Loading...
SIDE LETTER (2)INTERCONTINENTAL , 2015 City of Clearwater Employees' Pension Plan Attn: Retirement Board Trustees 100 S. Myrtle Avenue Clearwater, FL 33756 Re: U.S. Real Estate Investment Fund, LLC Ladies and Gentlemen: INTERCONTINENTAL REAL ESTATE CORPORATION 1270 SOLDIERS FIELD ROAD BOSTON, MASSACHUSETTS 02135 -1003 TELEPHONE 617 -782 -2600 FACSIMILE 617 - 782 -9442 www.intercontinental.net In connection with the investment in interests ( "Interests ") of U.S. Real Estate Investment Fund, LLC (the "Company ") by the City of Clearwater Employees' Pension Plan (the "Investor "), Intercontinental Real Estate Corporation ( "Manager ") is providing certain additional representations to the and entering into certain additional agreements, all as set forth in this letter (the "Side Letter "). Upon execution by the Company and the Manager, this Side Letter shall be a binding agreement against the Manager and the Company which may not be amended without the written consent of the Manager and the Investor. Capitalized terms used in this Side Letter and not otherwise defined herein shall have the respective meanings ascribed to them in the Limited Liability Company Agreement of U.S. Real Estate Investment Fund, LLC, dated as of September 1, 2006 (the "Agreement "). For purposes of this Side Letter, references to Company shall include any Feeder Fund or Parallel Fund in which the Investor maintains an investment. Notwithstanding any provision of the Agreement, as amended from time to time, the Confidential Private Placement Memorandum, as amended from time to time (the "Memorandum "), the Subscription Documents, or any other materials used in the offering or sale of Interests in the Company (collectively, the "Offering Documents ") to the contrary, to the extent that any provision of the Offering Documents conflicts with the terms of this Side Letter, the terms of this Side Letter shall control. 1. Valuation Process. Manager agrees to provide the Investor, as soon as reasonably possible, written notice and a detailed explanation of any event where Manager chooses for any reason to delay or suspend the valuation of Interests (or the Company) or otherwise adjusts a previously reported valuation thereof. 2. Notice Regarding Change in Manager's Personnel. Manager agrees to provide the Investor, as soon as reasonably possible, and in conjunction with a filing with the Securities and Exchange Commission, written notice of any changes to Manager's personnel reasonably likely to materially impact the management of the Company and its investments. 3. Other Side Letter. Notwithstanding anything contained herein or in the Offering Documents to the contrary, in the event that Manager has either previously entered into or enters into a side letter or similar agreement/arrangement with an existing or future investor in the Company with an investment in the Company equal to or less than the City of Clearwater Employees' Pension Plan Side Letter Page 2 value of the Investor's investment in the Company (each, an "Other Side Letter ") that has the effect of establishing rights (including fees) or benefits that otherwise treat such investor in a manner more favorable in any material respect than the rights and benefits established in favor of the Investor by the Offering Documents (or pursuant to this Side Letter), the Investor, at its sole discretion, will be entitled to the rights and benefits under each such Other Side Letter if the Investor provides written notice to Manager of such election within thirty (30) days of receipt of a copy of such Other Side Letter. Manager shall provide the Investor with a copy of any Other Side Letter that contains such preferential rights or benefits within ten (10) days of entering into it. Notwithstanding anything to the contrary, however, the Investor acknowledges that the Investor shall not be entitled to the benefit of any provisions (i) which are included in any such Other Side Letter solely because of a requirement of any law, statute, rule or regulation to which such other investor is subject and the Investor is not, (ii) which are personal to such investor based solely on the place of organization or headquarters, organizational form of, or other particular restrictions applicable to, such investor, and where such factors cannot be made reasonably applicable to the Investor, or (iii) so long as such provision does not impart a benefit which would violate the prohibition against self - dealing, which are for the benefit of the Manager or any of its Affiliates or any entity formed for investment in the Company by any of the foregoing or any officers, directors, or employees of the foregoing or any family members of the foregoing. 4. Notification. Manager shall notify the Investor within a reasonable period not to exceed twenty (20) days of any civil, criminal, Securities and Exchange Commission ( "SEC "), U.S. Department of Labor (the "Department ") or other governmental investigation (which does not include routine examinations, audits or reviews), disciplinary proceeding, or administrative action finding a material violation by Manager (or an Affiliate thereof) of an investment related statute or regulation. Manager shall also notify the Investor immediately in the event of a civil, criminal, SEC, Department or other governmental investigation, disciplinary proceeding, report or administrative action related to or involving the Investor's investment in the Company. Additionally, Manager shall notify the Investor within ten (10) days of the date it (or an Affiliate thereof) is the subject of any order or finding by a court of a violation by Manager (or an Affiliate thereof) of an investment related statute or regulation. 5. Amendments. Notwithstanding any provision (including Section 15.4 of the Agreement) of the Offering Documents to the contrary, Manager will not amend or modify the Standard of Care or Article 12 without the written consent of the Investor. 6. UBTI. Notwithstanding any provision of the Offering Documents to the contrary and in addition to Section 9.6 of the Agreement, if at any time the Company is making or managing an investment that is eligible to be held by a REIT or any subsidiary of a REIT, and at the time such investment is made such REIT is a "pension -held REIT" within the meaning of Section 856(h)(3) of the Internal Revenue Code of 1986, as amended (the "Code "), then, in making and managing such investment, the Manager will exercise its best efforts to avoid causing the Investor to incur UBTI with respect to such investment City of Clearwater Employees' Pension Plan Side Letter Page 3 until such time as the REIT ceases to be a "pension -held REIT" within the meaning of Section 856(h)(3) of the Code. In this regard, Manager agrees that during such time it will make and manage such investments, or offer the Investor the opportunity to hold its interest in such investments, through an investment vehicle or "blocker entity" to the extent necessary to prevent the Investor from recognizing UBTI. 7. Counterparts. This Side Letter may be executed in any number of counterparts, each of which shall be deemed an original and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart. 8. Assignment. This Side Letter is not assignable by either party hereto in whole or in part without the prior written consent of the other party, which may be withheld in such party's sole discretion. 9. Deletion of Section 7 of Subscription Agreement. The parties agree that in consideration of the lack of enabling authority for the Investor to consent to the conditions thereof, Manager will consent to the deletion of Section 7 of the Subscription Agreement. 10. Indemnification. The Company shall satisfy its indemnification obligations under Section 12.2(a) of the Agreement using only assets of the Company (which may include the proceeds of any insurance policy under which the Company is covered). 11. Standard of Care. Nothing set forth in Section 13.2(c) of the Agreement shall relieve the Manager of its duty to manage the affairs of the Company in accordance with the Standard of Care (which is the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims to the Company) as set forth in Section 9.1(a) of the Agreement. 12. No Assumption of Liability. For the avoidance of doubt, the parties acknowledge and agree that the Investor is not assuming any indemnification obligation or any other obligation of the Company under the Agreement or any other contract or agreement. Nothing in the foregoing sentence shall limit the Investor's obligation to make Capital Contributions to the Company in an amount up to its Capital Commitment in accordance with the terms of the Investor's Subscription Agreement and the Agreement. The Investment Manager acknowledges that it is a fiduciary with respect to the Fund and agrees to manage the assets of the Fund subject to and in accordance with: (1) its fiduciary responsibility; (2) the LLC Agreement, and (3) the Standard of Care. 13. Investor Exclusion. The Manager understands that, because of the Investor's status as a government plan, the Investor may, from time to time, adopt certain written investment policies prohibiting the Investor's participation in certain investments (any such investment, a "Prohibited Investment "), though the Investor represents that it has not adopted any such written policy as of the date hereof. The Manager agrees that, if the City of Clearwater Employees' Pension Plan Side Letter Page 4 Investor adopts a written policy prohibiting its participation in a Prohibited Investment that applies equally to all of the Investor's investments in pooled investment vehicles, provides such written policy to the Manager prior to the issuance of a funding notice in respect of any Prohibited Investment and delivers (i) if the reason for the Investor's exclusion involves a question of law, a written opinion of counsel in respect of any such Prohibited Investment or (ii) if the reason for the Investor's exclusion involves a factual determination, a written certificate (which certificate shall be reasonably satisfactory to the Manager) from the Investor that the Investor's participation in a portfolio investment would cause a material violation of such written policy and state in reasonable detail the grounds for such conclusion, the Investor shall be excused from the obligation to make a Capital Contribution relating thereto. The Investor acknowledges and agrees that, upon delivery of such notice to the Manager, the Investor waives its rights to have its Unfunded Capital Commitment called before a subsequently accepted Capital Commitment pursuant to Section 3.2(a)(ii) of the Agreement. 14. Public Records Law. The Investor acknowledges that it is committed to protecting the confidentiality of all confidential information that the Manager provides to the Investor regarding the Company. Notwithstanding the foregoing, the Manager acknowledges that the Investor is a government plan subject to laws, regulations and policies including certain public disclosure requirements. Notwithstanding anything to the contrary contained in the Agreement, the Manager agrees that the Investor shall be relieved from any confidentiality or other obligations under the Agreement or otherwise to the extent necessary to comply with its obligations under such laws, regulations and policies; provided, however, that, unless otherwise prohibited by law, prior to disclosing any "Non -Fund Level Information," the Investor shall use its reasonable best efforts to promptly notify the Manager upon receipt of a request for Non -Fund Level Information and will consult with the Manager regarding the response to such disclosure request, consistent with applicable laws, rules, regulations, the Investor's board policies and fiduciary duties. For purposes hereof, "Non -Fund Level Information" means confidential information (i.e., information the disclosure of which is restricted under the terms of the Agreement) other than Fund Level Information (as defined below). In connection therewith and notwithstanding anything to the contrary contained in the Agreement, the Manager consents to the disclosure by the Investor of "Fund Level Information" to the public and agrees that such disclosure shall not constitute a breach of the Agreement. For purposes hereof, "Fund Level Information" means: (i) the name and investment strategy of the Company; (ii) the year of formation of the Company and the date the investment in the Company was made by the Investor; (iii) the amount of the Investor's Commitment, (iv) the total amount of the Investor's Commitment drawn down pursuant to capital calls, (v) the total amount of distributions received by the Investor from the Company, (vi) the aggregate net asset value of the Investor's Interest; (vii) the Investor's net internal rate of return and net multiple of capital returned with respect to the Company's performance as a whole as prepared by the Investor, and (viii) the total amount of management fees paid by the Company with respect to the Investor's City of Clearwater Employees' Pension Plan Side Letter Page 5 Commitment by year. With respect to any disclosure of Fund Level Information, the Investor shall indicate that such disclosure was not prepared, reviewed or approved by the Manager or the Company. If the Manager makes a good faith determination to withhold all or any part of the information otherwise to be provided to the Investor in accordance with the Agreement, the Manager shall not be required to provide the Investor with any confidential Company information in paper format, but, in order to comply with the Investor's internal policy, shall provide the Investor with access to such confidential Company information on the Company's (or Manager's) website in password protected, non - downloadable, non- printable format or the Manager shall work in good faith together and cooperate with the Investor to reach an alternative arrangement to ensure that such withheld information is made available for the Investor's review in a format and manner and at a time mutually convenient for both the Manager and the Investor that allows the Investor to fulfill the fiduciary duties owed to its members and beneficiaries while protecting the confidentiality of such information. 15. Opinion of Counsel. The Manager agrees that for purposes of any provision of the Agreement requiring the delivery of an opinion of counsel by the Investor, the opinion of the general counsel to the Investor shall constitute counsel acceptable to the Manager. 16. Power of Attorney. The Manager shall provide the Investor with a copy of any agreement, instrument or other document that is signed by the Manager as attorney -in- fact for the Investor pursuant to the power of attorney set forth in the Agreement or the Investor Subscription Agreement. 17. Subscription Agreements. The Manager represents and warrants that the Subscription Agreement executed and delivered by each Member other than the Investor and any Member that is an Affiliate of the Manager is or shall be substantially similar in all material respects to the Investor Subscription Agreement. 18. Notice of Certain Matters. The Manager shall notify the Investor as soon as reasonably practicable of any claims for indemnification arising against the Company pursuant to the Agreement. The Manager shall promptly notify the Investor of the commencement of any lawsuit or legal proceeding (and the outcome, when resolved, of such lawsuit or legal proceeding) in which the Manager is a named party and which, if adversely determined, would be reasonably likely to materially adversely affect the Manager's ability to perform its obligations under the Agreement. 19. Reports. In addition to any reports required to be delivered pursuant to the Agreement, the Manager shall furnish the Investor with the following information: City of Clearwater Employees' Pension Plan Side Letter Page 6 (a) at the time that the audited annual financial statements for the Company are required to be delivered pursuant to the Agreement, a valuation of the Company's investments as of the end of such fiscal year; (b) any K -1 provided pursuant to the Agreement shall include therein the amount of any UBTI attributable to the Investor for such Fiscal Year; and (c) at the time that the unaudited quarterly financial statements for the Company are required to be delivered pursuant to the Agreement, a summary of acquisition and disposition of portfolio Investments by the Company during such period. 20. Withholding. The Investor has provided the Manager with an executed copy of Internal Revenue Service Form W -9 claiming that the Investor is not subject to backup withholding and further agrees to promptly provide a new Internal Revenue Service Form W -9 confirming its status with respect to the information provided on its original Internal Revenue Service Form W -9 if such information changes or if an updated Internal Revenue Service Form W -9 or its equivalent is required to be held on file in order for the Fund to continue to recognize the withholding exemption. In addition, the Investor hereby represents and warrants to the Manager and the Company that it is a tax - exempt entity under United States federal, state and local laws, and has never been subject to, and is unlikely to be subject to, any tax withholding requirements of the United States federal, state, or local laws. Based on the foregoing and to the extent practicable, the Manager agrees that, before withholding and paying over to any United States tax authority any amount purportedly representing a tax liability of the Investor pursuant to the provisions of the Company Agreement, the Manager shall (to the extent permitted by law) use reasonable efforts to provide the Investor with notice that such withholding or payment is intended and shall provide the Investor with the opportunity to contest (at the Investor's expense) such withholding or payment, provided that (a) such contest does not subject the Company, the Members, the Manager or their members or Affiliates to any potential liability to such taxing authority for any such withholding and payment and would not otherwise, in the Manager's sole discretion, result in adverse consequences to the Company or any of its Member and (b) the Manager and the Company shall not be required to refrain from such withholding or payment during such contest if they reasonably believe that they are not permitted by law to refrain from such withholding or payment. If withholding is made, the Manager shall use reasonable efforts to assist the Investor in obtaining any available refund of the withheld amount, provided that the Investor shall promptly reimburse the Company and the Manager and their Affiliates for any expenses incurred in providing such assistance. 21. Co- Investments. If the Manager determines to offer any co- investment opportunity to Members with a Capital Commitment equal to or less than the Capital Commitment of the Investor (other than a Member who, in the discretion of the Manager, can potentially add value in connection with the relevant portfolio investment or is an Affiliate of the Manager), then the Investor shall be offered its pro rata share of such co- investment City of Clearwater Employees' Pension Plan Side Letter Page 7 opportunity. In addition, the Investor may participate in such co- investment opportunity either directly or indirectly through any vehicle formed by the Investor primarily for the purpose of purchasing co- investment interests that (a) is an affiliate of the Investor and (b) meets the suitability requirements for such co- investment opportunity. 22. Diversification. The Manager will diversify the investments so as to minimize the risk of large losses, unless under the circumstances it is not prudent to do so. The quarterly summary of acquisition and disposition activity by the Company shall specifically note any investment in any single property of more than 15% of its aggregate Capital Contributions and the Advisory Board approval thereof, except as may be considered to be on a temporary basis. 23. Sunshine Law. Any provision in this side letter or other document or Agreement to the contrary, notwithstanding, by reason of the laws, regulations and public policies of the State of Florida applicable to the Investor as a governmental entity in the State of Florida, the Manager agrees, that (a) it will not take any action that will cause the Investor to not be in compliance with Florida Public Records Act and Government in the Sunshine Law; (b) it will not take any action that will cause the Investor to not be in compliance with Public Entities Crime Bill Notice - Section 287.133, Florida Statutes; and (c) it will not take any action that will cause the Investor to not be in compliance with Valuation of Illiquid Investments - Section 112.661(17), Florida Statutes. 24. Governmental Plan Partner. The Investor hereby notifies the Manager that it is a "governmental plan" within the meaning of Section 3(32) of ERISA and, as such, an irrevocable submission to jurisdiction or waiver of objections as set forth in Section 15.14(a) of the Limited Liability Company could constitute a violation of applicable law, regulation or established policy of the Investor. Manager acknowledges its obligations under this Side Letter may be governed by Florida law, venue and jurisdiction including but not limited to Florida Statute 112.656. The parties agree that they reserve the right to fully pursue any and all remedies respectively available to them, in any forum including without limitation a court of law having jurisdiction over the matter, in the event a party to this Agreement believes it has been aggrieved by the other. Notwithstanding any other term of any agreement existing between the parties to this Agreement, the parties do not agree to binding arbitration as the sole and exclusive remedy for resolving any dispute which may arise. With respect to the Company this Side Letter shall be construed in accordance with and governed by the laws of the State of Delaware (without regard to principles of conflict of laws). 25. Florida Venue. By reason of the laws, regulations and public policies of the State of Florida applicable to the Investor as a governmental entity in the State of Florida, the Manager agrees, that (a) it will submit to the nonexclusive jurisdiction of the courts located in Pinellas County, Florida, and (b) it will bring any suit, action, claim or proceeding against the Investor under any provision of this Letter Agreement, the Limited Liability Agreement, or the Investor's Subscription Agreement in the courts City of Clearwater Employees' Pension Plan Side Letter Page 8 located in Pinellas County, Florida, provided however, the Investor agrees that this paragraph 25 does not apply to claims asserted by any third parties. 26. Lawsuits. Notwithstanding anything to the contrary in any of the Company Offering Documents or Agreement, and subject to the following, each of the Company and the Manager agrees with the Investor that any legal proceeding brought solely by the Investor against it alleging a breach of fiduciary duties (and wherein the sole parties to such action during the pendency and until final resolution of such action remain solely the Investor and the Company and/or the Manager), may be brought and enforced in accordance with Florida state law in the courts of the state of Florida, with venue in Pinellas County, without regard to principles of conflicts of law, and it irrevocably submits to the jurisdiction of such courts in respect of any such action or proceeding. 27. Listed Transactions. The Manager shall not knowingly cause the Company to directly engage in a transaction that, as of the date the Company enters into a binding contract to engage in such transaction, is a "listed transaction" as defined in Treas. Reg. § 1.6011 - 4(b)(2). 28. Contingent Fee, Incentive Payment. The Manager represents and warrants to the Investor that the Company, or Manager has not entered into any contingent fee or similar relationship with any person associated with the Investor concerning its investment in the Company for the purpose of obtaining its participation in the Company and neither the Company, the Manager, nor Investor or persons associated with Investor (whether directly or indirectly through affiliates) will receive any incentive or special payments associated with or resulting from the Investor's investment in the Company except as otherwise expressly referenced in the Agreement or other Fund offering documents. 29. GAAP and Topic ASC 820 Compliance. The Company confirms that the audited financial statements of the Company required to be delivered to the Investor will be prepared in accordance with U.S. generally accepted accounting principles and in compliance with the requirements of Topic ASC 820, as in effect from time to time. 30. AML Laws. The Manager acknowledges that the Company is in compliance with applicable United States laws and regulations relating to anti -money laundering, including, as applicable, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "Patriot Act ") and the Bank Secrecy Act, as amended by the Patriot Act (collectively the "U.S. AML Laws and Regulations "). The Company represents and warrants that, in order to facilitate compliance with U.S. AML Laws and Regulations, a written anti -money laundering prevention program reasonably designed to comply with the requirements of the U.S. AML Laws and Regulations has been developed and implemented and will be maintained to the extent required by law or regulation, with respect to the Company. City of Clearwater Employees' Pension Plan Side Letter Page 9 31. U.S. Corrupt Practices Act. As long as the Investor is a participant in the Company, the Manager shall not make any payment to any person that is, to the Manager's knowledge, in violation of the U.S. Foreign Corrupt Practices Act, as amended. 32. Changes to Fee Schedule and Withdrawal Provisions. Company and Manager agree to provide notice to Investor in the event of a change in the fee schedule or withdrawal policy of the Company or Manager prior to implementation of such changes. In the event the Investor chooses to withdraw funds prior to the implementation of such changes, such changes will not apply to the Investor's funds to the extent that such funds were not able to be withdrawn from the Company prior to the implementation of such changes. 33. No Payments in Kind. All payments to the participating trust, including upon its withdrawal, will be made in cash. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] City of Clearwater Employees' Pension Plan Side Letter Page 10 Sincerely, Intercontinental Real Estate Corporation By: Peter'Palandj ian President and Treasurer U. S. Real Estate Investment Fund, LLC By: Intercontinental Real Estate Corporation, its Manager By: Peter Palandjian President and Treasurer RECEIVED AND ACKNOWLEDGED BY: City of Clearwater Employees' Pension Plan By: Cke4rke e t1WS Name: Title: George N. Cretekos Chairperson Approved as to Form: Matthew Smi �'', Assistant City Attorney Attest: Rosemarie Call City Clerk