Document:

exhibit1_4.htm

 Exhibit 10.12

PROPERTY MANAGEMENT AND LEASING AGREEMENT

between

HINES GLOBAL REIT [SPE PROPERTY OWNER NAME]

and

HINES INTERESTS LIMITED PARTNERSHIP

____________ __, 2010

TABLE OF CONTENTS

 

 

	
  

	
ARTICLE 1 APPOINTMENT

 

	
Section 1.1

	
Appointment of Manager

	
 

 

	
ARTICLE 2 TERM

	
 

	
 

 

	
Section 2.1

	
Term

	 

 

	
  

	
ARTICLE 3 RELATIONSHIP

 

	
Section 3.1

	
Relationship

	
 

 

	
  

	
ARTICLE 4 ASSIGNABILITY

 

	
Section 4.1

	
Assignability by Manager

	
 

 

	
Section 4.2

	
Assignment by Owner

	
 

 

	
  

	
ARTICLE 5 SERVICES OF MANAGER

 

	
Section 5.1

	
Management of the Premises

	
 

 

	
Section 5.2

	
Manager’s Employees

	
 

 

	
Section 5.3

	
Budgets and Leasing Guidelines;  Annual Performance

	
 

 

	
Section 5.4

	
Collection of Rents

	
 

 

	
Section 5.5

	
Leasing Duties of Manager

	
 

 

	
Section 5.6

	
Decorations and Repairs

	
 

 

	
Section 5.7

	
Operational Activities

	
 

 

	
Section 5.8

	
Taxes

	
 

 

	
Section 5.9

	
Compliance with Agreements

	
 

 

	
Section 5.10

	
Payrolls

	
 

 

	
Section 5.11

	
Banking Matters

	
 

 

	
Section 5.12

	
Inspections of Premises

	
 

 

	
Section 5.13

	
Maintenance of Records

	
 

 

	
Section 5.14

	
Staffing for Emergencies

	
 

 

	
Section 5.15

	
Tenant Relations Program

	
 

 

	
Section 5.16

	
Communications with Owner

	
 

 

	
Section 5.17

	
Books and Records

	
 

 

	
Section 5.18

	
Compliance with Laws

	
 

 

	
Section 5.19

	
Expenditures for Emergencies

	
 

 

	
Section 5.20

	
Establishment of Website

	
 

 

	
Section 5.21

	
Sarbanes-Oxley Compliance

	
 

 

	
Section 5.22

	
Submission of Annual Reports

	
 

 

	
  

	
ARTICLE 6 MANAGEMENT AUTHORITY

 

	
Section 6.1

	
Limitation on Manager’s Authority

	
 

 

	
Section 6.2

	
Expenditure of Monies by Manager

	
 

 

	
Section 6.3

	
Capital Expenditures

	
 

 

	
Section 6.4

	
Contracts with Affiliates of Manager

	
 

 

	
Section 6.5

	
Execution of Leases and Contracts

	
 

 

	
Section 6.6

	
Structural Changes

	
 

 

	
  

	
ARTICLE 7 INSURANCE

 

	
Section 7.1

	
Owner's Insurance

	
 

 

	
Section 7.2

	
Manager's Insurance

	
 

 

	
Section 7.3

	
Contractor's and Subcontractor's Insurance

	
 

 

	
Section 7.4

	
Insurance Requirements

	
 

 

	
Section 7.5

	
Waiver of Claims and Subrogation

	
 

 

	
  

	
ARTICLE 8 OWNER'S RIGHT TO AUDIT

 

	
Section 8.1

	
Audit Rights of Owner

	
 

 

	
Section 8.2

	
Correction of Internal Controls

	
 

 

	
  

	
ARTICLE 9 BANK ACCOUNTS

 

	
Section 9.1

	
Deposits of Rents and Other Sums

	 

 

	
Section 9.2

	
Security Deposit Records

	
 

 

	
Section 9.3

	
Owner to Have Access to Funds

	
 

 

	
Section 9.4

	
Ownership of Bank Records

	
 

 

	
  

	
ARTICLE 10 PAYMENT OF EXPENSES

 

	
Section 10.1

	
Payment by Manager of Expenses

	
 

 

	
Section 10.2

	
Expenses to be Borne by Manager

	
 

 

	
Section 10.3

	
Office for Manager

	
 

 

	
  

	
ARTICLE 11 INSUFFICIENT INCOME

 

	
Section 11.1

	
Insufficient Income

	
 

 

	
  

	
ARTICLE 12 TERMINATION

 

	
Section 12.1

	
Termination by Owner or Manager

	
 

 

	
Section 12.2

	
Termination by Owner

	
 

 

	
Section 12.3

	
Breach by Manager

	
 

 

	
Section 12.4

	
Breach by Owner

	
 

 

	
Section 12.5

	
Final Accounting

	
 

 

	
Section 12.6

	
Survival of Certain Rights and Obligations

	
 

 

	
  

	
ARTICLE 13 DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES

 

	
Section 13.1

	
Construction Management Services

	
 

 

	
Section 13.2

	
Development Management Services

	
 

 

	
  

	
ARTICLE 14 SALE OF THE PREMISES

 

	
Section 14.1

	
Sale of Premises

	
 

 

	
  

	
ARTICLE 15 LEGAL PROCEEDINGS

 

	
Section 15.1

	
Legal Proceedings

	
 

 

	
  

	
ARTICLE 16 MANAGER'S LIABILITY

 

	
Section 16.1

	
Liability of Manager

	
 

 

	
Section 16.2

	
Indemnity of Manager 

	
 

 

	
Section 16.3

	
Limitation on Making Certain Claims

	
 

 

	
Section 16.4

	
Expenditures Made in Good Faith

	
 

 

	
  

	
ARTICLE 17 REPRESENTATION AND WARRANTIES

 

	
Section 17.1

	
No Reliance by Owner

	
 

 

	
Section 17.2

	
Representations and Warranties

	
 

 

	
  

	
ARTICLE 18 CONSENTS

 

	
Section 18.1

	
Granting of Consents

	
 

 

	
  

	
ARTICLE 19 SUBSIDIARIES AND AFFILIATES

 

	
Section 19.1

	
Contracts with Manager’s Affiliates

	
 

 

	
  

	
ARTICLE 20 NOTICES

 

	
Section 20.1

	
Notices

	
 

 

	
  

	
ARTICLE 21 COMPENSATION

 

	
Section 21.1

	
Fees Payable to Manager

	
 

 

	
Section 21.2

	
Failure of Owner to Timely Pay

	
 

 

	
  

	
ARTICLE 22 MISCELLANEOUS

 

	
Section 22.1

	
Pronouns

	
 

 

	
Section 22.2

	
Amendments

	
 

 

	
Section 22.3

	
Headings

	
 

 

	
Section 22.4

	
Waiver

	
 

 

	
Section 22.5

	
Successors and Assigns

	
 

 

	
Section 22.6

	
Governing Law

	
 

 

	
Section 22.7

	
Ownership of Premises

	
 

 

	
Section 22.8

	
Other Activities of Manager

	
 

 

	
Section 22.9

	
Non-Discrimination

	
 

 

	
  

	
Section 22.10Special Parties

 

	
  

	
Section 22.11Counterparts

 

	
  

	
Section 22.12Survival of Agreement

 

	
  

	
Section 22.13Special Services

 

DAL02:456733.8

 

  

  

  

PROPERTY MANAGEMENT AND LEASING AGREEMENT

THIS PROPERTY MANAGEMENT AND LEASING AGREEMENT ("Agreement") is entered into effective as of the ___ day of _________, 20__, by and between Hines Global REIT [SPE PROPERTY OWNER] _____________, a [Delaware] ____________________ (hereinafter called "Owner"), and Hines Interests Limited Partnership, a Delaware limited partnership (hereinafter called "Manager"),

W I T N E S S E T H

WHEREAS, Owner is the owner of the land described in Schedule A attached hereto together with the office building and other improvements located thereon (the  "Premises"); and

WHEREAS, Owner wishes to obtain the benefits of Manager's expertise in the field of real estate management and leasing by relinquishing to Manager control in the operation, direction, management, leasing and supervision of the Premises, subject to the terms and provisions of this Agreement, and Manager, for a fee and pursuant to the terms and provisions of this Agreement, agrees to assume said control and discretion in the operation, direction, management and supervision of the Premises on behalf of Owner.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and of other good and valuable consideration, the parties hereto agree as follows:

ARTICLE 1

APPOINTMENT

Section 1.1 Appointment of Manager

.  Owner hereby contracts with Manager to manage, lease (or supervise the leasing by a third party), operate, direct and supervise the Premises on behalf of Owner and to provide services as required under this Agreement.

ARTICLE 2                      

TERM

Section 2.1 Term

.  Subject to and upon the terms and conditions set forth in this Agreement (including without limitation Article 12), the term of this Agreement (the "Term") shall commence on the date hereof and shall continue until the earlier of termination pursuant to Article 12 or ten (10) years after the date of this Agreement.  Thereafter, the Term shall continue from year to year unless written notice is given by either party of its desire not to continue this Agreement at least ninety (90) days prior to any anniversary of the commencement of this Agreement.  Notwithstanding the foregoing, upon the taking of possession of the Premises by a mortgagee through foreclosure or deed-in-lieu of foreclosure, this Agreement may be terminated by such mortgagee upon ninety (90) days prior written notice thereof.

ARTICLE 3

RELATIONSHIP

Section 3.1 Relationship

.  Manager shall at all times be the independent contractor of Owner and not the employee or agent of Owner.  Manager shall have no right or power to contract with third parties for, on behalf of, or in the name of Owner or otherwise to bind Owner.  Except as expressly provided herein to the contrary, Owner agrees to be responsible for and shall reimburse Manager for all costs, expenses and disbursements reasonably and properly incurred by Manager in accordance with the provisions of this Agreement in providing management, leasing (if applicable) and operational services hereunder, such as, but not limited to, contracts for cleaning services, contracts for landscaping or maintenance services and orders for supplies and equipment, and Owner agrees to indemnify and hold Manager harmless from and against the same.

ARTICLE 4

ASSIGNABILITY

Section 4.1 Assignability by Manager

.  Manager shall not transfer or assign this Agreement or any part thereof or any of its rights or obligations hereunder without the prior written consent of Owner, provided that Owner’s consent shall not be required for an assignment to a Hines Affiliate (defined below).  The foregoing shall not prevent Manager from either (i) pledging to any person or entity Manager's right to receive fees under this Agreement, or (ii) entering into contracts with third parties to assist Manager in providing the services required by this Agreement, provided that, as between Owner and Manager, Manager remains ultimately responsible for the provision of such services and Owner shall have no liability under such contracts unless expressly agreed to in writing by Owner.  The consent of Owner to one or more assignments of this Agreement shall not be construed as, or result in, consent by Owner to any further or future assignment or assignments.  Any assignment or attempted assignment not made strictly in accordance with the foregoing shall be void.

As used herein, "Hines Affiliate" shall mean any partnership, limited liability company, corporation, trust or other entity as to which fifty percent (50%) or more of the beneficial interests are held, directly or indirectly, by and effective day to day Control (as defined below) resides in the Hines Family (as defined below) and/or any current or former employees of Hines Interests Limited Partnership or its successors.  For the purposes of this Agreement, "Control" or "Controlled" shall mean with respect to any person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise.

As used herein, "Hines Family" shall mean Jeffrey C. Hines and/or Gerald D. Hines, their parents, brothers and sisters, their respective spouses and children (natural and adopted), grandchildren or great grandchildren of any of the foregoing and/or trusts for any of the foregoing.

Section 4.2 Assignment by Owner

.  If Owner conveys the Premises or any part thereof to an Affiliate (defined below) of Owner, then Owner shall assign this Agreement to such Affiliate.  If Owner conveys the Premises to someone who is not an Affiliate of Owner, then the provisions of Section 12.1 shall apply.  "Affiliate" means, with reference to any entity or person, any person or entity that directly or indirectly Controls, is Controlled by or is under common Control with that person or entity.

ARTICLE 5

SERVICES OF MANAGER

Section 5.1 Management of the Premises

.  Manager shall manage, operate and maintain the Premises in a manner normally associated with the management and operation of a high quality office building.  Manager shall at all times deal with third parties (whether or not affiliated with Manager) at arms' length and in Owner's interest at all times.  Manager shall act in a fiduciary capacity with respect to the proper protection of and accounting for Owner's assets.

Section 5.2 Manager’s Employees

.  Manager shall have in its employ at all times a sufficient number of capable employees to enable it to properly, adequately, safely and economically manage, lease (or supervise the leasing of), operate and maintain the Premises.  All matters pertaining to the employment, supervision, compensation, promotion and discharge of such employees are the responsibility of Manager.  Manager is in all respects the employer of such employees, but Owner may require that any particular employee or employees be removed from duty with respect to the Premises if Owner reasonably deems such employee or employees to be incompetent, careless, insubordinate or otherwise objectionable.  Manager shall fully comply with all applicable laws and regulations having to do with worker's compensation, social security, unemployment insurance, hours of labor, wages, working conditions, and other employer-employee related subjects.  All employees engaged by Manager shall be the employees of Manager and not of Owner.

Section 5.3 Budgets and Leasing Guidelines;  Annual Performance

.  Manager shall prepare and submit to Owner a proposed operating budget (the "Operating Budget"), capital budget (the "Capital Budget"), marketing program and leasing guidelines (the "Marketing Program") for the Premises for the management, leasing and operation of the Premises for the forthcoming calendar year (or in the case of the first calendar year in which the Term commences, the remainder of such year if it is not a full calendar year) in a format approved by Owner.  Manager shall also complete and deliver to Owner a written review of its performance for the then current calendar year at the same time (the “Performance Review”) it delivers the budgets and programs as contemplated in this Section 5.3.  The scope and substance of the Performance Review will be agreed to by the Manager and the Owner prior to the delivery of the first review.  The first such budgets, program and guidelines shall be submitted to Owner within forty-five (45) days after the date of this Agreement and in the future subsequent proposed budgets, program and guidelines shall be delivered to Owner no later than October 15 of each calendar year.  By October 15 of each calendar year, Manager will submit to Owner (i) a summary of the actual (through September 30) and projected (for the full year) results of management and operation of the Premises for such calendar year and (ii) a Performance Review for the then-current calendar year.

The leasing guidelines shall include the following:

(a) the minimum rental rate to be charged for office space, and, if applicable, storage, antenna, telecom, retail and parking space and the minimum and maximum term which may be provided in each category of space to be leased in the Premises;

(b) the maximum leasing concessions or inducements (on a per square foot basis) which may be provided with respect to the Premises;

(c) a list of currently vacant space in the Premises;

(d) a list of space which will become available for lease in the Premises during the applicable calendar year; and

(e) if a third party will perform leasing services for all or a portion of the Premises, whether pursuant to a contract with Manager or as a result of a leasing agreement directly with Owner as contemplated by Section 5.5, a summary of any material terms of such relationship and the supervision thereof by Manager.

Owner will consider the proposed budgets, program and guidelines and then will consult with Manager within forty-five (45) days after they are submitted in order to agree on an "Approved Operating Budget", an "Approved Capital Budget", and "Approved Marketing Programs".  Owner and Manager will use good faith efforts to agree on the foregoing within such forty-five (45) day period.  Additionally, if Owner identifies any operating or performance deficiencies that are within reasonable control of Manager after reviewing the Performance Review, Owner shall give Manager written notice of such deficiencies prior to the end of this forty-five (45) day period.  Manager shall then have the later of thirty (30) days, or such time as is reasonably necessary, to cure the deficiencies identified in such notice.  If such deficiencies are not corrected with this time period, Owner shall give Manager a second notice of its desire to terminate this Agreement pursuant to Section 12.2.  If Manager does not cure such deficiencies within thirty (30) days after this second notice, and provide Owner written notice (and when applicable, evidence) that such deficiencies have been cured, this Agreement may be terminated by Owner pursuant to Section 12.2.

No less frequently than quarterly, Manager shall during each calendar year review the Approved Operating Budget, Approved Capital Budget, and Approved Marketing Program, and compare the same to year-to-date activity to determine whether revisions are needed.  Any such needed revisions will be submitted to Owner for its approval.

Manager agrees to use diligence and to employ all reasonable efforts to ensure that the actual costs (net of amounts, if any, recovered from third parties) of maintaining, leasing and operating the Premises shall not exceed the approved budgets pertaining thereto.

Section 5.4 Collection of Rents

.  Manager shall use diligent efforts to collect all rents (including, without limitation, billings resulting from tenant participation in operating expenses, taxes and common area maintenance charges) and other charges which may become due at any time from any tenant or from others for services provided in connection with or for the use of the Premises or any portion thereof.  All monies so collected shall be deposited in the Receipts Account (defined in Section 9.1).  Manager cannot and may not terminate any lease, lock out a tenant, institute a suit for rent or for use and occupancy, or institute proceedings for recovery of possession of any premises, without the prior written approval of Owner.  In connection with such suits or proceedings only legal counsel designated by Owner shall be retained.  The estimated costs of legal services to be incurred in bringing such approved suit or proceeding shall be submitted to Owner for its approval.  Manager shall not write off any rental income of more than twenty percent (20%) of the gross monthly rent (up to a maximum of $10,000) for any single tenant without the prior approval of Owner.

Section 5.5 Leasing Duties of Manager

.  If Manager agrees to serve as the primary leasing agent for the Premises such that Manager serves as the agent involved in locating and securing tenants for the Premises, Manager shall be the “Primary Leasing Agent” and shall be entitled to the leasing fees set forth in Section 21.1(b).  If Manager is not the Primary Leasing Agent, Owner may contract with third parties to perform such services and Manager shall not be entitled to the leasing fees referenced above.  In all events, Manager shall act as leasing manager for the Premises and be ultimately responsible for the leasing activities of the Premises, including supervising any third party retained by Owner to ensure that such party is acting in accordance with the Approved  Marketing Program and leasing guidelines.  If Manager is the Primary Leasing Agent, Manager may also contract with other persons to perform leasing services for the Premises, provided that Owner will not be obligated to pay any leasing fees or commissions to such third parties unless it agrees to do so in writing, but Owner shall remain obligated to pay Manager leasing fees in accordance with Section 21.1(b).  Manager may act without further approvals as long as Manager acts in accordance with the Approved Marketing Program and leasing guidelines.  It is understood that Owner is the only signatory authority for the execution of all lease and related leasing documents and Manager shall not represent to the contrary to prospective tenants and other parties.

Section 5.6 Decorations and Repairs

.  Manager shall institute and supervise all ordinary and extraordinary repairs, decorations and alterations, including the administration of a preventative maintenance program for all mechanical, electrical and plumbing systems and equipment and the design and installation of any supplemental H.V.A.C. electrical, mechanical or plumbing devices, including metering devices, which are installed on behalf of any tenant(s) of the Premises, provided that such (unless the same relate to emergencies) are included in an Approved Operating Budget or in an authorization by Owner pursuant to an Approved Capital Budget.

Section 5.7 Operational Activities

.  Manager shall institute and supervise all operational activities of the Premises, including but not limited to:

A.           Supervision of the cleaning contractor;

B.           Supervision of the security contractor on behalf of Owner;

C.           Supervision of any landscaping contractor;

D.           Supervision of the window washing contractor;

E.           Responsibility for and supervision of the central plant and other H.V.A.C. equipment;

F.           Responsibility for and supervision of a preventative maintenance program;

G.           Responsibility for and supervision of any necessary repairs to the Premises;

H.           Supervision of the maintenance of the elevators serving the Premises;

I.           Responsibility for making arrangements for and administering account for utilities; and

J.           Any other activity reasonably required for the normal operation of any high quality office building.

As used herein, "supervise" and "supervision" shall also include responsibility for the particular task to the extent the Owner so directs and provides the funds therefor.

Section 5.8 Taxes

.  Manager shall obtain and verify bills for real estate and personal property taxes, improvement assessments and other like charges which are or may become liens against any portion of the Premises and recommend payment or appeal as its best judgment may decide.  Manager shall not make any payments on account of any ground lease, mortgage, deed of trust or other security instrument, if any, affecting any Premises unless such payments are included in the Approved Operating Budget or otherwise approved by Owner.

Section 5.9 Compliance with Agreements

.  Manager shall operate the Premises in compliance with any ground lease, space lease, mortgage, deed of trust or other security instruments affecting the Premises and of which Manager has knowledge, but Manager shall not be required to make any payment or incur any liability on account thereof.

Section 5.10 Payrolls

.  Manager shall prepare or cause to be prepared all payrolls and maintain comprehensive payroll records.

Section 5.11 Banking Matters

.  Manager shall handle all banking matters related to its contractual responsibility.

Section 5.12 Inspections of Premises

.  Manager shall conduct, from time to time as Manager deems necessary or as Owner requests, inspections of the Premises and provide Owner with a written report on its findings to the extent requested by Owner.

Section 5.13 Maintenance of Records

.  Manager shall, on behalf of Owner, maintain complete and identifiable records and files on all matters pertaining to the Premises, including, without limitation, all revenues and expenditures, service contracts and leases, all of which records and files shall be the property of Owner.

Section 5.14 Staffing for Emergencies

.  Manager shall have competent personnel available at all times for emergencies.

Section 5.15 Tenant Relations Program

.  Manager shall administer a tenant relations program that maintains a high visibility of management presence and service to tenants and is consistent with programs offered by high quality office properties and management thereof.

Section 5.16 Communications with Owner

.  Manager shall be available for communications with Owner and will keep Owner advised of items affecting the Premises.

Section 5.17 Books and Records.

(a) Manager, in the conduct of its responsibilities to Owner, shall maintain adequate and separate books and records for the Premises in accordance with generally accepted accounting principles ("GAAP"), which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded, which books and records shall be the property of Owner.  However, any computer software or other systems of Manager which are used to generate or keep such books and records shall remain the property of Manager.  Such books and records shall include all information necessary to calculate and to audit amounts contained therein and shall otherwise comply with the requirements of the documents referred to in Section 5.9 hereof.  Such books and records, as well as those records referred to in Section 5.13 hereof, shall be maintained by Manager at the Premises or at such other location as may be mutually agreed upon in writing, and at Manager's discretion in detail or summary form at the headquarters of Manager located in Houston, Texas.  Manager shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect Owner's assets from theft, error or fraudulent activity.

(b) Manager shall maintain records of, and furnish customary (or as requested) reports summarizing, all transactions occurring from the first day of the prior calendar quarter to the last day of the prior calendar quarter.  These reports are to be received by Owner no later than thirty (30) calendar days after the end of the above described accounting period (or sooner if necessary for Owner or any partner of Owner’s (direct or indirect) parent to comply with governmental requirements of which Manager is given reasonable advance notice) and must report financial details which Owner may request.  Reports on vacancies and other matters pertaining to the management, leasing, operation, and maintenance of the Premises will be provided on a monthly basis in a format approved by Owner.  The reports shall include a comparison of quarterly, year-to-date actual, and projected year-end income and expense with the Approved Operating Budget for the Premises in a format approved by Owner.  In addition, Manager shall remit to Owner all unexpended funds (except for a reserve approved by Owner for contingencies and operating working capital or such lesser amount as may be available after all proper disbursements from the Receipts Account) in the Receipts Account as of the end of the reporting quarter.

(c) All financial statements and reports required by Owner will be prepared on an accrual basis in accordance with GAAP, except for special financial reports which by their nature require a deviation from GAAP.

(d) Manager shall prepare such additional reports at such times and in such forms as may be reasonably requested from Owner from time to time.  All reports of Manager to Owner shall be furnished in electronic form if Owner so requests.

(e) Manager shall maintain necessary liaison with Owner's accountant and shall provide such accountant with such reports and other information as Owner shall request.

Section 5.18 Compliance with Laws

.  Manager shall use its reasonable efforts to assure full compliance with federal, state and municipal laws, ordinances, regulations and orders relative to the use, operation, repair and maintenance of the Premises and with the rules, regulations or orders of the local Board of Fire Underwriters or other similar body.  Manager shall promptly remedy any violation of any such law, ordinance, rules, regulation or order which comes to its attention, all at Owner's expense.

Expenses incurred in remedying violations may be paid from the Disbursement Account (as defined in Section 9.1) provided such expenses do not exceed $5,000 in any one instance.  When more than such amount is required or if the violation is one for which the Premises title holder might be subject to penalty, Manager shall notify Owner by the end of the next business day to assure that prompt arrangements may be made to remedy the violation.

Section 5.19 Expenditures for Emergencies

. Notwithstanding anything contained herein to the contrary, in case of emergency, Manager may make expenditures for repairs and other items which exceed approved budgets or prior approvals from Owner without prior written approval if in the reasonable judgment of Manager it is necessary to prevent damage or injury.  Owner must be informed of any such expenditures before the end of the next business day.

Section 5.20 Establishment of Website

.  Any and all reports required of Manager under this Agreement shall be made available at a website to be established by Manager accessible through the Internet within one year after Owner so requests.

Section 5.21 Sarbanes-Oxley Compliance

.  If requested by Owner, all reporting, record keeping, internal controls and like matters by Manager shall comply with the Sarbanes-Oxley Act.

Section 5.22 Submission of Annual Reports

.  All annual reports to be furnished by Manager shall be furnished within thirty (30) days after the end of the applicable calendar year.

ARTICLE 6

MANAGEMENT AUTHORITY

Section 6.1 Limitation on Manager’s Authority

.  Manager's authority is expressly limited to the provisions provided herein or as may be amended in writing from time to time by Owner and mutually agreed to and accepted by Manager in writing.

Section 6.2 Expenditure of Monies by Manager

.  The Approved Operating Budget shall constitute an authorization for Manager to expend money to operate, lease and manage the Premises and Manager may do so without further approval as long as Manager does not exceed the year-to-date budgeted amount for any line item (after any allocation of any contingency that may be contained in the budget and that can be applied to such line item).  Whenever the year-to-date budgeted amount for any line item is (or appears likely to be) exceeded, a year-to-date budget variance and a revised operating budget for such line item shall be presented to Owner for its consideration.  Except as expressly permitted in this Agreement, Manager may not act outside of the Approved Operating Budget until the budget revision is approved in writing by Owner, which approval Owner will endeavor to give in a timely manner.  Once approved, Manager's authority with the revised or any additionally revised budgets is the same as that authorized for the original budget.

Section 6.3 Capital Expenditures

.  The Approved Capital Budget shall not constitute an authorization for Manager to expend any money.  Any capital expenditures must be specifically authorized by Owner.  With respect to the purchase and installation of capital items, Manager shall recommend that Owner purchase such items when Manager believes such purchase to be necessary or desirable.  Owner may arrange to purchase and install the same itself or may authorize Manager to do so subject to prescribed supervision and specification requirements and conditions.  Unless Owner specifically waives such requirements, either by memorandum or as an amendment to the contract, all new or replacement capital items exceeding Twenty-five Thousand and No/100 Dollars ($25,000) shall be awarded on the basis of competitive bidding, solicited in the following manner:

(a) A minimum of three written bids will be obtained for each purchase in excess of $25,000.

(b) Each bid will be solicited in a form prescribed by Owner so that uniformity will exist in the bid quotes.

(c) Manager shall provide Owner with all bid responses accompanied by Manager's recommendations as to the most acceptable bid.  If Manager advises acceptance of other than the lowest bidder, Manager shall adequately support, in writing, its recommendations.

Owner shall be free to accept or reject any and all bids.  Owner will communicate to Manager in writing its acceptance or rejection of bids.  Owner may pay for capital expenses from its own resources or may authorize payment by Manager out of the Disbursement Account.

Section 6.4 Contracts with Affiliates of Manager

.  Manager shall not enter into any contract with an Affiliate of Manager for cleaning, maintaining, repairing or servicing the Premises or any of the constituent parts of the Premises without the prior written consent of Owner if the contract would require Owner to make any payments to an Affiliate of Manager.  As a condition to obtaining such consent, Manager shall supply Owner with a copy of the proposed contract and shall state to Owner the affiliation between Manager (or other person or persons in control of Manager) and the party proposed to supply such goods or services, or both.  Prior to entering into any such contract, whether or not with an affiliated or related party, Manager shall submit a proposal to Owner and Owner may veto the same if Owner reasonably deems it to be unnecessary, wasteful or inappropriate.  Further, any such contract must be on market terms and Owner may require Manager to demonstrate the same through third party bids or other means.  In addition to Owner's veto right referenced above, if required by the governance documents of the general partner of Owner, any such contract must be approved by the independent members of the board of directors of the Hines Global REIT, Inc., Owner’s indirect parent.  Any such contract will include prudent cancellation rights.

Section 6.5 Execution of Leases and Contracts

.  All leases and related lease documents, all service contracts and all purchases, and all legal documentation related thereto, are to be in the name of Owner in the form prescribed by Owner and shall be executed by Owner, with the exception of contracts permitted under Section 6.4 hereof and of purchase orders related to the purchase of items within approved budgets, which may be executed by Manager.  Additionally, Manager shall execute on behalf of Owner such service agreements as Owner may authorize from time to time.

Section 6.6 Structural Changes

.  Owner expressly withholds from Manager any power or authority to make any structural change to the Premises or to make any other major alterations or additions in or to the Premises or equipment therein without the prior written direction of Owner.

ARTICLE 7

INSURANCE

Section 7.1 Owner's Insurance

.  Throughout the Term, Owner shall obtain and maintain the insurance described below (to the extent the same is available at commercially reasonable rates):

	
  

	
(a)

	
All-risks property insurance (including comprehensive boiler & machinery coverage) on a full replacement cost basis covering the Premises.

	
  

	
(b)

	
Commercial general liability insurance on an occurrence basis with Owner and Manager as insureds with limits of not less than $5,000,000 each occurrence combined single limit on bodily injury, death or property damage.  Owner’s insurance shall be primary and non-contributory to any insurance otherwise carried by Manager.

Section 7.2 Manager's Insurance

.  Manager shall obtain and maintain:

	
  

	
(a)

	
Comprehensive crime/fidelity coverage in the amount of $1,000,000 and shall name Owner as loss payee.

 

	
  

	
(b)

	
All-risks property insurance on a full replacement cost basis covering Manager’s personal property on the Premises.

 

	
  

	
(c)

	
Worker’s Compensation insurance as required by statute.

 

	
  

	
(d)

	
Employer’s Liability insurance in the amount of $1,000,000 each accident.

 

	
  

	
(e)

	
Automobile Liability insurance in the amount of $1,000,000 each occurrence.

Section 7.3 Contractor's and Subcontractor's Insurance

.  Manager shall require that all contractors and subcontractors brought onto the Premises have insurance coverage at the contractor's or subcontractor’s expense, in the following minimum amounts, with Owner and Manager as additional insureds on the commercial general liability insurance:

	
  

	
(a)

	
Worker's Compensation:

	
Statutory Amount

	
  

	
(b)

	
Employer's Liability:

	
$500,000 minimum

	
  

	
(c)

	
Commercial General Liability:

	
$1,000,000 combined single limit

	
for bodily injury and property

	
damage

	
  

	
(d)

	
Comprehensive Automobile

	
$1,000,000 each occurrence

	
Liability Insurance

	
combined single limit for bodily

	
injury and property damage

Any exceptions to the requirements in this Section 7.3 must be approved in writing by Manager's risk management department.

Section 7.4 Insurance Requirements

.  The insurance required of all parties to this Agreement shall be written with insurers authorized to do business in the State in which the Premises are located and shall be rated at least A:IX by A.M. Best’s Rating Service.

Section 7.5 Waiver of Claims and Subrogation

.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, OWNER AND MANAGER HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION AGAINST THE OTHER, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS FOR ANY LOSS OR DAMAGE TO THE OTHER’S PROPERTY BY REASON OF FIRE, THE ELEMENTS, OR ANY OTHER CAUSE WHICH IS COVERED OR COULD BE COVERED BY STANDARD “ALL-RISKS” PROPERTY INSURANCE (INCLUDING COMPREHENSIVE BOILER AND MACHINERY COVERAGE), REGARDLESS OF CAUSE OR ORIGIN, INCLUDING NEGLIGENCE OF THE OTHER PARTY HERETO, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS.  EACH PARTY’S PROPERTY INSURANCE POLICIES SHALL CONTAIN PROVISIONS WHERE THE INSURER WAIVES THEIR RIGHT OF SUBROGATION AGAINST SUCH OTHER PARTY.

ARTICLE 8

OWNER'S RIGHT TO AUDIT

Section 8.1 Audit Rights of Owner

.  Owner reserves the right for Owner's employees or others appointed by Owner to conduct examinations, during normal business hours without notification, of the books and records maintained for Owner by Manager no matter where the books and records are located.  Owner also reserves the right to perform any and all additional audit tests relating to Manager's activities, either at the Premises or at any office of Manager, provided such audit tests are related to those activities performed by Manager for Owner.

Section 8.2 Correction of Internal Controls

.  Should Owner's employees or appointees discover either weaknesses in internal control or errors in record keeping, Manager shall correct such discrepancies either upon discovery or within a reasonable period of time thereafter.  Manager shall inform Owner in writing of the action taken to correct such audit discrepancies.  Any and all such audits conducted either by Owner's employees or appointees will be at the sole expense of Owner, unless such audit (i) indicates fraud or gross neglect by Manager in its record keeping, or (ii) discloses an error on the part of Manager which affects Owner adversely and is equal to or greater than two percent (2%) of the greater of gross expenses or gross receipts of the Premises for the period audited, and in the case of (i) or (ii) above, Manager shall bear the reasonable cost of the applicable audit.

ARTICLE 9

BANK ACCOUNTS

Section 9.1 Deposits of Rents and Other Sums

.  Manager shall deposit all rents and other funds collected from the operation of the Premises, including any and all advance funds, in a bank designated by Owner, in a special account (the "Receipts Account") for the Premises in the name of Owner (so that at all times the funds deposited therein shall be the sole and exclusive property of Owner).  The bank shall be informed in writing of the designated representatives of Manager that Owner has approved as having access to such accounts.  Manager, with Owner's approval, shall establish a second account (the "Disbursement Account").  Manager shall pay the operating expenses of the Premises and any other payments relative to the Premises as required by the terms of this Agreement (including Manager's fees under Article 21 hereof) out of the Disbursement Account.  Money shall be transferred from the Receipts Account to the Disbursement Account as deemed necessary by Manager, and approved by Owner.  Owner shall have the right from time to time to change the number and types of bank accounts used by Manager and the method of transferring funds between those accounts.  Notwithstanding the foregoing, Manager shall comply with the terms of any applicable cash management, blocked account or similar agreements entered into by Owner and Manager in connection with any loan obtained by Owner and secured by the Premises, and in the event of any conflict between any such agreements and this Section 9.1, the terms and provisions of such agreements shall control.

Section 9.2 Security Deposit Records

.  Manager shall, on behalf of Owner, maintain detailed records of all security deposits and such records will be open for inspection by Owner's employees or appointees.  Manager shall maintain such security deposits as required by applicable law and the terms of the leases, as approved by Owner.

Section 9.3 Owner to Have Access to Funds

.  Through the use of signature cards, authorized representatives of Owner shall be permitted access to any and all funds in the bank account described in Section 9.1.  However, Owner and Owner's representative may not draw against said bank accounts without written communication to Manager.  Manager's authority, and the authority of any designated representative of Manager, to draw against such accounts may be terminated at any time by Owner upon written notice to Manager.

Section 9.4 Ownership of Bank Records

.  All bank records pertaining to Owner's accounts shall be the property of Owner.

ARTICLE 10

PAYMENT OF EXPENSES

Section 10.1 Payment by Manager of Expenses

.  The following operating costs (except as excluded by Section 10.2), to the extent included in approved budgets, are to be paid directly from the Disbursement Account described in Section 9.1:

(a) Costs of the gross salary and compensation, to include payroll taxes, insurance, worker's compensation and other benefits, of the on-site property management team and approved staff;

(b) To the extent recoverable from tenants, costs of gross salary and compensation, to include payroll taxes, insurance, worker’s compensation and other benefits, and related overhead of non-accounting and non-bookkeeping personnel (for example, property managers and engineers) who may be located off-site at an office other than the Manager’s home or regional offices (for cost saving, administration or other reasons) but who directly support the operations of the Premises;

(c) To the extent recoverable from tenants, costs of gross salary and compensation, to include payroll taxes, insurance, worker’s compensation and other benefits, and related overhead of accounting and bookkeeping personnel who may be located off-site, including those located at Manager’s central headquarters offices (for cost savings, administrative or other reasons), but who directly support the operation of the Premises (as differentiated from regional and central accounting, which shall be governed by Section 10.1(x) of this Agreement);

(d) Costs of forms, papers, ledgers, and other supplies and equipment used in the on-site Manager's office;

(e) Costs of insurance permitted or required to be maintained by Manager pursuant to the provisions of this Agreement;

(f) Costs of all bonuses paid to on-site employees described in Section 10.1(a), excluding, however, any incentive compensation;

(g) Costs to correct any violation of federal, state and municipal laws, ordinances, regulations and orders relative to the leasing, use, repair and maintenance of the Premises, or relative to the rules, regulations or orders of the local board of fire underwriters or other similar body, provided that such cost is not a result of the negligence or willful misconduct of Manager or its agents or employees;

(h) Actual costs of making all repairs, decorations and alterations to the Premises;

(i) Costs incurred by Manager in connection with all service contracts entered into by Manager and/or Owner in accordance with authorizations in this Agreement or approved by Owner;

(j) Costs of collection of delinquent rentals;

(k) Costs of printed forms and supplies required for use at the Premises;

(l) Costs of capital expenditures;

(m) Costs of printed checks and third-party bank fees for each bank account required by Owner;

(n) Costs of adding machines, personal computers and computer software, and other equipment of such type used for managing the Premises;

(o) Subject to Section 10.2(c), leasing commissions payable to third parties;

(p) Costs of Owner approved advertising, business expenses, professional dues, professional development, employee relocation expenses and travel;

(q) To the extent the same can be recovered from tenants under their leases, the cost of Manager’s implementation of any new accounting or reporting systems (and upgrades to maintain such systems), including web based systems or systems that utilize servers and other equipment that may be located off-site of the Premises, as well as the cost of any new general ledger adopted by Manager;

(r) Legal fees of attorneys, provided such attorneys have been approved by Owner in writing in advance of retention;

(s) Costs of outside audits as required by leases and other outside audits as may be requested by Owner in writing;

(t) Property taxes, special assessments and costs of utilities;

(u) Costs of a management office, including necessary furnishings and equipment, as provided for in Section 10.3 hereof;

(v) All other costs and expenses for which Owner is obligated to pay or reimburse Manager as provided for in this Agreement;

(w) Subject to Section 10.2(c), any out-of-pocket costs Manager incurs in performing the leasing services described in Section 5.5, including the costs of printing leasing brochures and travel and entertainment costs; and

(x) To the extent the same relate to or support the performance of Manager’s duties under this Agreement, the cost of personnel and overhead expenses related to such personnel who are located in Manager’s headquarters and regional offices.  For the avoidance of doubt, the costs associated with the personnel described in Sections 10.1(b) and (c) hereof shall not be subject to the limitations of this Section 10.1(x).  Examples of such support include risk management, regional and central accounting, cash and systems management, human resources and payroll, technology and internal audit.  The amount to be included under this Section 10.1(x) shall (1) be included only to the extent the same is recovered from tenants under their leases and (2) not exceed in any calendar year $.335 per rentable square foot within the Premises; however, such amount shall be increased on January 1 of each year by the increase in the Consumer Price Index from the preceding January 1 beginning in 2011, such adjusted amount to be rounded to the nearest $.005.  “Consumer Price Index” or “CPI” means the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for all Urban Consumers (U.S. city average; base 1982-84 = 100), published by the Bureau of Labor statistics of the United States Department of Labor.  If at any time during the Term the CPI is discontinued or published less frequently, Manager and Owner shall mutually and reasonably agree to substitute an official index published by the Bureau of Labor Statistics, or a successor governmental agency, which index is most nearly equivalent to the CPI or to a substitute procedure which reasonably reflects and monitors consumer prices; and

(y)  Any and all other costs necessary to the management, leasing, operation and maintenance of the Premises or reasonably incurred by Manager in performing its duties hereunder which are covered within approved budgetary guidelines, which may exceed approved budgetary guidelines but which result from emergencies or which are otherwise approved by Owner.

Section 10.2 Expenses to be Borne by Manager

.  The following expenses or costs incurred by or on behalf of Manager shall be at the sole cost and expense of Manager and shall be paid by Manager out of the sums payable to Manager under Article 21:

(a) Costs of gross salary and wages, payroll taxes, insurance, worker's compensation, and other benefits of Manager's personnel not located on-site (except as otherwise provided in Sections 10.1(b), (c) and (x) above).

(b) All costs incurred as a result of Manager's fraud, breach of this Agreement, negligence or willful misconduct.

(c) All costs and liabilities relating to contracts between Manager and third parties for the performance of Manager’s obligations under this Agreement, including agreements relating to leasing the Premises if Manager is the Primary Leasing Agent.

(d) Except as provided in Sections 10.1(c) and 10.1(x), the costs of any personnel located in Manager’s home or regional offices, as well as any overhead costs related to those offices.

Section 10.3 Office for Manager

.  Owner shall also furnish to Manager, at Owner's expense, an office located in the Premises of a sufficient size (mutually agreed upon) to serve as the management and leasing office for the Premises, including standard leasehold improvements and appropriate furnishings and typical office equipment.

ARTICLE 11

INSUFFICIENT INCOME

Section 11.1 Insufficient Income

.  If at any time the gross income (or cash in the Receipts Account and the Disbursement Account) from the Premises shall not be sufficient to pay the bills and charges which may be incurred with respect to the Premises, or if such gross income is insufficient to pay the combined sum of both bills and charges, Manager shall not be obligated to pay said expenses and charges from its own account.

Manager shall notify Owner immediately upon first projection or awareness of a cash shortage or pending cash shortage and Owner and Manager shall jointly determine payment priority.  After Manager has paid, to the extent of available gross income, all bills and charges based upon the ordered priorities set jointly by Owner and Manager, Manager shall submit to Owner a statement of all remaining unpaid bills.  Owner shall thereafter and without undue delay provide sufficient monies to pay any unpaid expenses properly payable by Owner.

ARTICLE 12

TERMINATION

Section 12.1 Termination by Owner or Manager

.  Either Owner or Manager may terminate this Agreement upon thirty (30) days advance notice to the other in the event (A) Owner sells the Premises to a third party which is unaffiliated with Owner in a bona fide transaction, (B) the Premises is substantially destroyed or condemned and in the case of destruction cannot be restored within one year after the casualty, or (C) an Affiliate of Manager is no longer the advisor to the Hines Global REIT, Inc.

Section 12.2 Termination by Owner

.  The Owner may terminate this Agreement if the Owner has identified and communicated to the Manager any operating or performance deficiencies and such deficiencies are not cured by the Manager in accordance with the provisions set forth in Section 5.3.

Section 12.3 Breach by Manager

.  If Manager commits a material breach of any obligations of Manager under this Agreement, and if such breach shall continue for thirty (30) days after written notice from Owner (plus, with respect to breaches which Manager commences diligent efforts to cure within such period, but which cannot reasonably be cured within thirty (30) days, such additional period not to exceed ninety (90) additional days as is reasonably necessary to cure such breach), then Owner, in addition to the other remedies it may have at law or in equity, shall have the right to terminate this Agreement.

Section 12.4 Breach by Owner

.  If Owner (A) fails to timely pay any sum owed to Manager which remains unpaid for more than ten (10) days after notice from Manager or (B) commits a material violation or breach of any other obligation of Owner under this Agreement which remains uncured for more than thirty (30) days after notice from Manager (plus, in the case of breaches which cannot reasonably be cured within thirty (30) days, such additional time as is reasonably required to cure such breach not to exceed ninety (90) days), then Manager may, in addition to its other remedies at law or in equity, terminate this Agreement by written notice to Owner.

Section 12.5 Final Accounting

.  Upon termination of this Agreement for any reason, Manager shall deliver to Owner the following with respect to the Premises:

(a) A final accounting, reflecting the balance of income and expenses, as of the date of termination, to be delivered within thirty (30) days after such termination.

(b) Any balance or monies of Owner or tenant security deposits, or both, including, without limitation, all funds in any bank accounts under Article 9 hereof, held by or thereafter received by Manager to be delivered immediately upon such termination or withdrawal.

(c) All records, contracts, leases, receipts for deposits, unpaid bills, other papers or documents, supplies, files, keys, and equipment, which pertain to the Premises to be delivered immediately to Owner at the Premises upon such termination.

(d) All service contracts in the name of Manager pertaining to the Premises shall be assigned to, and assumed by Owner.

Section 12.6 Survival of Certain Rights and Obligations

.  Upon the expiration or earlier termination of this Agreement, neither party shall have any further rights or obligations under this Agreement, except that Articles 10, 12, 16, 17, and 21 shall survive the termination of this Agreement.

ARTICLE 13

DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES

Section 13.1 Construction Management Services

.  Manager shall act as construction manager with respect to the construction of any leasehold improvements within the Premises if requested by either Owner or the applicable tenant.  With respect thereto Manager shall:

(a) Evaluate and report the existing conditions of the base building.

(b) Prepare preliminary budgets and schedules.

(c) Review and assist in the coordination of leasehold improvements design drawings.

(d) Conduct pre-bid meetings.

(e) Evaluate bids and make recommendations of the award of contracts.

(f) Conduct construction progress meetings.  Evaluate ongoing schedules and the quality of workmanship and adherence of work to contract documents, specifications and drawings.

(g) Evaluate and verify accuracy of monthly construction draw requests.

(h) Assist architect in reviewing shop drawings.

(i) Direct architect/engineers to create punchlist.

(j) Coordinate with building management the use of the service elevator, the need for temporary utilities and loading docks.

Section 13.2 Development Management Services

.  Manager shall act as development manager for any redevelopment of the Premises.  As such, Manager shall be responsible for coordinating and facilitating the planning and performance of all construction related activities, including recommending the retention of architects, engineers and other consultants, assisting in cost estimating, advising Owner as to the selection of contractors to perform the work, and coordinating on behalf of Owner the work of such consultants and contractors.

ARTICLE 14                                

SALE OF THE PREMISES

Section 14.1 Sale of Premises

.  If Owner executes a listing agreement with a broker (other than Manager) for the sale of any portion of the Premises, Manager shall cooperate with such broker to the end that the respective activities of Manager and broker may be carried on without friction and without interference with tenants and occupants.  Manager will permit the broker to exhibit the Premises during reasonable business hours to the extent not prohibited by any tenant lease and provided the broker has secured Manager's permission in advance.  Manager shall be reimbursed by Owner for all reasonable costs incurred by Manager in coordinating any activities regarding any sale of all or any portion of the Premises.

ARTICLE 15

LEGAL PROCEEDINGS

Section 15.1 Legal Proceedings

.  Should any claims, demands, suits or other legal proceedings be made or instituted by any person against Owner or title holder of the Premises which arise out of any of the matters relating to this Agreement, Manager shall promptly give Owner all pertinent information and reasonable assistance in the defense or other disposition thereof, at the sole expense of Owner.

ARTICLE 16

MANAGER'S LIABILITY

Section 16.1 Liability of Manager

.  Manager shall not, in the performance of this Agreement, be liable to Owner or to any other person for any act or omission (negligent, tortious or otherwise) of any officer, agent or employee of Manager, unless the same results from negligence or misconduct of the Manager or its officers, employees, or agents acting within the scope of their office, employment or agency, or the breach of this Agreement by Manager.

Section 16.2 Indemnity of Manager

.  OWNER AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS MANAGER AND ITS OFFICERS, AGENTS AND EMPLOYEES (INDIVIDUALLY AND COLLECTIVELY, THE "MANAGER INDEMNITEES") FROM AND AGAINST ANY AND ALL CAUSES OF ACTION, CLAIMS, LOSSES, COSTS, EXPENSES, LIABILITIES, DAMAGES OR INJURIES (INCLUDING LEGAL FEES AND DISBURSEMENTS) THAT MANAGER INDEMNITEES MAY DIRECTLY OR INDIRECTLY SUSTAIN, SUFFER OR INCUR ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT OR THE PREMISES, UNLESS THE SAME RESULTS FROM (A) NEGLIGENCE OR MISCONDUCT OF THE MANAGER INDEMNITEES ACTING WITHIN THE SCOPE OF THEIR OFFICE, EMPLOYMENT OR AGENCY, OR (B) THE BREACH OF THIS AGREEMENT BY MANAGER.  OWNER SHALL ASSUME ON BEHALF OF THE MANAGER INDEMNITEES THE DEFENSE OF ANY ACTION AT LAW OR IN EQUITY WHICH MAY BE BROUGHT AGAINST THE MANAGER INDEMNITEES BASED UPON A CLAIM FOR WHICH INDEMNIFICATION IS APPLICABLE HEREUNDER.

Section 16.3 Limitation on Making Certain Claims

.  Notwithstanding any other provisions of this Agreement, in no event shall Owner make any claim against Manager, or its Affiliates or subsidiaries, on account of any good faith interpretation by Manager of the provisions of this Agreement (even if such interpretation is later determined to be a breach of this Agreement) or any alleged errors in judgment made in good faith and in accordance with this Agreement in connection with the operation of the Premises hereunder by Manager or the performance of any advisory or technical services provided by or arranged by the Manager.  The provisions of this Section 16.3 shall not be deemed to release Manager from liability for its negligence.

Section 16.4 Expenditures Made in Good Faith

.  Owner shall not object to any expenditures made by Manager in good faith in the course of its management of the Premises or in settlement of any claim arising out of the operation of the Premises unless such expenditure is specifically prohibited by this Agreement.  The provisions of this Section 16.4 shall not be deemed to release Manager from liability for its negligence.

ARTICLE 17                                

REPRESENTATION AND WARRANTIES

Section 17.1 No Reliance by Owner

.  Owner hereby represents that in entering into this Agreement Owner has not relied on any projection of earnings, statements as to the possibility of future success or other similar matter which may be prepared by Manager and understands that no guaranty is made or implied by Manager as to the future financial success of the Premises.

Section 17.2 Representations and Warranties

.  Each party to this Agreement represents and warrants the following:

(a) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation with all requisite power and authority to enter into this Agreement and to conduct its respective business.

(b) This Agreement constitutes the legal, valid and binding obligation of the party and is enforceable in accordance with its terms.

(c) No consents or approvals are required from any governmental authority or other person or entity for the party to enter into and perform this Agreement.  All corporate or partnership action on the part of the party necessary for the authorization, execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly taken.

(d) The execution and delivery of this Agreement by the party, and the consummation of the transactions contemplated hereby, does not conflict with or contravene the provisions of its organizational documents or any agreement or instrument by which it or its properties are bound or any law, rule, regulation, order or decree to which it or its properties are subject.

(e) The party has obtained or shall obtain all permits and licenses to the extent required by applicable law to perform its obligations hereunder, except with respect to permits and licenses, the lack of which do not and would not, individually or in the aggregate, have a material adverse effect on such party's ability to perform its obligations under this Agreement.

ARTICLE 18

CONSENTS

Section 18.1 Granting of Consents

.  Except as otherwise expressly provided herein to the contrary, whenever in this Agreement the consent or approval of Manager or Owner is required, such consent or approval shall not be unreasonably withheld or unduly delayed.  Such consent shall also be in writing only and shall be duly executed by an authorized officer or agent for the party granting such consent or approval.

ARTICLE 19

SUBSIDIARIES AND AFFILIATES

Section 19.1 Contracts with Manager’s Affiliates

.  Any contract or lease with respect to the Premises between Manager and any Affiliate of Manager shall be subject to the prior written approval of Owner, and at Owner's sole discretion such approval may be withheld.

ARTICLE 20

NOTICES

Section 20.1 Notices

.  Any notice provided for in or permitted under this Agreement shall be made in writing, and may be given or served by (i) delivering the same in person or by facsimile transmission to the party to be notified, or (ii) depositing the same in the United States mail, postage prepaid, registered or certified with return receipt requested, and addressed to the party to be notified at the address herein specified, or (iii) by depositing same with a reputable overnight courier service.  Any notice shall be effective only if and when received by the party to be notified (or the date such receipt is refused by the addressee) unless the day it is received is not a business day, and then it shall be deemed received on the next business day.  For the purpose of notice, the address of the party shall be, until changed as hereinafter provided for, as follows:

If to the Owner:                                Hines Global REIT ____________________

2800 Post Oak Boulevard

Suite 5000

Houston, Texas  77056-6118

Attention:                      Charles N. Hazen

Fax No.:                      (713) 966-7851

With a copy to:                                Hines Global REIT Advisors LP

c/o Hines Interests Limited Partnership

2800 Post Oak Boulevard

Suite 5000

Houston, Texas  77056-6118

Attention:                      Jason P. Maxwell, Esq. – Legal Dept.

Fax No.:                      (713) 966-2075

With a copy to:                                Greenberg Traurig LLP

200 Park Avenue

New York, NY 10166

Attention:                      Judith D. Fryer, Esq.

Fax No.:                      (212) 805-9330

If to the Manager:                                Hines Interests Limited Partnership

2800 Post Oak Boulevard

Suite 5000

Houston, Texas  77056-6118

Attention:                      C. Hastings Johnson

Fax No.:                      (713) 966-2636

With a copy to:                                Baker Botts L.L.P.

2001 Ross Avenue

Suite 600

Dallas, Texas  75201-2930

Attention:                      Jonathan W. Dunlay

Fax No.:                      (214) 661-4711

or to such other address as the Owner may specify in a written notice to the Manager or the Manager may specify in a written notice to the Owner in accordance with this Section 20.1.

Each party shall have the right from time to time and at any time to change its respective address and each shall have the right to specify as its address any other address by at least fifteen (15) days' written notice to the other party.  Each party shall have the right from time to time to specify additional parties to whom copies of notices must be given by delivering to the other party fifteen (15) days' written notice thereof setting forth the address of such additional party or parties; provided, however, that no party shall have the right to designate more than three (3) such additional parties.  Notice required to be delivered hereunder to either party shall not be deemed to be effective until the additional parties, if any, designated by such party have been given notice in a manner deemed effective pursuant to the terms of this Section 20.1.

ARTICLE 21

COMPENSATION

Section 21.1 Fees Payable to Manager

.  In addition to the sums Owner is obligated to pay Manager as described in this Agreement, each calendar year Manager shall receive remuneration for its services in managing and leasing the Premises as follows:

(a) A management fee (the "Management Fee") equal to:

(1)           For single-tenant properties, the lesser of (A) two and one-half percent (2.5%) of the Gross Revenues for the Premises or (B) the amount of the Management Fee that can be passed through to tenants of the Premises under their leases, subject to a minimum fee of at least one percent (1.0%) of Gross Revenues for the Premises.

(2)           For multi-tenant properties, the lesser of (A) two and one-half percent (2.5%) of the Gross Revenues for the Premises or (B) the amount of the Management Fee that can be passed through to tenants of the Premises under their leases.

(3)           "Gross Revenues" includes but is not limited to revenues arising from rentals (which includes all tenant recoveries for operating expenses, special or extra services and the like, including, without limitation, real estate taxes and assessments) for such year payable by tenants who lease space in the Premises, parking revenues, revenues from the leasing or licensing of antenna space and all other revenues of whatever nature.  The Management Fee shall be payable monthly based on interim results and projections with annual reconciliations.

(b) If Manager serves as the Primary Leasing Agent as set forth in Section 5.5, Manager will receive the following sums (the "Leasing Fees"):

(1)           For any lease or amendment thereto pursuant to which space is leased by a tenant which is executed or negotiated during the Term, a fee equal to one and one-half percent (1.5%) of the gross rentals which are payable pursuant to or on account of the applicable document during the term of the lease.

(2)           For any lease extension, renewal, expansion or other similar right whereby a tenant extends its lease or leases additional space which is exercised during the Term, a fee equal to one and one-half percent (1.5%) of the gross rentals which are payable pursuant to or on account of the applicable document for the term of such renewal, extension or expansion.

(3)           If Manager is the Primary Leasing Agent, then for purposes of subsections (1) and (2) above, the following shall apply:

(i)           Owner shall pay the Leasing Fees to Manager regardless of whether an outside broker was used in connection with any such lease, amendment, renewal, extension or expansion.  Owner shall be responsible for any fees paid to outside brokers or other third parties with whom Owner contracts directly, and such fees shall not count against, or be considered part of, the Leasing Fees;

(ii)           Owner's obligation to pay the Leasing Fees shall survive the expiration or earlier termination of this Agreement, it being agreed that Manager shall be entitled to such Leasing Fee after such expiration or termination to the extent provided in this Section 21.1.  "Executed or negotiated during the Term" and "exercised during the Term" also includes leases and other instruments executed and options and other rights exercisable within ninety (90) days after the Term, if the tenant under said lease or other instruments had substantial negotiations with Manager during the Term  (and for purposes hereof, "substantial negotiations" shall mean that a written proposal and related correspondence have been exchanged by Manager and the prospective tenant or any agent thereof and discussions regarding such proposal and correspondence have occurred).  Manager shall notify Owner in a monthly report prior to the end of the Term of its substantial negotiations with prospective tenants;

(iii)           gross rentals for triple net leases will include an estimate of operating expenses to be paid by tenants in the first (1st) lease year and such expenses shall not be increased in determining gross rentals in later years for purposes of determining the Leasing Fees; and

(iv)           rent increases based on changes in the Consumer Price Index shall not be taken into account in calculating gross rentals for purposes of determining the Leasing Fees except to the extent such lease includes a floor on the rent increases based on the Consumer Price Index, in which event for purposes of calculating gross rentals, rent shall be deemed increased based on such floor.

The Leasing Fees shall be payable as follows:  (x) fifty percent (50%) upon the date the applicable document is executed or right is exercised, as applicable, and (y) the balance (1) in the case of a lease of new space or an amendment providing for expansion into new space, on the earlier of (A) the date such tenant takes occupancy of the space subject to such lease or amendment, and (B) the date such tenant commences the payment of rent with respect to such space under such lease or amendment, or (2) in the case of a renewal, on the first (1st) day of the applicable renewal term.  In the event the tenant has an early termination option under its lease, however, the portion of the Leasing Fees attributable to periods after the applicable termination date shall not be payable until the tenant has waived the termination option or the right to exercise such termination option has expired or terminated.

(c) For the construction management services described in Section 13.1, Manager shall be entitled to retain or be paid any construction management fee paid by any tenant directly to Manager or to the Owner as landlord under such tenant’s lease, and any such fee that is paid to the Owner shall be received by the Owner on behalf of and as agent for Manager and shall be paid over by the Owner to Manager.  To the extent contained in the budget described below, Manager also shall be reimbursed for all third party costs reasonably incurred by Manager in performing construction management duties (e.g., consultants, legal, delivery and graphics) to the extent the same are approved and payable by the applicable tenant.  Owner and Manager shall agree on the scope of such direct costs as well as a budget relating thereto before Manager begins performing such services.  If the tenant does not agree in its lease to pay a construction management fee, then the following shall apply:

(x)           if Manager provides such construction management services utilizing on-site employees, Owner shall not be obligated to pay a construction management fee to Manager; or

(y)           if Manager utilizes off-site employees to provide such construction management services, Owner shall be obligated to pay Manager the direct costs Manager incurs in providing such services, including the salary, benefits and burdens of any such employees to the extent of the time they spend performing such services, to the extent contained in a budget approved by Owner as described above.

(d) For the development management services described in Section 13.2, Manager shall be paid a fee equal to two and one-half percent (2.5%) of the total project costs relating to the redevelopment.  To the extent contained in the budget described below, Manager also will be entitled to recover from Owner all direct costs incurred by Manager in performing such services, including but not limited to the salary, benefits and burdens of all employees directly involved in such project, the cost of any project office and overhead relating thereto (e.g., rent, telephones, computers) and all out-of-pocket costs incurred by Manager (for example, travel).  Owner and Manager shall agree on the scope of such direct costs as well as a budget relating thereto before Manager begins performing such services.

(e) Upon submission of the financial statements as required by Article 5, Manager shall submit to Owner Manager's calculation of all fees, which fees shall be paid by Owner to Manager.

Section 21.2 Failure of Owner to Timely Pay

.  Any sums owed by Owner to Manager which are not paid when due shall bear interest at the lesser of (i) the prime rate plus five (5) percentage points, or (ii) the maximum nonusurious rate of interest permitted by applicable law.

ARTICLE 22                                

MISCELLANEOUS

Section 22.1 Pronouns

.  The pronouns used in this Agreement referring to Manager or Owner shall be understood and construed to apply whether Manager or Owner be an individual, co-partnership, corporation or an individual or individuals doing business under a firm or trade name, and the masculine and neuter pronouns shall each include the other and may be used interchangeably with the same meaning.

Section 22.2 Amendments

.  Except as otherwise herein provided, any and all amendments, additions or deletions of this Agreement shall be null and void unless approved by the parties in writing.

Section 22.3 Headings

.  All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

Section 22.4 Waiver

.  The waiver of any of the terms and conditions of this Agreement on any occasion or occasions shall not be deemed as waiver of such terms and conditions on any future occasion.  No waiver shall be implied by any isolated or repeated action or non-action.  To be effective, any waiver must be in writing executed by the party to be bound thereby.

Section 22.5 Successors and Assigns

.  Subject to Article 4 and Section 12.1(a), this Agreement shall be binding upon and inure to the benefit of Owner, its successors and/or assigns, and shall be binding upon and inure to the benefit of Manager, and its successors.

Section 22.6 Governing Law

.  This Agreement shall be construed, interpreted and applied in accordance with and shall be governed by, the laws applicable to the state where the Premises are located.

Section 22.7 Ownership of Premises

.  Owner represents that it is the fee owner of the Premises and of the improvements and appurtenances and equipment installed therein, except such equipment as may be leased or acquired by Owner on a hire-purchase basis or as may be owned, leased or installed by tenants or other third parties.

Section 22.8 Other Activities of Manager

.  Nothing contained in this Agreement shall be construed so as to prohibit Manager from owning, operating, managing or investing in any real estate development.  Additionally, Manager may engage in or possess an interest in other ventures of any nature and description independently or with others and Owner shall have no rights with respect thereto by virtue of this Agreement.

Section 22.9 Nondiscrimination

Section 22.10 .  Manager agrees not to discriminate against any employee or applicant for employment because of said individual's race, religion, sex, national origin, physical or mental handicap or status as a disabled veteran of the Vietnam Era, in regard to any position for which the employee or applicant is otherwise qualified.

Section 22.10 Special Parties

.  Notwithstanding any provision hereof to the contrary, in no circumstances shall a shareholder, limited partner, director, officer, employee or agent ("Special Party") of a party hereto or of a Special Party of a party hereto be personally liable for any of the obligations of such party hereto under this Agreement except to the extent, if any, provided in any separate agreement now or hereafter executed and delivered by such Special Party.

Section 22.11 Counterparts

.  This Agreement may be executed in several counterparts, each of which shall be an original of this Agreement but all of which, taken together, shall constitute one and the same agreement.

Section 22.12 Survival of Agreement

.  The rights and obligations of Manager and Owner shall survive a termination of this Agreement.

Section 22.13 Special Services

.  Notwithstanding anything in this Agreement to the contrary, except as required by a tenant lease which has been approved by Owner, Manager shall not furnish or render services to the tenants of the Premises other than those services customarily furnished to tenants of similar properties unless (a) Manager makes separate, adequate charges to tenants for such services, (b) such charges are received and retained by Manager, (c) Manager bears the cost of providing such services and (d) Manager first obtains Owner’s written consent.  For purposes of this Section 22.13, it is agreed that maintenance, trash collection, janitorial services and cleaning services, the furnishing of water, heat, light, air conditioning, public entrances and exits, guard or security services and the provision of parking facilities on an unreserved basis and without separate charge are examples of services customarily furnished to the tenants of similar properties.

[Remainder of Page Intentionally Left Blank]

DAL02:456733.8

 

  

  

  

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

OWNER:

HINES GLOBAL REIT ______________,

a Delaware [limited partnership]

By:           Hines Global REIT ______________

a Delaware limited liability company,

its general partner

By:                                                                

Name:                                                                

Title:                                                                

MANAGER:

HINES INTERESTS LIMITED PARTNERSHIP,

a Delaware limited partnership

By:           Hines Holdings, Inc.

a Texas corporation,

its general partner

By:                                                                

Name:                                                                

Title:                                                                

Schedule A

Property Descriptionexhibit10_12.htm

Exhibit 10.13

	
HINES GLOBAL REIT PROPERTIES LP

as Hines

 

MREF II MH SÀRL

as Moorfield

 

	
JOINT VENTURE AGREEMENT

in respect of Hines - Moorfield UK Venture I Sàrl

 

 

 

 

Contents

 

 

Clause                 Name 

 

	
1

	
Definitions and interpretation 

	 

	
2

	
JV Completion 

	
 

	
3

	
Managers 

	
 

	
4

	
Conduct of the Company’s affairs 

	
 

	
5

	
Financial information 

	
 

	
6

	
Reserved Matters 

	
 

	
7

	
Property Exchange 

	
 

	
8

	
Property Completion 

	
 

	
9

	
Building 5 Contributions 

	
 

	
10

	
Additional Capital Contributions 

	
 

	
11

	
Additional obligations of the Shareholders 

	
 

	
12

	
Warranties 

	
 

	
13

	
Distribution policy 

	
 

	
14

	
Buy-Sell Right 

	
 

	
15

	
Transfer of Interests 

	
 

	
16

	
Permitted transfers 

	 

	
17

	
Pre-emption on the transfer of Interests 

	 

	
18

	
Forced Sale Right in respect of the Property and ROFR 

	 

	
19

	
Power of attorney 

	
 

	
20

	
Ancillary completion matters 

	
 

	
21

	
Administrative Manager 

	
 

	
22

	
Certain U.S. tax matters 

	
 

	
23

	
Announcements 

	
 

	
24

	
Non-disclosure of information 

	
 

	
25

	
Duration 

	
 

	
26

	
Dealing in Interests and assignment 

	
 

	
27

	
Consents 

	
 

	
28

	
No partnership 

	
 

	
29

	
Contracts (Rights of Third Parties) Act 1999 

	
 

	
30

	
Costs and liability of the Shareholders 

	
 

	
31

	
Variation 

	
 

	
32

	
Invalidity 

	
 

	
33

	
Entire agreement 

	
 

	
34

	
Status of the agreement 

	
 

	
35

	
Communications 

	
 

	
36

	
Counterparts 

	
 

	
37

	
Governing Law and Jurisdiction 

	
 

 

Schedule           Name 

 

	
1

	
Details of the Company 

	
 

 

	
2

	
Deed of Adherence 

	
 

 

	
3

	
Reserved Matters 

	
 

 

	
4

	
The Property 

	
 

 

	
5

	
United States tax and other matters 

	
 

 

 

 

 

Documents in the Agreed Form

 

Articles

 

Board minutes of the Company

 

Written resolution of the Shareholders

 

Convertible Preferred Equity Certificates

 

Asset Management Agreement

 

Property Management Agreement

 

Facility Agreements

 

Property Agreement

 

 

 

 

DATED                                                                      2010

 

PARTIES

 

	
(1)  

	
HINES GLOBAL REIT PROPERTIES LP, a Delaware Limited Partnership whose registered office is at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, United States of America (“Hines”)

 

	
(2)  

	
MREF II MH SÀRL, a société à responsabilité limitée incorporated in Luxembourg  whose registered office is at 421F route d’Esch, L-1030, Luxembourg, Grand Duchy of Luxembourg (“Moorfield”)

 

	
1  

	
DEFINITIONS AND INTERPRETATION

 

	
1.1  

	
In this Agreement:

 

 “1915 Law” means the Luxembourg law on commercial companies dated 10 August 1915, as amended from time to time.

 

 “A Manager” means a Manager appointed by the A Shareholder(s).

 

 “A Shareholder” means a holder of an A Share.

 

 “A Shares” means the A shares of £1 each in the capital of the Company (each different class of which has a right to participate in the capital and/or profits of either the Company or a specific Subsidiary Undertaking of the Company).

 

 “Administrative Manager” shall bear the meaning in Clause 2.2(a);

 

 “Agreed Form” means a form agreed between the parties, a copy of which has been initialled for the purpose of identification by or on behalf of the parties.

 

 “Agreed Proportions” means 60% in respect of the A Shareholder(s) and 40% in respect of the B Shareholder(s) or (if different) such other proportions as equal, at the relevant time, the percentages which the nominal value of the Interests beneficially owned by the A Shareholder(s) and B Shareholder(s) respectively bears to the combined nominal value of all Interests.

 

 “Annual Budget” means the financial projections and forecasts as at the date of this Agreement for the financial period from the date of this Agreement to 31 December 2010 and each successive calendar year in relation to the Business in the Agreed Form, and as adopted each year from time to time in accordance with this Agreement.

 

 “Annual Strategic Business Plan” means the annual strategic business plan for the Company in the form of the Agreed Form proforma, and as adopted each year from time to time in accordance with this Agreement prepared annually in respect of the forthcoming 4 year period and including the marketing plan and leasing guidelines for the Property.

 

 “Articles” means the articles of association of the Company in the Agreed Form, or, if those are replaced or amended in accordance with this Agreement, the articles of association of the Company as so replaced or amended.

 

 “Asset Manager” means Argent Estates Limited or any replacement or successor asset manager as shall be appointed from time to time.

 

 “Asset Management Agreement” means the asset management agreement between the Company (1) and Argent Estates Limited (2) in the Agreed Form.

 

 “Associate” means, in relation to any Shareholder, a Subsidiary Undertaking or Parent Undertaking of, or any other person under common Control with, such Shareholder.

 

 “Available Capital Proceeds” means all net proceeds (as reasonably determined by the Board) after expenses, debt re-payment and contributions to any reserves from: (i) any sale of all or any part of the Property or any other real estate assets of the Company or a Subsidiary Undertaking of the Company, (ii) the financing of assets of the Company or any Subsidiary Undertaking of the Company, or borrowings by the Company or any Subsidiary Undertaking of the Company (except for equipment financing and other unsecured borrowing in the ordinary course of business), (iii) any casualty loss or condemnation of the assets of the Company or any Subsidiary Undertaking of the Company, and (iv) any other transaction that is, under generally accepted accounting principles consistently applied, of a capital nature (including, without limitation, a liquidation of the Company or any Subsidiary Undertaking of the Company).

 

 “Available Cash Flow” means all net cash flow (as reasonably determined by the Board) from the operation of the Property and the Business (as differentiated from Available Capital Proceeds) after the payment of all expenses (including all payments on debt) and the establishment of or contributions to any reserves for future working capital and capital expenditure needs of the Company or any Subsidiary Undertaking of the Company.

 

 “B Manager” means a Manager appointed by the B Shareholder(s).

 

 “B Shareholder” means a holder of a B Share.

 

 “B Shares” means the B shares of £1 each in the capital of the Company (each different class of which has a right to participate in the capital and/or profits of either the Company or a specific Subsidiary Undertaking of the Company).

 

 “Board” means the board of managers of the Company.

 

 “Building 5” means the property detailed in paragraph 4 of Schedule 4 (The Property ) as the “Fourth Property”.

 

 “Business” means the business of acquiring the Property as an investment pursuant to the Property Agreement, and the subsequent owning, managing, developing and disposal of the property interests thereby acquired, through the Company and its Subsidiary Undertakings in accordance with this Agreement and such other business as the Board or Shareholders agree should be carried on by any member of the Group.

 

 “Business Day” means a day (other than a Saturday or Sunday) on which the banks in the City of London  United Kingdom, Houston  Texas  United States of America and in Luxembourg are open for business.

 

 “CA 2006” means the Companies Act 2006.

 

 “Car Park Lease” means an underlease to be entered into in respect of the Twelfth Property.

 

 “Code” means the United States Internal Revenue Code of 1986, as amended, and any rules or regulations promulgated with respect thereto (as well as any successor statute).

 

 “Company” means Hines - Moorfield UK Venture I Sarl a société à responsabilité limitée incorporated in Luxembourg on 22 June 2010 with company registration number to be determined whose registered office is at 205, route d’Arlon, L-1150 Luxembourg, Grand Duchy of Luxembourg (further details of which are set out in Schedule 1 (Details of the Company)).

 

 “Control” means the possession, directly or indirectly, of the power to direct the management and the policies of a person or entity whether through the ownership of voting securities, by contract or otherwise; and “Controls” and “Controlled by” shall be interpreted accordingly.

 

 “CPECs” means, as the context requires, any or all of the series of convertible preferred equity certificates of the Company in the Agreed Form (each different series of which has a right to participate in the profits of a specific Subsidiary Undertaking of the Company, with the ‘A’ class of any such series being issued to the A Shareholder and the ‘B’ class of any such series being issued to the B Shareholder).

 

 “Deed of Adherence” means a deed substantially in the form set out in Schedule 2 (Deed of Adherence ) under which a transferee of Shares agrees to be bound in terms identical, so far as appropriate, to the terms of this Agreement.

 

 “Facility Agreements” means the facility agreements between the Company (1) and Eurohypo (2) relating to the financing of the acquisition of the Property, in the Agreed Form.

 

 “Group” means the Company and its Subsidiary Undertakings from time to time.

 

 “Interests” means the Shares and the CPECs in issue from time to time.

 

 “JV Completion” means the occurrence of those matters contemplated by Clause 2.2.

 

 “Majority Manager” means a Manager appointed by the Majority Shareholder.

 

 “Majority Shareholder” means a Shareholder holding a majority of the Interests.

 

 “Manager” means a manager of the Company or, if the context requires, a manager of a Subsidiary Undertaking of the Company.

 

 “Material Casualty/Condemnation” means any damage or condemnation resulting in a loss at such Project or Projects that is reasonably estimated to be greater than 10% of the proposed price.

 

 “Minority Manager” means the Manager appointed by the Minority Shareholder.

 

 “Minority Shareholder” means a Shareholder holding between 25% and 50% inclusive, of the Interests.

 

 “Parent Undertaking” means, in relation to any person, any other person that directly or indirectly (through one or more intermediaries) Controls such person.

 

 “Project” has the meaning given in clause 18.1.

 

 “Property” means collectively the properties detailed in Schedule 4.

 

 “Property Agreement” means the agreement to be entered into by BrindleyPlace Nominee Limited, BrindleyPlace Co-Nominee Limited, BrindleyPlace (Headlease) Limited and BrindleyPlace (Headlease) (No 2) Limited (1) and the Company (2) in the Agreed Form relating to the acquisition of the Property.

 

 “Property Completion” means completion of the sale and purchase of the Property whether or not it takes place on the Completion Date (as defined in the Property Agreement).

 

 “Property Exchange” means the date of the Property Agreement.

 

 “Property Management Agreement” means the property management agreement between the Company (1) GVA Grimley Limited (2) and the Company’s Subsidiary Undertakings (3) in the Agreed Form.

 

 “Property Manager” means GVA Grimley Limited or any replacement or successor property manager as shall be appointed from time to time.

 

 “Registered Office” means the registered office of any member of the Group from time to time.

 

 “Reserved Matters” means those matters listed in Schedule 3 (Reserved Matters).

 

 “Shareholders” means the A Shareholder(s) and the B Shareholder(s) and “Shareholder” shall mean any one of them.

 

 “Shares” means A Shares or B Shares or, as the context requires, A Shares and B Shares.

 

 “Subsidiary Undertaking” means in relation to any person, any other person that is directly or indirectly (through one or more intermediaries) Controlled by such person.

 

 “Surviving Provisions” means Clause 1 (Definitions and interpretation ), Clause 23 (Announcements ), Clause 24 (Non-disclosure of information ), Clause 27 (Consents ), Clause 28 (No partnership ), Clause 29 (Contracts (Rights of Third Parties) Act 1999 ), Clause 30 (Costs ), Clause 31 (Variation ), Clause 32 (Invalidity ), Clause 33 (Entire agreement ), Clause 35 (Communications ), Clause 36 (Counterparts ) and Clause 37 (Governing Law and Jurisdiction ).

 

 “Twelfth Property” means the car park premises detailed in paragraph 12 of Schedule 4 (The Property ).

 

	
1.2  

	
Unless expressly provided otherwise, a reference to a statute or statutory provision includes a reference to:

 

	
(a)  

	
any statutory modification, consolidation or re-enactment of it to the extent in force from time to time.

 

	
(b)  

	
all statutory instruments or subordinate legislation (as defined in section 21(1), Interpretation Act 1978) or orders from time to time made under it. and

 

	
(c)  

	
any statute or statutory provision of which it is a modification, consolidation or re-enactment.

 

	
1.3  

	
Any reference to:

 

	
(a)  

	
a person includes a legal or natural person, partnership, trust, company, government or local authority department or other body (whether corporate or unincorporated);

 

	
(b)  

	
an individual includes, where appropriate, his personal representatives;

 

	
(c)  

	
the singular includes the plural and vice versa; and

 

	
(d)  

	
one gender includes all genders.

 

	
1.4  

	
Unless otherwise stated, a reference to a Clause, Sub-clause or Schedule is a reference to a Clause or Sub-clause of, or Schedule to, this Agreement and a reference to this Agreement includes its Schedules.

 

	
1.5  

	
Headings in this Agreement are inserted for convenience only and shall not affect its construction.

 

	
1.6  

	
In construing this Agreement the so-called ejusdem generis rule does not apply and accordingly the interpretation of general words shall not be restricted by words indicating a particular class or particular examples.

 

	
2  

	
JV COMPLETION

 

	
2.1  

	
JV Completion of shall take place at the offices of the Company immediately after the execution of this Agreement.

 

	
2.2  

	
On JV Completion:

 

	
(a)  

	
Hines Luxembourg Sarl (or any other entity or person appointed by Hines from time to time) will be appointed the administrative manager of the Company (the “Administrative Manager”);

 

	
(b)  

	
a meeting of the Board shall be held at which the resolutions set out in the board minutes in the Agreed Form shall be duly passed;

 

	
(c)  

	
the resolutions of the Shareholders set out in the written resolution in the Agreed Form shall be duly passed (including the adoption of the new Articles);

 

	
(d)  

	
the Board shall procure that Hines and Moorfield are entered in the register of Shareholders of the Company as the holders of the Shares applied for and allotted to them; and

 

	
(e)  

	
Moorfield shall deliver to Hines a duly dated and executed letter of credit in the Agreed Form from Bank of America in the amount of £11,400,000 in respect of the subscription monies required from Moorfield pursuant to Clause 8.2 below.

 

	
3  

	
MANAGERS

 

	
3.1  

	
The Company shall have at any time two A Managers if the A Shareholder holds more than 50% of the Interests and one A Manager if the A Shareholder has 25% to 50% inclusive of the Interests.  The Company shall have at any time two B Managers if the B Shareholder holds more than 50% of the Interests and one B Manager if the B Shareholder has 25% to 50% inclusive of the Interests.  The A Managers and the B Manager are appointed and removed by the general meeting of shareholders of the Company. The general meeting of shareholders of the Company chooses the A Managers and the B Manager to be appointed from the lists of candidates submitted by the A Shareholder(s) and the B Shareholder(s).

 

	
3.2  

	
Provided the A Shareholder holds more than 25% of the Interests, the A Shareholder shall be entitled at any time and from time to time to propose a list with names of candidates to be appointed by the general meeting of shareholders of the Company as A Manager(s).

 

	
3.3  

	
Provided the B Shareholder holds more than 25% of the Interests, the B Shareholder shall be entitled to propose a list with names of candidates to be appointed by the general meeting of shareholders of the Company as B Manager(s).

 

	
3.4  

	
The A Manager(s) and the B Manager(s) shall be the only managers of the Company.

 

	
3.5  

	
The A Shareholder may nominate one of the Managers to be the chairman of each meeting of the Board and each meeting of the Shareholders.  If the chairman is unable to attend a meeting of the Shareholders, the Shareholder who nominated him shall be entitled to nominate another Manager to act as chairman in his place at the meeting.

 

	
3.6  

	
The first chairman of the Company shall be Kenneth MacRae.

 

	
3.7  

	
Unless otherwise agreed by an A Manager and a B Manager:

 

	
(a)  

	
meetings of the Board shall be held at least once every three months and may be called by any Manager;

 

	
(b)  

	
meetings of the Board shall ordinarily be held at the Registered Office of the Company and, so long as at least one Manager participating in any such meeting does so from Luxembourg, any other Manager(s) may participate by telephone (save that any Manager who is ordinarily resident in the United Kingdom shall not participate by telephone whilst actually in the United Kingdom);

 

	
(c)  

	
meetings of the Board must be convened on notice to be given by registered mail, fax or email of no less than five Business Days;

 

	
(d)  

	
an agenda identifying in reasonable detail matters to be discussed by the Board at the meeting and any relevant documents shall be distributed in advance of the meeting to all Managers so as to ensure that they are received at least three Business Days prior to the date fixed for the meeting;

 

	
(e)  

	
each Manager shall receive a copy of the minutes of each meeting within 10 Business Days of the meeting for their approval and signing at the next Board meeting.

 

	
3.8  

	
The quorum for the transaction of business at meetings of the Board shall be two Managers, including one A Manager and one B Manager.

 

	
3.9  

	
Decisions of the Board shall be decided by simple majority vote.  Each Manager shall have one vote.

 

	
3.10  

	
If a quorum is not present within half an hour from the time set for a meeting of the Board or if during the meeting a quorum ceases to be present, the Company shall immediately give written notice to the Shareholders and the meeting shall be adjourned to the second Business Day after the date set for the meeting at the same time and place.  The quorum at the adjourned meeting shall be the Majority Managers.  If at the adjourned meeting a quorum is not present within half an hour from the time set for the meeting or if during the meeting a quorum ceases to be present, the meeting shall be dissolved.

 

	
3.11  

	
The provisions of this Clause 3 (Managers ) shall apply to the board of directors of each Subsidiary Undertaking of the Company in the same way as they do to the Board and references within this Clause to the Board shall in that context be read as references to the board of directors of the relevant Subsidiary Undertaking.

 

	
4  

	
CONDUCT OF THE COMPANY’S AFFAIRS

 

	
4.1  

	
The Shareholders shall exercise all voting rights and other powers available to them in relation to the Company so as to procure (insofar as they are able to do so by the exercise of those rights and powers) that, unless the Board determines otherwise:

 

	
(a)  

	
the Subsidiary Undertakings contemplated by the Property Agreement as purchase vehicles for the Property are duly incorporated and capitalised;

 

	
(b)  

	
the business of the Company and its Subsidiary Undertakings shall consist exclusively of the Business;

 

	
(c)  

	
the bankers of the Company and each of its Subsidiary Undertakings shall be Société Generale or such other bankers as the Board determines from time to time;

 

	
(d)  

	
central management and control of the Company, the Subsidiary Undertakings of the Company and the Property will be exercised outside of the United Kingdom and their Registered Office shall be located at 205, route d’Arlon, L-1150  Luxembourg;

 

	
(e)  

	
the Company and its Subsidiary Undertakings shall maintain and comply with a bank mandate determined by the Board from time to time;

 

	
(f)  

	
the Company and its Subsidiary Undertakings shall comply with the provisions of their articles of association; and

 

	
(g)  

	
the Company shall procure that all of its new Subsidiary Undertakings adopt articles of association in a form approved by the Shareholders.

 

	
4.2  

	
The Shareholders shall exercise all voting rights and other powers available to them in relation to the Company so as to procure (insofar as they are able to do so by the exercise of those rights and powers) that the Company shall comply with all provisions of this Agreement that are expressed to be obligations of the Company.

 

	
4.3  

	
The Company shall (subject to the fiduciary obligations of the Managers), and shall use its voting rights to ensure that its Subsidiary Undertakings shall, comply with the provisions of this Clause 4.

 

	
4.4  

	
The Shareholders agree that any sale of one or more parts of the Property (each an “Asset”), the Company’s interest in any Subsidiary Undertaking or a Shareholder’s interest in the Company, effected in accordance with the provisions of Clauses 14 and 18 or otherwise, shall be structured in a tax-efficient manner for both Shareholders, taking into account the overall economics of the transaction.  Such tax-efficient structures may include, without limitation, (i) structuring any such sales such that a Shareholder’s share of income or gain from such sales is allocable to one or more or taxable REIT subsidiaries as defined in Code Section 856(1) (including, as necessary, (A) distributing (by way of capital distribution only) to the Shareholder its interest in the Asset or the Subsidiary Undertaking that is to be sold, in order that the Shareholder may convey such interest to a taxable REIT subsidiary which would in turn effect the sale of the pertinent interest directly to the buyer, or (B) the Company contributing the Asset (or portion thereof) or the Subsidiary Undertaking that is being sold to a taxable REIT subsidiary), (ii) structuring the sale of a Shareholder’s interest in one or more Assets to the other Shareholder as a distribution (by way of capital distribution only) of the Asset(s) to the Shareholders pursuant to this Clause 4.4 and the sale of the selling Shareholder’s interest in the Asset(s) to the purchasing Shareholder or (iii) structuring the distribution of the proceeds of a disposal of an Asset so that it is regarded as a receipt of capital, rather than income, in the hands of the recipient.

 

	
4.5  

	
The Shareholders agree that all proceeds of a disposal of an asset by a Subsidiary Undertaking will be distributed to the Company as soon as is practicable and that furthermore:

 

	
(a)  

	
on the disposal of its asset by a Subsidiary Undertaking owning a single asset (including a Subsidiary Undertaking that previously did, but no longer does, hold more than one asset), the proceeds will be distributed to the Company by liquidating such Subsidiary Undertaking or by the Subsidiary Undertaking buying back its shares from the Company; and

 

	
(b)  

	
on the disposal of an asset by a Subsidiary Undertaking owning multiple assets, to the extent possible, there will be a buy-back of the whole of the class of shares that relates to the asset that has been disposed of or, if there is no such specific class of shares for such asset, such percentage of the relevant class(es) of shares of that Subsidiary Undertaking held by the Company that relate to such asset that is equal to the percentage that the proceeds of such disposal bear to the total assets of the Subsidiary Undertaking represented by such class(es) of shares at that time. If such buy-back is not possible, then such proceeds will be paid to the Company in whatever lawful manner the board of managers of the Subsidiary Underaking decides, which may include an upstream loan or some other form of distribution to the Company.

 

	
4.6  

	
Each Shareholder understands and acknowledges that each Parent Undertaking of Hines (“Hines Parent”) has elected to be treated as a real estate investment trust (“REIT”) under Code Sections 856 et. seq.  Each Shareholder further understands and acknowledges that in order to maintain the Hines Parent’s status as a REIT, each Hines Parent must comply with numerous and complex rules and regulations set forth in the Code and the U.S. Treasury Regulations, many of which are applied on a quarterly and/or annual basis (the “REIT Requirements”), and that the management and operation of the Company may have a material effect on the ability of Hines Global to continue to maintain its status as a REIT.  Accordingly, notwithstanding any other provision of this Agreement or any non-mandatory provision of the 1915 Law, the Company shall not take any action which (or fail to take any action, the omission of which ) (i) could adversely affect the ability of Hines Global to qualify or continue to qualify as a REIT, (ii) could subject Hines Global to any additional taxes under Code Section 857 or Code Section 4981 or other potentially adverse consequences under the Code, or (iii) otherwise could cause a Hines Parent to violate the REIT Requirements.

 

	
5  

	
FINANCIAL INFORMATION

 

	
5.1  

	
The Company shall ensure that books of account containing true and complete entries of all dealings and transactions in relation to the Business are kept at the Registered Office.

 

	
5.2  

	
The Company shall prepare and submit to the Board and the Shareholders the following information as soon as possible and not later than the dates/times set out below:

 

	
(a)  

	
a draft Annual Budget for the following financial year 120 days before the end of each financial year, provided however, that if any Annual Budget is not timely approved by October 15th, then, in relation to any disputed items in the draft Annual Budget only, the Company shall use the equivalent amounts from the Annual Budget for the prior year with an increase in expenses equal to the greater of inflation (as measured by the United Kingdom’s Consumer Prices Index (or any replacement index) or 5%, until such time as a current Annual Budget is approved;

 

	
(b)  

	
a draft Annual Strategic Business Plan for the following 4 year period 120 days before the end of each financial year;

 

	
(c)  

	
a copy of the unaudited accounts of the Company and its Subsidiary Undertakings prepared in accordance with Luxembourg law and with generally accepted accounting principles then in effect in the United States for the previous financial year within 45 days after the end of each financial year (with audited accounts to follow within 60 days after the end that financial year);

 

	
(d)  

	
quarterly unaudited management accounts of the Company and its Subsidiary Undertakings fifteen (15) Business Days after the end of each quarter containing:

 

	
(i)  

	
a profit and loss account, balance sheet and cash flow statement;

 

	
(ii)  

	
a comparison against the Annual Budget in respect of that quarter; and

 

	
(iii)  

	
a cash flow forecast for the balance of the period covered by the then current Annual Budget; and

 

	
(iv)  

	
leasing status reports.

 

	
5.3  

	
The Company shall provide Hines with such information reasonably necessary to perform REIT testing on a quarterly basis (to the extent not already provided in Clause 5.2 above):

 

	
(a)  

	
trial balance and general ledger per property owned by any member of the Group;

 

	
(b)  

	
detail of non real estate assets on the balance sheet of any member of the Group (if applicable);

 

	
(c)  

	
if any member of the Group own securities, schedule of value and of shares held compared to total value of the outstanding securities of the issuer (if applicable);

 

	
(d)  

	
schedule of notes receivable by any member of the Group including details of total value and vote of party from whom receivable is held;

 

	
(e)  

	
other income details of each member of the Group; and

 

	
(f)  

	
completed REIT Property Services Questionnaire for each property owned by any member of the Group.

 

	
5.4  

	
The Shareholders shall have full and prompt access to the books, accounts and records of the Company and its Subsidiary Undertakings.

 

	
6  

	
RESERVED MATTERS

 

	
6.1  

	
The Shareholders shall exercise all their voting rights and other powers in relation to the Managers and the Company to procure (insofar as they are able to do so by the exercise of those rights and powers) that neither the Company nor any of its Subsidiary Undertakings shall transact, and the Company undertakes, subject to the Managers’ fiduciary obligations, not to transact, any of the Reserved Matters:

 

	
(a)  

	
in the case of any Reserved Matter that is listed in Part 1 of Schedule 3, without the prior written consent of the Minority Shareholder (such written consent or refusal to be provided by the Minority Shareholder within ten Business Days and subject to Clause 6.2); or

 

	
(b)  

	
in the case of any Reserved Matter that is listed in Part 2 of Schedule 3, without the prior agreement of the Minority Manager (such agreement to be given at a Board meeting or otherwise, subject to Clause 6.2, given in writing to the Company),

 

save that no such prior consent or agreement of a Minority Shareholder and/or Minority Manager shall be required in respect of the provision of loan finance by any party that is not the Majority Shareholder (or an Associate of the Majority Shareholder) and/or the issue of Interests to the Majority Shareholder where such provision and/or issue is required further to the failure or refusal of the Minority Shareholder to provide finance or contribute capital to any member of the Group in accordance with the terms of this Agreement and/or any relevant agreement reached between the parties after the date of this Agreement.

 

	
6.2  

	
Where the prior consent or agreement of the Minority Shareholder or the Minority Manager is required under Clause 6.1 in respect of a Reserved Matter, the Majority Shareholder shall give notice in writing requesting the relevant consent to the Minority Shareholder following which the Minority Shareholder or Minority Manager shall confirm its consent, or refusal to consent, by notice in writing within ten Business Days of the receipt by the Minority Shareholder of such notice from the Majority Shareholder.  In the event that the Minority Shareholder or Minority Manager, as applicable, fails to respond to a request for consent or agreement within the ten Business Day period the Minority Shareholder the Minority Manager, shall be deemed to have provided their consent or agreement for the purposes of Clause 6.1 and the Minority Shareholder hereby undertakes to promptly take, and procure that the Minority Manager promptly takes, all such action required to ensure that any such deemed consent or agreement is legally effective and enforceable.

 

	
6.3  

	
The Shareholders shall use reasonable endeavours to co-operate with each other in relation to Reserved Matters and to make decisions on Reserved Matters in good faith in the best interests of the Shareholders as a whole.

 

	
7  

	
PROPERTY EXCHANGE

 

	
7.1  

	
Immediately prior to Property Exchange the Shareholders shall procure that the Company duly executes:

 

	
(a)  

	
the Facility Agreements;

 

	
(b)  

	
the Asset Management Agreement; and

 

	
(c)  

	
the Property Management Agreement,

 

provided that the agreements in (b) and (c) above shall only become effective upon Property Completion taking place.

 

	
7.2  

	
After Property Exchange but prior to Property Completion:

 

	
(a)  

	
Hines shall subscribe for 61,500 A Shares accompanied by payment of £61,500 in cash;

 

	
(b)  

	
Moorfield shall subscribe for 41,000 B Shares accompanied by payment of £41,000 in cash;

 

	
(c)  

	
Hines shall subscribe for 11,286,000 CPECs accompanied by payment of £11,286,000 in cash; and

 

	
(d)  

	
Moorfield shall subscribe for 7,524,000 CPECs accompanied by payment of £7,524,000 in cash,

 

and the Shareholders shall procure that the Company applies the proceeds of such subscriptions in satisfying the Company’s or the Subsidiary Undertakings’ payment obligations in relation to the deposit required under the Property Agreement.

 

	
7.3  

	
If the Shareholders pay the subscription monies referred to in Clause 7.2 to the Company or to the Subsidiary Undertakings prior to Property Exchange, the Company and/or the Subsidiary Undertakings shall hold such monies (or the conditional right to receive such monies on return of the deposit under the Property Agreement) on trust for the Shareholders until such times as the relevant Shares and CPECs have been issued.

 

	
7.4  

	
If Property Exchange has not taken place within three months after the date of this Agreement (or such later date as the parties shall agree in writing), then this Agreement shall immediately terminate and neither party shall have any ongoing rights, obligations or liabilities, other than in respect of any breach of the terms of the Agreement prior to such termination.

 

	
8  

	
PROPERTY COMPLETION

 

	
8.1  

	
The Shareholders agree that the Company shall neither:

 

	
(a)  

	
waive any condition to Property Completion contained in the Property Agreement; nor

 

	
(b)  

	
make any material amendment to the Property Agreement between Property Exchange and Property Completion,

 

without the prior consent of the Minority Shareholder.

 

	
8.2  

	
On the Business Day before the date of Property Completion:

 

	
(a)  

	
Hines shall subscribe for such number of A Shares, accompanied by payment in cash of the nominal value of such Shares, as is agreed between the parties acting in good faith;

 

	
(b)  

	
Moorfield shall subscribe for such number of B Shares, accompanied by payment in cash of the nominal value of such Shares, as is agreed between the parties acting in good faith;

 

	
(c)  

	
Hines shall subscribe for such number of CPECs, accompanied by payment in cash of the nominal value of such CPECs, as is agreed between the parties acting in good faith; and

 

	
(d)  

	
Moorfield shall subscribe for such number of CPECs, accompanied by payment in cash of the nominal value of such CPECs, as is agreed between the parties acting in good faith,

 

provided that the numbers of Shares and CPECs subscribed for by Hines and Moorfield respectively shall be in the Agreed Proportions and shall, in aggregate, be only so many as are required to ensure that the Company and its Subsidiary Undertakings have sufficient cash to meets their obligations to pay the Price (as defined in the Property Agreement) and all transaction costs and fees; and the Shareholders shall procure that the Company applies the proceeds of such subscriptions in satisfying the Company’s obligation pursuant to the Property Agreement to pay the Price.

 

	
8.3  

	
In the event that either party fails to comply with its respective payment obligations under Clause 8.2, the defaulting party shall be liable to the other party in respect of, and hereby agrees to pay to the other party, all costs, expenses, losses and liabilities whatsoever incurred, whether directly or indirectly, by the other party and/or its Associates at any time in relation to any of the Group, the Property, the Facility Agreement (and any transactions and documents contemplated therein), the Property Agreement (and any transactions and documents contemplated therein) and this Agreement (and any transactions and documents contemplated herein) including, but not limited to, all costs, expenses, losses and liabilities whatsoever incurred by the other party and/or its Associates in enforcing any of their rights against, and/or recovering any sums due from, the defaulting party.

 

	
8.4  

	
The Shareholders use all reasonable endeavours to procure that the Car Park Lease is entered into on, or as soon as possible after, Property Completion on terms reasonably satisfactory to both Shareholders.

 

	
9  

	
BUILDING 5 CONTRIBUTIONS

 

	
9.1  

	
The Board may at any time on or before 31 December 2012 (or such later date as the Shareholders in their absolute discretion may agree), require each Shareholder to contribute in cash in their Agreed Proportions an amount equal to the capital expenditure required to re-tenant Building 5, which expenditure is presently estimated to be £7,300,000 (the “Building 5 Contributions”) and which shall not, without the written consent of both Shareholders, exceed £10,000,000 (in each case less any amounts retained by the Group as a reserve to fund such capital expenditure), by giving not less than ten Business Days’ notice in writing specifying the amount and due date (or dates) for payment.  The Building 5 Contributions shall be provided to the Company in consideration for the issue of additional Shares and CPECs (of the classes applicable to the Subsidiary Undertaking which holds Building 5, with such ‘A’ class being issued to the A Shareholder and such ‘B’ class being issued to the B Shareholder).  The Shareholders and Managers shall use all reasonable endeavours to procure that the Group shall retain (at such times as the Board determines) sufficient funds out of Available Cash Flow as a reserve to fund such capital expenditure with the intention that it shall not be necessary to require any Building 5 Contributions from the Shareholders.

 

	
9.2  

	
If a Shareholder shall fail to fund its Agreed Proportion of the Building 5 Contributions when required, then the other Shareholder (the “Contributing Shareholder”) may fund such short-fall (the “Building 5 Shortfall”) by subscribing for additional Shares and CPECs (of the classes applicable to the Subsidiary Undertaking which holds Building 5, with such ‘A’ class being issued to the A Shareholder and such ‘B’ class being issued to the B Shareholder).  If the Contributing Shareholder elects to fund the Building 5 Shortfall by subscribing for additional Shares and CPECs (of the classes applicable to the Subsidiary Undertaking which holds Building 5, with such ‘A’ class being issued to the A Shareholder and such ‘B’ class being issued to the B Shareholder), such Shares and CPECs shall be issued in the same relative proportions as the existing Shares and CPECs in issue (which, for information only, is intended to be 1 Share to every 99 CPECs following Property Completion), at a subscription price equal to their nominal value.

 

	
9.3  

	
If both Shareholders fail to fund their Building 5 Contributions, or if one Shareholder fails to fund and the Contributing Shareholder elects not to fund the Building 5 Shortfall within ten Business Days of the due date for the Building 5 Contributions, the Board shall source on behalf of the Company debt financing or make such other arrangements as are necessary to pay for the short-fall (including, if third party debt financing is not available on reasonable terms, a loan to the Company from a Shareholder (or an Associate) on terms which are no less favourable to the Company than those available from other lenders) with terms such that the financing arrangement would not be treated as a security under Section 856(m) of the Code.

 

	
10  

	
ADDITIONAL CAPITAL CONTRIBUTIONS

 

	
10.1  

	
Save as otherwise expressly provided for in this Agreement, none of the Shareholders shall be required to make any loans to, purchase additional CPECs or subscribe for any shares of either the Company or its Subsidiary Undertakings nor to provide guarantees, indemnities or other security for the obligations of the Company or its Subsidiary Undertakings.

 

	
10.2  

	
The Board (after consultation with the Property Manager and/or Asset Manager) may issue a request for additional capital contributions to fund capital expenditure, tenant improvements, lender funding requirements and similar costs (“Additional Capital Contributions”).  Each Shareholder shall have the option to fund their Agreed Proportion of each of the Additional Capital Contributions within 20 days after the written request from the Board.  In the event that one Shareholder fails to contribute its proportion of the requested Additional Capital Contribution (the “Shortfall Amount”) when required, the other Shareholder (the “Contributing Shareholder”) shall have the right, but not the obligation, to fund the Shortfall Amount by subscribing for additional Shares and relevant CPECs.  If the Contributing Shareholder elects to fund the Shortfall Amount by subscribing for additional Shares and relevant CPECs, the Shares and CPECs shall be issued in the same relative proportions as the existing Shares and CPECs in issue (which, for information only, is intended to be 1 Share to every 99 CPECs following Property Completion) at a subscription price equal to their nominal value.

 

	
10.3  

	
If both Shareholders fail to fund their Additional Capital Contribution, or if one Shareholder fails to fund and the Contributing Shareholder elects not to fund the Shortfall Amount within ten Business Days of the due date for the Additional Capital Contribution, the Board shall source on behalf of the Company debt financing or make such other arrangements as are necessary to pay for the Shortfall Amount (including, if third party debt financing is not available on reasonable terms, a loan to the Company from a Shareholder (or an Associate) on terms which are no less favourable to the Company than those available from other lenders) with terms such that the financing arrangement would not be treated as a security under Section 856(m) of the Code.

 

	
10.4  

	
Any Shares and CPECs issued by the Company pursuant to this Clause 10 in respect of Additional Capital Contributions (or any Shortfall Amount) shall be of the class or classes that relate to the Subsidiary Undertaking(s) (or the relevant asset(s) within the Subsidiary Undertaking(s) if applicable) for which the monies obtained from the Additional Capital Contribution shall be used. If the Additional Capital Contributions are not to be applied to one or more particular Subsidiary Undertakings or assets represented by specific classes of Shares and CPECs, then Shares and CPECs of all classes shall be issued pro rata to the number of each class already in existence prior to the Additional Capital Contribution being made. Furthermore, only A classes of Shares and/or CPECs shall be issued to the A Shareholder and only B classes of Shares and/or CPECs shall be issued to the B Shareholder.

 

	
11  

	
ADDITIONAL OBLIGATIONS OF THE SHAREHOLDERS

 

	
11.1  

	
Each Shareholder shall:

 

	
(a)  

	
use all reasonable endeavours and cooperate in good faith to agree the terms of each of the initial Annual Budget and the initial Annual Strategic Business Plan as soon as possible (and in any event no later than the date falling 45 calendar days after Property Completion);

 

	
(b)  

	
exercise the voting rights and powers available to it in relation to any member of the Group so as to give full effect to this Agreement, including without limitation passing such Board and Shareholder resolutions as are required to approve any transfer of Shares in accordance with Clause 14 (Buy-Sell Right ), Clause 16 (Permitted transfers ), or Clause 17 (Pre-emption on the transfer  );

 

	
(c)  

	
procure that the Managers nominated by it use all reasonable endeavours to be available in Luxembourg for the meetings of the Board and the meetings of the boards of the Company’s Subsidiary Undertakings;

 

	
(d)  

	
agree in all their actions and at all times to operate (or procure the operation of) the Company and the Subsidiary Undertakings in such a way that they are, for the purposes of UK and Luxembourg tax, resident in and only resident in Luxembourg; and

 

	
(e)  

	
undertake not to take any action or procure or allow the Company or any of its Subsidiary Undertakings to take any action that would constitute a breach of any facility agreements or security documents in relation to third party debt financing provided to the Company or any of its Subsidiary Undertakings.

 

	
11.2  

	
No Shareholder shall agree to cast any of the voting rights exercisable in respect of any Shares held by it in accordance with the directions or subject to the consent of any other third party.

 

	
11.3  

	
The Shareholders agree that the appropriate representative(s) of each Shareholder (or their Associates) shall meet every three months to review the Annual Strategic Business Plan.

 

	
12  

	
WARRANTIES

 

	
12.1  

	
Hines warrants to Moorfield that:

 

	
(a)  

	
it is a limited partnership duly organised and validly existing under the laws of Delaware;

 

	
(b)  

	
it has power to own its assets, incur obligations, carry on its business and sue and be sued in its own name;

 

	
(c)  

	
it has the power and authority to enter into this Agreement and any other documents to be executed in connection with it and to fully perform its obligations under them in accordance with their terms;

 

	
(d)  

	
the obligations expressed to be assumed by it in this Agreement and any other documents to be executed in connection with it are lawful and valid obligations binding on it in accordance with their terms;

 

	
(e)  

	
it does not require the consent, approval or authority of any other person to enter into or exercise its rights or perform its obligations under this Agreement or any other documents to be executed in connection with it; and

 

	
(f)  

	
so far as it is actually aware and assuming that the Car Park Lease has been duly executed and put into effect:

 

	
(i)  

	
the proposed structure of the Company and its Subsidiary Undertakings; and

 

	
(ii)  

	
the terms of this Agreement (ignoring the effects of Clause 4.6 solely for the purpose of this warranty) and all material documents referred to in this Agreement,

 

comply at the date of this Agreement with the REIT Requirements (as defined in Clause 4.6).

 

	
12.2  

	
Moorfield warrants to Hines that:

 

	
(a)  

	
it is a company duly incorporated and organised and validly existing under the laws of its jurisdiction of incorporation;

 

	
(b)  

	
it has power to own its assets, incur obligations, carry on its business and sue and be sued in its own name;

 

	
(c)  

	
it has the power and authority to enter into this Agreement and any other documents to be executed in connection with it and to fully perform its obligations under them in accordance with their terms;

 

	
(d)  

	
the obligations expressed to be assumed by it in this Agreement and any other documents to be executed in connection with it are lawful and valid obligations binding on it in accordance with their terms;

 

	
(e)  

	
it does not require the consent, approval or authority of any other person to enter into or exercise its rights or perform its obligations under this Agreement or any other documents to be executed in connection with it; and

 

	
(f)  

	
it has provided Hines with a list of all persons and entities that:

 

	
(i)  

	
own (beneficially or otherwise) 10% of Moorfield;

 

	
(ii)  

	
Control Moorfield; or

 

	
(iii)  

	
Moorfield acts for or on behalf of.

 

	
13  

	
DISTRIBUTION POLICY

 

	
13.1  

	
No distributions shall be paid in respect of the Shares except (a) with the prior written consent of both Shareholders or (b) pursuant to a return of capital or liquidation of the Company (and, in respect of (b), the Shareholders hereby agree to vote in favour of any return of capital where capital is to be returned to the Shareholders pro-rata to their total Interests).

 

	
13.2  

	
All repurchases, redemptions and conversions of CPECs and all repurchases and redemptions of Shares and any other returns of capital shall be undertaken pro rata between the Shareholders unless the parties agree otherwise.

 

	
13.3  

	
No distributions of Available Cash Flow or Available Capital Proceeds shall be made by the Company to any Shareholder except in accordance with the 1915 Law and to the extent that such distribution would or might, in the reasonable opinion of the Board, leave the any member of the Group with insufficient funds for general working capital purposes, to meet liabilities as they fall due or to enable the Company to create and maintain (or increase) a reserve such that it can meet the liabilities (present or future, actual or contingent) of the Group as they fall due or are expected to fall due.

 

	
14  

	
BUY-SELL RIGHT

 

	
14.1  

	
At any time after the second anniversary of the date of Property Completion, either Shareholder (the actual Shareholder giving such notice being herein called the “Electing Shareholder”), shall have the option (“Buy-Sell Right”) to cause to occur the buy-sell rights under this Clause 14.1 by giving written notice (“B/S Notice”) thereof to the other Shareholder (the Shareholder receiving such notice being herein called the “Non-electing Shareholder”).  No notice may be given by any Shareholder at any time that (a) further to Clause 11.1(e), the exercise thereof would constitute a default with respect to any third party indebtedness of the Company (unless the holder thereof has waived such default or the Electing Shareholder in its notice states such indebtedness will be paid in full and demonstrates it has the financial means to do so); or (b) a Sale Notice pursuant to Clause 17.1 or a Forced Sale Notice in respect of the whole of the Property (but not less than the whole of the Property) pursuant to Clause 18.2 has already been issued until such time as the Sale Notice or Forced Sale Notice shall expire without the applicable sale having taken place.  The B/S Notice shall set forth an all cash price which the Electing Shareholder is prepared to pay for all of the Non-Electing Shareholder’s Interests (“Price”).  The Shareholders agree to reasonably cooperate in making available information about the Group and/or the Property during the pendency of any proceedings under this Clause 14.1.  Additionally, the B/S Notice shall also disclose all written offers, letters of intent, term sheets and other indications of interest in the Property or such Shareholder’s Shares that have been received by the Electing Shareholder within the period which is 12 months prior to the delivery of the B/S Notice.  The Non-electing Shareholder shall then decide whether: (1) the Electing Shareholder will buy all of the Interests of the Non-electing Shareholder; or (2) the Non-electing Shareholder will buy all of the Interests of the Electing Shareholder.  If the Non-electing Shareholder does not give to the Electing Shareholder written notice of selecting option (1) or (2) within 40 Business Days of the date of the B/S Notice, then the Electing Shareholder may within 20 Business Days after the expiration of such 40 Business Day period either withdraw its exercise of the Buy-Sell Right or give written notice of such failure to the Non-electing Shareholder (failing which, the exercise shall be deemed withdrawn) and, if the Non-electing Shareholder has not elected (1) or (2) within a further 10 Business Days after notice of its failure to provide a response to the Electing Shareholder, then the Non-electing Shareholder will be deemed to have selected option (1), which is to have the Electing Shareholder buy all of the Interests in the Company of the Non-electing Shareholder.  Within 40 Business Days after the determination of whether the Electing Shareholder or the Non-electing Shareholder will buy under option (1) or (2), the Shareholders shall be obligated to complete such purchase and sale for the Price (subject to pro rata adjustment based on each Shareholder’s relative Interests on the date of the B/S Notice, with such adjusted Price being referred to herein as the “Closing Sum”).  Within 3 Business Days after the determination of which Shareholder is the purchasing Shareholder, the purchasing Shareholder shall be obligated to deposit with Barclays Bank plc (or its successor) or such other financial escrow institution reasonably approved by the non-purchasing Shareholder as escrow agent (“Escrow Agent”), a cash deposit (“Deposit”) equal to two percent (2%) of the Closing Sum as security for its obligation to complete the purchase.  During the pendency of proceedings under this Clause 14.1, no Shareholder shall make any transfer any of its Interests in the Company other than pursuant to the Buy-Sell Right that instituted such proceedings.

 

	
14.2  

	
The closing of the purchasing Shareholder’s purchase of the other Shareholder’s Interests shall be held at the offices of the purchasing Shareholder’s solicitors (or such other place as agreed by the parties) on such Business Day within the 40 Business Day period as the parties may agree for completing the purchase and sale referred to in Clause 14.1 above (and in the absence of agreement on the last Business Day of such period).  Pending the closing, the Board shall cause the business of the Company and the Subsidiary Undertakings to be conducted in the ordinary course and shall not pay or incur any costs, expenses or obligations or accelerate or defer the receipt of any revenues in such a way as to cause the Company’s cash flow or the operating expenses or Company or any liabilities of the Company’s Subsidiary Undertakings as of the Closing Date to be materially different from what such would have been as of such date in the absence of the purchase and sale pursuant to this Clause 14 (Buy-Sell Right ).  At the closing:

 

	
(a)  

	
the purchasing Shareholder shall pay to the non-Purchasing Shareholder the Closing Sum (less the amount of the Deposit, which shall be applied to the Closing Sum) by wire transfer of immediately available funds prior to 2:00 p.m. London, England local time.  All costs and expenses in connection with any closing shall be paid by the Shareholder incurring such costs and no deductions shall be made from the Closing Sum for deemed closing costs;

 

	
(b)  

	
the non-purchasing Shareholder shall transfer to the purchasing Shareholder or its or their nominees, with full title guarantee, all of the Interests of the Company owned by the non-purchasing Shareholder, free and clear of all liens, claims and encumbrances; and

 

	
(c)  

	
the non-purchasing Shareholder and the purchasing Shareholder shall execute and deliver such other documents as may be reasonably necessary to carry out such transaction.

 

	
14.3  

	
In the event that the purchasing Shareholder shall default in its obligation to consummate the purchase contemplated by this Clause 14 (Buy-Sell Right ), then the non-purchasing Shareholder shall, at its option, have the right to:

 

	
(a)  

	
be the purchasing Shareholder on the same terms and provisions as were applicable to the purchase that the defaulting Shareholder failed to close;

 

	
(b)  

	
abandon the purchase and retain the Deposit as liquidated damages for the sale contemplated by this Clause 14 (Buy-Sell Right ) and carry forward as if the Buy-Sell Right had not been exercised; or

 

	
(c)  

	
if it had not been the Electing Shareholder with respect to the Buy-Sell Right that the purchasing Shareholder failed to consummate, then to institute the Buy-Sell Right itself (which may be, but is not required to be, for a different Price).

 

If the non-purchasing Shareholder shall not have used one or more of the options described in the paragraphs (a) through (c) of this Clause 14.3 within three months after the default by the purchasing Shareholder, then the non-purchasing Shareholder shall be deemed to have elected option (b); provided, however, that either Shareholder shall thereafter be entitled to exercise a new Buy-Sell Right, except that the defaulting purchasing Shareholder shall not be able to exercise a new Buy-Sell Right sooner than two years after the default by the purchasing Shareholder.

 

	
14.4  

	
In the event the non-purchasing Shareholder shall default in its or their obligations to consummate the purchase contemplated by this Clause 14 (Buy-Sell Right ), then the purchasing Shareholder may:

 

	
(a)  

	
abandon the purchase and sale contemplated by this Clause 14 (Buy-Sell Right ) and carry forward as if the Buy-Sell Right had not been exercised, in which event the non-performing Shareholder shall be obligated to return the Deposit to the purchasing Shareholder;

 

	
(b)  

	
enforce specific performance of the sale contemplated by this Clause 14 (Buy-Sell Right ), or

 

	
(c)  

	
exercise any remedy to which it may be entitled at law or in equity.

 

If the purchasing Shareholder shall not have used one or more of the options described in the preceding clauses (a) through (c) of this Clause 14.4 within three months after the default by the non-purchasing Shareholder, then the purchasing Shareholder shall be deemed to have elected option (a); provided, however, that either Shareholder shall thereafter be entitled to exercise a new Buy Sell Right, except that the defaulting non-purchasing Shareholder shall not be able to exercise a new Buy-Sell Right sooner than two years after the default by the non-purchasing Shareholder.

 

	
14.5  

	
From and after the consummation of any purchase and sale pursuant to this Clause 14 (Buy-Sell Right ) the non-purchasing Shareholder shall have no obligation or liability (except for title warranties) with respect to matters pertaining to the Company or the Subsidiary Undertakings arising from and after the Closing Date.

 

	
14.6  

	
Notwithstanding anything in this Clause 14 (Buy-Sell Right ) to the contrary, in no event shall a Shareholder be permitted to exercise a Buy-Sell Right at any time after a contract shall be entered into in the name of the Company to sell the Property (or part therof).  In the event that the sale of the Property shall fail to close and any such contract shall terminate, then the Shareholders shall again have the right to exercise the Buy-Sell Right subject to the terms and conditions of this Agreement.

 

	
15  

	
TRANSFER OF INTERESTS

 

	
15.1  

	
No Shareholder may transfer any Interests except in accordance with:

 

	
(a)  

	
in the case of Shares, the Articles;

 

	
(b)  

	
in the case of CPECs the terms of the relevant instrument constituting the same; and

 

	
(c)  

	
Clause 14 (Buy-Sell Right ), Clause 16 (Permitted transfers ), Clause 17 (Pre-emption on the transfer  ) and any purported transfer in breach of this Clause shall be of no effect.

 

	
15.2  

	
References in Clause 15.1 to a transfer of any Interest includes a transfer or grant of any interest in, or right in respect of, any Interest, whether by way of sale, gift, holding on trust, or in any other way, and whether at law or in equity,  and also includes an agreement to make any such transfer or grant or to exercise the voting rights attaching to a Share at the direction of any third party, but shall not include the grant of an interest by way of charge, mortgage or pledge to a bona fide funder of that Shareholder, or an agreement to grant such an interest.

 

	
16  

	
PERMITTED TRANSFERS

 

	
16.1  

	
A transfer of any Interest may be made only in whole and not in part and at any time in each of the following cases:

 

	
(a)  

	
for cash consideration and with the prior written consent of all the Shareholders for the time being of the Company; or

 

	
(b)  

	
a transfer to a company which is an Associate of the transferor.

 

	
16.2  

	
Subject always to the provisions of Clauses 16.4 and 16.5, if a Shareholder intends to transfer any Interests by reason of Clause 16.1(b), the Shareholders shall procure the passing of the requisite resolution of the Company approving such transfer.

 

	
16.3  

	
If a holder of Interests acquired any Interests by reason of Clause 16.1(b) it shall, immediately prior to it ceasing to be an Associate of the original transferring Shareholder, transfer the Interests back to the original transferring Shareholder or to another Associate of the original transferring Shareholder.

 

	
16.4  

	
To ascertain whether a proposed transferee is a permitted transferee, the Managers nominated by the non-transferring Shareholder(s) may require the transferor or the transferee to provide such information as they may reasonably specify.

 

	
16.5  

	
The Board may refuse to register a transfer which purports to be a permitted transfer so long as replies which are reasonably satisfactory in relation to a request for information under Clause 16.4 have not been received.

 

	
17  

	
PRE-EMPTION ON THE TRANSFER OF INTERESTS

 

	
17.1  

	
A Shareholder who wishes to transfer the legal and beneficial interest in all (but not part only) of the Interests registered in its name (the “Seller”) to a bona fide third party shall first give a written notice of such intention to the Administrative Manager and the other Shareholders (a “Sale Notice”). No Sale Notice under this provision may be given by a Shareholder prior to 1 July 2014.

 

	
17.2  

	
The Sale Notice shall:

 

	
(a)  

	
specify the number of Shares and CPECs registered in the name of the Seller (the “Seller’s Interests”);

 

	
(b)  

	
specify the cash price per individual Share and CPEC at which the Seller’s Interests are to be offered for sale, being the price offered by the bona fide third party (the “Offer Price”);

 

	
(c)  

	
specify the identity of the third party who has indicated a willingness to buy the Seller’s Interests (the “Proposed Purchaser”) and (if it is a body corporate) the person(s) believed by the Seller to control that company;

 

	
(d)  

	
be accompanied by a copy of any written offer, heads of terms, letter of intent or other written communication from the Proposed Purchaser setting out the proposed purchase price for the Seller’s Interests.

 

	
17.3  

	
Provided the other Shareholders approve the identity of the Proposed Purchaser (such approval only to be withheld if the other Shareholders reasonably believe the Proposed Purchaser to be of inadequate financial standing regarding the outstanding financial obligations under this Agreement), the Sale Notice shall appoint the Administrative Manager as the Seller’s agent for the sale of the Seller’s Interests and once given may not be withdrawn or varied.

 

	
17.4  

	
The Administrative Manager shall, within three Business Days of receipt of the Sale Notice offer the Seller’s Interests in writing to the other Shareholder (the “Offer”).  The Offer shall specify such information as is contained in the Sale Notice and shall provide that if the offeree does not accept the Offer in respect of the Interests offered within 20 Business Days of the Offer being made (the “Acceptance Period”), it shall be deemed to have declined it but that, if it does accept, it shall not be entitled to withdraw its acceptance except as provided in this Clause 17 (Pre-emption on the transfer ).

 

	
17.5  

	
If the Offer is accepted within the Acceptance Period, the Administrative Manager shall, as soon as practicable (and in any event within ten Business Days), give notice to the Seller who shall be required to complete the sale and purchase in accordance with Clause 17.6.

 

	
17.6  

	
Completion of the sale and purchase of the Seller’s Interests shall take place within forty Business Days after the giving of a notice under Clause 17.5.  At completion of the sale and purchase contemplated by this Clause 17 (Pre-emption on the transfer ) the Seller shall deliver or cause to be delivered to the Board duly executed transfers in respect of the Seller’s Interests (and any certificates issued by the Company in respect of any CPECs) in favour of the purchasing Shareholder (or as it directs), together with any power of attorney under which the transfer has been executed, against which the purchasing Shareholder shall deliver to the Managers a banker’s draft for the purchase price (or if required by the Seller shall pay the purchase price by wire transfer of immediately available funds prior to 2:00 p.m. London, England local time to such bank account nominated by the Seller).  The Seller shall do all other things and execute all other documents as the purchasing Shareholder may reasonably require to give effect to the sale and purchase of the Seller’s Interests.  The Seller’s Interests shall be deemed to be sold by the Seller with full title guarantee with effect from the date of transfer.  If the Seller fails to carry out the sale of any of the Interests in accordance with this Clause 17 (Pre-emption on the transfer ) the Managers may appoint some person to execute appropriate transfers on the Seller’s behalf and to give a receipt for the purchase price which shall be paid over to the Seller.

 

	
17.7  

	
If the Offer is declined or not accepted within the Acceptance Period, the Administrative Manager shall notify the Seller as soon as is reasonably practicable (and in any event within ten Business Days) and the Seller shall (subject to Clause 17.8) be entitled to sell its Interests to the Proposed Purchaser for a cash price per Share and CPEC which is not less than the Offer Price and otherwise on terms which are no more favourable (excluding the provisions of usual warranties and indemnities that are required by an arm’s length third party purchaser) than those which would have applied on a sale to a purchasing Shareholder, provided that such sale is completed within 120 days of the last day of the Acceptance Period.

 

	
17.8  

	
No distributions shall be made after the issue of a Sale Notice unless the Shareholders have agreed, and the Shareholders hereby agree to cooperate in good faith to agree, appropriate adjustments to the Offer Price to reflect distributions made after the issue of the Sale Notice but before the Completion of any transfer of Seller’s Interests pursuant to this Clause 17 (Pre-emption on the transfer ) save that such restriction on distributions shall not apply after:

 

	
(a)  

	
if the Offer is accepted within the Acceptance Period, the date falling forty Business Days after the giving of a notice under Clause 17.5; or

 

	
(b)  

	
if the Offer is declined or not accepted within the Acceptance Period, the earlier of the date on which the Proposed Purchaser declines to complete the purchase of the Interest and the date falling 120 days after the last day of the Acceptance Period.

 

	
17.9  

	
Completion of any transfer of Seller’s Interests to a third party purchaser(s) pursuant to this Clause 17 (Pre-emption on the transfer ) shall be subject to the condition that the Proposed Purchaser(s) shall first have entered into a Deed of Adherence.

 

	
18  

	
FORCED SALE RIGHT IN RESPECT OF THE PROPERTY AND ROFR

 

	
18.1  

	
From and after 1 July 2014 (the “Forced Sale Right”), each Shareholder shall have the right to initiate the sale by any member of the Group of the Property (or any part therof) (each sale being referred to in this Clause as a “Project”), upon and subject to the terms set forth in this Clause 18. No Shareholder shall initiate a Forced Sale Right hereunder at any time after a Shareholder has exercised the Buy-Sell Right pursuant to Clause 14 and prior to the completion of the Buy-Sell Right procedures set forth in Clause 14 or at any time after a Shareholder has issued a Sale Notice pursuant to Clause 17 and prior to completion of the pre-emption procedures set forth in Clause 17.

 

	
18.2  

	
A Shareholder (the “Triggering Shareholder”) shall exercise its Forced Sale Right by delivering to the other Shareholder (the “Non-Triggering Shareholder”) a written notice (a “Forced Sale Notice”) of the Triggering Shareholder’s desire for a particular Project or Projects to be sold and the gross purchase price (the “ROFR Price”) at which the Triggering Shareholder desires to sell the Project or Projects (including an allocation of such gross price among the Project(s) set forth in such Forced Sale Notice).

 

	
18.3  

	
Following the delivery of a Forced Sale Notice, the Shareholders shall procure the passing of the requisite resolution of the Company approving such actions are necessary to effect the sale contemplated by such Forced Sale Notice.

 

	
18.4  

	
The Non-Triggering Shareholder will have the right to elect to purchase (or cause its Associates to purchase) one or more of the subject Project or Projects upon the terms and conditions set forth in this Clause 18 by (i) delivery of written notice (an “Exercise Notice”) to the Triggering Shareholder during the  20 Business Day period following delivery of the Forced Sale Notice; and (ii) depositing with an Escrow Agent (as defined in Clause 14 a deposit (the “ROFR Deposit”) equal to 5% of the portion of the ROFR Price allocable to such Project(s).  In the event that the Non-Triggering Shareholder fails to deliver an Exercise Notice prior to the expiration of the foregoing 20 Business Day period, then it shall be deemed to have elected not to exercise its right to purchase the Project or Projects hereunder.

 

	
18.5  

	
To the extent that the Non-Triggering Shareholder does not elect to purchase the subject Project or Projects, the Shareholders shall meet to discuss an appropriate marketing plan for the Project or Projects, as applicable, including potential brokerage firms, the terms of the brokerage contract with such firms and the marketing strategy (the date of such meeting being the “Marketing Commencement Date”). If the Shareholders are unable to agree upon an appropriate marketing plan within 20 Business Days after the Non-Triggering Shareholder’s election or deemed election not to purchase subject Project or Projects, then the Triggering Shareholder shall direct the marketing efforts and shall have the right on behalf of the applicable member of the Group who owns the subject Project or Projects to engage the services of an independent real estate brokerage firm to solicit offers from third parties unaffiliated with either Shareholder to purchase the Project or Projects.  If more than one Project is to be sold, then, the Triggering Shareholder, subject to Clause 18.8, may market the subject Projects individually or as a unit.  In all events (i) the commission of any retained brokerage firm shall be an expense of the applicable member(s) of the Group who owns the subject Project or Projects, (ii) the Administrative Manager and each of the Shareholders shall cooperate with such brokerage firm to market the applicable Project or Projects and shall supply information to such brokerage firm so that such brokerage firm can prepare appropriate marketing materials, (iii) the Administrative Manager shall provide prospective purchasers with such information about the applicable marketing plan as such brokerage firm may reasonably request or is in line with industry practice, and (iv) the Triggering Shareholder shall on behalf of the applicable member(s) of the Group who owns the subject Project or Projects arrange for solicitors to be appointed to act on the sale.

 

	
18.6  

	
To the extent that the Non-Triggering Shareholder fails to elect to purchase the subject Project or Projects, the Triggering Shareholder shall (unless such sale shall result in a default or event of default with regard to any indebtedness of the Group) have the right to cause the applicable member(s) of the Group who owns the subject Project or Projects to accept a purchase offer for any or all Projects included in the particular Forced Sale Notice, from any person or entity who is not the Triggering Shareholder or an Associate of the Triggering Shareholder; provided, however, that the purchase price must be payable entirely in cash (e.g. the applicable member(s) of the Group who owns the subject Project or Projects may not provide seller financing by accepting a note for a portion of the purchase price), must be at least equal to ninety-five per cent (95%) of the allocable ROFR Price set forth in the Forced Sale Notice (a “Qualifying Offer”) with regard to the Project(s) being sold (as such ROFR price shall be adjusted by reference to any change in prepayment and similar fees and charges relating to the Project(s) being sold, to the extent that the purchaser will not pay the same)  and the closing of such sale must take place prior to the expiration of the 180 day period following the Marketing Commencement Date (failing which the subject Project or Projects shall not be sold pursuant to the original Forced Sale Notice and clause 18.9 shall apply).

 

	
18.7  

	
For any Qualifying Offer that the Triggering Shareholder determines to accept as provided in Clause 18.6, the applicable member(s) of the Group who owns the subject Project or Projects shall execute, acknowledge and deliver a purchase and sale agreement and such conveyance and other documents as shall be reasonably required to effectuate the sale; provided that such purchase and sale agreement and such conveyance shall be negotiated by the solicitors referred to in clause 18.5(iv), shall accord with market practice at the time (including the giving of appropriate indemnities for future breach by the purchaser), shall not impose personal liability on any Shareholder and shall require that any security interest in the Project(s) being sold held by the lender with respect to any debt financing and any guarantees or indemnities relating thereto be released and that such sale shall not result in a default or event of default with regard to any indebtedness of the Group.

 

	
18.8  

	
The Shareholders acknowledge that the terms of any debt facility agreements or other debt financing may limit the number of partial releases that may occur during the term of any loan.  Accordingly, in exercising their respective Forced Sale Rights and discussing the potential marketing plans for the subject Projects, the Shareholders shall give good faith consideration to marketing and selling one or more of the designated Projects as a unit or coordinating the closings of separate sales so as to minimise the number of releases.

 

	
18.9  

	
For any Project or Projects for which the Triggering Shareholder is unable to cause the applicable member(s) of the Group who owns the subject Project or Projects to complete a sale pursuant to a Qualifying Offer by the date that is 180 days after the Marketing Commencement Date the original Triggering Shareholder’s rights to direct the marketing and cause the sale of the subject Project or Projects as provided in this Clause 18 shall be revoked and the Triggering Shareholder shall not have any right to exercise a new Forced Sale Right of its own with respect to such Project(s) during the one year period following the expiration of the foregoing 180 day period.   The Non-Triggering Shareholder shall have the right to exercise a Forced Sale Right as to any such Project or Projects during that one year period (or thereafter) and the original Triggering Shareholder shall have the rights of a Non-Triggering Shareholder as to such Forced Sale Right.

 

	
18.10  

	
To the extent that a Non-Triggering Shareholder timely elects to purchase the Project(s) set forth in a Forced Sale Notice delivered by the Triggering Shareholder hereunder, the Triggering Shareholder and the Non-Triggering Shareholder (each acting reasonably) shall then procure that, as soon as reasonably practicable and in any event within 20 Business Days of such election, there shall come in to force a binding contract for the applicable member(s) of the Group who owns the subject Project or Projects to sell and the Non-Triggering Shareholder to purchase the subject Project or Projects (and the form of such contract and the conveyance shall contain provisions as described in Clauses 18.7 and 18.12) and the closing of such sale (the “ROFR Closing”) shall take place on the date that is 40 Business Days following the date that the Non-Triggering Shareholder elects to purchase such Project(s) or on such earlier date as the Non-Triggering Shareholder may specify on at least 10 Business Days’ prior written notice to the Triggering Shareholder (the “ROFR Closing Date”).  At such ROFR Closing, the Non-Triggering Shareholder and the Company (and each applicable member of the Group) shall execute, acknowledge and deliver such deeds, assignments, consents and other conveyance and other documents as shall be reasonably required to effectuate the sale.  In the event that the Non-Triggering Shareholder defaults in its obligation to purchase any subject Project or Projects pursuant to the provisions hereof (other than as a result of a default by the Triggering Shareholder or the applicable member(s) of the Group or as a result of the application of clause 18.10), then (i) the Company shall pay the ROFR Deposit to the Triggering Shareholder and (ii) the Triggering Shareholder shall be authorised to market and sell such Project or Projects to one or more third party purchasers upon such terms and conditions as the Triggering Shareholder shall determine to be appropriate in its reasonable discretion.

 

	
18.11  

	
Each of the following (unless and except (in the case of the conditions contained in clauses 18.11(a) to 18.11(c) inclusive only) to the extent waived by the Non-Triggering Shareholder) shall be a condition to the Non-Triggering Shareholder’s obligation to proceed with a purchase of the Project(s) contained in any Forced Sale Notice under this Clause 18:

 

	
(a)  

	
as of the ROFR Closing Date, there shall not have occurred any Material Casualty/Condemnation with respect to any of such Project(s) (provided that, the determination of a Material Casualty/Condemnation shall be made with reference to the subject Project or Projects rather than the Property as a whole and provided further that to the extent that the Non-Triggering Shareholder waives the condition set forth in this Clause 18.11(a), then at the ROFR Closing the applicable member(s) of the Group owning the Project(s) affected by such Material Casualty/Condemnation, shall pay to the Non-Triggering Shareholder (or its Associate) any and all condemnation awards and insurance proceeds received by the applicable member(s) of the Group in connection with such Material Casualty/Condemnation, plus an amount equal to the deductible under each applicable insurance policy, but not in excess of an amount equal to the actual damages caused by the Material Casualty/Condemnation);

 

	
(b)  

	
there shall be no suit, action or other proceeding pending on the ROFR Closing Date before or by any court or governmental body seeking to restrain or prohibit, or seeking material damages or other relief in connection with the sale of any Project(s) contained in the pertinent Forced Sale Notice and of which the Non-Triggering Shareholder was unaware as of at the time of making of its election to purchase such Project(s);

 

	
(c)  

	
the Project(s) shall be free and clear of any liens or encumbrances other than any Permitted Encumbrances (as defined herein).  For the purposes hereof “Permitted Encumbrances” means (i) liens for ad valorem taxes that are not yet due and payable, (ii) any liens relating to the external debt financing of any member of the Group that will be released at the ROFR Closing, (iii) any liens relating to any external debt financing that the Non-Triggering Shareholder elects, in its sole discretion, to assume in connection with its purchase of Project(s) hereunder, (iv) any liens that are approved by the Non-Triggering Shareholder in writing as liens to which its purchase will be subject, and (v) any encumbrances contained in the deeds conveying the Project(s) to a member of the Group or to which such conveyance was otherwise subject; and

 

	
(d)  

	
at the ROFR Closing, any security interest in the Project(s) being sold, held by the lender with respect to the Facility Agreement (or any other external debt financing) and any guarantees or indemnities relating thereto shall be released and such sale does not result in a default or event of default with regard to any external indebtedness of the Group.

 

The Triggering Shareholder hereby undertakes not to take, nor cause (whether directly or indirectly) any other party to take, any action that causes any of the conditions above to not be satisfied and, to the extent that any of the above conditions are not satisfied as of the ROFR Closing Date (or (where applicable) waived in writing by the Non-Triggering Shareholder), the Triggering Shareholder and the Non-Triggering Shareholder shall direct the Escrow Agent to return the ROFR Deposit to the Non-Triggering Shareholder and the contract and obligations to purchase subject Project(s) shall automatically cease and determine.

 

	
18.12  

	
The ROFR Price shall be payable by the Non-Triggering Shareholder to the relevant members of the Group in readily available funds.  The ROFR Deposit (together with any interest earned thereon) shall be applied to the ROFR Price at the ROFR Closing.  Rents, real estate taxes, and other items of revenue and expense applicable to the Project(s) that are being sold that are typically prorated in similar transactions shall be prorated as of the date of the ROFR Closing and the ROFR Price shall be adjusted accordingly.  All adjustments to the ROFR Price shall be made on the basis of good faith estimates of the Shareholders using currently available information, and final adjustment shall be made promptly after precise figures are determined or available.  At the end of the year of closing that includes the ROFR Closing, (i) the Administrative Manager shall calculate year-end adjustments for the calendar year in which the ROFR Closing occurred for common area maintenance expenses, taxes, and insurance owed by or to any tenant under leases in place at the time of the ROFR Closing with regard to the Project(s) sold hereunder and the parties shall make payments to each other as needed to true up the estimates of such items used for purposes of the ROFR Closing, and (ii) the Administrative Manager shall forward to the Company (or the applicable member of the Group) any amounts paid by tenants to the Administrative Manager which amounts are for the payment of such tenant’s pro rata share of expenses, taxes and insurance to the extent such expenses, taxes and insurance are attributable to that portion of the tax year during the Company (or the applicable member of the Group) owned the Property and for which expenses, taxes and insurance the Company (or the applicable member of the Group) gave the Administrative Manager a credit at the ROFR Closing.  If any transfer taxes are payable in connection with the purchase and sale of the applicable Project(s), then (y) the Triggering Shareholder and the Non-Triggering Shareholder shall each reasonably cooperate with the other to structure the transaction under this Clause 18 so as to minimise such transfer taxes, and (z) any such transfer taxes shall be payable by the parties in accordance with local custom.  With respect to any external debt financing which is in existence as of the date of the ROFR Closing and encumbers the subject Project or Projects, the parties will cooperate in using commercially reasonable efforts to persuade the lender with respect to such external debt financing and the servicer to waive any prepayment and similar fees and charges relating to the ROFR Closing; however, any such fees not so waived by any lender or any servicer shall be paid by the Company at the ROFR Closing.

 

	
19  

	
POWER OF ATTORNEY

 

	
19.1  

	
As security for the performance of its obligations under Clause 14 and Clause 17, each Shareholder appoints the Company (such appointment being revocable only upon a Shareholder ceasing to hold any Interests), acting by any Manager, to be its attorney for the following purposes:

 

	
(a)  

	
to approve, execute (as a deed or otherwise) and deliver all such documents as its attorney shall in its absolute and unfettered discretion deems necessary for the purpose of giving effect to any transfer of Interests;

 

	
(b)  

	
to receive the purchase money; and

 

	
(c)  

	
to cause the transferee’s name to be entered into the register of Shareholders of the Company as the holder of the relevant Interests.

 

	
19.2  

	
The Company shall hold any purchase money received pursuant to Clause 19.1(b) on terms that it is not to be bound to earn or pay interest on such monies.

 

	
19.3  

	
The receipt by the Company of the purchase money for the Interests shall be a good discharge of the relevant transferee’s obligations to pay the purchase money.

 

	
19.4  

	
Each Shareholder undertakes to ratify whatever the attorney does or lawfully causes to be done under the authority or purported authority of the power of attorney contained in Clause 19.1.

 

	
19.5  

	
If the buying Shareholder fails to pay the purchase price in full to the selling Shareholder on the relevant completion date, interest will accrue on the amount unpaid from the completion date until the date of payment at the rate of 4% per annum above the base rate of Barclays Bank PLC from time to time.

 

	
20  

	
ANCILLARY COMPLETION MATTERS

 

	
20.1  

	
On a sale or transfer of Interests in accordance with this Agreement each selling Shareholder shall:

 

	
(a)  

	
repay all loans, loan capital, borrowings and indebtedness in the nature of borrowings owed by that Shareholder or its Associates (together with any accrued interest) to any member of the Group; and

 

	
(b)  

	
procure the removal of any Managers of any member of the Group appointed by it.

 

	
20.2  

	
On a sale or transfer of Interests (save for a transfer or sale to a third party) in accordance with this Agreement the buying Shareholder shall (to the extent not already provided for in the preceding Clauses of this Agreement):

 

	
(a)  

	
procure that all loan capital, borrowings and indebtedness in the nature of borrowings (other than those incurred in the normal course of trade) owed by the Company to the selling Shareholder (together with any accrued interest) are either assigned to the buying Shareholder(s) for such value as may be agreed between the Shareholders or, failing agreement, are repaid by the Company or its Subsidiary Undertakings;

 

	
(b)  

	
procure that all CPECs held by the selling Shareholder are assigned to the buying Shareholder for such proportion of the aggregate purchase price as may be agreed between the Shareholders or, failing agreement at a price per CPEC equal to the price per Share; and

 

	
(c)  

	
use all reasonable endeavours (but without involving any financial obligation on its part) to procure the release of any guarantees, indemnities, security or other comfort given by the selling Shareholder to or in respect of any member of the Group.

 

	
21  

	
ADMINISTRATIVE MANAGER

 

	
21.1  

	
Subject to Clause 6 (Reserved Matters ) and any other relevant terms of this Agreement, the Administrative Manager shall be solely responsible for managing the day-to-day operations of the Company and for the high level strategic asset management of the Business. To such end, the Administrative Manager shall:

 

	
(a)  

	
assist the Company to make distributions to the Shareholders and the holders of CPECs as and when required pursuant to the terms of this Agreement and other relevant agreements contemplated hereby,

 

	
(b)  

	
supervise the generation of financial and other reports by the Property Manager and the Asset Manager, and supervise the distribution of said reports to the Shareholders as and when required pursuant to the terms of this Agreement,

 

	
(c)  

	
supervise the generation of unaudited and audited financial statements of the Company as and when required by this Agreement,

 

	
(d)  

	
assist the Company to prepare and file any and all tax and other regulatory filings with the appropriate Luxembourg taxing and regulatory authorities,

 

	
(e)  

	
assist with the management of the tax structure of the Company and the Subsidiary Undertakings of the Company so that the central management and control of the Company, the Subsidiary Undertakings of the Company and the Property will continue to be exercised outside of the United Kingdom,

 

	
(f)  

	
if requested by the Board, open and manage bank and other deposit accounts, and

 

	
(g)  

	
perform all other acts or activities reasonably related to the specific duties of the Administrative Manager which are necessary or desirable for the carrying out of the purposes of the Company (and the Subsidiary Undertakings of the Company) as set forth in this Agreement and the approved Annual Strategic Business Plan.

 

	
21.2  

	
The Administrative Manager’s duties and responsibilities shall be carried out in all material respects in accordance with:

 

	
(a)  

	
standards of care that are at least equal to those standards that are at the time of this Agreement customarily employed by the Administrative Manager in managing comparable properties for its own account,

 

	
(b)  

	
the Annual Strategic Business Plan and directions given from time to time by the Board, and

 

	
(c)  

	
the provisions of this Agreement.

 

	
21.3  

	
The Administrative Manager shall not be required to devote any particular amount of time to the Company’s Business, but shall it devote sufficient time to perform its duties hereunder.

 

	
21.4  

	
The Administrative Manager shall have no authority to bind the Company or any of its Subsidiary Undertakings, except as expressly authorized in writing by the Board or as otherwise permitted by this Agreement.

 

	
21.5  

	
The Administrative Manager shall be entitled to recover its reasonable and proper costs for managing the Company (including recovery of its personnel compensation and other overhead expenses without mark-up) in its capacity as Administrative Manager, in an amount not to exceed £120,000 per year (adjusted annually for inflation (as measured by Luxembourg’s Consumer Prices Index (or any replacement index) starting in 2011).

 

	
22  

	
CERTAIN U.S. TAX MATTERS

 

	
22.1  

	
The Shareholders agree that, solely for U.S. tax purposes, the Company shall elect to be treated as a partnership.  The Company shall file with the U.S. Internal Revenue Service IRS Form 8832 and shall take such other steps as are necessary to cause the Company to be so treated.

 

	
22.2  

	
The Shareholders further acknowledge and agree that:

 

	
(a)  

	
the CPECs are intended to be treated as partnership interests for U.S. federal income tax purposes; and

 

	
(b)  

	
none of such Shareholders shall take positions in any U.S. federal income tax report or filing that are inconsistent with such treatment.

 

	
22.3  

	
Schedule 5 (United States tax and other matters ) to this Agreement sets forth certain additional provisions that will apply solely for purposes of maintaining capital accounts, allocating income, gain, loss, and deduction, and determining relevant elections for United States tax purposes.

 

	
23  

	
ANNOUNCEMENTS

 

	
23.1  

	
Except as required by law, the U.S Securities and Exchange Commission, any U.S. state securities law commission, the UK Listing Authority, the London Stock Exchange, the Panel on Takeovers and Mergers or any other regulatory authority, or otherwise as specifically agreed between the parties, no announcement or statement shall be made in relation to this Agreement or another of the parties to this Agreement.  Notwithstanding the foregoing to the contrary, Moorfield recognizes that Hines Global REIT, Inc. is a public non-traded company, and it acknowledges and agrees that it may disclose in press releases, SEC and other filings with governmental authorities, financial statements and/or other communications such information regarding the transactions contemplated hereby and any such information relating to the Property as may be necessary or advisable under federal or state securities law, rules or regulations (including U.S. Securities and Exchange Commission (“SEC”) rules and regulations), “generally accepted accounting principles” or other accounting rules or procedures or in accordance with Hines Global REIT, Inc.’s prior custom, practice or procedure.  Hines Global REIT, Inc. will be required to publicly disclose the possible transactions contemplated hereby and file the Agreement with the SEC promptly after the execution of the same by both parties or as sooner required by law.  Notwithstanding the foregoing to the contrary, Hines recognizes that Moorfield is a Subsidiary Undertaking of an institutional fund with U.S. investors, and it acknowledges and agrees that it may disclose in reports to investors, filings with governmental authorities, financial statements and/or other communications such information regarding the transactions contemplated hereby and any such information relating to the Property as may be necessary or advisable under the fund regulations, applicable federal or state securities law, rules or regulations, "generally accepted accounting principles" or other accounting rules or procedures or in accordance with the MREF II fund's prior custom, practice or procedure.

 

	
23.2  

	
The parties agree that in the event that any initial public announcement of the transactions contemplated hereby and the acquisition of the Property is required by law or regulation as contemplated by Clause 23.1 the party making the announcement will use its best endeavours to provide the other party a draft of the proposed announcement at least two Business Days prior to the announcement being released for that party’s comment, and shall (where practicable) take such comment into consideration prior to issuing the announcement.

 

	
24  

	
NON-DISCLOSURE OF INFORMATION

 

	
24.1  

	
Despite the duties owed by the Managers to the Company and its Subsidiary Undertakings, a Manager may disclose information and provide relevant documents and materials about the Company and its Subsidiary Undertakings and discuss their affairs, accounts or finances with appropriate officers and senior employees of the Shareholder who appointed him.  Each of the Shareholders may disclose details of the affairs, accounts and finances of the Company and its Subsidiary Undertakings to that Shareholder’s professional and financial advisers who are required to know the same to carry out their duties.  Any information, documents or material supplied to or by a Shareholder in accordance with this Clause shall, subject to Clause 24.3 and Clause 24.4, be kept strictly confidential.

 

	
24.2  

	
Subject to Clause 24.3 and Clause 24.4, the Shareholders shall use their best endeavours to keep confidential (and to procure that their employees and agents keep confidential and that of its Associates) all information acquired in consequence of or in contemplation of this Agreement.  The Shareholders will not use or disclose this information except with the prior written consent of the other Shareholders and the Company or in accordance with the order of a court of competent jurisdiction.

 

	
24.3  

	
The obligations in Clause 24.1 and Clause 24.2 will continue without limit in time and shall remain binding on the Shareholders even after a Shareholder has disposed of all or any of its Interests.  However, they will not apply to information which is in, or comes into, the public domain other than by reason of a breach of this Clause.

 

	
24.4  

	
Nothing in Clause 24.1 and Clause 24.2 will prevent a party from disclosing information to the extent required in or in connection with legal proceedings arising out of this Agreement or where disclosure is required by law or any other applicable regulatory authority or governmental body (wherever situated) to which any party is bound to comply by the operation of law.

 

	
24.5  

	
Except as required by any law, legally binding rule or regulation applicable to a Shareholder, and except as required by its document retention, records and archiving policies, a Shareholder which ceases to be a Shareholder shall at that time hand over to the Company all information, documents, materials and correspondence belonging to or relating to the Business and shall, if so required by the Company, certify that it has not kept any records or copies of that information.

 

	
24.6  

	
Where a Shareholder has provided information to another Shareholder it may demand its return at any time by notice in writing.  Following the notice, that Shareholder shall (and shall procure that each of its Associates and its and their officers, employees and agents shall) hand over to the requesting Shareholder all such information, documents, materials and correspondence (except as required by law) and shall, if so required by that Shareholder, certify that it has not kept any records or copies of that information.

 

	
25  

	
DURATION

 

	
25.1  

	
Unless the Shareholders agree otherwise, and subject to Clause 7.3, this Agreement shall only be terminated on the earliest to occur of the following:

 

	
(a)  

	
commencement of the Company’s winding up;

 

	
(b)  

	
such time as there is only one beneficial owner of the Interests.

 

	
25.2  

	
Upon termination of this Agreement in accordance with Clauses 7.3 or 25.1 the Shareholders shall use reasonable endeavours to return the assets and capital of the Company to the Shareholders as soon as is reasonably practicable and the Shareholders agree that any liabilities and costs in respect of such termination shall be borne by the Company or by the Shareholders in the Agreed Proportions.

 

	
25.3  

	
The Surviving Provisions and any other provisions which expressly or by implication are necessary to give effect to the rights and obligations embodied in it shall continue to bind the parties after termination.

 

	
25.4  

	
If this Agreement terminates each party shall, if requested by the other, procure that the name of the Company is changed to avoid confusion with the name of the party making the request.

 

	
26  

	
DEALING IN INTERESTS AND ASSIGNMENT

 

	
26.1  

	
The issue of new Interests and the transfer of Interests are regulated in accordance with:

 

	
(a)  

	
in the case of Shares, the Articles; and

 

	
(b)  

	
in the case of CPECs, the terms of the relevant instrument constituting the same (such instruments, together with Articles, being a “Relevant Document”).

 

	
26.2  

	
The Shareholders shall procure that no transfer or allotment is registered by the Managers if it is not in accordance with a Relevant Document.  For the purposes of a Relevant Document, this Agreement and any Deed of Adherence executed pursuant to it shall constitute consent in writing of all the Shareholders for the time being of the Company in relation to any transfer of Interests made pursuant to the provisions of this Agreement.

 

	
26.3  

	
Each of the Shareholders agrees that it will not give a Sale Notice (as defined in the Articles) prior to 1 July 2014.

 

	
26.4  

	
Prior to any transfer of any Interests in the Company being completed the transferor shall procure that the transferee (save where the transferee is a Shareholder of the Company and is either an original party to this Agreement or has executed a Deed of Adherence) shall execute a Deed of Adherence.  The Shareholders shall procure that the Managers shall not register the transferee as the holder of the Interests being transferred until such Deed of Adherence has been executed by the parties to it.  Each party to this Agreement shall enter into a Deed of Adherence whenever requested to do so by another party provided such transfer is permitted by this Agreement or the Articles.  The foregoing provisions of this Clause 26.4 shall apply equally in relation to any issue of Interests to a person who is not already a Shareholder of the Company.

 

	
26.5  

	
Except as permitted by this Agreement or with the written consent of the other Shareholder, a Shareholder shall not:

 

	
(a)  

	
assign, charge or deal with its rights, benefits or obligations under this Agreement; or

 

	
(b)  

	
sub-contract its obligations under this Agreement.

 

	
26.6  

	
This Agreement binds each party’s successors and permitted assigns.

 

	
27  

	
CONSENTS

 

Consents to be given by the parties under this Agreement shall be given in writing.

 

	
28  

	
NO PARTNERSHIP

 

Nothing in this Agreement gives rise to a partnership between the parties or constitutes one party the agent of another.

 

	
29  

	
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

 

	
29.1  

	
Unless the right of enforcement is expressly granted, it is not intended that a third party, other than a lawful successor in title or a lawful assignee or the Administrative Manager, should have the right to enforce a provision of this Agreement pursuant to the Contracts (Rights of Third Parties) Act 1999.

 

	
29.2  

	
The parties may rescind or vary this Agreement without the consent of a third party to whom an express right to enforce any of its terms has been provided.

 

	
30  

	
COSTS AND LIABILITY OF THE SHAREHOLDERS

 

	
30.1  

	
Each Shareholder shall bear its own costs, fees and other expenses incurred in the preparation and execution of this Agreement.

 

	
30.2  

	
All costs and expenses relating to the negotiation of the Property Agreement by the Company (which shall include the legal and consultant expenses and third party due diligence costs of Hines associated therewith), including the Facility Agreements  and other documents entered into by the Company or any other member of the Group referred to in the Agreement as being in the Agreed Form and all other matters in connection with the transactions contemplated hereby will be borne by each Shareholder in the Agreed Proportions (or such costs will borne by the Company if Property Completion occurs).  All costs associated with operating the Company and its Subsidiary Undertakings (including ongoing costs of managing the tax structure) shall be borne by the Company and its Subsidiary Undertakings respectively.

 

	
30.3  

	
The rights of each of the parties in respect of a breach of this Agreement shall not be affected by completion, by its rescinding, or failing to rescind, this Agreement, or failing to exercise, or delaying in exercising, a right or remedy, or by anything else, except a specific authorised written waiver or release.  A single or partial exercise of a right or remedy provided by this Agreement or by law does not prevent its further exercise or the exercise of another right or remedy.

 

	
30.4  

	
Waiver of a breach of a term of this Agreement, or of a default under it, does not constitute a waiver of another breach or default nor affect the other terms of this Agreement.

 

	
30.5  

	
The rights and remedies provided in this Agreement are cumulative and not exclusive of any other rights or remedies.

 

	
30.6  

	
Notwithstanding anything to the contrary contained in this Agreement or in any agreement contemplated herein, except in respect of the liability of each Shareholder to fund its respective additional capital contributions pursuant to Clause 8.2 in connection with Property Completion, a Shareholder’s liability arising out of or in connection with any matter covered by this Agreement or any agreement contemplated herein, shall be limited to the value from time to time of its Interests and such Shareholder shall not be obliged to satisfy any such liability save:

 

	
(a)  

	
by transferring, or procuring that its Associate transfers, an appropriate number of Interests (at their market value at the time of transfer) to the other Shareholder (or as it directs); or

 

	
(b)  

	
where the Interests have been sold for cash after a claim under this Agreement or an agreement contemplated herein has been notified by the other Shareholder, by paying to the other Shareholder (or as it directs) an appropriate portion of the cash consideration received for such Interests,

 

and the other Shareholder shall have no other recourse to that Shareholder in respect of any liability under this Agreement or the other agreements contemplated herein.

 

	
30.7  

	
Subject to Clause 30.6, a Shareholder shall have no liability in respect of this Agreement or any other agreement contemplated herein for any claims the other Shareholder might otherwise have against it at law, in equity, by statute, or otherwise and each Shareholder waives to the fullest extent permissible by law any such claims against the other Shareholder and any member, manager, shareholder, partner, director, officer, employee or agent of  such Shareholder.

 

	
30.8  

	
Nothing in this Agreement shall exclude any person’s liability for fraud or fraudulent misrepresentation.

 

	
31  

	
VARIATION

 

A purported variation of this Agreement is not effective unless in writing signed by or on behalf of each of the parties.

 

	
32  

	
INVALIDITY

 

If a provision of this Agreement is held to be illegal or unenforceable, in whole or in part, under an enactment or rule of law, it shall to that extent be deemed not to form part of this Agreement and the enforceability of the remainder of this Agreement shall not be affected.  The parties agree to negotiate in good faith to agree the terms of a mutually satisfactory provision to be substituted for the provision found to be illegal or unenforceable.

 

	
33  

	
ENTIRE AGREEMENT

 

	
33.1  

	
This Agreement (together with the Agreed Form documents and all other documents entered into under it or at the same time as it) supersedes all prior understandings and agreements between the parties (whether written or oral) relating to its subject matter and contains the entire agreement between the parties relating to its subject matter.

 

	
33.2  

	
Each party acknowledges that it does not enter into this Agreement on the basis of, and does not rely on, warranties other than the warranties contained in Clause 12 (Warranties) or representations made, or agreed to, by any person (whether a party to this Agreement or not).

 

	
33.3  

	
Each party waives its rights against the others in respect of warranties and representations (whether written or oral) not expressly set out or referred to in this Agreement.

 

	
33.4  

	
Nothing in this Clause limits or excludes liability for fraud.

 

	
33.5  

	
The parties acknowledge that they have had the benefit of legal advice on the effects of this Clause and confirm that they consider this Clause to be reasonable in all circumstances of this Agreement.

 

	
34  

	
STATUS OF THE AGREEMENT

 

If there is a conflict between the terms of this Agreement and those of the Articles or the articles of association of any of the Company’s Subsidiary Undertakings or the terms of any instrument(s) constituting the CPECs, the terms of this Agreement shall prevail but not so as to amend those articles of association or instrument(s).  The Company shall not be bound by any provision that would constitute an unlawful fetter on any of its powers under Luxembourg law.

 

	
35  

	
COMMUNICATIONS

 

	
35.1  

	
All communications between the parties with respect to this Agreement shall be in writing and shall:

 

	
(a)  

	
be delivered by hand, or sent by internationally reputable overnight courier:

 

	
(i)  

	
in the case of Hines, to Hines Interests Limited Partnership (F.A.O. of Charles Hazen, with a copy to Jason Maxwell) of 2800 Post Oak Boulevard, Suite 4800, Houston, Texas 77056, USA; and

 

	
(ii)  

	
in the case of Moorfield, to its registered office for the time being, with a copy to Moorfield Group Limited (F.A.O Graham Sidwell) of Nightingale House, 65 Curzon Street, London W1J 8PE, United Kingdom;

 

or to such other address that the addressee notifies to the other parties for the purposes of this Clause; or

 

	
(b)  

	
be sent by facsimile to the facsimile number stated below or as notified for the purpose of this Clause.

 

	
35.2  

	
In the absence of evidence of earlier receipt, communications shall be deemed to have been received as follows:

 

	
(a)  

	
(if delivered by hand or internationally reputable overnight courier) on the day of delivery, if delivered before the close of business hours on a Business Day, and otherwise on the next Business Day; and

 

	
(b)  

	
(if sent by facsimile) at the time of transmission, if received before the close of business hours on a Business Day, and otherwise on the next Business Day.

 

	
35.3  

	
For the purposes of this Clause, “business hours” means between the hours of 10.00 am and 6.00 pm inclusive, in the jurisdiction of the recipient.

 

	
35.4  

	
In proving service it shall be sufficient to prove that personal delivery was made, or that the envelope containing the notice was properly addressed and delivered by the courier, or that the facsimile transmission was transmitted to the specified number and a confirmatory transmission report received.

 

	
35.5  

	
The facsimile numbers referred to in Clause 35.1 are:

 

for Hines: +1 (713) 966 2075

 

for Moorfield: +44 20 7499 2114

 

for the Company: + 352 26 43 37 37 (marked FAO Kenneth MacRae)

 

	
36  

	
COUNTERPARTS

 

	
36.1  

	
This Agreement may be executed in a number of counterparts and by the parties on different counterparts, but shall not be effective until each party has executed at least one counterpart.

 

	
36.2  

	
Each counterpart, when executed, shall be an original, but all the counterparts together constitute the same document.

 

	
37  

	
GOVERNING LAW AND JURISDICTION

 

	
37.1  

	
This Agreement and any non-contractual obligations arising in connection with it (and, unless provided otherwise, any document entered into in connection with it) shall be governed by English law.

 

	
37.2  

	
The English courts shall have exclusive jurisdiction to determine any dispute arising in connection with this Agreement (and, unless provided otherwise, any document entered into in connection with it), including disputes relating to any non-contractual obligations.

 

	
37.3  

	
Each party irrevocably waives any objection which it may now or later have to proceedings being brought in the English courts (on the grounds that the English courts are not a convenient forum or otherwise).

 

	
37.4  

	
Each party acknowledges that damages alone would not be an adequate remedy for the breach of any of the provisions of this Agreement.  Accordingly, without prejudice to any other rights and remedies they may have, the parties shall be entitled to the granting of equitable relief (including without limitation injunctive relief) concerning any threatened or actual breach of any of the provisions of this Agreement and nothing in this Agreement (or, unless provided otherwise, any document entered into in connection with it) shall prevent a party from applying to the English courts or the courts of any other country for injunctive or other interim relief.

 

Delivered as a Deed on the date of this document.

 

 

 

	
  

	
Schedule 1

	 

Details of the Company

 

 

 

	
Company number:

	
Pending

	  	  
	
Date of incorporation:

	
22 June 2010

	  	  
	
Share capital:

	
Authorised

	
Issued

	
£1 ordinary shares

	
£87,500

	
£87,500 (87,500 shares)

	  	  	  
	
Registered office:

	
205, route d’Arlon, L-1150 Luxembourg

	  	  
	
A Managers:

	
Kenneth MacRae

HGR International Investment Manager LLC

	  	  
	
B Manager:

	
Graham Sidwell

	  	  
	
Charges, mortgages and other security interests over assets of the Company

	
None

 

 

 

 

	
  

	
Schedule 2

	 

Deed of Adherence

 

 

DATED                         [●]

 

PARTIES

 

	
(1)  

	
[●], a [company][corporation] incorporated in [●] [with registered number [●]] whose registered office is at [●] (the “New Party”)

 

	
(2)  

	
[All parties to the Principal Agreement including any person who has entered into a Deed of Adherence pursuant to the Principal Agreement but excluding any person (other than the Transferor) who has ceased to be a Shareholder]

 

RECITAL

 

Under the terms of an agreement dated [●] 2010 and entered into between Hines Global REIT Properties LP (1), MREF II MH S.à.r.l (2) and Hines – Moorfield UK Venture I S.à.r.l (3) (the “Principal Agreement”)

 

EITHER

 

[and to which [●] (the “Transferor”) is [an original party] [a party by virtue of a Deed of Adherence dated [●]], the Transferor has sold and transferred to the New Party [insert number and type of shares and CPECs] subject to the New Party entering into this Deed.

 

OR

 

[the New Party has agreed to subscribe for [insert number and type of shares and CPECs].

 

OPERATIVE PROVISIONS

 

	
1  

	
Expressions defined in the Principal Agreement shall have the same meaning when used in this Deed and Clause 36 of the Principal Agreement shall apply to this Deed of Adherence as if repeated here in full.

 

	
2  

	
The New Party undertakes to and covenants with all the parties to the Principal Agreement (including any person who has entered into a Deed of Adherence pursuant to the Principal Agreement) to comply with the provisions of and to perform all the obligations in the Principal Agreement, so far as they become due to be observed and performed on or after the date of this Deed as if the New Party had been an original party to the Principal Agreement as well as the Transferor.

 

	
3  

	
The New Party shall become a Shareholder and on and after the date of this Deed the New Party shall have the benefit of the provisions of the Principal Agreement as if the New Party had been an original party to the Principal Agreement [in place of the Transferor] and the Principal Agreement shall be construed and apply accordingly.

 

Delivered as a Deed on the date of this document.

 

 

	
Executed as a deed by [name of New Party] acting by [name of first director]  and [name of second director or secretary]:

	
)

)

)

	  
	  	  	  
	  	  	
Director

Director/Secretary

 

 

 

OR

 

 

	
Executed as a deed by [name of New Party]  acting by [name of director]  in the presence of:

	
)

)

)

	  
	  	  	
Director

	
Name of witness:

Signature of witness:

Address:

Occupation:

	  	  

 

 

 

 

	
  

	
Schedule 3

	 

Reserved Matters

 

 

 

Part 1 - Shareholder Reserved Matters

 

 

	
1  

	
Approving the Annual Strategic Business Plan and the Annual Budget included therein, as well as approving any deviation from the Annual Budget in excess of 5% with respect to total expenses save where circumstances arise requiring additional emergency expenditure that is necessary to avoid a material adverse effect on any member of the Group and it is not practicable in such circumstances to seek the prior consent of the Minority Shareholder.

 

	
2  

	
Except as provided in Clause 18 of the Agreement, approving the sale or disposition of the Property (or any part thereof) (or the granting of any right of first refusal, option or similar right to purchase the Property (or any part therof)).

 

	
3  

	
Authorizing the initial first charge financing of the Property, or any new initial borrowing of other money for the Company that is not contemplated in an approved Annual Budget; or authorizing any material variation of any terms of such financing or borrowing.

 

	
4  

	
Guaranteeing the liabilities or obligations of any third party or of any Shareholder or of any of the Shareholder’s Associates.

 

	
5  

	
Approving all new Major Leases and amendments thereto, and approving all terminations or cancellations of any existing Major Lease (being any lease (or a number of leases leasing space to the same group of affiliated tenants in a single transaction) for space greater than 25,000 net square feet).

 

	
6  

	
Approving the change in leasing strategy at Building 5 from a single tenant to a multi-tenant strategy  or back from a multi-tenant strategy to a single tenant strategy and any deviation from the annual budget for Building 5, in excess of 5% with respect to total expenses for that asset.

 

	
7  

	
Approval of all new lettings, rent reviews, lease renewals or any other negotiations under which net effective rents for such letting or lease deviate more than 10% from the Annual Strategic Business Plan, other than any new letting, rent review, lease renewal or other negotiation where the stabilised annual rent receivable is less than £30,000 per relevant lease save where any such new lettings, rent reviews, lease renewals or other negotiations (or in any combination and whether or not in respect of the same Building) involve affiliated tenants and which, when taken together, result in an aggregate stabilised annual rent in excess of £30,000.

 

	
8  

	
Approving any change in the Property Manager or the Asset Manager, and approving any fees to be paid by the Company to any such Property Manager or any such Asset Manager.

 

	
9  

	
Approving any litigation, arbitration or defence of litigation or arbitration where the amount being claimed is of a value in excess of £250,000 is being applied for or defended in the name of the Company.

 

	
10  

	
Approving any non-arms length contract or transaction (including any material variation or renewal) in excess of £50,000.

 

	
11  

	
Approving the appointment of any letting agent and the approval of any fees payable to such letting agent, in respect of any vacant space within the Property in excess of 25,000 sq ft.

 

	
12  

	
Approving any other matter that can be reasonably expected to have an adverse effect on the valuation of the Company in excess of 10%, provided that this paragraph 12 shall not apply to any matter that would have been a Reserved Matter under paragraphs 1 to 11 above, but for the fact that the relevant matter did not exceed any materiality threshold set out in such paragraph.

 

 

Part 2 - Board Reserved Matters

 

 

	
1  

	
Save in respect of a transfer or sale of any Interests in accordance with the terms of this Agreement, admitting a new holder of any Interests or a shareholder in any Subsidiary Undertaking (or any options or rights to acquire same).

 

	
2  

	
Entering into or amending any agreement with either Shareholder or any of their respective Associates (except for any of: (a) the issue of Shares and CPECs to a Shareholder in respect of any Building 5 Contribution, Additional Capital Contribution, Building 5 Shortfall and/or Shortfall Amount pursuant to Clauses 9 or 10; and/or (b) any amendments to the Car Park Lease in relation to the rent payable to the Group in respect of the Twelfth Property.

 

	
3  

	
Taking any action that would cause the dissolution of the Company or any Subsidiary Undertaking under applicable law.

 

	
4  

	
Entering into any merger, business combination, consolidation, restructuring or similar agreement or arrangement with respect to the Company.

 

	
5  

	
Commencing any voluntary liquidation or winding up of the Company or any Subsidiary Undertaking.

 

	
6  

	
Changing the tax residency or status of the Company or any Subsidiary Undertaking.

 

	
7  

	
Making any amendments to the constitutional documents of the Company or any Subsidiary Undertaking.

 

	
8  

	
Changing the nature of the business of the Company or any Subsidiary Undertaking or permitting the Company to enter into any business or acquire any real property other than or in addition to the Property.

 

	
9  

	
Approving any other matter that can be reasonably expected to have an adverse effect on the valuation of the Company in excess of 10%, provided that this paragraph 9 shall not apply to any matter that would have been a Reserved Matter under paragraphs 1 to 8 above, but for the fact that the relevant matter did not exceed any materiality threshold set out in such paragraph.

 

 

	
  

	
Schedule 4

	 

The Property

 

 

	
1  

	
First Property

 

Description:

 

 

All those premises situate at or known as Brindleyplace, Birmingham being land and buildings on the north west side of Broad Street and all buildings from time to time on them or any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                                    WM491380

 

 

 

 

 

	
2  

	
Second Property

 

Description:

 

 

All those premises situate at or known as Number Three Brindleyplace, Birmingham  B1 2JB and all buildings from time to time on them or any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                                    WM682940

 

 

 

 

 

	
3  

	
Third Property

 

	
  

	
Description:

 

All those premises situate at or known as Number Four Brindleyplace, Birmingham and all buildings from time to time on them or any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                                    WM767322

 

 

 

 

 

	
4  

	
Fourth Property

 

Description:

 

 

All those premises situate at or known as Number Five Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM625319

 

 

	
5  

	
Fifth Property

 

Description:

 

 

All those premises situate at or known as Number Six Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM771278

 

 

 

 

 

	
6  

	
Sixth Property

 

Description:

 

 

All those premises forming part of the Ground Floor, Number Six Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM781841

 

 

 

 

 

	
7  

	
Seventh Property

 

Description:

 

 

All those premises situate at or known as the Additional Restaurant Area, Number Six Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM964812

 

 

	
8  

	
Eighth Property

 

Description:

 

 

All those premises situate at or known as Number Nine Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM728645

 

 

 

 

 

	
9  

	
Ninth Property

 

Description:

 

 

All those premises forming part of the Basement and Ground Floor, Number Nine Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM729814

 

 

 

 

 

	
10  

	
Tenth Property

 

Description:

 

 

All those premises situate at or known as the Café in the Square, Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM771271

 

 

 

 

 

	
11  

	
Eleventh Property

 

Description:

 

 

All those premises forming the basement of the Café in the Square, Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM771269

 

 

 

 

 

	
12  

	
Twelfth Property

 

Description:

 

 

All those premises situate at or known as the Canalside Car Park Brindleyplace, Birmingham and any fixtures and fittings whenever fixed except those fixed by the tenant which are generally regarded as tenant's or trade fixtures.

 

 

Title No:                         WM771273

 

 

 

Schedule 5                         

United States tax and other matters

 

 

The following provisions apply solely for purposes of maintaining capital accounts, allocating income, gain, loss, and deduction, and determining relevant elections for United States tax purposes:

 

 

	
1  

	
Definitions.

 

In addition to the provisions of Clause 1 of this Agreement, the following terms will have the meanings set forth below:

 

"Adjusted Capital Account Deficit" means, with respect to any Unitholder at any time, the deficit balance, if any, in such Unitholder's Capital Account, after giving effect to the following adjustments:

 

 

	
(a)

	
Crediting to such Capital Account (i) any amount which such Unitholder is obligated to restore following the liquidation of such Unitholder's interests in the Company and (ii) any amount which such Unitholder is deemed obligated to restore in accordance with Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5); and

 

 

	
(b)

	
Debiting to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6).

 

 

This definition is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d), and will be interpreted consistently therewith.

 

 

“Capital Account” means a Unitholder’s capital account maintained pursuant to section  2 (Maintenance of Capital Accounts; Deficit Restoration. )

 

“Capital Contribution” means any amounts paid or contributed by a Unitholder to the Company as consideration for, or in respect of, Shares,  Converted Shares or CPECs.

 

“Code” means the Internal Revenue Code of 1986, as amended as of the date hereof and as the same may be amended from time to time, and any successor statute.

 

“Converted Shares” means any shares of the Company received on conversion of a CPEC.

 

"Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, subject to the following exceptions and adjustments:

 

 

	
(a)

	
The initial Gross Asset Value of any asset contributed by a Unitholder to the Company will be the gross fair market value of such asset, as determined by the contributing Unitholder and the Company;

 

	
(b)

	
The Gross Asset Value of all Company assets will be adjusted to equal their respective gross fair market values immediately preceding the occurrence of any of the following events: (i) the acquisition of an additional interest in the Company by any new or existing Unitholder in exchange for more than a de minimis Capital Contribution or as consideration for the performance of services on behalf of the Company if Hines determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Unitholders in the Company; (ii) the distribution by the Company to a Unitholder of more than a de minimis amount of property as consideration for an interest in the Company if Hines determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Unitholders in the Company; (iii) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) (which for this purpose will include the termination of the Company for federal income tax purposes pursuant to Code Section 708(b)(1)(B)); and (iv) any other event for which such an adjustment is permitted under Regulations Section 1.704-1(b)(2)(ii) if Hines determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Unitholders in the Company;

 

	
(c)

	
The Gross Asset Value of any Company asset distributed to any Unitholder will be the gross fair market value of such asset on the date of distribution;

 

	
(d)

	
The Gross Asset Values of Company assets will be increased (or decreased) to reflect any adjustment to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 2(g); provided, however, that Gross Asset Values will not be adjusted pursuant to this subsection (d) to the extent that an adjustment pursuant to subsection (b) above is made in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d);

 

	
(e)

	
In accordance with Proposed Treasury Regulation Section 1.704-1(b)(2)(iv)(s), the Gross Asset Values of Company Assets will be adjusted to reflect their respective gross fair market values immediately after the conversion of any CPECs; and

 

	
(f)

	
If the Gross Asset Value of an asset has been determined or adjusted pursuant to subsection (a), (b) or (d) above, such Gross Asset Value will thereafter be adjusted by the book depreciation (calculated in accordance with Regulations Section 1.704-1(b)(2)(iv)(g)) taken into account with respect to such asset for purposes of computing Net Profits and Net Losses.

 

"Net Profits" or "Net Losses",  as the case may be, for any period, means an amount equal to the Company's Taxable Income or Taxable Loss for such period, with the following adjustments:

 

 

	
(a)

	
Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits and Net Losses pursuant to this definition will be added to such Taxable Income or will reduce such Taxable Loss;

 

 

	
(b)

	
Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition, will be subtracted from such Taxable Income or Losses;

 

 

	
(c)

	
If the Gross Asset Value of any Company asset is adjusted pursuant to subsection (b), (c) or (e) of the definition of Gross Asset Value, the amount of such adjustment will be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses;

 

 

	
(d)

	
Gain or loss resulting from the disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

 

	
(e)

	
In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such Taxable Income or Loss, there will be taken into account book depreciation (calculated in accordance with Regulations Section 1.704-1(b)(2)(iv)(g)) for such fiscal year or other period; and

 

 

	
(f)

	
Notwithstanding any other provision of this definition, any item which is specially allocated pursuant to section 4 (Regulatory Allocations) will not be taken into account in computing Net Profits or Net Losses.

 

 

“Regulations” means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

"Taxable Income" or "Taxable Loss," as the case may be, for any period, means the taxable income or taxable loss of the Company for such period, determined in accordance with Code Section 703(a), including all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1).

 

“Unitholder” means any holder of Shares, Converted Shares or CPECs.

 

	
2  

	
Maintenance of Capital Accounts; Deficit Restoration.

 

	
(a)  

	
A separate capital account (“Capital Account”) shall be maintained for each Unitholder.

 

	
(i)  

	
To each Unitholder’s Capital Account there shall be added such Unitholder’s Capital Contributions, such Unitholder’s distributive share of Net Profits and any items in the nature of income or gain which are specially allocated pursuant to section 4 (Regulatory Allocations), and the amount of any Company liabilities assumed by such Unitholder or which are secured by any Company property distributed to such Unitholder.

 

	
(ii)  

	
From each Unitholder’s Capital Account there shall be subtracted the amount of cash and the Gross Asset Value of any Company property distributed to such Unitholder in respect of Shares, Converted Shares or CPECs, such Unitholder’s distributive share of Net Losses and any items in the nature of expenses or losses which are specially allocated pursuant to section 4 (Regulatory Allocations), and the amount of any liabilities of such Unitholder assumed by the Company or which are secured by any property contributed by such Unitholder to the Company.

 

	
(iii)  

	
In the event Shares, Converted Shares or CPECs are transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Shares, Converted Shares or CPECs.

 

	
(iv)  

	
In determining the amount of any liability for purposes of clauses (i) and (ii), there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

 

This section 2(a) and the other provisions of this Schedule 5 (United States tax and other matters) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations.

 

	
(b)  

	
Subject to the provisions of any guarantee or other written agreement between a Unitholder and the Company, no Unitholder shall otherwise be required to pay to the Company any deficit or negative balance which may exist in its Capital Account.

 

	
3  

	
Allocations of Net Profits and Losses.

 

	
(a)  

	
After giving effect to the regulatory allocations set forth in section 4 (Regulatory Allocations), Net Profits for any fiscal year or other relevant period shall be allocated as follows:

 

	
(i)  

	
first, Net Profits shall be allocated among the Unitholders in proportion to, and until the cumulative amount of Net Profits allocated to each Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the cumulative amount of Net Losses allocated to each Unitholder for all prior fiscal years or other relevant periods under Section 3(b)(vi);

 

	
(ii)  

	
second, Net Profits shall be allocated among the Unitholders in proportion to, and until the cumulative amount of Net Profits allocated to each Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the cumulative amount of Net Losses allocated to each Unitholder for all prior fiscal years or other relevant periods under Section 3(b)(v);

 

	
(iii)  

	
third, Net Profits shall be allocated among the Unitholders in proportion to, and until the cumulative amount of Net Profits allocated to each Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the cumulative amount of Net Losses allocated to each Unitholder for all prior fiscal years or other relevant periods under Section 3(b)(iv);

 

	
(iv)  

	
fourth, Net Profits shall be allocated among those Unitholders holding CPECs in proportion to, and until the cumulative amount of Net Profits allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the sum of (x) the cumulative amount of Fixed Yield that has accrued on such Unitholder’s CPECs for the current and all prior fiscal years or other relevant periods, plus (y) the cumulative amount of Net Losses allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(b)(iii);

 

	
(v)  

	
fifth, Net Profits shall be allocated among those Unitholders holding CPECs in proportion to, and until the cumulative amount of Net Profits allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the sum of (x) the cumulative amount of Variable Yield that has accrued on such Unitholder’s CPECs for the current and all prior fiscal years or other relevant periods, plus (y) the cumulative amount of Net Losses allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(b)(ii); and

 

	
(vi)  

	
thereafter, Net Profits shall be allocated among those Unitholders holding Shares in proportion to the number of Shares held by each such Unitholder.

 

	
(b)  

	
After giving effect to the regulatory allocations set forth in section 4 (Regulatory Allocations ), Net Losses for any fiscal year or other relevant period shall be allocated among the Unitholders as follows:

 

	
(i)  

	
first, Net Losses shall be allocated among those Unitholders holding Shares in proportion to, and until the cumulative amount of Net Losses allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the excess of (x) the cumulative amount of Net Profits allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(a)(vi), over (y) the cumulative amount of distributions of such profits that have been made to such Unitholder in respect of its Shares for the current and all prior fiscal years or other relevant periods;

 

	
(ii)  

	
second, Net Losses shall be allocated among those Unitholders holding CPECs in proportion to, and until the cumulative amount of Net Losses allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the excess of (x) the cumulative amount of Net Profits allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(a)(v), over (y) the cumulative amount of distributions of Variable Yield that have been made to such Unitholder in respect of its CPECs for the current and all prior fiscal years or other relevant periods;

 

	
(iii)  

	
third, Net Losses shall be allocated among those Unitholders holding CPECs in proportion to, and until the cumulative amount of Net Losses allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, the excess of (x) the cumulative amount of Net Profits allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(a)(iv), over (y) the cumulative amount of distributions of Fixed Yield that have been made to such Unitholder in respect of its CPECs for the current and all prior fiscal years or other relevant periods;

 

	
(iv)  

	
fourth, Net Losses shall be allocated among those Unitholders holding Shares in proportion to, and until the cumulative amount of Net Losses allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, (x) the aggregate amount of Capital Contributions made by such Unitholder in respect of its Shares which have not previously been returned to such Unitholder as a result of distributions on such Shares plus (y) the cumulative amount of Net Profits allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(a)(iii);

 

	
(v)  

	
fifth, Net Losses shall be allocated among the Unitholders holding CPECs in proportion to, and until the cumulative amount of Net Losses allocated to each such Unitholder for the current and all prior fiscal years or other relevant periods under this paragraph equals, (x) the aggregate amount of Capital Contributions made by such Unitholder in respect of its CPECs which have not previously been returned to such Unitholder as a result of distributions on such CPECs, plus (y) the cumulative amount of Net Profits allocated to such Unitholder for all prior fiscal years or other relevant periods under Section 3(a)(ii); and

 

	
(vi)  

	
thereafter, Net Losses shall be allocated among those Unitholders holding Shares in proportion to the number of Shares held by each such Unitholder.

 

	
(c)  

	
The Net Losses allocated pursuant to Section 3(b) shall not exceed the maximum amount of Net Losses that can be so allocated without causing any Unitholder to have an Adjusted Capital Account Deficit at the end of any Fiscal Year.  Subject to the limitations in the preceding sentence, all Net Losses in excess of the limitations set forth in this paragraph shall be allocated pro rata to the other Unitholders in proportion to the number of Units held by each Unitholder.

 

	
(d)  

	
In the event that the Company issues or redeems Shares or CPECs, such revisions shall be made to the method of allocating Net Profits and Net Losses in this Section 3 (Allocations of Net Profits and Losses.) as are necessary to reflect the terms of such issuance or redemption, including such revisions as are needed to ensure that such allocations (i) will comply with the terms of Regulation Sections 1.704-1 and -2, (ii) will properly reflect the varying interests of the Unitholders in the Company, and (iii) will cause the Capital Accounts of the Unitholders in respect of Shares and/or CPECs held by them to be in the ratios in which the Unitholders are entitled to receive distributions with respect to their Shares and/or CPECs.

 

	
4  

	
Regulatory Allocations

 

Notwithstanding Section 3 (Allocations of Net Profits and Losses.) above, the following allocations shall be made in the following priority if and to the extent so required under the Regulations.

 

	
(a)  

	
Minimum Gain. If during any taxable year there is a net decrease in partnership minimum gain (as such term is defined by Regulations Sections 1.704-2(b)(2) and (d)), then each Unitholder shall be specially allocated items of gross income for such taxable year (and, if necessary, for subsequent taxable years) in the manner provided in Regulations Sections 1.704-2(f) and (j).  Likewise, if there is a net decrease during any taxable year in the minimum gain attributable to Unitholder nonrecourse debt (as defined in Regulations Section 1.704-2(i)(3)), then any Unitholder with a share of the minimum gain attributable to such debt at the beginning of such taxable year shall be specially allocated items of gross income for such taxable year (and, if necessary, for subsequent taxable years) in the manner provided in Regulations Sections 1.704-2(i)(4) and (j).  This Section 4(a) is intended to comply with, and shall be interpreted to be consistent with, the minimum gain chargeback requirements of Regulations Sections 1.704-2(b)(2), 1.704-2(f) and 1.704-2(i).

 

	
(b)  

	
Qualified Income Offset.  If any Unitholder unexpectedly receives any adjustment, allocation or distribution described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that, after tentatively taking into account all allocations that would be made for the current period under Sections 3 (Allocations of Net Profits and Losses.) and 4 (Regulatory Allocations ) of this Schedule (other than allocations pursuant to this Section 4(b)), would cause or increase an Adjusted Capital Account Deficit, items of Company income and gain will be specially allocated to such Unitholder in an amount and manner sufficient to eliminate, to the extent required by the Regulations under Code Section 704(b), the Adjusted Capital Account Deficit as quickly as possible.  This Section is intended to comply with the qualified income offset requirement in Regulations Section 1.704-1(b)(2)(ii)(d) and will be interpreted consistently therewith.  Allocations under this Section 4(b) will be comprised of a pro rata portion of each item of Company income (including gross income) and gain for the year.

 

	
(c)  

	
Preventative Allocation.  If any Unitholder would have an Adjusted Capital Account Deficit, such Unitholder will be specially allocated items of Company income and gain in the amount of such excess as quickly as possible.  Allocations under this Section 4(c) will be comprised of a pro rata portion of each item of Company income (including gross income) and gain for the year.

 

	
(d)  

	
Nonrecourse Deductions.  Gross deductions which are “partner nonrecourse deductions” (as defined in Regulations Section 1.704-2(b)(1)) for any taxable year shall be allocated to the Unitholder that bears the economic risk of loss with respect to the nonrecourse debt to which such partner nonrecourse deductions are attributable in accordance with Regulations section 1.704-2(i).  “Nonrecourse deductions” (as defined in Regulations Sections 1.704-2(b)(1) and (c)) shall be allocated to the holders of Shares in accordance with the number of Shares held by them.

 

	
(e)  

	
Curative Allocations.   The allocations set forth in Section 4(a)-(d) ("Regulatory Allocations") are intended to comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2. The Regulatory Allocations may not be consistent with the manner in which the Unitholders intend to divide Company distributions on Shares, Converted Shares and CPECs.  Accordingly, other allocations of Net Profit, Net Loss, and other items shall be made among the Unitholders so that the net amount of the Regulatory Allocations and such special allocations to each such Person is zero if and to the extent needed to cause overall allocations (including the regulatory allocations) to be consistent with the manner in which the Unitholders intend to divide Company distributions on Shares, Converted Shares and CPECs.

 

	
(f)  

	
Special Allocations in Respect of Converted Shares and Redeemed CPECs.

 

(i) Items of income, gain, loss or deduction shall be allocated among those Unitholders that have had any CPECs or Converted Shares redeemed during the current fiscal year or other relevant period in the minimum amounts needed to increase or decrease the portion of the Unitholder’s Capital Account balance which is attributable to such redeemed CPECs or redeemed Converted Shares (determined prior to reduction of such Capital Account balance as a result of the redemption distribution) to an amount equal to the amount received by such Unitholder in redemption of the redeemed CPECs or redeemed Converted Shares.

 

(ii) Items of income, gain, loss or deduction shall be allocated among those Unitholders that hold any Converted Shares in the minimum amounts needed to increase or decrease the portion of the Unitholder’s Capital Account balance which is attributable to such Converted Shares to an amount equal to the cumulative amount that would then be distributable to such Unitholder in respect of its Converted Shares if the Company were to sell all its assets for their Gross Asset Values, repay all its debts, and then distribute the remaining proceeds to holders of Shares, CPECs and Converted Shares in accordance with the terms thereof.

 

	
5  

	
Tax Allocations; Code Section 704(c).

 

The following special allocations shall be made in the following order:

 

	
(a)  

	
Proportional to Net Profits or Net Loss.  Except as otherwise provided in this Section 5 (Tax Allocations; Code Section 704(c).), for each taxable period, Taxable Income and Loss (and items thereof) shall be allocated among the Unitholders in the same proportion as the corresponding item of Net Profits, Net Losses or other item of Company income, gain, loss or deduction is allocated for such period under Sections 3 (Allocations of Net Profits and Losses.) and paragraph 4 (Regulatory Allocations).

 

	
(b)  

	
Contribution of Property.  In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction as to any property contributed to the capital of the Company shall, for tax purposes, be allocated among the Unitholders so as to take into account any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value.

 

	
(c)  

	
Gross Asset Value Adjustment.  If the Gross Asset Value of any Company asset is adjusted as the result of an adjustment as described in subsection (b) or (d) of the definition of "Gross Asset Value," subsequent allocations of income, gain, loss, and deduction as to such asset shall, for tax purposes, be made so as to eliminate as quickly as possible any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as pursuant to Code Section 704(c) and the Regulations thereunder.

 

	
(d)  

	
Elections Under Code Section 704(c).  Notwithstanding anything herein to the contrary, taxable items of income, gain, loss and deduction with respect to any property owned by the Company as of the date hereof, the adjusted basis of which differs from its Gross Asset Value, will be allocated among the Unitholders on a property by property basis in accordance with one of the methods provided in Regulations Section 1.704-3.

 

	
6  

	
Tax Matters Partner; Tax Elections.

 

	
(a)  

	
Hines shall be designated on the Company’s annual U.S. federal information tax return as the “tax matters partner” of the Company (the as provided in Section 6231(a)(7) of the Code).  If the Company is the subject of an income tax audit, then to the extent the Company is treated as an entity for purposes of the audit, including administrative settlement and judicial review, Hines shall be authorized to act for, and its decision shall be final and binding upon, the Company.  All expenses incurred in connection with any audit, investigation, settlement or review shall be borne by the Company.

 

	
(b)  

	
It is intended that the Company will be taxed as a partnership under the Code.  Accordingly, Hines is authorized to take any and all such steps as are necessary to ensure that the Company is taxed as a partnership under the Code.  In addition, Hines shall have the exclusive right to make any determination whether the Company shall make available elections (including any election pursuant to Code Section 754 to adjust the tax basis of Company assets) under the Code.  All other U.S. tax-related decisions and other matters concerning the computation and allocation or tax items and attributes which are not otherwise specifically provided for by the terms of this Schedule shall be determined by Hines.

 

 

EXECUTION PAGE

 

 

 

 

 

	
Executed as a deed by

HINES GLOBAL REIT PROPERTIES LP

acting by

.................................................................. in the presence of:

	
)

)

)

)

	  
	  	  	
Director/Authorised Signatory

	
Name of witness:

Signature of witness:

Address:

Occupation:

	  	  

 

 

	
Executed as a deed by

MREF II MH SÀRL

acting by GRAHAM SIDWELL

in the presence of:

	
)

)

)

)

	  
	  	  	
Director/Authorised Signatory

	
Name of witness:

Signature of witness:

Address:

Occupation:

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