledgor and the Pledgee each hereby
waive any right to a trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement or any amendment, instrument, document or
agreement delivered or which may in the future be delivered in connection
herewith or arising from any banking relationship existing in connection with
this Agreement, and agrees that any such action or proceeding shall be tried
before a court and not before a jury.
12
<PAGE>
24. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to conflict of laws
provisions) and decisions of the State of Illinois. Unless otherwise defined
herein, terms defined in Articles 3, 8 and 9 of the Code are used herein as
therein defined. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but, if any provision of this Agreement shall be interpreted in such manner as
to be ineffective or invalid under applicable law, such provisions shall be
ineffective or invalid only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
25. DEFINITIONS. The singular shall include the plural and vice versa
and any gender shall include any other gender as the text shall indicate.
26. SECTION HEADINGS. The section headings herein are for convenience
of reference only, and shall not affect in any way the interpretation of any of
the provisions hereof.
27. NON-RECOURSE. The non-recourse provisions set forth in Section
11.5 of the Loan Agreement are incorporated in this Agreement by reference as if
fully set forth herein.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
13
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Pledgee have each caused this
Pledge Agreement to be duly executed and delivered by its officer, if any,
thereunto duly authorized as of the date first above written.
PRIME GROUP VI, L.P., an Illinois
limited partnership
By: PGLP, Inc., an Illinois
corporation, as managing
general partner
By: /s/ Robert J. Rudnik
--------------------------------
Its: Vice President
-------------------------
LASALLE NATIONAL BANK, a national
banking association
By: /s/ John C. Hein
-------------------------------------
Its: First VP
-------------------------------
<PAGE>
SCHEDULE I
DESCRIPTION OF PLEDGED COLLATERAL
A. PLEDGED SHARES
<TABLE>
<CAPTION>
Issuer Certificate No. Shares
------ --------------- ------
<S> <C> <C>
Brookdale Living Communities, Inc. 3,576,933
Apartment Investment
and Management Company 115,000
</TABLE>
B. PLEDGED UNITS
104,632 units of limited partnership interests in Prime Retail, L.P.,
a Delaware limited partnership, as evidenced by certificate number
____________
47,525 units of limited partnership interests in Prime Group Realty,
L.P., a Delaware limited partnership, as evidenced by certificate number
____________
<PAGE>
SCHEDULE II
OTHER AGREEMENTS
1. Registration Rights Agreement dated as of November 17, 1997
by and among Prime Group Realty Trust, Prime Group Realty,
L.P., Prime Group Limited Partnership, Primestone
Investment Partners L.P. and the other investors named
therein.
2. Registration Rights Agreement dated as of June 15, 1998 by
and among Prime Retail, Inc., Prime Retail, L.P. and the
other investors named therein.
3. Prime Retail Partnership Agreement.
4. Prime Group Realty Partnership Agreement.
5. Lock-Up Agreement, dated November 11, 1997, from Prime Group
Limited Partnership to Prudential Securities Incorporated,
Friedman, Billings, Ramsey & Co., Inc., Smith Barney Inc. and
Morgan Keegan & Company, Inc.
<PAGE>
Exhibit 7
FIRST AMENDMENT TO LOAN DOCUMENTS, CONSENT AND LIMITED RELEASE
THIS FIRST AMENDMENT TO LOAN DOCUMENTS, CONSENT AND LIMITED RELEASE (this
"Amendment") is dated as of January 29, 1999 and is by and between Prime Group
VI, L.P., an Illinois limited partnership (the "Borrower"), and LaSalle National
Bank (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into that certain Loan
Agreement, dated as of December 18, 1998 (as amended, restated, modified or
supplemented and in effect from time to time, the "Loan Agreement"), pursuant to
which the Lender extended certain credit facilities to Borrower (all such
extensions of credit collectively referred to herein as the "Loans"), upon the
terms and subject to the conditions set forth therein (capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Loan Agreement); and
WHEREAS, as security for the Loans, Borrower executed and delivered that
certain Pledge Agreement to the Lender, dated as of December 18, 1998 (as
amended, restated, modified or supplemented and in effect from time to time, the
"Pledge Agreement"); and
WHEREAS, Borrower has requested that the Lender release the AIMCO Shares
pledged as Collateral under the Pledge Agreement and consent to Borrower (i)
selling the pledged AIMCO Shares and (ii) using the proceeds of the AIMCO Sale
to purchase 256,572 Prime Group Realty Partnership Units (the "Additional
Partnership Units") to be pledged to Lender in substitution for the pledged
AIMCO Shares; and
WHEREAS, the Lender is willing to release the pledged AIMCO Shares and
consent to their sale, subject to Borrower (i) consummating the sale of the
AIMCO Shares, (ii) purchasing the Additional Partnership Units, (iii) pledging
the Additional Partnership Units, (iv) delivering unit certificates evidencing
the Additional Partnership Units to Lender as Collateral for the Loans, and (v)
amending Lender's existing Uniform Commercial Code financing statements covering
the Collateral, on the terms and conditions contained herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and Lender hereby
agree as follows:
1. The Lender hereby agrees to release its lien on the AIMCO
Shares pledged to the Lender pursuant to the Pledge Agreement as Collateral for
the Loans, and hereby consents to the sale of the AIMCO Shares, subject to the
following conditions:
a) the Borrower shall sell the released AIMCO Shares (the
"Released Shares") through an investment account with ABN AMRO
Incorporated (the "ABN AMRO Account") for which the Borrower, the
Lender and ABN AMRO
<PAGE>
Incorporated have entered into a restricted account agreement to
evidence and perfect the Lender's security interest in the
Released Shares and all proceeds of, and substitutions for, the
Released Shares;
b) all proceeds from the sale of the Released Shares shall be
held in the ABN AMRO Account until the Borrower consummates the
purchase of the Additional Partnership Units;
c) the Borrower shall direct the seller of the Additional
Partnership Units to deliver the certificates evidencing the
Additional Partnership Units to the ABN AMRO Account immediately
upon consummation of the purchase of the Additional Partnership
Units;
d) the Borrower shall direct ABN AMRO Incorporated to deliver
the certificates evidencing the Additional Partnership Units to
the Lender upon ABN AMRO Incorporated's receipt of the Additional
Partnership Units; and
e) concurrently with the execution of this Amendment, the
Borrower shall deliver to Lender an assignment separate from
certificate executed in blank with respect to each certificate
evidencing the Additional Partnership Units.
2. The Loan Agreement is hereby amended by deleting Paragraph 5.15 and by
deleting all reference elsewhere in the Loan Agreement to "Apartment Investment
and Management Company," "AIMCO," and "AIMCO Shares."
3. The Pledge Agreement is hereby amended as follows:
a) by deleting all reference to "Apartment Investment and
Management Company," "AIMCO," and "AIMCO Stock"; and
b) by deleting Schedule 1 thereto in its entirety and, upon
purchase of the Additional Partnership Units, replacing it with a
new "Schedule 1" substantially in the form attached hereto.
4. The Prime Group, Inc., an Illinois corporation, hereby ratifies its
obligations under that certain Continuing Unconditional Guaranty, dated December
18, 1998, given by The Prime Group, Inc. in favor of the Lender.
5. The Borrower hereby represents and warrants that its execution,
delivery and performance of this Amendment, the Pledge Agreement and the Loan
Agreement (both as amended hereby) are within its partnership powers and have
been duly authorized by all requisite partnership action on its part and that
this Amendment has been duly executed by Borrower and this Amendment, the Pledge
Agreement and the Loan Agreement (both as amended hereby)
2
<PAGE>
constitute valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally and by general
principles of equity.
6. The parties hereto hereby agree and acknowledge that nothing contained
in this Amendment in any manner or respect limits or terminates any of the
provisions of the Pledge Agreement or the Loan Agreement other than as expressly
set forth herein and further agree and acknowledge that the Pledge Agreement and
the Loan Agreement both remain and continue in full force and effect.
7. This Amendment may be executed in one or more counterparts, each of
which, when executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
document with the same force and effect as if the signatures of all of the
parties were on a single counterpart.
8.This Amendment, taken with the Pledge Agreement and the Loan Agreement,
embodies the entire agreement and understanding with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
the subject matter hereof. Any reference to the Pledge Agreement or the Loan
Agreement (howsoever each may be called) contained in any notice, request,
certificate or other document shall be deemed to refer to the Pledge Agreement
and the Loan Agreement, respectively, as amended by this Amendment unless the
context shall otherwise expressly specify.
9. This Amendment shall be governed by and construed in accordance with
the laws of the State of Illinois.
[Balance of page intentionally left blank; signature page follows.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Loan Documents, Consent and Limited Release as of the date first written
above.
PRIME GROUP VI, L.P.
By: PGLP, Inc., an Illinois corporation,
as managing general partner
By: /s/ Robert J. Rudnik
------------------------------
Name: Robert J. Rudnik
----------------------------
Title: Vice President
---------------------------
LASALLE NATIONAL BANK
By: /s/ John C. Hein
-----------------------------
Name: John C. Hein
---------------------------
Title: FVP
--------------------------
Agreed to and Accepted as of the
29th day of January, 1999:
THE PRIME GROUP, INC.
By: /s/ Robert J. Rudnik
------------------------------
Name: Robert J. Rudnik
----------------------------
Title: Executive Vice President
---------------------------
<PAGE>
SCHEDULE I
DESCRIPTION OF PLEDGED COLLATERAL
A. PLEDGED SHARES
<TABLE>
<CAPTION>
Issuer Certificate No. Shares
- ------ --------------- ------
<S> <C> <C>
Brookdale Living Communities, Inc. C0008 137,000
C0009 137,000
C0010 137,000
C0011 137,000
C0012 137,000
C0013 137,000
C0014 137,000
C0015 137,000
C0016 137,000
C0017 137,000
C0035 300,000
C0043 673,327
C0046 1,233,606
---------
3,576,933
</TABLE>
B. PLEDGED UNITS
104,632 aggregate units of limited partnership interests in Prime Retail,
L.P., a Delaware limited partnership, as evidenced by certificates #0027
for 43,000 units and #0028 for 61,632 units.
304,097 units of limited partnership interests in Prime Group Realty,
L.P., a Delaware limited partnership, as evidenced by certificates
___________
<PAGE>
Exhibit 36
AMENDMENT NO. 29 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 29 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
October 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 October 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 October 15, 1999; and
<PAGE>
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 the grant of the rights consisting of the First
Option during the twenty-third 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 6494.0 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.
52 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. 29 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: Exec. 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: Exec. Vice President
-3-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,135,827 **
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. 29 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.
<PAGE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
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
</TABLE>
- ----------------------------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
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 133,050 $2,000,000
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 37,259 $745,180
H. John Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred
Suite 3900 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- ---------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
Exhibit 37
AMENDMENT NO. 30 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 30 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
November 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 November 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 November 15, 1999; and
<PAGE>
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 the grant of the rights consisting of the First
Option during the twenty-fourth 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 7020.0 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.
53 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. 30 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/ Jeffery A. Patterson
----------------------------------
Name: Jeffery 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/ Jeffery A. Patterson
-------------------------
Name: Jeffery A. Patterson
Title: Executive Vice President
-3-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,135,827 **
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
</TABLE>
- ---------------------------
* As amended by Amendment No. 30 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.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
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
</TABLE>
- ------------------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
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 140,070 $2,100,000
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
</TABLE>
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- ------------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
Exhibit 38
AMENDMENT NO. 31 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 31 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
December 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 December 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 December 15, 1999; and
<PAGE>
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 the grant of the rights consisting of the First Option during the
twenty-fifth 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
7390.0 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. 54 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. 31 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/ Jeffery A. Patterson
--------------------------
Name: Jeffery 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/ Jeffery A. Patterson
--------------------------
Name: Jeffery A. Patterson
Title: Executive Vice President
-3-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,135,827 **
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
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
Trust Dated May 22, 1992 388,677 $7,773,540
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
</TABLE>
- -----------------------
* As amended by Amendment No. 31 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.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
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
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
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 147,460 $2,200,000
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 37,259 $745,180
H. John Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
- -------------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
<S> <C> <C>
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 Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- -----------------
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
Exhibit 39
AMENDMENT NO. 32 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 32 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
December 30, 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 Real Estate Sales Contract, 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 the Vacant Parcels 4 and 11 in Carol Stream Industrial Business
Park, Carol Stream, 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 Carol Stream Industrial Park Joint Venture; 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 Carol
<PAGE>
Stream Industrial Park Joint Venture 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 151,621 Common Units of
Limited Partner Interest which are hereby issued by the Partnership to Carol
Stream Industrial Park Joint Venture pursuant to Section 4.3.C of the Limited
Partnership Agreement, and which are evidenced by Common Unit Certificate No.
58 of the Partnership.
(b) Each of the Common Units of Limited Partner Interest
issued to Carol Stream Industrial Park Joint Venture 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).
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. 32 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/ James F. Hoffman
----------------------------------------
Name: James F. Hoffman
--------------------------------------
Title: SVP, General Counsel and Secretary
--------------------------------------
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/ James F. Hoffman
------------------------------------
Name: James F. Hoffman
-----------------------------------
Title: SVP, General Counsel and Secretary
------------------------------------
-3-
<PAGE>
As to Section 1 hereof,
ACKNOWLEDGED AND AGREED
CAROL STREAM INDUSTRIAL PARK JOINT
VENTURE, an Illinois general partnership
By: NARCO ENTERPRISES, INC.,
an Illinois corporation
Its Managing General Partner
By: /s/ Stephen J. Nardi
----------------------------
Stephen J. Nardi
President
-4-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,683,936 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ----------------
The Nardi Group, L.L.C. 927,100 $18,542,000
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
Carol Stream Industrial Park Joint Venture 151,621 $ 2,150,054
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $ 7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
___________________
* As amended by Amendment No. 32 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.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
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 36,006 $ 720,120
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
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
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 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 93,849 $1,400,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
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
</TABLE>
________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible
Suite 3900 Preferred Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B --
Suite 3900 Preferred Units
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
___________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
Exhibit 40
AMENDMENT NO. 33 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 33 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of January
17, 2000 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 January 17, 2000;
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 January 17, 2000; and
<PAGE>
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 the grant of the rights consisting of the First
Option during the twenty-sixth 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 6922.0 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.
60 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, 2000 (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.
-2-
<PAGE>
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.
-3-
<PAGE>
AMENDMENT NO. 33 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/ James F. Hoffman
----------------------------------------
Name: James F. Hoffman
Title: SVP, General Counsel and Secretary
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/ James F. Hoffman
------------------------------------
Name: James F. Hoffman
Title: SVP, General Counsel and Secretary
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
MANAGING GENERAL PARTNER COMMON UNITS CONTRIBUTION
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,683,936 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
GENERAL PARTNER
- ---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
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
Carol Stream Industrial Park Joint Venture 151,621 $2,150,054
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
LIMITED PARTNERS COMMON UNITS CONTRIBUTION
- ---------------- ------------ ------------
<S> <C> <C>
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 36,006 $720,120
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
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
LIMITED PARTNERS COMMON UNITS CONTRIBUTION
- ---------------- ------------ ------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
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 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 100,771 $1,500,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
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
</TABLE>
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
MANAGING GENERAL PARTNER PREFERRED UNITS CONTRIBUTION
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- --------
* As amended by Amendment No. 33 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.
EXHIBIT A-4
<PAGE>
Exhibit 41
AMENDMENT NO. 34 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 34 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
February 15, 2000 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 February 15, 2000;
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 February 15, 2000; and
<PAGE>
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 the grant of the rights consisting of the First
Option during the twenty-seventh 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 7348.0 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. 61 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, 2000 (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.
-2-
<PAGE>
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.
-3-
<PAGE>
AMENDMENT NO. 34 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/ James F. Hoffman
----------------------------------------
Name: James F. Hoffman
Title: SVP, General Counsel and Secretary
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/ James F. Hoffman
------------------------------------
Name: James F. Hoffman
Title: SVP, General Counsel and Secretary
-4-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
MANAGING GENERAL PARTNER COMMON UNITS CONTRIBUTION
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,683,936 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
GENERAL PARTNER
- ---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
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
Carol Stream Industrial Park Joint Venture 151,621 $2,150,054
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
LIMITED PARTNERS COMMON UNITS CONTRIBUTION
- ---------------- ------------ ------------
<S> <C> <C>
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 36,006 $720,120
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
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
LIMITED PARTNERS COMMON UNITS CONTRIBUTION
- ---------------- ------------ ------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
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 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 87,821 $1,300,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
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
</TABLE>
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF CAPITAL
MANAGING GENERAL PARTNER PREFERRED UNITS CONTRIBUTION
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
- --------
* As amended by Amendment No. 34 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.
EXHIBIT A-4
<PAGE>
Exhibit 42
AGREEMENT OF LIMITED PARTNERSHIP
OF
PRIMESTONE INVESTMENT PARTNERS L.P.
A DELAWARE LIMITED PARTNERSHIP
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
PRIMESTONE INVESTMENT PARTNERS L.P.
A DELAWARE LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP (this "AGREEMENT") is
entered into this 17th day of November, 1997, by and among PG/Primestone,
L.L.C., a Delaware limited liability company ("PRIME GP") and BRE/Primestone
Investment Management L.L.C., a Delaware limited liability company
("BLACKSTONE GP") as the general partners, and PG/Primestone, L.L.C., a
Delaware limited liability company ("PRIME"), and BRE/Primestone Investment
L.L.C., a Delaware limited liability company ("BLACKSTONE"), as the limited
partners (the foregoing parties are sometimes hereinafter collectively
referred to as the "PARTNERS"), pursuant to the provisions of the Delaware
Revised Uniform Limited Partnership Act, on the following terms and
conditions:
WITNESSETH:
WHEREAS, the Partners desire to establish a limited partnership
to own an ownership interest in Prime Group Realty, L.P., a Delaware limited
partnership (the "Operating Partnership");
WHEREAS, each of Blackstone, Blackstone GP, Prime and Prime GP
concurrently with the execution hereof have made capital contributions to the
Partnership in exchange for the Percentage Interests (as hereinafter defined)
in the Partnership set forth on EXHIBIT A hereto;
WHEREAS, the Partners desire, therefore, to enter into this
Agreement to form the Partnership and to set forth the terms and conditions
of the Partnership in order to effectuate the foregoing.
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants and agreements of the Partners herein contained, the
Partners agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings set forth in this ARTICLE I (such meanings to be equally
applicable in both the singular and plural forms of the term defined).
1.1 "ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time (or any corresponding
provisions of succeeding law).
1
<PAGE>
1.1 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect
to any Partner, the deficit balance, if any, in such Partner's Capital
Account as of the end of the relevant Partnership taxable year, after giving
effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or is
deemed to be obligated to restore pursuant to the penultimate sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5)
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
1.2 "AFFILIATE" means, with respect to any Partner, any
Person that is controlling, controlled by or under common control with a
Partner (whether such control is through the ownership of voting securities,
by contract or otherwise).
1.3 "AGREEMENT" or "Partnership Agreement" means this
Agreement of Limited Partnership, as amended from time to time.
1.4 "APPROVED BY THE GENERAL PARTNERS", or any similar phase
used in this Agreement, means unanimously approved in writing by all of the
General Partners.
1.5 "AVAILABLE CASH FLOW" means, with respect to the
applicable period of measurement (i.e., any period beginning on the first day
of the fiscal year or other period commencing immediately after the last day
of the calculation of Available Cash Flow which was distributed, and ending
on the last day of the month, quarter or other applicable period immediately
preceding the date of calculation), the excess, if any, of the gross cash
receipts of the Partnership for such period from all sources whatsoever,
including, without limitation, the following:
(a) (i) all rents, revenues, income, dividends, distributions
and proceeds received by the Partnership; (ii) all proceeds and revenues
received on account of any sales of Property of the Partnership or on
account of any loans made to the Partnership or financings or
refinancings of any Property of the Partnership; (iii) all Capital
Contributions received by the Partnership from its Partners; (iv) all
cash amounts previously reserved by the Partnership, if the General
Partners unanimously agree in writing that the specific purposes for
which such amounts were reserved are no longer applicable; and (v) the
proceeds of liquidation of the Partnership's Property in accordance with
this Agreement:
over the sum of:
2
<PAGE>
(b) (i) all operating costs and expenses of the Partnership;
(ii) all costs and expenses expended during such period in connection
with the sale, other disposition, financing or refinancing of Property;
(iii) all fees under this Agreement paid during such period; (iv) all
debt service, including principal and interest, paid during such period
on all indebtedness of the Partnership; (v) all loans made by the
Partnership to any Person during such period, to the extent Approved by
the General Partners; and (vi) all reserves Approved by the General
Partners for debt service or other purposes.
1.6 "BLACKSTONE DEFAULT" means a Call Default, Put Default
or Single Purpose Entity Default caused by, or resulting from an act or
omission of, the Blackstone Group.
1.7 "BLACKSTONE GROUP" means Blackstone, Blackstone GP and
any of their Transferees treated as a single entity in accordance with the
community of interests provisions of SECTION 9.4 HEREOF.
1.8 "BUDGET" has the meaning set forth in SECTION 6.6.
1.9 "CALL" has the meaning set forth in SECTION 9.5(b).
1.10 "CALL DEFAULT" means the failure of the parties hereto
to consummate the transactions contemplated by SECTION 9.5 (b) hereof.
1.11 "CALL PRICE" means the amount necessary to be paid to
the Blackstone Group so that the Blackstone Group will receive (i) a 19.8%
pre-tax internal rate of return to the Scheduled Closing Date (or, if the
Closing does not occur on the Scheduled Closing Date due to a Call Default
which is a Prime Default, to the Closing Date) (compounded annually) on the
aggregate amount of Capital Contributions made by the Blackstone Group, after
taking into account the timing and the amount of all such Capital
Contributions and the timing and amount of all distributions of Available
Cash Flow and the fair market value of other property distributed to the
Blackstone Group by the Partnership PLUS (ii) an amount equal to 30% of the
Unrealized Profit. For purposes of the foregoing, "Unrealized" means an
amount equal to the difference between (I) the product of (A) (x) the value
of all Units owned by the Partnership valued assuming that such Units have
been converted into the common shares of PGRT and using the Value of such
common shares on the Scheduled Closing Date (or, if the Closing does not
occur on the Scheduled Closing Date due to a Call Default which is (Y) a
Prime Default, the greater of the Value on the Scheduled Closing Date or the
Closing Date or (Z) a Blackstone Default, the lesser of the Value on the
Scheduled Closing Date or the Closing Date) less the aggregate amount
outstanding under the Partnership Loan Agreement less (z) the amount of a
reserve determined by the General Partners to be sufficient to pay all
contingent or other liabilities of the Partnership multiplied by (B) the
Percentage Interest of the Blackstone Group less (II) the amount payable to
Blackstone Group under clause (i) above.
1.12 "CAPITAL ACCOUNT" means, with respect to any Partner,
the Capital Account maintained for such Partner in accordance with the
following provisions:
3
<PAGE>
(i) To each Partner's Capital Account there shall be credited
the amount of cash and the Gross Asset Value of any property contributed
by such Partner to the Partnership, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to ARTICLE IV hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by
any Property distributed to such Partner.
(ii) To each Partner's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Property distributed
to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to ARTICLE IV
hereof, and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such
Partner to the Partnership.
(iii) In determining the amount of any liability for purposes of
the foregoing subparagraphs (i) and (ii), there shall be taken into
account Code Section 752(c) and any other applicable provisions of the
Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2 and Section 514(c)(9), and shall
be interpreted and applied in a manner consistent with such Regulations. In
the event the General Partners shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities
which are secured by contributed or distributed Property or which are assumed
by the Partnership, General Partners or the Limited Partners) are computed in
order to comply with such Regulations, the General Partners may make such
modification provided that such modification is not likely to have a material
adverse effect on the amounts distributable to any Partner pursuant to
ARTICLE IX hereof upon the dissolution of the Partnership. The General
Partners also shall (i) make any adjustments that are necessary or
appropriate to comply with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Sections
1.704-1(b) or 1.704-2 or Section 514(c)(9).
1.13 "CAPITAL CONTRIBUTIONS" means, with respect to any
Partner, the amount of money and the initial Gross Asset Value of any
property (other than money), net of the amount of any debt to which such
property is subject, contributed to the Partnership with respect to the
Interest in the Partnership held by such Partner. The principal amount of a
promissory note which is not readily tradable on an established securities
market and which is contributed to the Partnership by the maker of the note
shall not be included in the Capital Account of any Person until the
Partnership makes a taxable disposition of the note or until (and to the
extent) such Partner makes principal payments on the note, all in accordance
with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
4
<PAGE>
1.14 "CAPITAL LOAN" has the meaning set forth in SECTION 3.4(b).
1.15 "CASH NEEDS NOTICE" has the meaning set forth in SECTION
3.4(a).
1.16 "CERTIFICATE" shall mean the Certificate of Limited
Partnership of the Partnership to be filed with the Secretary of State of
Delaware in accordance with the Act, as such Certificate may be amended
and/or restated from time to time.
1.17 "CHANGE IN CONTROL EVENT" has the meaning set forth for
such term in Exhibit C to the OP Agreement; provided the percentage in such
definition for the purposes hereof shall be 30%.
1.18 "CLOSING" shall mean the consummation of the
transactions contemplated by SECTION 9.5.
1.19 "CLOSING DATE" shall mean the date of the occurrence of
the Closing.
1.20 "CODE" means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding law).
1.21 "CONTRIBUTING PARTNER" has the meaning set forth in
SECTION 3.4(b).
1.22 "CONTRIBUTION AGREEMENT"means that certain Contribution
Agreement dated October 20, 1997 among the Partners and The Prime Group, Inc.
as such agreement is amended, modified, supplemented or restated subsequent
to such date.
1.23 "DEFAULTING PARTNER" has the meaning set forth in
SECTION 9.2.
1.24 "DEPRECIATION" means, for each Partnership taxable year
or other period, an amount equal to the depreciation, amortization or other
cost recovery deduction allowable with respect to an asset for such year or
other period, except that, if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; PROVIDED, HOWEVER,
that, if the federal income tax depreciation, amortization or other cost
recovery deduction for such year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable
method selected by the General Partners; and provided, further, however, that
to the extent that the "remedial" method described in Regulations Section
1.704-3 is elected Depreciation will be determined in a manner consistent
therewith.
1.25 "DISABLING EVENT" means any event which would cause a
General Partner to cease to be a general partner of the Partnership pursuant
to Section 17-402 of the Act.
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1.26 "DIVIDEND REDUCTION" means the dividend paid on a common
share of PGRT for each of two consecutive fiscal quarters of PGRT has been in
an amount less than eighty five percent (85%) of the dividend paid on a
common share of PGRT in the first full fiscal quarter of PGRT subsequent to
the IPO.
1.27 "ENFORCEMENT COSTS" shall mean all reasonable costs and
expenses actually incurred (including reasonable attorneys' fees and costs)
by a Partner in enforcing the Put or Call, as applicable.
1.28 "GENERAL PARTNER" means any Person which (i) is referred
to as such in the first paragraph of this Agreement or has become a General
Partner pursuant to the terms of this Agreement and (ii) has not ceased to be
a General Partner pursuant to the terms of this Agreement. All references in
this Agreement to a majority interest or a specified percentage of the
General Partners shall mean General Partners whose combined Percentage
Interests represent more than 50% or such specified percentage, respectively,
of the Percentage Interests then held by all General Partners.
1.29 "GOVERNMENTAL APPROVAL" means any authorization,
consent, approval, waiver, exemption, variance, franchise, permit or license
required to be obtained from or granted by a Governmental Authority.
1.30 "GOVERNMENTAL AUTHORITY" means the United States, any
state of the United States, any political subdivision of any of them and any
agency, department, commission, board, bureau or instrumentality of any of
them, having jurisdiction over the Partnership.
1.31 "GROSS ASSET VALUE" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the General
Partners; provided the Units contributed by Prime or Prime GP to the
Partnership shall be valued on the date of contribution as if they have
been converted into common shares of PGRT and using the Value of the
common shares resulting from such conversion on the date of contribution;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
reasonably determined by the General Partners, as of the following times:
(a) the acquisition of an additional Interest in the Partnership by any
new or existing Partner in exchange for more than a DE MINIMIS Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a DE MINIMIS amount of Partnership assets, including money, as
consideration for an Interest in the Partnership; and (c) the liquidation
of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); PROVIDED, HOWEVER, that adjustments pursuant to
clauses (a) and (b) above shall be made only if the General Partners
reasonably determine
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that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on the
date of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to Code Section 734(b) or 743(b), but only to the
extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and
the definition of "Capital Account" hereof; PROVIDED, HOWEVER, that Gross
Asset Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent the General Partners determine that an adjustment pursuant to
the foregoing subparagraph (ii) of this definition hereof is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this subparagraph.
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to any of the foregoing subparagraphs (i), (ii) or (iv), such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
1.32 "GROUP"means either Blackstone Group or the Prime Group
as applicable.
1.33 "INACTIVE PARTNER" has the meaning set forth in SECTION
9.2.
1.34 "INTEREST" means a Partner's ownership interest in the
Partnership, including any and all benefits to which the holder of such an
Interest may be entitled as provided in this Agreement, together with all
obligations of such Partner to comply with the terms and provisions of this
Agreement.
1.35 "IPO" means the initial public offering of common shares
of PGRT.
1.36 "LIMITED PARTNER" means any Person which (i) is referred
to as such in the first paragraph of this Agreement or who has become a
Limited Partner pursuant to the terms of this Agreement and (ii) has not
ceased to be a Limited Partner pursuant to the terms of this Agreement.
"Limited Partners" means all Limited Partners if at any time there shall be
more than one Limited Partner. All references in this Agreement to a
majority in interest or a specified percentage of the Limited Partners shall
mean Limited Partners whose combined Percentage Interests represent more than
50% or such specified percentage, respectively, of the Percentage Interests
then held by all Limited Partners.
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1.37 "LIQUIDATING EVENTS" has the meaning set forth in
SECTION 10.1.
1.38 "LIQUIDATOR" has the meaning set forth in SECTION 10.2.
1.39 "LOAN DOCUMENTS" means any document pursuant to which
any indebtedness for borrowed money of the Partnership has been incurred.
1.40 "MANAGING GENERAL PARTNER" means the General Partner
designated or appointed in accordance with SECTION 6.2.
1.41 "NON-CONTRIBUTING PARTNER" has the meaning set forth in
SECTION 3.4(b).
1.42 "NONDEFAULTING PARTNER" has the meaning set forth in
SECTION 9.2.
1.43 "NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(b). The amount of Nonrecourse Deductions for a
Partnership taxable year equals the excess, if any, of the net increase, if
any, in the amount of Partnership Minimum Gain during that Partnership
taxable year over the aggregate amount of any distributions during that
Partnership taxable year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Partnership Minimum Gain, determined according to
the provisions of Regulations Section 1.704-2(c).
1.44 "NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.45 "NONWITHDRAWING PARTNER" has the meaning set forth in
SECTION 9.7.
1.46 "OP AGREEMENT" means the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership dated November 17, 1997,
as such agreement may be amended, modified, supplemented or restated
subsequent to the date thereof.
1.47 "OPERATING PARTNERSHIP" has the meaning set forth in the
recitals hereto.
1.48 "PARTIES" has the meaning set forth in SECTION 6.8.
1.49 "PARTNER MINIMUM GAIN" has the meaning set forth in the
definition of "partner nonrecourse debt minimum gain" in Regulations Section
1.704-2(I)(2) and will be computed as provided in Regulations Section
1.704-2(I)(3).
1.50 "PARTNER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.51 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set
forth in Regulations Section 1.704-2(I). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
taxable year equals the excess, if any, of the net increase, if any, in the
amount of Partner Minimum Gain attributable to such Partner
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Nonrecourse Debt during that Partnership taxable year over the aggregate
amount of any distributions during that Partnership taxable year to the
Partner that bears the economic risk of loss for such Partner Nonrecourse
Debt to the extent such distributions are from the proceeds of such Partner
Nonrecourse Debt and are allocable to an increase in Partnership Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(I).
1.52 "PARTNERS" means the General Partners and the Limited
Partners, where no distinction is required by the context in which the term
is used herein. "Partner" means any one of the Partners. All references in
this Agreement to a majority interest or a specified percentage of the
Partners shall mean Partners whose combined Percentage Interests represent
more than 50% or such specified percentage, respectively, of the Percentage
Interests then held by all Partners.
1.53 "PARTNERSHIP" means the partnership formed pursuant to
this Agreement and the partnership continuing the business of this
Partnership in the event of dissolution as herein provided.
1.54 "PARTNERSHIP LOAN AGREEMENT" means that certain loan
agreement dated the date hereof, as subsequently amended, modified,
supplement or restated, pursuant to which the Partnership has borrowed up to
$40,000,000, the proceeds of which when aggregated with the Capital
Contribution of the Blackstone Group will be used to purchase Units.
1.55 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(b)(2) and will be computed as provided in
Regulations Section 1.704-2(d).
1.56 "PERCENTAGE INTEREST" means the percentage set forth for
the General Partners and Limited Partners on EXHIBIT A hereto, as the same
may be adjusted from time to time in accordance with the terms of this
Agreement.
1.57 "PERMITTED LOAN" means a loan to Blackstone Group
secured by the Interests owned by the Blackstone Group and the aggregate
principal amount of which does not exceed fifty percent (50%) of the value of
the Blackstone Group's Interest, on the date of the making of such loan and
such value being determined based on (A) the difference between (i) the Value
of the common shares of PGRT into which the Units owned by the Partnership
are convertible on the date of the making of the loan, less (ii) the amounts
outstanding under the Partnership Loan Agreement on the date of the making of
the loan, multiplied by (B) the Percentage Interest of the Blackstone Group
on the date of the making of the loan.
1.58 "PERSON" means any individual, general partnership,
limited partnership, limited liability company, corporation, trust or other
association or entity.
1.59 "PGRT" means Prime Group Realty Trust, a Maryland
business trust.
1.60 "PRIME DEFAULT" means a Put Default, Call Default or
Single Purpose Entity Default caused by, or resulting from an act or omission
of, the Prime Group.
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1.61 "PRIME GROUP" means Prime, Prime GP and their
Transferees treated as a single entity in accordance with the community of
interest provisions of SECTION 9.4 hereof.
1.62 "PROFITS" and "Losses", and reference to any item of
income, gain, loss or deduction thereof, means, for each Partnership taxable
year or other period, an amount equal to the Partnership's taxable income or
loss for such year or period, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is 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 Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
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 Asset Value of any Partnership asset
is adjusted pursuant to subparagraph (ii) or (iv) of the definition of
Gross Asset Value hereof, 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 property
(including distribution of Units pursuant to exercise of a Put or Call)
shall be computed by reference to the Gross Asset Value of the property
disposed of notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such
Partnership taxable year or other period, computed in accordance with the
definition of Depreciation herein;
(vi) Notwithstanding any other provision of this definition of
"Profits" and "Losses," any items which are specially allocated pursuant
to ARTICLE IV hereof shall not be taken into account in computing Profits
or Losses; and
(vii) The distribution of any property to a partner in which
taxable gain or loss is not recognized, in whole or in part, shall be
treated as if the Partnership sold such property for its Gross Asset
Value.
1.63 "PROPERTY" means Units in the Operating Partnership and
any other cash or investments or other assets held by the Partnership.
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1.64 "PUT" has the meaning set forth in SECTION 9.5(a).
1.65 "PUT DEFAULT" means the failure of the parties hereto to
consummate the transactions contemplated by SECTION 9.5(a) hereof.
1.66 "PUT DEFAULT PRICE" means the amount necessary to be
paid to the Blackstone Group so that the Blackstone Group will receive a 20%
pre-tax internal rate of return to the date of the consummation of the
purchase or redemption of the Blackstone Group's Interests hereunder
(compounded annually) on the aggregate amount of (i) all Capital
Contributions made by Blackstone Group and (ii) all Enforcement Costs
incurred by the Blackstone Group in enforcing the Put, after taking into
account the timing and the amount of all such Capital Contributions and
Enforcement Costs and the timing and the amount of all distributions of
Available Cash Flow and the fair market value of other property distributed
to the Blackstone Group by the Partnership.
1.67 "PUT EVENT" means the earliest to occur of (i) May 17,
2000, (ii) a default by the Partnership has occurred under the Partnership
Loan Agreement and the Partnership has failed to cure or have waived such
default within the applicable cure period, if any, (iii) a Dividend Reduction
and (iv) a Single Purpose Entity Default which is a Prime Default.
1.68 "PUT PRICE" means the amount necessary to be paid to the
Blackstone Group so that the Blackstone Group will receive a 16.8% pre-tax
internal rate of return to the Scheduled Closing Date (compounded annually)
on the aggregate amount of all Capital Contributions made by Blackstone
Group, after taking into account the timing and the amount of all such
Capital Contributions and the timing and the amount of all distributions of
Available Cash Flow and the fair market value of other property distributed
to the Blackstone Group by the Partnership.
1.69 "REGULATIONS" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
1.70 "REQUESTED AMOUNT" has the meaning set forth in SECTION
3.4(a).
1.71 "REQUIRED FUNDS" has the meaning set forth in SECTION
3.3.
1.72 "SCHEDULED CLOSING DATE" has the meaning set forth in
SECTION 9.5(d)
1.73 "SINGLE PURPOSE ENTITY" means a limited liability
company or limited partnership which (i) is organized solely for the purpose
of holding, directly, a general or limited partnership interest in the
Partnership, (ii) will not engage in any business other than that relating to
its ownership of its Interest in the Partnership, (iii) will not have any
assets other than its Interest in the Partnership and the proceeds thereof,
(iv) will not engage in, seek or consent to any dissolution, winding up,
liquidation, consolidation, merger or asset sale other than as permitted by
this Agreement, (v) will maintain its accounts, books and records separate
from any other person or entity, (vi) will not commingle its funds or assets
with those of any other entity,
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(vii) will conduct its business only in its name, (viii) will pay its own
liabilities out of its own funds and assets, (ix) will observe all limited
liability company or limited partnership formalities, as applicable, (x) does
not have any indebtedness other than as permitted by this Agreement, (xi)
will not assume or guarantee or become obligated for the debts of any other
entity or hold out its credit as being available to satisfy the obligations
of any other entity, (xii) other than as permitted by this Agreement, will
not pledge its assets for the benefit of any other person or entity and
(xiii) other than as permitted by this Agreement, will not make loans to any
person or entity.
1.74 "SINGLE PURPOSE ENTITY DEFAULT" means a breach by a
Partner of the covenant set forth in Section 9.1(b) which breach is not cured
within thirty (30) days after receipt of written notice of such default by
the Defaulting Partner. Notwithstanding the foregoing, the Partners
acknowledge and agree that if, at any time, a Partner is no longer a Single
Purpose Entity, such Partner may cure such breach by transferring its
Interest to an Affiliate of such Partner which Affiliate is a Single Purpose
Entity.
1.75 "TAX MATTERS PARTNER" has the meaning set forth in
SECTION 7.4.
1.76 "TRANSFER" means, as a noun, any voluntary or
involuntary transfer, sale, pledge, hypothecation or other disposition or
encumbrance and, as a verb, voluntarily or involuntarily to transfer, sell,
pledge, hypothecate or otherwise dispose of or encumber.
1.77 "TRANSFEREE" means any Person who has acquired a
beneficial interest in the Interest of a Partner in the Partnership.
1.78 "UNIT" means an ownership interest in the Operating
Partnership, which Unit is exchangeable into one common share of PGRT,
subject to adjustment as set forth in the OP Agreement.
1.79 "VALUE" means, with respect to an equity interest which
is publicly traded, an amount equal to the average daily closing price of
such equity interest as quoted in the Midwest Edition of THE WALL STREET
JOURNAL for the ten trading days (or such number of days the equity interest
has traded if less than ten) immediately preceding the required date for the
determination of the value of such equity interests.
1.80 "WITHDRAWAL NOTICE" has the meaning set forth in SECTION
9.7.
1.81 "WITHDRAWING PARTNER" has the meaning set forth in
SECTION 9.7.
ARTICLE II
THE PARTNERSHIP
2.1 ORGANIZATION. The Partners form the Partnership upon all
of the terms, covenants and conditions herein contained, solely for the
purpose and scope set forth in this
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Agreement. Except as otherwise expressly provided herein to the contrary,
the administration and termination of the partnership, and the rights and
obligations of the Partners, shall be governed by the Delaware Revised
Uniform Limited Partnership Act.
2.2 PARTNERSHIP NAME. The name of the Partnership shall be
"Primestone Investment Partners L.P." and all business of the Partnership
shall be conducted in such name or such other name as the General Partners
shall determine. The Partnership shall hold all of its property in the name
of the Partnership and not in the name of any Partner.
2.3 PURPOSE. The purpose and business of the Partnership
shall be to acquire, hold, finance, encumber, exchange, dispose of or
otherwise deal with Units or the proceeds of Units and to do any and all
other acts which may be necessary or incidental to the foregoing.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Partnership shall be 77 West Wacker Drive, Suite 3900,
Chicago, Illinois 60601 or such other location as may be Approved by the
General Partners from time to time.
2.5 TERM. The term of the Partnership shall commence on the
date of the execution of this Agreement and the filing of the Certificate in
the applicable governmental office in the State of Delaware in accordance
with the Act (or any predecessor statutes to the Act) and shall continue
until the winding up and liquidation of the Partnership and its business is
completed, as provided in ARTICLE X hereof.
2.6 SCOPE OF AUTHORITY. Except as expressly and
specifically provided in this Agreement, no Partner shall have any authority
to act for, or assume any obligations or responsibility on behalf of, the
other Partners or the Partnership.
2.7 RESERVATION OF OTHER BUSINESS OPPORTUNITIES. No
business opportunities other than those actually exploited by the Partnership
pursuant to SECTION 2.3 shall be deemed the property of the Partnership, and
any Partner or its Affiliates may engage in or possess an interest in any
business venture, independently or with others, of any nature or description;
and neither any other Partner nor the Partnership shall have any rights by
virtue hereof in and to such other business ventures, or to the income or
profits derived therefrom. The provisions of this SECTION 2.7 shall be
subject to, and not in any way affect the enforceability of, any separate
agreement by a Partner or any Affiliate thereof restricting or prohibiting
certain business activities of such Partner or Affiliate.
2.8 FILINGS; AGENT FOR SERVICE OF PROCESS.
(a) As soon as practicable after execution of this
Agreement, the Managing General Partner shall file the Certificate in the
office of the Secretary of State of Delaware in accordance with the
provisions of the Act. The Managing General Partner shall take any and all
other actions reasonably necessary to perfect and maintain the status of the
Partnership as a limited partnership under the laws of the State of Delaware.
The Managing General Partner shall cause amendments to the Certificate to be
filed whenever required by the Act. Such amendments may be executed by the
Managing General Partner only.
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(b) The Managing General Partner shall execute and cause to
be filed original or amended Certificates and shall take any and all other
actions as may be reasonably necessary to perfect and maintain the status of
the Partnership as a limited partnership or similar type of entity under the
laws of any other states or jurisdictions in which the Partnership engages in
business.
(c) The agent for service of process on the Partnership in
the State of Delaware, and other appropriate states, shall be CT Corporation
or such successor registered agents as may be selected by the General
Partners.
(d) Upon the dissolution of the Partnership, the Managing
General Partner (or, in the event there is no remaining Managing General
Partner, the Person responsible for the winding up and dissolution of the
Partnership) shall promptly execute and cause to be filed certificates of
dissolution in accordance with the Act and the laws of any other states or
jurisdictions in which the Partnership has filed certificates.
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS;
ADDITIONAL FINANCING AND CONTRIBUTIONS
3.1 SCHEDULED CAPITAL CONTRIBUTIONS. As of the execution
and delivery of this Agreement, Blackstone and Blackstone GP shall contribute
cash, and Prime and Prime GP shall contribute Units, to the Partnership, in
the manner and in accordance with the terms required by the Contribution
Agreement.
3.2 CAPITAL ACCOUNTS. The name, address and Percentage
Interest of each Partner are set forth on EXHIBIT A attached hereto. A
separate "Capital Account" shall be maintained by the Partnership for each
Partner in accordance with this SECTION 3.2 and the definitions hereof. The
Capital Account balances of each Partner as of the date of execution of this
Agreement are as described in EXHIBIT A.
3.3 ADDITIONAL FINANCING. The sums of money required to
finance the business and affairs of the Partnership shall be derived from a
loan from a Person or Persons satisfactory to the General Partners in the
aggregate principal amount of up to $40,000,000, the Capital Contributions
already made by the Partners to the Partnership, from funds generated from
the operation and the business of the Partnership and from any additional
Capital Contributions, loans, bond financing or other indebtedness incurred
by the Partnership. In the event the General Partners determine that
additional financing is needed by the Partnership for any reason (the
"Required Funds"), the General Partners may, in such amounts and at such
times as the General Partners shall determine to be necessary or appropriate,
cause the Partnership to borrow money, enter into loan arrangements, issue
debt securities, obtain letters of credit or otherwise borrow money on a
secured or unsecured basis. If such financing is not available to the
Partnership or, in the reasonable determination of the General Partners is
not available at a reasonable cost or upon reasonable terms and conditions,
then the General Partners may seek additional Capital Contributions from the
Partners in accordance with SECTION 3.4 hereof.
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3.4 CAPITAL CALLS.
(a) If the General Partners determine that Required Funds
are needed and that financing therefore (in addition to the funds available
under the Partnership Loan Agreement) is not available as set forth in
SECTION 3.3 HEREOF, the General Partners may, by notice to the other Partners
(the "Cash Needs Notice"), given at any time or from time to time, call upon
each Partner to contribute to the Partnership a share of the Required Funds
equal to its Percentage Interest of the Required Funds. Each Partner's share
of the Required Funds set forth in the Cash Needs Notice is referred to
herein as the "Requested Amount." A Cash Needs Notice shall be executed by
all of the General Partners and be accompanied by documentation confirming
the actual or estimated amount of such cash needs and itemizing how the
Required Funds will be applied.
(b) Within thirty (30) days after the giving of the Cash
Needs Notice, each Partner shall contribute to the Partnership an amount
equal to such Partner's Requested Amount. If any Partner (a
"Non-contributing Partner") fails to advance to the Partnership such
Partner's Requested Amount when required to do so, a Partner which has
advanced its Requested Amount (the "Contributing Partner"), shall have the
right to make a loan (a "Capital Loan") to the Non-contributing Partner by
advancing to the Partnership the Requested Amount due from the
Non-contributing Partner.
(c) If a Contributing Partner elects to make a Capital Loan,
the Capital Loan made by the Contributing Partner shall bear interest at a
rate equal to twenty percent (20%) per annum compounded annually.
Thereafter, all Available Cash Flow or other proceeds which would otherwise
be payable or distributable to the Non-contributing Partner shall be paid or
distributed to the Contributing Partner making a Capital Loan until such
Contributing Partner has received an amount equal to the outstanding
principal balance of the Capital Loan plus all accrued and unpaid interest as
aforesaid on the amount remaining from time to time outstanding. All funds
so paid or distributed to the Contributing Partner as a result of the Capital
Loan shall be applied first to accrued and unpaid interest and then to
principal. Notwithstanding anything to the contrary contained herein, a
Non-contributing Partner shall have the right to repay in full or in part at
any time any Capital Loan made the Contributing Partner, any such payment
being applied first to accrued and unpaid interest and then to principal on
such Capital Loan. Each Capital Loan and all accrued and unpaid interest
thereon shall be due and payable by the Non-contributing Partner to the
Contributing Partner (with full recourse) on the date five years from the
date of advance of such Capital Loan if not required to be repaid earlier as
provided herein.
3.5 ADDITIONAL LOANS OR CAPITAL CONTRIBUTIONS BY PARTNERS.
Except as expressly provided in this ARTICLE III, no Partner shall make any
loan or Capital Contribution to the Partnership unless Approved by the
General Partners.
3.6 NO THIRD PARTY BENEFICIARIES. Notwithstanding anything
herein to the contrary, no creditor of the Partnership or any other Person
(other than the Partners) shall be
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entitled to enforce the obligations of the Partners under this ARTICLE III to
make Capital Contributions to the Partnership.
ARTICLE IV
ALLOCATIONS
4.1 PROFITS AND LOSSES. After giving effect to the special
allocations set forth in SECTION 4.3 hereof, Profits for any Partnership
taxable year that includes, or begins subsequent to, the date hereof shall be
allocated as follows:
(a) PROFITS -- PARTNERSHIP OPERATIONS. Profits for any
taxable year of the Partnership (excluding any Partnership taxable year in
which a Put Default or Call Default occurs) shall be allocated among the
Partners, PRO RATA, in accordance with their respective Percentage Interests.
(b) PROFITS -- PUT/CALL DEFAULT. Profits for any Partnership
taxable year in which a Put Default or Call Default occurs shall be
allocated to the Partners, PRO RATA, in accordance with the relative
amounts to be allocated pursuant to this SECTION 4.1(b), so much of the
remaining Profits (and items of income and gain thereof) as is necessary
to cause, as nearly as possible, the positive balance in each Partner's
Capital Account (determined after taking into account any allocations
required under SECTION 4.3 and before taking into account any
distributions made within such Partnership taxable year) to be equal to
the Available Cash Flow that would be distributed in the Partnership
taxable year in which such Put Default or Call Default occurs, and in
each subsequent Partnership taxable year, to such Partner in the amounts
and sequence set forth in SECTIONS 5.1 AND 9.6, calculated as if all the
remaining assets of the Partnership were sold for cash at their
respective Gross Asset Values and all Available Cash Flow was
distributed.
4.2 ALLOCATION OF LOSSES. After giving effect to the special
allocations set forth in SECTION 4.3 hereof, Losses for any Partnership
taxable year that includes, or begins subsequent to, the date hereof shall be
allocated in accordance in the following order and priority:
(a) LOSSES -- PARTNERSHIP OPERATIONS. Losses, other than those
in any Partnership taxable year in which a Put Default or Call Default
occurs, shall be allocated among the Partners, PRO RATA, in proportion to
their Percentage Interests.
(b) LOSSES -- PUT/CALL DEFAULT. Losses in any Partnership
taxable year in which a Put Default or Call Default occurs shall be
allocated to the Partners, PRO RATA, in accordance with the relative
amounts to be allocated pursuant to this SECTION 4.2(b), so much of the
remaining Losses as is necessary to cause as nearly as possible, the
positive balance in each Partner's Capital Account (determined after
taking into account any allocations required under SECTION 4.3 and before
taking into account any distributions made within such Partnership
taxable year) to be equal to the Available Cash Flow that would be
distributed in the Partnership taxable year in which such Put Default or
Call
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Default occurs, and in each subsequent Partnership taxable year, to
such Partner in the amounts and sequence set forth in SECTIONS 5.1 AND
9.6, as if all the remaining assets of the Partnership were sold for cash
at their respective Gross Asset Values and all Available Cash Flow was
distributed.
4.3 SPECIAL ALLOCATIONS. The following special allocations
will be made in following order and priority:
(a) If there is a net decrease in Partnership Minimum
Gain during any Partnership taxable year, each Partner will be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the extent of, an
amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain determined in accordance with Regulations Section 1.704-2(g)(2).
The items to be allocated will be determined in accordance with Regulations
Section 1.704-2(f). This SECTION 4.3(a) is intended to comply with such
Sections of the Regulations and will be interpreted consistently therewith.
(b) The allocations otherwise required pursuant to
SECTION 4.3(a) hereof will not apply to a Partner to the extent that: (i)
such Partner's share of the net decrease in Partnership Minimum Gain is
caused by a guaranty, refinancing or other change in the instrument
evidencing a nonrecourse debt of the Partnership which causes such debt to
become a partially or wholly recourse debt or a Partner Nonrecourse Debt, and
such Partner bears the economic risk of loss (within the meaning of
Regulations Section 1.752-2) for such changed debt; or (ii) such Partner's
share of the net decrease in Partnership Minimum Gain results from the
repayment of a nonrecourse liability of the Partnership, which repayment is
made using funds contributed by such Partner to the capital of the
Partnership; or (iii) the Internal Revenue Service, pursuant to Regulations
Section 1.704-2(f)(4), waives the requirement of such allocation in response
to a request for such waiver made by the General Partners on behalf of the
Partnership; or (iv) additional exceptions to the requirement of such
allocation are established by revenue rulings issued by the Internal Revenue
Service pursuant to Regulations Section 1.704-2(f)(5), which exceptions apply
to such Partner, as determined by the General Partners.
(c) If there is a net decrease in Partner Minimum
Gain attributable to Partner Nonrecourse Debt during any Partnership taxable
year, determined in accordance with Regulations Section 1.704-2(i)(3), then,
except as provided in Regulations Section 1.704-2(i)(4), each Partner who has
a share of the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(5), will
be allocated items of income and gain for such Partnership taxable year (and,
if necessary, subsequent Partnership taxable years) equal to such Partner's
share of the net decrease in Partner Minimum Gain. The items to be allocated
will be determined in accordance with Regulations Section 1.704-2(j)(2).
This SECTION 4.3(c) is intended to comply with Regulations Section 1.704-2(i)
and will be applied and interpreted in accordance with such Regulation.
(d) Any item of Partnership loss, deduction or
expenditure under Code Section 705(a)(2)(b) attributable to Partner
Nonrecourse Debt will be allocated in accordance
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with Regulations Section 1.704-2(i) to the Partner who bears the economic
risk of loss for such Partner Nonrecourse Debt.
(e) In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) resulting in an Adjusted Capital
Account Deficit for such Partner, items of income and gain will be specially
allocated to such Partner in any amount and manner sufficient to eliminate,
to the extent required by the Regulations, such Adjusted Capital Account
Deficit as quickly as possible. The items to be allocated will be determined
in accordance with Regulations Section 1.704-1(b)(2)(ii)(d)(6). This SECTION
4.3(e) is intended to comply with Regulations Section 1.704-1(b)(2)(ii)(d)
and will be applied and interpreted in accordance with such Regulation.
(f) In the event any Partner has a deficit Capital
Account at the end of any Partnership taxable year in excess of the sum of
the amount which such Partner is obligated to restore pursuant to any
provision of this Agreement or pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) and the amount such Partner is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Partner will be specially
allocated items of Partnership income and gain (consisting of a pro rata
portion of each item of Partnership income and gain) to eliminate such excess
deficit Capital Account as quickly as possible, provided that an allocation
pursuant to this SECTION 4.3(f) will be made to a Partner if and only to the
extent that such Partner would have a deficit Capital Account in excess of
such sum after all other allocations provided for in this ARTICLE IV have
been tentatively made.
(g) No items of loss or deduction will be allocated
to any Partner to the extent that any such allocation would cause the Partner
to have an, or increase the amount of an existing, Adjusted Capital Account
Deficit at the end of any Partnership taxable year. All items of loss or
deduction in excess of the limitation set forth in the immediately preceding
sentence will be allocated among such other Partners which do not have
Adjusted Capital Account Deficit balances, pro rata, in proportion to their
Percentage Interests, until no Partner may be allocated any further items of
loss or deduction without creating or increasing an Adjusted Capital Account
Deficit. Thereafter , any remaining items of loss or deduction will be
allocated to the General Partners, pro rata, in proportion to their relative
aggregate Capital Contributions made prior to the last day of the period to
which the loss or deduction relates. To the extent an item of loss or
deduction is allocated pursuant to this Section 4.3(g) in a manner other than
in proportion to relative Percentage Interests, then in subsequent taxable
periods, items of income and gain shall be allocated to reverse any such
disproportionate allocation of items of loss or deduction.
(h) To the extent an adjustment to the adjusted tax
basis of any Property pursuant to Sections 734(b) or 743(b) of the Code is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of such adjustment
to the Capital Accounts will be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss will be specially allocated among the Partners
in a manner consistent with the
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manner in which their Capital Accounts are required to be adjusted pursuant
to such Section of the Regulations.
4.4 CURATIVE ALLOCATIONS.
(a) The "Regulatory Allocations" consist of the "Basic
Regulatory Allocations," as defined in SECTION 4.4(b) hereof, the
"Nonrecourse Regulatory Allocations," as defined in SECTION 4.4(c) hereof,
and the "Partner Nonrecourse Regulatory Allocations," as defined in SECTION
4.4(d) hereof.
(b) The "Basic Regulatory Allocations" consist of
allocations pursuant to SECTIONS 4.3(e), 4.3(f), 4.3(g) and 4.3(h) hereof.
Notwithstanding any other provision of this Agreement, other than the
Regulatory Allocations, the Basic Regulatory Allocations shall be taken into
account in allocating items of income, gain, loss and deduction among the
Partners so that, to the extent possible, the net amount of such allocations
of the Basic Regulatory Allocations and such other items to each Partner
shall be equal to the net amount that would have been allocated to each such
Partner as if the Basic Regulatory Allocations had not occurred. For
purposes of applying the foregoing sentence, allocations pursuant to this
SECTION 4.4(b) shall only be made with respect to allocations pursuant to
SECTION 4.3(h) hereof to the extent the General Partners reasonably determine
that such allocations will otherwise be inconsistent with the economic
agreement among the parties to this Agreement.
(c) The "Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to SECTIONS 4.3(a) hereof. Notwithstanding any other
provision of this Agreement, other than the Regulatory Allocations, the
Nonrecourse Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Partners so that, to the
extent possible, the net amount of such allocations of the Nonrecourse
Regulatory Allocations and such other items to each Partner shall be equal to
the net amount that would have been allocated to each such Partner if the
Nonrecourse Regulatory Allocations had not occurred. For purposes of
applying the foregoing sentence, no allocations pursuant to this SECTION
4.4(c) shall be made prior to the Partnership taxable year during which there
is a net decrease in Partnership Minimum Gain, and then only to the extent
necessary to avoid any potential economic distortions caused by such net
decrease in Partnership Minimum Gain.
(d) The "Partner Nonrecourse Regulatory Allocations" consist
of all allocations pursuant to SECTIONS 4.3(c) AND 4.3(d) hereof.
Notwithstanding any other provision of this Agreement, other than the
Regulatory Allocations, the Partner Nonrecourse Regulatory Allocations shall
be taken into account in allocating items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of the Partner Nonrecourse Regulatory Allocations and such other
items to each Partner shall be equal to the net amount that would have been
allocated to each such Partner if the Partner Nonrecourse Regulatory
Allocations had not occurred. For purposes of applying the foregoing
sentence (i) no allocations pursuant to this SECTION 4.4(d) shall be made
with respect to allocations pursuant to SECTION 4.3(c) relating to a
particular Partner Nonrecourse Debt prior to the Partnership taxable year
during which there is a net decrease in Partner Minimum Gain attributable to
such Partner
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Nonrecourse Debt, and then only to the extent necessary to avoid any
potential economic distortions caused by such net decrease in Partner Minimum
Gain, and (ii) allocations pursuant to this SECTION 4.4(d) shall be deferred
with respect to allocations pursuant to SECTION 4.3(d) hereof relating to a
particular Partner Nonrecourse Debt to the extent the General Partners
determine that such allocations are likely to be offset by subsequent
allocations pursuant to SECTION 4.3(c) hereof.
(e) The General Partners may, with respect to each
Partnership taxable year, (i) apply the provisions of SECTIONS 4.4(b), 4.4(c)
and 4.4(d) hereof in whatever order is likely to minimize the economic
distortions that might otherwise result from the Regulatory Allocations and
(ii) divide all allocations pursuant to SECTIONS 4.4(b), 4.4(c) and 4.4(d)
hereof among the Partners in a manner that is likely to minimize such
economic distortions.
4.5 OTHER ALLOCATION RULES.
(a) For purposes of determining the Profits, Losses or any
other items allocable to any period, Profits, Losses and any such other items
shall be determined on a daily, monthly or other basis, as determined by the
General Partners, using any permissible method under Code Section 706 and the
Regulations thereunder.
(b) For purposes of Regulations Section 1.752-3(a)(3), the
Partners agree that Nonrecourse Liabilities of the Partnership in excess of
the sum of (i) the amount of Partnership Minimum Gain and (ii) the total
amount of built-in gain (as defined in Regulations Section 1.752-3(a)(2))
shall be allocated among the Partners in accordance with their respective
Percentage Interests.
(c) In the event Interests are transferred in accordance
with the provisions of ARTICLE VIII hereof during any Partnership taxable
year, the distributive share of Partnership income, gain, loss and deductions
attributable to such transferred Interests for that taxable year shall be
apportioned between the transferor Partner and the person to whom the
Interest is transferred (the "Transferee") as determined by the Transferor
and Transferee, but subject to the constraints and limitations imposed by
Code Section 706. Distributions with respect to Interests transferred shall
be made only to Partners of record on a date designated by the General
Partners as the date of such distribution.
4.6 TAX ALLOCATIONS; CODE SECTION 704(c).
(a) In accordance with Code Section 704(c) and the
Regulations thereunder, solely for income tax purposes, income, gain, loss
and deduction with respect to any property contributed to the capital of the
Partnership (including income, gain, loss and deduction determined with
respect to the alternative minimum tax) shall be allocated among the Partners
so as to take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes (including such
adjusted basis for alternative minimum tax purposes) and its initial Gross
Asset Value, including, but not limited to, special allocations to a
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contributing Partner that are required under Code Section 704(c) to be made
upon distribution of such property to any of the non-contributing Partners.
(b) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to paragraph (ii) of the definition of
"Gross Asset Value" contained herein, solely for federal income tax purposes,
subsequent allocations of income, gain, loss and deduction with respect to
such asset (including income, gain, loss and deduction determined with
respect to the alternative minimum tax) will take account of any variation
between the adjusted basis of such asset (including such adjusted basis for
alternative minimum tax purposes) and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to
allocations under this SECTION 4.6, including the selection of any allocation
method permitted under Regulations Section 1.704-3, will be made as Approved
by the General Partners. Except as otherwise provided in this SECTION 4.6,
all items of Partnership income, gain, loss, deduction and credit will for
tax purposes be divided among the Partners in the same manner as they share
correlative Profits, Losses or Partnership items of income, gain, loss or
deduction, as the case may be, for the taxable year. Allocations pursuant to
this SECTION 4.6 are solely for purposes of federal, state and local taxes
and will not affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Profits, Losses or other items or
distributions pursuant to any provision of this Agreement.
(d) If any taxable item of income or gain is computed
differently from the taxable item of income or gain which results for
purposes of the alternative minimum tax, then to the extent possible, without
changing the overall allocations of items for purposes of either the
Partners' Capital Accounts or the regular income tax (i) each Partner will be
allocated items of taxable income or gain for alternative minimum tax
purposes taking into account the prior allocations of originating tax
preferences or alternative minimum tax adjustments to such Partner (and its
predecessors) and (ii) other Partnership items of income or gain for
alternative minimum tax purposes of the same character that would have been
recognized, but for the originating tax preferences or alternative minimum
tax adjustments, will be allocated away from those Partners that are
allocated amounts pursuant to clause (i) so that, to the extent possible, the
other Partners are allocated the same amount, and type, of alternative
minimum tax income and gain that would have been allocated to them had the
originating tax preferences or alternative minimum tax adjustments not
occurred.
(e) If any portion of gain recognized from the
disposition of property by the Partnership represents the "recapture" of
previously allocated deductions by virtue of the application of Code Section
1245 or 1250 ("RECAPTURE GAIN"), such Recapture Gain will be allocated as
follows:
FIRST, to the Partners, pro rata, in proportion to the lesser of each
Partner's (i) allocable share of the total gain recognized from the
disposition of such Partnership property and (ii) share of depreciation or
amortization with respect to such property (as determined under Regulations
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Sections 1.1245-1(e)(2) and (3)), until each such Partner has been allocated
Recapture Gain equal to such lesser amount; and
SECOND, the balance of Recapture Gain will be allocated among the
Partners whose allocable shares of total gain exceed their shares of
depreciation or amortization with respect to such property (as determined
under Regulations Sections 1.1245-1(e)(2) and (3)), in proportion to their
shares of total gain (including Recapture Gain) from the disposition of such
property;
provided, however, that no Partner will be allocated Recapture Gain under
this SECTION 4.6(e) in excess of the total gain allocated to such Partner
from such disposition.
ARTICLE V
DISTRIBUTIONS
5.1 DISTRIBUTIONS OF AVAILABLE CASH FLOW. Except as
otherwise provided in SECTIONS 5.2 AND 9.6 hereof, Available Cash Flow, if
any, shall be distributed within ten days after the receipt of distributions
from the Operating Partnership to the Partners or otherwise upon receipt and,
in each case, PRO RATA, in accordance with their respective Percentage
Interests. Except as provided in ARTICLES IX OR X , the Partnership shall not
distribute Property (other than Available Cash Flow) unless Approved by the
General Partners.
5.2 WITHHOLDING. Notwithstanding any other provision of
this Agreement, the Managing General Partner is authorized to take any action
that it determines to be necessary or appropriate to cause the Partnership to
comply with any withholding requirements established under any federal, state
or local tax law, including, without limitation, withholding on any
distribution to any Partner. For all purposes of this ARTICLE V, any amount
withheld on any distribution and paid over to the appropriate governmental
body shall be treated as if such amount had, in fact, been distributed to the
Partner.
ARTICLE VI
MANAGEMENT OF PARTNERSHIP
6.1 MANAGEMENT OF PARTNERSHIP. The exclusive management and
control of the business and affairs of the Partnership shall be vested in the
General Partners, and all actions Approved by the General Partners shall be
deemed to be authorized and approved by or on behalf of the Partnership.
Each Partner hereby waives any and all claims such Partner may have against
the Partnership or any other Partner for breach of fiduciary duty, or other
similar responsibility or obligation, PROVIDED the Partnership is managed,
and all decisions affecting the Partnership are made, in accordance with the
terms of this Agreement. Notwithstanding the foregoing, it is understood and
agreed that, except as otherwise provided in this Agreement, each General
Partner shall have all of the rights and powers of a general partner as
provided in the Act and as otherwise provided by law. In dealing with a
General Partner on behalf of the Partnership, no Person shall be required to
inquire into the authority of the General Partners to
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bind the Partnership. Persons dealing with the Partnership are entitled to
rely conclusively on the power and authority of the General Partners as set
forth in this Agreement.
6.2 MANAGING GENERAL PARTNER. Prime GP, in its capacity as
a General Partner, is hereby designated the original Managing General
Partner. The Managing General Partner shall be responsible for conducting the
ordinary and usual business and affairs of the Partnership as more fully set
forth herein. In the event of a Prime Default, the Prime GP shall
automatically be removed as the Managing General Partner and the Blackstone
GP will be appointed the successor Managing General Partner; provided that
the Blackstone GP shall not serve as Managing General Partner in the event of
a Blackstone Default.
6.3 APPROVAL OF THE GENERAL PARTNERS. Except as authorized
pursuant to SECTION 6.4 below or otherwise contemplated in a Budget Approved
by the General Partners, no act, including without limitation, voting of the
Units, shall be taken or sum expended or obligation incurred by the
Partnership, the Managing General Partner or any General Partner with respect
to any matter affecting the Partnership unless Approved by the General
Partners.
6.4 DUTIES OF MANAGING GENERAL PARTNER. The Managing
General Partner is hereby authorized to and shall perform or cause to be
performed the following duties in accordance with and as limited by this
Agreement and in accordance with the Budget:
(a) Protect and preserve the title and interests of the
Partnership with respect to the Property owned by the Partnership;
(b) Pay all taxes, assessments and other impositions
applicable to the Property owned by the Partnership;
(c) Prepare and file tax returns and submit the returns
along with other required tax information to the Partners;
(d) Keep all books of account and other records of the
Partnership in accordance with the provisions of this Agreement;
(e) Employ independent professionals and consultants
necessary or appropriate to carry on the business of the Partnership;
(f) Maintain all funds held or received by the Partnership
and invest such funds on a short term basis, to the extent not immediately
needed for expenditures or distribution to the Partners, in (i) direct
obligations of the United States or an agency thereof, (ii) commercial paper
rated as P-1 by Moody's Investor Service or A-1 by Standard & Poor's Corp. or
similarly rated by any successor to either of such investment rating
services, (iii) readily redeemable money market funds, (iv) certificates of
deposit or banker's acceptances (with a maturity not greater than 90 days)
not to exceed One Hundred Thousand Dollars ($100,000) with any bank, or in
any amount if such bank has (A) an investment grade rating by Moody's
Investor Service or Standard & Poor's Corp. or any successor to either of
such investment rating services and (B) a
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net worth of at least Five Hundred Million Dollars ($500,000,000) or (v) such
other investments and accounts as may be Approved by the General Partners;
(g) Deliver to the Partners, promptly after receipt, copies
of all notices received by the Partnership from third parties asserting
claims or exercising rights or options that are material to the business of
the Partnership;
(h) Obtain and maintain, as may be required by applicable
law, such licenses, permits and governmental authorizations as are necessary
for the lawful conduct of the business of the Partnership;
(i) To the extent that funds of the Partnership are
available therefor, pay all of the Partnership's debts and other obligations,
including, without limitation, the loan made to the Partnership pursuant to
the Partnership Loan Agreement, and make other expenditures in accordance
with an approved Budget;
(j) Make distributions to the Partners in accordance with
ARTICLE V of this Agreement;
(k) Prepare and file all necessary reports, statements and
other documents with Governmental Authorities in connection with the business
of the Partnership;
(l) Perform and observe all covenants required to be
performed and observed under the Loan Documents; and
(m) Perform all other acts and obligations provided
elsewhere in this Agreement to be performed by the Managing General Partner.
Each General Partner shall have the obligation to devote such
of its time to the affairs of the Partnership as is necessary for the
effective operation and management of the business of the Partnership. Each
General Partner shall use its good faith efforts to perform its duties
described in this Agreement, but does not guarantee or warrant that such
duties can or will be performed, nor shall such General Partner be liable for
failure to perform any such duties, nor will any such failure constitute a
breach of any obligation or duty hereunder, unless such failure is the result
of gross negligence, fraud or bad faith, or willful misconduct (not including
actions or omissions taken or omitted in good faith and in a manner
reasonably expected to be in the best interests of the Partnership).
6.5 COMPENSATION OF PARTNERS.
(a) Except as may be expressly provided for in this
Agreement, in an Approved Budget, or hereafter Approved by the General
Partners, no payment will be made by the Partnership for the services of any
Partner or any member, employee, agent or partner of any Partner or an
Affiliate thereof.
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(b) The Managing General Partner, and all Affiliates
thereof, shall be reimbursed by the Partnership for the reasonable out-of-
pocket expenses incurred by the Managing General Partner, or an Affiliate
thereof, on behalf of the Partnership in connection with the business and
affairs of the Partnership, including all legal, accounting, travel and other
similar expenses reasonably incurred by the Managing General Partner in
connection with the management of the Partnership provided such expenses are
(i) in accordance with the Budget Approved by the General Partners, (ii) not
in excess of $25,000 in any calendar year in the aggregate or (iii) otherwise
Approved by the General Partners.
6.6 BUDGET. Prior to the commencement of each fiscal year
of the Partnership, the Managing General Partner shall prepare and submit to
the Partners for consideration a budget (the "Budget") setting forth the
estimated income and expenditures (capital, operating and other) of the
Partnership for such fiscal year. When Approved by the General Partners, the
Managing General Partner shall implement the Budget and shall be authorized
to make the expenditures and incur the obligations provided for in the
Budget. The Managing General Partner shall not pursue any activities or
business on behalf of the Partnership which are not contemplated by the
Budget or otherwise Approved by the General Partners.
6.7 LIMITATION OF LIABILITY. Neither the General Partners,
nor any officer, director, partner, employee or Affiliate of any General
Partner shall be liable, responsible or accountable in damages or otherwise
to the Partnership or any Partner for any action taken or failure to act on
behalf of the Partnership within the scope of the authority conferred or
obligation imposed on such Person by this Agreement or by law, unless such
action or omission was performed or omitted fraudulently or in bad faith or
constituted gross negligence or willful misconduct.
6.8 INDEMNIFICATION. The Partnership shall indemnify and
hold harmless the General Partners and other Partners and each of their
respective partners, officers, directors, stockholders, employees, agents and
Affiliates (collectively, the "Parties") from and against any loss, expense,
damage or injury suffered or sustained by the Parties (or any of them) by
reason of any acts, omissions, or alleged acts or omissions arising out of
its or their activities on behalf of the Partnership or in furtherance of the
interests of the Partnership, including, but not limited to, any judgment,
award, settlement, reasonable attorney's fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim provided that the acts, omissions or alleged acts or
omissions upon which such actual or threatened action, proceeding or claims
are based were not performed or omitted fraudulently or in bad faith or as a
result of gross negligence or willful misconduct by any such Party. Such
indemnification shall be made only to the extent of the assets of the
Partnership.
6.9 NO PARTICIPATION IN MANAGEMENT. The Limited Partners
shall not participate in the management or control of the Partnership's
business, nor shall any Limited Partner transact any business for the
Partnership or have the power to act for or bind the Partnership, said powers
being vested solely and exclusively in the General Partners.
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6.10 NO PERSONAL LIABILITY. Except as otherwise specifically
provided herein, the Limited Partners shall have no personal liability
whatsoever, whether to the Partnership, to any of the Partners or to the
creditors of the Partnership for the debts, obligations, expenses or
liabilities of the Partnership or any of its losses beyond such Partner's
Capital Contributions.
ARTICLE VII
BOOKS AND RECORDS
7.1 BOOKS AND RECORDS. The Managing General Partner shall
keep proper and usual books and records pertaining to the Partnership's
business on an accrual basis in accordance with tax accounting principles or
generally accepted accounting principles consistently applied, showing all of
its assets and liabilities, receipts and disbursements, profits and losses,
Partners' Capital Contributions and distributions and all transactions
entered into by the Partnership. The books and records and all files of the
Partnership shall be kept at its principal office or such other place as the
Approved by the General Partners from time to time and the Partners and their
representatives shall at all reasonable times upon reasonable prior written
notice have reasonable access thereto during normal business hours for the
purpose of inspecting or copying the same. The fiscal year of the
Partnership shall end on December 31 of each year.
7.2 BANK ACCOUNTS. Funds of the Partnership shall be
deposited in an account or accounts in the bank or banks or other financial
institution or institutions Approved by the General Partners. Such account
or accounts shall be in the name of the Partnership and shall be subject to
withdrawal only upon signatures of those Persons authorized from time to time
by the Managing General Partner.
7.3 TAX RETURNS. Federal, state and local tax returns of
the Partnership shall be prepared and timely filed by or at the direction of
the Managing General Partner at the expense of the Partnership. The Managing
General Partner agrees that it shall submit a draft of the Partnership's tax
returns to Blackstone Group for Blackstone Group's approval not less than ten
(10) Business Days prior to the filing of such tax returns.
7.4 TAX DECISIONS AND ELECTIONS. The Managing General
Partner is hereby designated the "Tax Matters Partner" of the Partnership for
all purposes under this Agreement and as such term is defined under the Code.
The Tax Matters Partner shall make or revoke all elections and take all
reporting positions which, in its discretion, it deems necessary or desirable
for the Partnership. Each item of Partnership income and deduction shall be
separately reported on each Partner's income tax return, pursuant to
Regulations Section 1.702-1(a). The Tax Matters Partner shall, if requested
in writing by a Partner, make the election under Code Section 754. Tax
decisions and elections for the Partnership not provided for herein shall be
determined and made by the General Partners.
The following provisions shall apply with respect to the Tax
Matters Partner.
(a) The Tax Matters Partner shall be responsible for the
filing of the Partnership information returns required under Section 6031 of
the Code. Within thirty (30)
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days after the receipt by the Tax Matters Partner of the K-1 from the
Operating Partnership, but no later than ten (10) Business Days before the
due date for filing of the Partnership tax returns after giving effect to any
requested extensions of such due date for filing, the Tax Matters Partner
shall furnish to the Partnership's accountants sufficient information for the
preparation of all required Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters
Partner of its intent to file an original or an amended income tax return of
which such Partner will take a position with respect to a Partnership item
that is inconsistent with the position taken by the Tax Matters Partner on
the Partnership return. Such notice must be given at least thirty (30) days
prior to the filing of such return. At such time, such Partner shall provide
the Tax Matters Partner with a statement detailing the inconsistent item or
items contained in such return. Within ten (10) Business Days of receipt of
such statement, the Tax Matters Partner shall provide a copy of such
statement to each Partner.
(c) The Tax Matters Partner shall include in each
Partnership return sufficient information to entitle each eligible Partner
and any indirect partner (at its request) to notice from the Internal Revenue
Service pursuant to Section 6223(a) of the Code.
(d) Each General Partner reserves the right to participate
in an audit proceeding.
(e) Each Partner reserves the right to enter into a separate
settlement agreement with the Internal Revenue Service. A Partner who enters
into a settlement agreement with the Internal Revenue Service concerning a
Partnership item shall notify the Tax Matters Partner of its terms within ten
(10) days of such agreement, and the Tax Matters Partner shall notify the
other Partners of the terms of such agreement with ten (10) Business Days
after receiving such notice. The Tax Matters Partner shall notify each
other Partner of the terms of any settlement offer received by it within ten
(10) Business Days of receiving such offer.
(f) Each Partner reserves the right to file an
administrative adjustment request under Section 6227 of the Code. Any
Partner filing an administrative adjustment request shall notify the Tax
Matters Partner of its contents within ten (10) Business Days after filing
such request. The Tax Matters Partner shall notify each Partner of the
contents of such request within ten (10) Business Days of the receipt of such
notice.
(g) All Partners shall report to the Tax Matters Partner the
conversion of a Partnership item to a nonpartnership item under Section
6231(b) or any other provision of the Code within ten (10) Business Days of
learning of the conversion.
(h) Each General Partner reserves the right to file a
petition for judicial review and to participate in a judicial proceeding
under Section 6226 and 6228 of the Code. If the Tax Matters Partner files a
petition for judicial review of an appeal under Section 6226 of the Code, it
shall notify each Partner of such Petition or appeal within ten (10) days of
such filing. Any other Partner filing a petition for judicial review or any
appeal under Sections 6226 or 6228 of the
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Code shall notify the Tax Matters Partner of such petition or appeal on or
before the date of filing. The Tax Matters Partner shall notify each Partner
of such filing within ten (10) Business Days of receipt of such notice from
the filing Partner.
(i) The Tax Matters Partner shall not agree to extend the
statute of limitations for assessment without the Approval of the General
Partners.
(j) The provisions of this Section shall govern the conduct
of all parties who are currently Partners and all parties who were Partners
during the applicable Partnership taxable year. A Partner shall not be
relieved of any duties or responsibilities imposed under this Section by the
termination or Transfer of its Interest in the Partnership.
(l) All terms used in this Section that are defined in
Section 6231(a) of the Code shall have the meanings set forth therein.
7.5 TAX EXAMINATION. Each Partner shall give prompt notice
to the other Partners upon receipt of notice that the Internal Revenue
Service or any state or local taxing authority intends to examine any
Partnership income tax returns. The Tax Matters Partner shall promptly
notify the Partners of the commencement of any administrative or judicial
proceedings involving the tax treatment of items of Partnership income, loss,
deductions and credits, and shall further keep the Partners fully informed of
all material developments involved in such proceedings.
7.6 FINANCIAL STATEMENTS. (a) The Managing General Partner,
at the expense of the Partnership, shall prepare and furnish to the Partners
promptly after the close of each fiscal quarter an unaudited statement
showing the operation of the Partnership for such quarter, the balance in
each Partner's Capital Account and the unpaid balance due under all
obligations of the Partnership. The Managing General Partner, at the expense
of the Partnership, shall cause to be prepared and furnished to the Partners
promptly after the close of each fiscal year a balance sheet of the
Partnership dated as of the end of the fiscal year, related statements of
income or loss and changes in financial position for the Partnership for such
fiscal year, and the same information for the fiscal year as is required to
be included in the aforesaid quarterly reports.
(b) The books of the Partnership shall be examined,
certified and audited annually as of the end of each fiscal year of the
Partnership by Ernst & Young or such other recognized firm of independent
certified public accountants that is Approved by the General Partners. For
each fiscal year of the Partnership, such accountants shall determine and
prepare full financial statements, including, without limitation, a balance
sheet, an income statement, a statement of changes in financial position and
a statement of Available Cash Flow. The Managing General Partner shall as
soon as reasonably practical after the end of each such fiscal year of the
Partnership, transmit copies of the foregoing to each Partner. The cost of
all audits and reports provided to the Partners pursuant to this Section
shall be an expense of the Partnership.
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ARTICLE VIII
TRANSFER OR ASSIGNMENT OF PARTNERSHIP INTERESTS
8.1 RESTRICTIONS ON TRANSFER. Except as permitted by this
ARTICLE VIII and in SECTION 9.7, no Partner may Transfer all or any portion
of its rights or Interest in the Partnership or withdraw or retire from the
Partnership without the Approval of the General Partners, and any such
attempted Transfer, withdrawal or retirement not permitted hereunder shall be
null and void; provided, however, any Partner may Transfer its Interests to
an Affiliate without the Approval of the General Partners but no such
Transfer by a Partner to an Affiliate shall relieve the transferring Partner
of its obligations hereunder unless approved by the General Partners.
8.2 PLEDGES.
(a) No Partner may pledge, encumber, lien or otherwise
hypothecate its Interests other than as specifically set forth in this
Section 8.2.
(b) One or more Partners in the Blackstone Group may pledge
its respective Interests to secure repayment of a Permitted Loan. Prime GP
or Prime may not pledge its Interests without the prior written consent of
the Blackstone Group. Any Person to which Interests are pledged shall hold
such security subject to the terms hereof and shall have no right to exercise
any rights hereunder or receive any distributions hereunder until the
occurrence and during the continuance of a default by such Partner under the
applicable documentation pursuant to which such loan and security interests
were granted. In addition, in the event such Person should foreclose upon
the Interest, upon compliance with the provisions of SECTION 8.3 hereof, it,
its designee or any Person to which it shall Transfer the Interests shall be
entitled to become a substitute Partner hereunder with all concomitant
rights, responsibilities and obligations.
8.3 EFFECT OF TRANSFERS. In the event of any transfer or
transfers permitted under this ARTICLE VIII, the Interests so transferred
shall be and remain subject to all of the terms and provisions of this
Agreement; the transferee shall be deemed to have assumed all of the
obligations hereunder relating to the Interests so transferred; and except as
set forth in SECTION 8.1, the transferor shall be deemed relieved of all
obligations hereunder relating to the Interests so transferred that arise
from and after the date of such transfer. Such Transferee shall become a
substitute General Partner (if the Interest acquired is that of a General
Partner) or substitute Limited Partner (if the Interest acquired is that of a
Limited Partner) upon, and only upon (i) execution by the transferor and
Transferee of such documents as counsel for the Partnership may reasonably
require to effect such admission and assumption of the obligations hereunder;
and (ii) payment of all reasonable expenses incurred in connection with such
admission. A substitute General Partner or substitute Limited Partner has all
of the rights and powers and is subject to all of the restrictions and
obligations of its transferor. A Transferee of a Partner who is not admitted
as a substitute General Partner or substitute Limited Partner has no right to
interfere with or participate in the administration of the Partnership's
business, operations, activities or affairs, to acquire any information or
account of Partnership transactions or to inspect the Partnership books and
shall not be deemed a "substituted general partner" or "substituted limited
partner" as such terms are defined in the Act.
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ARTICLE IX
DISSOLUTION; PUT AND CALL OPTIONS
9.1 DISABLING EVENT; SINGLE PURPOSE ENTITY. (a) In the
event a Disabling Event occurs with respect to a General Partner, the Limited
Partner within such General Partner's Group must appoint, within thirty (30)
days of such Disabling Event, a replacement General Partner. Upon such
appointment, the replacement General Partner shall succeed to the Interests
and all of the rights and obligations of the General Partner which was
subject to a Disabling Event.
(b) Each Partner represents, warrants and covenants that it
is and will remain a Single Purpose Entity.
9.2 CERTAIN REMEDIES. For purposes of this ARTICLE IX, the
Partner, after giving effect to SECTION 9.4 hereof, which has caused a Put
Default, Call Default or Single Purpose Entity Default, shall be considered
the "Defaulting Partner" and the other Partners, after giving effect to
SECTION 9.4 hereof, shall be considered the "Nondefaulting Partner". For
purposes hereof, the references to a Nondefaulting Partner or a Defaulting
Partner in the singular in a situation or context in which there are more
than one Nondefaulting Partners or Defaulting Partners, respectively, the
singular use of the term shall be deemed plural. For purposes hereof, in the
event there are more than one Nondefaulting Partners, any election or
decision to be made, or right to be exercised, by the Nondefaulting Partners
shall be made only with the unanimous consent of the Nondefaulting Partners.
Upon the occurrence of (i) a Put Default, (ii) a Call Default, or (iii) a
Single Purpose Entity Default, the Defaulting Partner shall immediately be
deemed an "Inactive Partner."
9.3 INACTIVE PARTNER. A General Partner deemed an Inactive
Partner shall not have any authority to approve or disapprove any decision
regarding the exchange or vote of the Units, the remaining General Partner
acting alone shall be authorized to take any action provided in this
Agreement to be taken by the General Partners, and the consent and approval
of the remaining General Partner shall be deemed to be the Approval of the
General Partners.
9.4 COMMUNITY OF INTEREST.
(a) If Prime or Prime GP, or any of their respective
Transferees are the Defaulting Partner, Nondefaulting Partner, Withdrawing
Partner or Nonwithdrawing Partner, it shall be deemed that Prime, Prime GP,
and all of their Transferees, are the "Defaulting Partner", "Nondefaulting
Partner", "Withdrawing Partner" or "Nonwithdrawing Partner", respectively,
and the entire Percentage Interests of Prime, Prime GP and their respective
Transferees shall be deemed to be the "Percentage Interest" of the Defaulting
Partner, Nondefaulting Partner, Withdrawing Partner or Nonwithdrawing
Partner, as applicable, for the purposes hereof. In such case, Blackstone,
Blackstone GP and all of their Transferees, shall be deemed the
"Nondefaulting Partner", "Defaulting Partner", "Nonwithdrawing Partner" or
"Withdrawing Partner", respectively, and the entire Percentage Interests of
such parties shall be deemed to be the "Percentage Interest" of the
Nondefaulting Partner, Defaulting Partner, Nonwithdrawing
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Partner or Withdrawing Partner, as applicable, for the purposes hereof (and a
notice of election served by any of such parties shall bind all such parties).
(b) If Blackstone or Blackstone GP, or any of their
respective Transferees, are the Defaulting Partner, Nondefaulting Partner,
Withdrawing Partner or Nonwithdrawing Partner, it shall be deemed that
Blackstone, Blackstone GP, and all of their Transferees, are the "Defaulting
Partner", "Nondefaulting Partner", "Withdrawing Partner" or "Nonwithdrawing
Partner", respectively, and the entire Percentage Interests of Blackstone,
Blackstone GP and their respective Transferees shall be deemed to be the
"Percentage Interest" of the Defaulting Partner, Nondefaulting Partner,
Withdrawing Partner or Nonwithdrawing Partner, as applicable, for purposes
hereof. In such case, Prime, Prime GP and all of their Transferees, shall be
deemed the "Nondefaulting Partner", "Defaulting Partner", "Nonwithdrawing
Partner" or "Withdrawing Partner", respectively, and the entire Percentage
Interests of such parties shall be deemed to be the "Percentage Interest" of
the Nondefaulting Partner, Defaulting Partner, Nonwithdrawing Partner or
Withdrawing Partner, as applicable, for purposes hereof (and a notice of
election served by any of such parties shall bind all such parties).
9.5 PUT AND CALL SALE PROVISIONS.
(a) At any time subsequent to a Put Event, Blackstone Group
shall have the right to cause Prime Group, at Prime Group's election, either
(i) to purchase the Interests of Blackstone Group hereunder or (ii) cause the
Partnership to purchase or redeem the Interests of Blackstone Group hereunder
(provided that the Blackstone Group shall have no obligation to contribute or
advance funds to the Partnership for use by the Partnership to purchase or
redeem the Interests of the Blackstone Group) (a "Put"). Blackstone Group
shall exercise such right by giving irrevocable written notice to Prime Group
of the exercise of the Put pursuant to this SECTION 9.5(a). The purchase
price or the redemption price, as applicable, for all the Interests of
Blackstone Group pursuant to the SECTION 9.5(a) shall be the Put Price, which
shall be payable as set forth in SECTION 9.5(d). In the event that a Put
Default occurs which is a Prime Default then notwithstanding anything in this
Agreement to the contrary other than as set forth in SECTION 9.6 hereof,
Blackstone Group, as its sole and exclusive remedies, shall be (i) to act
without the consent of the Prime Group to exchange, sell, refinance or
otherwise dispose of all or any portion of the Property in the manner set
forth in the last sentence of this SECTION 9.5(a), (ii) to receive one
hundred percent (100%) of the Available Cash Flow of the Partnership, whether
from the sale or disposition of the Property or otherwise, until the
Blackstone Group in the aggregate has collected the Put Default Price and
(iii) if the Partnership is unable to convert the Units due to the ownership
restrictions set forth in the Declaration of Trust of PGRT, to withdraw
Units from the Partnership and transfer such Units to the Blackstone Partners
in the manner and subject to the limitations set forth in the fifth sentence
of SECTION 9.7 provided that it shall only withdraw the number of Units with
a Value (as determined below) equal to the Put Default Price. If the
Blackstone Group shall elect to withdraw Units, the Put Default Price shall
be calculated using the date of such withdrawal as "the date of the
consummation of the purchase or redemption of the Blackstone Group's
Interest" (as used in the definition of Put Default Price) and the Value of
the Units shall be determined based on the Value of the Units on such date.
To the extent the Value of the Units withdrawn, determined as set forth
above, is (i) greater than the Put Default
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Price, then the Blackstone Group shall promptly pay such difference to the
Prime Group and (ii) less than the Put Default Price, then the Prime Group
shall promptly pay such difference to the Blackstone Group. Upon Blackstone
Group's receipt of the Put Default Price, including through the withdrawal of
Units, its Interests shall be deemed purchased or redeemed by the Partnership
as determined by the Prime Group. If a Put Default or Call Default which is
a Prime Default occurs, Blackstone Group agrees that (i) it shall use good
faith efforts to sell only that portion of the Property as is necessary to
provide sufficient proceeds to enable the Partnership to fund the balance of
the Put Default Price to the Blackstone Group and (ii) all Units purchased by
the Blackstone Group and/or the Partnership shall be sold prior to or,
subject to clause (i) hereof, concurrently with, the sale of any Units
contributed by the Prime Group.
If a Put Default occurs which is a Blackstone Default, Prime
Group shall have all the rights and remedies set forth in SECTION 9.5(b) as
if a Call Default which is a Blackstone Default occurred and Blackstone Group
shall automatically forfeit its right to cause a Put hereunder.
(b) At any time subsequent to the earlier to occur of (A)
May 17, 2000, or (B) a Single Purpose Entity Default which is a Blackstone
Default, Prime Group shall have the right, at the Prime Group's election,
either (i) to cause Blackstone Group to sell the Interests of Blackstone
Group hereunder to the Prime Group or (ii) to cause the Partnership to
purchase or redeem the Interests of Blackstone Group hereunder (provided that
the Blackstone Group shall have no obligation to contribute or advance funds
to the Partnership for use by the Partnership to purchase or redeem the
Interests of the Blackstone Group) (the "Call"). Prime Group shall exercise
such right by giving irrevocable written notice to Blackstone Group of the
exercise of the Call pursuant to this SECTION 9.5(b). The purchase price or
redemption price, as applicable, for all the Interests of Blackstone Group
pursuant to the SECTION 9.5(b) shall be the Call Price and the Call Price
shall be payable in cash as provided in SECTION 9.5(d) or, at the election of
Prime Group, up to fifty percent (50%) of the Call Price may be paid by the
delivery of Units or common shares of PGRT, which are registered (or have
registration rights after an exchange of Units into common shares of PGRT
pursuant to a registration rights agreement substantially in the form of
Exhibit E to the Contribution Agreement) under the Securities Act of 1933, as
amended; provided, the total number of Units or common shares of PGRT
deliverable hereunder shall not exceed five percent (5%) of the total number
of publicly traded common shares of PGRT PLUS the number of common shares of
PGRT into which the Units owned by the Partnership are exchangeable (prior to
any distribution of Units). Such shares shall be valued at their Value as of
the Scheduled Closing Date. The parties hereto acknowledge and agree that in
the event of a Call Default which is a Blackstone Default, the Prime Group,
as its sole and exclusive remedies, (i) shall be entitled to specific
performance of this SECTION 9.5(b) (or SECTION 9.5(a) if a Put Default occurs
which is a Blackstone Default), (ii) shall receive one hundred percent (100%)
of the Available Cash Flow of the Partnership whether from operations, the
sale or disposition of the Property or otherwise and (iii) shall be paid by
the Blackstone Group an amount equal to all Enforcement Costs incurred by the
Prime Group plus an amount equal to twenty percent (20%) of such Enforcement
Costs compounded annually from the date of the incurrence of such Enforcement
Costs. Notwithstanding the foregoing, the Prime Group shall reserve or
otherwise keep available for payment to the Blackstone Group cash or Property
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(which Property shall be deemed available if it has not been distributed to
the Prime Group) with a Value of not less than (i) the Call Price (or Put
Price in the event of a Put Default which is a Blackstone Default) less (ii)
the amount of Enforcement Costs.
If Prime Group give Blackstone notice exercising the Call under
this SECTION 9.5(b) and then fails to pay the Call Price at the Closing as
required by this SECTION 9.5, then from and after such failure, Prime Group
shall automatically forfeit its right to cause a Call hereunder.
If a Call Default occurs which is a Prime Default, Blackstone
Group shall have those rights and remedies set forth in SECTION 9.5(a) as if
a Put Default which is a Prime Default occurred.
(c) The parties hereto acknowledge and agree that compliance
with the agreements in this SECTION 9.5 are necessary to protect the
interests of the parties hereto, and that a breach by the parties of the
provisions of this SECTION 9.5 will cause irreparable harm that cannot be
compensated by monetary damages and that the parties hereto shall be entitled
to specific performance of the provisions of this SECTION 9.5.
(d) The closing of a transaction pursuant to this SECTION
9.5 shall be held at the principal office of the Partnership on the date (the
"Scheduled Closing Date") determined in accordance with the following: (i)
with respect to the closing of a Put, on the earlier to occur of (A) the
120th day following the date notice was given by Blackstone Group exercising
the Put or (B) the date designated by the Prime Group upon not less than five
(5) Business Days notice to Blackstone Group or (ii) with respect to the
closing of a Call, on the earlier to occur of (A) the 10th day following the
date notice was given by the Prime Group exercising the Call or (B) the date
designated by the Prime Group upon not less than five (5) Business Days
notice to the Blackstone Group. At such closing, the Blackstone Group shall
assign to the Partnership, Prime GP or Prime, as directed by the Prime Group,
by such instruments of transfer as may reasonably be requested by such
purchasing party, the Interest in the Partnership to be sold free and clear
of all claims, liens, security interests and encumbrances and, at the request
of the Partnership, Prime GP or Prime, as applicable, in order to properly
set forth the record title to the assets of the Partnership, shall convey and
transfer to the such purchasing party, with covenants of special warranty as
to the selling party's Interest in the Partnership, an undivided percentage
interest in the assets of the Partnership in the same percentage as the
Blackstone Group's Percentage Interest and execute all other documents that
may be necessary to effectuate the purposes of this Agreement. Except as set
forth in SECTION 9.5(b) in the case of a Call, at the closing, the
Partnership, Prime or Prime GP, as determined by the Prime Group, shall pay
the purchase price for such Interest in the Partnership by wire transfer of
immediately available funds; and the Partnership, Prime or Prime GP, as
applicable, shall assume the obligations of the Blackstone Group under this
Agreement and shall execute such instruments of assumption as shall be
reasonably requested by Blackstone Group to confirm such assumption. At the
closing, all Capital Loans made pursuant to ARTICLE III hereof shall be paid
in full and shall be deducted from or added to, as applicable, the purchase
price.
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(e) In addition to the other rights and remedies of Prime
Group set forth herein, the Prime Group may, or may cause the Partnership to,
set off against, and/or reduce any amount due the Blackstone Group by an
amount equal to the Enforcement Costs. If a Call Default occurs which is a
Prime Default, the Call Price shall be increased by an amount equal to the
Enforcement Costs.
(f) The Prime Group and the Blackstone Group recognize and
agree that the provisions of this SECTION 9.5 are an integral part of this
Agreement and may not be severed from this Agreement for any reason
whatsoever. No Partner would have entered into this Agreement without the
existence of this SECTION 9.5. The obligations of each member of the Prime
Group and Blackstone Group under this SECTION 9.5 are absolute and
irrevocable; each member of the Prime Group and Blackstone Group shall be
obligated to perform its obligations under SECTION 9.5 notwithstanding any
event or state of facts whatsoever (including without limitation the
bankruptcy of any Partner).
9.6 DISTRIBUTIONS
Notwithstanding anything in ARTICLES V, IX and X in this
Agreement to the contrary, distributions of Available Cash Flow and
distributions upon winding up of the Partnership shall be subject to the
following restrictions:
(a) Upon the occurrence of a Blackstone Default, Prime Group
shall be entitled to receive one hundred percent (100%) of Available Cash
Flow; provided the Prime Group shall reserve or otherwise keep available
cash or Property (which Property shall be deemed available if it has not
been distributed to the Prime Group) with a Value not less than the Call
Price (or Put Price in the event of a Put Default which is a Blackstone
Default) less an amount equal to the Enforcement Costs.
(b) Upon the occurrence of a Put Default which is a Prime
Default, Blackstone Group shall be entitled to receive an aggregate
amount equal to the Put Default Price (whether, in the aggregate, under
SECTION 5.1(a), SECTION 10.2 or otherwise), in complete redemption or
purchase of their Interests prior to any distribution being made to the
Prime Group.
(c) There shall be deducted from the amount of any distribution
payable to (i) a Non-contributing Partner, the principal amount of any
outstanding Capital Loan and interest thereon, which amount shall be paid
to the applicable Contributing Partner(s) as set forth in SECTION 3.4(b)
in repayment of the applicable Capital Loan and (ii) the Blackstone
Group, the aggregate amount of any Enforcement Costs (but without
duplication of such amounts if such amounts have been previously set off
against amounts due to, or was otherwise paid by, the Blackstone Group).
9.7 WITHDRAWALS. Each Group shall have the right to
withdraw from the Partnership at any time after the earlier to occur of (a)
the third anniversary of the date of this Agreement or (b) a Change of
Control Event, by the giving of written notice to the other Group
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hereunder (a "Withdrawal Notice"; and the Group providing such Withdrawal
Notice being a "Withdrawing Partner" and the Group receiving such Withdrawal
Notice, a "Nonwithdrawing Partner" giving effect to the community of
interests provisions of SECTION 9.3). Upon receipt of the Withdrawal Notice,
the Nonwithdrawing Partner shall have the right to exercise their Put or
Call, as applicable, for a period of thirty (30) days subsequent to the
receipt of such notice. In the event the Nonwithdrawing Partner exercises
the Put or Call, as applicable, the provisions of SECTION 9.5 shall control.
In the event that the Nonwithdrawing Partner does not exercise the Put or
Call as provided herein during such thirty (30) day period, the Withdrawing
Partner shall have the right (i) to cause the Partnership to sell only such
portion of the Property as is required to satisfy all Partnership liabilities
(or establish reserves for contingent liabilities) and to then (ii) withdraw
all, all but not less than all, of its Capital Account and the Partnership
shall distribute to Withdrawing Partner a number of Units (and a portion of
all other Property which is not Units) equal to the Percentage Interest of
such Withdrawing Partner multiplied by the number of Units (or the fair
market value of all other Property that is not Units) held by the
Partnership. Blackstone Group agrees that if it is the Withdrawing Partner
that (i) it shall sell only that portion of the Property as is necessary to
provide sufficient proceeds to enable the Partnership to satisfy all
Partnership liabilities (or establish reserves for contingent liabilities)
and (ii) all Units purchased by the Blackstone Group and/or the Partnership
shall be liquidated or distributed to the Blackstone Group, as applicable,
prior to the sale or distribution to the Blackstone Group of any Units
contributed by the Prime Group. Any Withdrawing Partner shall be deemed to
have withdrawn as a Partner of the Partnership as of such date of such
withdrawal. In addition, the Put and Call rights shall terminate as of the
date of such withdrawal. The withdrawal of a Partner shall not dissolve the
Partnership.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 LIQUIDATING EVENTS. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) December 31, 2050;
(b) the sale of all or substantially all of the Property;
(c) the unanimous agreement of all Partners; or
(d) any event causing the dissolution of the Partnership under
the Act unless the remaining Partners, upon a vote taken within thirty
(30) days of the event triggering such dissolution, unanimously agree to
continue the Partnership.
The Partners hereby agree that, notwithstanding any provision of the Act, the
Partnership shall not dissolve prior to the occurrence of a Liquidating Event.
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10.2 WINDING UP. Upon the occurrence of a Liquidating Event,
the Partnership shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets and satisfying the
claims of its creditors and Partners. No Partner shall take any action that
is inconsistent with, or not necessary to or appropriate for, the winding up
of the Partnership's business and affairs. The General Partners (or, in the
event there are no General Partners, the Limited Partners or any Person
elected unanimously by the Limited Partners (the "Liquidator")) shall be
responsible for overseeing the winding up and dissolution of the Partnership
and shall take full account of the Partnership's liabilities, and the
Property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom, to the extent sufficient,
shall be applied and, subject to SECTION 9.6 hereof, distributed in the
following order:
(a) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors, other than Partners, in
the order of priority as provided by law;
(b) Second, to the establishment of reserves in amounts
established by the Liquidator to provide for contingent liability, if
any;
(c) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to Partners;
(d) Fourth, the balance, if any, to the General Partners and
Limited Partners in accordance with their respective Capital Accounts,
after giving effect to all contributions, distributions and allocations
for all periods, including the period in which such distribution occurs.
Within a reasonable time following the completion of the
liquidation of the Property (but not longer than 90 days), the Liquidator
shall furnish to all of the Partners a statement which shall set forth the
assets and liabilities of the Partnership as of the date of complete
liquidation and the portion of distributions to which each Partner is
entitled. No Partner shall have any right to demand or receive property
other than cash upon dissolution and liquidation of the Property or to demand
the return of its Capital Contributions from the Partnership. Upon
completion of the liquidation of the Partnership and the distribution of all
Partnership funds, the Partnership shall terminate, and the Liquidator shall
have the authority to execute and record documents required to effectuate the
dissolution and termination of the Partnership.
10.3 DEFICIT CAPITAL ACCOUNT BALANCE. If, upon liquidation
of the Partnership pursuant to SECTION 10.2(d), any Partner (or any Person
which is an Transferee of or successor to any Interest of such Partner) has a
deficit Capital Account, such Partner (or such Transferee or successor of
such Partner) shall have no obligation to make any contribution to the
capital of the Partnership with respect to such deficit, and such deficit
shall not be considered a debt owed to the Partnership or to any other Person
for any purpose whatsoever. In the discretion of the Liquidator, in order to
comply with the requirements of Regulations Section 1.704-1(b)(ii)(b)(2)
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or otherwise, a PRO RATA portion of the distributions that would otherwise be
made to the General Partners and Limited Partners pursuant to SECTION 10.2
may be:
(a) distributed to a trust established for the benefit of the
General Partners and the Limited Partners; PROVIDED such trust is a
liquidating trust or a grantor trust for federal income tax purposes, for
the purpose of liquidating Partnership assets, collecting amounts owed to
the Partnership and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partners arising out of
or in connection with the Partnership. The assets of any such trust
shall be distributed to the General Partners and the Limited Partners
from time to time at such times and in such amounts as determined, in the
reasonable discretion of the Liquidator, to be appropriate in the same
proportions as the amount distributed to such trust by the Partnership
would otherwise have been distributed to the General Partners and the
Limited Partners pursuant to SECTION 10.2; or
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership; PROVIDED
that such withheld amounts shall be distributed to the General Partners
and the Limited Partners as soon as practicable.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given on the date of service if served personally; three (3) business days
after the date of mailing, if mailed, by first class mail, registered or
certified, postage prepaid; one (1) business day after delivery to the
courier if sent by private receipt courier guaranteeing next day delivery,
delivery charges prepaid; the date of receipt by the sender of an answer back
receipt, if sent by facsimile with answer back receipt, and in each case,
addressed as follows:
If to Prime GP to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60607
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
37
<PAGE>
and with a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Facsimile No.: (312) 917-1684
Attn: General Counsel
and, if to Prime to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
and with a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Facsimile No.: (312) 917-1684
Attn: General Counsel
and, if to Blackstone GP to:
c/o Blackstone Real Estate Advisors L.P.
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Gary M. Sumers
Facsimile No.: (212) 754-8726
and, if to Blackstone to:
c/o Blackstone Real Estate Advisors L.P.
38
<PAGE>
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Gary M. Sumers
Facsimile No.: (212) 754-8726
or to such other place as the respective Partner may, from time to time,
designate in a written notice to the other Partners. All communications
among Partners in the normal course of the Partnership business shall be
deemed sufficiently given if sent by regular mail, postage prepaid.
11.2 BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
heirs, legatees, legal representatives, successors, transferees and assigns.
11.3 THIRD PARTIES. None of the provisions of this Agreement
shall be for the benefit of or enforced by any Person not a party to this
Agreement.
11.4 REMEDIES CUMULATIVE. No remedy herein conferred upon
any party is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise. No single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any other or further exercise
thereof.
11.5 CONSTRUCTION. Every covenant, term and provision of
this Agreement shall be construed simply according to its fair meaning and
not strictly for or against any Partner.
11.6 HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or
any provision hereof.
11.7 SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity or legality of the remainder of this Agreement.
11.8 INCORPORATION BY REFERENCE. Every exhibit, schedule and
other appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
11.9 FURTHER ACTION. Each Partner agrees to perform all
further acts and execute, acknowledge and deliver any documents which may be
reasonably necessary, appropriate or desirable to carry out the provisions of
this Agreement.
11.10 VARIATION OF PRONOUNS AND DESCRIPTIVE ADVERBS. All
pronouns and any variations thereof shall be deemed to refer to masculine,
feminine or neuter, singular or plural, as the identity of the Person or
Persons may require. Words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole, unless the context otherwise
requires.
39
<PAGE>
11.11 GOVERNING LAW. The laws of the State of Delaware shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners, without regard to
the principles of conflicts of laws.
11.12 WAIVER OF ACTION FOR PARTITION. Each of the Partners
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Property.
11.13 COUNTERPART EXECUTION. This Agreement may be executed
in any number of counterparts with the same effect as if all of the Partners
had signed the same document. All counterparts shall be construed together
and shall constitute one agreement.
[signature pages follow]
40
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day first above set forth.
PARTNERS
GENERAL PARTNERS:
PG/PRIMESTONE, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: /s/ Ray Grinvalds
--------------------------------
Name: Ray Grinvalds
Title: Vice President
BRE/PRIMESTONE INVESTMENT MANAGEMENT
L.L.C.
its general partner
By: /s/ Steven Orbuch
--------------------------------
Name: Steven Orbuch
Title: VP and Assistant Secretary
41
<PAGE>
LIMITED PARTNERS:
PG/PRIMESTONE, L.L.C.
its limited partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: /s/ Ray Grinvalds
--------------------------------
Name: Ray Grinvalds
Title: Vice President
BRE/PRIMESTONE INVESTMENT L.L.C.
its limited partner
By: /s/ Steven Orbuch
--------------------------------
Name: Steven Orbuch
Title: VP and Assistant Secretary
42
<PAGE>
EXHIBIT A
PARTNER'S CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAMES AND ADDRESSES CAPITAL CAPITAL PERCENTAGE
CONTRIBUTIONS ACCOUNT INTERESTS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL PARTNERS
- --------------------------------------------------------------------------------
Prime GP $1,134,600 $1,134,600 1%
- --------------------------------------------------------------------------------
Blackstone GP $1,134,600 $1,134,600 1%
- --------------------------------------------------------------------------------
LIMITED PARTNERS
- --------------------------------------------------------------------------------
Prime $66,941,400 $66,941,400 59%
- --------------------------------------------------------------------------------
Blackstone $44,249,400 $44,249,400 39%
- --------------------------------------------------------------------------------
$113,460,000 $113,460,000 100%
- --------------------------------------------------------------------------------
</TABLE>
The above Capital Contributions were made (i) in cash by each of Blackstone
GP and Blackstone and (ii) in cash in the amount of $576,000 and 3,375,000
Units by Prime GP and Prime, which Units have the agreed upon value set forth
above.
43
<PAGE>
Exhibit 43
November 11, 1997
Prudential Securities Incorporated
Friedman, Billings, Ramsey & Co., Inc.
Smith Barney Inc.
Morgan Keegan & Company, Inc.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Re: Prime Group Realty Trust
Common Shares of Beneficial Interest
Gentlemen:
As of the close of the Offering referred to below, the undersigned,
Primestone Investment Partners, L.P. ("Primestone") will be the beneficial owner
of limited partnership interests ("Common Units") in Prime Group Realty, L.P., a
Delaware limited partnership (the "Operating Partnership"), which Common Units
are exchangeable on a one-for-one basis, for common shares of beneficial
interest (the "Common Shares") of Prime Group Realty Trust, a Maryland real
estate investment trust (the "Company"). The undersigned understands that the
Company has filed a Registration Statement on Form S-11 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") for
the registration of up to 14,237,000 Common Shares (including 1,857,000 Common
Shares subject to an over-allotment option) (the "Offering"). The undersigned
further understands that you are contemplating entering into an Underwriting
Agreement with the Company and the Operating Partnership in connection with the
Offering. All terms not otherwise defined herein shall have the same meanings as
in the Underwriting Agreement.
In order to induce the Company, the Operating Partnership, you and the
other Underwriters to enter into the Underwriting Agreement and to proceed with
the Offering, the undersigned agrees, for the benefit of the Company, the
Operating Partnership, you and the other Underwriters, that should the Offering
be effected, the undersigned will not, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of (i) any Common Units or Common Shares or other
shares of beneficial interest of the Company or of securities substantially
similar thereto or (ii) any other securities convertible into, or exchangeable
or exercisable for, Common Units or Common Shares or other shares of beneficial
interest of the Company or such similar securities, beneficially owned (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
by the undersigned on the date hereof or hereafter acquired for a period of (i)
two years in the case of Common Units contributed by The Prime Group, Inc.
("Prime") to Primestone (except in the case of a Dividend Reduction and then in
such event no
<PAGE>
earlier than one year) and (ii) one year in the case of Common Units purchased
by Primestone, in each case, subsequent to the date of the final Prospectus
filed with the Commission pursuant to Rule 424(b) of the Securities Act of 1933,
as amended (the "Act") promulgated by the Commission or if no filing under Rule
424(b) is made, the date of the final Prospectus included in the Registration
Statement when declared effective under the Act. For the purposes hereof,
"Dividend Reduction" means the dividend paid on a Common Share of the Company
for each of two consecutive fiscal quarters of the Company has been in an amount
less than eighty-five percent (85%) of the dividend paid on a Common Share of
the Company in the first full fiscal quarter of the Company subsequent to the
Offering.
Further, Primestone agrees that prior to the effective date of the
Registration Statement, Primestone will not, without the prior written consent
of Prudential Securities Incorporated on behalf of the Underwriters, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose or transfer (or announce any offer,
sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other disposition or transfer) of (i) any Common Units or Common Shares or
other shares of beneficial interest of the Company or of securities
substantially similar thereto or (ii) any other securities convertible into, or
exchangeable or exercisable for, any Common Units or Common Shares or other
shares of beneficial interest of the Company or such similar securities,
beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) by the undersigned on the date hereof or
hereafter acquired without first requiring any such offering or acquiring
parties to execute and deliver to you an agreement of substantially the tenor
hereof.
For purpose of this agreement, the exchange of Common Units into Common
Shares will be deemed a transfer hereunder.
The undersigned, whether or not participating in the Offering, confirms
that he, she or it understands that the Underwriters and the Company will rely
upon the representations set forth in this agreement in proceeding with the
Offering. This agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
-2-
<PAGE>
Very truly yours,
PG/PRIMESTONE, L.L.C., in its
capacity as a general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: /s/ Robert J. Rudnik
---------------------------------
Name: Robert J. Rudnik
Title: Executive Vice President
BRE/PRIMESTONE INVESTMENT MANAGEMENT
L.L.C., in its capacity
as a general partner
By: /s/ Steven Orbuch
---------------------------------
Name: Steven Orbuch
Title: Vice President
-3-
<PAGE>
DOCUMENT NUMBER:
255103
-4-
<PAGE>
Exhibit 44
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "AGREEMENT") dated as of November 17, 1997 made
by Primestone Investment Partners L.P., a Delaware limited partnership (the
"PLEDGOR"), and Prudential Securities Credit Corporation, a Delaware corporation
(the "LENDER").
W I T N E S S E T H:
WHEREAS, the Pledgor has entered into an Amended and Restated Agreement
of Limited Partnership (including, without limitation, all exhibits thereto,
as amended, supplemented or otherwise modified from time to time, the
"PARTNERSHIP AGREEMENT") of Prime Group Realty, L.P., a Delaware limited
partnership ("PRIME") dated as of the date hereof among Prime Group Realty
Trust, a Maryland real estate investment trust (the "REIT") and The Nardi
Group, L.L.C., a Delaware limited liability company, as the General Partners
and the Persons whose names are set forth on Exhibit A thereto, as the
Limited Partners;
WHEREAS, pursuant to the Partnership Agreement the Pledgor is the
beneficial and record owner of the number of certificated limited partnership
interests issued by Prime pursuant to the Partnership Agreement identified on
Schedule I hereto (the "OP UNITS", and the OP Units together with the REIT
Stock (as defined below) collectively, the "PLEDGED SHARES");
WHEREAS, pursuant to the Partnership Agreement the Pledgor has the
right, subject to certain conditions, to exchange each OP Unit for one common
share of the REIT or, at the option of the REIT, cash equal to the fair
market value of such common share of the REIT at the time of exchange;
WHEREAS, the Pledgor has entered into the Credit Agreement dated as of
the date hereof (as the same may from time to time be amended, extended,
supplemented, restated or otherwise modified or replaced, the "CREDIT
AGREEMENT"; terms used herein, and not otherwise defined herein, are used
with the meanings ascribed to them in the Credit Agreement) between the
Pledgor and the Lender pursuant to which the Lender has agreed to make a loan
to the Pledgor in an amount no greater than the Commitment; and
WHEREAS, as a condition precedent to the Lender's entering into the
Credit Agreement, the Lender has required the Pledgor to grant, assign and
pledge, and the Pledgor has agreed to grant, assign and pledge, to the Lender
a continuing first priority security interest in and to all its rights, title
and interests in the Pledged Collateral (as hereinafter defined) to secure
all of the obligations of the Pledgor to the Lender under the Credit
Agreement, the Note and the other Loan Documents.
NOW, THEREFORE, Pledgor, intending to be bound hereby, in consideration
of the premises hereof, in order to induce the Lender to provide the Loan
under and in accordance with the terms of the Credit Agreement and for other
good and valuable consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, hereby agrees with, and for the
benefit of, the Lender as follows:
SECTION 1. PLEDGE. Pledgor hereby pledges and assigns to the Lender and
grants to the Lender a continuing first and prior security interest in all of
its rights, title and interests in and to, whether now owned or existing or
hereafter acquired or arising:
(i) Prime, including without limitation, the OP Units;
(ii) all common shares issued by the REIT in exchange for the OP Units
("REIT STOCK");
(iii) all payments due or to become due to the Pledgor arising out of,
as a result of or in connection with the OP Units, whether as distributions
of cash or property or otherwise and all of Pledgor's rights arising out of,
as a result of or in connection with the Pledged Shares, whether now existing
or hereafter arising or acquired, to exercise all voting, consensual and
other powers of ownership pertaining to the Pledge Shares (including, without
limitation, to make determinations, to exercise any election (including,
without limitation, election of remedies) or option, to give or receive any
notice, consent, amendment, waiver or approval), together with full power and
authority to demand, receive, enforce, collect or give receipt for any of the
foregoing, to enforce or execute any checks or other instruments or orders,
to file any claims and to take any action which, in the opinion of the
Lender, may be necessary or advisable in connection with any of the foregoing;
(iv) (a) that certain Registration Rights Agreement dated as of November
17, 1997 (as the same may from time to time be amended, supplemented,
restated or modified, the "REGISTRATION RIGHTS AGREEMENT") among the REIT,
Prime, The Prime Group, Inc., Primestone Investment Partners L.P. and the
other investors named therein and (b) the Partnership Agreement, (the
Partnership Agreement together with the Registration Rights Agreement
collectively, the "ASSIGNED AGREEMENTS"), including, without limitation, (1)
all rights of the Pledgor to receive moneys due and to become due under or
pursuant to the Assigned Agreements, (2) all rights of the Pledgor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to
the Assigned Agreements, (3) claims of the Pledgor for damages arising out of
or for breach of or default under the Assigned Agreements, (4) the right of
the Pledgor to terminate the Assigned Agreements, to perform thereunder and
to compel performance and otherwise exercise all remedies thereunder and (5)
the right of the Pledgor to exchange OP Units into REIT Stock, including,
without limitation, all income, cash, dividends or other distributions
received therefrom; and
(v) all proceeds and any replacements of any of the foregoing;
all of the foregoing being herein referred to as the "PLEDGED COLLATERAL."
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
indefeasible payment of all liabilities, obligations and indebtedness of any
and every kind and nature heretofore, now or hereafter owing, arising, due or
payable from the Pledgor to the Lender pursuant to the Credit Agreement, the
Note and all other Loan Documents to which it is a party,
2
<PAGE>
however evidenced, created, incurred, acquired or owing, whether for
principal, interest, fees, indemnification, expenses or otherwise, whether
primary or secondary, direct or indirect, joint or several, contingent or
fixed, or otherwise, including the expenses of preparing for and selling any
and all of the Pledged Collateral and the reasonable attorneys' fees and
legal expenses incurred in connection therewith by the Lender and including,
without limitation, obligations of performance, now or hereafter given by
Pledgor to the Lender and whether or not evidenced by promissory notes or
other evidence of indebtedness (all such obligations and liabilities being
hereinafter collectively referred to as the "OBLIGATIONS"). The Pledgor and
the Lender hereby agree that they intend the security interest hereby granted
to attach upon the execution of this Agreement.
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. (a) Should any of the Pledged
Collateral at any time be represented or evidenced by a certificate or
instrument, such certificates or instruments shall be endorsed, delivered to
and held by or on behalf of the Lender pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Lender. Upon the day after the maturity of the
Loan (if the Obligations have not been paid in full) or upon the occurrence
of an Event of Default under the Credit Agreement and/or the other Loan
Documents (any such event being an "ACCELERATION DEFAULT"), the Lender shall
have the right, at any time in its discretion and without notice to the
Pledgor, to transfer to or to register in the name of the Lender or any of
its nominees any or all of the Pledged Collateral. In addition, the Lender
shall have the right at any time to exchange certificates or instruments
representing or evidencing the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
(b) The books and records of Prime shall be marked to reflect the
transfer of the Pledged Collateral and/or the pledge and security interests
granted to the Lender under this Agreement, as applicable.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to the Lender as follows:
(a) The OP Units have been, and the REIT Stock upon the exchange of the
OP Units for the appropriate number of REIT Stock, will be duly authorized
and validly issued, are fully paid and non-assessable and represent, on the
Closing Date, the percentage of the issued limited partnership interests of
Prime as is set forth on SCHEDULE I hereto; and, except as set forth in the
REIT's most current registration statement filed with the SEC and in Section
3.08 of the Credit Agreement, no warrants, subscription rights or options are
outstanding with respect to the Pledged Shares.
(b) Other than as set forth in Section 3.08 of the Credit Agreement, it
is the legal and beneficial owner of the OP Units as indicated on SCHEDULE I
hereto, free and clear of any Liens, adverse claims, security interests,
options or other charges or encumbrances, except for the security interests
created by this Agreement.
(c) The pledge of the Pledged Collateral pursuant to this Agreement,
together with the delivery to the Lender of the certificates evidencing the
OP Units and the filing of the
3
<PAGE>
appropriate financing statements, create a valid and perfected continuing
first priority Lien and security interest in the Pledged Collateral, securing
the indefeasible payment and performance of the Obligations.
(d) Other than as set forth in Section 3.08 of the Credit Agreement, no
authorization, consent, approval or other action by, and no notice to or
filing with, any Governmental Authority, regulatory body or other Persons is
required to be obtained or made by Pledgor either (i) for the pledge by
Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by Pledgor, or (ii) for
the exercise by the Lender of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to
this Agreement, subject to applicable state and federal securities laws.
(e) Other than as set forth in Section 3.08 of the Credit Agreement,
there are no restrictions on the transfer of the Pledged Collateral, except
such, if any, as are imposed by operation of law. Other than as set forth in
Section 3.08 of the Credit Agreement, Pledgor has the right to transfer the
Pledged Collateral free of any Liens or encumbrances and without the consent
of the creditors of the Pledgor (other than the Lender), any persons or any
Governmental Authority whatsoever.
(f) Other than as set forth in Section 3.08 of the Credit Agreement,
neither the execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the compliance with or performance
of the terms and conditions of this Agreement by Pledgor is prevented by,
limited by, conflicts with or will result in the breach or violation of or a
default under the terms, conditions or provisions of (i) the by-laws or the
certificate of incorporation (or an equivalent organizational document) of
such Pledgor, Prime or the REIT or any agreement among the partners of Prime,
(ii) any mortgage, security agreement, indenture, evidence of indebtedness,
loan or financing agreement, trust agreement or other agreement or instrument
to which such Pledgor is a party or by which it is bound or to which any of
Pledgor's property or assets is subject, or (iii) any provision of law, any
order of any court or administrative agency or any rule or regulation
applicable to such Pledgor or any of its properties, subject to applicable
state and federal securities laws.
(g) Pledgor has full power, right and legal authority to execute,
deliver and perform its obligations under this Agreement and has taken all
partnership and other actions necessary to authorize the execution and
delivery of, and the performance of its obligations hereunder.
(h) This Agreement constitutes the legal, valid and binding obligation
of Pledgor, enforceable in accordance with its terms, subject to the effect
of any applicable bankruptcy, insolvency, reorganization or moratorium or
similar laws affecting the rights of creditors generally.
(i) Any assignee of all or any portion of the Pledged Collateral is
entitled to receive payments with respect thereto without any defense,
counterclaim, setoff, abatement, reduction, recoupment or other claim
arising out of the actions of Pledgor.
4
<PAGE>
(j) There are no actions, suits or proceedings (whether or not
purportedly on behalf of Pledgor) pending or, to the knowledge of Pledgor,
threatened affecting Pledgor that involve the Pledged Collateral, this
Agreement, the Credit Agreement, the Note or any of the other Loan Documents.
(k) Each Assigned Agreement, a true and complete copy of which has been
furnished to the Lender, has been duly authorized, executed and delivered by
Prime and the REIT and, to Pledgor's best knowledge, the other parties
thereto, has not been amended or otherwise modified, is in full force and
effect and is binding upon and enforceable against all parties thereto in
accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization or moratorium or similar laws
affecting the rights of creditors generally. There exists no default under
each Assigned Agreement by any party thereto. Each of the REIT, Prime, and
the Primestone Partners has executed and delivered to the Lender a consent to
the assignment of the Assigned Agreement pursuant to the Credit Agreement.
SECTION 5. FURTHER ASSURANCES. Pledgor hereby agrees that at any time
and from time to time, at its expense, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action,
that may be reasonably necessary or desirable and whether or not requested by
Lender, or that the Lender may reasonably request, in order to perfect and
protect any Lien or security interest granted or purported to be granted
hereby or to enable the Lender to exercise and enforce its rights and
remedies hereunder, subject to applicable state and federal securities laws,
with respect to any Pledged Collateral. Pledgor agrees that at any time and
from time to time, upon the written request of the Lender and at the cost and
expense of the Pledgor, the Pledgor will promptly and duly execute and
deliver any and all instruments and documents and take such action as the
Lender deems necessary.
SECTION 6. VOTING RIGHTS; DISTRIBUTIONS, ETC. (a) So long as no
Acceleration Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement, the
Credit Agreement or any other Loan Document to which Pledgor is a party;
PROVIDED, HOWEVER, that (a) Pledgor shall not vote for or consent to, any
amendment, supplement, restatement or modification to the Partnership
Agreement without the prior written consent of the Lender and (b)
Pledgor shall not exercise any other voting right without giving the
Lender prior written notice whenever Pledgor shall exercise or refrain
from exercising any such voting or other consensual right if such action
would have a Material Adverse Effect on the value of the Pledged
Collateral or any part thereof.
(ii) Pledgor shall be entitled to receive and retain any and all
distributions, income, dividends and interest paid in respect of the
Pledged Collateral; PROVIDED, HOWEVER, that any and all:
(A) income, dividends and distributions paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral;
5
<PAGE>
(B) income, dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of contributed capital or capital surplus; and
(C) all amounts paid, payable or otherwise distributed in
respect of redemption of, or in exchange for, any Pledged
Collateral,
shall be forthwith delivered to the Lender to hold as, Pledged
Collateral and shall, if received by Pledgor, be received in trust for
the benefit of the Lender, be segregated from the other property or
funds of Pledgor, and be forthwith delivered to the Lender as Pledged
Collateral in the same form as so received (with all necessary
endorsements).
(iii) The Lender shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to
exercise the voting and other rights which it is entitled to exercise
pursuant to clause (i) above and to receive the distributions, income,
dividends, or interest payments which it is authorized to receive and
retain pursuant to clause (ii) above.
(b) Upon the occurrence and during the continuance of an Acceleration
Default:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) hereof and to receive the income, dividends
and interest payments which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) hereof shall cease, and all such
rights shall thereupon become vested in the Lender who shall thereupon
have the sole right to exercise such voting and other consensual rights
and to receive and hold as Pledged Collateral such income, dividends and
interest payments.
(ii) All income, dividends and interest payments which are received
by Pledgor contrary to the provisions of clause (i) of this Section 6(b)
shall be received in trust for the benefit of the Lender, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Lender as Pledged Collateral in the same form as so received
(with all necessary endorsements).
SECTION 7. TRANSFERS AND OTHER LIENS; ADDITIONAL INTERESTS. (a) Pledgor
hereby agrees that it will not (i) sell or otherwise transfer or dispose of,
or grant any interest in or option with respect to, any of the Pledged
Collateral, or (ii) create or permit to exist any Lien, security interest, or
other charge or encumbrance upon or with respect to any of the Pledged
Collateral, except for the security interests under this Agreement or as
permitted by Section 3.08 of the Credit Agreement.
(b) The Pledgor shall at its expense:
6
<PAGE>
(i) perform and observe all the terms and provisions of the
Assigned Agreements to be performed or observed by it, maintain the
Assigned Agreements in full force and effect, enforce the Assigned
Agreements in accordance with their respective terms; and
(ii) furnish to the Lender promptly upon receipt thereof copies of
all notices, requests and other documents received by the Pledgor under
or pursuant to the Assigned Agreements, and from time to time (A)
furnish to the Lender such information and reports regarding the
Assigned Agreements as the Lender may reasonably request and (B) upon
request of the Lender make to any other party to the Assigned Agreements
such demands and requests for information and reports or as the Pledgor
is entitled to make thereunder.
(c) The Pledgor shall not:
(i) cancel or terminate the Assigned Agreements or consent to or
accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements; or
(iv) take any other action in connection with the Assigned
Agreements which would impair the value of the interest or rights of the
Pledgor thereunder or which would impair the interest or rights of the
Lender.
SECTION 8. LITIGATION RESPECTING THE PLEDGED COLLATERAL. In the event
any action, suit or other proceeding at law, in equity, in arbitration or
before any court, administrative agency or other authority involving or
affecting the Pledged Collateral becomes known to or is contemplated by the
Pledgor, Pledgor shall give the Lender immediate notice thereof.
SECTION 9. LENDER APPOINTED ATTORNEY-IN-FACT. (a) Pledgor hereby appoints
the Lender (and any officer or agent of the Lender with full power of
substitution and revocation) Pledgor's true and lawful attorney-in-fact,
coupled with an interest, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in the
Lender's discretion to (i) if an Acceleration Default occurs and is
continuing, take any action and to execute any instrument which the Lender
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, (A) to receive, endorse and collect all
instruments made payable to Pledgor representing any income, dividend or
other distribution in respect of the Pledged Collateral or any part or
proceeds thereof and to give full discharge for the same; (B) to transfer the
Pledged Collateral, in whole or in part, to the name of the Lender or such
other Person or Persons as the Lender may designate, or to cause the Pledged
Shares to be transferred on the books of Prime to the name of the Lender, (C)
take possession of and endorse any one or more checks, drafts, bills of
exchange, money orders or any other documents received on account of the
Pledged Collateral; (D) collect, sue for and give acquittances for moneys due
on account of the foregoing; withdraw any claims, suits, or proceedings
pertaining to or arising
7
<PAGE>
out of the foregoing; (E) take any other action contemplated by this
Agreement; and (F) sign, execute, acknowledge, swear to, verify, deliver,
file, record and publish any one or more of the foregoing, and (ii) at any
time execute and record or file on behalf of Pledgor any evidence of a
security interest contemplated by this Agreement and any refilings,
continuations or extensions thereof.
(b) The powers of attorney which shall be granted pursuant to Section
9(a) hereof and all authority thereby conferred shall be granted and
conferred solely to protect the Lender's interests in the Pledged Collateral
and shall not impose any duty upon the attorney-in-fact to exercise such
powers. Such powers of attorney shall be irrevocable prior to the
indefeasible payment and performance in full of the Obligations and shall not
be terminated prior thereto or affected by any act of the Pledgor or by
operation of law, including, but not limited to, dissolution, liquidation,
wind-up, death, disability or incompetency of any Person, the termination of
any trust, or the occurrence of any other event, and if the Pledgor should
become bankrupt, insolvent, or come under the direct regulation of similar
laws which affect the rights of creditors generally or any other event should
occur before the indefeasible payment and performance in full of the
Obligations and termination of the Credit Agreement, the Note and the other
Loan Documents, such attorney-in-fact shall nevertheless be fully authorized
to act under such powers of attorney as if such event had not occurred and
regardless of notice thereof.
SECTION 10. LEADER MAY PERFORM. If Pledgor fails to perform any
agreement contained herein, the Lender may itself perform, or cause
performance of, such agreement, and the expenses of the Lender incurred in
connection therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 11. REASONABLE CARE. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if the Pledged Collateral is accorded treatment substantially
equal to that which the Lender accords its own property, it being understood
that the Lender shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Collateral, whether or not
the Lender has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against any parties with respect to
any Pledged Collateral.
SECTION 12. REMEDIES UPON ACCELERATION DEFAULT.
(a) If any Acceleration Default shall have occurred and be continuing:
(i) The Lender may notify the obligors or other parties, if any,
interested in any items of Pledged Collateral of the interests of the
Lender therein and of any action proposed to be taken with respect
thereto, and inform any of those parties that all payments otherwise
payable to the Pledgor with respect thereto shall be made to the Lender
until the Loan has been indefeasibly paid in full;
(ii) The Lender may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party under the Uniform Commercial Code in effect
8
<PAGE>
in the State of New York at that time (the "CODE"), and the Lender may
also, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Lender's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable.
Pledgor hereby agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to Pledgor of the time
and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. The Lender shall
not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Lender may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned;
(iii) Any cash held by the Lender as Pledged Collateral and all
cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Lender, be held by the
Lender as collateral for, and thereafter applied (after payment of any
amounts payable to the Lender pursuant to Section 13 hereof) in whole or
in part by the Lender against, all or any part of the Obligations in
such order as the Lender shall elect. Any surplus of such cash or cash
proceeds held by the Lender and remaining after the indefeasible payment
in full of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus; and
(iv) The Lender may otherwise use or deal from time to time with
the Pledged Collateral, in whole or in part, in all respects as if the
Lender were the outright owner thereof.
(b) Except as set forth in Section 12(a)(iii) hereof, the Lender shall
have the sole right to determine the order in which Obligations shall be
deemed discharged by the application of the Pledged Collateral or any other
property or money held hereunder or any amount realized thereon. Any
requirement of reasonable notice imposed by law shall be deemed met if such
notice is in writing and is mailed, teletransmitted or hand delivered to the
Pledgor at least five (5) days prior to the sale, disposition or other event
giving rise to such notice requirement.
(c) The Lender shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by and in accordance
with subsection (a) above and shall apply the full proceeds in accordance
with the provisions of this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 12 shall confer on the Lender any rights or privileges that are not
permissible under applicable law.
(e) In connection with the provisions of this Agreement, Pledgor from
time to time shall promptly execute and deliver, or cause to be executed and
delivered, to the Lender such documents and instruments, and shall join in
such notices and shall take, or cause to be taken, such other lawful actions
as the Lender shall deem necessary or desirable to enable it to exercise any
of the rights with respect to the Pledged Collateral granted to it pursuant
to this Agreement.
9
<PAGE>
SECTION 13. EXPENSES. The Pledgor will, upon demand, pay to the Lender
the amount of all reasonable out-of-pocket expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Lender may incur in connection with (i) the perfection, custody or
preservation of, or the sale of, collection from, or other realization upon,
any of the Pledged Collateral, (ii) the exercise or enforcement of any of the
rights of the Lender hereunder, (iii) the failure by the Pledgor to perform
or observe any of the provisions hereof, or (iv) any actual or attempted
sale, assignment of rights or interests, or exchange of, or any enforcement,
collection, compromise or settlement respecting the Pledged Collateral or
any other property or money held hereunder, or (v) any other action taken by
the Lender hereunder whether directly or as attorney-in-fact pursuant to the
power of attorney herein conferred, and all such expenses shall be deemed a
part of the Obligations for all purposes of this Agreement and the Lender may
apply the Pledged Collateral or any other property or money held hereunder to
payment of or reimbursement of itself for such expenses. The Pledgor shall
pay all such expenses on demand, together with interest thereon from the date
the expense is paid or incurred by the Lender at an interest rate equal to
that under the Note (computed on the basis of the actual number of days
elapsed over a 360-day year).
SECTION 14. WAIVERS AND AMENDMENTS, ETC. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such
exercise would be prohibited by law. No action, failure to act or knowledge
of the Lender shall be deemed to constitute a waiver of any power, right or
remedy hereunder, nor shall any single or partial exercise thereof preclude
any further exercise thereof or the exercise of any other power, right or
remedy. Any waiver or consent respecting any covenant, representation,
warranty or other term or provision of this Agreement shall be effective only
in the specified instance and for the specific purpose for which given and
shall not be deemed, regardless of frequency given, to be a further or
continuing waiver or consent. The failure or delay of the Lender at any time
or times to require performance of, or to exercise its rights with respect
to, any representation, warranty, covenant or other term or provision of this
Agreement in no manner shall affect its rights at a later time to enforce any
such provision. No notice to or demand on a party in any case shall entitle
such party to any other or further notice or demand in the same, similar or
other circumstances. Any right or power of the Lender hereunder respecting
the Pledged Collateral and any other property or money held hereunder may at
the option of the Lender be exercised as to all or any part of the same and
the term the "Pledged Collateral" wherever used herein, unless the context
clearly requires otherwise, shall be deemed to mean (and shall be read as)
the "Pledged Collateral and any other property or money held hereunder or any
part thereof." This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting
forth the amendment or waiver and signed by the party against whom or which
such amendment or waiver is sought to be charged.
SECTION 15. NOTICES. Each notice to, and each demand upon, the Pledgor
by the Lender relating to this Agreement and each notice to, and each demand
upon, the Lender by the Pledgor relating to this Agreement, shall
specifically refer to this Agreement, and shall be in writing and shall be
conclusively deemed to have been received and shall be effective except as
explicitly noted hereinabove (i) on the day on which delivered if delivered
personally, or transmitted by telecopier (followed by a mailed written
confirmation), (ii) on the next Business Day if delivered by a nationally
recognized overnight courier (such as Federal Express), or (iii)
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<PAGE>
five (5) Business Days after the date on which the same is mailed by
certified United States mail postage prepaid, return receipt requested and
shall be addressed:
(a) in the case of the Pledgor, to:
Primestone Investment Partners L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
Telecopier No.: (312) 917-1511
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Telecopier No.: (312) 558-5700
With a copy to:
BRE/Primestone Investment Management L.L.C.
c/o Blackstone Real Estate Advisors
345 Park Avenue
New York, New York 10154
Attention: Steven Orbuch
Telephone No.: (212) 935-2626
Telecopier No.: (212) 754-8730
(b) in the case of the Lender, to:
Prudential Securities Credit Corporation
One New York Plaza
New York, New York 10292
Attention: Mr. Richard K. Gupta
Telephone No.: (212) 778-5751
Telecopier No.: (212) 778-4586
With copies to:
Prudential Securities Incorporated
One Seaport Plaza
27th Floor
New York, New York 10292
11
<PAGE>
Attention: Ms. Erika Walters-Engemann
Telecopier No.: (212) 214-7678
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Mr. Geoffrey Bedrosian
Telecopier No.: (212) 778-3194
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Greg Milmoe, Esq.
Telecopier No.: (212) 735-2000
or at such other address as the party giving such notice shall have been
advised of in writing for such purpose by the party to which the same is
directed.
SECTION 16. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing perfected and first priority Lien and security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
indefeasible payment in full or performance of the Loan, (ii) be binding upon
Pledgor, its successors and assigns and (iii) inure to the benefit of the
Lender and its successors, transferees and assigns. Upon the indefeasible
payment in full or performance of the Loan, Pledgor shall be entitled to the
return at its out-of-pocket expense, if any, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms of this Agreement and/or applicable law.
SECTION 17. SEVERABILITY. In the event that any provision of this
Agreement shall be determined to be superseded, invalid or otherwise
unenforceable pursuant to applicable law, such determination shall not affect
the validity of the remaining provisions of this Agreement, and the remaining
provisions of this Agreement shall be enforced as if the invalid provision
were deleted.
SECTION 18. SURVIVAL OF REPRESENTATIONS, ETC. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Credit Agreement, the Note and the
other Loan Documents have been indefeasibly paid in full. This Agreement
shall remain and continue in full force and effect without regard to any
modification, execution, renewal, amendment or waiver of any provision of any
of the Credit Agreement, the Note or any other Loan Document.
SECTION 19. TERMINATION AND MISCELLANEOUS PROVISIONS. This Agreement
shall continue in full force and effect until all of the Obligations shall
have been indefeasibly paid and satisfied. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors, and assigns. Section headings used herein are for
convenience only and shall not affect the meaning or construction of any of
the provisions
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<PAGE>
hereof. This Agreement may be executed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 20. ENTIRE AGREEMENT. This Agreement, the Credit Agreement and
the other Loan Documents contain the entire agreement of the parties and
supersedes all other agreements, understandings and representations, oral or
otherwise, between the parties with respect to the matters contained herein.
SECTION 21. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 22. DISCLOSURE; LIMITATION OF LIABILITY. No claim may be made by
Pledgor or any other Person against the Lender or its affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan Documents, or
any act, omission or event occurring in connection herewith or therewith; and
Pledgor hereby waives, releases and agrees not to sue upon any claim for any
and all special, indirect, consequential, punitive or treble damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this Pledge
and Security Agreement to be duly executed and delivered as of the date first
above written.
PRIMESTONE INVESTMENT PARTNERS L.P.
By: PG/Primestone, L.L.C.,
its general partner
By:
-------------------------------------
Name:
Title:
By: BRE/Primestone Investment
Management, L.L.C.,
its general partner
By:
-------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES CREDIT CORPORATION
By: /s/ George Morgan
-------------------------------------
Name: George D. Morgan, III
Title: Vice President
14
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this
Pledge and Security Agreement to be duly executed and delivered as of the
date first above written.
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/PRIMESTONE, L.L.C.
its general partner
By: THE PRIME GROUP, INC.
its Administrative Member
By: /s/ Ray Grinvalds
---------------------------------
Name: Ray Grinvalds
Title: Vice President
By: BRE/PRIMESTONE INVESTMENT
MANAGEMENT L.L.C. its general
partner
By: /s/ Steven Orbuch
---------------------------------
Name: Steven Orbuch
Title: VP and Assistant Secretary
15
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
No. of Pledged Percentage
Certificate Shares or of Total
Pledgor Issuer Class of Interest No. Interest Outstanding
- ------- ------ ----------------- --- -------- -----------
<S> <C> <C> <C> <C> <C>
Primestone Investment Prime Group Realty, Limited Partnership 19 7,944,893 35.5%
Partners L.P. L.P. Interest
</TABLE>
16
<PAGE>
Exhibit 45
JOINT FILING STATEMENT
PURSUANT TO RULE 13d-1(k)(1)
The undersigned acknowledge and agree that the foregoing
statement on Schedule 13d is filed on behalf of each of the undersigned and that
all subsequent amendments to this statement on Schedule 13d shall be filed on
behalf of each of the undersigned without the necessity of filing additional
joint filing statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him or it contained therein, but
shall not be responsible for the completeness and accuracy of information
concerning the other, except to the extent that he or it knows or has reason to
believe that such information is inaccurate.
Date: March 8, 2000
/s/ Michael W. Reschke
-----------------------------------
Michael W. Reschke
PRIMESTONE INVESTMENT PARTNERS, L.P.
By: PG/Primestone, L.L.C.,
Managing General Partner
By: The Prime Group, Inc.
Administrative Member
By /s/ Michael W. Reschke
--------------------------------
Name: Michael W. Reschke
Title: President
PG/PRIMESTONE, L.L.C.
By: The Prime Group, Inc.
Administrative Member
By: /s/ Michael W. Reschke
--------------------------------
Name: Michael W. Reschke
Title: President
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
Name: Michael W. Reschke
Title: President
24
