Exhibit 10.17
FORMATION AGREEMENT
THIS FORMATION AGREEMENT (this "Agreement") is made and entered into as
of the 17th day of November, 1997 by and among (i) PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust (the "Company"), (ii) PRIME GROUP REALTY,
L.P., a Delaware limited partnership (the "Operating Partnership"), (iii) PRIME
GROUP REALTY SERVICES, INC., a Delaware corporation ("Services Company"), (iv)
THE PRIME GROUP, INC., an Illinois corporation ("PGI"), (v) PRIME GROUP LIMITED
PARTNERSHIP, an Illinois limited partnership ("PGLP"), and (vi) XXXXXXX X.
XXXXXXXXX ("Xxxxxxxxx").
RECITALS:
A. The Company is a recently organized real estate investment trust
formed for the purpose of, among other things, acquiring substantially all of
the office and industrial real estate business and operations of PGI and its
affiliates (including, without limitation, PGI's contractual rights to acquire
additional office and industrial properties). Concurrently with the
contributions contemplated by this Agreement, the Company will issue in an
initial public offering (the "Offering") Common Shares of Beneficial Interest in
the Company (the "Common Shares").
B. The business and operations of the Company will be conducted through
the Operating Partnership and the Services Company. The Operating Partnership
will issue limited partnership interests (the "Common Units") to the Company and
to other entities, including PGI and/or its affiliates, in connection with
contributions contemplated hereby and the other transactions contemplated to
occur in connection with the formation of the Company and the Offering (the
"Formation Transactions").
C. PGI and PGLP (collectively, the "Prime Transferors") desire to
convey and cause to be conveyed to the Company and to the Operating Partnership
all the right, title and interest held by the Prime Transferors and their
affiliates in and to (i) the entities identified on Schedule 1 hereto (such
entities being hereinafter referred to collectively as the "Prime Entities"),
together with all other interests of PGI and PGLP in and to each of the
businesses and facilities operated and owned by the Prime Entities (the Prime
Entities and all of such other assets being together referred to herein as the
"Prime Projects") and (ii) the entities identified on Schedule 1 hereto (such
entities being hereinafter referred to collectively as the "Prime Contribution
Entities" and together with the Prime Entities, the "Contributed Entities"),
together with all other interests of PGI and PGLP in and to each of the
businesses and facilities operated and owned by the Prime Contribution Entities
(Contributed Entities and all of such other assets being together referred to
herein as the "Contributed Projects").
X. Xxxxxxxxx desires to convey his rights and interests in the
Contributed Projects to the Operating Partnership in exchange for Common Units.
E. PGI has entered into (i) that certain option agreement dated as of
August 4, 1997 (the "Lumbermens Agreement") with Lumbermens Mutual Casualty
Company, an Illinois insurance corporation ("Lumbermens"), pursuant to which
Lumbermens granted to PGI an option to purchase all right, title and interest of
Lumbermens in the LMCC 77 Subordinate Loan Interests (as defined in the
Lumbermens Agreement) and (ii) that certain Amended and Restated Agreement dated
as of July 15,1997 (the "Xxxxxx Subordinate Agreement") by and among Xxxxxx
Investors Life Insurance Company, an Illinois insurance corporation ("KILICO"),
Federal Xxxxxx Life Assurance Company, an Illinois insurance corporation
("FKLA"), KILICO Realty Corporation an Illinois corporation ("KRC"), FKLA Realty
Corporation, an Illinois corporation ("FRC"), KR 77 Fitness Center, Inc., a
Delaware corporation ("KR Fitness"), 77 West Xxxxxx Limited Partnership, an
Illinois limited partnership ("77 L.P."), K/77 Investors Limited Partnership, an
Illinois limited partnership ("K/77 L.P."), PGLP and Prime 77 Fitness Center,
Inc., an Illinois corporation (KILICO, FKLA, KRC, FRC and KR Fitness are
hereinafter referred to as the "Xxxxxx Parties") pursuant to which the Xxxxxx
Parties have granted to PGI an option to purchase all right, title and interest
of the Xxxxxx Parties in and to the Subordinate Loan Documents (as defined
therein); such interests, among other things, encumber the real estate commonly
known as 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, owned by 77 L.P.;
F. PGI has entered into that certain (i) letter agreement dated July
18, 1997 (the "Triad Agreement") with KILICO, KRC and KRC Portfolio Corp. and
(ii) Option To Purchase Partnership Interests dated as of June 17, 1994 but made
effective as of March 22, 1994, as amended by that certain Amendment To Option
To Purchase Partnership Interests dated as of January 21, 1997 and that certain
Second Amendment To Option To Purchase Partnership Interests dated as of July
15, 1997 (as amended, the "Partnership Option Agreement"), pursuant to which it
has the right to acquire the partnership interests in 77 L.P. and K/77 L.P. held
by one or more of the Xxxxxx Parties.
G. PGI has agreed to convey and assign to the Operating Partnership,
the rights under the Lumbermens Agreement, the Xxxxxx Subordinate Agreement, the
Triad Agreement and the Partnership Option Agreement (the Lumbermens Agreement,
the Xxxxxx Subordinate Agreement, the Triad Agreement and the Purchase Option
Agreement and the related agreements and documents are hereinafter referred to
as the "Xxxxxx Agreements"), and the Operating Partnership has agreed to assume
the obligation to pay the purchase price therefor as set forth in the Xxxxxx
Agreements.
H. The Prime Transferors desire to convey to the Operating Partnership
all of their respective right, title and interest in substantially all the
assets and liabilities relating to their office and industrial development,
leasing and management business, which assets and liabilities are set forth on
Schedules 2 and 3 attached hereto (collectively, the "Contributed Personal
Property").
I. PGI has entered into that certain Contribution Agreement dated as of
July 8, 1997 with (i) LaSalle National Trust, N.A., not personally, but solely
as Trustee under Trust Agreement dated June 15, 1982 and known as Trust No.
00-00000-00, (ii) LaSalle National Trust, N.A., not personally, but solely as
Trustee under Trust Agreement dated September 7, 1994 and known as Trust No.
11-9051, (iii) LaSalle National Trust, N.A., not personally, but solely as
Trustee under Trust Agreement dated March 30, 1984 and known as Trust No.
11-107825, (iv) LaSalle National Trust, N.A., not personally, but solely as
Trustee under Trust Agreement dated August 1, 1986 and
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known as Trust No. 11-1358, (v) LaSalle National Trust, N.A., not personally,
but solely as Trustee under Trust Agreement dated August 1, 1986 and known as
Trust No. 11-1357, (vi) LaSalle National Trust, N.A., not personally, but solely
as Trustee under Trust Agreement dated January 17, 1974 and known as Trust No.
286-34, (vii) LaSalle National Trust, N.A., not personally, but solely as
Trustee under Trust Agreement dated October 15, 1995 and known as Trust No.
11-9869, (viii) LaSalle National Trust, N.A., not personally, but solely as
Trustee under Trust Agreement dated December 1, 1987 and known as Trust No.
11-2868, (ix) 310 ERA Limited Partnership, (x) MacArthur Drive Properties, (xi)
CLE Limited Partnership, (xii) 500 Xxxxxxxx Limited Partnership, (xiii) 515
Xxxxx Limited Partnership, (xiv) 555 Xxxxx Limited Partnership, (xv) Sky Harbor
Associates, (xvi) 1001 Technology Way, LLC, (xvii) The Grandville Road Limited
Partnership and (xviii) Industrial Building and Development Company
(collectively, the "Contributors") as amended by the First Amendment to the
Contribution Agreement dated as of August 12, 1997, with LaSalle National Trust,
NA, as Trustee under the Trust Agreements identified in clauses (i) through
(viii) above (as amended, the "IBD Contribution Agreement") pursuant to which
the Contributors will contribute their interests in such entities to the
Operating Partnership in exchange for Common Units.
J. PGI has entered into that certain Contribution Agreement dated as of
October 20, 1997 (the "NAC Contribution Agreement") with (i) the Operating
Partnership, (ii) the Company, (iii) Narco River Business Center, (iv) Narco
Tower Road Associates, (v) Olympian Office Center, (vi) Tri-State Industrial
Park Joint Venture, (vii) Xxxxx Stream Industrial Park Joint Venture, (viii)
Narco Enterprises, Inc., (ix) The Xxxxx Group Ltd., (x) Narco Construction Inc.,
(xi) Xxxxx & Co., (xii) Xxxxx Asset Management, Inc., (xiii) Xxxxx Asset
Management, Inc., and (xiv) Xxxxx Architectural, Inc. (collectively the entities
identified in clauses (iii) through (xiv), the "NAC Contributors") pursuant to
which the NAC Contributors will contribute their interests in properties owned
by them to the Operating Partnership in exchange for Common Units.
K. PGI has agreed to convey to the Operating Partnership or its
designee all of PGI's rights under the IBD Contribution Agreement and the NAC
Contribution Agreement, and the Operating Partnership has agreed to assume all
of PGI's obligations under the IBD Contribution Agreement and the NAC
Contribution Agreement.
L. PGI has entered those certain purchase agreements set forth on
Schedule 4 hereto (the "Facility Acquisition Agreements") with certain third
parties (the "Facility Transferors") pursuant to which PGI has the contractual
right to acquire the certain office and industrial facilities, or interests
therein, owned or held by the Facility Transferors as set forth on Schedule 4
hereto.
M. PGI has agreed to convey and assign to the Operating Partnership or
its designee all of PGI's rights under the Facility Acquisition Agreements, and
the Operating Partnership has agreed to assume all of PGI's obligations under
the Facility Acquisition Agreements.
N. PGI has entered into those certain option agreements set forth on
Schedule 5 hereof (the "Land Option Agreements") pursuant to which it has been
granted the right to purchase the real estate indicated on Schedule 5 hereto.
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O. PGI has agreed to convey and assign to the Operating Partnership or
its designee all of PGI's rights under the Land Option Agreements, and the
Operating Partnership has agreed to assume all of PGI's obligations under the
Land Option Agreements.
P. The parties desire to enter into this Agreement to set forth their
understanding with respect to the manner in which the Company, Operating
Partnership or their designee will acquire interests in the Contributed
Projects, the Contributed Personal Property, the operations relating thereto and
the rights of PGI under the Contributed Contracts (as hereinafter defined) in
exchange for Common Units, cash and the assumption of certain liabilities.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. TRANSFER OF CONTRIBUTED ENTITIES, CONTRACTUAL RIGHTS AND CERTAIN
OTHER ASSETS. As part of a single plan, on the Closing Date (as hereinafter
defined) the Prime Transferors and Xxxxxxxxx will convey to the Company, the
Operating Partnership, or their designees, (w) their interests in the
Contributed Entities, (x) the contractual rights of PGI and PGLP under the
Xxxxxx Agreements and the Facility Acquisition Agreements, (y) the Contributed
Personal Property and (z) the contractual rights of PGI under the Land Option
Agreements, the IBD Contribution Agreement and the NAC Contribution Agreement
(the Xxxxxx Agreements, the Facility Acquisition Agreements, the Land Option
Agreements, the IBD Contribution Agreement and the NAC Contribution Agreement
are hereinafter referred to collectively as the "Contributed Contracts"; and the
assets and rights described in clauses (w), (x), (y) and (z) are hereinafter
collectively referred to as the "Contributed Assets") in consideration for,
among other things, the issuance by the Operating Partnership of Common Units
(which are exchangeable into Common Shares subject to the conditions and
restrictions contained in Section 8.6 and Exhibit C to the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership dated as of the
date hereof) to the Prime Transferors or their designees and Xxxxxxxxx as
provided in Section 3 hereof, the assumption by the Company, the Operating
Partnership or their designee of the liabilities associated with the Contributed
Projects, the Contributed Contracts and the other Contributed Assets referred to
herein and the cash payments required to be made in accordance with Section 4
hereof, all in a transaction designed to meet the requirements of section 351(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Company and
the Operating Partnership will acquire the Contributed Projects subject to the
existing debt, liabilities and contractual and other obligations of such
Contributed Entities existing on the date hereof, except for the liabilities and
obligations identified on Schedule 9 hereof.
In furtherance of the foregoing, on the Closing Date:
(a) PGI shall transfer or cause to be transferred to the
Operating Partnership the following:
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(i) The general partnership interests, the limited
partnership interests, stock interests and limited liability company interests
set forth on Schedule 1 hereof.
(ii) All of its right, title and interest in the Facility
Acquisition Agreements, the Xxxxxx Agreements and the Land Option Agreements.
(iii) All of its interests in all other assets and properties
of the office and industrial real estate division of PGI and its affiliates, all
as more fully described on Schedule 2 hereto.
(b) PGLP shall transfer or cause to be transferred to the
Operating Partnership the following:
(i) The general partnership interests, limited partnership
interests and limited liability company interests set forth on Schedule 1
hereof.
(ii) All of its rights under the Xxxxxx Agreements.
(c) PGLP shall transfer to the Company a one tenth of one percent
(.1%) limited partnership interest in the entities listed on Schedule 1 hereof.
(d) PGI shall pay the transfer taxes relating to the transfer to
the Company of the Contributed Entities to the extent such taxes exceed
$2,500,000.
(e) PGI shall transfer to the Company a one tenth of one percent
(.1%) limited partnership interest in the entities listed on Schedule 1 hereto
and a one tenth of one percent (.1%) general partnership interest in
Xxxxxx/Prime Industrial Partners.
(f) Xxxxxxxxx shall transfer to the Operating Partnership all of
his rights and interests in the Contributed Projects.
2. CERTAIN DISTRIBUTIONS. On or prior to the Closing Date, the Prime
Transferors shall have the right to receive distributions from the Contributed
Entities, net of all advances to PGI by the Contributed Entities.
3. ISSUANCE OF COMMON UNITS. In partial consideration of the transfer
of the assets provided for in Section 1, on the Closing Date, the Operating
Partnership shall issue (a) an aggregate of 3,465,000 of its Common Units to
Prime Transferors and (b) 110,000 of its Common Units to Xxxxxxxxx subject to
the terms of the employment agreement between the Company and Xxxxxxxxx. All
such Common Units shall be fully paid and nonassessable.
4. ASSUMPTION OF LIABILITIES; CERTAIN PAYMENTS.
(a) As further consideration for the transfer of the assets by
the Prime Transferors to the Company, the Operating Partnership or their
designees as provided for in Section 1, on the Closing Date the Operating
Partnership will enter into an Assignment and Assumption Agreement
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substantially in the form of Exhibit A hereto pursuant to which the Operating
Partnership shall assume all of the outstanding liabilities of each Prime
Transferor and their affiliates with respect to the Contributed Assets
(including the assets and operations of the Contributed Projects, the
Contributed Contracts and the operations of the office and industrial real
estate division of PGI and its affiliates), whether or not reflected on the
books and records of the Prime Transferors or the Contributed Entity, and
whether known or unknown, accrued or unaccrued, absolute, contingent or
otherwise, except for those liabilities and obligations identified on Schedule 9
hereto.
(b) In addition, on the Closing Date, the Operating
Partnership or its designee will make cash payments as described in Schedule 6
to this Agreement.
5. CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur on the day (the "Closing Date")
immediately following the day that all of the conditions precedent of the
parties under this Agreement have been met or waived by the party entitled to
the benefit thereof, but in any event no later than the date of closing of the
Offering.
6. REPRESENTATIONS AND WARRANTIES.
(a) Each of PGI and PGLP hereby represents and warrants to the
Company and the Operating Partnership as follows (except as set forth in the
Disclosure Schedule attached hereto as Schedule 7):
(i) Organization; Authority. Each of PGI and PGLP and each of
the Contributed Entities (collectively, the "Applicable Partnerships"),
are either (A) in the case of such Persons (as hereinafter defined)
which are corporations, duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation or (B) in
the case of such Persons which are partnerships or limited liability
companies, a partnership or a limited liability company, as the case
may be, duly formed, validly existing and in good standing (to the
extent applicable) under the laws of its jurisdiction of formation.
Each of PGI and PGLP has the requisite authority to enter into and
perform its obligations under this Agreement. For the purposes hereof,
"Person" means a natural person, partnership, corporation, limited
liability company, association, joint stock company, trust, estate,
joint venture, unincorporated organization or other entity.
(ii) Due Authorization; Binding Agreement. The execution,
delivery and performance of this Agreement by each of PGI and PGLP has
been duly and validly authorized by all necessary action of each of PGI
and PGLP. This Agreement has been duly executed and delivered by each
of PGI and PGLP, and constitutes a legal, valid and binding obligation
of each of PGI and PGLP, enforceable against each of PGI and PGLP in
accordance with the terms hereof, except to the extent enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors rights generally or
general principles of equity.
(iii) Consents and Approvals. No consent, waiver, approval or
authorization of, or filing, registration or qualification with, or
notice to, any governmental unit or any other
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Person is required to be made, obtained or given by any Applicable
Partnership in connection with the execution, delivery and performance
by the Prime Transferors of their obligations under this Agreement,
except for such consents, approvals or authorizations which have been
obtained or for which the failure to obtain would not have a Material
Adverse Effect. For the purposes hereof, "Material Adverse Effect"
means a material adverse effect on the business, assets or financial
condition of the Company and its affiliates, taken as a whole.
(iv) No Violation. None of the execution, delivery or
performance of this Agreement by either of PGI or PGLP does or will,
with or without the giving of notice, lapse of time or both, (A)
violate, conflict with or constitute a default (which violation,
conflict or default would result in a Material Adverse Effect) under
any term or condition of (y) the organizational documents of any
Applicable Partnership or any Significant Agreement (as defined below)
to which any Applicable Partnership is a party or by which it is bound,
or (z) any term or provision of any judgment, decree, order, statute,
injunction, rule or regulation of a governmental unit applicable to an
Applicable Partnership or (B) result in the creation of any Lien or
other encumbrance upon the interest of either of PGI or PGLP in any
Contributed Entity or the assets or properties of the Contributed
Entities. For the purposes hereof, "Liens" shall mean any mortgage,
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, encumbrance for the payment of money, lien
(statutory or otherwise), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, but not limited to, any conditional sale or other title
retention agreement or the interest of a lessor under a capital lease.
(v) Ownership of the Contributed Entities. Other than for the
interests of the Xxxxxx Parties which are to be acquired by the
Operating Partnership and the Company on the date hereof, each of the
Persons identified as an Assignor on Schedule 1 hereto is the sole
owner of the partnership interests of a Contributed Entity contributed
by it to the Company or the Operating Partnership (the "Contributed
Partnership Interests") and has good and valid title to such interests,
free and clear of all Liens (subject to the rights and interests of
Xxxxxxxxx that are being contributed pursuant to this Agreement). The
Contributed Partnership Interests have been issued in compliance with
the partnership agreements (as then in effect) of the Contributed
Entities and were not issued in violation of any federal or state
securities laws. There are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any securities or obligations of any kind
convertible into any partnership interest or other equity interests or
profit participation of any kind in the Contributed Entities or the
real estate owned by them (the "Properties")(or any part thereof) which
will not be terminated or contributed to the Operating Partnership
prior to Closing.
(vi) Compliance with Laws. Each of the Prime Entities has
complied with all laws (excepting, however, Environmental Laws (as
hereinafter defined), which are specifically covered by subsection
(vii) below) applicable to the conduct of the business of the Prime
Entities and the ownership, use and operation of the Property owned by
a Prime Entity and has obtained all licenses and permits required for
the conduct thereof, except where the failure to so comply or obtain
could not have a Material Adverse Effect. To the best of the
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knowledge of each of PGI and PGLP, (A) such licenses and permits are in
full force and effect and (B) neither PGI nor PGLP has received any
notice of violation from any federal, state or municipal entity or
notice of an intention by any such government entity to revoke any
certificate of occupancy or other certificate, license or permit issued
by it in connection with the use of any of the Properties owned by a
Prime Entity, that in each case has not been cured or otherwise
resolved to the satisfaction of such government entity, except where
such failure or such action could not have a Material Adverse Effect.
For the purposes hereof, "Environmental Laws" means all federal, state
and local laws, ordinances and rules of common law relating to
environmental safety or health matters, including those relating to
fines, orders, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the release or
threatened release of hazardous substances and the generation, use,
storage, transportation or disposal of hazardous substances.
(vii) Environmental Matters. Except as disclosed in
environmental reports, no Prime Entity has knowingly caused or
permitted any Hazardous Material (as defined under applicable
Environmental Laws) to be improperly maintained or disposed of on,
under or at the Prime Entity's Property or any part thereof in
violation of any Environmental Law. To the knowledge of each of PGI and
PGLP and except for such matters as disclosed in environmental reports
and except for such matters as would not have a Material Adverse
Effect: (A) the Prime Entities are in compliance, and have heretofore
complied, with all Environmental Laws, (B) none of the Prime Entities
has received any written notice from any governmental unit or other
person that it, its current or former operations or the properties now
or heretofore owned, leased or used by it or any of its predecessors,
are not or have not been in compliance with the Environmental Laws or
that it has any material liability with respect thereto, (C) there are
no administrative, regulatory or judicial proceedings pending or
threatened against the Prime Entities pursuant to, or alleging any
material violation of, or material liability under, any Environmental
Laws, (D) none of the properties now or heretofore owned, leased or
used by the Prime Entities has been used as a disposal site for any
Hazardous Materials.
(viii) Ownership of Properties. With respect to each of the
Prime Entities, said Prime Entity (A) is the sole owner of the Property
as indicated on the Schedules hereto and (B) has good, valid and
marketable title to such Property, free and clear of all Liens other
than the Permitted Exceptions. For purposes hereof, "Permitted
Exceptions" shall mean with respect to real property or any interest or
estate therein owned by any Person:
A. Liens or deposits made to secure the release of
such Liens, securing taxes, the payment of which is at the
time not delinquent or the payment of which is actively being
contested in good faith by appropriate proceedings diligently
pursued and for which appropriate reserves shall have been
established on the Applicable Partnership's books in
accordance with generally accepted accounting principles
consistently applied ("GAAP");
B. attachments, judgments and other similar Liens
arising in connection with court or administrative
proceedings, provided that the execution or other enforcement
of such Liens is effectively stayed or secured and the claims
secured by
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such Liens are actively being contested in good faith by
appropriate proceedings diligently pursued and for which
appropriate reserves shall have been established on the
Applicable Partnership's books in accordance with GAAP;
C. zoning laws and ordinances; provided that the
Prime Entities' Property is not in violation thereof and that
such laws and ordinances do not require the demolition,
vacation or cessation of the present use of such Property or
require the discontinuance of the use of all or any material
portion of such Property as an office building, an industrial
building or a parking facility, as applicable;
D. any laws, ordinances, deeds of trust, mortgages,
Liens, easements, rights of way, restrictions, exemptions,
reservations, conditions, limitations, covenants, adverse
rights or interests, matters disclosed in the title reports
delivered in connection with the transactions contemplated
hereby (the "Title Reports") and other matters described as
exceptions on the Disclosure Schedule; provided that the
applicable Property is not in violation thereof and the same
do not require the demolition, vacation or cessation of the
present use of such Property or require the discontinuance of
the use of all or any material portion of such Property as an
office building, an industrial building or a parking facility,
as applicable;
E. any other easements, rights of way, restrictions,
exceptions, reservations, conditions, limitations, covenants,
adverse rights or interests, licenses, minor irregularities in
title and other similar encumbrances which do not in the
aggregate have a Material Adverse Effect;
F. any law or governmental regulation or other right
of any governmental unit, which (Y) requires the person to
maintain certain facilities or perform certain acts as a
condition of its occupancy or use of its assets and
properties, or (Z) condemns, appropriates or recaptures the
person's assets or property; and
G. Liens imposed by laws, such as carriers',
warehouseman's and mechanics' liens and other similar liens
arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which
are being contested in good faith by appropriate proceedings
diligently pursued, and for which adequate reserves shall have
been established as of the date hereof on the Applicable
Partnership's books in accordance with GAAP.
(ix) Tenant Leases. The rent roll described in subparagraph
(xvi) below lists each of the leases to which a Prime Entity is a party
which is currently in effect with respect to the Property owned by such
Prime Entity, as the same have been amended or modified to the date
hereof. The parties hereto acknowledge that the Disclosure Schedule
does not list, and neither PGI nor PGLP makes any representation with
respect to, (A) subleases, concessions, or license agreements which may
have been entered into by tenants or subtenants or (B) license or
concession agreements which have terms not in excess of sixty (60)
days; provided that, in the case of a sublease or assignment, each of
PGI and PGLP represents that the tenant
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listed in the rent roll described in subparagraph (xvi) below remains
liable for the performance of the lease.
(x) Absence of Undisclosed Liabilities and Contractual
Obligations. Except for liabilities arising in the ordinary course of
business, since the date of the Applicable Partnerships' most recent
financial statements and for those matters specifically and adequately
accrued or reserved for in the financial statements of the Applicable
Partnerships, the Prime Entities have no liabilities of any material
nature, required by GAAP to be included in the financial statements of
such Prime Entity, and which would have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of each of PGI
and PGLP, there are no Significant Agreements of the Prime Entities
other than as set forth in the Title Reports or reflected in the final
prospectus for the initial public offering of securities of the Company
or in the most recent financial statements of the Applicable
Partnerships delivered to the Company. For purposes hereof,
"Significant Agreement" of a Prime Entity means and includes any of the
following to which such Person is a party or by which such Person or
any of its assets or properties may be subject or bound, in each such
case as amended and currently in effect, inclusive of any waivers
relating thereto:
A. all agreements, instruments and documents evidencing
or securing the contractual obligations of the Prime
Property that involve annual payments in excess of
$100,000;
B. all leases where the Prime Entity is the lessee
(including capital leases), contracts, agreements or
commitments (whether written or oral) that are not
terminable without penalty on not more than 90 days'
notice and that involve annual gross payments in
excess of $100,000;
C. all ground leases where the Prime Entity is a ground
lessee; and
D. all reciprocal easement agreements affecting the
Prime Entities.
(xi) Significant Agreements; Binding Agreements. To the
knowledge of PGI and PGLP, each of the Significant Agreements is valid
and binding obligation of the applicable Prime Entity enforceable
against the Prime Entity party thereto in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors rights generally and general equitable principles.
(xii) Litigation. There are no claims, actions, suits or
proceedings pending, and, to the knowledge of each of PGI and PGLP,
there are no investigations pending or claims, actions, suits,
proceedings or investigations threatened, before any court,
governmental unit or any arbitrator with respect to the Prime Entities
in which an adverse determination is reasonably likely and would have a
Material Adverse Effect.
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(xiii) Property Improvements. To the knowledge of each of PGI
and PGLP, except as previously disclosed, the improvements at each
Property owned by a Prime Entity is in good condition and repair,
ordinary wear and tear excepted, and has not suffered any material
casualty or other material damage which has not been repaired in all
material respects. To the knowledge of each of PGI and PGLP except as
previously disclosed, there is no material latent or patent structural,
mechanical or other significant defect or deficiency in the
improvements owned by a Prime Entity.
(xiv) Condemnation Proceedings. Except as disclosed in the
Title Reports or as otherwise previously disclosed, no proceedings have
been commenced, or, to the knowledge of each of PGI and PGLP,
threatened, by an authority having the power of eminent domain to
condemn any part of any Property owned by a Prime Entity or any
improvements thereon or, to the knowledge of each of PGI and PGLP, any
property owned by a party to a reciprocal easement agreement affecting
any Prime Entity, except such as would not have a Material Adverse
Effect.
(xv) Bankruptcy and Insolvency. To the knowledge of each of
PGI and PGLP, none of the tenants now occupying any Property owned by a
Prime Entity, is the subject of any bankruptcy, reorganization,
insolvency or similar proceedings.
(xvi) Rent Roll. The rent roll for the Property owned by a
Prime Entity, contained in the closing certificates dated November 17,
1997 for each such entity, is true, correct and complete and, as of the
date thereof, there are no prospective tenant cancellation rights,
prospective renewal or extension options or future rent abatements or
unpaid tenant concessions or other unpaid landlord obligations other
than those summarized on such rent roll, except in each case to the
extent any inaccuracies would not, individually or in the aggregate,
have a Material Adverse Effect.
(xvii) Neither PGI nor PGLP is a "foreign person" within the
meaning of Section 1445 (f) of the Code nor a "foreign partner" within
the meaning of Section 1446 of the Code.
(xviii) Neither PGI nor PGLP owns, directly or indirectly, (i)
five percent (5%) or more of the total combined voting power of all
classes of stock entitled to vote, or five percent (5%) or more of the
total number of shares of all classes of stock, of any corporation that
is a tenant in a Property owned by a Prime Entity or (ii) an interest
of five percent (5%) or more in the assets or net income of any tenant
in a Property owned by a Prime Entity.
(xix) To the knowledge of each of PGI and PGLP, no condition
exists which, with the giving of notice or the passage of time, or
both, would permit any party to cancel its obligations under any
reciprocal easement agreement to which any Prime Entity is a party or
to be relieved of its operating covenants thereunder, except as set
forth in the rent roll described in subparagraph (xvi) above.
(xx) Neither PGI nor PGLP has received or been informed in
writing of the receipt of any written notice which is still in effect
that there is any violation of a condition
11
or agreement contained in any easement, restrictive covenant or any
similar instrument or agreement affecting any Property or any portion
thereof.
(xxi) Transfer Taxes. There are no transfer taxes payable,
accruing or otherwise arising out of the transfer of the Contributed
Entities to the Company or to the Operating Partnership (including any
reconstitution of the limited partnership interests to general
partnership interests) which shall not have been paid on or prior to
the date hereof, other than transfer taxes relating to the transfer to
the Company of the Contributed Entities in the amount of no more than
$2,500,000.
(b) For the purposes of the representations and warranties of
PGI and PGLP made pursuant hereto, a statement that a fact is true to "the
knowledge" means, that after reasonable investigation, none of the following
Persons actually knows such statement to be untrue: Xxxxxxx X. Xxxxxxx, Xxxxxxx
X. Xxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and Xxxxxx
Xxxxxx. For purposes of this Agreement, any written notice given to the on-site
property manager of a Property shall be deemed to have been given to the
Contributed Entity and PGI.
(c) Xxxxxxxxx hereby represents and warrants to the Company
and the Operating Partnership as follows:
(i) This Agreement constitutes his valid and legally
binding obligation, enforceable against him in accordance with its terms.
(ii) He owns the rights and interests to be conveyed
by him to the Operating Partnership pursuant to the terms of this Agreement free
and clear of all liens and encumbrances.
(d) Except as specifically warranted in this Section, the
Prime Transferors and Xxxxxxxxx make no representations and warranties to the
Company or the Operating Partnership whatsoever regarding the Contributed
Entities, the assets or properties to be acquired under the Contributed
Contracts, or the assets of the Contributed Entities, including, but not limited
to, THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH
ARE SPECIFICALLY DISCLAIMED. The Operating Partnership acknowledges that all of
the assets to be conveyed by the Prime Transferors and Xxxxxxxxx to the
Operating Partnership (and all of the assets of the Contributed Entities) will
be conveyed "as is, where is." The Prime Transferors and Xxxxxxxxx make no
representation or warranty with respect to any asset which is the subject of any
of the Facility Acquisition Agreements.
(e) The Company hereby represents, warrants and covenants with
and to the Prime Transferors and Xxxxxxxxx as follows:
(i) It is a real estate investment trust duly
organized and validly existing under the laws of the State of Maryland.
12
(ii) It has the full power and authority under the
terms of its trust agreement to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(iii) This Agreement constitutes its valid and
legally binding obligation, enforceable against it in accordance with its terms.
(iv) On the Closing Date, except as otherwise agreed
to by PGI, the Operating Partnership and/or the Services Company will hire all
of the employees of the Prime Transferors associated with the Contributed
Entities and will assume all liabilities and obligations to or with respect to
such employees, including any accrued but unpaid benefits, bonuses and vacation
pay.
(f) The Operating Partnership hereby represents, warrants and
covenants with and to the Prime Transferors and Xxxxxxxxx as follows:
(i)It is a limited partnership duly organized and
validly existing under the laws of the State of Delaware.
(ii) It has full legal power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
(iii) This Agreement constitutes its valid and
legally binding obligation, enforceable against it in accordance with its terms.
(iv) On the Closing Date, except as otherwise agreed
to by PGI, the Operating Partnership and/or the Services Company will hire all
of the employees of the Prime Transferors associated with the Contributed
Entities and will assume all liabilities and obligations to or with respect to
such employees, including any accrued but unpaid benefits, bonuses and vacation
pay.
(v) The Common Units to be issued by the Operating
Partnership to the Prime Transferors and Xxxxxxxxx pursuant to the terms of this
Agreement will, when issued in accordance herewith be duly authorized, fully
paid and nonassessable.
(vi) The Operating Partnership will not take any
action which would cause the transfers provided for in Section 1 not to qualify
for tax-free treatment under section 351 of the Code.
(g) All of the representations and warranties provided for in
this Section 6 shall survive the Closing Date and the delivery of the closing
documents on the Closing Date for a period of two years.
7. CONDITIONS PRECEDENT.
13
(a) The obligation of the Prime Transferors and Xxxxxxxxx to
consummate the transactions contemplated hereby is subject to the satisfaction
of the following conditions (any of which may be waived by the Prime Transferors
and Xxxxxxxxx in writing):
(i) All the terms, covenants and conditions of this
Agreement to be complied with and performed by the Company or the Operating
Partnership on or before the Closing Date shall have been fully complied with
and performed in all respects.
(ii) All the representations and warranties made by
the Company and Operating Partnership herein shall be true and correct in all
material respects on and as of the Closing Date.
(iii) All consents required for the valid and
effective transfer of the assets to be transferred in accordance with Section 1
shall have been obtained and the consent to the assumption by the Operating
Partnership of the obligations to be assumed by the Operating Partnership
pursuant to Section 4 shall have been obtained, except for any approvals and
consents described in Schedule 8 to this Agreement.
(iv) There shall be no pending or threatened
litigation against any of the parties hereto concerning or relating to the
transactions contemplated hereby.
(v) The approval of all administrative agencies, if
any, whose approval of the transactions contemplated hereby is necessary or
desirable shall have been obtained.
(vi) The Company, the Operating Partnership, PGI and
the other parties signatory thereto shall have entered into a Registration
Rights Agreement in a form mutually agreeable to the parties thereto.
(vii) The Company, the Operating Partnership, Xxxxxxx
X. Xxxxxxx and PGI shall have entered into a Non-Compete Agreement substantially
in a form mutually agreeable to the parties thereto.
(viii) PGI shall have entered into an Indemnity
Agreement in a form mutually agreeable to the parties thereto.
(ix) PGI and the Operating Partnership shall have
entered into a Right of First Offer Agreement in a form mutually agreeable to
the parties thereto.
(b) The obligations of the Company and the Operating
Partnership to consummate the transactions contemplated hereby are subject to
the satisfaction of the following conditions (any of which may be waived by the
Company and Operating Partnership in writing):
(i) All the terms, covenants and conditions of this
Agreement to be complied with and performed by the Prime Transferors and
Xxxxxxxxx on or before the Closing Date shall have been fully complied with and
performed in all respects.
14
(ii) All the representations and warranties made by
the Prime Transferors and Xxxxxxxxx herein shall be true and correct in all
material respects on and as of the Closing Date.
(iii) All required consents necessary for the valid
and effective transfer of the assets to be transferred to the Operating
Partnership in accordance with the provisions of Section 1 shall have been
obtained and the consent to the assumption by the Operating Partnership of the
obligations to be assumed by the Operating Partnership pursuant to Section 4
shall have been obtained, except for any approvals and consents described in
Schedule 8 to this Agreement.
(iv) The Operating Partnership shall have obtained
title insurance (or endorsed commitment) insuring that all real property owned
by the Contributed Entities are vested in the respective entities free and clear
of all mortgages, liens and encumbrances except those reasonably acceptable to
the Operating Partnership.
(v) The conditions referred to in Sections 7(a)(iv)
through 7(a)(ix) shall have been complied with or otherwise satisfied.
(vi) PGI shall have entered into an Environmental
Remediation and Indemnification Agreement with the Operating Partnership in a
form mutually agreeable to the parties thereto.
8. INDEMNIFICATION
(a) Each Prime Transferor and Xxxxxxxxx hereby agrees to
indemnify the Company and the Operating Partnership for, and to hold the Company
and the Operating Partnership harmless from, the following:
(i) Any and all liabilities, damages, losses, costs
or deficiencies including any liabilities, damages, losses, costs or
deficiencies under the Securities Act of 1933, as amended, resulting from any
misrepresentation, breach of any warranty or nonfulfillment of any agreement or
covenant on the part of the Prime Transferor or Xxxxxxxxx, whether contained in
this Agreement or in any document furnished in connection with the transactions
contemplated hereby; and
(ii) Any and all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses incident to the foregoing,
including reasonable attorney's fees.
(b) Each of the Company and the Operating Partnership hereby
agrees to indemnify each Prime Transferor and Xxxxxxxxx for, and to hold each
Prime Transferor and Xxxxxxxxx harmless from, the following:
15
(i) Any and all indebtedness, lease, contract or
other liabilities and obligations assumed by the Company and the Operating
Partnership in accordance with the terms hereof;
(ii) Any and all liabilities, losses, costs, damages
or deficiencies resulting from any misrepresentations, breach of any warranty or
nonfulfillment of any agreement or covenant on the part of the Company or the
Operating Partnership, whether contained in this Agreement or in any document
furnished in connection with the transactions contemplated hereby;
(iii) Any and all liabilities, damages, losses, costs
or deficiencies resulting from any act or circumstance relating to any of the
assets transferred (including the assets and operations of the Contributed
Entities and operations of PGI's office and industrial real estate division)
whenever occurring;
(iv) Any loss, claim, damage, or liability, including
any loss, claim, damage, or liability under the Securities Act of 1933, as
amended, or any applicable state securities laws, arising out of, or
attributable to the Offering, except for losses, claims, damages or liabilities
arising from the inaccuracy of information supplied by PGI for inclusion in the
prospectus relating to the Offering; and
(v) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to any of the foregoing,
including reasonable attorneys' fees.
(c) Any party seeking indemnification ("Indemnitee") pursuant
to this Section 8 shall promptly (within 20 days of service to the Indemnitee if
a third party has commenced actual litigation against the Indemnitee) give
written notice to the party from which indemnification is sought ("Indemnitor")
after the Indemnitee has knowledge of any claim against the Indemnitor as to
which recovery may be sought against the Indemnitee pursuant to this Section 8,
or of the commencement of any legal proceedings against the Indemnitee as to
such claim after the Indemnitee has knowledge of such proceedings, whichever
shall first occur, and shall permit the Indemnitor to assume the defense of any
such claim or any litigation resulting from such claim. Such notice shall
specify in reasonable detail the facts known to the Indemnitee giving rise to
such indemnification rights and, if possible, an estimate of the amount of
liability which could result therefrom. The right of the Indemnitee to
indemnification hereunder shall be deemed agreed to unless, within ten days
after the receipt of such notice, the Indemnitee is notified in writing by the
Indemnitor that it disputes the right to indemnification as set forth in such
notice. Failure by the Indemnitor to notify the Indemnitee of the Indemnitor's
election to defend such action within ten days after notice thereof shall have
been given to the Indemnitor, or failure to deliver notification to the
Indemnitee by the Indemnitor that the Indemnitee's right to indemnification is
being disputed, shall be deemed an acknowledgment by Indemnitor that Indemnitee
is entitled to indemnification hereunder and shall be deemed to be an election
by Indemnitor to defend such action. The Indemnitor shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of any
judgment (except with the consent of the Indemnitee) or enter into any
settlement (except with the consent of the Indemnitee) which does not include as
an unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnitee of a full, absolute and unconditional release from all liability in
respect of such claim or litigation.
16
(d) If the Indemnitor shall not assume the defense of any such
claim or litigation resulting therefrom, the Indemnitee may defend against such
claim or litigation in such manner as it may deem appropriate. The Indemnitee
may settle such claim or litigation on such terms as it may deem appropriate and
the Indemnitor shall promptly reimburse the Indemnitee for the amount of such
settlement, and all expenses, legal or otherwise, incurred by the Indemnitee in
connection with the defense against, or settlement of, such claim or litigation.
If no settlement of such claim or litigation is made, the Indemnitor shall
promptly reimburse the Indemnitee for the amount of any judgment rendered with
respect to such claim or in such litigation, and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense against such claim or
litigation. Notwithstanding the foregoing, if the Indemnitor has disputed the
Indemnitee's right to indemnification in accordance with the provisions of
Section 8(c), the Indemnitor shall not be obligated to pay the Indemnitee the
amount provided for in this Section 8(d) until such dispute has been resolved
and it has been determined that the Indemnitor is required to make such
indemnification payment.
(e) The right of any party to seek indemnification hereunder
shall expire as to any claim not made on or prior to the second anniversary of
the Closing whether or not the basis for any such claim was known on such date.
(f) The Prime Transferors maximum liability under this Section
8 shall be limited to $69,300,000.
(g) The recourse against Xxxxxxxxx for indemnity claims under
this Section 8 shall be limited to the reconveyance by Xxxxxxxxx to the
Operating Partnership of that certain amount of Common Units equal in value
(based on the then trading value of the Common Shares of the Company) to the
amount of the indemnity claim. Further, in no event shall Xxxxxxxxx be liable
for further amounts after the reconveyance to the Operating Partnership of his
full 110,000 Common Units received on the date hereof. Without the prior written
consent of the Operating Partnership, Xxxxxxxxx agrees not to assign, transfer,
pledge or otherwise convey such 110,000 Common Units for a period expiring on
the later of (i) November 17, 1999, or (ii) the satisfaction of any claim for
indemnification made of Xxxxxxxxx pursuant to this Section 8.
(h) As between the Prime Transferors and Xxxxxxxxx all
liabilities under this Section 8 shall be shared on a pro-rata basis in
accordance with the maximum amount of liability under this Section 8 of the
Prime Transferors as set forth in Section 8(f) of $69,300,000 and an amount for
Xxxxxxxxx of $2,200,000, unless the liability is caused by the gross negligence
or willful misconduct of either the Prime Transferors or Xxxxxxxxx, in which
event, as between the Prime Transferors and Xxxxxxxxx, the Person guilty of the
gross negligence or willful misconduct shall be solely liable.
17
9. MISCELLANEOUS.
(a) Each of the parties hereto hereby covenants and agrees
that subsequent to the Closing Date they will, at any time, and from time to
time, upon the request and at the expense of the Company, do, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required to fully effectuate the transactions
contemplated by this Agreement. Each of the Prime Transferors and Xxxxxxxxx
hereby constitutes and appoints the Company as its true and lawful
attorney-in-fact, with full power of substitution, to collect for the account of
the Company or the Operating Partnership, as applicable, any receivables and
other items conveyed to the Company or the Operating Partnership, as applicable,
pursuant to the provisions of Section 1, to endorse in the name of the Prime
Transferor, Xxxxxxxxx, the Company or the Operating Partnership, or any of them,
any check received on account of any receivable, claim or other item, to
institute and prosecute in the name of a Prime Transferor, Xxxxxxxxx or
otherwise, any and all proceedings which the Company or the Operating
Partnership may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in and to any of such transferred assets.
(b) All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and be personally
delivered against a written receipt, delivered to a reputable overnight courier,
for overnight delivery, transmitted by confirmed telephonic facsimile (fax) or
transmitted by mail, registered, express or certified, return receipt requested,
postage prepaid, addressed as follows:
If to the Company or the Operating Partnership:
Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
With a copy to:
Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
18
If to PGI or PGLP:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
With a copy to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
and
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
If to Xxxxxxxxx:
Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
All notices, demands and requests shall be effective upon being properly
personally delivered, one (1) business day after delivery to a reputable
overnight courier, upon transmission of a confirmed fax, or upon being deposited
in the United States mail in the manner provided in this Section 9. However, the
time period in which a response to any such notice, demand or request must be
given shall commence to run from the date of personal delivery, one (1) business
day after delivery to a reputable overnight courier, the date on the
confirmation of a fax, or the date on the return receipt, as applicable. If any
party refuses delivery, the notice, demand or request shall be deemed received
(i) one business day after personal delivery of the notice, demand or request
was attempted or the notice, demand or request was delivered to a reputable
overnight courier or was transmitted by fax or (ii) three business days after
the notice, demand or request was deposited in the United States mail.
(a) This Agreement may be modified or amended from time to
time only by a written instrument executed by all of the parties hereto.
19
(b) Captions contained in this Agreement are inserted only as
a matter of convenience and reference, and in no way define, limit, extend or
describe the scope of this Agreement, or the intent of any provision hereof. All
references to Sections herein shall refer to Sections of this Agreement unless
the context clearly requires otherwise.
(c) This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns.
(d) This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Illinois without regard to
its conflicts of laws rules.
(e) This Agreement represents the entire agreement of the
parties hereto with respect to the subject matter hereof.
(f) This Agreement may be executed in counterparts which,
taken together, shall constitute one and the same instrument.
(g) Notwithstanding anything in this Agreement to the
contrary, there shall be no recourse for any of the obligations set forth herein
against the partners of PGLP or to or against their personal assets.
[signature page follows]
20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
PRIME GROUP REALTY TRUST
By: /s/ W. Xxxxxxx Xxxxxx
-----------------------------------
Its: Executive VP
-------------------------
PRIME GROUP REALTY, L.P.
By: Prime Group Realty Group
Its General Partner
By: /s/ W. Xxxxxxx Xxxxxx
-----------------------------------
Its Executive VP
--------------------------
PRIME GROUP REALTY SERVICES, INC.
By: /s/ W. Xxxxxxx Xxxxxx
-----------------------------------
Its Executive VP
--------------------------
THE PRIME GROUP, INC.
By: /s/ Xxx Xxxxxxxxx
------------------------------------
Name: Xxx Xxxxxxxxx
---------------------------------
Title: SVP
--------------------------------
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx,
Managing General Partner
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
21
SCHEDULE 1
TO
FORMATION AGREEMENT
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
K/77 Investors Limited Partnership
(dissolve after assignments)........... 98.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P. Kilico Realty
------------------------------------------- ------------------------------- -------------------------- -------------------------
77 West Xxxxxx Limited Partnership..... 5% G.P. Kilico Realty
------------------------------------------- ------------------------------- -------------------------- -------------------------
5% G.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
34.9% L.P. .1% L.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
55% L.P. K/77 Investors Limited
Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
77 Fitness Center Limited Partnership.. 89.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
10% G.P. PGI (from Prime 77
Fitness Center, Inc.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
0000 Xxxxxxxxx
Xxxx, L.L.C............................ 98% L.L.C. PGLP (includes 1% from
PGLP, Inc. and 1% from
Prime International,
Inc.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% L.L.C. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% L.L.C. Prime Group II, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
Triad Development Company (dissolve after
assignments) 25% G.P. Kilico Realty
------------------------------------------- ------------------------------- -------------------------- -------------------------
(PGC Development, Ltd. to distribute its 25% L.P. KILICO
ownership interests prior to assignments)
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P. PGI (from Prime of
Tennessee, Inc.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
.48% L.P. (from PGC PGI (from PGC, Inc.)
Development, Ltd.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
16.04% L.P. (from PGC Professional Plaza,
Development, Ltd.) Ltd. (from R. Xxx Xxxx)
------------------------------------------- ------------------------------- -------------------------- -------------------------
32.38% L.P. (31.48% from PGC .1% L.P. PGI
Development, Ltd.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
Nashville Office Building I, Ltd...... 49% G.P. Triad
------------------------------------------- ------------------------------- -------------------------- -------------------------
50.9% L.P. .1% L.P. PGI (from Xxxxxxx
Xxxx)(1)
------------------------------------------- ------------------------------- -------------------------- -------------------------
Professional Plaza, Ltd.(1)............ 49% G.P. Triad
------------------------------------------- ------------------------------- -------------------------- -------------------------
50.9% L.P. .1% L.P. PGI (from Xxx Xxxxxxx(2)
------------------------------------------- ------------------------------- -------------------------- -------------------------
-------------------
(1) Use Power of Attorney granted to Triad Development Company to assign to
PGI and then assign to Operating Partnership and the Company.
(2) Operating Partnership will assign a .1% L.P. interest in this limited
partnership to R. Xxx Xxxx.
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
Centre Square II, Ltd.................. 49% G.P Triad
------------------------------------------- ------------------------------- -------------------------- -------------------------
50.9% L.P. .1% L.P. PGI (from Xxxxx Xxxxxx(2)
------------------------------------------- ------------------------------- -------------------------- -------------------------
Old Kingston Properties, Ltd. ....... . 49% G.P. Triad
------------------------------------------- ------------------------------- -------------------------- -------------------------
50.9% L.P. .1% L.P. PGI (from Xxxxx
Xxxxxxx)(2)
------------------------------------------- ------------------------------- -------------------------- -------------------------
Triad Parking Corporation (dissolve after 50% stock PGI
assignments)...........................
------------------------------------------- ------------------------------- -------------------------- -------------------------
50% stock Kilico Realty
------------------------------------------- ------------------------------- -------------------------- -------------------------
Triad Parking Company, Ltd............. 98.9% L.P. .1% L.P. Triad
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P. Triad Parking
Corporation
------------------------------------------- ------------------------------- -------------------------- -------------------------
Prime Columbus
Industrial, L.L.C...................... 98% LLC PGLP (includes 1% from
Prime International,
Inc. and 1% from PGLP,
Inc.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
-------------------
(2) Use Power of Attorney granted to Triad Development Company to assign to
PGI and then assign to Operating Partnership and the Company.
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% LLC PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% LLC Prime Group II, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
Arlington Heights I, L.P............... 48.9% L.P. .1% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
50% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P.* PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
Arlington Heights II, L.P.............. 48.9% L.P. .1% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
50% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P.* PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
Arlington Heights III, L.P............. 48.9% L.P. .1% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
50% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P.* PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
Prime IRB Holdings, L.P (to be dissolved
after assignments and transfer of Bonds) 98.9% L.P. .1% L.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P. PGLP (from Prime IRB,
Inc.)
------------------------------------------- ------------------------------- -------------------------- -------------------------
* 1% G.P. interest to be assigned to PGI from Prime/AH Industrial Center,
Inc. prior to assignments.
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
East Chicago Enterprise Center Limited
Partnership............................ 50% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
22.5% G.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
27.4% L.P. .1% L.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Xxxxxx/Prime Industrial Partners....... 50% G.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% G.P. .1% G.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
Xxxxxxx Enterprise Center Limited
Partnership............................ 50% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
25% G.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
24.9% L.P. .1% L.P. PGI
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
K-P Enterprise Centers, Inc. 50% stock PGLP
(dissolve after assignments)........... 50% stock Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
K-P Enterprise Centers
Limited Partnership (dissolve after
assignments)........................... 49% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
50% L.P. Prime Group IV, L.P.
------------------------------------------- ------------------------------- -------------------------- -------------------------
1% G.P. K-P Enterprise Centers,
Inc.
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center I, L.P............... 50% G.P. K-P Enterprise
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center II, L.P.............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center III, L.P............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center IV, L.P.............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center V, L.P............... 50% G.P. . K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center VI, L.P.............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Interest Being Transferred to Interest Being
Operating Partnership Transferred to
Entity the Company Assignor
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center VII, L.P............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center VIII, L.P............ 50% G.P. . K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center IX, L.P.............. 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
------------------------------------------- ------------------------------- -------------------------- -------------------------
Enterprise Center X, L.P............... 50% G.P. K-P Enterprise Centers
Limited Partnership
------------------------------------------- ------------------------------- -------------------------- -------------------------
49.9% L.P. .1% L.P. PGLP
------------------------------------------- ------------------------------- -------------------------- -------------------------
-------------------
All entities on this Schedule 1 are Prime Entities other than 0000
Xxxxxxxxx Xxxx, L.L.C. and Prime Columbus Industrial, L.L.C. which are Prime
Contribution Entities.
SCHEDULE 4 TO FORMATION AGREEMENT
Asset Purchase Agreement by and among Continental Offices, Ltd.,
Continental Offices Ltd. Realty and Prime Group Realty, L.P.
Agreement for Purchase or Exchange dated June 13, 1997 by and between
Sun Annex Partners and Salt Creek Partners, Ltd. and The Prime Group, Inc.
Assignment and Assumption of Real Estate Purchase and Sale Agreement
dated November 16, 1997 by and between The Prime Group, Inc. and 0000
Xxxxxxxxx Xxxx, L.L.C. and 0000 Xxxxxxxxx Xxxx, L.L.C.
Purchase and Sale Agreement dated October, 1997, by and between The
Mutual Life Insurance Company of New York, a New York mutual life insurance
company and The Prime Group, Inc.
Contract of Sale dated October 13, 1997, by and between The Mutual Life
Insurance Company of New York, a New York mutual life insurance company and
The Prime Group, Inc.
Contract of Sale dated October 13, 1997 between MGI Properties
(formerly known as Mortgage Growth Investors), Xxx Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (Seller) and The Prime Group, Inc., 77 West Xxxxxx
Limited Partnership (Purchaser).
Purchase and Sale Agreement and Joint Escrow instructions dated October
1, 1997 by and between Mission Land Company and The Prime Group, Inc.
SCHEDULE 5 TO FORMATION AGREEMENT
NONE
Schedule 6
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 1
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
BUYER: XX
SELLER: XX
PROPERTY:
RECEIPTS
THE PRIME GROUP, INC. 31,865.20
PARTNERSHIP FUNDING (KNOXV) 273,560.00
PARTNERSHIP FUNDING RE: 77 893,827.00
PRIMESTONE - PGI PRIMESTON 240,000.00
PRIMESTONE - BLACKSTONE 45,160,000.00
PRIMESTONE - PRUDENTIAL SE 39,600,000.00
SECURITY CAPITAL 39,000,000.00
PRUDENTIAL SECURITIES LOAN 82,613,370.00
PRUDENTIAL SECURITIES RE: 232,125,000.00
EM/TICOR TO COME 373,579.61
CT&TCO./JO EM TO COME 800,000.00
--------------
TOTAL RECEIPTS 441,711,202.01
--------------
--------------
DISBURSEMENTS
A BANK OF MONTREAL, CHICAGO BRANCH W 000000000000 11/17/97
230,802,639.78
CHECK TOTAL 230,802,639.78
B XXXXXX FINANCIAL, INC. W 000000002391 11/17/97
8,512,403.26
CHECK TOTAL 8,512,403.26
C ALLIED CAPITAL W 000000002392 11/17/97
11,258,519.92
2,011,805.55
CHECK TOTAL 13,270,325.47
D MCHENRY STATE BANK W 000000002473 11/17/97
7,707,033.45
CHECK TOTAL 7,707,033.45
E NATIONWIDE LIFE INSURANCE COMPANY W 000000002396 11/17/97
6,443,983.60
CHECK TOTAL 6,443,983.60
F NATIONWIDE LIFE INSURANCE COMPANY W 000000002398 11/17/97
690,426.27
CHECK TOTAL 690,426.27
G GENERAL AMERICAN LIFE INS CO W 000000002399 11/ 17/97
5,423,246.28
H GENERAL AMERICAN LIFE INS CO W 000000002402 11/ 17/97
2,480,104.36
CHECK TOTAL 2,480,104.36
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 2
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
I GENERAL AMERICAN LIFE INS CO W 000000002403 11/ 17/97
1,756,335.41
CHECK TOTAL 1,756,335.41
J GENERAL AMERICAN LIFE INS CO W 000000002404 11/ 17/97
4,006,541.08
CHECK TOTAL 4,006,541.08
K FIRST TENNESSEE BK NATL ASOC KNOXVILLE W 000000002405 11/ 17/97
1,123,676.59
CHECK TOTAL 1,123,676.59
L FIRST TENNESSEE BK NATL ASSOC KNOXVILLE W 000000002406 11/17/97
5,293,736.78
CHECK TOTAL 5,293,736.78
M MID NORTH FINANCIAL SERVICES, INC W 000000002461 11/17/97
1,380,605.72
CHECK TOTAL 1,380,605.72
N BANK ONE ILLINOS, NA W 000000002408 11/17/97
6,851,602.96
CHECK TOTAL 6,851,602.96
O LASALLE BANK NI W 000000002409 11/17/97
3,586,653.61
CHECK TOTAL 3,586,653.61
P LASALLE NATIONAL BANK W 000000002411 11/17/97
1,916,681.97
CHECK TOTAL 1,916,681.97
Q LASALLE BANK NA W 000000002412 11/17/97
3,830,113.09
CHECK TOTAL 3,830,113.09
R MELLON MORTGAGE COMPANY W 000000002413 11/17/97
647,496.75
CHECK TOTAL 647,496.75
S WEST SUBURBAN BANK W 000000002415 11/17/97
495,084.05
CHECK TOTAL 495,084.05
T LASALLE BANK NA W 000000002416 11/17/97
498,577.10
CHECK TOTAL 498,577.10
U AID ASSOCIATION FOR LUTHERANS W 000000002417 11/17/97
3,711,924.67
CHECK TOTAL 3,711,924.67
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 3
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
V MIDLAND LOAN SERVICES W 000000002418 11/17/97
13,988,172.25
CHECK TOTAL 13,988,172.25
W WEST SUBURBAN BANK W 000000002421 11/17/97
153,383.85
CHECK TOTAL 153,383.85
X LASALLE BANK NA W 000000002423 11/17/97
1,057,253.72
CHECK TOTAL 1,057,253.72
Y LASALLE BANK NA W 000000002424 11/17/97
254,109.37
CHECK TOTAL 254,109.37
A LASALLE BANK NA W 000000002426 11/17/97
3,302,323.64
CHECK TOTAL 3,302,323.64
AA MERCANTILE BANK W 000000002428 11/17/97
4,705,340.59
CHECK TOTAL 4,705,340.59
AB MERCANTILE BANK W 000000002430 11/17/97
1,077,115.42
CHECK TOTAL 1,077,115.42
AC MERCANTILE BANK W 000000002434 11/17/97
2,350,893.56
CHECK TOTAL 2,350,893.56
AD NATIONAL CANADA CORPORATION W 0000000002419 11/17/97
19,444,186.94
CHECK TOTAL 19,444,186.94
AE CHICAGO TITLE AND TRUST COMPANY
200,000.00
CHECK TOTAL 200,000.00
AF XXXXXXX X. XXXXX W 000000002436 11/17/97
144,026.72
CHECK TOTAL 144,026.72
AG LUMBERMANS MUTUAL CASUALTY COMPANY W 000000002437 11/17/97
PER CLOSING STATEMENT (XXXXXX) 3,050,000.00
CHECK TOTAL 3,050,000.00
AH KILICO REAL ESTATE ACCOUNT W 000000002439 11/17/97
2,524,272.00
CHECK TOTAL 2,524,272.00
AI U.S. TITLE GUARANTY CO, INC W 000000002463 11/17/97
SALT CREEK NET PROCEEDS 1,365,284.71
CHECK TOTAL 1,365,284.71
AJ AMERICAN UNITED LIFE INSURANCE COMPANY W 000000002441 11/17/97
2,350,950.57
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 4
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
CHECK TOTAL 2,350,950.57
AK NARCO 4300 ASSOCIATES W 000000002442 11/17/97
PYT. AS DIR., PROCEEDS 334,676.00
CHECK TOTAL 334,676.00
AL XXXXX STREAM INDUSTRIAL PARK W 000000002443 11/17/97
PYT. AS DIR., PROCEEDS 348,335.00
CHECK TOTAL 348,335.00
AM NARCO ENTERPRISES, INC. W 000000002445 11/17/97
PYT. AS DIR., PROCEEDS 238,774.00
CHECK TOTAL 238,774.00
AN NARCO LISLE ASSOCIATES W 000000002446 11/17/97
PYT. AS DIR., PROCEEDS 3,228,760.00
CHECK TOTAL 3,228,760.00
XX XXXXX 130 W 000000002450 11/17/97
PYT. AS DIR., PROCEEDS 952,036.00
CHECK TOTAL 952,036.00
AP TRI-STATE INDUSTRIAL PARK W 000000002451 11/17/97
PYT. AS DIR., PROCEEDS 51,869.00
CHECK TOTAL 51,869.00
AQ UTAH FIRST EXCHANGE, INC. W 000000002452 11/17/97
XXXXXX X. XXXXXXX PROCEEDS 169,522.98
CHECK TOTAL 169,522.98
AR IBD W 000000002453 11/17/97
PROCEEDS 427,987.00
CHECK TOTAL 47,987.00
AS XXXXXXX FORELICH & DIVINE LTD. W 000000002454 11/17/97
LEGAL FEES 111,000.00
CHECK TOTAL 111,000.00
AT CREDIT SUISSE, FIRST BOSTON W 000000002454 11/17/97
LETTER OF CREDIT EXTENSION FEE 75,000.00
CHECK TOTAL 75,000.00
AU CHICAGO TITLE 97970059
5,856,255.57
143,744.43
CHECK TOTAL 6,000,000.00
AW XXXXXXX X. XXXXX W 000000002502 11/17/97
AFFILIATE LOAN PAYMENT 6,114,204.00
CHECK TOTAL 6,114,204.00
AX XXX XXX
PROCEEDS/HADESMAN 100,000.00
CHECK TOTAL 100,000.00
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 5
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
AY TO COME
PYT RE: SURVEY 4,700.00
CHECK TOTAL 4,700.00
B CT&T CO.
TITLE - OTHER HADESMAN 17,665.00
CHECK TOTAL 17,665.00
BA CT&T CO.
PYT RE TECHNOLOGY 1,337.00
CHECK TOTAL 1,337.00
BB CT&T CO.
TRANSFER TAX RE 801N TECHNOLOGY 6,075.00
CHECK TOTAL 6,075.00
BC CT&T CO.
ALL OTHER TRANSFER TAX 70,632.00
CHECK TOTAL 70,632.00
XX XXXXXXX & XXXXXXXXXX
BROKER 50,000.00
CHECK TOTAL 50,000.00
BE PRUDENTIAL SECURITIES, INC. W 000000002485 11/17/97
PYT RE FINANCIAL ADVISORY FEE 1,841,618.50
CHECK TOTAL 1,841,618.50
BF BANK OF BOSTON W 000000002494 11/17/97
940,062.27
CHECK TOTAL 940,062.27
BG PRUDENTIAL SECURITIES, BK OR NY W 000000002497 11/17/97
562,500.00
CHECK TOTAL 562,500.00
XX XXXXXXX & XXXX
132,500.00
CHECK TOTAL 132,500.00
BI XXXX, XXXX & XXXXX
PYT. AS DIR., FEES & EXPENSES 291,200.00
CHECK TOTAL 291,200.00
BJ THE PRIME GROUP, INC. W 000000002491 11/17/97
PROCEEDS 7,420,509.79
CHECK TOTAL 7,420,509.79
BK FIRST AMERICAN TITLE W 000000002521 11/17/97
PYT. AS DIR., RE XXXXX 202,824.30
CHECK TOTAL 202,824.30
XX XXXXX XXXXXXXX
BOND COUNSEL FEE 30,600.00
CHECK TOTAL 30,600.00
ESCROW RECEIPT AND DISBURSEMENT AUTHORIZATION PAGE 6
ESCROW NUM: 097070239-001 ORDER NUM: 01401-097070239 D2
CLOSER: XXXXX XXXXXX
XX XXXXXX
LETTER OF CREDIT FEE 9,776.00
ASSET MANAGEMENT FEE 6,209.72
CHECK TOTAL 15,985.72
BN XXX XXX
PARTNERSHIP PORTION 100,000.00
CHECK TOTAL 100,000.00
BO TO COME
SURVEYS RE HADESMAN 14,878.02
CHECK TOTAL 14,878.02
BQ AMERICAN NATIONAL BANK
TRUST FEES RE XXXXX 125.00
CHECK TOTAL 125.00
BR WINSTON & XXXXXX
CONTINENTAL OFFICE ESCROW 700,000.00
CHECK TOTAL 700,000.00
BS CONTINENTAL OFFICES LIMITED
PURCHSE OF ASSETS 5,225,129.00
CHECK TOTAL 5,225,129.00
XX XXXXXX
PYT. AS DIR., RE TRIAD 1,597,851.41
CHECK TOTAL 1,597,851.41
BU TICOR TITLE
33,186.02
CHECK TOTAL 33,186.02
BV CB COMMERCIAL
270,000.00
CHECK TOTAL 270,000.00
BW XXXXXXX X. XXXXX W 00000002520 11/17/97
PROCEEDS 3,277,025.00
CHECK TOTAL 3,277,025.00
BX CHICAGO TITLE
RETAIN RE MUNSTER 13,450,000.00
CHECK TOTAL 13,450,000.00
--------------
TOTAL DISBURSEMENTS 431,486,698.00
--------------
--------------
BALANCE 10,224,503.41
--------------
--------------
Schedule 7
To Formation Agreement
Disclosure Schedule
1. All matters disclosed in any title insurance reports or commitments
delivered in connection with the transactions contemplated by the Formation
Agreement.
2. All matters disclosed in any environmental assessments or reports
delivered in connection with the transactions contemplated by the Formation
Agreement.
3. All matters disclosed in the Registration Statement and Prospectus,
dated November 11, 1997, including the exhibits thereto and the financial
statements included therein.
4. Tenants in which The Prime Group, Inc. or Prime Group Limited
Partnership has a 5% or more interest:
Entity Address of Project
Brookdale Living Communities, Inc. 00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
The Prime Group, Inc. 00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Ambassador Apartments, Inc. 00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
The Prime Group, Inc.* 00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
*Will be assumed by Prime Group Realty Trust
5. Pending litigation:
(a) Xxxxx XxXxxxxx v. The Prime Group, Inc. . Pepper Construction Company,
77 West Xxxxxx Limited Partnership, and all unknown owners of 00 Xxxx Xxxxxx,
Xxxx Xx. 00 X0 0000, filed on June 9, 1994, in the Circuit Court of Xxxx
County, Illinois, Municipal Department - Second District. Plaintiff, an
employee of a tenant in the 77 West Xxxxxx Drive Building (the "77 Project'),
alleges that she was struck by a board providing protection to the wood
paneling in the elevator cab in the 77 Project and, as a result thereof,
sustained injuries. Pepper Construction
Company ("Pepper") constructed the protective barrier in the elevator cab.
The plaintiff alleges that The Prime Group, Inc. ("PGI") and 77 West Xxxxxx
Limited Partnership (the "77 Partnership") were negligent in failing to
maintain, inspect and repair the elevator cab in a reasonable manner and,
that her injuries were proximately caused by such negligence. This matter
has been forwarded to the 77 Partnership's insurance carrier. The 77
Partnership's insurance carrier has tendered the defense of this action to
the insurance carrier for Pepper, which has accepted the tender. It is
expected that any and all damages awarded to the plaintiff against the 77
Partnership or PGI will be fully covered by insurance.
(b) Xxxxxxx Xxxxxxx v. Schal Associates, Inc. , Pepper Construction, The
Prime Group, Inc. and Xxxxxxx Xxxxxx & Xxxxxxx, Xxxx Xx. 00X00000, filed on
December 15, 1992, in the Circuit Court of Xxxx County, Illinois, County
Department, Law Division. Plaintiff alleges that he was an employee of
Carrera Marble & Mosaics ("Carrera"), which performed work and/or supplied
materials for or in connection with the construction of the 77 Project. The
plaintiff alleges that, while working on the 77 Project, the plaintiff
sustained injuries, and is seeking damages therefor. The defense of this
case is being handled by Carrera's insurance carrier. It is expected that
any and all damages awarded to the plaintiff against the 77 Partnership or
PGI will be fully covered by insurance.
(c) Xxxxxxxx Xxxxxxx v. Schal Associate, Inc. and 77 West Xxxxxx Limited
Partnership, Case No. 92LI4542, filed in the Circuit Court, Xxxx County,
Illinois on November 20, 1992. The plaintiff in this action, alleges that he
was an employee of GMI Corporation ("GMI") , a subcontractor retained by
Schal to perform work in connection with the construction of the 77 Project,
and that he was injured while performing work on the 77 Project. The 77
Partnership has tendered defense of this lawsuit to the 77 Partnership's
insurance carrier, which, in turn, tendered defense of the action to
Massachusetts Bay Insurance Company ("MBIC") , the insurance carrier of GMI,
which has accepted the defense of this lawsuit. The defense of this action is
being handled by attorneys retained by MBIC. It is expected that any and all
damages awarded to the plaintiff against the 77 Partnership will be fully
covered by insurance.
(d) Xxxxxxx X. Xxxxxx x. Xxxxx Associates, Inc., The Prime Group, Inc.,
Prime Group Realty, Inc. and 00 Xxxx Xxxxxx Xxxxxxx Xxxxxxxxxxx, Xxxx Xx.
00X00000, filed on June 25, 1993, in the Circuit Court of Xxxx County,
Illinois, County Department, Law Division. Plaintiff in this action alleges
that he was employed by PDM Structural Group ("PDM") , a subcontractor
retained by Schal to perform work in connection with the construction of the
77 Project, and that, on or about July 2, 1991, the plaintiff was injured
while working on the 77 Project. The defense of PGI, Prime Group Realty,
Inc. and the 77 Partnership in this action was tendered to the insurance
carrier for Schal, which, in turn, tendered the defense on behalf of Schal,
PGI, Prime Grout) Realty, Inc. and the 77 Partnership to the insurance
carrier for PDM. The insurance carrier for PDM has accepted tender of the
defense on behalf of all defendants of this action. The defense of this
action is being handled by attorneys retained by PDM's insurance carrier. It
is expected that any and all damages awarded to the plaintiff against the 77
Partnership, PGI or Prime Group Realty, Inc. will be fully covered by
insurance.
2
(e) Xxxxxx Xxxxx v. 77 West Xxxxxx Limited Partnership, American National
Bank as Trustee under Trust Agreement No. 110025-08, The Prime Group, Inc. ,
X.X. Xxxxxxxxx Building, Schal Construction Company, Pepper Construction,
LaSalle Construction, Xxxxxx Xxxxx Company and TOR Construction, Case No.
93L010010, filed on August 17, 1993, in the Circuit Court of Xxxx County,
Illinois, County Department, Law Division. The plaintiff alleges that he was
an employee of Great Lakes Plumbing Heating Company ("Great Lakes"), a
subcontractor of Schal, and that, on or about May 2, 1992, plaintiff fell off
scaffolding while performing work in connection with the construction of the
77 Project and, as a result thereof, sustained injuries. The 77 Partnership
has tendered defense of this action on behalf of the 77 Partnership to the 77
Partnership's insurance carrier, which, in turn, tendered defense of this
action to the insurance carrier for Schal. The insurance carrier for Schal,
in turn, tendered defense of this action to the insurance carrier for Great
Lakes, which has accepted such tender. The defense of this action was being
handled by attorneys retained by the insurance carrier for Great Lakes. it is
expected that any and all damages awarded to the plaintiff against the 77
Partnership will be fully covered by insurance.
(f) Xxxxxxx Xxxxxxxxxx x. Xxxxx Associates, Inc. and The Prime Group, Inc.,
Case No. 94L08011, filed on June 29, 1994, in the Circuit Court of Xxxx
County, Illinois, County Department, Law Division. The plaintiff alleges
that he was an employee of Xxxxxx Caulking, Inc., a subcontractor of Schal,
and that he was injured on September 16, 1992 while performing work on or
with respect to the 77 Project. This matter has been forwarded to the 77
Partnership's insurance carrier, which tendered defense of this action to
Schal's insurance carrier. The defense of this action is being handled by
attorneys retained by Schal's insurance carrier. The 77 Partnership expects
that any and all damages awarded to the plaintiff against the 77 Partnership
will be fully covered
(g) Xxxxxxxx Xxxxxxxx v. The Prime Group, Inc., Schal Associates, Inc.
n/k/a Schal Bovis, Inc., 77 West Xxxxxx Limited Partnership, Pitt-Des Moines,
Inc. and Tribco Construction Co., Case No. 94L09311, filed on July 27, 1994,
in the Circuit Court of Xxxx County, Illinois, County Department, Law
Division. The plaintiff, alleges that he was an employee of Gateway Steel
which, in turn, was a subcontractor of Schal, and that, on August 18, 1990,
the plaintiff was injured while performing work in connection with the
construction of the 77 Project. This matter has been forwarded to the 77
Partnership's insurance carrier, which tendered defense of this action to
Schal's insurance carrier. Schal's insurance carrier subsequently tendered
this action to the insurance carrier for Tribco Construction Co. ("Tribco") .
The defense of this action is being handled by attorneys retained by Tribco's
insurance carrier. It is expected that any and all damages awarded to the
plaintiff against the 77 Partnership will be fully covered by insurance.
(h) Xxxxxxxx Xxxxxxxx v. The Prime Group, Inc., Schal Associates, Inc. and
n/k/a Schal Bovis, Inc., and PDM Structural Group, a division of Xxxx-Xxx
Xxxxxx, Xxx., Xxxx Xx. 00X00000, filed on January 11, 1995 in the Circuit
Court of Xxxx County, Illinois, County Department, Law Division. The
plaintiff alleges that he was an employee of Gateway Erectors, which, in
turn, was a subcontractor of Schal, and that, on or about, May 30, 1991,
while working at the 77 Project,
3
the plaintiff was injured when the plaintiff was required to lift a metal
re-enforcing bar at the 77 Project. Defense of this action on behalf of all
defendants is being handled by attorneys retained by the insurance carrier
for a subcontractor of Schal. It is expected that any and all damages awarded
to plaintiff against the 77 Partnership will be fully covered by insurance.
This case is in the discovery stage.
(i) Xxxxx X. Xxxx d/b/a Xxxxx Xxxx & Company v. Bank of Montreal, Xxxxxx
Investors Life Insurance Company, 77 West Xxxxxx Limited Partnership, The
Prime Group, Inc., The Xxxx Xxxx Company and Xxxx, Xxxxx & Xxxx, Case No.
96CH02007284, filed on July 11, 1996, in the Circuit Court of Xxxx County,
Illinois, County Department, Chancery Division. The plaintiff in this action
alleges that he provided real estate brokerage services in connection with a
sublease between Xxxx, Xxxxx & Xxxx, as sublandlord, and Xxxxxxx, Best &
Friedrich, as subtenant, for space in the 77 Project. Plaintiff claims he is
entitled to a commission payment of $117,530.00 for such services, plus
interest, fees and costs. The plaintiff seeks foreclosure and other
available relief. Motions to Dismiss this action, filed by the defendants,
have been granted. The defendants are seeking to recover attorneys' fees and
costs. The plaintiff has indicated that he intends to appeal the granting of
the Motions to Dismiss. The 77 Partnership and PGI are represented in this
matter by Xxxxxxx X. Xxxxxxx, Esq. of Winston & Xxxxxx.
(j) McOuay Services v. The Prime Group, Inc., Case No. 97MI-158877, filed
on October 29, 1997, in the Circuit Court of Xxxx County, Illinois, Municipal
Department, First District, Contract. The plaintiff in this action seeks
$10,353.01, plus interest, which plaintiff alleges is due for a piece of
equipment supplied by plaintiff for the 77 Project. PGI and 77 Partnership
claim that the equipment was defective and, therefore, no amount is owed to
plaintiff. PGI and 77 Partnership intend to defend this action.
(k) In Re: Xxxxx Material Handling, Inc. In 1995, Xxxxx Material Handling,
Inc. ("Xxxxx") filed for protection against creditors under Chapter 11 of the
United States Bankruptcy Code (Case No. 95-60258 in the United States
Bankruptcy Court, Northern District of Indiana, Hammond Division at
Xxxx/LaFayette). Xxxxx was the lessee under the Lease for space in the
facility now owned by Enterprise Center I, L.P. ("ECLLP"). The business
conducted in the premises leased by Xxxxx was conducted under the name of
Rubber Material Handling, Inc. ("RMH") , which, to the best knowledge of the
undersigned, is an affiliate of Xxxxx. Xxxxx is delinquent in the payment of
rent and other amounts under its Lease. EC1LP has made a claim in the
bankruptcy proceedings in the amount of $2,208,432.46 for administrative
costs and expenses and for contingent and unliquidated pre-petition costs and
expenses. Xxxxx has disputed EC1LP's claim, and, based on Xxxxx'x financial
condition, it is unlikely that EC1LP will recover the full amount of its
claims against Xxxxx. EC1LP is represented in this matter by Xxxxx Xxxxx,
Esq. and Xxxx X. Xxxxxxxx, Esq. of Winston & Xxxxxx.
(l) Cametco Illinois, Inc.; Granulation Services, Inc. Cametco Illinois,
Inc. ("Cametco") leases space in the building owned by Enterprise Center II,
L.P. ("EC2LP") . Cametco apparently sublet this space to Granulation
Services, Inc. ("Granulation") . EC2LP made
4
demands on Cametco that Cametco repair damages to the building owned by EC2LP
caused by the corrosive nature of the substances used in the business
operated in the leased premises. EC2LP, Cametco, Granulation and Xxxx Xxxx
(the guarantor of a portion of Cametco's obligations under its lease with
EC2LP) entered into that certain Second Amendment to Lease Agreement (the
"Second Amendment") , dated as of January 28, 1997, in connection with the
settlement of this dispute. The Second Amendment provides, in part, (i) that
Granulation will pay $208,348.00 to EC2LP, (ii) that Cametco and Xxxx Xxxx
will pay $90,000.00 to EC2LP, and (iii) that Granulation will make certain
repairs to the leased premises, which obligation is secured by a cash escrow
of $100,000.00 (the "Escrowed Funds") made by Granulation. The foregoing
payments have been made by Granulation, Cametco and Xxxx Xxxx, as applicable,
and the required repairs have been completed by Granulation. EC2LP has
delivered a Joint Order to Granulation for the release of the Escrowed Funds
to the contractor which performed the work, but the Joint Order has not yet
been returned to EC2LP, and, therefore the Escrowed Funds have not been
released. The Second Amendment also extends the termination date of
Cametco's lease with EC2LP from January 31, 1997 to July 31, 1997. EC2LP is
represented in this matter by Xxxxxx X. Xxxxxxxxx, Esq. of Xxxxxxx &
Xxxxxxxxxx.
(m) Illiana Steel, Inc. Illiana Steel, Inc. ("Illiana") , a tenant in the
building owned by Enterprise Center IV, L.P. ("EC4LP"), has not paid all
amounts which EC4LP has determined is owed under its lease. Illiana has
disputed the calculation of additional rent under the lease and, as a result,
has not paid all of the amounts invoiced by EC4LP. In addition, a dispute
exists between Illiana. and EC4LP over whether EC4LP is responsible for
tuckpointing brick on the exterior of the leased premises or for the repairs
of certain cranes in the leased premises. The parties currently are
negotiating a settlement of the matter.
(n) Xxxxx Van Lul, Xxxxxxxx Van Lul and Xxxx Xxxxxxxx v. The Prime Group,
Inc., Cause No 450049702CT00144, filed on February 19, 1997, in the Superior
Court of Lake County, Indiana, Civil Division, Room Four. In August, 1995, a
trailer on the property owned by EC1LP was blown over by wind, injuring Xxxxx
van Lul's left arm, wrist and back, injuring Xxxx Xxxxxxxx'x spine and
extremities and causing damage to the car owned by Xx. Xxxxxxxx. The
plaintiffs allege that Prime was negligent and that such negligence caused
the incident. The defense in this action is being handled by EC1LP's
insurance carrier. It is expected that any damages awarded against PGI in
this action will be fully covered by insurance.
(o) Slitting Services, Inc. Slitting Services, Inc. ("Slitting"), a former
tenant in the project owned by EC5LP, has claimed that Enterprise Center V,
L.P. ("EC5LP") has not satisfied its obligations to perform certain tenant
improvement work under its lease with Slitting. Slitting and EC5LP have
agreed on a settlement of this dispute under which EC5LP will make certain
payments to Slitting. In addition, EC5LP has demanded Slitting to pay
approximately $107,100, representing the estimated cost to remediate a
petroleum spill on EC5LP's property which was allegedly caused by Slitting.
EC5LP has withheld this amount from amounts otherwise payable by EC5LP to
Slitting under the terms of the above-referenced settlement.
5
(p) Kerola Enterprises, Inc. On or about April 25, 1995, HECLP sent a
letter to Kerola Enterprises, Inc. ("Kerola") , a former tenant in the
facility owned by Hammond Enterprise Center Limited Partnership ("HECLP") ,
demanding payment by Kerola of past due a-mounts aggregating $156,871.08.
HECLP and Kerola had agreed to settle this dispute for the payment by Kerola
to HECLP in the aggregate amount of $28,725.38, plus interest thereon at the
rate of twelve percent (12!k) per annum, payable in monthly installments of
$1,500.00 each, commencing December 1, 1995, but Kerola has not made the
required payments. Kerola currently owes at least $45,053.90 in past due
rent and $387,914.05 in late charges. HECLP is currently considering
initiating litigation against Kerola.
(q) Xxxx Xxxxxx and Xxxxx Xxxxxx v. Xxxxx Xxxxx, The Prime Group, Inc. and
Xxxxxx X. Auto Sales, Inc., Cause No. 45D019605CT 447, filed on May 6, 1996,
in the Lake Xxxxxx Xxxxxxxx Xxxxx, Xxxx 0, Xxxxxxx, Xxxxxxx. The plaintiffs
in this action allege that, on or about May 16, 1994, Xxxx Xxxxxx was
involved in an automobile accident with a vehicle driven by Xxxxx Xxxxx, who,
at the time, was employed by PGI and worked through PGI's office in Hammond,
Indiana. PGI has tendered the defense of this action to its insurance
carrier. It is expected that all damages awarded to plaintiffs against PGI
in this action will be fully covered by insurance.
(r) Xxxxx Xxxxx, Special Administratrix of the estate of Xxxxx X. Xxxxx,
deceased x. Xxxxxxxx Steel Services, Ltd., Sterling Steel, Inc., The Prime
Group, Inc. and Xxxxxxx Corporation, Case No. 96L02402, filed on March 1,
1996, in the Circuit Court of Xxxx County, Illinois County Department, Law
Division. The plaintiff in this action seeks damages allegedly suffered by
the plaintiff by reason of the death of Xxxxx X. Xxxxx. Xx. Xxxxx was an
employee of Xxxxxxx Corporation ("Xxxxxxx"). Xxxxxxx was retained by
Enterprise Center X, L.P. ("EC10LP") to perform certain work in the space
leased by Sterling. While working in the space leased by Sterling, Xx. Xxxxx
fell off scaffolding and died. It is expected that any damages awarded in
this action to plaintiff against PGI or EC10LP will be fully covered by
insurance. The defense of this action on behalf of PGI and EC10LP is being
handled by attorneys retained by EC10LP's insurance carrier.
(s) Norfolk and Western Railway Company x. Xxxxxxxx Partners Limited
Partnership, Xxxxxxx Chicago, Inc., Principal Mutual Life Insurance Company,
Container Recycling Alliance, L.P., Xxxxxx/Prime Industrial Partners, The
Prime Group, Inc. Enterprise Center VII. L.P. , Enterprise Center VIII, L.P.,
Enterprise Center IX, L.P., Enterprise Center X, L.P., K-P Enterprise
Centers, Inc., Galaxy Steel & Tube, Inc., LaSalle National Bank, Limited
Partners of Xxxxxxxx Partners Limited Partnership), Xxxxxx X. Xxxxxxxx, as
County Treasurer and unknown owners, Case No. 97L 50613, filed on June 4,
1997, in the Circuit Court of Xxxx County, Illinois, County Department, Law
Division. The plaintiff filed a Complaint for Condemnation to condemn the
property owned by Torrence Partners Limited Partnership (the "Torrence
Property"). The Xxxxxxxx Property is located in the Chicago Enterprise
Center, but is not owned by any of the CEC Partnerships (defined below). The
CEC Partnerships were named in this action on account of their interests in
the Xxxxxxxx Property by reason of various easement agreements.
6
(t) Xxxxxxxx Xxxxxxxx and Boquska Chryczvk v. The Prime Group, Inc.,
Arlington Heights I, L.P., Arlington Heights II, L.P., Arlington Heights III,
L.P., International Components Corporation, Lech Construction Company and
Belcore Electric Construction Co., Case No. 96-L-009297, filed on August 13,
1996, in the Circuit Court of Xxxx County, Illinois, County Department, Law
Division. This action was brought by the plaintiffs to recover damages
suffered on account of an incident which occurred on or about April 28, 1995,
in the facility owned by Arlington Heights I, L.P. ("AHlLP"), Arlington
Height II, L.P. ("AH2LP") and Arlington Heights III, L.P. ("AH3LP";
collectively the "AH Partnerships"). On or about such date, Xxxxxxxx
Xxxxxxxx, an electrician working in the facility owned by the AH
Partnerships, was severely burned as a result of an electrical explosion
which occurred from an electrical panel in the facility. Xx. Xxxxxxxx
sustained xxxxx over more than sixty percent off his body and, thus far, has
incurred more than $780,000.00 in medical expenses. Xx. Xxxxxxxx was employed
by Sigma Electric Company, a subcontractor of Lech Construction Company,
which was retained by International Components Corporation ("ICC"), a tenant
in the facility, to perform certain tenant build-out work for ICC. This
action is in the discovery stage. PGI and the AH Partnerships are represented
in this action by attorneys retained by the insurance carrier for PGI and the
AH Partnerships. It is expected that any damages awarded to plaintiffs
against Prime and the AH Partnership will by fully covered by insurance.
6. Pending Litigation - Retained Liabilities:
(a) Xxxxx Xxxxxx, Xxxxxxx Xxxxxx, Sr., Xxx Xxxxx on behalf of themselves
and all other similarly situated v. The Prime Group Real Estate Investment
Trust, Rubber Material Handling, Inc., Xxx XxXxxxx, Enterprise Center I,
L.P., K-P Enterprise Centers Limited Partnership, K-P Enterprise Centers,
Inc., East Chicago Enterprise Center Limited Partnership, KILICO Realty
Corporation and The Prime Group, Inc., Case No. 45C019408CT01629, filed in
the Circuit Court of Lake County, Crown Point, Indiana, on August 9, 1994
(First Amended Complaint filed on March 18, 1995). This class action was
brought on behalf of the people residing in the vicinity of the building
owned by Enterprise Center I, L.P. ("EC1LP") The plaintiffs alleged that the
storing of tires and shredded tires on the premises owned by EC1LP was an
ultrahazardous activity and that the smoke released as a result of the fire
contained hazardous and toxic substances. The plaintiffs further allege
that, as a result of the fire and the smoke released as a result thereof, the
plaintiffs suffered personal injuries, bodily pain, mental anguish and
property damage and were deprived of the use and enjoyment of their homes,
for which they are entitled to damages in unspecified amounts. The
plaintiffs alleged that EC1LP, its general partner (K-P Enterprise Centers
Limited Partnership), the general partner of its general partner (K-P
Enterprise Centers, Inc.), its predecessor in interest (East Chicago
Enterprise Center Limited Partnership) and the general partners of its
predecessor in interest (KILICO Realty Corporation and Prime) were negligent
in allowing the allegedly hazardous situation to exist. A settlement in this
action was reached in October, 1996, and, in February, 1997, pursuant to the
terms of the settlement agreement, EC1LP make a payment of $400,000 in full
and final settlement of this action. EC1LP, The Prime Group, Inc. and the
other related defendants were represented in this action by Xxxxx X. Xxxxx,
Esq. of Winston & Xxxxxx. Recently, approximately 60 additional people who
7
were not included in the certified class have sought to intervene in this
action. If these people are not allowed to intervene, it is expected that
they will file a separate action. Liability resulting from the foregoing
will be retained by PGI.
(b) Enterprise Center VII, L.P., Enterprise Center VIII . L.P., Enterprise
Center IX, L.P. , Enterprise Center X, L.P. and Xxxxxx/Prime Industrial
Partners v. USX Corporation, Illinois Tool Works, Inc. and Signode
Corporation; and USX Corporation v. The Prime Group, Inc., Case No. 96C 5283,
filed on August 22, 1996, in the United States District Court for the
Northern District of Illinois, Eastern Division. The CEC Partnerships
brought this action to recover from USX Corporation ("USX"), Illinois Tool
Works, Inc. ("ITW") and Signode Corporation ("Signode"), a division or an
affiliate of ITW, response costs incurred by Xxxxxx/Prime Industrial Partners
("KPIP"), Enterprise Center VII, L.P. ("EC7LP"), Enterprise Center VIII ,
L.P. ("EC8LP"), Enterprise Center IX, L.P. ("EC9LP") or Enterprise Center X,
L.P. ("ECl0LP"; collectively, the CEC Partnerships") in investigating and
responding to releases and threatened releases of hazardous waste from the
property owned by the CEC Partnerships (the "Property") and to obtain a
declaratory judgment to the effect that USX is responsible for all future
response costs for the remediation of the environmental conditions on the
Property. USX is the former owner of the Property. Signode is a tenant at
the Property. On October 10, 1996, USX filed a Third-Party Complaint against
PGI for contribution. There have been many settlement meetings and
discussions among the CEC Partnerships and USX relating to this action, and,
on May 12, 1997, USX made a payment to the CEC Partnerships in the amount of
$591,443.26 to reimburse the CEC Partnerships for a portion of the costs
previously incurred by the CEC Partnerships in connection with this matter.
This payment was made "as a good faith effort to demonstrate
[USX's] willingness to achieve a fair and final settlement" of this action.
The terms of the settlement which have been discussed between the CEC
Partnerships and USX relating to this action involve the payment by
USX to the CEC Partnerships of an additional $1,822,305. The CEC
Partnerships believe that USX is responsible for most of the environmental
conditions on the Property that will be required to be remediated. The
CEC Partnerships and Prime are represented in this matter by Xxxxxx X.
Xxxxxxxxx, Esq. of Xxxxxxx & Xxxxxxxxxx. This claim and any liability
resulting from this action will be retained by PGI.
(c) Xxxxxx/Prime Industrial Partners x. Xxxxxxxxxx Xxxxxx Americas, Inc.
(as successor by merger to Xxxxxx Inc. f/k/a Xxxxxx Engineering, Inc.), Case
No. 97 C 4278, filed on June 13, 1997, in the United States District Court
for the Northern District of Illinois, Eastern Division (the "Court") .
Xxxxxx/Prime Industrial Partners ("KPIP") brought this action against
Xxxxxxxxxx Xxxxxx Americas, Inc. . the successor in interest to Xxxxxx
Engineering ("Xxxxxx"). In connection with the acquisition by KPIP of the
property owned by the CEC Partnerships (the "Property") , KPIP retained
Xxxxxx to conduct an environmental assessment of the Property. In conducting
such assessment, Telarzyn failed to discover 26 underground storage tanks on
the Property. On account of the presence of these storage tanks, KPIP has
incurred and may incur significant costs in remediating the environmental
conditions on the Property caused by leakage from the storage tanks on the
Property. KPIP believes that Xxxxxx may be liable to KPIP for failing to
discover and/or disclose the presence of these storage tanks. Xxxxxx,
8
however, has disclaimed any liability and has asserted that period in which
KPIP could make a claim has expired. Xxxxxx filed an Answer and Affirmative
Defenses and has filed a Motion for Summary Judgment. The Court has not yet
set a briefing schedule for this Motion. KPIP is represented in this matter
by Xxxxxx X. Xxxxxxxxx, Esq. of Xxxxxxx & Xxxxxxxxxx. This claim will be
retained by PGI.
(d) Xxxxxx Xxxxx, et al., including 67 individuals in United States
Steelworkers of America, Local 3127-12 v. The Prime Group Real Estate
Investment Trust, Rubber Material Handling Enterprise Center I, L.P,
Enterprise Centers Limited Partnership. K-P Enterprise Centers, Inc., East
Chicago Enterprise Center Limited Partnership, KILICO Realty Corporation and
The Prime Group, Inc., Cause No. 45C019606CT01208, filed on June 14, 1996, in
the Lake County Circuit Court, Sitting in Crown Point, Indiana. This action
was filed by and on behalf of certain workers at the General American
Transportation Corporation ("GATX") plant in East Chicago, Indiana, located
in the vicinity of the facility owned by EC1LP (the "EC1LP Facility"). The
plaintiffs allege that, on account of the fire which occurred at the
Facility, the GATX plant was shut down for approximately three weeks. The
plaintiffs seek to recover wages lost during the period during which the GATX
plant was shut down. PGI, EC1LP and the related defendants, K-P Enterprise
Centers Limited Partnership and K-P Enterprise Centers, Inc., believe that
they have meritorious defenses to this action. Such defendants are
represented in this action by Xxxxx X. Xxxxx, Esq. of Xxxxxxx Xxxxxx. This
liability will be retained by PGI.
(e) Other Claims. As a consequence of the abovementioned fire, several
businesses located in the vicinity of the building owned by EC1LP were shut
down for various periods of time. Shortly after the fire, EC1LP received a
notice from General American Transportation Corporation ("GATX") indicating
that GATX suffered both property damage and business interruption as a result
of the fire and that GATX and its insurance carrier intend to hold EC1LP
responsible for the damages incurred. GATX has not made a formal claim
against EC1LP. It is possible that other businesses will make similar claims
against EC1LP. Although EC1LP may have meritorious defenses to such claims,
it currently is not possible to evaluate EC1LP's potential liability in
connection with GATX's claims or any similar claims which other businesses,
or their insurance carriers, may make. This liability will be retained by PGI.
(f) Xxxxxx Xxxx v. The Prime Group, Inc., Prime of Tennessee, Inc., Triad
Development Company Centre Square II, Ltd., and R. Xxx Xxxx, case number
131388-2, filed in the Chancery Court for Xxxx County, Tennessee. In this
action, plaintiff, a former employee of Triad, seeks a declaratory judgment
as to plaintiff's status with respect to the Centre Square II, Ltd. ("CS2")
and seeks an unspecified amount of compensatory and punitive damages for
breach of contract. This dispute arose from an improper assumption made by
Triad, the managing general partner of CS2, that plaintiff was an assignee of
the limited partnership interests in CS2. When notified by plaintiff's
counsel that plaintiff never accepted an assignment of such partnership
interests, Triad acknowledged this and corrected its files accordingly. In
this action, plaintiff asserts that plaintiff should be found to be a limited
partner in the Partnership and that the defendants, by involving plaintiff in
the Partnership without plaintiff's knowledge or consent, are
9
liable for breach of contract. The defendants have denied all material
allegations made by plaintiff in this action and intend to vigorously defend
this action. The defendants have filed a motion to dismiss this action,
which motion in pending. CS2 and all other defendants are represented in
this matter by Baker, Donelson, Bearman & Xxxxxxxx. This liability will be
retained by PGI.
10
SCHEDULE 8
TO
FORMATION AGREEMENT
POST-CLOSING CONSENTS
NONE
----
----
Schedule 9
Retained Liabilities
1. All liability arising or resulting from the items described in Schedule
7 under item 6 Pending Litigation - Retained Liabilities.
2. "Known Contamination", as such term is defined in the Environmental
Remediation and Indemnification Agreement, dated as of November 17,
1997, between The Prime Group, Inc., and Prime Group Realty, L.P.,
relating to existing environmental conditions at Chicago Enterprise
Center, Hammond Enterprise Center and East Chicago Enterprise Center.
EXHIBIT A
TO
FORMATION AGREEMENT
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR TRANSFER OF CONTRIBUTED ASSETS
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, XXXXXXX X. XXXXXXXXX, an individual, THE PRIME
GROUP, INC., an Illinois corporation, and PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership (collectively, "Assignors") do hereby assign,
transfer and convey to PRIME GROUP REALTY, L.P., a Delaware limited partnership
(the "Operating Partnership" or the "Assignee"), any and all of their respective
rights, title and interests in and to the assets (collectively, the "Contributed
Assets") described on Schedule A attached hereto and made a part hereof and any
other rights, privileges and benefits appertaining thereto.
Assignee hereby (i) accepts the assignment and transfer of the
Contributed Assets and expressly assumes any and all duties, obligations and
liabilities, whether arising prior to or after the date hereof, with respect to
the Contributed Assets and the properties and assets owned by the Contributed
Entities (as defined in the hereinafter defined Formation Agreement) as further
described on Schedule A (collectively the "Assumed Obligations") and (ii) agrees
to indemnify and hold harmless Assignors, and Assignors' respective partners,
directors, officers, employees and agents, and its and their respective heirs,
legal representatives, successors and assigns, from and against any liability,
demand, claim or action in relation to any and all duties, obligations and
liabilities so assumed.
Assignors hereby certify that they have full power to make
this Assignment. Except as expressly set forth herein and for the warranties
made by the Assignors in that certain Formation Agreement dated as of the date
hereof (the "Formation Agreement") among Assignors, Assignee, Prime Group Realty
Trust and the other parties signatory thereto, this Assignment is made without
representation or warranty. All capitalized terms used in this Assignment and
the Schedule hereto without definition have the meanings assigned to them in the
Formation Agreement.
[signature page follows]
IN WITNESS WHEREOF, Assignors and Assignee have executed this
Assignment as of the 17th day of November, 1997.
ASSIGNORS:
----------------------------------------
XXXXXXX X. XXXXXXXXX
THE PRIME GROUP, INC., an Illinois corporation
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership
By:
-----------------------------------
Xxxxxxx X. Xxxxxxx,
Managing General Partner
ASSIGNEE:
PRIME GROUP REALTY, L.P., a Delaware
limited partnership
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
SCHEDULE A
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
I. ASSUMED OBLIGATIONS
X. Xxxxxx Agreements
B. Facility Acquisition Agreements
C. Land Option Agreements
D. Liabilities associated with Contributed Projects and with
office and industrial real estate division of PGI and its
affiliates except for those liabilities identified on Schedule
9 to the Formation Agreement which will be retained by the
Prime Transferor identified on such Schedule 9
E. IBD Contribution Agreement
F. NAC Contribution Agreement
G. Lease, dated May 1, 1992, between 77 West Xxxxxx Limited
Partnership, as landlord, and The Prime Group, Inc., as
tenant, relating to the 39th Floor (the "Office Lease")
II. CONTRIBUTED ASSETS
A. General partnership interests, limited partnership interests,
stock interests, limited liability company interests and other
interests in the entities identified on Schedule 1 to the
Formation Agreement
X. Xxxxxx Agreements
C. Facility Acquisition Agreements
D. Contributed Personal Property
E. Land Option Agreements
F. IBD Contribution Agreement
G. NAC Contribution Agreement
H. the Office Lease
I. All of PGI's interests in all assets and properties of the
office and industrial real estate division of PGI and its
affiliates, all as more fully described on Schedule 2 to the
Formation Agreement
