<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, 1996
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 of organization)
455 Pennsylvania Avenue, Suite 135
Ft. Washington, Pennsylvania 19034
(address of principal executive office) (Zip Code)
Trust's telephone number, including area code: (215) 542-9250
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
------------------- -----------------------------------------
Share of Beneficial Interest, par value American Stock Exchange
$1.00 per share
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Trust (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 Trust 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 [ ].
The aggregate market value, as of November 20, 1996, of the voting stock held
by non-affiliates of the Registrant is $168,499,000. (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, 1996, 8,678,098 Shares of Beneficial Interest of the Trust
were outstanding.
Documents Incorporated by Reference
Portions of the Trust's 1996 Annual Report to Shareholders are incorporated by
reference into Part II of this report. Portions of the Trust's Proxy Statement
for the 1996 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, 1996
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TABLE OF CONTENTS
PART I
Item 1. Business ....................................................... 1
Item 2. Properties...................................................... 11
Item 3. Legal Proceedings............................................... 12
Item 4. Submission of Matters to a Vote of Security Holders............. 12
Item 4A. Executive Officers of the Trust................................ 13
PART II
Item 5. Market for the Trust's Common Equity and Related Stockholder
Matters................................................... 14
Item 6. Selected Financial Data......................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................... 14
Item 8. Financial Statements and Supplementary Data..................... 14
Item 9. Disagreements on Accounting and Financial Disclosure............ 14
PART III .......................................................... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15
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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, 1996 included 19
apartment communities with 7,236 units and 18 shopping centers totaling 4.8
million square feet, located primarily in the mid- Atlantic region from
Pennsylvania to Virginia, and in parts of Florida. Of these properties, 15 are
wholly-owned by the Trust and its subsidiaries (one property is treated by the
Trust as effectively wholly- owned because a wholly-owned subsidiary of 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
22 properties are owned by the Trust and its subsidiaries through partnerships
and joint ventures with equity interests ranging from 25 percent to 87.5
percent. The Trust also owns, directly and through subsidiaries, partnerships
and joint ventures, interests in six industrial properties and three parcels
of unimproved land.
Twenty-six 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) are owned by partnerships in
which the Trust or one of its wholly-owned subsidiaries is 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.
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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.
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
newly-acquired 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 apartment properties that are not currently
managed by the Trust were unable or unwilling to perform their obligations or
responsibilities, the Trust would manage those properties with its own staff.
However, if the current managers of shopping center properties that are not
currently managed by the Trust were unable or unwilling to perform their
obligations, the Trust's present staff is not of sufficient size to carry out
those functions and the Trust would contract management services with others.
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.
In December 1995, a partnership in which the Trust has a 40% interest
refinanced a mortgage of $28,000,000 for a term of 8 years secured by Laurel
Mall, Hazleton, Pennsylvania. The interest rate was reduced from 8% to 7.63%.
The mortgage loan, which had previously been interest only, now requires
annual principal payments of $885,000.
In December 1995, a partnership in which the Trust has a 50% interest
reset the interest rate on the $16,150,000 mortgage secured by its 264 unit
apartment community in Coral Springs, Florida. The interest rate for the
remaining five years of the mortgage term was reset to 8.235% from 9.875%. The
revised annual debt service is $1,526,000, including amortization based on a
25-year schedule, compared with $1,594,000 on an interest-only basis.
In February 1996, a partnership in which the Trust has a 40% interest
completed the refinancing of its 312-unit apartment community in Altamonte
Springs, Florida, with the placement of a $5,700,000 10-year mortgage maturing
in February 2006. The interest rate is 7.5% and amortization is based on a
25-year schedule. The excess proceeds of the refinancing of $777,000 were
distributed to the partners with 60% distributed to the Trust.
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In March 1996, a wholly owned subsidiary of the Trust acquired the
Trust's partner's 25% interest in Forestville Plaza, Forestville, Maryland,
for $122,000. The Trust now owns 100% of this property. Subsequently, the
Trust paid off the mortgage on the property in the amount of $1,749,000.
In May 1996, the Trust sold 25 acres of land in Bucks County,
Pennsylvania, for $4,100,000 and realized a gain of $411,000. Proceeds from
the sale were used to reduce the Trust's bank debt.
In June 1996, the Trust sold a property consisting of 101 apartment units
in Midland, Texas, for $1,246,000 and realized a gain of $454,000. Proceeds
from the sale were used to reduce the Trust's bank debt.
In August 1996, the modification to the Trust's $75,000,000 bank facility
was completed. The facility provides for a $20,000,000 revolving line of
credit and $55,000,000 of term debt. As of November 1996, $34,000,000 is in
use leaving $41,000,000 available. Of that amount, $13,000,000 is available
under the revolving line of credit and $28,000,000 under the term debt.
The revolving line of credit is on a floating rate basis with the Trust
having the right to select either the prime rate or 185 basis points over
LIBOR. The term facility permits the Trust to select the floating rates on the
same basis as the revolving loan, or to fix a rate on up to $30,000,000 of the
loan amount with a maturity of August 2006 and up to $25,000,000 with a
maturity of August 2003. If the Trust does not select a fixed rate, the loans
become due in August 2001.
In September 1996, Lehigh Valley Mall, in which the Trust has a 50%
interest, was refinanced in the amount of $54,000,000. The new loan was
sufficient to repay the existing debt of approximately $22,000,000, fund
renovations to the mall of $5,000,000, and provide excess capital which has
been distributed to the owners, the Trust's share of which is $13,000,000. The
ten-year mortgage loan bears interest at 7.9% with principal payments based on
a twenty-five year amortization schedule. The renovations to Lehigh Valley
Mall were completed in November 1996 and consist primarily of improvements to
internal common areas.
In September 1996, a partnership in which the Trust has a 50% interest
completed the refinancing of its 232-unit apartment community in West Chester,
Pennsylvania, with the placement of a $5,400,000 twenty-year mortgage maturing
in October 2016. The interest rate is 8.345% and amortization is based on a
thirty-year schedule. The Trust received $2,400,000 of the net proceeds of the
financing while the Trust's partners received the balance pursuant to the
terms of the Partnership Agreement.
The Trust has entered into agreements with its partners regarding three
shopping centers, all located in Pennsylvania in Lancaster, Waynesburg, and
Beaver Falls, pursuant to which its partners will purchase the Trust's
interest for a cash consideration of $2,000,000 plus the assumption of debt of
$2,700,000. In the event the Trust's partners are unable to complete the
transaction by December 1996, the Trust has the obligation to purchase the
properties by June 1997, under substantially the same terms and conditions
except that the price will be reduced by $200,000.
Real Estate Investments
The following table sets forth certain information concerning Trust's
real estate investments at August 31, 1996.
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<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........ 11 4,659 $124,640,000
Shopping Centers........... 4 694,000 27,253,000
Industrial Properties...... 5 587,000 1,956,000
-- ------------
TOTAL............. 20 $153,849,000
== ============
Partnerships and Joint Ventures
Apartment Buildings........ 8 2,577 $85,797,000
Shopping Centers........... 14 4,112,000 75,458,000
Industrial Property........ 1 141,000 436,000
Land....................... 3 90 acres 4,446,000
-- ------------
TOTAL............. 26 $166,137,000
== ============
</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.
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, 1996,
the Trust's net equity in income from partnerships was $6,258,000, which
constituted approximately 61.5% of the Trust's net income before gains on
sales of interests in real estate and approximately 56.7% of the Trust's total
net income.
The 27 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 17 different
partners, 11 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, 1996, the aggregate indebtedness secured by mortgages on
the wholly-owned properties of the Trust was $84,833,000, including
indebtedness of $17,163,000 secured by a mortgage against the property owned
by the Consolidated Partnership. In addition, the Trust has equity interests
in 17 partnerships which have an aggregate mortgage indebtedness of
$133,578,000, the Trust's proportionate share of which is $63,416,000. The
mortgage notes bear interest at rates ranging from 5.9% 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 $7,563,000 which are
guaranteed by the partners of the respective partnerships, including the
Trust.
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<PAGE>
WHOLLY-OWNED PROPERTIES
The following chart sets forth certain information with respect to the Trust's
wholly-owned properties at August 31, 1996.
<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 99% $ 868,000 $ 0(2)
Marylander
Baltimore, MD 1962 510 92% 1,304,000 0
Kenwood Gardens
Toledo, OH 1963 504 88% 1,749,000 0(2)
Camp Hill Plaza
Camp Hill, PA 1969 300 97% 1,537,000 6,860,000
Lakewood Hills
Harrisburg, PA 1972 562 93% 6,499,000 0(2)
Cobblestone
Pompano Beach, FL 1993 384 93% 12,182,000 8,965,000
Shenandoah
West Palm Beach, FL 1993 220 95% 11,083,000 8,770,000
Hidden Lakes 1994 360 97% 12,515,000 0(2)
Dayton, OH
Palms of Pembroke
Pembroke Pines, FL 1994 348 94% 21,438,000 0
Boca Palms
Boca Raton, FL 1994 522 95% 34,281,000 0
----- ---------- ----------------
SUB TOTAL 3,797 103,456,000 24,595,000
Consolidated Partnership
Emerald Point 1993 862 96% 21,184,000 17,163,000
---- --- ------------ -----------
Virginia Beach, VA
TOTAL 4,659 94% $124,640,000 $41,758,000
===== === ============ ===========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Shopping Centers
Property and Location Year Acquired Square Percentage Leased (3) Depreciated Cost Mortgage Balance
- --------------------- ------------- ------ --------------------- ---------------- ----------------
Feet
----
<S> <C> <C> <C> <C> <C>
Crest Plaza Shopping Center
Allentown, PA 1964 153,000 90% $ 2,540,000 $ 0
Forestville Shopping Center
(4) 1983 218,000 80% 4,249,000 0
Forestville, MD
South Blanding Village
Jacksonville, FL 1986 107,000 96% 7,822,000 0
Mandarin Corners
Jacksonville, FL 1986 216,000 97% 12,642,000 8,641,000
------- --- ---------- -----------
TOTAL 694,000 90% $27,253,000 $8,641,000
======= === =========== ==========
Industrial Properties
Property and Location Year Acquired Square Feet Percentage Leased (3) Depreciated Cost Mortgage Balance
- --------------------- ------------- ----------- --------------------- ---------------- ----------------
Office and Warehouse
Annandale, VA 1962 332,000 100% $ 1,139,000 $ 0
Warehouse
Pennsauken, NJ 1962 12,000 100% 58,000 0
Warehouse
Allentown, PA 1962 16,000 100% 13,000 0
Warehouse
Pennsauken, NJ 1963 30,000 100% 98,000 0
Warehouse and Plant
Lowell, MA 1963 197,000 100% 648,000 0
------- ---- -------------- ---------------
TOTAL 587,000 100% $ 1,956,000 0
======= ==== ============= ---------------
TOTAL WHOLLY OWNED $153,849,000 $50,399,000
============ ===========
</TABLE>
(1) Occupancy rate is calculated as the percentage of occupied units for all
apartments as of August 31, 1996.
(2) Excludes aggregate indebtedness of $34,434,000 that is
cross-collateralized by the apartment complexes in Philadelphia, PA,
Toledo, OH, Harrisburg, PA and Dayton, OH 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, 1996.
(4) On February 1, 1996, the Trust acquired its partner's 25% interest in the
partnership that owns this property and therefore now has 100% of the
equity interest in this property.
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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, 1996.
<TABLE>
<CAPTION>
Apartment Buildings
Unconsolidated Partnerships and Joint Ventures
Partnerships
Partnerships and and Joint
Joint Ventures Ventures Trust's Investment
Property and Year Trust's Equity Occupancy Depreciated Mortgage in Partnerships
Location Acquired Interest Units Rate(1) Cost Balance(2) and Joint Ventures
- ------------ -------- ---------- ----- --------- ------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cambridge Hall
West Chester, PA 1967 50% 232 97% $ 1,177,000 $ 0 $ 1,974,000
Fox Run
Warminster, PA 1969 50% 196 99% 1,673,000 3,912,000 (1,066,000)
Will-O-Hill
Reading, PA 1983 50% 190 99% 3,137,000 1,857,000 807,000
Fox Run
Bear, DE 1988 50% 414 97% 19,137,000 14,931,000 1,700,000
Eagle's Nest
Coral Springs, FL 1989 50% 264 96% 20,293,000 15,999,000 2,108,000
Regency Lakeside
Omaha, NE 1990 50% 433 99% 23,903,000 18,953,000 1,428,000
Countrywood
Tampa, FL 1993 50% 536 97% 10,079,000 6,440,000 1,733,000
Charter Pointe
[formerly Windsong]
Altamonte Springs, FL 1993 40% 312 93% 6,398,000 5,646,000 346,000
--- --- --------- --------- ----------
TOTAL
2,577 97% $85,797,000 $67,738,000 $9,030,000
===== === =========== =========== ==========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Partnerships and Joint Ventures (continued)
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 99% $1,585,000 $ 412,000 $ 665,000
Whitehall Mall
Allentown, PA 1964 50% 603,000 (3) 83% 5,830,000 0 3,510,000
Punta Gorda Mall
Punta Gorda, FL 1965 25% 102,000 94% 859,000 2,204,000 (310,000)
Ormond Beach Mall
Daytona Beach, FL 1966 25% 103,000 99% 558,000 0 142,000
Palmer Park Mall
Easton, PA 1972 50% 349,000 (4) 96% 5,665,000 3,896,000 424,000
Gateway Mall
St. Petersburg, FL 1973 60% 386,000 (5) 61% 2,171,000 0 1,839,000
Rio Mall
Rio Grande, NJ 1973 50% 161,000 83% 2,080,000 598,000 996,000
Lehigh Valley Mall
Allentown, PA 1973 50% 1,054,000 (6) 98% 18,400,000 21,604,000 (778,000)
East Towne Mall
Lancaster, PA 1973 50% 303,000 86% 3,856,000 3,288,000 322,000
Chippewa Mall
Beaver Falls, PA 1979 50% 83,000 83% 1,792,000 1,685,000 (108,000)
Greene Plaza
Waynesburg, PA 1980 50% 117,000 93% 2,470,000 2,296,000 194,000
Ingleside Center
Thorndale, PA 1981 70% 102,000 100% 2,734,000 2,430,000 340,000
Laurel Mall
Hazleton, PA 1988 40% 558,000 96% 25,484,000 27,427,000 (454,000)
Margate Center
Margate, FL (7) 1987 87.5% 40,000 85% 1,974,000 0 389,000
------ --- --------- -------------- -------
TOTAL 4,112,000 90% $75,458,000 $65,840,000 $7,171,000
========= === =========== =========== ==========
</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> <C>
Warehouse and Plant
Ft. Washington, PA 1962 50% 141,000 100% $ 436,000 $ 0 $ 109,000
------- ---- ---------- ------------ -----------
TOTAL 141,000 100% $ 436,000 $ 0 $ 109,000
======= ==== ========== ============ ===========
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
- --------------------- -------- -------- ----- ------ --------- --------
Rancocas, NJ 1971 75% 54 $ 646,000 $ 0 ($1,539,000)
Elizabethtown, PA 1972 50% 22 279,000 0 219,000
Coral Springs, FL 1990 50% 14 3,521,000 0 ( 826,000)
-- --------- --------- ------------
TOTAL 90 $4,446,000 $ 0 ($2,146,000)
-- ---------- --------- ------------
Other 36,000
TOTAL PARTNERSHIPS AND JOINT VENTURES $166,137,000 $133,578,000 $14,200,000
============ ============ ===========
</TABLE>
(1) Occupancy rate is calculated as the percentage of occupied units for all
apartments as of August 31, 1996.
(2) Some partnerships and joint ventures have incurred non-mortgage
indebtedness in connection with operations.
(3) Whitehall Mall includes 82,000 square feet leased to Kimco Realty which
announced plans for occupancy by Kohl's.
(4) Palmer Park Mall includes 82,000 square feet acquired by Kimco Realty
which contemplates occupancy 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 leasable area for which leases were in effect as of August 31, 1996.
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.
Increased building of new apartment communities and shopping centers as
well as renovation of older properties are a source of competition for the
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PHTRANS:139957_1.WP5
<PAGE>
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. In difficult economic times or in strongly competitive environments,
the shopping center owner may have to offer concessions, negotiate leases in
which the tenant pays a lower rental or less than its pro rata share of
certain operating costs or offer tenant allowances.
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 one of the 46 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 eastern United States 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.
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 operations 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
-10-
<PAGE>
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 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 $1,200,000. The Trust
and its partners have sued the former tenant for damages. In addition, above
normal radon levels have been detected at two wholly-owned properties. The
estimated cost to remediate these properties is approximately $325,000, 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 $447,000,
based upon the consultants' evaluation of these matters which, in certain
instances, are subject to applicable state approvals of the remediation plans.
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, 1996, employed one hundred and thirty seven
(137) 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 has leased 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 current year is $14.00 per square
foot, escalating to $14.50 per square foot in the final 18 months of the lease
term. 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.
Schedule of Real Estate and Accumulated Depreciation
Schedule III, "Real Estate and Accumulated Depreciation - August 31,
1996," is part of the financial statement schedules set forth herein and
-11-
<PAGE>
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.
On 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 of 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.
-12-
<PAGE>
Item 4A. Executive Officers of the Trust
The executive officers of the Trust on November 1, 1996 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 82 1960 Chairman and Chief Executive
Chairman and Officer of the Trust. Presently of
Chief Executive Officer counsel to the Philadelphia law
firm of Drinker Biddle & Reath
and formerly partner of the
Philadelphia law firm of Cohen,
Shapiro, Polisher, Shiekman and
Cohen.
Jonathan B. Weller 49 1994 President and Chief Operating
President and Chief Officer of the Trust. From 1988-
Operating Officer 1993, Executive Vice President of
Eastdil Realty, Inc., a real estate
investment banking firm.
Robert G. Rogers 65 1972 Executive Vice President of the
Executive Vice President Trust.
Jeffrey A. Linn 47 1990 Senior Vice President -
Senior Vice President for Acquisitions since 1994 and
Acquisitions and Secretary Secretary since 1990. Vice
President - Operations of the Trust
until 1994.
Dante J. Massimini 63 1976 Senior Vice President - Finance of
Senior Vice President - Finance the Trust since 1994, Vice
and Treasurer President - Finance since 1990 and
Treasurer since 1976.
Raymond J. Trost 41 1994 Asset Manager of the Trust's
Vice President - Asset Apartment complexes since 1994.
Management 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.
-13-
<PAGE>
PART II
Item 5. Market for the Trust's Common Equity and Related Stockholder Matters
Incorporated by reference to "Market Prices and Distribution Record,"
inside back cover (page 25) of the 1996 Annual Report to Shareholders.
The Board of Trustees on December 19, 1991 changed the prior practice of
making semi-annual distributions. Since May 1992 the Trust has made quarterly
distributions to its shareholders. 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 1996
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 1996 Annual Report to
Shareholders.
Item 8. Financial Statements and Supplementary Data
The consolidated balance sheets of the Trust as of August 31, 1996 and
1995, and the related consolidated statements of income, beneficiaries' equity
and cash flows for each of the three years in the period ended August 31,
1996, and the report of independent public accountants thereon and the Trust's
summary of unaudited quarterly financial information for the two-year period
ended August 31, 1996 are incorporated by reference from the 1996 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
1996 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 and Exchange Act
of 1934, as amended.
-14-
<PAGE>
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
2. The Trust's Consolidated Financial Statements, as described below, are
incorporated by reference to pages 12-20 of the Trust's 1996 Annual
Report to Shareholders.
Consolidated Balanced Sheet at August 31, 1996 and 1995
Consolidated Statements of Income and Beneficiaries' Equity for the
fiscal years ended August 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the fiscal years ended
August 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. Lehigh Valley Associates Financial Statements
Report of Independent Auditors F-1
Balance Sheets at August 31, 1996 and 1995 F-2
Statements of Operations for the fiscal years ended F-3
August 31, 1996, 1995, and 1994
Statements of Partners' Deficiency for the fiscal years ended
August 31, 1996, 1995 and 1994 F-4
Statements of Cash Flows for the fiscal years ended F-5
August 31, 1996, 1995 and 1994
Notes to Financial Statements F-6
(2) Financial Statement Schedules
II - Valuation and Qualifying Accounts 19
III - Real Estate and Accumulated Depreciation 20
IV - Mortgage Loans on Real Estate - August 31, 1996 22
Report of Independent Public Accountants on Supplemental
Schedules 23
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.
-15-
<PAGE>
(3) Exhibits
3.1 Trust Agreement as Amended and Restated on December 16, 1987. Filed as
Exhibit 3.1 to the Trust's Annual Report on Form 10-K for the fiscal
year ended August 31, 1988, and incorporated herein by reference.
4.1 Revolving Credit Agreement dated August 29, 1996, between the Trust and
CoreStates Bank, N.A. as lender.
4.2 Form of Revolving Credit Agreement Note.
4.3 Guaranty dated August 29, 1996 of the Trust in favor of CoreStates Bank,
N.A.
4.4 Secured Loan Agreement dated November 9, 1994 among the Trust,
CoreStates Bank, N.A., as lender and as agent, and PNC Bank, National
Association, filed as exhibit 4.4 to the Trust's Annual Report on Form
10-K for its fiscal year ended August 31, 1995, and incorporated herein
by reference.
4.5 First Amendment to Secured Loan Agreement dated March 20, 1995 among the
Trust, CoreStates Bank, N.A., as lender and as agent, and PNC Bank,
National Association, filed as exhibit 4.5 to the Trust's Annual Report
on Form 10-K for its fiscal year ended August 31, 1995, and incorporated
herein by reference.
4.6 Form of Replacement Note pursuant to the First Amendment to Secured Term
Loan Agreement, filed as exhibit 4.6 to the Trust's Annual Report on
Form 10-K for its fiscal year ended August 31, 1995, and incorporated
herein by reference.
4.7 Second Amendment to Secured Loan Agreement dated April 25, 1995 among
the Trust, CoreStates Bank, N.A., as lender and as agent, and PNC Bank,
National Association.
4.8 Third Amendment to Secured Loan Agreement dated August 29, 1991 among
the Trust, CoreStates Bank, N.A., as lender and as agent, and PNC Bank,
National Association.
4.9 Guaranty dated August 2, 1993 of the Trust in favor of CoreStates Bank,
N.A., filed as exhibit 4.7 to the Trust's Annual Report on Form 10-K for
its fiscal year ended August 31, 1995, and incorporated herein by
reference.
4.10 Guaranty dated January 27, 1994 of the Trust in favor of CoreStates
Bank, N.A., filed as exhibit 4.8 to the Trust's Annual Report on Form
10-K for its fiscal year ended August 31, 1995, and incorporated herein
by reference.
4.11 Guaranty dated September 23, 1994 of the Trust in favor of CoreStates
Bank, N.A., filed as exhibit 4.9 to the Trust's Annual Report on Form
10-K for its fiscal year ended August 31, 1995, and incorporated herein
by reference.
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, and incorporated
herein by reference.
-16-
PHTRANS:1
<PAGE>
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, and incorporated herein by reference.
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, and 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, and incorporated herein by reference.
10.5 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, and incorporated herein by reference.
10.6 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, and 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 the 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, and 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
Pennsylvania Real Estate Investment 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, and incorporated by reference.
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
-17-
<PAGE>
10.9 to the Trust's Report on Form 8-K dated November 10, 1994 and filed
on November 23, 1994, and 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, and 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,
and 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, and incorporated herein by reference.
10.13 Employment Agreement dated as of October 1, 1985 between the Trust and
Jeffrey Linn, filed as exhibit 10.13 to the Trust's Annual Report on
Form 10-K for its fiscal year ended August 31, 1995, and incorporated
herein by reference.
13.1 "Market Price and Distribution Record" contained on the inside back page
of the Trust's 1996 Annual Report to Shareholders; "Financial
Highlights" contained on page 1 of the Trust's 1996 Annual Report to
Shareholders; consolidated financial statements, including "Notes to
consolidated financial statements" and "Report of independent public
accountants," pages 12-20 of the Trust's 1996 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 1996 Annual Report to Shareholders.
21. Listing of subsidiaries
23.1 Consent of Arthur Andersen LLP (Independent Public Accountants of the
Trust).
23.2 Consent of Ernst & Young LLP (Independent Auditors of Lehigh Valley
Associates).
27. Financial Data Schedule
99. Portions of the Trust's definitive proxy statement for its 1996 Annual
Meeting of Shareholders responsive to Items 10, 11, 12 and 13 in Part
III hereof filed on November 15, 1996, 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) Report on Form 8-K.
There were no reports on Form 8-K filed during the three months ended
August 31, 1996.
-18-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
VALUATION AND QUALIFYING ACCOUNTS
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
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE
LOSSES:
Year ended August 31, 1996 $ 2,775,000 $ -- $ -- $ 733,000 $ 2,042,000
============== ============== ============== ============== ==============
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
============== ============== ============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1996
Column A Column B Column C Column D
Encumbrances Improvements,
------------------------------------------------ Net of
Interest Maturity Balance at Initial Cost Retirements
Description Rate Date 8/31/96 to Trust Etc. (Note 4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
APARTMENT BUILDINGS:
2031 Locust Street-
Land $ $ 100,000 $ --
Building and improvements 1,028,000 1,283,000
Furniture and portable equipment 587,000
Camp Hill Plaza Apartments-
Land 9.5% 3/1/2007 6,860,268 337,000 --
Building and improvements 2,911,000 688,000
Furniture and portable equipment 150,000 642,000
Cobblestone Apartments-
Land 7.50% to 8.25% 12/16/2002 8,965,000 2,791,000 --
Building and improvements 9,336,000 409,000
Furniture and portable equipment 362,000 423,000
Kenwood Gardens-
Land 489,000 --
Building and improvements 3,007,000 1,410,000
Furniture and portable equipment 228,000 1,092,000
Lakewood Hills Apartments-
Land 500,000 --
Building and improvements 10,935,000 1,210,000
Furniture and portable equipment 468,000 1,616,000
Marylander Apartments-
Land 117,000 --
Building 4,013,000 1,633,000
Furniture and portable equipment 327,000 717,000
Shenandoah Village-
Land 2,200,000 --
Building and improvements 8,695,000 283,000
Furniture and portable equipment 281,000 503,000
Emerald Point
Land 6.790% 12/1/2008 17,163,000 3,062,000 --
Building and improvements 17,352,000 1,175,000
Furniture and portable equipment 1,293,000 586,000
Hidden Lakes-
Land 1,225,000 --
Building and improvements 10,807,000 126,000
Furniture and portable equipment 986,000 308,000
Palms of Pembroke-
Land 4,868,000 --
Building and improvements 16,399,000 62,000
Furniture and portable equipment 985,000 188,000
Boca Palms-
Land 7,107,000 --
Building and improvements 27,270,000 225,000
Furniture and portable equipment 1,101,000 206,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1996
Column A Column B Column C Column D
Encumbrances Improvements,
------------------------------------------------ Net of
Interest Maturity Balance at Initial Cost Retirements
Description Rate Date 8/31/96 to Trust Etc. (Note 4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 1,404,000
People's Drug (CVS), Annandale, VA-
Land 225,000 --
Building and improvements 1,873,000 476,000
Sears, Roebuck and Company,
Pennsauken, NJ-
Land 25,000 --
Building and improvements 206,000 176,000
SHOPPING CENTERS AND RETAIL STORES:
Crest Plaza Shopping Center-
Land 278,000 --
Building and improvements 2,230,000 3,096,000
Furniture and portable equipment -- 18,000
Sitler Tract-
Land 54,000 --
Forestville Plaza-
Land 440,000 --
Building and improvements 5,572,000 699,000
Furniture and portable equipment -- --
South Blanding Village-
Land 2,947,000 --
Building and improvements 6,138,000 329,000
Furniture and portable equipment -- --
Mandarin Corners-
Land 9.125% 8/1/2008 8,641,000 4,891,000 --
Building and improvements 10,168,000 502,000
Furniture and portable equipment -- --
Total for wholly owned and
consolidated partnership $ 50,399,000 $ 176,470,000 $ 22,072,000
============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1996
Column A Column E Column F Column G&H Column I
Amount at
Which Carried Accumulated Date
8/31/96 Depreciation Constructed Depreciable
Description (Notes 1 & 2) (Note 3) or Acquired Life (Years)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APARTMENT BUILDINGS:
2031 Locust Street-
Land $ 100,000 $ -- 1961
Building and improvements 2,311,000 1,826,000 11-25
Furniture and portable equipment 587,000 304,000 10
Camp Hill Plaza Apartments-
Land 337,000 -- 1969
Building and improvements 3,599,000 2,823,000 5-33-1/3
Furniture and portable equipment 792,000 368,000 7-10
Cobblestone Apartments-
Land 2,791,000 -- 1992
Building and improvements 9,745,000 977,000 10-40
Furniture and portable equipment 785,000 162,000 7-10
Kenwood Gardens-
Land 489,000 -- 1963
Building and improvements 4,417,000 3,692,000 8-38
Furniture and portable equipment 1,320,000 788,000 8-10
Lakewood Hills Apartments-
Land 500,000 -- Phase I 1972
Building and improvements 12,145,000 7,076,000 Phase II 1975 8-45
Furniture and portable equipment 2,084,000 1,155,000 Phase III 1980 10
Marylander Apartments-
Land 117,000 -- 1962
Building 5,646,000 4,907,000 10-39
Furniture and portable equipment 1,044,000 594,000 5-10
Shenandoah Village-
Land 2,200,000 --
Building and improvements 8,978,000 751,000 1993 10-39
Furniture and portable equipment 784,000 128,000 5-10
Emerald Point
Land 3,062,000 -- 1993
Building and improvements 18,527,000 1,750,000 10-39
Furniture and portable equipment 1,879,000 537,000 5-10
Hidden Lakes-
Land 1,225,000 -- 1994
Building and improvements 10,933,000 831,000 10-39
Furniture and portable equipment 1,294,000 106,000 5-10
Palms of Pembroke-
Land 4,868,000 -- 1994
Building and improvements 16,461,000 946,000 10-39
Furniture and portable equipment 1,173,000 119,000 5-10
Boca Palms-
Land 7,107,000 --
Building and improvements 27,495,000 1,398,000 1994 10-39
Furniture and portable equipment 1,307,000 229,000 5-10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION--AUGUST 31, 1996
Column A Column E Column F Column G&H Column I
Amount at
Which Carried Accumulated Date
8/31/96 Depreciation Constructed Depreciable
Description (Notes 1 & 2) (Note 3) or Acquired Life (Years)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
ARA Services, Inc., Allentown, PA-
Land $ 3,000 $ -- 1962
Building and improvements 82,000 71,000 10-40
ARA Services, Inc., Pennsauken, NJ-
Land 20,000 -- 1962
Building and improvements 190,000 152,000 10-50
Interstate Container Corporation,
Lowell, MA-
Land 34,000 -- 1963
Building and improvements 1,768,000 1,155,000 20-50
People's Drug (CVS), Annandale, VA-
Land 225,000 -- 1962
Building and improvements 2,349,000 1,435,000 25-55
Sears, Roebuck and Company,
Pennsauken, NJ-
Land 25,000 -- 1963
Building and improvements 382,000 309,000 10-50
SHOPPING CENTERS AND RETAIL STORES:
Crest Plaza Shopping Center-
Land 278,000 -- 1964
Building and improvements 5,326,000 3,118,000 20-40
Furniture and portable equipment 18,000 18,000 10
Sitler Tract-
Land 54,000 -- 1964
Forestville Plaza-
Land 440,000 -- 1983
Building and improvements 6,271,000 2,462,000 33-1/3
Furniture and portable equipment -- --
South Blanding Village-
Land 2,947,000 -- 1988
Building and improvements 6,467,000 1,591,000 20-40
Furniture and portable equipment -- --
Mandarin Corners-
Land 4,891,000 -- 1988
Building and improvements 10,670,000 2,920,000 33-1/3
Furniture and portable equipment -- --
Total for wholly owned and
consolidated partnership $ 198,542,000 $ 44,693,000
================= =================
</TABLE>
<PAGE>
SCHEDULE III
(Continued)
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
<TABLE>
<CAPTION>
NOTES:
<S> <C> <C>
(1) Reconciliation of amount shown in Column E:
Balance, August 31, 1995 $ 195,929,000
Additions during the year-
Improvements, furniture and portable
equipment $ 1,589,000
Land 440,000
Building 8,107,000
10,136,000
Deductions during the year-
Transferred to partnerships and joint
ventures (1,862,000)
Retirements --
Properties sold (5,661,000)
------------------
Balance, August 31, 1996 $ 198,542,000
==================
(2) The aggregate cost for federal income tax
purposes is approximately $ 197,333,000
==================
(3) Reconciliation of amount shown in Column F:
(Accumulated Depreciation):
Balance, August 31, 1995 $ 38,828,000
Depreciation during the year-
Buildings and improvements 4,591,000
Furniture and portable equipment 1,036,000 5,627,000
---------------
Deductions during the year-
Transferred to partnerships and joint
ventures 1,654,000
Retirements --
Properties sold (1,416,000)
------------------
Balance, August 31, 1996 $ 44,693,000
==================
(4) Cost of improvements, net of retirements, etc.,
consists of the following:
Cost of improvements $ 22,072,000
Retirements --
------------------
$ 22,072,000
==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MORTGAGE LOANS ON REAL ESTATE--AUGUST 31, 1996
Column A Column B Column C Column D Column E
Periodic Payment
Terms
Interest Maturity ------------------------------- Prior
Description Rate Date Interest Principal Liens
- ---------------------------------------------- ---------------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Samuel Lauter (Note 2) (Note 4) Monthly (Note 4) None
Donald Cafiero (Note 2) (Note 4) Monthly (Note 4) None
Charles A. Lotz, Jr. (Note 3) 2% over prime (Note 3) Monthly (Note 3) None
Column A Column F Column G Column H
Principal
Carrying Amount of Loan
Outstanding Amount Subject to
Principal of Delinquent
Amount of Mortgage Principal
Description Mortgage (Note 5) or Interest
- ------------------------------------------------ ------------ --------------- -----------
Samuel Lauter $ 560,000 $ 560,000 None
Donald Cafiero 568,000 568,000 None
Charles A. Lotz, Jr. (Note 3) 521,000 521,000 $521,000
-------------- ---------------
$ 1,649,000 $ 1,649,000
============== ===============
NOTES:
(1) Reconciliation of mortgage loans-
Balance at August 31, 1995 $1,649,000
Advances during period --
Repayments during period --
-------------
Balance at August 31, 1996 $ 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 cost for federal income tax purposes is the same as the cost 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 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 21, 1996. 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 basic consolidated financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
October 21, 1996
<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 Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
(The Registrant)
Date: November 27, 1996 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 attorney-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
attorney-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
- -------------------------------------------------
Sylvan M. Cohen, November 27, 1996
Chairman and Chief Executive Officer and Trustee
(Principal Executive Officer)
/s/ Jonathan B. Weller
- -------------------------------------------------
Jonathan B. Weller, November 27, 1996
President and Chief Operating Officer and Trustee
/s/ William R. Dimeling
- -------------------------------------------------
William R. Dimeling, November 27, 1996
Trustee
-24-
<PAGE>
/s/ Jack Farber
- -------------------------------------------------
Jack Farber, November 27, 1996
Trustee
/s/ Robert Freedman
- -------------------------------------------------
Robert Freedman, November 27, 1996
Trustee
/s/ Lee Javitch
- -------------------------------------------------
Lee Javitch, November 27, 1996
Trustee
/s/ Leonard I. Korman
- -------------------------------------------------
Leonard I. Korman, November 27, 1996
Trustee
/s/ Jeffrey P. Orleans
- -------------------------------------------------
Jeffrey P. Orleans, November 27, 1996
Trustee
/s/ Robert G. Rogers
- -------------------------------------------------
Robert G. Rogers, November 27, 1996
Executive Vice President and Trustee
/s/ Dante J. Massimini
- -------------------------------------------------
Dante J. Massimini, November 27, 1996
Senior Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
-25-
<PAGE>
[LETTERHEAD ERNST & YOUNG LLP]
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, 1996 and 1995, and the related statements
of operations, partners' deficiency, and cash flows for each of the three years
in the period ended August 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended August 31, 1996, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
October 18, 1996
F-1
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
August 31
1996 1995
------------------------------------------
<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 22,323,824 21,559,002
Office building 587,771 587,771
------------------------------------------
28,663,678 27,898,856
Less accumulated depreciation 12,587,778 11,899,934
------------------------------------------
16,075,900 15,998,922
Cash and cash equivalents 1,767,561 1,707,710
Due from tenants and others 1,079,554 662,926
Accrued rent (Note 1) 1,872,634 1,779,296
Prepaid expenses and other assets 795,522 637,584
Deferred charges, net (Note 1) 1,882,138 71,940
Deferred finance costs, net (Note 1) 78,478 -
------------------------------------------
$ 23,551,787 $ 20,858,378
==========================================
Liabilities
Mortgages payable and construction loan, (Note 2) $ 22,488,686 $ 22,226,947
Accrued expenses and other liabilities, including
accrued interest (1996--$170,690;
1995--$168,043) 2,657,661 1,040,899
------------------------------------------
25,146,347 23,267,846
Partners' deficiency (1,594,560) (2,409,468)
------------------------------------------
$ 23,551,787 $ 20,858,378
==========================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Year ended August 31
1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Income:
Rentals (Notes 1 and 4):
Minimum $ 9,613,342 $ 9,729,591 $ 9,086,148
Percentage 627,388 773,350 771,092
----------------------------------------------------------
10,240,730 10,502,941 9,857,240
Sundry 285,405 364,891 286,856
----------------------------------------------------------
10,526,135 10,867,832 10,144,096
Expenses, other than depreciation:
Real estate taxes, net of tenants' reimbursements
(1996--$787,135; 1995--$765,852; 1994--
$692,754) 6,313 14,051 46,876
Interest (Note 2) 1,998,258 2,040,410 2,090,278
Management fees (Note 3) 714,827 731,156 701,419
Common area expenses, net of tenants'
reimbursements (1996--$2,510,033;
1995--$2,038,059; 1994--$2,553,995) (145,219) (195,062) (239,848)
Other property expenses 324,539 58,135 359,637
----------------------------------------------------------
2,898,718 2,648,690 2,958,362
----------------------------------------------------------
Income before depreciation and amortization 7,627,417 8,219,142 7,185,734
Depreciation and amortization (Note 1) 712,509 671,333 664,840
----------------------------------------------------------
Net income $ 6,914,908 $ 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 Balance
Interest Per as of as of
Partnership September 1, August 31,
Agreement 1993 Distributions Net Income 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General Partners:
Delta Ventures, Inc. 0.50% $ (18,391) $ (34,470) $ 32,605 $ (20,256)
Pennsylvania Real Estate Investment Trust 30.00 (1,103,451) (2,068,200) 1,956,268 (1,215,383)
Limited Partners:
Morris A. Kravitz Residuary Trust 9.00 (331,035) (620,460) 586,880 (364,615)
Myles H. Tanenbaum 8.55 (314,484) (589,437) 557,537 (346,384)
Jordan A. Katz 4.50 (165,518) (310,230) 293,440 (182,308)
Robert T. Girling 4.50 (165,518) (310,230) 293,440 (182,308)
Lea R. Powell, Trustee under indenture of
Arthur L. Powell 9.00 (331,035) (620,460) 586,880 (364,615)
Harold G. Schaeffer 4.50 (165,518) (310,230) 293,440 (182,308)
Adele K. Schaeffer, Trustee under indenture
of Harold G. Schaeffer 4.50 (165,518) (310,230) 293,440 (182,308)
Richard A. Jacoby 4.95 (182,069) (341,253) 322,784 (200,538)
Pennsylvania Real Estate Investment Trust 20.00 (735,634) (1,378,800) 1,304,180 (810,254)
-------------------------------------------------------------------------
100.00% $(3,678,171) $(6,894,000) $ 6,520,894 $(4,051,277)
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Balance
as of
August 31,
Distributions Net Income 1995
---------------------------------------------
<S> <C> <C> <C>
General Partners:
Delta Ventures, Inc. $ (29,530) $ 37,739 $ (12,047)
Pennsylvania Real Estate Investment Trust (1,771,800) 2,264,343 (722,840)
Limited Partners:
Morris A. Kravitz Residuary Trust (531,540) 679,303 (216,852)
Myles H. Tanenbaum (504,963) 645,338 (206,009)
Jordan A. Katz (265,770) 339,651 (108,427)
Robert T. Girling (265,770) 339,651 (108,427)
Lea R. Powell, Trustee under indenture of
Arthur L. Powell (531,540) 679,303 (216,852)
Harold G. Schaeffer (265,770) 339,651 (108,427)
Adele K. Schaeffer, Trustee under indenture
of Harold G. Schaeffer (265,770) 339,651 (108,427)
Richard A. Jacoby (292,347) 373,617 (119,268)
Pennsylvania Real Estate Investment Trust (1,181,200) 1,509,562 (481,892)
---------------------------------------------
$(5,906,000) $7,547,809 $(2,409,468)
=============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balance
as of
August 31,
Distributions Net Income 1996
------------------------------------------------
<S> <C> <C> <C>
General Partners:
Delta Ventures, Inc. $ (30,500) $ 34,575 $ (7,972)
Pennsylvania Real Estate Investment Trust (1,830,000) 2,074,472 (478,368)
Limited Partners:
Morris A. Kravitz Residuary Trust (549,000) 622,342 (143,510)
Myles H. Tanenbaum (521,550) 591,224 (136,335)
Jordan A. Katz (274,500) 311,171 (71,756)
Robert T. Girling (274,500) 311,171 (71,756)
Lea R. Powell, Trustee under indenture of
Arthur L. Powell (143,510)
Harold G. Schaeffer (549,000) 622,342 (71,756)
Adele K. Schaeffer, Trustee under indenture (274,500) 311,171
of Harold G. Schaeffer (274,500) 311,171 (71,756)
Richard A. Jacoby (301,950) 342,287 (78,931)
Pennsylvania Real Estate Investment Trust (1,220,000) 1,382,982 (318,910)
------------------------------------------------
$(6,100,000) $6,914,908 $(1,594,560)
================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended August 31
1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 6,914,908 $ 7,547,809 $ 6,520,894
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 712,509 671,333 664,840
Amortization of deferred charges 434,908 35,968 -
Changes in operating assets and liabilities:
Due from tenants and others and accrued rent (509,966) (128,606) (553,443)
Prepaid expenses and other assets (18,069) (31,261) (110,066)
Accrued expenses and other liabilities 20,701 (108,134) 554,884
----------------------------------------------------------
Net cash provided by operating activities 7,554,991 7,987,109 7,077,109
Investing activities
Deferred charges (1,083,014) (107,908) -
Expenditures for property and equipment (512,748) (17,872) (6,341)
----------------------------------------------------------
Net cash used in investing activities (1,595,762) (125,780) (6,341)
Financing activities
Proceeds from construction loan 884,368 - -
Principal payments on mortgages (622,629) (569,154) (520,267)
Deferred finance costs (61,117) - -
Distributions paid to partners (6,100,000) (5,906,000) (6,894,000)
----------------------------------------------------------
Net cash used in financing activities (5,899,378) (6,475,154) (7,414,267)
----------------------------------------------------------
Increase (decrease) in cash and cash equivalents 59,851 1,386,175 (343,499)
Cash and cash equivalents at beginning of year 1,707,710 321,535 665,034
----------------------------------------------------------
Cash and cash equivalents at end of year $ 1,767,561 $ 1,707,710 $ 321,535
==========================================================
</TABLE>
See accompanying notes.
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements
August 31, 1996
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 generally over 35 years for
the shopping center and 22 years for the office building, representing the
estimated lives of the 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 volume at
August 31 exceeded the minimum annual sales volumes required for percentage
rents.
Deferred Charges
Deferred charges, consisting of costs incurred that are reimbursable from
tenants, are amortized as tenants are billed. Accumulated amortization as of
August 31, 1996, 1995, and 1994 amounted to $470,876, $35,968, and $0,
respectively.
Deferred Finance Costs
Costs incurred in connection with the construction loan and the refinancing
described in Note 2 have been capitalized. The costs related to the construction
loan will be fully amortized on the date of the refinancing. Costs associated
with the refinancing will be amortized over the term of the related mortgage.
F-6
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments
Cash and cash equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates fair value.
Mortgages Payable and Construction Loan: The fair values of the mortgages
payable and construction loan have not been disclosed due to the refinancing
which occurred on September 18, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect various amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
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
The Partnership considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
F-7
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1995 financial statements have been reclassified to
conform with the 1996 presentation.
2. Mortgages Payable and Construction Loan
<TABLE>
<CAPTION>
Year ended August 31
1996 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C>
Mortgage note on Property--payable in monthly
installments of $192,002, including interest at 9%
through 2012 $ 19,363,950 $ 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 1,630,209 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 415,855 425,837 434,841
Mortgage note on office building and fringe land--payable
in monthly installments of $4,434, including interest
at 8%, through 2001 194,304 230,385 263,700
Construction loan--interest only, payable monthly at
variable rate (8.75% at June 30, 1996) on outstanding
draws up to $4,770,000, principal due earlier of
March 30, 1997 or refinancing, as defined. 884,368 - -
-----------------------------------------------------------
$ 22,488,686 $ 22,226,947 $ 22,796,101
===========================================================
</TABLE>
The above mortgages are collateralized by the respective real estate and tenant
leases. The construction loan is guaranteed by the general partners.
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
2. Mortgages Payable and Construction Loan (continued)
The Partnership refinanced the above mortgages and construction loan on
September 18, 1996 with a mortgage loan obtained from an insurance company. The
proceeds of the mortgage loan of $54,000,000 were used to pay off the
outstanding principal and interest due on all of the above loans, pay prepayment
fees and other closing costs, including approximately $338,000 paid to an
affiliate, and provided a $26,000,000 distribution to the partners.
The mortgage is secured by the property and an assignment of leases and rents
and requires monthly payments of principal and interest of $413,210 (based on
annual interest of 7.9%) with remaining unpaid principal due on October 10,
2006.
Principal payments on the mortgage dated September 18, 1996 are due as follows:
Year ending August 31:
1997 $ 594,500
1998 766,857
1999 829,682
2000 897,653
2001 971,192
Thereafter 49,940,116
----------------------
$ 54,000,000
======================
Interest paid on the mortgages during 1996, 1995, and 1994 amounted to
$1,995,611, $2,044,685, and $2,093,560, respectively.
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.
F-9
<PAGE>
Lehigh Valley Associates
(A Limited Partnership)
Notes to Financial Statements (continued)
3. Related Party Transactions (continued)
During 1996, development fees of $220,000 were paid to an affiliate in
connection with certain renovations of the center.
4. Leases
The Partnership earns rental income under operating leases with retail tenants.
Leases generally provide for minimum rentals plus percentage rentals based on
the tenants' sales volume and also require each tenant 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, 1996 and does not include
any amounts due as percentage rent or the exercise of renewal options under
existing leases:
Years ending August 31:
1997 $ 8,712,000
1998 8,088,000
1999 7,777,000
2000 7,539,000
2001 7,083,000
Thereafter 20,469,000
---------------
$ 59,668,000
===============
F-10
<PAGE>
EXHIBIT INDEX
EXHIBITS
Exhibit No. Description Page
4.1 Revolving Credit Agreement dated August 29, 1996,
between the Trust and CoreStates Bank, N.A. as lender.
4.2 Form of Revolving Credit Agreement Note.
4.3 Guaranty dated August 29, 1996 of the Trust in favor of
CoreStates Bank, N.A.
4.7 Second Amendment to Secured Loan Agreement dated
April 25, 1995 among the Trust, CoreStates Bank,
N.A., as lender and as agent, and PNC Bank, National
Association.
4.8 Third Amendment to Secured Loan Agreement dated
August 29, 1991 among the Trust, CoreStates Bank,
N.A., as lender and as agent, and PNC Bank, National
Association.
13.1 "Market Price and Distribution Record" contained on
the inside back page of the Trust's 1996 Annual Report
to Shareholders; "Financial Highlights" contained on
page 1 of the Trust's 1996 Annual Report to
Shareholders; consolidated financial statements,
including "Notes to consolidated financial statements"
and "Report of independent public accountants," pages
12-20 of the Trust's 1996 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
1996 Annual Report to Shareholders.
21 Listing of subsidiaries
23.1 Consent of Arthur Andersen LLP (Independent Public
Accountants of the Trust).
23.2 Consent of Ernst & Young LLP (Independent Auditors
of Lehigh Valley Associates).
27 Financial Data Schedule
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
-----------------------
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
-----------------------
CORESTATES BANK, N.A.
Lender
$75,000,000
Unsecured Revolving Credit
August 29, 1996
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
AGREEMENT, made this 29th day of August, 1996, 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 ("Lender").
BACKGROUND
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 $75,000,000
credit facility with Lender for a term of 24 months for the Revolving Credit and
five (5) years for the Term Loan Credit, each such term 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),
(iii) to refinance existing indebtedness, and (iv) to fulfill Borrower's
obligations to Ventures to obtain Venture Loans. Lender has agreed to extend
such credit facility to Borrower, subject to the terms and conditions
hereinafter more particularly set forth.
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:
<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 Borrowings" and "Adjusted LIBOR
Loans" mean Advances bearing interest at a rate determined with reference to the
Adjusted LIBOR.
"Advance" means the cash which Lender advances to
Borrower or a Venture Borrower under the Revolving Credit (including draws under
Letters of Credit) or the Term Loan 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.
"Agreement" means this Revolving Credit and Term Loan
Agreement, and all schedules, exhibits, riders, extensions, supplements,
amendments, or modifications to this Revolving Credit Agreement.
"Applicable Yield to Maturity" means, as of a specific date
with respect to any Fixed Rate Term Loan, the yield to maturity of the issue
United States Treasury obligations (excluding those commonly known as "Flower
Bonds") maturing nearest in time to the applicable Term Loan Maturity Date. The
maturity date and yield to maturity of such issue of United States Treasury
obligations shall be determined by quotations in the Wall Street Journal most
recently published, and if there shall be more than one such issue of United
States Treasury obligations maturing nearest in time to such Term Loan Maturity
Date, the "Applicable Yield to Maturity" shall be the arithmetic average of the
yields to maturity of all such issues.
(2)
<PAGE>
"Authorized Signer" means any of the Persons listed on the
certificate to be delivered to Lender at Closing in accordance with Section
4.1.3 hereof or any replacement certificate with respect thereto subsequently
delivered to Lender.
"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 Lender
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 Lender 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.
"Borrower Costs" means reasonable attorneys' fees and expenses
incurred by Borrower in connection with the preparation or review of Mortgages.
"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.
(3)
<PAGE>
"Closing" and "Closing Date" mean the day on which all of the
conditions set forth in Section 4.1 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 Lender's
commitments (i) to lend under the Revolving Credit and (ii) to make Term Loans,
which amount is $75,000,000 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
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, exclusive of any amount included in clause (i) 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. For any property placed in
service after the acquisition of such property, the gross revenues and operating
expenses thereof shall be measured on a pro-forma basis until Borrower, in the
good faith exercise of its business judgment, determines that actual gross
revenues and operating expenses have stabilized. Borrower's determination that
actual revenues and operating expenses have stabilized shall be subject to
Lender's reasonable approval. Adjustments as a result of
(4)
<PAGE>
the disposal of any property shall be made on the basis of the actual gross
revenues and operating expenses for such property.
"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) minus (iii) any amounts included within
the definition of "Consolidated Liabilities."
"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 Lender 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 8.1 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
(5)
<PAGE>
the day of such transactions received by Lender 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.
"Fixed Rate Term Loan" means each Term Loan with respect to
which interest is charged at a rate that is fixed from the Funding Date thereof
until the applicable Term Loan Maturity Date.
"Floating Rate Loan" means each Floating Rate Term Loan and
each Revolving Credit Loan.
"Floating Rate Term Loan" means each Term Loan that is not a
Fixed Rate Term Loan.
"Funding Date" means the Business Day on which an Advance of
the Revolving Credit or of a Term Loan 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 Lender.
(6)
<PAGE>
"Indebtedness" means all amounts due from Borrower to Lender
pursuant to Article and otherwise arising out of or in connection with this
Agreement or any other Loan Document.
"Initial Unencumbered Property Pool" means those Properties
identified on Schedule 1.1.A attached hereto.
"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 applica- ble to an
Adjusted LIBOR Borrowing as determined pursuant Section 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 Lender.
"Lender" means CoreStates Bank, N.A.
"Lender's Costs" means all reasonable costs and expenses of
any kind paid or incurred by Lender 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 Lender in connection with the preservation,
enforcement, defense and protection of Lender's 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 Lender in enforcing, obtaining legal advice
in preparing, reviewing, consummating, amending, restructuring, extending,
terminating, defending, or preserving or protecting Lender's rights, remedies,
(7)
<PAGE>
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 Lender may from time to time establish for such service; provided,
however, that Lender's Costs shall not include any costs incurred by Lender in
connection with the preparing or reviewing of the Mortgages.
"Letter of Credit" means a letter of credit issued pursuant to
Section 2.1.8 hereof.
"LIBOR" means the rate per annum at which deposits of Dollars
are offered to Lender 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 Note, the Guaranties, the Venture Notes, the Mortgages and every other
certificate or agreement of Borrower in favor of Lender delivered pursuant to
this Agreement.
"Loan(s)" means the aggregate of all Advances under the
Revolving Credit and all Term Loans.
"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 Loans
which may be outstanding under this Agreement as determined in accordance with
Section 2.2.12 hereof.
"Mortgage" means a mortgage and security agreement in
substantially the form of Exhibit 1.1.B attached hereto or a deed of trust and
security agreement in similar form, in each case appropriately modified in order
to conform to the customs and practices of
(8)
<PAGE>
the jurisdiction in which the Property that is to be encumbered by
such instrument is located.
"NOI" means Borrower's, plus Borrower's applicable Percentage
Interest of each Venture's, gross revenue 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.
"Note" means the note of Borrower in favor of Lender to
evidence Borrower's repayment obligations under this Agreement with respect to
the Revolving Credit and all Term Loans.
"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 substan- tially 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.
"Permitted Lien" means (i) liens for taxes, assess- ments or
governmental charges or claims which are not overdue or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; (ii) statutory liens of
carriers, warehouse- men, mechanics, materialmen, repairmen, suppliers and other
like liens incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, if a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(iii) liens (other than any lien imposed by ERISA) incurred or deposits made in
the ordinary course of business in connection with workers' compensation or
unemployment insurance and other types of social security; (iv) liens incurred
or deposits made to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations incurred in the ordinary
course of business (exclusive of obligations
(9)
<PAGE>
for the payment of borrowed money); (v) any judgment lien; provided that, within
45 days after the entry of the judgment secured thereby, such judgment shall be
discharged or execution thereof shall be stayed pending appeal; and further
provided that such judgment shall be discharged within 45 days after the
expiration of any such stay; (vi) the rights of tenants under leases or
subleases not interfering with the ordinary conduct of the Business of Borrower;
(vii) easements, rights-of-way, encroachments, zoning provisions, covenants,
conditions, restrictions and other similar charges, encumbrances and
governmental restrictions not interfering with the ordinary conduct of the
business of Borrower; and (viii) liens created pursuant to the Loan Documents.
"Person" means an individual, corporation, partner- ship,
joint venture, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Prepayment Premium" means, with respect to each prepayment of
a Loan by Borrower, the additional compensation determined in accordance with
Section 2.2.8.1(e) hereof.
"Prime Rate" means that rate of interest per annum announced
by Lender from time to time as its "prime rate" which may not represent the
lowest rate charged by Lender 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, exclusive of
the amount of any final payment of principal which would exceed the periodic
payments of principal on such debt.
"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.
(10)
<PAGE>
"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 $20,000,000, 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.
"Secured Loan Agreement" means the Secured Loan Agreement
dated November 9, 1994, among Borrower, Lender, Meridian Bank, Midlantic Bank,
PNC Bank, National Association, and CoreStates Bank, N.A., as Agent, as at any
time thereafter amended.
"Senior Liabilities" means Borrower's obligations to Lender to
repay the Indebtedness.
"Substituted Unencumbered Property" means any Property that
hereafter is made part of the Unencumbered Property Pool pursuant to Section 3.3
hereof.
"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.
(11)
<PAGE>
"Term Loan" means each extension of credit made by Lender to
Borrower pursuant to Section 2.1.2 hereof of this Agreement.
"Term Loan Credit" means the facility under which Term Loans
may be extended by Lender, in the maximum aggregate amount of $55,000,000, all
as more fully described in Article 2 hereof.
"Term Loan Maturity Date" means the date, selected by Borrower
pursuant to Section 2.1.2 hereof, on which a Term Loan is scheduled to mature.
"Termination Date" means (i), with respect to the Revolving
Credit, August 31, 1998, and (ii) with respect to the Term Loan Credit, August
31, 2001, or such extension thereof agreed to in writing by Lender.
"Unencumbered Property Pool" means, at any time, (i) those
Properties that are part of the Initial Unencumbered Property Pool and are then
unencumbered and wholly-owned by Borrower and (ii) all Substituted Unencumbered
Properties that are then unencumbered and wholly-owned by Borrower, but
excluding from the Properties identified in clauses (i) and (ii) (A) such
Properties as are necessary in order that the combined average occupancy rate of
the Unencumbered Property Pool, as of the last day of the most recently
concluded Fiscal Quarter, is not less than 80% and (B) such other Properties
that may have been withdrawn by Borrower pursuant to Section 3.3 hereof.
"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 2.1.6
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.
"Venture Borrower" means Rancocas Limited Partnership and any
other Venture to which Lender may hereafter make a Venture Loan.
"Venture Loans" means the Loans or commitments for Loans made
by Lender to Ventures at the request of Borrower pursuant hereto, including,
without limitation, the following:
(12)
<PAGE>
Venture Maximum Credit
Rancocas Limited Partnership $ 3,000,000
"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 containin g 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 Note 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 Note or any other Loan
Document, to make payments of any nature to Lender, Lender shall be entitled,
and Borrower hereby authorizes Lender to draw against any Deposit Account owned
by Borrower at Lender on account of such fees and expenses or payments due. By
10:00 a.m. on the date on which any draw is made, Lender 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.
1.6 Lender's Costs. Borrower shall, upon the request of
Lender, pay Lender the amount of all unpaid Lender's Costs within fifteen days
after such notice. Until paid, all past due and owing
(13)
<PAGE>
interest payments, fees and all past due Lender's 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 and Term Loan 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, Lender shall extend to Borrower the Revolving
Credit pursuant to which Lender shall make Advances to Borrower up to
$20,000,000 (or such lesser amount to which the Revolving Credit shall be
reduced pursuant to Section 2.2.8.3 hereof), which Borrower may from time to
time, borrow, repay and reborrow.
2.1.2 Term 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, Lender shall, from time to time, extend Term
Loans to Borrower, which Term Loans shall mature on the applicable Term Loan
Maturity Dates elected by Borrower in accordance with Section 2.2.15 hereof.
2.1.3 Payment of Principal.
2.1.3.1 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 that were not made as or converted
to Term Loans and the face amount of Letters of Credit issued and outstanding
under Section 2.1.8 hereof at any time exceeds $20,000,000 in the aggregate,
Borrower shall immediately pay such excess to Lender, without demand or notice.
(14)
<PAGE>
2.1.3.2 The principal of each Term Loan shall be paid in
consecutive monthly installments, commencing on the first Business Day of the
second calendar month after the Funding Date of such Term Loan and on the first
Business Day of each calendar month thereafter, to and including the month in
which the applicable Term Loan Maturity Date occurs. The amount of each such
monthly installment shall be determined by an amortization schedule, prepared by
Lender, that fully amortizes the principal amount of the Term Loan that was
outstanding on the Funding Date thereof (subject to recalculation in accordance
with the next following sentence) in 300 level monthly payments of principal and
interest, with interest calculated (i) at the rate of 8.0% per annum, on
Floating Rate Term Loans and (ii) at the rate of interest that is charged on the
subject Fixed Rate Term Loan. If a Floating Rate Term Loan is subsequently
converted to a Fixed Rate Term Loan, the monthly principal payments payable
thereon shall be recalculated by Lender in accordance with this Section 2.1.3.2
based on the fixed rate of interest then payable on such Fixed Rate Term Loan,
but the amortization period for such recalculation shall be reduced to 300 minus
the number of monthly installments of principal of the Floating Rate Term Loan
that were theretofore payable. The entire outstanding principal balance of each
Term Loan shall be due and payable on the applicable Term Loan Maturity Date.
2.1.4 Payment of Interest. Interest on the Revolving Credit
and all Term Loans 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.
2.1.5 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): (i) 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); (ii) 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); and (iii) with respect to Fixed Rate Term Loans, which
loans shall not become available until Borrower's notice to Lender that Borrower
requests the Fixed Rate Interest Rate Option to become available, along with the
payment to Lender of $110,000, if said amount has not previously been paid to
Lender on the first anniversary of the date of this Agreement in accordance with
Section 4.1.10 hereof, the applicable rate quoted by Lender (which shall be
Lender's then-
(15)
<PAGE>
current market rate of interest for similar loans) and accepted by Borrower. 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.
2.1.6 Unused Fee. Borrower agrees to pay to Lender a fee at an
annual rate equal to one quarter of one percent (0.25%) 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.
2.1.7 Note. To evidence Borrower's obligations under the
Revolving Credit and all Term Loans, Borrower shall execute and deliver the Note
to Lender.
2.1.8 Letters of Credit. Upon receipt of a properly executed
Notice of Borrowing submitted by Borrower to Lender at least five Business Days
before the date of issuance, Lender 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 2.1.8
shall not exceed $5,000,000 at any time. Letters of Credit may provide for
automatic renewal absent termination by Lender, 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 Lender'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 2.1.8.
2.1.8.1 Letter of Credit Fee. Borrower agrees to pay to Lender
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.
2.1.8.2 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 maximum amount of the Revolving Credit as provided
herein.
(16)
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2.1.8.3 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 2.1.3 hereof.
2.1.8.4 Other Documents. Borrower agrees to execute and
deliver such documents and instruments as Lender may require in connection with
each Letter of Credit.
2.1.9 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 Lender 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"), and by the
amount that is outstanding under the Promissory Notes dated November 3, 1994
made by VLRC Associates in favor of CoreStates Bank, N.A. and the other Lender
parties to the Revolving Credit Agreement dated November 3, 1994 (the "VLRC
Notes") until the Turren Note or the VLRC Note is replaced with a Venture Note
executed by Turren Associates or VLRC Associates, as applicable, in favor of
Lender in a principal amount at least equal to such outstanding amounts, and, in
the case of the execution of a Venture Note by Turren Associates, the execution
of a Guaranty on the same terms as the Guaranty dated May 5, 1992 executed in
connection with the Turren Note (exclusive of the Addendum to Guaranty of even
date). 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
Lender a promissory note in the form attached hereto as Schedule 2.1.9A in the
principal amount of such Venture Loan and Borrower shall execute and deliver to
Lender a guaranty or guaranties of such Venture Loan in the form attached hereto
as Schedule 2.1.9B. 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 Lender to a Venture during an Interest
Period shall bear interest at the Base Rate until the expiration of the relevant
Interest Period.
(17)
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2.2 General Provisions.
2.2.1 Intentionally Omitted.
2.2.2 Notice of Borrowing. Subject to the provi- sions of this
Article 2, whenever Borrower desires to borrow under this Agreement, or to
convert any Revolving Credit Loan to a Term Loan, 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 and Fixed Rate Term 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, if any, and whether such Advance is to be a Term
Loan, (iii) which Revolving Credit Loan, if any, is to be converted to a Term
Loan, (iv) whether an Advance, if it is to be Revolving Credit Loan, is
initially to consist of Base Rate Loans, Adjusted LIBOR Loans or a combination
thereof, (v) whether a Term Loan is initially to be a Base Rate Loan, an
Adjusted LIBOR Loan, or a Fixed Rate Term Loan; and (vi) 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, that the minimum amount of Term Loans shall be $5,000,000,
and that at no time shall the aggregate number of Interest Periods, Base Rate
Loans and Fixed Rate Term Loans, excluding Venture Loans, that Lender shall be
required to administer at any time exceed twelve (12). Subject to the foregoing
limitations, Floating Rate Loans may be continued as or converted into Adjusted
LIBOR Loans or Fixed Rate Term Loans in the manner provided in Section 2.2.3
hereof upon the submission to Lender 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 to
an Adjusted LIBOR Loan in accordance therewith.
2.2.3 Notice of Rate Election; Failure to Give Notice.
Whenever Borrower desires to change or continue the Interest Rate Option on a
Floating Rate Loan, 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. Whenever
Borrower desires to
(18)
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convert a Floating Rate Term Loan to a Fixed Rate Term Loan, Borrower shall
deliver to Agent a Notice of Rate Election no later than 11:00 A.M. at least one
Business Day in advance of the proposed conversion. No notice shall be necessary
to continue any Base Rate Loan at the Base Rate. The Notice of Rate Election
shall specify: (i) the proposed date of change or continuation or conversion
(which shall be a Business Day); (ii) the Floating Rate Loan and amount thereof
affected; (iii) whether such interest rate change or continuation is to consist
of Fixed Rate Term Loans, Adjusted LIBOR Loans or a combination thereof; and
(iv) the Interest Periods therefor. 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 at the interest rate that is based
on Adjusted LIBOR, then such Adjusted LIBOR Loans 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 or
Fixed Rate Term Loans only on the expiration date of an Interest Period
applicable thereto. In addition, no outstanding portions of the Revolving Credit
or any Floating Rate Term Loan may be continued as, or be converted into,
Adjusted LIBOR Loans, and no Revolving Credit Loan may be converted to a Term
Loan, 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, or any
Term Loan is, 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, and such Term Loan, shall bear interest at the
Base Rate.
2.2.4 Funding. Upon satisfaction of the conditions precedent
specified in Section 4.2, not later than 11:00 A.M. on the Funding Date
specified in the Notice of Borrowing, Lender shall make such Advance available
to Borrower on the Funding Date
(19)
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pertaining thereto by depositing the amount thereof in the designated account of
Borrower with Lender.
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:
2.2.5.1 the first Interest Period for any Adjusted LIBOR Loan
shall commence on the Funding Date of such Adjusted LIBOR Loan;
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, with respect to any Revolving
Credit Loan, shall extend beyond the Termination Date or, with respect to any
Floating Rate Term Loan, shall extend beyond the applicable Term Loan Maturity
Date.
2.2.6 Post-Maturity Interest. Any principal pay- ments 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
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, if any, and after the expiration of the
then applicable Interest Period, if any, at a rate which is 2% per annum in
excess of the Base Rate.
(20)
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2.2.7 Adjusted LIBOR, Base Rate, and Fixed Rates.
2.2.7.1 Lender shall give 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. Lender shall give Borrower prompt notice, following each
request therefor from Borrower, of the then applicable rate of interest
available for Fixed Rate Term Loans (determined as set forth in Section
2.1.5(iii)) with the available Term Loan Maturity Date requested by Borrower,
which offered rate of interest shall be available to Borrower for a period of
two (2) Business Days, provided that Borrower delivers to Lender within such two
(2) Business Day period an appropriate Notice or Notices of Borrowing or of Rate
Election, as appropriate.
2.2.7.2 If Borrower requests that all or any portion of the
outstanding Revolving Credit or all of a Term Loan bear interest at the Adjusted
LIBOR and (i) Lender 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) certifies that the relevant
rates of interest referred to in the definition of Adjusted LIBOR do not
accurately reflect the cost to Lender of making or maintaining Adjusted LIBOR
Loans for the Interest Periods therefor, then Lender shall forthwith give notice
thereof to Borrower, whereupon until Lender notifies Borrower that the
circumstances giving rise to such suspension no longer exist, (a) the obligation
of Lender 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 Lender 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 Lender to make or maintain or fund loans at the Adjusted LIBOR,
Lender shall promptly notify Borrower and the interest rates on the applicable
portions of the outstanding Revolving Credit or a Floating Rate Term 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
(21)
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Period if Lender may lawfully continue to maintain loans at the Adjusted LIBOR
to such day, or (ii) immediately if Lender may not lawfully continue to maintain
loans at the Adjusted LIBOR to such day. 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 Lender to make, maintain or fund loans at the Adjusted LIBOR,
Borrower shall not request future Adjusted LIBOR Loans until the Lender shall
have notified Borrower of the absence or removal of such illegality or
impossibility.
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, Lender,
or shall impose on 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 Lender of making or maintaining the interest rate at the
Adjusted LIBOR or to reduce the amount of any sum received or receivable by
Lender under this Agreement, the Note or the Venture Notes by an amount deemed
by Lender to be material, then within five days after demand by Lender, Borrower
shall pay to Lender such additional amount or amounts as will compensate Lender
for such increased cost or reduction. Lender will promptly notify Borrower of
any event of which it has knowledge occurring after the date hereof, which will
entitle Lender to compensation pursuant to this subsection 2.2.7.4. A
certificate of Lender claiming compensation under this subsection 2.2.7.4 and
setting forth the additional amount or amounts to be paid to Lender 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 Lender 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
(22)
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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 Lender, furnish to Lender evidence, in form and
substance satisfactory to Lender, that Borrower has met its obligation under
this subsection 2.2.7.6. Borrower will indemnify Lender against, and reimburse
Lender on demand for, any Eurodollar Rate Tax, as determined by Lender in its
good faith discretion. 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 Lender as to any amount payable pursuant to this
Section shall, absent manifest error, be final, conclusive and binding on all
parties hereto.
2.2.7.7 If 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 Lender
(or any lending office or any holding company of 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 Lender (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 Lender of making or maintaining, or to impose upon
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 Loan as a consequence of Lender's obligations pursuant to this
Agreement or Loans made by Lender pursuant hereto to a level below that which
Lender (or Lender's holding company) could have achieved but for such adoption,
imposition, change or compliance (taking into consideration Lender's policies
and the policies of Lender's holding company with respect to capital adequacy)
by an amount deemed by such holder to be material (which
(23)
<PAGE>
adoption, imposition, change, or increase in capital requirements or reduction
in amounts receivable may be determined by Lender'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 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 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. Lender (or Lender's holding company) shall be entitled to
compensation pursuant to this Section 2.2.7.7. A certificate of Lender claiming
compensation under this Section 2.2.7.7 and setting forth the increased cost,
reduction in amounts receivable, additional amount or amounts necessary to
compensate Lender (or Lender's holding company) hereunder shall be delivered to
Borrower and shall be conclusive in the absence of manifest error. Borrower
shall pay Lender the amount shown as due on any such certificate delivered by
Lender within 10 days after Borrower's receipt of same. If Lender demands
compensation under this Section, Borrower may, upon 10 Business Days' prior
notice to Lender, prepay in full, in accordance with Section 2.2.8 hereof, the
then outstanding: (i) Base Rate Loans together with accrued interest thereon to
the date of prepayment without penalty; and (ii) Adjusted LIBOR Loans and Fixed
Rate Term Loans, together with accrued interest thereon to the date of
prepayment along with a prepayment premium in an amount equal to the amount of
any funding loss actually incurred by Lender as a direct result of such
prepayment, as determined by Lender in good faith, in each case payable to
Lender. Concurrently with prepaying such Base Rate Loans or Adjusted LIBOR
Loans, Borrower may, subject to the terms of this Agreement, borrow from Lender
Advances at an Interest Rate Option not so affected.
2.2.7.8 Failure on the part of 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 Lender's right to demand compensation with respect to such period or
any other period. The protection of this Section shall be available to 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.
2.2.8 Prepayment; Repayments; Prepayment Premium.
(24)
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2.2.8.1 Voluntary Prepayments. In connection with each
voluntary prepayment:
(a) Borrower shall provide Lender with at least one
(1) Business Day prior notice of Borrower's 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.
(c) Borrower shall concurrently with the prepayment
in full of any Term Loan pay the full amount of any accrued interest thereon,
and payments received shall be applied first to accrued interest and thereafter
in reduction of principal.
(d) Each prepayment of principal shall be in an
amount equal to the lesser of (i) 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) or (ii) the amount
required to pay in full any outstanding Term Loan (in which event such
prepayment shall be applied in payment of such Term Loan).
(e) Borrower acknowledges that if Borrower makes a
prepayment of any Term Loan or any Revolving Credit Loan that is an Adjusted
LIBOR Loan (whether voluntary or mandatory), Lender will not likely be able to
reinvest promptly the amount so prepaid in a loan of comparable creditworthiness
and on terms equivalent to the terms hereof. Accordingly, if a Term Loan or any
Revolving Credit Loan that is an Adjusted LIBOR Loan is prepaid, Borrower shall
pay to Lender, concurrently with such prepayment, a Prepayment Premium
determined as follows:
(I) If the prepayment is made with respect to a
Fixed Rate Term Loan and is made during the first half of the period from the
applicable Funding Date to the applicable Term Loan Maturity Date, the
Prepayment Premium shall be calculated as follows:
On the date of prepayment, the remaining
payments of principal and interest that would otherwise have become payable on
such Fixed Rate Term Loan shall be discounted to a present value at a rate per
annum equal to the Applicable Yield
(25)
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to Maturity on such date of prepayment, and if such discounted value shall
exceed the unpaid principal amount of such Fixed Rate Term Loan being prepaid,
the Prepayment Premium shall be an amount equal to such excess; otherwise no
Prepayment Premium shall be payable.
(II) If the prepayment is made with respect to a
Fixed Rate Term Loan and is made after the expiration of the period described in
clause (I) above, the Prepayment Premium shall be equal to the product of (x)
the amount of such prepayment multiplied by (y) the greater of (A) one half of
one percent (0.5%) or (B) the amount, if any, by which the Applicable Yield to
Maturity pertaining to such Fixed Rate Term Loan, as determined on the day which
interest thereon was first charged at a fixed rate of interest, plus one-half of
one percent (0.5%) per annum exceeded the Applicable Yield to Maturity
pertaining to such Fixed Rate Term Loan, as determined on the date such
prepayment is made.
(III) If the prepayment is made with respect to
a Floating Rate Term Loan and is made during the first half of the period from
the applicable Funding Date to the applicable Term Loan Maturity Date, the
Prepayment Premium shall be equal to the sum of (A) one and one half percent
(1.5%) of the amount prepaid plus (B) the amount determined pursuant to clause
(V) below.
(IV) If the prepayment is made with respect to a
Floating Rate Term Loan and is made after the expiration of the period described
in clause (III) above, the Prepayment Premium shall be equal to the sum of (A)
one percent (1%) of the amount prepaid if the prepayment is made more than one
(1) year before the applicable Term Loan Maturity Date and zero if the
prepayment is made within one (1) year of the applicable Term Loan Maturity Date
plus (B) the amount determined pursuant to clause (V) below.
(V) If Borrower prepays, during the applicable
Interest Period on a day other than the last day of such Interest Period, any
Revolving Credit Loan that is an Adjusted LIBOR Loan, the Prepayment Premium
with respect to such Revolving Credit Loan will be calculated as follows (and
the Prepayment Premiums determined pursuant to clauses (III) and (IV) above
shall include):
On the date of prepayment, the principal amount
of the Revolving Credit Loan being prepaid and interest that would have accrued
thereon to the last day of the applicable Interest Period shall be discounted to
a present value at a rate per annum equal to the Applicable Yield to Maturity as
of the date of such prepayment, and if the discounted value shall exceed the
(26)
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principal amount of the Revolving Credit Loan being prepaid, then the Prepayment
Premium shall be an amount equal to such excess; otherwise no Prepayment Premium
shall be payable.
(VI) Notwithstanding the provi- sions of clauses
(III)(A) and (IV)(A) above, the Prepayment Premiums provided for therein shall
only be payable if the prepayment is made with the proceeds of Debt incurred by
Borrower for such purpose and shall not be payable if such prepayment is made
with the proceeds of any offering of equity securities by Borrower or with the
net proceeds of the sale of any Property. For purposes of this clause (VI) a
prepayment shall be deemed to have been made with the proceeds of Debt incurred
by Borrower for such purpose to the extent that the amount of Debt for borrowed
money incurred by Borrower during the period commencing three (3) months before
and ending three (3) months after the date of such prepayment, (exclusive of any
such amounts assumed in connection with any acquisition, merger or similar
transaction), exceeds the sum of (i) the net proceeds of the sale of Properties
and offering of equity securities received by Borrower during such period plus
(ii) the aggregate amount of repayments made by Borrower during such period of
Debt for borrowed money (excluding the amount of all prepayments of Term Loans).
Furthermore, the Prepayment Premiums provided for in clauses (III)(A) and
(IV)(A) above shall not be payable in the event Borrower makes a prepayment of
the Loans after Lender declines to waive any and all breaches of any covenants
or other Events of Default caused by Borrower's acquisition of or merger with
another entity.
(f) Partial prepayments of the Revolving Credit shall
be applied first to Prepayment Premium (to the extent payable), then 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 Revolving Credit Loans accruing
interest at a rate based upon the Adjusted LIBOR and among such portions of the
Revolving Credit 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 Lender as provided in this Article 2, Borrower shall reimburse
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 Lender shall have delivered to the Borrower a
certificate as to the amount of such loss
(27)
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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 Commit- ments. Borrower
shall have the right without premium or penalty except as provided in Section
2.2.8.1 hereof, upon not less than three Business Days' prior written notice to
Lender, at any time after the Closing Date to reduce or terminate any or all of
the commitment of Lender regarding the Revolving Credit or the Term Loan Credit
or both. 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 $1,000,000. If Borrower desires to terminate or
reduce the Commitment Amount as aforesaid, Borrower shall execute and deliver to
Lender such documents and instruments as Lender shall require.
2.2.9 Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Note shall be made by Borrower without
notice, set off or counterclaim and in immediately available same day funds and
delivered to Lender not later than 12:00 noon on the date due at its office
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19101; funds
received by Lender after that time shall be deemed to have been paid by Borrower
on the next succeeding Business Day.
2.2.10 Intentionally Deleted.
2.2.11 Use of Proceeds. The Revolving Credit and Term Loan
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), (iii) to refinance existing indebtedness, and (iv) 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 Lender in payment or on account of the
Indebtedness constitute only conditional payment until such items are actually
paid to Lender.
(28)
<PAGE>
2.2.14 Postponement of Termination Date. If Borrower desires
to extend the Termination Date of this Agreement, Borrower shall deliver to
Lender 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. Any such request shall be to extend the Termination Date by 12 months.
Lender 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 Lender has approved such request, which approval shall be in
Lender's sole discretion. If Lender approves such request, the Termination Date
shall be postponed for 12 months and Borrower and Lender shall promptly execute
and deliver such documentation Lender may require to evidence such postponement.
If Lender does not give Borrower written notice of Lender's approval of the
requested postponement, the then-current Termination Date shall remain
unchanged.
2.2.15 Term Loans. Each Notice of Borrowing and Notice of Rate
Election pursuant to which Borrower elects to create a Term Loan shall also
include the Term Loan Maturity Date elected by Borrower with respect to such
Term Loan, provided that Borrower may not elect (i) to create Term Loans, in the
aggregate amount in excess of $55,000,000, (ii) the Term Loan Maturity Date of a
Term Loan may not be later than ten (10) years after the date of this Agreement,
(iii) the maximum sum of the initial principal amounts of all Term Loans having
Term Loan Maturity Dates later than seven (7) years after the date of this
Agreement may not exceed $30,000,000, (iv) payments of principal of Term Loans
made by Borrower, whether scheduled payments or prepayments, may not be
reborrowed, whether as Term Loans or as Advances of the Revolving Credit, and
(v) at any time, Borrower may not elect that interest on a Term Loan be charged
other than at the same rate on the entire outstanding principal amount of that
particular Term Loan.
ARTICLE 3
SECURITY
3.1 Mortgages. As security for its obligations under this
Agreement and the Note, Borrower shall execute, acknowledge and deliver to
Lender a Mortgage with respect to each Property that is part of the Initial
Unencumbered Property Pool and an assignment of rents, leases and profits and
UCC-1 Financing Statements with respect to each such Property. Such Mortgages
shall be in the aggregate amount of $75,000,000, allocated among such Properties
as Borrower and Lender have agreed. Within five (5) Business Days after written
notice by Lender from time to time, Borrower shall re-execute and acknowledge
the Mortgages and deliver the same to Lender.
(29)
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3.2 Recording of Mortgages. Lender agrees that no Mortgage
will be recorded by or at the direction of Lender until the first to occur of
(i) Borrower's failure to pay any regularly scheduled payment of principal or
interest when due and Lender's written notification to Borrower of such failure
and that Lender intends to record any or all of the Mortgages as a result
thereof ("Lender's Notice") and Borrower's failure to make such regularly
scheduled payment of principal or interest within five (5) Business Days of
Lender's Notice, or (ii) such time as the ratio described in Section 6.1.1
exceeds 7.0 to 1. Upon the occurrence of any such event, Lender may, at its
option, cause any one or more of the Mortgages and such assignments of rents,
leases and profits and UCC-1 Financing Statements to be recorded. If Lender is
entitled to record, and does record, any or all of the Mortgages, all costs
incurred by Lender in the recording of Mortgages and such other security
instruments (including, without limitation, mortgage, documentary or recording
stamps or taxes, and all other taxes payable by Lender by reason of its holding
a Note that is secured by Mortgages) shall be Lender's Costs, shall be paid or
reimbursed by Borrower upon demand, and shall be secured by the Mortgages.
Except as expressly provided in the immediately preceding sentence, Borrower is
not responsible to pay Lender's Costs in connection with the preparation, review
and recording of the Mortgages, and Lender shall reimburse Borrower for
Borrower's Costs.
3.3 Removals from and Additions to Unencumbered Property Pool.
3.3.1 Prior to the recording of Mortgages pur- suant to
Section 3.2 hereof, Lender shall, within ten (10) Business Days after each
written request by Borrower to Lender, return to Borrower the Mortgage with
respect to any Property within the Unencumbered Property Pool, provided that
such Property shall, retroactively as of the last day of the most recently
conducted Fiscal Quarter, no longer be deemed to be part of the Unencumbered
Property Pool, and further provided that, as a result of the removal of such
Property from the Unencumbered Property Pool the covenant contained in Section
6.1.3 hereof would not have been breached as of the last day of the most
recently concluded Fiscal Quarter. If a Property is requested to be removed from
the Unencumbered Property Pool in connection with its sale, the Mortgage will be
returned to Borrower concurrently with the closing of such sale and, for
purposes of determining Borrower's continued compliance with Section 6.1.3
hereof following removal of such Property from the Unencumbered Property Pool,
the sale will be deemed to have occurred on the last day of the most recently
concluded Fiscal Quarter.
(30)
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3.3.2 At any time after the recording of the Mortgages
pursuant to Section 3.2 hereof, Borrower may obtain from Lender the release of
any Mortgage, within ten (10) Business Days after Borrower's written request
therefor, specifying the Mortgage to be released, provided that (i) there then
exists no Event of Default, (ii) the covenant contained in Section 6.1.3 hereof
would not have been breached, as of the end of the most recently concluded
Fiscal Quarter, had the Property that is subject to such Mortgage not then been
part of the Unencumbered Property Pool, and (iii) Borrower has made prepayments
of Term Loans, or reduced the Commitment Amount, or both, in an aggregate amount
not less than the portion of the Indebtedness that is secured by such Mortgage
(and which prepayments were not previously the basis for the release of another
Mortgage pursuant to this Section 3.3.2) (the "Release Amount" and provided that
after total principal payments have been made on one or more Term Loans pursuant
to Section 2.1.3.2 in an aggregate amount of $1,000,000, subsequent payments of
principal made pursuant to Section 2.1.3.2 shall be covered in the Release
Amount.
3.3.3 Borrower may at any time, in connection with the return
of a Mortgage by Lender pursuant to Section 3.3.1 hereof, or otherwise, add
Properties to the Unencumbered Property Pool by executing, acknowledging and
delivering to Lender a Mortgage encumbering a Substituted Unencumbered Property,
and such Property will thereupon become part of the Unencumbered Property Pool,
provided that (i) the Substituted Unencumbered Property, in Lender's good faith
determination, must be of like quality to the Properties that are then part of
the Unencumbered Property Pool, (ii) the Substituted Unencumbered Property will
be deemed to have been added to the Unencumbered Property Pool as of the last
day of the most recently concluded Fiscal Quarter for purposes of determining
compliance with the covenant contained in Section 6.1.3 hereof, (iii) the
Property that is to become part of the Unencumbered Property Pool must be free
of all liens and encumbrances, other than Permitted Liens, and (iv) no Property
shall be a Substituted Unencumbered Property unless Lender has received such
environmental reports with respect to such Property as Lender in good faith
requires and shall have found such reports to be acceptable to Lender in the
good faith exercise of Lender's business judgment.
3.4 Release of All Mortgages. Upon written request by Borrower
prior to the recording of any Mortgage, Lender shall return to Borrower all
Mortgages then held by Lender in the event that, at the time such notice is so
received by Lender, the ratio described in Section 6.1.1 hereof is less than 5.0
to 1; provided that if such ratio shall at any time thereafter exceed 5.5 to 1,
Borrower shall, within ten (10) Business Days after receipt of written notice
from Lender, deliver to Lender an executed and acknowledged Mortgage,
(31)
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assignment of rents, leases and profits, and UCC-1 Financing Statements with
respect to each Property then in the Unencumbered Property Pool, which security
instruments shall be in the same forms as those delivered in connection with the
execution of this Agreement and shall be held by Lender in accordance with the
terms of this Article 3.
ARTICLE 4
CONDITIONS PRECEDENT
The performance by Lender of any of its obligations hereunder
is subject to the following conditions precedent:
4.1 Initial Funding of the Loans. Borrower shall deliver or
cause to be delivered to Lender on the Closing Date (except as otherwise
indicated herein), in form and substance satisfactory to Lender and its counsel,
in addition to this Agreement, the following documents and instruments and the
following transactions shall have been consummated:
4.1.1 The Note;
4.1.2 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 Note, the Mortgages, all other Loan
Documents, and all other documents and instruments required by Lender 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;
4.1.3 An incumbency and signature certificate with respect to
each of the trustees of Borrower authorized to execute and deliver this
Agreement, the Note, the Mortgages, the other Loan Documents, and all other
documents and instruments required by Lender for the implementation of this
Agreement and to be the Authorized Signers;
4.1.4 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 Note by each Venture, together with copies
of each Venture's partnership agreement;
4.1.5 A Mortgage, executed and acknowledged by Borrower, any
subsidiary of Borrower or any Venture, as appropriate,
(32)
<PAGE>
with respect to each property in the Initial Unencumbered Property
Pool.
4.1.6 The opinion of Borrower's and Borrower's subsidiaries'
counsel, in form and substance acceptable to Lender in their reasonable
judgment;
4.1.7 A Notice of Borrowing with respect to any Advances,
Venture Loans, and Term Loans requested as of the Closing Date;
4.1.8 Venture Notes evidencing, and Borrower's Guaranties of,
any Venture Loans then requested by Borrower (except that no new note evidencing
the Venture Loan to Turren Associates shall be required);
4.1.9 Such additional documents or instruments as may be
required by this Agreement or as Lender may reasonably require; and
4.1.10 A structuring fee in the amount of $150,000 and a
portion of the term loan commitment fee equal to $165,000. If, on the first
anniversary of this Agreement, Borrower has not yet requested that the Fixed
Rate Interest Rate Option become available and made the $110,000 payment
pursuant to Section 2.1.5, then on the first anniversary of this Agreement,
Borrower shall pay the balance of the term loan commitment fee in the amount of
$110,000. The fees payable pursuant to this Section 4.1.10 are in addition to
Borrower's obligation to pay Lender's Costs, as required by the Agreement. No
portion of the fees payable pursuant to this Section 4.1.10 shall be returned to
Borrower in the event that the Revolving Credit is terminated, for any reason,
prior to the Termination Date, or if Borrower does not request Term Loans in the
maximum amount available pursuant to the terms hereof, or if the maturity of any
Term Loan is accelerated by Lender by reason of the occurrence of any Event of
Default.
4.2 All Loan Fundings. On the Funding Date of any Advance of
the Revolving Credit, Term Loan, Venture Loan or issuance date of any Letter of
Credit: (a) Lender shall have received a Notice of Borrowing as required by
Section 2.2.2; (b) the representations and warranties set forth in Articles 5
and 5A 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 Lender and not objected to by Lender; (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
(33)
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the terms and conditions hereof, of the Note, and of all other Loan Documents,
in each case on and as of the date of the performance of such obligations by
Lender; and (e) with respect to each Venture Loan, Borrower shall cause to be
delivered to Lender (if such have not theretofore been delivered to Lender), 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 Note 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 of the Revolving Credit, Term Loan, 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.
ARTICLE 5
BORROWER'S REPRESENTATIONS AND WARRANTIES.
5.1 Borrower represents and warrants to each Lender as
follows:
5.1.1 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.
5.1.2 Power and Authority. The making, execu- tion, issuance
and performance by Borrower of this Agreement, the Note, 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 Note, the Mortgages and the
other Loan Documents have been duly executed and delivered by Borrower and
constitute legal, valid and binding
(34)
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obligations of Borrower, enforceable in accordance with their
respective terms.
5.1.3 Financial Condition. The audited balance sheet of
Borrower together with income and surplus statements as at and for the year
ended August 31, 1995 and the unaudited balance sheet of Borrower together with
income and surplus statements as at and for the nine months ended May 31, 1996
heretofore furnished to Lender, 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,
1996, 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.
5.1.4 No Litigation. Except as set forth on Schedule 5.1.4
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.
5.1.5 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 Note, the Mortgages or any
other Loan Document.
(35)
<PAGE>
5.1.6 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).
5.1.7 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.
5.1.8 Environmental.
Except as set forth in Schedule 5.1.8 and as identified in the
reports provided to Lender pursuant to Section 6.1.25 hereof, or where failure
to comply would not have or result in a Materially Adverse Effect on Borrower or
the conduct of Borrower's Business;
5.1.8.1 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.
5.1.8.2 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
(36)
<PAGE>
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.
5.1.9 Liens. None of the Properties that constitute the
Initial Unencumbered Property Pool is subject to any lien or encumbrance, other
than Permitted Liens.
5.1.10 Other Contractual Obligations. The execu- tion 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.
5.1.11 Investment Company Act. Borrower is not an Investment
Company within the meaning of the Investment Company Act of 1940.
5.1.12 Public Utility Holding Company Act. Borrower is not a
Public Utility Holding Company within the meaning of the Public Utility Holding
Company Act.
5.1.13 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.
5.2 Accuracy of Representations; No Default. The infor- mation
regarding the Borrower or any Venture Borrower set forth herein and on each of
the Schedules hereto, in the Note, the other Loan Documents and each document
delivered by the Borrower or any Venture Borrower to Lender 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 Note or the other Loan Documents, has occurred.
(37)
<PAGE>
ARTICLE 5A
BORROWER'S REPRESENTATIONS AND WARRANTIES
REGARDING THE VENTURE BORROWERS.
5A.1 Borrower, as the holder of a 50% or more beneficial, or
other controlling, ownership in each of the Venture Borrowers, represents and
warrants to Lender as follows with respect to each Venture Borrower which has
executed a Venture Note:
5A.1.1 Good Standing. Except as set forth on Schedule 5A.1.1,
each Venture Borrower 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.
5A.1.2 Power and Authority. The making, execu- tion, issuance
and performance by each Venture Borrower of its respective Venture Note 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
Borrower; will not violate any agreement, trust or other indenture or instrument
to which such Venture Borrower is a party or by which such Venture Borrower or
any of its property is bound. Each Venture Note has been duly executed and
delivered by the respective Venture Borrower and constitutes the legal, valid
and binding obligation of such Venture Borrower, enforceable in accordance with
its respective terms.
5A.1.3 No Litigation. To the best of Borrower's knowledge, and
except as set forth on Schedule 5.1.4 hereto, there are no suits or proceedings
pending, or, to the knowledge of Borrower, threatened against or affecting any
Venture Borrower, and none of the Venture Borrowers is in default in the
performance of any agreement to which such Venture Borrower may be a party or by
which such Venture 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 such Venture Borrower.
5A.1.4 Compliance. To the best of Borrower's knowledge, each
of the Venture Borrowers has all Governmental Approvals necessary for the
conduct of their respective businesses, and the conduct of their respective
businesses is not and has not
(38)
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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 Borrower. No Venture Borrower requires any Governmental Approvals to
enter into, or perform under its respective Venture Note.
5A.1.5 Compliance with Regulations T, U and X. No Venture
Borrower 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).
5A.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 Borrower or of any trade or business
(whether or not incorporated) which is under common control with such Venture
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. No Venture Borrower 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 Borrower is a party to any multi-employer
plan.
5A.1.7 Other Contractual Obligations. To the best of
Borrower's knowledge, the execution by each Venture Borrower and delivery of
such Venture Borrower's Venture Note does not, and the performance by such
Venture Borrower of its obligations and covenants thereunder will not, violate
any other contractual obligation of such Venture Borrower.
5A.1.8 Investment Company Act. No Venture Borrower is an
Investment Company within the meaning of the Investment Company Act of 1940.
(39)
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5A.1.9 Public Utility Holding Company Act. No Venture Borrower
is a Public Utility Holding Company within the meaning of the Public Utility
Holding Company Act.
5A.1.10 RICO. To the best of Borrower's knowledge, no Venture
Borrower has engaged in any conduct or taken or omitted to take any action which
violates RICO.
5A.2 Accuracy of Representations; No Default. The infor-
mation regarding any Venture Borrower set forth herein and on each of the
Schedules hereto, in the Venture Borrower Note and each document known by
Borrower to have been delivered by any Venture Borrower to Lender 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 Note has occurred.
ARTICLE 6
AFFIRMATIVE COVENANTS
6.1 Borrower's Covenants. As long as any portion of the
Indebtedness or any Venture Loan remains outstanding and unpaid, Lender has 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 Lender, Borrower shall:
6.1.1 Maintain the ratio of (a) Consolidated Liabilities, as
reported in Borrower's most recent Company-Prepared Consolidated Financial
Statements, plus, without duplication, Contingent Liabilities minus the amount
of Cash and cash equivalents of Borrower plus Borrower's Percentage Interest in
Cash and Cash Equivalents of the Ventures as so reported to (b) Consolidated NOI
at no more than 7.25 to 1.
6.1.2 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;
(40)
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6.1.3 Maintain NOI generated by the Unencumbered Property Pool
("Unencumbered NOI") at not less than $8,830,000 (the "Unencumbered NOI
Standard") 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 7.9 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; provided
that if the Unencumbered NOI shall be less than $9,500,000 (which number shall
be reduced proportionally with any reduction of the Unencumbered NOI Standard as
provided below), the Revolving Credit (and, as a result thereof, the Commitment
Amount) shall be reduced by the product of (i) $7.90 multiplied by (ii)
$9,500,000 (which number shall be reduced proportionally with any reduction of
the Unencumbered NOI Standard as provided below) minus the Unencumbered NOI; and
provided further that if a Property that was part of the Unencumbered Property
Pool is sold in a bona fide transaction to a Person who is not an Affiliate of
Borrower, the Unencumbered NOI Standard shall be reduced, effective as of the
end of the most recently concluded Fiscal Quarter, by the NOI of the Property so
sold during the last four Fiscal Quarters that such Property was owned by
Borrower, but in no event shall the required Unencumbered NOI ever be less than
$7,000,000 (which number shall be reduced proportionally with any reduction of
the Unencumbered NOI Standard as provided below). Any reduction of the Revolving
Credit (and the Commitment Amount) resulting pursuant to this Section 6.1.3
shall continue in effect until the next quarterly calculation is made pursuant
to this Section 6.1.3, at which time such reduction shall be reversed by an
amount commensurate with any increase in Unencumbered NOI. The Unencumbered NOI
Standard shall also be reduced effective as of the end of the most recently
concluded Fiscal Quarter each time Borrower makes prepayments of the principal
of one or more Term Loans, or reduces the Commitment Amount, or both, in an
aggregate amount that is at least $1,000,000, each such reduction of the
Unencumbered NOI Standard to be equal to the quotient of the sum of such
payments of principal and reductions of the Commitment Amount divided by 7.9,
and provided that after total principal payments have been made on one or more
Term Loans pursuant to Section 2.1.3.2 in an aggregate amount of $1,000,000,
subsequent payments of principal made pursuant to Section 2.1.3.2 shall be
counted in the $1,000,000 amount required for reductions in the Unencumbered NOI
Standard as provided herein.
6.1.4 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, exclusive of gross proceeds used in any acquisition of intangible
assets;
(41)
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6.1.5 Maintain the ratio of Consolidated NOI to Actual Debt
Service at not less than 1.4 to 1, tested at the end of each Fiscal Quarter on a
rolling four Fiscal Quarter historical basis;
6.1.6 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 1.25 to 1;
6.1.7 Deliver to Lender, 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;
6.1.8 Deliver to Lender, within 60 days after the end of each
Fiscal Quarter, Company-Prepared Consolidated Financial Statements;
6.1.9 Deliver to Lender, 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 Lender; provided that if such financial statements are
prepared by another national firm of certified public accountants that is
reasonably acceptable to Lender, 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, and provided that no opinion of any
accountant shall be considered to be qualified merely because such accountants
have relied upon financial statements or opinions prepared or issued by or on
behalf of the Ventures;
6.1.10 Deliver to Lender, 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;
6.1.11 Deliver to Lender, at the time each finan- cial
statement is required to be delivered pursuant to Sections 6.1.7 and 6.1.9
hereof, a covenant compliance certificate, together with a certification, signed
by a senior executive officer of Borrower, both in the form of Schedule 6.1.11
attached hereto, certifying to Lender
(42)
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that there exists no breach of any of the covenants contained in this
Article 6 or in Article 7 hereof;
6.1.12 With reasonable promptness furnish to Lender 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 Lender; afford Lender or its
agents reasonable access to the financial books and records, computer records
and properties of Borrower at all reasonable times after reasonable notice and
permit Lender or its agents to make copies and abstracts of same and to remove
such copies; and abstracts from Borrower's premises and permit Lender or its
agents the right to converse directly with the independent accounting firm then
engaged by Borrower to prepare its audited financial statements;
6.1.13 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 Borrower's assets and pay all other material claims
which, if unpaid, might become liens or charges upon Borrower's or any Venture
Borrower's assets, provided, however, that nothing in this Section shall require
Borrower or any Venture 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
Lender being available or having been set aside;
6.1.14 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;
6.1.15 Promptly defend all actions, proceedings or claims
which would have a Materially Adverse Effect on Borrower or Borrower's Business
and promptly notify Lender of the institution of, or any change in, any such
action, proceeding or claim if the same is in excess of $1,000,000 (other than
claims covered by insurance in the ordinary course of business and booked on
Borrower's balance sheet) or would have a Materially Adverse Effect on the
financial condition of Borrower or its property if adversely determined;
(43)
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6.1.16 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 Lender 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 Lender 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;
6.1.17 Maintain or cause to be maintained each Property in
good condition and repair, reasonable wear and tear excepted, making as and when
necessary, all material repairs of every nature;
6.1.18 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;
6.1.19 Promptly after Borrower becomes aware that any such
event has occurred, Borrower shall notify Lender of: (i) the occurrence or
imminent occurrence of any event which causes or would
(44)
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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 in any
material respect, 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, have a
Materially Adverse Affect upon Borrower;
6.1.20 Cause at least 66% of Consolidated NOI to be generated
from assets located in states of the United States east of the Mississippi
River;
6.1.21 Cause each Venture Borrower and cause the borrowers
under the Turren Note and VLRC Notes to pay and perform, when due, all of such
Venture Borrower's or other borrower's respective obligations under any Venture
Note executed by such Venture Borrower or under the Turren Note or VLRC Notes,
as applicable;
6.1.22 Maintain or cause to be maintained insur- ance 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 Lender
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, except that any deductibles for
any insurance covering damage by windstorm may be in amounts up to five percent
(5%) of the value of the Property insured;
(ii) Rent and rental value/extra expense insur- ance (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;
(45)
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(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
Lender 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 insur- ance, 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 Lender may, from time to time, require in the
exercise of good faith;
6.1.23 Maintain the Unencumbered Property Pool free from any
mortgage, lien, pledge, charge, security interest or
(46)
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other encumbrance, whether voluntary or involuntary, other than
Permitted Liens;
6.1.24 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; and
6.1.25 With respect to any Property that now is, or hereafter
becomes, part of the Unencumbered Property Pool, deliver to Lender, (i) a copy
of each complete Phase I report that Borrower may have as of the Closing Date;
and (ii) promptly after receipt thereof by Borrower, a copy of each report
prepared by any Person at Borrower's request regarding the presence thereon of
any Hazardous Substance requiring remedial action under Environmental Laws,
provided that Borrower shall not be required to deliver to Lender any additional
environmental reports, including, without limitation, any ongoing, periodic
reports of the monitoring of any environmental remediation undertaken with
respect to any Property, except in the event Lender requests copies of any
existing additional environmental reports due to concerns it may have based on
reports previously provided, in the reasonable exercise of its business
judgment.
6.2 Indemnification. Borrower hereby indemnifies and agrees to
protect, defend, and hold harmless Lender and Lender's 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 Note, the Loans, the Venture Notes, the Turren Note,
the VLRC 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 Lender in connection with this Agreement, the Note, the Loans, the
Venture Notes, the Turren Note, the VLRC 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 Lender's gross negligence or willful misconduct or that of
Lender's 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 Lender. THIS COVENANT
SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
6.2.1 Lender shall promptly give Borrower written notice of
all suits or actions instituted against Lender with respect
(47)
<PAGE>
to which Borrower has indemnified Lender, and Borrower shall timely proceed to
defend any such suit or action. Lender shall also have the right, at the expense
of Borrower, to participate in or, at Lender's election, assume the defense or
prosecution of such suit, action, or proceeding, and in the latter event
Borrower may employ counsel and participate therein. Lender 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 Lender
collateral security sufficient to pay any judgment rendered, with interest,
costs, legal fees and expenses; and the right of Lender to indemnification under
this Agreement shall extend to any money paid by Lender in settlement or
compromise of any such claims, suits, and judgments in good faith, after notice
to Borrower.
6.2.2 If any suit, action, or other proceeding is brought by
Lender 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 7
NEGATIVE COVENANTS
7.1 Borrower's Negative Covenants. As long as any portion of
the Indebtedness or of any Venture Loan shall remain outstanding and unpaid,
Lender has any obligation to extend Advances or any Term Loan, or any Letter of
Credit remains outstanding hereunder, Borrower covenants and agrees that, in the
absence of prior written consent of Lender, Borrower shall not:
7.1.1 Except for (i) the indebtedness heretofore incurred by
Borrower pursuant to the Secured Loan Agreement, (ii) the Guaranties, (iii)
secured liabilities for which the obligee's recourse is limited solely to the
specific asset or assets that are encumbered (which limitation may be subject to
customary exceptions), (iv) indebtedness heretofore incurred by Palmer Park Mall
Venture in favor of Midlantic Bank, N.A. and guarantied by Borrower, and (v)
indebtedness heretofore incurred by Laurel Mall Associates in the amount of
$30,200,000 that is guarantied by Borrower, create, assume, incur or otherwise
become liable under Consolidated Liabilities or Contingent Liabilities in
amounts in excess of $10,000,000 in the aggregate after the date hereof;
(48)
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7.1.2 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 November 3, 1994);
7.1.3 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;
7.1.4 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
Lender, Borrower will furnish Lender statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation;
7.1.5 Except as described in Schedule 5.1.8, 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 $1,000,000 or (ii) the
written consent of Lender;
7.1.6 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.
(49)
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7.1.7 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, except as set forth in the Secured
Loan Agreement.
ARTICLE 8
DEFAULT
8.1 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 Note (together with accrued interest
thereon) and under each of the other Loan Documents, provided however, that
nothing contained in this Article 8 shall be deemed to enlarge or extend any
grace period provided for in the Note, or any other Loan Document:
8.1.1 Failure by Borrower to pay the Indebtedness or any
portion thereof as the same becomes due;
8.1.2 Failure by Borrower to observe or perform any agreement,
condition, undertaking or covenant in this Agreement, the Note, or the other
Loan Documents, which failure, if it does not consist of the failure to pay
money to Lender and is susceptible to being cured, is not cured within twenty
(20) days after written notice from 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 8.1.2 shall not apply
to the breach by Borrower of any covenants contained in Sections 6.1.1, 6.1.2,
6.1.3, 6.1.4, 6.1.5, 6.1.6, 6.1.14, 6.1.19, 6.1.20, 6.1.21, 7.1.1, 7.1.2, or
7.1.3 hereof or a voluntary or consensual breach of the covenant contained in
Section 7.1.7 hereof, and provided further that the grace period with respect to
a breach of the covenants contained in Section 6.1 hereof that pertain to the
delivery to Lender of financial information shall be limited to thirty(30) days
after delivery of any Lender's written notice of such breach;
8.1.3 Any representation or warranty of the Bor- rower made,
or deemed made, in this Agreement, the Note, the Venture Note, 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;
(50)
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8.1.4 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 garnish-
ment 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 undis-
missed 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;
8.1.5 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;
8.1.6 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
Lender 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
(51)
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or avoidable by any governmental authority or court and the parties cannot agree
upon substitutions therefor within thirty (30) days; or
8.1.7 Borrower shall be accused of conduct in violation of
RICO which is not explained to Lender within ten (10) days thereafter in a
manner in which Lender, in its sole discretion, determines that such accusation
is not likely to result in a RICO indictment;
8.1.8 The occurrence of any unwaived "Event of Default" under
any Venture Note, the Turren Note or the VLRC Notes;
8.1.9 Borrower shall have defaulted in the pay- ment 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 or the occurrence of any unwaived Event of Default under the Secured Term
Loan Agreement,
whereupon, and in every such event, Lender may (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 Note
(together with accrued interest thereupon) to be, and the Note 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 8.1.4 hereof, the Note 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.
8.2 Remedies on Default. Upon the occurrence and continuation
of any Event of Default, Lender may 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), Lender may exercise the rights and remedies
available to Lender at law or in equity or under this Agreement, the Note and
any of the other Loan Documents or any other agreement by, between or among
Borrower and Lender in accordance with the respective provisions thereof.
8.3 Set-Off Rights Upon Default. Upon and during the
continuance of any Event of Default, Lender, 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
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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 Lender and other indebtedness at any time
owing by 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 Note, or any other Loan Document, whether or not Lender
shall have made any demand hereunder or thereunder.
8.4 Purchase of Venture Notes Upon Default. Upon the
occurrence and during the continuance of any Event of Default, Lender may give
written notice to Borrower that an Event of Default has occurred and is
continuing and that Lender requires Borrower to purchase from Lender all of the
Venture Notes, the Turren Note or the VLRC Notes. Borrower shall purchase from
Lender each of the Venture Notes, the Turren Note or the VLRC 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 Turren Note or the VLRC Notes, as applicable, (the "Purchase Price")
shall be paid in immediately available funds to Lender on or before five (5)
Business Days after receipt of Lender'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 Lender's ownership thereof, and (ii) that the Venture Notes, the
Turren Note or the VLRC Notes, as applicable, shall be free and clear of
encumbrances and other assignments, shall be without representation or warranty
of any kind, which Lender disclaims, including without limitation, the
execution, legality, validity, genuineness, sufficiency, value, transferability,
enforceability or collectibility of the Venture Notes, the Turren Note or the
VLRC Notes, as applicable, the existence or value of any collateral therefor,
and the priority of any interests in such collateral. Upon Lender's receipt of
collected funds in the amount of the Purchase Price, Lender shall deliver the
original Venture Notes, the Turren Note or the VLRC Notes, as applicable, to
Borrower, each endorsed by Lender, without recourse, together with any
collateral documentation therefor appropriately assigned to Borrower.
8.5 Singular or Multiple Exercise; Non-Waiver. The reme- dies
provided herein, in the Note and in the other Loan Documents or otherwise
available to Lender 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 dis- cretion of Lender, 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.
(53)
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ARTICLE 9
MISCELLANEOUS
9.1 Integration. This Agreement, the Note, and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of the Note 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 Note 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. Modifications or amendments of or to the
provisions of this Agreement, the Note, or any other Loan Document shall be
effective only if set forth in a written instrument signed by Lender and
Borrower.
9.3 Waivers. Any provision of this Agreement, the Note or any
other Loan Document may be waived if, but only if, such waiver is in writing and
is signed by the Borrower and Lender.
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
(54)
<PAGE>
With a copy to:
Howard A. Blum, Esq.
Drinker, Biddle & Reath
1100 PNB Building
Broad and Chestnut Streets
Philadelphia, PA 19107
Telecopier: (215) 988-2757
If to the Lender:
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:
Kenneth I. Rosenberg, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telecopier (215) 994-1111
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 Note 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, 6.2, 9.8, and
9.9 hereof shall survive the payment of the Indebtedness. Borrower hereby
acknowledges that Lender has relied upon the foregoing in making the Loans.
9.6 Closing. Closing hereunder shall occur on August 29, 1996
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 September 3, 1996, 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
(55)
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further force or effect except for the provisions of Sections 6.2,
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 Lender and (ii) that subject to the right to
enter into participation arrangements under Section 9.10 hereof, Lender may not
assign its rights or duties arising hereunder without the express prior written
consent of Borrower. 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 PENNSYL- VANIA WHERE LENDER 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 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 AGREEMENT OR
THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER TO ENTER INTO, ACCEPT OR RELY UPON THIS AGREEMENT.
9.10 Participation. Lender may in its sole discretion enter
into a participation arrangement(s), in an amount not in excess of 70%, in the
aggregate, of the Commitment Amount, as the same may be reduced or terminated
pursuant hereto and minus the aggregate amount of any principal payments made in
respect of any Term Loans, with respect to 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 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.
(56)
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9.11 Excess Payments. If Borrower shall pay any interest under
the terms of the Note at a rate higher than the maximum rate allowed by
applicable law, then such excess payment shall be credited against outstanding
Advances as directed by Borrower unless Borrower notifies Lender 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.
9.12 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.
9.13 Compliance with Rules. Lender 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.
9.14 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.
9.15 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.
9.16 Retention of Documents. Unless otherwise provided herein,
any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender six months after they are delivered
to or received by Lender, unless Borrower requests the return of such documents,
schedules, invoices or other papers and makes arrangements, at Borrower's
expense, for their return.
9.17 Name of Borrower. The name and designation Pennsyl- vania
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
(57)
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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.
(58)
<PAGE>
IN WITNESS WHEREOF, Borrower, Lender and Lender 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/ Jeffrey A. Linn
------------------------------------
Jeffrey A. Linn, Senior Vice
President-Acquisitions and
Secretary
LENDER:
CORESTATES BANK, N.A.
By: /S/ Glenn W. Gallagher
------------------------------------
Glenn W. Gallagher, Vice President
(59)
<PAGE>
-------------------------
Bank Officer
NOTE
Philadelphia, Pennsylvania
$75,000,000 August 29, 1996
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") (i) on or before the Termination Date (as defined in the
Revolving Credit and Term Loan Agreement of even date (the "Loan Agreement")
with respect to the Revolving Credit, the lesser of (x) Twenty Million Dollars
($20,000,000) or (y) the unpaid principal amount of all Advances made by the
Lender to the Borrower under the Revolving Credit and (ii) on or before the Term
Loan Maturity Date, applicable to a Term Loan, the aggregate unpaid principal
amount of such Term Loan made by Lender to Borrower pursuant to the Loan
Agreement, in lawful money of the United States of America and in immediately
available funds. Borrower shall also pay monthly installments of the principal
of each Term Loan when due pursuant to Section 2.1.3.2 of the Loan Agreement.
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 all Advances of the Revolving Credit and all Floating Rate
Term Loans 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 and all Floating Rate Term Loans
shall be selected by Borrower at the time a Notice of Borrowing is given
pursuant to Section 2.2.2 of the Loan Agreement or a Notice of Rate Election is
given pursuant to Section 2.2.3 of the Loan Agreement. If on any day an Advance
or Floating Rate Term Loan 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 or
Floating Rate Term Loan shall bear interest as if a Base Rate Loan.
1
<PAGE>
Borrower also promises to pay interest on the unpaid
principal amount of all Fixed Rate Term Loans, from the date that the interest
rate with respect to such Fixed Rate Term Loan became fixed to maturity (whether
by acceleration or otherwise) at the rate of interest with respect to each such
Fixed Rate Term Loan quoted by Lender in accordance with the provisions of the
Loan Agreement and selected by Borrower at the time a Notice of Borrowing is
given pursuant to Section 2.2.2 of the Loan Agreement or a notice of Rate
Election is given pursuant to Section 2.2.3 of the Loan Agreement with respect
to such Fixed Rate Term 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
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 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 (i) with respect to Revolving Credit Loans and Floating
Rate Term Loans, 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
and (ii) with respect to Fixed Rate Term Loans, at a rate which is two percent
(2%) per annum in excess of the rate of interest otherwise payable on such Fixed
Rate Term Loan.
This Note 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 the Advances and Term Loans
evidenced hereby are to be repaid.
All payments of principal and interest in respect of this
Note shall be made by Borrower without setoff or counterclaim in immediately
available funds and delivered to Lender 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 Lender after
that time shall be deemed to have been paid by the Borrower on the next
succeeding Business Day.
2
<PAGE>
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.
Borrower authorizes Lender to charge Borrower's accounts
with Lender (but only to the extent there are sufficient funds therein) in order
to cause timely payment to be made to Lender of all principal, interest and fees
hereunder as provided in Section 1.5 of the 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.
3
<PAGE>
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 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 Lender and Borrower.
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 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
4
<PAGE>
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: /s/ Jeffrey A. Linn
-----------------------------------
Jeffrey A. Linn, Senior Vice
President - Acquisitions
and Secretary
5
<PAGE>
Exhibit 4.3
GUARANTY
THIS GUARANTY is made and entered into by PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST, an unincorporated association in business trust form (the
"Guarantor"), for the benefit of CORESTATES BANK, N.A. (the "Bank").
BACKGROUND
A. Guarantor is a holder of a 50% or more beneficial, or other
controlling, ownership interest in each of the entities comprising Obligor (as
hereinafter defined).
B. To induce Bank to make credit facilities available to obligor,
Bank has required Guarantor to execute and deliver this Guaranty as a
condition precedent thereto.
NOW, THEREFORE, intending to be legally bound hereby, Guarantor
agrees as follows:
1. OBLIGOR. The "Obligor" means Turren Associates, a Florida general
partnership, Rancocas Limited Partnership, a New Jersey limited partnership,
and VLRC Associates, a Florida general partnership, and any one or more of the
foregoing entities.
2. 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, and arising
out of Obligor's Notes in favor of Bank, dated as of the date of this Guaranty
(the "Notes"), 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 Notes or
otherwise, 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. If the term "Obligor"
includes more than one person or entity, the obligations shall include all
obligations of any one or more of such persons or entities, whether such
Obligations are individual, joint, several or joint and several.
<PAGE>
3. UNCONDITIONAL GUARANTY. In consideration of any existing
obligations and any obligations which may hereafter arise or be incurred,
Guarantor, intending to be legally bound, absolutely and unconditionally (and
jointly and severally if more than one) guaranties to Bank, and becomes surety
for, the prompt payment, performance and satisfaction when due (whether by
stated maturity, demand, acceleration or otherwise) of all obligations. The
obligations of 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.
4. COST OF ENFORCEMENT. Guarantor agrees to pay Bank all costs and
expenses (including reasonable attorney's fees) at any time incurred by or on
behalf of Bank in the enforcement of this Guaranty against Guarantor.
5. PAYMENT BY GUARANTOR. Payment by Guarantor is due upon demand by
Bank after the occurrence of an event of default under the Obligations and is
payable in immediately available funds in lawful money of the United States of
America.
6. CONTINUING GUARANTY. This Guaranty shall continue in full force
and effect with respect to 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.
7. WAIVERS AND CONSENTS BY GUARANTOR. 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 or
others on behalf of 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 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 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
(2)
<PAGE>
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.
8. OTHER AGREEMENTS BY GUARANTOR. 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 Guarantor. 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 any Obligor's insolvency or
as a result of any proceeding applicable to obligor or Obligor's property
under any bankruptcy or insolvency law. 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.
9. SUBROGATION AND SIMILAR RIGHTS. Guarantor will not 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. Until such time any such
rights against the Obligor 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 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 Bank 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 Obligor in connection with the Obligations.
10. 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
(3)
<PAGE>
settlement or compromise in good faith with any such claimant (including
obligor), then, and in such event, Guarantor agrees that any such judgment,
decree, order, settlement or compromise shall be binding upon Guarantor,
notwithstanding any termination hereof or the cancellation of any note or
other instrument evidencing any Obligation, and 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.
11. 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 to 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 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.
12. GUARANTOR'S ADDRESS. Guarantor warrants and represents that the
address set forth below is Guarantor's correct mailing address and agrees
immediately to notify Bank in the event of any change therein.
13. MISCELLANEOUS.
(a) No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by Guarantor and Bank, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by 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 Guarantor hereunder shall not be subject
to any counterclaim, setoff, deduction or defense based upon any related or
unrelated claim which 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.
(4)
<PAGE>
(d) This Guaranty shall (i) be binding on Guarantor, and its
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.
14. 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, THE 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. THE 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 THE UNDERSIGNED PARTY.
15. WAIVER OF JURY TRIAL. THE UNDERSIGNED 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.
16. 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
(5)
<PAGE>
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, Guarantor has executed this Guaranty under seal
as of the 29th day of August, 1996.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jeffrey A. Linn
--------------------------------
Jeffrey A. Linn, Senior
Vice President - Acquisitions
and Secretary
(Corporate Seal)
Address: 455 Pennsylvania Avenue
Fort Washington, PA 19034
(6)
<PAGE>
Exhibit 4.7
SECOND AMENDMENT TO SECURED LOAN AGREEMENT
THIS SECOND AMENDMENT, made as of the 25th day of
April, 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, as amended by a
First Amendment to Secured Loan Agreement dated March 20, 1995
(the "Loan Agreement"). All capitalized terms used but not
specifically defined herein have the meanings defined in the Loan
Agreement.
B. Borrower, Agent and Lenders have this date
completed the Subsequent Closing and Lenders have severally, in
accordance with their respective Pro Rata Shares, advanced to
Borrower an additional $7,800,000.00, causing the outstanding
principal balance of the Loan to be $35,000,000.00.
C. Pursuant to Section 2.1.2.1 of the Loan Agreement,
the parties have agreed upon a new Schedule 2.1.2.1 for the Loan
Agreement.
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:
1. Schedule 2.1.2.1 of the Loan Agreement is hereby
deleted and the new Schedule 2.1.2.1 that is attached to this
Second Amendment as Exhibit "A" is substituted in its place.
<PAGE>
2. Except as specifically modified hereby, the Loan
Agreement remains in full force and effect, in accordance with
its terms.
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
MIDLANTIC BANK, N.A.
By: /s/ Robert A. Goldstein
---------------------------------------
Robert A. Goldstein,
Vice President
[signature continued on next page]
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ David A. Pioch
---------------------------------------
David A. Pioch, Vice President
AGENT:
CORESTATES BANK, N.A.
By: /s/ Glenn W. Gallagher
---------------------------------------
Glenn W. Gallagher,
Vice President
<PAGE>
EXHIBIT "A"
Schedule 2.1.2.1
Scheduled Monthly Installment
Payment Date Installment of Principal Due
------------------------------ ----------------------------
May 1, 1995 through April, 1996,
inclusive $34,610.63
May 1, 1996 through April, 1997,
inclusive 37,714.80
May 1, 1997 through April, 1998,
inclusive 41,097.38
If first option to extend is
exercised:
April 1, 1998 41,097.38
May 1, 1998 through March 1,
1999, inclusive 44,783.35
If second option to extend is
exercised:
April 1, 1999 44,783.35
May 1, 1999 through March, 2000,
inclusive 48,799.90
<PAGE>
THIRD AMENDMENT TO
SECURED LOAN AGREEMENT
-----------------------
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Borrower
-----------------------
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
MIDLANTIC BANK, N.A., and
PNC BANK, NATIONAL ASSOCIATION
Lenders
August 29, 1996
<PAGE>
THIRD AMENDMENT TO
SECURED LOAN AGREEMENT
THIS THIRD AMENDMENT ("this Third Amendment"), made this
29th day of August, 1996, 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 (in which individual capacity it is referred to
herein as "CoreStates") and as Agent for itself and MIDLANTIC BANK, N.A.
("Midlantic"), and PNC BANK, NATIONAL ASSOCIATION ("PNC") (CoreStates, Midlantic
and PNC are individually referred to herein 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, as amended by a First Amendment to Secured
Loan Agreement dated March 20, 1995 and a Second Amendment to Secured Loan
Agreement dated April 25, 1995 (the "1994 Loan Agreement") pursuant to which
Lenders severally, in accordance with their respective Pro Rata Shares, agreed
to advance $35,000,000 to Borrower. All capitalized terms used but not
specifically defined herein have the meanings defined in the 1994 Loan
Agreement.
B. CoreStates has heretofore acquired all of the inter- ests and
obligations of Meridian Bank ("Meridian") in, to and under the Loans and all
Loan Documents.
C. Borrower, Agent and Lenders desire 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:
"Consolidated Liabilities" means, at any time, the sum of (i)
all liabilities of Borrower, determined in accordance with
<PAGE>
GAAP, plus (ii) Borrower's applicable Percentage Interest in the total
liabilities of each Venture, exclusive of any amount included in clause (i) 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. For any property placed
in service after the acquisition of such property, the gross revenues and
operating expenses thereof shall be measured on a pro-forma basis until
Borrower, in the good faith exercise of its business judgment, determines that
actual gross revenues and operating expenses have stabilized. Borrower's
determination that actual revenues and operating expenses have stabilized
shall be subject to Lender's reasonable approval. Adjustments as a result of
the disposal of any property shall be made on the basis of the actual gross
revenues and operating expenses for such property.
"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) minus (iii) any amounts included
within the definition of "Consolidated Liabilities."
"NOI" means Borrower's, plus Borrower's applicable Percentage
Interest of each Venture's, gross revenue 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.
"Permitted Lien" means (i) liens for taxes, assess- ments or
governmental charges or claims which are not overdue or which are being
contested in good faith by appropriate proceedings
(2)
<PAGE>
promptly instituted and diligently conducted, if a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(ii) statutory liens of carriers, warehousemen, mechanics, materialmen,
repairmen, suppliers and other like liens incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, if a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor; (iii) liens (other than any lien imposed by
ERISA) incurred or deposits made in the ordinary course of business in
connection with workers' compensation or unemployment insurance and other types
of social security; (iv) liens incurred or deposits made to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) any judgment lien; provided
that, within 45 days after the entry of the judgment secured thereby, such
judgment shall be discharged or execution thereof shall be stayed pending
appeal; and further provided that such judgment shall be discharged within 45
days after the expiration of any such stay; (vi) the rights of tenants under
leases or subleases not interfering with the ordinary conduct of the Business of
Borrower; (vii) easements, rights-of-way, encroachments, zoning provisions,
covenants, conditions, restrictions and other similar charges, encumbrances and
governmental restrictions not interfering with the ordinary conduct of the
business of Borrower; and (viii) liens created pursuant to the Loan Documents.
"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,
exclusive of the amount of any final payment of principal which would exceed
the periodic payments of principal on such debt.
"Revolving Credit Agreement" means the Revolving Credit and
Term Loan Agreement dated August 29, 1996, executed by Borrower and
CoreStates, and as the same may in the future be amended.
"Unencumbered Property Pool" means, at any time, (i) those
Properties that are part of the Initial Unencumbered Property Pool and are
then unencumbered and wholly-owned by Borrower and (ii)
(3)
<PAGE>
all Substituted Unencumbered Properties, as defined in the Revolving Credit
Agreement, that are then unencumbered and wholly-owned by Borrower, but
excluding from the Properties identified in clauses (i) and (ii) (A) such
Properties as are necessary in order that the combined average occupancy rate of
the Unencumbered Property Pool, as of the last day of the most recently
concluded Fiscal Quarter, is not less than 80% and (B) such other Properties
that may have been withdrawn by Borrower pursuant to Section 3.3 of the
Revolving Credit Agreement.
"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.
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 Third Amendment, the definition contained in this Third
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 Third 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 Third 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 Third Amendment, unless otherwise specifically
indicated.
ARTICLE 2
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 Third Amendment, subject to the following:
2.1 Schedules 4.1.4 and 4.1.8 of the 1994 Loan Agreement is hereby
deleted and replaced by Schedules A and B, annexed hereto; and
(4)
<PAGE>
2.2 Section 4.1.8 of the 1994 Loan Agreement is hereby amended by
deleting the text preceding Section 4.1.8.1 and substituting the following in
its place:
"4.1.8 Environmental. Except as set forth in Schedule 4.1.8 and
as identified in the reports provided to Lender pursuant to Section 6.1.25 of
the Revolving Credit Agreement, 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):"
ARTICLE 3
AFFIRMATIVE COVENANTS
The following Sections of the 1994 Loan Agreement are hereby amended
as follows:
3.1.1 Section 5.1.1 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"5.1.1. Maintain the ratio of (a) Consolidated Liabilities, as
reported in Borrower's most recent Company-Prepared Consolidated Financial
Statements, plus, without duplication, Contingent Liabilities minus the amount
of Cash and cash equivalents of Borrower plus Borrower's Percentage Interest
in Cash and Cash Equivalents of the Ventures as so reported to (b)
Consolidated NOI at no more than 7.25 to 1;"
3.1.2. 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 $8,830,000 (the "Unencumbered NOI
Standard") 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 7.9 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;
provided that if the Unencumbered NOI shall be less than $9,500,000 (which
number shall be reduced proportionally with any reduction of the Unencumbered
NOI Standard as provided below), the Revolving Credit (and, as a result
thereof, the Commitment Amount) shall be reduced by
(5)
<PAGE>
the product of (i) $7.90 multiplied by (ii) $9,500,000 (which number shall be
reduced proportionally with any reduction of the Unencumbered NOI Standard as
provided below) minus the Unencumbered NOI; and provided further that if a
Property that was part of the Unencumbered Property Pool is sold in a bona fide
transaction to a Person who is not an Affiliate of Borrower, the Unencumbered
NOI Standard shall be reduced, effective as of the end of the most recently
concluded Fiscal Quarter, by the NOI of the Property so sold during the last
four Fiscal Quarters that such Property was owned by Borrower, but in no event
shall the required Unencumbered NOI ever be less than $7,000,000 (which number
shall be reduced proportionally with any reduction of the Unencumbered NOI
Standard as provided below). Any reduction of the Revolving Credit (and the
Commitment Amount) resulting pursuant to this Section 5.1.3 shall continue in
effect until the next quarterly calculation is made pursuant to this Section
5.1.3, at which time such reduction shall be reversed by an amount commensurate
with any increase in Unencumbered NOI. The Unencumbered NOI Standard shall also
be reduced, effective as of the end of the most recently concluded Fiscal
Quarter, each time Borrower makes prepayments of the principal of one or more
Term Loans, or reduces the Commitment Amount, or both, in an aggregate amount
that is at least $1,000,000, each such reduction of the Unencumbered NOI
Standard to be equal to the quotient of the sum of such payments of principal
and reductions of the Commitment Amount divided by 7.9, and provided that after
total principal payments have been made on one or more Term Loans pursuant to
Section 2.1.3.2 in an aggregate amount of $1,000,000, subsequent payments of
principal made pursuant to Section 2.1.3.2 shall be counted in the $1,000,000
amount required for reductions in the Unencumbered NOI Standard as provided
herein.
3.1.3 Section 5.1.4 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"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, exclusive of gross proceeds used in any acquisition of
intangible assets."
3.1.4 Section 5.1.5 of the 1994 Loan Agreement is hereby amended by
deleting the ratio "1.5 to 1" and substituting in its place the ratio "1.4 to
1;"
3.1.5 Section 5.1.6 of the 1994 Loan Agreement is hereby amended by
deleting the ratio "1.35 to 1" and substituting in its place the ratio "1.25
to 1;"
(6)
<PAGE>
3.1.6 Section 5.1.9 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"5.1.9 Deliver to Lender, 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 Lender; provided that if such financial
statements are prepared by another national firm of certified public
accountants that is reasonably acceptable to Lender, 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, and provided that
no opinion of any accountant shall be considered to be qualified merely
because such accountants have relied upon financial statements or opinions
prepared or issued by or on behalf of the Ventures;"
3.1.7 Section 5.1.15 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"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 Lender of the institution of, or any change in,
any such action, proceeding or claim if the same is in excess of $1,000,000
(other than claims covered by insurance in the ordinary course of business and
booked on Borrower's balance sheet), or would have a Materially Adverse Effect
on the financial condition of Borrower or its property if adversely
determined;"
3.1.8 Section 5.1.17 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"5.1.17 Maintain or cause to be maintained each Property in
good condition and repair, reasonable wear and tear excepted, making as and
when necessary, all material repairs of every nature;"
3.1.9 Section 5.1.19 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"5.1.19 Promptly after Borrower becomes aware that any such
event has occurred, Borrower shall notify Lender of: (i) the
(7)
<PAGE>
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 in any material
respect, 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, have a Materially Adverse
Affect upon Borrower;"
3.1.10 Section 5.1.21(i) of the 1994 Loan Agreement is hereby
amended by deleting the entire text thereof and substituting the following in
its place:
"5.1.21 Maintain or cause to be maintained insur- ance 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 Lender 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, except that any deductibles for any insurance covering damage by
windstorm may be in amounts up to five percent (5%) of the value of the
Property insured;"
3.1.11 Section 5.1.21.1 of the 1994 Loan Agreement is hereby amended
by deleting the entire text thereof and substituting the following in its
place:
"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, except for Permitted Liens and the
Mortgages, as defined in the Revolving Credit Agreement;"
3.1.12 Section 5.1.23 of the 1994 Loan Agreement is hereby amended
by deleting the entire text thereof and substituting the following in its
place:
(8)
<PAGE>
"Maintain 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 other than Permitted Liens;"
3.1.13 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 for (i) the indebtedness incurred by Borrower
pursuant to the Revolving Credit Agreement, (ii) the Guaranties, (iii) secured
liabilities for which the obligee's recourse is limited solely to the specific
asset or assets that are encumbered (which limitation may be subject to
customary exceptions), (iv) indebtedness heretofore incurred by Palmer Park
Mall Venture in favor of Midlantic Bank, N.A. and guarantied by Borrower, and
(v) indebtedness heretofore incurred by Laurel Mall Associates in the amount
of $30,200,000 that is guarantied by Borrower, create, assume, incur or
otherwise become liable under Consolidated Liabilities or Contingent
Liabilities in amounts in excess of $10,000,000 in the aggregate after the
date hereof;"
3.1.14 Section 6.1.3 of the 1994 Loan Agreement is hereby
amended by deleting the entire text thereof and substituting the
following in
its place:
"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;"
3.1.15 Section 6.1.5 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"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
(9)
<PAGE>
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 $1,000,000 or (ii) the
written consent of Lender;"
3.1.16 Section 6.1.7 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"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, except as provided in the Revolving
Credit Agreement."
3.1.17 Section 7.1.3 of the 1994 Loan Agreement is hereby amended by
deleting the entire text thereof and substituting the following in its place:
"7.1.3 The occurrence of any unwaived "Event of Default" as
defined in the Revolving Credit Agreement."
ARTICLE 4
MISCELLANEOUS
4.1 Consent to Transfer. Borrower, Agent, Midlantic and PNC hereby
consent to the transfer to CoreStates of Meridian Bank's interests and
obligations described in Paragraph B of the Background to this Third
Amendment.
4.2 Notices. Henceforth, notices to Midlantic shall be addressed as
follows:
If to Midlantic: Midlantic Bank, N.A.
Robert Ballard, Vice President
1500 Market Street, 11th Floor
Philadelphia, PA 19102
Telecopier: (215) 564-7446
(10)
<PAGE>
A copy of notice to
Borrower shall be sent to: Howard A. Blum, Esq.
Drinker Biddle & Reath
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier: (215) 988-1809
4.3 Partial Invalidity. If any provision of this Second 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
Second Amendment shall be construed as if such invalid or unenforceable
provision had never been contained herein.
4.4 Headings. The heading of any Article or Section contained in
this Third Amendment is for convenience of reference only and shall not be
deemed to amplify, limit, modify or give full notice of the provisions
thereof.
4.5 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.
4.6 Loan Modification. All Loan Documents executed in connection
with the Loan shall be deemed appropriately amended by the provisions
specifically contained herein.
4.7 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.
(11)
<PAGE>
4.8 Counterpart Execution. This Third 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, Borrower, Agent and Lenders have
executed this Third Amendment 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/ Jeffrey A. Linn
---------------------------------------
Jeffrey A. Linn, Senior Vice
President-Acquisitions and
Secretary
LENDERS:
CORESTATES BANK, N.A.
By:
---------------------------------------
Glenn W. Gallagher, Vice
President
MIDLANTIC BANK, N.A.
By: /s/ Robert Ballard
---------------------------------------
Robert Ballard, Vice President
(Signatures Continue On Following Page)
(12)
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert Ballard
---------------------------------------
Robert Ballard, Vice President
AGENT:
CORESTATES BANK, N.A.
By: /s/ Glenn W. Gallagher
---------------------------------------
Glenn W. Gallagher,
Vice President
(13)
<PAGE>
Subsidiaries of Registrant Exhibit 21 Exhibit 21
Trust or its subsidiaries have an interest in 22 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 one partnership 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.
Names of Partnership State of Organization Percentage Owned
- -------------------- --------------------- ----------------
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
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
<PAGE>
Trust owns 100% of thirteen 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 and one incorporated in Maryland which holds a 1% interest.
Names of Subsidiaries State of Organization Percentage Owned
- --------------------- --------------------- ----------------
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 West Palm 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
PR Forestville Inc. MD 100
-2-
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated October 21, 1996 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 26, 1996
<PAGE>
Exhibit 23.2
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 18, 1996, 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, 1996 of Pennsylvania Real Estate Investment
Trust.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 25, 1996
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<NAME> PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 1,030,000
<SECURITIES> 0
<RECEIVABLES> 24,888,000
<ALLOWANCES> 2,042,000
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<PP&E> 198,542,000
<DEPRECIATION> 44,693,000
<TOTAL-ASSETS> 177,725,000
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<BONDS> 124,148,000
0
0
<COMMON> 8,676,000
<OTHER-SE> 37,829,000
<TOTAL-LIABILITY-AND-EQUITY> 177,725,000
<SALES> 38,985,000
<TOTAL-REVENUES> 46,004,000
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<INTEREST-EXPENSE> 9,831,000
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