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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  August 3, 2018

 

Hilltop Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Maryland

 

1-31987

 

84-1477939

(State or other jurisdiction of
incorporation)

 

(Commission
File Number)

 

(IRS Employer Identification
No.)

 

2323 Victory Avenue, Suite 1400

 

 

Dallas, Texas

 

75219

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (214) 855-2177

 

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o                        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Section 1 — Registrant’s Business and Operations

 

Item 1.01  Entry into a Material Definitive Agreement.

 

Hilltop Headquarters

 

On August 3, 2018, Hilltop Holdings Inc. (“Hilltop”), through HTH Diamond Hillcrest Land LLC (“Hillcrest Land LLC”), a newly formed entity owned equally between a wholly owned subsidiary of Hilltop and an affiliate of Mr. Gerald J. Ford, Chairman of the Board of Directors of Hilltop, purchased approximately 1.7 acres of land located in the City of University Park, Texas (the “Land”). Each of HTH Hillcrest Land LLC, a wholly owned subsidiary of Hilltop (“HTH Land LLC”), and Diamond Ground, LLC, an entity affiliated with Mr. Gerald J. Ford (“Diamond Ground LLC”), contributed $19.3 million to Hillcrest Land LLC to purchase the Land for an aggregate purchase price of $38.5 million. Mr. Gerald J. Ford beneficially owned 16.15% of Hilltop common stock as of August 3, 2018 and is the father of Jeremy Ford, a director, the President and Co-Executive Officer of Hilltop, and the father-in-law of Corey Prestidge, the Executive Vice President, General Counsel and Secretary of Hilltop. Trusts for which Jeremy Ford and the wife of Corey Prestidge are a beneficiary own 10.2% and 10.1%, respectively, of Diamond Ground, LLC. A copy of the Limited Liability Company Agreement of Hillcrest Land LLC is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.

 

Immediately following the purchase of the Land, on August 3, 2018, Hillcrest Land LLC entered into a 99-year ground lease (the “Ground Lease”) of the Land to SPC Park Plaza Partners LLC, an unaffiliated third party (“Park Plaza”), as to an undivided 50% leasehold interest, HTH Hillcrest Project LLC (“HTH Project LLC”), a wholly owned subsidiary of Hilltop, as to an undivided 25% leasehold interest, and Diamond Hillcrest, LLC (“Diamond Hillcrest”), an entity owned by Mr. Gerald J. Ford, as to an undivided 25% leasehold interest. The Ground Lease is triple net and, accordingly, the lessees agreed to pay all property taxes, property insurance and maintenance costs. The base rent payable under the Ground Lease commences 18 months from entry into the Ground Lease at $1.8 million per year, which increases 1.0% per year each January 1, following the rent abatement period. A copy of the Ground Lease is attached as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference herein.

 

In connection with Ground Lease, on August 3, 2018, each of Park Plaza, HTH Project LLC and Diamond Hillcrest (collectively, the “Co-Owners”) entered into a Co-Owners Agreement to purchase the improvements currently being constructed on the Land, which is a mixed-use project (the “Project”) that is planned to contain a six-story building (the “Building”). The Co-Owners Agreement governs the parties’ undivided ownership in the Project. HTH Project LLC and Diamond Hillcrest each own an undivided 25% interest in the Project. Park Plaza owns the remaining undivided 50% interest in the Project. Park Plaza serves as the Co-Owner Manager under the Co-Owner Agreement; however, certain actions require approval of all Co-Owners. On August 3, 2018, each of HTH Project LLC and Diamond Hillcrest contributed $5.3 million to the construction and initial operation of the Project. The Project obtained a construction loan from an unaffiliated third-party bank with a maximum commitment of approximately $41.0 million to finance the construction of the Project, as well. The Co-Owners have engaged Strode Property Company to serve as developer of the Project under a Development Service Agreement. A copy of the Co-Owners Agreement is attached as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated by reference herein.

 

On August 3, 2018, Hilltop entered into an office lease with Park Plaza, HTH Project LLC and Diamond Hillcrest (the “Office Lease”) for approximately 68,000 square feet in the Building. The Office Lease is for an initial term of 129 months and provides Hilltop with an option to renew for an additional ten-year term at fair market rental rates for comparable buildings. The Office Lease is a triple net lease. The first nine months of rent is abated, which commences upon move-in to the Building. The base rent commences at $43 per square foot and increases 1.5% per year. The total cost of base rent over the initial term of the Office Lease is $31.3 million, which averages to $3.1 million per year over the initial term. Move-in is expected in the fourth quarter of 2019. A copy of the Office Lease is attached as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated by reference herein.

 

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Additionally, on August 3, 2018, PlainsCapital Bank entered into a retail lease with Park Plaza, HTH Project LLC and Diamond Hillcrest (the “Retail Lease”) for approximately 4,100 square feet for a branch location on the ground floor of the Building. The Retail Lease is for an initial term of 129 months and provides PlainsCapital Bank with an option to renew for an additional ten-year term at fair market rental rates for comparable buildings. The Retail Lease is a triple net lease. The first nine months of rent is abated, which commences upon move-in to the premises. The base rent commences at $75 per square foot and increases 1.5% per year. The total cost of base rent over the initial term of the Retail Lease is $3.3 million, which averages to $0.3 million per year over the initial term. The Retail Lease is subject to all required regulatory approvals and move-in is expected in the fourth quarter of 2019. A copy of the Retail Lease is attached as Exhibit 10.5 to this Current Report on Form 8-K and is incorporated by reference herein.

 

The foregoing description of the Limited Liability Company Agreement of Hillcrest Land LLC, Ground Lease, Co-Owners Agreement, Office Lease and Retail Lease does not purport to be complete and is qualified in its entirety by reference to the full text of such documents, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K.

 

Forward-Looking Statements

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions, construction timing and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “might,” “plan,” “probable,” “projects,” “seeks,” “should,” “target,” “view” or “would” or the negative of these words and phrases or similar words or phrases. Factors that could cause our actual results to differ materially from those described in the forward-looking statements include, among others: (i) the possibility that we may not receive necessary regulatory approvals for the Retail Lease; and (ii) the failure of the Project to be completed on the expected timeline or at all. For a discussion of certain other factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.

 

Section 7 — Regulation FD

 

Item 7.01 Regulation FD Disclosure.

 

On August 6, 2018, Hilltop issued a press release announcing the items set forth in Item 1.01 of this Current Report on Form 8-K.

 

A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The information in this Item 7.01 (including Exhibit 99.1) is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth in such filing.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits.

 

(a)

Financial statements of businesses acquired.

 

 

 

Not applicable.

(b)

Pro forma financial information.

 

 

 

Not applicable.

 

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(c)

Shell company transactions.

 

 

 

Not applicable.

(d)

Exhibits.

 

 

The following exhibit(s) are filed or furnished, depending on the relative item requiring such exhibit, in accordance with the provisions of Item 601 of Regulation S-K and Instruction B.2 to this form.

 

Exhibit
Number

 

Description of Exhibit

 

 

 

10.1

 

Limited Liability Company Agreement of HTH Diamond Hillcrest Land LLC, dated as of July 31, 2018.

 

 

 

10.2

 

Ground Lease, dated as of July 31, 2018, by and among HTH Diamond Hillcrest Land LLC, as Ground Lessor, and HTH Hillcrest Project LLC, Diamond Hillcrest, LLC and SPC Park Plaza Partners LLC, as Ground Lessees.

 

 

 

10.3

 

Co-Owners Agreement, dated as of July 31, 2018, by and by and among HTH Hillcrest Project LLC, Diamond Hillcrest, LLC and SPC Park Plaza Partners LLC.

 

 

 

10.4

 

Office Lease, dated as of July 31, 2018, by and among Hilltop Holdings Inc., as Tenant, and HTH Hillcrest Project LLC, Diamond Hillcrest, LLC and SPC Park Plaza Partners LLC, as Landlord.

 

 

 

10.5

 

Retail Lease, dated as of July 31, 2018, by and among PlainsCapital Bank, as Tenant, and HTH Hillcrest Project LLC, Diamond Hillcrest, LLC and SPC Park Plaza Partners LLC, as Landlord.

 

 

 

99.1

 

Press Release issued August 6, 2018 (furnished pursuant to Item 7.01).

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Hilltop Holdings Inc.,

 

 

a Maryland corporation

 

 

 

Date: August 6, 2018

By:

/s/ Corey G. Prestidge

 

Name:

Corey G. Prestidge

 

Title:

Executive Vice President,

 

 

General Counsel & Secretary

 

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Section 2: EX-10.1 (EX-10.1)

Exhibit 10.1

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

HTH DIAMOND HILLCREST LAND LLC

 

THE MEMBERSHIP INTERESTS OF THE MEMBERS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES ACT OF ANY STATE OR THE DISTRICT OF COLUMBIA IN RELIANCE ON EXEMPTIONS UNDER THOSE LAWS.  NO RESALE OF A MEMBERSHIP INTEREST BY A MEMBER IS PERMITTED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT AND ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AND ANY VIOLATION OF SUCH PROVISIONS COULD EXPOSE THE SELLING MEMBER AND THE COMPANY TO LIABILITY.

 

DATED AS OF JULY 31, 2018

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 1. DEFINITIONS

1

 

 

 

1.1

Definitions

1

1.2

Rules of Construction

11

 

 

 

SECTION 2. THE LIMITED LIABILITY COMPANY

12

 

 

 

2.1

Formation

12

2.2

Purpose

12

2.3

No Partnership Intended for Nontax Purposes

12

2.4

Term

12

2.5

Registered Office and Agent

12

2.6

Defects as to Formalities

12

2.7

Title to Property

13

2.8

Principal Office

13

2.9

Foreign Qualification

13

2.10

Subsidiaries

13

 

 

 

SECTION 3. NAMES, ADDRESSES, MEMBERSHIP INTERESTS, AND CAPITAL CONTRIBUTIONS OF MEMBERS

13

 

 

 

3.1

Names and Addresses

13

3.2

Membership Interests

13

3.3

Initial Capital Contributions

13

3.4

Additional Funding Requirement

13

3.5

Adjustments to Percentage Interests

15

3.6

Company Loans

16

3.7

Establishment of Capital Accounts

16

3.8

Transfers of Interests in the Company

17

3.9

Capital of the Company

18

3.10

Limited Liability of Members

18

3.11

Guaranties

18

 

 

 

SECTION 4. MANAGEMENT

18

 

 

 

4.1

Management by the Investment Committee

18

4.2

Books and Records

23

4.3

Reporting Requirements

23

4.4

Tax Matters Partner; Tax Returns

23

4.5

Conduct of the Company

24

 

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Table of Contents

(continued)

 

4.6

Member Defaults

24

4.7

Regulatory Events

24

 

 

 

SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS

25

 

 

 

5.1

Representations, Warranties and Covenants by the Members

25

5.2

Additional Representations, Warranties and Covenants

25

 

 

 

SECTION 6. PROFIT AND LOSS

27

 

 

 

6.1

Allocations of Profits and Losses

27

6.2

Limitation on Loss Allocation

27

6.3

Special Allocations

27

6.4

Tax Allocations

28

 

 

 

SECTION 7. DISTRIBUTIONS

28

 

 

 

7.1

Distributable Cash

28

7.2

Amounts Withheld

28

7.3

Limitations on Distributions

29

7.4

Characterization of Certain Distributions

29

7.5

Liquidation

29

7.6

Repayment of Member Loans

29

 

 

 

SECTION 8. ADDITIONAL AND SUBSTITUTE MEMBERS

29

 

 

 

8.1

Admission

29

8.2

Acceptance of Prior Acts

30

 

 

 

SECTION 9. TRANSFERS OF INTERESTS

30

 

 

 

9.1

Restriction on Transfers

30

9.2

Permitted Transfers

31

9.3

Right of First Offer

31

9.4

Tag-Along Rights

34

9.5

Purchase Option/Obligation

35

9.6

Rights and Obligations of Assignees and Assignors

36

9.7

Acceptance of Assignee as Substitute Member

37

9.8

Distributions and Allocations Regarding Transferred Interests

37

9.9

Section 754 Election

37

 

 

 

SECTION 10. EXCULPATION AND INDEMNIFICATION

37

 

 

 

10.1

Liability

37

10.2

Indemnity

38

10.3

Insurance

38

 

ii



 

Table of Contents

(continued)

 

SECTION 11. DISSOLUTION AND WINDING UP

38

 

 

 

11.1

Covenant Not to Withdraw or Cause Dissolution

38

11.2

Dissolution Events

39

11.3

Winding Up

39

11.4

Compliance with Regulations; Deficit Capital Accounts

40

11.5

Notice of Dissolution

40

11.6

Filing of Certificate of Cancellation

40

11.7

Return of Contributions Non-Recourse to Other Members

40

 

 

 

SECTION 12. CONFLICT OF INTEREST; COMPETITION

41

 

 

 

12.1

Rights of Members to Engage in Separate Activities

41

12.2

Other Self Interest

41

 

 

 

SECTION 13. BUY-SELL PROCEDURES

41

 

 

 

13.1

Buy-Sell

41

 

 

 

SECTION 14. GENERAL CONTRACT PROVISIONS

44

 

 

 

14.1

Governing Law

44

14.2

Savings Clause

44

14.3

Attorney Fees and Costs

44

14.4

Counterparts

44

14.5

Successors and Assigns

44

14.6

Notices

44

14.7

Rights and Remedies Cumulative

45

14.8

Waivers

45

14.9

Amendments

45

14.10

Entire Agreement

46

14.11

No Third Party Beneficiary

46

14.12

Further Assurances

46

14.13

Partition

46

14.14

Maintenance as a Separate Entity

46

14.15

Arbitration

46

 

EXHIBITS

 

Exhibit A

-

Form of Assignment and Assumption Agreement

Exhibit b

-

Form of Member Loan Note

Exhibit C

-

Appraisal Procedures

 

iii



 

Table of Contents

(continued)

 

Schedule A

-

Description of the Property

Schedule 3.1

-

Names and Addresses of Members

Schedule 3.3

-

Initial Capital Contributions and Percentage Interests

 

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LIMITED LIABILITY COMPANY AGREEMENT
OF

 

HTH DIAMOND HILLCREST LAND LLC

 

This LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is made and entered into as of July 31, 2018 (the “Effective Date”), by and between the Members hereinafter described.

 

SECTION 1.  DEFINITIONS

 

1.1                               Definitions.  As used in this Agreement, the following terms have the meanings set forth below:

 

AAA” shall have the meaning set forth in Section 14.15(a)(ii).

 

Acquiring Offeree Members” shall have the meaning set forth in Section 9.3(b).

 

Act” shall mean the Texas Limited Liability Company Law, which is part of the TBOC, as it may be amended, modified or supplemented from time to time.

 

Additional Funding Requirement” shall have the meaning set forth in Section 3.4(b).

 

Additional Member(s)” shall mean a Member, other than a Substitute Member, who has acquired a Membership Interest from the Company.

 

Adjusted Deficit(s)” shall mean, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

(a)                                the Capital Account shall be increased by any amounts that such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the next-to-the-last sentence of Regulations Section 1.704-2(g)(1) and of Regulation Section 1.704-2(i)(5); and

 

(b)                                the Capital Account shall be decreased by the items described in Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.

 

The foregoing definition of Adjusted Deficit is intended to comply with the provisions of Section 1.704-l(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

 

Adjustment Event” shall mean the exercise by a Contributing Member of an election pursuant to Section 3.4(b)(i), including in connection with the conversion of a Member Loan under Section 3.4(b)(ii).

 

Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person.  For purposes of this Agreement, “control” means the possession

 



 

directly or indirectly of the power to direct the management of such Person (whether through ownership of voting securities, by contract or otherwise), and “controlled” and “controlling” shall have meanings correlative with the foregoing.

 

Agreement” shall mean this Limited Liability Company Agreement as originally executed and as amended or restated from time to time.

 

Appointing Party” shall have the meaning set forth in Section 4.1(d).

 

Bankruptcy” shall mean, with respect to the affected party, (i) the entry of an Order for Relief under the Bankruptcy Code, (ii) the admission by such party of its inability to pay its debts as they mature, (iii) the making by it of an assignment for the benefit of creditors, (iv) the filing by it of a petition in bankruptcy or a petition for relief under the Bankruptcy Code or any other applicable federal or state bankruptcy or insolvency statute or any similar law, (v) the expiration of thirty (30) days after the filing of an involuntary petition under the Bankruptcy Code, an application for the appointment of a receiver for the assets of such party, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within such thirty (30)-day period or (vi) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged or vacated or the enforcement thereof stayed within thirty (30) days after its effective date.

 

Bankruptcy Code” shall mean any chapter of the United States Bankruptcy Code (as now or in the future amended).

 

BHCA” shall mean the U.S. Bank Holding Company Act of 1956, as the same may be amended from time to time.

 

Bonus Capital” shall mean, with respect to any Member at any time, the amount by which the aggregate Capital Contributions (including Capital Advances treated as Capital Contributions pursuant to Section 3.4(b)(i)) made by such Member pursuant to Section 3.4 exceed such Member’s Maximum Amount.

 

Book Basis” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes; provided, however, (a) if property is contributed to the Company, the initial Book Basis of such Property will equal its fair market value on the date of contribution, and (b) if the Capital Accounts of the Company are adjusted pursuant to Regulation Section 1.704-1(b) to reflect the fair market value of any Company assets, the Book Basis of such assets will be adjusted to equal its respective fair market value as of the time of such adjustment in accordance with such Regulation.  The Book Basis of all assets will be further adjusted thereafter by depreciation or amortization as provided in Regulation Section 1.704-1(b)(2)(iv)(g).

 

Business Day” shall mean any day, other than Saturday, Sunday or a day on which national banks are authorized or required to be closed in Dallas, Texas.

 

Buy-Sell Deposit Amount” shall have the meaning set forth in Section 13.1(c)(iii).

 

Buy-Sell Notice” shall have the meaning set forth in Section 13.1(a).

 

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Buy-Sell Price” shall have the meaning set forth in Section 13.1(a).

 

Capital Account(s)” shall have the meaning set forth in Section 3.7.

 

Capital Advance” shall have the meaning set forth in Section 3.4(b).

 

Capital Call” shall mean any written notice from the Investment Committee to the Members delivered in accordance with Section 3.4(a) requesting a contribution in cash of capital to the Company, which notice must state the total amount of the contributions required to be made and the amount to be funded by each Member.

 

Capital Contribution” shall mean, except as otherwise provided herein, any contribution of cash or cash equivalent for such value as the Investment Committee determines in good faith which a Member contributes to the Company as a member in accordance with, and subject to, the terms of this Agreement (excluding the amount of any Member Loan advanced by any Member).

 

Certificate” shall mean the Certificate of Formation of the Company as filed with the Secretary of State of Texas, as the same may be amended or restated from time to time.

 

Claimant” shall have the meaning set forth in Section 14.15(b).

 

Closing Period” shall have the meaning set forth in Section 9.3(d).

 

Code” shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue laws.

 

Committee Representative” shall mean each individual appointed from time to time by any Appointing Party pursuant to Section 4.1(d), and “Committee Representatives” shall mean all of such individuals, collectively.

 

Company” shall mean HTH Diamond Hillcrest Land LLC, as identified in the Certificate.

 

Company Group” shall have the meaning set forth in Section 4.1(c).

 

Company Loans” shall mean all loans made by Members to the Company pursuant to Section 3.6.

 

Company Minimum Gain” shall mean the same as “partnership minimum gain” as set forth in Section 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

 

Company Property” shall mean collectively, all right, title and interest of the Company in and to the Property and all other assets (real, personal, tangible or intangible) owned by the Company including, without limitation, the Company’s ownership interests in any Subsidiary and any other contract or agreement.

 

Contributing Member” shall have the meaning set forth in Section 3.4(b).

 

Contribution Period” shall have the meaning set forth in Section 3.4(b).

 

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Covered Person” shall have the meaning set forth in Section 10.1(c).

 

Debtor Member” means any Member that is a borrower under a Member Loan, for so long as that Member Loan remains outstanding.

 

Defaulting Member” shall have the meaning set forth in Section 9.5(a).

 

Depreciation” shall mean for each Fiscal Year an amount equal to the depreciation, amortization or other cost-recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of any asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost-recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method approved by all of the Members.

 

Diamond Group” shall mean an Affiliate of Gerald J. Ford, together with its successors by merger, consolidation or transfer of all or substantially all of its assets.

 

Diamond Member” shall mean Diamond Ground, LLC, a Texas limited liability company, together with its permitted successors and assigns.

 

Dilution Factor” shall mean one and one-half (1.5).

 

Disposition Transaction” shall have the meaning set forth in Section 9.3.

 

Dissociated Member” shall mean a Member which is the subject of a Bankruptcy, or with respect to which any other event occurs which under the Act causes such Member to cease to be a Member of the Company.

 

Dissolution Event(s)” shall mean any of the events identified in Section 11.2.

 

Distributable Cash” for any period shall mean the sum of: (i) (X) the gross cash proceeds from the Company from operations less (Y) the portion thereof used to pay all Company expenses and debt service payments (other than Company Loans), to establish or maintain a reserve for payment of anticipated expenses, the amount of which reserve shall be determined by the  Investment Committee in its discretion, and for capital improvements, replacements, and contingencies as determined by the  Investment Committee in its discretion plus (ii) the net cash proceeds received by the Company, after payment of, or provision for, all Company debts (other than Company Loans), obligations and reserves required or incurred or established, as determined by the  Investment Committee in its discretion in connection with, the receipt by the Company of such proceeds, and all expenses incurred by the Company in connection with the transaction giving rise to such proceeds, including, without limitation, from any of the following events: (A) any sale or other disposition of all or any part of the Company Property, (B) any loan secured by all or any part of the assets of the Company, (C) the refinancing of Company Indebtedness, (D) the condemnation of all or any part of the Company Property, or (E) any unapplied insurance recovery

 

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relating to the Company Property.  Distributable Cash shall not be reduced by depreciation, amortization, cost recovery deductions, or similar allowances, but shall be increased by any reductions of reserves previously established as described above.  Furthermore, except as otherwise approved in writing by all of the Members or in connection with a final liquidating distribution, Distributable Cash shall not include Capital Contributions made by the Members.

 

Economic Rights” shall mean a Member’s rights to allocations and distributions, if any, pursuant to the Act, the Certificate and this Agreement, but shall not include any Management Rights.

 

Effective Date” shall have the meaning set forth in the Preamble.

 

Encumber” or “Encumbrance” shall mean, as a noun, any voluntary or involuntary lien or encumbrance on a Member’s interest, including without limitation, judicial attachments, judgment liens, any liens arising out of a decree, order or judgment of any court, any lien arising in connection with taxes claimed due by any governmental unit, and any lien arising under federal or state bankruptcy laws, and as a verb, the act or voluntarily or involuntarily encumbering or permitting any such lien or encumbrance.

 

Entity” shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization.

 

Fiscal Year(s)” shall mean the fiscal year of the Company and shall be the same as its taxable year, which shall be the period beginning on January 1 of a given year (other than the year of formation of the Company, for which the beginning shall be on the date of such formation) and ending on December 31, unless otherwise required by the Code.  Each Fiscal Year shall commence on the day immediately following the last day of the immediately preceding Fiscal Year.

 

Funded Amount” shall have the meaning set forth in Section 3.4(a)(ii).

 

Funding Member” shall have the meaning set forth in Section 3.4(a)(ii).

 

Funder Funded Amount” shall have the meaning set forth in Section 3.4(a)(ii).

 

HTH Group” shall mean Hilltop Holdings, Inc., a Maryland corporation, together with its successors by merger, consolidation or transfer of all or substantially all of its assets.

 

HTH Member” shall mean Hilltop Investments I LLC, a Delaware limited liability company, together with its permitted successors and assigns.

 

Guaranty” means any guaranty, indemnity or other assurance of payment, directly or indirectly, provided by any Person in any manner or form by virtue of which such Person becomes primarily, secondarily, contingently or otherwise liable for another Person’s obligations, including by acting as an account party on, or becoming obligated to reimburse amounts drawn under, any letter of credit obtained for such other Person.

 

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Indebtedness” shall include with respect to any Person (i) all indebtedness (whether secured or unsecured) of such Person for borrowed money or for the deferred purchase price of property, goods or services, including reimbursement, and all other obligations contingent or otherwise of such Person with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured, and hedges and other derivative contracts and financial instruments, (ii) all obligations of such Person evidenced by notes, bonds, derivatives, loan agreements, reimbursement agreements or similar instruments (including senior, mezzanine and junior borrowings, which may provide the lender with a participation in profits), (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all capital lease obligations of such Person, (v) all indebtedness referred to in clause (i), (ii), (iii), or (iv) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (vi) all Indebtedness of others guaranteed by such Person or for which such Person has otherwise assumed responsibility on, before or after the date such Indebtedness is incurred.

 

Indemnified Losses” shall have the meaning set forth in Section 10.2(a).

 

Indemnified Person” shall have the meaning set forth in Section 10.2(a).

 

Initial Contribution Amount” shall mean, with respect to each Member, the aggregate amount to be contributed to the Company by such Initial Member pursuant to Section 3.3.

 

Initial Member(s)” shall mean the HTH Member and the Diamond Member.

 

Lender Member” means any Member that has made a Member Loan, for as long as that Member Loan remains outstanding.

 

Liquidating Trustee” shall have the meaning set forth in Section 11.3(a).

 

List” shall mean the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury, and/or on any other similar list maintained by the Office of Foreign Assets Control pursuant to any authorizing statute, executive order or regulation.

 

Loan Guaranty” means any Guaranty approved by the Members and provided under, in respect of or in connection with, any Indebtedness of the Company or any Subsidiary, including, without limitation, any Guaranty provided in respect of principal, interest, taxes, the environment, “bad boy” non-recourse carveouts or obligations of the Company or any Subsidiary in connection with any Indebtedness of the Company or any Subsidiary.

 

Management Right(s)” shall mean the right of a Member to participate in the management of the Company pursuant to the terms of this Agreement, including the rights to information and to participate in approvals of the Members and the rights of any Member to appoint Committee Representatives pursuant to the terms hereof.

 

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Maximum Amount” shall mean, with respect to any Member at any time, an amount equal to the total Capital Contributions which are required to have been made by such Member at that time in connection with all Capital Calls made by the Investment Committee pursuant to Section 3.4(a).

 

Members” or “Member” shall mean each of the Persons who executes a counterpart of this Agreement as an Initial Member and each of the Persons who may hereafter become an Additional Member or a Substitute Member.

 

Member Loan” shall have the meaning set forth in Section 3.4(b)(ii).

 

Member Loan Rate” shall mean a rate of interest equal to 15% per annum, compounded monthly; provided, however, that in no event shall the rate of interest exceed the maximum rate of interest permitted by applicable law.

 

Member Non-Recourse Debt” shall have the meaning set forth in Section 1.704-2(b)(4) of the Regulations for “partner nonrecourse debt.”

 

Member Non-Recourse Debt Minimum Gain” shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.

 

Member Non-Recourse Deductions” shall have the meaning set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations for “partner nonrecourse deductions.”

 

Membership Interest(s)” shall have the meaning set forth in Section 3.2.

 

Necessary Expenditures” shall mean all costs, expenditures or amounts that are necessary or advisable, in the good faith opinion of the Investment Committee, to preserve, protect or maintain the interest of the Company or any of its Subsidiaries in the Property or any other assets of the Company or any of its Subsidiaries, including, without limitation, (i)  costs of restoring the Property after a casualty or condemnation thereof, (ii) any amounts required to be expended by the Company or any of its Subsidiaries in order to comply with legal requirements or with any contractual obligations of the Company or any of its Subsidiaries, (iii) payments due in respect of any Indebtedness of the Company or any of its Subsidiaries, (iv) any amounts required to pay any uncontrollable expenses, including any real estate taxes, operating deficits, insurance premiums, utility costs, marketing costs, fees payable under any property management agreement, leasing agreement and/or any sales agency agreement, and (v) any amounts required to reimburse a Member (or its Affiliate) for amounts funded by such Member (or its Affiliate) in respect of any Loan Guaranty.

 

Non-Contributing Member” shall have the meaning set forth in Section 3.4(b).

 

Nonrecourse Liability” shall have the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

 

Offer Notice” shall have the meaning set forth in Section 9.3(a).

 

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Offer Notice Parameters” shall have the meaning set forth in Section 9.3(a).

 

Offer Parameters Disposition Transaction” shall have the meaning set forth in Section 9.3(c).

 

Offeree Member” shall have the meaning set forth in Section 9.3(a).

 

Offering Member” shall have the meaning set forth in Section 9.3(a).

 

Percentage Interests” shall mean, with respect to each Member, an amount equal to a fraction, the numerator of which is the aggregate amount of Capital Contributions then or theretofore made or deemed made to the Company by such Member, and the denominator of which is the aggregate amount of Capital Contributions then or theretofore made or deemed made to the Company by all of the Members, as the same may be adjusted from time to time pursuant to the terms of this Agreement.  Following the initial Capital Contributions of the Members pursuant to Section 3.3, the initial Percentage Interests for each Member shall be as set forth in Schedule 3.3.

 

Permitted Transfer” shall mean any Transfer described in Section 9.2.

 

Permitted Transferee” shall mean (i) a general or limited partnership, corporation or limited liability company that is an affiliate of the HTH Group or Diamond Group, as applicable; (ii) a trust of which the beneficiaries are members of the immediate family of Gerald J. Ford and (iii) any Person 100% owned by one or more of the Persons described in clauses (i) and (ii) of this definition.

 

Person(s)” shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such “Person” where the context so permits.

 

Profit(s)andLoss(es)” shall mean, for each Fiscal Year, an amount equal to the Company’s taxable income or loss for such Fiscal Year, 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)(l) shall be included in taxable income or loss), with the following adjustments:

 

(a)                                any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this paragraph shall be added to such taxable income or loss;

 

(b)                                any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this paragraph shall be subtracted from such taxable income or loss;

 

(c)                                 gain or loss resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Basis of the Company Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Book Basis;

 

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(d)                                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 Fiscal Year, computed in accordance with the definition thereof; and

 

(e)                                 Profits and Losses of the Company shall be computed without regard to the amount of any items of gross income, gain, loss or deduction that are specially allocated pursuant to Section 6.3.

 

Property” shall have mean that certain real property described on Schedule A hereto.

 

Proposed Purchaser” shall mean any Person to which the Member desires to sell all or any part of its Membership Interest that is not a Permitted Transferee.

 

Proposed Price” shall have the meaning set forth in Section 9.3(a).

 

Proposed Terms” shall have the meaning set forth in Section 9.3(a).

 

Purchase Agreement” shall mean that certain Purchase and Sale Agreement relating to the Property.

 

Purchase Notice” shall have the meaning set forth in Section 9.5(a).

 

Purchase Price” shall have the meaning set forth in Section 9.5(b).

 

Regulations” shall mean temporary and final regulations promulgated under the Code in effect as of the date of filing the Certificate and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.

 

Regulatory Authorities” means the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and any other banking authority in the United States, the Commodity Futures Trading Commission and the Securities and Exchange Commission.

 

Regulatory Event” means (i) such time as the HTH Member or its Affiliates lease less than 20% of the aggregate rentable square footage in the building to be constructed on the Property or (ii) a violation of the Volcker Rule in the written opinion of legal counsel.

 

Regulatory Event Notice” has the meaning ascribed to it in Section 4.7(a).

 

Reimbursable Amount” shall have the meaning set forth in Section 3.4(a)(ii).

 

Reimbursement Percentage” shall mean, with respect to any Member:

 

(i)                                     with respect to any liability under a Loan Guaranty caused solely by an action of such Member, 100%;

 

(ii)                                  with respect to any liability under a Loan Guaranty caused by an action (a) to which such Member consented, (b) in which such Member participated, (c) of which such Member was

 

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notified in advance but failed to object or (d) that is not attributable to the action of a particular Member (e.g. an environmental condition), such Member’s Percentage Interest; and

 

(iii)                               with respect to any liability directly attributable to an action of the Member (a) to which such Member did not consent, (b) in which such Member did not participate and (c) of which such Member had no advance knowledge (or if such Member did have advance knowledge, to which such Member objected in writing), 0%.

 

Reply Notice” shall have the meaning set forth in Section 13.1(b).

 

Required Committee Approval” shall mean the affirmative vote of over a majority of the Committee Representatives.

 

Required Reimbursement Amount” shall have the meaning set forth in Section 3.4(a)(ii).

 

Responding Member” shall have the meaning set forth in Section 13.1(a).

 

Response Notice” shall have the meaning set forth in Section 9.3(b).

 

Response Period” shall have the meaning set forth in Section 9.3(b).

 

ROFO Percentage” shall have the meaning set forth in Section 9.3(b).

 

Sale Period” shall have the meaning set forth in Section 9.3(c).

 

Default” shall mean (i) if there is any Bankruptcy of the Member, (ii) if the Member fails to make any payment required by Section 3.4(a)(ii) or (iii) if the Member defaults under Section 13.1.

 

Stated Amount” shall have the meaning set forth in Section 13.1(a).

 

Subsidiaries” means any subsidiary that may be formed by the Company in accordance with this Agreement, each of which shall be wholly owned by the Company, including, for the avoidance of doubt, Property Owner.  “Subsidiary” means any one of the foregoing.

 

Subject Interest” shall have the meaning set forth in Section 9.3.

 

Substitute Member” shall mean an Assignee who has been admitted to all of the rights of membership in the Company.

 

Tag-Along Interest” shall have the meaning set forth in Section 9.4(a).

 

Tag-Along Notice” shall have the meaning set forth in Section 9.4(a).

 

Tag-Along Price” shall have the meaning set forth in Section 9.4(b).

 

Tax Matters Partner” shall mean the Person appointed pursuant to Section 4.4.

 

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TBOC” shall mean the Texas Business Organization Code, as amended, supplemented or modified from time to time.

 

Transfer” shall mean, as a noun, any voluntary or involuntary transfer, sale, assignment, substitution, exchange or other disposition whether by operation of law or otherwise and, as a verb, to, voluntarily or involuntary, transfer, sell, assign, substitute, exchange or dispose of, whether by operation of law or otherwise.

 

Triggering Member” shall have the meaning set forth in Section 13.1(a).

 

Total Distributions” shall mean, at any time, the total amount of Distributable Cash distributed or deemed distributed to all of the Members pursuant to Section 7.1, but excluding, for the avoidance of doubt, any amount distributed to the Members in respect of Company Loans.

 

Unadjusted Member” shall mean, at any time adjustments are made to Percentage Interests pursuant to Section 3.5(a), any Member which has (x) contributed to the Company the entire amount of such Member’s Maximum Amount, and (y) has not made Capital Contributions to the Company which constitute Bonus Capital.

 

Unfunded Amount” shall have the meaning set forth in Section 3.4(a).

 

Volcker Rule” means Section 13 of the United States Bank Holding Company Act of 1956, as amended (as added by Section 619 of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), or any successor statute.

 

1.2                               Rules of Construction.  (a)  References to numbered or lettered sections and subsections refer to sections and subsections of this Agreement unless otherwise expressly stated.  The words “herein,” “hereof,” “hereunder,” “hereby,” “this Agreement” and other similar references shall be construed to mean and include this Agreement, including all exhibits and schedules hereto and all amendments and supplements hereto, unless the context shall clearly indicate or require otherwise.  Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the Person may in the context require.  Any reference to statutes or laws shall include all amendments, modifications or replacements of the specific sections and provisions concerned.  Unless expressly stated otherwise, the word “including” in this Agreement shall be deemed to be followed by the words “without limitation.”

 

(b)                                 This Agreement is not subject to the principle of construing its meaning against the party that drafted it.  The parties agree that there shall be a conclusive presumption that the Agreement was drafted by each party to an equal degree, and each Member acknowledges that it was represented by its own counsel in connection with its negotiation and drafting.  Wherever in this Agreement a Member is permitted or required to make a decision or determination or take an action in its “discretion” or its “judgment,” that means such Member may take that decision in its “sole discretion” or “sole judgment” unless otherwise specifically provided herein.  Wherever in this Agreement a Member is empowered to take or make a decision, direction, consent, vote, determination, election, action or approval, such Member is entitled to consider, favor and further only such interests and factors as it desires, including its own interests, and has no duty or obligation to consider, favor or further any interest of the Company or the other Members.

 

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Wherever in this Agreement a Member is to act in its “discretion”, “in good faith” or under another express standard, such Member may act under that express standard and is not, and will not be, subject to any other or different standard arising from this Agreement or any other agreement contemplated herein or by relevant provision of law or in equity or otherwise.

 

SECTION 2.  THE LIMITED LIABILITY COMPANY

 

2.1                               Formation.  The name of the Company is set forth on the cover page of this Agreement.  The execution and filing of the Certificate on June 25, 2018 created the Company under the Act.  The Company has been organized upon the terms and conditions set forth in this Agreement and pursuant to the Act.  The rights and obligations of the Company and its Members shall be as provided in the Act except as otherwise expressly provided in this Agreement.

 

2.2                               Purpose.  The purpose of the Company is to enter into the Purchase Agreement and to acquire, own, operate, manage, lease, maintain, finance, market, sell and otherwise deal with the Property.  The Company may engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing.  In connection therewith, the Company may acquire, own, hold, manage, finance, mortgage, pledge, lease and assign any assets, enter into such acquisition agreements, leases, assignments, financing agreements, security agreements and other instruments and agreements of any kind, enter into partnerships, limited partnerships, limited liability companies and joint ventures, and do any and all other acts and things that may be necessary or useful for the conduct of its business or the winding up thereof.  Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company organized under the laws of the State of Texas.

 

2.3                               No Partnership Intended for Nontax Purposes.  Except for purposes of the Code, the Members do not intend by execution of this Agreement to be, as among themselves, partners or any other venture or Person other than a limited liability company.  Notwithstanding the foregoing, the Members and the Company shall elect to be taxed as a partnership under applicable federal, state and local tax laws and regulations.

 

2.4                               Term.  The Company commenced on the filing of the Certificate and shall continue in existence until the winding up and liquidation of the Company and its business following a Dissolution Event.

 

2.5                               Registered Office and Agent.  The registered office of the Company shall be located in the State of Texas at the location designated in the Certificate or at such other location as may be approved from time to time by an Officer upon the filing of any notices required by law.  The initial registered agent shall be the Person designated in the Certificate.  The registered agent shall have a business office identical with such registered office.

 

2.6                               Defects as to Formalities.  A failure to observe any formalities or requirements of this Agreement, the Certificate or the Act shall not be grounds for imposing personal liability on the Members for liabilities or obligations of the Company.

 

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2.7                               Title to Property.  All Company Property shall be owned, directly or indirectly, by the Company and no Member shall have any ownership interest in Company Property in a Member’s individual name or right.

 

2.8                               Principal Office.  The initial principal office of the Company in the United States shall be at c/o Hilltop Holdings Inc., 2323 Victory Avenue, Suite 1400, Dallas, Texas 75219 or at such other place as may be approved from time to time by an Officer, which need not be in the State of Texas.

 

2.9                               Foreign Qualification.  Prior to the Company’s conducting business in any jurisdiction other than the State of Texas, the Company shall comply with all requirements necessary to qualify the Company as a foreign limited liability company in each jurisdiction in which the character of its business requires it to be qualified.  An Officer shall execute, acknowledge, swear to, and deliver all certificates and other instruments that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in each jurisdiction in which the character of its business requires it to be qualified.

 

2.10                        Subsidiaries.  The Company may form, directly or indirectly, one or more Subsidiaries to hold title to all or part of any Company Property.  Any and all references herein to the Company or any Member causing or directing any action on behalf of a Subsidiary shall be deemed to refer to the Company causing (or such Member causing the Company to cause), in its capacity as a direct or indirect partner, member or stockholder of such Subsidiaries, such action to be taken for and on behalf of such Subsidiary.

 

SECTION 3.  NAMES, ADDRESSES, MEMBERSHIP
INTERESTS, AND CAPITAL CONTRIBUTIONS OF MEMBERS

 

3.1                               Names and Addresses.  The name and address of each Initial Member are set forth in Schedule 3.1.

 

3.2                               Membership Interests.  The “Membership Interest” of a Member is all of the Member’s rights and interests under this Agreement and all other rights and interests of a member of a limited liability company as set forth in the Act (subject to the terms of this Agreement), including the Member’s right to receive distributions under Section 7.1 and the Member’s Management Rights.

 

3.3                               Initial Capital Contributions.  As of the Effective Date, the Members have funded Capital Contributions to the Company in the amounts set forth on Schedule 3.3 attached hereto.

 

3.4                               Additional Funding Requirement.

 

(a)                                 (i)  The Members shall have the sole and exclusive right to make Capital Calls in accordance with this Section 3.4(a).  The Members may, at any time or times, require all of the Members to make additional cash capital contributions to the Company that the Members determine, in good faith, are necessary to fund any Necessary Expenditure in excess of available, unrestricted cash and to pay such Necessary Expenditure with the proceeds of such Capital Call.  The Investment Committee shall notify all the Members in writing (which, for the avoidance of doubt, may be via e-mail) of any Capital Calls made pursuant to this Section 3.4(a).

 

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(ii)                                  If any Member (or an Affiliate thereof) (“Funding Member”) funds any amounts (such amounts, the “Funded Amount”) under any Loan Guaranty, the Funding Member may give written notice of the funding of such Funded Amount and each of the other Members shall, within five (5) Business Days after its receipt of such notice, reimburse such Funding Member an amount equal to (x) such Funded Amount (together with any interest that has accrued thereon at the Member Loan Rate from the date of such notice) (the “Reimbursable Amount”) multiplied by (y) such Member’s Reimbursement Percentage (the “Required Reimbursement Amount”). If any Member timely reimburses the Funding Member the Required Reimbursement Amount as provided in the immediately preceding sentence, (i) the Member shall be deemed to have made a Capital Contribution in an amount equal to (x) the Reimbursable Amount multiplied by (y) the Member’s Percentage Interest (each, a “Funder Funded Amount”) and (ii) such Member shall be deemed to have made a Capital Contribution in an amount equal to the Required Reimbursement Amount.  If any Member does not timely reimburse the Required Reimbursement Amount to the Funding Member (such amount not reimbursed, the “Unfunded Amount”) in accordance with the first sentence of this paragraph, then, for all purposes of this Agreement, (i) the Company shall be deemed to have made a Capital Call in the amount of the Reimbursable Amount, (ii) the Funding Member shall be deemed to have contributed capital to the Company pursuant to such Capital Call in an amount equal to the Funding Member’s Funded Amount, (iii) the Funding Member shall be deemed a Contributing Member with respect to such Capital Call and shall be deemed to have funded a Capital Advance equal to the Unfunded Amount, (iv) each Member that failed to reimburse the Unfunded Amount shall be deemed a Non-Contributing Member with respect to such Capital Call, and (v) the provisions of Section 3.4(b) shall apply to such deemed Capital Contributions and Capital Advance.

 

(b)                                 Each Member’s pro rata share (based on its Percentage Interests) of a Capital Call is referred to herein as an “Additional Funding Requirement.”  Each Member shall fund its Additional Funding Requirement of any such Capital Call within five (5) Business Days of receipt of notice therefor from the Investment Committee (the “Contribution Period”).  If any Member (each, a “Non-Contributing Member”) refuses or fails to make all or any portion of an Additional Funding Requirement on or prior to the expiration of the Contribution Period therefor (as such period may be extended in accordance with the preceding sentence), then such refusal or failure shall constitute a default by the Non-Contributing Member, and (A) if any Member shall be a Non-Contributing Member, then each of the other Members (each a “Contributing Member”), provided such Contributing Member shall have made its corresponding Additional Funding Requirement, and subject to the succeeding provisions of this Section 3.4(b), within five (5) Business Days after the expiration of the relevant Contribution Period, may advance all or a portion of a Non-Contributing Member’s unpaid Additional Funding Requirement to the Company (a “Capital Advance”).  If more than one Member desires to be a Contributing Member with respect to another Member’s failure to timely fund its Additional Funding Requirement, each such Member (provided the Contributing Member shall have made its corresponding Additional Funding Requirement) shall have the right to fund a portion of such Capital Advance pro rata in proportion to the relative Percentage Interests of such Contributing Members.  In the event a Contributing Member makes a Capital Advance pursuant to this Section 3.4(b), then such Contributing Member may irrevocably elect either of the following:

 

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(i)                                     to treat the amount of the Capital Advance paid by such Contributing Member as a Capital Contribution by that Contributing Member, with the corresponding dilution of the Non-Contributing Member provided for in Section 3.5; or

 

(ii)                                  to treat the entire amount funded by such Contributing Member attributable to such Contributing Member’s Additional Funding Requirement as a loan by such Contributing Member to the Non-Contributing Member (a “Member Loan”), which Member Loan shall (i) be treated as a demand loan made by the Contributing Member to the Non-Contributing Member and (ii) bear interest at the Member Loan Rate.  Any Member Loan will be recourse only to the Non-Contributing Member’s Interest and must be repaid directly by the Company on behalf of the Non-Contributing Member as set forth in Section 7.6.  Funds used to repay a Member Loan must be applied first to interest and then to principal.  At any time before full repayment of any Member Loan, the Lender Member may elect, in its sole discretion, to terminate that Member Loan and have the Non-Contributing Member’s Percentage Interest diluted as set forth in Section 3.5, with the entire outstanding principal treated as the amount of the Bonus Capital and the Capital Accounts of the Contributing and Non-Contributing Members adjusted as provided in Section 3.5.  Each Member Loan may, at the election of the Lender Member, be evidenced by a promissory note in the form of Exhibit B, and that Lender Member is hereby granted an irrevocable power of attorney, coupled with an interest, to execute and deliver on behalf and in the name of the Debtor Member that promissory note and such Uniform Commercial Code financing and continuation statements and other security instruments reasonably requested by such Lender Member, as may be necessary to perfect and continue the security interest in favor of such Lender Member until such Member Loan is paid in full or converted as described below.  The failure of a Lender Member or Debtor Member to execute the promissory note will not invalidate or otherwise affect the enforceability of, or amounts owing under, any Member Loan.

 

(c)                                  An election by a Contributing Member pursuant to Section 3.4(b) to treat a Capital Advance (x) as a Capital Contribution by such Contributing Member with the corresponding dilution set forth in Section 3.5, as provided in Section 3.4(b)(i), or (y) as a Member Loan as provided in Section 3.4(b)(ii), shall in each case be made by the Contributing Member concurrently with the funding of such Capital Advance, by notice to the Non-Contributing Member and the Company.  If a Contributing Member fails to provide notice to the Non-Contributing Member and the Company in accordance with this Section 3.4(c), such Contributing Member shall be deemed to have elected to treat its Capital Advance together with the amount funded by such Contributing Member with respect to the relevant Additional Funding Requirement as a Member Loan as provided in Section 3.4(b)(ii).  In the event more than one Member is a Contributing Member, then each Member shall be required to make the same election pursuant to Section 3.4(b).

 

3.5                               Adjustments to Percentage Interests.

 

(a)                                 Upon the occurrence of an Adjustment Event, the Percentage Interests of the Members shall be adjusted as follows:  (A) the Percentage Interest of each Contributing Member shall be adjusted so that it is equal to a fraction, the numerator of which is the sum of (x) such Member’s Initial Contribution Amount, plus (y) any additional Capital Contributions then or theretofore made or deemed made by such Contributing Member (including any Capital Advance

 

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made by such Contributing Member pursuant to an election as provided in Section 3.4(b)(i) up to (and not in excess of) such Member’s Maximum Amount, plus (z) the product of (1) the Dilution Factor, multiplied by (2) such Contributing Member’s Bonus Capital, and the denominator of which is the aggregate amount of all Capital Contributions then or theretofore made or deemed made to the Company by all of the Members (including any Capital Advances made by the Members pursuant to an election as provided in Section 3.4(b)(i)), (B) the Percentage Interest of each Unadjusted Member shall remain unchanged (that is, each Unadjusted Member’s Percentage Interest is neither increased nor decreased) and (C) the Percentage Interest of each Non-Contributing Member shall be equal to such Non-Contributing Member’s pro rata portion (based on the relative Percentage Interests of all of the Non-Contributing Members) of the difference between (x) 100% and (y) the sum of (1) the aggregate Percentage Interests of all of the Contributing Members and (2) the aggregate Percentage Interests of all of the Unadjusted Members, in each case after giving effect to the provisions of this Section 3.5(a).

 

(b)                                 If a Member’s Percentage Interest shall be reduced below 0.1% as a result of the operation of Section 3.5(a), then such Non-Contributing Member shall have no further right, title or interest in the Company and shall, upon the request of the Contributing Members, execute and deliver to the Contributing Members such documents of transfer and assignment, and such other instruments, as the Contributing Members shall reasonably request, to confirm that such Non-Contributing Member has no further right, title or interest in or to the Company, as a Member, manager or otherwise.  Each Non-Contributing Member hereby grants to each Contributing Member an irrevocable power of attorney, coupled with an interest, to execute and deliver the documents of transfer and assignment and such other instruments referred to in the immediately preceding sentence.  The Members hereby acknowledge to one another that because of the difficulty in calculating the damage that may result from the failure of a Member to fund its share of an Additional Funding Requirement the remedies set forth in this Section 3.5 have been approved by the Members as fair and reasonable.

 

(c)                                  For so long as no Member has made Capital Contributions to the Company in excess of such Member’s Maximum Amount, the Percentage Interest of each Member shall be equal to a fraction, the numerator of which is the aggregate amount of Capital Contributions then or theretofore made or deemed made to the Company by such Member, and the denominator of which is the aggregate amount of Capital Contributions then or theretofore made or deemed made to the Company by all of the Members.

 

3.6                               Company Loans.  Except as otherwise expressly provided in this Agreement, no Member may make any contributions of capital or otherwise advance funds to the Company without the prior written consent of all Members.

 

3.7                               Establishment of Capital Accounts.  A capital account shall be established for each Member (a “Capital Account”) in the initial amount of that portion of such Member’s Capital Contribution which has been fully paid.  Capital Accounts shall be determined and maintained in accordance with Regulations Section 1.704-1(b)(2)(iv).  A Member’s Capital Account shall:

 

(a)                                 be increased by:

 

(i)                                     the amount of money contributed by the Member to the Company;

 

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(ii)                                  the fair market value of property (other than money) contributed by, or on behalf of, the Member to the Company determined as of the date of such contribution;

 

(iii)                               allocations to the Member of Profits (or items thereof); and

 

(iv)                              the amount of any Company liabilities that are assumed by the Member or secured by any Company property distributed to the Member.

 

(b)                                 and decreased by:

 

(i)                                     the amount of money distributed to or withdrawn by the Member;

 

(ii)                                  the Book Basis of property (other than money) distributed to the Member by the Company determined as of the date of such distribution;

 

(iii)                               allocations of Company Losses (or items thereof); and

 

(iv)                              the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by the Member to the Company.

 

(c)                                  The Capital Account of each Member also shall be adjusted appropriately to reflect any other adjustment required pursuant to Regulation Section 1.704-1 or 1.704-2, including, without limitation, the requirements set forth in Regulation Sections 1.704-1(b)(2)(iv)(g) and 1.704-1(b)(2)(iv)(m).

 

(d)                                 In the event a Member fails to make a Capital Contribution and pursuant to Section 3.4(b) another Member makes such contributions then the Capital Account balances of such Members shall be adjusted so that the Capital Account balances immediately after such adjustment (after taking into account all allocations of Profit and Loss and other items through the date of the adjustment as deemed appropriate by the Members) are equal as closely as possible to their respective Target Capital Accounts, after giving effect to the adjustments to the amounts distributable resulting from changes to the Percentage Interests and Capital Contributions made by the Members.  For purposes of the preceding Target Capital Account means, with respect to any Member, as of any date, an amount equal to the hypothetical distribution such Member would receive with respect to its equity interests in the Company if all assets of the Company, including cash, were sold for cash equal to their Gross Asset Value, all liabilities of the Company were satisfied (limited, with respect to nonrecourse liabilities to the Book Basis of the assets securing such liabilities) and the remaining proceeds were distributed pursuant to Section 7.1.

 

3.8                               Transfers of Interests in the Company.  Upon the Transfer of all or a part of an interest in the Company, the Capital Account of the transferor that is attributable to the transferred interest shall carry over to the transferee, and tax items for the Company taxable year of the Transfer shall be allocated between the transferor and the transferee in accordance with Section 9.8.

 

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3.9                               Capital of the Company.  Except as otherwise provided herein, no Member shall be entitled to withdraw or receive any interest or (except as otherwise expressly provided herein) other return on, or return of, all or any part of its Capital Contribution, or to receive any Company Property (other than cash) in return for its Capital Contribution.

 

3.10                        Limited Liability of Members.  No Member will be bound by, nor be personally liable for, the expenses, liabilities, indebtedness or obligations of the Company or any of its Subsidiaries, whether arising in contract, tort or otherwise.  The provisions of Section 3.4 of this Agreement are intended solely to benefit the Members, and no Member has any obligation to any creditor of the Company or any of its Subsidiaries to make any Capital Contributions to the Company or any of its Subsidiaries.

 

3.11                        Guaranties.  If one or more Members, but not all of the Members (or an Affiliate thereof) provides a Loan Guaranty that is in the nature of a payment guaranty (i.e. is not only an environmental indemnity or non-recourse carve-out guaranty), the Company shall pay to such Member a market-rate fee (to be agreed by the Members at the time any such Loan Guaranty is provided) for providing such Loan Guaranty, which fee shall be based on the guaranteed amount.  For the avoidance of doubt, nothing herein shall obligate a Member of any Affiliate thereof to provide any Loan Guaranty.

 

SECTION 4.  MANAGEMENT

 

4.1                               Management by the Investment Committee.

 

(a)                                 Except as otherwise expressly provided in this Agreement, the management and control of the business and affairs of the Company shall be vested in the Investment Committee.  A member of the Investment Committee is hereby authorized to execute and deliver on behalf of the Company any and all documents, contracts, certificates, agreements and instruments, and to take any action and to do anything and everything such member of the Investment Committee deems reasonably necessary or appropriate for and on behalf of the Company or any of its Subsidiaries in accordance with the provisions of this Agreement and applicable law to consummate the Purchase Agreement and effect the Ground Lease.

 

(b)                                 A committee consisting of the Committee Representatives (the “Investment Committee”) is hereby established and is granted the sole and exclusive right, power and authority to (i) make, approve or disapprove all Investment Committee Decisions on behalf of the Company and its Subsidiaries, and (ii) cause the Company and its Subsidiaries to effect decisions and determinations made by the Investment Committee (and designate authorized signatories of the Company or any Subsidiary to execute and deliver on behalf of the Company or any Subsidiary any and all such contracts, certificates, agreements, instruments and other documents, and to take any such action, as the Investment Committee deems necessary or appropriate relating to Investment Committee Decisions).  None of the Members shall have authority to do (or to cause the Company to cause any of its Subsidiaries to do) or permit any of the Investment Committee Decisions (with respect to the Company or any of its Subsidiaries), or bind the Company (or any of its Subsidiaries or cause the Company to bind any of its Subsidiaries) as to any of the Investment Committee Decisions without first obtaining the approval of the Investment Committee, except to the extent otherwise expressly permitted herein.

 

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(c)                                  The “Investment Committee Decisions” shall mean any matter set forth in this Agreement that is specifically reserved to the discretion of the Investment Committee and each of the following decisions with respect to the Company or any of its Subsidiaries (collectively, the “Company Group”),:

 

(i)                                     any sale, participation, exchange, mortgage or other encumbrance, pledge or other transfer or disposition of all or any portion of the Company Property (excluding space leases of portions of the Property), including, without limitation, all or any portion of any of Property and any equity interests held by any member of the Company Group, or entering into any contract or agreement to do so;

 

(ii)                                  organizing or forming any Subsidiary of any member of the Company Group;

 

(iii)                               the merger, combination, consolidation or other reorganization of any member of the Company Group with or into another Entity;

 

(iv)                              the exercise or waiver of any rights of the Company under the  Purchase Agreement, Ground Lease or the execution or delivery of any of the documents or notices required to be executed or delivered thereunder;

 

(v)                                 the incurrence of any material expense;

 

(vi)                              the entry into, amendment or modification of any contract or other arrangement between any member of the Company Group and a Member or any Affiliate of a Member;

 

(vii)                           borrowing money or incurring Indebtedness on behalf of the Company or any of its Subsidiaries, or any refinancing thereof, or amending or modifying the terms and conditions of any loan in any material respect, or voluntarily prepaying any such financing or the intentional taking of any action or any intentional omission that would constitute an event of default under any loan agreement to which the Company or any of its Subsidiaries is a party;

 

(viii)                        (A) adjusting, settling, compromising or disposing any claim (including any condemnation action), regulatory proceeding or arbitration, or obligation, debt, demand, suit or judgment against or involving the Company or any of its Subsidiaries or any Company Property or any group of claims arising out of the same or related facts and circumstances involving more than $50,000, except for claims for which the Company or any of its Subsidiaries or a Company Property has full insurance coverage, without regard to the amount of deductibles or self-insured retentions which are equal to or less than $50,000, (B) becoming a plaintiff in any litigation or otherwise filing or initiating any suit for or on behalf of the Company or any of its Subsidiaries, except for litigation commenced by any insurer of the Company or any of its Subsidiaries pursuant to the policy or policies of insurance issued by such insurer, or (C) settling on behalf of the Company or any of its Subsidiaries any claim for payment of insurance in excess of $50,000 or for payment of awards or damages arising out of the exercise of eminent domain by any public or governmental authority in excess of $50,000; and

 

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(ix)                              approving, executing, modifying, amending or terminating any property management agreement, management agreement or asset management agreement or any other leasing, sales agency or brokerage agreement or marketing agreement with respect to the Property; provided, however, that the consent of all of the Members shall be required for any material changes to the economic terms of an Asset Management Agreement to which an Affiliate of the Member is a party;

 

(x)                                 approving any insurance program for the Company or any of its Subsidiaries or the Property;

 

(xi)                              making or agreeing to any changes to the zoning of the Property or approve the terms and provisions of any restrictive covenant or easement affecting the Property or any portion thereof;

 

(xii)                           converting the Property into multiple condominium units;

 

(xiii)                        except to the extent required under the terms of any instrument of Indebtedness secured by the Property, deciding whether to repair or rebuild in the case of any casualty affecting the improvement located at the Property;

 

(xiv)                       entering into any lease of space at the Property in excess of twenty thousand (20,000) square feet or entering into any amendment, renegotiation, modification, supplement or extension of any lease that materially impairs any substantive right of the Company or any of its Subsidiaries thereunder or reduces the rents payable thereunder;

 

(xv)                          the acquisition by the Company of any material real property other than the Property;

 

(xvi)                       taking any act, including, without limitation, making any distribution, in contravention of this Agreement;

 

(xvii)                    lending any funds of the Company;

 

(xviii)                 altering the amount of any Member Loan;

 

(xix)                       causing the Company to employ any employees of the Company;

 

(xx)                          admitting any additional Member (other than in accordance with this Agreement);

 

(xxi)                       authorization of Indebtedness requiring (or the Company’s agreement to indemnify any guarantor of) any Guaranty of principal or interest of any Indebtedness of the Company or any Subsidiary; and

 

(xxii)                    changing the fundamental business purpose of the Company.

 

(xxiii)                 making any Capital Calls;

 

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(xxiv)                establishing bank accounts on behalf of the Company or its Subsidiaries;

 

(xxv)                   subject to Section 7 hereof, setting the timing and amount of distributions of Distributable Cash, and establishing reserves in good faith by the Investment Committee for the ultimate discharge of contingent, unliquidated or unforeseen liabilities or obligations of the Company;

 

(xxvi)                making or revoking any tax election or making any material tax decision by or on behalf of the Company or any of its Subsidiaries, filing any tax return or tax report on behalf of the Company or any of its Subsidiaries, or adopting significant accounting policies or selecting and employing the independent auditors of the Company or any of its Subsidiaries;

 

(xxvii)             taking any action in respect of environmental matters involving the Company or any of its Subsidiaries or any Company Property, including any environmental matters involving the Property; and

 

(xxviii)          filing, or consenting to the filing of, on behalf of the Company or any of its Subsidiaries, a petition or other similar action in any Bankruptcy or other similar proceeding under any present or future federal, state, local or other law and making any decisions on behalf of the Company or any such Subsidiaries in any such proceeding, and making any decisions on behalf of the Company or any of its Subsidiaries with respect to any Bankruptcy or other similar proceeding under any present or future federal, state, local or other law involving any other Person.

 

(d)                                 The Investment Committee shall at all times consist of four (4) Committee Representatives, two of whom shall be appointed by the HTH Member and two of whom shall be appointed by the Diamond Member; provided, however, that if both of the Committee Representatives appointed by the HTH Member or the Diamond Member (the “Appointing Party”) are deemed to have resigned pursuant to Section 11.3(b), Section 13.1(d)(ii) or Section 13.1(d)(iii), then such Committee Representatives may not be replaced and the Investment Committee shall thereafter only consist of two (2) Committee Representatives, each of whom shall be appointed by the other Appointing Party.  Each Appointing Party may appoint an alternate for any Committee Representative appointed by it to the Investment Committee, who shall have all the powers of a given Committee Representative in his absence or inability to serve.  Each Appointing Party shall have the power to remove any Committee Representative or alternative Committee Representative of the Investment Committee appointed by it by delivering written notice of such removal to the Company and to the other Appointing Party.  Subject to the first sentence of this Section 4.1(d), vacancies on the Investment Committee shall be filled by the Appointing Party that appointed the Committee Representative previously holding the position which is then vacant.

 

(e)                                  The Committee Representatives effective as of the date hereof shall be as follows:

 

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HTH Members:

 

(1) Jeremy Ford

 

 

 

 

 

(2)  Corey Prestidge

 

 

 

Diamond Member:

 

(1)  Gerald Ford

 

 

 

 

 

(2) Gary Shultz

 

(f)                                   The Investment Committee shall act with respect to all matters (whether to approve any Investment Committee Decision or to exercise any other right (or to grant any consent or approval) accorded to the Investment Committee hereunder) by Required Committee Approval.  Each Committee Representative shall have one (1) vote on all matters that arise before the Investment Committee.  For avoidance of doubt and notwithstanding anything to the contrary herein, no matter may be approved and no action taken by the Investment Committee without Required Committee Approval.

 

(g)                                  (i)  The Investment Committee shall meet required to vote on any Investment Committee Decisions.  Special meetings of the Investment Committee may be called by any Committee Representative to propose and vote on Investment Committee Decisions upon not less than five (5) days’ prior written notice of time and place of such meeting; provided, however, that such notice requirement shall be deemed waived by any Committee Representative who is present (in person or by telephone) at the commencement of any such special meeting.  Regular and special meetings may be held at any place as may be designated from time to time by any Committee Representative, including meetings by telephone conference.  One (1) Committee Representative appointed by each of the HTH Member and the Diamond Member shall constitute a quorum for Investment Committee action with respect to any Investment Committee Decision, provided that if any member of the Committee Representative fails to attend five (5) consecutive meetings, then, until such Committee Representative attends a meeting, such Committee Representative shall not be needed to constitute a quorum for a meeting and such Committee Representative shall be deemed to have voted against any matter proposed at any such meeting.

 

(ii)                                  The Committee Representatives shall use commercially reasonable efforts to evidence all actions taken or approved by the Investment Committee in writing (which may be by e-mail) promptly following such action or approval.

 

(iii)                               Any action required or permitted to be taken at a meeting of the Investment Committee may be taken without a meeting if a written consent setting forth the action so taken is signed by the Committee Representatives whose approval is required to constitute the Required Committee Approval.  Such consent may be in one or more counterparts, and shall have the same force and effect as a vote of such Committee Representatives.  An action so taken shall be deemed to have been taken at a meeting held on the latest date of a counterpart of such consent.

 

(iv)                              Each Committee Representative may authorize any other Committee Representative to act for him or her by proxy on all matters in which a Committee Representative is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting; provided that in no event shall any Committee Representative be

 

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obligated to accept a proxy from any other Committee Representative.  Every proxy must be given in writing and signed by the Committee Representative.  Every proxy shall be revocable at the pleasure of the Committee Representative executing it, such revocation to be effective upon the Company’s receipt of written notice thereof.

 

(v)                                 All reasonable travel expenses incurred by each of the Committee Representatives in connection with their service on the Investment Committee shall be borne by the Company.

 

4.2                               Books and Records.  The Company shall direct the HTH Member to maintain full and complete books and records of the Company and its Subsidiaries, including those specified in the Act, at all times.  The books and records required to be maintained hereunder by the HTH Member shall be the property of the Company and shall be made available by the HTH Member for examination by any Member and such Member’s attorneys, accountants or other agents or representatives, in each case at reasonable times and upon reasonable notice.

 

4.3                               Reporting Requirements.  The Company shall direct the HTH Member to do the following (the expenses of which shall be expenses of the Company):

 

(a)                                 within ninety (90) days after the end of the Company’s Fiscal Year, deliver to the Members an estimate of the Members’ distributive share of the items set forth in Section 702 of the Code for such Fiscal Year;

 

(b)                                 within one hundred twenty (120) days after the end of the Company’s Fiscal Year, deliver to the Members (i) pro forma IRS Schedules K-1 and such other tax information with respect to such year as is necessary for inclusion in the Members’ federal and state income tax and other tax returns, and (ii) an annual report of the Company, including a balance sheet, profit and loss statement and a statement of changes in financial position, and a statement showing distributions to the Members all as prepared in accordance with U.S. generally accepted accounting principles consistently applied; and

 

(c)                                  within sixty (60) days after the end of each quarter of each Fiscal Year, deliver to the Members quarterly financial statements of the Company, including a balance sheet, profit and loss statement and a statement showing distributions to the Members, all as prepared in accordance with U.S. generally accepted accounting principles consistently applied.

 

All of the above reports, balance sheets or other financial statements shall be prepared on an accrual basis and shall otherwise be in form reasonably acceptable to the Members.

 

4.4                               Tax Matters Partner; Tax Returns.  The HTH Member shall act as the Tax Matters Partner of the Company pursuant to § 6231(a)(7) of the Code.  The Tax Matters Partner, in its capacity as such, is authorized, to the extent provided in Code §§6221 through 6231, but subject to the succeeding provisions of this Section 4.4, to represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company and its Members and to execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and its Members.  The Tax Matters Partner shall not be liable to the Company or any Member for any action taken in

 

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good faith and without gross negligence as Tax Matters Partner, including in connection with the examination by the Internal Revenue Service of the Company’s federal partnership tax return or the determination, protest or adjudication of any federal or state income tax liability of any Member resulting from the Company.  Nothing in this Section 4.4 shall be construed to restrict or otherwise limit the other Members’ rights to participate at each Member’s own cost in any administrative or judicial proceeding in connection with any tax matters relating to the Company.  Any direct or indirect costs and expenses incurred by the Tax Matters Partner, acting in its capacity as such, shall be deemed costs and expenses of the Company, and the Company shall reimburse the Tax Matters Partner for such amounts.

 

4.5                               Conduct of the Company.

 

(a)                                 Subject to the respective rights and obligations of the Members to manage the Company under the terms of this Agreement, the Members agree to use their commercially reasonable efforts to cause the Company and its Subsidiaries to comply with all requirements of applicable laws (including any directives or informal guidance provided by applicable regulatory authorities, whether through an examination process or otherwise).

 

4.6                               Member Defaults.

 

(a)                                 Within one hundred twenty (120) days of a Default, the non-Defaulting Member  may:  (x) deliver a Buy-Sell Notice to the Defaulting Member pursuant to Section 13.1, or (y) deliver a Purchase Notice to the Defaulting Member in order to exercise the purchase option with respect to the Membership Interest of the Defaulting Member pursuant to Section 9.5.

 

4.7                               Regulatory Events.

 

(a)                                 Regulatory Event Notices.  If a Regulatory Event has occurred, then the HTH Member may, but is not obligated to, deliver to the other Members a written notice (a “Regulatory Event Notice”) specifying in reasonable detail the occurrence and the nature of such Regulatory Event.

 

(b)                                 Procedures.  If a Regulatory Event Notice is given as provided above, then the Members agree to negotiate in good faith to restructure the terms of the transactions contemplated by this Agreement and the agreements to which the Company and its Subsidiaries are a party in such a manner as may be required so that HTH Member determines that the transactions contemplated by this Agreement and the agreements to which the Company and its Subsidiaries would be in compliance with the terms of all applicable laws and regulations (whether applicable to the HTH Member or any of its Affiliates) and all policies and procedures implemented by such party or any of its Affiliates pursuant to all applicable law and regulations but which preserves the economic interests of the other Members under this Agreement to the extent possible.  Nothing in this Section 4.7(b) shall require a Member to incur a loss (other than immaterial incidental expenses) or increase its regulatory risk or cost in connection with any restructuring contemplated by the preceding sentence or to otherwise suffer a material adverse effect.

 

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(c)                                  Forced Sale.  In the event that a Regulatory Event Notice has been delivered and the Members do not enter into a restructuring that satisfies the requirements of Section 4.7(b), then the HTH Member shall thereafter be entitled to sell all of the Company Assets in accordance with Section 9.5.

 

SECTION 5.  REPRESENTATIONS, WARRANTIES AND COVENANTS

 

5.1                               Representations, Warranties and Covenants by the Members.  To induce each Member to execute, deliver and perform this Agreement, each of the Members, with respect to itself, hereby, severally and not jointly, represents, warrants and covenants to the other Members, their respective successors and assigns as follows:

 

(a)                                 Such Member (i) is, if an entity, duly organized, validly existing and in good standing under the laws of the State of Texas as a limited liability company and (ii) has the full right, power and authority to enter into this Agreement, and to perform all of its obligations hereunder.

 

(b)                                 This Agreement has been duly and validly executed and delivered by and on behalf of such Member and, assuming the due authorization, execution and delivery thereof by and on behalf of each other party hereto, constitutes a valid, binding and enforceable obligation of such Member enforceable in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors in general.

 

(c)                                  Neither the execution and delivery hereof, nor the taking of any actions contemplated hereby, will conflict with or result in a breach of any of the provisions of, or constitute a default, event of default or event creating a right of acceleration, termination or cancellation of any obligation under any instrument, note, mortgage, contract, judgment, order, award, decree or other agreement or restriction to which such Member is a party, or by which such Member is otherwise bound.

 

(d)                                 There is no claim, cause of action or other litigation or any judicial, administrative or investigative proceedings pending or, to the best of such Member’s knowledge, threatened against such Member that would reasonably be expected to have a material adverse effect on the performance of such Member’s obligations hereunder.

 

(e)                                  Neither such Member nor any ultimate beneficial interest holder of such Member that holds through a flow-through entity for tax purposes is a “qualified organization” within the meaning of Section 514(c)(9)(C) of the Code.

 

5.2                               Additional Representations, Warranties and Covenants.

 

(a)                                 Each Member represents and warrants that (i) each Person owning a 10% or greater interest in such Member (A)  is not currently identified on the List, and (B) is not a Person with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or executive order of the President of the United States and (ii) such Member has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations

 

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and warranties remain true and correct at all times.  This Section 5.2(a) shall not apply to any Person to the extent that such Person’s interest in the Member is through either (A) a Person (other than an individual) whose securities are listed on a national securities exchange, or quoted on an automated quotation system, in the United States, or a wholly-owned subsidiary of such a Person or (B) an “employee pension benefit plan” or “pension plan” as defined in Section 3(2) of ERISA.

 

(b)                                 Each Member shall comply with all applicable requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect and shall promptly notify the other Members in writing if any of the foregoing representations, warranties or covenants are no longer true or have been breached or if such Member has actual knowledge that they may no longer be true or have been breached.

 

(c)                                  Each Member represents and warrants that:

 

(i)                                     it has been advised to engage and has engaged its own counsel (whether in-house or external) and such other advisers as such Member deems necessary and appropriate; by reason of its business or financial experience, or by reason of the business or financial experience of such Member’s own attorneys, accountants and financial advisors who are not Affiliates of the Company or any other Member and who are not compensated, directly or indirectly, by the Company or any other Member or any Affiliate thereof, it is capable of evaluating the risks and merits of an investment in the Company and of protecting its own interests in connection with this investment (nothing in this Agreement shall be construed to allow any Member to rely upon the counsel acting for another Member or to create an attorney-client relationship between such counsel and such other Member);

 

(ii)                                  it and each of its beneficial owners is an “accredited investor” (as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended) and it is acquiring its Membership Interest for investment purposes for its own account only and not with a view to or for sale in connection with any distribution of all or any part of its Membership Interest;

 

(iii)                               it is financially able to bear the economic risk of an investment in the Company, including the total loss thereof; and

 

(iv)                              no Person has at any time expressly or impliedly represented, guaranteed, or warranted to it that it may freely transfer its Membership Interest, that a percentage of profit and/or amount or type of consideration will be realized as a result of an investment in the Company, that cash distributions from Company operations or otherwise will be made to the Members by any specific date or will be made at all, or that any specific tax benefits will accrue as a result of an investment in the Company.

 

(d)                                 Each Member covenants and agrees not to take any action which may cause the Company to be treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code or otherwise cause the Company to be treated as an association taxable as a corporation for U.S. federal income tax purposes.

 

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SECTION 6.  PROFIT AND LOSS

 

6.1                               Allocations of Profits and Losses.

 

(a)                                 After giving effect to the special allocations set forth in Sections 6.2 and 6.3, Profits and Losses with respect to any year shall be allocated to the Members such that each Member’s Capital Account balance (computed after taking into account all distributions with respect to such taxable period and increased by such Members’ share of Company Minimum Gain and Member Minimum Gain), would, as nearly as possible, be equal to the amount that each Member would receive if all of the remaining assets of the Company were sold for their Book Basis, all liabilities of the Company were satisfied (limited, with respect to nonrecourse liabilities, to the Book Basis of the assets securing such liabilities) and the remaining assets were distributed pursuant to Section 7.1, all as of the last day of the period for which the allocations are being made.

 

(b)                                 Notwithstanding Section 6.1(a), in any year in which the Company sells substantially all of its assets or liquidates (or in any prior open year if the Investment Committee reasonably believe it necessary to accomplish the purposes of this Section 6.1(b)), each Member shall be allocated Profits or Losses (or items thereof) to the extent necessary to cause its Capital Account balance to reflect the amount that will be distributable to such Member in liquidation of the Company pursuant to this Agreement.

 

6.2                               Limitation on Loss Allocation.  No allocation of Losses, or items thereof, will be made to any Member if such allocation would create or increase such Members’ Adjusted Deficits.  Any such disallowed allocation will be made to the Members entitled to receive such allocation under the Section 704(b) Regulations.  Any Member that would have a deficit balance in its Capital Account in excess of any amount such Member is obligated to restore, or is deemed obligated to restore under Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5), will be specially allocated items of income and gain to eliminate such deficit balance as quickly as possible.

 

6.3                               Special Allocations.  (a)  If there is a net decrease in Company Minimum Gain during any Fiscal Year, then, subject to the exceptions set forth in Regulations § 1.704-2(f)(2), (3), (4) and (5), each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Regulations § 1.704-2(g).  If there is a net decrease in Member Non-Recourse Debt Minimum Gain attributable to a Member Non-Recourse Debt during any Fiscal Year, each Member who has a share of the Member Non-Recourse Debt Minimum Gain, determined in accordance with Regulations § 1.704-2(i)(5), shall be specially allocated items of Company income and gain, including gross income, for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Member Non-Recourse Debt Minimum Gain, determined in accordance with Regulations § 1.704-2(i)(4).  If any Member unexpectedly receives any adjustments, allocations or distributions described in Regulations § 1.704-1 (b)(2)(ii)(d)(4), (5), or (6), items of Company income and gain, including gross income, shall be specially allocated to each such Member in an amount and manner sufficient to eliminate the Adjusted Deficit of such Member as quickly as possible.  Any Member Non-Recourse Deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Non-Recourse Debt in accordance with Regulations § 1.704-2(i)(1).  Non-Recourse

 

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Deductions and any excess non-recourse liabilities (within the meaning of Regulation Section 1.752-3(a)) for any Fiscal Year shall be allocated among the Members in accordance with Percentage Interests.  To the extent an adjustment to the tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of the adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases basis), and the gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to that Section of the Regulations.

 

(b)                                 The Members intend that the provisions of this Section 6 be interpreted in a manner that produces allocations that are respected under Section 704(b) of the Code and that, on liquidation of the Company, result in Capital Account balances that are consistent with the liquidating distributions required to be made pursuant to Section 11.3(a)(vi).

 

6.4                               Tax Allocations.  (a)  Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations each Company item of income, gain, loss and deduction shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.1, 6.2, and 6.3 hereof.

 

(b)                                 Notwithstanding Section 6.4(a) hereof, Tax Items with respect to assets whose Gross Asset Value varies from its adjusted tax basis in the hands of the Company shall be allocated among the Members for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation using any method selected in the reasonable determination of the Investment Committee.

 

SECTION 7.  DISTRIBUTIONS

 

7.1                               Distributable Cash.

 

(a)                                 The Investment Committee shall determine the amount and timing of all distributions of the Distributable Cash of the Company; provided, however, that distributions of Distributable Cash, if any, shall be made no less frequently than quarterly.  Unless all of the Members otherwise approve and except as otherwise provided in this Agreement, all distributions of Distributable Cash of the Company shall be applied as follows:

 

(i)                                     First, to pay accrued and unpaid interest on, and thereafter principal of, Company Loans, in proportion to the aggregate balances of such accrued interest and principal, respectively;

 

(ii)                                  Second, to the Members pro rata in accordance with their Percentage Interests.

 

7.2                               Amounts Withheld.  All amounts withheld by the Company pursuant to the Code or any provision of any state or local tax law with respect to any payment, distribution or allocation by the Company to the Members shall be treated as amounts distributed to the Members pursuant to this Section 7 for all purposes under this Agreement.  The Company is authorized to withhold from distributions and to pay over to any federal, state or local government any amounts required

 

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to be so withheld pursuant to the Code or any provisions of any other federal, state or local law and shall allocate any such amounts to the Members with respect to which such amounts were withheld.

 

7.3                               Limitations on Distributions.  Except as otherwise provided for in the Act, the Certificate or this Agreement, no Member shall have the right or power to demand or receive a distribution in a form other than cash and shall not be required or compelled to accept a distribution of any asset in-kind.  Notwithstanding anything contained in this Agreement or the Certificate to the contrary, no distribution shall be made to a Member in violation of the Act.

 

7.4                               Characterization of Certain Distributions.  The Members acknowledge and agree that, notwithstanding anything to the contrary set forth in this Agreement, amounts payable, or payments made, to the Members in respect of Company Loans pursuant to Section 7.1 shall not be deemed or otherwise constitute (i) amounts which are distributable to the Members hereunder, or (ii) distributions made or deemed made to such Members hereunder.

 

7.5                               Liquidation.  Subject to Section 11 hereof, in the event of the sale or other disposition of all or substantially all of the Company Property, the Company shall be dissolved and the proceeds of such sale or other disposition shall be distributed in liquidation as provided in Section 11.3, except that to the extent that the Company receives a purchase money note or notes in exchange for all or a portion of such assets, the Company shall continue in existence until such purchase money notes or notes have been paid in full.

 

7.6                               Repayment of Member Loans.   If, as a result of a Member Loan, any Member becomes a Debtor Member, then any distributions that would otherwise be payable to the Debtor Member pursuant to Section 7.1 or Section 11.3 will instead be paid to the Lender Member or Members, first to pay any accrued interest (at the applicable Member Loan Rate) and then to pay the principal amount thereof, until these Member Loans (including any accrued and unpaid interest) are repaid in full.  A Member Loan will be secured by a lien on the Debtor Member’s Membership Interest, and any Transferee of the Debtor Member’s Membership Interest will take that Membership Interest subject to the lien.  If there are two or more Lender Members with respect to any Debtor Member, distributions under this Section 7.6 will be made pro rata to each Lender Member in proportion to the relative principal amount of Member Loans (including accrued and unpaid interest) that each Lender Member has outstanding as a percentage of total outstanding Member Loans made to the Debtor Member by all Lender Members.  Any amounts distributed pursuant to this Section 7.6 will, for tax allocation and all other purposes of this Agreement, be treated as if they had been distributed to the Debtor Member, not the Lender Member or Members.

 

SECTION 8.  ADDITIONAL AND SUBSTITUTE MEMBERS

 

8.1                               Admission.  Persons may be admitted as Additional Members or Substitute Members with the approval of, and upon the terms and conditions approved by, all of the Members.  Notwithstanding the foregoing, a Person shall not become an Additional Member or a Substitute Member unless and until such Person:

 

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(a)                                 becomes a party to this Agreement as a Member by signing a counterpart hereof and executes such documents and instruments as the Members determine are necessary or appropriate to confirm such Person as a Member of the Company (including representations and warranties requested by the Company) and such Person’s agreement to be bound by the terms and conditions hereof;

 

(b)                                 if the Person is not an individual, provides the Company with evidence satisfactory to counsel for the Company of the authority of the Person to become a Member and to be bound by the terms and conditions of this Agreement; and

 

(c)                                  pays or reimburses the Company for its expenses in connection with such admission.

 

8.2                               Acceptance of Prior Acts.  Any person who becomes a Member, by becoming a Member, accepts, ratifies and agrees to be bound by all actions duly taken pursuant to the terms and provisions of this Agreement by the Company prior to the date it became a Member and, without limiting the generality of the foregoing, specifically ratifies and approves all agreements and other instruments as may have been executed and delivered on behalf of the Company prior to said date and which are in force and effect on said date.

 

SECTION 9.  TRANSFERS OF INTERESTS

 

9.1                               Restriction on Transfers.

 

(a)                                 Except as expressly set forth in this Agreement, unless approved by all of the Members, no Member shall have the right or power to Transfer or Encumber or permit any Encumbrance of all or any part of such Member’s Membership Interest or cause or suffer the direct or indirect Transfer of, or Encumbrance on, all or any part of such Membership Interest.

 

(b)                                 No Transfer of all or any part of the Membership Interest of a Member permitted to be made under this Agreement shall be binding upon the Company unless and until a duplicate original of such assignment or instrument of transfer, duly executed and acknowledged by the assignor or transferor, has been delivered to the Company, and such instrument evidences (i) the written acceptance by the assignee of all of the terms and provisions of this Agreement, (ii) the assignee’s representation that such assignment was made in accordance with all applicable laws and regulations and (iii) the unanimous consent of all of the Members to the Transfer of the Membership Interest unless such Transfer is pursuant to Section 9.2, Section 9.3, Section 9.4, Section 9.5, or Section 13.1, or such unanimous consent is otherwise not required pursuant to the express terms hereof.

 

(c)                                  Any purported Transfer or Encumbrance in violation of this Agreement shall be void ab initio, and shall not bind the Company, and the Members making such purported Transfer, sale or assignment or Encumbrance shall indemnify and hold the Company and the other Members harmless from and against any federal, state or local income taxes, or transfer taxes, including, without limitation, transfer gains taxes, arising as a result of, or caused directly or indirectly by, such purported Transfer or Encumbrance.  The giving of any consent to a Transfer or Encumbrance in any one or more instances shall not limit or waive the need for such consent in any other or subsequent instances.

 

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(d)                                 Notwithstanding anything contained in this Agreement, no Transfer shall be made if (i) registration is required under the Securities Act of 1933, as amended, in respect of such Transfer; (ii) such Transfer violates any applicable federal or state securities or comparable laws; or (iii) such Transfer will be subject to, or such Transfer, when aggregated with prior Transfers, in accordance with applicable law will result in the imposition of, any state, city or local transfer taxes, including, without limitation, any transfer gains taxes, unless such assignor pays such taxes.

 

9.2                               Permitted Transfers.

 

(a)                                 Member Permitted Transfers.  A Transfer by a Member of all or any portion of its Membership Interests in the Company to a Member Permitted Transferee shall be permitted without the necessity of obtaining the approval of any other Member.  Each such Member Permitted Transferee shall, upon becoming a member of the Company, represent, warrant and covenant to the other Members the representations, warranties and covenants set forth in Section 5.1 and Section 5.2 (in each case as applied to such Member Permitted Transferee).  Transfers or Encumbrances of indirect interests in the Member shall be permitted and in no event shall any such Transfer or Encumbrance require the approval of any Member hereunder or otherwise require compliance with any of the provisions of this Section 9.

 

9.3                               Right of First Offer.  Subject only to the terms of this Section 9.3 and Section 9.4, a Member shall be permitted to Transfer all or any portion of its Membership Interest (the “Subject Interest”) to any Proposed Purchaser (any such transaction, a “Disposition Transaction”), without restriction and without the necessity of obtaining any consents or approvals.

 

(a)                                 If a Member desires to engage in a Disposition Transaction (other than pursuant to a Permitted Transfer described in Section 9.2 above) in respect of the Membership Interests in the Company, such Member (the “Offering Member”) shall give notice (the “Offer Notice”) to each of the other Members (“Offeree Members”), of the Offering Member’s desire to engage in said Disposition Transaction, which Offer Notice shall state the desired sale price (the “Proposed Price”) and the other desired material economic terms of such sale (the “Proposed Terms”).  The Proposed Price and the Proposed Terms are sometimes collectively referred to herein as the “Offer Notice Parameters.”

 

(b)                                 Within a period (“Response Period”) of thirty (30) days after the Offering Member gives the Offer Notice to the Offeree Members, each Offeree Member shall give notice (the “Response Notice”) to the Offering Member and each other Offeree Member that: (i) such Offeree Member will purchase the entire Subject Interest in cash for the Proposed Price and upon the Proposed Terms, or (ii) such Offeree Member will waive its right to purchase the Subject Interest pursuant to this Section 9.3.  In the event that more than one Offeree Member (individually or collectively, the “Acquiring Offeree Members”) elects to acquire the entire Subject Interest, then the entire Subject Interest shall be acquired by the Acquiring Offeree Members on a pro rata basis in accordance with their respective Percentage Interests as of the date of the Response Notice.  In the event that no Offeree Member gives the Response Notice to the Offering Member prior to the end of the Response Period, the Offeree Members shall be deemed to have waived their right to acquire the Subject Interest pursuant to this Section 9.3 and the Offering Member shall be permitted to proceed in accordance with Section 9.3(c) below.  If prior to the end of the Response

 

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Period any one or more of the Offeree Members elect to acquire the Subject Interest, then, simultaneously with said election, the Acquiring Offeree Members shall deliver into escrow to a nationally recognized title insurance company, bank or trust company (which escrow agent shall be selected by the Offering Member) immediately available funds in an amount equal to ten percent (10%) of the Proposed Price (the “ROFO Percentage”).  The ROFO Percentage shall be held in escrow in an interest-bearing account for the benefit of the Offering Member if the Acquiring Offeree Members do not perform their obligations under this Section 9.3 (other than solely as a result of a default by the Offering Member in its obligation to deliver the Subject Interest to the Acquiring Offeree Members, pursuant to an assignment and assumption agreement in the form attached hereto as Exhibit A, against payment of the Proposed Price).  If any of the Acquiring Offeree Members fail to deposit the ROFO Percentage as described above, then all the Acquiring Offeree Members will be conclusively determined to have made an election under clause (ii) above (provided that if any of the Acquiring Offeree Members default on their obligation to deposit their pro rata percentage of the ROFO Percentage, the other Acquiring Offeree Members shall have three (3) Business Days to deposit the amounts on behalf of the defaulting Acquiring Offeree Members).  Any election made by the Acquiring Offeree Members to purchase the Subject Interest in accordance with this Section 9.3 shall not be subject to receipt by the Acquiring Offeree Members of representations and warranties and/or indemnification from the Offering Member (other than representations and warranties set forth in the form of assignment and assumption agreement attached hereto as Exhibit A).  Each party shall bear its own legal fees and expenses in connection with any sale of the Subject Interest to the Acquiring Offeree Members pursuant to Section 9.3(d).

 

(c)                                  In the event the Offering Member is not, pursuant to the preceding paragraph, obligated to sell the Subject Interest to the Offeree Members, the Offering Member shall have the right, subject to Section 9.4 and the further provisions of this Section 9.3(c), to consummate a Disposition Transaction (an “Offer Parameters Disposition Transaction”) with a Proposed Purchaser for not less than 100% of the Proposed Price, in cash, and otherwise on economic terms not materially more favorable to such Proposed Purchaser than the Proposed Terms (after taking into account any terms of such sale that are not customary in the market and that would require payments of liquidated sums or other contractually stipulated categories of expenses or other sums by the Offering Member that would effectively constitute a reduction of the Purchase Price), on or prior to the date which is six (6) months after the expiration of the Response Period (the “Sale Period”).  If the Offer Parameters Disposition Transaction is not closed prior to the end of the Sale Period, then the Offering Member may not enter into a Disposition Transaction with respect to the Subject Interest without sending a new Offer Notice and otherwise complying with the provisions of Sections 9.3(a) and (b).  If the Offer Parameters Disposition Transaction is closed on or prior to the end of the final day of the Sale Period, the Offeree Members’ rights under Section 9.3(a) shall terminate as to the Subject Interest and Section 9.3(a) will, as to the Subject Interest, be null, void and of no further force and effect.  In furtherance of any of the foregoing, the Offeree Members each hereby agree to promptly execute and deliver any and all documents reasonably requested by the Offering Member to evidence its consent to the foregoing.

 

(d)                                 If, prior to the expiration of the Response Period, the Acquiring Offeree Members elect to purchase the Subject Interest pursuant to Section 9.3(b) above and timely deposit the ROFO Percentage as required by Section 9.3(b) then the Offering Member shall sell and assign

 

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the Subject Interest to the Acquiring Offeree Members, pursuant to an assignment and assumption agreement in the form attached hereto as Exhibit A, for the Proposed Price and on the Proposed Terms.  The closing of such sale shall be held at the principal office of the Offering Member within sixty (60) days following the Acquiring Offeree Members’ exercise of their election to purchase the Subject Interest (the “Closing Period”) on a date designated by the Offeree Members  by notice to the Offering Member at least ten (10) Business Days in advance (or, failing such designation, on the final day of the Closing Period or, if such day is not a Business Day, the Business Day preceding such final day).  At the closing of the Acquiring Offeree Members’ acquisition of the Subject Interest:

 

(i)                                     the Offering Member shall assign and convey to the Acquiring Offeree Members the Subject Interest, free and clear of all liens, claims, and encumbrances, and each of the Offering Member and the Acquiring Offeree Members shall execute and deliver an assignment and assumption agreement in the form attached hereto as Exhibit A;

 

(ii)                                  any deed, documentary, stamp, transfer or similar taxes or fees due in connection with the sale shall be paid by or apportioned equally as between the buyer and seller, unless a different apportionment is included in the Offer Notice Parameters;

 

(iii)                               the Acquiring Offeree Members shall pay the Purchase Price, net of the ROFO Percentage, to the Offering Member by wire transfer, and the ROFO Percentage shall be paid to the Offering Member; and

 

(iv)                              the Members shall execute all amendments to fictitious name certificates, certificates of formation or similar certificates necessary to effect the withdrawal of the Offering Member from the Company (if applicable) and the substitution of the Acquiring Offeree Members or their designees for the Offering Member with respect to the Subject Interest.

 

(e)                                  If any of the Acquiring Offeree Members defaults on its obligation to purchase the Subject Interest in accordance with Section 9.3(d), (i) the other Acquiring Offeree Members shall have three (3) Business Days to cure such default and if such default has not been cured at the end of such period, the ROFO Percentage shall be immediately paid to the Offering Member as liquidated damages and the Offeree Members shall thereafter have no further rights under this Section 9.3 with respect to any sale of all or any portion of the Offering Member’s Membership Interest and the Offering Member shall be free to sell all or any portion of its Membership Interest at any time without having to comply with this Section 9.3 or Section 9.4, and without having to obtain any consent or approval of any of the Offeree Members; (ii) the Offeree Members shall have no further liability or obligation to the Offering Member with respect to the purchase of the Subject Interest; (iii) the Offeree Members’ purchase option set forth in Section 9.3(b) shall be null, void and of no further force and effect; and (iv) the Offeree Members’ rights pursuant to Section 9.4 shall be null, void and of no further force and effect.  If after the Acquiring Offeree Members have elected to purchase the Subject Interest as described above, the Offering Member defaults on its obligation to sell the Subject Interest to the Acquiring Offeree Members in accordance with this paragraph, the ROFO Percentage shall be immediately returned to the Acquiring Offeree Members and the Offering Member shall immediately pay to the Acquiring Offeree Members as liquidated damages, an amount equal to the ROFO Percentage.

 

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The parties agree that, in connection with a default under this Section 9.3 by the Acquiring Offeree Members or the Offering Member, damages to the non-defaulting Member(s) will be difficult and impracticable to ascertain and the retention of the ROFO Percentage by the Offering Member, or the payment by the Offering Member to the Acquiring Offering Members of an amount equal to the ROFO Percentage, as the case may be, is a reasonable estimate of such damages from such default and shall not be considered a penalty.  The costs of any escrow established by the Offering Member and the Acquiring Offeree Members to implement the terms and provisions of this Section 9.3 shall be shared by the parties according to their respective Percentage Interests

 

(f)                                   In the event that an Acquiring Offeree Member becomes a majority owner of the Company as a result of the exercise of its right of first offer pursuant to this Section 9.3, the parties shall cooperate to cause Section 4 of this this Agreement to be amended to increase the management rights of such Acquiring Offeree Member accordingly; provided, however, as a condition of such amendment, the Offering Member (and all of its Affiliates) shall be concurrently released from any Loan Guaranty to which any of them is a party.

 

9.4                               Tag-Along Rights.  (a)  In the event that (x) the Offering Member desires to sell all of its Membership Interests to any Proposed Purchaser other than pursuant to a Permitted Transfer described in Section 9.2 above (such interest, the “Tag-Along Interest”), and (y) the Offeree Members have not elected to purchase (or are deemed to have elected not to purchase) such Tag-Along Interest pursuant to Section 9.3, then the Offering Member shall deliver written notice (the “Tag-Along Notice”) to each of the Offeree Members (which notice shall set forth the information required by Section 9.4(b)).  Within thirty (30) days after delivery of such Tag-Along Notice, each Offeree Member shall notify the Offering Member if such Offeree Member elects to participate in the sale to the Proposed Purchaser in accordance with this Section 9.4, failing which, such Offeree Member will be deemed to have waived such participation right.  If the Offeree Members waive or are deemed to have waived their rights under this Section 9.4 with respect to a proposed sale, the Offering Member may consummate the sale of the Tag-Along Interest to the Proposed Purchaser, provided that the Offering Member shall not be entitled to consummate the sale of the Tag-Along Interest to the Proposed Purchaser at a purchase price which exceeds 100% of the Proposed Price without again offering the Offeree Members the right to participate in such sale in accordance with the requirements of this Section 9.4.  If the Offeree Members notify the Offering Member that all the Offeree Members elect to participate in the sale of the Tag-Along Interest, each Offeree Member shall be bound to sell to the Proposed Purchaser, at the Tag-Along Price, a portion of its Membership Interest equal to the product of (x) the total Membership Interests to be purchased by the Proposed Purchaser multiplied by (y) a fraction of which the numerator is the Percentage Interest of each such Offeree Member immediately prior to such sale, and the denominator is the aggregate Percentage Interests of the Offering Member and the Offeree Members immediately prior to such sale, and on the other terms set forth in the Tag-Along Notice.

 

(b)                                 The Tag-Along Notice shall set forth: (i) the name and address of the Proposed Purchaser, (ii) the proposed terms and conditions of the offer, including any representations and warranties to be made by the Offering Member and any indemnity obligations of the Offering Member, (iii) the Tag-Along Price, and (iv) a statement of the right of the Offeree Members to participate in the proposed sale on the terms applicable to the sale by the Offering Member and in accordance with this Section 9.4.  For purposes hereof, “Tag-Along Price” shall mean, with respect to each Member, an amount equal to the amount such Member would receive

 

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if all of the Company Assets were sold for the purchase price paid by the Proposed Purchaser, and then such amount was distributed to the Members in accordance with the terms of this Agreement

 

(c)                                  In connection with a sale of the Tag-Along Interest in which the Offeree Members participate pursuant to this Section 9.4, the Offeree Members will, if requested by the Proposed Purchaser, execute, deliver and perform agreements with the Proposed Purchaser relating to the sale containing terms that are substantially similar in all material respects to those contained in the comparable agreements to be executed, delivered and performed by the Offering Member.

 

9.5                               Purchase Option/Obligation.

 

(a)                                 Within one hundred twenty (120) days after the occurrence of a Member Default (such Member, the “Defaulting Member”), the Non-Defaulting Members may deliver notice to the Defaulting Member exercising their right to purchase the Membership Interest of the Defaulting Member (such notice, a “Purchase Notice”), in which case the provisions of this Section 9.5 will apply; provided, however, that in no event shall the Non-Defaulting Members be permitted to deliver a Purchase Notice when the Property is under contract for sale and the consummation of such sale remains pending.

 

(b)                                 If a Purchase Notice is delivered, the Non-Defaulting Members will have the obligation to purchase, and the Defaulting Member shall have the obligation to sell, the Membership Interests of the Defaulting Member on the following terms:

 

(i)                                     The purchase price for the Membership Interests of the Defaulting Member (the “Purchase Price”) shall be determined pursuant to Section 9.5(d) below.

 

(ii)                                  The closing of the sale of the Membership Interests of the Defaulting Member shall occur on a date designated by the Non-Defaulting Members, which date shall be no less than ten (10) Business Days following the determination of the Purchase Price and no more than ninety (90) days following the determination of the Purchase Price.

 

(iii)                               The Purchase Price will be paid by the Non-Defaulting Members to the Defaulting Member on the closing of the purchase.  Simultaneously with the receipt of the Purchase Price, the Defaulting Member shall execute and deliver all documents that may be necessary to Transfer the entire Membership Interests of the Defaulting Member to the Non-Defaulting Members.  Except as set forth on Exhibit C, Closing costs and all other charges involved in closing the sale shall be divided equally between the Defaulting Member and the Non-Defaulting Members.

 

(c)                                  In any sale of the Membership Interests of the Defaulting Member pursuant to this Section 9.5:

 

(i)                                     In connection with such purchase, the Non-Defaulting Members will not be entitled to any representations, warranties or indemnification from the Defaulting Member (other than representations and warranties to the effect that (x) the Defaulting Member is duly organized and validly existing, (y) the Defaulting Member is duly authorized to effect the sale of its Membership Interests and (z) the Membership

 

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Interests of the Defaulting Member are owned by the Defaulting Member and such Membership Interests are being transferred free and clear of all liens and encumbrances).

 

(ii)                                  The Defaulting Member shall convey its Membership Interests to the Non-Defaulting Members free and clear of all liens upon payment of the Purchase Price.  If the Defaulting Member has created or suffered any liens upon its Membership Interest, the Non-Defaulting Members may either (A) bring an action for specific performance to compel the Defaulting Member to have the liens removed, in which case the closing will be adjourned for that purpose, or (B) deduct an appropriate offset against the Purchase Price.

 

(iii)                               Each Person will bear its own legal fees and expenses for the purchase, except that the Defaulting Member shall pay for any reasonable attorneys’ fees and costs incurred by the Non-Defaulting Members in removing liens on the Membership Interest of the Defaulting Member.

 

(iv)                              The Transfer of the Membership Interests of the Defaulting Member will be evidenced by a written instrument in customary form provided by the Non-Defaulting Members.

 

(d)                                 The “Purchase Price” shall be determined based on the fair market value of the Membership Interest of the Defaulting Member (which shall be determined based on the fair market value of the Property less any transfer costs which would be incurred if the Property were transferred via sale or otherwise) either by agreement of the Non-Defaulting Members and the Defaulting Member or, if the Non-Defaulting Members and the Defaulting Member do not reach agreement within 15 business days after delivery of the Purchase Notice, in accordance with the appraisal procedure set forth in Exhibit C.

 

9.6                               Rights and Obligations of Assignees and Assignors.

 

(a)                                 A Transfer of a Person’s interest in the Company does not itself dissolve the Company or entitle the Assignee to become a Member or exercise any Management Rights.

 

(b)                                 If a court of competent jurisdiction holds that a nonvoidable Transfer has occurred notwithstanding the failure to comply with the conditions precedent to Transfer set forth in this Agreement, then (i) a Person who acquires a Membership Interest, but who is not admitted as a Substitute Member, shall be entitled to no more than the Economic Rights with respect to such Membership Interest, shall have no right to any information or accounting of the affairs of the Company or any of its Subsidiaries, shall have no right to attend meetings and shall not be entitled to inspect the books and records of the Company or any of its Subsidiaries, (ii) all distributions payable to such Person shall first be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations or liabilities for damages that the Company or the Members may have suffered as a result of such Transfer, and (iii) the parties engaging, or attempting to engage, in such Transfer shall indemnify and hold harmless the Company and the other Members from all costs, liabilities and damages that any of such indemnified Persons may incur (including, without limitation, incremental tax liability and attorney fees and expenses as a result of such Transfer, or attempted Transfer, and efforts to enforce the indemnity granted herein).

 

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9.7                               Acceptance of Assignee as Substitute Member.  Subject to the other provisions of this Section 9, a transferee of a Membership Interest may be admitted to the Company as a Substitute Member, with all of the Management Rights of a Member, only upon satisfaction of all of the conditions set forth in Section 8.1; provided, however, that with respect to the Transfer of a Membership Interest pursuant to Section 9.2, Section 9.3, Section 9.4, Section 9.5, or Section 13.1, the approval of the Members pursuant to Section 8.1 to the substitution of the transferee of such Membership Interest shall be deemed to have been given concurrently with such Transfer.

 

9.8                               Distributions and Allocations Regarding Transferred Interests.  If any Person’s interest in the Company is transferred during any Fiscal Year in compliance with the provisions of this Section 9, Profits, Losses, each item thereof and all other items attributable to such interest for such Fiscal Year shall be divided and allocated between the transferor and the transferee either by the pro rating method, closing of the books method or any other reasonable method, in each case as determined by the transferor or, if both the transferor and the transferee are Members, by agreement of such transferor and transferee.

 

9.9                               Section 754 Election.  At the request of either the transferor or transferee in connection with a Transfer of an interest in the Company permitted under this Section 9, the Tax Matters Partner may cause the Company to make the election provided for in § 754 of the Code and to maintain a record of the adjustments to basis resulting from the election.  As a condition to making the election, any such transferee shall pay to or reimburse the Company immediately upon demand for any and all costs and expenses incurred by the Tax Matters Partner and the Company (as such costs and expenses are reasonably estimated by the Tax Matters Partner or the Company) in connection with the § 754 election and the maintenance of the basis adjustment records.

 

SECTION 10.  EXCULPATION AND INDEMNIFICATION

 

10.1                        Liability.  (a) Each Member’s liability shall be limited as set forth in this Agreement, the Act and other applicable law.  Unless otherwise provided by law or expressly assumed, a Person who is a Member shall not be liable for the acts, debts or liabilities of the Company or any other Member.

 

(b)                                 To the fullest extent permitted by applicable law, each Member hereby expressly waives any fiduciary duty and any implied duties that might be owed to such Member or the Company or any of its Subsidiaries by any other Member.

 

(c)                                  No Member and no Affiliate, partner, member, manager, shareholder, officer, principal, employee, representative or agent of a Member (including any Person representing a Member) (each, a “Covered Person”), in its capacity as such, shall be liable to the Company, any of its Subsidiaries or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company or of its Subsidiaries and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any loss, damage or claim incurred by reason of such Covered Person’s bad faith, fraud or willful misconduct.

 

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10.2                        Indemnity.  (a) Subject to Section 10.2(b), the Company shall indemnify each of its Members, including the Tax Matters Partner, each Member’s respective Affiliates and each of their respective members, partners, officers, directors, managers and shareholders and each Representative (each, an “Indemnified Person”) against all expense, liability, and loss (including reasonable attorney fees) (collectively, “Indemnified Losses”) incurred or suffered by such Person by reason of or arising from the fact that such Person is or was a Member of the Company, an Affiliate of a Member, a member, partner, officer, director, investment manager, manager or shareholder of a Member or its Affiliate, or a Representative or otherwise a party to this Agreement.  Notwithstanding the foregoing, the Company shall have no obligation to indemnify any Indemnified Person for Indemnified Losses resulting from such Person’s violation of the terms of this Agreement, fraud, gross negligence, willful misconduct or knowing, material violation of law.  Any amounts incurred by an Indemnified Person in connection with a pending action, suit, proceeding or claim shall be paid or reimbursed by the Company in advance of the final disposition of such matter upon delivery to the Company of such Person’s written affirmation of such Person’s good faith belief that such Person has met the standard of conduct (i.e., such Person has acted in good faith and in a manner that such Person reasonably believed to be within the scope of such Person’s authority and without fraud, willful misconduct, gross negligence or a knowing material violation of law) necessary for entitlement to indemnification by the Company and such Person’s written undertaking to repay such amount if it should ultimately be determined that such Person has not met such standard of conduct.  The rights of any Person to indemnification hereunder are intended to be in addition to, and not in limitation of, any rights to indemnification granted by the Company to such Person by separate agreement or to which such Person is entitled under applicable law.

 

(b)                                 Any indemnification pursuant to this Section 10.2 shall be made only from the assets of the Company, and no Member shall be personally liable therefor.

 

(c)                                  To the extent that insurance from third parties has been obtained and is available to satisfy any Indemnified Losses, the Members shall seek to cause such Indemnified Losses to be satisfied first out of the proceeds of such insurance.

 

(d)                                 All rights to indemnification pursuant to this Section 10.2 shall survive the dissolution of the Company, the withdrawal of a Member from the Company, the failure for any reason to remain a party to this Agreement and, in the case of a Representative, the resignation or removal of such Representative.

 

10.3                        Insurance.  The Company may obtain and maintain at its expense for itself and/or any Subsidiary such insurance, as the Members shall unanimously approve.  Each Member shall separately secure directors’ and officers’ liability insurance, general liability, worker’s compensation, fidelity, professional liability and worker’s compensation for their employees who serve in any capacity for the Company.

 

SECTION 11.  DISSOLUTION AND WINDING UP

 

11.1                        Covenant Not to Withdraw or Cause Dissolution.  Except as otherwise expressly permitted in Section 9 or Section 13 of this Agreement, each Member hereby covenants not to voluntarily withdraw from the Company and agrees not to take any action that would cause the

 

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Company to dissolve (excluding any dissolution approved by the Members).  In the event of a withdrawal by a Member in violation of this Section 11.1, the withdrawing Member shall not have the right to require the Company to pay such withdrawing Member the fair market value of the Membership Interest of such withdrawing Member (or any other compensation, for that matter), whether or not such ability exists as a matter of statute or otherwise.  Notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Dissolution Event, which are the exclusive events that may cause the Company to dissolve.

 

11.2                        Dissolution Events.  The Company shall dissolve and commence winding up and liquidating upon the first to occur of any of the following (“Dissolution Events”):

 

(a)                                 the sale, assignment or other disposition of all of the Company Property and the full payment and collection of any consideration for such sale, unless the Members approve the continuation of the Company following such sale or disposition;

 

(b)                                 the unanimous approval of the Members to dissolve, wind up and liquidate the Company; or

 

(c)                                  the entry of a decree of judicial dissolution of the Company pursuant to the Act.

 

The foregoing events shall be the exclusive events that shall cause the dissolution and winding up of the Company.

 

11.3                        Winding Up.

 

(a)                                 Upon the occurrence of a Dissolution Event, the Company 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.  Such Persons as may be authorized by the Members shall act as the liquidating trustee of the Company (the “Liquidating Trustee”).    The Liquidating Trustee shall, to the extent feasible, proceed to wind up the affairs and liquidate the assets of the Company, as promptly as practicable, allowing a reasonable time for the process so as to minimize the losses that would normally be incidental to it.  The Liquidating Trustee shall issue to all Members a final, accurate accounting of the affairs of the Company through the completion of the wind up of the Company; and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs.  To the extent not inconsistent with the foregoing, this Agreement shall continue in full force and effect until all proceeds of the liquidation have been distributed pursuant to this Section 11.3.  The proceeds of a liquidation shall be applied in the following order of priority:

 

(i)                                     in payment of the expenses of liquidation;

 

(ii)                                  in payment of debts of the Company to creditors other than the Members;

 

(iii)                               in payment of debts of the Company to Members who are also creditors, other than payments in respect of Company Loans;

 

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(iv)                              to establish reserves deemed reasonable by the Members for the ultimate discharge of contingent, unliquidated or unforeseen liabilities or obligations of the Company;

 

(v)                                 in payment of debts of the Company to Members in respect of Company Loans; and

 

(vi)                              the balance, if any, to the Members in accordance with Section 7.1.

 

(b)                                 If a Member shall become a Dissociated Member, (i) such Member shall, concurrently with becoming a Dissociated Member, be deemed to have withdrawn from the Company and (ii) such Member shall have no right to participate in the management of the Company or to approve or veto any decisions or actions in connection with the business or affairs of the Company or any of its Subsidiaries.

 

11.4                        Compliance with Regulations; Deficit Capital Accounts.  In the event that the Company is “liquidated” within the meaning of Regulations § 1.704-l(b)(2)(ii)(g), if any Member has a deficit Capital Account balance (after giving effect to all Capital Contributions, distributions and allocations for all Fiscal Years, including the Fiscal Year during which such liquidation occurs), such Member shall have no obligation to make any contribution with respect to such deficit, and to the fullest extent permitted by law such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever.

 

11.5                        Notice of Dissolution.  If a Dissolution Event occurs and the Company is dissolved and liquidated, the Company shall, within thirty (30) days thereafter, provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Members) and shall comply with all applicable notice provisions of the Act.

 

11.6                        Filing of Certificate of Cancellation.  Upon the dissolution and complete winding up of the Company, a Certificate of Cancellation (or an equivalent instrument) shall be delivered to the Texas Secretary of State.  Upon the filing of the Certificate of Cancellation, the existence of the Company shall cease, except for the purpose of suits, other proceedings and appropriate action as provided in the Act.  The Liquidating Trustee shall have authority to distribute any Company Property discovered after dissolution, convey real estate and take such other action as may be necessary on behalf of and in the name of the Company.

 

11.7                        Return of Contributions Non-Recourse to Other Members.  Except as provided by law, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contributions.  If the Company Property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash or other property contributed by one or more Members, such Member or Members shall have no recourse against any other Member.

 

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SECTION 12.  CONFLICT OF INTEREST; COMPETITION

 

12.1                        Rights of Members to Engage in Separate Activities.  Except as otherwise expressly provided herein or in any other agreement, any Member or Affiliate thereof may engage in or possess an interest in any other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company or any of its Subsidiaries, including the ownership, management and operation of loans and real property, and none of the Company, any of its Subsidiaries, any Member shall have any rights by virtue of this Agreement or the relationship created hereby in or to any other ventures or activities engaged in by any Member or Affiliate thereof or to the income or proceeds derived therefrom, and the pursuit of such ventures or activities by any Member or Affiliate thereof shall not be deemed wrongful or improper, even to the extent the same is competitive with the business activities of the Company or any of its Subsidiaries.  Except as otherwise expressly provided herein or in any other agreement, no Member or Affiliate thereof shall be obligated to submit any investment opportunity to the Company or any of its Subsidiaries even if such opportunity is of a character which, if submitted to the Company or any of its Subsidiaries, could be availed of by the Company or any of its Subsidiaries, and any Member or Affiliate thereof shall have the right to take for its own account (individually or as a partner, member or fiduciary) or to recommend to others any investment opportunity.

 

12.2                        Other Self Interest.  No agreement or transaction between the Company or any of its Subsidiaries and any Member or Affiliate of a Member shall be void or voidable solely by reason of such relationship.

 

SECTION 13.  BUY-SELL PROCEDURES

 

13.1                        Buy-Sell.

 

(a)                                 Buy-Sell Notice.  In the event that (x) the Committee Members or Members are unable to unanimously agree on three (3) or more Decisions during any twenty-four (24) month period or (y) any Member is expressly permitted to deliver a Buy-Sell Notice pursuant to the terms of this Agreement, then each of Member shall have the right to institute a buy-sell pursuant to the terms and procedures set forth in this Section 13.1 at any time within ninety (90) days following the fourth such dispute or the occurrence of the event that gave rise to such Member’s right to deliver a Buy-Sell Notice, as applicable.  If a Member wishes to so institute a buy-sell, such Member (the “Triggering Member”) shall first deliver a written notice (the “Buy-Sell Notice”) to the other Members (the “Responding Member”) of the Triggering Member’s intent to rely on this Section 13.1 which Buy-Sell Notice shall state that the Triggering Member is making a combined offer to (x)  purchase for cash all, but not less than all, of the Membership Interests of the Responding Member, or (y) sell for cash all, but not less than all, of the Membership Interests of the Triggering Member.  The Buy-Sell Notice shall set forth the cash purchase price at which the Triggering Member would be willing to purchase one hundred percent (100%) of the Company Assets (the “Stated Amount”), and include a calculation of the amount the Triggering Member and the Responding Member would receive if the Company Assets were sold for the Stated Amount and the Stated Amount, less assumed transaction costs equal to five percent (5%) of the Stated Amount, were distributed to the Members in accordance with the terms of this Agreement (the amount any Member would receive, such Member’s “Buy-Sell Price”).

 

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(b)                                 Reply Notice.  The Responding Member shall have a period of fifteen (15) days (or, if the Buy-Sell Price for the Triggering Member’s Membership Interest is greater than $5,000,000, thirty (30) days) after the receipt of the Buy-Sell Notice within which to notify the Triggering Member in writing (each, a “Reply Notice”) whether such Responding Member shall (i) sell to the Triggering Member its Membership Interests for a purchase price equal to the Responding Member’s Buy-Sell Price, or (ii) purchase the Triggering Member’s Membership Interest for a purchase price equal to the Triggering Member’s Buy-Sell Price.  In the event that a Reply Notice is not so given by a Responding Member prior to the expiration of the 15-day or 30-day period, as applicable, then it shall be conclusively presumed that such Responding Member elected to sell its Membership Interest to the Triggering Member pursuant to clause (i) of the immediately preceding sentence.

 

(c)                                  Deposits.

 

(i)                                     Within three (3) days (or, if the Buy-Sell Price for any Responding Member is greater than $5,000,000, fifteen (15) days) following the election or deemed election by any Responding Member to sell its Membership Interests pursuant to Section 13.1(b), the Triggering Member shall deliver into escrow to a nationally recognized title insurance company, bank or trust company (which escrow agent will be selected by the Triggering Member), to be held by the escrow holder pursuant to this Section 13.1, a cash deposit in an amount equal to the Buy-Sell Deposit Amount.  If the Triggering Member shall fail to deliver such deposit, then the Buy-Sell Notice shall be deemed withdrawn and the rights and duties of the Members shall be as if the Buy-Sell Notice had never been given, except that the Triggering Member shall bear all costs and expenses resulting from the delivery and withdrawal of the Buy-Sell Notice.

 

(ii)                                  As a condition to the effectiveness of the Reply Notice in which a Responding Member elects to purchase the Triggering Member’s Membership Interests pursuant to Section 13.1(b), such Responding Member shall, within three (3) days (or, if the Buy-Sell Price for the Triggering Member’s Membership Interest and the selling Responding Member’s Membership Interest is greater than $5,000,000, fifteen (15) days) following delivery of such election. deliver into escrow to a nationally recognized title insurance company, bank or trust company (which escrow agent will be selected by such Responding Member), to be held by the escrow holder pursuant to this Section 13.1(c), a cash deposit in an amount equal to the Buy-Sell Deposit.  If a Responding Member fails to deliver the Buy-Sell Deposit Amount, then such Responding Member shall be deemed to have elected to sell its Membership Interests pursuant to clause (i) of Section 13.1(b) above.

 

(iii)                               For purposes hereof, the “Buy-Sell Deposit Amount” shall mean with respect to the Membership Interests of any Member, 10% of the Buy-Sell Price for such Membership Interest.

 

(d)                                 Consummation of Buy-Sell; Default.

 

(i)                                     The purchase and sale of Membership Interests pursuant to this Section 13.1  shall be closed on or before the thirtieth (30th) day (or, if the Buy-Sell Price

 

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for the Membership Interests being sold is greater than $5,000,000, the sixtieth (60th) day) following the election or deemed election of the Responding Member pursuant to Section 13.1(c), as applicable.  In connection with any such sale by a Member, (x) the selling Member and the purchasing Member shall enter into an instrument of assignment in customary form that transfers the entire Membership Interest of the selling Member to the purchasing Member, which instrument shall include a representation from the selling Member that it is transferring the Membership Interest free and clear of all liens, claims or other encumbrances, (y) any transfer taxes and recording or documentary stamp taxes and similar taxes and fees shall be an expense of and paid by the selling and purchasing Member in accordance with their respective Percentage Interests and (z) each of the selling Member and the purchasing Member shall otherwise be responsible for its own out-of-pocket costs and expenses relating to such Transfer.

 

(ii)                                  If any Member is obligated under this Section 13.1 to purchase the Membership Interest of any other Member and fails to do so and the failure to purchase such Membership Interest is not caused by the actions or inactions of the selling Member or the inability of the selling Member to convey its Membership Interest to the purchasing Member free and clear of all liens, claims and encumbrances, then in addition to any other remedies available to it, the non-defaulting selling Member shall be entitled to retain, as liquidated damages, the Buy-Sell Deposit Amount delivered to it as a deposit by the defaulting purchasing Member under Section 13.1(d)(i), it being agreed that the amount represents a fair and equitable estimate of the damages to be suffered by the non-defaulting Member in those circumstances and that actual damages would be highly impracticable to determine.

 

(iii)                               If a Member is obligated under this Section 13 to sell its Membership Interest to any other Member and fails to do so and the failure to sell such Membership Interest is not caused by the actions or inactions of the purchasing Member, then (in addition to having any other rights and remedies available at law or in equity to the non-defaulting purchasing Member(s)) (w) the defaulting selling Member shall return to the non-defaulting purchasing Member the Buy-Sell Deposit Amount delivered to it as a deposit by the defaulting Member under Section 13.1(c), (x) the purchasing Member shall have the right to seek any remedies available to it at law or in equity, including, without limitation, specific performance, in respect of such default (and to collect from the selling Member the costs incurred in seeking such remedies), and (y) the purchasing Member shall have the right to execute and deliver, on behalf of the selling Member, all documents necessary to transfer the Membership Interest from the selling Member to the purchasing Member and the selling Member hereby irrevocably constitutes and appoints the purchasing Member as the selling Member’s true and lawful attorney-in-fact, coupled with an interest, to execute and to deliver for and on the selling Member’s behalf, all such documents.

 

(iv)                              If any Member is obligated under this Section 13.1 to purchase the Membership Interests of any other Member, such Member shall (x) obtain any required consents of lenders with respect to any Indebtedness of the Company or any Subsidiary and releases of the selling Member(s) and its Affiliates from any Guaranty delivered by any of the foregoing to such lenders or (y) otherwise repay or defease such Indebtedness

 

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in full simultaneously upon the closing of the purchase pursuant to this Section 13.1.  The failure to obtain any lender consent shall be deemed a default by the purchasing Member(s) of its obligations under this Section 13.1 and shall entitle the non-defaulting Member(s) to the remedies set forth in clause (ii) above.

 

(e)                                  Designee.  Any Member acquiring the Membership Interest of another Member pursuant to this Section 13.1 may designate another Person to acquire such Membership Interest.

 

(f)                                   Exclusion.  No Member shall be entitled to deliver a Buy-Sell Notice at any time when the buy-sell procedures set forth in Section 13.1 are continuing in respect of another Buy-Sell Notice.

 

SECTION 14.  GENERAL CONTRACT PROVISIONS

 

14.1                        Governing Law.  This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Texas, and not in accordance with any conflict-of-law provisions that would apply the law of a different jurisdiction.

 

14.2                        Savings Clause.  If any provision of this Agreement shall be held to be invalid and unenforceable, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

 

14.3                        Attorney Fees and Costs.  If action becomes necessary in connection with this Agreement or any rights arising therefrom or thereunder, or to recover damages for breach of any terms of this Agreement, or to obtain injunctive or other equitable relief, the prevailing party in such action shall be entitled to recover reasonable attorney fees and costs incurred in such action, whether at trial, on appeal, or in any arbitration or bankruptcy proceeding.

 

14.4                        Counterparts.  This Agreement may be executed manually or by facsimile in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed an original and all of which counterparts, taken together, shall constitute but one and the same agreement.  Duplicates of the same signature page or pages with the original signatures on different pages may be attached to the original Agreement without affecting the validity thereof or the liability of the Members.

 

14.5                        Successors and Assigns.  Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and permitted assigns.

 

14.6                        Notices.

 

(a)                                 Any and all notices, requests, demands, consents and other communications required or permitted under this Agreement shall be in writing, signed by or on behalf of the party by which given, and shall be considered to have been duly given when (i) delivered by hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy is mailed (on the same date) by certified or registered mail, return receipt requested, postage prepaid, or (iii) received by the

 

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addressee, if sent by Express Mail, Federal Express or other reputable express delivery service (receipt requested), or by first class certified or registered mail, return receipt requested, postage prepaid, in each case to the party for which intended at its address set forth below (or to such other addresses and telecopier numbers as a party may from time to time designate as to itself by notice similarly given to the other parties in accordance with this Section 14.6):

 

If to the HTH Member:

 

Hilltop Investments I LLC
2323 Victory Avenue
Suite 1400
Dallas, Texas 75219
Attention: Corey G. Prestidge
Telephone: (214) 525-4647
Facsimile: (214) 580-5722
Email: cprestidge@hilltop-holdings.com

 

 

 

If to the Diamond Member:

 

Diamond Ground, LLC
200 Crescent Court, Suite 1350
Attention: Gary Shultz
Telephone: (214) 871-5938
Facsimile: (214) 871-5199

 

 

Email: gshultz@diamond-a.com

 

A notice of change of address shall not be deemed given until received by the addressee.

 

14.7                        Rights and Remedies Cumulative.  Except as otherwise expressly provided herein, the rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies, and said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

 

14.8                        Waivers.  The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Agreement shall not prevent a subsequent act that would have originally constituted a violation from having the effect of an original violation.  Any waiver shall be in writing and signed by the party against whom the waiver is effective.

 

14.9                        Amendments.  This Agreement may only be amended by a written instrument executed by all of the Members.  Any other attempt to amend any of the terms of this Agreement will be null and void and of no force or effect.

 

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14.10                 Entire Agreement.  This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements with respect to the same subject matter, whether oral or written.

 

14.11                 No Third Party Beneficiary.  Notwithstanding any contrary provisions of the Act, except as otherwise expressly provided herein, the provisions of this Agreement are not intended to be relied upon by and are not for the benefit of any other Person (other than a Member in its capacity as such) to whom any debts, liabilities or obligations are at any time owed by (or who otherwise has any claim against) the Company or any of its Subsidiaries, any of the Members or any Indemnified Person; and no such creditor or other Person shall obtain any right under any of the provisions or shall by reason of any of such provisions make any claim in respect of any debt, liability or obligation (or otherwise) against the Company or any of its Subsidiaries or any of the Members; except that the Persons who are expressly entitled to indemnification from the Company pursuant to the terms hereof are intended third party beneficiaries of this Agreement, but this Agreement may be amended or terminated without their consent or approval.

 

14.12                 Further Assurances.  Each party to this Agreement agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by law or as may be necessary or advisable to carry out the intent and purpose of this Agreement.

 

14.13                 Partition.  The Members hereby agree that no Member or any successor-in-interest to any Member shall have the right to have the property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Company partitioned, and each Member, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right.

 

14.14                 Maintenance as a Separate Entity.  The Company shall maintain books and records and bank accounts separate from those of its Affiliates; shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (including in its operating activities, in entering into any contract, in preparing its financial statements, and on its stationery and any signs it posts), and shall cause its Affiliates to do the same and to conduct business with it on an arm’s-length basis; shall not commingle its assets with assets of any of its Affiliates; shall not guarantee any obligation of any of its Affiliates; and shall keep minutes of all meetings of the Members.

 

14.15                 Arbitration.

 

(a)                                 Arbitration is the exclusive method for resolution of any claims or disputes arising out of, or in connection with, this Agreement or the business or affairs of the Company or any of its Subsidiaries, and the determination of the arbitrators will be final and binding (except to the extent there exist grounds for vacation of an award under applicable arbitration statutes) on the Members.

 

(i)                                     The parties agree that they will give conclusive effect to the arbitrators’ determination and award and that judgment thereon may be entered in any court having jurisdiction.

 

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(ii)                                  The American Arbitration Association (the “AAA”) Commercial Arbitration Rules will apply to any proceedings commenced under this Section 14.15.

 

(iii)                               The arbitrators may issue awards for compensatory damages and/or equitable remedies (including injunctive relief and specific performance) only, and may not, and will have no power to, award indirect, consequential, or punitive damages.

 

(iv)                              The parties waive any claim for, and the arbitrators will have no power to award, damages for defamation, negligent or intentional infliction of emotional distress, or similar torts based on harm to one’s reputation or emotional or mental condition.

 

(v)                                 The arbitrators may award the prevailing party its attorneys’ fees and other costs incurred in connection with the proceeding.  If any party fails to appear at any properly noticed arbitration proceeding, an award may be entered against that party by default or otherwise, notwithstanding such failure to appear.

 

(b)                                 The number of arbitrators will be three, each of whom will be disinterested in the dispute or controversy and impartial with respect to all parties hereto.  A Member must commence arbitration by serving a demand for arbitration on the other Members and the AAA.  The initiating Member (“Claimant”) must appoint an arbitrator within 10 Business Days of the demand.  The respondent(s), collectively, must appoint an arbitrator within 10 Business Days of the appointment of an arbitrator by the Claimant.  The third arbitrator will be appointed by both arbitrators within ten (10) Business Days of appointment of the second arbitrator.  If they cannot agree, the AAA will appoint the third arbitrator.

 

(c)                                  The place of arbitration will be Dallas, Texas.  The arbitration will be conducted in the English language.  The arbitrators shall decide the dispute in accordance with the law of Texas.  To the fullest extent permitted by law, they shall apply the Commercial Arbitration Rules of the AAA, except to the extent that such rules conflict with the provisions of this Section 14.15, in which event the provisions of this Section 14.15 control.  The arbitration provisions contained herein are self-executing and will remain in full force and effect after expiration or termination of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first above written.

 

 

MEMBERS:

 

 

 

HILLTOP INVESTMENTS I LLC

 

a Delaware limited liability company

 

 

 

 

By:

Hilltop Holdings Inc.,

 

 

a Maryland corporation,

 

 

its sole member

 

 

 

 

 

 

 

 

By:

/s/ COREY PRESTIDGE

 

 

Name:

Corey Prestidge

 

 

Title:

Executive Vice President and

 

 

 

General Counsel

 

 

 

 

 

 

 

 

 

DIAMOND GROUND, LLC,

 

a Texas limited liability company

 

z

 

By:

/s/ GARY SHULTZ

 

Name:

Gary Shultz

 

Title:

Vice President

 



 

EXHIBIT A

 

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

 

ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS

 

This ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTERESTS, dated as of [           ], 20[  ] (this “Assignment”), is entered into by and among [                ], a [                ] (“Assignor”), and [                ], a [                ] (“Assignee 1”), [                ], a [                ] (“Assignee 2”) and [                ], a [                ] (“Assignee 3” and, collectively with Assignee 1 and Assignee 2, the “Assignees”).

 

WITNESSETH:

 

WHEREAS, HTH DIAMOND HILLCREST LAND LLC (the “Company”) was formed pursuant to the terms and provisions of that certain Limited Liability Company Agreement, dated as of         , 2018 (as amended to date, the “Agreement”; capitalized terms used but not defined herein shall have the meanings given such terms in the Agreement), by and among Assignor, Assignee 1. Assignee 2 and Assignee 3, the Certificate and the statutes and laws of the State of Texas relating to limited liability companies, including the Act;

 

WHEREAS, (x) Assignor desires to assign, transfer and convey [   ]% of its Membership Interest  in the Company (the “Assignee 1 Transferred Interests”) to Assignee 1, Assignor desires to assign, transfer and convey [   ]% of its Membership Interest in the Company (the “Assignee 2 Transferred Interests”) to Assignee 2 and Assignor desires to assign, transfer and convey [   ]% of its Membership Interest in the Company (the “Assignee 3 Transferred Interests” and, collectively with the Assignee 1 Transferred Interests and the Assignee 2 Transferred Interests, the “Transferred Interests”) to Assignee 3 and (y) Assignor desires to withdraw from the Company as a member of the Company; and

 

WHEREAS, Assignee 1 desires to purchase the Assignee 1 Transferred Interests from Assignor, Assignee 2 desires to purchase the Assignee 2 Transferred Interests from Assignor and Assignee 3 desires to purchase the Assignee 3 Transferred Interests from Assignor.

 

NOW, THEREFORE, the undersigned, in consideration of the premises, covenants and agreements contained herein, do hereby agree as follows:

 

1.                                      Assignments.

 

(a)                                 For value received, the receipt and sufficiency of which is hereby acknowledged, upon the execution of this Assignment by the parties hereto and the funding of the purchase price by Assignee 1 to Assignor in the amount of $[           ], Assignor does hereby assign, transfer and convey the Assignee 1 Transferred Interests to Assignee 1.

 



 

(b)                                 For value received, the receipt and sufficiency of which is hereby acknowledged, upon the execution of this Assignment by the parties hereto and the funding of the purchase price by Assignee 2 to Assignor in the amount of $[           ], Assignor does hereby assign, transfer and convey the Assignee 2 Transferred Interests to Assignee 2.

 

(c)                                  For value received, the receipt and sufficiency of which is hereby acknowledged, upon the execution of this Assignment by the parties hereto and the funding of the purchase price by Assignee 3 to Assignor in the amount of $[           ], Assignor does hereby assign, transfer and convey the Assignee 3 Transferred Interests to Assignee 3.

 

2.                                      Assumptions.

 

(a)                                 Assignee 1 hereby assumes all liabilities in connection with the Assignee 1 Transferred Interests and shall hereby be entitled to all benefits in respect of the Assignee 1 Transferred Interests.

 

(b)                                 Assignee 2 hereby assumes all liabilities in connection with the Assignee 2 Transferred Interests and shall hereby be entitled to all benefits in respect of the Assignee 2 Transferred Interests.

 

(c)                                  Assignee 3 hereby assumes all liabilities in connection with the Assignee 3 Transferred Interests and shall hereby be entitled to all benefits in respect of the Assignee 3 Transferred Interests.

 

3.                                      [Withdrawal.  Immediately following the assignments made pursuant hereto, Assignor shall and does hereby withdraw from the Company as a member of the Company, and shall thereupon cease to be a member of the Company and to have or exercise any right or power as a member of the Company, including any and all of its rights to appoint any Committee Representatives to the Investment Committee of the Company (and Committee Representatives theretofore appointed by the Assignor shall be deemed to have immediately resigned).](1)

 

4.                                      Continuation of the Company.  The parties hereto agree that the assignment of the Transferred Interests [and the withdrawal of Assignor as a member of the Company](2) shall not dissolve the Company and that the business of the Company shall continue.

 

5.                                      Representations and Warranties.

 

(a)                                 Assignor represents and warrants that as of the date hereof, and prior to the transfers being made pursuant hereto, Assignor is the sole and legal beneficial owner

 


(1)              To be included if the Member is assigning 100% of its Membership Interest.

(2)              To be included if the Member is assigning 100% of its Membership Interest.

 



 

of the Transferred Interests, free and clear of all pledges, security interests, liens, charges and encumbrances of any kind or nature.

 

(b)                                 Assignor is duly organized, validly existing and in good standing as a [           ] under the laws of the State of [            ] and has the full right, power and authority to enter into this Assignment, and to perform all of its obligations hereunder.

 

(c)                                  This Assignment has been duly and validly executed and delivered by and on behalf of Assignor.

 

(d)                                 Neither the execution and delivery hereof, nor the taking of any actions contemplated hereby, will conflict with or result in a breach of any of the provisions of, or constitute a default, event of default or event creating a right of acceleration, termination or cancellation of any obligation under any instrument, note, mortgage, contract, judgment, order, award, decree or other agreement or restriction to which Assignor is a party, or by which Assignor is otherwise bound.

 

6.                                      Binding Effect.  This Assignment shall be binding upon, and shall inure to the benefit of the parties hereto and their respective successors and assigns.

 

7.                                      Execution in Counterparts.  This Assignment may be executed (a) in counterparts, each of which shall be deemed an original, but all which shall constitute one and the same instrument and (b) by scanned e-mail, telecopy or other facsimile signature (which shall be deemed an original for all purposes).

 

8.                                      Governing Law.  This Assignment shall be governed by and construed in accordance with the laws of the State of Delaware.

 



 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly executed as of the day and year first-above written.

 

 

ASSIGNOR:

 

 

 

[                   ]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

ASSIGNEE 1:

 

 

 

[                   ]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

ASSIGNEE 2:

 

 

 

[                   ]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

ASSIGNEE 3:

 

 

 

[                   ]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 



 

EXHIBIT B

 

FORM OF MEMBER LOAN NOTE

 

PROMISSORY NOTE

 

$[·]

 

[·], 20[·]

 

FOR VALUE RECEIVED, the undersigned, [INSERT NAME OF THE DEBTOR MEMBER], a [INSERT TYPE OF ENTITY] (the “Maker”), does hereby promise to pay to [INSERT NAME OF FUNDING MEMBER], a [INSERT TYPE OF ENTITY] (the “Payee”), or its order, at its offices in [·], or such other address as may be duly designated by the holder of this Note, [·] ($[·]), with interest thereon at the rate equal to [·] percent ([·]%) per annum.  The principal amount of the loan together with any interest thereon is payable on the Maturity Date (as defined below).

 

Business Day” means a day upon which banks in Texas are not authorized or required by law to be closed.

 

Maturity Date” means the earliest of the date on which (i) the final liquidating distribution by the Company and (ii) any sale of the Maker’s Interest is completed.

 

1.                                      Capitalized terms used but not defined herein have the meaning set forth in the Limited Liability Company Agreement (the “LLC Agreement”) of [    ] (the “Company”), dated as of [     ].

 

2.                                      Interest due on this Note is calculated on the basis of a 360-day year for the actual number of days elapsed prior to the Maturity Date and shall be compounded monthly.

 

3.                                      This Note evidences a Member Loan made by Payee to Maker pursuant to Section 3.4 of the LLC Agreement.  This Note may be prepaid at any time by the Maker in whole or in part at the election of the Maker, in an amount equal to the outstanding principal amount thereof plus accrued interest.

 

4.                                      The Maker hereby authorizes the Company to (i) make any and all distributions that would otherwise be payable to the Maker by the Company pursuant to Articles 7 and 11 of the LLC Agreement and (ii) pay any and all proceeds which would otherwise be payable to the Maker from, and upon the closing of, any sale of the Maker’s Interest in the Company, directly to the Payee and any other Members that have made Member Loans to the Maker (to be split among them pro rata in accordance with the relative amounts of such Member Loans to the Maker) until such time as the obligations evidenced by this Note have been paid in full.

 

5.                                      If the Maker fails to repay this Note on the Maturity Date, the Maker shall reimburse the holder of this Note for all of its costs and expenses incurred in enforcing this Note, including reasonable attorneys’ fees and expenses.  The obligations of the Maker hereunder shall be recourse only to the Maker’s Interest in the Company.

 



 

6.                                      This Note may be discharged, terminated, amended, supplemented or otherwise modified only by an instrument in writing signed by the party against which enforcement of such discharge, termination or modification is sought.

 

7.                                      To the fullest extent permitted by law, the Maker hereby waives diligence, presentment, protest and demand, notice of protest, dishonor and nonpayment of this Note and expressly agrees that, without in any way affecting the liability of the Maker hereunder, the holder hereof may extend the time for payment of any amount due hereunder, accept additional security, release any party liable hereunder or any security now or hereafter securing this Note, without in any other way affecting the liability and obligation of the Maker or any other person.

 

8.                                      No failure by the holder hereof to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a breach thereof will constitute a waiver of any such term or of any such breach.  No waiver of any breach will affect or alter this Note, which will continue in full force and effect, nor will such waiver affect or alter the rights of the holder hereof with respect to any other then existing or subsequent breach.  The acceptance by the holder hereof of any payment hereunder that is less than payment in full of all amounts due at the time of such payment will not, without the express written consent of the holder hereof:  (i) constitute a waiver of the right to exercise any of such holder’s remedies at that time or at any subsequent time, (ii) constitute an accord and satisfaction, or (iii) nullify any prior exercise of any remedy.

 

9.                                      No acceptance of a past due payment or indulgences granted from time to time may be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of the holder hereof thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by law.

 

10.                               In case any one or more of the provisions of this Note are determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.

 

11.                               Nothing contained in this Note or elsewhere may be deemed or construed to create a partnership or joint venture between the holder hereof and the Maker or between the holder hereof and any other person, or cause the holder hereof to be responsible in any way for the debts or obligations of the Maker or any other person.

 

12.                               It is hereby expressly agreed that, if from any circumstances whatsoever, fulfillment of any provision of this Note, at the time performance of such provision will be due, violates any applicable usury statute or any other law, then ipso facto such provision will be conformed to comply with such statute or law.  In no event shall the Maker be bound to pay for the use, forbearance or detention of the money lent pursuant hereto, interest of more than the current legal limit; the right to demand any such excess being hereby expressly waived by the holder hereof.

 



 

13.                               THIS NOTE IS MADE UNDER AND IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CHOICE-OF-LAW RULES.

 

14.                               Any legal action or proceeding with respect to this Note may be brought in any state or federal court located in the State of Texas.  By execution and delivery hereof, the Maker hereby accepts for itself and in respect of property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Nothing herein, however, shall affect the right of the holder hereof to commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction.

 

15.                               WITH RESPECT TO ANY SUCH LEGAL ACTION OR PROCEEDING, THE MAKER HEREBY IRREVOCABLY WAIVES TRIAL BY JURY, AND THE MAKER HEREBY IRREVOCABLY WAIVES 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 IN SUCH JURISDICTIONS.  SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE MADE BY THE PAYEE ON THE MAKER BY MAILING A COPY OF THE SUMMONS AND ANY COMPLAINT TO THE MAKER, BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.

 



 

IN WITNESS WHEREOF, the Maker has caused this instrument to be duly executed on the date in the year first above written.

 

 

MAKER:

 

 

 

[INSERT NAME OF MAKER]

 

 

 

By:

 

 

 

Name:

 

 

Title:

 



 

EXHIBIT C

 

Appraisal Procedure

 

If at the end of the 15-business day period specified in Section 9.5(d), there is disagreement between the Members and the Defaulting Member on the fair market value of the Defaulting Member’s Membership Interest under Section 9.5, the following appraisal procedure shall apply:

 

1.                                      Either the Members or the Defaulting Member (each, a “party”) may invoke this appraisal procedure by giving a notice to the other party of the appointment of an appraiser.  The other party shall have 10 business days after the notice of appointment of the first appraiser to appoint an appraiser by notice to the first appointing party.  If the other party fails to give a notice of appointment within such 10-day period, then the other party shall lose its right to appoint an appraiser.

 

2.                                      No discounts shall be taken for any reason, including without limitation discounts for minority interest and lack of marketability.

 

3.                                      If only one appraiser is appointed in accordance with the foregoing, the sole appraiser shall make a determination of fair market value in writing and shall give notice to the Members and the Defaulting Member of such determination.

 

4.                                      If two appraisers are appointed in a timely manner, the two appraisers shall conduct such meetings as they may deem appropriate, shall make their determination of fair market value in writing and shall give notice to the Members and the Defaulting Member of such determination.  If the two appraisers are unable to reach agreement on fair market value within 30 days after the appointment of the second appraiser, each appraiser shall notify the Members and the Defaulting Member of the determination of fair market value made by such appraiser.  If the higher of the two determinations is within 10% of the lower, then fair market value shall be equal to the average of the two fair market values so determined.

 

5.                                      If the higher of the two determinations is not within 10% of the lower and the parties do not themselves reach agreement on fair market value within 10 business days after their receipt of both determinations, either of the parties may, by notice to the two appraisers, instruct the two appraisers to designate a third appraiser.  Within 10 business days after any such instruction, the two appraisers shall make such appointment and notify the Members and the Defaulting Member.

 

6.                                      If the two appraisers fail to appoint a third appraiser within the specified period for appointment, then the Members shall designate a third appraiser from a list of at least three potential appraisers provided by the two appraisers within two business days after the end of the 10-day period for agreement by the appraisers on fair market value.  If the two appraisers do not agree on and provide such a list to the Members within such period of two business days, the Members shall designate a third appraiser from a separate list of at least three potential appraisers provided to the Members by the appraiser appointed by the Defaulting Member or, if such appraiser does not provided a separate list to the Members within such period of two business days, from a separate list of at least three potential appraisers provided to the Members by the appraiser appointed by the Members.

 



 

7.                                      The third appraiser shall review the written reports of the initial two appraisers and issue a written report selecting one of the appraisals made as the fair market value of the Defaulting Member’s Membership Interests within 30 days after appointment of the third appraiser.

 

8.                                      Fair market value determined in accordance with the provisions of this appraisal procedure shall be final and binding for the intended purpose under the Agreement.

 

9.                                      All appraisers appointed in accordance with this appraisal procedure shall be members of a recognized national appraisal organization.  Each person acting as the appraiser (or, if the appraiser is an appraisal firm, heading up the appraisal on behalf of the appraisal firm) shall have had at least 10 years’ experience in the business of appraising businesses of the Company’s type and size and, in addition, shall have experience in the business then being conducted by the Company.  Specifically, any appraiser shall be experienced in appraising real property and real estate holding companies.

 

10.                               The Members and the Defaulting Member shall each pay all fees and expenses of any appraiser appointed by the Members and the Defaulting Member, applicable, and one-half of all fees and expenses of any third appraiser.

 



 

SCHEDULE A

 

DESCRIPTION OF THE PROPERTY

 

PROPERTY DESCRIPTION

 

Being a tract of land situated in the John Scurlock Survey, Abstract No. 1351, City of University Park, Dallas County, Texas, being the same tract of land described in a deed to SPC Hillcrest LP, recorded in Instrument Number 201500282785, Official Public Records, Dallas County, Texas, being the same tract of land described in City Ordinance No. 18-001, recorded in Instrument Number 201800019205, Official Public Records, Dallas County, Texas, being all of Lot 6R, Block 3, University Park Addition, an addition to The City of University Park, according to the plat recorded in Instrument No. 201800049372, Official Public Records, Dallas County, Texas,  and being more particularly described as follows:

 

BEGINNING at a MAG nail found at the intersection of the south line of Daniel Avenue (variable width right-of-way) and the west line of Hillcrest Avenue (100’ right-of-way) for the northeast corner of said Lot 6R;

 

THENCE South 00° 24’ 47” East, along the west line of said Hillcrest Avenue, a distance of 150.00 feet to a chiseled “X” in concrete found at the intersection of the west line of said Hillcrest Avenue and the north line of Haynie Avenue (50’ right-of-way) for the southeast corner of said Lot 6R;

 

THENCE South 89° 16’ 53” West, along the north line of said Haynie Avenue, passing the southeast corner of said City Ordinance No. 18-001 at 180.00 feet, passing the southwest corner of said City Ordinance No. 18-001 at 195.00 feet, and continuing for a total distance of 488.60 feet to a 1/2” iron rod with yellow plastic cap stamped “RLG INC” found for the southwest corner of said Lot 6R and the southeast corner of Lot 4R of said addition, from which a 1/2” iron rod with yellow plastic cap stamped “RLG INC” found bears South 89° 16’ 53” West, a distance of 150.00 feet for the southwest corner of said Lot 4R and the southeast corner of Lot 3, Block 3 of University Park Addition, an addition to the City of University Park, according to the plat filed of record in Volume 2, Page 6, Map Records, Dallas County, Texas.

 

THENCE North 00° 43’ 07” West, departing the north line of said Haynie Avenue, and along the common line between said Lot 6R and said Lot 4R, a distance of 150.00 feet to a chiseled “X” in concrete found on the south line of said Daniel Avenue for the northwest corner of said Lot 6R and the northeast corner of said Lot 4R, from which a chiseled “X” in concrete found bears South 89° 16’ 53” West, a distance of 150.00 feet for the northwest corner of said Lot 4R and the northeast corner of said Lot 3;

 

THENCE North 89° 16’ 53” East, along the south line of Daniel Avenue, passing the northwest corner of said City Ordinance No. 18-001 at 294.40 feet, passing the northeast corner of said City Ordinance No. 18-001 at 309.40 feet and continuing for a total distance of 489.40 feet to the POINT OF BEGINNING, containing 73,350 square feet or 1.6893 acres of land, more or less AND ALSO KNOWN AS:

 

BEING all of Lot 6R, Block 3, UNIVERSITY PARK ADDITION, an Addition to the City of University Park, according to the plat recorded in Instrument No. 201800049372, Official Public Records, Dallas County, Texas.

 



 

SCHEDULE 3.1

 

NAMES AND ADDRESSES OF INITIAL MEMBERS

 

Diamond Ground, LLC

200 Crescent Court, Suite 1350

Dallas, Texas 75201

 

Hilltop Investments I LLC

2323 Victory Avenue, Suite 1400

Dallas, Texas 75219

 



 

SCHEDULE 3.3

 

INITIAL CONTRIBUTIONS AND PERCENTAGE INTERESTS

 

 

 

CURRENT
CONTRIBUTION

 

PERCENTAGE
INTERESTS

 

 

 

 

 

 

 

HILLTOP INVESTMENTS I LLC

 

$

19,250,000.00

 

50.00

%

 

 

 

 

 

 

DIAMOND GROUND, LLC

 

$

19,250,000.00

 

50.00

%

 


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Section 3: EX-10.2 (EX-10.2)

Exhibit 10.2

 

GROUND LEASE AGREEMENT

 

THIS GROUND LEASE AGREEMENT (this “Lease”), is made and entered into effective as of the 31st day of July, 2018 (the “Effective Date”), by and among HTH DIAMOND HILLCREST LAND LLC, a Texas limited liability company (“Landlord”), and SPC PARK PLAZA PARTNERS LLC, a Texas limited liability company (“SPC CO-OWNER”), as to an undivided 50% leasehold interest, HTH HILLCREST PROJECT LLC, a Texas limited liability company (“HILLTOP CO-OWNER”), as to an undivided 25% leasehold interest, and DIAMOND HILLCREST, LLC, a Texas limited liability company (“FORD CO-OWNER”), as to an undivided 25% leasehold interest, (SPC Co-Owner, Hilltop Co-Owner and Ford Co-Owner being collectively referred to herein as (“Tenant”) and being individually referred to herein as a “Tenant Co-Owner”).

 

WITNESSETH:

 

Subject to the terms, provisions and conditions of this Lease, and each in consideration of the duties, covenants and obligations of the other hereunder, Landlord does hereby lease, demise and let unto Tenant and Tenant does hereby lease from Landlord the Land, as such term is hereinbelow defined (the Land and Landlord’s interest, if any, in any improvements now or hereafter constructed thereon are hereinafter referred to collectively as the “Premises”).  Landlord acknowledges and agrees that prior to the date hereof, Strode Property Company, an affiliate of the Tenant, has commenced and continues to undertake site planning and construction planning services on the Land, which include, but are not limited to, demolition of existing improvements, site grading and clearing, platting, permitting, termination of existing utilities, and planning related to the commencement of permanent building improvements (collectively, the “Existing Improvements”).  Landlord does not and shall not have any vested ownership rights in and to such Existing Improvements which have been performed and installed by Strode Property Company in, under and to the Land.  Such rights relating to the Existing Improvements have been assigned and conveyed to Tenant (the “SPC Assigned Rights”), and Tenant hereby expressly subjects such SPC Assigned Rights to the terms of this Lease as part of the “Premises”.  Landlord’s fee title in and to such Existing Improvements and SPC Assigned Rights shall automatically become vested upon the expiration or earlier termination of this Lease.

 

ARTICLE I.

 

CERTAIN DEFINITIONS

 

For purposes of this Lease, the following terms shall have the meanings respectively indicated:

 

1.1                               Affiliate” of Tenant means: (i) any entity controlled by, controlling or under joint control with a Tenant Co-Owner or any Tenant Co-Owner’s partners, members or shareholders; (ii) any entity which is owned in whole or in part, by a Tenant Co-Owner or Tenant Co-Owner’s partners, members or shareholders; or (iii) any entity which is the successor by merger or otherwise to all or substantially all of a Tenant Co-Owner’s assets used in connection with a Tenant Co-Owner’s business operations at the Premises and liabilities including, but not

 

1



 

limited to, any merger or acquisition pursuant to any public offering or reorganization to obtain financing and/or growth capital.

 

1.2                               Annual Rent” means One Million Eight Hundred Thousand and No/100 Dollars ($1,800,000) for the first Lease Year, commencing on the first day of the first full calendar month occurring eighteen (18) months after the Effective Date (the “Rent Commencement Date”), and thereafter, Annual Rent shall increase on January 1st of each succeeding calendar year, beginning on January 1st of the calendar year following the Rent Commencement Date, by one percent (1%) in excess of the Annual Rent paid for each prior Lease Year, until the expiration of the Term.  A Schedule of the amounts of Annual Rent is set forth on Exhibit “D” attached hereto.

 

1.3                               Business Days” means any week day (but not any Saturday or Sunday) other than New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.

 

1.4                               Bylaws” means the by-laws of the Master Association.

 

1.5                               Commencement Date” means the Effective Date, which is the same date Landlord acquired title to the Land.

 

1.6                               Common Elements” means the common areas and facilities of the Condominium as defined in Section 1.1 of the Condominium Declaration.

 

1.7                               Condominium” means the condominium regime that has been created pursuant to the Condominium Documents and covers Tenant’s leasehold interest in the Premises as provided in this Lease.

 

1.8                               Condominium Declaration” means the Master Condominium Declaration for Hilltop Plaza Condominium dated of even date herewith, and recorded in the Official Public Records.

 

1.9                               Condominium Documents” means the Condominium Declaration, the Bylaws, the Rules and Regulations and any amendments thereto.

 

1.10                        Condominium Statute” means the Uniform Condominium Act, Texas Property Code, Chapter 82, Section 82.001 et seq., as amended from time to time.

 

1.11                        Construction Loan Agreement” means that certain Construction Loan Agreement between Comerica Bank, as lender, and Tenant, as borrower, dated contemporaneously herewith.

 

1.12                        Joint Obligations” means all obligations, covenants, agreements, terms or conditions contained in this Lease other than the Several Obligations, which shall be joint and several obligations of the Unit Owners.

 

2



 

1.13                        Land” means that certain tract or parcel of land lying and being situated in Dallas County, Texas, which land is described in Exhibit “A” attached hereto and made a part hereof for all purposes.

 

1.14                        Lease Year” means a period of one calendar year; provided, however, the first Lease Year shall commence at 11:59 p.m. on the Commencement Date and shall end at midnight on December 31 of the year following the year in which the Commencement Date occurs.

 

1.15                        Leasehold Estate” means Tenant’s interest in the Premises created pursuant to this Lease.

 

1.16                        Master Association” means Hilltop Plaza Owners Association, a Texas nonprofit corporation, created for the purposes and possessing the rights, powers, authority and obligations set forth in the Condominium Documents.

 

1.17                        Official Public Records” means the records of the Dallas County Clerk in Dallas, Dallas County, Texas.

 

1.18                        Person” means any individual, corporation, partnership, limited partnership, limited liability partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other legal entity, and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

1.19                        Proportionate Interest” shall equal, with respect to each Unit, the percentage of interest in the undivided ownership of the Common Elements which is appurtenant thereto.

 

1.20                        Rules and Regulations” means the rules and regulations of the Master Association, as amended from time to time, relating to the appearance, use and occupancy of the Units.

 

1.21                        Several Obligations” means (a) the payment of Rent and related reporting requirements required by this Lease, (b) the payment of taxes and Impositions, (c) the indemnity obligations contained in Article VII of this Lease to the extent attributable to a single Unit, (d) the surrender or holdover of an individual Unit under Article XIII of this Lease, (e) casualty or condemnation affecting a single Unit under Article XVII or XVIII of this Lease, (f) transfers by owners of a single Unit under this Lease, (g) violation of any applicable laws to the extent attributable to a single Unit, or (h) liability for liquidated damages under this Lease, all of which shall be the several (and not joint) obligations of each Owner.

 

1.22                        Subtenants” means all persons or other entities occupying any portion of the Premises as a subtenant of Tenant and their subtenants pursuant to a Sublease (herein so called) of any portion of the Premises, including the building improvements located thereon.

 

1.23                        Unit” means a unit of the Condominium.

 

1.24                        Unit Owner’s Share” means, with respect to each Unit, that percentage which is equal to the Proportionate Interest for such Unit.

 

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1.25                        Unit Owners” means the person(s) holding title to a Unit as shown by the Official Public Records.

 

ARTICLE II.

 

COMMENCEMENT, TERM AND OPTIONS

 

2.1                               Term.  This Lease will continue in full force and effect for a term (the “Term”) of ninety-nine (99) Lease Years, commencing on the Effective Date; and ending on the date which is ninety-nine (99) Lease Years later, unless such Term is sooner terminated as hereinafter provided.

 

ARTICLE III.

 

RENT

 

3.1                               Annual Rent.  Commencing on the Rent Commencement Date, and continuing thereafter for each Lease Year of the Term, Tenant agrees to pay the applicable Annual Rent as herein provided, in lawful money of the United States of America, without deduction or offset, prior notice or demand, and at such place or places as Landlord may from time to time designate.  Tenant shall pay such rent monthly in advance on or before the first day of each month in an amount equal to one-twelfth (1/12) of the applicable Annual Rent.  A schedule of Annual Rent payments is set forth on Exhibit “D” attached hereto.

 

3.2                               Late Charge; Interest.  In the event that Tenant shall fail to pay: (i) any portion of any installment of Annual Rent on or before the day which is five (5) days after the day on which such installment is due, there shall be added to such unpaid amount a late charge of five percent (5%) of the amount owed, in order to compensate Landlord for the extra administrative expenses incurred in collecting delinquent accounts. In addition, from and after the date which is ten (10) days after the due date the total amount then due shall bear interest at the rate (the “Default Rate”) which is lesser of: (a) fifteen percent (15%) or (b) the highest lawful rate, until paid. The parties hereto stipulate and agree that Landlord will incur additional expenses in collecting any delinquent payments and the late charges provided for herein are intended to compensate Landlord for overhead and other expenses likely to be incurred in collecting delinquent accounts. The parties further stipulate and agree that the late charges are not “interest” and it is not the intent of the parties to contract for, charge or receive interest in excess of the maximum lawful amount.

 

3.3                               Additional Rent.  It is understood and agreed this Lease is “triple net”, and Landlord shall have no payment obligations whatsoever nor shall Landlord have any duty, obligation or liability to maintain, repair or improve all of any portion of the Premises.  All Impositions, including real estate taxes, other taxes, insurance premiums, franchise and margin taxes, and all sums, liabilities, obligations, and other amounts which Tenant is required to pay or discharge pursuant to this Lease, in addition to Annual Rent, together with any interest, penalty, or other sum which may be added for late payment thereof, shall constitute additional rent hereunder (“Additional Rent”). So long as Tenant is not then in default hereunder, Tenant may pay Additional Rent directly to the person entitled thereto.  Annual Rent and Additional Rent are

 

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sometimes collectively referred to in this Lease as “rent”.  For avoidance of doubt, Tenant’s obligation to pay Additional Rent commences on the Effective Date.

 

3.4                               Place and Manner of Payment.  Subject to the further provisions hereof, the rent and any other sums due and owing by Tenant to Landlord hereunder shall be payable to Landlord or its designee at the original or changed address of Landlord set forth in Section 20.1 hereof or to such other person at such address as Landlord may designate from time to time in writing.

 

3.5                               Payments to Assignees and Third Parties.

 

(a)                                 If Landlord’s interest in this Lease shall be assigned to a third party or if any sum accrued or to accrue hereunder shall ever be assigned or if any third party other than Landlord shall ever be entitled to collect such sum, then in any such event written notice shall be given by Landlord to Tenant within thirty (30) days after such assignment.

 

(b)                                 If Landlord’s interest in this Lease shall be owned by more than one person, firm, corporation or entity, such parties shall arrange among themselves for the joint execution of a notice specifying one (1) party or agent and an address therefor for the receipt of notices to Landlord under this Lease and to which all payments to Landlord under this Lease shall be made, and notices delivered and payments made by Tenant in accordance with such executed notice shall constitute notice and payment to all parties included within the term “Landlord”.

 

ARTICLE IV.

 

DELIVERY OF THE PREMISES

 

4.1                               DELIVERY OF THE PREMISES.  TENANT HEREBY ACCEPTS THE PREMISES FROM LANDLORD IN ITS “AS IS”, “WHERE IS” CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY BY LANDLORD OR ANY OF ITS EMPLOYEES OR AGENTS, AND “WITH ALL FAULTS”. THE EXECUTION OF THIS LEASE BY TENANT SHALL BE PRIMA FACIE EVIDENCE THAT TENANT HAS INSPECTED THE PREMISES AND IS OR WILL BE THOROUGHLY FAMILIAR WITH ITS CONDITION, AND TENANT HEREBY ACCEPTS THE PREMISES AS BEING IN GOOD AND SATISFACTORY CONDITION AND SUITABLE FOR TENANT’S INTENDED PURPOSES.  THE PROVISIONS OF THIS ARTICLE IV HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION BY LANDLORD OF, AND TENANT DOES HEREBY DISCLAIM, ANY AND ALL WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANOTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.

 

4.2                               Zoning, Easements and Dedications.  From time to time throughout the term of this Lease, Landlord shall, upon the request of Tenant (but subject to Section 4.4 hereof), execute such consents, authorizations, applications, plats, requests, dedications, easements and other documents and instruments as may be reasonable and necessary or desirable in connection with Tenant’s development and/or leasing of the Premises, including, without limitation, utility

 

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easements, site plans, platting instruments and other documents or instruments, in forms approved by Landlord, as may be required by the City of University Park or any Major Subtenant (as hereinafter defined); provided, however, the Land shall not be rezoned or replatted without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed.  Tenant shall bear all expenses with respect to the matters described in this Section 4.2 and in no event shall Landlord be required to incur any expense (other than a reasonable amount of fees of its own counsel incurred in connection with the review of the documents and instruments submitted to Landlord in compliance with the terms of this Section 4.2), or undertake any development or construction obligation.

 

4.3                               Restrictions.  At the written request of Tenant (but subject to Section 4.4 hereof), Landlord shall, from time to time, execute and deliver or join in the execution and delivery of such documents as are reasonable and appropriate, in forms approved by Landlord, necessary or required to impose on the Premises such covenants, conditions and restrictions providing for, inter alia, exclusive uses of the Premises, or any part thereof, the establishment of common and parking areas, the establishment of party walls, replatting of the Land, and provisions for the enlargement of the common and parking areas by the establishment of mutual and reciprocal parking rights and the rights of ingress and egress, and other like matters, for the purpose of the orderly development and operation of the Premises.  All matters, agreements, restrictions and ordinances which affect the Land shall be subject to the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed.

 

4.4                               Extent of Landlord’s Obligation.  Notwithstanding anything in Section 4.2 and Section 4.3 to the contrary, Landlord’s obligations thereunder will be limited to the execution and delivery or the joinder in the execution and delivery of such documents and instruments as may be necessary to grant and create “Typical Easements and Restrictions” (as hereinafter defined) for “Major Subtenants” (as hereinafter defined) and otherwise reasonably cooperate with Tenant to accommodate Major Subtenants. As to Subtenants who are not Major Subtenants, Landlord will reasonably consider such easements, dedications, restrictions, covenants and other conditions as may be necessary for or requested by such Subtenants and agrees to execute and deliver or join in the execution and delivery of same to the extent approved by Landlord, such approval not to be unreasonably withheld or delayed. Landlord’s cooperation shall not, however, require Landlord to incur any expense (other than a reasonable amount fees of its own counsel incurred in connection with the review of the documents and instruments submitted to Landlord in compliance with the terms of this Section 4.4) or undertake any development or construction obligation.  As used above, the term “Typical Easements and Restrictions” shall mean such easements, dedications, restrictions, covenants, non-disturbance agreements and conditions as are typically required by a National or Regional User (as defined in Section 11.4 below) for the lease and occupancy of space and the operation of its business in a multi-tenant first-class office, retail and restaurant project, which may include, but not be limited to, use and/or product exclusives, use and/or product radius restrictions, parking restrictions, access and/or service drive restrictions, building height restrictions, building area restrictions, signage restrictions, and other such matters as contemplated in Section 4.3 above; provided, however, in no event shall any of such easements, dedications, restrictions, covenants or conditions affect or burden any land other than the Premises.

 

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ARTICLE V.

 

INDEPENDENT COVENANTS

 

5.1                               It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that the Annual Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected.

 

ARTICLE VI.

 

USE

 

6.1                               Permitted Uses.  The Premises may be used and occupied by Tenant (and its permitted assignees and Subtenants) solely for the demolition of the existing improvements and the construction, operation and maintenance thereon of office operations, retail businesses, restaurants, financial institutions, professional offices and related facilities common to first class commercial developments in the Dallas-Fort Worth metroplex, and for common areas relating and necessary to the operation of the foregoing, including a parking garage facility; provided, however, notwithstanding anything in this Lease to the contrary, Tenant shall not use or permit the Premises or any part thereof to be used for any use proscribed on Exhibit “B” attached hereto and made a part hereof for all purposes, without Landlord’s prior written consent, which consent may be withheld in Landlord’s sole and absolute discretion (collectively, the “Prohibited Uses”).

 

6.2                               Intentionally Deleted.

 

6.3                               Compliance with Laws; Indemnity.  Tenant shall, at Tenant’s sole cost and expense, promptly observe and comply with (i) all present and future laws (including, without limitation, environmental laws), ordinances, statutes, codes, requirements, orders, directions, rules and regulations of all federal, state, county and municipal governments and of all other governmental authorities having or claiming jurisdiction over the Premises or any appurtenances thereto or any part thereof, and of all the respective departments, bureaus and officials of any such authorities (collectively “Laws”), and (ii) the requirements and regulations of the Board of Fire Underwriters or any other body exercising similar functions, and of all insurance companies issuing policies covering the Premises or any part thereof (collectively, “Regulations”) applicable to the use, condition, structure or occupancy of the Premises, including, without limitation, Laws relating to the environment, persons with disabilities, construction and occupational health and safety.  Tenant must comply with the Laws and Regulations regardless of (a) whether the Laws or Regulations are in force at the commencement of the Term of this Lease or may in the future be passed, enacted or directed, and (b) whether compliance with such Laws and Regulations shall require structural or extraordinary alterations or additions, repairs or replacements to the Premises or any part thereof.  Without limiting the generality of the foregoing, Tenant must also procure, at Tenant’s sole cost and expense, each and every permit, license, certificate or other authorization required in connection with any building(s) or improvement(s) now or hereafter erected on the Premises or any part thereof, as well as any and

 

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all licenses and permits required for Tenant’s intended use upon the Premises (collectively the “Permits”).

 

6.4                               Americans with Disabilities Act.  Notwithstanding any other provisions of this Lease to the contrary, Tenant must comply with the Americans With Disabilities Act, as it now exists and as it may hereafter be amended and any other accessibility Laws or Regulations as they may hereafter be amended (collectively, “ADA”) with regard to the Premises and Tenant’s use thereof.  Landlord is not responsible for compliance with the ADA with respect to the Premises, including the design or construction of any buildings or improvements on the Premises.

 

ARTICLE VII.

 

INDEMNITY

 

7.1                               Tenant shall indemnify, protect and save Landlord and Landlord’s successors and assigns, partners, shareholders, trustees, directors, agents, contractors, employees and officers (collectively, the “Indemnified Parties”) harmless from and against, and shall reimburse such parties for, all liabilities, obligations, losses, claims, damages, fines, penalties, costs, charges, judgments and expenses, including, without limitation, reasonable attorneys’ fees and expenses which may be imposed upon or incurred or paid by or asserted against such Indemnified Parties by reason of or in connection with any of the following occurring during the Term of this Lease and any time thereafter Tenant, successors and/or assigns of Tenant retains possession of the Premises or any part thereof or a Subtenant holds over after the termination of this Lease without Landlord’s consent (except to the extent caused by the gross negligence or willful misconduct of the Indemnified Parties):

 

(a)                                 Any accident, injury, death or damage to any person or property occurring in, on or about the Premises;

 

(b)                                 All construction and any changes, alterations, repairs and anything done in, on or about the Premises or any part thereof in connection with such construction, changes, alterations and repairs;

 

(c)                                  Any act (whether or not negligent) or omission on the part of Tenant or any of its agents, contractors, subcontractors, servants, successors, employees, Subtenants, licensees, invitees or any trespassers;

 

(d)                                 Performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof;

 

(e)                                  Any failure of Tenant or any of its agents, contractors, subcontractors, servants, successors, employees, Subtenants, licensees, invitees or any trespassers to comply with any Laws or Regulations or obtain or maintain any Permits;

 

(f)                                   The use, occupancy, operation or condition of the Premises, or of any buildings or other structures now or hereafter situated thereon, or the fixtures or personal property thereon or therein;

 

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(g)                                  Any Event of Default by Tenant under this Lease; or

 

(h)                                 Any other action or matter concerning the Premises except to the extent caused by the gross negligence or willful misconduct of the Indemnified Parties.

 

Tenant’s foregoing indemnity and hold harmless agreement shall survive the termination or expiration of this Lease.

 

ARTICLE VIII.

 

IMPOSITIONS, UTILITIES, MAINTENANCE

 

8.1                               Impositions.

 

(a)                                 Subject to Tenant’s right to contest such charges pursuant to Section 8.1 (d) below, from and after the Commencement Date, Tenant shall pay all real property taxes which are assessed by any lawful authority against the Premises and all other taxes, assessments for local improvements, use and occupancy taxes, ad valorem taxes, margin taxes (including the margin tax imposed by Chapter 171 of the Texas Tax Code and any amendment or replacement thereof in addition thereto), water, and storm and sanitary sewer rates and charges (other than ordinary charges for utility services as provided in Section 8.2), licenses and permit fees, tap fees and other governmental levies and charges, which are assessed, levied, confirmed, imposed or become a lien upon the Premises (or any portion thereof), or become payable or accrue during the term of this Lease (the “Impositions”), payment thereof to be made at least fifteen (15) days before the earlier of (i) the date such payment is due, or (ii) the date on which any fine, penalty, interest or cost may be added thereto for the nonpayment thereof; provided, however, that any Impositions relating to a fiscal period of the taxing authority a portion of which is included within the Term hereof and a portion of which is included in a period of time before the Commencement Date or after the expiration of the term (for reasons other than Tenant’s default hereunder) shall be adjusted between Landlord and Tenant as of the date for payment of Impositions occurring during the first Lease Year or such year in which this Lease expires, as applicable. If Tenant does not timely pay such Impositions (or contest such payment pursuant to Section 8.1(c) below), Landlord, at Landlord’s option, may pay the same (without waiving Tenant’s default) and such amount so paid, together with interest thereon at the Default Rate, shall be due and payable to Landlord as Additional Rent upon written demand therefor by Landlord. At least thirty (30) days prior to the end of the calendar year occurring during the first partial Lease Year of the Term, Landlord shall bill Tenant for the estimated Impositions based upon the overlap, if any, of the first partial Lease Year and the fiscal period of the taxing authorities. Such bill shall be accompanied with Landlord’s calculation of such estimated Impositions (taking into consideration the required date of payment thereof by Tenant, as set forth below). Such estimated billing shall be based upon the Impositions for the previous fiscal year, or such other information then available to Landlord. Tenant shall pay each such estimated billing to Landlord within thirty days (30) days of receipt thereof and Landlord shall remit same together with Landlord’s share prior to the later to occur of delinquency or fifteen (15) days after receipt of Tenant’s share; provided, however, that if such estimated amounts shall vary from the actual amounts due for the fiscal year, Landlord and Tenant shall make a final adjustment as

 

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soon as reasonably possible after the end of the partial Lease Year based upon the Impositions actually payable by Landlord.

 

(b)                                 Nothing hereinabove contained shall require Tenant to pay any franchise, estate, inheritance, succession, capital levy, stamp levy, stamp tax or transfer tax of Landlord or any income, excess profits, or revenue tax, or any other tax, assessment, charge, or levy based on or measured by the gross income or capital stock of Landlord or upon any rental payable by Tenant under this Lease; provided, however, that if at any time during the Term of this Lease, the present method of taxation or assessment shall be so changed that the whole or any part of the taxes, assessments, levies or charges now levied, assessed or imposed on real estate and improvements thereon shall be changed or discontinued and as a substitute therefor, taxes, assessments, levies or charges shall be levied, assessed and/or imposed wholly or partially as a capital levy or otherwise on the rents received from said real estate or the rents reserved herein or any part thereof, then such changed or substitute taxes, assessments, levies or charges, to the extent so levied, assessed or imposed, shall be deemed to be included within the term “Impositions”.  Impositions shall also include any additional taxes and assessments (other than an income tax on Landlord’s net income) that are hereafter levied and/or assessed with respect to the Premises and/or this Lease.  In the event a sales tax or use tax is hereafter imposed upon any rental payable hereunder (“Rental Tax”), Tenant shall be responsible for the payment thereof, provided same is not an income tax on Landlord’s net income.   Tenant agrees to seek all available exemptions and waivers of Rental Tax and/or credits applicable to the payment of Rental Tax so as to minimize, to the extent possible, the net amount of Rental Tax actually paid by Tenant. To the extent received by Landlord, Landlord covenants to forward promptly to Tenant any and all notices or statements relating to taxes, assessments, fees, water, sewer or other rent, rate or charge, excise, levy, license fee, permit fee, inspection fee or other authorization fee and will reasonably cooperate with Tenant to allow such notices or statements to be sent directly to Tenant.  Tenant shall furnish to Landlord for Landlord’s inspection, at least 15 days prior to the delinquency date thereof, official receipts of the appropriate taxing authority or a canceled check payable to such taxing authority or other evidence reasonably satisfactory to Landlord evidencing payment thereof. The certificate, advice or bill of nonpayment of any Imposition from the appropriate official designated by law to make or issue the same or to receive payment of any Imposition shall be prima facie evidence that such Imposition is due and unpaid at the time of the making or issuance of such certificate, advice, or bill of nonpayment.  If Tenant fails to furnish such receipts or other proof within the foregoing 15 day period, Landlord, at Landlord’s option, may pay such Taxes, and Tenant will reimburse such amount to Landlord, together with any interest, penalties or late fees accrued thereon within fifteen (15) days after Landlord’s written request therefor.

 

(c)                                  Tenant is liable for all taxes levied or assessed against personal property, furniture or fixtures placed or situated in or on the Premises during the Term (“Personal Property Taxes”).  If any such Personal Property Taxes for which Tenant is liable under this Section 8.1 are levied or assessed against Landlord or Landlord’s property and if Landlord, at Landlord’s option, elects to pay the same or if the assessed value of Landlord’s property is increased by inclusion of personal property, furniture or fixtures placed or situated in or on the Premises during the Term, and Landlord, at Landlord’s option, elects to pay the Personal Property Taxes based on such increase, Tenant must pay to Landlord upon demand that part of such Personal Property Taxes.

 

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(d)                                 So long as there is then no uncured default hereunder, Tenant may contest the collection or assessment of any Impositions, tax, assessment, fee, water or sewer charge or rate, excise or levy by legal proceedings or other appropriate action provided that:  (i)  neither the Premises nor any part thereof nor any interest therein is placed in any danger of being sold, forfeited, lost or interfered with by virtue of any such contest; (ii) Tenant, prior to the prosecution or defense of any such claim, notifies Landlord in writing of its decision to pursue such contest; (iii)  to the extent procedurally required and to avoid the consequences of delinquency, Tenant shall pay the amount in question prior to initiating the contest; (iv) provide, to the reasonable satisfaction of Landlord, adequate security to Landlord prior to initiating the contest; and (v) within thirty (30) days after the conclusion of such contest, pay all expenses (including, without limitation, any fees, penalty or interest) which are assessed or incurred in connection with or as a result of any such proceedings are paid by Tenant.

 

8.2                               Utilities.  Tenant alone shall be responsible for and promptly pay all charges incurred for all utility services to the Premises, including, but not limited to, telephone service, sanitary and storm sewer, water, natural gas, light, power, heat, steam, communications services, garbage collection and electricity arising out of Tenant’s and any Subtenant’s or other occupant’s use, occupancy, and possession of the Premises during the term of this Lease. Tenant shall also pay for all penalties, surcharges and maintenance upon such utilities. In no event shall Landlord be liable in any respect (including for damages to either person or property) for any interruption or failure of utility service to the Premises, except to the extent caused by Landlord’s gross negligence.  In no event will any such failure or cessation relieve Tenant from fulfillment of any covenant in this Lease.

 

8.3                               Other Services.  Landlord is not responsible for providing any services to Tenant and/or the Premises (including, without limitation, janitorial services, landscaping, trash removal, or the like, it being hereby acknowledged and agreed that same are the sole responsibility of Tenant), except as may be otherwise expressly set forth herein.

 

8.4                               Maintenance and Repairs.  Subject to the provisions of Article XVII below relating to destruction of or damage to the Premises, Tenant agrees that at all times and during the Term at its own expense it will keep and maintain or cause to be kept and maintained all of the Premises (structural and non-structural and interior and exterior), including, without limiting the generality of the foregoing, all buildings and other improvements; heating, ventilating and air conditioning systems (collectively, “HVAC”); plumbing; lighting; signage; pavement; common areas; and landscaping (including mowing of grass and care of shrubs), in clean, neat and first-class condition and repair commensurate with similar first-class office, retail and restaurants located in the Dallas metropolitan area. Tenant must at all times during the Term and, at Tenant’s sole cost and expense, further keep and maintain in good order and repair all buildings and improvements as may be situated on the Premises at any time during the Term, or forming part thereof, and their full equipment and appurtenances, both interior and exterior, structural or nonstructural, ordinary or extraordinary, regardless of how the necessity or desirability for such repairs may occur or arise.  All repairs, replacements and renewals must be made promptly by Tenant and must be at least equal in quality and class to the original “as new” condition thereof.  In no event shall Landlord have any obligation to make any repairs or replacements to the Premises, however, if Tenant fails to make the repairs or replacements promptly as required herein, Landlord may, at Landlord’s sole option, make such repairs and replacements and the cost

 

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of such repairs and replacements will be charged to Tenant as Additional Rent and will become due and payable by Tenant upon demand therefor.  Upon the expiration or termination of this Lease, so long as Tenant is not in default hereunder, Tenant may remove from the Premises all of Tenant’s movable fixtures, personal property and equipment located thereon; provided, however, Tenant may not remove any signs (except sign panels), HVAC, plumbing, electrical and similar equipment typically furnished to tenants of lease space or any of the building systems (or parts thereof) serving or benefitting the Premises or any portion thereof.

 

ARTICLE IX.

 

HAZARDOUS SUBSTANCES

 

9.1                               Hazardous Substance.  For purposes of this Article IX, “Hazardous Substance” means any substance, matter, material, waste or pollutant, the generation, storage, disposal, handling, release (or threatened release), treatment, discharge or emission of which is regulated, prohibited or limited under: (i) the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984, as now or hereafter amended (“RCRA”) (42 U.S.C. Sections 6901 et seq.); (ii) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, as now or hereafter amended (“CERCLA”) (42 U.S.C. Sections 9601 et leg.); (iii) the Clean Water Act, as now or hereafter amended (“CWA”) (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic Substances and Control Act, as now or hereafter amended (“TSCA”) (15 U.S.C. Sections 2601 et seq.); (v) the Clean Air Act, as now or hereafter amended (“CAA”) (42 U.S.C. Sections 7401 et seq.), (RCRA, CERCLA, CWA, TSCA and CAA are collectively referred to herein as the “Federal Toxic Waste Laws”); (vi) any local, state or foreign law, statute, regulation, or ordinance analogous to any of the Federal Toxic Waste Laws; and (vii) any other federal, state, local or foreign law (including any common law), statute, regulation or ordinance now existing or hereafter enacted regulating, prohibiting or otherwise restricting the placement, discharge, release, threatened release, generation, treatment or disposal upon or into any environmental media of any substance, pollutant or waste which is now or hereafter classified or considered to be hazardous or toxic. All of the laws, statutes, regulations and ordinances referred to in subsections (vi) and (vii) above, together with the Federal Toxic Waste Laws are collectively referred to herein as “Toxic Waste Laws”. The term “Hazardous Substances” shall also include, without limitation: (a) gasoline, diesel fuel, fuel oil, motor oil, waste oil and any other petroleum hydrocarbons, including any additives or other by-products associated therewith; (b) asbestos and asbestos-containing materials in any form; (c) polychlorinated biphenyls; and (d) any substance the presence of which on the Premises: (x) requires reporting or remediation under any Toxic Waste Law, (y) causes or threatens to cause a nuisance on the Premises or poses or threatens to pose a hazard to the health or safety of persons on the Premises, or (z) which, if it emanated or migrated from the Premises, could constitute a trespass, nuisance or health or safety hazard to persons on adjacent property.

 

9.2                               Hazardous Substances on Premises Prohibited.  Tenant shall not conduct, permit, cause, allow or authorize the manufacturing, emission, generation, transportation, storage, treatment, existence or disposal in, on or under the Premises, of any Hazardous Substance without prior written authorization by Landlord, except for such quantities which are routinely utilized in connection with, or which routinely results from, the lawful use of the

 

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Premises, all of which are to be stored, used, handled, and disposed of in full compliance with all Toxic Waste Laws.  In particular, but without limitation, Tenant (and not Landlord) shall be responsible and liable for any Hazardous Substances located in, on or under the Land on or prior to the Effective Date (the “Pre-Existing Conditions”) and/or after the Effective Date.

 

9.3                               Compliance with Toxic Waste Laws Indemnity.

 

(a)                                 Tenant shall, at its sole cost and expense, comply with all applicable Toxic Waste Laws.  In particular, but without limitation, Tenant (and not Landlord) shall be responsible and liable for compliance with applicable Toxic Waste Laws, whether Pre-Existing Conditions or conditions that occur after the Effective Date.

 

(b)                                 Notwithstanding anything contained herein to the contrary, TENANT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD from any and all liabilities, claims, causes of action, penalties, fines, costs, expenses, attorneys’ fees, remedial or response costs, investigatory costs and other similar expenses arising out of or otherwise attributable to any violation by Tenant, or the Premises of any Toxic Waste Law.  In particular, but without limitation, Tenant (and not Landlord) shall be responsible and liable for any violation, whether Pre-Existing Conditions or conditions that occur after the Effective Date. Such indemnity obligation shall survive any termination or expiration of this Lease.

 

ARTICLE X.

 

INSURANCE

 

10.1                        Tenant’s Insurance.

 

(a)                                 Tenant shall, at its sole cost and expense, obtain and maintain insurance upon and relating to the Premises by builder’s risk insurance during construction and after construction is complete and by comprehensive commercial general liability property insurance or an “all-risk” form of insurance policy(ies) in amounts equal to the greater of: (i) one hundred percent (100%) of the full insurable replacement value of the improvements located on the Land; or (ii) such amount as is necessary to avoid co-insurance. All such policies of insurance shall insure Tenant, Landlord, Landlord’s mortgagee and any Leasehold Mortgagee, as their interests may appear.  Such policy must be endorsed to provide that Tenant’s insurance is primary in the event of any overlapping coverage with the insurance covered by Tenant.  All payments for losses under such insurance will be made solely to Tenant or to any Leasehold Mortgagee as their interests may appear, provided that Tenant uses such insurance to rebuild or restore the improvements constructed upon the Land and provided that such proceeds are held in escrow by a third party acceptable to Landlord and on terms and conditions concerning such rebuilding and restoration as Landlord shall reasonably approve.

 

(b)                                 Tenant also must maintain a policy or policies of special form (“all risk”) property insurance on all of its personal property, including removable trade fixtures, supplies and movable furniture and equipment located on the Premises, in an amount equal to full replacement cost and endorsed to provide that Tenant’s insurance is primary in the event of any overlapping coverage with the insurance carried by Landlord.  All payments for losses under

 

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such insurance will be made solely to Tenant or to any Leasehold Mortgagee of Tenant (if permitted hereunder) as their interests may appear.

 

(c)                                  Tenant shall, at its sole cost and expense, obtain and maintain a commercial general liability insurance, insuring Landlord, Landlord’s mortgagee, Leasehold Mortgagee and Tenant against all claims, demands or actions arising out of or in connection with injury to or death of a person or persons and for damage to or destruction of property occasioned by or arising out of or in connection with the use or occupancy of the Premises, the limits of such policy or policies to be not less than $5,000,000.00 combined single limit for any one accident or occurrence.  Tenant will review this coverage annually and increase limits as reasonably prudent for first-class commercial developments.  Tenant’s insurance must contain an endorsement that Tenant’s insurance is primary and non-contributory for claims arising out of an incident or event occurring within the Premises.  Tenant’s insurance must contain a provision naming Landlord (and any Mortgagee designated by Landlord) as an additional insured and include coverage for the contractual liability of Tenant to indemnify Landlord pursuant to the terms of this Lease.

 

(d)                                 Tenant, at Tenant’s sole cost and expense, must also maintain throughout the Term a policy or policies of workers’ compensation insurance in an amount not less than that necessary to satisfy all statutory limits and other requirements of law concerning such workman’s compensation coverage for Tenant’s use and operations within the Premises.  Such policy must contain a waiver of subrogation endorsement reasonably acceptable to Landlord.

 

(e)                                  Tenant, at Tenant’s sole cost and expense, must also maintain throughout the Term business interruption insurance in an amount equivalent to at least twelve (12) months’ Annual Rent and other expenses paid by Tenant under this Lease for the calendar year then most recently concluded.

 

(f)                                   All policies of insurance shall be issued by an insurance company or companies having a Best’s rating of not less than A:X as stated in the most current available Best’s insurance reports (or comparable rating service if Best’s reports are not currently being published), licensed to do business in the State of Texas. All policies of insurance shall be in form and substance reasonably satisfactory to Landlord with Landlord shown as an additional insured or loss payee, as applicable; provided, however, that Landlord’s rights to any casualty insurance proceeds with respect to the Property shall be subject to the rights of any Leasehold Mortgagee pursuant to Section 17.3.  Tenant shall deliver to Landlord certificates or copies of all policies of required insurance and, upon request from Landlord, proof of the payment of the premiums. Sixty (60) days prior to the expiration of each of the policies required hereunder, Tenant shall furnish Landlord with a certificate of insurance in force or replacement coverage and meeting the standards hereinabove provided, all as required by this Lease. All such policies shall contain a provision that such policies will not be canceled or materially amended, including any reduction in the scope or limits of coverage, without ten (10) days prior written notice to Landlord. In the event Tenant fails to maintain, or cause to be maintained, or deliver and furnish to Landlord certified copies of policies of insurance required by this Lease, Landlord may procure such insurance for the benefit only of Landlord for such risks covering Landlord’s interests, and Tenant will pay all premiums thereon within ten (10) days after demand by Landlord. In the event Tenant fails to pay such premiums (or reimburse Landlord) upon demand the amount of all such premiums shall bear interest at the Default Rate.

 

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(g)                                  All insurance required to be maintained under this Section 10.1 shall be in addition to the insurance maintained by the Master Association as described in the Bylaws; provided, however, the insurance maintained by the Master Association shall satisfy Tenant’s requirement herein if Landlord is named as an additional insured on the Master Association’s policy and the above dollar amounts are satisfied.

 

10.2                        Insurance Proceeds.  Landlord and Tenant agree that in the event of loss under any insurance policy or policies maintained pursuant to this Section 10, Tenant must proceed with the repair and restoration of the damaged or destroyed buildings and improvements in accordance with this Section 10 hereof and that the insurance proceeds in connection with such loss will, subject to Section 17.3, be paid to a third party acceptable to Landlord and Tenant on terms and conditions acceptable to Landlord and Tenant, allow the proceeds to be used by Tenant for application to such repair and restoration.

 

10.3                        Waiver of Subrogation.  Notwithstanding anything contained in this Lease to the contrary, each party hereto hereby waives any and every claim which arises or may arise in its favor and against the other party hereto, or anyone claiming through or under them, by way of subrogation or otherwise, during the term for any and all loss of, or damage to, any of its property (WHETHER OR NOT SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT OR NEGLIGENCE OF THE OTHER PARTY OR ANYONE FOR WHOM SUCH OTHER PARTY MAY BE RESPONSIBLE), which loss or damage is covered, or is required by this Lease to be covered, by valid and collectible fire and extended coverage insurance policies. Such waivers shall be in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss or damage to property of the parties hereto.

 

ARTICLE XI.

 

ASSIGNMENT AND SUBLETTING

 

11.1                        Right to Sublet.  Tenant may from time to time sublet the Premises in part at any time and from time to time without Landlord’s consent. The making of any such sublease shall not release Tenant from, or otherwise affect in any manner, any of Tenant’s obligations hereunder. All Subleases will contain customary terms and conditions for similar first-class office, retail and restaurant projects in the Dallas area as determined by Tenant in its reasonable discretion, including the obligation to comply with the Prohibited Uses.  Tenant shall not be relieved of any liability under this Lease as a result of any Sublease

 

11.2                        Right to Assign.  Tenant may not assign this Lease at any time without Landlord’s consent, which consent shall not be unreasonably withheld; provided, however, that Tenant shall have the right to assign this Lease without Landlord’s consent if such assignment is to an Affiliate of Tenant.  Tenant shall, in each case of an assignment by Tenant (including, but not limited to, an assignment to an Affiliate of Tenant, but excluding the creation of a Leasehold Mortgage), deliver to Landlord an instrument in recordable form under the terms of which the assignee of Tenant’s interest in this Lease assumes all of the burdens, terms, covenants, conditions and obligations of Tenant hereunder. After any assignment of this Lease that is approved in writing by Landlord, the assigning Tenant shall be relieved of any and all of

 

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Tenant’s liabilities or obligations hereunder except those accrued as of the time of the assignment and Landlord shall look only to such successor Tenant for performance of all of the obligations and liabilities of Tenant under this Lease of every kind and character thereafter to accrue.  For purposes hereof, an assignment of this Lease by Tenant shall also include a transfer of 50% or more of the voting and/or ownership interests in Tenant by the current owners of Tenant to a person or entity that is not an Affiliate of Tenant.

 

11.3                        Procedure.  If Tenant desires to assign, mortgage, pledge, encumber, hypothecate or otherwise permit the transfer of this Lease or all or a portion of Tenant’s interest in this Lease (all of the foregoing being referred to herein as a “Transfer”), then Tenant must deliver written notice of such intent to Landlord, together with a copy of the proposed instrument of assignment or sublease, at least thirty (30) days prior to the effective date of the proposed assignment or commencement date of the term of the proposed sublease.  Any attempted Transfer by Tenant in violation of the terms and covenants of this Section 11 will be void.  Any assignee which is permitted pursuant hereto must expressly accept and assume in writing all of the obligations of Tenant hereunder.

 

11.4                        Recognition of Subleases.

 

(a)                                 All subleases covering any portion of the Premises shall provide that the rights of the Subtenants thereunder shall be subject and subordinate to this Lease and the rights of Landlord hereunder, including but not limited to the obligation of such Subtenants to comply with the Prohibited Uses. The failure of any Subtenant to observe and comply with any covenants, conditions or restrictions set forth in this Lease (unless applicable only to Tenant), whether by act, negligence or omission, shall, subject to the notice and cure provisions set forth in Section 14.1(a) below, be deemed a default by Tenant.

 

(b)                                 Notwithstanding the foregoing, Landlord agrees to enter into a nondisturbance agreement with any Major Subtenant (as hereinafter defined) upon request by such Major Subtenant or Tenant. For purposes hereof, a “Major Subtenant” is either: (i) a Subtenant occupying or proposing to occupy at least five thousand (5,000) square feet of leasable area within the Premises, or at least two thousand five hundred (2,500) square feet if the Sublease involves a retail store or restaurant, (ii) a Sublease with an Affiliate of Tenant, or (iii) a National or Regional User (as hereinafter defined).  As used herein, the term “National or Regional User” shall mean a party operating (direct, franchise, or otherwise) at least thirty (30) or more facilities in the United States or at least twenty (20) within a single region thereof (e.g. the Southwest, New England, Pacific Northwest, etc.) under a single trade name, style or mark, and having a national or regional identity with the public-at-large.  The nondisturbance agreement shall provide that, notwithstanding the termination of this Lease, the Major Subtenant Sublease shall continue for the duration of its term and extensions thereof as direct leases between Landlord hereunder and Major Subtenant thereunder; provided, however, the nondisturbance agreement shall be conditioned on the following: (i) Landlord shall not be liable to any Major Subtenant for any security deposits (unless the security deposit has been delivered to Landlord) under its Major Subtenant Sublease, nor shall Landlord be bound by any rental which is paid more than thirty (30) days in advance of the due date under the terms of the sublease; (ii) the Major Subtenant must not be in default under its Major Subtenant Sublease on the date of the Lease termination; (iii) the Major Subtenant shall attorn to Landlord; and (iv)

 

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Landlord shall not be liable for any act or omission of Tenant or be subject to any offsets or defenses which any Major Subtenant may have against Tenant.  In no event shall Tenant enter into any Sublease (including, but not limited to a Major Subtenant Sublease) which has a term (including available extensions) which extends beyond the Term of this Lease.  As to any Subtenant who is not an Major Subtenant, Landlord agrees to consider any request by such Subtenant for a non-disturbance and attornment agreement, but Tenant shall not offer to obtain same unless and until requested by such Subtenant.  Landlord agrees to devote a reasonable amount of time to the review, consideration, and negotiation of such non-disturbance and attornment agreements, but Tenant shall be liable and obligated to reimburse Landlord for any costs, fees and expenses that Landlord may suffer or incur in connection with such review, consideration and/or negotiation. Unless otherwise approved by Landlord, all Subleases for which a non-disturbance agreement is requested from Landlord (whether with Major Subtenants or otherwise) shall be “arm’s length” with third party tenants unaffiliated with Tenant, and a copy of the executed or proposed Sublease will be delivered to Landlord at the same time the non-disturbance agreement is delivered to Landlord.

 

11.5                        Assignment to Financial Partner.  Landlord acknowledges that Tenant may enter into an agreement for the development, operation, leasing and/or management of the Premises during the Term of this Lease with a pension fund, real estate investment trust, public debt or equity pool, or other financial partner and Landlord agrees that no consent or approval shall be required therefor; provided, however, that any such agreement shall automatically terminate and be of no force or effect and not affect or be binding upon Landlord or the Premises after the termination of this Lease.

 

ARTICLE XII.

 

QUIET ENJOYMENT

 

12.1                        Quiet Enjoyment.  Provided Tenant pays the Annual Rent and Additional Rent payable hereunder as and when due and payable and timely keeps and fulfills all of the terms, covenants, agreements and conditions to be performed or observed by Tenant hereunder, Tenant shall at all times during the term have quiet and peaceable enjoyment of the Premises.

 

12.2                        Warranty of Title.  Landlord represents and warrants that Landlord is the sole owner of fee simple title in and to the Land, subject only to the matters set forth herein and on Exhibit “C” attached hereto (“Title Exceptions”), and that Landlord alone has the full and sole right to lease the Premises to Tenant without the consent or joinder of any other party.

 

ARTICLE XIII.

 

HOLDING OVER; SURRENDER

 

13.1                        Holdover.  Upon the termination of this Lease (whether by the expiration of the term of this Lease or otherwise), Tenant must immediately vacate the Premises, but, if Tenant fails to do so, then, without the execution of a new lease or renewal and/or extension of this Lease by Landlord and Tenant, Tenant, at the option of Landlord, shall immediately become a holdover, month-to-month tenant of the Premises under all terms, conditions, provisions, and

 

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obligations of this Lease.  In the event Tenant remains in possession of the Demised Premises after the expiration of this Lease without the consent of Landlord, (i) such event shall be an immediate event of default under this Lease; (ii)  the Annual Rent for such holdover tenancy shall be equal to one hundred twenty-five percent (125%) of the Annual Rent payable by Tenant for the last month of the term immediately preceding such holdover period plus any Additional Rent owed; and (iii) Landlord shall have all rights and remedies available to Landlord under this Lease and at law.  Either party shall have the right to terminate such tenancy upon thirty (30) days’ written notice to the other.

 

13.2                        Surrender of Premises.  No act by Landlord will be deemed an acceptance by Landlord of Tenant’s surrender of the Premises, and no agreement to accept a surrender of the Premises will be valid, unless the same is made in writing and signed by Landlord.  Upon the expiration or other termination of the Term of this Lease, Tenant will quit and surrender to Landlord the Premises, including all buildings, replacements, changes, additions and improvements constructed, erected, added or placed by Tenant thereon, with all equipment in or appurtenant thereto, in good condition and repair, reasonable wear and tear excepted.  Upon the expiration or sooner termination of this Lease, all buildings (if any, including all equipment in or appurtenant thereto), improvements and all changes, additions and alterations therein shall be and remain on the Land and title to all such property, including all existing leases, rights and contracts, will vest in and belong to Landlord without further action on the part of either party hereto and without cost or charge to Landlord.  Tenant will, within five days after Landlord’s request therefor, execute, acknowledge and deliver such documents as may be necessary or convenient in Landlord’s discretion for the purpose of further evidencing that title to all such property and improvements is vested in Landlord.  Notwithstanding the foregoing, upon Landlord’s request Tenant must promptly remove such alterations, additions, improvements, trade fixtures, equipment and/or furnishings (other than New Improvements, as defined in Section 19.1(a), and such other improvements or alterations approved by Landlord) as Landlord may request, which removal will be at Tenant’s sole cost and expense, and Tenant must repair all damage caused by such removal.  All items not so removed will be deemed to have been abandoned by Tenant and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items.  Landlord will not be liable or responsible for any loss of or damage to any personalty owned or held by or for Tenant which may be on the Premises when Landlord takes possession of it, nor will Landlord be required to account for any such personalty.

 

ARTICLE XIV.

 

DEFAULT AND REMEDIES

 

14.1                        Tenant Events of Default.  The occurrence and continuation of one or more of the following events shall constitute an event of default (each being referred to as an “Event of Default”) pursuant to the terms hereof:

 

(a)                                 The partition of the Condominium and/or the removal of the Condominium from the provisions of the Condominium Statute other than in accordance with this Lease;

 

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(b)                                 Any violation of a Prohibited Use that remains uncured for a period of thirty (30) consecutive days after Landlord delivers written notice to Tenant of such violation;

 

(c)                                  The failure of Tenant to comply with or to observe any terms, provisions, or conditions of this Lease performable by and obligatory upon Tenant, excluding the rent and other payment provisions hereof and excluding any obligation that could give rise to a Terminable Event of Default, within thirty (30) days after written notice by Landlord plus, if such failure cannot reasonably be cured within such thirty (30) day period, such additional time as is needed to cure the same so long as Tenant (or its Leasehold Mortgagee , subject to Article XV below) has commenced such cure within such thirty (30) day period and such cure thereafter is continuously and diligently undertaken by Tenant (or its Leasehold Mortgagee, subject to Article XV below) and prosecuted to completion;

 

(d)                                 The failure of Tenant to pay when due any portion of any installment of Annual Rent, Additional Rent or any other monetary charge due from Tenant hereunder and such failure continues for ten (10) days after written notice thereof from Landlord; provided, however, Landlord shall not be obligated to send more than two (2) such notices in any calendar year for nonpayment of Annual Rent;

 

(e)                                  The taking of all of Tenant’s Leasehold Estate by execution or other process of law other than as provided in Article XVIII;

 

(f)                                   Tenant shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of Tenant’s creditors;

 

(g)                                  Tenant shall file a petition seeking relief, or a petition seeking an order for relief against Tenant is filed under any section or chapter of Title 11 of the United States Code, as amended, or under any similar law or statute of the United States or any state thereof; or Tenant shall be adjudged bankrupt or insolvent in proceedings filed against Tenant; or

 

(h)                                 A receiver or trustee (other than a bankruptcy trustee or receiver) is appointed for all or substantially all of the assets of Tenant and Tenant fails to have such receivership or trusteeship terminated within sixty (60) days after appointment.

 

Upon the occurrence of any Event of Default, but subject to the rights of Leasehold Mortgagees and their designees as provided in Article XV hereof, Landlord may, in addition to all other rights and remedies afforded Landlord hereunder or by law or equity, take any one or more of the following actions:

 

(i)                                     Subject to the rights of Major Subtenants which have received nondisturbance agreements from Landlord, terminate this Lease by giving Tenant written notice thereof, in which event Tenant shall pay to Landlord the sum of (a) all Rent accrued hereunder through the date of termination, (b) all Default Costs (defined below), and (c) an amount equal to (but in no event less than zero) (1) the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at a per annum rate equal to the Default Rate, minus (2) the then present fair rental value of the Premises for such period, similarly discounted.  “Default Costs” shall mean all amounts, costs, losses and/or expenses incurred, abated or foregone by Landlord (including court costs and reasonable attorneys’ fees and

 

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expenses) in (a) obtaining possession of the Premises, (b) removing, storing and/or disposing of Tenant’s or any other occupant’s property, (c) repairing, restoring, altering, remodeling, or otherwise putting the Premises into the condition acceptable to a new tenant, (d) performing Tenant’s obligations under this Lease which Tenant failed to perform, (e) enforcing, or advising Landlord of, its rights, remedies, and recourses arising out of the default, and (f) securing this Lease, including all commissions, allowances, reasonable attorneys’ fees, and if this Lease or any amendment hereto contains any abated Rent granted by Landlord as an inducement or concession to secure this Lease or amendment hereto, the full amount of all Rent so abated (and such abated amounts shall be payable immediately by Tenant to Landlord, without any obligation by Landlord to provide written notice thereof to Tenant, and Tenant’s right to any abated rent accruing following such Terminable Event of Default shall immediately terminate);

 

(ii)                                  Subject to the rights of Major Subtenants which have received nondisturbance agreements from Landlord, terminate Tenant’s right to possess the Premises without terminating this Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord (a) all Rent and other amounts accrued hereunder to the date of termination of possession, (b) all Default Costs, (c) all costs of reletting all or any part of the Premises (including brokerage commissions, cost of tenant finish work, and other costs incidental to such reletting), and (d) all Rent and other net sums required hereunder to be paid by Tenant during the remainder of the Term, diminished by any net sums thereafter received by Landlord through reletting the Premises during such period, after deducting all costs incurred by Landlord in reletting the Premises.  If Landlord elects to terminate Tenant’s right to possession without terminating this Lease, and to retake possession of the Premises (and Landlord shall have no duty to make such election), Landlord shall use reasonable efforts to relet the Premises.  Landlord shall not be liable for, nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s failure to relet the Premises or to collect rent due for such reletting.  Tenant shall not be entitled to the excess of any consideration obtained by reletting over the Rent due hereunder.  Reentry by Landlord in the Premises shall not affect Tenant’s obligations hereunder for the unexpired Term; rather, Landlord may, from time to time, bring an action against Tenant to collect amounts due by Tenant, without the necessity of Landlord’s waiting until the expiration of the Term.  Unless Landlord delivers written notice to Tenant expressly stating that it has elected to terminate this Lease, all actions taken by Landlord to dispossess or exclude Tenant from the Premises shall be deemed to be taken under this Section 14.1(h)(ii).  If Landlord elects to proceed under this Section 14.1(h)(ii), it may at any time elect to terminate this Lease under Section 14.1(h)(i);

 

(iii)                               Perform any act Tenant is obligated to perform under the terms of this Lease (and enter upon the Premises in connection therewith if necessary) in Tenant’s name and on Tenant’s behalf, without being liable for any claim for damages therefor, and Tenant shall reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease (including, but not limited to, collection costs and legal expenses), plus interest thereon at the Default Rate;

 

(iv)                              Institute a suit for damages against Tenant; and/or

 

(v)                                 Sue for injunctive relief and/or for specific performance.

 

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The exercise by Landlord of any one or more remedies hereunder will not constitute forfeiture or an acceptance of surrender of the Premises by Tenant.  Such surrender can be effected only by the written agreement of Landlord and Tenant.

 

14.2                        No Waiver by Landlord.  Pursuit by Landlord of any of the remedies provided for in Section 14.1 hereof shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law or equity, nor shall pursuit by Landlord of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord’s acceptance of rent following an Event of Default hereunder shall not be construed as Landlord’s waiver of such Event of Default. No waiver by Landlord of any violation or breach of any of the terms, provisions, and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an Event of Default shall not be deemed or construed to constitute a waiver of such default.

 

14.3                        Tenant’s Waiver of Statutory and Other Rights.  In the event of any termination of this Lease (or any repossession of the Premises pursuant to Section 14.1 hereof), Tenant, so far as permitted by law, waives (a) any notice of re-entry or of the institution of legal proceedings to that end, (b) any right of redemption, reentry or repossession, (c) any right to a trial by jury in any proceeding or in any matter in any way connected with this Lease, and (d) the benefits of any laws now or hereafter in force exempting property from liability for rent or for debt.  To the full extent permitted by law, Tenant further hereby releases and waives all claims against Landlord and Landlord’s principals, agents, representatives, employees, officers, directors, shareholders and independent contractors, for injury or damage to person, property or business sustained in or about the Premises by Tenant or Tenant’s agents, employees or contractors, other than damage proximately and solely caused by the gross negligence or willful misconduct of Landlord or Landlord’s agents or employees.  Landlord additionally will not be responsible or liable to Tenant for any event, act or omission to the extent same is covered by insurance maintained or required to be maintained by Tenant with respect to the Premises and Tenant’s use and occupancy thereof (whether or not such insurance is actually obtained or maintained), and, at the request of Landlord, Tenant must from time to time cause Tenant’s insurers to provide effective waivers of subrogation for the benefit of Landlord and Landlord’s agents, employees, contractors and insurers in a form satisfactory to Landlord.

 

14.4                        Attorneys’ Fees.  In the event Landlord employs an attorney to collect past due Annual Rent, Additional Rent or other payments due to Landlord hereunder, Landlord shall also be entitled to recover its reasonable attorneys’ fees and expenses incurred in connection therewith. In any case where Landlord or Tenant employs attorneys to protect or enforce its rights hereunder and litigation results, then the non-prevailing party agrees to pay the reasonable attorney’s fees and expenses incurred by the prevailing party. In the event of a bankruptcy proceeding wherein Tenant is a debtor, Tenant shall be additionally liable for all reasonable attorneys’ fees and expenses incurred by Landlord in any such bankruptcy proceeding.

 

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ARTICLE XV.

 

FINANCING

 

15.1                        Right to Finance.  Tenant shall from time to time and at any time have the right to encumber by one or more mortgages, deeds of trust, security agreements, or other instruments in the nature thereof (in each case, individually and collectively, “Leasehold Mortgage”), as security for one or more loans, indebtednesses or obligations, Tenant’s right to use and occupy the Premises (but not Landlord’s fee interest in the Land), the Leasehold Estate created hereby, all of Tenant’s right, title and interest in and to any improvements at any time located on or partially on the Premises, and any other property so affixed to said land, buildings or improvements as to be a part thereof. Any such indebtedness or obligation and any such Leasehold Mortgage shall be for such amount and on such other terms and conditions as Tenant may agree to in its sole discretion; provided that any such Leasehold Mortgage shall at all times be subject and subordinate to the terms and provisions of this Lease and the rights, titles and interests of Landlord whether arising by virtue of this Lease or otherwise. IN NO EVENT WILL LANDLORD BE REQUIRED TO “SUBORDINATE” LANDLORD’S FEE SIMPLE ESTATE IN THE PREMISES FOR FINANCING OBTAINED BY TENANT UNDER THIS SECTION 15.1, OR OTHERWISE ENCUMBER ITS FEE INTEREST IN THE PREMISES, WITH ANY LIEN OR OTHER ENCUMBRANCE WHATSOEVER AND IN NO EVENT WILL TENANT HAVE ANY RIGHT TO PLACE OR CAUSE ANY LIEN TO ATTACH TO OR COVER LANDLORD’S FEE INTEREST IN THE LAND OR THE PREMISES.  There shall be no limitation to the granting of a Leasehold Mortgage by Tenant, the foreclosure (or transfer in lieu of foreclosure) of same by such Leasehold Mortgagee or its designee, but any subsequent Transfer after foreclosure (or Transfer in lieu thereof) by such Leasehold Mortgagee or its designee shall be subject to the terms and provisions set forth in Section 11.2 of this Lease.

 

15.2                        Nondisturbance Agreements.  Notwithstanding anything to the contrary contained herein, Landlord will, within fifteen (15) days after written request from Tenant, deliver to Tenant agreements of nondisturbance from Landlord and any of Landlord’s mortgagees or lienholders subject to the form of the agreement of nondisturbance having been approved by Landlord and such mortgagee or lienholder.  Such agreements will provide that, conditioned on Tenant not then being in default under this Lease, Landlord and such mortgagees or lienholders or underlying landlords will recognize the terms of this Lease in the event of foreclosure or the exercise of the power of sale under any mortgage or deed of trust, or in the event any proceedings are brought for default hereunder.  The agreement executed by such lienholder must also contain an agreement to cause any purchaser at foreclosure sale to assume and agree to perform all of the duties of Tenant under this Lease.

 

15.3                        Notices to Mortgagee.  If at any time after execution and recordation in Dallas County, Texas, of any such Leasehold Mortgage, Tenant or the mortgagee therein (in each case, individually and collectively, “Leasehold Mortgagee”) shall notify Landlord in writing that any such Leasehold Mortgage has been given and executed by Tenant, and shall furnish Landlord with the address to which such Leasehold Mortgagee desires copies of notices to be mailed (or designate some person or corporation as the agent and/or representative of such Leasehold Mortgagee for the purpose of receiving copies of notices), Landlord hereby agrees that Landlord will thereafter, in addition to any other notice Landlord shall be required by this Lease to deliver

 

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to such Leasehold Mortgagee, mail to each such Leasehold Mortgagee or agent thereof, at the address so given, by certified mail, postage prepaid, return receipt requested, and at the same time that such notice is placed in the mail or otherwise delivered to Tenant, duplicate copies of any and all notices in writing which Landlord may from time to time give or serve upon Tenant under and pursuant to the terms and provisions of this Lease, including, but not by way of limitation, any notices of default required to be sent by virtue of Article XIV hereof.

 

15.4                        Right to Cure.  Any such Leasehold Mortgagee, at the option of such Leasehold Mortgagee, acting either directly or indirectly through a designee, may pay any rent due hereunder or may effect any insurance, or may pay any taxes and assessments, or may make any repairs and improvements, or may make any deposits, or may do any other act or thing or make any other payment required of Tenant by the terms of this Lease, or may do any act or thing which may be necessary and proper to be done in the observance of the covenants and conditions of this Lease, or to prevent the forfeiture of this Lease; and all payments so made and all things so done and performed by such Leasehold Mortgagee or designee shall, if made or done timely as required under Article XIV hereof, including cure periods, be effective to prevent a forfeiture of the rights of Tenant hereunder as the same would have been if timely done and performed by Tenant instead of by any such Leasehold Mortgagee or designee. In the event it becomes necessary for any Leasehold Mortgagee to either take possession of the Premises or foreclose its Leasehold Mortgage in order to complete any cure and if: (i) the Leasehold Mortgagee is unable to take possession or foreclose due to the filing of any bankruptcy proceeding involving Tenant; (ii) the Leasehold Mortgagee promptly commences and diligently proceeds to obtain bankruptcy court approval to take possession or foreclose; and (iii) the Leasehold Mortgagee, or its designee, shall pay or cause to be paid all rent required of Tenant hereunder as and when such rent becomes due under the terms of this Lease, then the cure period afforded to the Leasehold Mortgagee shall be extended for a reasonable period of time as is necessary to complete the cure (but not to exceed sixty (60) days); provided, further, that if at the end of such sixty (60) day period, the Leasehold Mortgagee has taken possession of the Premises or has foreclosed its Leasehold Mortgage and is diligently prosecuting such cure, the cure period afforded to the Leasehold Mortgagee shall be extended for an additional period of time as is reasonably necessary to complete the cure.

 

15.5                        No Liability.  No such mortgagee of the rights or interests of Tenant or its designee hereunder shall be or become liable to Landlord as an assignee of this Lease, unless such Leasehold Mortgagee or designee succeeds to the rights or interests of Tenant, through foreclosure, transfer in lieu of foreclosure or other legal process, or otherwise expressly assumes by written instrument, or is deemed to have assumed by law, such liability or takes possession and control of the Premises, in which event such Leasehold Mortgagee or designee shall be liable to Landlord to the extent set forth in this Lease for the obligations of Tenant accruing during the period of such Leasehold Mortgagee’s or designee’s ownership or possession of the Leasehold Estate created hereby; provided, however, that (a) in order to assume this Lease, such Leasehold Mortgagee or its designee must cure all of the defaults of Tenant existing at the time of such assumption, and (b) such Leasehold Mortgagee or its designee shall be liable for any and all damages caused by such Leasehold Mortgagee or its designee.

 

15.6                        Modifications.  Landlord shall not accept any surrender of or agree to any termination of this Lease without the prior written consent thereto by any such Leasehold

 

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Mortgagee, which consent will not be unreasonably withheld or delayed and shall be deemed given if such Leasehold Mortgagee does not consent or object in writing within thirty (30) days after the request for consent is received, and any attempt to do so without such written consent (or deemed consent) shall be void and of no force and effect; provided, however, that the foregoing shall not prohibit or adversely affect Landlord from terminating this Lease due to an Event of Default by Tenant under this Lease or any other express right of Landlord to terminate this Lease as provided in this Lease.  In addition, Landlord shall not enter into any modification or amendment to this Lease which would materially increase the obligations of Tenant or materially and adversely affect the rights of Tenant under this Lease without the prior written consent thereto by any such Leasehold Mortgagee, which consent will not be unreasonably withheld or delayed and shall be deemed given if such Leasehold Mortgagee does not consent or object in writing within fifteen (15) days after the request for consent is received, and any attempt to do so without such written consent (or deemed consent) shall not be binding upon any such Leasehold Mortgagee.

 

15.7                        Intentionally Deleted.

 

15.8                        Landlord’s Right to Finance and Assign.  From and after the first to occur of: (i) Completion (as defined in the Construction Loan Agreement), and (ii) the payoff of the Debt (as defined in the Construction Loan Agreement), Landlord may at any time and from time to time, without the prior written consent of Tenant, encumber by mortgage, deed of trust, security agreement or other instrument in the nature thereof, any of Landlord’s right, title or interest in the Premises and/or this Lease; provided that any such mortgage, deed of trust or other instrument in the nature thereof shall at all times be subject and subordinate to this Lease and the rights, titles and interests of Tenant and any Leasehold Mortgagee of Tenant arising by virtue of this Lease, subject to the terms of this Lease.  Landlord shall, subject to the provisions of Section 20.24, also have the right to sell or transfer its fee title in the Premises and to transfer its rights, titles and interests in this Lease to such transferee or purchaser, without the consent of Tenant, but Tenant shall be given written notice of any such sale and transfer upon consummation thereof.

 

ARTICLE XVI.

 

ESTOPPEL CERTIFICATES

 

16.1                        Landlord and Tenant will, at any time and from time to time, upon not less than fifteen (15) days prior written request by the other party, execute, acknowledge and deliver to each other or to any person whom the requesting party may designate, a certificate, certifying as follows: (i) that this Lease is unmodified and in full effect (or setting forth any modifications and that this Lease is in full effect as modified); (ii) the Annual Rent payable and the dates to which the Annual Rent has been paid and whether other sums payable hereunder have been paid; (iii) any default of which such party may have knowledge; (iv) the commencement and expiration dates of this Lease; and (v) such other factual matters as may reasonably be requested by either of the parties hereto. Any such certificate may be relied upon by any existing or prospective Leasehold Mortgagee, any existing or prospective Subtenant, any prospective purchaser or any existing or prospective lender.

 

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ARTICLE XVII.

 

DAMAGE OR DESTRUCTION

 

17.1                        Rights and Obligations upon Casualty.  In the event the Premises shall be wholly or partially damaged or destroyed by fire or other casualty, Tenant shall, at its expense (utilizing proceeds of the insurance policies carried by Tenant pursuant to Article X hereof), cause such damage to be repaired or restored to the condition of the Premises which existed immediately prior to such casualty or construct other new improvements on the Land; provided, however, that Tenant shall have no right to construct and shall not construct any new improvements on the Land without Landlord’s prior written consent if such new improvements are materially different in size, scope or quality to the improvements that existed on the Land immediately prior to such casualty. In all casualty events (whether or not Tenant repairs or restores), this Lease shall remain in full force and effect (unless terminated pursuant to Section 17.4 hereof) and, rent shall not be abated or reduced.

 

17.2                        Time to Complete.  Tenant shall commence the repairs or rebuilding as soon as reasonably practicable after insurance proceeds are received and complete same with due diligence as soon as reasonably practicable, subject to extensions for Force Majeure.

 

17.3                        Rights of Leasehold Mortgagee.  Notwithstanding anything in this Lease to the contrary, all of the provisions contained in this Article XVII are subject to the right of any Leasehold Mortgagee to require, if provided for in such Leasehold Mortgage, that all insurance proceeds either be paid to the Leasehold Mortgagee to be applied to the debt secured thereby or be used by Tenant to repair and/or rebuild the Premises in accordance with Section 17.1.  In such event, Tenant shall still be responsible for completing all necessary repairs or rebuilding and Tenant shall provide evidence reasonably acceptable to Landlord, including, without limitation, creation of a construction fund to assure that there are sufficient funds to pay all costs and expenses of repairs or rebuilding.

 

17.4                        Right to Terminate.  In the event a casualty loss occurs during the last two (2) years of this Lease, then Tenant shall have the right to terminate this Lease by giving written notice of termination to Landlord not later than ninety (90) days after the date of the casualty loss.  Failure to give such notice during such ninety (90) day period shall be deemed to be a waiver by Tenant of its right to terminate this Lease. In the event such notice is timely given, this Lease shall terminate as of the date notice is delivered to Landlord and the rental payable hereunder shall be prorated to the date of such termination. In the event of such termination, Landlord shall have the option exercisable on or before the thirtieth (30th) day after such termination to require Tenant to demolish and remove all improvements which have been damaged or destroyed by the casualty, in which event Tenant may use so much of the proceeds of its insurance as may be required to pay for such demolition and removal, and the balance of the casualty proceeds shall be delivered to Landlord. In the event Landlord fails to give Tenant written notice to demolish within such ninety (90) day period or Landlord otherwise notifies Tenant in writing that Landlord is willing to accept the improvements in their then-present condition, then this Lease shall terminate with the improvements in their then present condition and the casualty proceeds shall be delivered to Landlord.

 

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ARTICLE XVIII.

 

CONDEMNATION

 

18.1                        Definitions.  For purposes of this Article XVIII, the following terms shall have the respective meanings set forth below:

 

(a)                                 Award(s)” means the amount of any award made, consideration paid or damages ordered as a result of a Taking less any reasonable costs in obtaining such award, such as reasonable legal fees and costs, consultant fees and appraisal costs.

 

(b)                                 Date of Taking” means the date upon which title to the Premises, or a portion thereof, passes to and vests in the condemnor or the effective date of any order for possession if issued prior to the date title vests in the condemnor.

 

(c)                                  Partial Taking” means any Taking which does not constitute a Significant Taking.

 

(d)                                 Significant Taking” means a Taking which, in the good faith determination of both Landlord and Tenant, materially and adversely affects Tenant’s use of the Premises.

 

(e)                                  Taking” means a permanent (and not a temporary) taking of the Premises or any damage related to the exercise of the power of eminent domain and including a voluntary conveyance to any agency, authority, public utility, person or corporate entity empowered to condemn property in lieu of court proceedings.

 

(f)                                   Total Taking” means the permanent Taking of the entire Premises.

 

18.2                        Partial Taking.

 

(a)                                 In the event of a Partial Taking of the Premises during the Term of this Lease which takes any portion of the Premises, the following shall occur: (i) the rights of Tenant under this Lease and the Leasehold Estate of Tenant in and to the portion of the Premises taken shall cease and terminate as of the Date of Taking; and (ii) this Lease shall otherwise continue in full effect, except that Annual Rent shall be reduced as set forth below.  Tenant shall, promptly after any such Taking, at its expense, repair any damage caused thereby so that, thereafter, the Premises shall be, as nearly as reasonably possible, in a condition as good as the condition thereof immediately prior to such Taking. In the event of any such Partial Taking, Landlord shall make an amount equal to that portion of the Award that is attributed to any building or other improvement then situated on the Land (but not any portion of the Award attributed to the Land) available to Tenant to make such repair.  Any portion of the Award attributed to the Land shall be and remain the property of Landlord and in no event shall Tenant shall have any right to receive or share in any portion thereof.  Any amount of the Award retained by Landlord and any amount of the Award delivered to Tenant remaining after such repairs have been made shall remain the property of Landlord, and shall, to the extent previously paid by Landlord to Tenant, be repaid by Tenant to Landlord. After such repairs have been completed, Annual Rent shall be reduced by the product of the Annual Rent multiplied by a fraction (the “Rent Reduction

 

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Percentage”), the denominator of which is the total land area of the Land prior to the Taking and the numerator of which is the total land area of the Land subject to the Taking.

 

(b)                                 In the event of any temporary Partial Taking, Tenant shall be entitled to the entire Award and there shall be no reduction in rent.  A temporary Partial Taking shall mean a Taking for no more than ninety (90) days.

 

18.3                        Significant Taking.

 

(a)                                 In the event of a Significant Taking of the Premises during the Term of this Lease, after which Landlord and Tenant reasonably determine that Tenant can effectively continue its business in the Premises, the following shall occur: (i) the rights of Tenant under this Lease and the Leasehold Estate of Tenant in and to the portion of the Premises taken shall cease and terminate as of the Date of Taking; and (ii) this Lease shall otherwise continue in full effect, except that Annual Rent shall be reduced as set forth below (however Additional Rent or other sums payable by Tenant hereunder shall continue unreduced notwithstanding any such Taking). Tenant shall, promptly after any such Taking, at its expense, repair any damage caused thereby so that, thereafter, the Premises shall be, as nearly as possible, in a condition as good as the condition thereof immediately prior to such Taking. In the event of any such Significant Taking, Landlord shall make an amount equal to that portion of the Award that is attributed to any building or other improvement then situated on the Land (but not any portion of the Award attributed to the Land) available to Tenant to make such repair.  Any portion of the Award attributed to the Land shall be and remain the property of Landlord and in no event shall Tenant  have any right to receive or share in any portion thereof.  Any amount of the Award retained by Landlord and any amount of the Award delivered to Tenant remaining after such repairs have been made shall remain the property of Landlord, and shall, to the extent previously paid by Landlord to Tenant, be repaid by Tenant to Landlord. After such repairs have been completed, Annual Rent shall be reduced by the Rent Reduction Percentage.

 

(b)                                 In the event of a Significant Taking of the Premises during the Term of this Lease, after which Landlord and Tenant reasonably determine that Tenant cannot effectively continue its business in the Premises, the provisions of Section 18.4 shall apply.

 

18.4                        Total Taking.  In the event of a Total Taking, Tenant’s Leasehold Estate shall terminate as of the Date of Taking and all rights and obligations of Landlord and Tenant hereunder shall terminate except for the rights and obligations under this Section 18.4 and those that otherwise survive termination of this Lease. Tenant and Landlord shall each be entitled to separately pursue any and all condemnation Awards to which they may legally be entitled with respect to the Premises and such Taking.

 

18.5                        Rights of Leasehold Mortgagee.  Notwithstanding anything in this Lease to the contrary, all of the provisions contained in this Article XVIII are subject to the right of any Leasehold Mortgagee to require, if provided for in such Leasehold Mortgage, that all condemnation proceeds be paid to the Leasehold Mortgagee to be applied to the debt secured thereby.

 

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ARTICLE XIX.

 

PROPOSED IMPROVEMENTS; DEEMED APPROVAL

 

19.1                        New Improvements; Deemed Approval.

 

(a)                                 Tenant may demolish any existing improvements and construct new improvements on the Land (such improvements, along with the SPC Assigned Rights, the “New Improvements”), such New Improvements to consist of a first-class office, retail and restaurant containing approximately one hundred nineteen thousand (119,000) square feet of gross leasable area.  Landlord hereby approves the site plan, elevations and other building plans, landscape plans and signage plans for same (collectively, the “Development Plans”), including without limitation exterior materials, colors, and architectural schemes, that are referenced and/or described in Exhibit “E” attached hereto and made a part hereof for all purposes.  Landlord hereby approves Tenant’s site plan, elevations and architectural scheme (the “Conceptual Plans”) and general signage program and criteria, that are referenced and/or described in Exhibit “E” attached hereto and made a part hereof for all purposes.  Notwithstanding the foregoing, however, Tenant shall have no right to construct and shall not construct any new improvements on the Land without Landlord’s prior written consent if such new improvements are materially different in size, scope or quality to the improvements that existed on the Land immediately prior to any such demolition.

 

(b)                                 In addition, in the event Tenant desires at any time during the term of this Lease to make alterations, additions or improvements to the Premises which vary materially from the site plan or the architectural scheme, colors or materials, depicted in the Conceptual Plans, Development Plans or any other plans approved by Landlord, or if Tenant seeks Landlord’s consent for any other matter hereunder which requires that Tenant must first obtain the written consent of Landlord.  Landlord’s consent to such request shall be deemed given if Landlord fails to respond to such written request (within the timeframe for such response set forth in this Lease) provided that Tenant shall have sent Landlord an Initial Notice (herein so called), which Initial Notice shall have been marked in bold lettering with the following language on the top of the first page:  “LANDLORD’S RESPONSE IS REQUIRED PURSUANT TO THE TERMS OF THE GROUND LEASE AGREEMENT BETWEEN THE UNDERSIGNED AND LANDLORD” and the envelope containing the Initial Notice shall have been marked “PRIORITY-DEEMED APPROVAL MAY APPLY” on its face; (i) Landlord shall have failed to respond to the Initial Notice within the aforesaid time-frame (requests for additional information shall be a response); (ii) Tenant shall have submitted a Second Notice (herein so called), which Second Notice shall have been marked in bold lettering with the following language:  “LANDLORD’S RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF THE GROUND LEASE AGREEMENT BETWEEN THE UNDERSIGNED AND LANDLORD” and the envelope containing the Second Notice shall have been marked “SECOND NOTICE: PRIORITY-DEEMED APPROVAL MAY APPLY” on its face; and (iii) Landlord shall have failed to respond to the Second Notice within the aforesaid time-frame, Landlord’s approval shall be deemed given with respect to the proposed Lease matter.

 

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ARTICLE XX.

 

GENERAL PROVISIONS

 

20.1                        Notice.  Any notice, request, or other communication (hereinafter severally and collectively called “Notice”) in this Lease provided for or permitted to be given, made or accepted by either party to the other must be in writing, and may, unless otherwise in this Lease expressly provided, be given or be served by depositing the same in the United States mail, postpaid and certified and addressed to the party to be notified, with return receipt requested. Notice given in any manner as provided in this Section 20.1 shall: (a) as to Notice given to or served by depositing the same in the United States mail, as aforesaid, shall be effective two (2) business days after depositing the same in a regularly maintained receptacle for pick up and delivery of United States mail; and (b) as to Notice given or served by any other method, shall be effective only if and when received by the party to be notified. The following shall be prima facie evidence of the date of actual receipt of Notice by the addressee: (i) if hand delivered, by a delivery receipt signed by the addressee or the addressee’s agent or representative; (ii) written evidence by the carrier of such notice of the date of attempted delivery at the address of the addressee if such delivery is refused; or (iii) a return telecopy sent from a fax machine or office of the addressee or other confirmation from the office of the addressee indicating that any faxed notice has been received.

 

For purposes of Notice, the addresses of the parties shall, until changed as herein provided, be as follows:

 

LANDLORD

 

HTH Diamond Hillcrest Land LLC

2323 Victory Avenue, Suite 1400

Dallas, Texas  75219

Attn:  Corey G. Prestidge

Telephone:  214-525-4647

Email: cprestidge@hilltop-holdings.com

 

With Copy to:                                                                                                                   HTH Diamond Hillcrest Land LLC

200 Crescent Court, Suite 1350

Dallas, Texas  75201

Attn: Gary Shultz

Telephone:  (214) 871-5938

Email: gshultz@diamond-a.com

 

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TENANT

 

SPC Co-Owner:                                                                                                           SPC Park Plaza Partners LLC
c/o First American Exchange Company
215 South State Street, Suite 380
Salt Lake City, UT 84111
Attn: Mark A. Bullock
Telephone:  866-516-1031
Email:  mbullock@firstam.com

 

With a copy to:                                                                                                            Kane Russell Coleman Logan PC
3700 Thanksgiving Tower
1601 Elm Street
Dallas, TX 75201
Attn:  Raymond J. Kane
Telephone: 214-777-4290
Email:  rkane@krcl.com

 

Ford Co-Owner:                                                                                                         Diamond Hillcrest, LLC
200 Crescent Court, Suite 1350
Dallas, TX  75201
Attn: Gary Shultz
Telephone: (214) 871-5938
Email: gshultz@diamond-a.com

 

With a copy to:                                                                                                            William C. Wilshusen
Haynes and Boone, LLP
2323 Victory Avenue
Suite 700
Dallas, TX 75219
Telephone: 214-651-5595
Email: william.wilshusen@haynesboone.com

 

Hilltop Co-Owner:                                                                                             HTH Hillcrest Project LLC
2323 Victory Ave., 14th Floor
Dallas, TX 75209
Telephone: 214-525-4647
Email: cprestidge@hilltop-holdings.com

 

With a copy to:                                                                                                            K. Brock Bailey
Bracewell LLP
1445 Ross Avenue, Suite 3800
Dallas, TX  75202
Telephone: 214-758-1076
Email: brock.bailey@bracewell.com

 

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However, the parties hereto and their respective heirs, successors, legal representatives and permitted assigns shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least ten (10) days written Notice to the other party.  Any Notice delivered by counsel to a party shall be deemed delivered by such party.

 

20.2                        Captions.  The title captions appearing in this Lease are inserted and included solely for convenience and shall never be considered or given any effect in construing this Lease, or any provisions hereof, or in connection with the duties, obligations, or liabilities of the respective parties hereto, or in ascertaining intent, if any question of intent exists.

 

20.3                        Entire Contract: Amendment.  It is expressly agreed by both parties that this Lease, and the Exhibits attached hereto is the entire agreement of the parties with respect to the subject matter hereof, and that there are, and have been, no verbal representations, understandings, stipulations, agreements or promises pertaining to this Lease. It is likewise agreed that this Lease may not be altered, amended, or extended except by an instrument in writing signed by both Landlord and Tenant.

 

20.4                        No Personal Liability.  Tenant agrees to look solely to Landlord’s interest in the Premises for recovery of any judgment or claim from Landlord and that in no event shall Landlord (or its partners, members, beneficiaries, shareholders, officers or directors) ever be personally liable to Tenant or any other party for any matter pertaining to this Lease.  Landlord agrees that in no event shall any of Tenant’s partners, members, beneficiaries, shareholders, officers or directors ever be personally liable to Landlord or any other party for any matter pertaining to this Lease.

 

20.5                        Severability.  If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

 

20.6                        Successor and Assigns.  All covenants and obligations as contained within this Lease shall bind and, except as otherwise prohibited or restricted by the terms of this Lease, extend and inure to the benefit of the successors and permitted assigns of each of Landlord and Tenant.

 

20.7                        Personal Pronouns.  All personal pronouns used in this Lease shall include the other gender, whether used in the masculine, feminine, or neuter gender, and the singular shall include the plural whenever and as often as may be appropriate.

 

20.8                        No Merger.  There shall be no merger of this Lease or of the Leasehold Estate created by this Lease with the fee or any other estate or interest in the Premises solely by reason of the fact that the same person owns or holds, directly or indirectly, all such estates and interests or any combination thereof.

 

20.9                        Short Form Lease.  Before the recordation of the Condominium Declaration, the parties hereto shall execute and record a memorandum of this Lease in the Real Property

 

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Records of Dallas County, Texas, and further agree that the recordation of such memorandum affirms that this Lease complies with the provisions of Section 82.056 of the Texas Uniform Condominium Act.  If such compliance is ever legally challenged by either (i) one or more of the parties hereto or (ii) any third party, and such challenge may be remedied by the recordation of this Lease, the parties hereto agree that the Lease will be recorded without further collective action on the part of either or both Landlord or Tenant.

 

20.10                 LEGAL INTERPRETATION.  THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE OBLIGATIONS OF THE PARTIES HERETO ARE PERFORMABLE, AND VENUE FOR ANY ACTION HEREUNDER SHALL BE, IN DALLAS COUNTY, TEXAS.

 

20.11                 No Mortgage or Joint Venture.  Tenant and Landlord acknowledge and agree that this Lease is, in fact, a lease arrangement, and does not constitute a loan, a joint venture or a partnership, and that Landlord and Tenant have been represented by experienced legal counsel, who have advised Landlord and Tenant of the rights and duties of Landlord and Tenant.  Neither Landlord nor Tenant will assert that the transaction evidenced hereby is a loan, a joint venture or a partnership if either party attempts to enforce its rights hereunder.

 

20.12                 Brokers.  Landlord and Tenant each warrant that it has had no dealings with any broker or agent in connection with the negotiation or execution of this Lease, and each of Landlord and Tenant AGREES TO INDEMNIFY THE OTHER AND HOLD THE OTHER HARMLESS from and against any and all costs, expenses, or liability for commissions or other compensation or charges claimed by any broker or other party claiming by, through, or under such party with respect to this Lease.

 

20.13                 Waiver of Landlord’s Lien.  Landlord hereby waives any contractual, statutory or other Landlord’s lien on Tenant’s furniture, fixtures, supplies, equipment and inventory located on the Premises.

 

20.14                 Authority to Execute.

 

(a)                                 Tenant represents and warrants that Tenant is duly formed and validly existing under the laws of the State of its organization, has full right, power and authority to enter into this Lease and that the party(ies) executing this Lease on behalf Tenant has (have) full right, power, and authority to execute this Lease on behalf of Tenant.

 

(b)                                 Landlord represents and warrants that Landlord is duly formed and validly existing under the laws of the State of its organization, has full right, power, and authority to enter into this Lease and that the party(ies) executing this Lease on behalf of Landlord has (have) full right, power, and authority to execute this Lease on behalf of Landlord.

 

20.15                 Force Majeure.  Whenever a period of time is herein prescribed for action to be taken by Landlord or Tenant (except as to payment of rent or other sums due by either party hereunder), neither Landlord nor Tenant, as applicable, shall be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays (collectively, “Force Majeure”) due to strikes, riots, acts of God, shortages of labor or materials,

 

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war or other causes which are beyond the control of such party and could not have been reasonably anticipated by Landlord or Tenant, as the case may be, at the time of execution of this Lease.  Tenant shall, within twenty (20) days of the occurrence of an event of Force Majeure, advice Landlord in writing of any Force Majeure delays which Tenant claims with respect to any aspect of Tenant’s performance hereunder.

 

20.16                 Time is of the Essence.  Time is of the essence of this Lease.

 

20.17                 Title to Buildings and Improvements.  The title to the buildings, improvements and fixtures appurtenant thereto and all changes, additions and alterations therein, and all renewals and replacements thereof, when made, erected, constructed, installed or placed upon the Land by Tenant, shall be and remain in Tenant until the expiration of the Term of this Lease, unless sooner terminated as provided herein. Upon the expiration or sooner termination of this Lease, title to all such property shall automatically pass to, vest in and belong to Landlord without further action on the part of either party. So long as Tenant retains ownership of the buildings, improvements, additions and alterations, Tenant shall be entitled to claim depreciation and all other tax losses with respect thereto.

 

20.18                 No Mechanic’s Liens.

 

(a)                                 Tenant covenants and agrees with Landlord that Tenant will not permit or suffer to be filed or claimed against the Land or Premises or any building or improvement thereon or against Landlord, any mechanic’s, materialman’s or other lien, charge or order for the payment of money. In the event any such lien, charge or order shall be filed or claimed, Tenant shall immediately notify Landlord thereof in writing and Tenant shall, at its own expense, cause the same to be canceled and discharged of record within twenty (20) days after Tenant shall have received notice of the filing thereof, or Tenant may, within said period, furnish to Landlord a bond satisfactory to Landlord against said lien, charge or order, in which case Tenant shall have the right in good faith to contest the validity or amount thereof. TENANT HEREBY INDEMNIFIES AND AGREES TO HOLD LANDLORD HARMLESS from any loss, liability, expense (including attorneys’ fees) incurred or suffered by Landlord as a result of any such lien, charge or order.

 

(b)                                 Nothing in this Lease contained shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific alteration, addition, improvement or repair that would give rise to the filing of any lien against the estate or interest of Landlord in and to the Land, nor as giving Tenant any right, power or authority to contract for or permit any rendering of any services or the furnishing of any materials that would give rise to the filing of any lien against the estate or interest of Landlord in and to the Land.  Notice is hereby given that Landlord shall not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding the Land through or under Tenant, upon credit and that no mechanic’s or other lien for such labor, services or materials shall attach to or affect the estate or interest of Landlord in and to the Land.

 

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20.19                 Inspection by Landlord; Signs.  Within one (1) year prior to the expiration of this Lease, or upon the earlier termination thereof, Landlord shall have the right to inspect the Premises and to show the Premises to prospective purchasers and/or tenants from time to time upon reasonable advance notice to Tenant, subject to the rights of all Subtenants under their respective subleases. All such inspections shall be done during normal business hours and shall not unreasonably interfere with the business operations conducted on the Premises by Tenant and its Subtenants. During the final one (1) year of the term of this Lease, or any applicable extended term, Landlord shall have the right to place signs on the Premises offering the Premises for lease. All such signs shall comply with the requirements of the City of University Park.

 

20.20                 Net Lease.  This Lease shall be deemed and construed to be a “net lease”, and Tenant shall pay to Landlord the rent hereunder without abatement, deduction or offset; and under no circumstances or conditions, whether now existing or hereafter arising, or whether or not beyond the present contemplation of the parties, shall Landlord be expected or required to make any payment of any kind whatsoever or be under any other obligation or liability hereunder or with respect to the Premises, except as herein otherwise expressly set forth.

 

20.21                 Parties Constituting Landlord; Landlord Representative.  In the event that the “Landlord” hereunder consists of more than one (1) party, such parties shall, at the written request of Tenant, designate, in writing, one (1) person or entity (the “Landlord Representative”) to act on behalf of all such parties and Tenant shall be entitled to rely on the consent, approval or agreement of the Landlord Representative for any and all purposes under this Lease; the approval, consent or agreement of the Landlord Representative shall be deemed to be the approval, consent and/or agreement of all parties constituting Landlord hereunder; provided, however, that any amendment or other modification or supplement to this Lease shall require the signature of all parties constituting Landlord. The authority of any person or entity designated as the Landlord Representative may be revoked at any time upon written notice to Tenant, such written notice: (i) to be executed by all parties constituting Landlord; and (ii) to designate another person or entity to serve as the successor Landlord Representative. In addition, the default, failure or omission of any one (1) party constituting Landlord shall be deemed a default, failure or omission as to all parties constituting Landlord.

 

20.22                 Parties Constituting Tenant: Tenant Representative.  In the event that the “Tenant” hereunder consists of more than one (1) party, such parties shall, at the written request of Landlord, designate, in writing, one (1) person or entity (the “Tenant Representative”) to act on behalf of all such parties and Landlord shall be entitled to rely on the consent, approval or agreement of the Tenant Representative for any and all purposes under this Lease; the approval, consent or agreement of the Tenant Representative shall be deemed to be the approval, consent and/or agreement of all parties constituting Tenant hereunder; provided, however, that any amendment or other modification or supplement to this Lease shall require the signature of all parties constituting Tenant. The authority of any person or entity designated as the Tenant Representative may be revoked at any time upon written notice to Landlord, such written notice: (i) to be executed by all parties constituting Tenant; and (ii) to designate another person or entity to serve as the successor Tenant Representative. In addition, the default, failure or omission of any one (1) party constituting Tenant shall be deemed a default, failure or omission as to all parties constituting Tenant.

 

34



 

20.23                 Joint and Several.  If there is more than one party comprising Tenant, the obligations hereunder imposed upon Tenant will, as to all such parties comprising Tenant, be joint and several, and if there is a guarantor of Tenant’s obligations hereunder, the obligations hereunder imposed upon Tenant will be the joint and several obligations of Tenant and each such guarantor.  Landlord need not first proceed against Tenant before proceeding against such guarantor, nor shall any such guarantor be released from its guarantee for any reason whatsoever, including (without limitation) in case of any amendments hereto, waivers hereof or failure to give such guarantor any notices hereunder.

 

20.24                 Intentionally Deleted.

 

20.25                 Condominium Declaration.  It is anticipated that Tenant’s Leasehold Estate in the Premises shall be subject to the Condominium Declaration establishing at least three (3) Units.  Landlord consents to the creation of a condominium regime from the Leasehold Estate hereunder and agrees to join in the Condominium Declaration, to evidence Landlord’s consent to the Condominium Declaration, and cause any lender holding a lien on the Landlord’s fee title to the Premises and/or Landlord’s interest under this Lease to join in the Condominium Declaration to evidence its consent to the Condominium Declaration.

 

20.26                 Transfer of Condominium Units.  Notwithstanding anything to the contrary contained in this Lease, in no event, without Landlord’s prior written consent, shall any Unit be hereafter acquired, in whole or in part, by any person who is not then a Tenant under this Lease.  If Landlord hereafter expressly consents in writing to any Unit being acquired, in whole or in part, by a Person who is not a Tenant under this Lease, then the following shall apply during the period that the Person (who is not a Tenant hereunder) owns its Unit:

 

(a)                                 each Unit Owner (regardless of whether the Unit Owner is a Tenant under this Lease) shall perform, or cause to be performed, each Several Obligation applicable to its Unit or arising from the ownership of its Unit; and the Unit Owners collectively shall perform, or shall cause to be performed, all Joint Obligations; and

 

(b)                                 each Several Obligation of Tenant under this Lease shall be proportionately discharged by the applicable Unit Owner, and Landlord shall accept performance of Tenant’s Several Obligations through such proportionate discharge by the applicable Unit Owner; provided, however, that if the applicable Unit Owner fails to timely discharge a Severable Obligation of Tenant under this Lease, then, notwithstanding that such failure is a Severable Obligation, Tenant must cause such failure to be remedied pursuant to Section 14.1 of this Lease or an Event of Default shall occur and Landlord shall be entitled to exercise any and all rights and remedies available to Landlord with respect to the entire Premises and not just that portion of the Premises owned by the applicable Unit Owner.

 

20.27                 Non-merger of Fee and Leasehold Estates.  If under any circumstances both Landlord’s and Tenant’s estates in the Premises become vested in the same owner, this Lease nevertheless shall not be extinguished by application of the doctrine of merger except at the express written election of the Landlord recorded in the Official Public Records and with the express written consent of all Unit Owners as Tenant, and the express written consent of any

 

35



 

Leasehold Mortgagee, which consent may be withheld in such Leasehold Mortgagee’s sole and absolute discretion.

 

INTENTIONALLY LEFT BLANK

 

36



 

EXECUTED IN MULTIPLE ORIGINAL COUNTERPARTS, which constitute but one and the same instrument, as of the Effective Date. Upon the final execution hereof by Landlord and Tenant, the last to sign of such parties shall complete the date on the first page hereof.

 

 

LANDLORD:

 

 

 

HTH DIAMOND HILLCREST LAND LLC,

 

a Texas limited liability company

 

 

 

By:

/s/ COREY PRESTIDGE

 

Name:

Corey Prestidge

 

Title:

Committee Representative

 

37



 

 

TENANT:

 

 

 

SPC PARK PLAZA PARTNERS LLC,

 

a Texas limited liability company

 

 

 

By:

First American Exchange Company, LLC

 

 

A Delaware limited liability company

 

 

Its sole member and manager

 

 

 

 

 

By:

/s/ MARK A. BULLOCK

 

 

Name:

Mark A. Bullock

 

 

Title:

Legal Counsel

 

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HILLTOP CO-OWNER:

 

 

 

HTH HILLCREST PROJECT LLC,

 

a Texas limited liability company

 

 

 

 

By:

Hilltop Holdings Inc.,

 

 

a Maryland corporation,

 

 

its sole member

 

 

 

 

 

 

By:

/s/ COREY PRESTIDGE

 

 

Name:

Corey Prestidge

 

 

Title:

Executive Vice President and General Counsel

 

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DIAMOND HILLCREST, LLC

 

a Texas limited liability company

 

 

 

 

By:

/s/ GARY SHULTZ

 

Name:

Gary Shultz

 

Title:

Vice President

 

EXHIBITS AND SCHEDULES INTENTIONALLY OMITTED

 

40


(Back To Top)

Section 4: EX-10.3 (EX-10.3)

Exhibit 10.3

 

HILLTOP PLAZA

 

CO-OWNERS AGREEMENT

 

July 31, 2018

 

THE UNDIVIDED INTERESTS IN THE PROJECT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS ANY COMMISSION OR AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF ANY OFFERING OR THE ACCURACY OR ADEQUACY OF ANY DISCLOSURE MADE IN CONNECTION THEREWITH.

 



 

TABLE OF CONTENTS

 

ARTICLE I. Nature of Relationship Among Co-Owners

2

 

 

1.01

Co-Owners Relationship; No Partnership

2

1.02

Tax Reporting as Direct Owners and Not as a Partnership

2

1.03

Indemnity

3

1.04

No Agency

3

1.05

Limitation on Number of Co-Owners; Compliance with Revenue Procedure

3

 

 

 

ARTICLE II. Management

3

 

 

2.01

Co-Owner Manager

3

2.02

Property Manager

5

2.03

Developer

6

2.04

Leasing Agent

6

2.05

The Project Agreements

6

2.06

The Condominium Documents and Ground Lease

6

 

 

 

ARTICLE III. Use of the Project

6

 

 

3.01

Use of Project

6

3.02

Loan Responsibilities

7

 

 

 

ARTICLE IV. Income and Proceeds from the Project

7

 

 

4.01

Income from Project Operations

7

4.02

Disbursement of Proceeds on Disposition of the Project

8

 

 

 

ARTICLE V. Payment of Project Expenses; Right of Contribution

8

 

 

5.01

Obligation to Pay

8

5.02

Time of Payment

9

5.03

Delinquencies

9

5.04

Indemnity

9

5.05

Co-Owner Loans

10

5.06

Unanticipated Overrun Funding

11

 

 

 

ARTICLE VI. Rights and Obligations of the Co-Owners

11

 

 

6.01

Rights of Co-Owners

11

6.02

Decisions of Co-Owners

12

6.03

Permitted Transfers

13

6.04

Buy-Sell Option

14

 

 

 

ARTICLE VII. Indemnification

16

 

 

7.01

General

15

7.02

Indemnification for Loan Default Damages

15

7.03

Survival of Indemnification

15

 

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ARTICLE VIII. Term

15

 

 

8.01

Term

15

8.02

Accounting on Termination

16

 

 

 

ARTICLE IX. Election To Purchase Ownership Interests

16

 

 

ARTICLE X. General Provisions

16

 

 

10.01

Mutuality; Reciprocity; Runs With the Land

16

10.02

Binding Arbitration

16

10.03

Attorneys’ Fees

17

10.04

Entire Agreement

17

10.05

Governing Law; Venue

17

10.06

Notice and Payments

18

10.07

Successors

18

10.08

Waivers

18

10.09

Counterparts

18

10.10

Severability

19

10.11

Securities Laws

19

10.12

Time is of the Essence

19

10.13

Subordination

19

10.14

Memorandum

20

10.15

Representations, Warranties, and Covenants of Owners of Co-Owners

20

10.16

Confidentiality

22

 

 

 

Exhibit A

Description of the Property

 

 

 

 

Exhibit B

Ownership Interests

 

 

 

 

Exhibit C

Description of the Project

 

 

 

 

Exhibit D

Property Management Agreement [TO BE ADDED WHEN APPROVED/EXECUTED]

 

 

 

 

Exhibit E

Development Agreement

 

 

 

 

Exhibit F

Leasing Agreement

 

 

 

 

Exhibit G

Construction Budget

 

 

 

 

Exhibit H

Memorandum of Co-Owners Agreement

 

 

ii



 

CO-OWNERS AGREEMENT

 

THIS CO-OWNERS AGREEMENT (this “Agreement”) dated effective July 31, 2018 (the “Effective Date”), is entered into by and among Diamond Hillcrest, LLC, a Texas limited liability company (“Ford Owner”), HTH Hillcrest Project LLC, a Texas limited liability company (“Hilltop Owner”), and SPC Park Plaza Partners LLC, a Texas limited liability company (“SPC Owner”) (together with any other persons or parties who acquire an interest and assume the rights and obligations hereunder by written instrument, each sometimes referred to as a “Co-Owner” or collectively as the “Co-Owners”), with reference to the facts set forth below.

 

RECITALS

 

A.                                    Collectively Ford Owner, Hilltop Owner, and SPC Owner are the “Co-Owners” and separately each a “Co-Owner”;

 

B.                                    The Co-Owners are each individually executing this Agreement for the specific purpose of acknowledging and agreeing to the covenants, representations, warranties, and indemnifications of the respective Co-Owners set forth herein;

 

C.                                    The Co-Owners are simultaneously executing a Ground Lease, as ground tenant thereunder (the “Ground Lease”);

 

D.                                    The Ground Lease covers certain real property and existing and proposed improvements thereon, located at 6565 Hillcrest Avenue, University Park, Texas, as more particularly described on Exhibit A attached hereto and incorporated herein (the “Property”).  The notice addresses for the Co-Owners and percentage interest held by each Co-Owner in the Property (the “Ownership Interests” or “Interests”) are set forth on Exhibit B attached hereto and incorporated herein;

 

E.                                     The Co-Owners’ leasehold interest in the Ground Lease is or will be encumbered by a loan from Comerica Bank, its successors and/or assigns (including its successors and assigns, collectively the “Lender”), in the approximate aggregate original principal amount of FORTY MILLION, SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($40,750,000.00) (the “Loan”);

 

F.                                      The Loan is or will be evidenced and secured by a Promissory Note in the approximate original principal amount of FORTY MILLION, SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($40,750,000.00) payable to the Lender (the “Note”), a Leasehold Deed of Trust, Security Agreement, Assignment of Lease and Rents, and Fixture Filing (collectively the “Deed of Trust”), UCC Financing Statement(s), and certain other documents evidencing or securing the Loan (collectively with the Note and Deed of Trust, the “Loan Documents”); and

 

G.                                    Each Co-Owner desires to enter into this Agreement to:  provide for (i) the acquisition of SPC Assigned Rights and the development of additional improvements upon the Property, as more particularly described in Exhibit C attached hereto (the Property is encumbered by the Ground Lease and improved by

 

1



 

the buildings and other features described on Exhibit C, such improvements are collectively referred to as the “Project”); (ii) the establishment of a commercial condominium regime upon the Project by filing a commercial condominium declaration executed by the Co-Owners (the “Condominium”); (iii) the leasing, operation and management of the Project; (iv) the orderly administration of their rights and responsibilities as to each other and as to third parties; and (v) the delegation of authority and responsibility for the intended further leasing, operation and management of the Project.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained in this Agreement and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties agree as set forth below.

 

ARTICLE I.
NATURE OF RELATIONSHIP AMONG CO-OWNERS

 

1.01                        Co-Owners Relationship; No Partnership.

 

(a)                                 Tenancy in Common Created.  The Co-Owners each shall hold their respective undivided interests in the Project (collectively the “Interests” and each an “Interest”) as tenants in common.

 

(b)                                 Purpose.  The purposes of the Co-Owners with respect to the Project are: (i) to acquire, develop, manage, lease, mortgage, and transfer the Project; and (ii) to take such other actions, in accordance with the terms of this Agreement, as the Co-Owners determine, in accordance with the terms of this Agreement, necessary or advisable to carry out the foregoing.  The Co-Owners shall hold their Interests for investment purposes only and not for the active conduct of a trade or business.

 

(c)                                  No Partnership.  The Co-Owners do not intend by this Agreement to create a partnership or joint venture among themselves, but merely to set forth the terms and conditions upon which each of them shall hold their respective Interests.  In addition, the Co-Owners do not intend to create a partnership or joint venture with the Developer or Property Manager (as such terms are defined below).  Therefore, each Co-Owner hereby elects to be excluded from the provisions of Subchapter K of Chapter 1 of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to the tenancy in common ownership of the Project.  The exclusion elected by the Co-Owners hereunder shall commence with the execution of this Agreement.

 

1.02                        Tax Reporting as Direct Owners and Not as a Partnership.  Each Co-Owner hereby covenants and agrees to report on such Co-Owner’s respective federal and state income tax returns all items of income, deduction and credits that result from its Interests.  All such reporting shall be consistent with the exclusion of the Co-Owners from Subchapter K of Chapter 1 of the Code, commencing with the first taxable year following the execution of this Agreement.  Further, each Co-Owner covenants and agrees not to notify the Commissioner of Internal Revenue (the “Commissioner”) that it desires that Subchapter K of Chapter 1 of the Code apply to the Co-Owners.

 

2



 

1.03                        Indemnity.  Each Co-Owner hereby agrees to indemnify, protect, defend and hold the other Co-Owners free and harmless from all costs, liabilities, tax consequences and expenses (for example, taxes, interest and any penalties), including, without limitation, attorneys’ fees and costs, which may result from such indemnifying Co-Owner(s) violating Section 1.02 of this Agreement, or otherwise taking a contrary position on any tax return, report or other document.

 

1.04                        No Agency.  Except as expressly set forth herein, no Co-Owner is authorized to act as agent for, to act on behalf of, or to do any act that will bind, any other Co-Owner, or to incur any duties, obligations, or liabilities with respect to the Project, except as expressly set forth herein to the contrary.

 

1.05                        Limitation on Number of Co-Owners; Compliance with Revenue Procedure.  Notwithstanding anything to the contrary in this Agreement, at no time shall the number of Co-Owners exceed the limit set forth in Revenue Procedure 2002-22, 2002-1 C.B. 733 (the “Revenue Procedure”), as such limit may be modified from time to time.  The Co-Owners consent and agree that they shall at all times comply with the entirety of the Revenue Procedure in connection with this Agreement and the Project.

 

ARTICLE II.
MANAGEMENT

 

2.01                        Co-Owner Manager.

 

(a)                                 The Co-Owners agree to appoint one (1) Co-Owner to be responsible, subject to Section 6.02, for timely overseeing the development, operation, management, and leasing of the Project (the “Co-Owner Manager”).  In addition to those duties expressly set forth herein, the Co-Owner Manager shall be responsible for enforcing the rights of the Co-Owners under, and complying with the terms of, the Ground Lease, Condominium, Property Management Agreement, Development Agreement, and Leasing Agreement, as such terms are defined below in this Article II from time to time (collectively, the “Co-Owner Manager Duties”).  The Co-Owners agree that SPC Owner shall be appointed as the initial Co-Owner Manager.  The Co-Owner Manager shall not be compensated for the Co-Owner Manager Duties but shall be reimbursed by each Co-Owner, pro-rata, for any and all ordinary and necessary costs and expenses incurred by the Co-Owner Manager in executing the Co-Owner Manager Duties, including but not limited to a reimbursement of all costs and expenses which have been incurred by an affiliate of SPC Owner, Strode Property Company, in connection with the site planning and pre-construction activities relating to the Project prior to the date hereof, in the approximate amount of $10,642,366.00, which is more particularly set forth in a rider attached to, and all of which comprises development costs shown in the construction budget attached hereto as Exhibit G (the “Construction Budget”), which reimbursement shall be made simultaneously with the closing of the Loan.  Except as expressly set forth in Article VI below, the Co-Owner Manager Duties shall include, and the Co-Owner Manager shall be authorized to act for and on behalf of each Co-Owner, including but not limited to, the following enumerated

 

3



 

acts: (i) execution of all leases (excluding Major Leases (defined below)) proposed to be executed by the Leasing Agent and the Managing Co-Owner, provided that all rental and tenant finish amounts set forth in such leases are set forth in the Construction Budget, Operating Budget, or otherwise approved by the Co-Owners; (ii) execution of all agreements and contracts (excluding Material Contracts (defined below)) required in connection with the development, repair, maintenance and operation of the Project, provided the financial obligations set forth in such agreements and contracts are set forth in the Construction Budget, Operating Budget, or otherwise approved by the Co-Owners in accordance with this Agreement; (iii) execution of all Loan Documents in connection with the Loan, provided that a Majority in Interest (defined below) of the Co-Owners have approved the form and content of the Loan Documents in writing; and (iv) execution of those agreements described in Sections 2.02, 2.03, and 2.04.  The Co-Owner Manager shall execute any agreements authorized under this Agreement as “Co-Owner Manager under that certain Co-Owners Agreement dated [of even date herewith], as same may be amended from time to time”.  Notwithstanding the foregoing, contracts which (i) are on standard forms approved by a Majority in Interest of the Co-Owners, and (ii) conform to the Construction Budget or Operating Budget approved by a Majority in Interest of the Co-Owners, may be executed by the Co-Owner Manager.

 

(b)                                 The Co-Owner Manager may resign at any time by providing written notice to the Co-Owners.  The Co-Owner Manager may be removed by an affirmative vote of the Co-Owners holding at least an aggregate of 50% of the Ownership Interests, for “cause”.  As used in the preceding sentence, the term “cause” shall mean the act, existence, occurrence, omission, or commission of one or more of the following (each, a “Bad Act”, and collectively, “Bad Acts”): (i) the criminal conduct, fraud, negligence or willful misconduct of Co-Owner Manager which, in the reasonable opinion of the Co-Owners, other than Co-Owner Manager, had or will have a materially adverse effect on the Project; (ii) a breach of Co-Owner Manager’s duties under this Agreement that remains uncured (notwithstanding any provision hereunder to the contrary, the removal of SPC Owner as Co-Owner Manager pursuant to this subpart (ii), shall be subject to the following: for any breach or default by Co-Owner Manager under this Agreement that is susceptible to being cured, Co-Owner Manager shall be given ten (10) days’ written notice and opportunity to cure, provided that if such breach or default cannot reasonably be cured within such 10-day period, and Co-Owner Manager promptly commences the cure of such breach or default and diligently pursues such cure to completion, then such cure period shall be extended to the extent necessary, but not to exceed a total cure period of thirty (30) days); or (iii) an uncured event of default by Developer under the Development Agreement.  If as a result of resignation, removal, or any other reason for which the Co-Owner Manager ceases to serve, there shall exist or occur any vacancy in the Co-Owner Manager’s position, then a vote of one or more Co-Owners holding collectively more than 50% of the Ownership Interests (a “Majority in  Interest”) shall appoint another party to fill such vacancy.

 

4



 

(c)                                  The Co-Owners agree to indemnify and defend the Co-Owner Manager, and hold it harmless, from and against all costs, damages, liabilities and expenses (including reasonable attorneys’ fees) arising directly or indirectly out of any matter relating to the Co-Owner Manager’s duties or any action taken by Co-Owner Manager within the scope of its authority and duties under this Agreement, unless such costs, damages, liabilities or expenses result from a Bad Act by Co-Owner Manager.  This indemnity extends to and protects the affiliates, agents, officers, managers, members, and employees of Co-Owner Manager.

 

(d)                                 The Co-Owner Manager agrees to indemnify the Co-Owners, and hold them harmless, from and against all costs, damages, liabilities and expenses (including reasonable attorney’s fees) arising directly or indirectly out of any matter relating to the Co-Owner Manager’s duties or any action taken by Co-Owner Manager in connection with this Agreement to the extent that such costs, damages, liabilities and/or expenses result from Bad Acts committed by the Co-Owner Manager.

 

(e)                                  The execution of any Major Lease (including, without limitation, any renewal, extension, termination or amendment thereto) shall require the approval (not to be unreasonably withheld) of a Majority in Interest of the Co-Owners.  “Major Lease” means any Lease or Leases with respect to the Property, (a) in which a tenant together with one or more of its affiliates, is leasing in the aggregate, in excess of 10,000 square feet (inclusive of expansion options), (b) has a term of ten (10) years or longer, (c) [includes non-market terms], or (d) with respect to which the tenant is an affiliate of a Co-Owner.

 

2.02                        Property Manager.  The Co-Owner Manager, on behalf of the Co-Owners, shall enter into a property management agreement with respect to the Project (which agreement and any amendments thereto and any successor agreement with any other property manager, shall collectively be referred to as the “Property Management Agreement”) with a qualified property manager experienced in the operation of mixed use commercial projects similar to the Project, following approval thereof by a Majority in Interest of the Co-Owners (the “Property Manager”) which shall provide for a property management fee not to exceed market based compensation for projects similar to the Project.  Once approved and executed, the Property Management Agreement shall be attached hereto as Exhibit D.  Pursuant to the Property Management Agreement, the Property Manager shall be the sole and exclusive manager of the Project to act on behalf of the Co-Owners with respect to the management, operation, and maintenance of the Project during the term of the Property Management Agreement.  The Property Manager shall keep adequate books and records for the Company and the Project, setting forth a true and accurate account of all receipts, disbursements and business transactions arising out of or connected with the operation of the Project.  The calendar year shall be the annual accounting period for the operation of the Project.  All reasonable costs and expenses of keeping and maintaining such books and records and the audits thereof shall be deemed and treated as an expense of operating the Project.  Each Co-Owner shall be entitled to review the books and records of the Company and the Project upon reasonable prior notice, and may audit the books and records of the Company and the Project no more than one (1) time in any calendar year, upon reasonable

 

5



 

prior notice to the Property Manager and the Co-Owner Manager, which audit shall be conducted at the offices of the Co-Owner Manager.

 

2.03                        Developer.  The Co-Owner Manager, on behalf of the Co-Owners, shall enter into that certain Development Services Agreement in form and substance attached hereto as Exhibit E with respect to the Project (which agreement and any amendments thereto and any successor agreement with any other Developer, shall collectively be referred to as the “Development Agreement”) with Strode Property Company or an affiliate (the “Developer”), which is a related party to SPC Owner, following the approval thereof by each of the Co-Owners, which shall provide for the Development Fee as calculated in the Development Agreement), which is set forth in the Construction Budget.  Pursuant to the Development Agreement, the Developer shall be the sole and exclusive developer of the Project to act on behalf of the Co-Owners with respect to the development of the Project during the term of the Development Agreement.

 

2.04                        Leasing Agent.  The Co-Owners shall accept an assignment of that certain Leasing Agreement in form and substance attached hereto as Exhibit F with respect to the Project (which agreement and any amendments thereto and any successor agreement with any other Leasing Agent, collectively the “Leasing Agreement”) with Myers Commercial (the “Leasing Agent”), setting forth the schedule of lease commissions payable with respect to the Project.  Pursuant to the Leasing Agreement, the Leasing Agent shall be the sole and exclusive Leasing Agent for the office portion of the Project to act on behalf of the Co-Owners with respect to the leasing of the office portion of the Project during the term of the Leasing Agreement.  An affiliate of SPC Owner shall manage the retail leasing portion of the Project, and shall be entitled to receive market rate fees for such efforts, in accordance with the Construction Budget.

 

2.05                        The Project Agreements.   The Development Agreement and Leasing Agreement are hereby approved by the Co-Owners.  Such agreements, together with the Property Management Agreement and any retail leasing agreements, shall not be amended in a material way, terminated, or replaced without the consent of a Majority in Interest of the Co-Owners.

 

2.06                        The Condominium Documents and Ground Lease.  The Condominium and the Condominium Documents (defined below), and the Ground Lease, have been approved by each of the Co-Owners, and Co-Owner Manager is authorized to cause same to be completed, executed, and, as applicable, filed against record title to the Property.

 

ARTICLE III.
USE OF THE PROJECT

 

3.01                        Use of Project.  The Co-Owners intend to lease the Project for third-party occupancy at all times.  Accordingly, no Co-Owner shall have the right to occupy or use the Project at any time during the term of this Agreement, and each Co-Owner hereby expressly waives any such right, unless such Co-Owner or its affiliate has executed an arm’s length lease agreement with the Co-Owners, as landlord (“Landlord”).  The Co-Owners hereby acknowledge that (i) Hilltop Holdings Inc. and/or Plains Capital Bank, its affiliate, which

 

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is an affiliate of each of Hilltop Owner and Ford Owner (collectively, the “Lead Tenants”), and Co-Owner Manager, have executed contemporaneously herewith that certain Office Lease agreement and that certain Retail Lease agreement, and that (ii) Hunter’s Glen/Ford, Ltd. which is an affiliate of each of Ford Owner, has executed contemporaneously herewith that certain Office Lease agreement (each a “Lead Tenant Lease,” and collectively, the “Lead Tenant Leases”) with Co-Owner Manager.  The Co-Owners hereby approve the completion and full execution of the Lead Tenant Leases by Co-Owner Manager, and pledge of same to Lender in accordance with the Loan Documents.

 

3.02                        Loan Responsibilities.  The Co-Owners shall cause the Project to be maintained and shall otherwise conduct themselves in relation to the Project in accordance with the Ground Lease, Condominium, Property Management Agreement, Development Agreement, Leasing Agreement and the Loan Documents.  Without limiting the foregoing, insofar as the Loan Documents require a Co-Owner to be a so-called special purpose bankruptcy remote entity (an “SPE”), each Co-Owner (and each Co-Owner by such Co-Owner’s acknowledgement and agreement set forth below) covenants and agrees to at all times maintain its status as such in accordance with the SPE requirements of the Loan Documents and the Co-Owners’ respective own operating agreements.  No Co-Owner may transfer or encumber, or permit the transfer or encumbrance of, its membership interest except in compliance with the Agreement and in compliance with the Loan Documents.  All rights, remedies, and indemnities of each Co-Owner against any other Co-Owner or in the Interests of any Co-Owner pursuant to this Agreement, at law, in equity, or otherwise, shall be subject to the Loan Documents and Lender’s rights under the Loan Documents.  Furthermore, notwithstanding anything to the contrary herein, each Co-Owner agrees that it will not exercise any rights it may have against any other Co-Owner or in the Interests of any Co-Owner, whether such rights accrue pursuant to this Agreement, at law, in equity, or otherwise, if the exercise of such rights would violate the Loan Documents.  Each Co-Owner shall join in this Agreement to acknowledge and agree to be bound by the terms, conditions, and obligations of this Section 3.02.  To the extent that any Co-Owner or its affiliates breach or otherwise violate the transfer restrictions or other provisions contained in the Loan Documents, each such Co-Owner having read and understood the Loan Documents, such breaching Co-Owner hereby agrees to indemnify, defend and hold the other Co-Owners, and their affiliates acting in a capacity as guarantor under any of the Loan Documents, from any loss, cost, liability or damage which results from such breach or other violation of the Loan Documents by the breaching Co-Owner(s).

 

ARTICLE IV.
INCOME AND PROCEEDS FROM THE PROJECT

 

4.01                        Income from Project Operations.  Subject to Article V below and the consent of the Co-Owners, the Co-Owner Manager shall cause the Property Manager to disburse Net Operating Revenue on a quarterly basis to the Co-Owners, pro rata in accordance with their respective Ownership Interests.  “Net Operating Revenue” shall be equal to all income, revenue and other cash flow derived from the operation of the Project, less (a) any ordinary and necessary operating expenses, including payments under the Loan Documents and Ground Lease, and (b) any expenditure set forth in either a Construction Budget or an Operating Budget approved by the Co-Owners (other than a disbursement related to

 

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payment of legal fees, which must be approved by a Majority in Interest of the Co-Owners), net of such amounts as may be reasonably determined by the Property Manager to be retained for reasonable reserves for operations, repairs or improvements from time to time in accordance with the Property Management Agreement, shall be disbursed by the Co-Owner Manager to the Co-Owners, pro rata in accordance with their respective Ownership Interests, on a quarterly basis.  Each Co-Owner shall approve (i) the Construction Budget (herein so called) prepared by the Developer in connection with the Loan, and all material amendments thereto, and (ii) annual operating budgets (each, an “Operating Budget”) prepared by the Co-Owner Manager, based upon information provided by the Property Manager, no later than November 1 of each calendar year.  If the Co-Owners are unable to agree upon an Operating Budget, then the Co-Owner Manager shall utilize the Operating Budget in effect for the prior calendar year to operate the Project, subject to the provisions of Article V.  The Co-Owners approve the Construction Budget attached hereto as Exhibit G.

 

4.02                        Disbursement of Proceeds on Disposition of the Project.  Subject to Article V below, the Co-Owner Manager shall cause the Property Manager to disburse net proceeds derived from the sale, exchange, or other joint disposition of, or from the financing or refinancing of all or any part of the Project, after satisfaction of any debts, liabilities or expenses of the Project, first to repay Co-Owner Loans (as described in Section 5.05(a)), next to return each Co-Owner’s Initial Investment and Subsequent Required Contributions (along with any accrued preferred return as described in Section 5.06), then to SPC Owner in return of any Unanticipated Overrun Costs (as described in Section 5.06 below), and then in accordance with the Co-Owners’ respective Ownership Interests.

 

ARTICLE V.
PAYMENT OF PROJECT EXPENSES; RIGHT OF CONTRIBUTION

 

5.01                        Obligation to Pay.  The Construction Budget will reflect that each Co-Owner will have invested the cash funds in connection with the acquisition of its Ownership Interest in the Project, as more particularly described on Exhibit B (with respect to each Co-Owner, its “Initial Investment” and collectively, the “Initial Investments”).  It is understood and agreed that SPC Owner’s purchase price investment for its Interest is part of a like kind exchange transaction, and such sums invested by SPC Owner in connection with its acquisition of its undivided interest in the Project shall occur through the exchange accommodation title holder engaged for such purpose.  Except as otherwise expressly provided for in this Agreement, the Co-Owners shall apportion all debts, liabilities, and expenses that they incur in connection with the Project and the costs of constructing the Project (the “Project Expenses”) in proportion to their respective Ownership Interests.  Without limitation of the foregoing and except as otherwise provided below, Project Expenses shall include all debt service with respect to the Project.  For the avoidance of doubt, (a) nothing herein shall be deemed to affect the liability of the Co-Owners under the Loan Documents; and (b) all payments required to be made pursuant to the terms of the Loan Documents shall have priority over all other payments provided for hereunder, including, but not limited to, disbursements to Co-Owners pursuant to Article IV and payments in respect of any Co-Owners Loan (as defined in Section 5.05(a)).

 

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5.02                        Time of Payment.  The Property Manager shall be responsible for collecting and disbursing funds from the operation of the Project pursuant to the Property Management Agreement (including each Co-Owner’s share of Net Operating Revenue).  Whenever the Co-Owner Manager, in the Co-Owner Manager’s reasonable discretion, determines that the Project Expenses must be paid in an amount which exceeds the Co-Owner’s share of income from the Project then held by the Property Manager, or which have been paid to a Co-Owner, then the Co-Owner Manager shall give written notice to the Co-Owners setting forth (a) the total amount required to pay the Project Expenses (including, without limitation, a detailed explanation of the amount of any such Project Expenses that relate solely to the construction of the Project (the “Project Construction Expenses”)) and (b) such Co-Owner’s proportionate share thereof.  Except as provided below in Section 5.06, the Co-Owners shall be required, in accordance with their Ownership Interests, to fund Project Construction Expenses in the amounts set forth in the Construction Budget, which includes the Initial Investments, and upon notice from Co-Owner Manager, to fund Project Expenses (the “Subsequent Required Contributions”).  The Co-Owners shall have ten (10) business days from the date such notice is received to deliver to the Co-Owner Manager, by wire transfer, certified or bank cashier’s check or other mutually acceptable means, their share of the required funds.  Such notice shall contain sufficient detail explaining the nature of the request for payment of Project Expenses, including an explanation of why the related shortfall in Net Operating Revenue occurred, if applicable, along with any related impacts to the current Operating Budget.  Each Co-Owner shall have access to and the right to inspect and review the books and records of the Co-Owner Manager concerning the Project and, in particular, but without limitation, the Project Expenses and the Net Operating Revenue.

 

5.03                        Delinquencies.  If a Co-Owner does not timely pay its share of Project Expenses when due in accordance with Section 5.02 hereof, then the Co-Owner Manager shall send the delinquent Co-Owner written notice of delinquency, giving such delinquent Co-Owner an additional five (5) business days from the date such notice is received to pay in full its proportionate share of the Project Expenses.  If the delinquent Co-Owner does not timely pay the full amount of its proportionate share of the Project Expenses, together with any and all late fees, additional interest and other charges resulting from the delinquency, then the delinquent Co-Owner shall thereupon become a “Defaulting Co-Owner”.

 

5.04                        Indemnity.  A delinquent Co-Owner or Defaulting Co-Owner shall pay all late fees, additional interest or other charges that the other Co-Owners incur as a result of such delinquent Co-Owner’s failure to timely pay its share of the Project Expenses and shall otherwise indemnify the other Co-Owners from any and all loss, cost, liability or expense suffered on account of such Co-Owner’s failure.

 

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5.05                        Co-Owner Loans.

 

(a)                                 If a delinquent Co-Owner becomes a Defaulting Co-Owner by failing to pay its share of Project Expenses when due and not curing such failure within the applicable notice and cure period, the Co-Owner Manager shall give written notice of such failure to the other Co-Owners (each a “Non-Defaulting Co-Owner”) within two (2) days following the expiration of the five (5) business day period described in Section 5.03. Within seven (7) days following such notice, any one or more of the Non-Defaulting Co-Owner may elect to pay all or any part of the Defaulting Co-Owner’s proportionate share of the delinquent Project Expenses (each such paying Co-Owner a “Lending Co-Owner”).  Such amount shall be treated as a loan by the respective Lending Co-Owner to the Defaulting Co-Owner whether one or more (a “Co-Owner Loan”).  All Co-Owner Loans shall be payable in full within thirty-one (31) days from the date such loan was made, together with interest at the rate per annum equal to the lesser of (i) the maximum legal rate, or (ii) sum of the prime rate of interest as published from time to time in The Wall Street Journal plus six percent (6.0%) (the “Default Rate”).  All Co-Owner Loans shall be with recourse to the Defaulting Co-Owner.  Notwithstanding any provision herein to the contrary, in the event either Hilltop Owner or Ford Owner becomes a Defaulting Co-Owner, then Hilltop Owner or Ford Owner, whichever is then a Non-Defaulting Co-Owner, shall have the first and pre-eminent right to exercise the Non-Defaulting Co-Owner rights described above relative to SPC Owner’s rights to cure such default, provided such first and pre-eminent rights are exercised within the period set forth above for a Lending Co-Owner to advance its share of delinquent Project Expenses; thereafter, if either Hilltop Owner or Ford Owner fail to advance such delinquent Project Expenses, then SPC Owner shall have the period of time set forth in this Section 5.05(a) to elect to advance such delinquent Project Expenses.

 

(b)                                 Except to the extent prohibited by the Loan Documents, each Co-Owner hereby grants to each other Co-Owner a lien on such Co-Owner’s Interest to secure its obligations under this Agreement, including without limitation, such Co-Owner’s obligations to pay its share of all expenses the Co-Owners incur in connection with their ownership of the Project (the “Co-Owner Lien”).  Any such Co-Owner Lien if made is expressly subordinate and inferior to the Loan and Lender’s rights under the Loan Documents.  Furthermore, without Lender’s prior written approval, any holder of a Co-Owner Lien shall not exercise any right to foreclose such Co-Owner Lien against the Defaulting Co-Owner’s Interest, as provided in Section 5.05(c).

 

(c)                                  If a Co-Owner Loan is not paid when due by the Defaulting Co-Owner (each Defaulting Co-Owner that does not pay a Co-Owner Loan when due a “Delinquent Co-Owner”), then the Lending Co-Owners shall receive all distributions of Net Operating Revenue which the Defaulting Co-Owner would have otherwise received, until the Co-Owner Loan, and all interest thereon, is repaid; provided, however, if such Co-Owner Loan is not repaid within twelve (12) months, interest shall accrue on all unpaid principal amounts at the Default Rate.

 

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5.06                        Unanticipated Overrun Funding.  As of the date hereof, the Managing Co-Owner does not anticipate that Project Construction Expenses will exceed the amount set forth in the Construction Budget, or that the Project will require additional investment from the Co-Owners, other than the Initial Investments and any Subsequent Required Contributions.  If, however, aggregate Project Construction Expenses (other than change orders required by the tenants under the Lead Tenant Leases, the costs and expenses of which shall be treated in accordance with the applicable provisions of such Lead Tenant Leases, and if treated therein as a cost of Landlord, then such shall be a Project Expense under Section 5.01), including, without limitation, hard costs, interest carry costs, architectural and/or engineering costs, permitting costs and impact fees, exceed the amounts set forth in the Construction Budget as a result of an event or circumstance that (i) rises to the level of a Bad Act by SPC Owner, (ii) constitutes an uncured breach of the Development Agreement by Developer, or (iii) which was (A) within the reasonable control or either SPC Owner or Developer, or (B) should have been anticipated by either SPC Owner or Developer using reasonable diligence, then any related cost overruns (the “Unanticipated Overrun Costs”) shall be paid solely by SPC Owner as an Overrun Contribution (as hereinafter defined). Any such Unanticipated Overrun Costs, then SPC Owner shall be solely liable for the payment of all such Unanticipated Overrun Costs not paid by Developer or a guarantor of the Loan.  Any contributions made by SPC Owner with respect to Unanticipated Overrun Costs pursuant to this Section are referred to as “Overrun Contributions”.  Overrun Contributions shall be contributed by SPC Owner in accordance with Section 5.02.  If SPC Owner fails to contribute the Unanticipated Overrun Costs as and when required by this Section and Section 5.02, each of Ford Owner and Hilltop Owner shall have the rights as set forth in Section 5.05(a) to make Co-Owner Loans to satisfy such Unanticipated Overrun Costs, as described therein.  Notwithstanding any provision of this Agreement to the contrary, Overrun Contributions made by SPC Owner in accordance with this Section shall be considered to be investment(s) in the Project; however, they shall not impact the Ownership Interests of the parties, and such Overrun Contributions shall be returned to SPC Owner pursuant to the provisions of Article IV following such time as each of the Co-Owners has received 100% of its Initial Investment and all Subsequent Required Contributions (not including any Overrun Contributions made by SPC Owner) in the Project, plus a preferred return on such investment equal to eight percent (8%) per annum, compounded annually, commencing on the date of such contribution.  All other amounts of Construction Project Expenses set forth in any request for payment delivered by the Co-Owner Manager (other than Unanticipated Overrun Costs) shall be treated as Subsequent Required Contributions in accordance with Article V of this Agreement.

 

ARTICLE VI.
RIGHTS AND OBLIGATIONS OF THE CO-OWNERS

 

6.01                        Rights of Co-Owners.  Except as otherwise provided in Section 6.03, a Co-Owner shall have no right to transfer, partition or encumber the Co-Owner’s Interest in the Project without the prior written consent of the other Co-Owners; provided, however, that in any event:

 

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(a)                                 No transfer shall be permitted if the number of Co-Owners after such transfer would exceed the number of persons specified in Section 1.05 hereof, or such lesser number required by the Loan Documents;

 

(b)