<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
________________
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the Fiscal Year Ended August 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
------------------- ----------------
Commission File No. 1-6300
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Pennsylvania 23-6216339
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
455 Pennsylvania Avenue, Suite 135 19034
Ft. Washington, Pennsylvania (Zip Code)
(address of principal executive office)
Registrant's telephone number, including area code: (215) 542-9250
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
- ---------------------------------- -------------------------
Shares of Beneficial Interest, par American Stock Exchange
value $1.00 per share
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
------ -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /x/
The aggregate market value, as of November 15, 1995, of the voting stock held by
non-affiliates of the registrant was approximately $148,994,600. (Aggregate
market value is estimated solely for the purposes of this report and shall not
be construed as an admission for the purposes of determining affiliate status.)
At November 15, 1995, 8,676,098 Shares of Beneficial Interest of the Trust were
outstanding.
Documents Incorporated by Reference
Portions of the Trust's 1995 Annual Report to Shareholders are incorporated by
reference into Part II of this report. Portions of the Trust's Proxy Statement
for the 1995 Annual Meeting of Shareholders are incorporated by reference into
Part III of this report. Except for the parts of such documents that have been
specifically incorporated herein by reference, such documents shall not be
deemed "filed" for the purposes of this report.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED AUGUST 31, 1995
----------------
TABLE OF CONTENTS
PART I
Item 1. Business........................................................1
Item 2. Properties.....................................................12
Item 3. Legal Proceedings..............................................13
Item 4. Submission of Matters to a Vote of
Security Holders...............................................13
Item 4A. Executive Officers of the Trust................................14
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters....................................15
Item 6. Selected Financial Data........................................15
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................................................15
Item 8. Financial Statements and Supplementary Data....................15
Item 9. Disagreements on Accounting and Financial
Disclosure.....................................................16
PART III
Item 10. Item 13........................................................16
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................................16
<PAGE>
Item 1. Business
General
Pennsylvania Real Estate Investment Trust (the "Trust") is a
self-administered equity real estate investment trust engaged, directly and
through subsidiaries, partnerships and joint ventures, in the business of
acquiring, managing and holding for current yield and long-term appreciation
real estate and interests in real estate. The Trust has invested substantially
all of its assets in rental producing real estate, with an emphasis on shopping
centers and apartment complexes.
The Trust has elected to qualify, and conducts its operations in a
manner intended to comply with the requirements for qualification, as a real
estate investment trust under the Real Estate Investment Trust Act of 1960,
Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code").
Under the Code, a real estate investment trust that meets certain requirements
is not subject to Federal income tax on the portion of its taxable income which
is distributed to its shareholders provided that at least 95% of its real estate
investment trust taxable income, excluding any net capital gain, is so
distributed.
The Trust is an unincorporated association in business trust form
created in Pennsylvania pursuant to a Trust Agreement dated December 17, 1960,
as amended and restated on December 16, 1987. Since its inception it has been
self-administered by its trustees.
The Trust's principal real estate assets at August 31, 1995 included 20
apartment communities with 7,337 units and 18 shopping centers totaling 4.8
million square feet. Located primarily in the mid-Atlantic region from
Pennsylvania to Virginia, and in selected areas of Florida, 15 of these
properties are wholly-owned by the Trust and its subsidiaries (in one instance,
the property is treated by the Trust as effectively wholly-owned because the
Trust holds a 65% interest in the partnership that owns the property and this
interest, under the partnership agreement, gives the Trust control). Another 23
are owned by the Trust and its subsidiaries through partnerships and joint
ventures with equity interests ranging from 25 percent to 87.5 percent in the
Trust and its subsidiaries. The Trust also owns, directly and through
subsidiaries, joint ventures and partnerships, interests in six industrial
properties and four parcels of undeveloped land.
Of the 27 properties in which the Trust has a partial interest
(excluding the property held by the partnership that is consolidated in the
Trust's financial statements as described below), 22 are owned by partnerships
in which the Trust or one of its wholly-owned subsidiaries is a general partner
and 5 are joint ventures in which the Trust has substantially the same
<PAGE>
powers as a general partner. Under the terms of the partnership or joint venture
agreements (hereinafter, collectively, "partnership agreements"), major
decisions, such as a sale, refinancing or expansion or rehabilitation of the
property held by the partnership or joint venture (hereinafter, collectively,
"partnerships"), and all leasing decisions, require the consent of all partners
and co-venturers (hereinafter, collectively, "partners"). There are restrictions
on the ability of any partner to borrow against or dispose of its interest in
the partnership. Because of the requirement for unanimity, the taking of any
action or the making of any decision respecting a partnership could be
significantly delayed.
Under the terms of many of the partnership agreements to which the
Trust or one of its subsidiaries is a party, the concurrence of all partners is
required to change the property manager. Where the other partner is providing
management, effecting such a change could be difficult or even unfeasible, even
if the Trust believed the management services were unsatisfactory. However, many
of the partnership agreements entitle the Trust to a priority with respect to
distributions of partnership cash based on the Trust's capital contributions to
the partnership. Under the terms of some of these agreements, the Trust has a
unilateral right to change management if it has not received its priority
distributions of partnership cash for a stated period of time.
The Trust's wholly-owned apartment properties are managed by its own
staff. The Trust's wholly-owned shopping center properties are managed by
non-affiliated independent contractors. Many of the properties held by
partnerships in which the Trust has an interest are managed by one or more
partners other than the Trust who oversee the day-to-day development,
construction, leasing and management of properties.
The Trust intends generally to seek to acquire 100% equity interests in
properties and to rely less on joint ventures and partnership structures in the
future. During the 1995 fiscal year, the Trust enlarged its management staff for
apartment properties and acquired management information systems in view of this
strategy. The Trust is presently considering the personnel and technology
support required to create a similar in-house shopping center management team.
If the current managers of the properties that are not currently
managed by the Trust are unable or unwilling to perform their obligations or
responsibilities, the Trust's present staff is not of sufficient size to carry
out those functions. In such event, the Trust would be obligated to contract
with others, perhaps at a substantially increased cost, for such services or to
increase its staff to manage the properties itself, which may be a less costly
alternative.
-2-
<PAGE>
In November 1994, the Trust acquired a 522-unit apartment complex in
Boca Raton, Florida for approximately $32 million. This acquisition was financed
through the Trust's credit facility described in the Notes to
Consolidated Financial Statements appearing in the portions of the 1995 Annual
Report to Shareholders incorporated by reference in this report.
In October 1995, the Trust completed a financing of its 220-unit
Shenandoah Village Apartment community in West Palm Beach, Florida with the
placement of $8.8 million in tax-exempt bonds issued by the Housing Finance
Authority of Palm Beach County, Florida. The bonds, which are insured by
Financial Security Assurance, Inc., carry an average annual interest rate of
5.90%, are amortized over 30 years, and constitute long-term indebtedness of the
Trust. The Trust applied the net proceeds of the financing to reduce the
outstanding indebtedness under its $75 million revolving credit facility.
Real Estate Investments
The following table sets forth certain information concerning the
Trust's real estate investments at August 31, 1995.
<TABLE>
<CAPTION>
Real Estate Investments
-----------------------
No. of Square Feet or Depreciated
Properties Apartment Units Cost (2)
---------- --------------- ------------
<S> <C> <C> <C>
Wholly-Owned and Consolidated Partnership(1)
Apartment Buildings.......................... 12 4,760 $126,591,000
Shopping Centers............................. 3 476,000(3) 23,675,000(3)
Industrial Properties........................ 5 587,000 2,059,000
Land......................................... 1 25 acres 3,590,000
Partnerships and Joint Ventures
Apartment Buildings.......................... 8 2,577 $86,625,000
Shopping Centers(3).......................... 15 4,330,000(3) 81,728,000(3)
Industrial Properties........................ 1 141,000 443,000
Land......................................... 3 90 acres 4,445,000
</TABLE>
- --------------------
(1) The Trust has a 65% "controlling" interest in an apartment building
partnership. This partnership is reported on a consolidated basis with
the Trust in the Trust's consolidated financial statements.
(2) The amounts shown represent 100% of the depreciated cost of the
property held by the respective partnerships and joint ventures. The
equity interest of the Trust in each of the partnerships and joint
ventures is set forth on pages 7-9 herein.
-3-
<PAGE>
(3) Ingleside Shopping Center is primarily held through a joint venture in
which the Trust has a 50% equity interest. However, the property also
consists of a parcel that is owned directly by the Trust. For purposes
of this table, this wholly-owned parcel has not been counted in the
number of wholly-owned shopping center properties and has been included
in the totals shown for partnerships and joint ventures shopping
centers square footage and depreciated cost.
The Trust accounts for its investments in partnerships that it does not
control (which is the case with all but one of the partnerships) using the
equity method of accounting. These investments, which represent 25-to-87.5%
non-controlling ownership interests, are recorded initially at the Trust's cost
and subsequently adjusted for the Trust's net equity in income and cash
contributions and distributions. During the fiscal year ended August 31, 1995,
the Trust's net equity in income from partnerships was $6,381,000, which
constituted approximately 57.5% of the Trust's net income before gains on sales
of interests in real estate and approximately 56.8% of the Trust's total net
income.
The 28 properties held through partnerships (including the property
owned by the partnership that is reported on a consolidated basis with the Trust
in the Trust's financial statements and in which the Trust has a 65% controlling
interest (hereinafter the "Consolidated Partnership")) involve 18 different
partners, 12 of whom held an interest in only one property and 6 of whom held
interests in from 2 to 4 properties.
No trustee or employee of the Trust or any of its subsidiaries
participates in the ownership or income from the properties held in partnership
form or any other property in which the Trust has an interest and none of the
Trust's partners in the partnerships is affiliated with the Trust.
As of August 31, 1995, the aggregate indebtedness secured by mortgages
on the wholly-owned properties of the Trust was $78,198,000, including
indebtedness of $17,413,000 secured by a mortgage against the property owned by
the Consolidated Partnership. In addition, the Trust has equity interests in 18
partnerships which have an aggregate mortgage indebtedness of $136,004,000. The
mortgage notes relating to the wholly-owned and the partnership properties bear
interest at rates ranging from 6.8% to 10.4% per annum. The liability under each
mortgage note is limited to the particular property except for two loans in the
aggregate amount of $28,761,000 which are guaranteed by the partners of the
respective partnerships, including the Trust. In addition, a bank loan in the
amount of $1,306,000 has been guaranteed by the partners of one partnership,
including the Trust.
-4-
<PAGE>
WHOLLY-OWNED PROPERTIES
The following chart sets forth certain information with respect to the Trust's
wholly-owned properties at August 31, 1995.
<TABLE>
<CAPTION>
Apartment Buildings
-------------------
Property and Location Year Acquired Units Occupancy Rate (1) Depreciated Cost Mortgage Balance
- --------------------- ------------- ----- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
2031 Locust Street
Philadelphia, PA 1961 87 100% $ 877,000 $ 0(2)
Marylander
Baltimore, MD 1962 510 95% 1,363,000 0
Kenwood Gardens
Toledo, OH 1963 504 94% 1,866,000 0(2)
Chateau
Midland, TX 1964 101 97% 725,000 0
Camp Hill Plaza
Camp Hill, PA 1969 300 96% 1,585,000 6,963,000
Lakewood Hills
Harrisburg, PA 1972 562 96% 6,599,000 0(2)
Cobblestone
Pompano Beach, FL 1993 384 96% 12,323,000 9,072,000
Shenandoah
West Palm Beach, FL 1993 220 98% 11,240,000 0
Hidden Lakes
Dayton, OH 1994 360 99% 12,752,000 0(2)
Palms of Pembroke
Pembroke Pines, FL 1994 348 97% 21,734,000 0
Boca Palms
Boca Raton, FL 1994 522 96% 33,918,000 0
----- ----------- ----------
SUB TOTAL 3,898 104,982,000 16,035,000(2)
Consolidated Partnership
- ------------------------
Emerald Point
Virginia Beach, VA 1993 862 96% 21,609,000 17,413,000
----- --- ------------ -----------
TOTAL 4,760 96% $126,591,000 $33,448,000
===== === ============ ===========
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Shopping Centers
--------------------------
Property and Location Year Acquired Square Feet Percentage Leased(3) Depreciated Cost Mortgage Balance
- --------------------- ------------- ----------- -------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Crest Plaza Shopping Center
Allentown, PA 1964 153,000 94% $ 2,701,000 $ 0
Ingleside Center
Thorndale, PA 1980 41,000 100% 1,185,000 1,043,000
South Blanding Village
Jacksonville, FL 1986 107,000 100% 8,005,000 0
Mandarin Corners
Jacksonville, FL 1986 216,000 96% 12,969,000 8,845,000
------- --- ----------- ----------
TOTAL 517,000 96% $24,860,000 $9,888,000
======= === =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Industrial Properties
--------------------------
Property and Location Year Acquired Square Feet Percentage Leased Depreciated Cost Mortgage Balance
- --------------------- ------------- ----------- -------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Office and Warehouse
Alexandria, VA 1962 332,000 100% $ 1,183,000 $ 0
Warehouse
Pennsauken, NJ 1962 12,000 100% 61,000 0
Warehouse
Allentown, PA 1962 16,000 100% 15,000 0
Warehouse
Pennsauken, NJ 1963 30,000 100% 108,000 0
Warehouse and Plant
Lowell, MA 1963 197,000 100% 693,000 0
------- ---- ----------- -------------
TOTAL 587,000 100% $ 2,060,000 0
======= ==== =========== =============
</TABLE>
<TABLE>
<CAPTION>
Land
----
Property and Location Year Acquired Acres Depreciated Cost Mortgage Balance
- --------------------- ------------- ----- ---------------- ----------------
<S> <C> <C> <C> <C>
Bucks County, PA(4) 1985 25 $3,590,000 $ 0
-- ------------ ---------------
TOTAL 25 3,590,000 0
== ============ ===============
Total Wholly Owned $157,101,000 $ 43,336,000(2)
============ ===============
</TABLE>
- ------------------------------
(1) Occupancy rate is calculated as the percentage of occupied units for
all apartments as of August 31, 1995.
(2) Excludes aggregate indebtedness of $34,862,000 that is
cross-collateralized by the apartment complexes in Philadelphia,
Pennsylvania, Toledo, Ohio, Harrisburg, Pennsylvania and Dayton, Ohio
shown in this table.
(3) Percentage Leased is calculated as a percentage of total shopping
center net leasable area for which leases were in effect as of August
31, 1995.
(4) On January 1, 1995, the Trust, in satisfaction of its partner's
obligation, acquired its partner's 50% interest in the partnership that
owns this property and therefore now has 100% of the equity interest in
this property.
-6-
<PAGE>
PARTNERSHIPS AND JOINT VENTURES
The following chart sets forth certain information with respect to the
properties owned by the partnerships, and the Trust's equity interest and
investment in the partnerships at August 31, 1995.
<TABLE>
<CAPTION>
Apartment Buildings
-------------------
Partnerships
Partnerships and and Joint Trust's
Trust's Joint Ventures Ventures Investment in
Property and Year Equity Occupancy Depreciated Mortgage Partnerships and
Location Acquired Interest Units Rate(1) Cost Balance (2) Joint Ventures
- ------------ -------- -------- ----- --------- ----------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cambridge Hall
West Chester, PA 1967 50% 232 98% $ 1,175,000 $ 0 $ 1,861,000
Fox Run
Warminster, PA 1969 50% 196 98% 1,742,000 4,000,000 (1,088,000)
Will-O-Hill
Reading, PA 1983 50% 190 99% 3,226,000 1,913,000 853,000
Fox Run
Bear, DE 1988 50% 414 91% 19,529,000 15,164,000 1,809,000
Eagle's Nest
Coral Springs, FL 1989 50% 264 96% 20,396,000 16,150,000 1,976,000
Regency Lakeside
Omaha, NE 1990 50% 433 100% 24,415,000 19,171,000 1,734,000
Countrywood
Tampa, FL 1993 50% 536 97% 10,169,000 6,610,000 1,706,000
Windsong
Altamonte Springs, FL 1993 40% 312 92% 5,973,000 3,685,000 869,000
----- --- ----------- ----------- ----------
TOTAL 2,577 96% $86,625,000 $66,693,000 $9,720,000
===== === =========== =========== ==========
-7-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shopping Centers
---------------------
Partnerships Partnerships Trust's
and Joint and Joint Investment in
Trust's Ventures Ventures Partnerships
Year Equity Square Percentage Depreciated Mortgage and Joint
Property and Location Acquired Interest Feet Leased (8) Cost Balance (2) Ventures
- --------------------- -------- -------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Park Plaza Shopping Center
Pinellas Park, FL 1963 50% 151,000 96% $1,386,000 $ 542,000 $ 478,000
Whitehall Mall
Allentown, PA 1964 50% 603,000(3) 95% 5,671,000 0 3,952,000
Punta Gorda Mall
Punta Gorda, FL 1965 25% 102,000 91% 882,000 2,253,000 (335,000)
Ormond Beach Mall
Daytona Beach, FL 1966 25% 103,000 95% 650,000 0 143,000
Palmer Park Mall
Easton, PA 1972 50% 349,000(4) 96% 5,586,000 4,315,000 285,000
Gateway Mall
St. Petersburg, FL 1973 60% 386,000(5) 74% 2,300,000 0 1,804,000
Rio Mall
Rio Grande, NJ 1973 50% 161,000 84% 2,243,000 747,000 976,000
Lehigh Valley Mall
Allentown, PA 1973 50% 1,054,000(6) 99% 17,428,000 22,227,000 (1,277,000)
East Towne Mall
Lancaster, PA 1973 50% 303,000 71% 4,124,000 3,648,000 312,000
Chippewa Mall
Beaver Falls, PA 1979 50% 83,000 67% 1,755,000 1,828,000 (102,000)
Greene Plaza
Waynesburg, PA 1980 50% 117,000 93% 2,608,000 2,388,000 150,000
Ingleside Center
Thorndale, PA 1981 50% 61,000 100% 1,658,000 1,559,000 95,000
Forestville Shopping Center
Forestville, MD 1983 75% 218,000 90% 6,062,000 1,859,000 3,046,000
Laurel Mall
Hazelton, PA 1988 40% 558,000 95% 26,150,000 27,945,000 (404,000)
Margate Center
Margate, FL(7) 1987 87.5% 40,000 76% 2,040,000 0 371,000
--------- --- ----------- ----------- ----------
TOTAL 4,289,000 91% $80,543,000 $69,311,000 $9,494,000
========= === =========== =========== ==========
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Industrial Property
-------------------
Partnerships Partnerships Trust's
and Joint and Joint Investment in
Trust's Ventures Ventures Partnerships
Year Equity Square Percentage Depreciated Mortgage and Joint
Property and Location Acquired Interest Feet Leased Cost Balance (2) Ventures
- --------------------- -------- -------- ------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Warehouse and Plant
Ft. Washington, PA 1962 50% 141,000 100% $ 443,000 $ 0 $ 108,000
------- ---- ---------- ----------- -----------
TOTAL 141,000 100% $ 443,000 $ 0 $ 108,000
======= ==== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Land
----
Partnerships Partnerships Trust's
and Joint and Joint Investment in
Trust's Ventures Ventures Partnerships
Year Equity Depreciated Mortgage and Joint
Property and Location Acquired Interest Acres Cost Balance Ventures
- --------------------- -------- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Rancocas, NJ 1971 75% 54 $ 646,000 $ 0 ($1,393,000)
Elizabethtown, PA 1972 50% 22 279,000 0 136,000
Coral Springs, FL 1990 50% 14 3,521,000 0 ( 662,000)
-- ------------ ------------ -------------
TOTAL 90 $ 4,446,000 $ 0 ($1,919,000)
== ============ ============ =============
Other 36,000
------------
Total Partnerships and Joint Ventures $172,057,000 $136,004,000 $17,439,000
============ ============ ============
</TABLE>
- ------------------------------------
(1) Occupancy rate is calculated as the percentage of occupied units for
all apartments as of August 31, 1995.
(2) Some partnerships and joint ventures have incurred non-mortgage
indebtedness in connection with operations.
(3) Whitehall Mall includes 82,000 square feet occupied by a department
store tenant which leases the ground and owns the building.
(4) Palmer Park Mall includes 82,000 square feet occupied and owned by a
department store.
(5) Gateway Mall includes 60,000 square feet occupied and owned by a
department store.
(6) Lehigh Valley Mall includes 565,000 square feet occupied and owned by
department stores which either own or lease the ground upon which
their stores are located.
(7) Frank's Garden Center which had occupied 18,800 square feet, vacated
the property but is obligated to pay rent until its lease term expires
December 2006.
(8) Percentage Leased is calculated as a percentage of total shopping
center net leaseable area for which leases were in effect as of
August 31, 1995.
Competition, Regulation and Other Factors
The real estate business is highly competitive. The Trust competes for
tenants with other property owners. All of the Trust's shopping center and
apartment properties are subject to significant competition. The Trust also
competes for investment opportunities with investors and purchasers of real
estate of all types, many of which have greater financial resources, revenues
and geographical diversity than those of the Trust, including institutional,
private and foreign investors.
-9-
<PAGE>
Increased building of new apartment communities and shopping centers as
well as renovation of older properties are a source of competition for the
Trust. In addition, single family housing becomes increasingly attractive when
lower interest rates make mortgages more affordable. These trends can affect the
number of prospective tenants for the Trust's apartment properties.
A substantial portion of the Trust's shopping center income consists of
rents received under long-term leases. Most of these shopping center leases
provide for payment by tenants of an annual minimum rent and additional rent
calculated generally as a percentage of gross sales in excess of a specified
amount ("percentage rent"). These shopping center leases often contain
provisions for contribution by tenants to the cost of maintaining common areas
and real estate tax escalation clauses under which the tenant bears its
proportionate share of increases in or total real estate taxes. While tenant
contributions historically have not covered all costs required to maintain
common areas, some leases provide for full recovery of these costs from tenants.
Upon renewal of a shopping center lease, the annual minimum rent of a tenant may
be increased to an amount which approaches or exceeds the sum of the former
annual minimum rent plus the most recent annual percentage rent received from
the tenant, and the level from which percentage rent is calculated is
correspondingly increased. In difficult economic times or in strongly
competitive environments, the shopping center owner may have to offer
concessions or negotiate leases in which the tenant pays a lower rental or less
than its pro rata share of certain operating costs.
The success of the Trust depends, among other factors, upon general
economic conditions, population trends, real estate fluctuations, income tax
laws, governmental regulations, availability and costs of financing,
construction costs, increases or decreases in operating expenses, zoning laws
and the ability of the Trust to keep its properties leased at profitable levels.
All but two of the 48 properties in which the Trust has an interest are
located in the eastern United States, with 20 of the properties located in
Pennsylvania and 15 in Florida. The ability of some existing tenants of the
Trust's properties to meet their lease obligations could be adversely affected
by economic conditions in the East and in Florida and Pennsylvania in
particular.
The effects of inflation upon the Trust's operations and investment
portfolio are varied. From the standpoint of revenues, inflation has the dual
effect of both increasing the tenant revenues upon which percentage rentals are
based and allowing increased fixed rentals to rise generally to reflect higher
construction costs on new properties and on renovation and rehabilitation of
older properties. This positive effect may be offset by higher operating
expenses.
-10-
<PAGE>
Fundamental to the Trust is the generation of cash flow which, if
distributed to shareholders, is free from Federal income taxes to the Trust. The
determination to make distributions to shareholders, however, is not solely
based on cash flow because the Trust is required to distribute to its
shareholders annually at least 95% of its real estate investment trust taxable
income to remain qualified for the favorable tax treatment afforded by the
Internal Revenue Code. The Trust generally attempts to distribute 100% of such
income and capital gains from sales of real estate investments so as to avoid
any Federal income and excise tax liability for the Trust.
The United States government and a number of states and their
subdivisions have adopted laws and regulations relating to environmental
controls, some of which directly, and many of which indirectly, limit the
development of real estate and may adversely affect the operation of existing
properties. Such laws and regulations may operate to reduce the number and
attractiveness of investment opportunities available to the Trust and limit the
extent to which existing properties may be utilized. If hazardous substances are
discovered on or emanating from any of the Trust's properties, the owner or
operator of the property, including the Trust, may be held liable for all costs
and liabilities relating to such hazardous substances. Since 1987, the Trust has
conducted a Phase I environmental study on each property it seeks to acquire.
These studies may, but do not necessarily, detect the potential environmental
hazards associated with a property. The Trust has no way of determining the
magnitude of any potential liability to which it may be subject arising out of
unknown environmental conditions or violations.
Environmental matters have arisen at certain properties in which the
Trust has an interest. The Trust retained environmental consultants in order to
investigate certain of these matters. At one property in which the Trust has a
50% ownership interest, groundwater contamination may exist which the Trust
alleges was caused by the former tenant. Estimates to remediate this property,
which are subject to the length of monitoring and the extent of remediation
required, range in total from $400,000 to $1,600,000. In addition, above normal
radon levels have been detected at two wholly-owned properties. The estimated
cost to remediate these properties is approximately $380,000, which costs were
received as a credit from the sellers as part of the initial acquisitions.
The Trust has recorded its share of these liabilities, totaling
$688,000, based upon the consultants' evaluation of these matters which, in
certain instances, are subject to applicable state approvals of the remediation
plans.
-11-
<PAGE>
There are asbestos-containing materials in many of the properties in
which the Trust has an interest, primarily in the form of floor tiles and
adhesives. The floor tiles and adhesives are generally in good condition.
Fire-proofing material containing asbestos is present at some of the properties
in limited concentrations or in limited areas.
Employees
The Trust, as of August 31, 1995, employed fifteen (15) persons on a
full-time basis, three of whom, Sylvan M. Cohen, Chairman and Chief Executive
Officer, Jonathan B. Weller, President and Chief Operating Officer, and Robert
G. Rogers, Executive Vice President, are Trustees.
Item 2. Properties
See the tables under "Item 1. Business" at pages 5 to 9 for the
properties owned by the Trust, both wholly-owned and those in which it has a
percentage interest, and reference is made thereto.
The Trust leases 4,661 square feet of space for its principal offices
at 455 Pennsylvania Avenue, Ft. Washington, Pennsylvania with a five-year term
expiring December 31, 1998. The rent for the first year was $13.00 per
square foot, and the rent escalates annually to the final year's rent at $14.50
per square foot. In addition to the rent, the Trust pays its pro rata share of
any increase in operating expenses over those in 1994, which is the base year
for determining the increase.
Titles to all of the Trust's real estate investments have been searched
and reported to the Trust by reputable title companies. The exceptions listed in
such title reports will not, in the opinion of the Trust, materially interfere
with the use of the respective properties for the intended purposes.
-12-
<PAGE>
Schedule of Real Estate and Accumulated Depreciation
Schedule III, "Real Estate and Accumulated Depreciation-August 31,
1995," is part of the financial statement schedules set forth herein and
reference is made to that schedule which is incorporated herein by reference
for the amount of encumbrances, initial cost of the properties to the Trust,
cost of improvements, the amount at which carried and the amount of the
accumulated depreciation.
Item 3. Legal Proceedings
Daniel Berman and Robert Berman and/or entities owned or controlled by
them (collectively, the "Bermans") are partners of wholly-owned subsidiaries of
the Trust in the ownership of Fox Run Apartments, Bear, Delaware, Eagle's Nest
Apartments, Coral Springs, Florida, and 14 undeveloped acres in Coral Springs,
Florida. Berman Real Estate Management, Inc., a corporation owned by the
Bermans, currently manages the two apartment complexes.
In May 1994, the Bermans commenced an action against the Trust and
certain of its wholly-owned subsidiaries in the Montgomery County Court of
Common Pleas in Pennsylvania (the "Pennsylvania Litigation"). In the
Pennsylvania Litigation, the Bermans, seeking damages and a declaratory
judgment, asserted that the Trust interfered with a contract to develop the
parcel in Coral Springs, Florida and violated the partnership agreement relating
to Eagle's Nest Apartments in Coral Springs, Florida. The Bermans later amended
their complaint to add new parties and to allege that the defendants had no
right to terminate the leasing and management agreement at Fox Run Apartments,
had violated the Fox Run partnership agreement and that the Bermans had no
liability for certain partnership expenses.
In June 1994, two wholly-owned subsidiaries of the Trust commenced an
action in Delaware Chancery Court against the Bermans (the "Delaware
Litigation"). The action seeks, among other things, a declaratory judgment and
an injunction preventing the defendants from continuing to manage Fox Run and
damages resulting from the payment by plaintiffs of defendants' share of the
investigation and remediation of the environmental condition at Fox Run
Apartments.
The Trust intends to continue to vigorously resist plaintiffs' claims
in the Pennsylvania Litigation and to pursue the claims asserted in the Delaware
Litigation. Management does not believe that resolution of these matters will
have a material adverse effect on the Trust's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
-13-
<PAGE>
Item 4A. Executive Officers of the Registrant
The executive officers of the Trust on November 1, 1995 were as
follows:
<TABLE>
<CAPTION>
FIRST BECAME
AN EXECUTIVE BUSINESS EXPERIENCE
NAME AND OFFICE AGE OFFICER DURING PAST 5 YEARS
<S> <C> <C> <C>
Sylvan M. Cohen 81 1960 Chairman and Chief
Chairman and Executive Officer of
Chief Executive the Trust. Presently
Officer of counsel to the
Philadelphia law firm
of Drinker Biddle &
Reath and formerly
partner in the
Philadelphia law firm
of Cohen, Shapiro, Polisher,
Shiekman and Cohen.
Jonathan B. 48 1994 President and Chief
Weller Operating Officer of
President and the Trust. From 1988-
Chief Operating 1993, Executive Vice
Officer President and Director
of Eastdil Realty,
Inc., a real estate
investment banking
firm.
Robert G. Rogers 64 1972 Executive Vice
Executive Vice President of the
President Trust.
Jeffrey A. Linn 46 1990 Vice President -
Senior Vice Acquisitions since
President - 1994 and Secretary
Acquisitions and since 1990. Vice
Secretary President - Operations
of the Trust until
1994.
Dante J. 62 1976 Treasurer and Vice
Massimini President - Finance of
Senior Vice the Trust.
President -
Finance and
Treasurer
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
FIRST BECAME
AN EXECUTIVE BUSINESS EXPERIENCE
NAME AND OFFICE AGE OFFICER DURING PAST 5 YEARS
<S> <C> <C> <C>
Raymond J. Trost 40 1994 Asset Manager of the
Vice President - Trust's Apartment
Asset Management Complexes since 1994.
Formerly, Property
Manager of one of the
Trust's properties.
</TABLE>
Each of Messrs. Cohen, Weller, Rogers, Linn and Massimini has an
employment agreement to serve the Trust in the capacities described above.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Incorporated by reference to "Market Price and Distribution Record",
inside back cover (page 25) of the 1995 Annual Report to Shareholders.
The Board of Trustees on December 19, 1991 changed the prior practice
of making semi-annual distributions. The Board of Trustees has, in each quarter
subsequent to the third quarter of the 1992 fiscal year, considered and declared
a quarterly distribution. It is anticipated that the Board of Trustees will
consider a distribution each quarter; however, no assurance can be given that a
distribution will be declared.
Item 6. Selected Financial Data
Incorporated by reference to "Financial Highlights", page 1 of the 1995
Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Incorporated by reference to pages 21-23 of the 1995 Annual Report to
Shareholders.
Item 8. Financial Statements and Supplementary Data
The consolidated balance sheets of the Trust as of August 31, 1995 and
1994, and the related consolidated statements of income, beneficiaries' equity
and cash flows for each of the three years in the period ended August 31, 1995,
and the report of independent public accountants thereon and the Trust's summary
-15-
<PAGE>
of unaudited quarterly financial information for the two-year period ended
August 31, 1995 are incorporated by reference from the 1995 Annual Report to
Shareholders, pages 12-20.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
The information called for by Items 10, 11, 12 and 13 (except the information
concerning executive officers included in Item 4A of this report) is
incorporated by reference to the Trust's proxy statement relating to its 1995
Annual Meeting. However, the portions of such proxy statement constituting the
report of the Executive Compensation and Human Resources Committee of the Board
of Trustees and the graph showing performance of the Trust's shares and certain
share indices shall not be deemed to be incorporated herein or filed for
purposes of the Securities Exchange Act of 1934, as amended.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
1. The Trust's Consolidated Financial Statements, as
described below, are incorporated by reference to pages
12-20 of the Trust's 1995 Annual Report to Shareholders.
Consolidated Balance Sheet at
August 31, 1995 and 1994
Consolidated Statements of Income and
Beneficiaries' Equity for the fiscal years ended
August 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the
fiscal years ended August 31, 1995, 1994 and 1993
Notes to Consolidated Financial
Statements
-16-
<PAGE>
Report of Independent Public
Accountants
2. Lehigh Valley Associates Financial Statements
Report of Independent Auditors F-1
Balance Sheets at August 31, 1995
and 1994 F-2
Statements of Operations for the
fiscal years ended August 31,
1995 and 1994 F-3
Statements of Partners'
Deficiency at August 31, 1995 and
1994 and September 1, 1993 F-4
Statements of Cash Flows for the
fiscal years ended August 31,
1995 and 1994 F-5
Notes to Financial Statements F-6
The audited financial statements of Lehigh Valley Associates
for the year ended August 31, 1993 and the report of the
independent public accountants thereon are incorporated herein
by reference from the Trust's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993.
(2) Financial Statement Schedules
II - Valuation and Qualifying
Accounts 22
III - Real Estate and Accumulated
Depreciation 23
IV - Mortgage Loans on Real Estate
- August 31, 1995 26
Report of Independent Public Accountants
on Supplemental Schedules. 27
All other schedules are omitted because they are not
applicable or are not required or because the required
information is reported in the consolidated financial
statements or notes thereto.
(3) Exhibits
3.1 Trust Agreement, as amended and restated on
December 16, 1987, filed as Exhibit 3.1 to the
-17-
<PAGE>
Trust's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988, is incorporated herein by
reference.
4.1 Revolving Credit Agreement dated November 3, 1994
among the Trust, CoreStates Bank, N.A. as lender
and as agent, Meridian Bank, Midlantic Bank, N.A.
and PNC Bank, National Association.
4.2 First Amendment to Revolving Credit Agreement dated
March 20, 1995 among the Trust, CoreStates Bank,
N.A., as a lender and as agent, Meridian Bank,
Midlantic Bank, N.A. and PNC Bank, National
Association.
4.3 Form of Revolving Credit Agreement Note.
4.4 Secured Loan Agreement dated November 9, 1994 among
the Trust, CoreStates Bank, N.A., as lender and as
agent, Meridian Bank, Midlantic Bank, N.A. and PNC
Bank, National Association.
4.5 First Amendment to Secured Loan Agreement dated
March 20, 1995 among the Trust, CoreStates Bank,
N.A., as lender and as agent, Meridian Bank,
Midlantic Bank, N.A. and PNC Bank, National
Association.
4.6 Form of Replacement Note pursuant to the First
Amendment to Secured Term Loan Agreement.
4.7 Guaranty dated August 2, 1993 of the Trust in favor
of CoreStates Bank, N.A.
4.8 Guaranty dated January 27, 1994 of the Trust in
favor of CoreStates Bank, N.A.
4.9 Guaranty dated September 23, 1994 of the Trust in
favor of CoreStates Bank, N.A.
10.1 Employment Agreement, dated as of January 1, 1990,
between the Trust and Sylvan M. Cohen, filed as Exhibit
10.1 to the Trust's Annual Report on Form 10-K for the
fiscal year ended August 31, 1990, is incorporated
herein by reference.
10.2 First Amendment to Amended and Restated Employment
Agreement as of July 12, 1993 between the Trust and
Robert G. Rogers, filed as Exhibit 10.2 to the Trust's
Annual Report on Form 10-K for the fiscal year ended
August 31, 1993, is incorporated herein by reference.
-18-
<PAGE>
10.3 Amended and Restated Employment Agreement, dated as of
October 1, 1990, between the Trust and Robert G. Rogers,
filed as Exhibit 10.2 to the Trust's Annual Report on
Form 10-K for the fiscal year ended August 31, 1990, is
incorporated herein by reference.
10.4 Amended and Restated Employment Agreement, dated as of
October 1, 1990, between the Trust and Dante J.
Massimini, filed as Exhibit 10.3 to the Trust's Annual
Report on Form 10-K for the fiscal year ended August 31,
1990, is incorporated herein by reference.
10.5 The Trust's 1990 Incentive Stock Option Plan, filed as
Appendix A to Exhibit "A" to the Trust's Quarterly
Report on Form 10-Q for the quarterly period ended
November 30, 1990, is incorporated herein by reference.
10.6 The Trust's Stock Option Plan for Non-Employee Trustees,
filed as Appendix B to Exhibit "A" to the Trust's
Quarterly Report on Form 10-Q for the quarterly period
ended November 30, 1990, is incorporated herein by
reference.
10.7 Purchase and Sale Agreement between Robert G.
Rogers and Jonathan B. Weller, as Trustees and on
behalf of all other Trustees of the Trust, and
Pembroke Associates Limited Partnership dated
May 9, 1994 and Amendment No. 1 to Purchase and
Sale Agreement between Robert G. Rogers and
Jonathan B. Weller, as Trustees and on behalf of
all other Trustees of Trust, and Pembroke
Associates Limited Partnership dated June 28, 1994,
filed as Exhibit 10.7 to the Trust's Report on Form
8-K dated August 1, 1994 and filed August 15, 1994,
is incorporated herein by reference.
10.8 Agreement of Sale (Phase I) between Robert G.
Rogers and Jonathan B. Weller, as Trustees and on
behalf of all other Trustees of the Trust, and
Arbern Investors VI, L.P., dated September 24, 1994
and Amendment No. 1 to Purchase and Sale Agreement
(Phase I), between Robert G. Rogers and Jonathan B.
Weller, as Trustees and on behalf of all other
Trustees of the Trust, and Arbern Investors VI,
L.P., dated November 4, 1994, filed as Exhibit 10.8
to the Trust's Report on Form 8-K dated November
10, 1994 and filed November 23, 1994, is
incorporated herein by reference.
-19-
<PAGE>
10.9 Agreement of Sale (Phase II) between Robert G.
Rogers and Jonathan B. Weller, as Trustees and on
behalf of all other Trustees of the Trust, and
Arbern Investors VIII, L.P., dated September 24,
1994, Amendment No. 1 to Purchase and Sale
Agreement (Phase I) between Robert G. Rogers and
Jonathan B. Weller, as Trustees and on behalf of
all other Trustees of the Trust, and Arbern
Investors VIII, L.P., dated November 4, 1994, and
Amendment No. 2 to Purchase and Sale Agreement
(Phase I) between Robert G. Rogers and Jonathan B.
Weller, as Trustees and on behalf of all other
Trustees of the Trust, and Arbern Investors VIII,
L.P., dated November 4, 1994, filed as Exhibit 10.9
to the Trust's Report on Form 8-K dated November
10, 1994 and filed on November 23, 1994, is
incorporated herein by reference.
10.10 Employment Agreement dated as of December 14, 1993
between the Trust and Jonathan B. Weller, filed as
Exhibit 10.10 to the Trust's Annual Report on Form 10-K
for the fiscal year ended August 31, 1994, is
incorporated herein by reference.
10.11 The Trust's Amended Incentive and Non Qualified Stock
Option Plan, filed as Exhibit A to the Trust's
definitive proxy statement for the Annual Meeting of
Shareholders on December 15, 1994 filed on November 17,
1994, is incorporated herein by reference.
10.12 The Trust's 1993 Jonathan B. Weller Non Qualified Stock
Option Plan, filed as Exhibit B to the Trust's
definitive proxy statement for the Annual Meeting of
Shareholders on December 15, 1994 which was filed
November 17, 1994, is incorporated herein by reference.
10.13 Employment Agreement dated as of October 1, 1985
between the Trust and Jeffrey Linn.
13. "Market Price and Distribution Record" contained on
the inside back page of the Trust's 1995 Annual
Report to Shareholders; "Financial Highlights"
contained on page 1 of the Trust's 1995 Annual
Report to Shareholders; the Trust's consolidated
financial statements, including "Notes to
consolidated financial statements" and "Report of
independent public accountants", pages 12-20 of the
Trust's 1995 Annual Report to Shareholders; and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained on
pages 21-23 of the Trust's 1995 Annual Report to
Shareholders.
-20-
<PAGE>
21. Listing of subsidiaries.
23.1 Consent of Arthur Andersen LLP (Independent Public
Accountants).
23.2 Consent of Ernst & Young LLP (Independent
Auditors).
27. Financial Data Schedule
99. Portions of the Trust's definitive proxy statement
for its 1995 Annual Meeting of Shareholders
responsive to Items 10, 11, 12 and 13 in Part III
hereof filed on November 16, 1995, are incorporated
herein by reference. However, the portions of such
proxy statement constituting the report of the
Executive Compensation and Human Resources
Committee of the Board of Trustees and the graph
showing performance of the Trust's Shares and
certain shares indices shall not be deemed to be
incorporated herein or filed for the purposes of
the Securities Exchange Act of 1934.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months
ended August 31, 1995.
-21-
<PAGE>
SCHEDULE II
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
------------------------
Balance Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- --------------------------------- ------------ ---------- ----------- ---------- ----------
ALLOWANCE FOR POSSIBLE
LOSSES:
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1995 $3,235,000 $ - $ - $ 460,000 $2,775,000
========== ========== ========== ========== ==========
Year ended August 31, 1994 $1,440,000 $1,795,000 $ - $ - $3,235,000
========== ========== ========== ========== ==========
Year ended August 31, 1993 $1,120,000 $ 320,000 $ - $ - $1,440,000
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
SCHEDULE III
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C
Encumbrances
------------------------------------------------------------
Interest Maturity Balance at Initial Cost
Description Rate Date 8/31/95 to Trust
------------------------------------ ------------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
APARTMENT BUILDINGS:
2031 Locust Street-
Land $ $ 100,000
Building and improvements 1,028,000
Furniture and portable equipment
Camp Hill Plaza Apartments-
Land 9.5% 3/1/2007 6,963,268 337,000
Building and improvements 2,911,000
Furniture and portable equipment 150,000
Chateau Apartments-
Land 110,000
Building and improvements 1,004,000
Furniture and portable equipment 159,000
Cobblestone Apartments-
Land 7.50% to 8.25% 12/16/2002 9,072,466 2,791,000
Building and improvements 9,336,000
Furniture and portable equipment 362,000
Kenwood Gardens-
Land 489,000
Building and improvements 3,007,000
Furniture and portable equipment 228,000
Lakewood Hills Apartments-
Land 501,000
Building and improvements 10,935,000
Furniture and portable equipment 468,000
Marylander Apartments-
Land 117,000
Building 4,013,000
Furniture and portable equipment 327,000
Shenandoah Village-
Land 2,200,000
Building and improvements 8,695,000
Furniture and portable equipment 281,000
Emerald Point-
Land 6.790% 12/1/2008 17,412,875 3,063,000
Building and improvements 17,352,000
Furniture and portable equipment 1,293,000
Hidden Lakes-
Land 1,225,000
Building and improvements 10,807,000
Furniture and portable equipment 986,000
Palms of Pembroke-
Land 4,868,000
Building and improvements 16,389,000
Furniture and portable equipment 848,000
Boca Palms-
Land 7,107,000
Building and improvements 26,378,000
Furniture and portable equipment 1,101,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Column A Column D Column E Column F Column G&H Column I
Improvements, Amount at
Net of Which Carried Accumulated Date
Retirements 8/31/95 Depreciation Constructed Depreciable
Description Etc. (Note 4) (Notes 1 & 2) (Note 3) or Acquired Life (Years)
----------------------------------- ------------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
APARTMENT BUILDINGS:
2031 Locust Street-
Land $ - $ 100,000 $ - 1961
Building and improvements 1,234,000 2,262,000 1,765,000 11-25
Furniture and portable equipment 527,000 527,000 248,000 10
Camp Hill Plaza Apartments-
Land - 336,000 - 1969
Building and improvements 657,000 3,567,000 2,700,000 5-33-1/3
Furniture and portable equipment 539,000 689,000 307,000 7-10
Chateau Apartments-
Land - 110,000 - 1964
Building and improvements 355,000 1,359,000 1,045,000 3-38
Furniture and portable equipment 443,000 602,000 301,000 5-13
Cobblestone Apartments-
Land - 2,791,000 - 1992
Building and improvements 345,000 9,681,000 693,000 10-40
Furniture and portable equipment 285,000 647,000 102,000 7-10
Kenwood Gardens-
Land - 489,000 - 1963
Building and improvements 1,369,000 4,375,000 3,555,000 8-38
Furniture and portable equipment 1,002,000 1,230,000 673,000 8-10
Lakewood Hills Apartments-
Land - 500,000 - Phase I 1972
Building and improvements 1,108,000 12,042,000 6,772,000 Phase II 1975 8-45
Furniture and portable equipment 1,369,000 1,837,000 1,010,000 Phase III 1980 10
Marylander Apartments-
Land - 117,000 - 1962
Building 1,574,000 5,587,000 4,756,000 10-39
Furniture and portable equipment 599,000 926,000 510,000 5-10
Shenandoah Village-
Land - 2,200,000 -
Building and improvements 265,000 8,960,000 495,000 1993 10-39
Furniture and portable equipment 367,000 648,000 72,000 5-10
Emerald Point-
Land - 3,062,000 - 1993
Building and improvements 1,075,000 18,427,000 1,216,000 10-39
Furniture and portable equipment 404,000 1,697,000 362,000 5-10
Hidden Lakes-
Land - 1,225,000 - 1994
Building and improvements 69,000 10,877,000 477,000 10-39
Furniture and portable equipment 196,000 1,182,000 55,000 5-10
Palms of Pembroke-
Land - 4,869,000 - 1994
Building and improvements 25,000 16,424,000 481,000 10-39
Furniture and portable equipment 130,000 977,000 54,000 5-10
Boca Palms-
Land - 7,107,000 -
Building and improvements - 26,378,000 574,000 1994 10-39
Furniture and portable equipment - 1,101,000 93,000 5-10
</TABLE>
<PAGE>
SCHEDULE III
(Continued)
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C
Encumbrances
------------------------------------------------------
Interest Maturity Balance at Initial Cost
Description Rate Date 8/31/95 to Trust
---------------------------------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
ARA Services, Inc., Allentown, PA-
Land $ $ 3,000
Building and improvements 82,000
ARA Services, Inc., Pennsauken, NJ-
Land 20,000
Building and improvements 190,000
Interstate Container Corporation,
Lowell, MA-
Land 34,000
Building and improvements 364,000
People's Drug (CVS), Annandale, VA-
Land 225,000
Building and improvements 1,873,000
Sears, Roebuck and Company,
Pennsauken, NJ-
Land 25,000
Building and improvements 206,000
LAND HELD FOR DEVELOPMENT:
Big Oak-
Land 3,590,000
SHOPPING CENTERS AND RETAIL STORES:
Crest Plaza Shopping Center-
Land 278,000
Building and improvements 2,230,000
Furniture and portable equipment --
Sitler Tract-
Land 55,000
Ingleside Shopping Center
Land 7.5% 8/1/2000 1,042,790 382,000
Building and improvements 1,471,000
Furniture and portable equipment --
South Blanding Village-
Land 2,947,000
Building and improvements 6,138,000
Furniture and portable equipment --
Mandarin Corners-
Land 9.125% 8/1/2008 8,844,508 4,892,000
Building and improvements 10,168,000
Furniture and portable equipment --
------------------ -----------------
Total for wholly owned and
consolidated partnership $ 43,336,000 $ 176,139,000
================== =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Column A Column D Column E Column F Column G&H Column I
Improvements, Amount at
Net of Which Carried Accumulated Date
Retirements 8/31/95 Depreciation Constructed Depreciable
Description Etc. (Note 4) (Notes 1 & 2) (Note 3) or Acquired Life (Years)
----------------------------------- -------------- ------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
ARA Services, Inc., Allentown, PA-
Land $ -- $ 3,000 $ -- 1962
Building and improvements -- 82,000 70,000 10-40
ARA Services, Inc., Pennsauken, NJ-
Land -- 20,000 -- 1962
Building and improvements -- 190,000 150,000 10-50
Interstate Container Corporation,
Lowell, MA-
Land -- 34,000 -- 1963
Building and improvements 1,404,000 1,768,000 1,110,000 20-50
People's Drug (CVS), Annandale, VA-
Land -- 225,000 -- 1962
Building and improvements 476,000 2,349,000 1,392,000 25-55
Sears, Roebuck and Company,
Pennsauken, NJ-
Land -- 25,000 -- 1963
Building and improvements 176,000 382,000 299,000 10-50
LAND HELD FOR DEVELOPMENT:
Big Oak-
Land -- 3,590,000 -- 1995 --
SHOPPING CENTERS AND RETAIL STORES:
Crest Plaza Shopping Center-
Land -- 278,000 -- 1964
Building and improvements 3,013,000 5,243,000 2,874,000 20-40
Furniture and portable equipment 18,000 18,000 17,000 10
Sitler Tract-
Land -- 54,000 -- 1964
Ingleside Shopping Center -- Acme Parcel-
Land -- 382,000 -- 1980
Building and improvements 8,000 1,478,000 676,000 33-1/3
Furniture and portable equipment 2,000 2,000 2,000 10
South Blanding Village-
Land -- 2,947,000 -- 1988
Building and improvements 292,000 6,429,000 1,370,000 20-40
Furniture and portable equipment 10
Mandarin Corners-
Land -- 4,891,000 -- 1988
Building and improvements 464,000 10,631,000 2,553,000 33-1/3
Furniture and portable equipment -- ------------ ------------
------------
Total for wholly owned and
consolidated partnership $ 19,790,000 $195,929,000 $ 38,828,000
============ ============ ============
</TABLE>
<PAGE>
SCHEDULE III
(Continued)
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES:
(1) Reconciliation of amount shown in Column E:
Balance, August 31, 1994 $ 154,281,000
Additions during the year-
Improvements, furniture and portable
equipment $ 3,753,000
Land 10,627,000
Building 27,268,000
41,648,000
Deductions during the year-
Retirements --
Properties sold --
------------
Balance, August 31, 1995 $195,929,000
============
(2) The aggregate cost for federal income tax
purposes is approximately $194,720,000
============
(3) Reconciliation of amount shown in Column F:
(Accumulated Depreciation):
Balance, August 31, 1994 $ 33,735,000
Depreciation during the year-
Buildings and improvements 4,217,000
Furniture and portable equipment 876,000 5,093,000
-----------
Deductions during the year-
Retirements --
Properties sold --
------------
Balance, August 31, 1995 $ 38,828,000
============
(4) Cost of improvements, net of retirements, etc.,
consists of the following:
Cost of improvements $ 19,790,000
Retirements --
------------
$ 19,790,000
============
<PAGE>
SCHEDULE IV
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MORTGAGE LOANS ON REAL ESTATE--AUGUST 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column H
Principal
Amount of
Carrying Loan
Periodic Payment Outstanding Amount Subject to
Terms Principal of Delinquent
Interest Maturity --------------------- Prior Amount of Mortgage Principal
Description Rate Date Interest Principal Liens Mortgage (Note 5) or Interest
- ------------------------------- -------- -------- -------- --------- ----- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel Lauter (Note 2) (Note 4) Monthly (Note 4) None $ 560,000 $ 560,000 None
Donald Cafiero (Note 2) (Note 4) Monthly (Note 4) None 568,000 568,000 None
Charles A. Lotz, Jr. (Note 3) 2% over prime (Note 3) Monthly (Note 3) None 521,000 521,000 $521,000
--------- ----------
$1,649,000 $1,649,000
========== ==========
NOTES:
(1) Reconciliation of mortgage loans-
Balance at August 31, 1994 $1,649,000
Advances during period --
Repayments during period --
----------
Balance at August 31, 1995 $1,649,000
==========
(2) The interest rate is 1% over the prime rate but not less than 10% or more than 18%.
(3) The loan was not paid on the maturity date of February 15, 1990. The loan is on a nonaccrual basis.
(4) The loan was not paid on the maturity date of March 4, 1994. Beginning in March 1992,
25% of all distributions due are applied to the repayment of the loan.
(5) The aggregate carrying value for federal income tax purposes is the same as the amount shown in Column G.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
To Pennsylvania Real Estate Investment Trust:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in the portions of Pennsylvania Real
Estate Investment Trust's annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated October
19, 1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedules are the responsibility
of the Trust's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
October 19, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Trust has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
(Registrant)
Date: November 29, 1995 By:/s/ Sylvan M. Cohen
--------------------------------
Sylvan M. Cohen, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sylvan M. Cohen and Jonathan B. Weller,
or either of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Annual
Report on Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them or any substitute therefor, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Trust and in the
capacities and on the dates indicated:
/s/ Sylvan M. Cohen November 29, 1995
- ----------------------------------
Sylvan M. Cohen,
Chairman and Chief Executive
Officer and Trustee
(Principal Executive Officer)
/s/ Jonathan B. Weller November 29, 1995
- ----------------------------------
Jonathan B. Weller,
President and Chief Operating
Officer and Trustee
/s/ William R. Dimeling November 29, 1995
- ----------------------------------
William R. Dimeling,
Trustee
/s/ Jack Farber
- ---------------------------------- November 29, 1995
Jack Farber,
Trustee
/s/ Robert Freedman November 29, 1995
- ----------------------------------
Robert Freedman,
Trustee
<PAGE>
/s/ Lee Javitch November 29, 1995
- ----------------------------------
Lee Javitch,
Trustee
- ---------------------------------- November __, 1995
Samuel J. Korman,
Trustee
/s/ Jeffrey P. Orleans November 29, 1995
- ----------------------------------
Jeffrey P. Orleans,
Trustee
/s/ Robert G. Rogers November 29, 1995
- ----------------------------------
Robert G. Rogers,
Executive Vice President
and Trustee
/s/ Jeffrey A. Linn November 29, 1995
- ----------------------------------
Jeffrey A. Linn,
Senior Vice President -
Acquisitions and Secretary
/s/ Dante J. Massimini November 29, 1995
- ----------------------------------
Dante J. Massimini,
Senior Vice President -
Finance and Treasurer
(Principal Financial and
Accounting Officer)
<PAGE>
LOGO ERNST & YOUNG LLP // Two Commerce Square // Phone: 215-448-5000
Suite 4000 Fax: 215-448-4069
2001 Market Street
Philadelphia
Pennsylvania 19103-7096
Report of Independent Auditors
To the Partners of
Lehigh Valley Associates
We have audited the accompanying balance sheets of Lehigh Valley Associates (a
limited partnership) as of August 31, 1995 and 1994, and the related statements
of operations, partners' deficiency, and cash flows for the years then ended.
These financial statements are the responsibility of Lehigh Valley Associates'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lehigh Valley Associates at
August 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
October 20, 1995
F-1
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
August 31
1995 1994
------------------------------
<S> <C> <C>
Assets
Real estate, at cost (Notes 1 and 2):
Land $ 5,752,083 $ 5,752,083
Regional shopping center building and
building improvements 21,559,002 21,551,272
Office building 587,771 587,771
------------------------------
27,898,856 27,891,126
Less accumulated depreciation 11,899,934 11,240,992
------------------------------
15,998,922 16,650,134
Cash and cash equivalents 1,707,710 321,535
Due from tenants and others 662,926 852,084
Accrued rent (Note 1) 1,779,296 1,461,532
Prepaid expenses and other assets 709,524 608,572
------------------------------
$ 20,858,378 $ 19,893,857
==============================
Liabilities
Mortgages payable (Note 2) $ 22,226,947 $ 22,796,101
Accrued expenses and other liabilities, including
accrued interest (1995--$168,043;
1994--$172,318) 1,040,899 1,149,033
------------------------------
23,267,846 23,945,134
Partners' deficiency (2,409,468) (4,051,277)
------------------------------
$ 20,858,378 $ 19,893,857
==============================
</TABLE>
See accompanying notes.
F-2
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Year ended August 31
1995 1994
------------------------------
<S> <C> <C>
Income:
Rentals (Notes 1 and 4):
Minimum $ 9,729,591 $ 9,086,148
Percentage 773,350 771,092
------------------------------
10,502,941 9,857,240
Sundry 364,891 286,856
------------------------------
10,867,832 10,144,096
Expenses, other than depreciation and amortization:
Real estate taxes, net of tenants' reimbursements
(1995--$765,852; 1994--$692,754) 14,051 46,876
Interest (Note 2) 2,040,410 2,090,278
Management fees (Note 3) 731,156 701,419
Common area expenses, net of tenants'
reimbursements (1995--$2,038,059;
1994--$2,553,995) (195,062) (239,848)
Other property expenses 58,135 359,637
------------------------------
2,648,690 2,958,362
------------------------------
Income before depreciation and amortization 8,219,142 7,185,734
Depreciation and amortization (Note 1) 671,333 664,840
------------------------------
Net income $ 7,547,809 $ 6,520,894
==============================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Statements of Partners' Deficiency
<TABLE>
<CAPTION>
Percentage Balance
Interest Per as of
Partnership September 1,
Agreement 1993 Distributions Net Income
----------------------------------------------------------
<S> <C> <C> <C> <C>
General Partners:
Delta Ventures, Inc. 0.50% $ (18,391) $ (34,470) $ 32,605
Pennsylvania Real Estate Investment Trust 30.00 (1,103,451) (2,068,200) 1,956,268
Limited Partners:
Morris A. Kravitz Residuary Trust 9.00 (331,035) (620,460) 586,880
Myles H. Tanenbaum 8.55 (314,484) (589,437) 557,537
Jordan A. Katz 4.50 (165,518) (310,230) 293,440
Robert T. Girling 4.50 (165,518) (310,230) 293,440
Lea R. Powell, Trustee under indenture of
Arthur L. Powell 9.00 (331,035) (620,460) 586,880
Harold G. Schaeffer 4.50 (165,518) (310,230) 293,440
Adele K. Schaeffer, Trustee under indenture
of Harold G. Schaeffer 4.50 (165,518) (310,230) 293,440
Richard A. Jacoby 4.95 (182,069) (341,253) 322,784
Pennsylvania Real Estate Investment Trust 20.00 (735,634) (1,378,800) 1,304,180
----------------------------------------------------------
100.00% $(3,678,171) $(6,894,000) $ 6,520,894
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Balance Balance
as of as of
August 31, August 31,
1994 Distributions Net Income 1995
-------------------------------------------------------------
<S> <C> <C> <C> <C>
General Partners:
Delta Ventures, Inc. $ (20,256) $ (29,530) $ 37,739 $ (12,047)
Pennsylvania Real Estate Investment Trust (1,215,383) (1,771,800) 2,264,343
(722,840)
Limited Partners:
Morris A. Kravitz Residuary Trust (364,615) (531,540) 679,303 (216,852)
Myles H. Tanenbaum (346,384) (504,963) 645,338 (206,009)
Jordan A. Katz (182,308) (265,770) 339,651 (108,427)
Robert T. Girling (182,308) (265,770) 339,651 (108,427)
Lea R. Powell, Trustee under indenture of
Arthur L. Powell (364,615) (531,540) 679,303 (216,852)
Harold G. Schaeffer (182,308) (265,770) 339,651 (108,427)
Adele K. Schaeffer, Trustee under indenture
of Harold G. Schaeffer (182,308) (265,770) 339,651 (108,427)
Richard A. Jacoby (200,538) (292,347) 373,617 (119,268)
Pennsylvania Real Estate Investment Trust (810,254) (1,181,200) 1,509,562 (481,892)
-------------------------------------------------------------
$(4,051,277) $(5,906,000) $7,547,809 $(2,409,468)
=============================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended August 31
1995 1994
-------------------------------
<S> <C> <C>
Operating activities
Net income $ 7,547,809 $
6,520,894
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 671,333 664,840
Changes in operating assets and liabilities:
Due from tenants and others and accrued rent (128,606) (553,443)
Prepaid expenses and other assets (103,201) (110,066)
Accrued expenses and other liabilities (108,134) 554,884
-------------------------------
Net cash provided by operating activities 7,879,201 7,077,109
Investing activities
Net expenditures for property and equipment (17,872) (6,341)
Financing activities
Principal payments on mortgages (569,154) (520,267)
Distributions paid to partners (5,906,000) (6,894,000)
-------------------------------
Net cash used in financing activities (6,475,154) (7,414,267)
-------------------------------
Increase (decrease) in cash and cash equivalents 1,386,175 (343,499)
Cash and cash equivalents at beginning of year 321,535 665,034
-------------------------------
Cash and cash equivalents at end of year $ 1,707,710 $ 321,535
===============================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements
August 31, 1995
1. Summary of Significant Accounting Policies
Real Estate
The Partnership owns and operates a regional shopping center and an office
building (the "Property") located in Whitehall, Pennsylvania. Two retail
department stores own adjacent property upon which each has constructed a store
as part of the Property and have entered into operating agreements with the
Partnership under which they are responsible for a share of common area
expenses.
Depreciation is computed on the straight-line method over 35 years for the
shopping center and 22 years for the office building, representing the estimated
lives of such assets.
Recognition of Rental Income
Minimum rent is recognized on a straight-line basis over the lease terms
regardless of when payments are due. Accrued rent represents minimum rent
recognized in excess of payments due.
Percentage rents are accrued as income for those tenants whose sales at August
31 exceeded the minimum annual sales volumes required for percentage rents.
Income Taxes
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the limited partnership is required to be
reported in the tax returns of the partners in accordance with the terms of the
limited partnership agreement and, accordingly, no provision has been made in
the accompanying financial statements for any federal, state, or local income
taxes.
Cash Equivalents
For purposes of the Statement of Cash Flows, the Partnership considers all
highly liquid investments with maturities of three months or less when purchased
to be cash equivalents.
F-6
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.
2. Mortgages Payable
<TABLE>
<CAPTION>
Year ended August 31
1995 1994
----------------------------
<S> <C> <C>
Mortgage note on Property--payable in monthly installments
of $192,002, including interest at 9% through 2012 $19,898,791 $20,387,762
Mortgage note on Property--payable in monthly installments
of $16,909, including interest at 9-3/4%, through 2012 1,671,934 1,709,798
Mortgage note on Property--payable in monthly installments
of $4,475, including interest at 10-3/8%, through 2012 425,837 434,841
Mortgage note on office building and fringe land--
payable in monthly installments of $4,434,
including interest at 8%, through 2001 230,385 263,700
----------------------------
$22,226,947 $22,796,101
============================
</TABLE>
The above mortgages are collateralized by the respective real estate and tenant
leases.
Principal payments are due as follows:
Year ending August 31:
1996 $ 622,381
1997 677,304
1998 743,862
1999 814,890
2000 891,520
Thereafter 18,476,990
-----------
$22,226,947
===========
Interest paid on the mortgages during 1995 and 1994 amounted to $2,044,685 and
$2,093,560, respectively.
F-7
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
3. Related Party Transactions
Management fees were paid to an affiliate, pursuant to the terms of a management
agreement, at the rate of 5% of gross receipts from the Property (as defined).
In addition, an affiliate provides the center and its tenants with electricity.
4. Leases
The Partnership earns rental income under operating leases with retail stores.
Leases generally provide for minimum rentals plus percentage rentals based on
the stores' sales volume and also require each store to pay a portion of real
estate taxes and common area expenses. In addition, leases provide for the
tenants to pay utility charges to an affiliate. Lease periods generally range
from 10 to 20 years and contain various renewal options.
The Partnership also earns rental income under leases with commercial tenants
located in its office building. Such leases generally provide for the tenant to
pay minimum rentals plus a portion of increases in real estate taxes and
operating expenses. Commercial lease periods generally range from 3 to 5 years
and contain various renewal options.
The following is a schedule by year of future minimum rental payments on
noncancelable tenant operating leases as of August 31, 1995 and does not include
any amounts due as percentage rent or the exercise of renewal options under
existing leases:
Years ending August 31:
1996 $ 9,327,000
1997 8,423,000
1998 7,599,000
1999 7,358,000
2000 7,085,000
Thereafter 23,833,000
-----------
$63,625,000
===========
F-8
<PAGE>
EXHIBIT INDEX
EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ---------- ----------- ----
<S> <C> <C>
4.1 Revolving Credit Agreement dated November
3, 1994 among the Trust, CoreStates Bank,
N.A. as lender and as agent, Meridian
Bank, Midlantic Bank, N.A. and PNC Bank,
National Association.
4.2 First Amendment to Revolving Credit Agreement dated March 20, 1995
among the Trust, CoreStates Bank, N.A., as a lender and as agent,
Meridian Bank, Midlantic Bank, N.A. and PNC Bank, National Association.
4.3 Form of Revolving Credit Agreement Note.
4.4 Secured Loan Agreement dated November 9,
1994 among the Trust, CoreStates Bank,
N.A., as lender and as agent, Meridian
Bank, Midlantic Bank, N.A. and PNC Bank,
National Association.
4.5 First Amendment to Secured Loan Agreement dated March 20, 1995 among
the Trust, CoreStates Bank, N.A., as lender and as agent, Meridian
Bank, Midlantic Bank, N.A. and PNC Bank, National Association.
4.6 Form of Replacement Note pursuant to the
First Amendment to Secured Term Loan
Agreement.
4.7 Guaranty dated August 2, 1993 of the Trust in favor of CoreStates Bank,
N.A.
4.8 Guaranty dated January 27, 1994 of the Trust in favor of CoreStates
Bank, N.A.
4.9 Guaranty dated September 23, 1994 of the Trust in favor of CoreStates
Bank, N.A.
10.13 Employment Agreement dated as of October 1, 1985 between the Trust and
Jeffrey Linn.
13. "Market Price and Distribution Record" contained on the inside back
page of the Trust's 1995 Annual Report to Shareholders; "Financial
Highlights" contained on page 1 of the Trust's 1995 Annual Report to
Shareholders; the Trust's consolidated financial statements,
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ---------- ----------- ----
<S> <C> <C>
including "Notes to consolidated financial statements" and "Report of
independent public accountants", pages 12-20 of the Trust's 1995 Annual
Report to Shareholders; and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained on pages 21-23
of the Trust's 1995 Annual Report to Shareholders.
21. Listing of subsidiaries.
23.1 Consent of Arthur Andersen LLP (Independent Public Accountants).
23.2 Consent of Ernst & Young LLP (Independent Auditors).
27. Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 4.1
REVOLVING CREDIT AGREEMENT
-----------------------
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
-----------------------
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
MERIDIAN BANK
MIDLANTIC BANK, N.A.
PNC BANK, NATIONAL ASSOCIATION
Lenders
$78,000,000
Unsecured Revolving Credit
November 3, 1994
<PAGE>
REVOLVING CREDIT AGREEMENT
AGREEMENT, made this 3rd day of November, 1994, by and among
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an unincorporated association in
business trust form ("Borrower"), and CORESTATES BANK, N.A.*, a national banking
association ("Agent") in its individual capacity as a Lender and as Agent for
itself and MERIDIAN BANK, MIDLANTIC BANK, N.A., and PNC BANK, NATIONAL
ASSOCIATION (individually, including Agent, referred to as a "Lender" and
collectively referred to as "Lenders").
BACKGROUND
A. Borrower is a real estate investment trust engaged in
investment in "real estate assets," as defined in Section 856 of the Code (the
"Business"). Borrower desires to establish a committed maximum $78,000,000
unsecured revolving credit facility with Lenders for a term of 30 months,
subject to renewal as provided in this Agreement (i) to finance the acquisition,
expansion and renovation of real estate assets wholly-owned by Borrower, (ii)
for its working capital purposes (including without limitation for investments
in Ventures), and (iii) to fulfill Borrower's obligations to Ventures to obtain
Venture Loans. Lenders have agreed to extend such credit facilities to Borrower,
subject to the terms and conditions hereinafter more particularly set forth.
B. Subject to the terms and conditions hereinafter set
forth, Loans will be funded by all Lenders in accordance with
each Lender's respective Pro Rata Share.
C. Agent is both Agent and a Lender hereunder.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms. Each of the terms listed below shall
have the meaning herein ascribed to it for the purposes hereof
and for each of the Loan Documents:
"Actual Debt Service" means all interest and principal
required to have been paid on Consolidated Liabilities for any period, excluding
any final payment of principal which exceeds the periodic payments of principal
on such debt.
- --------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
"Adjusted LIBOR" means the LIBOR finally adjusted and
determined in accordance with the following formula:
[LIBOR]*
Adj. LR = --------
[1.00 - RP]
Adj. LR = Adjusted LIBOR
LIBOR = London Interbank Offered Rate
RP = Reserve Percentage pertaining to
eurocurrency liabilities
---------------
* the amount in brackets shall be rounded upwards if
necessary, to the next higher 1/16 of 1%
"Adjusted LIBOR Borrowings" and "Adjusted LIBOR Loans" mean
Advances bearing interest at a rate determined with reference to the Adjusted
LIBOR.
"Advance" means the cash which Lenders advance to Borrower or
a Venture under the Revolving Credit including draws under Letters of Credit,
all subject to and in accordance with the provisions of Article hereof.
"Affiliate" means and refers to, as applied to any Person, any
other Person directly or indirectly controlling, or through one or more Persons
is controlled by, controlling or in common control with that Person. "Control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and/or policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" means CoreStates Bank, N.A., a national banking
association, with its main office at the Northeast corner of Broad and Chestnut
Streets, Philadelphia, Pennsylvania 19101, or its successor designated pursuant
to Section hereof.
"Agreement" means this Revolving Credit Agreement, and all
schedules, exhibits, riders, extensions, supplements, amendments, or
modifications to this Revolving Credit Agreement.
"Authorized Signer" means any of the Persons listed on the
certificate to be delivered to Agent at Closing in accordance with Section 3.1.3
hereof or any replacement certificate with respect thereto subsequently
delivered to Agent.
"Bankruptcy Code" means Title 11 of the United States Code as
now or hereafter in effect, or any successor statute.
<PAGE>
"Base Rate" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day, or (b) the Federal
Funds Effective Rate in effect on such day plus 1/2%. If for any reason Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of Agent to obtain sufficient
quotations in accordance with the terms thereof, the Base Rate shall be
determined without regard to clause (b) of the preceding sentence, until the
circumstances giving rise to such inability no longer exist.
"Base Rate Borrowing" and "Base Rate Loans" mean Advances
bearing interest at a rate with reference to the Base Rate.
"Borrower" means Pennsylvania Real Estate Investment Trust, an
unincorporated association in business trust form.
"Business" shall have the meaning set forth in the
Background to this Agreement.
"Business Day" means any week day except those on which
commercial banks in Philadelphia are authorized by law to close.
"Calendar Quarter" means the three month period ending on the
last day of March, June, September and December of each year.
"Capital Lease" means any lease of any property (real,
personal or mixed) which, in conformity with GAAP, is or should be accounted for
as a capital lease on the balance sheet of the lessee.
"Cash" means money, currency or a credit balance in a
Deposit Account.
"Closing" and "Closing Date" mean the day on which all of the
conditions set forth in Article III hereof have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
from time to time, and any successor code or statute.
"Commitment Amount" means the aggregate amount of Lenders'
commitments to lend under the Revolving Credit, which amount is $78,000,000 on
the Closing Date, or such lesser amount as Borrower shall have determined
pursuant to Section 2.2.8.3 hereof.
"Company-Prepared Consolidated Financial Statements" means an
income and expense statement and balance sheet with respect to the operations
and financial condition of Borrower, which consolidate each of Borrower's
<PAGE>
subsidiaries and Borrower's Percentage Interest in all Ventures during and as of
the last day of each Fiscal Quarter, prepared and certified as true, correct and
complete by Borrower's chief financial officer.
"Consolidated Liabilities" means, at any time, the sum of (i)
all liabilities of Borrower, determined in accordance with GAAP, plus (ii)
Borrower's applicable Percentage Interest in the total liabilities of each
Venture, plus (iii) the aggregate amount of indebtedness incurred in connection
with construction in progress by Borrower or any wholly-owned subsidiary and
Borrower's applicable Percentage Interest in all such indebtedness incurred by
each Venture, to the extent any such indebtedness referred to in this clause
(iii) is not included in clauses (i) and (ii).
"Consolidated NOI" means, at any time, Funds From Operations,
plus Interest Expense (from the most recent Company-Prepared Consolidated
Financial Statements), which sum shall be appropriately adjusted on a rolling
four Fiscal Quarter historical basis by the gross revenues and operating
expenses for each income-producing property that was placed in service or
disposed of by Borrower, by any wholly-owned subsidiary of Borrower, or by any
Venture, during such period of four Fiscal Quarters.
"Contingent Liabilities" means, at any time, the sum of (i)
all indebtedness of Borrower for borrowed monies (other than indebtedness for
which Borrower's liability is limited solely to specific assets of Borrower that
are financed by such indebtedness) plus (ii) all indebtedness of others for
borrowed monies, to the extent that payment of such monies is guarantied by
Borrower (excluding Borrower's Guaranty of its Percentage Interest in the
Venture known as Laurel Mall Associates).
"Debt" means for any Person at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments
with an original maturity in excess of one year, (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued liabilities, in each case arising in the ordinary
course of business, (iv) all Debt of others secured by a lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (v) all
Debt of others guaranteed by such Person.
"Deposit Account" means a demand, time, savings, passbook or
like account with a federally insured bank or savings and loan association,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Officer" means Glenn W. Gallagher or any
other person designated in writing by Agent as its representative
for the purpose of receiving notice hereunder.
<PAGE>
"Dollars" and the symbol "$" mean the lawful money of
the United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" means each of the events set forth
in Section hereof.
"Federal Funds Effective Rate" means for any day the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
succeeding Business Day by the Federal Reserve Bank of Philadelphia, or, if such
rate is not so published for any day which is a Business Day, the average of
quotations for the day of such transactions received by Agent from three Federal
funds brokers of recognized standing selected by it.
"Fiscal Quarter" means a fiscal quarter of Borrower, currently
ending on the last day of each November, February, May, and August.
"Fiscal Year" means the fiscal year of Borrower, which
currently ends on August 31 of each year.
"Funding Date" means the Business Day on which an
Advance is made.
"Funds From Operations" means, at any time, Borrower's NOI
less gains or losses from the sale, or the restructuring of any indebtedness
secured by, real properties, plus depreciation and amortization, and after
adjustments for unconsolidated entities in which Borrower holds an equity
interest, plus provisions for losses.
"GAAP" means generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as in effect on the
date hereof, which are applicable to the circumstances as of the date of
determination and which are applied on a consistent basis.
"Governmental Approvals" means all material authorizations,
consents, approvals, licenses and exemptions of, registrations and filings with,
and reports to all governmental bodies.
"Guaranties" means Borrower's Guaranties of the Venture
Loans in favor of each Lender.
<PAGE>
"Indebtedness" means all amounts due from Borrower to Lenders
or Agent pursuant to Article and otherwise arising out of or in connection with
this Agreement or any other Loan Document.
"Interest Expense" means all payments by Borrower with respect
to interest on the Indebtedness or any other obligation of Borrower on which
interest is paid, including the interest portion of Capital Leases.
"Interest Period" means that period of time applicable
to an Adjusted LIBOR Borrowing as determined pursuant Section 2.2.5 hereof.
"Interest Rate Determination Date" means each date for
determining the interest rate for an Interest Period in respect of an Advance
based on the Adjusted LIBOR. The Interest Rate Determination Date shall be the
second London Business Day prior to the first day of the related Interest Period
for an Adjusted LIBOR Loan.
"Interest Rate Option" means the Base Rate or the Adjusted
LIBOR selected by Borrower for all or any part of the Loans as permitted by this
Agreement.
"Last Reported Fiscal Year" means, at any time, the most
recently concluded Fiscal Year of Borrower for which financial statements have
been delivered to Lenders.
"Lenders" means Agent and each Lender listed in the preamble
hereto. As used herein, the term Lenders, unless the context clearly requires to
the contrary, refers to all Lenders.
"Lenders' Costs" means all reasonable costs and expenses of
any kind paid or incurred by Agent in connection with the preparation,
execution, delivery, amendment, modification, administration or termination of
this Agreement or any other Loan Document, any amendments thereto, any
transaction contemplated herein or any existing or future related agreements and
the reasonable costs and expenses of Agent and each Lender in connection with
the preservation, enforcement, defense and protection of Lenders' rights,
remedies, obligations and liabilities in any manner concerning this Agreement or
any other Loan Document, any transaction contemplated herein or any existing or
future related agreements, including, but not limited to: (a) reasonable
attorneys' fees and other expenses paid or incurred by Agent in enforcing,
obtaining legal advice in preparing, reviewing, consummating, amending,
restructuring, extending, terminating, defending, or preserving or protecting
Agent's or Lenders' rights, remedies, obligations or liabilities in any manner
concerning, this Agreement, any Loan Document or any amendments thereto, any
transaction contemplated herein or any existing or future related agreements;
and (b) wire transfer charges in such amounts as Agent may from time to time
establish for such service.
<PAGE>
"Letter of Credit" means a letter of credit issued
pursuant to Section hereof.
"LIBOR" means the rate per annum at which deposits of Dollars
are offered to Agent by prime banks in the London Eurodollar interbank market at
or about 11:00 A.M. local time in such interbank market, two London Business
Days prior to the first day of the applicable Interest Period for a period equal
to the period of such Interest Period in an amount substantially equal to the
principal amount requested to be lent as, maintained as or converted to an
Adjusted LIBOR Loan.
"Loan Documents" means this Agreement, any Letters of Credit,
the Notes, the Guaranties, the Venture Notes, and every other certificate or
agreement of Borrower in favor of Agent or Lenders delivered pursuant to this
Agreement.
"Loan(s)" means the aggregate of all Advances under the
Revolving Credit.
"London Business Day" means any Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London and Philadelphia.
"Materially Adverse Effect" means, with respect to Borrower, a
materially adverse effect upon the business, assets, financial condition, or
results of operations of the Borrower and its subsidiaries taken as a whole, or
Borrower's ability to perform Borrower's obligations under the Loan Documents in
accordance with their respective terms.
"Maximum Available Credit" means the maximum amount of the
Loan which may be outstanding under this Agreement as determined in accordance
with Section 2.2.12 hereof.
"NOI" means Borrower's, plus Borrower's applicable Percentage
Interest of each Venture's, gross rental income minus operating and servicing
expenses derived from the operation by Borrower, or by any wholly-owned
subsidiary or Venture, of income-producing property wholly-owned by Borrower, a
subsidiary of Borrower or Venture during, and as shown on the financial
statements for, the Last Reported Fiscal Year, before Interest Expense,
depreciation and amortization.
<PAGE>
"Notes" means the notes of Borrower in favor of Lenders to
evidence Borrower's repayment obligations under this Agreement with respect to
the Revolving Credit.
"Notice of Borrowing" means a notice substantially in the form
of Schedule 2.2.2 attached hereto and made a part hereof.
"Notice of Rate Election" means a notice substantially in the
form of Schedule 2.2.3 attached hereto and made a part hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Percentage Interest" means, with respect to each Venture, the
aggregate ownership interests of Borrower and any wholly-owned subsidiary of
Borrower in such Venture.
"Person" means an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Prime Rate" means that rate of interest per annum announced
by Agent from time to time as its "prime rate" which may not represent the
lowest rate charged by Agent to other borrowers, or to any class of borrowers,
at any time, or from time to time.
"Pro Forma Debt Service" means, with respect to any period of
time, the aggregate amount of principal payments and interest during such period
on Consolidated Liabilities, calculated using the greater of (i) Actual Debt
Service or (ii) the amount of interest and principal payable, based on a 25 year
amortization schedule, on the principal amounts of such long term debt at a rate
of interest equal to the current yield to maturity of United States Treasury
obligations having a 10 year maturity plus two percent per annum.
"Project Specific Information" means an income and expense
statement and balance sheet with respect to individual income producing real
properties owned by Borrower or any subsidiary, and Borrower's Percentage
Interest in any Venture's income producing real property, disclosing gross
rental revenues, operating expenses, mortgage interest, depreciation and
amortization expenses and net operating income.
"Properties" means all real estate owned, leased or occupied
at any time by Borrower, any subsidiary of Borrower, or any Venture, and
"Property" means any single parcel of such real estate.
<PAGE>
"Pro Rata Share" means, with respect to each Lender, the ratio
of the portion of the Loans funded by such Lender to all outstanding Loans, or
if no Loans are outstanding, the percentage of the Commitment Amount set forth
on Schedule 1.1A attached hereto and made a part hereof, as the same may be
amended, from time to time, by Lenders.
"Requisite Lenders" means Lenders whose Pro Rata Shares
aggregate at least 66 2/3%.
"Reserve Percentage" means for any day that maximum percentage
(expressed as a decimal), whether or not incurred, which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System, for
determining the reserve requirement for a member bank of the Federal Reserve
System in Philadelphia with respect to the Adjusted LIBOR "Eurocurrency
liabilities" (as such term is defined in Regulation D) (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Adjusted LIBOR Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of any Lender to United States residents).
"Revolving Credit" means the facility under which Advances may
be borrowed, repaid and reborrowed, Venture Loans may be extended, and Letters
of Credit may be issued and paid, in the maximum amount of $78,000,000, all as
more fully described in Article 2 hereof.
"RICO" means the Racketeer Influenced and Corrupt Organization
Act, as amended by the Comprehensive Crime Control Act of 1984, 18 USC
ss.ss.1961-68.
"Rules" means any law, regulation, or rule of practice whether
or not having the force of law by which any Lender is bound or to which it
adheres.
"Senior Liabilities" means Borrower's obligations to
Lenders to repay the Indebtedness.
"Tangible Net Worth" means, at any time, the sum of (i)
Borrower's beneficiaries' equity (less the value of treasury stock and debt
convertible into Borrower's capital stock); (ii) Borrower's cumulative retained
earnings; and (iii) Borrower's, and Borrower's Percentage Interest in any
Venture's, accumulated depreciation and amortization; less all intangible assets
carried on the books of Borrower.
"Termination Date" means April 30, 1997 or such extension
thereof agreed to in writing by Lenders.
"Unencumbered Property Pool" means a group of no fewer than
five of Borrower's unencumbered, wholly-owned, income producing Properties with
a combined average occupancy rate of not less than 80% (as determined at the end
of each Fiscal Quarter).
<PAGE>
"Unmatured Event of Default" means and refers to any event,
act or occurrence which with the passage of time or giving of notice or both
becomes an Event of Default.
"Unused Fee" means the fees provided for in Section
2.1.5 hereof.
"Venture" means each partnership, joint venture or other
entity in which Borrower or any wholly-owned subsidiary of Borrower has a 50% or
more beneficial, or other controlling, ownership interest, a list of which, as
of the date hereof, is attached hereto as Schedule 1.1B.
"Venture Loans" means the Loans or commitments for Loans made
by Lenders to Ventures, including, without limitation, the following:
Venture Maximum Credit
------- --------------
Rancocas Limited Partnership $3,000,000
VLRC Associates 1,750,000
Big Oak Associates 4,275,000
Turren Associates 2,750,000
"Venture Note" means a promissory note executed by a Venture
to evidence any Venture Loan.
1.2 Construction of Definitions. All terms defined herein shall be
construed to include the plural or the singular, and references to persons in
the masculine or neuter gender shall refer to all persons or entities, as the
context requires.
1.3 Accounting Reports and Principles. Except for Company-prepared
Consolidated Financial Statements, the character or amount of any asset,
liability, account or reserve and of any item of income or expense to be
determined, and any consolidation or other accounting computation to be made,
and the construction of any definition containing a financial term, pursuant to
this Agreement or any other Loan Document, shall be construed, determined or
made, as the case may be, in accordance with GAAP, consistently applied, unless
such principles are inconsistent with any express provision of this Agreement.
1.4 Business Day. Whenever any payment or other obligation hereunder,
whether under the Notes or under another Loan Document, is due on a day other
than a Business Day, such shall be paid or performed on the Business Day next
following the prescribed due date, except as otherwise specifically provided for
herein to the contrary, and such extension of time shall be included in the
computation of interest and charges. Any reference made herein or in any other
Loan Document to an hour of day shall refer to the then prevailing Philadelphia,
Pennsylvania time, unless specifically provided herein to the contrary.
<PAGE>
1.5 Charging Accounts. Whenever Borrower is obligated, pursuant to
Article , hereof, or pursuant to the Notes or any other Loan Document, to make
payments of any nature to Agent or Lenders, Agent shall be entitled, and
Borrower hereby authorizes Agent to draw against any Deposit Account owned by
Borrower at Agent on account of such fees and expenses or payments due. By 10:00
a.m. on the date on which any draw is made, Agent shall deliver to Borrower a
notice setting forth, in reasonable detail, the amount of the fees, expenses
and/or payments to be satisfied by such draw, and the name or number of the
account or accounts from which the draw was made. Any such charge shall be
subject to the provisions of Section 8.3 hereof relating to the sharing of
recoveries among Lenders.
1.6 Lenders' Costs. Borrower shall, upon the request of Agent, pay
Agent the amount of all unpaid Lenders' Costs within fifteen days after such
notice. Until paid, all past due and owing interest payments, fees and all past
due Lenders' Costs shall be deemed to be part of the principal balance of the
Loan, bear interest at the rate applicable to Base Rate Loans.
1.7 Other Terms. The words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
exhibits hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Any reference to an "Article", a "Section", an "Exhibit" or
"Schedule" shall refer to the relevant Article of, Section of, Exhibit to or
Schedule to this Agreement, unless otherwise specifically indicated.
ARTICLE 2
THE LOAN
2.1 Revolving Credit.
2.1.1 Extension of Revolving Credit. Provided that no Event of
Default or Unmatured Event of Default has occurred and is continuing and subject
to the terms and conditions set forth herein, commencing on the Closing Date and
expiring on the Termination Date, Lenders severally, in accordance with their
respective Pro Rata Shares, shall extend to Borrower the Revolving Credit
pursuant to which each Lender severally shall make Advances to Borrower in
accordance with its Pro Rata Share up to an aggregate for all Lenders of the
Commitment Amount, which Borrower may from time to time, borrow, repay and
reborrow.
<PAGE>
2.1.2 Payment of Principal. The entire outstanding principal
balance of the Revolving Credit shall be paid in full on the Termination Date.
In the event the principal amount of all outstanding Advances and the face
amount of Letters of Credit issued and outstanding under Section hereof at any
time exceeds $78,000,000 in the aggregate, Borrower shall immediately pay such
excess to Agent for the benefit of Lenders, without demand or notice.
2.1.3 Payment of Interest. Interest on the Revolving Credit
shall be payable monthly, subject to Section 2.2.9 hereof in arrears to the last
Business Day of each month, with the first payment to be made on the first
Business Day of the month next following the Closing Date, and continuing
thereafter on the first Business Day of each month.
2.1.4 Revolving Credit Interest Rate Option and Notice of Rate
Election. Advances shall bear interest on the unpaid principal balance thereof
from the Funding Date to maturity (whether by acceleration or otherwise): with
respect to Base Rate Loans at the Base Rate per annum (calculated on the basis
of a 360-day year and charged for the actual number of days elapsed); and with
respect to Adjusted LIBOR Loans at the Adjusted LIBOR on the relevant Interest
Rate Determination Date plus one and eighty-five one-hundredths percent (1.85%)
per annum (calculated on the basis of a 360-day year and charged for the actual
number of days elapsed). The applicable basis for determining the Interest Rate
Option with respect to each Advance shall be selected by Borrower at the time a
Notice of Borrowing or Notice of Rate Election is given pursuant to Sections
2.2.2, and hereof.
2.1.5 Unused Fee. Borrower agrees to pay to Agent for the
benefit of Lenders a fee at an annual rate equal to one half of one percent
(0.5%) per annum of the aggregate daily average unused portion of the Revolving
Credit after Closing and until the Termination Date, payable in arrears, such
payments to be made first on the last day of the Calendar Quarter in which
Closing occurs and thereafter on the last day of each Calendar Quarter and on
the Termination Date. Provided however, that if the daily average borrowed
portion of the Revolving Credit equals or exceeds 50% of the Commitment Amount
for the Calendar Quarter then ended, the fee shall be one fourth of one percent
(0.25%) per annum for such Calendar Quarter. The Unused Fee shall be calculated
on the basis of the number of days actually elapsed in a 360 day year.
2.1.6 Notes. To evidence Borrower's obligations under the
Revolving Credit, Borrower shall execute and deliver the Notes to Lenders.
<PAGE>
2.1.7 Letters of Credit. Upon receipt of a properly executed
Notice of Borrowing submitted by Borrower to Agent at least five Business Days
before the date of issuance, Agent shall issue a Letter or Letters of Credit to
a beneficiary designated by Borrower, for the purpose of collateralizing such of
Borrower's obligations as are required to be secured by a Letter of Credit. The
aggregate face amount of issued Letters of Credit under this subsection 2.1.7
shall not exceed $5,000,000 at any time. Letters of Credit may provide for
automatic renewal absent termination by Agent, provided however, no Letter of
Credit hereunder shall be issued with an expiration date exceeding one year and
no Letter of Credit shall be issued with an expiration date after the
Termination Date. Each Letter of Credit shall be subject to the terms and
conditions of Agent's standard unsecured application and agreement in effect at
the time of the issuance of the Letter of Credit, the current form of which is
attached hereto as Schedule 2.1.7.
2.1.7.1 Letter of Credit Fee. Borrower agrees
to pay to Agent for the benefit of Lenders a letter of credit fee at an annual
rate of 1.5% of the principal face amount of each issued Letter of Credit,
payable quarterly in arrears.
2.1.7.2 Reduction of Available Revolving Credit. Letters of
Credit shall reduce, dollar-for-dollar, the available borrowings under the
Revolving Credit and, upon the termination thereof, shall increase the available
borrowings, subject to the Commitment Amount.
2.1.7.3 Draws under Letter of Credit. All draws under Letters
of Credit shall be deemed to be Advances to be repaid in accordance with the
provisions of subsection 2.1.2 hereof.
2.1.7.4 Other Documents. Borrower agrees to execute and
deliver such documents and instruments as Agent may require in connection with
each Letter of Credit.
2.1.8 Venture Loans. Provided that no Event of Default or
Unmatured Event of Default has occurred and is continuing, and subject to the
terms and conditions set forth herein, commencing on the Closing Date and
expiring on the Termination Date, Borrower may request that Loans be made to any
Venture, and Lenders severally, in accordance with their respective Pro Rata
Shares, shall extend to such Venture such Venture Loan; provided, however, that
the aggregate face amount of all outstanding Venture Loans shall not exceed
$15,000,000 at any one time, except that the aforesaid $15,000,000 sublimit and
the available borrowings under the Revolving Credit shall be reduced, dollar for
dollar, by the amount that is outstanding from time to time under the Promissory
Note dated May 2, 1992, as amended, made by Turren Associates in favor of
CoreStates Bank, N.A. (the "Turren Note"), until the Turren Note is replaced
with Venture Notes executed by Turren Associates in favor of each Lender in the
principal amount equal to each Lender's Pro Rata Share of the Venture Loan to
Turren Associates. On the date hereof, by agreement of Lenders, CoreStates Bank,
N.A. has sold participation interests to each of the other Lenders each Lender's
Pro Rata Share of the Turren Note, which participation interests shall become
<PAGE>
null and void as to any Lender upon delivery to such Lender of an executed
Venture Note for such Lender's Pro Rata Share of the Venture Loan to Turren
Associates. On the Funding Date of any Venture Loan, Borrower shall cause the
Venture which is to be the borrower of such Venture Loan to execute and deliver
to Agent a promissory note in the form attached hereto as Schedule 2.1.8A in the
principal amount equal to such Lender's Pro Rata Share of such Venture Loan and
Borrower shall execute and deliver to Agent a guaranty or guaranties of such
Venture Loan in the form attached hereto as Schedule 2.1.8B in favor of each
Lender. Each Venture Loan shall reduce, dollar for dollar, the available
borrowings under the Revolving Credit. With respect to each Venture Loan, the
applicable Venture shall select one Interest Rate option for the entire
principal amount thereof that is outstanding at any time, except that any
subsequent extension of credit made by Lenders to a Venture during an Interest
Period shall bear interest at the Base Rate until the expiration of the relevant
Interest Period.
2.2 General Provisions.
2.2.1 Advances. All Advances under this Agreement shall be
made by Lenders simultaneously and proportionately to their Pro Rata Shares, it
being understood that the obligations of Lenders for Advances are independent
and that no Lender shall be responsible for any default by any other Lender in
that other Lender's obligation to make Advances hereunder, nor shall the
commitment of any Lender be increased or decreased as a result of the default by
any other Lender in that other Lender's obligation to make Advances hereunder.
2.2.2 Notice of Borrowing. Subject to the provisions of this
Article 2, whenever Borrower desires to borrow under this Agreement, Borrower
shall deliver by telecopy to Agent a properly completed and executed Notice of
Borrowing with respect to (i) Adjusted LIBOR Loans no later than 11:00 A.M. at
least three London Business Days in advance of the proposed Funding Date, or
(ii) Base Rate Loans no later than 11:00 A.M. at least one Business Day in
advance of the proposed Funding Date. The Notice of Borrowing shall specify (i)
the proposed Funding Date (which shall be a Business Day), (ii) the amount of
the proposed Advance, (iii) whether such Advance is initially to consist of Base
Rate Loans, Adjusted LIBOR Loans or a combination thereof, and (iv) if such
Advance, or any portion thereof, is initially to be one or more Adjusted LIBOR
Loans, the amounts thereof and the initial Interest Periods therefor; provided
that the minimum amount of Advances shall be $100,000 for Base Rate Loans and
$1,000,000 for Adjusted LIBOR Loans, except for Venture Loans, which may be less
than the foregoing minimums. Advances may be continued as or converted into
Adjusted LIBOR Loans in the manner provided in Section 2.2.3 hereof upon the
submission to Agent of a properly completed and executed Notice of Rate
Election.
A Notice of Borrowing or a Notice of Rate Election for an Adjusted
LIBOR Loan shall be irrevocable on and after the related Interest Rate
Determination Date, and Borrower shall be bound to make, continue or convert an
Advance in accordance therewith.
<PAGE>
2.2.3 Notice of Rate Election; Failure to Give Notice.
Whenever Borrower desires to change or continue the Interest Rate Option on an
Advance, Borrower shall deliver to Agent a Notice of Rate Election with respect
to Adjusted LIBOR Loans no later than 11:00 A.M. at least three London Business
Days in advance of the proposed change or continuation. The Notice of Rate
Election shall specify: (i) the proposed date of change or continuation (which
shall be a Business Day); (ii) the type of Advance and amount thereof affected;
(iii) whether such interest rate change or continuation is to consist of Base
Rate Loans, Adjusted LIBOR Loans or a combination thereof; and (iv) the Interest
Periods therefor, if applicable. If at the termination of any Interest Period,
Borrower has failed to submit a Notice of Rate Election, as aforesaid, to
convert or to continue Adjusted LIBOR Loans, then such portions of the Revolving
Credit shall automatically be and become Base Rate Loans as of the termination
of the relevant Interest Period.
Upon the expiration of any Interest Period applicable to portions of
the Revolving Credit bearing interest based on the Adjusted LIBOR, such portions
of the Revolving Credit shall be deemed repaid and reborrowed upon the
submission to Agent of a properly completed and executed Notice of Rate Election
pertaining thereto within the requisite time periods for a change or
continuation of an Interest Rate Option, and the succeeding Interest Period(s)
of such continued portions of the Revolving Credit shall commence on the first
day of the Interest Period of the portions of the Revolving Credit deemed to be
reborrowed and continued.
Adjusted LIBOR Loans may be converted into Base Rate Loans only on the
expiration date of an Interest Period applicable thereto. In addition, no
outstanding portions of the Revolving Credit may be continued as, or be
converted into Base Rate Loans or Adjusted LIBOR Loans when any Event of Default
or Unmatured Event of Default has occurred and is continuing.
If on any day portions of the Revolving Credit are outstanding with
respect to which a Notice of Rate Election has not been delivered to Agent in
accordance with the terms of this Agreement specifying the basis for determining
the Interest Rate Option, then such portions of the Revolving Credit shall bear
interest at the Base Rate.
2.2.4 Funding. By 5:00 p.m. on the day Agent receives a Notice
of Borrowing pursuant to Section 2.2.2, Agent shall notify each Lender of the
proposed borrowing. Except as provided in the following paragraph, upon
satisfaction of the conditions precedent specified in Sections 3.1 (in the case
of the initial Advances) and 3.2 (in the case of all subsequent Advances), not
later than 11:00 A.M. on the Funding Date specified in the Notice of Borrowing,
each Lender shall wire transfer to such account of Agent as Agent shall
designate an amount in immediately available funds equal to the amount of each
Lender's Pro Rata Share of the Advance to be made to Borrower on such Funding
Date. Agent shall cause such Advances to be made available to Borrower on the
Funding Date pertaining thereto by depositing the amount thereof in the
designated account of Borrower with Agent.
<PAGE>
Each Lender shall make the amount of its Pro Rata Share of the Advance
available to Agent, in same day funds at the office of Agent located at Broad
and Chestnut Streets, Philadelphia, Pennsylvania, 19101, not later than 11:00
A.M. on the Funding Date. Unless Agent shall have been notified by any Lender
prior to any Funding Date in respect of any Advances that such Lender does not
intend to make available to Agent such Lender's Pro Rata Share of the Advance on
such Funding Date, Agent may assume that such Lender has made such amount
available to Borrower on such Funding Date and Agent in its sole discretion may,
but shall not be obligated to, make available to Borrower a corresponding amount
on such Funding Date by depositing the proceeds thereof in the designated
Deposit Account of Borrower with Agent. If any Lender's Pro Rata Share is not in
fact made available (either by a wire transfer to Agent or otherwise) to Agent
by such Lender, Agent shall not be required to advance to Borrower on the
Funding Date any amount not made available to Agent by a Lender; provided, that
if Agent (or any other Lender(s)) advances to Borrower on the Funding Date any
amount not made available to Agent by a Lender, Agent (or such Lender) shall
notify Borrower that Agent (or such Lender) has advanced more than its Pro Rata
Share of such Advance and that such Advance is subject to reclamation in
accordance with the provisions of this Section. Any amount so advanced shall be
deemed to be an Advance which Borrower is obligated to repay as set forth under
this Agreement; and Agent shall be entitled to recover such corresponding amount
on demand from such Lender together with interest thereon, for each day from
such Funding Date until the date such amount is paid to the Agent at the daily
average Federal Funds Effective Rate for such period. If such Lender does not
pay such corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the Borrower and the Borrower shall immediately pay
such corresponding amount to the Agent, together with interest at the Interest
Rate Option chosen by Borrower for such Advance. If such Advance was in the form
of an Adjusted LIBOR Loan, any prepayment penalty under Section 2.2.8.1 for
breakage of an Interest Period shall be paid by the Lender which failed to fund
its Pro Rata Share of such Advance.
In the event that any Lender fails to advance its Pro Rata Share of any
Advance, then such Lender's Pro Rata Share of the aggregate principal, interest,
fees and recoveries on all Advances will be reduced so as to be proportionate to
the amount such Lender did advance but will not cause a comparable reduction in
such Lender's Pro Rata Share of the expenses of collection of the Indebtedness
from Borrower or other costs or expenses relating to this Agreement. Such
reduction will not affect or limit such Lender's obligation to advance its full
Pro Rata Share of any and all future Advances or other obligations.
2.2.5 Interest Periods. In connection with each Adjusted LIBOR
Loan, Borrower shall elect an Interest Period to be applicable to such Loan,
which Interest Period shall be either a one, two, three, or six month period;
provided that:
<PAGE>
2.2.5.1 the first Interest Period for any Advance
shall commence on the Funding Date of such Advance;
2.2.5.2 except as provided in subsection 2.2.5.3
hereof, if an Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day;
2.2.5.3 any Interest Period in respect of an Adjusted
LIBOR Loan which: (i) begins on the last Business Day of a calendar month (or a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
relevant calendar month, or (ii) would expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in that
month, such Interest Period shall expire on the last Business Day of the month;
2.2.5.4 no Interest Period shall extend beyond the
Termination Date; and
2.2.5.5 excluding Venture Loans, there shall be no
more than a maximum combination of six Adjusted LIBOR Loans and Base Rate Loans
outstanding at any time.
2.2.6 Post-Maturity Interest. Any principal payments on the
Loans not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loans not paid when due, and any other amount due to
Agent or any Lender under this Agreement or any other Loan Document not paid
when due, in any case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest payable upon demand at
a rate which is 2% per annum in excess of the applicable Interest Rate until the
expiration of the then applicable Interest Period and after the expiration of
the then applicable Interest Period, at a rate which is 2% per annum in excess
of the Base Rate.
2.2.7 Adjusted LIBOR and Base Rate.
2.2.7.1 Agent shall give Lenders and Borrower prompt
notice of the Adjusted LIBOR determined for an Interest Period, and absent
manifest error, each determination of such rates by Agent shall be conclusive
and binding for all purposes hereof.
<PAGE>
2.2.7.2 If Borrower requests that all or any portion
of the outstanding Revolving Credit bear interest at the Adjusted LIBOR and (i)
Agent determines that, by reason of circumstances affecting the interbank
Eurodollar market generally, deposits in U.S. Dollars (in the applicable
amounts) are not being offered to banks in the interbank Eurodollar market for
the selected Interest Period, or (ii) the Requisite Lenders shall certify that
the relevant rates of interest referred to in the definition of Adjusted LIBOR
do not accurately reflect the cost to Lenders of making or maintaining Adjusted
LIBOR Loans for the Interest Periods therefor, then Agent shall forthwith give
notice thereof to Borrower, whereupon until Agent notifies Borrower that the
circumstances giving rise to such suspension no longer exist, (a) the obligation
of Agent to permit applicable portions of the Revolving Credit to bear interest
at the Adjusted LIBOR shall be suspended so long as such circumstances exist,
and (b) Borrower shall convert the interest rates on the applicable portions of
the outstanding Revolving Credit to the Base Rate or the available Adjusted
LIBOR on the last day of the then current Interest Period.
2.2.7.3 If, after the date of this Agreement, the
adoption of or any change in Rules, or change in the interpretation or
administration thereof, by a governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Lenders with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Lender to make or maintain or fund loans at the
Adjusted LIBOR, the affected Lender or Lenders shall promptly notify Borrower
and the interest rates on the applicable portions of the outstanding Revolving
Credit shall be deemed to have been converted to the Base Rate, or the Adjusted
LIBOR, whichever is available, on either (i) the last day of the then current
Interest Period if Lenders may lawfully continue to maintain loans at the
Adjusted LIBOR to such day, or (ii) immediately if Lenders may not lawfully
continue to maintain loans at the Adjusted LIBOR to such day. The affected
Lender will use its best efforts to designate a different lending office if such
office may lawfully continue to maintain loans at the Adjusted LIBOR through the
end of the then current Interest Period. After Borrower's receipt of notice of
the illegality or impossibility for any Lender to make, maintain or fund loans
at the Adjusted LIBOR, Borrower shall not request future Adjusted LIBOR Loans
until the affected Lender or Lenders shall have notified Borrower of the absence
or removal of such illegality or impossibility.
<PAGE>
2.2.7.4 If, after the date of this Agreement, any
governmental authority, central bank or other comparable authority shall at any
time impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), any tax (including without limitation, any United States interest
equalization tax or similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with respect thereto),
duty, charge, fee, deduction, withholding, special deposit or similar
requirement against assets of, deposits with, or for the account of, or credit
extended by, any Lender, or shall impose on any Lender or the interbank
Eurodollar market any other condition affecting loans at the Adjusted LIBOR, and
the result of any of the foregoing is to increase the cost to any Lender of
making or maintaining the interest rate at the Adjusted LIBOR or to reduce the
amount of any sum received or receivable by any Lender under this Agreement, the
Notes or the Venture Notes by an amount deemed by such Lender to be material,
then within five days after demand by such Lender, Borrower shall pay to Agent
such additional amount or amounts as will compensate such Lender for such
increased cost or reduction. Agent will promptly notify Borrower of any event of
which it has knowledge occurring after the date hereof, which will entitle any
Lender to compensation pursuant to this subsection 2.2.7.4. A certificate of
Agent claiming compensation under this subsection 2.2.7.4 and setting forth the
additional amount or amounts to be paid to Lenders hereunder shall be conclusive
in the absence of manifest error.
2.2.7.5 The Adjusted LIBOR shall be adjusted
automatically on and as of the effective day of any change in the relevant
Reserve Percentage.
2.2.7.6 Promptly upon notice from Agent to Borrower,
Borrower will pay, prior to the date on which penalties attach thereto, all
present and future stamp, documentary and other similar taxes, levies, or costs
and charges whatsoever imposed, assessed, levied or collected on or in respect
of the Loans solely as a result of the interest rate being determined by
reference to the Adjusted LIBOR and/or the provisions of this Agreement relating
to the Adjusted LIBOR and/or the recording, registration, notarization or other
formalization of any thereof and/or payments of principal, interest or other
amounts made on or in respect of a Loan when the interest rate is determined by
reference to the Adjusted LIBOR (all such taxes, levies, costs and charges being
herein collectively called "Eurodollar Rate Tax"). Promptly after the date on
which payment of any such Eurodollar Rate Tax is due pursuant to applicable law,
Borrower will, at the request of Agent, furnish to Agent evidence, in form and
substance satisfactory to Agent, that Borrower has met its obligation under this
subsection 2.2.7.6. Borrower will indemnify each Lender against, and reimburse
each Lender on demand for, any Eurodollar Rate Tax, as determined by such Lender
in its good faith discretion. Such Lender shall provide Borrower with
appropriate receipts for any payments or reimbursements made by Borrower
pursuant to this subsection 2.2.7.6. A certificate of Agent (or a Lender) as to
any amount payable pursuant to this Section shall, absent manifest error, be
final, conclusive and binding on all parties hereto.
<PAGE>
2.2.7.7 If Agent or any Lender shall determine that
(i) any current Rule, law, regulation, or guideline, the adoption or imposition
of any Rules, law, regulation, or guideline any change in any Rules, law,
regulation or guideline, or the adoption, imposition or change in the
interpretation or administration thereof by a governmental authority, central
bank or comparable agency charged with the interpretation and administration
thereof, or (ii) compliance by any Lender (or any lending office or any holding
company of a Lender) with any request, guideline or directive whether or not
having the force of law regarding special deposit, capital adequacy, risk based
capital, capital or reserve maintenance, capital ratio, or similar requirements
against loans or loan commitments or any commitments to extend credit or other
assets of or any deposits or other liabilities taken or entered into by Lenders
(including the capital adequacy guidelines promulgated by the Board of Governors
of the Federal Reserve System) and the result of any event referred to in
clauses (i) or (ii) above (x) shall be to increase the cost to any Lender of
making or maintaining, or to impose upon any Lender or increase any capital
requirement applicable as a result of the making or maintenance of, the Loan or
the obligation of Borrower hereunder or (y) has or would have the effect of
reducing the rate of return or amounts receivable hereunder on any Lender's (or
any holding company's) Pro Rata Share of any Loan as a consequence of its
obligations pursuant to this Agreement or Loans made by any Lender pursuant
hereto to a level below that which any Lender (or any Lender's holding company)
could have achieved but for such adoption, imposition, change or compliance
(taking into consideration such Lender's policies and the policies of such
Lender's holding company with respect to capital adequacy) by an amount deemed
by such holder to be material (which adoption, imposition, change, or increase
in capital requirements or reduction in amounts receivable may be determined by
Agent's reasonable allocation of the aggregate of such cost increase, capital
increase or imposition or reductions in amounts receivable resulting from such
events), then, from time to time, Borrower shall pay to such Lender, on demand
by Lender as set forth below, such additional amount or amounts as will be
necessary to restore the rate of return to such Lender from the date of such
change, together with interest on such amount from the date demanded until
payment thereof in full at the rate provided in this Agreement. Each Lender (or
Lender's holding company) shall be entitled to compensation pursuant to this
subsection 2.2.7.7. A certificate of each Lender claiming compensation under
this subsection 2.2.7.7 and setting forth the increased cost, reduction in
amounts receivable, additional amount or amounts necessary to compensate any
Lender (or any Lender's holding company) hereunder shall be delivered to
Borrower and shall be conclusive in the absence of manifest error. Borrower
shall pay each Lender the amount shown as due on any such certificate delivered
by such Lender within 10 days after Borrower's receipt of same. If any Lender
demands compensation under this Section, Borrower may, upon 10 Business Days'
prior notice to Agent, prepay in full, in accordance with subsection 2.2.8
hereof, the then outstanding: (1) Base Rate Loans together with accrued interest
thereon to the date of prepayment without penalty; and (ii) Adjusted LIBOR Loans
together with accrued interest thereon to the date of prepayment along with the
respective prepayment premium as provided in subsection 2.2.8.4 hereof, in each
case payable to such Lender. Concurrently with prepaying such Base Rate Loans or
Adjusted LIBOR Loans, Borrower may borrow from Lenders Advances at an Interest
Rate Option not so affected.
<PAGE>
2.2.7.8 Failure on the part of any Lender to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender's right to demand compensation with
respect to such period or any other period. The protection of this Section shall
be available to each Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed.
2.2.7.9 The Base Rate shall be determined and
adjusted daily.
2.2.7.10 If any Lender shall demand compensation as a
result of the events or conditions described in subsections 2.2.7.4, 2.2.7.6, or
2.2.7.7 hereof, and such events or conditions have not affected the other
Lenders or the other Lenders have not demanded compensation therefor, Borrower
shall have the option to prepay the portion of the Loans, together with accrued
and unpaid interest and any applicable prepayment premium, funded by the
affected Lender. Upon prepayment in full to the affected Lender, such Lender
shall be discharged from all of its duties and obligations as a Lender under
this Agreement. Agent shall thereupon appoint a successor Lender acceptable to
Borrower, whose assent shall not be unreasonably withheld, which successor
Lender shall become vested with all the rights, powers, privileges and duties of
the removed Lender upon execution of a counterpart signature page hereof. In the
event no successor Lender is obtained, the Commitment Amount shall be reduced by
the amount of the departing Lender's Pro Rata Share of the former Commitment
Amount during any period for which there is no successor Lender. Upon any such
change in Commitment Amount, the Pro Rata Share of the remaining Lenders shall
change to reflect the absence of the departing Lender's Pro Rata Share.
2.2.8 Prepayment; Repayments; Prepayment Premium.
2.2.8.1 Voluntary Prepayments. All voluntary
prepayments shall be applied among the Lenders in accordance with the Pro Rata
Share of each. In connection with each voluntary prepayment:
(a) Borrower shall provide Agent with at
least one (1) Business Day prior notice of its intention to prepay, specifying
the amount and date of such payment.
(b) Borrower shall concurrently with any
prepayment in full of the Revolving Credit pay the full amount of all interest
accrued on the Revolving Credit and accrued fees (including without limitation
the Unused Fee attributable to the expired portion of the period with respect to
which such fees have not yet been paid), and payments received shall be applied
first to fees, then to accrued interest and thereafter in reduction of
principal.
<PAGE>
(c) Each prepayment of principal shall be in
an amount equal to at least One Million Dollars ($1,000,000.00) (exclusive of
the Interest and fees payable in connection therewith and of the other amounts
payable pursuant to this Agreement upon a prepayment).
In the event Borrower makes a prepayment (whether voluntary or mandatory) of any
portion of the Loans bearing interest at a rate based on the Adjusted LIBOR
during a specified Interest Period on a day other than the last day of such
Interest Period, Borrower will pay to the Agent upon demand, for the account of
the affected Lenders, any cost or expense incurred as a result of such
prepayment. Each affected Lender shall certify the amount of such cost or
expense to Borrower and provide Borrower with a written statement setting forth
the cost or expense claimed and the calculations used in determining such loss
and expense, which certification and statement shall be conclusive in the
absence of manifest error.
Prepayments shall be applied first to interest (to the extent then payable),
then to principal with respect to the portions of the Loans accruing interest at
a rate based upon the Base Rate, and then to principal with respect to those
portions of the Loans accruing interest at a rate based upon the Adjusted LIBOR
and among such portions of the Loans accruing interest at rates based upon the
Adjusted LIBOR to such portions with the earliest expiring Interest Periods.
2.2.8.2 Funding Losses. If the Borrower fails to
borrow any Adjusted LIBOR Loans after a Notice of Borrowing or Notice of Rate
Election has been given to Agent as provided in this Article , Borrower shall
reimburse each Lender on demand for any resulting loss or expense incurred by it
(or by any existing or prospective participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, provided that such Lender shall have delivered to
the Borrower a certificate as to the amount of such loss or expense and
specifying the calculation thereof, which certificate shall be conclusive in the
absence of manifest error.
2.2.8.3 Termination or Reduction in Commitments.
Borrower shall have the right without premium or penalty except as provided in
subsection 2.2.8.1 hereof, upon not less than three Business Days' prior written
notice to Agent, at any time after the Closing Date to reduce or terminate any
or all of the commitments of the Lenders regarding the Revolving Credit. Any
voluntary termination or reduction in the Commitment Amount shall permanently
reduce the Commitment Amount. No such reduction in Commitment Amount shall be in
an amount less than $3,000,000. All voluntary reductions of Commitment Amount
shall effect a pro rata reduction of each Lender's commitment. If Borrower
desires to terminate or reduce the Commitment Amount as aforesaid, Borrower
shall execute and deliver to Agent such documents and instruments as Agent shall
require.
<PAGE>
2.2.9 Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Notes shall be made by Borrower
without notice, set off or counterclaim and in immediately available same day
funds and delivered to Agent not later than 12:00 noon on the date due at its
office located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19101
for the account of Lenders; funds received by Agent after that time shall be
deemed to have been paid by Borrower on the next succeeding Business Day.
2.2.10 Apportionment of Payments. Aggregate principal and
interest payments in respect of Loans shall be apportioned among all outstanding
Loans to which such payments relate, proportionately to each Lender's respective
Pro Rata Share except to the extent a Lender fails to fund its portion of such
Loan (in which case such Lender shall be entitled to a portion of principal and
interest payments determined with respect to the ratio of Loans made by it to
all outstanding Loans). Agent shall within one Business Day distribute to each
Lender its share of all payments received by Agent for the benefit of Lenders.
2.2.11 Use of Proceeds. The Revolving Credit shall be used
solely by Borrower (i) to finance the acquisition, expansion and renovation of
real estate assets wholly-owned by Borrower, (ii) for its working capital
purposes (including without limitation for investments in Ventures), and (iii)
to fulfill Borrower's obligations to Ventures to obtain Venture Loans.
2.2.12 Maximum Available Credit. Notwithstanding anything
herein to the contrary, the maximum amount of the Loans to Borrower that may be
outstanding at any one time shall not exceed the Commitment Amount, less (i) the
aggregate maximum amount of all Venture Loans then outstanding (including all
unfunded portions thereof), and (ii) the face amount of all outstanding Letters
of Credit.
2.2.13 Conditional Payment. Borrower agrees that checks and
other instruments received by Agent on behalf of Lenders or by any Lender in
payment or on account of the Indebtedness constitute only conditional payment
until such items are actually paid to Agent or such Lender.
<PAGE>
2.2.14 Postponement of Termination Date. If Borrower desires
to extend the Termination Date of this Agreement, Borrower shall deliver to
Agent a written request therefor not later than January 1 of the calendar year
that immediately precedes the calendar year of the then-current Termination
Date. If such request is made on or before January 1, 1996, the request shall be
to extend the Termination Date to August 31, 1998. Any subsequent request shall
be to extend the Termination Date by 12 months. Agent shall advise Borrower in
writing, not later than March 1 of the calendar year that immediately precedes
the calendar year of the then-current Termination Date, whether Lenders have
approved such request, which approval shall be in Lenders' sole discretion. If
Lenders approve such request, the Termination Date shall be postponed to August
31, 1998 or for 12 months, as applicable, and Borrower, Agent, and Lenders shall
promptly execute and deliver such documentation as Agent may require to evidence
such postponement. If Agent does not give Borrower written notice of Lenders'
approval of the requested postponement, the then-current Termination Date shall
remain unchanged.
ARTICLE 3
CONDITIONS PRECEDENT
The performance by Lenders of any of their obligations hereunder are
subject to the following conditions precedent:
3.1 Initial Funding of the Loan. Borrower shall deliver or cause to be
delivered to Agent on the Closing Date (except as otherwise indicated herein),
in form and substance satisfactory to Agent and its counsel, in addition to this
Agreement, the following documents and instruments and the following
transactions shall have been consummated:
3.1.1 The Notes;
3.1.2 A certified copy of Borrower's Trust Agreement and
resolutions adopted by the Board of Trustees authorizing the execution, delivery
and performance of this Agreement, the Notes, all other Loan Documents, and all
other documents and instruments required by Agent for the implementation of this
Agreement to which Borrower is a party, all certified by a trustee or officer of
Borrower to be true and correct copies of the originals and to be in full force
and effect as of the Closing Date;
3.1.3 An incumbency and signature certificate with respect to
each of the trustees of Borrower authorized to execute and deliver this
Agreement, the Notes, the other Loan Documents, and all other documents and
instruments required by Agent for the implementation of this Agreement and to be
the Authorized Signers;
3.1.4 A copy of the Partnership Actions executed by the
general partner(s) of each Venture authorizing the execution, delivery and
performance of the respective Venture Notes by each Venture, together with
copies of each Venture's partnership agreement;
<PAGE>
3.1.5 The opinion of Borrower's and Borrower's subsidiarys'
counsel, in form and substance acceptable to Lenders in their reasonable
judgment;
3.1.6 A Notice of Borrowing with respect to any Advances and
Venture Loans requested as of the Closing Date;
3.1.7 Venture Notes evidencing, and Borrower's Guaranties of,
any Venture Loans then requested by Borrower.
3.1.8 Such additional documents or instruments as may be
required by this Agreement or as Agent may reasonably require.
3.2 All Loan Fundings. On the Funding Date of any Advance, Venture Loan
or issuance date of any Letter of Credit: (a) Agent shall have received a Notice
of Borrowing as required by Section 2.2.2; (b) the representations and
warranties set forth in Articles 4 and 4A hereof shall be true and correct on
and as of such date, with the same effect as though made on and as of such date,
except to the extent such representations and warranties relate to an earlier
date or changes have been disclosed to all Lenders and not objected to by
Requisite Lenders; (c) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing; (d) Borrower shall be in compliance with all of
the terms and conditions hereof, of the Notes, and of all other Loan Documents,
in each case on and as of the date of the performance of such obligations by
Lenders; and (e) with respect to each Venture Loan, Borrower shall cause to be
delivered to Agent the organizational documents and all amendments thereto of
the Venture receiving the Venture Loan, a copy of the action or resolutions of
such Venture authorizing the execution, delivery and performance of the Venture
Notes to be executed by such Venture, and a signature and incumbency certificate
with respect to the officers or partners of the entities signing on behalf of
such Venture, each certified as true, complete and correct as of the Funding
Date of such Venture Loan.
Each Advance, Venture Loan and issuance of a Letter of Credit shall be
deemed to constitute a representation and warranty by Borrower on the respective
Funding Date or issuance date as to the matters specified in paragraphs (b), (c)
and (d) of this Section. Continuations and conversions of outstanding portions
of the Revolving Credit shall not be deemed to be new borrowings for purposes of
this Section.
<PAGE>
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES.
4.1 Borrower represents and warrants to each Lender as
follows:
4.1.1 Good Standing. Borrower is a "real estate investment
trust" as defined in Section 856 of the Code; has the power and authority to own
and operate Borrower's Properties and to carry on Borrower's Business where and
as contemplated; is an unincorporated association in business trust form duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business in, and is in good standing in,
every jurisdiction where the nature of Borrower's Business requires such
qualification.
4.1.2 Power and Authority. The making, execution, issuance and
performance by Borrower of this Agreement, the Notes, and the other Loan
Documents to which Borrower is a party, have been duly authorized by all
necessary action and will not violate any provision of law or regulation or of
the trust agreement of Borrower; will not violate any agreement, trust or other
indenture or instrument to which Borrower is a party or by which Borrower or any
of its property is bound. This Agreement, the Notes and the other Loan Documents
have been duly executed and delivered by Borrower and constitute legal, valid
and binding obligations of Borrower, enforceable in accordance with their
respective terms.
4.1.3 Financial Condition. The audited balance sheet of
Borrower together with income and surplus statements as at and for the year
ended August 31, 1993 and the unaudited balance sheet of Borrower together with
income and surplus statements as at and for the nine months ended May 31, 1994
heretofore furnished to Agent, are complete and correct in all respects, have
been prepared in accordance with GAAP, consistently applied, and fairly present
the financial condition of Borrower as of said dates and the results of
Borrower's operations for the periods then ended. Except as set forth on such
financial statements, Borrower does not have any fixed, accrued or contingent
obligation or liability for taxes or otherwise that is not disclosed or reserved
against on its balance sheets. Borrower has filed all federal, state and local
tax returns required to be filed by it with any taxing authority. Since May 31,
1994, there has been no material adverse change in the condition of Borrower's
financial position or otherwise from that set forth in the balance sheet as of
said date. Borrower does not believe, in the exercise of reasonable business
judgment, that there has been or will likely be a change relating to the
Business of Borrower that would cause a Materially Adverse Effect on Borrower.
Borrower is not aware of any additional tax assessment or tax to be assessed
that would have a Material Adverse Effect on the financial condition of
Borrower.
<PAGE>
4.1.4 No Litigation. Except as set forth on Schedule 4.1.4
hereto, there are no suits or proceedings pending, or, to the knowledge of
Borrower, threatened against or affecting Borrower, and Borrower is not in
default in the performance of any agreement to which Borrower may be a party or
by which Borrower is bound, or with respect to any order, writ, injunction, or
any decree of any court, or any federal, state, municipal or other government
agency or instrumentality, domestic or foreign, which is likely to have a
Materially Adverse Effect on Borrower.
4.1.5 Compliance. Borrower has all Governmental Approvals
necessary for the conduct of Borrower's Business, and the conduct of Borrower's
Business is not and has not been in violation of any such Governmental Approvals
or any applicable law, rule, regulation, judgment, decree or order, the failure
to obtain or with which to comply would, in any such case, have a Materially
Adverse Effect on Borrower. Borrower does not require any Governmental Approvals
to enter into, or perform under, this Agreement, the Notes or any other Loan
Document.
4.1.6 Compliance with Regulations T, U and X. Borrower is not
engaged principally, or as one of Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meanings of Regulations T, U and X of the Board of Governors
of the Federal Reserve System).
4.1.7 ERISA. With respect to each employee pension benefit
plan (within the meaning of Section 3(2) of ERISA other than any "multi-employer
plan" within the meaning of Section 3(37) of ERISA) (hereinafter, a "Plan"),
maintained for employees of Borrower or of any trade or business (whether or not
incorporated) which is under common control with Borrower (within the meaning of
Section 4001(b)(1) of ERISA), (i) there is no accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), as of
the last day of the most recent plan year of such Plan heretofore ended, taking
into account contributions made or to be made within the time prescribed by
Section 412(c)(10) of the Code; (ii) each such Plan has been maintained in
accordance with its terms and ERISA; and (iii) there has been no "reportable
event" within the meaning of Section 4043 of ERISA and the regulations
thereunder for which the 30-day notice requirement has not been waived. Borrower
has not incurred any liability to the PBGC other than required insurance
premiums, all of which, that have become due as of the date hereof, have been
paid. Borrower is not a party to any multi-employer plan.
4.1.8 Environmental.
Except as set forth in Schedule 4.1.8 or where failure to comply would
not have or result in a Materially Adverse Effect on Borrower or the conduct of
Borrower's Business;
<PAGE>
4.1.8.1 Borrower and each Venture has, to the best of
Borrower's knowledge, in the conduct of Borrower's Business, and the ownership
and use of the Properties, complied, in all respects, with all federal, state
and local, laws, rules, regulations, judicial decisions and decrees pertaining
to the use, storage or disposal of hazardous waste or toxic materials.
4.1.8.2 To the best of Borrower's knowledge: (i) no
Hazardous Substance, is present on any of the Properties in any quantity in
excess of those allowed by applicable law; (ii) neither Borrower nor any Venture
has been identified in any litigation, administrative proceedings or
investigation as a responsible party for any liability under any Environmental
Law; (iii) all materials that are located on any of the Properties in lawful
amounts are properly stored and maintained in containers appropriate for such
purposes. For purposes of this Agreement, the term "Environmental Law" means any
and all applicable Federal, State and local environmental statutes, laws,
ordinances, rules and regulations, whether now existing or hereafter enacted,
together with all amendments, modifications, and supplements thereto, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. ss.9601, as amended by the Superfund
Amendments and Re-authorization Act of 1986 (Pub. L. No. 99-499, 100 Stat. 1613
(1986) (SARA) or 40 CFR Part 261, whichever is applicable) and the term
"Hazardous Substance" means all contaminants, hazardous substances, pollutants,
hazardous waste, residual waste, solid waste, or similar substances or wastes
which may be the subject of any Environmental Law.
4.1.9 Other Contractual Obligations. The execution and
delivery of this Agreement does not, and the performance by Borrower of its
obligations and covenants under this Agreement will not, violate any other
contractual obligation of Borrower.
4.1.10 Investment Company Act. Borrower is not an
Investment Company within the meaning of the Investment Company
Act of 1940.
4.1.11 Public Utility Holding Company Act. Borrower
is not a Public Utility Holding Company within the meaning of the
Public Utility Holding Company Act.
4.1.12 RICO. To the best of Borrower's knowledge, Borrower has
not engaged in any conduct or taken or omitted to take any action which violates
RICO.
<PAGE>
4.2 Accuracy of Representations; No Default. The information regarding
the Borrower or any Venture set forth herein and on each of the Schedules
hereto, in the Notes, the other Loan Documents and each document delivered by
the Borrower or any Venture to Agent in connection herewith is complete and
accurate and contains full and true disclosure of pertinent financial and other
information in connection with the Loans. None of the foregoing contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the information contained herein or therein not misleading or
incomplete. No Event of Default or Unmatured Event of Default hereunder, under
the Notes or the other Loan Documents, has occurred.
ARTICLE 4A
BORROWER'S REPRESENTATIONS AND WARRANTIES
REGARDING THE VENTURES.
4A.1 Borrower, as the holder of a 50% or more beneficial, or other
controlling, ownership in each of the Ventures, represents and warrants to each
Lender as follows with respect to each Venture which has executed a Venture
Note:
4A.1.1 Good Standing. Except as set forth on Schedule 4A.1.1,
each Venture is a partnership, corporation, joint venture or other entity, as
applicable, and is duly organized and validly existing under the laws of its
state of formation; has the power and authority to own and operate its
respective Properties and to carry on its respective business where and as
contemplated; is duly qualified to do business in, and is in good standing in,
every jurisdiction where the nature of its business requires such qualification.
4A.1.2 Power and Authority. The making, execution, issuance
and performance by each Venture of its respective Venture Notes have been duly
authorized by all necessary action and will not violate any provision of law or
regulation or of the organizational documents of such Venture; will not violate
any agreement, trust or other indenture or instrument to which such Venture is a
party or by which such Venture or any of its property is bound. Each Venture
Note has been duly executed and delivered by the respective Venture and
constitutes the legal, valid and binding obligation of such Venture, enforceable
in accordance with its respective terms.
4A.1.3 No Litigation. To the best of Borrower's knowledge, and
except as set forth on Schedule 4.1.4 hereto, there are no suits or proceedings
pending, or, to the knowledge of Borrower, threatened against or affecting any
Venture, and none of the Ventures is in default in the performance of any
agreement to which such Venture may be a party or by which such Venture is
bound, or with respect to any order, writ, injunction, or any decree of any
court, or any federal, state, municipal or other government agency or
instrumentality, domestic or foreign, which is likely to have a Materially
Adverse Effect on such Venture.
<PAGE>
4A.1.4 Compliance. To the best of Borrower's knowledge, each
of the Ventures has all Governmental Approvals necessary for the conduct of
their respective businesses, and the conduct of their respective businesses is
not and has not been in violation of any such Governmental Approvals or any
applicable law, rule, regulation, judgment, decree or order, the failure to
obtain or with which to comply with would, in any such case, have a Materially
Adverse Effect on any Venture. No Venture requires any Governmental Approvals to
enter into, or perform under its respective Venture Notes.
4A.1.5 Compliance with Regulations T, U and X. No Venture is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meanings of Regulations T, U and X of the Board of Governors of the Federal
Reserve System).
4A.1.6 ERISA. With respect to each employee pension benefit
plan (within the meaning of Section 3(2) of ERISA other than any "multi-employer
plan" within the meaning of Section 3(37) of ERISA) (hereinafter, a "Plan"),
maintained for employees of any Venture or of any trade or business (whether or
not incorporated) which is under common control with such Venture (within the
meaning of Section 4001(b)(1) of ERISA), (i) there is no accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), as of the last day of the most recent plan year of such Plan heretofore
ended, taking into account contributions made or to be made within the time
prescribed by Section 412(c)(10) of the Code; (ii) each such Plan has been
maintained in accordance with its terms and ERISA; and (iii) there has been no
"reportable event" within the meaning of Section 4043 of ERISA and the
regulations thereunder for which the 30-day notice requirement has not been
waived. No Venture has incurred any liability to the PBGC other than required
insurance premiums, all of which, that have become due as of the date hereof,
have been paid. No Venture is a party to any multi-employer plan.
4A.1.7 Other Contractual Obligations. To the best of
Borrower's knowledge, the execution by each Venture and delivery of such
Venture's Venture Notes does not, and the performance by such Venture of its
obligations and covenants thereunder will not, violate any other contractual
obligation of such Venture.
4A.1.8 Investment Company Act. No Venture is an
Investment Company within the meaning of the Investment Company
Act of 1940.
4A.1.9 Public Utility Holding Company Act. No
Venture is a Public Utility Holding Company within the meaning of
the Public Utility Holding Company Act.
4A.1.10 RICO. To the best of Borrower's knowledge, no Venture
has engaged in any conduct or taken or omitted to take any action which violates
RICO.
<PAGE>
4A.2 Accuracy of Representations; No Default. The information regarding
any Venture set forth herein and on each of the Schedules hereto, in the Venture
Notes and each document delivered by any Venture to Agent in connection herewith
is complete and accurate and contains full and true disclosure of pertinent
financial and other information in connection with the Venture Loans. None of
the foregoing contains any untrue statement of a material fact or omits to state
a material fact necessary to make the information contained herein or therein
not misleading or incomplete. No Event of Default or Unmatured Event of Default
hereunder or under the Venture Notes has occurred.
ARTICLE 5
AFFIRMATIVE COVENANTS
5.1 Borrower's Covenants. As long as any portion of the Indebtedness or
any Venture Loan remains outstanding and unpaid, Lenders have any obligation to
extend Advances, or any Letter of Credit remains outstanding hereunder, Borrower
covenants and agrees that, in the absence of prior written consent of Agent,
Borrower shall:
5.1.1 Maintain the ratio of (a) Consolidated Liabilities, as
reported in Borrower's most recent Company-Prepared Consolidated Financial
Statements, plus Contingent Liabilities to (b) Consolidated NOI at no more than
6.0 to 1; provided however, that (i) upon Borrower's successful completion of a
public offering of equity securities of Borrower, such ratio shall be maintained
at no more that 5.0 to 1 and (ii) on and after August 31, 1996, if Borrower has
not completed a public offering of its equity securities, Borrower shall
maintain the ratio at no more than 5.5 to 1;
5.1.2 Maintain Consolidated NOI at no less than $25,000,000
tested quarterly at the end of each Fiscal Quarter on a rolling four Fiscal
Quarter historical basis, and provide comparative Consolidated NOI calculations
for the same Fiscal Quarter of the prior Fiscal Year on a rolling four Fiscal
Quarter historical basis, and cause Consolidated NOI during any period of four
consecutive Fiscal Quarters which ends with any Fiscal Quarter to be at least
90% of Consolidated NOI during the four Fiscal Quarters determined at the end of
the immediately prior Fiscal Quarter;
5.1.3 Maintain NOI generated by the Unencumbered Property Pool
("Unencumbered NOI") at not less than $10,500,000 to be tested quarterly on a
rolling four Fiscal Quarter historical basis, and cause the ratio of Senior
Liabilities to Unencumbered NOI to be no more than 7.5 to 1 to be tested
annually on and as of the last day of each Fiscal Year upon Borrower's
submission of Project Specific Information;
<PAGE>
5.1.4 Maintain Tangible Net Worth at not less than
$115,000,000, or such larger amount determined by adding thereto amounts equal
to 75% of the gross proceeds from Borrower's sale of equity securities from time
to time;
5.1.5 Maintain the ratio of Consolidated NOI to Actual Debt
Service at not less than 1.5 to 1, tested at the end of each Fiscal Quarter on a
rolling four Fiscal Quarter historical basis;
5.1.6 Maintain, as of the last day of each Fiscal Quarter, the
ratio of Consolidated NOI to Pro Forma Debt Service with respect to the next
four (4) Fiscal Quarters at no less than 1.35 to 1;
5.1.7 Deliver to Lenders, within 60 days after the end of each
of the first three (3) Fiscal Quarters, an income and expense statement, balance
sheet, and schedule of sources and uses of funds, with respect to the operations
and financial condition of Borrower, and each of its subsidiaries during and as
of the last day of such fiscal quarter, prepared and certified by Borrower's
chief financial officer;
5.1.8 Deliver to Lenders, within 60 days after the
end of each Fiscal Quarter, Company-Prepared Consolidated
Financial Statements;
5.1.9 Deliver to Lenders, within 120 days after the end of
each Fiscal Year, audited consolidated financial statements of Borrower,
including an income and expense statement, balance sheet and schedule of sources
and uses of funds, which financial statements shall include the unqualified
opinion of Arthur Andersen & Co. or another national firm of certified public
accountants reasonably acceptable to Agent; provided that if such financial
statements are prepared by another national firm of certified public accountants
that is reasonably acceptable to Agent, such statements may include a
qualification with respect to the results of prior fiscal years for which such
other accountants were not engaged by Borrower;
5.1.10 Deliver to Lenders, within 120 days after the end of
each Fiscal Year of Borrower, Project Specific Information for such Fiscal Year
prepared and certified by the chief financial officer of Borrower;
5.1.11 Deliver to Lenders, at the time each financial
statement is required to be delivered pursuant to Sections 5.1.7 and 5.1.9
hereof, a covenant compliance certificate, together with a certification, signed
by a senior executive officer of Borrower, both in the form of Schedule 5.1.11
attached hereto, certifying to Lender that there exists no breach of any of the
covenants contained in this Article 5 or in Article 6 hereof;
<PAGE>
5.1.12 With reasonable promptness furnish to Lenders all
financial and business information provided to beneficiaries of Borrower, the
Securities and Exchange Commission, and the American Stock Exchange, and such
additional information and data concerning the business and financial condition
of Borrower as may be reasonably requested by Lenders; afford Lenders or their
agents reasonable access to the financial books and records, computer records
and properties of Borrower at all reasonable times after reasonable notice and
permit Lenders or their agents to make copies and abstracts of same and to
remove such copies; and abstracts from Borrower's premises and permit Lenders or
their agents the right to converse directly with the independent accounting firm
then engaged by Borrower to prepare its audited financial statements;
5.1.13 Cause the prompt payment and discharge of all material
taxes, governmental charges and assessments levied and assessed or imposed upon
Borrower's or any Venture's assets and pay all other material claims which, if
unpaid, might become liens or charges upon Borrower's or any Venture's assets,
provided, however, that nothing in this Section shall require Borrower or any
Venture to pay any such taxes, claims or assessments which are not overdue or
which are being contested in good faith and by appropriate proceedings, with
reserves therefor in an amount acceptable to Agent being available or having
been set aside;
5.1.14 Maintain the existence of Borrower as a "real estate
investment trust" under Section 856 of the Code and all necessary foreign
qualifications in good standing; continue to comply with all applicable
statutes, rules and regulations with respect to the conduct of Borrower's
Business to the extent the same are material to the financial condition of
Borrower or the conduct of Borrower's Business; maintain such necessary licenses
and permits required for the conduct of Borrower's Business, in each case if the
failure to maintain or comply would have a Materially Adverse Effect on
Borrower;
5.1.15 Promptly defend all actions, proceedings or claims
which would have a Materially Adverse Effect on Borrower or Borrower's Business
and promptly notify Agent of the institution of, or any change in, any such
action, proceeding or claim if the same is in excess of $250,000 for any single
action, proceeding or claim and $500,000 (other than claims covered by insurance
in the ordinary course of business and booked on Borrower's balance sheet) in
the aggregate, or would have a Materially Adverse Effect on the financial
condition of Borrower or its property if adversely determined;
<PAGE>
5.1.16 Comply in all material respects with the requirements
of ERISA applicable to any employee pension benefit plan (within the meaning of
Section 3(2) of ERISA), sponsored by Borrower. With respect to any such plan,
other than any "multi-employer plan" (within the meaning of Section 3(37) of
ERISA), in the case of a "reportable event" within the meaning of Section 4043
of ERISA and the regulations thereunder for which the 30-day notice requirement
has not been waived, or in the case of any other event or condition which
presents a material risk of the termination of any such plan by action of the
PBGC or Borrower, Borrower shall furnish to Agent a certificate of the chief
financial officer of Borrower identifying such reportable event or such other
event or condition and setting forth the action, if any, that Borrower intends
to take or has taken with respect thereto, together with a copy of any notice of
such reportable event or such other event or condition filed with the PBGC or
any notice received by Borrower from the PBGC evidencing the intent of the PBGC
to institute proceedings to terminate any such plan. Such certificate of the
chief financial officer or such other notice to be furnished to Agent in
accordance with the preceding sentence shall be given in the manner provided for
in Section hereof: (i) within 30 days after the Borrower knows of such
reportable event or such other event or condition; (ii) as soon as possible upon
receipt of any such notice from the PBGC; or (iii) concurrently with the filing
of any such notice with the PBGC, as the case may be. For purposes of this
Section, Borrower shall be deemed to have all knowledge attributable to the
administrator of any such plan;
5.1.17 Maintain each Property in good condition and repair,
reasonable wear and tear excepted, making as and when necessary, all material
repairs of every nature;
5.1.18 Except where failure to do so would not have a
Materially Adverse Effect on Borrower: perform, as and when due, all of
Borrower's obligations (both monetary and non-monetary) under all leases,
easements, agreements, mortgages and deeds of trust that encumber any part of
the real estate assets of Borrower, within such applicable notice or cure period
allowed Borrower pursuant to the relevant lease, easement, agreement, mortgage
or deed of trust, pay and discharge, at or before maturity, all Borrower's
material obligations and liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, in accordance with
GAAP, appropriate reserves for the accrual of any of the same;
5.1.19 Immediately notify Agent of: (i) the occurrence or
imminent occurrence of any event which causes or would imminently cause (A) any
material adverse change in the Business, property, prospects or financial
condition of Borrower (B) any representation or warranty made by Borrower
hereunder to be untrue, incomplete or misleading, or (C) the occurrence of any
other Event of Default or Unmatured Event of Default hereunder; and (ii) the
institution of, or the issuance of any order, judgment, decree or other process
in, any litigation, investigation, prosecution, proceeding or other action by
any governmental authority or other Person against Borrower and that does, or
could, materially affect Borrower;
<PAGE>
5.1.20 Cause at least 66% of Consolidated NOI to be generated
from assets located in states of the United States east of the Mississippi
River;
5.1.21 Cause each Venture to pay and perform, when due, all of
such Venture's obligations under any Venture Note executed by such Venture;
5.1.22 Maintain or cause to be maintained insurance on the
Properties in such amounts, against such hazards and liabilities, and with such
companies as is consistent with sound business practices, including without
limitation:
(i) Insurance against loss to the Properties on an
"all risk" policy form, covering insurance risks no less broad than those
covered under a Standard Multi Peril (SMP) policy form, which contains a
Commercial ISO "Causes of Loss-Special Form," in the then current form, and such
other risks as Lenders may reasonably require, in amounts equal to the full
replacement cost of the Properties including fixtures and equipment, Borrower's
interest in leasehold improvements, and the cost of debris removal, with an
agreed amount endorsement, and with deductibles of not more than $50,000;
(ii) Rent and rental value/extra expense insurance
(if the Property is tenant occupied) in amounts sufficient to pay during any
period in which a Property may be damaged or destroyed, for a period of twelve
(12) months: (x) at least 80% all rents and (y) all amounts (including, but not
limited to, all taxes, assessments, utility charges and insurance premiums)
required to be paid by tenants of the Property;
(iii) Broad form boiler and machinery insurance
including business interruption/extra expense and rent and rental value
insurance, on all equipment and objects customarily covered by such insurance
and/or involved in the heating, cooling, electrical and mechanical systems of
the Properties (if any are located at the Properties), but excluding individual
HVAC equipment that serves only one residential apartment unit, providing for
full repair and replacement cost coverage, and other insurance of the types and
in amounts as Lenders may reasonably require, but in no event less than that
customarily carried by persons owning or operating like properties;
(iv) During the making of any alterations or
improvements to a Property, (x) insurance covering claims based on the owner's
or employer's contingent liability not covered by the insurance provided in
subsection (vi) below, (y) workers' compensation insurance covering all persons
engaged in such alterations or improvements, and (z) builder's completed value
risk insurance against "all risks of physical loss" for construction projects of
$1,000,000 or more;
<PAGE>
(v) Insurance against loss or damage by flood or mud
slide in compliance with the Flood Disaster Protection Act of 1973, as amended
from time to time, if the Properties are now, or at any time while the
Indebtedness or any portion thereof remains unpaid shall be, situated in any
area which an appropriate governmental authority designates as a special flood
hazard area, in amounts equal to the full replacement value of all above grade
structures on the Properties;
(vi) Commercial general public liability insurance,
with the location of the Properties designated thereon, against death, bodily
injury and property damage arising on, about or in connection with the
Properties, with Borrower or the applicable subsidiary or Venture listed as the
named insured, with such limits as Borrower or the applicable subsidiary or
Venture may reasonably require (but in no event less than $1,000,000 and written
on a then current Standard "ISO" occurrence basis form or equivalent form),
excess umbrella liability coverage with such limits as Borrower or the
applicable subsidiary or Venture may reasonably require but in no event less
than $5,000,000; and
(vii) Such other insurance relating to the Properties
and the uses and operation thereof as Lenders may, from time to time, require in
the exercise of good faith;
5.1.23 Maintain the Unencumbered Property Pool free from any
mortgage, lien, pledge, charge, security interest or other encumbrance, whether
voluntary or involuntary; and
5.1.24 Comply in all material respects with all laws, rules,
regulations, judgments, decrees, and orders, the failure with which to comply
would have a Materially Adverse Effect on Borrower or any Venture.
5.2 Indemnification. Borrower hereby indemnifies and agrees to
protect, defend, and hold harmless Lenders and Lenders' directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, including all reasonable counsel fees incurred in
investigating, evaluating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with this Agreement, the Notes, the Loans, the Venture Notes, the other Loan
Documents and any transaction contemplated herein or therein including, but not
limited to, claims based upon any act or failure to act by Lenders in connection
with this Agreement, the Notes, the Loans, the Venture Notes, the other Loan
Documents and any transaction contemplated herein or therein; provided that
Borrower shall not be liable for any portion of such losses, damages, expenses
or liabilities resulting from any Lender's gross negligence or willful
misconduct or that of Lenders' directors, officers, employees, agents, attorneys
and shareholders. If Borrower shall have knowledge of any claim or liability
hereby indemnified against, it shall promptly give written notice thereof to
Agent. THIS COVENANT SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
<PAGE>
5.2.1 Agent shall promptly give Borrower written notice of all
suits or actions instituted against Lenders with respect to which Borrower has
indemnified Lenders, and Borrower shall timely proceed to defend any such suit
or action. Lenders shall also have the right, at the expense of Borrower, to
participate in or, at Lenders' election, assume the defense or prosecution of
such suit, action, or proceeding, and in the latter event Borrower may employ
counsel and participate therein. Agent shall have the right to adjust, settle,
or compromise any claim, suit, or judgment after notice to Borrower, unless
Borrower desires to litigate such claim, defend such suit, or appeal such
judgment and simultaneously therewith deposits with Agent collateral security
sufficient to pay any judgment rendered, with interest, costs, legal fees and
expenses; and the right of Lenders to indemnification under this Agreement shall
extend to any money paid by Lenders in settlement or compromise of any such
claims, suits, and judgments in good faith, after notice to Borrower.
5.2.2 If any suit, action, or other proceeding is brought by
Lenders against Borrower for breach of Borrower's covenant of indemnity herein
contained, separate suits may be brought as causes of action accrue, without
prejudice or bar to the bringing of subsequent suits on any other cause or
causes of action, whether theretofore or thereafter accruing.
ARTICLE 6
NEGATIVE COVENANTS
6.1 Borrower's Negative Covenants. As long as any portion of the
Indebtedness or of any Venture Loan shall remain outstanding and unpaid, Lenders
have any obligation to extend Advances, or any Letter of Credit remains
outstanding hereunder, Borrower covenants and agrees that, in the absence of
prior written consent of Agent, Borrower shall not:
6.1.1 Except for (i) Lenders' proposed $32,000,000 term loan
to be secured by mortgages on certain of Borrower's Properties in Pennsylvania
and Ohio, (ii) the Guaranties (iii) secured liabilities for which the obligee's
recourse is limited solely to the specific asset or assets that are encumbered,
and (iv) indebtedness incurred by Palmer Park Mall Venture in favor of Midlantic
Bank, N.A. and guarantied by Borrower, create, assume, incur or otherwise become
liable under Consolidated Liabilities or Contingent Liabilities in amounts in
excess of $5,000,000 in the aggregate after the date hereof;
6.1.2 Pay dividends or other distributions to beneficiaries in
any Fiscal Year in excess of Funds From Operations for such Fiscal Year plus
$5,000,000 (excluding special capital gains distributions which shall not exceed
$10,000,000 in the aggregate after the date of this Agreement);
<PAGE>
6.1.3 Change the general character of Borrower's Business from
that in which it is currently engaged; enter into proceedings in total or
partial dissolution; merge or consolidate with or into any entity, or acquire
all or substantially all of the assets or securities of any other Person, unless
Borrower remains the surviving entity and such other Person is engaged primarily
in the business of owning and operating shopping centers or multi-family
residential income-producing properties; or otherwise take any action or omit to
take any action which would have a Materially Adverse Effect on Borrower or
Borrower's Business;
6.1.4 Use any part of the proceeds of the Loans to purchase or
carry, or to reduce, retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations T, U and X of the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any margin stock. If requested by
Agent, Borrower will furnish Agent statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation;
6.1.5 Except as described in Schedule 4.1.8, use, generate,
treat, store, dispose of, or otherwise introduce any Hazardous Substances,
pollutants, contaminants, hazardous waste, residual waste or solid waste (as
defined above) into or on any of the Properties and will not cause, suffer,
allow, or permit anyone else to do so in material violation of any Environmental
Law, and will not knowingly acquire, or permit any subsidiary of Borrower or any
Venture to knowingly acquire, any Property on which any Hazardous Substance,
pollutant, contaminant, hazardous waste, residual waste or solid waste has been
used, generated, treated, stored, disposed of or otherwise introduced in
violation of any Environmental Law; provided that such a Property may be
acquired if Borrower has received (i) a final remediation plan, prepared by a
qualified environmental engineer, for the remediation of the violative
environmental situation, Borrower's direct or indirect liability for the cost of
which remediation is reasonably estimated to be less than $250,000 or (ii) the
written consent of the Requisite Lenders;
6.1.6 Engage in any conduct or take or fail to take any action
which will, or would, if the facts and circumstances relative thereto were
discovered, violate RICO.
6.1.7 Agree with any other Person not to encumber, whether by
mortgage, lien, pledge, charge, security interest, or other encumbrance, any
parcel of the Unencumbered Property Pool.
<PAGE>
ARTICLE 7
DEFAULT
7.1 Events of Default. The occurrence of any one or more of the
following events, conditions or states of affairs, shall constitute an "Event of
Default" hereunder, under the Notes (together with accrued interest thereon) and
under each of the other Loan Documents, provided however, that nothing contained
in this Article 7 shall be deemed to enlarge or extend any grace period provided
for in the Notes, or any other Loan Document:
7.1.1 Failure by Borrower to pay the Indebtedness or any
portion thereof as the same becomes due;
7.1.2 Failure by Borrower to observe or perform any agreement,
condition, undertaking or covenant in this Agreement, the Notes, or the other
Loan Documents, which failure, if it does not consist of the failure to pay
money to such Lender and is susceptible to being cured, is not cured within
twenty (20) days after written notice from such Lender (but if such failure
cannot reasonably be cured within such twenty (20) day period, such shall not be
an Event of Default if Borrower has commenced such cure within such twenty (20)
day period and thereafter diligently pursues such cure to its completion, but in
no event shall the period to cure exceed one hundred twenty (120) days);
provided that the notice and grace period provided in this Section 7.1.2 shall
not apply to the breach by Borrower of any covenants contained in Sections
5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5, 5.1.6, 5.1.14, 5.1.19, 5.1.20, 5.1.21, 6.1.1,
6.1.2, or 6.1.3 hereof or a voluntary or consensual breach of the covenant
contained in Section 6.1.7 hereof, and provided further that the grace period
with respect to a breach of the covenants contained in Section 5.1 hereof that
pertain to the delivery to Lenders of financial information shall be limited to
thirty(30) days after delivery of any Lender's written notice of such breach;
7.1.3 Any representation or warranty of the Borrower made, or
deemed made, in this Agreement, the Notes, the Venture Notes, the other Loan
Documents or any statement or information in any report, certificate, Financial
Statement or other instrument furnished by Borrower in connection with making of
this Agreement, the making of the Loans hereunder or in compliance with the
provisions hereof or any other Loan Document shall have been false or misleading
in any material respect when so made, deemed made or furnished;
<PAGE>
7.1.4 Borrower shall become insolvent or unable to pay its
debts as they mature, or file a voluntary petition or proceeding seeking
liquidation, reorganization or other relief with respect to itself under any
provision of the Bankruptcy Code or any state bankruptcy or insolvency statute,
or make an assignment or any other transfer of assets for the benefit of its
creditors, or apply for or consent to the appointment of a receiver for its
assets, or suffer the filing against its property of any attachment or
garnishment or take any action to authorize any of the foregoing; or an
involuntary case or other proceeding shall be commenced against Borrower seeking
liquidation, reorganization or other relief with respect to its debts under the
Bankruptcy Code or any other bankruptcy, insolvency or similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days (it being understood
that no delay period applies with respect to any default arising under this
Section by reason of the filing of a voluntary petition by Borrower under the
Bankruptcy Code or any state bankruptcy or insolvency statute or the making of
an assignment or other transfer of assets for the benefit of Borrower's
creditors or by reason of Borrower applying for or consenting to the appointment
of a receiver for Borrower's assets); or an order for relief shall be entered
against the Borrower under any provision of the Bankruptcy Code or any state
bankruptcy or insolvency statute as now or hereafter in effect;
7.1.5 Entry of a final judgment or judgments against Borrower
by a court of law in an amount exceeding an aggregate of $500,000 outstanding at
any one time: (i) which is not fully or unconditionally covered by insurance; or
(ii) for which Borrower has not established a cash or cash equivalent reserve in
the amount of such judgment or judgments that were entered by a court of record
against Borrower; or (iii) enforcement of such judgment or judgments has not
been stayed or such judgment or judgments shall continue in effect for a period
of thirty (30) consecutive days without being vacated, discharged, satisfied or
bonded pending appeal;
7.1.6 Regardless of the intent or knowledge of Borrower, if
the validity, binding nature or enforceability of any material term, provision,
condition, covenant or agreement contained in this Agreement, any other Loan
Document or in any other existing or future agreement between Borrower and
Lenders shall be wrongfully disputed by, on behalf of, or in the right or name
of Borrower or if any such material term, provision, condition, covenant or
agreement shall be found or declared to be invalid, non-binding, unenforceable
or avoidable by any governmental authority or court and the parties cannot agree
upon substitutions therefor within thirty (30) days; or
7.1.7 Borrower shall be accused of conduct in violation of
RICO which is not explained to Lenders within ten (10) days thereafter in a
manner in which Lenders, in their sole discretion, determine that such
accusation is not likely to result in a RICO indictment;
7.1.8 The occurrence of any "Event of Default"
under any Venture Note; or
<PAGE>
7.1.9 Borrower shall have defaulted in the payment when due of
any Debt in an amount in excess of $500,000 and such default shall have
continued beyond any period of grace permitted with respect thereto, unless
waived;
then, and in every such event, upon the vote of Requisite Lenders, the Agent
shall (i) by notice to Borrower, terminate the commitments to lend pursuant to
this Agreement and they shall thereupon terminate, and (ii) without notice to
Borrower, declare the Notes (together with accrued interest thereupon) to be,
and the Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by Borrower. Notwithstanding the foregoing, upon any Event of
Default arising from any of the events or circumstances described in Section
7.1.4 hereof, the Notes shall, without any further action, become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower.
7.2 Remedies on Default. Upon the occurrence and continuation of any
Event of Default, Agent may, subject to Article 8 hereof, forthwith declare all
Indebtedness to be immediately due and payable, without protest, demand or other
notice (which are hereby expressly waived by Borrower) and, in addition to the
rights specifically granted hereunder or now or hereafter existing in equity, at
law, by virtue of statute or otherwise (each of which rights may be exercised at
any time and from time to time), Agent may exercise the rights and remedies
available to Lenders at law or in equity or under this Agreement, the Notes and
any of the other Loan Documents or any other agreement by, between or among
Borrower and Lenders in accordance with the respective provisions thereof.
7.3 Set-Off Rights Upon Default. Upon and during the continuance of any
Event of Default, Lenders, in addition to any remedies set forth above, shall
have the right at any time and from time to time without notice to Borrower (to
the extent permitted by law) (any such notice being expressly waived by Borrower
and to the fullest extent permitted by applicable Rules, to set off, to exercise
any banker's lien or any right of attachment or garnishment and apply any and
all balances, credits, deposits (general or special, time or demand, provisional
or final), accounts or monies at any time held by any Lender and other
indebtedness at any time owing by any Lender to or for the account of Borrower
against any and all Indebtedness or other obligations of Borrower now or
hereafter existing under this Agreement, the Notes, or any other Loan Document,
whether or not any Lender shall have made any demand hereunder or thereunder.
All net funds recovered under the rights provided in this Section 7.3 shall be
recovered by Lenders as agent for the other Lenders and shall be distributed
among Lenders according to their Pro Rata Share. Each Lender shall be an agent
of all other Lenders for purposes of rights of set-off.
<PAGE>
7.4 Purchase of Venture Notes Upon Default. Upon the occurrence and
during the continuance of any Event of Default, Agent may, at the instruction of
Requisite Lenders, give written notice to Borrower that an Event of Default has
occurred and is continuing and that Lenders require Borrower to purchase from
Lenders all of the Venture Notes. Borrower shall purchase from Lenders each of
the Venture Notes for a price equal to the outstanding principal balance of, and
all accrued and unpaid interest on, each Venture Note, the aggregate amount of
which for all Venture Notes (the "Purchase Price") shall be paid in immediately
available funds to Agent on behalf of Lenders on or before five (5) Business
Days after receipt of Agent's notice requiring the repurchase of all Venture
Notes. The sale of the Venture Notes shall be on an "as is" basis and, except
(i) for Lenders' ownership thereof, and (ii) that the Venture Notes shall be
free and clear of encumbrances and other assignments, shall be without
representation or warranty of any kind, which Lenders individually and severally
disclaim, including without limitation, the execution, legality, validity,
genuineness, sufficiency, value, transferability, enforceability or
collectibility of the Venture Notes, the existence or value of any collateral
therefor, and the priority of any interests in such collateral. Upon Lenders'
receipt of collected funds in the amount of the Purchase Price, Lenders shall
deliver the original Venture Notes to Borrower, each endorsed by the appropriate
Lender, without recourse, together with any collateral documentation therefor
appropriately assigned to Borrower.
7.5 Singular or Multiple Exercise; Non-Waiver. The remedies provided
herein, in the Notes and in the other Loan Documents or otherwise available to
Lenders at law or in equity and any warrants of attorney therein contained,
shall be cumulative and concurrent, and may be pursued singly, successively or
together at the sole discretion of Agent, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or release of the same.
ARTICLE 8
AGENT
8.1 Appointment. Each Lender hereby appoints CoreStates Bank, N.A. as
agent hereunder, and each Lender hereby authorizes Agent to act hereunder and
under the other instruments and agreements referred to herein (including,
without limitation, the Notes and the other Loan Documents) as its agent
hereunder and thereunder. Agent agrees to act as such upon the express
conditions contained in this Article 8 and in the Loan Documents. The provisions
of this Article 8 are solely for the benefit of Lenders; Borrower shall not have
any rights as a third party beneficiary of any of the provisions hereof except
with respect to the provisions requiring Borrower's consent or that certain
matters be satisfactory to Borrower. In performing its functions and duties
under this Agreement, Agent shall act solely as agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Borrower.
<PAGE>
8.2 Powers; General Immunity.
8.2.1 Duties Specified. Each Lender irrevocably authorizes
Agent to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other instruments and agreements referred to herein
(including, without limitation, the Loan Documents) as are specifically
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto. Agent shall have only those duties and
responsibilities which are expressly specified in this Agreement and the other
Loan Documents and Agent may perform such duties by or through its agents or
employees. The duties of Agent shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement or the other instruments and agreements referred to
herein except as expressly set forth herein or therein. Agent agrees promptly to
transmit to Lenders any documents which have been transmitted by Borrower to
Agent for transmittal to Lenders. Agent shall take such action as has been
determined to be taken by a vote of the applicable Lenders hereunder. In
performing its duties and functions under this Agreement and the Loan Documents,
Agent will exercise the same care which it normally exercises in making and
handling loans and handling collateral in which it alone is interested, but
Agent assumes no further responsibility.
8.2.2 Powers of Agent.
8.2.2.1 In General. Unless otherwise specifically
limited by this Section 8.2.2, Agent may take all actions hereunder on behalf of
all of the Lenders without seeking the advise or consent of any of the Lenders.
8.2.2.2 Actions Requiring Certain Votes of Lenders.
Notwithstanding anything to the contrary herein contained, Agent agrees that it
will not, without the unanimous consent of the Lenders, take any of the
following actions whether voluntary or involuntary pursuant to this Agreement:
(i) decrease any of the rates of interest with respect to any of the Loans
hereunder; (ii) decrease any fees with respect to the Loans hereunder; (iii)
except for Borrower's request to reduce the Commitment Amount pursuant to
Section 2.2.8.3 hereof, increase or decrease the Commitment Amount or the
commitment of any Lender or subject any Lender to any additional obligation to
lend; (iv) reduce the principal of any Loan; (v) postpone the date fixed for any
payment of principal of or interest on any Loan; (vi) change the definitions of
Pro Rata Shares or Requisite Lenders; or (vii) amend this Section 8.2.2.2. It is
the intention of Borrower and Lenders that, upon the occurrence and during the
continuance of an Event of Default, Borrower shall repurchase the Venture Notes
as provided in Section 7.4 hereof. Proceeds received in respect of the Venture
Notes, whether by repurchase or otherwise, shall be shared among the Lenders
according to their Pro Rata Shares in like manner as provided in Sections 8.3
and 8.5 hereof.
<PAGE>
8.2.2.3 Actions Requiring Votes of Requisite Lenders.
Notwithstanding anything to the contrary herein contained, Agent agrees that it
will not without the vote of the Requisite Lenders: (i) declare any Event of
Default; (ii) exercise any remedies upon and after the occurrence of an Event of
Default; or (iii) subject to Section 8.2.2.2 hereof, amend or waive any
provision of this Agreement.
8.2.2.4 Agent's Action when Lender Fails to Respond.
If Agent requests authority to act in a specified manner, Agent may at Agent's
option, act as if a Lender had approved such request if such Lender fails or
refuses to respond to Agent's request within seven (7) Business Days after
receipt of Agent's written request.
8.2.3 No Responsibility for Certain Matters. Agent
shall not be responsible to any Lender for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement, the other Loan Documents, the Notes or the Venture Notes issued
hereunder, or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by Agent to Lenders or by
or on behalf of Borrower to Agent or any Lender except to the extent Agent has
actual knowledge to the contrary that such representation, warranty, recital or
statement is false or incorrect, or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Event of
Default or Unmatured Event of Default or potential Event of Default or Unmatured
Event of Default.
<PAGE>
8.2.4 Exculpatory Provisions. Agent and its officers,
directors, employees and agents shall not be liable to any Lenders for any
action taken or omitted hereunder or in connection herewith (including, without
limitation, any act or omission under the Notes or the other Loan Documents)
unless caused by its or their gross negligence or willful misconduct. If Agent
shall request instructions from Lenders with respect to any act or action
(including the determination not to take an action) in connection with this
Agreement or the Notes, or the other Loan Documents, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Requisite Lenders or the applicable percentage of
Lenders, as the case may be. Without prejudice to the generality of the
foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Borrower),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against Agent as a result of
Agent's acting or (where so instructed) refraining from acting under this
Agreement, the Notes, or other Loan Documents in accordance with the
instructions of the Requisite Lenders or the applicable percentage of Lenders,
as the case may be. Agent shall be entitled to refrain from exercising any
power, discretion or authority vested in it under this Agreement, the Notes, or
other Loan Documents unless and until it has obtained the instructions of the
Requisite Lenders.
8.2.5 Agent Entitled to Act as Lender. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Agent in its individual capacity as a
Lender hereunder. With respect to its granting of Loans, Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not performing the duties and functions delegated to it
hereunder, and the terms "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Notwithstanding the foregoing, Agent shall not be
influenced to act hereunder in a manner inconsistent with the best interests of
Lenders by reason of Agent's involvement in unrelated transactions with
Borrower. Agent and its affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Borrower or any affiliate of Borrower as if it were not performing
the duties specified herein, and may accept fees and other consideration from
Borrower for services in connection with this Agreement and otherwise without
having to account for the same to Lenders. Lenders acknowledge that Agent has,
and may from time to time hereafter, enter into lending arrangements with
Borrower, its subsidiaries or Ventures and that Borrower may grant mortgages,
security interests or otherwise encumber its assets in favor of Agent
individually and not as agent for the Lenders as collateral for such lending
arrangements, which shall be independent of the Revolving Credit hereunder.
<PAGE>
8.2.6 No Responsibility for Creditworthiness. Each Lender
represents and warrants that it has made its own independent investigation of
the financial condition and affairs of Borrower in connection with the making of
the Loans hereunder and has made and shall continue to make its own appraisal of
the creditworthiness of Borrower. Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or, except as expressly
provided in this Agreement, to provide any Lender with any credit or other
information with respect thereto whether coming into its possession before the
making of the Loan or any time or times thereafter, and Agent shall further have
no responsibility with respect to the accuracy of or the completeness of the
information provided to Lenders.
8.2.7 Right to Indemnity. Each Lender severally agrees to
indemnify Agent, its officers, directors, employees and agents, proportionately
to its Pro Rata Share, to the extent Agent shall not have been reimbursed by
Borrower, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in performing its duties hereunder or in any way relating to or arising out of
this Agreement, except in its capacity as a Lender; provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful misconduct; and provided
further that Agent shall not be entitled to be indemnified hereunder for amounts
paid by Agent in settlement of litigation prior to final judgment unless such
settlement shall be consented to by Requisite Lenders. If any indemnity
furnished to Agent for any purpose shall, in the opinion of Agent, be
insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against (other than acts
constituting Agent's obligations to Lenders hereunder) until such additional
indemnity is furnished.
8.2.8 Resignation; Removal; Successor Agent.
8.2.8.1 Agent may resign from the performance of all
its functions and duties hereunder at any time by giving 45 Business Days' prior
written notice to Borrower and Lenders. Agent may be removed at any time with or
without cause by a notice or concurrent notices in writing delivered to Borrower
and Agent and signed by all Lenders other than Agent. Such resignation or
removal shall take effect upon the acceptance by a successor Agent pursuant to
subsections 8.2.8.2 and 8.2.8.3.
8.2.8.2 Upon any such notice of resignation or
removal, Lenders upon the vote of the holders of 66.67% of the Commitment Amount
shall have the right to appoint a successor Agent which shall be a Lender or
such other Person as is satisfactory to Borrower. Such successor agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent, and the retiring or removed Agent
shall be discharged from all its duties and obligations as Agent under this
Agreement (except as otherwise provided herein).
<PAGE>
8.2.8.3 If a successor Agent shall not have been so
appointed within said 45 Business Day period, a resigning (but not a removed)
Agent with the consent of Borrower, shall then appoint a successor Agent, which
shall be a commercial bank with capital and surplus of not less than
$5,000,000,000 who shall serve as Agent until such time, if any, as the
Requisite Lenders, with the consent of Borrower, appoint a successor Agent as
provided above.
8.3 Sharing of Recoveries. Lenders hereby agree that all sums recovered
(and the proceeds of all property recovered) from Borrower by any Lender
hereunder, whether on foreclosure of any banker's or other lien or any setoff or
other claim on or against any deposit or other balance of Borrower held by any
Lender shall be on behalf of Lenders and shall be shared by Lenders according to
their respective Pro Rata Shares. If a Lender shall make any recovery, it will
promptly remit to the other Lenders their Pro Rata Share thereof. No Lender's
Pro Rata Share shall have priority over any other Lender's Pro Rata Share.
8.4 Intentionally Deleted.
8.5 Ratable Sharing. Each Lender and each subsequent holder by
acceptance of a Note agree among themselves that with respect to all amounts
received by them which are applicable to the payment of or reduction of a
proportion of the aggregate amount of principal and interest due with respect to
the Notes held by the Lender or holder, which is greater than the proportion
received by any other holder of a Note in respect to the aggregate amount of
principal and interest due with respect to the Notes held by it, or any other
amount payable hereunder, that Lender or that holder of a Note receiving such
proportionately greater payments shall notify each other Lender and the Agent of
such receipt and remit to them such amounts as are necessary so that all such
recoveries of principal and interest with respect to the Notes shall be
proportionate to the Lenders' respective Pro Rata Shares. If any Lender or
holder of a Note receiving such proportionately greater payments is required to
return such proportionately greater payment to any trustee, receiver or other
representative of or for Borrower upon or by reason of the bankruptcy,
insolvency, reorganization or dissolution of any entity comprising Borrower,
then such other Lender(s) which received its or their Pro Rata Share of such
proportionately greater payment must also return such amounts to Borrower as if
such payment or payments from the Lender receiving such proportionately greater
payments had not been made.
<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 Integration. This Agreement, the Notes, and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of the Notes shall control over the provision of
this Agreement or any other Loan Document, and the provisions of this Agreement
shall control over the provisions of any other Loan Document. This Agreement,
the Notes and the other Loan Documents contain all the agreements of the parties
hereto with respect to the subject matter of each thereof and supersede all
prior or contemporaneous discussions and agreements with respect to such subject
matter.
9.2 Modification. Except as provided in Section 8.2.2.2 hereof,
modifications or amendments of or to the provisions of this Agreement, the
Notes, or any other Loan Document shall be effective only if set forth in a
written instrument signed by Requisite Lenders and Borrower. No Lender shall
amend any Note or Venture Note payable to such Lender without the written
consent of Requisite Lenders.
9.3 Waivers. Except as provided in Section 8.2.2.2 hereof, any
provision of this Agreement, the Notes or any other Loan Document may be waived
if, but only if, such waiver is in writing and is signed by the Borrower and
Requisite Lenders.
9.4 Notices. Except as hereinelsewhere specifically allowed with
respect to a Notice of Borrowing or a Notice of Rate Election, any notice or
other communication by one party hereto to the other shall be in writing and
shall be deemed to have been validly given upon receipt if by hand delivery, or
by overnight delivery service or by telecopier, or two days after mailing if
mailed, first class mail, postage prepaid, return receipt requested, addressed
as follows:
If to Borrower:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attn: Dante J. Massimini
Telecopier: (215) 542-9179
<PAGE>
With a copy to:
Diane Rosecrans Wender, Esq.
Cohen, Shapiro, Polisher, Shiekman & Cohen
12 South 12th Street, 22nd Floor
Philadelphia, PA 19107
Telecopier: (215) 592-4329
If to the Agent:
CoreStates Bank, N.A.
FC 1-8-10-67
Widener Building 10th Floor
1339 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19107
Attn: Glenn W. Gallagher, Vice President
Telecopier (215) 786-6381
With a copy to:
CoreStates Investment Banking
1345 Chestnut Street
FC 1-8-12-1
Philadelphia, PA 19101-7618
Attn: Stacy Shegda, Commercial Officer
Telecopier (215) 973-6621
With a copy to:
Kenneth I. Rosenberg, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telecopier (215) 994-1111
With a copy to:
Meridian Bank
K.C. Barrett, Vice President
Real Estate Department
1650 Market Street, Suite 3600
Philadelphia, PA 19103
Telecopier (215) 854-3296
<PAGE>
With a copy to:
Midlantic Bank, N.A.
Robert A. Goldstein, Vice President
Real Estate Department
1500 Market Street, 11th Floor
Philadelphia, PA 19102
Telecopier (215) 564-7446
With a copy to:
PNC Bank, National Association
Richard H. Ohnmacht, Banking Officer
Real Estate Finance Division
Land Title Building, 3rd Floor
Broad and Chestnut Streets
Philadelphia, PA 19101
Telecopier (215) 585-5806
9.5 Survival. The terms of this Agreement and all agreements,
representations, warranties and covenants made by Borrower in any other Loan
Document shall survive the issuance and payment of the Notes and shall continue
as long as any portion of the Indebtedness shall remain outstanding and unpaid;
provided, however, that the covenants set forth in Sections 2.2.7, 5.2, 9.8, and
9.9 hereof shall survive the payment of the Indebtedness. Borrower hereby
acknowledges that Lenders have relied upon the foregoing in making the Loans.
9.6 Closing. Closing hereunder shall occur on November __, 1994 at the
offices of Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, 38th
Floor, Philadelphia, Pennsylvania 19103- 7598 or at such other time and place as
the parties hereto may determine. In the event Closing is not held on or before
such date unless extended by all of the parties hereto, the rights and
obligations of the parties hereto contained herein shall be terminated and be of
no further force or effect except for the provisions of Sections 5.2, 9.8, and
9.9.
9.7 Successors and Assigns; Governing Law. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto; provided, however (i) that Borrower shall not assign this
Agreement, or any rights or duties arising hereunder, without the express prior
written consent of Lenders and (ii) that subject to the right to enter into
participation arrangements under Section 9.10 hereof, no Lender may assign its
rights or duties arising hereunder, except as provided in 9.11 hereof, without
the express prior written consent of Borrower and of the other Lenders. This
Agreement shall be construed and enforced in accordance with the internal laws
of the Commonwealth of Pennsylvania for contracts made and to be performed in
Pennsylvania.
<PAGE>
9.8 Jurisdiction. IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
RELATIONSHIP EVIDENCED HEREBY, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY COUNTY IN
THE COMMONWEALTH OF PENNSYLVANIA WHERE AGENT MAINTAINS AN OFFICE AND AGREES NOT
TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF
THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. BORROWER AGREES THAT SERVICE OF
PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER.
9.9 Waiver of Jury Trial. BORROWER HEREBY WAIVES, AND LENDERS BY THEIR
ACCEPTANCE HEREOF THEREBY WAIVE, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDERS TO ENTER INTO, ACCEPT OR RELY UPON THIS AGREEMENT.
9.10 Participation. Each Lender may in its sole discretion enter into a
participation arrangement(s) with respect to its Pro Rata Share of the Loans
made or committed to be made under this Agreement and may provide all
information in its possession relating to Borrower to any current or prospective
participating lender; provided, however, that no such participant shall have any
voting rights or right to consent to or approve matters hereunder except for (i)
any decrease in the rates of interest payable by Borrower with respect to the
Loans, (ii) the final maturity of the Loans, and (iii) any change in the
Commitment Amount.
9.11 Assignments by Lenders.
9.11.1 Right to Assign. Each Lender may in its sole discretion
assign portions of its respective Pro Rata Share of the Loans in increments not
less than $5,000,000 to any other commercial bank with assets of at least
$5,000,000,000 subject to the approval of Borrower and Agent, which approval
shall not be unreasonably withheld, delayed or conditioned; provided however,
that each Lender shall retain at least $10,000,000 of the Commitment Amount and
that such assignment shall be in the form of Schedule 9.11 hereto. Any Lender
assigning a portion of its Pro Rata Share of the Loans shall give Agent written
notice thereof and pay to Agent a $3,000 fee upon the consummation thereof.
<PAGE>
9.11.2 Substitution of Notes. Upon each assignment by a Lender
of a portion of its Pro Rata Share of the Loans, Borrower shall, and shall use
its best efforts to cause each Venture that is then the beneficiary of a Venture
Loan to, execute replacement Notes, or Venture Notes, in favor of the assigning
Lender and its assignee, which replacement Notes, and replacement Venture Notes,
shall be in the amounts that are equal to the assigning Lender's and its
assignee's respective Pro Rata Shares of the Commitment Amount, and of the
appropriate Venture Loan. Such replacement Notes and Venture Notes shall be
delivered to the assigning Lender and its assignee upon delivery to Borrower and
to each Venture of the original Note and Venture Notes that have been so
replaced, with each such replaced Note and Venture Note marked "Replaced."
9.12 Excess Payments. If Borrower shall pay any interest under the terms
of the Notes at a rate higher than the maximum rate allowed by applicable law,
then such excess payment shall be credited against outstanding Advances unless
Borrower notifies Agent in writing to return the excess payment to Borrower.
Notwithstanding anything to the contrary contained in this Agreement, crediting
the excess payments hereunder as a payment of principal shall not trigger the
application of any prepayment penalties that might otherwise apply to a
prepayment of principal hereunder.
9.13 Partial Invalidity. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
9.14 Compliance with Rules. Lenders shall not be required by operation or
effect of any provision of this Agreement to violate any statute or regulation
under state or federal law, including all Rules.
9.15 Headings. The heading of any Article or Section contained in this
Agreement is for convenience of reference only and shall not be deemed to
amplify, limit, modify or give full notice of the provisions thereof.
9.16 Counterparts. This Agreement may be signed in counterparts each of
which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
9.17 Retention of Documents. Unless otherwise provided herein, any
documents, schedules, invoices or other papers delivered to Agent on behalf of
Lenders or to any Lender may be destroyed or otherwise disposed of by Agent or
such Lender six months after they are delivered to or received by Agent or such
Lender, unless Borrower requests the return of such documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
<PAGE>
9.18 Name of Borrower. The name and designation Pennsylvania Real
Estate Investment Trust is the designation of the Trustees from time to time
under the Trust Agreement amended and restated as of December 16, 1987 and
recorded in the Office for the Recording of Deeds in Norristown, Montgomery
County, Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with
the Pennsylvania Real Estate Investment Trust must look solely to the Trust
property for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
<PAGE>
IN WITNESS WHEREOF, Borrower, Agent and Lenders have executed this
Agreement under seal, intending to be legally bound hereby, as of the day and
year first above written.
BORROWER:
PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST
By:/s/Jonathan B. Weller
----------------------------------
Jonathan B. Weller, Trustee
By:/s/Robert G. Rogers
----------------------------------
Robert G. Rogers, Trustee
LENDERS:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
----------------------------------
Glenn W. Gallagher, Vice President
[Signatures Continue On Next Page]
<PAGE>
MERIDIAN BANK
By:/s/K.C. Barrett
----------------------------------
K.C. Barrett, Vice President
MIDLANTIC BANK, N.A.
By:/s/Robert A. Goldstein
----------------------------------
Robert A. Goldstein,
Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/Bruce B. St. Clair
----------------------------------
Bruce B. St. Clair,
Vice President
AGENT:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
----------------------------------
Glenn W. Gallagher,
Vice President
<PAGE>
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
MERIDIAN BANK
MIDLANTIC BANK, N.A.
PNC BANK, NATIONAL ASSOCIATION
Lenders
$78,000,000.00
Unsecured Revolving Credit
March 20, 1995
<PAGE>
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This First Amendment made this 20th day of March, 1995, by and among
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an unincorporated association in
business trust form ("Borrower"), and CORESTATES BANK, N.A., a national banking
association ("Agent") in its individual capacity as a Lender and as Agent for
itself and MERIDIAN BANK, MIDLANTIC BANK, N.A. and PNC BANK, NATIONAL
ASSOCIATION (individually, including Agent, referred to as a "Lender" and
collectively referred to as "Lenders").
B a c k g r o u n d
A. Borrower, Agent and Lenders are parties to a Revolving Credit
Agreement dated November 3, 1994 (the "1994 Loan Agreement"), pursuant to which
Lenders severally, in accordance with their respective Pro Rata Shares, agreed
to provide a committed maximum $78,000,000.00 unsecured revolving credit
facility. All capitalized terms used but not specifically defined herein have
the meanings defined in the 1994 Loan Agreement.
B. Pursuant to a Secured Loan Agreement dated November 9, 1994 among
Borrower, Agent and Lenders, as amended by a First Amendment to Secured Loan
Agreement dated the date hereof (as so amended, the "Secured Loan Agreement"),
Lenders have agreed to provide to Borrower a secured term loan in the maximum
aggregate amount of $35,000,000.00.
C. Borrower, Agent and Lenders desire to modify the 1994 Loan Agreement
in the manner set forth below.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. On the "Subsequent Closing Date" (as defined in the Secured Loan
Agreement), (i) the Commitment Amount shall be reduced to $75,000,000.00, or
such lesser amount as Borrower shall have determined pursuant to Section 2.2.8.3
of the 1994 Loan Agreement and (ii) Borrower shall make such payment of
principal of the Loan, if any, as shall be necessary to cause the outstanding
principal balance of the Loan plus the face amounts of all outstanding Letters
of Credit to be not greater than $75,000,000.00.
2. Pursuant to Section 2.2.8.1 of the 1994 Loan Agreement, Borrower
agreed that in the event that Borrower makes a prepayment (whether voluntary or
mandatory) of any portion of the Loans bearing interest at a rate based on
Adjusted LIBOR on a day other than the last day of the relevant Interest Period,
Borrower will pay to the Agent, upon demand, for the account of the affected
Lenders any cost or expense incurred as a result of such prepayment. Borrower
and Lenders agree that if Borrower prepays an Adjusted LIBOR Loan prior to the
last day of the relevant Interest Period, the precise amount of any such cost or
expense incurred by the Lenders may not be susceptible to precise calculation.
Accordingly, if any such prepayment is made, Borrower shall pay to each Lender,
as a prepayment premium and not as a penalty, such Lender's Pro Rata Share of
the amount (the "Prepayment Premium") calculated as follows:
<PAGE>
(i) All Adjusted LIBOR Loans being prepaid and interest that
would have accrued thereon to the last day of the relevant Interest
Period shall be discounted to a present value at a rate per annum equal
to the "Applicable Yield to Maturity" for each Adjusted LIBOR Loan so
prepaid, and if the aggregate of such discounted values shall exceed
the aggregate of the Adjusted LIBOR Loans being prepaid, then the
Prepayment Premium shall be an amount equal to such excess; otherwise
no Prepayment Premium shall be payable.
(ii) The "Applicable Yield to Maturity" for each Adjusted
LIBOR Loan shall mean the yield to maturity of the United States
Treasury obligation (excluding those commonly known as "Flower Bonds")
having a maturity date nearest in time to the last day of the relevant
Interest Period with respect to such Adjusted LIBOR Loan (and if there
are two or more such Treasury obligations with the same maturity date,
the Applicable Yield to Maturity shall be the arithmetic average of
such different yields). The maturity date and yield to maturity of such
United States Treasury obligations shall be determined on the basis of
quotations published in the Wall Street Journal on the prepayment date.
The foregoing calculation of any required Prepayment Premium shall supersede
the method of determination found in the next to the last paragraph of Section
2.2.8.1 of the 1994 Loan Agreement.
<PAGE>
3. Section 5.1.1 of the 1994 Loan Agreement is hereby amended by adding
at the end thereof "The issuance by Borrower of equity securities pursuant to a
dividend reinvestment plan or an optional shareholder investment plan shall not
be deemed to be a public offering of equity securities of Borrower for purposes
of this Section 5.1.1."
4. Section 5.1.3 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"5.1.3 Maintain NOI generated by the Unencumbered Property
Pool ("Unencumbered NOI") at not less than $5,500,000 to be tested
quarterly on a rolling four Fiscal Quarter historical basis, and cause
the ratio of Senior Liabilities to Unencumbered NOI to be no more than
7.5 to 1 to be tested quarterly on and as of the last day of each
Fiscal Quarter upon Borrower's submission of Project Specific
Information;"
5. Section 6.1.1 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"6.1.1 Except (i) pursuant to the secured term loan made by
Lenders pursuant to a Secured Loan Agreement dated November 9, 1994, as
heretofore or hereafter amended, (ii) the Guaranties, (iii) secured
liabilities for which the obligee's recourse is limited to the specific
asset or assets that are encumbered, (iv) indebtedness incurred by
Palmer Park Mall Venture in favor of Midlantic Bank, N.A. and
guarantied by Borrower, and (v) indebtedness incurred on or before June
1, 1996 and secured by the Shenandoah Apartments in West Palm Beach,
Florida, in an amount not greater than $10,000,000, create, assume,
incur or otherwise become liable under Consolidated Liabilities or
Contingent Liabilities in amounts in excess of $5,000,000 in the
aggregate after the date hereof; provided, however, that in no event
shall the sum of the indebtedness referred to in clause (v) plus the
aggregate amount of such Consolidated Liabilities or Contingent
Liabilities hereafter created, assumed, incurred or for which Borrower
has otherwise become liable exceed $10,000,000;"
<PAGE>
6. Without limiting the provisions of Section 7.1.9 of the 1994 Loan
Agreement, the occurrence of any "Event of Default" under the terms of the
Secured Loan Agreement dated November 9, 1994 among Borrower, Agent and Lenders,
as amended by a First Amendment to Secured Loan Agreement dated the date of this
First Amendment, shall be an Event of Default under the 1994 Loan Agreement, as
amended hereby.
7. Borrower represents to and agrees with Agent and Lenders that, as of
this date, Borrower has no defense, set-off or counterclaim to or against any of
Borrower's obligations or liabilities under the 1994 Loan Agreement or any of
the other Loan Documents.
8. Except as specifically modified hereby, the 1994 Loan Agreement
remains in full force and effect, in accordance with its terms.
<PAGE>
9. This First Amendment may be executed in counterpart and when so
executed by and delivered to each of the parties hereto shall constitute a
single agreement that is binding upon the parties.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Revolving Credit Agreement as of the day and year first above
written.
BORROWER:
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By:/s/Robert G. Rogers
-------------------------------------
Robert G. Rogers, Trustee
By:/s/Jeffrey A. Linn
-------------------------------------
Jeffrey A. Linn, Secretary
LENDERS:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
-------------------------------------
Glenn W. Gallagher,
Vice President
MERIDIAN BANK
By:/s/K.C. Barrett
-------------------------------------
K. C. Barrett, Vice President
MIDLANTIC BANK, N.A.
By:/s/Robert A. Goldstein
-------------------------------------
Robert A. Goldstein,
Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/David Tioch
-------------------------------------
David Tioch, Vice President
AGENT:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
-------------------------------------
Glenn W. Gallagher,
Vice President
<PAGE>
[FORM OF REVOLVING CREDIT AGREEMENT NOTE]
-------------------------
Bank Officer
NOTE
Philadelphia, Pennsylvania
$________________ November __, 1994
FOR VALUE RECEIVED, PENNSYLVANIA REAL ESTATE INVESTMENT TRUST,
an unincorporated association in business trust form (the "Borrower") promises
to pay to the order of CORESTATES BANK, N.A.*, a national banking association
("Lender") on or before the Termination Date the lesser of (x) _____________
__________________________ Dollars ($______________) or (y) Lender's Pro Rata
Share of the unpaid principal amount of all Advances made by the Lenders to the
Borrower under the Revolving Credit Agreement dated the date hereof by and among
Borrower, Lender, Meridian Bank, Midlantic Bank, N.A. and PNC Bank, National
Association (the "Loan Agreement"), in lawful money of the United States of
America and in immediately available funds. All initially capitalized terms used
herein shall have the same meanings ascribed to them in the Loan Agreement
unless the context clearly requires to the contrary.
Borrower also promises to pay interest on the unpaid principal
amount of Lender's Pro Rata Share of all Advances from the Funding Date to
maturity (whether by acceleration or otherwise) with respect to Base Rate Loans,
at the Base Rate per annum, and with respect to Adjusted LIBOR Loans, at the sum
of the Adjusted LIBOR on the relevant Interest Rate Determination Date plus one
and eighty-five one-hundredths percent (1.85%) per annum. The applicable basis
for determining the rate of interest with respect to Advances shall be selected
by Borrower at the time a Notice of Borrowing is given pursuant to Section 2.2.2
of the Loan Agreement. If on any day an Advance is outstanding with respect to
which notice has not been delivered to Agent in accordance with the terms of the
Loan Agreement specifying the basis for determining the rate of interest, then
such Advance shall bear interest as if a Base Rate Loan.
Interest shall be payable on the Loans in arrears to the last
Business Day of each month, with the first payment to be made on the first
- --------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
Business Day of the month next following the Closing Date and continuing
thereafter on the first Business Day of each month and at maturity.
Any principal payments on the Loans not paid when due and, to
the extent permitted by applicable law, any interest payment on the Loans not
paid when due, and any other amount due to Agent or Lender under the Loan
Agreement or any other Loan Document not paid when due, in any case whether at
stated maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is two percent (2%)
per annum in excess of the applicable Interest Rate until the expiration of the
then applicable Interest Period and after the expiration of the then applicable
Interest Period, at a rate which is two percent (2%) in excess of the Base Rate.
This Note is one of the Notes referred to in the Loan
Agreement and is issued pursuant to and entitled to the benefits of the Loan
Agreement to which reference is hereby made for a more complete statement of the
terms and conditions pertaining to Lender's Pro Rata Share of the Advances
evidenced hereby and by the other Notes were made and are to be repaid. All
recoveries by Lender under this Note or otherwise are subject to the provisions
of Article 8 of the Loan Agreement.
All payments of principal and interest in respect of this Note
shall be made by Borrower without defense, setoff or counterclaim in immediately
available funds and delivered to Agent not later than 12:00 noon (Philadelphia
time) on the date due at Agent's offices located at Widener Building, 10th
Floor, 1339 Chestnut Street, FC 1-8-10-67, Philadelphia, Pennsylvania 19107 or
at such other place as shall be designated in writing for such purpose in
accordance with the terms of the Loan Agreement. Funds received by Agent after
that time shall be deemed to have been paid by the Borrower on the next
succeeding Business Day.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note; provided, however, that in
the event that the day on which payment of principal and interest on a Adjusted
LIBOR Loan is due is not a Business Day, then the due date thereof shall be the
last Business Day of such month.
Borrower authorizes Agent to charge Borrower's accounts with
Agent (but only to the extent there are sufficient funds therein) in order to
cause timely payment to be made to Agent of all principal, interest and fees
hereunder as provided in Section 1.5 of the Loan Agreement.
-2-
<PAGE>
Borrower may prepay all or any portion of the outstanding
principal balance hereof subject to the terms and conditions of the Loan
Agreement.
The liabilities and obligations of the Borrower hereunder
shall be unconditional without regard to the liability or obligations of any
other party and shall not be in any manner affected by any indulgence whatsoever
granted or consented to by Lender, including, but without being limited to, any
extension of time, renewal, waiver or other modification. Any failure of Lender
to exercise any right hereunder shall not be construed as a waiver of the right
to exercise the same or any other right at any time and from time to time
thereafter.
This Note shall be governed as to its validity, interpretation
and effect by the internal laws of the Commonwealth of Pennsylvania for
contracts made and to be performed in Pennsylvania. Borrower consents to the
jurisdiction of the courts of Philadelphia County, Pennsylvania, or at the
election of the holder hereof, the United States District Court for the Eastern
District of Pennsylvania, in any and all actions and proceedings by Lender, and
the Borrower hereby irrevocably agrees to service of process by registered mail,
return receipt requested, postage prepaid at the Borrower's address appearing on
Lender's records.
BORROWER HEREBY WAIVES, AND LENDER BY ITS ACCEPTANCE HEREOF
THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE RELATIONSHIP EVIDENCED HEREBY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO, ACCEPT OR RELY
UPON THIS NOTE.
Borrower hereby waives presentment, demand for payment, notice
of dishonor or acceleration, protest or notice of protest and any and all
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
Lender may assign a portion or portions of its rights and
obligations under this Note subject to the terms and conditions of the Loan
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued but unpaid
interest thereon, and Lender's Pro Rata Share of all other Indebtedness may
become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
-3-
<PAGE>
The terms of this Note may not be changed or amended orally
but only by an agreement in writing and signed by all Lenders, or by such number
of Lenders as all Lenders may determine from time to time.
Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, as provided in Section 1.6 of the Loan Agreement,
incurred in the collection and enforcement of this Note. Borrower and endorsers
of this Note hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waive diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
If any provision of this Note shall for any reason be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as if such
invalid or unenforceable provision had never been contained herein.
The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of December 16, 1987 and recorded in the
Office for the Recording of Deeds in Norristown, Montgomery County,
Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust property
for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By:____________________________
,Trustee
By:____________________________
,Trustee
-4-
<PAGE>
SECURED LOAN AGREEMENT
-----------------------
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
-----------------------
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
MERIDIAN BANK, MIDLANTIC BANK, N.A.,
and PNC BANK, NATIONAL ASSOCIATION
Lenders
$32,000,000
Secured Mortgage Loan
November 9, 1994
<PAGE>
SECURED LOAN AGREEMENT
THIS AGREEMENT, made this 9th day of November, 1994, by and among
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an unincorporated association in
business trust form ("Borrower"), and CORESTATES BANK, N.A.*, a national banking
association ("Agent") in its individual capacity as a Lender and as Agent for
itself and MERIDIAN BANK, MIDLANTIC BANK, N.A., and PNC BANK, NATIONAL
ASSOCIATION, (individually, including Agent, referred to as a "Lender" and
collectively referred to as "Lenders").
BACKGROUND
A. Borrower is a real estate investment trust engaged in investment in
"real estate assets," as defined in Section 856 of the Code (the "Business").
Borrower desires to borrow the sum of $32,000,000 to finance its acquisition of
the Boca Palms Apartments, Boca Raton, Florida. Lenders have agreed to make such
loan to Borrower, subject to the terms and conditions hereinafter more
particularly set forth.
B. Subject to the terms and conditions hereinafter set forth, the Loan
will be funded by all Lenders in accordance with each Lender's respective Pro
Rata Share.
C. Agent is both Agent and a Lender hereunder.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms. Each of the terms listed below shall have the
meaning herein ascribed to it for the purposes hereof and for each of the Loan
Documents:
"Actual Debt Service" means all interest and principal
required to have been paid on Consolidated Liabilities for any period, excluding
any final payment of principal which exceeds the periodic payments of principal
on such debt.
"Adjusted LIBOR" means the LIBOR finally adjusted and
determined in accordance with the following formula:
- --------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
[LIBOR]*
Adj. LR = --------
[1.00 - RP]
Adj. LR = Adjusted LIBOR
LIBOR = London Interbank Offered Rate
RP = Reserve Percentage pertaining to
eurocurrency liabilities
---------------
* the amount in brackets shall be rounded upwards if
necessary, to the next higher 1/16 of 1%
"Adjusted LIBOR Amounts" means those portions of the
outstanding principal balance of the Loan with respect to which Borrower has
elected to have interest charged during an Interest Period at a rate of interest
that is based on Adjusted LIBOR.
"Affiliate" means and refers to, as applied to any Person, any
other Person directly or indirectly controlling, or through one or more Persons
is controlled by, controlling or in common control with that Person. "Control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and/or policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" means CoreStates Bank, N.A., a national banking
association, with its main office at the Northeast corner of Broad and Chestnut
Streets, Philadelphia, Pennsylvania 19101, or its successor designated pursuant
to Section hereof.
"Agreement" means this Secured Loan Agreement, and all
schedules, exhibits, riders, extensions, supplements, amendments, or
modifications to this Secured Loan Agreement.
"Authorized Signer" means any of the Persons listed on the
certificate to be delivered to Agent at Closing in accordance with Section 3.1.7
hereof or any replacement certificate with respect thereto subsequently
delivered to Agent.
"Bankruptcy Code" means Title 11 of the United States Code as
now or hereafter in effect, or any successor statute.
"Base Rate" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day, or (b) the Federal
Funds Effective Rate in effect on such day plus 1/2%. If for any reason Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of Agent to obtain sufficient
quotations in accordance with the terms thereof, the Base Rate shall be
determined without regard to clause (b) of the 0preceding sentence, until the
circumstances giving rise to such inability no longer exist.
<PAGE>
"Borrower" means Pennsylvania Real Estate Investment Trust, an
unincorporated association in business trust form.
"Business" shall have the meaning set forth in the
Background to this Agreement.
"Business Day" means any week day except those on which
commercial banks in Philadelphia are authorized by law to close.
"Calendar Quarter" means the three month period ending on the
last day of March, June, September and December of each year.
"Capital Lease" means any lease of any property (real,
personal or mixed) which, in conformity with GAAP, is or should be accounted for
as a capital lease on the balance sheet of the lessee.
"Cash" means money, currency or a credit balance in a
Deposit Account.
"Closing" and "Closing Date" mean the day on which all of the
conditions set forth in Article III hereof have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
from time to time, and any successor code or statute.
"Company-Prepared Consolidated Financial Statements" means an
income and expense statement and balance sheet with respect to the operations
and financial condition of Borrower, which consolidate each of Borrower's
subsidiaries and Borrower's Percentage Interest in all Ventures during and as of
the last day of each Fiscal Quarter, prepared and certified as true, correct and
complete by Borrower's chief financial officer.
"Consolidated Liabilities" means, at any time, the sum of (i)
all liabilities of Borrower, determined in accordance with GAAP, plus (ii)
Borrower's applicable Percentage Interest in the total liabilities of each
Venture, plus (iii) the aggregate amount of indebtedness incurred in connection
with construction in progress by Borrower or any wholly-owned subsidiary and
Borrower's applicable Percentage Interest in all such indebtedness incurred by
each Venture, to the extent any such indebtedness referred to in this clause
(iii) is not included in clauses (i) and (ii).
<PAGE>
"Consolidated NOI" means, at any time, Funds From Operations,
plus Interest Expense (from the most recent Company-Prepared Consolidated
Financial Statements), which sum shall be appropriately adjusted on a rolling
four Fiscal Quarter historical basis by the gross revenues and operating
expenses for each income-producing property that was placed in service or
disposed of by Borrower, by any wholly-owned subsidiary of Borrower, or by any
Venture, during such period of four Fiscal Quarters.
"Contingent Liabilities" means, at any time, the sum of (i)
all indebtedness of Borrower for borrowed monies (other than indebtedness for
which Borrower's liability is limited solely to specific assets of Borrower that
are financed by such indebtedness) plus (ii) all indebtedness of others for
borrowed monies, to the extent that payment of such monies is guarantied by
Borrower (excluding Borrower's Guaranty of its Percentage Interest in the
Venture known as Laurel Mall Associates).
"Debt" means for any Person at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments
with an original maturity in excess of one year (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued liabilities, in each case arising in the ordinary
course of business, (iv) all Debt of others secured by a lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (v) all
Debt of others guaranteed by such Person.
"Deposit Account" means a demand, time, savings, passbook or
like account with a federally insured bank or savings and loan association,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Officer" means Glenn W. Gallagher or any
other person designated in writing by Agent as its representative
for the purpose of receiving notice hereunder.
"Dollars" and the symbol "$" mean the lawful money of
the United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" means each of the events set forth
in Section hereof.
"Federal Funds Effective Rate" means for any day the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
succeeding Business Day by the Federal Reserve Bank of Philadelphia, or, if such
rate is not so published for any day which is a Business Day, the average of
quotations for the day of such transactions received by Agent from three Federal
funds brokers of recognized standing selected by it.
<PAGE>
"Fiscal Quarter" means a fiscal quarter of Borrower, currently
ending on the last day of each November, February, May, and August.
"Fiscal Year" means the fiscal year of Borrower, which
currently ends on August 31 of each year.
"Fixed Rate Amount" means a portion of the outstanding
principal balance of the Loan with respect to which Borrower has elected the
Interest Rate Option.
"Fixed Rate Date" means the Business Day on which interest on
an Adjusted LIBOR Amount commences to be charged at a rate based on Adjusted
LIBOR.
"Funds From Operations" means, at any time, Borrower's NOI
less gains or losses from the sale, or the restructuring of any indebtedness
secured by, real properties, plus depreciation and amortization, and after
adjustments for unconsolidated entities in which Borrower holds an equity
interest, plus provisions for losses.
"GAAP" means generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as in effect on the
date hereof which are applicable to the circumstances as of the date of
determination and which are applied on a consistent basis.
"Governmental Approvals" means all material authorizations,
consents, approvals, licenses and exemptions of, registrations and filings with,
and reports to all governmental bodies.
"Indebtedness" means all amounts due from Borrower to Lenders
or Agent pursuant to Article and otherwise arising out of or in connection with
this Agreement or any other Loan Document.
"Interest Expense" means all payments by Borrower with respect
to interest on the Indebtedness or any other obligation of Borrower on which
interest is paid, including the interest portion of Capital Leases.
"Interest Period" means that period of time applicable to an
Adjusted LIBOR Borrowing as determined pursuant Section 2.2.4 hereof.
"Interest Rate Determination Date" means each date for
determining the interest rate for an Interest Period in respect of which
interest on all or a portion of the Loan is based on the Adjusted LIBOR. The
Interest Rate Determination Date shall be the second London Business Day prior
to the first day of the related Interest Period for an Adjusted LIBOR Amount.
<PAGE>
"Interest Rate Option" means the Adjusted LIBOR selected by
Borrower for all or any part of the Loan as permitted by this Agreement.
"Last Reported Fiscal Year" means, at any time, the most
recently concluded Fiscal Year of Borrower for which financial statements have
been delivered to Lenders.
"Lenders" means Agent and each Lender listed in the preamble
hereto. As used herein, the term Lenders, unless the context clearly requires to
the contrary, refers to all Lenders.
"Lenders' Costs" means all reasonable costs and expenses of
any kind paid or incurred by Agent in connection with the preparation,
execution, delivery, amendment, modification, administration or termination of
this Agreement or any other Loan Document, any amendments thereto, any
transaction contemplated herein or any existing or future related agreements and
the reasonable costs and expenses of Agent and each Lender in connection with
the preservation, enforcement, defense and protection of Lenders' rights,
remedies, obligations and liabilities in any manner concerning this Agreement or
any other Loan Document, any transaction contemplated herein or any existing or
future related agreements, including, but not limited to: (a) reasonable
attorneys' fees and other expenses paid or incurred by Agent in enforcing,
obtaining legal advice in preparing, reviewing, consummating, amending,
restructuring, extending, terminating, defending, or preserving or protecting
Agent's or Lenders' rights, remedies, obligations or liabilities in any manner
concerning, this Agreement, any Loan Document or any amendments thereto, any
transaction contemplated herein or any existing or future related agreements;
and (b) wire transfer charges in such amounts as Agent may from time to time
establish for such service.
"LIBOR" means the rate per annum at which deposits of Dollars
are offered to Agent by prime banks in the London Eurodollar interbank market at
or about 11:00 A.M. local time in such interbank market, two London Business
Days prior to the first day of the applicable Interest Period for a period equal
to the period of such Interest Period in an amount substantially equal to the
principal amount requested to be lent as, maintained as or converted to an
Adjusted LIBOR Amount.
"Loan Documents" means this Agreement, the Notes, the
Mortgages, Assignments of Rents, Leases and Profits, Collateral Assignments of
Agreements Affecting Real Estate, and every other certificate or agreement of
Borrower in favor of Agent or Lenders delivered pursuant to this Agreement.
<PAGE>
"Loan" means the $32,000,000 loan made by Lenders to Borrower
pursuant to this Agreement.
"London Business Day" means any Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London and Philadelphia.
"Materially Adverse Effect" means, with respect to Borrower, a
materially adverse effect upon the business, assets, financial condition,
results of operations of Borrower and its subsidiaries taken as a whole, or
Borrower's ability to perform Borrower's obligations under the Loan Documents in
accordance with their respective terms.
"Mortgage" means each Open-End Mortgage and Security
Agreement, dated the date hereof, executed by Borrower in favor of Agent and
delivered as security for the Loan.
"Mortgaged Property" means each of, and "Mortgaged Properties"
means all of, Borrower's real property known as 2031 Locust Street,
Philadelphia, Pennsylvania, the Lakewood Hill Apartments, Lower Paxton Township,
Dauphin County, Pennsylvania, and the Kenwood Gardens Apartments, City of
Toledo, Lucas County,
Ohio.
"NOI" means Borrower's, plus Borrower's applicable Percentage
Interest of each Venture's, gross rental income minus operating and servicing
expenses derived from the operation by Borrower, or by any wholly-owned
subsidiary, of income-producing property wholly-owned by Borrower, a subsidiary
of Borrower or a Venture during, and as shown on the financial statements for,
the Last Reported Fiscal Year, before Interest Expense, depreciation and
amortization.
"Notes" means the notes of Borrower in favor of Lenders to
evidence Borrower's repayment obligations under this Agreement with respect to
the Loan.
"Notice of Rate Election" means a notice substantially in the
form of Schedule 2.2.2 attached hereto and made a part hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Percentage Interest" means, with respect to each Venture, the
aggregate ownership interests of Borrower and any wholly-owned subsidiary of
Borrower in such Venture.
"Person" means an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Prime Rate" means that rate of interest per annum announced
by Agent from time to time as its "prime rate" which may not represent the
lowest rate charged by Agent to other borrowers, or to any class of borrowers,
at any time, or from time to time.
<PAGE>
"Pro Forma Debt Service" means, with respect to any period of
time, the aggregate amount of principal payments and interest during such period
on Consolidated Liabilities, calculated using the greater of (i) Actual Debt
Service or (ii) the amount of interest and principal payable, based on a 25 year
amortization schedule, on the principal amounts of such long term debt at a rate
of interest equal to the current yield to maturity of United States Treasury
obligations having a 10 year maturity plus two percent per annum.
"Project Specific Information" means an income and expense
statement and balance sheet with respect to individual income producing real
properties owned by Borrower or any subsidiary, and Borrower's Percentage
Interest in any Venture's income producing real property, disclosing gross
rental revenues, operating expenses, mortgage interest, depreciation and
amortization expenses and net operating income.
"Properties" means all real estate owned, leased or occupied
at any time by Borrower, any subsidiary of Borrower and "Property" means any
single parcel of such real estate.
"Pro Rata Share" means, with respect to each Lender, the
percentage of the Loan set forth on Schedule 1.1A attached hereto and made a
part hereof, as the same may be amended, from time to time, by Lenders.
"Requisite Lenders" means Lenders whose Pro Rata Shares
aggregate at least 66 2/3%.
"Reserve Percentage" means for any day that maximum percentage
(expressed as a decimal), whether or not incurred, which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System, for
determining the reserve requirement for a member bank of the Federal Reserve
System in Philadelphia with respect to the Adjusted LIBOR "Eurocurrency
liabilities" (as such term is defined in Regulation D) (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Adjusted Amounts is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any
Lender to United States residents).
"Revolving Credit Agreement" means the Revolving Credit
Agreement dated November 3, 1994 that Borrower, Agent, and Lenders have executed
with respect to a $78,000,000 loan facility to Borrower.
<PAGE>
"RICO" means the Racketeer Influenced and Corrupt Organization
Act, as amended by the Comprehensive Crime Control Act of 1984, 18 USC
ss.ss.1961-68.
"Rules" means any law, regulation, or rule of practice whether
or not having the force of law by which any Lender is bound or to which it
adheres.
"Scheduled Maturity Date" means the first to occur of (i) one
year after the date of this Agreement or (ii) December 31, 1995.
"Senior Liabilities" means Borrower's obligations to Lenders
to repay all amounts due under the Revolving Credit Agreement.
"Tangible Net Worth" means, at any time, the sum of (i)
Borrower's beneficiaries' equity (less the value of treasury stock and debt
convertible into Borrower's capital stock); (ii) Borrower's cumulative retained
earnings; and (iii) Borrower's, and Borrower's Percentage Interest in any
Venture's, accumulated depreciation and amortization; less all intangible assets
carried on the books of Borrower.
"Unencumbered Property Pool" means a group of no fewer than
five of Borrower's unencumbered, wholly-owned, income producing Properties with
a combined average occupancy rate of not less than 80% (as determined at the end
of each Fiscal Quarter).
"Unmatured Event of Default" means and refers to any event,
act or occurrence which with the passage of time or giving of notice or both
becomes an Event of Default.
"Venture" means each partnership, joint venture or other
entity in which Borrower or any wholly-owned subsidiary of Borrower has a 50% or
more beneficial, or other controlling, ownership interest a list of which, as of
the date hereof, is attached hereto, as Schedule 1.1B.
1.2 Construction of Definitions. All terms defined herein shall be
construed to include the plural or the singular, and references to persons in
the masculine or neuter gender shall refer to all persons or entities, as the
context requires.
1.3 Accounting Reports and Principles. Except for Company-prepared
Consolidated Financial Statements, the character or amount of any asset,
liability, account or reserve and of any item of income or expense to be
determined, and any consolidation or other accounting computation to be made,
and the construction of any definition containing a financial term, pursuant to
this Agreement or any other Loan Document, shall be construed, determined or
made, as the case may be, in accordance with GAAP, consistently applied, unless
such principles are inconsistent with any express provision of this Agreement.
<PAGE>
1.4 Business Day. Whenever any payment or other obligation hereunder,
whether under the Notes or under another Loan Document, is due on a day other
than a Business Day, such shall be paid or performed on the Business Day next
following the prescribed due date, except as otherwise specifically provided for
herein to the contrary, and such extension of time shall be included in the
computation of interest and charges. Any reference made herein or in any other
Loan Document to an hour of day shall refer to the then prevailing Philadelphia,
Pennsylvania time, unless specifically provided herein to the contrary.
1.5 Charging Accounts. Whenever Borrower is obligated, pursuant to
Article , hereof, or pursuant to the Notes or any other Loan Document, to make
payments of any nature to Agent or Lenders, Agent shall be entitled, and
Borrower hereby authorizes Agent to draw against any Deposit Account owned by
Borrower at Agent on account of such fees and expenses or payments due. By 10:00
a.m. on the date on which any draw is made, Agent shall deliver to Borrower a
notice setting forth, in reasonable detail, the amount of the fees, expenses
and/or payments to be satisfied by such draw, and the name or number of the
account or accounts from which the draw was made. Any such charge shall be
subject to the provisions of Section 8.3 hereof relating to the sharing of
recoveries among Lenders.
1.6 Lenders' Costs. Borrower shall, upon the request of Agent, pay
Agent the amount of all unpaid Lenders' Costs within fifteen days after such
notice. Until paid, all past due and owing interest payments, fees and all past
due Lenders' Costs shall be deemed to be part of the principal balance of the
Loan and bear interest at the Base Rate.
1.7 Other Terms. The words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
exhibits hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Any reference to an "Article", a "Section", an "Exhibit" or
"Schedule" shall refer to the relevant Article of, Section of, Exhibit to or
Schedule to this Agreement, unless otherwise specifically indicated.
ARTICLE 2
THE LOAN
2.1 Loan
2.1.1 Extension of Credit. On the Closing Date, Lenders
severally, in accordance with their respective Pro Rata Shares, shall advance
the amount of the Loan to Borrower. Any payments of principal that Borrower may
from time to time make with respect to the Loan may not be reborrowed.
<PAGE>
2.1.2 Payment of Principal. The entire outstanding principal
balance of the Loan shall be paid in full on the day of the Scheduled Maturity
Date.
2.1.3 Payment of Interest. Interest on the Loan shall be
payable monthly, subject to Section 2.2.8 hereof in arrears to the last Business
Day of each month, with the first payment to be made on the first Business Day
of the month next following the Closing Date, and continuing thereafter on the
first Business Day of each month.
2.1.4 Interest Rate Option and Notice of Rate Election. The
Loan shall bear interest on the unpaid principal balance thereof from the date
hereof to maturity (whether by acceleration or otherwise) at the Base Rate per
annum (calculated on the basis of a 360-day year and charged for the actual
number of days elapsed); except that Adjusted LIBOR Amounts shall bear interest
during the relevant Interest Period at the Adjusted LIBOR on the relevant
Interest Rate Determination Date plus two percent (2%) per annum (calculated on
the basis of a 360-day year and charged for the actual number of days elapsed).
The applicable basis for determining the Interest Rate Option with respect to
any Adjusted LIBOR Amount shall be selected by Borrower at the time a Notice of
Rate Election is given pursuant to Section 2.2.2 hereof.
2.1.5 Notes. To evidence Borrower's obligations under the
Loan, Borrower shall execute and deliver to each Lender a Note in the principal
amount of the Pro Rata Share of the Loan that has been advanced by such Lender.
2.2 General Provisions.
2.2.1 Advances. The Loan shall be made by Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that the obligations of Lenders to advance funds to Borrower hereunder are
independent and that no Lender shall be responsible for any default by any other
Lender in that other Lender's obligation to make any such advances.
2.2.2 Notice of Election of Interest Rate Option; Failure to
Give Notice. Subject to the provisions of this Article 2, whenever Borrower
desires to fix the rate of interest charged on all or any portion of the
outstanding principal balance of the Loan, including the desire to continue the
Interest Rate Option on a Fixed Rate Amount, Borrower shall deliver by telecopy
to Agent a properly completed and executed Notice of Rate Election no later than
11:00 A.M. at least three London Business Days in advance of the proposed Fixed
Rate Date or date of continuation. The Notice of Rate Election shall specify (i)
the proposed Fixed Rate Date or date of continuation (which shall be a Business
Day) and (ii) the proposed Adjusted LIBOR Amount(s) and the initial Interest
Period(s) therefor; provided that the minimum amount of each Adjusted LIBOR
Amount shall be $1,000,000.
<PAGE>
A Notice of Rate Election for an Adjusted LIBOR Amount shall be
irrevocable on and after the related Interest Rate Determination Date, and
Borrower shall be bound to make, continue or convert the Adjusted LIBOR Amount
in accordance therewith.
If at the termination of any Interest Period, Borrower has failed to
submit a Notice of Rate Election, as aforesaid, to have interest on the relevant
Adjusted LIBOR Amount or any portion thereof continue to be charged at a rate
based on Adjusted LIBOR, then interest thereon shall automatically be charged at
the Base Rate as of the termination of the relevant Interest Period.
Adjusted LIBOR Amounts may be converted to portions of the Loan on
which interest is charged at the Base Rate only on the expiration date of an
Interest Period applicable thereto. In addition, no outstanding portions of the
Loan may be continued as, or be converted into, Adjusted LIBOR Amounts when any
Event of Default or Unmatured Event of Default has occurred and is continuing.
If on any day portions of the Loan are outstanding with respect to
which a Notice of Rate Election has not been delivered to Agent in accordance
with the terms of this Agreement, then such portions of the Loan shall bear
interest at the Base Rate.
2.2.3 Intentionally Deleted.
2.2.4 Interest Periods. In connection with each Adjusted LIBOR
Amount, Borrower shall elect an Interest Period to be applicable to such
Adjusted LIBOR Amount, which Interest Period shall be either a one, two, three,
or six month period; provided that:
2.2.4.1 except as provided in subsection 2.2.4.2
hereof, if an Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day;
2.2.4.2 any Interest Period in respect of an Adjusted
LIBOR Amount which: (i) begins on the last Business Day of a calendar month (or
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
relevant calendar month, or (ii) would expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in that
month, such Interest Period shall expire on the last Business Day of the month;
<PAGE>
2.2.4.3 no Interest Period shall extend beyond the
Scheduled Maturity Date; and
2.2.4.4 there shall be no more than five Adjusted
LIBOR Amounts outstanding at any time.
2.2.5 Post-Maturity Interest. Any principal payments on the
Loan not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loan not paid when due, and any other amount due to
Agent or any Lender under this Agreement or any other Loan Document not paid
when due, in any case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest payable upon demand at
a rate which is two percent (2%) per annum in excess of the applicable Interest
Rate until the expiration of the then applicable Interest Period and after the
expiration of the then applicable Interest Period, at a rate which is two
percent (2%) per annum in excess of the Base Rate.
2.2.6 Adjusted LIBOR and Base Rate.
2.2.6.1 Agent shall give Lenders and Borrower prompt notice of
the Adjusted LIBOR determined for an Interest Period, and absent manifest error,
each determination of such rates by Agent shall be conclusive and binding for
all purposes hereof.
2.2.6.2 If Borrower requests that all or any portion of the
outstanding principal balance of the Loan bear interest at the Adjusted LIBOR
and (i) Agent determines that, by reason of circumstances affecting the
interbank Eurodollar market generally, deposits in U.S. Dollars (in the
applicable amounts) are not being offered to banks in the interbank Eurodollar
market for the selected Interest Period, or (ii) the Requisite Lenders shall
certify that the relevant rates of interest referred to in the definition of
Adjusted LIBOR do not accurately reflect the cost to Lenders of making or
maintaining Adjusted LIBOR Amounts for the Interest Periods therefor, then Agent
shall forthwith give notice thereof to Borrower, whereupon until Agent notifies
Borrower that the circumstances giving rise to such suspension no longer exist,
(a) the obligation of Agent to permit applicable portions of the Loan to bear
interest at the Adjusted LIBOR shall be suspended so long as such circumstances
exist, and (b) Borrower shall convert the interest rates on the applicable
portions of the outstanding Loan to the Base Rate or the available Adjusted
LIBOR on the last day of the then current Interest Period.
<PAGE>
2.2.6.3 If, after the date of this Agreement, the adoption of
or any change in Rules, or change in the interpretation or administration
thereof, by a governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Lenders with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Lender to make or maintain or fund loans at the Adjusted
LIBOR, the affected Lender or Lenders shall promptly notify Borrower and the
interest rates on the applicable portions of the outstanding Loan shall be
deemed to have been converted to the Base Rate, or the Adjusted LIBOR, whichever
is available, on either (i) the last day of the then current Interest Period if
Lenders may lawfully continue to maintain loans at the Adjusted LIBOR to such
day, or (ii) immediately if Lenders may not lawfully continue to maintain loans
at the Adjusted LIBOR to such day. The affected Lender will use its best efforts
to designate a different lending office if such office may lawfully continue to
maintain Adjusted LIBOR Amounts at the Adjusted LIBOR through the end of the
then-current Interest Period. After Borrower's receipt of notice of the
illegality of or impossibility for any Lender to make, maintain or fund loans at
the Adjusted LIBOR, Borrower shall not request future Adjusted LIBOR Amounts
until the affected Lender or Lenders shall have notified Borrower of the absence
or removal of such illegality or impossibility.
2.2.6.4 If, after the date of this Agreement any
governmental authority, central bank or other comparable authority shall at any
time impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), any tax (including without limitation, any United States interest
equalization tax or similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with respect thereto),
duty, charge, fee, deduction, withholding special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Lender, or shall impose on any Lender or the interbank Eurodollar market any
other condition affecting loans at the Adjusted LIBOR, and the result of any of
the foregoing is to increase the cost to any Lender of making or maintaining the
interest rate at the Adjusted LIBOR or to reduce the amount of any sum received
or receivable by any Lender under this Agreement or the Notes by an amount
deemed by such Lender to be material, then within five days after demand by such
Lender, Borrower shall pay to Agent such additional amount or amounts as will
compensate such Lender for such increased cost or reduction. Agent will promptly
notify Borrower of any event of which it has knowledge occurring after the date
hereof, which will entitle any Lender to compensation pursuant to this
subsection 2.2.6.4. A certificate of Agent claiming compensation under this
subsection 2.2.6.4 and setting forth the additional amount or amounts to be paid
to Lenders hereunder shall be conclusive in the absence of manifest error.
2.2.6.5 The Adjusted LIBOR shall be adjusted automatically on
and as of the effective day of any change in the relevant Reserve Percentage.
<PAGE>
2.2.6.6 Promptly upon notice from Agent to Borrower, Borrower
will pay, prior to the date on which penalties attach thereto, all present and
future stamp, documentary and other similar taxes, levies, or costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of any
portion of the Loan solely as a result of the interest rate on Adjusted LIBOR
Amounts being determined by reference to the Adjusted LIBOR and/or the
provisions of this Agreement relating to the Adjusted LIBOR and/or the
recording, registration, notarization or other formalization of any thereof
and/or payments of principal, interest or other amounts made on or in respect of
an Adjusted LIBOR Amount when the interest rate is determined by reference to
the Adjusted LIBOR (all such taxes, levies, costs and charges being herein
collectively called "Eurodollar Rate Tax"). Promptly after the date on which
payment of any such Eurodollar Rate Tax is due pursuant to applicable law,
Borrower will, at the request of Agent, furnish to Agent evidence, in form and
substance satisfactory to Agent, that Borrower has met its obligation under this
subsection 2.2.6.6. Borrower will indemnify each Lender against, and reimburse
each Lender on demand for, any Eurodollar Rate Tax, as determined by such Lender
in its good faith discretion. Such Lender shall provide Borrower with
appropriate receipts for any payments or reimbursements made by Borrower
pursuant to this subsection 2.2.6.6. A certificate of Agent (or a Lender) as to
any amount payable pursuant to this Section shall, absent manifest error, be
final, conclusive and binding on all parties hereto.
<PAGE>
2.2.6.7 If Agent or any Lender shall determine that (i) any
current Rule, law, regulation, or guideline, the adoption or imposition of any
Rules, law, regulation, or guideline any change in any Rules, law, regulation or
guideline, or the adoption, imposition or change in the interpretation or
administration thereof by a governmental authority, central bank or comparable
agency charged with the interpretation and administration thereof, or (ii)
compliance by any Lender (or any lending office or any holding company of a
Lender) with any request, guideline or directive whether or not having the force
of law regarding special deposit, capital adequacy, risk based capital, capital
or reserve maintenance, capital ratio, or similar requirements against loans or
loan commitments or any commitments to extend credit or other assets of or any
deposits or other liabilities taken or entered into by Lenders (including the
capital adequacy guidelines promulgated by the Board of Governors of the Federal
Reserve System) and the result of any event referred to in clauses (i) or (ii)
above (x) shall be to increase the cost to any Lender of making or maintaining,
or to impose upon any Lender or increase any capital requirement applicable as a
result of the making or maintenance of, the Loan or the obligation of Borrower
hereunder or (y) has or would have the effect of reducing the rate of return or
amounts receivable hereunder on any Lender's (or any holding company's) Pro Rata
Share of the Loan as a consequence of its obligations pursuant to this Agreement
or the Loan made by any Lender pursuant hereto to a level below that which any
Lender (or any Lender's holding company) could have achieved but for such
adoption, imposition, change or compliance (taking into consideration such
Lender's policies and the policies of such Lender's holding company with respect
to capital adequacy) by an amount deemed by such holder to be material (which
adoption, imposition, change, or increase in capital requirements or reduction
in amounts receivable may be determined by Agent's reasonable allocation of the
aggregate of such cost increase, capital increase or imposition or reductions in
amounts receivable resulting from such events), then, from time to time,
Borrower shall pay to such Lender, on demand by Lender as set forth below, such
additional amount or amounts as will be necessary to restore the rate of return
to such Lender from the date of such change, together with interest on such
amount from the date demanded until payment thereof in full at the rate provided
in this Agreement. Each Lender (or Lender's holding company) shall be entitled
to compensation pursuant to this subsection 2.2.6.7. A certificate of each
Lender claiming compensation under this subsection 2.2.6.7 and setting forth the
increased cost, reduction in amounts receivable, additional amount or amounts
necessary to compensate any Lender (or any Lender's holding company) hereunder
shall be delivered to Borrower and shall be conclusive in the absence of
manifest error. Borrower shall pay each Lender the amount shown as due on any
such certificate delivered by such Lender within 10 days after Borrower's
receipt of same. If any Lender demands compensation under this Section, Borrower
may, upon 10 Business Days' prior notice to Agent, prepay in full, in accordance
with subsection 2.2.7 hereof, the then outstanding: (1) any portion of the
outstanding principal balance of the Loan other than Adjusted LIBOR Amounts
together with accrued interest thereon to the date of prepayment without
premium; and (ii) Adjusted LIBOR Amounts together with accrued interest thereon
to the date of prepayment along with the respective prepayment premium as
provided in subsection 2.2.7.4 hereof, in each case payable to such Lender. In
lieu of prepaying an Adjusted LIBOR Amount as aforesaid, Borrower may elect to
convert such Adjusted LIBOR Amount to a portion of the Loan on which interest is
charged at the Base Rate, provided that Borrower pays to Lenders an amount equal
to the prepayment premium that would have been payable to Lenders, as provided
in subsection 2.2.7.1 hereof, had such Adjusted LIBOR Amount been prepaid on the
date of such conversion.
<PAGE>
2.2.6.8 Failure on the part of any Lender to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender's right to demand compensation with
respect to such period or any other period. The protection of this Section 2.2.6
shall be available to each Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed.
2.2.6.9 The Base Rate shall be determined and adjusted daily.
2.2.6.10 If any Lender shall demand compensation as a
result of the events or conditions described in subsections 2.2.6.4, 2.2.6.6.,
or 2.2.6.7, hereof, and such events or conditions have not affected the other
Lenders or the other Lenders have not demanded compensation therefor, Borrower
shall have the option to prepay the portion of the Loan, together with accrued
and unpaid interest and any applicable prepayment premium penalty, funded by the
affected Lender and the Pro Rata Shares of the Lenders shall automatically be
adjusted to reflect such prepayment. If the prepayment is a partial prepayment
of the portion of the Loan held by the affected Lender, no other Lender shall be
obligated to advance additional funds to Borrower, nor shall the affected Lender
be obligated to re-advance the amount so prepaid if the event or condition that
gave rise to such prepayment shall cease to exist. Upon prepayment in full to
the affected Lender, such Lender shall be discharged from all of its duties and
obligations as a Lender under this Agreement.
2.2.7 Prepayment; Prepayment Premium.
2.2.7.1 Voluntary Prepayments. All voluntary
prepayments shall be applied among the Lenders in accordance with the Pro Rata
Share of each. In connection with each voluntary prepayment:
(a) Borrower shall provide Agent with at
least one (1) Business Day prior notice of its intention to prepay, specifying
the amount and date of such payment.
(b) Borrower shall concurrently with any
prepayment in full of the Loan pay the full amount of all interest accrued on
the Loan and accrued Lender's Costs, and payments received shall be applied
first to Lender's Costs, then to accrued interest, and thereafter in reduction
of principal.
(c) Each prepayment of principal shall be in
an amount equal to at least One Million Dollars ($1,000,000.00) (exclusive of
the Interest payable in connection therewith and of the other amounts payable
pursuant to this Agreement upon a prepayment).
In the event Borrower makes a prepayment (whether voluntary or mandatory) of any
portion of the Loan bearing interest at a rate based on Adjusted LIBOR during a
specified Interest Period on a day other than the last day of such Interest
Period, Borrower will pay to the Agent, upon demand, for the account of the
affected Lenders any cost or expense incurred as a result of such prepayment.
Each affected Lender shall certify the amount of such cost or expense to
Borrower and provide Borrower with a written statement setting forth the cost or
expense claimed and the calculations used in determining such loss and expense,
which certification and statement shall be conclusive in the absence of
manifest error.
<PAGE>
Prepayments shall be applied first to interest (to the extent then payable),
then to principal with respect to the portions of the Loan accruing interest at
a rate based upon the Base Rate and then to Adjusted LIBOR Amounts and among
such Adjusted LIBOR Amounts to such with the earliest expiring Interest Periods.
2.2.7.2 Mandatory Prepayment.
(a) In the event that Borrower issues any
equity securities during the term of the Loan, Borrower shall make a mandatory
prepayment of the Loan in the amount that equals the lesser of the net proceeds
to Borrower of such issuance or the amount sufficient to prepay the Loan in
full. Each such mandatory prepayment shall be made within one (1) Business Day
after the date of Borrower's receipt of such net proceeds and shall be applied
among the Lenders in accordance with the Pro Rata Shares of each. Each such
mandatory prepayment shall be accompanied by payment of the prepayment premium,
if any, that would have been payable in accordance with subsection 2.2.7.1
hereof had such mandatory prepayment been a voluntary prepayment.
(b) Notwithstanding the provisions of
subsection 2.2.7.2(a) hereof, (i) the issuance of equity securities by Borrower
pursuant to a dividend reinvestment plan shall not require Borrower to make a
mandatory prepayment of the Loan and (ii) if Borrower issues equity securities
pursuant to an optional shareholder investment plan (other than a dividend
reinvestment plan), the proceeds of such issuance shall require mandatory
prepayments of the Loan, such prepayments to be made within ten (10) Business
Days after each accumulation by Borrower of $1,000,000 of proceeds of such
issuance.
2.2.7.3 Funding Losses. If the Borrower prepays any
Adjusted LIBOR Amount after a Notice of Rate Election has been given to Agent as
provided in this Article , Borrower shall reimburse each Lender on demand for
any resulting loss or expense incurred by it (or by any existing or prospective
participant in the Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, provided that
such Lender shall have delivered to the Borrower a certificate as to the amount
of such loss or expense and specifying the calculation thereof, which
certificate shall be conclusive in the absence of manifest error.
2.2.8 Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Notes shall be made by Borrower
without notice, set off or counterclaim and in immediately available same day
funds and delivered to Agent not later than 12:00 noon on the date due at its
office located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19101
for the account of Lenders; funds received by Agent after that time shall be
deemed to have been paid by Borrower on the next succeeding Business Day.
<PAGE>
2.2.9 Apportionment of Payments. Aggregate principal and
interest payments in respect of Loan shall be apportioned proportionately to
each Lender's respective Pro Rata Share. Agent shall, within one (1) Business
Day, distribute to each Lender its share of all payments received by Agent for
the benefit of Lenders.
2.2.10 Use of Proceeds. The Loan shall be used by Borrower to
acquire the Boca Palms Apartments, Boca Raton, Florida.
2.2.11 Conditional Payment. Borrower agrees that checks and
other instruments received by Agent on behalf of Lenders or by any Lender in
payment or on account of the Indebtedness constitute only conditional payment
until such items are actually paid to Agent or such Lender.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Funding of the Loan. The performance by Lenders of any of their
obligations hereunder is subject to the delivery by Borrower to Agent on the
Closing Date, in form and substance satisfactory to Agent and its counsel, in
addition to this Agreement, the following documents and instruments:
3.1.1 The Notes;
3.1.2 The Mortgages;
3.1.3 An Assignment of Rents, Leases and Profits with respect
to each Mortgaged Property;
3.1.4 A Collateral Assignment of Agreements Affecting Real
Estate with respect to each Mortgaged Property;
3.1.5 UCC-1 Financing Statements with respect to each
Mortgaged Property;
3.1.6 A certified copy of Borrower's Trust Agreement and
resolutions adopted by the Board of Trustees authorizing the execution, delivery
and performance of this Agreement, the Notes, the Mortgages, all other Loan
Documents, and all other documents and instruments required by Agent for the
implementation of this Agreement to which Borrower is a party, all certified by
a trustee or officer of Borrower to be true and correct copies of the originals
and to be in full force and effect as of the Closing Date;
<PAGE>
3.1.7 An incumbency and signature certificate with respect to
each of the trustees of Borrower authorized to execute and deliver this
Agreement, the Notes, the Mortgages, the other Loan Documents, and all other
documents and instruments required by Agent for the implementation of this
Agreement and to be the Authorized Signers;
3.1.8 The opinion of Borrower's counsel, in form and substance
acceptable to Lenders in their reasonable judgment;
3.1.9 A Notice of Rate Election with respect to any Adjusted
LIBOR Amount(s) desired as of the Closing Date;
3.1.10 A policy of title insurance, or a marked-up commitment
to issue such a policy, by First American Title Insurance Company (together with
such reinsurance and direct access agreements with other title insurance
companies as Lender's may require), insuring the Mortgages as first liens upon
the Mortgaged Properties, subject only to such exceptions as Lenders may accept;
3.1.11 Evidence of Borrower's policies of insurance, with
respect to each Mortgaged Property, as required by the terms of Section 5.1.21
hereof;
3.1.12 Evidence that Borrower has received, with respect to
each Mortgaged Property, all required Governmental Approvals relating to the
ownership, use, operation and occupancy of the Mortgaged Properties and that the
Mortgaged Properties comply in all material respects with all applicable laws;
3.1.13 A "Phase I" environmental audit performed with respect
to each Mortgaged Property by a qualified environmental engineer acceptable to
Lenders; and
3.1.14 Appraisals of each Mortgaged Property, which appraisals
are acceptable to Lenders and indicate an aggregate value of the Mortgaged
Properties of $34,000,000 or more; and
3.1.15 Such additional documents or instruments as may be
required by this Agreement or as Agent may reasonably require.
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES.
4.1 Borrower represents and warrants to each Lender as follows:
4.1.1 Good Standing. Borrower is a "real estate investment
trust" as defined in Section 856 of the Code; has the power and authority to own
and operate Borrower's Properties and to carry on Borrower's Business where and
as contemplated; is an unincorporated association in business trust form duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business in, and is in good standing in,
every jurisdiction where the nature of Borrower's Business requires such
qualification.
<PAGE>
4.1.2 Power and Authority. The making, execution, issuance and
performance by Borrower of this Agreement, the Notes, the Mortgages, and the
other Loan Documents to which Borrower is a party, have been duly authorized by
all necessary action and will not violate any provision of law or regulation or
of the trust agreement of Borrower; will not violate any agreement, trust or
other indenture or instrument to which Borrower is a party or by which Borrower
or any of its property is bound. This Agreement, the Notes and the other Loan
Documents have been duly executed and delivered by Borrower and constitute legal
and binding obligations of Borrower, enforceable in accordance with their
respective terms.
4.1.3 Financial Condition. The audited balance sheet of
Borrower together with income and surplus statements as at and for the year
ended August 31, 1993 and the unaudited balance sheet of Borrower together with
income and surplus statements as at and for the nine months ended May 31, 1994
heretofore furnished to Agent, are complete and correct in all respects, have
been prepared in accordance with GAAP, consistently applied, and fairly present
the financial condition of Borrower as of said dates and the results of
Borrower's operations for the periods then ended. Except as set forth on such
financial statements, Borrower does not have any fixed, accrued or contingent
obligation or liability for taxes or otherwise that is not disclosed or reserved
against on its balance sheets. Borrower has filed all federal, state and local
tax returns required to be filed by it with any taxing authority. Since May 31,
1994, there has been no material adverse change in the condition of Borrower's
financial position or otherwise from that set forth in the balance sheet as of
said date. Borrower does not believe, in the exercise of reasonable business
judgment, that there has been or will likely be a change relating to the
Business of Borrower that would cause a Materially Adverse Effect on Borrower.
Borrower is not aware of any additional tax assessment or tax to be assessed
that would have a Material Adverse Effect on the financial condition of
Borrower.
4.1.4 No Litigation. Except as set forth on Schedule 4.1.4
hereto, there are no suits or proceedings pending, or, to the knowledge of
Borrower, threatened against or affecting Borrower or the Mortgaged Properties,
and Borrower is not in default in the performance of any agreement to which
Borrower may be a party or by which Borrower is bound, or with respect to any
order, writ, injunction, or any decree of any court, or any federal, state,
municipal or other government agency or instrumentality, domestic or foreign,
which is likely to have a Materially Adverse Effect on Borrower.
<PAGE>
4.1.5 Compliance. Borrower has all Governmental Approvals
necessary for the conduct of Borrower's Business and for the operation of the
Mortgaged Properties, and the conduct of Borrower's Business and the operation
of the Mortgaged Properties is not and has not been in violation of any such
Governmental Approvals or any applicable law, rule, regulation, judgment, decree
or order the failure to obtain or with which to comply would, in any such case,
have a Materially Adverse Effect on Borrower. Borrower does not require any
Governmental Approvals to enter into, or perform under, this Agreement, the
Notes, the Mortgages or any other Loan Document.
4.1.6 Compliance with Regulations T, U and X. Borrower is not
engaged principally, or as one of Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meanings of Regulations T, U and X of the Board of Governors
of the Federal Reserve System).
4.1.7 ERISA. With respect to each employee pension benefit
plan (within the meaning of Section 3(2) of ERISA other than any "multi-employer
plan" within the meaning of Section 3(37) of ERISA) (hereinafter, a "Plan"),
maintained for employees of Borrower or of any trade or business (whether or not
incorporated) which is under common control with Borrower (within the meaning of
Section 4001(b)(1) of ERISA), (i) there is no accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), as of
the last day of the most recent plan year of such Plan heretofore ended, taking
into account contributions made or to be made within the time prescribed by
Section 412(c)(10) of the Code; (ii) each such Plan has been maintained in
accordance with its terms and ERISA; and (iii) there has been no "reportable
event" within the meaning of Section 4043 of ERISA and the regulations
thereunder for which the 30-day notice requirement has not been waived. Borrower
has not incurred any liability to the PBGC other than required insurance
premiums, all of which, that have become due as of the date hereof, have been
paid. Borrower is not a party to any multi-employer plan.
4.1.8 Environmental. Except as set forth in Schedule 4.1.8 or
where failure to comply would not have or result in a Materially Adverse Effect
on Borrower or the conduct of Borrower's Business, (which knowledge with respect
to the Mortgaged Properties is based upon the environmental studies prepared for
Borrower and delivered to Agent and Lenders in connection with the execution of
this Agreement):
<PAGE>
4.1.8.1 Borrower and each Venture has, to the best of
Borrower's knowledge, in the conduct of Borrower's Business, and the ownership
and use of the Properties, complied, in all respects, with all federal, state
and local, laws, rules, regulations, judicial decisions and decrees pertaining
to the use, storage or disposal of hazardous waste or toxic materials.
4.1.8.2 To the best of Borrower's knowledge: (i) no
Hazardous Substance, is present on any of the Properties in any quantity in
excess of those allowed by applicable law; (ii) Borrower has not been identified
in any litigation, administrative proceedings or investigation as a responsible
party for any liability under any Environmental Law; (iii) all materials that
are located on any of the Borrower's Properties in lawful amounts are properly
stored and maintained in containers appropriate for such purposes. For purposes
of this Agreement, the term "Environmental Law" means any and all applicable
Federal, State and local environmental statutes, laws, ordinances, rules and
regulations, whether now existing or hereafter enacted, together with all
amendments, modifications, and supplements thereto, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), 42 U.S.C. ss.9601, as amended by the Superfund Amendments and
Re-authorization Act of 1986 (Pub. L. No. 99-499, 100 Stat. 1613 (1986) (SARA)
or 40 CFR Part 261, whichever is applicable) and the term "Hazardous Substance"
means all contaminants, hazardous substances, pollutants, hazardous waste,
residual waste, solid waste, or similar substances or wastes which may be the
subject of any Environmental Law.
4.1.9 Other Contractual Obligations. The execution and
delivery of this Agreement does not, and the performance by Borrower of its
obligations and covenants under this Agreement will not, violate any other
contractual obligation of Borrower.
4.1.10 Investment Company Act. Borrower is not an Investment
Company within the meaning of the Investment Company Act of 1940.
4.1.11 Public Utility Holding Company Act. Borrower is not a
Public Utility Holding Company within the meaning of the Public Utility Holding
Company Act.
4.1.12 RICO. To the best of Borrower's knowledge, Borrower has
not engaged in any conduct or taken or omitted to take any action which violates
RICO.
4.2 Accuracy of Representations; No Default. The information regarding
the Borrower set forth herein and on each of the Schedules hereto, in the Notes,
the other Loan Documents and each document delivered by the Borrower to Agent in
connection herewith is complete and accurate and contains full and true
disclosure of pertinent financial and other information in connection with the
Loan. None of the foregoing contains any untrue statement of a material fact or
omits to state a material fact necessary to make the information contained
herein or therein not misleading or incomplete. No Event of Default or
Unmatured Event of Default hereunder, under the Notes or the other Loan
Documents, has occurred.
<PAGE>
ARTICLE 5
AFFIRMATIVE COVENANTS
5.1 Borrower's Covenants. As long as any portion of the Indebtedness
remains outstanding and unpaid, Borrower covenants and agrees that, in the
absence of prior written consent of Agent, Borrower shall:
5.1.1 Maintain the ratio of (a) Consolidated Liabilities, as
reported in Borrower's most recent Company-Prepared Consolidated Financial
Statements, plus Contingent Liabilities to (b) Consolidated NOI at no more than
6.0 to 1; provided however, that (i) upon Borrower's successful completion of a
public offering of equity securities of Borrower, such ratio shall be maintained
at no more that 5.0 to 1 and (ii) on and after August 31, 1996, if Borrower has
not completed a public offering of its equity securities, Borrower shall
maintain the ratio at no more than 5.5 to 1;
5.1.2 Maintain Consolidated NOI at no less than $25,000,000
tested quarterly at the end of each Fiscal Quarter on a rolling four Fiscal
Quarter historical basis, and provide comparative Consolidated NOI calculations
for the same Fiscal Quarter of the prior Fiscal Year on a rolling four Fiscal
Quarter historical basis, and cause Consolidated NOI during any period of four
consecutive Fiscal Quarters which ends with any Fiscal Quarter to be at least
90% of Consolidated NOI during the four Fiscal Quarters determined at the end of
the immediately prior Fiscal Quarter;
5.1.3 Maintain NOI generated by the Unencumbered Property Pool
("Unencumbered NOI") at not less than $10,500,000 to be tested quarterly on a
rolling four Fiscal Quarter historical basis, and cause the ratio of Senior
Liabilities to Unencumbered NOI to be no more than 7.5 to 1 to be tested
annually on and as of the last day of each Fiscal Year upon Borrower's
submission of Project Specific Information;
5.1.4 Maintain Tangible Net Worth at not less than
$115,000,000, or such larger amount determined by adding thereto amounts equal
to 75% of the gross proceeds from Borrower's sale of equity securities from time
to time;
5.1.5 Maintain the ratio of Consolidated NOI to Actual Debt
Service at not less than 1.5 to 1, tested at the end of each Fiscal Quarter on a
rolling four Fiscal Quarter historical basis;
5.1.6 Maintain, as of the last day of each Fiscal Quarter, the
ratio of Consolidated NOI to Pro Forma Debt Service with respect to the next
four (4) Fiscal Quarters at no less than 1.35 to 1;
<PAGE>
5.1.7 Deliver to Lenders, within 60 days after the end of each
of the first three (3) Fiscal Quarters, an income and expense statement, balance
sheet, and schedule of sources and uses of funds, with respect to the operations
and financial condition of Borrower, and each of its subsidiaries during and as
of the last day of such fiscal quarter, prepared and certified by Borrower's
chief financial officer;
5.1.8 Deliver to Lenders, within 60 days after the
end of each Fiscal Quarter, Company-Prepared Consolidated
Financial Statements;
5.1.9 Deliver to Lenders, within 120 days after the end of
each Fiscal Year, audited consolidated financial statements of Borrower,
including an income and expense statement, balance sheet and schedule of sources
and uses of funds, which financial statements shall include the unqualified
opinion of Arthur Andersen & Co. or another national firm of certified public
accountants reasonably acceptable to Agent; provided that if such financial
statements are prepared by another national firm of certified public accountants
that is reasonably acceptable to Agent, such statements may include a
qualification with respect to the results of prior fiscal years for which such
other accountants were not engaged by Borrower;
5.1.10 Deliver to Lenders, within 120 days after the end of
each Fiscal Year of Borrower, Project Specific Information for such Fiscal Year
prepared and certified by the chief financial officer of Borrower;
5.1.11 Deliver to Lenders, at the time each financial
statement is required to be delivered pursuant to Sections 5.1.7 and 5.1.9
hereof, covenant compliance certificate, together with a certification, signed
by a senior executive officer of Borrower, both in the form of Schedule 5.1.11
attached hereto, certifying to Lender that there exists no breach of any of the
covenants contained in this Article 5 or in Article 6 hereof;
5.1.12 With reasonable promptness furnish to Lenders all
financial and business information provided to beneficiaries of Borrower, the
Securities and Exchange Commission, and the American Stock Exchange, and such
additional information and data concerning the business and financial condition
of Borrower as may be reasonably requested by Lenders; afford Lenders or their
agents reasonable access to the financial books and records, computer records
and properties of Borrower at all reasonable times after reasonable notice and
permit Lenders or their agents to make copies and abstracts of same and to
remove such copies; and abstracts from Borrower's premises and permit Lenders or
their agents the right to converse directly with the independent accounting firm
then engaged by Borrower to prepare its audited financial statements;
<PAGE>
5.1.13 Cause the prompt payment and discharge of all material
taxes, governmental charges and assessments levied and assessed or imposed upon
Borrower's assets and pay all other material claims which, if unpaid, might
become liens or charges upon Borrower's assets, provided, however, that nothing
in this Section shall require Borrower to pay any such taxes, claims or
assessments which are not overdue or which are being contested in good faith and
by appropriate proceedings, with reserves therefor in an amount acceptable to
Agent being available or having been set aside;
5.1.14 Maintain the existence of Borrower as a "real estate
investment trust" under Section 856 of the Code and all necessary foreign
qualifications in good standing; continue to comply with all applicable
statutes, rules and regulations with respect to the conduct of Borrower's
Business to the extent the same are material to the financial condition of
Borrower or the conduct of Borrower's Business; maintain such necessary licenses
and permits required for the conduct of Borrower's Business, in each case if the
failure to maintain or comply would have a Materially Adverse Effect on
Borrower;
5.1.15 Promptly defend all actions, proceedings or claims
which would have a Materially Adverse Effect on Borrower or Borrower's Business
and promptly notify Agent of the institution of, or any change in, any such
action, proceeding or claim if the same is in excess of $250,000 for any single
action, proceeding or claim and $500,000 (other than claims covered by insurance
in the ordinary course of business and booked on Borrower's balance sheet) in
the aggregate, or would have a Materially Adverse Effect on the financial
condition of Borrower or its property if adversely determined;
5.1.16 Comply in all material respects with the requirements
of ERISA applicable to any employee pension benefit plan (within the meaning of
Section 3(2) of ERISA), sponsored by Borrower. With respect to any such plan,
other than any "multi-employer plan" (within the meaning of Section 3(37) of
ERISA), in the case of a "reportable event" within the meaning of Section 4043
of ERISA and the regulations thereunder for which the 30-day notice requirement
has not been waived, or in the case of any other event or condition which
presents a material risk of the termination of any such plan by action of the
PBGC or Borrower, Borrower shall furnish to Agent a certificate of the chief
financial officer of Borrower identifying such reportable event or such other
event or condition and setting forth the action, if any, that Borrower intends
to take or has taken with respect thereto, together with a copy of any notice of
such reportable event or such other event or condition filed with the PBGC or
any notice received by Borrower from the PBGC evidencing the intent of the PBGC
to institute proceedings to terminate any such plan. Such certificate of the
<PAGE>
chief financial officer or such other notice to be furnished to Agent in
accordance with the preceding sentence shall be given in the manner provided for
in Section hereof: (i) within 30 days after the Borrower knows of such
reportable event or such other event or condition; (ii) as soon as possible upon
receipt of any such notice from the PBGC; or (iii) concurrently with the filing
of any such notice with the PBGC, as the case may be. For purposes of this
Section, Borrower shall be deemed to have all knowledge attributable to the
administrator of any such plan;
5.1.17 Maintain each Property in good condition and repair,
reasonable wear and tear excepted, making as and when necessary, all material
repairs of every nature;
5.1.18 Except where failure to do so would not have a
Materially Adverse Effect on Borrower: perform, as and when due, all of
Borrower's obligations (both monetary and non-monetary) under all leases,
easements, agreements, mortgages and deeds of trust that encumber any part of
the real estate assets of Borrower, within such applicable notice or cure period
allowed Borrower pursuant to the relevant lease, easement, agreement, mortgage
or deed of trust, pay and discharge, at or before maturity, all Borrower's
material obligations and liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, in accordance with
GAAP, appropriate reserves for the accrual of any of the same;
5.1.19 Immediately notify Agent of: (i) the occurrence or
imminent occurrence of any event which causes or would imminently cause (A) any
material adverse change in the Business, property, prospects or financial
condition of Borrower (B) any representation or warranty made by Borrower
hereunder to be untrue, incomplete or misleading, or (C) the occurrence of any
other Event of Default or Unmatured Event of Default hereunder; and (ii) the
institution of, or the issuance of any order, judgment, decree or other process
in, any litigation, investigation, prosecution, proceeding or other action by
any governmental authority or other Person against Borrower and that does, or
could, materially affect Borrower;
5.1.20 Cause at least 66% of Consolidated NOI to be generated
from assets located in states of the United States east of the Mississippi
River;
5.1.21 Maintain or cause to be maintained insurance on the
Properties in such amounts, against such hazards and liabilities, and with such
companies as is consistent with sound business practices, including without
limitation:
<PAGE>
(i) Insurance against loss to the Properties on an
"all risk" policy form, covering insurance risks no less broad than those
covered under a Standard Multi Peril (SMP) policy form, which contains a
Commercial ISO "Causes of Loss-Special Form," in the then current form, and such
other risks as Lenders may reasonably require, in amounts equal to the full
replacement cost of the Properties, including fixtures and equipment, Borrower's
interest in leasehold improvements, and the cost of debris removal, with an
agreed amount endorsement, and with deductibles of not more than $50,000;
(ii) Rent and rental value/extra expense insurance
(if the Property is tenant occupied) in amounts sufficient to pay during any
period in which a Property may be damaged or destroyed, for a period of twelve
(12) months: (x) at least 80% of all rents and (y) all amounts (including, but
not limited to, all taxes, assessments, utility charges and insurance premiums)
required to be paid by tenants of the Property;
(iii) Broad form boiler and machinery insurance
including business interruption/extra expense and rent and rental value
insurance, on all equipment and objects customarily covered by such insurance
and/or involved in the heating, cooling, electrical and mechanical systems of
the Properties (if any are located at the Properties), but excluding individual
HVAC equipment that serves only one residential apartment unit, providing for
full repair and replacement cost coverage, and other insurance of the types and
in amounts as Lenders may reasonably require, but in no event less than that
customarily carried by persons owning or operating like properties;
(iv) During the making of any alterations or
improvements to a Property, (x) insurance covering claims based on the owner's
or employer's contingent liability not covered by the insurance provided in
subsection (vi) below, (y) workers' compensation insurance covering all persons
engaged in such alterations or improvements, and (z) builder's completed value
risk insurance against "all risks of physical loss" for construction projects of
$1,000,000 or more;
(v) Insurance against loss or damage by flood or mud
slide in compliance with the Flood Disaster Protection Act of 1973, as amended
from time to time, if the Properties are now, or at any time while the
Indebtedness or any portion thereof remains unpaid shall be, situated in any
area which an appropriate governmental authority designates as a special flood
hazard area, in amounts equal to the full replacement value of all above grade
structures on the Properties;
(vi) Commercial general public liability insurance,
with the location of the Properties designated thereon, against death, bodily
injury and property damage arising on, about or in connection with the
Properties, with Borrower or the applicable subsidiary or Venture listed as the
named insured, with such limits as Borrower or the applicable subsidiary or
Venture may reasonably require (but in no event less than $1,000,000 and written
on a then-current Standard "ISO" occurrence basis form or equivalent form,
excess umbrella liability coverage with such limits as Borrower or the
applicable subsidiary or Venture may reasonably require but in no event less
than $5,000,000; and
<PAGE>
(vii) Such other insurance relating to the Properties
and the uses and operation thereof as Lenders may, from time to time, require in
the exercise of good faith;
5.1.21.1 Maintain the Unencumbered Property Pool free from any
mortgage, lien, pledge, charge, security interest or other encumbrance, whether
voluntary or involuntary;
5.1.21.2 Comply in all material respects with all laws, rules,
regulations, judgments, decrees, and orders, the failure with which to comply
would have a Materially Adverse Effect on Borrower;
5.1.22 Promptly perform all additional environmental testing
of the Mortgaged Properties that is suggested by BCM Engineers, Inc., in the
environmental audits identified in the Mortgages, to be performed and diligently
perform such remediation and institute such maintenance and operational policies
as are recommended in such environmental audits or in subsequent reports that
are the result of such additional testing;
5.1.23 Keep the Mortgaged Properties free of all liens and
encumbrances, other than the Mortgages and those liens and encumbrances that are
exceptions to the title insurance policies issued pursuant to Section 3.1.10
hereof; and
5.1.24 Pay the cost of any revenue, tax or other stamps now or
hereafter required by law at any time to be affixed to any Note or any Mortgage.
5.2 Indemnification. Borrower hereby indemnifies and agrees to protect,
defend, and hold harmless Lenders and Lenders' directors, officers, employees,
agents, attorneys and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims, or
demands, including all reasonable counsel fees incurred in investigating,
evaluating or defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with this
Agreement, the Notes, the Mortgages, the Loan, the other Loan Documents and any
transaction contemplated herein or therein including, but not limited to, claims
based upon any act or failure to act by Lenders in connection with this
Agreement, the Notes, the Loan, the Mortgages, the other Loan Documents and any
transaction contemplated herein or therein; provided that Borrower shall not be
liable for any portion of such losses, damages, expenses or liabilities
resulting from any Lender's gross negligence or willful misconduct, or that of
Lenders' directors, officers, employees, agents, attorneys and shareholders. If
Borrower shall have knowledge of any claim or liability hereby indemnified
against, it shall promptly give written notice thereof to Agent. THIS COVENANT
SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
<PAGE>
5.2.1 Agent shall promptly give Borrower written notice of all
suits or actions instituted against Lenders with respect to which Borrower has
indemnified Lenders, and Borrower shall timely proceed to defend any such suit
or action. Lenders shall also have the right, at the expense of Borrower, to
participate in or, at Lenders' election, assume the defense or prosecution of
such suit, action, or proceeding, and in the latter event Borrower may employ
counsel and participate therein. Agent shall have the right to adjust, settle,
or compromise any claim, suit, or judgment after notice to Borrower, unless
Borrower desires to litigate such claim, defend such suit, or appeal such
judgment and simultaneously therewith deposits with Agent collateral security
sufficient to pay any judgment rendered, with interest, costs, legal fees and
expenses; and the right of Lenders to indemnification under this Agreement shall
extend to any money paid by Lenders in settlement or compromise of any such
claims, suits, and judgments in good faith, after notice to Borrower.
5.2.2 If any suit, action, or other proceeding is brought by
Lenders against Borrower for breach of Borrower's covenant of indemnity herein
contained, separate suits may be brought as causes of action accrue, without
prejudice or bar to the bringing of subsequent suits on any other cause or
causes of action, whether theretofore or thereafter accruing.
ARTICLE 6
NEGATIVE COVENANTS
6.1 Borrower's Negative Covenants. As long as any portion of the
Indebtedness shall remain outstanding and unpaid, Borrower covenants and agrees
that, in the absence of prior written consent of Agent, Borrower shall not:
6.1.1 Except (i) pursuant to the Revolving Credit Agreement,
(ii) secured liabilities for which the obligee's recourse is limited to the
specific asset or assets that are encumbered, and (iii) indebtedness incurred by
Palmer Park Mall Venture in favor of Midlantic Bank, N.A. and guarantied by
Borrower, create, assume, incur or otherwise become liable under Consolidated
Liabilities or Contingent Liabilities in amounts in excess of $5,000,000 in the
aggregate after the date hereof;
6.1.2 Pay dividends or other distributions to beneficiaries in
any Fiscal Year in excess of Funds From Operations for such Fiscal Year plus
$5,000,000 (excluding special capital gains distributions which shall not exceed
$10,000,000 in the aggregate after the date of this Agreement);
<PAGE>
6.1.3 Change the general character of Borrower's Business from
that in which it is currently engaged; enter into proceedings in total or
partial dissolution; merge or consolidate with or into any entity, or acquire
all or substantially all of the assets or securities of any other Person, unless
Borrower remains the surviving entity and such other Person is engaged primarily
in the business of owning and operating shopping centers or multi-family
residential income-producing properties; or otherwise take any action or omit to
take any action which would have a Materially Adverse Effect on Borrower or
Borrower's Business;
6.1.4 Use any part of the proceeds of the Loan to purchase or
carry, or to reduce, retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations T, U and X of the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any margin stock. If requested by
Agent, Borrower will furnish Agent statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation;
6.1.5 Except as described in Schedule 4.1.8, use, generate,
treat, store, dispose of, or otherwise introduce any Hazardous Substances,
pollutants, contaminants, hazardous waste, residual waste or solid waste (as
defined above) into or on any of the Properties and will not cause, suffer,
allow, or permit anyone else to do so in material violation of any Environmental
Law, and will not knowingly acquire, or permit any subsidiary of Borrower to
knowingly acquire, any Property on which any Hazardous Substance, pollutant,
contaminant, hazardous waste, residual waste or solid waste has been used,
generated, treated, stored, disposed of or otherwise introduced in violation of
any Environmental Law; provided that such a Property may be acquired if Borrower
has received (i) a final remediation plan, prepared by a qualified environmental
engineer, for the remediation of the violative environmental situation,
Borrower's direct or indirect liability for the cost of which remediation is
reasonably estimated to be less than $250,000 or (ii) the written consent of the
Requisite Lenders;
6.1.6 Engage in any conduct or take or fail to take any action
which will, or would, if the facts and circumstances relative thereto were
discovered, violate RICO.
6.1.7 Agree with any other Person not to encumber, whether by
mortgage, lien, pledge, charge, security interest, or other encumbrance, any
parcel of the Unencumbered Property Pool.
<PAGE>
ARTICLE 7
DEFAULT
7.1 Events of Default. The occurrence of any one or more of the
following events, conditions or states of affairs, shall constitute an "Event of
Default" hereunder, under the Notes (together with accrued interest thereon) and
under each of the other Loan Documents, provided however, that nothing contained
in this Article 7 shall be deemed to enlarge or extend any grace period provided
for in the Notes or any other Loan Document:
7.1.1 Failure by Borrower to pay the Indebtedness or any
portion thereof as the same becomes due;
7.1.2 Failure by Borrower to observe or perform any agreement,
condition, undertaking or covenant in this Agreement, the Notes, the Mortgages,
or the other Loan Documents, which failure, if it does not consist of the
failure to pay money to such Lender and is susceptible to being cured, is not
cured within twenty (20) days after written notice from such Lender (but if such
failure cannot reasonably be cured within such twenty (20) day period, such
shall not be an Event of Default if Borrower has commenced such cure within such
twenty (20) day period and thereafter diligently pursues such cure to its
completion, but in no event shall the period to cure exceed one hundred twenty
(120) days); provided that the notice and grace period provided in this Section
7.1.2 shall not apply to the breach by Borrower of any covenants contained in
Sections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5, 5.1.6, 5.1.14, 5.1.19, 5.1.20,
6.1.1, 6.1.2, or 6.1.3 hereof or a voluntary or consensual breach of the
covenant contained in Section 6.1.7 hereof, and provided further that the grace
period with respect to a breach of the covenants contained in Section 5.1 hereof
that pertain to the delivery to Lenders of financial information shall be
limited to thirty(30) days after delivery of any Lender's written notice of such
breach;
7.1.3 The occurrence of any "Event of Default" as defined in
the Revolving Credit Agreement.
7.1.4 Any representation or warranty of the Borrower made, or
deemed made, in this Agreement, the Notes, the Mortgages, the other Loan
Documents or any statement or information in any report, certificate, Financial
Statement or other instrument furnished by Borrower in connection with making of
this Agreement, the making of the Loan hereunder or in compliance with the
provisions hereof or any other Loan Document shall have been false or misleading
in any material respect when so made, deemed made or furnished;
<PAGE>
7.1.5 Borrower shall become insolvent or unable to pay its
debts as they mature, or file a voluntary petition or proceeding seeking
liquidation, reorganization or other relief with respect to itself under any
provision of the Bankruptcy Code or any state bankruptcy or insolvency statute,
or make an assignment or any other transfer of assets for the benefit of its
creditors, or apply for or consent to the appointment of a receiver for its
assets, or suffer the filing against its property of any attachment or
garnishment or take any action to authorize any of the foregoing; or an
involuntary case or other proceeding shall be commenced against Borrower seeking
liquidation, reorganization or other relief with respect to its debts under the
Bankruptcy Code or any other bankruptcy, insolvency or similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days (it being understood
that no delay period applies with respect to any default arising under this
Section by reason of the filing of a voluntary petition by Borrower under the
Bankruptcy Code or any state bankruptcy or insolvency statute or the making of
an assignment or other transfer of assets for the benefit of Borrower's
creditors or by reason of Borrower applying for or consenting to the appointment
of a receiver for Borrower's assets); or an order for relief shall be entered
against the Borrower under any provision of the Bankruptcy Code or any state
bankruptcy or insolvency statute as now or hereafter in effect;
7.1.6 Entry of a final judgment or judgments against Borrower
by a court of law in an amount exceeding an aggregate of $500,000 outstanding at
any one time: (i) which is not fully or unconditionally covered by insurance; or
(ii) for which Borrower has not established a cash or cash equivalent reserve in
the amount of such judgment or judgments that were entered by a court of record
against Borrower; or (iii) enforcement of such judgment or judgments has not
been stayed or such judgment or judgments shall continue in effect for a period
of thirty (30) consecutive days without being vacated, discharged, satisfied or
bonded pending appeal;
7.1.7 Regardless of the intent or knowledge of Borrower, if
the validity, binding nature or enforceability of any material term, provision,
condition, covenant or agreement contained in this Agreement, any other Loan
Document or in any other existing or future agreement between Borrower and
Lenders shall be wrongfully disputed by, on behalf of, or in the right or name
of Borrower or if any such material term, provision, condition, covenant or
agreement shall be found or declared to be invalid, non-binding, unenforceable
or avoidable by any governmental authority or court and the parties cannot agree
upon substitutions therefor within thirty (30) days; or
7.1.8 Borrower shall be accused of conduct in violation of
RICO which is not explained to Lenders within ten days thereafter in a manner in
which Lenders, in their sole discretion, determine that such accusation is not
likely to result in a RICO indictment;
<PAGE>
7.1.9 Borrower shall have defaulted in the payment when due of
any Debt in an amount in excess of $500,000 and such default shall have
continued beyond any period of grace permitted with respect thereto unless
waived;
then, and in every such event, upon the vote of Requisite Lenders, the Agent
shall, without notice to Borrower, declare the Notes (together with accrued
interest thereupon) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by Borrower. Notwithstanding the foregoing, upon
any Event of Default arising from any of the events or circumstances described
in Section 7.1.5 hereof, the Notes shall, without any further action, become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by Borrower.
7.2 Remedies on Default. Upon the occurrence and continuation of any
Event of Default, Agent may, subject to Article 8 hereof, forthwith declare all
Indebtedness to be immediately due and payable, without protest, demand or other
notice (which are hereby expressly waived by Borrower) and, in addition to the
rights specifically granted hereunder or now or hereafter existing in equity, at
law, by virtue of statute or otherwise (each of which rights may be exercised at
any time and from time to time), Agent may exercise the rights and remedies
available to Lenders at law or in equity or under this Agreement, the Notes, the
Mortgages, and any of the other Loan Documents or any other agreement by,
between or among Borrower and Lenders in accordance with the respective
provisions thereof.
7.3 Set-Off Rights Upon Default. Upon and during the continuance of any
Event of Default, Lenders, in addition to any remedies set forth above, shall
have the right at any time and from time to time without notice to Borrower (to
the extent permitted by law) (any such notice being expressly waived by Borrower
and to the fullest extent permitted by applicable Rules, to set off, to exercise
any banker's lien or any right of attachment or garnishment and apply any and
all balances, credits, deposits (general or special, time or demand, provisional
or final), accounts or monies at any time held by any Lender and other
indebtedness at any time owing by any Lender to or for the account of Borrower
against any and all Indebtedness or other obligations of Borrower now or
hereafter existing under this Agreement, the Notes, or any other Loan Document,
whether or not any Lender shall have made any demand hereunder or thereunder.
All net funds recovered under the rights provided in this Section 7.3 shall be
recovered by Lenders as agent for the other Lenders and shall be distributed
among Lenders according to their Pro Rata Share. Each Lender shall be an agent
of all other Lenders for purposes of rights of set-off.
<PAGE>
7.4 Singular or Multiple Exercise; Non-Waiver. The remedies provided
herein, in the Notes and in the other Loan Documents or otherwise available to
Lenders at law or in equity and any warrants of attorney therein contained,
shall be cumulative and concurrent, and may be pursued singly, successively or
together at the sole discretion of Agent, and may be exercised as often as
occasion therefor shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or release of the same.
ARTICLE 8
AGENT
8.1 Appointment. Each Lender hereby appoints CoreStates Bank, N.A. as
agent hereunder, and each Lender hereby authorizes Agent to act hereunder and
under the other instruments and agreements referred to herein (including,
without limitation, the Notes, the Mortgages, and the other Loan Documents) as
its agent hereunder and thereunder. Agent agrees to act as such upon the express
conditions contained in this Article 8 and in the Loan Documents. The provisions
of this Article 8 are solely for the benefit of Lenders; Borrower shall not have
any rights as a third party beneficiary of any of the provisions hereof except
with respect to the provisions requiring Borrower's consent or that certain
matters be satisfactory to Borrower. In performing its functions and duties
under this Agreement, Agent shall act solely as agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Borrower.
8.2 Powers; General Immunity.
8.2.1 Duties Specified. Each Lender irrevocably authorizes
Agent to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other instruments and agreements referred to herein
(including, without limitation, the Loan Documents) as are specifically
delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto. Agent shall have only those duties and
responsibilities which are expressly specified in this Agreement and the other
Loan Documents and Agent may perform such duties by or through its agents or
employees. The duties of Agent shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement or the other instruments and agreements referred to
herein except as expressly set forth herein or therein. Agent agrees promptly to
transmit to Lenders any documents which have been transmitted by Borrower to
Agent for transmittal to Lenders. Agent shall take such action as has been
determined to be taken by a vote of the applicable Lenders hereunder. In
performing its duties and functions under this Agreement and the Loan Documents,
Agent will exercise the same care which it normally exercises in making and
handling loans and handling collateral in which it alone is interested, but
Agent assumes no further responsibility.
<PAGE>
8.2.2 Powers of Agent.
8.2.2.1 In General. Unless otherwise specifically
limited by this Section 8.2.2, Agent may take all actions hereunder on behalf of
all of the Lenders without seeking the advise or consent of any of the Lenders.
8.2.2.2 Actions Requiring Certain Votes of Lenders.
Notwithstanding anything to the contrary herein contained, Agent agrees that it
will not, without the unanimous consent of the Lenders, take any of the
following actions whether voluntary or involuntary pursuant to this Agreement:
(i) decrease any of the rates of interest with respect to the Loan hereunder;
(ii) decrease any fees with respect to the Loan hereunder; (iii) reduce the
principal of the Loan; (iv) postpone the date fixed for any payment of principal
of or interest on the Loan; (v) change the definitions of Pro Rata Shares or
Requisite Lenders; (vi) amend this Section 8.2.2.2; or (vii) release any
collateral for the Loan.
8.2.2.3 Actions Requiring Votes of Requisite Lenders.
Notwithstanding anything to the contrary herein contained, Agent agrees that it
will not without the vote of the Requisite Lenders: (i) declare any Event of
Default; (ii) exercise any remedies upon and after the occurrence of an Event of
Default; or (iii) subject to Section 8.2.2.2 hereof, amend or waive any
provision of this Agreement.
8.2.2.4 Agent's Action when Lender Fails to Respond.
If Agent requests authority to act in a specified manner, Agent may at Agent's
option, act as if a Lender had approved such request if such Lender fails or
refuses to respond to Agent's request within seven (7) Business Days after
receipt of Agent's written request.
8.2.3 No Responsibility for Certain Matters. Agent shall not
be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement, the
other Loan Documents, or the Notes issued hereunder, or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by Agent to Lenders or by or on behalf of Borrower to Agent or
any Lender except to the extent Agent has actual knowledge to the contrary that
such representation, warranty, recital or statement is false or incorrect, or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Loan or of the existence or
possible existence of any Event of Default or Unmatured Event of Default or
potential Event of Default or Unmatured Event of Default.
<PAGE>
8.2.4 Exculpatory Provisions. Agent and its officers,
directors, employees and agents shall not be liable to any Lender for any action
taken or omitted hereunder or in connection herewith (including, without
limitation, any act or omission under the Notes or the other Loan Documents)
unless caused by its or their gross negligence or willful misconduct. If Agent
shall request instructions from Lenders with respect to any act or action
(including the determination not to take an action) in connection with this
Agreement or the Notes, or the other Loan Documents, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Requisite Lenders or the applicable percentage of
Lenders, as the case may be. Without prejudice to the generality of the
foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Borrower),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against Agent as a result of
Agent's acting or (where so instructed) refraining from acting under this
Agreement, the Notes, or other Loan Documents in accordance with the
instructions of the Requisite Lenders or the applicable percentage of Lenders,
as the case may be. Agent shall be entitled to refrain from exercising any
power, discretion or authority vested in it under this Agreement, the Notes, or
other Loan Documents unless and until it has obtained the instructions of the
Requisite Lenders.
8.2.5 Agent Entitled to Act as Lender. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Agent in its individual capacity as a
Lender hereunder. With respect to its granting of Loan, Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not performing the duties and functions delegated to it
hereunder, and the terms "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include Agent in its individual
capacity as a Lender. Notwithstanding the foregoing, Agent shall not be
influenced to act hereunder in a manner inconsistent with the best interests of
Lenders by reason of Agent's involvement in unrelated transactions with
Borrower. Agent and its affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Borrower or any affiliate of Borrower as if it were not performing
the duties specified herein, and may accept fees and other consideration from
Borrower for services in connection with this Agreement and otherwise without
having to account for the same to Lenders. Lenders acknowledge that Agent has,
and may from time to time hereafter, enter into lending arrangements with
Borrower, its subsidiaries or Ventures and that Borrower may grant mortgages,
security interests or otherwise encumber its assets in favor of Agent
individually and not as agent for the Lenders as collateral for such lending
arrangements, which shall be independent of the Revolving Credit hereunder.
<PAGE>
8.2.6 No Responsibility for Creditworthiness. Each Lender
represents and warrants that it has made its own independent investigation of
the financial condition and affairs of Borrower in connection with the making of
the Loan hereunder and has made and shall continue to make its own appraisal of
the creditworthiness of Borrower. Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or, except as expressly
provided in this Agreement, to provide any Lender with any credit or other
information with respect thereto whether coming into its possession before the
making of the Loan or any time or times thereafter, and Agent shall further have
no responsibility with respect to the accuracy of or the completeness of the
information provided to Lenders.
8.2.7 Right to Indemnity. Each Lender severally agrees to
indemnify Agent, its officers, directors, employees and agents, proportionately
to its Pro Rata Share, to the extent Agent shall not have been reimbursed by
Borrower, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in performing its duties hereunder or in any way relating to or arising out of
this Agreement, except in its capacity as a Lender; provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful misconduct; and provided
further that Agent shall not be entitled to be indemnified hereunder for amounts
paid by Agent in settlement of litigation prior to final judgment unless such
settlement shall be consented to by Requisite Lenders. If any indemnity
furnished to Agent for any purpose shall, in the opinion of Agent, be
insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against (other than acts
constituting Agent's obligations to Lenders hereunder) until such additional
indemnity is furnished.
<PAGE>
8.2.8 Resignation; Removal; Successor Agent.
8.2.8.1 Agent may resign from the performance of all
its functions and duties hereunder at any time by giving 45 Business Days' prior
written notice to Borrower and Lenders. Agent may be removed at any time with or
without cause by a notice or concurrent notices in writing delivered to Borrower
and Agent and signed by all Lenders other than Agent. Such resignation or
removal shall take effect upon the acceptance by a successor Agent pursuant to
subsections 8.2.8.2 and 8.2.8.3.
8.2.8.2 Upon any such notice of resignation or
removal, Lenders upon the vote of the holders of 66.67% of the Commitment Amount
shall have the right to appoint a successor Agent which shall be a Lender or
such other Person as is satisfactory to Borrower. Such successor agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent, and the retiring or removed Agent
shall be discharged from all its duties and obligations as Agent under this
Agreement (except as otherwise provided herein).
8.2.8.3 If a successor Agent shall not have been so
appointed within said 45 Business Day period, a resigning (but not a removed)
Agent with the consent of Borrower, shall then appoint a successor Agent, which
shall be a commercial bank with capital and surplus of not less than
$5,000,000,000 who shall serve as Agent until such time, if any, as the
Requisite Lenders, with the consent of Borrower, appoint a successor Agent as
provided above.
8.3 Sharing of Recoveries. Lenders hereby agree that all sums recovered
(and the proceeds of all property recovered) from Borrower by any Lender
hereunder, whether as a result of the enforcement of any Mortgage or other Loan
Document or on foreclosure of any banker's or other lien or any setoff or other
claim on or against any deposit or other balance of Borrower held by any Lender
shall be on behalf of Lenders and shall be shared by Lenders according to their
respective Pro Rata Shares. If a Lender shall make any recovery, it will
promptly remit to the other Lenders their Pro Rata Share thereof. No Lender's
Pro Rata Share shall have priority over any other Lender's Pro Rata Share.
8.4 Intentionally Deleted.
8.5 Ratable Sharing. Each Lender and each subsequent holder by
acceptance of a Note agree among themselves that with respect to all amounts
received by them which are applicable to the payment of or reduction of a
proportion of the aggregate amount of principal and interest due with respect to
the Notes held by the Lender or holder, which is greater than the proportion
received by any other holder of a Note in respect to the aggregate amount of
principal and interest due with respect to the Notes held by it, or any other
amount payable hereunder, that Lender or that holder of a Note receiving such
<PAGE>
proportionately greater payments shall notify each other Lender and the Agent of
such receipt and remit to them such amounts as are necessary so that all such
recoveries of principal and interest with respect to the Notes shall be
proportionate to the Lenders' respective Pro Rata Shares. If any Lender or
holder of a Note receiving such proportionately greater payments is required to
return such proportionately greater payment to any trustee, receiver or other
representative of or for Borrower upon or by reason of the bankruptcy,
insolvency, reorganization or dissolution of any entity comprising Borrower,
then such other Lender(s) which received its or their Pro Rata Share of such
proportionately greater payment must also return such amounts to Borrower as if
such payment or payments from the Lender receiving such proportionately greater
payments had not been made.
ARTICLE 9
MISCELLANEOUS
9.1 Integration. This Agreement, the Notes, and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of the Notes shall control over the provision of
this Agreement or any other Loan Document, and the provisions of this Agreement
shall control over the provisions of any other Loan Document. This Agreement,
the Notes and the other Loan Documents contain all the agreements of the parties
hereto with respect to the subject matter of each thereof and supersede all
prior or contemporaneous discussions and agreements with respect to such subject
matter.
9.2 Modification. Except as provided in Section 8.2.2.2 hereof,
modifications or amendments of or to the provisions of this Agreement, Notes, or
any other Loan Document shall be effective only if set forth in a written
instrument signed by Requisite Lenders and Borrower. No Lender shall amend any
Note payable to such Lender without the written consent of Requisite Lenders.
9.3 Waivers. Except as provided in Section 8.2.2.2 hereof, any
provision of this Agreement, the Notes or any other Loan Document may be waived
if, but only if, such waiver is in writing and is signed by the Borrower and
Requisite Lenders.
9.4 Notices. Except as hereinelsewhere specifically allowed with
respect to a Notice of Rate Election, any notice or other communication by one
party hereto to the other shall be in writing and shall be deemed to have been
validly given upon receipt if by hand delivery, or by overnight delivery service
or by telecopier, or two days after mailing if mailed, first class mail, postage
prepaid, return receipt requested, addressed as follows:
<PAGE>
If to Borrower:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attn: Dante J. Massimini
Telecopier: (215) 542-9179
With a copy to:
Robert Freedman, Esq.
Cohen, Shapiro, Polisher, Shiekman & Cohen
12 South 12th Street, 22nd Floor
Philadelphia, PA 19107
Telecopier: (215) 592-4329
If to the Agent:
CoreStates Bank, N.A.
FC 1-8-10-67
Widener Building 10th Floor
1339 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19107
Attn: Glenn W. Gallagher, Vice President
Telecopier (215) 786-6381
With a copy to:
CoreStates Investment Banking
1345 Chestnut Street
FC1-8-12-1
Philadelphia, PA 19101-7618
Attn: Stacy Shegda, Commercial Officer
Telecopier (215) 973-6621
Telephone (215) 973-1887
With a copy to:
Kenneth I. Rosenberg, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telecopier (215) 994-1111
<PAGE>
With a copy to:
Meridian Bank
K.C. Barrett, Vice President
Real Estate Department
1650 Market Street, Suite 3600
Philadelphia, PA 19103
Telecopier (215) 854-3296
With a copy to:
Midlantic Bank, N.A.
Robert A. Goldstein, Vice President
Real Estate Department
1500 Market Street, 11th Floor
Philadelphia, PA 19102
Telecopier (215) 564-7446
With a copy to:
PNC Bank, National Association
Richard H. Ohnmacht, Banking Officer
Real Estate Finance Division
Land Title Building, 3rd Floor
Broad and Chestnut Streets
Philadelphia, PA 19101
Telecopier (215) 585-5806
9.5 Survival. The terms of this Agreement and all agreements,
representations, warranties and covenants made by Borrower in any other Loan
Document shall survive the issuance and payment of the Notes and shall continue
as long as any portion of the Indebtedness shall remain outstanding and unpaid;
provided, however, that the covenants set forth in Sections 2.2.6, 5.2, 9.8, and
9.9 hereof shall survive the payment of the Indebtedness. Borrower hereby
acknowledges that Lenders have relied upon the foregoing in making the Loan.
9.6 Closing. Closing hereunder shall occur on November 10, 1994 at the
offices of Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, 38th
Floor, Philadelphia, Pennsylvania 19103-7598 or at such other time and place as
the parties hereto may determine. In the event Closing is not held on or before
such date unless extended by all of the parties hereto, the rights and
obligations of the parties hereto contained herein shall be terminated and be of
no further force or effect except for the provisions of Sections 5.2, 9.8, and
9.9.
<PAGE>
9.7 Successors and Assigns; Governing Law. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto; provided, however (i) that Borrower shall not assign this
Agreement, or any rights or duties arising hereunder, without the express prior
written consent of Lenders and (ii) that subject to the right to enter into
participation arrangements under Section 9.10 hereof, no Lender may assign its
rights or duties arising hereunder, except as provided in 9.11 hereof, without
the express prior written consent of Borrower and of the other Lenders. This
Agreement shall be construed and enforced in accordance with the internal laws
of the Commonwealth of Pennsylvania for contracts made and to be performed in
Pennsylvania.
9.8 Jurisdiction. IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
RELATIONSHIP EVIDENCED HEREBY, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY COUNTY IN
THE COMMONWEALTH OF PENNSYLVANIA WHERE AGENT MAINTAINS AN OFFICE AND AGREES NOT
TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF
THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. BORROWER AGREES THAT SERVICE OF
PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER.
9.9 Waiver of Jury Trial. BORROWER HEREBY WAIVES, AND LENDERS BY THEIR
ACCEPTANCE HEREOF THEREBY WAIVE, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDERS TO ENTER INTO, ACCEPT OR RELY UPON THIS AGREEMENT.
9.10 Participation. Each Lender may in its sole discretion enter into a
participation arrangement(s) with respect to its Pro Rata Share of the Loan made
under this Agreement and may provide all information in its possession relating
to Borrower to any current or prospective participating lender; provided,
however, that no such participant shall have any voting rights or right to
consent to or approve matters hereunder except for (i) decrease in the rates of
interest payable by Borrower with respect to the Loan, and (ii) any change in
the Scheduled Maturity Date.
9.11 Assignments by Lenders.
9.11.1 Right to Assign. Each Lender may in its sole discretion
assign portions of its respective Pro Rata Share of the Loan in increments not
less than $3,000,000 to any other commercial bank with assets of at least
$5,000,000,000 subject to the approval of Borrower and Agent, which approval
shall not be unreasonably withheld, delayed or conditioned; provided however,
that each Lender shall retain at least $3,000,000 of the Loan and that such
assignment shall be in the form of Schedule 9.11 hereto. Any Lender assigning a
portion of its Pro Rata Share of the Loan shall give Agent written notice
thereof and pay to Agent a $3,000 fee upon the consummation thereof.
<PAGE>
9.11.2 Substitution of Notes. Upon each assignment by a Lender
of a portion of its Pro Rata Share of the Loan, Borrower shall execute
replacements Notes in favor of the assigning Lender and its assignee, which
replacement Notes shall be in the amounts that are equal to the assigning
Lender's and its assignee's respective Pro Rata Shares of the Loan. Such
replacement Notes shall be delivered to the assigning Lender and its assignee
upon delivery to Borrower of the original Note that has been so replaced, with
each such replaced Note marked "Replaced."
9.12 Excess Payments. If Borrower shall pay any interest under the terms
of the Notes at a rate higher than the maximum rate allowed by applicable law,
then such excess payment shall be credited against the outstanding principal
balance of the Loan unless Borrower notifies Agent in writing to return the
excess payment to Borrower. Notwithstanding anything to the contrary contained
in this Agreement, crediting the excess payments hereunder as a payment of
principal shall not trigger the application of any prepayment penalties that
might otherwise apply to a prepayment of principal hereunder.
9.13 Partial Invalidity. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
9.14 Compliance with Rules. Lenders shall not be required by operation or
effect of any provision of this Agreement to violate any statute or regulation
under state or federal law, including all Rules.
9.15 Headings. The heading of any Article or Section contained in this
Agreement is for convenience of reference only and shall not be deemed to
amplify, limit, modify or give full notice of the provisions thereof.
9.16 Counterparts. This Agreement may be signed in counterparts each of
which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
9.17 Retention of Documents. Unless otherwise provided herein, any
documents, schedules, invoices or other papers delivered to Agent on behalf of
Lenders or to any Lender may be destroyed or otherwise disposed of by Agent or
such Lender six months after they are delivered to or received by Agent or such
Lender, unless Borrower requests the return of such documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
<PAGE>
9.18 Name of Borrower. The name and designation Pennsylvania Real
Estate Investment Trust is the designation of the Trustees from time to time
under the Trust Agreement amended and restated as of December 16, 1987 and
recorded in the Office for the Recording of Deeds in Norristown, Montgomery
County, Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with
the Pennsylvania Real Estate Investment Trust must look solely to the Trust
property for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
<PAGE>
IN WITNESS WHEREOF, Borrower, Agent and Lenders have executed this
Agreement under seal, intending to be legally bound hereby, as of the day and
year first above written.
BORROWER:
PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST
By:/s/Robert G. Rogers
--------------------------------------
Robert G. Rogers, Trustee
By:/s/Jeffrey A. Linn
--------------------------------------
Jeffrey A. Linn, Secretary
LENDERS:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
--------------------------------------
Glenn W. Gallagher, Vice President
[Signatures Continue On Next Page]
<PAGE>
MERIDIAN BANK
By:/s/K.C. Barrett
--------------------------------------
K.C. Barrett, Vice President
MIDLANTIC BANK, N.A.
By:/s/Robert A. Goldstein
--------------------------------------
Robert A. Goldstein,
Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/Dominic J. Desimone
--------------------------------------
Name: Dominic J. Desimone
Title: Assistant Vice President
[Title]
AGENT:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
--------------------------------------
Glenn W. Gallagher,
Vice President
<PAGE>
FIRST AMENDMENT TO
SECURED LOAN AGREEMENT
-----------------------
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
-----------------------
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
MERIDIAN BANK, MIDLANTIC BANK, N.A.,
and PNC BANK, NATIONAL ASSOCIATION
Lenders
March 20, 1995
<PAGE>
FIRST AMENDMENT TO
SECURED LOAN AGREEMENT
THIS FIRST AMENDMENT, made this 20th day of March, 1995, by
and among PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an unincorporated
association in business trust form ("Borrower"), and CORESTATES BANK, N.A., a
national banking association ("Agent") in its individual capacity as a Lender
and as Agent for itself and MERIDIAN BANK, MIDLANTIC BANK, N.A., and PNC BANK,
NATIONAL ASSOCIATION (individually, including Agent, referred to as a
"Lender" and collectively referred to as "Lenders").
BACKGROUND
A. Borrower, Agent and Lenders are parties to a Secured Loan
Agreement dated November 9, 1994 (the "1994 Loan Agreement") pursuant to
which Lenders severally, in accordance with their respective Pro Rata Shares,
agreed to advance $32,000,000 to Borrower. All capitalized terms used but not
specifically defined herein have the meanings defined in the 1994 Loan
Agreement.
B. Borrower, Agent and Lenders desire to increase the maximum
amount of the Loan to $35,000,000 and otherwise to modify certain of the terms
and provisions of the 1994 Loan Agreement, as set forth below.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE 1
DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms. Each of the terms listed below
shall have the meaning herein ascribed to it for the purposes
hereof and for each of the Loan Documents:
"Agreement" means the 1994 Loan Agreement, and all
schedules, exhibits, riders, extensions, supplements, amendments, or
modifications to the 1994 Loan Agreement, including without limitation, this
First Amendment.
"Appraisal" means an appraisal that has been
ordered by Agent with respect to a Property that is owned by Borrower that is,
or may become, a Mortgaged Property, which appraisal has been prepared in
accordance with all Rules, the cost of which appraisal shall be a Lenders' Cost.
"Balance of the Term" means, on any specific date,
the period of time that commences on such date and ends on the then-current
Scheduled Maturity Date.
<PAGE>
"Cash Equivalents" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof, (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (iv) certificates of deposit, demand accounts or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any Lender or any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, and having
combined capital and surplus of not less than $1,000,000,000, and (v) repurchase
agreements and reverse repurchase agreements with securities dealers of
recognized national standing relating to any of the obligations referred to in
the foregoing clause (i), provided that the terms of such agreement comply with
the guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy -- Repurchase Agreements of Depository Institutions
with Securities Dealers and Others as adopted by the Comptroller of the Currency
on October 31, 1985 (the "Supervisory Policy") and further provided that
possession or control of the underlying securities is established as provided in
the Supervisory Policy.
"First Amendment" means this First Amendment to
Secured Loan Agreement.
"Fixed Term Amount" means each portion of the
outstanding principal balance of the Loan that bears interest at a Fixed Term
Rate.
"Fixed Term Rate" means the rate of interest
offered by Agent, with the approval of all Lenders, and accepted by Borrower
that shall be charged on a Fixed Term Amount, as set forth in Section 2.1.3
hereof.
"Hidden Lakes" means the 360 unit garden apartment
complex known as Hidden Lakes Apartments, 2341 Equestrian Drive, Miamisburg,
Ohio, that is owned by Borrower.
"Initial Fixed Term Amount" means $27,200,000.
<PAGE>
"Interest Rate" means, with respect to each portion
of the outstanding principal balance of the Loan at any time, the annual rate of
interest that such portion of the Loan then bears.
"LTV" means, at any time, the ratio, expressed as
a percentage, of the then-outstanding principal balance of the Loan to the
aggregate value of all Properties that are then Mortgaged Properties, based upon
the most current Appraisals thereof obtained by Agent.
"Loan Documents" means the Agreement, the
Replacement Notes, the Mortgages, Assignments of Rents, Leases and Profits,
Collateral Assignments of Agreements Affecting Real Estate, and every other
certificate or agreement of Borrower in favor of Agent or Lenders heretofore or
hereafter delivered pursuant to the Agreement.
"Loan" means the loan of up to $35,000,000 made by
Lenders to Borrower pursuant to the Agreement.
"Mortgage" means each Open-End Mortgage and
Security Agreement that encumbers a Property and that has heretofore been, or
may hereafter be, executed by Borrower in favor of Agent and delivered as
security for the Loan, as the same may from time to time be amended or modified.
"Mortgaged Property" means each of, and "Mortgaged
Properties" means all of, Borrower's real property that is encumbered by any
Mortgage.
"1994 Loan Agreement" has the meaning defined in
the Background portion of this First Amendment.
"Notes" means the Replacement Notes of Borrower in
favor of Lenders, dated the date of this First Amendment, to evidence Borrower's
repayment obligations under the Agreement with respect to the Loan.
"Option Term" shall mean each one (1) year period,
if any, for which the Scheduled Maturity Date is postponed pursuant to Section
2.2.3 hereof.
"Revolving Credit Agreement" means the Revolving
Credit Agreement dated November 3, 1994, executed by Borrower, Agent and
Lenders, as amended by a First Amendment to Revolving Credit Agreement dated the
date of this First Amendment.
"Scheduled Maturity Date" means the date that is
three (3) years after the date of this First Amendment.
"Subsequent Closing" and "Subsequent Closing Date"
mean the Business Day next following the date on which all of the conditions set
forth in Section 3.2 hereof have been satisfied.
<PAGE>
"Substitute Collateral" means a Property owned by
Borrower that has become a Mortgaged Property pursuant to Section 2.2.4 hereof.
1.2 Construction of Definitions. All terms defined herein
shall be construed to include the plural or the singular, and references to
persons in the masculine or neuter gender shall refer to all persons or
entities, as the context requires. If any term defined in the 1994 Loan
Agreement is defined differently in this First Amendment, the definition
contained in this First Amendment shall amend and replace the definition of such
term that is contained in the 1994 Loan Agreement.
1.3 Other Terms. The words "herein", "hereof", "hereunder" and
other words of similar import refer to this First Amendment as a whole,
including the exhibits hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this First Amendment. Any reference to an "Article", a
"Section", an "Exhibit" or "Schedule" shall refer to the relevant Article of,
Section of, Exhibit to or Schedule to this First Amendment, unless otherwise
specifically indicated.
ARTICLE 2
THE LOAN
2.1 Loan
2.1.1 Extension of Credit. Lenders have heretofore
advanced to Borrower, pursuant to the 1994 Loan Agreement, the aggregate amount
of $32,000,000 of the Loan. On the date hereof, Borrower has made a payment to
Lenders of $4,800,000 of the principal of the Loan. On the Subsequent Closing
Date, if any, Lenders severally, in accordance with their respective Pro Rata
Shares, shall advance to Borrower up to an additional $7,800,000, but not more
than the amount that would result in the then-current LTV equalling 75%. Any
payments of principal that Borrower may from time to time make with respect to
the Loan may not be reborrowed.
2.1.2 Payments of Principal.
2.1.2.1 Commencing on the first day of the
second calendar month after the date hereof, and on the first day of each
calendar month thereafter, to and including the month in which the Scheduled
Maturity Date occurs, Borrower shall pay to each Lender such Lender's Pro Rata
Share of an installment of principal of the Loan. Such installments of principal
shall be in accordance with the column headed "Principal" on the amortization
schedule attached hereto as Schedule 2.1.2.1 (which has been calculated on the
basis of the Interest Rate applicable to the Initial Fixed Term Amount and an
assumed term of 25 years after the date hereof (the "Assumed Term")). On the
<PAGE>
Subsequent Closing Date, there shall be substituted a new Schedule 2.1.2.1 which
shall increase all subsequent monthly installments of principal by the amount
that would be payable on a loan of the aggregate amount advanced by Lenders on
the Subsequent Closing Date were such loan to be payable, with interest at the
Interest Rate payable by Borrower in such amount pursuant to Section 2.1.3.2
hereof, in equal monthly installments of principal and interest over the number
of calendar months then remaining in the Assumed Term.
2.1.2.2 The entire outstanding principal
balance of the Loan shall be paid in full on the day of the Scheduled Maturity
Date.
2.1.3 Interest at Fixed Term Rates.
2.1.3.1 Commencing on the date hereof, the
Initial Fixed Term Amount shall bear interest for the Balance of the Term at the
Fixed Term Rate of 8.65% per annum, calculated on the basis of a 360-day year
and charged for the actual number of days elapsed, subject to the provisions of
Section 2.2.5 of the 1994 Loan Agreement.
2.1.3.2 The portion of the Loan that is
advanced to Borrower on the Subsequent Closing Date shall be a Fixed Term Amount
and bear interest for the Balance of the Term at the Fixed Term Rate applicable
thereto that has been approved in writing by Borrower, Agent and Lenders on the
Subsequent Closing Date, calculated on the basis of a 360-day year and charged
for the actual number of days elapsed, subject to the provisions of Section
2.2.5 of the 1994 Loan Agreement.
2.1.3.3 During each Option Term, the Loan
shall bear interest, either (i) on the entire outstanding principal balance
thereof at a Fixed Term Rate acknowledged in writing by Borrower, Agent and
Lenders prior to the commencement of such Option Term or (ii) in accordance with
the provisions of Section 2.1.4 of the 1994 Loan Agreement, except that during
an Option Term the rates charged pursuant to Section 2.1.4 of the 1994 Loan
Agreement shall be either the floating Prime Rate or the relevant Adjusted LIBOR
plus one and eighty-five one-hundredths of one percent (1.85%) per annum.
Interest during each Option Term, at whichever rate(s) elected by Borrower,
shall be calculated on the basis of a 360-day year and charged for the actual
number of days elapsed.
2.1.4 Interest Rate Option and Notice of Rate
Election. The provisions of Section 2.1.4 of the 1994 Loan Agreement shall be
applicable only to that portion of the outstanding principal balance of the Loan
that is not a Fixed Term Amount.
<PAGE>
2.1.5 Replacement Notes. To evidence Borrower's
obligations under the Loan, Borrower shall execute and deliver to each Lender a
Replacement Note in the principal amount of the Pro Rata Share of the Loan that
has been advanced by such Lender. Wherever the term "Note" or "Notes" is used in
any Loan Document, such term shall be deemed to refer to the applicable
Replacement Note or the Replacement Notes.
2.2 General Provisions.
2.2.1 Post-Maturity Interest. For purposes of this
First Amendment and of Section 2.2.5 of the 1994 Loan Agreement, the Balance of
the Term shall, with respect to each Fixed Term Amount, be deemed to be an
Interest Period.
2.2.2 Prepayment; Prepayment Premium.
2.2.2.1 Section 2.2.7.2 of 1994 Loan
Agreement is hereby deleted and of no further force or effect.
2.2.2.2 In the event Borrower makes a
prepayment (whether voluntary or mandatory) of any portion of any Fixed Term
Amount, Borrower will pay to the Agent, upon demand, for the account of the
affected Lenders any cost or expense incurred as a result of such prepayment.
Borrower and Lenders agree that if Borrower prepays a Fixed Term Amount or an
Adjusted LIBOR Amount prior to the last day of the relevant Interest Period (and
with respect to each Fixed Term Amount the then-current Scheduled Maturity Date
shall be the last day of the relevant Interest Period), the precise amount of
any such cost or expense incurred by the Lenders may not be susceptible to
precise calculation. Accordingly, if any such prepayment is made, Borrower shall
pay to each Lender, as a prepayment premium and not as a penalty, such Lender's
Pro Rata Share of the amount (the "Prepayment Premium") calculated as follows:
(i) All Adjusted LIBOR Amounts and Fixed
Term Amounts being prepaid and interest that would have accrued thereon to the
last day of the relevant Interest Period shall be discounted to a present value
at a rate per annum equal to the "Applicable Yield to Maturity" for each
Adjusted LIBOR Amount and Fixed Term Amount so prepaid, and if the aggregate of
such discounted values shall exceed the aggregate of the Adjusted LIBOR Amounts
and Fixed Term Amounts being prepaid, then the Prepayment Premium shall be an
amount equal to such excess; otherwise no Prepayment Premium shall be payable.
<PAGE>
(ii) The "Applicable Yield to Maturity" for
each Adjusted LIBOR Amount and Fixed Term Amount shall mean the yield to
maturity of the United States Treasury obligation (excluding those commonly
known as "Flower Bonds") having a maturity date nearest in time to the last day
of the relevant Interest Period with respect to such Adjusted LIBOR Amount and
Fixed Term Amount (and if there are two or more such Treasury obligations with
the same maturity date, the Applicable Yield to Maturity shall be the arithmetic
average of such different yields). The maturity date and yield to maturity of
such United States Treasury obligations shall be determined on the basis of
quotations published in the Wall Street Journal on the prepayment date.
The foregoing calculation of any required Prepayment Premium shall supersede the
method of determination found in the next to the last paragraph of Section
2.2.7.1 of the 1994 Loan Agreement.
2.2.2.3 Notwithstanding the provisions of
Section 2.2.2.2 hereof, no Prepayment Premium shall be payable with respect to
any prepayment that is made as a result of Lenders' election to apply the
proceeds of casualty insurance or any condemnation award in reduction of the
Loan, to the extent permitted under any Mortgage.
2.2.2.4 After payment of the applicable
Prepayment Premium, if any, prepayments of the Loan shall be applied (i) first
to interest (to the extent then due and payable), (ii) then to principal with
respect to the portions of the Loan that are not Adjusted LIBOR Amounts or Fixed
Term Amounts, (iii) then to Adjusted LIBOR Amounts, and among such Adjusted
LIBOR Amounts to such with the earliest expiring Interest Periods, and (iv) then
to Fixed Term Amounts (and if after the Subsequent Closing Date but prior to any
postponement of the Scheduled Maturity Date pursuant to Section 2.2.3 hereof,
first to the Fixed Term Amount that bears interest at the lower Fixed Term
Rate). This Section 2.2.2.4 is in substitution of the last paragraph of Section
2.2.7.1 of the 1994 Loan Agreement.
2.2.3 Postponement of Scheduled Maturity Date.
2.2.3.1 Borrower shall have the option,
which may be exercised not more than two (2) times, to postpone the Scheduled
Maturity Date for a period of one (1) year each time, subject to compliance with
and satisfaction of the following terms and conditions:
(i) Each such option shall be
exercised by written notice to Agent and Lenders at least sixty (60) days prior
to the then-current Scheduled Maturity Date.
(ii) There has occurred no Event of
Default that has not been waived by the Lenders in writing in accordance with
Article 8 of the 1994 Loan Agreement or cured.
(iii) Agent and the Lenders have
received, in connection with each postponement request, current Appraisals that
are acceptable to Lenders of all Properties that are then Mortgaged Properties,
indicating an aggregate value of such Mortgaged Properties of not less than
$46,700,000.
<PAGE>
(iv) The Mortgaged Properties
referred to in clause (iii) of this Section 2.2.3.1 shall have experienced, for
the period of the two (2) Fiscal Quarters immediately preceding the then-current
Scheduled Maturity Date, an average occupancy rate of not less than 90% and NOI
(annualized) of not less than $4,670,000.
2.2.4 Substitution of Collateral. Borrower shall have
the right, provided that no Event of Default has occurred that has not been
waived by Lenders in writing or cured, to obtain the release of a Mortgaged
Property from the lien of the encumbering Mortgage, provided that Borrower has
delivered to Agent, or Agent has otherwise received, in form and substance
satisfactory to Agent and its counsel, the following documents and instruments:
2.2.4.1 A notice from Borrower designating
to Agent and Lenders Substitute Collateral that is of like quality to the
Mortgaged Property requested to be released and that will generate NOI that,
when added to the NOI of the remaining Mortgaged Properties, will total not less
than $4,670,000, all as determined by Lenders in good faith;
2.2.4.2 An Appraisal acceptable to Agent and
Lenders with respect to the proposed Substitute Collateral, (i) which indicates
a value not less than the value of the Mortgaged Property requested to be
released, the value of the Mortgaged Property requested to be released to be as
determined by the Appraisal of such Mortgaged Property most recently obtained by
Agent; and (ii) which evidences, based upon the most recently obtained
Appraisals, that following the release of such Mortgaged Property and delivery
of a Mortgage encumbering the Substitute Collateral, the then-current LTV shall
not exceed 75%;
2.2.4.3 A Mortgage encumbering the
Substitute Collateral, in the form of that which was delivered to Agent with
respect to the Kenwood Gardens Apartments, Toledo, Ohio, pursuant to the 1994
Loan Agreement, as modified to reflect this First Amendment and the requirements
of the jurisdiction in which the Substitute Collateral is located;
2.2.4.4 An Assignment to Rents, Leases and
Profits encumbering the Substitute Collateral, in the form of that which was
delivered to Agent with respect to the Kenwood Gardens Apartments, Toledo, Ohio,
pursuant to the 1994 Loan Agreement, as modified to reflect this First Amendment
and the requirements of the jurisdiction in which the Substitute Collateral is
located;
<PAGE>
2.2.4.5 A Collateral Assignment of
Agreements Affecting Real Estate encumbering the Substitute Collateral, in the
form of that which was delivered to Agent with respect to the Kenwood Gardens
Apartments, Toledo, Ohio, pursuant to the 1994 Loan Agreement, as modified to
reflect this First Amendment and the requirements of the jurisdiction in which
the Substitute Collateral is located;
2.2.4.6 UCC-1 Financing Statements with
respect to the Substitute Collateral;
2.2.4.7 A certified copy of resolutions
adopted by the Board of Trustees of Borrower authorizing the execution, delivery
and performance of the documents referred to in this Section 2.2.4 that are
executed by Borrower, all certified by a trustee or officer of Borrower to be
true and correct copies of the originals and to be in full force and effect as
of the date hereof;
2.2.4.8 An incumbency and signature
certificate with respect to each of the trustees of Borrower authorized to
execute and deliver the documents referred to in this Section 2.2.4 that are
executed by Borrower;
2.2.4.9 The opinion of Borrower's counsel,
in form and substance acceptable to Lenders in their reasonable judgment;
2.2.4.10 A Policy of Title Insurance, or a
marked-up commitment to issue such a policy, by First American Title Insurance
Company, insuring the Mortgage encumbering the Substitute Collateral as a first
lien thereon, subject to only such exceptions as Lenders may accept;
2.2.4.11 Evidence of Borrower's policies of
insurance, with respect to the Substitute Collateral, as required by the terms
of Section 5.1.21 of the 1994 Loan Agreement;
2.2.4.12 Evidence that Borrower has
received, with respect to the Substitute Collateral, all required Governmental
Approvals relating to the ownership, use, operation and occupancy thereof and
that the Substitute Collateral complies in all material respects with all
applicable laws;
2.2.4.13 A "Phase I" Environmental Audit
performed with respect to the Substitute Collateral by a qualified environmental
engineer acceptable to Lenders; and
2.2.4.14 Such additional documents or
instruments as may be required by this Agreement or as Agent may reasonably
require.
<PAGE>
2.2.5 No Subsequent Closing. If the Subsequent
Closing shall not be completed on or before May 30, 1995, Borrower shall, not
later than September 30, 1995, either (i) complete the Subsequent Closing, (ii)
prepay a portion of the outstanding principal of the Loan (which prepayment
shall be in addition to the payment of principal due pursuant to Section 2.1.2.2
hereof or (iii) deliver to Agent additional collateral for the Loan, which
collateral shall be either (A) cash or Cash Equivalents acceptable to Agent and
the Lenders or (B) real property collateral acceptable to Agent and Lenders in
their sole discretion. Such additional collateral shall be evidenced and created
by documents acceptable to Agent and Lenders. The amount of any such prepayment
or additional collateral that is in the form of cash or Cash Equivalents shall
be in the amount of $1,700,000. The value of any such real property additional
collateral shall be not less than $2,267,000, as determined by Agent and Lenders
on the basis of a current Appraisal.
2.2.6 Fees. Borrower shall pay to each Lender other
than CoreStates Bank, N.A., upon the execution of this First Amendment, a
non-refundable fee in the amount of $2,500 to compensate such Lenders for
administrative and other expenses incurred in connection with this First
Amendment. These payments shall be in addition to Borrower's obligation to pay
Agent for other Lenders' Costs incurred in connection with this First Amendment.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Execution of This First Amendment. The execution of this
First Amendment by Lenders and performance of any of their obligations hereunder
is subject to the delivery by Borrower to Agent on the date hereof, in form and
substance satisfactory to Agent and its counsel, in addition to this First
Amendment, of the following documents and instruments:
3.1.1 The Replacement Notes;
3.1.2 Modifications of the Mortgages, reflecting the
execution of this First Amendment, the increase in the amount of the Loan, and
the execution and delivery of the Replacement Notes.
3.1.3 Amendments to the Assignments of Rents, Leases
and Profits heretofore delivered by Borrower with respect to each Mortgaged
Property, reflecting the execution of this First Amendment, the increase in the
amount of the Loan, and the execution and delivery of the Replacement Notes.
3.1.4 Amendments to the Collateral Assignments of
Agreements Affecting Real Estate heretofore delivered by Borrower with respect
to each Mortgaged Property, reflecting the execution of this First Amendment,
the increase in the amount of the Loan, and the execution and delivery of the
Replacement Notes.
<PAGE>
3.1.5 A certified copy of resolutions adopted by the
Board of Trustees of Borrower authorizing the execution, delivery and
performance of this First Amendment, the Replacement Notes, and all other
documents and instruments required by Agent for the implementation of this First
Amendment to which Borrower is a party, all certified by a trustee or officer of
Borrower to be true and correct copies of the originals and to be in full force
and effect as of the date hereof (provided that if this First Amendment is
executed on or before March 22, 1995, delivery of such certified copy may be
made to Agent on or before March 24, 1995);
3.1.6 An incumbency and signature certificate with
respect to each of the trustees of Borrower authorized to execute and deliver
this First Amendment, the Replacement Notes, and all other documents and
instruments required by Agent for the implementation of this First Amendment and
to be the Authorized Signers;
3.1.7 The opinion of Borrower's counsel, in form and
substance acceptable to Lenders in their reasonable judgment;
3.1.8 An endorsement to the policy(ies) of title
insurance issued by First American Title Insurance Company, insuring the
Mortgages as modified, as first liens upon the Mortgaged Properties, subject
only to such exceptions as Lenders may accept;
3.1.9 An amendment to the Revolving Credit Agreement,
in form reasonably acceptable to Agent and Lenders; and
3.1.10 Such additional documents or instruments as
may be required by this Agreement or as Agent may reasonably require.
3.2 Subsequent Closing. The occurrence of the Subsequent
Closing is subject to (i) all of the representations and warranties contained in
the 1994 Loan Agreement being true and correct as if made on and as of the
Subsequent Closing Date and (ii) the delivery by Borrower to Agent, on or before
November 9, 1995, in form and substance satisfactory to Agent and its counsel,
of the following documents and instruments:
3.2.1 A Mortgage encumbering Hidden Lakes, in the
form of that which was delivered to Agent with respect to the Kenwood Gardens
Apartments, Toledo, Ohio, pursuant to the 1994 Loan Agreement, as modified to
reflect this First Amendment;
3.2.2 An Assignment to Rents, Leases and Profits
encumbering Hidden Lakes, in the form of that which was delivered to Agent with
respect to the Kenwood Gardens Apartments, Toledo, Ohio, pursuant to the 1994
Loan Agreement, as modified to reflect this First Amendment;
<PAGE>
3.2.3 A Collateral Assignment of Agreements Affecting
Real Estate encumbering Hidden Lakes, in the form of that which was delivered to
Agent with respect to the Kenwood Gardens Apartments, Toledo, Ohio, pursuant to
the 1994 Loan Agreement, as modified to reflect this First Amendment;
3.2.4 UCC-1 Financing Statements with respect to
Hidden Lakes;
3.2.5 A certified copy of resolutions adopted by the
Board of Trustees of Borrower authorizing the execution, delivery and
performance of the documents referred to in this Section 3.2 that are executed
by Borrower, all certified by a trustee or officer of Borrower to be true and
correct copies of the originals and to be in full force and effect as of the
date hereof;
3.2.6 An incumbency and signature certificate with
respect to each of the trustees of Borrower authorized to execute and deliver
the documents referred to in this Section 3.2 that are executed by Borrower;
3.2.7 The opinion of Borrower's counsel, in form and
substance acceptable to Lenders in their reasonable judgment;
3.2.8 A Policy of Title Insurance, or a marked-up
commitment to issue such a policy, by First American Title Insurance Company,
insuring the Mortgage encumbering Hidden Lakes as a first lien upon Hidden
Lakes, subject to only such exceptions as Lenders may accept;
3.2.9 Evidence of Borrower's policies of insurance,
with respect to Hidden Lakes, as required by the terms of Section 5.1.21 of the
1994 Loan Agreement;
3.2.10 Evidence that Borrower has received, with
respect to Hidden Lakes, all required Governmental Approvals relating to the
ownership, use, operation and occupancy of Hidden Lakes and that Hidden Lakes
complies in all material respects with all applicable laws;
3.2.11 A "Phase I" Environmental Audit performed with
respect to Hidden Lakes by a qualified environmental engineer acceptable to
Lender;
3.2.12 An Appraisal of Hidden Lakes, which Appraisal
is acceptable to Lenders; and
3.2.13 Such additional documents or instruments as
may be required by this Agreement or as Agent may reasonably require.
<PAGE>
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to each Lender that all of
the representations and warranties contained in the 1994 Loan Agreement are true
and correct as if made on and as of the date hereof and after giving effect to
this First Amendment.
ARTICLE 5
AFFIRMATIVE COVENANTS
The following Sections of the 1994 Loan Agreement are hereby
amended as follows:
5.1.1 Section 5.1.1 is amended by adding, at the end thereof,
the sentence "The issuance by Borrower of equity securities pursuant to a
dividend reinvestment plan or an optional shareholder investment plan shall not
be deemed to be a public offering of equity securities of Borrower for purposes
of this Section 5.1.1."
5.1.2 Section 5.1.3 of the 1994 Loan Agreement is hereby
amended by deleting the entire text thereof and substituting the following in
its place:
"5.1.3 Maintain NOI generated by the Unencumbered Property
Pool ("Unencumbered NOI") at not less than $5,500,000 to be tested quarterly on
a rolling four Fiscal Quarter historical basis, and cause the ratio of Senior
Liabilities to Unencumbered NOI to be no more than 7.5 to 1 to be tested
quarterly on and as of the last day of each Fiscal Quarter upon Borrower's
submission of Project Specific Information;"
ARTICLE 6
NEGATIVE COVENANTS
Section 6.1.1 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"6.1.1 Except (i) pursuant to the Revolving Credit
Agreement, (ii) secured liabilities for which the obligee's recourse is limited
to the specific asset or assets that are encumbered, (iii) indebtedness incurred
by Palmer Park Mall Venture in favor of Midlantic Bank, N.A. and guarantied by
Borrower, and (iv) indebtedness incurred on or before June 1, 1996 and secured
by the Shenandoah Apartments in West Palm Beach, Florida, in an amount not
greater than $10,000,000, create, assume, incur or otherwise become liable under
Consolidated Liabilities or Contingent Liabilities in amounts in excess of
$5,000,000 in the aggregate after the date hereof, provided, however, that in no
event shall the sum of the indebtedness referred to in clause (iv) plus the
aggregate amount of such Consolidated Liabilities or Contingent Liabilities that
are hereafter created, assumed, incurred or for which Borrower has otherwise
become liable exceed $10,000,000;"
<PAGE>
ARTICLE 7
DEFAULT
7.1 Events of Default. In addition to the Events of Default
specified in the 1994 Loan Agreement, it shall be an Event of Default under the
Agreement if Borrower fails to deliver to Agent, on or before March 24, 1995,
the certified copy of resolutions described in Section 3.1.5 of this First
Amendment.
ARTICLE 8
MISCELLANEOUS
8.1 Integration. The Agreement, the Notes, and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of the Notes shall control over the provision of
the Agreement or any other Loan Document, and the provisions of the Agreement
shall control over the provisions of any other Loan Document. The Agreement, the
Notes and the other Loan Documents contain all the agreements of the parties
hereto with respect to the subject matter of each thereof and supersede all
prior or contemporaneous discussions and agreements with respect to such subject
matter.
8.2 Subsequent Closing. The Subsequent Closing hereunder shall
occur on not less than 10 Business Days' prior written notice from Borrower to
Agent and Lenders, but not later than November 9, 1995, at the offices of
Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, 38th Floor,
Philadelphia, Pennsylvania 19103-7598 or at such other time and place as the
parties hereto may determine. In the event Subsequent Closing is not held on or
before such date (unless extended by all of the parties hereto), Lenders shall
not be obligated to make any additional advance of proceeds of the Loan to
Borrower.
8.3 Partial Invalidity. If any provision of this First Amendment
shall for any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this First
Amendment shall be construed as if such invalid or unenforceable provision had
never been contained herein.
8.4 Headings. The heading of any Article or Section contained
in this First Amendment is for convenience of reference only and shall not be
deemed to amplify, limit, modify or give full notice of the provisions thereof.
<PAGE>
8.5 Counterparts. This First Amendment may be signed in
counterparts each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
8.6 1994 Loan Agreement. Except as specifically modified
hereby, the 1994 Loan Agreement remains in full force and effect, in accordance
with its terms. Borrower represents to and agrees with Agent and Lenders that as
of this date, Borrower has no defense, set-off or counter-claim to or against
any of Borrower's obligations or liabilities under the 1994 Loan Agreement or
any of the other Loan Documents.
8.7 Name of Borrower. The name and designation Pennsylvania
Real Estate Investment Trust is the designation of the Trustees from time to
time under the Trust Agreement amended and restated as of December 16, 1987 and
recorded in the Office for the Recording of Deeds in Norristown, Montgomery
County, Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with
the Pennsylvania Real Estate Investment Trust must look solely to the Trust
property for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
8.8 Counterpart Execution. This First Amendment may
be executed in counterpart and when so executed by and delivered to each of the
parties hereto shall constitute a single agreement that is binding upon the
parties.
<PAGE>
IN WITNESS WHEREOF, Borrower, Agent and Lenders have executed
this Agreement under seal, intending to be legally bound hereby, as of the day
and year first above written.
BORROWER:
PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST
By:/s/Robert G. Rogers
--------------------------------
Robert G. Rogers, Trustee
By:/s/Jeffrey A. Linn
--------------------------------
Jeffrey A. Linn, Secretary
LENDERS:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
--------------------------------
Glenn W. Gallagher, Vice President
MERIDIAN BANK
By:/s/K.C. Barrett
--------------------------------
K.C. Barrett, Vice President
(Signatures Continue On Following Page)
<PAGE>
MIDLANTIC BANK, N.A.
By:/s/Robert A. Goldstein
--------------------------------
Robert A. Goldstein,
Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/David Tioch
--------------------------------
Name: David Tioch
Title: Vice President
AGENT:
CORESTATES BANK, N.A.
By:/s/Glenn W. Gallagher
--------------------------------
Glenn W. Gallagher,
Vice President
<PAGE>
EXHIBIT 4.6
[FORM OF REPLACEMENT NOTE PURSUANT
TO FIRST AMENDMENT TO SECURED TERM LOAN AGREEMENT]
-------------------------
Bank Officer
REPLACEMENT NOTE
Philadelphia, Pennsylvania
$___________________ March __, 1995
FOR VALUE RECEIVED, PENNSYLVANIA REAL ESTATE INVESTMENT TRUST,
an unincorporated association in business trust form (the "Borrower") promises
to pay to the order of CORESTATES BANK, N.A., a national banking association
("Lender") on or before the Scheduled Maturity Date
Dollars ($ ), heretofore advanced or which may hereafter be
advanced by Lender to Borrower pursuant to that certain Secured Loan Agreement
dated November 9, 1994 by and among Borrower, Lender, Meridian Bank, Midlantic
Bank, N.A. and PNC Bank, National Association (the "1994 Loan Agreement") as
amended by that certain First Amendment to Secured Loan Agreement, dated the
date hereof (the "First Amendment"), executed by the parties to the 1994 Loan
Agreement (the 1994 Loan Agreement, as amended by the First Amendment and as
may hereafter be amended in writing), is referred to in this Note as the "Loan
Agreement"), in lawful money of the United States of America and in immediately
available funds. All initially capitalized terms used herein shall have the
same meanings ascribed to them in the Loan Agreement unless the context clearly
requires to the contrary.
Borrower also promises to pay interest on the unpaid principal
amount hereof from the date hereof to maturity (whether by acceleration or
otherwise) (i) if the Scheduled Maturity Date is postponed pursuant to the terms
of the Loan Agreement, with respect to that portion of the outstanding principal
balance hereof that is not an Adjusted LIBOR Amount or a Fixed Term Amount, at
the Prime Rate per annum, (ii) if the Scheduled Maturity Date is postponed
pursuant to the terms of the Loan Agreement, with respect to Adjusted LIBOR
Amounts, at the sum of the Adjusted LIBOR on the relevant Interest Rate
Determination Date plus one and eighty five one-hundredths of one percent
(1.85%) per annum, and (iii) with respect to each Fixed Term Amount, at the
applicable Fixed Term Rate determined from time to time in accordance with
Section 2.1.3 of the First Amendment. The applicable basis for determining the
rate(s) of interest payable hereunder shall be selected by Borrower at the time
a Notice of Rate Election is given pursuant to Section 2.2.2 of the 1994 Loan
<PAGE>
Agreement, except that Fixed Term Rates shall be determined in accordance with
Section 2.1.3 of the First Amendment. If on any day any principal of this Note
is outstanding which is not a Fixed Term Amount and with respect to which notice
has not been delivered to Agent in accordance with the terms of the Loan
Agreement electing Adjusted LIBOR, then such portion of the outstanding
principal balance hereof shall bear interest at the Prime Rate, in accordance
with clause (i) of this paragraph.
Interest shall be payable on the Loan in arrears to the last
Business Day of each month, with the first payment to be made on the first
Business Day of the month next following the date of this Note and continuing
thereafter on the first Business Day of each month and at maturity.
Any principal payments on the Loan not paid when due and, to
the extent permitted by applicable law, any interest payment on the Loan not
paid when due, and any other amount due to Agent or Lender under the Loan
Agreement or any other Loan Document not paid when due, in any case whether at
stated maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is two percent (2%)
per annum in excess of the applicable Interest Rate or Fixed Term Rate until the
expiration of the then applicable Interest Period or, with respect to Fixed Term
Amounts, the Balance of the Term, and after the expiration of the then
applicable Interest Period or the then-current Scheduled Maturity Date, as the
case may be, at a rate which is two percent (2%) in excess of the Base Rate.
This Note is one of the Notes referred to in the Loan
Agreement and is issued pursuant to and entitled to the benefits of the Loan
Agreement to which reference is hereby made for a more complete statement of the
terms and conditions pertaining to Lender's Pro Rata Share of the Loan evidenced
hereby and by the other Notes were made and are to be repaid. All recoveries by
Lender under this Note or otherwise are subject to the provisions of Article 8
of the 1994 Loan Agreement.
All payments of principal and interest in respect of this Note
shall be made by Borrower without defense, setoff or counterclaim in immediately
available funds and delivered to Agent not later than 12:00 noon (Philadelphia
time) on the date due at Agent's offices located at Widener Building, 10th
Floor, 1339 Chestnut Street, FC 1-8-10-67, Philadelphia, Pennsylvania 19107 or
at such other place as shall be designated in writing for such purpose in
accordance with the terms of the Loan Agreement. Funds received by Agent after
that time shall be deemed to have been paid by the Borrower on the next
succeeding Business Day.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
<PAGE>
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note; provided, however, that in
the event that the day on which payment of principal and interest on an Adjusted
LIBOR Loan is due is not a Business Day, then the due date thereof shall be the
last Business Day of such month.
Borrower authorizes Agent to charge Borrower's accounts with
Agent (but only to the extent there are sufficient funds therein) in order to
cause timely payment to be made to Agent of all principal, interest and fees
hereunder, as provided in Section 1.5 of the 1994 Loan Agreement.
Borrower may prepay all or any portion of the outstanding
principal balance hereof subject to the terms and conditions of the Loan
Agreement.
The liabilities and obligations of the Borrower hereunder
shall be unconditional without regard to the liability or obligations of any
other party and shall not be in any manner affected by any indulgence whatsoever
granted or consented to by Lender, including, but without being limited to, any
extension of time, renewal, waiver or other modification. Any failure of Lender
to exercise any right hereunder shall not be construed as a waiver of the right
to exercise the same or any other right at any time and from time to time
thereafter.
This Note shall be governed as to its validity, interpretation
and effect by the internal laws of the Commonwealth of Pennsylvania for
contracts made and to be performed in Pennsylvania. Borrower consents to the
jurisdiction of the courts of Philadelphia County, Pennsylvania, or at the
election of the holder hereof, the United States District Court for the Eastern
District of Pennsylvania, in any and all actions and proceedings by Lender, and
the Borrower hereby irrevocably agrees to service of process by registered mail,
return receipt requested, postage prepaid at the Borrower's address appearing on
Lender's records.
BORROWER HEREBY WAIVES, AND LENDER BY ITS ACCEPTANCE HEREOF
THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE RELATIONSHIP EVIDENCED HEREBY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO, ACCEPT OR RELY
UPON THIS NOTE.
Borrower hereby waives presentment, demand for payment, notice
of dishonor or acceleration, protest or notice of protest and any and all
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
<PAGE>
Lender may assign a portion or portions of its rights and
obligations under this Note subject to the terms and conditions of the Loan
Agreement.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued but unpaid
interest thereon, and Lender's Pro Rata Share of all other Indebtedness may
become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
The terms of this Note may not be changed or amended orally
but only by an agreement in writing and signed by all Lenders, or by such number
of Lenders as all Lenders may determine from time to time.
Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, as provided in Section 1.6 of the 1994 Loan
Agreement, incurred in the collection and enforcement of this Note. Borrower and
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
If any provision of this Note shall for any reason be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as if such
invalid or unenforceable provision had never been contained herein.
This Note replaces and supersedes the Note made by Borrower in
favor of Lender and dated November 9, 1994 (the "Prior Note"). To the extent
that the principal balance of this Note includes Borrower's indebtedness
hitherto evidenced by the Prior Note, this Note (i) merely re-evidences the
indebtedness hitherto evidenced by the Prior Note, (ii) is given an substitution
for, and not as payment of, the Prior Note and (iii) is in no way intended to
constitute a novation of the Prior Note.
The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of December 16, 1987 and recorded in the
Office for the Recording of Deeds in Norristown, Montgomery County,
Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust property
for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
<PAGE>
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By:____________________________
Robert G. Rogers, Trustee
By:____________________________
Jeffrey A. Linn, Secretary
<PAGE>
EXHIBIT 4.7
GUARANTY
THIS GUARANTY is made and entered into by the undersigned, and by each
of them if more than one (the "Guarantor"), for the benefit of CoreStates Bank,
N.A., a national banking association (the "Bank").
I. OBLIGOR. The "Obligor" means Laurel Mall Associates, a
Pennsylvania partnership.
II. OBLIGATIONS. The "Obligations" means all existing and hereafter
incurred or arising indebtedness, obligations and liabilities of the Obligor to
the Bank, whether absolute or contingent, direct or indirect, that arise out
of the Construction Loan Agreement dated the date of this Guaranty, between
Obligor and Bank with respect to a loan in the principal amount of up to
$22,600,000 (the "Loan Agreement") and the Note and Mortgage referred to in the
Loan Agreement and includes, without limitation, all matured and unmatured
indebtedness, obligations and liabilities of the Obligor under or in connection
with existing and future advances evidenced by the Note, including without
limitation all interest, expenses, costs (including collection costs) and fees
(including reasonable attorney's fees and prepayment fees) incurred, arising or
accruing (whether prior or subsequent to the filing of any bankruptcy petition
by or against any Obligor) under or in connection with any of the foregoing.
III. UNCONDITIONAL GUARANTY. In consideration of any existing
Obligations and any Obligations which may hereafter arise or be incurred, each
Guarantor, intending to be legally bound, absolutely and unconditionally (and
jointly and severally if more than one) guaranties to Bank the payment,
performance and satisfaction when due (whether by stated maturity, demand,
acceleration or otherwise) of all Obligations. The obligations of the Guarantor
hereunder shall continue in full force and effect irrespective of the validity,
legality or enforceability of any agreements, notes or documents pursuant to
which any of the Obligations arise, or the existence, value or condition of any
collateral for any of the Obligations, or of any other guaranty of the
Obligations, or any other circumstance which might otherwise constitute a legal
or equitable discharge of a surety or guarantor.
IV. COST OF ENFORCEMENT. Each Guarantor agrees (jointly and severally
if more than one) to pay Bank all costs and expenses (including reasonable
attorney's fees) at any time incurred by Bank in the enforcement of this
Guaranty against any Guarantor.
V. PAYMENT BY GUARANTOR. Payment by each Guarantor is due upon demand
by Bank and is payable in immediately available funds in lawful money of the
United States of America.
<PAGE>
VI. LIMITATION OF GUARANTORS' LIABILITY.
A. The aggregate amount of the Guarantors' liability under
this Guaranty shall be reduced to the amount that equals 35% of the principal
balance of the Note that is thereafter outstanding at such time as (i) the
"Improvements" (as defined in the Loan Agreement) have been fully completed and
certificates of occupancy for all portions thereof have been issued by the
appropriate Commonwealth and local authorities and (ii) during the most recent
period of six (6) calendar months (A) not less than 92% of the rentable square
feet of retail space in the "Real Estate" (as defined in the Loan Agreement) and
Improvements has been leased to tenants who occupy the demised premises and have
paid all rent that accrued during such period under their respective leases and
(B) the "Net Operating Income" derived by Obligor from the ownership and
operation of the Real Estate and Improvements, on an annualized basis, was not
less than $2,621,000. For purposes of this Guaranty, the term "Net Operating
Income" shall mean, with respect to any period of time, the amount, determined
on a cash basis, not an accrual basis, by which Obligor's "gross revenues"
derived during such period exceed its "direct expenses" during such period. The
term "gross revenues" shall mean the gross revenues of any kind whatsoever
derived from Obligor's ownership or operation of the "Mortgaged Property" (as
defined in the Loan Agreement), including, without limitation, all income
derived from all sources whatsoever as the result of the operation of the
Mortgaged Property, income on investments of the income and reserves of Obligor,
tenant security deposits not required to be escrowed (but only if, when and to
the extent forfeited to Obligor pursuant to the terms of the applicable Lease or
applicable law), and all refunds, rebates and recoveries of items, if any,
previously charged as deductions from gross revenue, but "gross revenues" shall
not include the proceeds of any sale or refinancing of the Mortgaged Property or
any portion thereof, any revenues derived from the "Adjacent Parcel" (as defined
in the Loan Agreement) (unless Lender shall otherwise agree in writing),
condemnation awards, or proceeds of insurance (other than loss of rents
insurance). The terms "direct expenses" shall mean all expenses actually
incurred and paid in connection with the ownership and operation of the
Mortgaged Property, but "direct expenses" shall not include expenditures paid
with condemnation awards or the proceeds of insurance (other than loss of rents
insurance), or debt service.
B. The Guarantors' aggregate liability under this Guaranty
shall be limited to the amount that equals 25% of the principal balance of the
Note that is thereafter outstanding from and after such time as the outstanding
principal balance of the Note has been reduced to $20,000,000 or less, but only
if at such time the conditions described in subparagraph (a) of this paragraph 6
are also satisfied.
<PAGE>
C. Upon request from the Guarantors from time to time, Bank
will confirm to the Guarantors the then-current limit of Guarantors' liability
under this paragraph.
VII. CONTINUING GUARANTY. This Guaranty shall continue in full force
and effect with respect to each Guarantor and may not be revoked until all
existing Obligations and all Obligations hereafter incurred or arising have been
paid, performed and satisfied in full.
VIII. WAIVERS AND CONSENTS BY GUARANTOR. Each Guarantor unconditionally
consents to, and waives as a defense to liability hereunder, each of the
following: (a) any waiver, inaction, delay or lack of diligence by Bank in
enforcing its rights against any Obligor or in any property, or the
unenforceability of any such rights, including any failure to perfect, protect
or preserve any lien or security interest which may be intended directly or
indirectly to secure any of the Obligations, and the absence of notice thereof
to any Guarantor, (b) the absence of any notice of the incurrence or existence
of any Obligation, (c) any action, and the absence of notice thereof to any
Guarantor, taken by Bank or any Obligor with respect to any of the Obligations,
including any release, subordination or substitution of any collateral or
release, termination, compromise, modification or amendment of any instrument
executed by or applicable to any Obligor or of any claim, right or remedy
against any Obligor or any property, (d) any impairment of Guarantor's right to
reimbursement by way of subrogation, indemnification or contribution, (e) any
other action taken or omitted by Bank in good faith with respect to the
Obligations, (f) the absence or inadequacy of any formalities of every kind in
connection with enforcement of the Obligations, including presentment, demand,
notice and protest, and (g) the waiver of any rights of Bank under or any action
taken or omitted by Bank with respect to any other guaranty of the Obligations.
IX. OTHER AGREEMENTS BY GUARANTOR. Each Guarantor agrees that there
shall be no requirement that Bank document its acceptance of this Guaranty,
evidence its reliance thereon, or that Bank take any action against any person
or any property prior to taking action against any Guarantor. Each Guarantor
further agrees that Bank's rights and remedies hereunder shall not be impaired
or subject to any stay, suspension or other delay as a result of Obligor's
insolvency or as a result of any proceeding applicable to Obligor or Obligor's
property under any bankruptcy or insolvency law. Each Guarantor also agrees that
payments and other reductions on the Obligations may be applied to such of the
Obligations and in such order as Bank may elect.
X. SUBROGATION AND SIMILAR RIGHTS. No Guarantor will exercise any
rights with respect to Bank or any Obligor related to or acquired in connection
with or as a result of its making of this Guaranty which it may acquire by way
of subrogation, indemnification or contribution, by reason of payment made by it
<PAGE>
hereunder or otherwise, until after the date on which all of the Obligations
shall have been satisfied in full, and until such time any such rights against
the Borrower shall be fully subordinate in lien and payment to any claim in
connection with the Obligations which Bank now or hereafter has against the
Obligor. If any amount shall be paid to any Guarantor on account of such
subrogation, indemnification or contribution at any time when all of the
Obligations and all other expenses guaranteed pursuant hereto shall not have
been paid in full, such amount shall be held in trust for the benefit of Bank,
shall be segregated from the other funds of Guarantor and shall forthwith be
paid over to Bank to be applied in whole or in part by Bank against the
Obligations, whether matured or unmatured, in such order as the Banks shall
determine in its sole discretion. If Guarantor shall make payment to the Bank of
all or any portion of the Obligations and all of the Obligations shall be paid
in full, Guarantor's right of subrogation shall be without recourse to and
without any implied warranties by Bank and shall remain fully subject and
subordinate to Bank's right to collect any other amounts which may thereafter
become due to the Bank by the Borrower in connection with the Obligations.
XI. REINSTATEMENT OF LIABILITY. If any claim is made upon the Bank for
repayment or recovery of any amount or amounts received by Bank in payment or on
account of any Obligations and Bank repays all or part of said amount by reason
of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, or (b) any settlement
or compromise in good faith with any such claimant (including Obligor), then and
in such event each Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor, notwithstanding
any termination hereof or the cancellation of any note or other instrument
evidencing any Obligation, and each Guarantor shall remain liable to the Bank
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by Bank.
XII. SECURITY INTEREST. Each Guarantor hereby assigns to the Bank a
security interest in any balance or assets in any deposit or other account of
such Guarantor in or with the Bank whenever and so long as any of the
Obligations shall be outstanding and unpaid and agrees that the security
interest hereby granted shall be independent of the right of setoff.
XIII. FINANCIAL INFORMATION ON GUARANTOR. Each Guarantor hereby agrees
to provide the Bank with such information on the business affairs and financial
condition of such Guarantor as is required pursuant to the terms of the Mortgage
and to notify the Bank of any change in the address of such Guarantor.
XIV. EFFECT OF OTHER AGREEMENTS. The provisions of this Guaranty are
cumulative and concurrent with Bank's rights and remedies against Guarantor
<PAGE>
under any existing or future agreement pertaining or evidencing any of the
Obligations. No such additional agreement shall be deemed a modification or
waiver hereof unless expressly so agreed by Bank in writing. If Bank holds any
other guaranty or surety agreement applicable to any of the Obligations, the
liability of each Guarantor hereunder shall be joint and several with each
party obligated on such other guaranty or surety agreement, unless otherwise
agreed by Bank in writing.
XV. CONFESSION OF JUDGMENT; WARRANT OF ATTORNEY - Each Guarantor
irrevocably authorizes and empowers any attorney or any clerk of court of
record, upon the occurrence of a default or an Event of Default under or in
connection with any of the Obligations, or at any time thereafter, to appear for
and confess judgment against such Guarantor for the full amount of such
Guarantor's liability under paragraph 3 and paragraph 6 hereof, with or without
declaration, with costs of suit and release of errors, and reasonable attorney's
fees (but not less than $10,000) and without stay of execution. If a copy of
this Guaranty, verified by affidavit by or on behalf of Bank, shall have been
filed in such action, it shall not be necessary to file the original of this
Guaranty. The authority granted hereby shall not be exhausted by the initial
exercise thereof and may be exercised by Bank from time to time. There shall be
excluded from the lien of any judgment obtained solely pursuant to this
paragraph all improved real estate in any area identified by the Federal
Emergency Management Agency as having special flood hazards if the community in
which such area is located is participating in the National Flood Insurance
Program. Any such exclusion shall not affect any lien upon property not so
excluded.
XVI. GUARANTORS' ADDRESSES. Each Guarantor warrants and represents that
the address set forth below is such Guarantor's correct mailing address and
agrees immediately to notify Bank in the event of any change therein.
XVII. MISCELLANEOUS.
A. No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by each Guarantor and Bank, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by the Guarantor therefrom, shall be effective unless it is in writing
and signed by Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
B. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
<PAGE>
C. The obligations of each Guarantor hereunder shall not be
subject to any counterclaim, setoff, deduction or defense based upon any related
or unrelated claim which such Guarantor may now or hereafter have against Bank
or any Obligor, except payment of the Obligations, and shall not be affected by
any change in Obligor's legal status or ownership or by any change in corporate,
partnership or other organizational structure applicable to Obligor.
D. This Guaranty shall (i) be binding on each Guarantor and
its personal representatives, estate, heirs, successors and assigns, and (ii)
inure, together with all rights and remedies of Bank hereunder, to the benefit
of the Bank and its successors, transferees and assigns. Notwithstanding the
foregoing clause (i), none of the rights or obligations of any Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Bank.
E. This Guaranty shall be governed by and construed in
accordance with the internal laws, and not the law of conflicts, of the
Commonwealth of Pennsylvania.
XVIII. The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of December 16, 1987 and recorded in the
Office for the Recording of Deeds in Norristown, Montgomery County,
Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust property
for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
XIX. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK
MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION
OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH
COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH
PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED
MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
XX. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES, AND
BANK BY ITS ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
<PAGE>
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK TO ENTER INTO, ACCEPT OR RELY UPON THIS GUARANTY.
XXI. COUNTERPARTS. This Guaranty may be executed in counterpart and
when copies of this Guaranty have been executed by each of the Guarantors, each
such counterpart copies shall constitute a single agreement binding upon the
Guarantors.
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
2nd day of August, 1993.
Pennsylvania Real Estate Investment
Trust
By: /s/Robert G. Rogers
- ----------------------------- ---------------------------------
Witness Robert G. Rogers, Trustee
By: /s/Sylvan M. Cohen
- ---------------------------- ---------------------------------
Witness Sylvan M. Cohen, Trustee
Address: 455 Pennsylvania Avenue
Suite 350
Fort Washington, PA 19034
/s/Albert R. Boscov
- --------------------------- ------------------------------------
Witness Albert R. Boscov
Address: 70 Devon Drive
Reading, PA 19606
/s/Edwin A. Lakin
- -------------------------- ------------------------------------
Witness Edwin A. Lakin
Address: 4640 Oley Turnpike Road
Reading, PA 19606
/s/Louis P. Meshon
- -------------------------- ------------------------------------
Witness Louis P. Meshon
Address: 1120 Ivymont Road
Rosemont, PA 19010
<PAGE>
GUARANTY
THIS GUARANTY is made and entered into by the undersigned, and by each
of them if more than one (the "Guarantor"), for the benefit of CoreStates Bank,
N.A.*, a national banking association (the "Bank").
I. OBLIGOR. The "Obligor" means Laurel Mall Associates, a Pennsylvania
partnership.
II. OBLIGATIONS. The "Obligations" means all existing and hereafter
incurred or arising indebtedness, obligations and liabilities of the Obligor to
the Bank, whether absolute or contingent, direct or indirect, that arise out
of the Mortgage Note dated the date of this Guaranty, executed by Obligor in
favor of Bank in the principal amount of $4,000,000 (the "Note") and includes,
without limitation, all matured and unmatured indebtedness, obligations and
liabilities of the Obligor under or in connection with existing and future
advances evidenced by the Note, including without limitation all interest,
expenses, costs (including collection costs) and fees (including reasonable
attorney's fees and prepayment fees) incurred, arising or accruing (whether
prior or subsequent to the filing of any bankruptcy petition by or against any
Obligor) under or in connection with any of the foregoing.
III. UNCONDITIONAL GUARANTY. In consideration of any existing
Obligations and any Obligations which may hereafter arise or be incurred, each
Guarantor, intending to be legally bound, absolutely and unconditionally (and
jointly and severally if more than one) guaranties to Bank the payment,
performance and satisfaction when due (whether by stated maturity, demand,
acceleration or otherwise) of all Obligations. The obligations of the Guarantor
hereunder shall continue in full force and effect irrespective of the validity,
legality or enforceability of any agreements, notes or documents pursuant to
which any of the Obligations arise, or the existence, value or condition of any
collateral for any of the Obligations, or of any other guaranty of the
Obligations, or any other circumstance which might otherwise constitute a legal
or equitable discharge of a surety or guarantor.
IV. COST OF ENFORCEMENT. Each Guarantor agrees (jointly and severally
if more than one) to pay Bank all costs and expenses (including reasonable
attorney's fees) at any time incurred by Bank in the enforcement of this
Guaranty against any Guarantor.
- --------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
V. PAYMENT BY GUARANTOR. Payment by each Guarantor is due upon demand
by Bank and is payable in immediately available funds in lawful money of the
United States of America.
VI. LIMITATION OF GUARANTORS' LIABILITY.
A. The aggregate amount of the Guarantors' liability under
this Guaranty shall be reduced to the amount that equals 35% of the principal
balance of the Note that is thereafter outstanding at such time as (i) the
"Improvements" (as defined in the Construction Loan Agreement dated August 2,
1993, between Obligor and Bank, as amended by a First Amendment to Construction
Loan Agreement dated August 27, 1993, and by a Second Amendment to Construction
Loan Agreement dated the date of this Guaranty (the "Loan Agreement")) have been
fully completed and certificates of occupancy for all portions thereof have been
issued by the appropriate Commonwealth and local authorities and (ii) during the
most recent period of six (6) calendar months (A) not less than 92% of the
rentable square feet of retail space in the "Real Estate" (as defined in the
Loan Agreement) and Improvements has been leased to tenants who occupy the
demised premises and have paid all rent that accrued during such period under
their respective leases and (B) the "Net Operating Income" derived by Obligor
from the ownership and operation of the Real Estate and Improvements, on an
annualized basis, was not less than $3,110,780. For purposes of this Guaranty,
the term "Net Operating Income" shall mean, with respect to any period of time,
the amount, determined on a cash basis, not an accrual basis, by which Obligor's
"gross revenues" derived during such period exceed its "direct expenses" during
such period. The term "gross revenues" shall mean the gross revenues of any kind
whatsoever derived from Obligor's ownership or operation of the "Mortgaged
Property" (as defined in the Loan Agreement), including, without limitation, all
income derived from all sources whatsoever as the result of the operation of the
Mortgaged Property, income on investments of the income and reserves of Obligor,
tenant security deposits not required to be escrowed (but only if, when and to
the extent forfeited to Obligor pursuant to the terms of the applicable Lease or
applicable law), and all refunds, rebates and recoveries of items, if any,
previously charged as deductions from gross revenue, but "gross revenues" shall
not include the proceeds of any sale or refinancing of the Mortgaged Property or
any portion thereof, any revenues derived from the "Adjacent Parcel" (as defined
in the Loan Agreement) (unless Lender shall otherwise agree in writing),
condemnation awards, or proceeds of insurance (other than loss of rents
insurance). The terms "direct expenses" shall mean all expenses actually
incurred and paid in connection with the ownership and operation of the
Mortgaged Property, but "direct expenses" shall not include expenditures paid
with condemnation awards or the proceeds of insurance (other than loss of rents
insurance), or debt service.
<PAGE>
B. The Guarantors' aggregate liability under this Guaranty
shall be limited to the amount that equals 25% of the principal balance of the
Note that is thereafter outstanding from and after such time as the aggregate
outstanding principal balances of the Note and of Obligor's note to Bank dated
August 2, 1993 has been reduced to $23,540,000 or less, but only if at such time
the conditions described in subparagraph (a) of this paragraph 6 are also
satisfied.
C. Upon request from the Guarantors from time to time, Bank
will confirm to the Guarantors the then-current limit of Guarantors' liability
under this paragraph.
VII. CONTINUING GUARANTY. This Guaranty shall continue in full force
and effect with respect to each Guarantor and may not be revoked until all
existing Obligations and all Obligations hereafter incurred or arising have been
paid, performed and satisfied in full.
VIII. WAIVERS AND CONSENTS BY GUARANTOR. Each Guarantor unconditionally
consents to, and waives as a defense to liability hereunder, each of the
following: (a) any waiver, inaction, delay or lack of diligence by Bank in
enforcing its rights against any Obligor or in any property, or the
unenforceability of any such rights, including any failure to perfect, protect
or preserve any lien or security interest which may be intended directly or
indirectly to secure any of the Obligations, and the absence of notice thereof
to any Guarantor, (b) the absence of any notice of the incurrence or existence
of any Obligation, (c) any action, and the absence of notice thereof to any
Guarantor, taken by Bank or any Obligor with respect to any of the Obligations,
including any release, subordination or substitution of any collateral or
release, termination, compromise, modification or amendment of any instrument
executed by or applicable to any Obligor or of any claim, right or remedy
against any Obligor or any property, (d) any impairment of Guarantor's right to
reimbursement by way of subrogation, indemnification or contribution, (e) any
other action taken or omitted by Bank in good faith with respect to the
Obligations, (f) the absence or inadequacy of any formalities of every kind in
connection with enforcement of the Obligations, including presentment, demand,
notice and protest, and (g) the waiver of any rights of Bank under or any action
taken or omitted by Bank with respect to any other guaranty of the Obligations.
IX. OTHER AGREEMENTS BY GUARANTOR. Each Guarantor agrees that there
shall be no requirement that Bank document its acceptance of this Guaranty,
evidence its reliance thereon, or that Bank take any action against any person
or any property prior to taking action against any Guarantor. Each Guarantor
further agrees that Bank's rights and remedies hereunder shall not be impaired
or subject to any stay, suspension or other delay as a result of Obligor's
insolvency or as a result of any proceeding applicable to Obligor or Obligor's
property under any bankruptcy or insolvency law. Each Guarantor also agrees that
payments and other reductions on the Obligations may be applied to such of the
Obligations and in such order as Bank may elect.
<PAGE>
X. SUBROGATION AND SIMILAR RIGHTS. No Guarantor will exercise any
rights with respect to Bank or any Obligor related to or acquired in connection
with or as a result of its making of this Guaranty which it may acquire by way
of subrogation, indemnification or contribution, by reason of payment made by it
hereunder or otherwise, until after the date on which all of the Obligations
shall have been satisfied in full, and until such time any such rights against
the Borrower shall be fully subordinate in lien and payment to any claim in
connection with the Obligations which Bank now or hereafter has against the
Obligor. If any amount shall be paid to any Guarantor on account of such
subrogation, indemnification or contribution at any time when all of the
Obligations and all other expenses guaranteed pursuant hereto shall not have
been paid in full, such amount shall be held in trust for the benefit of Bank,
shall be segregated from the other funds of Guarantor and shall forthwith be
paid over to Bank to be applied in whole or in part by Bank against the
Obligations, whether matured or unmatured, in such order as the Banks shall
determine in its sole discretion. If Guarantor shall make payment to the Bank of
all or any portion of the Obligations and all of the Obligations shall be paid
in full, Guarantor's right of subrogation shall be without recourse to and
without any implied warranties by Bank and shall remain fully subject and
subordinate to Bank's right to collect any other amounts which may thereafter
become due to the Bank by the Borrower in connection with the Obligations.
XI. REINSTATEMENT OF LIABILITY. If any claim is made upon the Bank for
repayment or recovery of any amount or amounts received by Bank in payment or on
account of any Obligations and Bank repays all or part of said amount by reason
of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, or (b) any settlement
or compromise in good faith with any such claimant (including Obligor), then and
in such event each Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor, notwithstanding
any termination hereof or the cancellation of any note or other instrument
evidencing any Obligation, and each Guarantor shall remain liable to the Bank
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by Bank.
<PAGE>
XII. SECURITY INTEREST. Each Guarantor hereby assigns to the Bank a
security interest in any balance or assets in any deposit or other account of
such Guarantor in or with the Bank whenever and so long as any of the
Obligations shall be outstanding and unpaid and agrees that the security
interest hereby granted shall be independent of the right of setoff.
XIII. FINANCIAL INFORMATION ON GUARANTOR. Each Guarantor hereby agrees
to provide the Bank with such information on the business affairs and financial
condition of such Guarantor as is required pursuant to the terms of the Mortgage
and to notify the Bank of any change in the address of such Guarantor.
XIV. EFFECT OF OTHER AGREEMENTS. The provisions of this Guaranty are
cumulative and concurrent with Bank's rights and remedies against Guarantor
under any existing or future agreement pertaining or evidencing any of the
Obligations. No such additional agreement shall be deemed a modification or
waiver hereof unless expressly so agreed by Bank in writing. If Bank holds any
other guaranty or surety agreement applicable to any of the Obligations, the
liability of each Guarantor hereunder shall be joint and several with each party
obligated on such other guaranty or surety agreement, unless otherwise agreed by
Bank in writing.
XV. CONFESSION OF JUDGMENT; WARRANT OF ATTORNEY - Each Guarantor
irrevocably authorizes and empowers any attorney or any clerk of court of
record, upon the occurrence of a default or an Event of Default under or in
connection with any of the Obligations, or at any time thereafter, to appear for
and confess judgment against such Guarantor for the full amount of such
Guarantor's liability under paragraph 3 and paragraph 6 hereof, with or without
declaration, with costs of suit and release of errors, and reasonable attorney's
fees (but not less than $10,000) and without stay of execution. If a copy of
this Guaranty, verified by affidavit by or on behalf of Bank, shall have been
filed in such action, it shall not be necessary to file the original of this
Guaranty. The authority granted hereby shall not be exhausted by the initial
exercise thereof and may be exercised by Bank from time to time. There shall be
excluded from the lien of any judgment obtained solely pursuant to this
paragraph all improved real estate in any area identified by the Federal
Emergency Management Agency as having special flood hazards if the community in
which such area is located is participating in the National Flood Insurance
Program. Any such exclusion shall not affect any lien upon property not so
excluded.
XVI. GUARANTORS' ADDRESSES. Each Guarantor warrants and represents that
the address set forth below is such Guarantor's correct mailing address and
agrees immediately to notify Bank in the event of any change therein.
<PAGE>
XVII. MISCELLANEOUS.
A. No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by each Guarantor and Bank, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by the Guarantor therefrom, shall be effective unless it is in writing
and signed by Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
B. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
C. The obligations of each Guarantor hereunder shall not be
subject to any counterclaim, setoff, deduction or defense based upon any related
or unrelated claim which such Guarantor may now or hereafter have against Bank
or any Obligor, except payment of the Obligations, and shall not be affected by
any change in Obligor's legal status or ownership or by any change in corporate,
partnership or other organizational structure applicable to Obligor.
D. This Guaranty shall (i) be binding on each Guarantor and
its personal representatives, estate, heirs, successors and assigns, and (ii)
inure, together with all rights and remedies of Bank hereunder, to the benefit
of the Bank and its successors, transferees and assigns. Notwithstanding the
foregoing clause (i), none of the rights or obligations of any Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Bank.
E. This Guaranty shall be governed by and construed in
accordance with the internal laws, and not the law of conflicts, of the
Commonwealth of Pennsylvania.
XVIII. The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of December 16, 1987 and recorded in the
Office for the Recording of Deeds in Norristown, Montgomery County,
Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust property
for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
<PAGE>
XIX. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK
MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION
OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH
COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH
PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED
MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
XX. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES, AND
BANK BY ITS ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK TO ENTER INTO, ACCEPT OR RELY UPON THIS GUARANTY.
XXI. COUNTERPARTS. This Guaranty may be executed in counterpart and
when copies of this Guaranty have been executed by each of the Guarantors, each
such counterpart copies shall constitute a single agreement binding upon the
Guarantors.
XXII. PRIOR TRANSACTION. This Guaranty is in addition to the Guaranty
dated August 2, 1993, made by Guarantor in favor of Bank with respect to
Obligor's liabilities to Bank under the Loan Agreement and Obligor's Mortgage
Note dated August 2, 1993, in the principal amount of $22,600,000 (the "August
Guaranty"). Guarantor's liability to Bank hereunder is in addition to
Guarantor's liability under the August Guaranty.
XXIII. This document may be executed in counterpart by the parties
hereto and when this document has been so executed, it shall constitute a single
document and agreement and be binding upon the parties hereto as if each had
executed the same copy of this document.
<PAGE>
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
27th day of January, 1994.
Pennsylvania Real Estate Investment
Trust
By:/s/Robert G. Rogers
- ------------------------ -----------------------------------------
Witness Robert G. Rogers, Trustee
By:/s/Sylvan M. Cohen
- ------------------------ -----------------------------------------
Witness Sylvan M. Cohen, Trustee
Address: 455 Pennsylvania Avenue
Suite 350
Fort Washington, PA 19034
/s/Albert R. Boscov
- ------------------------ --------------------------------------------
Witness Albert R. Boscov
Address: 70 Devon Drive
Reading, PA 19606
/s/Edwin A. Lakin
- ------------------------ --------------------------------------------
Witness Edwin A. Lakin
Address: 4640 Oley Turnpike Road
Reading, PA 19606
/s/Louis P. Meshon
- ------------------------ --------------------------------------------
Witness Louis P. Meshon
Address: 1120 Ivymont Road
Rosemont, PA 19010
<PAGE>
GUARANTY
THIS GUARANTY is made and entered into by the undersigned, and by each
of them if more than one (the "Guarantor"), for the benefit of CoreStates Bank,
N.A.*, a national banking association (the "Bank").
I. OBLIGOR. The "Obligor" means Laurel Mall Associates, a Pennsylvania
partnership.
II. OBLIGATIONS. The "Obligations" means all existing and hereafter
incurred or arising indebtedness, obligations and liabilities of the Obligor to
the Bank, whether absolute or contingent, direct or indirect, that arise out of
the Mortgage Note dated the date of this Guaranty, executed by Obligor in favor
of Bank in the principal amount of $4,000,000 (the "Note") and includes, without
limitation, all matured and unmatured indebtedness, obligations and liabilities
of the Obligor under or in connection with existing and future advances
evidenced by the Note, including without limitation all interest, expenses,
costs (including collection costs) and fees (including reasonable attorney's
fees and prepayment fees) incurred, arising or accruing (whether prior or
subsequent to the filing of any bankruptcy petition by or against any Obligor)
under or in connection with any of the foregoing.
III. UNCONDITIONAL GUARANTY. In consideration of any existing
Obligations and any Obligations which may hereafter arise or be incurred, each
Guarantor, intending to be legally bound, absolutely and unconditionally (and
jointly and severally if more than one) guaranties to Bank the payment,
performance and satisfaction when due (whether by stated maturity, demand,
acceleration or otherwise) of all Obligations. The obligations of the Guarantor
hereunder shall continue in full force and effect irrespective of the validity,
legality or enforceability of any agreements, notes or documents pursuant to
which any of the Obligations arise, or the existence, value or condition of any
collateral for any of the Obligations, or of any other guaranty of the
Obligations, or any other circumstance which might otherwise constitute a legal
or equitable discharge of a surety or guarantor.
IV. COST OF ENFORCEMENT. Each Guarantor agrees (jointly and severally
if more than one) to pay Bank all costs and expenses (including reasonable
attorney's fees) at any time incurred by Bank in the enforcement of this
Guaranty against any Guarantor.
- --------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE>
V. PAYMENT BY GUARANTOR. Payment by each Guarantor is due upon demand
by Bank and is payable in immediately available funds in lawful money of the
United States of America.
VI. LIMITATION OF GUARANTORS' LIABILITY.
A. The aggregate amount of the Guarantors' liability under
this Guaranty shall be reduced to the amount that equals 35% of the principal
balance of the Note that is thereafter outstanding at such time as (i) the
"Improvements" (as defined in the Construction Loan Agreement dated August 2,
1993, between Obligor and Bank, as amended by a First Amendment to Construction
Loan Agreement dated August 27, 1993, by a Second Amendment to Construction Loan
Agreement dated January 27, 1994 and by a Third Amendment to Construction Loan
Agreement dated the date of this Guaranty (the "Loan Agreement")) have been
fully completed and certificates of occupancy for all portions thereof have been
issued by the appropriate Commonwealth and local authorities and (ii) during the
most recent period of six (6) calendar months (which period ends not later than
December 31, 1995) (A) not less than 92% of the rentable square feet of retail
space in the "Real Estate" (as defined in the Loan Agreement) and Improvements
has been leased to tenants who occupy the demised premises and have paid all
rent that accrued during such period under their respective leases and (B) the
"Net Operating Income" derived by Obligor from the ownership and operation of
the Real Estate and Improvements, on an annualized basis, was not less than
$3,453,000. For purposes of this Guaranty, the term "Net Operating Income" shall
mean, with respect to any period of time, the amount, determined on a cash
basis, not an accrual basis, by which Obligor's "gross revenues" derived during
such period exceed its "direct expenses" during such period. The term "gross
revenues" shall mean the gross revenues of any kind whatsoever derived from
Obligor's ownership or operation of the "Mortgaged Property" (as defined in the
Loan Agreement), including, without limitation, all income derived from all
sources whatsoever as the result of the operation of the Mortgaged Property,
income on investments of the income and reserves of Obligor, tenant security
deposits not required to be escrowed (but only if, when and to the extent
forfeited to Obligor pursuant to the terms of the applicable Lease or applicable
law), and all refunds, rebates and recoveries of items, if any, previously
charged as deductions from gross revenue, but "gross revenues" shall not include
the proceeds of any sale or refinancing of the Mortgaged Property or any portion
thereof, any revenues derived from the "Adjacent Parcel" (as defined in the Loan
Agreement) (unless Lender shall otherwise agree in writing), condemnation
awards, or proceeds of insurance (other than loss of rents insurance). The terms
"direct expenses" shall mean all expenses actually incurred and paid in
connection with the ownership and operation of the Mortgaged Property, but
"direct expenses" shall not include expenditures paid with condemnation awards
<PAGE>
or the proceeds of insurance (other than loss of rents insurance), or debt
service.
B. The Guarantors' aggregate liability under this Guaranty
shall be limited to the amount that equals 25% of the principal balance of the
Note that is thereafter outstanding from and after such time as the aggregate
outstanding principal balances of the Note and of Obligor's notes to Bank dated
August 2, 1993, and January 27, 1994, have been reduced to $26,900,000 or less,
but only if the Guarantors' aggregate liability has theretofore been reduced
pursuant to Paragraph 6(a) above.
C. Upon request from the Guarantors from time to time, Bank
will confirm to the Guarantors the then-current limit of Guarantors' liability
under this paragraph.
VII. CONTINUING GUARANTY. This Guaranty shall continue in full force
and effect with respect to each Guarantor and may not be revoked until all
existing Obligations and all Obligations hereafter incurred or arising have
been paid, performed and satisfied in full.
VIII. WAIVERS AND CONSENTS BY GUARANTOR. Each Guarantor unconditionally
consents to, and waives as a defense to liability hereunder, each of the
following: (a) any waiver, inaction, delay or lack of diligence by Bank in
enforcing its rights against any Obligor or in any property, or the
unenforceability of any such rights, including any failure to perfect, protect
or preserve any lien or security interest which may be intended directly or
indirectly to secure any of the Obligations, and the absence of notice thereof
to any Guarantor, (b) the absence of any notice of the incurrence or existence
of any Obligation, (c) any action, and the absence of notice thereof to any
Guarantor, taken by Bank or any Obligor with respect to any of the Obligations,
including any release, subordination or substitution of any collateral or
release, termination, compromise, modification or amendment of any instrument
executed by or applicable to any Obligor or of any claim, right or remedy
against any Obligor or any property, (d) any impairment of Guarantor's right to
reimbursement by way of subrogation, indemnification or contribution, (e) any
other action taken or omitted by Bank in good faith with respect to the
Obligations, (f) the absence or inadequacy of any formalities of every kind in
connection with enforcement of the Obligations, including presentment, demand,
notice and protest, and (g) the waiver of any rights of Bank under or any action
taken or omitted by Bank with respect to any other guaranty of the Obligations.
IX. OTHER AGREEMENTS BY GUARANTOR. Each Guarantor agrees that there
shall be no requirement that Bank document its acceptance of this Guaranty,
evidence its reliance thereon, or that Bank take any action against any person
or any property prior to taking action against any Guarantor. Each Guarantor
further agrees that Bank's rights and remedies hereunder shall not be impaired
or subject to any stay, suspension or other delay as a result of Obligor's
insolvency or as a result of any proceeding applicable to Obligor or Obligor's
<PAGE>
property under any bankruptcy or insolvency law. Each Guarantor also agrees that
payments and other reductions on the Obligations may be applied to such of the
Obligations and in such order as Bank may elect.
X. SUBROGATION AND SIMILAR RIGHTS. No Guarantor will exercise any
rights with respect to Bank or any Obligor related to or acquired in connection
with or as a result of its making of this Guaranty which it may acquire by way
of subrogation, indemnification or contribution, by reason of payment made by it
hereunder or otherwise, until after the date on which all of the Obligations
shall have been satisfied in full, and until such time any such rights against
the Borrower shall be fully subordinate in lien and payment to any claim in
connection with the Obligations which Bank now or hereafter has against the
Obligor. If any amount shall be paid to any Guarantor on account of such
subrogation, indemnification or contribution at any time when all of the
Obligations and all other expenses guaranteed pursuant hereto shall not have
been paid in full, such amount shall be held in trust for the benefit of Bank,
shall be segregated from the other funds of Guarantor and shall forthwith be
paid over to Bank to be applied in whole or in part by Bank against the
Obligations, whether matured or unmatured, in such order as the Banks shall
determine in its sole discretion. If Guarantor shall make payment to the Bank of
all or any portion of the Obligations and all of the Obligations shall be paid
in full, Guarantor's right of subrogation shall be without recourse to and
without any implied warranties by Bank and shall remain fully subject and
subordinate to Bank's right to collect any other amounts which may thereafter
become due to the Bank by the Borrower in connection with the Obligations.
XI. REINSTATEMENT OF LIABILITY. If any claim is made upon the Bank for
repayment or recovery of any amount or amounts received by Bank in payment or on
account of any Obligations and Bank repays all or part of said amount by reason
of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, or (b) any settlement
or compromise in good faith with any such claimant (in- cluding Obligor), then
and in such event each Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor, notwithstanding
any termination hereof or the cancellation of any note or other instrument
evidencing any Obligation, and each Guarantor shall remain liable to the Bank
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by Bank.
XII. SECURITY INTEREST. Each Guarantor hereby assigns to the Bank a
security interest in any balance or assets in any deposit or other account of
such Guarantor in or with the Bank whenever and so long as any of the
<PAGE>
Obligations shall be outstanding and unpaid and agrees that the security
interest hereby granted shall be independent of the right of setoff.
XIII. FINANCIAL INFORMATION ON GUARANTOR. Each Guarantor hereby agrees
to provide the Bank with such information on the business affairs and financial
condition of such Guarantor as is required pursuant to the terms of the Mortgage
and to notify the Bank of any change in the address of such Guarantor.
XIV. EFFECT OF OTHER AGREEMENTS. The provisions of this Guaranty are
cumulative and concurrent with Bank's rights and remedies against Guarantor
under any existing or future agreement pertaining or evidencing any of the
Obligations. No such additional agreement shall be deemed a modification or
waiver hereof unless expressly so agreed by Bank in writing. If Bank holds any
other guaranty or surety agreement applicable to any of the Obligations, the
liability of each Guarantor hereunder shall be joint and several with each party
obligated on such other guaranty or surety agreement, unless otherwise agreed by
Bank in writing.
XV. CONFESSION OF JUDGMENT; WARRANT OF ATTORNEY - Each Guarantor
irrevocably authorizes and empowers any attorney or any clerk of court of
record, upon the occurrence of a default or an Event of Default under or in
connection with any of the Obligations, or at any time thereafter, to appear for
and confess judgment against such Guarantor for the full amount of such
Guarantor's liability under paragraph 3 and paragraph 6 hereof, with or without
declaration, with costs of suit and release of errors, and reasonable attorney's
fees (but not less than $10,000) and without stay of execution. If a copy of
this Guaranty, verified by affidavit by or on behalf of Bank, shall have been
filed in such action, it shall not be necessary to file the original of this
Guaranty. The authority granted hereby shall not be exhausted by the initial
exercise thereof and may be exercised by Bank from time to time. There shall be
excluded from the lien of any judgment obtained solely pursuant to this
paragraph all improved real estate in any area identified by the Federal
Emergency Management Agency as having special flood hazards if the community in
which such area is located is participating in the National Flood Insurance
Program. Any such exclusion shall not affect any lien upon property not so
excluded.
XVI. GUARANTORS' ADDRESSES. Each Guarantor warrants and represents that
the address set forth below is such Guarantor's correct mailing address and
agrees immediately to notify Bank in the event of any change therein.
XVII. MISCELLANEOUS.
A. No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by each Guarantor and Bank, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by the Guarantor therefrom, shall be effective unless it is in writing
and signed by Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
B. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
<PAGE>
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
C. The obligations of each Guarantor hereunder shall not be
subject to any counterclaim, setoff, deduction or defense based upon any related
or unrelated claim which such Guarantor may now or hereafter have against Bank
or any Obligor, except payment of the Obligations, and shall not be affected by
any change in Obligor's legal status or ownership or by any change in corporate,
partnership or other organizational structure applicable to Obligor.
D. This Guaranty shall (i) be binding on each Guarantor and
its personal representatives, estate, heirs, successors and assigns, and (ii)
inure, together with all rights and remedies of Bank hereunder, to the benefit
of the Bank and its successors, transferees and assigns. Notwithstanding the
foregoing clause (i), none of the rights or obligations of any Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Bank.
E. This Guaranty shall be governed by and construed in
accordance with the internal laws, and not the law of conflicts, of
the Commonwealth of Pennsylvania.
XVIII. The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of December 16, 1987 and recorded in the
Office for the Recording of Deeds in Norristown, Montgomery County,
Pennsylvania, in Deed Book 4864, page 1463, and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust property
for the enforcement of any claims against the Pennsylvania Real Estate
Investment Trust, as neither the Trustees, officers, agents or shareholders of
the Pennsylvania Real Estate Investment Trust assume any personal liability for
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
XIX. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY
<PAGE>
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK
MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION
OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH
COUNTY. EACH UNDERSIGNED PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH
PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED
MAIL, POSTAGE PREPAID, TO EACH UNDERSIGNED PARTY.
XX. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES, AND
BANK BY ITS ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK TO ENTER INTO, ACCEPT OR RELY UPON THIS GUARANTY.
XXI. COUNTERPARTS. This Guaranty may be executed in counterpart and
when copies of this Guaranty have been executed by each of the Guarantors, each
such counterpart copies shall constitute a single agreement binding upon the
Guarantors.
XXII. PRIOR TRANSACTIONS. This Guaranty is in addition to the Guaranty
dated August 2, 1993 (the "August Guaranty") and the Guaranty dated January 27,
1994 (the "January Guaranty"), made by Guarantor in favor of Bank with respect
to Obligor's liabilities to Bank under the Loan Agreement and Obligor's Mortgage
Note dated August 2, 1993, in the principal amount of $22,600,000 (the "August
Note") and Obligor's Mortgage Note dated January 27, 1994, in the principal
amount of $4,000,000 (the "January Note"). The August Note and the January Note
are amended by Amendment to Mortgage Notes dated the date of this Guaranty.
Guarantor's liability to Bank hereunder is in addition to Guarantor's liability
under the August Guaranty and the January Guaranty.
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
23rd day of September, 1994.
Pennsylvania Real Estate Investment
Trust
By:/s/Jonathan B. Weller
- -------------------- -----------------------------------------
Witness Jonathan B. Weller, Trustee
By:/s/Robert G. Rogers
- -------------------- -----------------------------------------
Witness Robert G. Rogers, Trustee
Address: 455 Pennsylvania Avenue
Suite 350
Fort Washington, PA 19034
(Signatures continued on next page)
<PAGE>
/s/Albert R. Boscov
- -------------------- -----------------------------------------
Witness Albert R. Boscov
Address: 70 Devon Drive
Reading, PA 19606
/s/Edwin A. Lakin
- -------------------- -----------------------------------------
Witness Edwin A. Lakin
Address: 4640 Oley Turnpike Road
Reading, PA 19606
/s/Louis P. Meshon
- -------------------- -----------------------------------------
Witness Louis P. Meshon
Address: 1120 Ivymont Road
Rosemont, PA 19010
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the 1st day of October, 1985, between
Pennsylvania Real Estate Investment Trust ("PREIT") and
Jeffrey Linn ("Employee").
Background of Agreement
-----------------------
Employee has, for many years, served PREIT faithfully as its Director
of Operations and is acknowledged as having been instrumental in the growth and
success of PREIT. PREIT desires that Employee continue to serve as its Director
of Operations and Employee desires to continue to so serve. The parties are
entering into this Agreement to provide for the relationships and obligations of
each of the parties hereto with respect to such employment.
NOW THEREFORE, the parties hereto, intending to be legally bound hereby
and in consideration of the mutual covenants herein contained, agree as follows:
1. Employment
----------
PREIT hereby employs the Employee, and the Employee hereby
accepts employment, upon the terms and conditions set forth herein.
2. Duties
------
Employee shall serve PREIT in the position of Director of
Operations of PREIT. The duties and authority of Employee shall be consistent
with those currently performed and exercised by Employee. Employee shall devote
his time, attention and best efforts to the performance of his duties hereunder
and shall not, during the term of his employment, be engaged in any other
<PAGE>
business activity (whether or not such business activity is pursued for gain,
profit or other pecuniary advantage) that would interfere with the services to
be rendered by Employee hereunder. However, this provision shall not prevent
Employee from investing his assets in such form or manner as will not require
any services on his part in the operation of the affairs of the companies in
which investments are made.
3. Term
----
The term of employment hereunder shall commence on the date
first set forth above and shall continue for an initial term of two (2) years,
expiring September 30, 1987. The initial term of employment shall be
automatically extended for a term of one year thereafter unless either party
gives the other not less than ninety (90) days notice prior to the expiration of
the original term of its or his intention not to extend the term of such
employment. Upon the expiration of the initial term and the first additional
term, employment shall continue for an additional term of one year, unless not
later than one ninety (90) days prior to the expiration of the then current
term, written notice is given by either party hereto of his or its election to
terminate the employment at the end of the then current term. If such notice is
given, the term of employment shall terminate at the end of the then current
term.
4. Basic Compensation
------------------
PREIT agrees to pay and Employee agrees to accept, as
the basic compensation for all services to be rendered by
-2-
<PAGE>
Employee hereunder, the sum of $50,000 per annum, payable in approximately equal
weekly, bi-monthly or monthly installments. The Board of Trustees of PREIT, in
its sole discretion, may increase the annual basic compensation payable
hereunder at any time or times during the term hereof.
5. Working Facilities and Expenses
-------------------------------
PREIT shall furnish Employee with appropriate office space,
stenographic help and other facilities and services suitable to his employment
hereunder and adequate for the performance of his duties. PREIT shall also pay
directly or reimburse to Employee all business related expenses incurred in the
course of his duties hereunder.
6. Termination of Employment
-------------------------
In addition to the provisions contained in Section 2 hereof,
PREIT shall have the right to terminate the term of employment pursuant to the
provisions of Sections 6.1 and 6.2 hereof and the term of employment shall end
upon the occurrence described in Section 6.3 hereof:
6.1 Upon thirty (30) days notice for "good cause". The term
"good cause" shall mean (i) dishonesty; (ii) conduct on the part of Employee
intended to or likely to injure the business of PREIT; (iii) Employee's
indictment for a crime involving moral turpitude, whether relating to his
employment or otherwise; (iv) insobriety; and (v) a material failure of Employee
to perform or observe the provisions of this Agreement (other than by reason of
illness or incapacity) which persists for an unreasonable period
-3-
<PAGE>
of time after notice is given to Employee which details the
failure.
6.2 By complying with the provisions of Section 7
hereof.
6.3 Upon the death of Employee.
7. Disability
----------
7.1 Effect of Disability
--------------------
In the event that during the term of employment Employee shall
become disabled so that he is unable to perform his duties hereunder, the
compensation herein provided shall continue to be paid until PREIT exercises its
right of termination set forth herein. Should the disability continue for more
than six (6) consecutive months or should such disability exist for more than
nine (9) months in any twelve (12) month period, Employer shall have the right
to terminate the term of employment, without further liability to pay
compensation hereunder, by giving Employee thirty (30) days notice of its
intention to do so. If Employee shall resume his duties within thirty (30) days
after such notice is given and shall perform such duties on a regular basis for
three (3) consecutive months thereafter, the term of employment shall continue
in full force and effect and the notice of intention to terminate shall have no
further force or validity; otherwise the term of employment shall terminate at
the end of such thirty (30) day period or, if applicable, upon the recurrence of
disability during the three (3) month period.
-4-
<PAGE>
7.2 Determination of Disability
---------------------------
Employee shall be deemed disabled for purposes of this
Agreement either (i) if he is deemed disabled for purposes of any disability
policy, group or individual, paid for by PREIT and at the time in effect, or
(ii) if no such policy is then in effect, by an independent referee licensed to
practice medicine selected by the Board of Trustees of PREIT and approved by
Employee or in the event the Board of Trustees and Employee are unable to agree
on a single referee, then by a panel of three (3) independent referees licensed
to practice medicine, one of whom shall be selected by the Board of Trustees,
one by Employee and the third by the other two (2) referees.
7.3 Clarification
-------------
Employee shall not be entitled to the benefits of Sections 7.1
and 7.2 hereof if he should become disabled after his employment has been
terminated pursuant to the provisions of Section 6.1 hereof.
8. Additional Benefits
-------------------
8.1 Employee shall be entitled to receive benefits equivalent
to those presently provided to him in the course of his employment with PREIT.
8.2 Employee shall be entitled to paid vacation in accordance
with past practice in this regard.
9. Trade Secrets; Confidential Information
---------------------------------------
In the event that, during the course of his employment
hereunder, Employee shall acquire trade secrets or other
-5-
<PAGE>
information confidential to the business of PREIT, Employee agrees not to
disclose any such information, during and after his term of employment, to any
person, firm, corporation or other entity for any reason whatsoever.
10. Restrictive Covenant
--------------------
During the term set forth in Section 3 of this Agreement,
unless PREIT shall fail to comply with its obligations hereunder, Employee shall
not directly or indirectly, engage in rendering of service to act on behalf of,
be connected with, furnish consulting services to, or be employed by any real
estate investment trust (other than PREIT or an affiliate or subsidiary of
PREIT) or any person, corporation or other entity within a three hundred (300)
mile radius of Wyncote, Pennsylvania, which invests, directly or through
partnerships and joint ventures, in shopping centers, apartment complexes,
office buildings and industrial and warehouse facilities.
11. No Mitigation
-------------
11.1 In the event of the failure of PREIT to comply with the
terms hereof, or in the event of the termination of Employee's employment by
PREIT other than for good cause as herein defined, the Employee shall not be
required to seek other employment in order to mitigate the amounts recoverable
for such action; nor shall PREIT be entitled to set off against such amounts any
sums earned by Employee in other employment.
-6-
<PAGE>
12. Notices
-------
Any notice required or permitted under this Agreement shall be
in writing and shall be deemed to have been given when delivered personally or
sent by registered or certified mail, postage prepaid, addressed as follows:
If to Employee:
Jeffrey Linn
552 Bader Road
Jenkintown, Pennsylvania 19046
If to PREIT:
Pennsylvania Real Estate Investment Trust
Cedarbrook Hill III
Wyncote, Pennsylvania 19095
Attention: Sylvan M. Cohen, President
The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by a similar
notice to be effective ten (10) days after such change designation is supplied.
13. Binding Effect
--------------
This Agreement and all of the terms hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successors, administrators and assigns.
14. Location of Employment
----------------------
Employee's place of employment shall remain in Philadelphia or
in Pennsylvania within a ten (10) mile radius of Philadelphia.
-7-
<PAGE>
15. Severability
------------
If any term or provision of this Agreement is held to be
invalid or unenforceable for any reason, such invalidity or unenforceability
shall not affect any other term or provision hereof, and this Agreement shall
continue in full force and effect as if such invalid or unenforceable term or
provision (to the extent of the invalidity or unenforceability) had not been
contained herein.
16. Headings
--------
The section headings in this Agreement are for reference
purposes only and shall not define, limit or affect the meaning or
interpretation of this Agreement.
17. Applicable Law
---------------
This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Pennsylvania.
18. Entire Agreement
----------------
This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior negotiations, understandings and agreements, if any, with
-8-
<PAGE>
respect to such subject matter and there are no agreements other than those set
forth, provided for, or referred to herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By:/s/Sylvan M. Cohen
-----------------------------------------
, Trustee
/s/Morris A. Kravitz
-----------------------------------------
, Trustee
EMPLOYEE
/s/Jeffrey Linn
--------------------------------------------
Jeffrey Linn
-9-
<PAGE>
<TABLE>
<CAPTION>
Financial highlights
Years Ended August 31
(Thousands of dollars except per share results) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results
Income Before Gains on Sales of
Interests in Real Estate $ 11,106 $ 8,325 $ 10,125 $ 8,677 $ 8,750
Gains on Sales of Interests in Real Estate 119 12,362 3,875 -- 1,600
Net Income 11,225 20,687 14,000 8,677 10,350
Distributions Paid to Beneficiaries 16,302 16,121 15,386 14,860(1) 13,997
- -------------------------------------------------------------------------------------------------------------------
Per share results
Income Before Gains on Sales
of Interests in Real Estate $ 1.28 $ .96 $ 1.17 $ 1.01 $ 1.07
Gains on Sales of Interests in Real Estate .01 1.43 .45 -- .20
Net Income 1.29 2.39 1.62 1.01 1.27
Distributions Paid 1.88 1.86 1.78 1.72(1) 1.72
Distribution Rate at Fiscal Year End 1.88 1.88 1.80 1.72 1.72
- -------------------------------------------------------------------------------------------------------------------
Balance sheet data
Investments in Real Estate, at Cost $195,929 $154,281 $112,262 $ 64,612 $ 62,075
Total Assets 181,336 142,495 107,853 66,250 57,680
Total Mortgage and Bank Loans Payable 122,518 80,155 51,929 10,772 8,769
- -------------------------------------------------------------------------------------------------------------------
Funds from operations(2)
Years Ended August 31
(Thousands of dollars) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
Net income $ 11,225 $ 20,687 $ 14,000 $ 8,677 $ 10,350
Less: Gains on sales of interests in real estate 119 12,362 3,875 -- 1,600
- -------------------------------------------------------------------------------------------------------------------
11,106 8,325 10,125 8,677 8,750
Plus:
Depreciation and amortization:
Wholly owned and consolidated
partnerships(3) 5,044 3.322 2,685 2,101 1,977
Partnerships and joint ventures 3,214 3,229 4,119 3,960 3,766
Provision for losses(4) -- 1,795 320 320 320
- -------------------------------------------------------------------------------------------------------------------
Funds from operations $ 19,364 $ 16,671 $ 17,249 $ 15,058 $ 14,813
===================================================================================================================
</TABLE>
<PAGE>
Funds from operations ($ in millions)
BAR GRAPH APPEARED IN ANNUAL REPORT. THE VALUES APPEAR BELOW:
-------------------------------------------------------------
Fiscal Years
----------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
12.7 13.2 14.4 15.4 15.3 14.8 15.1 17.2 16.7 19.4
Dividend rate per share at fiscal year end
adjusted for share splits (in dollars)
BAR GRAPH APPEARED IN ANNUAL REPORT. THE VALUES APPEAR BELOW:
-------------------------------------------------------------
Fiscal Years
----------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.40 1.52 1.60 1.68 1.72 1.72 1.72 1.80 1.88 1.88
(1) In 1992, distributions paid to beneficiaries and distributions paid per
share have been adjusted to reflect the annualized change from a semi-annual
distribution to a quarterly distribution (Actual amount paid during the
fiscal year was $11,145,000 or $1.29 per share).
(2) Defined as net income excluding gains or losses from sales of property, plus
depreciation and amortization and other non-cash charges and similar
adjustments for unconsolidated joint ventures. This does not represent cash
generated from operations as defined by Generally Accepted Accounting
Principles (GAAP) and is not necessarily indicative of cash available to
fund cash needs.
(3) Net of minority interest share of $241,000 and $219,000 in 1995 and 1994,
respectively.
(4) See Note 1 to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
At August 31
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in Real Estate, At Cost (Notes 1, 3 and 7):
Apartment buildings $ 154,907,000 $ 116,918,000
Industrial properties 5,078,000 5,078,000
Shopping centers and retail stores 32,354,000 32,285,000
- -------------------------------------------------------------------------------------------------------------------
Total investments in real estate 192,339,000 154,281,000
Less accumulated depreciation 38,828,000 33,735,000
- -------------------------------------------------------------------------------------------------------------------
153,511,000 120,546,000
Land held for sale 3,590,000 --
Investments in Partnerships and Joint Ventures, At Equity
(Notes 1 and 2) 17,439,000 15,225,000
Advances to Partnerships and Joint Ventures 2,414,000 2,418,000
Notes Receivable 1,649,000 1,649,000
- -------------------------------------------------------------------------------------------------------------------
178,603,000 139,838,000
Less allowance for possible losses (Note 1) 2,775,000 3,235,000
- -------------------------------------------------------------------------------------------------------------------
175,828,000 136,603,000
Other Assets:
Cash and cash equivalents 1,098,000 2,152,000
Rents and sundry receivables 346,000 328,000
Deferred costs, prepaid real estate taxes and expenses, net 4,064,000 3,412,000
- -------------------------------------------------------------------------------------------------------------------
$ 181,336,000 $ 142,495,000
===================================================================================================================
Liabilities and Beneficiaries' Equity
Mortgage Notes Payable (Note 3) $ 78,198,000 $ 44,019,000
Bank Loans Payable (Note 3) 44,320,000 36,136,000
Tenants' Deposits and Deferred Rents 1,352,000 1,214,000
Accrued Pension and Retirement Benefits (Notes 1 and 4) 1,213,000 1,084,000
Accrued Expenses and Other Liabilities 3,954,000 2,886,000
- -------------------------------------------------------------------------------------------------------------------
129,037,000 85,339,000
- -------------------------------------------------------------------------------------------------------------------
Minority Interest in Consolidated Partnership (Note 1) 528,000 408,000
- -------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 6)
Beneficiaries' Equity
($5.97 and $6.55 per share at August 31, 1995 and 1994)
(Notes 1 and 5):
Shares of Beneficial Interest, $1 Par; Authorized, Unlimited;
Issued and Outstanding 8,676,098 Shares in 1995 and 8,669,848
Shares in 1994 8,676,000 8,670,000
Capital Contributed in Excess of Par 53,133,000 53,039,000
Distributions in Excess of Net Income (10,038,000) (4,961,000)
- -------------------------------------------------------------------------------------------------------------------
51,771,000 56,748,000
- -------------------------------------------------------------------------------------------------------------------
181,336,000 $ 142,495,000
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the years ended August 31
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C>
Gross revenues from real estate (Note 6) $ 36,978,000 $ 27,640,000 $ 21,083,000
Interest and other income 176,000 274,000 542,000
- -------------------------------------------------------------------------------------------------------------------
37,154,000 27,914,000 21,625,000
- -------------------------------------------------------------------------------------------------------------------
Expenses
Property operating expenses 14,859,000 11,758,000 8,959,000
Depreciation and amortization (Note 1) 5,286,000 3,541,000 2,784,000
General and administrative expenses (Notes 1 and 4) 3,091,000 2,528,000 1,873,000
Mortgage and bank loan interest 8,908,000 4,162,000 2,222,000
Provisions for losses on investments (Note 1) -- 1,795,000 320,000
- -------------------------------------------------------------------------------------------------------------------
32,144,000 23,784,000 16,158,000
- -------------------------------------------------------------------------------------------------------------------
Income before minority interest, equity in income of
partnerships and joint ventures and gains on sales
of interests in real estate 5,010,000 4,130,000 5,467,000
Minority interest (285,000) (221,000) (92,000)
Equity in income of partnerships and joint ventures
(Notes 1 and 2) 6,381,000 4,416,000 4,750,000
Gains on sales of interests in real estate 119,000 12,362,000 3,875,000
- -------------------------------------------------------------------------------------------------------------------
Net income $ 11,225,000 $ 20,687,000 $ 14,000,000
===================================================================================================================
Net Income Per Share (Note 1) $ 1.29 $ 2.39 $ 1.62
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Consolidated Statements of
Beneficiaries' Equity
<TABLE>
<CAPTION>
For the three years ended August 31, 1995
Shares Capital
of beneficial contributed Distributions
interest in excess in excess
$1 par of par of net income
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, September 1, 1992 $ 8,640,000 $ 52,595,000 $ (8,141,000)
Net income -- -- 14,000,000
Shares issued upon exercise of options (Note 5) 9,000 135,000 --
Distributions paid to beneficiaries ($1.78 per share) -- -- (15,386,000)
- -------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1993 8,649,000 52,730,000 (9,527,000)
Net income -- -- 20,687,000
Shares issued upon exercise of options (Note 5) 21,000 309,000 --
Distributions paid to beneficiaries ($1.86 per share) -- -- (16,121,000)
- -------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1994 8,670,000 53,039,000 (4,961,000)
Net income 11,225,000
Shares issued upon exercise of options (Note 5) 6000 94,000
Distributions paid to beneficiaries ($1.88 per share) (16,302,000)
- -------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1995 $ 8,676,000 $ 53,133,000 $ (10,038,000)
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended August 31
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income $ 11,225,000 $ 20,687,000 $ 14,000,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in income of consolidated partnership 285,000 221,000 92,000
Depreciation and amortization 5,286,000 3,541,000 2,784,000
Gains on sales of interests in real estate (119,000) (12,362,000) (3,875,000)
(Decrease) increase in allowance for possible losses (460,000) 1,795,000 320,000
Change in assets and liabilities:
Rents and sundry receivables (18,000) 161,000 (102,000)
Deferred costs, prepaid real estate taxes
and expenses, net. (837,000) 536,000 (1,544,000)
Accrued pension and retirement benefits 130,000 4,000 (3,000)
Accrued expenses and other liabilities 1,042,000 1,028,000 915,000
Tenants' deposits and deferred rents 138,000 298,000 447,000
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,672,000 15,909,000 13,034,000
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Investments in wholly owned real estate (38,058,000) (37,144,000) (48,333,000)
Investments in partnerships and joint ventures (983,000) (471,000) (7,416,000)
Cash proceeds from sales of real estate investments -- 14,540,000 5,175,000
Increase in advances to partnerships and joint ventures (749,000) (429,000) (414,000)
Cash distributions from partnerships and joint ventures
(less than) in excess of equity in income (127,000) 2,529,000 2,463,000
Net cash (distributions to) contributions from
minority partners (165,000) (144,000) 240,000
Decrease (increase) in notes receivable -- 6,000 (363,000)
Decrease in U.S. Treasury obligations -- 2,589,000 9,965,000
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (40,082,000) (18,524,000) (38,683,000)
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Principal installments on mortgage notes payable (821,000) (576,000) (385,000)
Increase in mortgage notes payable 35,000,000 -- 27,240,000
Prepayment of mortgage notes payable -- (2,164,000) --
Proceeds from bank loan payable 39,379,000 36,136,000 14,300,000
Increase in bank loan payable (35,000,000) (14,300,000) --
Shares of beneficial interest issued 100,000 330,000 144,000
Distributions paid to beneficiaries (16,302,000) (16,121,000) (15,386,000)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,356,000 3,305,000 25,913,000
- -------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (1,054,000) 690,000 264,000
Cash and cash equivalents, beginning of year 2,152,000 1,462,000 1,198,000
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,098,000 $ 2,152,000 $ 1,462,000
===================================================================================================================
Supplemental disclosure of non-cash investing activities:
Net assets acquired $ 3,590,000 -- --
Liabilities assumed primarily bank loans payable (3,804,000) -- --
- -------------------------------------------------------------------------------------------------------------------
$ (214,000) -- --
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Notes to Consolidated Financial Statements
Years Ended August 31, 1995, 1994 and 1993
1. Summary of significant accounting policies
Consolidation
The consolidated financial statements of the Trust include the accounts of
twelve wholly owned subsidiaries, two are Delaware corporations, one is a
Nebraska corporation, one is a Virginia corporation and eight are Florida
corporations. One partnership in which the Trust is a 65% general partner, and
has control as provided in the partnership agreement, has been consolidated for
financial statement presentation. The minority partne's interest is 35%. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Partnership and joint venture investments
In accordance with the American Institute of Certified Public Accountant'
Statement of Position 78-9, "Accounting for Investments in Real Estate
Ventures," the Trust accounts for its investment in partnerships and joint
ventures which it does not control using the equity method of accounting. These
investments, which represent 25-to-87.5% non-controlling ownership interests,
are recorded initially at the Trus's cost and subsequently adjusted for the
Trust's net equity in income and cash contributions and distributions.
Statements of cash flows
The Trust considers all highly liquid short-term investments with an original
maturity of 3 months or less to be cash equivalents. Cash paid for interest was
$8,619,000, $3,948,000, and $1,985,000 for the years ended August 31,1995, 1994
and 1993, respectively.
Depreciation
The Trust, for financial reporting purposes, depreciates its buildings,
equipment and leasehold improvements over their estimated useful lives of 10 to
45 years, using the straight-line method of depreciation. For Federal income tax
purposes, the Trust currently uses the straight-line method of depreciation and
the useful lives prescribed by the Internal Revenue Code.
It is the Trust's policy to capitalize interest and real estate taxes related to
construction in progress and to depreciate these costs over the life of the
related assets in order to more properly match revenues and expenses. These
items are capitalized for income tax purposes and amortized or depreciated in
accordance with the provisions of the Internal Revenue Code.
Allowance for possible losses
Management reviews the net realizable value of the Trust's portfolio
periodically to determine whether an allowance for possible losses is necessary.
The carrying value of the Trust's investments is evaluated on an individual
investment basis, and to the extent management's estimate of the net realizable
value of each investment is less than its carrying value, a provision for
possible losses is established. During 1994, a provision of approximately
$1,795,000 was recorded for certain investments in the Trus's portfolio, based
upon independent appraisals and managemen's estimates of the potential income
or loss associated with each property to realize the adjusted carrying value.
<PAGE>
Benefit plans
The Trust has provided pension benefits since 1970 for all employees, excluding
the Chairman and CEO for whom retirement benefits are provided in an employment
contract. The Trust's policy is to fund such accrued benefit costs. Refer to
footnote 4 for further discussion of current year changes to benefit plans.
With regard to the Chairman and CEO's employment contract, no provision was
required for fiscal years ended August 31, 1995, 1994 and 1993, respectively.
Income taxes
The Trust has elected to qualify as a real estate investment trust under
Sections 856-860 of the Internal Revenue Code and intends to remain so
qualified. Accordingly, no provision has been made for Federal income taxes on
income resulting from those sales of real estate investments which have or will
be distributed to shareholders within the prescribed time limits. However, taxes
are provided for those gains which are not anticipated to be distributed to
shareholders.
The Trust is subject to a Federal excise tax computed on a calendar year. The
excise tax equals 4% of the excess, if any, of 85% of the Trust's ordinary
income plus 95% of the Trust's capital gain net income for the calendar year
over cash distributions during the calendar year, as defined. The Trust has in
the past distributed a substantial portion of its taxable income in the
subsequent fiscal year and may also follow this policy in the future.
A provision for excise tax was made in 1994 in the amount of $400,000. No
provision for excise tax was made for fiscal years 1995 and 1993 as no tax was
due.
The tax status of distributions paid to beneficiaries was composed of the
following for the calendar years ended December 31, 1994 and 1993.
1994 1993
Ordinary income $ .65 $ .96
Capital gains 1.23 .84
-------------------
$1.88 $ 1.80
===================
The tax status of distributions paid to beneficiaries for the calendar year
ending December 31, 1995 will be determined upon preparation of the Trus's
federal income tax return. Management expects such distributions to consist of
ordinary income.
Net income per share
Earnings per share are based on the weighted average number of shares
outstanding which were 8,670,810 in 1995, 8,663,646 in 1994 and 8,643,223 in
1993.
Reclassifications
Certain accounts in the 1993 financial statements have been reclassi-fied to
conform with the 1994 presentation.
<PAGE>
2. Investments in partnerships and joint ventures The following presents
summarized financial information for the Trust's investments in 27 and 28
partnerships and joint ventures at August 31, 1995 and 1994 respectively, and
the Trust's equity in income for the years ended August 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
At August 31
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in Real Estate at Cost:
Apartment buildings $103,683,000 $ 102,395,000
Industrial property 1,250,000 1,237,000
Shopping centers and retail stores 132,597,000 122,248,000
Land 4,445,000 7,051,000
-----------------------------
Total investments in real estate 241,975,000 232,931,000
Less accumulated depreciation 69,918,000 63,639,000
-----------------------------
172,057,000 169,292,000
Cash and cash equivalents 7,303,000 3,566,000
Other assets 4,544,000 5,454,000
-----------------------------
Total assets 183,904,000 178,312,000
-----------------------------
Liabilities and Partners' Equity
Mortgage notes payable 136,004,000 131,002,000
Bank loans payable 8,277,000 11,928,000
Due to the Trust 2,414,000 2,418,000
Other liabilities 4,571,000 4,729,00
-----------------------------
Total liabilities 151,266,000 150,077,000
-----------------------------
Total partners' equity 32,638,000 28,235,000
Partners' share (15,199,000) (13,010,000)
-----------------------------
Investment in partnerships and joint ventures $ 17,439,000 $ 15,225,000
=============================
</TABLE>
<TABLE>
<CAPTION>
For the years ended August 31
1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenues from real estate $ 52,339,000 $ 51,088,000 $ 55,700,000
-----------------------------------------------
Expenses:
Property operating expenses 20,477,000 22,601,000 21,713,000
Mortgage and bank loan interest 12,463,000 12,668,000 16,379,000
Depreciation and amortization 6,502,000 6,406,000 8,179,000
-----------------------------------------------
39,442,000 41,675,000 46,271,000
-----------------------------------------------
12,897,000 9,413,000 9,429,000
Partners' share (6,516,000) (4,997,000) (4,679,000)
-----------------------------------------------
Equity in income of partnerships and
joint ventures $ 6,381,000 $ 4,416,000 $ 4,750,000
===============================================
</TABLE>
Mortgage notes payable which are secured by the related properties, are due in
installments over various terms extending to the year 2020 with interest rates
ranging from 7.5% to 10.5% with an average interest rate of 8.89%. Principal
payments are due as follows:
Fiscal year ending
1996 $ 8,474,000
1997 3,213,000
1998 5,571,000
1999 35,776,000
2000 28,831,000
2001 and thereafter 54,139,000
------------
$136,004,000
============
<PAGE>
The liability under each mortgage note is limited to the particular property
except for two loans in the amount of $28,761,000 which are guaranteed by the
partners of the respective partnerships, including the Trust. In addition, a
bank loan in the amount of $1,306,000 has been guaranteed by the partners of the
partnership including the Trust.
The Trust's investments in certain partnerships and joint ventures reflect cash
distributions in excess of the Trus's net investments totaling $6,352,000 and
$6,270,000 at August 31, 1995 and 1994, respectively.The Trust is generally
entitled to a priority return on these investments.
The Trust has a 50% partnership interest in Lehigh Valley Mall Associates which
is included in the amounts above. Summarized financial information for this
investment which is accounted for by the equity method follows:
For the years ended
8/31/95 8/31/94 8/31/93
- --------------------------------------------------------------------------------
Total assets $20,858,000 $19,894,000 $20,711,000
Revenues 13,667,000 13,391,000 13,182,000
Net income 7,548,000 6,521,000 6,292,000
Equity in income of partnership 3,774,000 3,260,000 3,146,000
3. Mortgage notes and bank loans payable
Mortgage notes payable which are secured by the related properties are due in
installments over various terms extending to the year 2008 with interest at
rates ranging from 6.79% to 9.50% with an average interest rate of 8.2%.
Principal payments are due as follows:
Fiscal Year ending
1996 $ 1,157,000
1997 1,256,000
1998 1,358,000
1999 1,455,000
2000 34,535,000
2001 and thereafter 38,437,000
------------
$ 78,198,000
============
In March, 1995 the Trust modified its existing $110 million credit facility by
obtaining a $35 million five-year term loan at a fixed rate of interest of 8.62%
for the first three years. The Trust has the option of accepting a fixed or
floating rate for years four and five.
As of August 31, 1995, the Trust had available $75,000,000 of unsecured
revolving line of credit of which $51,308,000 had been borrowed ($44,320,000
directly by the Trust and $6,988,000 through partnerships and joint ventures).
As of August 31, 1994, the Trust had available $55,000,000 of unsecured
revolving lines of credit of which $46,655,000 had been borrowed ($36,136,000
directly by the Trust and $10,519,000 through partnerships and joint ventures).
Under the line of credit, the Trust must maintain minimum net worth and net
operating income levels, as defined in the loan document. The line of credit is
due to mature on April 30, 1997 and bears interest at LIBOR plus 185 basis
points or the prime rate. The weighted average interest rates based on amounts
borrowed were 7.98% and 6.5% for the fiscal years ended August 31, 1995 and
1994, respectively.
<PAGE>
During 1995, the Trust purchased interest rate protection at a cost of $250,000
on $15,000,000 of outstanding debt at a 30-day LIBOR rate of 7.5% plus 185 basis
points limiting the maximum rate to 9.35% for three years. The Trust also
limited its exposure to increases in LIBOR on $20,000,000 of its floating rate
debt by entering into a swap agreement which fixes a rate of 6.12% verses 30-day
LIBOR.
The Trust is exposed to credit loss in the event of non-performance by
counterparties to the interest rate protection agreements; however, the Trust
does not anticipate non-performance by the counterparties. At August 31, 1995,
the Trust was in compliance with all debt covenants.
The carrying values of the mortgage notes and bank loans payable at August 31,
1995 and 1994 were approximately equal to their respective fair values, as
determined by using year-end interest rates and market conditions. At August 31,
1995, the fair values of the interest rate protection and swap agreements
referred to above were approximately $184,000 and $(230,000), respectively.
4. Benefit Plans
Prior to February 28, 1995, the Trust maintained a noncontributory, defined
benefit pension plan for all eligible employees. Benefits under the plan were
generally based on years of service and final pay. Pension costs were accrued
and funded annually from entry date in the plan to projected retirement date and
included service costs for benefits earned during the period, interest costs on
the projected benefit obligation less the return on plan assets. Pension cost
was $94,000 and $88,000 for the years ended August 31, 1994 and 1993
respectively. The actual return on plan assets was ($30,000) for the year ended
August 31, 1994. The funding status of the pension plan at August 31, 1994 was:
Actuarial present value of benefit obligations:
Vested benefit obligation $1,675,000
Accumulated benefit obligation 1,680,000
Projected benefit obligation 2,067,000
Plan assets at market value 1,567,000
Key assumptions used in these determinations were:
Discount rate 7.0%
Rate of increase in compensation levels 5.0%
Expected long-term rate of return 8.5%
<PAGE>
Effective February 28, 1995 the Trust funded $169,000 and the pension plan was
terminated. All participants were paid their accumulated benefit obligation and
the Trust received a favorable determination letter from the I.R.S.
During 1995 the Trust adopted a 401(k) Plan in which substantially all of the
officers and employees are eligible to participate. The Plan permits eligible
participants, as defined in the Plan agreement, to defer up to 15% of their
compensation, and the Trust, at its discretion, may match a percentage of the
employee' contributions. The employees' contributions are fully vested and
contributions from the Trust vest in accordance with an employee's years of
service as defined in the plan agreement.
During 1995, the Trust also adopted a Supplemental Retirement Plan (the
"Supplemental Plan") covering certain senior management employees. The
Supplemental Plan provides eligible employees through normal retirement date, as
defined in the plan agreement, a benefit amount similar to that which would have
been received under the provisions of the terminated pension plan referred to
above. As of August 31, 1995, the Trust has recorded $168,000 of contributions
due under the provisions of this plan.
5. Stock Option Plans
In December 1990, the shareholders approved an incentive stock option plan for
key employees and a stock option plan for non-employee trustees, covering
200,000 and 100,000 shares of beneficial interest, respectively. Under the terms
of the plans, the purchase price of shares subject to each option granted will
be at least equal to the fair market value of the shares on the date of grant.
Options under the incentive stock option plan may be exercised as determined by
the Trust, but in no event later than 10 years from the date of grant. In
December 1993, the Board of Trustees amended the incentive stock option plan for
key employees, to increase the number of shares subject to option to 400,000
shares, to change the name of the plan to "1990 Incentive and Non Qualifying
Stock Option Plan" and to expand some provisions of the plan. The stock option
plan for non-employee trustees provides for annual grants of 1,000 options
(becoming exercisable in four equal installments). The options expire 10 years
after the date of grant.
In December 1993, the Board of Trustees adopted a non-qualifying stock option
plan covering 100,000 shares. The Trust granted options on February 1, 1994
having a term of 10 years and subject to the other terms and conditions set
forth in the plan. All 100,000 shares are outstanding at 8/31/95.
Changes in options outstanding are as follows:
Plan For Plan For
Key Non-Employee
Employees Trustees
Options outstanding at 8/31/93 89,500 23,250
Options granted 85,000 6,000
Options exercised (20,625) 0
---------------------------
Options outstanding at 8/31/94 153,875 29,250
Options granted 97,000 6,000
Options exercised (6,250) 0
---------------------------
Options outstanding at 8/31/95 244,625 35,250
===========================
<PAGE>
As of August 31, 1995, options for 282,000 shares had been granted pursuant to
the incentive stock option plan of which 244,625 remain outstanding at $16.00 to
$24.625 per share and options for 36,000 shares had been granted, pursuant to
the stock option plan for non-employee trustees of which 35,250 shares remain
outstanding at $15.75 to $25.375 per share.
6. Commitments and Contingencies
Environmental matters have arisen at certain properties in which the Trust has
an interest. The Trust retained environmental consultants in order to
investigate these matters. At one property, in which the Trust has a 50%
ownership interest, groundwater contamination exists which the Trust alleges was
caused by the former tenant. Estimates to remediate this property, which are
subject to the length of monitoring and the extent of remediation required,
range in total from $400,000 to $1,600,000. In addition, above normal radon
levels have been detected at two wholly owned properties. The estimated cost to
remediate these properties is approximately $380,000, which costs were received
as a credit from the sellers as part of the initial acquisitions.
The Trust has recorded its share of these liabilities totaling $688,000 related
to the consultants' evaluation of these matters which, in certain instances, are
subject to applicable state approvals of the remediation plans. In Management's
opinion, no material incremental cost will be incurred on these properties. The
Trust will pursue recovery of remediation costs from all of the responsible
parties, including its tenants and partners.
The Trust has been named as a defendant in a suit brought by persons and their
affiliates who are partners of the Trust in three partnerships. The Trust is
vigorously defending the suit and has denied the plaintiffs' allegations. The
Trust also believes that it has viable claims against certain of the same
partners (or their affiliates) which it is asserting. As the pleadings are not
yet closed and discovery is still continuing, it is not possible to judge the
ultimate outcome of these suits at this time. However, Management does not
believe that resolution of these matters will have a material effect on the
Trust's financial condition or results of operations.
The Trust has committed up to $1,900,000 of cash contributions to the
partnership which owns Laurel Mall for costs related to the recent expansion.
The actual amount to be funded will be determined by the amount of permanent
financing obtained by the partership.
Future minimum rentals receivable under non-cancelable operating leases at
August 31, 1995 are as follows:
1996 $ 4,634,000
1997 4,548,000
1998 4,256,000
1999 3,632,000
2000 3,474,000
Thereafter 18,646,000
-----------
$39,190,000
===========
<PAGE>
7. Acquisitions
The Trust acquired one property during the year ended August 31, 1995 for
approximately $34,000,000 (including improvements) which was accounted for by
the purchase method. The results of the property were included in the Trust's
financial statements from the acquisition date. The pro forma financial
information may not be indicative of results that would have been reported if
the acquisition had occurred on September 1, 1994. Also, amounts presented below
may not be indicative of future results.
Year ended August 31, 1995 (unaudited)
Pro forma total revenues $37,815,000
Pro forma net income 11,103,000
Pro forma earnings per share 1.28
The Trust acquired two properties during the year ended August 31, 1994 for
approximately $36,100,000 which were accounted for by the purchase method. The
results of each property were included from the respective acquisition date. In
addition, in settlement of a partner's obligation to the Trust, the Trust
acquired a partner's 50% interest in the partnership owning a shopping center in
which the Trust previously held a 50% partnership interest. The pro forma
financial information may not be indicative of results that would have been
reported if the acquisitions had occurred on September 1, 1993. Also, amounts
presented below may not be indicative of future results.
Year ended August 31, 1994 (unaudited)
Pro forma total revenues $32,136,000
Pro forma net income $20,744,000
Pro forma earnings per share $ 2.39
<PAGE>
8. Summary of quarterly results (unaudited)
The following presents a summary of the unaudited quarterly financial
information for the years ended August 31, 1995 and 1994 (thousands of dollars,
except per share data).
<TABLE>
<CAPTION>
For the year ended August 31, 1995
1st 2nd 3rd 4th Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 8,555 $ 9,548 $ 9,495 $ 9,556 $ 37,154
Income before gain on sale of interest in real estate 3,345 2,713 2,569 2,479 11,106
Gain on sale of interest in real estate -- 119 -- -- 119
Net income 3,345 2,832 2,569 2,479 11,225
Net income per share:
Income before gain on sale of interest in real estate $ .39 $ .32 $ .30 $ .27 $ 1.28
Gain on sale of interest in real estate -- .01 -- -- .01
---------------------------------------------------
Total $ .39 $ .33 $ .30 $ .27 $ 1.29
===================================================
</TABLE>
<TABLE>
<CAPTION>
For the year ended August 31, 1994
1st 2nd 3rd 4th Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 6,480 $ 6,525 $ 7,263 $ 7,646 $ 27,914
Income before gains on sales of interests in real estate 2,957 2,612 2,342 414 8,325
Gains on sales of interests in real estate 12,223 106 -- 33 12,362
Net income 15,180 2,718 2,342 447 20,687
Net income per share:
Income before gain on sale of interest in real estate $ .34 $ .30 $ .27 $ .05 $ .96
Gains on sale of interest in real estate 1.41 .01 -- .01 1.43
---------------------------------------------------
Total $ 1.75 $ .31 $ .27 $ .06 $ 2.39
===================================================
</TABLE>
<PAGE>
Report of Independent Public Accountants
To the Shareholders and Trustees of Pennsylvania Real Estate
Investment Trust:
We have audited the accompanying consolidated balance sheets of Pennsylvania
Real Estate Investment Trust (a Pennsylvania Trust) and Subsidiaries as of
August 31, 1995 and 1994, and the related consolidated statements of income,
beneficiaries' equity and cash flows for each of the three years in the period
ended August 31, 1995. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the 1995 and 1994
financial statements of Lehigh Valley Mall Associates, a partnership in which
the Trust has a 50 percent interest which is reflected in the accompanying
financial statements using the equity method of accounting. The equity in net
income of Lehigh Valley Mall Associates represents 32 percent and 16 percent of
net income, in 1995 and 1994, respectively. The financial statements of Lehigh
Valley Mall Associates were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to the amounts included
for Lehigh Valley Mall Associates, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Pennsylvania Real Estate Investment Trust and
Subsidiaries as of August 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
1995 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Philadelphia, PA
October 19, 1995
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On August 31, 1995 liquidity was provided by cash and cash equivalents of $4.9
million, including the Trust's proportionate share of cash held by partnerships
and joint ventures and by the unused portion of the Trust's line of credit in
the amount of $23.7 million.
Management does not foresee a shortfall between its available resources and
projected uses of funds. However, events such as acquisitions of properties,
reduction in the Trust's lines of credit, failure of the Trust's partners to
make capital contributions when due could result in the need to explore
additional sources of funds. These sources could include refinancing of existing
mortgage debt, sale of assets, securing loans on the 12 properties presently
unencumbered by debt, other securitized borrowings or the sale of shares of
beneficial interest.
Lines of credit
During 1995 the Trust obtained a $110 million credit facility from four
commercial banks. Included in the facility is a $75 million unsecured revolving
credit facility which expires in April 1997, with provisions for annual
extensions. The variable interest rate is LIBOR plus 185 basis points or the
prime rate. At August 31, 1995 the rate in effect was 7.70%, and the outstanding
amount was $51.3 million. Of the $51.3 million in use on that date, $7 million
was borrowed by partnerships in which the Trust or its wholly-owned subsidiaries
have an interest. The Trust's pro rata share of that amount was $4.8 million. At
August 31, 1995, $23.7 million was available under the line of credit.
In April 1995, the Trust converted a portion of the credit facility to a $35
million term loan which matures in five years and has an interest rate of 8.62%
for three years with the rate in the fourth and fifth years to be reset on a
fixed or floating rate at the option of the Trust. The term loan replaced a
floating rate facility priced at 200 basis points over LIBOR. The loan is
secured by mortgages on four properties with release provisions.
In connection with the line of credit and term loan, the Trust has agreed to
certain covenants, including maintaining minimum net worth and net operating
income levels as defined in the loan documents. The Trust has never failed to be
in compliance with those covenants.
Interest rate protection
In order to reduce exposure to variable interest rates, the Trust purchased a
three-year interest rate cap on $15 million at a 30-day LIBOR rate of 7.5%
limiting the maximum rate to 9.35%. In June, 1995 the Trust entered into a
6-year interest rate swap agreement with CoreStates Bank, NA on $20 million
which fixes a rate of 6.12% per annum versus 30-day LIBOR. When combined with
the 1.85% interest rate spread on the Trus's revolving credit agreement, the
Trust has effectively locked in a rate of 7.97%. As a result of these
transactions the Trust has fixed or hedged $35 million of the $51 million
outstanding balances on its revolving credit facilities.
<PAGE>
Contingent liability
Three loans, totalling $30,067 million, are secured by properties in which the
Trust has an interest and are not limited in recourse to the real estate (see
Note 2 of notes to Consolidated Financial Statements). The Trust's contingent
liability for these loans is $12,239 million.
Significant capital events
In November, 1995 the Trust acquired Boca Palms Apartments in Boca Raton,
Florida. The total cost of $34 million includes improvements and renovations
still in progress. The source of the funds was a borrowing through the Trust's
credit facilities. The property contains 522 luxury apartments in a garden
setting.
During the next three years mortgage loans secured by properties owned by six
partnerships in which the Trust or a wholly-owned subsidiary has an interest
mature by their terms. The Trust's proportionate share of these loans which
total $52 million is $22.7 million.
The partnership owning Eagle's Nest Apartments has received a commitment from
the present lender to extend the loan term by five years to mature in 2000 at an
interest rate of 8.235%, reduced from 9.875%. Principal payments will be based
on a 25-year amortization schedule. The Trust's proportionate share of the loan
is $8.075 million.
Two of the partnerships have applied for financing. In one case (Laurel Mall),
while the loan is not due until 1998, the present lender has approved a
modification of the loan to expire in 2003 with amortization payments based on a
20-year schedule. The interest rate will be fixed for the full term at
approximately 7.70%. The present rate is 8.29% on the existing obligation which,
when fully funded, will be $30.6 million. The Trust's proportionate share of the
loan is $11.2 million. The other partnership (Windsong Apartments) has applied
for a loan of $4.0 million to refinance the present balance of $3.6 million. The
excess proceeds will be used for property improvements and closing expenses. The
Trust's proportionate share of the loan is $1.4 million.
One partnership (Forestville Shopping Center) in which the Trust has a 75%
interest has been notified that the lender is exercising its right to call the
loan for repayment in March, 1996. The Trust's proportionate share of the loan
is $1.4 million. The present interest rate is 9.75%.
The Trust's proportionate share of loans on two other properties will be
approximately $800,000 upon maturity in 1998. Management has not yet addressed
refinancing these obligations.
<PAGE>
Lehigh Valley Mall will be renovated at an estimated cost of $5.2 million, the
Trus's share of which is $2.6 million. It is expected that the property will be
refinanced in an amount sufficient to repay the existing debt of approximately
$22 million, the cost of the renovations and provide excess capital which will
be distributed to the owners, the Trust's share of which will be approximately
$15 million. The interest rate under discussion is less than 8% for a ten-year
term with principal payments based on a 25-year amortization schedule. The
present rate is 9.07% on the existing obligations.
Following the end of the year, a 30-year fully self amortizing loan was obtained
by a wholly owned subsidiary of the Trust at an average interest rate of 5.9%
secured by a mortgage on Shenandoah Apartments, West Palm Beach Florida. The
funds were used to pay down the Trust's line borrowings which had a rate of
7.70% at August 31, 1995.
Environmental matters
At August 31, 1994 the Trust's reserve for environmental remediation costs was
$597,000. During 1995 $288,000 was charged to the reserve, leaving a balance of
$309,000. In addition the Trust received a credit of $380,000 for environmental
matters in connection with the acquisition of two properties. There can be no
assurance that these amounts will be adequate to cover future environmental
costs.
Competition
The Trust's shopping centers compete with other shopping centers in their trade
areas as well as alternative retail formats, such as catalogues and home
shopping networks. Apartment properties compete for tenants with other
multi-family properties in their markets. Economic factors, such as employment
trends and the level of interest rates, impact shopping center sales as well as
a prospective tenant's choice to or own his/her residence.
Inflation
Inflation can have many effects on the financial performance of the Trust.
Shopping center leases often provide for the payment of rents based on a
percentage of sales which may increase with inflation. Leases may also provide
for tenants to bear all or a portion of operating expenses which may reduce the
impact of such increases on the Trust. Apartment leases are normally for a
one-year term which may allow the Trust to seek increased rents as leases are
renewed or when new tenants are obtained.
<PAGE>
Results of Operations
Fiscal 1995 compared with Fiscal 1994
Net income for the fiscal year ended August 31, 1995 before gains on sales of
interests in real estate, increased to $11,106,000 from $8,325,000 for the
comparable period in 1994. In the 1995 period, the gain on the sale of an
interest in real estate was $119,000 as compared to the 1994 period which
included gains on sales of interests in real estate totaling $12,362,000.
Gross revenues from real estate increased to $36,978,000 from $27,640,000,
primarily due to revenues from Boca Palms Apartments, which was acquired in
November 1994, and increased revenues from Hidden Lakes Apartments, Palms of
Pembroke Apartments and Mandarin Corners Shopping Center which were acquired or
became wholly-owned in the prior fiscal year.
Principally, as a result of the increase in the Trust's wholly-owned portfolio,
operating expenses increased to $14,859,000 from $11,758,000, depreciation and
amortization increased to $5,268,000 from $3,541,000 and mortgage and bank loan
interest increased to $8,908,000 from $4,162,000.
Interest and other income decreased to $176,000 from $274,000 due to maturing of
invested Treasury obligations.
For the fiscal year ended August 31, 1995, $460,000 was charged against the
allowance for possible losses. No additional provision is considered necessary
at this time.
General and administrative expenses increased to $3,091,000 from $2,528,000 due
to the addition of management and administrative personnel and an increase in
pension costs.
Equity in income of partnerships and joint ventures increased to $6,381,000 from
$4,416,000 primarily due to (i) improved performance of apartments and shopping
centers of $940,000 including a lease termination fee received from a shopping
center tenant in the amount of $220,000 and (ii) non-recurring environmental
costs and reserves of $760,000 associated with five properties in fiscal 1994.
Fiscal 1994 Compared With Fiscal 1993
Net income for the fiscal year 1994 increased to $20,687,000 from $14,000,000
for the comparable period in 1993, principally as a result of an increase in
gains on sales of interests in real estate of $8,487,000 and the results of
operations from newly acquired properties. This was offset by an increase in the
provision for losses on investments of $1,475,000.
In the fiscal year 1994, the Trust sold interests in Village Shopping Center,
Gary, Indiana (which was wholly owned); Commons of Chicago Ridge, Chicago Ridge,
Illinois and Sheridan Village Shopping Center, Peoria, Illinois. The gains
totaled $12,362,000. In the comparable period in fiscal 1993, the Trust sold
interests in Park Hills Plaza and Valley Forge Mall and realized gains totaling
$3,875,000.
<PAGE>
Gross revenue from wholly owned and controlled real estate increased to
$27,640,000 from $21,083,000, primarily due to revenue from Cobblestone
Apartments acquired in December 1992, Shenandoah Village Apartments acquired in
August 1993, Emerald Point, Virginia Beach, Virginia, acquired in February 1993,
Hidden Lakes Apartments, Dayton, Ohio, acquired in February 1994, and Mandarin
Corners Shopping Center which became a wholly owned property in February 1994.
Principally, as a result of these acquisitions, operating expenses for wholly
owned and controlled properties increased to $11,758,000 from $8,959,000;
depreciation and amortization increased to $3,541,000 from $2,784,000; and
mortgage and bank loan interest increased to $4,162,000 from $2,222,000.
Provision for losses on investments increased to $1,795,000 from $320,000. (See
Note 1 to consolidated financial statements.)
Interest and other income decreased to $274,000 from $542,000, due to maturing
of invested Treasury obligations, a portion of such proceeds having been
invested in real estate.
General and administrative expenses increased to $2,528,000 from $1,873,000, due
to the addition of a new president for the Trust and an increase in officers'
compensation and professional fees, including legal fees dealing with litigation
with a partner.
Equity in income of partnerships and joint ventures decreased from $4,750,000 to
$4,416,000 primarily due to recognition of environmental costs and reserves
associated with five properties which totaled $760,000 as compared to $50,000 in
the prior year. This was offset by an increase in equity in income from
Countrywood Apartments acquired in August 1993 of $158,000 and the disposition
of the Commons of Chicago Ridge, Chicago Ridge, Illinois in October 1993 which
incurred a loss of $368,000 for fiscal 1993.
Fiscal 1993 Compared With Fiscal 1992
Net income for the fiscal year 1993 increased to $14,000,000 from $8,677,000 for
the comparable period of 1992, principally as a result of gains on sales of
interests in real estate of $3,875,000. The acquisition of Cobblestone
Apartments added $461,000 and improved performance of existing properties such
as Lehigh Valley Mall added $740,000. The properties sold were Valley Forge Mall
and Park Hills Plaza.
Gross revenue from real estate increased to $21,083,000 from $16,064,000,
primarily due to the revenues from Cobblestone Apartments which was acquired in
December, 1992 and Emerald Point acquired in February, 1993. Interest and other
income decreased to $542,000 from $795,000 due to the maturing of invested
Treasury obligations, as well as a reduction in the rates received on such
investments.
Property operating expenses increased to $8,959,000 from $6,607,000 primarily
due to operating expenses on Cobblestone Apartments and Emerald Point.
Mortgage and bank interest expense increased to $2,222,000 from $945,000
primarily due to the acquisition of Cobblestone Apartments and Emerald Point and
interest expense on Camp Hill Plaza Apartments which was financed in February
1992. Interest expense was reduced by $460,000 due to the prepayment of
mortgages in February 1992 on Kenwood Gardens and Lakewood Hills.
Equity in income of partnerships and joint ventures increased by $1,100,000,
primarily due to an increase in gross rental income of $840,000 from Lehigh
Valley Mall and $250,000 from the Commons of Chicago Ridge and a reduction in
the interest rate on borrowings for Sheridan Village Shopping Center which
reduced its mortgage interest expense by $134,000.
The net income from Marylander Apartments declined by $100,000 because of an
increase in vacancies to 12% from 10% and an increase of 10% in operating
expenses.
<PAGE>
Market price and distribution record
The following table shows the high and low sales prices for PREIT shares on the
American Stock Exchange and cash distributions paid for the periods indicated.
Quarters Distributions
Ended High Low Paid
Fiscal Year 1995
- ------------------------------------------------------------------------
November 30 $21.25 $18.50 $ .47
February 28 23.63 19.88 .47
May 31 21.75 20.13 .47
August 31 21.88 21.25 .47
-----
$1.88
=====
Fiscal Year 1994
- ------------------------------------------------------------------------
November 30 $26.00 $23.25 $ .45
February 28 25.38 22.00 .47
May 31 24.75 22.25 .47
August 31 24.63 22.88 .47
-----
$1.86
=====
As of November 3, 1995, there were approximately 1,525 shareholders of the
Trust's shares of beneficial interest.
<PAGE>
Subsidiaries of Registrant Exhibit 21
Trust or its subsidiaries have an interest in 23 partnerships and 5
joint ventures as follows: a 50% partnership interest in 17 partnerships; a 40%
partnership interest in two partnerships; a 60% partnership interest in one
partnership, a 65% partnership interest in one partnership, a 75% partnership
interest in two partnerships and a 87.5% partnership interest in one other
partnership. In addition, Trust has a 50% interest in 3 joint ventures and a 25%
interest in 2 joint ventures.
Trust accounts for its investments in partnerships and joint ventures
which it does not "control" using the equity method of accounting. These
investments, which represent 25% to 87.5% ownership interests, are recorded at
Trust's cost adjusted for Trust's net equity in the income and cash
contributions and distributions.
<TABLE>
<CAPTION>
Names of Partnership State of Organization Percentage Owned
- -------------------- --------------------- ----------------
<S> <C> <C>
Bailey Associates PA 50%
Cambridge Apartments PA 50
Chippewa Associates PA 50
Countrywood Apartments Limited FL 50
Partnership
Eagles Nest Associates FL 50
East Lampeter Associates PA 50
Elizabethtown Associates PA 50
Forestville Plaza Shopping Center MD 75
Associates
Fox Run Apartments PA 50
Fox Run Del Associates DE 50
Gateway Mall Associates FL 60
Laurel Mall Associates PA 40
Lehigh Valley Associates PA 50
New Regency Hilltop Associates VA 65
Palmer Park Mall Venture PA 50
Rancocas Limited Partnership NJ 75
Regency Associates NE 50
Rio Grande Venture PA 50
Turren Associates FL 50
Waynesburg Associates PA 50
Windsong Apartments Limited FL 40
Partnership
VLRC Associates FL 87.5
Will-O-Hill Apartments PA 50
</TABLE>
<PAGE>
Trust owns 100% of twelve corporations which hold partnership interests
as follows: two incorporated in Delaware, one which holds a 50% interest, one
with a 40% interest; eight incorporated in Florida, four which hold a 50%
interest, one a 60% interest and two a 1% interest; one incorporated in Nebraska
which holds a 50% interest and one in Virginia which holds a 65% interest.
<TABLE>
<CAPTION>
Names of Subsidiaries State of Organization Percentage Owned
- --------------------- --------------------- ----------------
<S> <C> <C>
Berdel, Inc. DE 100%
Berfla, Inc. FL 100
Blanding, Inc. FL 100
Burren, Inc. FL 100
Larmes, Inc. DE 100
PR Countrywood Inc. FL 100
PR Shenandoah Inc. FL 100
PR VA Regency Inc. VA 100
PR Windsong Inc. FL 100
RA Inc. NE 100
Stones Inc. FL 100
PR Mandarin, Inc. FL 100
</TABLE>
<PAGE>
Exh. 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated October 19, 1995 included in or incorporated by reference in this
Form 10-K, into the Trust's previously filed: Form S-3 Registration Statement
File No. 33-61115 and Form S-8 Registration Statements File Nos. 33-59771,
33-59773 and 33-59767.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 22, 1995
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No.33-61115, Form S-8 No. 33-59771, Form S-8 No. 33-59773 and
Form S-8 No. 33-59767) of Pennsylvania Real Estate Investment Trust of our
report dated October 20, 1995, relating to the financial statements of Lehigh
Valley Associates which report appears in the Annual Report on Form 10-K for
the fiscal year ended August 31, 1995 of Pennsylvania Real Estate Investment
Trust.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 29, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 1,098,000
<SECURITIES> 0
<RECEIVABLES> 29,502,000
<ALLOWANCES> 2,775,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 192,339,000
<DEPRECIATION> 38,828,000
<TOTAL-ASSETS> 181,336,000
<CURRENT-LIABILITIES> 7,047,000
<BONDS> 122,518,000
<COMMON> 8,676,000
0
0
<OTHER-SE> 43,095,000
<TOTAL-LIABILITY-AND-EQUITY> 181,336,000
<SALES> 37,154,000
<TOTAL-REVENUES> 43,250,000
<CGS> 0
<TOTAL-COSTS> 23,236,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,908,000
<INCOME-PRETAX> 11,106,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,106,000
<DISCONTINUED> 0
<EXTRAORDINARY> 119,000
<CHANGES> 0
<NET-INCOME> 11,225,000
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
</TABLE>
