EXHIBIT NO. 10.9
OMNIBUS THIRD MODIFICATION
TO MEZZANINE LOAN DOCUMENTS
THIS OMNIBUS THIRD MODIFICATION TO MEZZANINE LOAN DOCUMENTS (this
"Agreement") is made and dated as of March 19th, 2003 by and among PRIME/XXXXXXX
DEVELOPMENT COMPANY, L.L.C., a Delaware limited liability company ("Borrower"),
LNR EASTERN LENDING, LLC, a Georgia limited liability company (the "Lender"),
DEARBORN CENTER, L.L.C., a Delaware limited liability company ("Property
Owner"), and PRIME GROUP REALTY, L.P., a Delaware limited partnership ("PGLP").
W I T N E S S E T H:
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WHEREAS, Lender and Borrower are parties to that certain Mezzanine
Loan Agreement, dated as of the date hereof, as the same has been amended
pursuant to that certain Omnibus First Modification to Mezzanine Loan Documents
and that certain Omnibus Second Modification to Mezzanine Loan Documents (the
"Second Mezzanine Modification"), both of even date herewith (as so amended, the
"Loan Agreement");
WHEREAS, Property Owner and Bayerische Hypo-Und Vereinsbank AG, New
York Branch (the "Senior Agent") are party to that certain Credit Agreement,
dated as of January 5, 2001, as the same has been amended pursuant to that
certain Omnibus First Modification to Senior Loan Documents dated as of March
12, 2001, as amended by that certain Amendment to Omnibus First Modification to
Senior Loan Documents dated as of January 2, 2002, and the Omnibus Second
Modification to Senior Loan Documents dated as of March 26, 2002 (the "Second
Senior Modification"), and as the same has been further amended pursuant to that
certain Omnibus Third Modification to Senior Loan Documents (the "Third Senior
Modification") dated as of July 16, 2002 (as so amended, the "Senior Loan
Agreement");
WHEREAS, a Hard Cost and Operating Expense overrun existed as of
July 16, 2002 with respect to the Project (the "Cost Overrun");
WHEREAS, this Agreement constitutes an amendment to the Loan
Agreement.
NOW, THEREFORE, in consideration of the modification and waiver of
certain financial covenants contained in the Guaranties and the covenants,
agreements, representations and warranties set forth in this Agreement, the
parties hereto hereby covenant, agree, represent and warrant as follows:
Section 1. Reserve Accounts; Hard Cost Overruns.
(a) An interest-bearing reserve account entitled the "Senior
Additional Reserve Account" has been established with the Senior Agent (the
"Senior Additional Reserve Account") pursuant to the provisions of the Third
Senior Modification. The sum of $3,494,000 has been deposited into the Senior
Additional Reserve Account. Amounts so deposited into the Senior Additional
Reserve Account shall be governed by the Senior Loan Documents; provided,
however, that such amounts shall be disbursed from the Senior Additional Reserve
Account as part of construction draws under the Senior Loan in lieu of Senior
Loan proceeds, as follows: (i) the first $3,494,000 will be funded from the
Senior Additional Reserve Account; and (ii) the balance will be funded with
Senior Loan proceeds.
(b) $1,820,000 of the leasing commission indicated in the Approved
Construction Budget as of July 16, 2002, and which was owed to PGLP at that time
under the Leasing Agreement with respect to the Bank One lease at the Project,
and $286,000 of the leasing commission indicated in the Approved Construction
Budget as of July 16, 2002, and which was owed to PGLP and J. Xxxx Xxxxxxx
Development Company ("Xxxxxxx") at that time under the Leasing Agreement with
respect to the Holland & Knight lease at the Project, shall not be paid without
the prior written consent of Senior Agent and Lender (unless heretofore
consented) until both the Senior Loan and the Mezzanine Loan (and the Loan) have
been repaid in full, and such amounts shall instead be reallocated to other line
items in the Approved Construction Budget as approved by Senior Agent. PGLP
(with respect to the above-referenced Bank One and Holland & Knight leasing
commissions), and Xxxxx Xxxxxxx L.L.C. ("Xxxxx") and Xxxxxxx (with respect to
the above-referenced Holland & Knight leasing commission only) have heretofore
elected to fully and permanently waive any and all rights under the Leasing
Agreement, the Limited Liability Agreements of Borrower and Property Owner and
under applicable law to be paid their share of such leasing commissions unless
and until both the Senior Loan and the Mezzanine Loan (and the Loan) have been
repaid in full.
(c) [Intentionally Deleted].
(d) PGLP hereby agrees to deposit into a newly-created, interest
bearing reserve account maintained by the Senior Agent (the "Second Senior
Citadel Reserve Account") the following amounts: (x) on July 16, 2002,
$4,000,000 (the "Prefunded Amount"), which shall represent an estimate of the
Monthly Citadel Deposit (as defined below) which would be due for each of June
2003, July 2003, August 2003 and September 2003, and (y) commencing on the
Interest Payment Date in January 2003 and on each Interest Payment Date
thereafter (other than the Interest Payment Dates in June 2003, July 2003,
August 2003 and September 2003 which have been prefunded and subject to Section
1(e)(vi) and (vii) below) until the entire Citadel space has been leased
pursuant to Approved Subleases or, subject to the provisions of Section 1(e)(i)
below, until the Maximum Xxxxxx Reserve Amount has been deposited, an amount
equal to the Monthly Citadel Deposit. Notwithstanding the foregoing, if the
amount of the Monthly Citadel Deposit is reduced below $1,000,000 due to the
execution of Approved Subleases and therefore the Prefunded Amount is greater
than the amounts which would actually be required for the months of June 2003,
July 2003, August 2003 or September 2003 (such excess, the "Overfunding"), PGLP
shall be entitled to a credit in the full amount of the Overfunding which shall
be applied to the next Monthly Citadel Payment which is due. In the event that
the amount of the Overfunding is greater than the aggregate amount of the next
four Monthly Citadel Payments which are due, PGLP shall be entitled to a
reimbursement of the portion of the Overfunding which is greater than the
aggregate amount of such four Monthly Citadel Deposits.
"Currently Unleased Xxxxxx Space" means 151,488 NRSF.
"Monthly Citadel Deposit" means the product of (x) $1,000,000 times
(y) a fraction, the numerator of which is the Net Unleased Xxxxxx Space
and the denominator of which is the Currently Unleased Xxxxxx Space;
provided, however, that at any time when an Event of Default is pending
under (and as defined in) either the Senior Loan Documents or the Loan
Documents (as defined in the Loan Agreement), the Monthly Citadel Deposit
due during the continuation of such Event of Default shall be equal to the
amount of the Monthly Citadel Deposit payable in the last month during
which no Event of Default existed.
"Net Unleased Xxxxxx Space" means (w) 151,488, minus (x) the NRSF of
the Xxxxxx Space (i) that, at the time of determination, are subject to
executed Approved Subleases, as defined in the Reserve Account Agreement
(excluding, however, the portion of the Xxxxxx Space subleased by Chicago
Analytic Capital Management, LLC as of the date of this Agreement),
provided that the subtenants under such Approved Subleases have commenced
payment of rent and reimbursements required under such Approved Subleases,
(ii) with respect to which, at the time of determination, Property Owner
has otherwise been released from the Xxxxxx Reimbursement Obligations by
Citadel under the Citadel Lease, (iii) that, at the time of determination,
is no longer demised by the Xxxxxx Lease such that the Xxxxxx
Reimbursement Obligations no longer apply thereto, and/or (iv) with
respect to which, at the time of determination, the Xxxxxx Lease and the
associated Xxxxxx Reimbursement Obligations have been terminated.
(e) Notwithstanding anything contained in subsection (d) above to
the contrary, the following terms and provisions shall apply with respect
to funds deposited into the Second Senior Citadel Reserve Account:
(i) If at any time the aggregate amount of funds in the Senior
Citadel Reserve Account and the Second Senior Citadel Reserve Account
equals or exceeds the Maximum Xxxxxx Reserve Amount, PGLP shall not be
required to make Monthly Citadel Deposits as required under subsection (d)
above and, provided that no default is continuing under either the Senior
Loan Documents or the Loan Documents, Senior Agent shall remit to PGLP any
such excess. If the aggregate amount on deposit in the Senior Citadel
Reserve Account and the Second Senior Citadel Reserve Account at anytime
thereafter falls below the Maximum Xxxxxx Reserve Amount, then PGLP shall
be obligated to resume making Monthly Citadel Deposits in the amounts
determined as provided above until the combined balance in such accounts
again meets the Maximum Xxxxxx Reserve Amount.
"Maximum Xxxxxx Reserve Amount" means the sum of (i) the estimated
aggregate gross amount of the Xxxxxx Reimbursement Obligations less the
estimated gross amount of income to be generated by the Approved Subleases
(provided that the subtenants under such Approved Subleases have commenced
payment of rent and reimbursements required under such Approved
Subleases), as determined by the Senior Agent in good faith, plus (ii) the
aggregate cost of tenant improvements and leasing commissions that will be
required to sublease the portion of the Xxxxxx Space that is not subject
to Approved Subleases with respect to which all tenant improvements and
leasing commissions have been paid (other than amounts required to be paid
by the owner of the Xxxxxx Space), as determined by the Senior Agent in
good faith, plus (iii) $4,000,000.
(ii) Funds in the Second Senior Citadel Reserve Account shall be
applied toward payment of Xxxxxx Subleasing Costs in the manner provided
in Section 3(a) of the Reserve Account Agreement and payment of Extra
Citadel Costs in the manner provided in Section 3(b) of the Reserve
Account Agreement. Funds in the Second Senior Citadel Reserve Account
shall specifically not be available for payment of any Xxxxxx
Reimbursement Obligations at any time prior to July 1, 2003, and
thereafter may only be released to pay Xxxxxx Reimbursement Obligations so
long as no default is then pending under the Senior Loan Documents or the
Loan Documents (as defined in the Loan Agreement).
(iii) Any and all refunds or reimbursements of any funds contained
in the Second Senior Citadel Reserve Account shall be paid directly to
PGLP (or as PGLP directs in writing) and not to Property Owner, Borrower,
Xxxxx or Xxxxxxx.
(iv) Any and all funds in the Second Senior Citadel Reserve Account
in excess of $10,000,000 shall constitute Unrestricted Cash for the
purposes of the calculation of the liquidity covenant contained in Section
8(d) of the Completion Guaranty and Section 6(d) of the Interest and
Operating Costs Guaranty (as such guaranties are amended pursuant to this
Agreement). Any and all funds in the Second Senior Citadel Reserve Account
may be considered (x) as a portion of "Total Assets" solely for the
purposes of the calculation of the financial covenant contained in Section
8(e) of the Completion Guaranty and Section 6(e) of the Interest and
Operating Costs Guaranty (as such guaranties are amended pursuant to this
Agreement) and (y) in the calculation of Consolidated Net Worth relating
to the financial covenant contained in Section 8(c) of the Completion
Guaranty and Section 6(c) of the Interest and Operating Costs Guaranty (as
such guaranties are amended pursuant to this Agreement). Notwithstanding
the foregoing permission from the Lender to consider funds on deposit in
the Second Senior Citadel Reserve Account for accounting purposes only
relating to certain financial covenants, PGLP, Borrower and Property Owner
(A) expressly acknowledge that all funds now or in the future on deposit
in the Second Senior Citadel Reserve Account have been pledged and
assigned to the Senior Agent and do not and will not constitute "assets"
of PGLP or any future bankruptcy estate of PGLP and (B) hereby irrevocably
waive any right to claim that such funds are the property of or an asset
of PGLP or any future bankruptcy estate of PGLP.
(v) [Intentionally deleted.]
(vi) In addition to the other provisions of this Agreement pursuant
to which PGLP's obligation to fund the Monthly Citadel Deposit would
terminate, PGLP's obligation to continue to fund the Monthly Citadel
Deposit shall automatically cease and terminate on and as of the earliest
to occur of (1) the date of transfer to the Lender or any third party of
title to the Collateral pursuant to a transfer in lieu of foreclosure
thereof, (2) the date that is six (6) months after the transfer to the
Lender or any Affiliate of the Lender of title to the Collateral, pursuant
to a foreclosure or UCC sale thereof, and (3) the date that the Lender or
any Affiliate of the Lender sells or conveys the Collateral to a third
party after obtaining title to the Collateral pursuant to the completion
of a foreclosure or UCC sale thereof.
(vii) In addition to the other provisions of this Agreement pursuant
to which PGLP's obligation to fund the Monthly Citadel Deposit would
terminate, PGLP's obligation to continue to fund the Monthly Citadel
Deposit shall cease at such time on or after June 30, 2003, as Senior
Agent and the Lender receive acceptable evidence that the original
financial covenants (not taking into account any amendments to or
modifications of such covenants from and after the closing of the
Mezzanine Loan) set forth in Section 8 of the Completion Guaranty and
Section 6 of the Interest and Operating Costs Guaranty (the "Original
Covenants") have been satisfied for two (2) consecutive calendar quarters.
The earliest date that PGLP may satisfy this test with respect to the
Original Covenants is June 30, 2003. Upon receiving such satisfactory
evidence of two quarters' compliance with the Original Covenants, the
Senior Agent shall disburse to PGLP any and all funds then on deposit in
the Second Senior Citadel Reserve Account (but not from any other reserve
account or escrow held by the Senior Agent) and the amendments to the
Original Covenants made pursuant to this Agreement shall be automatically
rescinded and the provisions of the Original Covenants shall once again
apply; provided, however, that if PGLP fails to meet such Original
Covenants for any quarter thereafter, (x) PGLP's obligation to fund the
Monthly Citadel Deposits shall be immediately and automatically
reinstated, (y) the amendments to the Original Covenants made pursuant to
this Agreement shall automatically be reinstated and (z) PGLP shall
immediately pre-fund $4.0 million (or such lesser amount which would
represent four (4) months of Monthly Citadel Deposits if such monthly
amounts have been reduced as provided in Section 1(d) above) into the
Second Senior Citadel Reserve Account. So long as PGLP satisfies such
revised covenants and the foregoing funding requirements, there shall be
no default under the Senior Loan Documents or the Loan Documents solely
from the failure of PGLP to satisfy the Original Covenants.
(f) As of July 16, 2002, each of PGLP, Borrower, Xxxxx and Property
Owner represented and warranted that, based on the state and progress of
construction of the Project and anticipated cost savings, it estimated in
good faith that the aggregate Hard Costs that will be incurred in order to
complete the construction of the Project would not exceed by more than
$4,600,000 the aggregate amount of Hard Costs set forth in the Approved
Construction Budget.
(g) Each of PGLP, Borrower and Property Owner hereby acknowledges
that the Lender's willingness to agree to the amendments of the Guaranties
set forth in Section 2 below is conditioned upon PGLP not paying dividends
to common or preferred shareholders (other than dividends payable in
connection with the Security Capital transaction which have previously
been disclosed to the Lender). If PGLP desires to declare or pay a
dividend, so long as (i) PGLP can demonstrate compliance with the
financial covenants applicable during the non-Relaxed Covenant Period (as
provided in Section 2 below) with respect to the fiscal quarter to which
such dividend relates (i.e., if a dividend is declared with respect to the
first quarter but paid in the second quarter, compliance must be
demonstrated as of the end of the first quarter) and (ii) such dividend is
paid within 30 days after such compliance has been demonstrated, then PGLP
shall not be in default for paying such a dividend. If, however, PGLP at
any time pays dividends when it is not in compliance with the financial
covenants applicable during the non-Relaxed Covenant Period (as provided
in Section 2 below), an Event of Default will automatically have occurred
under the Loan Documents.
Section 2. Amendments to the Guaranties.
(a) The following definition is hereby added to each of the
Completion Guaranty and the Interest and Operating Costs Guaranty:
" 'Relaxed Covenant Period' means the period from April 1, 2002 to
the first date thereafter on which PGLP makes or declares any dividend or
other distribution to the holders of any common or preferred equity
interests in PGLP, excepting, however, any dividends and distributions
required to be paid in connection with the so-called "Security Capital
Transaction."
(b) The first sentence of Section 8(d) of the Completion Guaranty
and the first sentence of Section 6(d) of the Interest and Operating Costs
Guaranty are each hereby amended and restated to read as follows:
"As of the end of the fiscal quarter immediately preceding the
Initial Advance (as defined in the Prior Loan Agreement), and as of the
end of any fiscal quarter thereafter, the amount of Unrestricted Cash
shall at no time be less than (x) if no Relaxed Covenant Period is
continuing, $17,500,000.00 or (y) during the Relaxed Covenant Period,
$7,500,000."
(c) The first sentence of Section 8(g) of the Completion Guaranty
and the first sentence of Section 6(g) of the Interest and Operating Costs
Guaranty are each hereby amended and restated to read as follows:
"As of the end of the fiscal quarter immediately preceding the
Initial Advance (as defined in the Prior Loan Agreement), and as of the
end of any fiscal quarter thereafter, at no time that the Loan is
outstanding shall the ratio (stated as a percent), in respect of any
period, of (i) Consolidated EBITDA to (ii) Consolidated Total Interest
Expense, be less than (x) if no Relaxed Covenant Period is continuing,
165% or (y) during the Relaxed Covenant Period, 140%."
(d) The first sentence of Section 8(h)(i) of the Completion Guaranty
and the first sentence of Section 6(h)(i) of the Interest and Operating Costs
Guaranty are each hereby amended and restated to read as follows:
"As of the end of the calendar quarter immediately preceding the
Initial Advance (as defined in the Prior Loan Agreement), and as of the
end of any fiscal quarter thereafter, at no time that the Loan is
outstanding shall the ratio (stated as a percent), in respect of any
period, of (A) Consolidated EBITDA to (B) Consolidated Total Fixed Charges
A, be less than (x) if no Relaxed Covenant Period is continuing, 145% or
(y) during the Relaxed Covenant Period, 120%."
(e) The first sentence of Section 8(h)(ii) of the Completion
Guaranty and the first sentence of Section 6(h)(ii) of the Interest and
Operating Costs Guaranty are each hereby amended and restated to read as
follows:
"As of the end of any calendar quarter immediately preceding the
Initial Advance (as defined in the Prior Loan Agreement) , at no time that
the Loan is outstanding shall the ratio (stated as a percent), in respect
of any period, of (A) Consolidated EBITDA to (B) Consolidated Total Fixed
Charges B, be less than (x) if no Relaxed Covenant Period is continuing,
125% or (y) during the Relaxed Covenant Period, 105%."
(f) Section 8(c) of the Completion Guaranty and Section 6(c) of the
Interest and Operating Costs Guaranty are each hereby amended by adding the
following sentence at the end thereof:
"For purposes of this clause (c), during the continuance of a
Relaxed Covenant Period, Consolidated Net Worth shall be calculated
without reduction for accumulated depreciation."
Section 3. Consent of the Lender.
The Lender, by its execution of this Agreement, hereby confirms that
it has consented to and approved, to the extent required under the Loan
Documents, the terms and conditions of this Agreement and the Third Senior
Modification and agrees that the Senior Agent may rely upon this Agreement to
evidence such consents and approvals.
Section 4. Miscellaneous.
(a) Governing Law. Except as otherwise provided in Section 11.2 of
the Loan Agreement, the terms and provisions hereof and the rights and
obligations of the parties hereunder shall in all respects be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Florida.
(b) Full Force. Except as expressly set forth herein, the Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
(c) Binding; No Amendment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall not be modified orally, but only by a
writing executed by all of the parties hereto.
(d) Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
(e) Defined Terms. All capitalized terms not otherwise defined
herein shall have the meaning set forth in the Loan Agreement.
[Signatures on next page(s)]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives, all as of the date
and year first above written.
PRIME/XXXXXXX DEVELOPMENT COMPANY,
L.L.C., a Delaware limited liability
company
By: Prime Group Realty, L.P., a
Delaware limited partnership, its
sole member
By: Prime Group Realty Trust, a
Maryland real estate
investment trust, its
managing general partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxxx
Its: Co-President
DEARBORN CENTER, L.L.C., a Delaware
limited liability company
By: Prime/Xxxxxxx Development Company,
L.L.C., a Delaware limited
liability company, its sole member
By: Prime Group Realty, L.P., a
Delaware limited partnership,
its sole member
By: Prime Group Realty
Trust, a Maryland real
estate investment
trust, its managing
general partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxxx
Its: Co-President
PRIME GROUP REALTY, L.P.
By: Prime Group Realty Trust, its
managing general partner
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Office of the President
LNR EASTERN LENDING, LLC, a Georgia
limited liability company
By: LNR PROPERTY CORPORATION EASTERN
REGION, a Georgia corporation, its
sole member
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
