CONSENT AND AGREEMENT
This CONSENT AND AGREEMENT (this "Agreement") is entered
into as of this 16th day of November, 2001, by and among Prime Group Realty
Trust, a Maryland real estate investment trust (the "REIT"), Prime Group
Realty, L.P., a Delaware limited partnership (the "Partnership"), and Cadim
inc. ("Cadim"), an affiliate of Caisse de depot et placement du Quebec
("CDP").
W I T N E S S E T H:
WHEREAS, the REIT is the Managing General Partner of the
Partnership;
WHEREAS, the Partnership and Cadim have previously
entered into a Confidentiality and Standstill Agreement dated as of July 5,
2001 (the "CSA"), as amended by a First Amendment to Confidentiality and
Standstill Agreement, dated as of October 12, 2001 (the "First Amendment"),
among the Partnership, the REIT and Cadim (as so amended, the
"Confidentiality Agreement");
WHEREAS, the Partnership, the REIT, Cadim and The Prime
Group, Inc. have entered into an Amended and Restated Support Standstill
Agreement dated as of September 14, 2001 (the "SSA");
WHEREAS, Primestone Investment Partners L.P., a Delaware
limited partnership (the "Borrower"), the REIT, the Partnership, The Prime
Group, Inc., an Illinois corporation ("PGI"), and certain other investors
named therein have entered into the Registration Rights Agreement dated as
of November 17, 1997 (as the same may from time to time be amended or
modified in accordance with its terms, the "Registration Rights
Agreement");
WHEREAS, by letter dated November 9, 2001 (the "Cadim
Letter"), Cadim has requested that the REIT grant certain waivers to, make
certain agreements with and acknowledgments to, Cadim for the benefit of
Cadim and its affiliates, concerning, in part, the 7,944,983 outstanding
common units of limited partner interest of the Partnership that are
pledged by the Borrower (the "Pledged Units") under (i) the Loan Agreement
among the Borrower and Vornado PS, L.L.C. and the other parties thereto,
dated September 26, 2000, and (ii) the Amended and Restated Credit
Agreement among P-B Finance Ltd. and the Borrower, dated as of September
26, 2000 (collectively, the "Loan Agreements"), and the common shares of
the REIT issuable upon exchange of such common units (collectively with the
Pledged Units, the "Pledged Shares"); and
WHEREAS, the Board of Trustees (the "Board") of the REIT
and the Committee of Independent Trustees (the "Independent Committee") of
the Board have considered the various requests contained in the Cadim
Letter and have determined that certain of such requests are advisable and
in the best interests of the REIT and its shareholders.
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NOW, THEREFORE, in consideration of the foregoing and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby consent and agree as follows:
1. Limited Waiver of Ownership Limit. The REIT hereby acknowledges
that, subject to the provisions of Section 2 of this Agreement, the
conditions set forth in Section 4.6 of the REIT's Articles of Amendment and
Restatement, as supplemented (as so supplemented, the "Declaration of
Trust") have been satisfied and that the "Ownership Limit" (as defined in
the Declaration of Trust) is waived with respect to Cadim or CDP and any
affiliate of Cadim or CDP (other than any "individual" for purposes of
Section 542(a)(2) of the Internal Revenue Code of 1986, as amended) (x)
that is controlled by Cadim or CDP and (y) in which Cadim or CDP own at
least 75% of the outstanding equity interest (collectively, the "Cadim
Entities") (but not with respect to any transferees or purported
transferees of the Cadim Entities) by the Board to the extent and only to
the extent set forth in this Agreement, the Excepted Holder Certificate
delivered by Cadim on the date hereof and attached hereto as Exhibit A and
the Resolutions of the Board attached hereto as Exhibit B (the "Board
Resolutions"). Accordingly, and subject to the foregoing, the REIT hereby
confirms that it has granted a waiver of the Ownership Limit as it applies
to the Cadim Entities to the extent, and only to the extent, necessary to
allow the Cadim Entities to become the beneficial owners of all or a
portion of the Pledged Shares. Nothing contained herein shall be deemed as
a limitation on any Cadim Entity's right to transfer or assign its interest
in the loans pursuant to the Loan Agreements; provided, that any assignee
or transferee of any such interest shall be subject to the Ownership Limit
unless such assignee or transferee shall have obtained a valid waiver of
the Ownership Limit from the REIT.
2. Cadim Representation, Warranty and Covenant. Notwithstanding
anything in this Agreement, the Excepted Holder Certificate or the Board
Resolutions to the contrary, Cadim hereby represents and warrants to and
covenants for the benefit of the REIT that, neither it nor any of the Cadim
Entities or their affiliates currently own or will directly or indirectly
acquire or own any interest in any of the REIT's or the Partnership's
equity securities, without the prior written approval of the REIT, other
than the Pledged Shares (or a portion thereof). The benefits to the Cadim
Entities contained in this Agreement and the Board Resolutions shall be
null and void and this Agreement and the Board Resolutions shall be
revocable and subject to modification by the Board, in each case in the
event the foregoing representation, warranty and covenant is breached;
provided, however, that the foregoing representation, warranty and covenant
shall not be breached as the result of (i) the unknowing and indirect
acquisition by any of the Cadim Entities of an interest in an immaterial
number of the REIT's or the Partnership's securities if such Cadim Entity
causes the disposition of such interest promptly after it becomes aware of
the consummation of such indirect acquisition or (ii) the independent
ownership or acquisition by trustees or officers of any of the Cadim
Entities of an immaterial number of equity securities of the REIT or the
Partnership for their own personal account.
3. Maryland Law Matters. The REIT hereby represents, warrants and
agrees, subject to the second sentence of the foregoing Section 2, that,
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pursuant to Section 3-603(c) of the Maryland Business Combination Act (the
"MBCA") set forth in the Maryland General Corporation Law, any "business
combination" (as that term is defined in the MBCA) of the REIT with any of
the Cadim Entities (or any affiliate thereof) has been exempted from the
provisions of Section 3-602 of the MBCA, provided that the business
combination is first approved by the Board, including approval by a
majority of the members of the Board who are not "affiliates" or
"associates" (as each such term is defined in the MBCA) of the Cadim
Entities (or any affiliate thereof). Notwithstanding the foregoing and
notwithstanding Section 3-601(j)(3) of the MBCA, each of the Cadim Entities
will be an "interested stockholder" (as that term is defined in the MBCA)
of the REIT if and at all times that it is an "interested stockholder" of
the REIT within the definition thereof set forth in the MBCA.
4. Confidentiality Agreement and SSA. The REIT and the Partnership
hereby grant a consent under the Confidentiality Agreement to permit the
acquisition by the Cadim Entities of all or part of the Pledged Shares
either directly or by virtue of purchasing the Loan Agreements or a
participation therein. In addition, and without in any way otherwise
releasing Cadim or any of its affiliates from their obligations under the
Confidentiality Agreement and the SSA, the REIT and the Partnership hereby
acknowledge and agree (i) that the Cadim Entities may engage in discussions
with, or may at some point entertain the possibility of a joint proposal
together with, Vornado Realty Trust (or Vornado Realty Trust and one or
more of its control affiliates), regarding a possible strategic transaction
involving the Partnership and the REIT (a "Possible Transaction"), and may
act together in concert for such purpose, and as a result may be, or may be
deemed to be, a "group" under the Exchange Act of 1934, as amended (the
"Exchange Act"), so long as none of such discussions, exchanges of views or
concerted activities regarding a possible proposal of a Possible
Transaction require or result in any public filing or other public
disclosure of specific discussions, specific proposals or specific
concerted activities relating to a Possible Transaction pursuant to
Regulation 13D promulgated under the Exchange Act, or otherwise, and (ii)
that any such discussions, exchanges of views, concerted activities or the
formation of a "group" for the purposes described above in this Section 4
shall not violate the terms of the Confidentiality Agreement, including the
provisions of Section 2 of the First Amendment (it being further understood
that public disclosure on Schedule 13D by any of the Cadim Entities or
Vornado Realty Trust (A) that such parties are, or may be deemed to be, a
"group" under the Exchange Act, by virtue of their joint exercise of
remedies under the Loan Agreements to obtain beneficial ownership of the
Pledged Shares (and related activities) or (B) that such parties may in the
future make a proposal regarding a Possible Transaction, shall not violate
the terms of the Confidentiality Agreement, including the provisions of
Section 2 of the First Amendment, so long as such disclosure(s) do not
include specific proposals or plans to make specific proposals); provided,
that none of the Cadim Entities may provide any "Evaluation Material" (as
defined in each of the Confidentiality Agreement and the SSA) to Vornado or
any of its affiliates, agents, advisors, etc., unless Vornado first
executes and delivers to the REIT a confidentiality and standstill
agreement reasonably acceptable to the REIT.
5. Exchange of Partnership Units. In the event that any Cadim
Entity becomes the beneficial owner of any of the Pledge Units,
notwithstanding the provisions of the Partnership Agreement, the REIT and
Partnership shall cause the exchange of all such Pledged Units for common
shares of the REIT for which such Pledged Units are then exchangeable
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within five business days following the REIT and Partnership's receipt of
written notice from or on behalf of any Cadim Entity of such acquisition
(it being understood that such acquisition notice shall contain in
substance the information and request that is otherwise required in an
"Exchange Exercise Notice" (as defined in Exhibit C to the Partnership
Agreement)) and shall be accompanied by appropriate evidence of beneficial
ownership by the applicable Cadim Entity of such Pledged Units together
with the physical certificate(s) representing the applicable Pledged Units.
6. Registration Rights Agreement. Each of the REIT and the
Partnership agrees, that the Cadim Entities, to the extent they own any of
the Pledged Shares, shall be entitled to require and enforce the
performance of all actions and things required to be performed by the REIT
or the Partnership under the Registration Rights Agreement and shall be
entitled to all rights thereunder to which the Borrower is entitled. The
REIT agrees that as promptly as possible after the date hereof, the REIT
will amend the prospectus constituting part of the shelf registration
statement filed pursuant to Article IV of the Registration Rights Agreement
to include the applicable Cadim Entity and/or any permitted subsequent
holder of the Pledged Shares as a selling shareholder under such
Registration Rights Agreement and that the REIT will continue to include
such Cadim Entity, and/or any subsequent permitted holder of the Pledged
Shares as such a selling shareholder under the Registration Rights
Agreement for so long as any Cadim Entity may be entitled to exercise
rights under the Registration Rights Agreement in accordance with its terms
as modified hereby.
7. The Board Resolutions. The Board Resolutions were adopted by
the Board on November 14, 2001, and have not been amended, modified or
rescinded and remain in full force and effect as of the date of this
Agreement. Except as set forth in the foregoing Section 2, neither the
Board nor the REIT shall, without the prior written consent of the relevant
Cadim Entities, allow the Board Resolutions to be amended, modified or
rescinded by the Board in any manner which adversely affects any of the
relevant Cadim Entities' rights under this Agreement and the Board
Resolutions.
8. Miscellaneous.
(a) No Waiver; Amendments. No failure on the part of any
party to this Agreement to exercise, no delay in exercising, and no course
of dealing with respect to, any right or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right or
remedy hereunder preclude any other further exercise of any other right or
remedy. This Agreement may not be amended, supplemented or modified except
by written agreement of all of the parties hereto.
(b) Confidentiality. Subject to the provisions of
Section 4 hereof, except as otherwise required by applicable law or the
rules or regulations of any securities exchange on which the securities of
such party or any affiliate of such party are listed or traded, each of the
parties hereto agrees that it and its affiliates shall not issue or cause
the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the
consent of the other party hereto, and in such event disclosure is
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required, such party shall, prior to making such disclosure, inform the
other party of such proposed disclosure and reasonably cooperate with such
other party regarding the proposed content of such disclosure.
(c) Notices. All notices and other communications required
under the terms and provisions hereof shall be in writing and shall be
addressed:
If to the REIT and/or the Partnership:
c/o Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000 and (000) 000-0000
With copies to:
Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
And to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Xxxxx X. Black
Telecopy No.: (000) 000-0000
Or if to The Cadim Entities:
Cadim inc.
000 Xxxxxx Xxxxxxxx
Xxxxx 0000
X.X. Xxx 000
Xxxxxxxx Xxxxxx X0X0X0
Attn: Xxxxx Xxxxxx
Telecopy No.: (000) 000-0000
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With a copy to:
Cadim inc.
000 Xxxxxx Xxxxxxxx
Xxxxx 0000
X.X. Xxx 000
Xxxxxxxx Xxxxxx X0X0X0
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
And to:
Xxxxx, Xxxxx & Xxxxx
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxx
Telecopy No.: (000) 000-0000
Or at such other place as any party may hereafter designate
to the other party hereto in writing. Any notice under this Agreement to
the REIT, Partnership or the Cadim Entities shall be in writing and sent
(A) by facsimile transmission (provided a copy of such notice is also sent
on the same day by one of the methods set forth in the following clauses
(B) or (C)), or (B) by registered or certified mail with return receipt
requested (postage paid), or (C) by a recognized overnight delivery service
with charges prepaid. Any notice under this Agreement to any party shall be
deemed given only when received or when delivery is refused or not able to
be made because such party has moved without giving notification to the
other party pursuant to this Section 8(c) of such party's new address.
(d) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the REIT and the Partnership and their
respective successors and assigns. This Agreement shall be binding upon and
inure to the benefit of the Cadim Entities; provided, however, that the
Cadim Entities' rights, waivers, exemptions and other benefits under this
Agreement shall not be assignable to any third party and any attempted
assignment shall be null and void.
(e) Governing Law. This Consent and Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of Maryland without regard to conflicts of laws provisions thereof.
(f) Business Day. "Business Day" means, for purposes of
this Agreement, any day other than Saturday, Sunday, or other day on which
commercial banks in Chicago, Illinois are obligated or permitted to be
closed.
(g) Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be a full and complete copy
of this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned, have executed this
Consent and Agreement as of the date set forth in the first paragraph of
this Consent and Agreement.
OPERATING PARTNERSHIP:
PRIME GROUP REALTY, L.P.,
a Delaware limited partnership
By: Prime Group Realty Trust,
a Maryland real estate
investment trust,
its general partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President,
General Counsel and Secretary
TRUST:
PRIME GROUP REALTY TRUST,
a Maryland real estate investment Trust
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President,
General Counsel and Secretary
CADIM:
CADIM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
By: /s/ Line Xxxxxxxx
--------------------------------
Name: Line Xxxxxxxx
Title: Vice President
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