Exh 10.7 10/26/2005 Income Target Agreement


    
      

    

    Exhibit
      10.7


     

     

    INCOME
      TARGET AGREEMENT

     

    THIS
      INCOME TARGET AGREEMENT (this “Agreement”), is dated as of January 5, 2006,
      by and among MAGUIRE MO MANAGER, LLC, a Delaware limited liability company
      (the
“Manager”), MACQUARIE OFFICE II, LLC, a Delaware limited liability company
      (“MOF”), MAGUIRE PROPERTIES, L.P., a Maryland limited partnership (“Maguire”),
      and MAGUIRE MACQUARIE OFFICE LLC, a Delaware limited liability company (the
      “Company”). Capitalized terms used but not otherwise defined herein shall have
      the meanings ascribed to them in the LLC Agreement (as defined
      below).

     

    W I T N E S S E T H
      :

     

    WHEREAS,
      the Manager, MOF and Maguire have entered into that certain First Amended and
      Restated Limited Liability Company Agreement, dated as of October 26, 2005,
      and
      amended and restated as of January 5, 2006, (as amended or restated from
      time to time, the “LLC Agreement”), of the Company;

     

    WHEREAS,
      in connection with entering into the LLC Agreement, the Manager, MOF and Maguire
      have agreed that $7,500,000 of the distribution paid to Maguire pursuant to
      Section 3.1(c) of the LLC Agreement will be deposited into an escrow account
      (such amount, the “Income Support Escrow”); and

     

    WHEREAS,
      the distribution of the Income Support Escrow is contingent upon confirmation
      of
      certain assumptions made by Maguire about future net operating income
      attributable to the Projects, other than the SG Project (each as defined in
      the
      LLC Agreement) (the "Applicable Projects") and therefore, will be distributed
      in
      accordance with this Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises hereof, and the mutual promises,
      obligations and agreements contained herein, the parties hereto, intending
      to be
      legally bound, do hereby agree as follows:

     

     

    ARTICLE
      I

     

     

    


     

     

    ESTABLISHMENT
      OF ESCROW ACCOUNT

     

    The
      parties shall establish an escrow account for the Income Support Escrow within
      30 days after the date of this Agreement (the “Escrow Account”). The Manager
      shall serve as escrow agent of the Escrow Account. The Escrow Account shall
      be
      invested in cash equivalents 

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    or
      other
      low risk investments. Maguire shall be the owner of the Escrow Account and
      interest on the Escrow Account shall be disbursed to Maguire (and allocated
      to
      Maguire for income tax purposes) when and as the Income Support Escrow is
      distributed to any of the parties hereunder.

     

     

    ARTICLE
      II

     

     

    


     

     

    DISTRIBUTIONS
      OF INCOME SUPPORT ESCROW

     

    2.1 Year
      1
      Income Target.
      

     

    
      	 	
              (a)

            	
              In
                the event that the actual NOI (as defined below) of the Applicable
                Projects for each of the quarters ending March 31, June 30, September
                30
                or December 31 (each a “Year 1 Quarter”) of the year ended December 31,
                2006 (“Year 1”) is less than US$18,967,500 (the “Year 1 Quarter Target
                NOI”), an amount equal to the difference between the Year 1 Quarter Target
                NOI and the actual NOI of the Applicable Projects for the such Year
                1
                Quarter, multiplied by 0.80, shall be payable to MOF as of the last
                day of
                such Year 1 Quarter, and shall be distributed to MOF from the Escrow
                Account on the 15th
                day after the last day of each such Year 1 Quarter, but in no event
                shall
                the aggregate amount of such distributions for each of the Year 1
                Quarters
                be greater than US$7,500,000; provided, that in the event the aggregate
                amount of the actual NOI allocable to MOF for each of the Year 1
                Quarters
                plus any payments received by MOF for the first three Year 1 Quarters
                pursuant to this Section
                2.1(a)
                is
                greater than US$60,696,000, MOF shall not be entitled to any distribution
                with respect to the Year 1 Quarter ending December 31, 2006, and
                MOF shall
                repay to the Escrow Account an amount equal to the lesser of
                

            


    

     

    (i) any
      distributions it has received pursuant to this Section
      2.1(a)
      for any
      of the Year 1 Quarters ending March 31, 2006, June 30, 2006 or September 30,
      2006 and

     

    (ii) (A)
      the
      sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
      of
      the Year 1 Quarters, plus (2) any payments received by MOF for the first three
      Year 1 Quarters pursuant to this Section
      2.1(a),
      minus
      (B) US$60,696,000.

     

    


     

    
      	 	
              (b)

            	
              On
                the 15th
                day following the end of Year 1, an amount equal to US$2,500,000
                less the
                aggregate amount of the distributions made to MOF for each Year 1
                Quarter
                pursuant to Section
                2.1(a)
                (taking into account any repayments MOF is required to pay the Escrow
                Account pursuant thereto) shall be distributed to Maguire from the
                Escrow
                Account; provided that Maguire hereby agrees and covenants to repay
                and
                guaranty such amount (plus up to an additional $156,000) to the Escrow
                

            


    

     


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    


     

    Account
      to the extent that the Escrow Account is not sufficient to distribute any
      amounts due to MOF pursuant to Section
      2.2(a)
      or
Section
      2.3(a).

     

    
      	 	
              (c)

            	
              For
                purposes of this Agreement, "NOI" means, with respect to any Applicable
                Project for any period, the total rental income and other income
                (without
                deduction for rent abatements to the extent of reserves therefore)
                from
                the operation of such Applicable Project for such period, after deducting
                all expenses and other proper charges incurred by the Company in
                connection with the operation and maintenance of such Applicable
                Project
                during such period, including, without limitation, management fees,
                real
                estate taxes and bad debt expenses, but before payment or provision
                for
                debt service charges, income taxes and depreciation, amortization
                and
                other non-cash expenses, in each case for such period, all as determined
                in accordance with United States generally accepted accounting
                principles.

            


    

     

    2.2 Year
      2
      Income Target.

     

    
      	 	
              (a)

            	
              In
                the event that the actual NOI of the Applicable Projects for each
                of the
                quarters ending March 31, June 30, September 30 or December 31 (each
                a
                “Year 2 Quarter”) of the year ended December 31, 2007 (“Year 2”) is less
                than US$19,350,000 (the “Year 2 Quarter Target NOI”), an amount equal to
                the difference between the Year 2 Quarter Target NOI and the actual
                NOI of
                the Applicable Projects for such Year 2 Quarter, multiplied by 0.80,
                shall
                be payable to MOF as of the last day of such Year 2 Quarter, and
                shall be
                distributed to MOF from the Escrow Account on the 15th
                day after the last day of each such Year 2 Quarter, but in no event
                shall
                the aggregate amount of such distributions for each of the Year 2
                Quarters
                plus the aggregate amount of distributions made to MOF for the Year
                1
                Quarters pursuant to Section
                2.1(a)
                (taking into account any repayments MOF is required to pay the Escrow
                Account pursuant thereto) be greater than US$7,656,000; provided,
                that in
                the event the aggregate amount of the actual NOI allocable to MOF
                for each
                of the Year 2 Quarters plus any payments received by MOF for the
                first
                three Year 2 Quarters pursuant to this Section
                2.2(a)
                is
                greater than US$61,920,000, MOF shall not be entitled to any distribution
                with respect to the Year 1 Quarter ending December 31, 2007, and
                MOF shall
                repay to the Escrow Account an amount equal to the lesser
                of

            


    

     

    (i) any
      distributions it has received pursuant to this Section
      2.2(a)
      for any
      of the Year 2 Quarters ending March 31, 2007, June 30, 2007 or September 30,
      2007 and

     

    (ii) (A)
      the
      sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
      of
      the Year 2 Quarters, plus (2) any payments 

     


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    


     

    received
      by MOF for the first three Year 2 Quarters pursuant to this Section
      2.2(a),
      minus
      (B) US$61,920,000.

     

    
      	 	
              (b)

            	
              To
                the extent funds remain available for distribution from the Escrow
                Account
                after the distributions set forth in Section
                2.1,
                on the 15th
                day following the end of Year 2, an amount equal to US$2,500,000
                less the
                aggregate amount of the distribution made to MOF for each Year 2
                Quarter
                pursuant to Section
                2.2(a)
                (taking into account any repayments MOF is required to pay the Escrow
                Account pursuant thereto) shall be distributed to Maguire from the
                Escrow
                Account; provided that Maguire hereby agrees and covenants to repay
                and
                guaranty such amount (plus, without duplication of the amount set
                forth in
                the parenthetical in Section 2.1(b) up to an additional $156,000)
                to the
                Escrow Account to the extent that the Escrow Account is not sufficient
                to
                distribute any amounts due to MOF pursuant to Section
                2.3(a).

            


    

     

    2.3 Year
      3
      Income Target.
      

     

    
      	 	
              (a)

            	
              In
                the event that the actual NOI of the Applicable Projects for each
                of the
                quarters ending March 31, June 30, September 30 or December 31 (each
                a
                “Year 3 Quarter”) of the year ended December 31, 2008 (“Year 3”) is less
                than US$20,035,000 (the “Year 3 Quarter Target NOI”), an amount equal to
                the difference between the Year 3 Quarter Target NOI and the actual
                NOI of
                the Applicable Projects for such Year 3 Quarter, multiplied by 0.80,
                shall
                be payable to MOF as of the last day of such Year 3 Quarter, and
                shall be
                distributed to MOF from the Escrow Account on the 15th
                day after the last day of each such Year 3 Quarter, but in no event
                shall
                the aggregate amount of such distributions for each of the Year 3
                Quarters
                plus the aggregate amount of distributions made to MOF for the Year
                1
                Quarters pursuant to Section
                2.1(a)
                and for the Year 2 Quarters pursuant to Section
                2.2(a)
                (in each case taking into account any repayments MOF is required
                to pay
                the Escrow Account pursuant thereto) be greater than US$7,656,000;
                provided, that in the event the aggregate amount of the actual NOI
                allocable to MOF for each of the Year 3 Quarters plus any payments
                received by MOF for the first three Year 3 Quarters pursuant to this
                Section
                2.3(a)
                is
                greater than US$64,112,000, MOF shall not be entitled to any distribution
                with respect to the Year 3 Quarter ending December 31, 2008, and
                MOF shall
                repay to the Escrow Account an amount equal to the lesser
                of

            


    

     

    (i) any
      distributions it has received pursuant to this Section
      2.3(a)
      for any
      of the Year 3 Quarters ending March 31, 2008, June 30, 2008 or September 30,
      2008 and

     

    (ii) (A)
      the
      sum of (1) the aggregate amount of the actual NOI allocated to MOF for each
      of
      the Year 3 Quarters, plus (2) any payments 

     


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    


     

    received
      by MOF for the first three Year 3 Quarters pursuant to this Section
      2.3(a),
      minus
      (B) US$64,112,000.

     

    
      	 	
              (b)

            	
              In
                the event that the NOI of the Applicable Projects for the one-year
                period
                ended December 31, 2008 is greater than US$80,140,000 (the “Year 3 Target
                NOI”), and distributions were previously made from the Escrow Account
                to
                MOF pursuant to Section
                2.2(a)
                (taking into account any repayments MOF is required to pay the Escrow
                Account pursuant thereto), an amount equal to the lesser of (x) the
                amounts previously distributed to MOF from the Escrow Account pursuant
                to
                Section
                2.2(a),
                (y) an amount equal to the product of (i) 0.80 and (ii) the difference
                between the Year 3 Target NOI and the actual NOI of the Applicable
                Projects for Year 3 and (z) $760,000, shall be paid by MOF to Maguire
                on
                January 20, 2009.

            


    

     

    2.4 Payment
      of Remaining Funds.
      Any
      portion of Income Support Escrow that is not paid or distributed to MOF or
      Maguire pursuant to Section
      2.1,
      Section
      2.2
      or
Section
      2.3
      of this
      Agreement shall be paid to Maguire out of the Escrow Account on January 30,
      2009.

     

    2.5 Treatment
      of Income Support Payments.
      Any
      portion of the Income Support Escrow paid to MOF pursuant Section 2.1, Section
      2.2, or Section 2.3 of this Agreement shall be deemed to be capital
      contributions to the Company by Maguire. Items of deduction shall be specially
      allocated to Maguire in an amount equal to such capital contributions.


     

     

    ARTICLE
      III

     

     

    


     

     

    MISCELLANEOUS

     

    3.1 Amendments.
      This
      Agreement may not be amended, altered or modified except by a writing signed
      by
      all the parties hereto.

     

    3.2 Binding
      Provisions.
      The
      covenants and agreements contained herein shall be binding upon, and inure
      to
      the benefit of, the successors and permitted assigns of the respective parties
      hereto. No other person shall have any rights or remedies
      hereunder.

     

    3.3 Severability.
      Each
      provision of this Agreement shall be considered separable and if for any reason
      any provision or provisions hereof are determined to be illegal or invalid
      and
      contrary to any existing or future law, such illegality or invalidity shall
      not
      impair the operation of, or affect, those portions of this Agreement which
      are
      legal and valid.

     

    3.4 Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be an
      original and all of which together shall constitute one agreement binding on
      all
      parties hereto, notwithstanding that all the parties may not have signed the
      same counterpart.

     

     


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    


     

    3.5 Applicable
      Law.
      This
      Agreement shall be construed and enforced in accordance with the laws of the
      State of Delaware applicable to agreements to be performed solely within the
      State of Delaware.

     

    3.6 Complete
      Agreement.
      This
      Agreement, together with the exhibits which are incorporated as if expressly
      set
      forth herein, constitutes the entire agreement between the parties and
      supersedes all agreements, representations, warranties, statements, promises
      and
      understandings, whether oral or written, with respect to the subject matter
      hereof, and neither party hereto shall be bound by nor charged with any oral
      or
      written agreements, representations, warranties, statements, promises or
      understandings not specifically set forth in this Agreement or the exhibits
      hereto.

     

    3.7 Notices.
      Any
      Notification (as defined in the LLC Agreement) to any party with respect to
      any
      matter relating to this Agreement shall be sent in the manner set forth in
      the
      LLC Agreement.

     

     


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    


     

    IN
      WITNESS WHEREOF, this Agreement has been executed by each of the parties hereto
      as of the date of this Agreement set forth above.

     

    


     

    


     

    MAGUIRE
      MACQUARIE OFFICE, LLC, 

     

    a
      Delaware limited liability company

     

    By: Maguire
      MO Manager, LLC, 

    a
      Delaware limited liability company, 

    its
      manager 

    


    By:Maguire
      Properties, L.P.,

    a
      Maryland limited partnership, 

    its
      sole
      member

    


    By:Maguire
      Properties, Inc.,

    a
      Maryland corporation,

    its
      general partner

     

     
      
      By:    /s/ Mark
        Lammas                                                 


       

      Name:   
        Mark
        Lammas                                        
        

       

      Its           Senior
        Vice
        President                                      

    

     

    


     

    


     

    


     

    MAGUIRE
      PROPERTIES, L.P.,

     

    a
      Maryland limited partnership

     

    By:
      Maguire Properties, Inc.,

    a
      Maryland corporation,

    its
      general partner

    


    
      By:    /s/ Mark
        Lammas                                                 


       

      Name:   
        Mark
        Lammas                                        
        

       

      Its           Senior
        Vice
        President                                      

    

    


     

    


     

    


     

    


     

    


     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    


     

    MACQUARIE
      OFFICE II LLC,

     

    a
      Delaware limited liability company

     

    By:
      Macquarie Office (US) Corporation, 

     

    a
      Maryland corporation,

     

    its
      manager

     

    By:   
       /s/ Rena X.
      Pulido                                           
      

     

    Name:    
      Rena X.
      Pulido                                                 


     

    Its           
      Vice
      President                                                 


     

    


     

    MAGUIRE
      MO MANAGER, LLC

    a
      Delaware limited liability company

    


    By:Maguire
      Properties, L.P., 

    a
      Maryland limited partnership, 

    its
      sole
      member

    


    By:Maguire
      Properties, Inc., a Maryland corporation, its general partner

    


    By:    /s/ Mark
      Lammas                                                 


     

    Name:   
      Mark
      Lammas                                        
        

     

    Its           Senior
      Vice
      President