Exhibit 10.3

 

HILLTOP PLAZA

 

CO-OWNERS AGREEMENT

 

July 31, 2018

 

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

 

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TABLE OF CONTENTS

 

ARTICLE I. Nature of Relationship Among Co-Owners

2

 

 

1.01

Co-Owners Relationship; No Partnership

2

1.02

Tax Reporting as Direct Owners and Not as a Partnership

2

1.03

Indemnity

3

1.04

No Agency

3

1.05

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

3

 

 

 

ARTICLE II. Management

3

 

 

2.01

Co-Owner Manager

3

2.02

Property Manager

5

2.03

Developer

6

2.04

Leasing Agent

6

2.05

The Project Agreements

6

2.06

The Condominium Documents and Ground Lease

6

 

 

 

ARTICLE III. Use of the Project

6

 

 

3.01

Use of Project

6

3.02

Loan Responsibilities

7

 

 

 

ARTICLE IV. Income and Proceeds from the Project

7

 

 

4.01

Income from Project Operations

7

4.02

Disbursement of Proceeds on Disposition of the Project

8

 

 

 

ARTICLE V. Payment of Project Expenses; Right of Contribution

8

 

 

5.01

Obligation to Pay

8

5.02

Time of Payment

9

5.03

Delinquencies

9

5.04

Indemnity

9

5.05

Co-Owner Loans

10

5.06

Unanticipated Overrun Funding

11

 

 

 

ARTICLE VI. Rights and Obligations of the Co-Owners

11

 

 

6.01

Rights of Co-Owners

11

6.02

Decisions of Co-Owners

12

6.03

Permitted Transfers

13

6.04

Buy-Sell Option

14

 

 

 

ARTICLE VII. Indemnification

16

 

 

7.01

General

15

7.02

Indemnification for Loan Default Damages

15

7.03

Survival of Indemnification

15

 

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ARTICLE VIII. Term

15

 

 

8.01

Term

15

8.02

Accounting on Termination

16

 

 

 

ARTICLE IX. Election To Purchase Ownership Interests

16

 

 

ARTICLE X. General Provisions

16

 

 

10.01

Mutuality; Reciprocity; Runs With the Land

16

10.02

Binding Arbitration

16

10.03

Attorneys’ Fees

17

10.04

Entire Agreement

17

10.05

Governing Law; Venue

17

10.06

Notice and Payments

18

10.07

Successors

18

10.08

Waivers

18

10.09

Counterparts

18

10.10

Severability

19

10.11

Securities Laws

19

10.12

Time is of the Essence

19

10.13

Subordination

19

10.14

Memorandum

20

10.15

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

20

10.16

Confidentiality

22

 

 

 

Exhibit A

Description of the Property

 

 

 

 

Exhibit B

Ownership Interests

 

 

 

 

Exhibit C

Description of the Project

 

 

 

 

Exhibit D

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

 

 

 

 

Exhibit E

Development Agreement

 

 

 

 

Exhibit F

Leasing Agreement

 

 

 

 

Exhibit G

Construction Budget

 

 

 

 

Exhibit H

Memorandum of Co-Owners Agreement

 

 

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CO-OWNERS AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I.
NATURE OF RELATIONSHIP AMONG CO-OWNERS

 

1.01                        Co-Owners Relationship; No Partnership.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II.
MANAGEMENT

 

2.01                        Co-Owner Manager.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE III.
USE OF THE PROJECT

 

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

 

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

 

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

 

ARTICLE IV.
INCOME AND PROCEEDS FROM THE PROJECT

 

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

 

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

 

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

 

ARTICLE V.
PAYMENT OF PROJECT EXPENSES; RIGHT OF CONTRIBUTION

 

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

 

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

 

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

 

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

 

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5.05                        Co-Owner Loans.

 

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

 

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

 

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

 

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

 

ARTICLE VI.
RIGHTS AND OBLIGATIONS OF THE CO-OWNERS

 

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

 

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

 

(b)                                 Any transfer (whether voluntary or
involuntary) partition or encumbrance of a Co-Owner’s Interest in the Project
must satisfy all of the terms and provisions of the Loan Documents and may not
constitute an event of default thereunder.  Notwithstanding anything to the
contrary herein, to the extent that Lender has required the Co-Owners to waive
their right to file a complaint or institute any proceeding at law or in equity
to have the Project partitioned in accordance with applicable law and to waive
their right to transfer their Co-Owner’s Interest in the Project, accordingly,
each Co-Owner hereby waives such rights to the greatest extent permitted by
applicable law, but only for so long as any obligations of the Co-Owners under
the Loan remain outstanding;

 

(c)                                  The transferee shall agree to be bound by
all of the terms, conditions, restrictions, and limitations set forth in, and
shall expressly join, this Agreement;

 

(d)                                 The transferor shall reimburse the other
Co-Owners (or their owners, as applicable) for all reasonable fees and expenses
and other costs that they incur as a result of the transaction; and

 

(e)                                  The transferee is an “accredited investor”
as defined in Rule 501 of Regulation D of the rules and regulations promulgated
under the Securities Act of 1933.

 

6.02                        Decisions of Co-Owners.

 

(a)                                 Notwithstanding the provisions of
Section 2.01, the following actions require the consent of one or more of the
Co-Owners holding in the aggregate at least ninety percent (90%) of the
Ownership Interests (a “Supermajority in Interest”): (i) entering into any
agreement for the sale, transfer, or exchange of all or any portion of the
Project (the “Sale Agreement”) and the consummation of the related transaction;
and the termination of any Sale Agreement prior to the consummation thereof;
(ii) entering into, modifying, extending, renewing or canceling any agreement
pertaining to any indebtedness to be secured in whole or in part by any
mortgage, deed of trust, pledge, lien or other encumbrance upon the Project;
(iii) modifying or amending this Agreement; (iv) amending, terminating or
modifying the Condominium Documents; or (v) amending, terminating or modifying
the Loan Documents.  Notwithstanding the foregoing, or any other provision of
this Agreement to the contrary, for so long as the Loan is outstanding, this
Agreement may not be modified or amended without the prior written consent of
Lender.  Notwithstanding the provisions of Article II, the following actions
require the consent of a Majority in Interest of the Co-Owners:  entering into,
amending, terminating and/or replacing (each of the following, a “Material
Contract”): (1) the Property Management Agreement, (2) the Development
Agreement, (3) the Leasing Agreement, (4) any Major Lease, (5) any and all
leases, contracts and other agreements that provide for a payment term or
duration of more than 5 years

 

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(including renewal periods), or involve expenses or receipts in excess of
$250,000, unless otherwise set forth in the Construction Budget or Operating
Budget, or (6) any leases, contracts or other agreements with (aa) a third party
that is not on then current fair market value terms,  (bb) an entity that is
related to or affiliated with a Co-Owner, (cc) any construction, repairs,
renovations or other expenses relating to the Project that will cost more than
$100,000 in the aggregate, or (dd) any lease, contract, easement, restriction
and/or governmental approval (such as zoning and/or platting of the Project)
that would be binding on the Project after the termination of the Ground Lease. 
For purposes hereof, the “Condominium Documents” mean the Master Condominium
Declaration and Master Condominium Association formation and governance
agreements for the Hilltop Plaza Condominiums.

 

(b)                                 Whenever an action by the Co-Owners not
otherwise authorized by the terms of this Agreement is proposed by any Co-Owner,
or unless a separate approval process is described herein with respect to
actions taken by the Managing Co-Owner, the requesting Co-Owner shall first send
to all Co-Owners written notice (the “Decision Notice”) setting forth the
particulars of the decision to be taken (the “Decision”).  The Decision Notice
shall include a ballot on which the Co-Owner may mark its vote for or against
the Decision.  Consistent with the provisions of Section 10.06, the Co-Owners
shall respond to the Decision Notice by returning the marked ballot to the
Co-Owner Manager within ten (10) days following receipt of the Decision Notice. 
A Co-Owner not returning the ballot within the prescribed period of time shall
be deemed to have consented to the Decision, if such Co-Owner fails to respond
to a second copy of the Decision Notice, marked to show “SECOND DECISION NOTICE:
DEEMED APPROVAL MAY APPLY”, and such Co-Owner fails to respond to the Second
copy of the Decision Notice within five (5) days following delivery thereof. 
The Managing Co-Owner shall notify all Co-Owners of the results of the vote (the
“Outcome Notice”).  The Managing Co-Owner shall be authorized to take action
with respect to such Decision if such Decision has been approved by a Majority
in Interest of the Co-Owners.  If the Decision requires approval of all the
Co-Owners, then the Co-Owner Manager shall be authorized to take action with
respect to such Decision only if the Co-Owners have unanimously approved it.

 

6.03                        Permitted Transfers.  Subject to the provisions of
Section 6.01 above, a Co-Owner may sell, assign, or transfer all (but not less
than all) of Ownership Interest, with prior written notice to but without the
prior written consent of the other Co-Owner, to:  (a) the Co-Owner’s spouse,
descendants and/or spouse of his or her descendants, his or her stepson or
stepdaughter or a descendant of either; (b) a trust established for the benefit
of the Co-Owner or any one or more of the individuals described in clause
(a) above; or (c) any person that is already a Co-Owner.  In addition, subject
to the provisions of Section 6.01 above, each of Ford Owner and Hilltop Owner
may sell, sign or transfer some or all of its respective Ownership Interest,
with prior written notice to but without the prior written consent of SPC Owner,
to:  (i) each other, (ii) Hilltop Holdings Inc. (and/or its successor),
(iii) any entity that is owned or controlled by either Hilltop Holdings Inc.
(and/or its successor), or Gerald J. Ford and/or Gerald J. Ford’s spouse, his
descendants and/or spouse

 

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of his descendants, his step-son or step-daughter or a descendant of either
and/or (iv) a trust established for the benefit of Gerald J. Ford and/or any one
or more of the individuals described in clause (iii) above.  Notwithstanding
anything contained herein to the contrary, the Co-Owners are aware that SPC
Owner has entered into one or more exchange accommodation agreements
(collectively, the “Exchange Agreement”) with respect to a 1031 like kind
exchange related to its Interest, and transfers of the ownership of the SPC
Owner solely in connection with such Exchange Agreement shall be deemed to be a
permitted transfer under this Section 6.03.

 

6.04                        Buy-Sell Option.  At any time following the two
(2) year anniversary of the Effective Date of this Agreement (or earlier
exercisable by Hilltop Owner and/or Ford Owner, only, in the event the HF Owners
(defined below) have notified SPC Owner that SPC Owner has committed a Bad Act),
a Co-Owner (the “Offeror”) may deliver to the other Co-Owners (the “Offerees”) a
written offer (“Offer”) that gives the Offerees the option to either
(i) purchase all of the Offeror’s Ownership Interest or (ii) sell all of the
Offerees’ Ownership Interests to the Offeror, which Offer shall set forth a
specified cash purchase price for each 1% of Ownership Interest (the “Interest
Price”) (i.e., the same Interest Price per 1% of Ownership Interest whether the
Offeror becomes a buyer or a seller).  Within fifteen (15) days after the
Offerees receives the Offer, the Offerees shall notify the Offeror in writing
that the Offerees either (i) agree to sell all of the Offerees’ Ownership
Interest to the Offeror for a sales price (the “Offeree Sales Price”) equal to
the product of the Interest Price multiplied by the Ownership Interest of the
Offerees or (ii) agree to purchase all of the Offeror’s Ownership Interest for a
purchase price (the “Offeror Sales Price”) equal to the product of the Interest
Price multiplied by the Ownership Interest of the Offeror.  The election of the
Offerees shall be binding upon the Offeror.  In the event that, following an
Offer, one or more Offeree(s) determines to purchase, but other Offeree(s), if
any, determine to sell, the Offeree(s) desiring to purchase shall be obligated
to purchase both the other (selling) Offeree(s)’ Ownership Interests and the
Offeror’s Ownership Interest.  The failure of the Offerees to give a written
notice of its election within such fifteen (15) day period shall be deemed an
acceptance of the Offer to sell the Offerees’ Ownership Interest to Offeror for
the Offeree Sales Price.  Notwithstanding the foregoing, if the Offeror is
either Hilltop Owner or Ford Owner (each, a “HF Owner”) or their respective
successors or assigns, such offer must first be made to the other HF Owner prior
to being made to SPC Owner, and if the Offeror is SPC Owner, such Offer must be
made to each of the HF Owners.  Further, the HF Owners may aggregate their
respective Ownership Interests in connection with an Offer to SPC Owner.  Any
Offer to the Offerees shall be exercisable by them in the same proportion which
their Ownership Interests bear, in the aggregate, to the Offeror’s Ownership
Interest, or in such other manner as the Offerees agree in writing.

 

The closing of any purchase or sale under this Section 6.04 shall occur within
sixty (60) days after the Offeror’s delivery of the Offer to the Offeree (the
“Closing Period”).  If the Offerees deliver a notice to the Offeror that the
Offerees elect to purchase all of the Offeror’s Ownership Interest and fail to
close such purchase within the Closing Period, then the Offeror shall have the
option to elect to purchase all of the Offerees’ Ownership Interest for an
amount equal to seventy-five percent (75%) of the Offeree Sales Price and the
closing of such purchase shall occur within thirty (30) days after the
expiration of the

 

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Closing Period.  At the closing of any purchase or sale under this Section 6.04,
the purchaser shall deliver or cause to the delivered the applicable purchase
price, as calculated hereinabove, to the sellers and the sellers, at the
sellers’ expense, shall cause all liens and security interests covering all of
any portion of the sellers’ Ownership Interest to be released at or prior to the
closing and the sellers shall transfer to the purchaser all of the sellers’
Ownership Interest, free and clear of all liens and security interests and in
such form and substance reasonably acceptable to the purchaser.

 

ARTICLE VII.
INDEMNIFICATION

 

7.01                        General.  Subject to Section 2.01, each Co-Owner, as
indemnitor, shall indemnify, defend and hold harmless each of the other
Co-Owners from and against all losses, damages, penalties and liabilities of
every kind, arising in any manner out of the indemnitor’s failure to perform or
observe any of the terms or provisions of this Agreement.

 

7.02                        Indemnification for Loan Default Damages.  In
addition to the indemnification provided by Section 7.01, a Co-Owner, as
indemnitor, shall indemnify, defend and hold harmless each of the other
Co-Owners from and against losses, damages, penalties and liabilities of every
kind, arising in any manner out of a default on the Loan caused by the
indemnitor or the Co-Owner owned by such indemnitor.  Each Co-Owner joins in
this Agreement as provided below to acknowledge and agree to be bound by the
terms and conditions of this Section 7.02.

 

7.03                        Survival of Indemnification.  The provisions
contained in this Article VII shall survive the termination of this Agreement.

 

ARTICLE VIII.
TERM

 

8.01                        Term.

 

(a)                                 The term of this Agreement commenced upon
the Effective Date and shall terminate upon the occurrence of any of the
following events: (i) the Co-Owners unanimously agree in writing to terminate
this Agreement; (ii) the Co-Owners sell, exchange, or otherwise dispose of the
entire Project and distribute the proceeds; or (iii) one Co-Owner acquires the
entire Project.  Notwithstanding the foregoing, or any other provision of this
Agreement to the contrary, for so long as the Loan is outstanding, this
Agreement may not be terminated, and the Co-Owners shall take no action that
will terminate this Agreement as provided in this Section 8.01, without the
prior written consent of the Lender.

 

(b)                                 Neither the death, retirement, removal,
withdrawal, termination nor resignation of the Property Manager, nor any
assignment for the benefit of creditors by or the adjudication of bankruptcy or
incompetency of the Property Manager shall cause the termination of this
Agreement.

 

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8.02                        Accounting on Termination.  In the event of any
termination of this Agreement, there shall be a prompt accounting by the
Co-Owner Manager with respect to the Project.  A termination shall not relieve
any Co-Owner of any obligations owing to any other Co-Owner existing at the time
of such termination.

 

ARTICLE IX.
ELECTION TO PURCHASE OWNERSHIP INTERESTS

 

For purposes of this Agreement, if a Co-Owner exercises a right to purchase the
Interest of another Co-Owner pursuant to this Agreement, then such Purchasing
Co-Owner may elect, subject to compliance with the Loan Documents, to purchase,
at closing, either: (a) the Interest of the selling Co-Owner; or (b) the
ownership interest in such selling Co-Owner where such selling Co-Owner is an
SPE.

 

ARTICLE X.
GENERAL PROVISIONS

 

10.01                 Mutuality; Reciprocity; Runs With the Land.  All
provisions, conditions, covenants, restrictions, obligations and agreements
contained herein are made for the direct, mutual and reciprocal benefit of each
and every part of the Project; shall be binding upon and shall inure to the
benefit of each of the Co-Owners and their respective heirs, executors,
administrators, successors, assigns, devisees, representatives and all other
persons acquiring any undivided interest in the Project or any portion thereof
whether by operation of law or any manner whatsoever (collectively,
“Successors”); shall create mutual, equitable servitudes and burdens upon the
undivided Interest in the Project of each Co-Owner in favor of the Interest of
every other Co-Owner; shall create reciprocal rights and obligations between the
respective Co-Owners, their Interests in the Project, and their Successors; and
shall, as to each of the Co-Owners and their Successors operate as covenants
running with the land, for the benefit of the other Co-Owners pursuant to
applicable law.  It is expressly agreed that each covenant contained herein
(i) is for the benefit of and is a burden upon the undivided Interests in the
Project of each of the Co-Owners, (ii) runs with the undivided Interest in the
Project of each Co-Owner, and (iii) benefits and is binding upon each Successor
owner during its ownership of any undivided Interest in the Project, and each
owner having any interest therein derived in any manner through any Co-Owner or
Successor.  Every person or entity who now or hereafter owns or acquires any
right, title or interest in or to any portion of the Project is and shall be
conclusively deemed to have consented and agreed to every restriction,
provision, covenant, right and limitation contained herein, whether or not such
person or entity expressly assumes such obligations or whether or not any
reference to this Agreement is contained in the instrument conveying such
interest in the Project to such person or entity.  The Co-Owners agree that,
subject to the restrictions on transfer contained herein, any Successor shall
become a party to this Agreement upon acquisition of an undivided interest in
the Project as if such person was a Co-Owner initially executing this Agreement.

 

10.02                 Binding Arbitration.  Any controversy arising out of or
related to this Agreement or the breach thereof or an investment in the
Interests shall be settled by arbitration in Dallas County, Texas, in accordance
with the rules of The American Arbitration Association, and

 

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judgment entered upon the award rendered may be enforced by appropriate judicial
action pursuant to Texas law.  The arbitration panel shall consist of three
members, consisting of one member selected by each Co-Owner, which panel members
shall be experienced in the legal rights related to the ownership and operation
of projects similar to the Project.  Selection of the members by the Co-Owners
must occur within thirty (30) days following notice by one party that it desires
that a matter be arbitrated.  If there was no mediation and the parties are
unable within such thirty (30) day period to agree upon the arbitrations, then
the panel shall be one arbitrator selected by the Dallas, Texas office of The
American Arbitration Association. Each member of the arbitration panel shall
also be knowledgeable with respect to the subject matter area of the dispute, as
well as applicable legal and equitable remedies related thereto.  The
non-prevailing party shall bear any fees and expenses of the arbitrator, other
tribunal fees and expenses, reasonable attorneys’ fees of both parties, any
costs of producing witnesses and any other reasonable costs or expenses incurred
by it or the prevailing party or such costs shall be allocated by the
arbitrator.  The arbitration panel shall render a decision within thirty (30)
days following the close of presentation by the parties of their cases and any
rebuttal.  The parties shall agree within thirty (30) days following selection
of the arbitrator to any prehearing procedures or further procedures necessary
for the arbitration to proceed, including interrogatories or other discovery;
provided, in any event each Co-Owner shall be entitled to discovery in
accordance with Texas law.  Nothing contained herein shall prevent a Co-Owner
from seeking equitable remedies under exigent circumstances.

 

10.03                 Attorneys’ Fees.  If any action or proceeding is
instituted between all or any of the Co-Owner arising from or related to or with
this Agreement, the Co-Owner or Co-Owners prevailing in such action or
arbitration shall be entitled to recover from the other Co-Owner or Co-Owners
all of its or their costs of action or arbitration, including, without
limitation, reasonable attorneys’ fees and costs as fixed by the court or
arbitrator therein.

 

10.04                 Entire Agreement.  This Agreement, together with the
Property Management Agreement, constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and all prior and
contemporaneous agreements, representations, negotiations and understandings of
the parties hereto, oral or written, are hereby superseded and merged herein.

 

10.05                 Governing Law; Venue.  THIS AGREEMENT AND ANY CLAIM,
CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS
AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW
RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS
OF ANOTHER JURISDICTION.  ALL OF THE PARTIES HERETO CONSENT TO THE EXERCISE OF
JURISDICTION IN PERSONA BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN
DALLAS COUNTY, TEXAS OR THE STATE COURTS LOCATED IN DALLAS COUNTY, TEXAS FOR ANY
ACTION ARISING OUT OF THIS AGREEMENT, THE TRANSACTION DOCUMENTS,

 

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OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.  ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO, OR FROM THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING
SITES IN DALLAS, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT.  THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANOTHER IN ANY MATTER
WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS
AGREEMENT.

 

10.06                 Notice and Payments.

 

(a)                                 Any notice to be given or other document or
payment to be delivered by any party to any other party hereunder may be
delivered in person, or may be deposited in the United States mail, duly
certified or registered, return receipt requested, with postage prepaid, or by
Federal Express or other similar overnight delivery service, and addressed to
the Co-Owner at the addresses specified on the signature page hereof or in any
instrument effecting an assignment and assumption hereof.  Any party hereto from
time to time, by written notice to the others, may designate a different address
(or phone number) that shall be substituted for the one above specified.  Unless
otherwise specifically provided for herein, all notices, payments, demands or
other communications given hereunder shall be in writing and shall be deemed to
have been duly given and received (i) upon personal delivery, or (ii) as of the
third business day after mailing by United States registered or certified mail,
return receipt requested, postage prepaid, addressed as set forth above, or
(iii) the immediately succeeding business day after deposit with Federal Express
or other similar overnight delivery system.

 

(b)                                 For all purposes of the Loan, the Co-Owners
hereby designate the Co-Owner Manager as the notice party for purposes of all
communication and correspondence by, with or on behalf of the Co-Owners with
respect to the Lender.

 

10.07                 Successors.  All provisions of this Agreement shall inure
to the benefit of and shall be binding upon the permitted
successors-in-interest, assigns and legal representatives of the parties hereto.

 

10.08                 Waivers.  No act of any Co-Owner shall be construed to be
a waiver of any provision of this Agreement, unless such waiver is in writing
and signed by the Co-Owner(s) affected.

 

10.09                 Counterparts.  This Agreement may be executed in
counterparts, each of which, when taken together, shall be deemed one fully
executed original.

 

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10.10                 Severability.  If any portion of this Agreement shall
become illegal, null or void or against public policy, for any reason, or shall
be held by any court of competent jurisdiction to be illegal, null or void or
against public policy, the remaining portions of this Agreement shall not be
affected thereby and shall remain in full force and effect to the fullest extent
permissible by law.

 

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

 

10.12                 Time is of the Essence.  Time is of the essence of each
and every provision of this Agreement.

 

10.13                 Subordination.

 

(a)                                 For so long as there is outstanding any
balance on the Loan, the Deed of Trust, and any renewals and extensions thereof,
shall unconditionally be and remain at all times a lien on the Project prior and
superior to this Agreement and all rights, privileges, duties and obligations of
each Co-Owner hereunder.  For so long as there is any outstanding balance on the
Loan, this Agreement and all rights, privileges, duties and obligations of the
Co-Owners hereunder shall be and hereby are subjected and subordinated to the
Note, the Deed of Trust, and the other Loan Documents, including, without
limitation, all indebtedness, and any interest, fees, costs or expenses thereon
due or to become due to the holder thereof under the Note, Deed of Trust or any
other Loan Document.  The Co-Owners each agree that they shall not engage in any
activity which would violate the terms of any of the Loan Documents.  The
Co-Owners each agree not to allow its Interest in the Project to become subject
to any liens of any third party, and if a Co-Owner’s Interest is involuntarily
encumbered, then such lien will be discharged within thirty (30) days.  Each
Co-Owner shall promptly respond to any request for information from the other
Co-Owner or Lender and will promptly execute documents reasonably required in
connection with the Loan and the operation of the Project.  Each Co-Owner shall
promptly notify all other Co-Owners and the Lender of any change in address or
telephone number set forth on the signature page attached hereto.

 

(b)                                 For so long as there is outstanding any
balance on the Loan, the Co-Owners agree that: (i) any and all rights and
remedies, including rights of indemnity or otherwise under this Agreement are
subject to the terms and provisions of the Loan Documents; and (ii) they shall
not take any action that would cause a violation of the Loan Documents.

 

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10.14                 Memorandum.  The Co-Owners agree that they will execute
and record the Memorandum of Co-Owners Agreement in the deed records of Dallas
County, Texas in the form of Exhibit H attached hereto, in lieu of the
recordation of this Co-Owners Agreement.

 

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

 

(a)                                 Ford Owner hereby represents, covenants, and
agrees that:

 

(i)                                     Ford Owner is an “accredited investor”
as defined in Rule 501 of Regulation D of the General Rules and Regulations
promulgated under the Securities Act of 1933.

 

(ii)                                  Ford Owner is a Texas limited liability
company, duly formed, validly existing and in good standing under the laws of
the State of Texas and has all requisite organizational power and authority to
own, lease, and operate its Interest and to carry on its business as now
conducted and as contemplated herein.

 

(iii)                               All of the outstanding membership interests
of Ford Owner (the “Ford Owner Interests”) are validly issued and owned,
beneficially and of record, by Ford Owner.  There are no interests or rights to
Ford Owner Interests other than what issued, outstanding, and owned by Ford
Owner.

 

(iv)                              Ford Owner owns free and clear of any and all
liens, encumbrances, claims, or other restrictions or limitations whatsoever all
legal and beneficial right, title, and interest in Ford Owner Interests.  Except
as created by this Agreement, Ford Owner has not, directly or indirectly entered
into any agreement, commitment or arrangement to transfer, pledge, mortgage,
hypothecate or otherwise encumber Ford Owner Interests or any interest therein.

 

(v)                                 Ford Owner will not transfer all or a
portion of Ford Owner Interests, or any interest therein, except in compliance
with this Agreement and the Loan Documents, and only if the transferee executes
a joinder, acknowledgement, and agreement to all the terms and conditions of
this Agreement.  Further, Ford Owner shall deliver written notice to the other
Co-Owners of any such transfer, prior to or contemporaneously with such
transfer.

 

(b)                                 Hilltop Owner hereby represents, covenants,
and agrees that:

 

(i)                                     Hilltop Owner is an “accredited
investor” as defined in Rule 501 of Regulation D of the General Rules and
Regulations promulgated under the Securities Act of 1933.

 

(ii)                                  Hilltop Owner is a Texas limited liability
company, duly formed, validly existing and in good standing under the laws of
the State of Texas and has all requisite organizational power and authority to
own, lease, and operate

 

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its Interest and to carry on its business as now conducted and as contemplated
herein.

 

(iii)                               All of the outstanding membership interests
of Hilltop Owner (the “Hilltop Owner Interests”) are validly issued and owned,
beneficially and of record, by Hilltop Owner.  There are no interests or rights
to Hilltop Owner Interests other than what issued, outstanding, and owned by
Hilltop Owner.

 

(iv)                              Hilltop Owner owns free and clear of any and
all liens, encumbrances, claims, or other restrictions or limitations whatsoever
all legal and beneficial right, title, and interest in Hilltop Owner Interests. 
Except as created by this Agreement, Hilltop Owner has not, directly or
indirectly entered into any agreement, commitment or arrangement to transfer,
pledge, mortgage, hypothecate or otherwise encumber Hilltop Owner Interests or
any interest therein.

 

(v)                                 Hilltop Owner will not transfer all or a
portion of Hilltop Owner Interests, or any interest therein, except in
compliance with this Agreement and the Loan Documents, and only if the
transferee executes a joinder, acknowledgement, and agreement to all the terms
and conditions of this Agreement.  Further, Hilltop Owner shall deliver written
notice to the other Co-Owners of any such transfer, prior to or
contemporaneously with such transfer.

 

(c)                                  SPC Owner hereby represents, covenants, and
agrees that:

 

(i)                                     SPC Owner is an “accredited investor” as
defined in Rule 501 of Regulation D of the General Rules and Regulations
promulgated under the Securities Act of 1933

 

(ii)                                  SPC Owner is a Texas limited liability
company duly formed, validly existing and in good standing under the laws of the
State of Texas and has all requisite organizational power and authority to own,
lease, and operate its Interest and to carry on its business as now conducted
and as contemplated herein.

 

(iii)                               All of the outstanding partnership interests
of SPC Owner (the “SPC Owner Interests”) are validly issued and owned,
beneficially and of record, by SPC Owner.  There are no interests or rights to
SPC Owner Interests other than what issued, outstanding, and owned by SPC Owner.

 

(iv)                              SPC Owner owns free and clear of any and all
liens, encumbrances, claims, or other restrictions or limitations whatsoever all
legal and beneficial right, title, and interest in SPC Owner Interests.  Except
as created by this Agreement, SPC Owner has not, directly or indirectly entered
into any agreement, commitment or arrangement to transfer, pledge, mortgage,
hypothecate or otherwise encumber SPC Owner Interests or any interest therein.

 

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(v)                                 SPC Owner will not transfer all or a portion
of SPC Owner Interests, or any interest therein, except in compliance with this
Agreement and the Loan Documents, and only if the transferee executes a joinder,
acknowledgement, and agreement to all the terms and conditions of this
Agreement.  Further, SPC Owner shall deliver written notice to the other
Co-Owners of any such transfer, prior to or contemporaneously with such
transfer.

 

10.16                 Confidentiality.  By executing this Agreement, each
Co-Owner hereby agrees, on behalf of itself and each of its affiliates, not to
reveal or make known to any person or entity (other than a Co-Owner’s officers,
directors, managers, members, partners, investors, prospective investors,
lenders, prospective lenders, purchasers, accountants and attorneys) any
financial statements or reports provided to the Co-Owners by the Co-Owner
Manager, Property Manager, Developer, Leasing Agent or other third party
contracted by the Co-Owners in accordance with this Agreement or any other
information (whether written or otherwise) respecting the Property or the
Project; provided, however, that the foregoing limitation shall not apply to any
information which (A) was already known to such Co-Owner on a non-confidential
basis at the time of its disclosure to such Co-Owner, (B) is made known to such
Co-Owner on a non-confidential basis from a source other than the Co-Owner
Manager, Property Manager, Developer, Leasing Agent  or other third party
contracted by the Co-Owners in accordance with this Agreement, (C) was at the
time of its disclosure to such Co-Owner, or later becomes, part of the public
domain otherwise than by any act, omission or fault of such Co-Owner, (D) the
Co-Owner Manager authorizes such disclosure, or (E) is required to be disclosed
by law, including, without limitation, rules promulgated by the Securities and
Exchange Commission, or court order.

 

[This section left blank; signature pages to follow]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.

 

 

CO-OWNERS:

 

 

 

FORD OWNER

 

 

 

DIAMOND HILLCREST, LLC,

 

a Texas limited liability company

 

 

 

By:

/s/ GARY SHULTZ

 

Name:

Gary Shultz

 

Title:

Vice President

 

 

 

Notice Address: 200 Crescent Court

 

Suite 1350

 

Dallas, Texas 75201

 

Attn: Mr. Gary Shultz

 

Telephone Number: (214) 871-5938

 

Email: gshultz@diamond-a.com

 

 

 

With a copy to:

 

 

 

William C. Wilshusen

 

Haynes and Boone, LLP

 

Suite 700

 

2323 Victory Avenue

 

Dallas, TX 75219

 

Telephone Number: (214) 651-5595

 

e-mail: william.wilshusen@haynesboone.com

 

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HILLTOP OWNER

 

 

 

HTH HILLCREST PROJECT LLC,

 

a Texas limited liability company

 

 

 

By: Hilltop Holdings Inc., its sole member

 

 

 

 

By:

/s/ COREY PRESTIDGE

 

 

Name:

Corey Prestidge

 

 

Title:

Executive Vice President and General Counsel

 

 

 

Notice Address:

 

c/o Hilltop Holdings Inc.

 

2323 Victory Avenue, Suite 1400

 

Dallas, Texas 75219

 

Attn: Mr. Corey G. Prestidge

 

Telephone Number: (214) 525-4647

 

Email: cprestidge@hilltop-holdings.com

 

 

 

With a copy to:

 

 

 

Notice Address:

 

1445 Ross Ave, Suite 3800

 

Dallas, Texas 75202

 

Attn: Mr. K. Brock Bailey

 

Telephone Number: (214) 758-1076

 

Email: brock.bailey@bracewell.com

 

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SPC OWNER

 

 

 

SPC PARK PLAZA PARTNERS LLC,

 

a Texas limited liability company

 

 

 

By:

First American Exchange Company, LLC,

 

 

a Delaware limited liability company,

 

 

its sole member and manager

 

 

 

 

 

 

 

By:

/s/ MARK A. BULLOCK

 

Name:

Mark A. Bullock

 

Its:

Legal Counsel

 

 

 

 

 

Notice address:

 

c/o FIRST AMERICAN EXCHANGE COMPANY

 

215 South State Street, Suite 380

 

Salt Lake City, UT 84111

 

Attn.: Mark A. Bullock

 

Legal Counsel

 

 

 

 

 

With a copy to:

 

 

 

Kane Russell Coleman Logan PC

 

3700 Thanksgiving Tower

 

1601 Elm Street

 

Dallas, TX 75201

 

Attn: Raymond J. Kane

 

Telephone No.: 214-777-4290

 

Email: rkane@krcl.com

 

EXHIBITS AND SCHEDULES INTENTIONALLY OMITTED

 

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