<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 333-1666
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRIME RETAIL, INC.
(Exact name of Registrant as specified in governing instruments)
100 EAST PRATT STREET
NINETEENTH FLOOR
BALTIMORE, MARYLAND 21202
(410) 234-0782
(Address of principal executive offices)
MICHAEL W. RESCHKE
CHAIRMAN OF THE BOARD
PRIME RETAIL, INC.
100 EAST PRATT STREET
NINETEENTH FLOOR
BALTIMORE, MARYLAND 21202
(410) 234-0782
(Name and address of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Wayne D. Boberg, Esq. J. Warren Gorrell, Jr., Esq.
Steven J. Gavin, Esq. Bruce W. Gilchrist, Esq.
Winston & Strawn Hogan & Hartson L.L.P.
35 West Wacker Drive Columbia Square
Chicago, Illinois 60601 555 13th Street, NW
Washington, DC 20004
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________________
If this Form is post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
Prime Retail, Inc. has prepared this Amendment No. 3 for the purpose of
filing with the Securities and Exchange Commission Exhibit 10.48 to the
Registration Statement. Amendment No. 3 does not modify any provision of the
Prospectus included in the Registration Statement; accordingly, the related
Cross-Reference Sheet and such Prospectus have not been included herein.
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are the expenses payable by the Company in connection with
the issuance and distribution of the shares of Common Stock. All amounts are
estimated other than the Securities and Exchange Commission Registration Fee and
the NASD Fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Fee......................................... $17,776.24
NASD Fee....................................................................... 5,655.11
Printing and Engraving Expenses................................................ *
Legal Fees and Expenses........................................................ *
Accounting Fees and Expenses................................................... *
Blue Sky Fees and Expenses..................................................... *
Transfer Agent's and Registrar's Fees and Expenses............................. *
Miscellaneous Expenses.........................................................
----------
Total...................................................................... *
----------
----------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 31. SALES TO SPECIAL PARTIES.
Not applicable.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information as to all securities sold by
the Company within the last three years that were not registered under the
Securities Act. As to such transactions, an exemption is claimed under Section
4(2) and/or Section 3(a)(9) of the Securities Act.
On July 16, 1993, the Company issued 100 shares of Common Stock to Michael
W. Reschke for $10 per share, or an aggregate consideration of $1,000. This
Common Stock was purchased solely for investment purposes to facilitate the
organization of the Company. Upon completion of the Initial Public Offering, all
of the shares so acquired by Mr. Reschke were redeemed by the Company for an
aggregate redemption price of $1,000.
In addition, at the time of the Initial Public Offering, the Company caused
the Operating Partnership to issue 9,200,800 Common Units to the Limited
Partners in exchange for their respective interests in the Properties and the
Management and Development Operations. Also at the time of the Initial Public
Offering, the Operating Partnership loaned, on a recourse basis, $2.5 million to
each of Messrs. Rosenthal and Carpenter who used the proceeds of such loan to
each purchase 125,000 additional Common Units. The Company has issued options to
purchase a total of 585,000 shares of Common Stock pursuant to the 1994 Stock
Incentive Plan and options to purchase a total of 600,000 shares of Common Stock
pursuant to the 1995 Stock Incentive Plan to certain executives and the
Company's independent directors.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Charter and Bylaws authorize the Company to indemnify its present and
former directors and officers and to pay or reimburse expenses for such
individuals in advance of the final disposition of a proceeding to the maximum
extent permitted from time to time under Maryland law. The MGCL provides that
indemnification of a person who is a party, or threatened to be made a party, to
legal proceedings by reason of the fact that such a person is or was a director,
officer, employee or agent of a corporation, or is or was serving as a director,
officer, employee or agent of a corporation or other firm at the request of a
corporation, against expenses, judgments, fines and amounts paid in settlement,
is mandatory in certain circumstances and permissive in others, subject to
authorization by the board of directors, so long as a person
II-1
<PAGE>
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to criminal proceedings, had no reason to believe that his or her
conduct was unlawful.
The Company's officers and directors are also indemnified pursuant to the
Operation Partnership Agreement and their respective employment agreements,
which agreements were filed in connection with the Company's Registration
Statement on Form S-11 pursuant to the Initial Public Offering.
The Company has purchased an insurance policy which purports to insure the
officers and directors of the Company against certain liabilities incurred by
them in the discharge of their functions as such officers and directors except
for liabilities resulting from their own malfeasance.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 35. EXHIBITS.
(a) Financial Statements
Unaudited Consolidated Balance Sheets of the Company as of March 31,
1996 and December 31, 1995
Unaudited Consolidated Statements of Operations of the Company for the
three months ended March 31, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows of the Company for the
three months ended March 31, 1996 and 1995
Notes to Interim Consolidated Financial Statements of the Company
Report of Independent Auditors
Consolidated Balance Sheets of the Company as of December 31, 1995 and
December 31, 1994
Consolidated Statements of Operations of the Company for the year ended
December 31, 1995 and for the period from March 22, 1994 to December 31,
1994 and Combined Statements of Operations of the Predecessor for the
period from January 1, 1994 to March 21, 1994 and the year ended December
31, 1993
Consolidated Statements of Cash Flows of the Company for the year ended
December 31, 1995 and for the period from March 22, 1994 to December 31,
1994 and Combined Statements of Cash Flows of the Predecessor for the
period from January 1, 1994 to March 21, 1994 and the year ended December
31, 1993
Consolidated Statements of Shareholders' Equity of the Company and
Combined Statements of Predecessor Owners' Deficit
Notes to Consolidated Financial Statements of the Company and Combined
Financial Statements of the Predecessor
(b) Financial Statement Schedules
Report of Independent Auditors
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules have been omitted either because they are not applicable
or because the required information has been disclosed in the Financial
Statements and related notes included in the Prospectus.
II-2
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------
<S> <C>
1.1+ Form of Underwriting Agreement among the Company, the Operating
Partnership, the Selling Stockholder and the Underwriters
3.1+ Amended and Restated Articles of Incorporation of Prime Retail, Inc., as
amended [Restated to incorporate amendment dated May 29, 1996 for
purposes of Regulation ST Section 232.102(c) only]
3.2 Amended and Restated By-Laws of Prime Retail, Inc. [Incorporated by
reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (File No.
0-23616).]
4 Form of Stock Certificate [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-11
(Registration No. 33-68536).]
5.1+ Form of Opinion of Winston & Strawn regarding the validity of the
securities registered
8.1+ Form of Opinion of Winston & Strawn regarding tax matters
10.1 Agreement of Limited Partnership of Prime Retail, L.P. [Incorporated by
reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.1A+ First Amendment to Agreement of Limited Partnership of Prime Retail, L.P.
10.1B+ Common Unit Contribution Agreement
10.2 1994 Stock Incentive Plan [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-11
(Registration No. 33-68536).]
10.3* 1995 Stock Incentive Plan
10.4 Executive Employment Agreement (Michael W. Reschke) [Incorporated by
reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.5 Combined Service and Special Distribution and Allocation Agreement
(Abraham Rosenthal) [Incorporated by reference to the same titled exhibit
in the Company's registration statement on Form S-4 (Registration No.
333-1784).]
10.5A Special Distribution and Allocation Agreement by and between the Company,
the Operating Partnership and the Rosenthal Family LLC [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-4 (Registration No. 333-1784).]
10.5B Indemnification and Option Agreement by and between the Prime Group, Inc.,
the Rosenthal Family LLC and Abraham Rosenthal [Incorporated by reference
to the same titled exhibit in the Company's registration statement on
Form S-4 (Registration No. 333-1784).]
10.6 Combined Service and Special Distribution and Allocation Agreement
(William H. Carpenter, Jr.) [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-4 (Registration
No. 333-1784).]
10.6A Special Distribution and Allocation Agreement by and between the Company,
the Operating Partnership and the Carpenter Family Associates LLC
[Incorporated by reference to the same titled exhibit in the Company's
registration statement on Form S-4 (Registration No. 333-1784).]
10.6B Indemnification and Option Agreement by and between the Prime Group, Inc.,
William H. Carpenter, Jr. and the Carpenter Family Associates LLC
[Incorporated by reference to the same titled exhibit in the Company's
registration statement on Form S-4 (Registration No. 333-1784).]
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------
<S> <C>
10.7 Form of Executive Employment Agreement (David G. Phillips) [Incorporated
by reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
10.8 Letter Agreement with R. Bruce Armiger [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.9 Right of First Refusal Agreement (Northgate Plaza-Improved Parcel)
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.10 Right of First Refusal Agreement (Northgate Plaza - Vacant Parcel)
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.11 Right of First Refusal Agreement (Huntley Factory Shops) [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
10.12 Right of First Refusal Agreement (San Marcos Factory Shops) [Incorporated
by reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.13 Purchase Option Agreement (Northgate Plaza - Excluded Parcel)
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.14A Purchase and Option Agreement (Huntley Factory Shops) [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
10.14B* First Amendment to Purchase and Option Agreement (Huntley Factory Shops)
10.15 Purchase Agreement (Northgate Plaza) [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.16 Registration Rights Agreement [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.17 Agreement of Partnership of Grove City Factory Shops Partnership by and
between Pittsburgh Factory Shops Limited Partnership and Fru-Con
Development of Pennsylvania, Inc. as amended by Amendments One through
Four [Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration No.
33-68536).]
10.18 Assignment, Assumption and Indemnification Agreement (Northgate Plaza)
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.19 Form of Property Level General Partnership Agreement [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
10.20 Form of Property Level Limited Partnership Agreement [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------
<S> <C>
10.21 Noncompetition Agreement with PGI [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.22 Form of Standby Bond Purchase and Indemnity Agreement [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-11 (Registration No. 33-68536).]
10.23 Second Amended and Restated Subscription Agreement of Abraham Rosenthal
regarding Common Units of Prime Retail, L.P. [Incorporated by reference
to the same titled exhibit in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended (File No.
0-23616).]
10.24 Second Amended and Restated Subscription Agreement of William H.
Carpenter, Jr. regarding Common Units of Prime Retail, L.P. [Incorporated
by reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.25 Amended and Restated Promissory Note (Northgate Plaza) with respect to
Northgate Plaza [Incorporated by reference to the same titled exhibit in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended (File No. 0-23616).]
10.26 Loan Modification and Assumption Agreement and Partial Release of Mortgage
(Northgate Plaza) [Incorporated by reference to the same titled exhibit
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended (File No. 0-23616).]
10.27 Environmental Remediation and Indemnity Agreement (Northgate Plaza)
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.28 Guaranty (Northgate Plaza) [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.29 ADA Indemnity Agreement (Northgate Plaza) [Incorporated by reference to
the same titled exhibit in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.30 Consulting Agreement between the Company and Marvin Traub Associates, Inc.
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.31 Secured Promissory Note of Rosenthal Family LLC with respect to the
purchase of the Restricted Common Units [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.31A Allonge related to the Secured Promissory Note of Rosenthal Family LLC
[Incorporated by reference to the same titled exhibit in the Company's
registration statement on Form S-4 (Registration No. 333-1784).]
10.32 Secured Promissory Note of Carpenter Family Associates LLC with respect to
the purchase of the Restricted Common Units [Incorporated by reference to
the same titled exhibit in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.32A Allonge related to the Secured Promissory Note of Carpenter Family
Associates LLC [Incorporated by reference to the same titled exhibit in
the Company's registration statement on Form S-4 (Registration No.
333-1784).]
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------
<S> <C>
10.33 Pledge and Security Agreement of Rosenthal Family LLC with respect to the
purchase of the Restricted Common Units [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.34 Pledge and Security Agreement of Carpenter Family Associates LLC with
respect to the purchase of the Restricted Common Units [Incorporated by
reference to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.35 Guaranty of Abraham Rosenthal with respect to the purchase of the
Restricted Common Units [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.35A Reaffirmation of Pledge and Guaranty with respect to the Restricted Common
Units of Rosenthal Family LLC and Abraham Rosenthal [Incorporated by
reference to the same titled exhibit in the Company's registration
statement on Form S-4 (Registration No. 333-1784).]
10.36 Guaranty of William H. Carpenter, Jr. with respect to the purchase of the
Restricted Common Units [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.36A Reaffirmation of Pledge and Guaranty with respect to the Restricted Common
Units of Carpenter Family Associates LLC and William H. Carpenter, Jr.
[Incorporated by reference to the same titled exhibit in the Company's
registration statement on Form S-4 (Registration No. 333-1784).]
10.37 Waiver, Recontribution and Indemnity Agreement by the Limited Partners
[Incorporated by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
as amended (File No. 0-23616).]
10.38 Lock-Up Agreement (PGI) [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.39 Lock-Up Agreement (Kemper Companies) [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.40 Lock-Up Agreement (Abraham Rosenthal) [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No. 0-23616).]
10.41 Lock-Up Agreement (William H. Carpenter, Jr.) [Incorporated by reference
to the same titled exhibit in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended (File No.
0-23616).]
10.42 Promissory Note dated June 30, 1994 by and among Prime Retail, L.P. and
Nomura Asset Capital Corporation [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.43 Open-End Mortgage Agreement, Assignment of Rents and Fixture Filing dated
June 30, 1994, by and among Ohio Factory Shops Partnership and Nomura
Asset Capital Corporation [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------
<S> <C>
10.44 Revolving Loan Agreement dated March 2, 1995 between Gainesville Factory
Shops Limited Partnership, Florida Keys Factory Shops Limited
Partnership, Indianapolis Factory Shops Limited Partnership and Nomura
Asset Capital Corporation [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.45 Commitment Letter dated December 18, 1995 between the Company and Nomura
Asset Capital Corporation [Incorporated by reference to the same titled
exhibit in the Company's Current Report on Form 8-K dated December 18,
1995 (File No. 0-23616).]
10.46* Indemnity Agreement made by the Company in favor of Prime Group, Inc. and
Prime Group Limited Partnership
10.47* Partnership Interest Purchase Agreement Grove City Factory Shops
Partnership by and between Prime Retail, L.P. and The Fru-Con Projects,
Inc. dated as of May 6, 1996.
10.48 Commitment Letter dated June 5, 1996 between the Company and Nomura Asset
Capital Corporation [Confidential treatment requested for certain omitted
portions; complete copy on file with the Securities and Exchange
Commission]
12.1* Statement re Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
12.2* Statement re Computation of Ratio of Funds from Operations to Combined
Fixed Charges and Preferred Stock Dividends
22 Subsidiaries of Prime Retail, Inc. [Incorporated by reference to the same
titled exhibit in the Company's registration statement on Form S-4
(Registration No. 333-1784).]
24.1 Consent of Winston & Strawn (included in their opinions filed as Exhibits
5.1 and 8.1)
24.2* Consent of Ernst & Young LLP
25* Power of Attorney
27* Financial Data Schedule
</TABLE>
- ------------------------
+ To be filed by amendment.
* Previously filed.
ITEM 36. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-7
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers of the Registrant pursuant to the
provisions referred to in Item 33 above or otherwise, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceedings), is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Baltimore, State of Maryland, on June 21, 1996.
PRIME RETAIL, INC.
By: /s/ C. ALAN SCHROEDER
-----------------------------------
C. Alan Schroeder
Senior Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
*
- ----------------------------------- Chairman of the Board and June 21, 1996
Michael W. Reschke Director
* Chief Executive Officer
- ----------------------------------- (Principal Executive June 21, 1996
Abraham Rosenthal Officer) and Director
* President, Chief
- ----------------------------------- Operating Officer and June 21, 1996
William H. Carpenter, Jr. Director
Executive Vice President
-- Chief Financial
/s/ ROBERT P. MULREANEY Officer and Treasurer
- ----------------------------------- (Principal Financial June 21, 1996
Robert P. Mulreaney Officer and Principal
Accounting Officer)
*
- ----------------------------------- Director June 21, 1996
Terence C. Golden
*
- ----------------------------------- Director June 21, 1996
Kenneth A. Randall
II-9
<PAGE>
<TABLE>
<C> <S> <C>
*
- ----------------------------------- Director June 21, 1996
James R. Thompson
*
- ----------------------------------- Director June 21, 1996
Marvin S. Traub
*By: /s/ C. ALAN SCHROEDER
- ----------------------------------- as Attorney-in-Fact
C. Alan Schroeder
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
1.1+ Form of Underwriting Agreement among the Company, the
Operating Partnership, the Selling Stockholder and the
Underwriters
3.1+ Amended and Restated Articles of Incorporation of Prime
Retail, Inc., as amended [Restated to incorporate amendment
dated May 29, 1996 for purposes of Regulation ST Section
232.102(c) only]
3.2 Amended and Restated By-Laws of Prime Retail, Inc.
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (File No. 0-23616).]
4 Form of Stock Certificate [Incorporated by reference to the
same titled exhibit in the Company's registration statement
on Form S-11 (Registration No. 33-68536).]
5.1+ Form of Opinion of Winston & Strawn regarding the validity of
the securities registered
8.1+ Form of Opinion of Winston & Strawn regarding tax matters
10.1 Agreement of Limited Partnership of Prime Retail, L.P.
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.1A+ First Amendment to Agreement of Limited Partnership of Prime
Retail, L.P.
10.1B+ Common Unit Contribution Agreement
10.2 1994 Stock Incentive Plan [Incorporated by reference to the
same titled exhibit in the Company's registration statement
on Form S-11 (Registration No. 33-68536).]
10.3* 1995 Stock Incentive Plan
10.4 Executive Employment Agreement (Michael W. Reschke)
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.5 Combined Service and Special Distribution and Allocation
Agreement (Abraham Rosenthal) [Incorporated by reference to
the same titled exhibit in the Company's registration
statement on Form S-4 (Registration No. 333-1784).]
10.5A Special Distribution and Allocation Agreement by and between
the Company, the Operating Partnership and the Rosenthal
Family LLC [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-4
(Registration No. 333-1784).]
10.5B Indemnification and Option Agreement by and between the Prime
Group, Inc., the Rosenthal Family LLC and Abraham Rosenthal
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-4 (Registration
No. 333-1784).]
10.6 Combined Service and Special Distribution and Allocation
Agreement (William H. Carpenter, Jr.) [Incorporated by
reference to the same titled exhibit in the Company's
registration statement on Form S-4 (Registration No.
333-1784).]
10.6A Special Distribution and Allocation Agreement by and between
the Company, the Operating Partnership and the Carpenter
Family Associates LLC [Incorporated by reference to the same
titled exhibit in the Company's registration statement on
Form S-4 (Registration No. 333-1784).]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
10.6B Indemnification and Option Agreement by and between the Prime
Group, Inc., William H. Carpenter, Jr. and the Carpenter
Family Associates LLC [Incorporated by reference to the same
titled exhibit in the Company's registration statement on
Form S-4 (Registration No. 333-1784).]
10.7 Form of Executive Employment Agreement (David G. Phillips)
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.8 Letter Agreement with R. Bruce Armiger [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.9 Right of First Refusal Agreement (Northgate Plaza-Improved
Parcel) [Incorporated by reference to the same titled exhibit
in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.10 Right of First Refusal Agreement (Northgate Plaza - Vacant
Parcel) [Incorporated by reference to the same titled exhibit
in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.11 Right of First Refusal Agreement (Huntley Factory Shops)
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.12 Right of First Refusal Agreement (San Marcos Factory Shops)
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.13 Purchase Option Agreement (Northgate Plaza - Excluded Parcel)
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.14A Purchase and Option Agreement (Huntley Factory Shops)
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.14B* First Amendment to Purchase and Option Agreement (Huntley
Factory Shops)
10.15 Purchase Agreement (Northgate Plaza) [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.16 Registration Rights Agreement [Incorporated by reference to
the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as
amended (File No. 0-23616).]
10.17 Agreement of Partnership of Grove City Factory Shops
Partnership by and between Pittsburgh Factory Shops Limited
Partnership and Fru-Con Development of Pennsylvania, Inc. as
amended by Amendments One through Four [Incorporated by
reference to the same titled exhibit in the Company's
registration statement on Form S-11 (Registration No.
33-68536).]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
10.18 Assignment, Assumption and Indemnification Agreement
(Northgate Plaza) [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.19 Form of Property Level General Partnership Agreement
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.20 Form of Property Level Limited Partnership Agreement
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.21 Noncompetition Agreement with PGI [Incorporated by reference
to the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as
amended (File No. 0-23616).]
10.22 Form of Standby Bond Purchase and Indemnity Agreement
[Incorporated by reference to the same titled exhibit in the
Company's registration statement on Form S-11 (Registration
No. 33-68536).]
10.23 Second Amended and Restated Subscription Agreement of Abraham
Rosenthal regarding Common Units of Prime Retail, L.P.
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.24 Second Amended and Restated Subscription Agreement of William
H. Carpenter, Jr. regarding Common Units of Prime Retail,
L.P. [Incorporated by reference to the same titled exhibit in
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.25 Amended and Restated Promissory Note (Northgate Plaza) with
respect to Northgate Plaza [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended
(File No. 0-23616).]
10.26 Loan Modification and Assumption Agreement and Partial Release
of Mortgage (Northgate Plaza) [Incorporated by reference to
the same titled exhibit in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as
amended (File No. 0-23616).]
10.27 Environmental Remediation and Indemnity Agreement (Northgate
Plaza) [Incorporated by reference to the same titled exhibit
in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.28 Guaranty (Northgate Plaza) [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended
(File No. 0-23616).]
10.29 ADA Indemnity Agreement (Northgate Plaza) [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
10.30 Consulting Agreement between the Company and Marvin Traub
Associates, Inc. [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.31 Secured Promissory Note of Rosenthal Family LLC with respect
to the purchase of the Restricted Common Units [Incorporated
by reference to the same titled exhibit in the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994, as amended (File No. 0-23616).]
10.31A Allonge related to the Secured Promissory Note of Rosenthal
Family LLC [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-4
(Registration No. 333-1784).]
10.32 Secured Promissory Note of Carpenter Family Associates LLC
with respect to the purchase of the Restricted Common Units
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.32A Allonge related to the Secured Promissory Note of Carpenter
Family Associates LLC [Incorporated by reference to the same
titled exhibit in the Company's registration statement on
Form S-4 (Registration No. 333-1784).]
10.33 Pledge and Security Agreement of Rosenthal Family LLC with
respect to the purchase of the Restricted Common Units
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.34 Pledge and Security Agreement of Carpenter Family Associates
LLC with respect to the purchase of the Restricted Common
Units [Incorporated by reference to the same titled exhibit
in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended (File No. 0-23616).]
10.35 Guaranty of Abraham Rosenthal with respect to the purchase of
the Restricted Common Units [Incorporated by reference to the
same titled exhibit in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended
(File No. 0-23616).]
10.35A Reaffirmation of Pledge and Guaranty with respect to the
Restricted Common Units of Rosenthal Family LLC and Abraham
Rosenthal [Incorporated by reference to the same titled
exhibit in the Company's registration statement on Form S-4
(Registration No. 333-1784).]
10.36 Guaranty of William H. Carpenter, Jr. with respect to the
purchase of the Restricted Common Units [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.36A Reaffirmation of Pledge and Guaranty with respect to the
Restricted Common Units of Carpenter Family Associates LLC
and William H. Carpenter, Jr. [Incorporated by reference to
the same titled exhibit in the Company's registration
statement on Form S-4 (Registration No. 333-1784).]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
10.37 Waiver, Recontribution and Indemnity Agreement by the Limited
Partners [Incorporated by reference to the same titled
exhibit in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended (File No.
0-23616).]
10.38 Lock-Up Agreement (PGI) [Incorporated by reference to the same
titled exhibit in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, as amended (File
No. 0-23616).]
10.39 Lock-Up Agreement (Kemper Companies) [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.40 Lock-Up Agreement (Abraham Rosenthal) [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.41 Lock-Up Agreement (William H. Carpenter, Jr.) [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.42 Promissory Note dated June 30, 1994 by and among Prime Retail,
L.P. and Nomura Asset Capital Corporation [Incorporated by
reference to the same titled exhibit in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, as amended (File No. 0-23616).]
10.43 Open-End Mortgage Agreement, Assignment of Rents and Fixture
Filing dated June 30, 1994, by and among Ohio Factory Shops
Partnership and Nomura Asset Capital Corporation
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.44 Revolving Loan Agreement dated March 2, 1995 between
Gainesville Factory Shops Limited Partnership, Florida Keys
Factory Shops Limited Partnership, Indianapolis Factory Shops
Limited Partnership and Nomura Asset Capital Corporation
[Incorporated by reference to the same titled exhibit in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended (File No. 0-23616).]
10.45 Commitment Letter dated December 18, 1995 between the Company
and Nomura Asset Capital Corporation [Incorporated by
reference to the same titled exhibit in the Company's Current
Report on Form 8-K dated December 18, 1995 (File No.
0-23616).]
10.46* Indemnity Agreement made by the Company in favor of Prime
Group, Inc. and Prime Group Limited Partnership
10.47* Partnership Interest Purchase Agreement Grove City Factory
Shops Partnership by and between Prime Retail, L.P. and the
Fru-Con Projects, Inc. dated as of May 6, 1996.
10.48 Commitment Letter dated June 5, 1996 between the Company and
Nomura Asset Capital Corporation [Confidential treatment
requested for certain omitted portions; complete copy on file
with the Securities and Exchange Commission]
12.1* Statement re Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
12.2* Statement re Computation of Ratio of Funds from Operations to
Combined Fixed Charges and Preferred Stock Dividends
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- ------------ -------------------------------------------------------------- ---------------
<S> <C> <C>
22 Subsidiaries of Prime Retail, Inc. [Incorporated by reference
to the same titled exhibit in the Company's registration
statement on Form S-4 (Registration No. 333-1784).]
24.1 Consent of Winston & Strawn (included in their opinions filed
as Exhibits 5.1 and 8.1)
24.2* Consent of Ernst & Young LLP
25* Power of Attorney
27* Financial Data Schedule
</TABLE>
- ------------------------
+ To be filed by amendment.
* Previously filed.
<PAGE>
Exhibit 10.48
June 5, 1996
Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attn: Mr. Michael Reschke
Re: Commitment Letter dated May 24, 1996, as amended May 31, 1996, (the
"Commitment Letter") between [*]
("Lender") and Prime Retail, L.P. ("Borrower")
Ladies and Gentlemen:
The undersigned, Nomura Asset Capital Corporation ("Nomura"), hereby
agrees to provide the financing and otherwise perform the Lender's
obligations described in the Commitment Letter upon the terms and conditions
set forth therein.
Please sign below to indicate your agreement to perform the Borrower's
obligations described in the Commitment Letter upon the terms and conditions
set forth therein; PROVIDED, HOWEVER, THAT (i) there shall be no investment
advisory firm fee payable with respect to the [*] described in
the Commitment Letter, (ii) you will not be required to pay a repayment fee
to Nomura under the existing revolving loan credit facility with Nomura to
the extent such repayment is made to Nomura by application of proceeds of the
loans described in the Commitment Letter pursuant to this letter and (iii)
the fees that are otherwise due and payable to the Lender shall be paid at
the closing of the Mortgage Loans, scheduled for July 1, 1996.
Sincerely,
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Ethan Penner
-------------------------------
Title: President
----------------------------
AGREED TO BY:
PRIME RETAIL, L.P.
By: Prime Retail, Inc.,
general partner
By: /s/ Michael W. Reschke
--------------------------------
Title: Chairman
-----------------------------
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
[*]
May 24, 1996
Prime Retail, L.P.
100 East Pratt Street, 19th floor
Baltimore, Maryland 21202
Attention: Mr. Michael Reschke
Re: 1. Mortgage Loans and Mezzanine Financing and Preferred Equity on
Thirteen Factory Outlet Centers and [*]
Ladies and Gentlemen:
We are pleased to advise you that we, or an entity affiliated with
us or acting on our behalf (the "LENDER"), agree (i) to make a mortgage loan
(the "LOAN") to Borrowers (as hereinafter defined) secured by the Mortgaged
Premises (as hereinafter defined) and other collateral, (ii) to make
available certain mezzanine financing (the "MEZZANINE LOAN") to Borrowers,
(iii) under certain circumstances described herein to make available certain
additional financing to Borrowers or an Affiliate thereof (such financing,
the "PREFERRED EQUITY") and [*]
available to Prime Retail, L.P. ("PRIME RETAIL"), in
each case on the terms, and subject to the conditions, hereinafter set forth:
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-2- May 24, 1996
A. MORTGAGE LOAN TERMS
1. SECURITIZATION.
(a) It is intended that the Loan will be assigned to a trust to be
formed by an affiliate of Lender, as depositor, (the "TRUST") which
will issue one or more classes of mortgage pass-through certificates
(the "SENIOR CERTIFICATES")
[*]
The Senior Certificates will represent beneficial
ownership interests in the Loan and certain other assets of the Trust.
(b) It is also intended that the Mezzanine Loan will be assigned to the
Trust or another trust to be formed by an affiliate of Lender, as
depositor, and such trust will issue mortgage pass-through certificates
(the "JUNIOR CERTIFICATES," and, together with the Senior Certificates,
the "CERTIFICATES")
[*]
It is anticipated that the Senior Certificates will be offered to
investors in a Rule 144A offering and/or other private placement and
that the Junior Certificates will be purchased by Prime Retail or an
affiliate of Prime Retail.
(c) It is further anticipated that Preferred Equity may be issued by
Borrowers or an affiliate thereof and purchased by Lender under the
terms and conditions set forth herein.
(d) [*]
(e) The parties intend that the date of issuance of the Certificates, and
if applicable, the Preferred Equity (such issuances, the
"SECURITIZATION," and such date, the "SECURITIZATION CLOSING DATE")
shall be not later than September 30, 1996. Both parties agree to
cooperate in good faith to achieve such timing; provided that the
foregoing shall not be construed to limit Lender's terms and conditions
or approval rights hereunder.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-3- May 24, 1996
(f) In the event that the Securitization does not occur by September 30,
1996, notwithstanding any other provision of this Commitment, the per
annum interest rate on the Mezzanine Loan shall be increased to LIBOR
(as hereinafter defined) plus 5.20%, commencing on October 1, 1996.
Notwithstanding the foregoing, the interest rate on the Mezzanine Loan
shall be increased to such rate prior to October 1, 1996 under the
circumstances set forth in Paragraph 19 of this Part A. In the event
that the Securitization does not occur by the date that is six months
after the Closing Date (as hereinafter defined) of the Loan and
Mezzanine Loan (the "SIX MONTH DATE"), except as otherwise provided in
the following sentence, notwithstanding any other provision of this
Commitment, at any time after the Six Month Date Lender shall have the
right to notify Borrower demanding repayment of the Loan and Mezzanine
Loan on the date that is six months from the date of such notice (the
"NOTICE DUE DATE"), and Borrower shall be required to repay the Loan
and Mezzanine Loan on the Notice Due Date. Notwithstanding the
foregoing, Lender may give a Termination Notice (as defined in
Paragraph 19 of this Part A) prior to the Six Month Date, in which
event Borrower shall be required to repay the Loan and Mezzanine Loan
one year thereafter; and if at any time on or after the Six Month Date
Lender has not yet given notice under this clause (f), and Borrower
refuses to enter into a Construction Related Amendment pursuant to
Paragraph 19 of this Part A, any notice to Borrower to repay the Loan
and Mezzanine Loan given under this clause (f) by Lender shall be
deemed to constitute a Termination Notice and shall comply with the
provisions of Paragraph 19 of this Part A with respect to Termination
Notices.
(g) Notwithstanding any other provision of this Commitment, Borrowers shall
have the right to prepay the Loan or Mezzanine Loan without payment of
a prepayment fee at any time prior to the Securitization Closing Date;
provided that (i) prepayment of the Loan may not be made unless the
Mezzanine Loan is also prepaid (provided, however, that Borrower shall
have the right to prepay the Mezzanine Loan without prepaying the
Loan), (ii) each of the Loan and the Mezzanine Loan may be prepaid in
whole only and (iii) Borrowers pay all other amounts due to Lender
under the Loan, the Mezzanine Loan and this Commitment.
2. PRINCIPAL AMOUNT. The aggregate initial principal amount of the Loan (net
of the amount in the Expansion Escrow (as hereinafter defined)) (such net
amount of the Loan, the "NET LOAN") shall be $226,500,000 (the "ANTICIPATED
SENIOR SIZE").
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-4- May 24, 1996
[*]
3. LOAN COMPONENTS. Each class of Senior Certificates will represent a
particular rating level. The initial principal amount of the Loan will be
divided into two or more components (collectively "COMPONENTS," and each
individually a "COMPONENT"), each of which will correspond to a class of the
Senior Certificates, and will have the same principal amount and payment
terms as its corresponding Senior Certificate class. If origination of the
Loan occurs prior to pricing of the Senior Certificates, Lender will
determine the amounts of the Components based on its best estimate of the
final Senior Certificates, and such amounts will be adjusted at the time of
the initial pricing of the Certificates to equal the initial principal
amount of the corresponding class of Senior Certificates.
4. INTEREST RATE.
(a) The initial weighted average interest rate per annum on the Loan will
equal the London Interbank offered rate for thirty (30) day deposits in
U.S. dollars ("LIBOR") plus a margin equal to one and twenty four one
hundredths percent (1.24%) (the "ANTICIPATED MARGIN") plus seven one
hundredths percent (.07%), which represents the anticipated per annum
fees payable to the trustee and servicer for the Senior Certificates
(the "ANTICIPATED SERVICING FEE RATE"). LIBOR shall be determined by
Lender on the basis of Telerate Page 3750, or if at any time LIBOR
cannot be determined from Telerate Page 3750, on the basis of standard
backup methods for LIBOR determination.
The interest rate for each Component will be set at the time of the
initial pricing of the Senior Certificates to equal LIBOR plus the
margin on the corresponding class of Senior Certificates plus the per
annum fees payable to the trustee and servicer for the Senior
Certificates (the per annum amount of such fees, the "SERVICING FEE
RATE"). Interest on the Loan and each Component thereof will be
calculated based on the actual number of days in each interest accrual
period and a three hundred sixty (360) day year. The interest accrual
period for the Loan will be the period from each payment date to the
day preceding the next payment date. LIBOR for each interest accrual
period will be determined as described in the preceding paragraph on
the second London banking day preceding the commencement of such
interest accrual period.
The interest rate on the Loan (the "INTEREST RATE") will at all times
equal the weighted average of the interest rates on the Components;
provided, however that prior to the Securitization Closing Date the
per annum interest rate on the Loan shall at all times equal LIBOR
plus 1.31%.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-5- May 24, 1996
(b) From and after the Increased Amortization Date (as hereinafter
defined), the per annum margin over LIBOR at which interest accrues on
each component will be increased by two percent (2%) (the per annum
interest rate on each Component, as increased by such increase in
margin, the "INCREASED COMPONENT RATE" and the weighted average of the
Increased Component Rates, the "INCREASED INTEREST RATE").
(c) The "INCREASED AMORTIZATION DATE" is the date that is seven years from
first payment date after the Closing Date; provided that the Increased
Amortization Date will be adjusted at the time of pricing of the Senior
Certificates to be the date that is seven years from the first payment
date after the Securitization Closing Date.
5. TERM. The Loan shall initially have a term of thirty (30) years, subject to
clause (f) of Paragraph 1 of this Part A. The term of the Loan shall be
adjusted at the time of pricing of the Certificates to be 30 years from the
Securitization Closing Date.
6. PAYMENTS. Borrower shall make monthly payments under the Loan on account of
interest and principal monthly in arrears on the eleventh day of each month,
or if such eleventh day is not a business day, on the next business day, as
follows:
(a) From the Closing Date to the Securitization Closing Date a variable
amount equal to interest at the Interest Rate (or if applicable, the
Increased Interest Rate) in effect from time to time.
(b) From the Securitization Closing Date until the Increased Amortization
Date (as hereinafter defined), a variable amount equal to the sum of
(i) interest at the Initial Interest Rate in effect from time to time
plus (ii) a payment (the "AMORTIZATION PAYMENT") on account of
principal determined on a fixed amortization schedule over a thirty
year period assuming interest is paid at a rate equal to the initial
weighted average interest rate under the Loan throughout such thirty
(30) year period.
(c) From and after the Increased Amortization Date (if after the
Securitization Closing Date), interest and principal in an amount equal
to (i) the Amortization Payment plus (ii) accrued interest at the
Increased Interest Rate in effect from time to time, provided that,
unless the Lender requires Borrower to purchase a replacement Cap (as
hereinafter defined) after the Increased Amortization Date any portion
of such accrued interest in excess of the amount that would have
accrued if the Increased Interest Rate equaled the Derived Constant
Rate (as hereinafter defined) and interest shall accrue on such
deferred amount at the Increased Interest Rate (such accrued and
deferred interest, and interest thereon, the "DEFERRED INTEREST") until
the principal amount of the Loan shall have been paid in full, plus
(iii) the Excess Cash Flow (as hereinafter defined under
<PAGE>
-6- May 24, 1996
"LOCKBOX AGREEMENT") for the preceding month, which Excess Cash Flow
shall be applied to reduction of the outstanding principal balance
of the Loan.
(d) The outstanding principal balance of the Loan, together with all
accrued and unpaid interest, including, without limitation, the
Deferred Interest, shall be due and payable at maturity.
(e) Payments of principal on the Loan shall be applied to the
Components of the Loan in the order of the rating level of the
corresponding class of Certificates, so that no Component will
receive a payment of principal unless all Components corresponding
to a class of Certificates having a higher rating level than the
Certificates corresponding to such Component have been paid in
full; provided, however, that if such feature is acceptable to the
Rating Agencies (without causing any Rating Agency to decrease its
proposed rating of any class of Certificates or the principal
amount of such class that is permitted to obtain such rating) and
either (i) such feature would not increase the weighted average
margin on the Senior Certificates, or (ii) Borrower agrees that
Lender shall not bear any cost related to such feature that Lender
would otherwise bear under Paragraph 9 of this Part A.
7. INTEREST RATE CAP. At the initial pricing of the Senior
Certificates, Borrower will be required to purchase an interest rate
cap (the "CAP") from a counterparty (the "CAP COUNTERPARTY") which has a
long term unsecured debt rating from each Rating Agency of "AAA" or its
equivalent or if acceptable to the Rating Agencies (without causing any
Rating Agency to decrease its proposed rating of any class of
Certificates or the principal amount of such class that is permitted to
obtain such rating) of not less than "AA" or its equivalent and which
is otherwise acceptable to Lender (provided that Lender shall not
require a rating of greater than "AA" or its equivalent if an "AA" or
equivalent rating is acceptable to the Rating Agencies as aforesaid).
Lender hereby confirms that the counterparties set forth in the
memorandum dated May 21, 1996 entitled "Potential Cap Counterparties"
from Michael Bontrager and Dave Hall of Chatham Financial Corporation
to Steven S. Gothelf (attached as Exhibit A hereto) are acceptable to
Lender for so long as they are rated not less than "AA" or its
equivalent. The Cap shall mature on the Increased Amortization Date.
The Cap shall require the Counterparty to make monthly payments on each
payment date under the Loan through the Increased Amortization Date in
an amount at least equal to the product of (i) the excess, if any, of
LIBOR for the related interest accrual period over the Required Cap
Strike Rate (as hereinafter defined), (ii) the principal amount of the
Loan during such interest accrual period, and (iii) the actual number
of days in such interest accrual period divided by three hundred and
sixty (360). The "REQUIRED CAP STRIKE RATE" as of any date is equal to
the interest rate derived from the Rating Agency Senior Constant (after
giving effect to the actual amortization schedule of the Loan) (such
interest rate, the "DERIVED CONSTANT RATE") less the weighted average
margin on the Loan in effect from time to time, assuming the Loan
amortizes in accordance with its amortization
<PAGE>
-7- May 24, 1996
schedule and there are no prepayments or defaults, or if so required by
any Selected Rating Agency, less such higher margin as such Rating
Agency may require. Borrower at its option may purchase a Cap that
requires payments to be made in accordance with the preceding formula
except that the LIBOR rate at which the Counterparty is required to
make payments is lower at all times than the Required Cap Strike Rate
(such lower rate, the "ACTUAL CAP STRIKE RATE"). The Cap shall have
such other terms and conditions as shall be acceptable to Lender.
All fees payable to the Cap Counterparty under the Cap shall be paid by
Borrower on the origination date of the Securitization.
In the event that the rating of the Cap Counterparty shall be
downgraded below "AA" or its equivalent, or shall be qualified or
withdrawn, by any Rating Agency, or there shall be a breach or default
by the Cap Counterparty under the Cap, Borrower shall be obligated, at
Lender's direction, to terminate such Cap and to purchase another
interest rate cap having identical payment terms and maturity and
otherwise acceptable to Lender in its sole discretion from a
counterparty rated "AAA" or its equivalent or if acceptable to the
Selected Rating Agencies (and would not cause any such Rating Agency to
downgrade from its initial rating, qualify or withdraw its ratings of
the Senior Certificates) of not less than "AA" or its equivalent;
provided, that if Borrower obtains a written confirmation from each
Selected Rating Agency that such failure to terminate and replace such
Cap will not cause such Rating Agency to downgrade from their initial
ratings, qualify or withdraw the ratings of the Certificates Borrower
shall not be required to terminate and replace such Cap for so long as
such letter is effective. Any such replacement cap shall be subject to
replacement on the same terms and under the same conditions as the
original Cap. The counterparty for any replacement Cap shall be
selected by Borrower from a list of counterparties reasonably agreed to
by Borrower and Lender, or if Borrower and Lender are unable to agree
upon a list, shall be selected by Lender in its reasonable discretion;
provided that such counterparty shall have the required rating
described above.
In the event that the Loan is not repaid on the Increased Amortization
Date, if required by Lender, Borrower will be obligated on the
Increased Amortization Date and/or thereafter to purchase an additional
cap or caps on such terms as such Lender shall require.
In the event that at any time after the Closing Date and prior to the
Securitization Closing Date LIBOR shall be six and one half percent
(6.50%) or higher, Borrowers shall be required to purchase one or more
interest rate caps (the "PRE-SECURITIZATION CAPS") for each of the Loan
and Mezzanine Loan within five business days after LIBOR shall equal or
exceed such rate on the same terms and conditions as the initial Cap,
except that (i) the term of such Pre-Securitization Caps shall be for
one year (unless Lender has given Borrower notice of a Notice Due Date
or has given a Termination Notice for the Loan and Mezzanine Loan or
Borrower has given Lender
<PAGE>
-8- May 24, 1996
notice of prepayment of the Loan and/or Mezzanine Loan, in each case
such that the maturity of the Loan and/or Mezzanine Loan, as
applicable, occurs prior to one year, in which event the term for the
applicable Pre-Securitization Cap may end on the applicable maturity
date); provided, further, that Borrower, in its sole discretion, may
purchase a Pre-Securitization Cap for a period which expires after such
maturity date, (ii) the "strike rate" over LIBOR at which payments are
required to be made by the counterparty shall be eight and one half
percent (8.50%), in the case of the Pre-Securitization Cap for the Loan,
and seven and one half percent (7.50%) in the case of the
Pre-Securitization Cap for the Mezzanine Loan or in each case, such
other strike rate as shall be mutually acceptable to the parties, both
acting reasonably, and (iii) the principal amount on which payments are
calculated shall be the principal amount of the Loan, in the case of
the Pre-Securitization Cap for the Loan, and the principal amount of
the Mezzanine Loan, in the case of the Pre-Securitization Cap for the
Mezzanine Loan. In the event that following the expiration of the
initial Pre-Securitization Cap the Loan or Mezzanine Loan shall remain
outstanding and the Securitization Closing Date shall not have
occurred, if at any time thereafter LIBOR shall be six and one half
percent (6.50%) or higher, Lender shall have the right to require
Borrower to purchase an additional Pre-Securitization Cap for the Loan
and/or Mezzanine Loan, as the case may be, for the remaining term that
the Loan and/or Mezzanine Loan, as the case may be, is outstanding.
Borrowers may elect in lieu of purchasing any interest rate cap
required under this paragraph to purchase an interest rate swap that
would result in the same payments being made to Borrowers; provided
however, that in all cases, including a swap purchased prior to the
Securitization, (i) the use of a swap is acceptable to the Rating
Agencies (without causing any Rating Agency to decrease its proposed
rating of any class of Certificates or the principal amount of such
class that is permitted to obtain such rating) and (ii) the use of a
swap would not compromise the single-purpose bankruptcy-remote status
of the Borrowers.
Each cap or swap shall be pledged to secure the Loan and payments on
each cap shall be paid directly into the account maintained under the
Lockbox Agreement (as hereinafter defined) or into a collection account
maintained under the Pooling and Servicing Agreement for the Senior
Certificates.
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-9- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-10- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-11- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-12- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-13- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-14- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-15- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-16- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-17- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-18- May 24, 1996
[*]
10. PREPAYMENT PRIVILEGE. The Loan may be prepaid in whole or in part, on sixty
(60) days prior written notice to Lender, by paying the portion of the
outstanding principal balance being prepaid together with interest to the
date of such payment (or, if such payment is on a date other than a payment
date under the Loan, interest to the next succeeding payment date following
such payment) and any other amounts which may be owing under the terms of
the Loan Documents (as hereinafter defined), including a prepayment fee
equal to (a) two percent (2%) of the outstanding principal balance of
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-19- May 24, 1996
the Loan, if such prepayment occurs in the first (1st) Loan year, or (b) one
percent (1%) of the outstanding principal balance of the Loan, if such
prepayment occurs in the second (2nd) Loan year (except as otherwise
permitted under Paragraph 1 of this Part A). Notwithstanding the foregoing,
no prepayment fee shall be payable in connection with the application by
Lender of insurance proceeds or condemnation awards to reduce the
outstanding principal balance of the Loan. In addition, notwithstanding the
foregoing, Lender shall use its best efforts to obtain market pricing of the
Senior Certificates assuming that there is no prepayment fee in the second
year of the Loan, and if such feature does not increase the weighted average
margin on the Senior Certificates or Borrower agrees to bear the full cost
of any such increase, there will be no prepayment fee in the second year of
the Loan.
If Lender exercises its right to accelerate the maturity date following any
default (beyond applicable notice and/or grace period) by Borrower, any
tender of payment, whether made by Borrower, its successors or assigns or by
anyone on behalf of Borrower, of the amount necessary to satisfy the entire
indebtedness remaining at any time prior to a foreclosure sale, shall be
deemed (a) to constitute an evasion of the prepayment privilege and (b) to
be a voluntary prepayment, which shall require payment of the prepayment fee
set forth herein.
11. SECURITY. The Loan shall be (a) evidenced by thirteen (13) promissory notes
each of which shall have the same number of Component notes as the number of
classes of Senior Certificates (individually and collectively, the "NOTE")
made by the respective Borrowers in favor of Lender, each in an original
principal amount to be allocated by Lender (each such amount, an "ALLOCATED
AMOUNT"), which Allocated Amounts shall, in the aggregate, equal the
original principal amount of the Net Loan and (b) secured by, among other
things, (i) a separate first mortgage, deed of trust, deed to secure debt,
leasehold mortgage or leasehold deed of trust (individually and
collectively, the "MORTGAGE") executed by each Borrower in favor of Lender
covering such Borrower's fee simple estate in one of those eleven (11)
parcels of real property identified by project name on SCHEDULE B attached
hereto and all right, title and interest of the applicable Borrowers in, to
and under those two (2) leases (the "GROUND LEASES") affecting the projects
identified by name on SCHEDULE B-1 attached hereto and all of the
applicable Borrowers' right, title and interest in, to and under such Leases
(including, without limitation, all right, title and interest of the
applicable Borrower in, to and under the purchase option contained in the
Ground Lease encumbering Land in MacIntosh County, Georgia (the "MAGNOLIA
BLUFFS LEASE"), and the leasehold estates created by the Ground Leases in
those two (2) parcels of real property identified by project name on
SCHEDULE B-1 (such fee and leasehold parcels are hereinafter referred to,
individually and collectively, as the "LAND"), the factory outlet centers
and all other buildings and improvements constructed on the Land (the
"IMPROVEMENTS" and, together with the Land and all right, title and
interest of Borrower in, to and under the Ground Leases and the leasehold
estates created thereby, individually and collectively, as the context
requires, the "MORTGAGED PREMISES"), (ii) a first priority, perfected,
<PAGE>
-20- May 24, 1996
present and absolute assignment (individually and collectively, the
"ASSIGNMENT OF LEASES AND RENTS") by each Borrower each in favor of Lender
of all leases, rents, profits and other income ("RENTS") arising from or
related to the Mortgaged Premises, (iii) a guarantee of payment
(individually and collectively, the "GUARANTEE") by each Borrower,
guaranteeing payment of each Note executed by the other Borrowers, (iv) a
separate second mortgage, deed of trust, deed to secured debt, leasehold
mortgage or leasehold deed of trust (individually and collectively, the
"SECOND MORTGAGE") executed by each Borrower in favor of Lender as security
for the Guarantee executed by such Borrower, covering such Borrower's fee
simple estate, or leasehold estate, as applicable, in each Mortgaged
Premises, (v) a separate second priority, perfected assignment
(collectively, the "SECOND ASSIGNMENT") by each Borrower in favor of Lender
as security for the Guaranty executed by such Borrower, covering all Rents
arising from or relating to the Mortgaged Premises, (vi) a lockbox
agreement (the "LOCKBOX AGREEMENT") between each Borrower and Lender
pursuant to which all Rents shall be (A) paid by the tenants of the
Mortgaged Premises directly into the Lockbox Account (as hereinafter
defined) and (B) allocated by Lender to separate subaccounts to create
Reserves (as hereinafter defined), (vii) a first priority, perfected
security interest in all Reserves and Escrows (as hereinafter defined), and
each interest rate cap and the Expansion Escrow (as hereinafter defined),
including any investments in which any of the foregoing is permitted to be
invested, (viii) a first priority, perfected security interest in all
furniture, furnishings, fixtures, and equipment now or hereafter installed
in, affixed to, placed upon, or used in connection with the Mortgaged
Premises, except for any such items of property which are owned by tenants
or other parties which are not affiliated with Borrowers, and (ix) a first
priority, perfected security interest in all right, title and interest of
Prime Retail, L.P. in, to and under that certain Loan Agreement dated as of
February 28, 1995, as amended (the "LOAN AGREEMENT"), between Prime Retail,
L.P., as lender, and MacIntosh County Industrial Development Authority, as
borrower, in the amount of $22,730,000, entered into in connection with the
Magnolia Bluff Lease. If the proposed security structure causes Borrowers
to incur unreasonable expenses for mortgage recording taxes and/or title
insurance premiums, Lender and Borrower shall in good faith consider
alternative structures to provide Lender with equivalent security at reduced
expense. The Expansion Escrow shall be evidenced by a promissory note by
all Borrowers in favor of Lender in the principal amount of the Expansion
Escrow and secured by Mortgages on all the Mortgaged Premises.
12. BORROWER. "BORROWER" means each of those thirteen general or limited
partnerships listed on SCHEDULE A attached hereto, each of which shall be
a single-purpose, bankruptcy-remote limited partnership wholly owned,
directly or indirectly, by Prime Retail. Each Borrower's organizational
documents shall be satisfactory to Lender and to the Rating Agencies and
shall not be amended during the term of the Loan without Lender's prior
written consent. No Borrower shall own any assets other than its Mortgaged
Premises nor conduct any business other than the ownership and operation
<PAGE>
-21- May 24, 1996
of its Mortgaged Premises. During the term of the Loan, no Borrower
shall incur any debt (including debt to related parties) other than the
Loan and the Mezzanine Loan and the Preferred Equity. The Loan
Documents and each Borrower's organizational documents shall require
such Borrower to comply with all of the Rating Agencies' standards for
bankruptcy-remote status, including, without limitation, (a)
maintaining its separate status and identity, (b) not commingling
assets with those of any other entity (including related parties), (c)
not guaranteeing or otherwise becoming liable for the obligations of
any other entity (including related parties), except pursuant to the
Loan Documents or the Mezzanine Loan Documents and (d) having a
corporate general partner that is itself a single-purpose bankruptcy
remote entity and has an "independent director" on its board of
directors.
13. MANAGER. Each Mortgaged Premises shall be managed by Prime
Retail, L.P. (in such capacity, "MANAGER") pursuant to the provisions
of such Borrower's partnership agreement. The fees, expenses and
reimbursements payable to Manager for such management services shall
not exceed four percent (4%) or such other percentage as is used by the
Selected Rating Agencies in determining Loan Net Cash Flow of the Rents
(as hereinafter defined). On the Closing Date, each Borrower shall
deliver to Lender an agreement executed by such Borrower and Manager
that will provide, among other things, that (a) payment of Manager's
fees and expenses shall be subject and subordinate to payment of all
amounts then due and payable under the Loan Documents, provided,
however, that after the occurrence of an event of default, Manager
shall be entitled to receive from the Rents (in the priority provided
for Operating expenses in the Lockbox) reimbursement of its actual
expenses of operating the Mortgage Premises up to three percent (3%)
of the Rents until such time as Lender may elect to have Manager
replaced as hereinafter provided, (b) the provisions of such Borrower's
partnership agreement relating to the management of its Mortgaged
Premises may not be amended or terminated, nor any other entity engaged
to manage the Mortgaged Premises, without the prior written consent of
Lender and the Rating Agencies, (c) Manager shall operate the Mortgaged
Premises in compliance with the Loan Documents and (d) Lender may cause
Borrower to replace Manager with a third-party manager approved by
Lender (i) upon the occurrence of a default, beyond any applicable
notice and/or grace period under the Loan Documents, (ii) if the Loan
DSCR shall be less than 1.20/1.00, (iii) for cause, including, without
limitation, Manager's gross negligence, willful misconduct, fraud or
default beyond applicable notice or grace under the Management
Agreement or (iv), if such provision is required by the Selected Rating
Agencies, upon (A) acquisition of more than fifty percent (50%) of the
ownership interest in, or of control of, Prime Retail, Inc. by any
party or group of related parties that does not hold such interest or
such control (either through ownership of stock of Prime Retail, Inc.
or ownership of limited partnership units in Prime Retail, L.P.) on the
Closing Date or (B) Prime Retail, Inc. ceasing to own one hundred
percent (100%) of the general partnership interest in, and to have sole
control of, Manager (to the same extent as Prime Retail Inc. has
control over Prime Retail
<PAGE>
-22- May 24, 1996
under the existing terms of the partnership agreement of Prime Retail),
unless, with respect to each of the foregoing clauses (i) through (iv),
(x) the Rating Agencies shall have delivered written confirmation that
any rating issued by such Rating Agencies in connection with the Loan
will not, as a result of such occurrence, be downgraded, qualified or
withdrawn and (y) the holder of the Mezzanine Loan shall have consented
in writing to the retention of Manager. As used in this letter, the
term "CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of an entity, whether through ownership of voting securities, by
contract or otherwise.
14. REPLACEMENT PROPERTIES. At any time prior to the occurrence of
the Increased Amortization Date, any Borrower shall have the right to
obtain the release of any Mortgaged Premises from the lien of the
related Mortgage, provided that simultaneously with such release, such
Borrower shall either (i) execute and deliver to Lender, as security
for the Note, a mortgage (a "REPLACEMENT MORTGAGE") encumbering a
factory outlet center (a "REPLACEMENT PREMISES") and such other
documents (together with the Replacement Mortgage, the "REPLACEMENT
DOCUMENTS"), including, without limitation, documents corresponding to
each of the Loan Documents, Mezzanine Loan Documents and Preferred
Equity Documents (as hereinafter defined) required to be delivered
hereunder with respect to the Mortgaged Premises, as Lender may require
in order to grant Lender a first priority, perfected lien on and
security interest in such Replacement Premises and all related Rents,
personal property, Reserves and Escrows on the same terms and
conditions as the liens and security interests granted to Lender in the
Mortgaged Premises and the related Rents, personal property, Reserves
and Escrows on the Closing Date (as hereinafter defined) under the Loan
and Mezzanine Loan or (ii) (provided that the Rating Agencies shall
have permitted the following actions in connection with their ratings
of the Certificates (without causing any Rating Agency to decrease its
proposed rating of any class of Certificates or the principal amount of
such class that is permitted to obtain such rating)) Borrower shall
cause an affiliate, wholly owned directly or indirectly by Prime Retail
and meeting all the objective criteria, terms, conditions and
requirements for Borrowers hereunder, including without limitation the
requirements under Paragraph 12 of this Part A of this Commitment (a
"REPLACEMENT BORROWER"), to execute and deliver to Lender a Note in
the original principal amount of the outstanding Allocated Amount of
the Mortgaged Premises to be released (plus any increase thereto), a
Replacement Mortgage encumbering Replacement Premises and Replacement
Documents. All Replacement Premises and Replacement Documents shall be
subject to the same objective criteria, terms, conditions and
requirements as are imposed with respect to the Mortgaged Premises and
the Loan hereunder. Each Borrower's right to obtain such release of a
Mortgaged Premises shall also be subject to the following conditions
and restrictions:
(a) No default shall have occurred and be continuing under the Loan
Documents.
<PAGE>
-23- May 24, 1996
(b) Borrowers shall not be entitled to obtain the release of more than
TWO (2) individual Mortgaged Premises in any calendar year.
(c) At least sixty (60) days prior to the proposed date of such release,
the applicable Borrower shall have delivered to Lendcr appraisals,
in form and substance reasonably satisfactory to, and prepared by a
third-party real estate professional reasonably approved by, Lender,
indicating the market value for the proposed Replacement Premises is
at least equal to the fair market value of the Mortgaged Premises
proposed to be released, as of the date of such proposed release.
(d) Borrower shall have delivered a Phase I environmental report and, if
suggested by such Phase I report, a Phase II environmental report
(collectively, an "ENVIRONMENTAL REPORT") in form and substance
reasonably satisfactory to, and prepared by an environmental
consultant reasonably approved by, Lender, stating that the
Replacement Premises comply with all applicable environmental laws,
or if remedial steps are required to effect such compliance,
identifying such steps and projecting the cost thereof, in which
case Borrower shall be required to deposit into the Environmental
Escrow (as hereinafter defined) an amount equal to one hundred fifty
percent (150%) of such projected costs.
(e) Borrower shall have delivered an engineering report (an "ENGINEERING
REPORT"), in form and substance reasonably satisfactory to, and
prepared by a consulting engineer reasonably approved by, Lender,
stating that the Replacement Premises comply with all applicable
building laws and do not require performance of deferred maintenance
or if remedial steps are required to effect such compliance or such
deferred maintenance, identifying such steps and projecting the cost
thereof, in which case Borrower shall be required to deposit into the
Engineering Escrow (as hereinafter defined) an amount equal to one
hundred fifty percent (150%) of such projected costs.
(f) Borrower shall have caused to be delivered all leases,
title commitments, title insurance policies, surveys, hazard and
liability insurance, evidence of compliance with zoning and other
laws and other items of due diligence with respect to the
Replacement Premises as were required to be delivered by Borrower
with respect to the Mortgaged Premises pursuant to the terms
hereof.
(g) The Net Cash Flow of the Replacement Premises as of the time of
such release shall be at least equal to the Net Cash Flow of the
Mortgaged Premises to be released.
(h) The person transferring the Replacement Premises to Borrower, or
the Replacement Borrower, as the case may be (i) shall be solvent
and (ii) shall be making such transfer or agreeing to act as
Replacement Borrower and issuing the Replacement Note on an arm's
length basis and for fair consideration, and the Borrower and
such person or Replacement Borrower shall deliver
<PAGE>
-24- May 24, 1996
certifications and evidence to such effect and such other
certifications as Lender shall reasonably require to assure itself
that the substitution does not constitute a fraudulent conveyance
on the part of any person (assuming such person were insolvent at
the time of substitution).
(i) Such other terms and conditions as the Rating Agencies shall require
in connection with such substitution shall be met.
(j) The Rating Agencies shall have delivered written confirmation that
any rating issued by such Rating Agencies in connection with the
Certificates will not, as a result of the proposed release and the
substitution of the Replacement Premises or the substitution of
the Replacement Borrower, be downgraded from their initial ratings
thereof, qualified or withdrawn.
(k) In connection with a substitution of a Replacement Borrower,
(i) such method of substitution shall be expressly described in
the nonconsolidation opinion to be delivered on the Closing Date
pursuant to Paragraph 16, which nonconsolidation opinion shall be
in form and substance, and from counsel, acceptable to Lender,
(ii) the same nonconsolidation opinion shall be delivered with
respect to such Replacement Borrower prior to the substitution and
(iii) such substitution shall be made in accordance with all facts
and assumptions relating thereto set forth in such nonconsolidation
opinions, and the Borrower and Replacement Borrower shall provide
Lender with evidence and certifications to such effect.
15. EXPANSION ESCROWS. Lender shall use its good faith commercially
reasonable efforts to persuade the Rating Agencies to permit (i) the
structure of the Senior Certificates to include an escrow ("EXPANSION
ESCROW") to be used to reflect the anticipated increase in Net Cash
Flow resulting from the completion of certain proposed expansions at
the various Mortgaged Premises and (ii) for the Expansion Escrow to be
released from time to time upon Borrower's satisfaction of certain
objective standards, which objective standards shall be mutually
acceptable to Borrower and the Rating Agencies. The Expansion Escrow
shall have such other terms as shall be acceptable to Borrower and the
Rating Agencies. It is currently intended that the size of the
Expansion Escrow shall be between twenty-five to fifty million dollars,
to the extent permitted by the Rating Agencies without impairing the
ratings that would otherwise obtain on the Certificates.
16. NON-CONSOLIDATION 0PINION. At the closing, the Borrowers shall
deliver to Lender an opinion of counsel, in form and substance
satisfactory to Lender and its counsel, to the effect that in the event
of a bankruptcy of Manager or any other entity that, together with any
related parties, directly or indirectly owns more than forty-nine
percent (49%) of (i) the partnership interests of any Borrower or (ii)
the stock of any general partner of Borrower, the assets of Borrower
and/or such general partner will not be consolidated into the
bankruptcy estate. Such opinion shall, among other things, expressly
consider the effect on such consolidation risk of Borrowers' right to
<PAGE>
-25- May 24, 1996
substitute Replacement Premises as collateral for the Loan or to
substitute a Replacement Borrower, as described in Paragraph 13 above,
the Guaranty executed by each Borrower, the funding of expansions of
the properties, and such other matters as Lender shall request. A
draft of such opinion must be submitted to Lender at least one month
prior to the Closing Date.
17. LOCKBOX AGREEMENT. Each Borrower shall enter into the Lockbox
Agreement, pursuant to which all rental income, including expense
reimbursements by tenant ("RENTS") and other income from the property
(together with Rents, "INCOME") shall be deposited in an account (the
"PROPERTY ACCOUNT") in a bank approved by Lender, which Property
Account shall be swept daily and all funds transferred into an account
(the "LOCKBOX ACCOUNT") under the sole dominion and control of Lender
and allocated by Lender into subaccounts to provide reserves
("RESERVES") for the payment of debt service, taxes and insurance
premiums, provided that in any calendar month, when all amounts
required to be deposited in the Reserves on the next payment date shall
have been received, Lender shall notify the bank in which the Property
Account is held to discontinue daily sweeps until such payment date has
occurred. After the occurrence of the Increased Amortization Date,
Income shall also be allocated to Reserves to provide for the payment
of operating expenses, costs of capital improvements and repairs,
tenant improvement costs and leasing commissions. Any amount of Income
received in the Lockbox Account after allocation to all applicable
Reserves ("EXCESS CASH FLOW") shall be paid over to Borrower (subject
to the payment requirements under the Mezzanine Loan and to the
provisions set forth in clause (j) of Paragraph 7 of Part E of this
commitment) or, if the Increased Amortization Date has occurred,
applied in reduction of the outstanding principal balance of the Loan.
Borrower will be responsible for paying all fees and expenses of the
bank at which the Lockbox Account is maintained. The banks maintaining
the Lockbox Account and each Property Account shall have such short
term and long term unsecured debt ratings, and such accounts shall be
invested in such permitted investments, as shall be required by the
Rating Agencies for lockbox accounts for mortgaged properties
underlying commercial mortgage pass-through certificates having a
rating of "AA" or its equivalent or for investments in such accounts,
as the case may be.
18. ENVIRONMENTAL AND ENGINEERING ESCROWS. On the closing date, each
Borrower shall deposit with Lender an amount equal to one hundred fifty
percent (150%) of (a) the projected costs for remedying any
environmental conditions on its Mortgaged Premises as recommended in
the Environmental Report delivered by Borrower to Lender in connection
with its application for the Loan (the "ENVIRONMENTAL ESCROW") and (b)
the projected costs of remedying any physical defects or items of
deferred maintenance as recommended in the Engineering Report delivered
by Borrower to Lender in connection with its application for the Loan
(the "ENGINEERING ESCROW" and, together with the Environmental Escrow,
the "ESCROWS").
19. COOPERATION WITH SECURITIZATION. Borrowers shall cooperate in all
respects with the securitization of the Loan and Mezzanine Loan, the
issuance, sale and initial rating of
<PAGE>
-26- May 24, 1996
the Certificates and the issuance and sale of the Preferred Equity
(collectively, the "SECURITIZATION"). Without limitation, Borrowers shall,
at the sole cost and expense of Borrowers:
(a) Draft and/or amend any and all Loan Documents and Mezzanine Loan
Documents (as hereinafter defined) and organizational documents and
contracts of Borrower and its affiliates to comply with requirements
of the Rating Agencies
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-27- May 24, 1996
[*]
(b) Cooperate with Lender in preparing a private placement memorandum for
the Certificates, provide all information requested by Lender or its
investors in preparation of such memorandums (subject to the agreement
of Lender regarding confidential information set forth in Paragraph 24
of this Part A), and deliver to Lender and each affiliate involved in
the offering of the Certificates an indemnity agreement indemnifying
Lender and each such affiliate for any loss, claim, liability or
damage, including legal fees and expenses, arising from any
misstatement of a material fact or omission to state a material fact
in the memorandums (provided that such indemnity shall not cover
information included in the memorandums that was provided in writing
for inclusion therein by persons other than Borrower and its affiliates
and was not delivered or approved by Borrowers or any affiliate) or in
any other material prepared, delivered or approved by Borrower and
provided to investors;
(c) In connection with the initial offering of the Certificates and the
Mezzanine Loan and on an ongoing basis following their issuance
(subject to the agreement of Lender regarding confidential information
set forth in Paragraph 24 of this Part A), provide all financial and
statistical information, together with audits thereof and accountants'
consents to the use thereof in the memorandum and in other materials
provided to investors as shall be required by the Rating Agencies or
by securities or other laws applicable to the Certificates or shall be
requested by Lender;
(d) Provide to investors ongoing information regarding the Mortgaged
Premises, the Borrower and its affiliates, and the Loan (subject to
the agreement of Lender regarding confidential information set forth
in Paragraph 24 of this Part A) including without limitation the
information required by Rule 144A under the Securities Act of 1933,
as amended;
(e) Provide such legal opinions, in form and substance and from counsel
acceptable to Lender and each Rating Agency, as shall be required by
the Rating Agencies or requested by Lender in connection with the
issuance of the Certificates and the making of the Mezzanine Loan,
including without limitation a
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-28- May 24, 1996
nonconsolidation opinion with respect to Borrowers and such of their
affiliates as shall be requested by Lender, opinions regarding the tax
status of Borrowers and their affiliates and the Certificates and
Mezzanine Loan, a "10b-5" opinion regarding the memorandum (other than
financial and statistical information included therein and the legal
aspects of the tax and ERISA treatment of the Certificates) and first
priority perfected security interest opinions with respect to the
security for the Loan;
(f) Provide such appraisals, environmental reports, engineering reports,
insurance reports and other similar information, and updates thereto
(except to the extent provided within the prior six months of the date
of delivery which shall be no earlier than June 1), as shall be
required by the Rating Agencies or requested by Lender;
(g) Obtain and maintain such insurance as shall be required by the Rating
Agencies in order for each class of Certificates to achieve its rating
level at its anticipated initial principal amount;
(h) Provide for any Certificates that represent a residual interest in a
REMIC to be held by an affiliate of Prime Retail or an assignee
thereof that (i) has sufficient resources to pay the tax liability
associated with such Certificates, (ii) can and does make the
representations required in a standard affidavit for REMIC residual
holders and (iii) can and does otherwise comply with all laws
applicable to the holder of a residual interest in a REMIC; and
(i) Provide such representations and warranties as are typically required
by Rating Agencies and investors in securitizations and financings
similar to the transactions contemplated hereby.
Lender will to the extent practicable and permitted by the Rating Agencies
permit the Borrower to participate in conversations regarding major
decisions in the Rating Agency process; provided that all Borrower
contacts and conversations with the Rating Agencies regarding the
transactions contemplated hereby shall be initiated through and
participated in by Lender.
20. RELEASE OF MORTGAGED PREMISES. A Borrower may obtain (x) the release (in
whole but not in part) of any individual Mortgaged Premises from the lien
of the related Mortgage and Second Mortgage and (y) the release of such
Borrower from obligations thereafter arising under the Loan Documents, at
such Borrower's cost, upon satisfaction of each of the following
conditions:
(a) Lender shall receive payment of an amount (the "RELEASE AMOUNT") equal
to the sum of (i) one hundred twenty-five percent (125%) of the then
current Allocated Amount for such Mortgaged Premises plus (ii) such
additional amount, to be applied in reduction of the principal balance
of the Loan, as may be necessary
<PAGE>
-29- May 24, 1996
so that, immediately after the release of the Mortgaged Premises, the
Loan DSCR for the Loan shall be at least equal to the greater of
(I) the Loan DSCR for the Loan on the Closing Date and (II) the Loan
DSCR for the Loan immediately prior to release of the Mortgaged
Premises, or if permitted by the Rating Agencies (without causing any
Rating Agency to decrease its proposed rating of any class of
Certificates or the principal amount of such class that is permitted
to obtain such rating) the Loan DSCR for the Loan on the Closing Date;
(b) Lender shall receive payment of all other amounts then due and payable
under the Loan, including, without limitation, any prepayment fee
described in Paragraph 10 of this Part A payable in connection with
the Release Amount;
(c) no default shall have occurred and be continuing either before or after
giving effect to such release;
(d) Lender shall have received the payment required under the Mezzanine
Loan as discussed in Paragraph 7 of Part B of this Commitment; and
(e) Unless the property being released is the sole Mortgaged Premises
owned by the applicable Borrower and such Borrower is being released
under the Loan and Mezzanine Loan, the Mortgaged Premises being
released shall be transferred by the related Borrower to a third
party, whether affiliated with Prime Retail or otherwise.
21. BUDGET APPROVAL. From and after the Increased Amortization Date, Borrower
must obtain the approval of the Lender for each annual budget for the
Mortgaged Premises, operating expenses for the Mortgaged Premises will be
disbursed periodically in accordance with the approved annual budget, and
expenses that arise for which amounts have not previously been budgeted
must be approved separately.
22. MAGNOLIA BLUFF LEASE LOAN DOCUMENTS. The Lender shall have received and
approved a true and complete copy of all documents executed and delivered
in connection with the issuance of the Magnolia Bluff Lease and the Loan
Agreement, including, without limitation, copies of the Loan Agreement and
a policy of title insurance issued in connection with the execution of the
Loan Agreement and the related transactions encumbering the fee estate of
the property subject to the Magnolia Bluff Lease and any subsequent
amendments to such documents including such amendments and/or other comfort
as Lender or the Rating Agencies may require in order to protect, secure
and enhance Lender's security in the Loan Agreement, the Magnolia Bluff
Lease and the property encumbered thereby.
23. GROUND LEASE DOCUMENTS. Lender shall have received and approved a true and
correct copy of each Ground Lease, and such related documents, including
estoppel certificates
<PAGE>
-30- May 24, 1996
and nondisturbance agreements with any Landlord or fee mortgagee as Lender
or the Rating Agencies may require to protect a mortgagee's interest in
such Ground Leases.
24. CONFIDENTIALITY OF CERTAIN BORROWER INFORMATION. Lender agrees that
(i) information furnished by Borrower to it regarding tenant sales and
property figures and rent rolls and individual lease terms, and (ii) any
information that (A) is not contained or required to be contained in the
financial statements, and is not specifically described and required to be
delivered to Lender pursuant to Part E, Paragraph 7, clause (b) or clause
(d) (other than the first sentence and last three sentences thereof) but
(B) is reasonably requested by the Lender pursuant to the Loan that
Borrower reasonably considers confidential, shall be kept confidential;
provided that:
(a) Lender may include information regarding sales on a Mortgaged
Premises basis for the year ended December 31, 1995 and a table of
lease expirations in the aggregate in any disclosure document regarding
the Certificates;
(b) Lender may provide information regarding sales on a Mortgaged
Premises basis, trends in sales on a Mortgaged Premises basis, rent
rolls showing such information as is reasonably acceptable to Lender
and any other information received by it from Borrower to any investor
or prospective investor in Certificates that signs an agreement to keep
such information confidential (provided that each such investor may use
such information in a resale of its Certificates provided that the
transferee signs the same confidentiality agreement);
(c) The servicer of the Certificates shall provide (i) to all
Certificateholders quarterly information regarding Loan DSCR, Loan Net
Cash Flow, and occupancy rates of the Mortgaged Premises, and (ii) upon
request, to Certificateholders that sign an agreement to keep such
information confidential (provided that each such Certificateholder may
use such information in a resale of its Certificates provided that the
transferee signs the same confidentiality agreement) quarterly
information regarding sales on a Mortgaged Premises basis, trends in
sales on a Mortgaged Premises basis and rent rolls showing such
information as is reasonably acceptable to Lender. In the event that
there is an event of default under the Loan or Mezzanine Loan, or the
Loan DSCR under the Loan or Mezzanine Loan shall decline to below 1.20,
the foregoing information shall be provided on a monthly basis to any
Senior Certificateholder (or in the case of an event of default or Loan
DSCR decline under the Mezzanine Loan, any Junior Certificateholder)
that signs an agreement to keep the information confidential (provided
that each such Certificateholder may use such information in a resale
of its Certificates provided that the transferee signs the same
confidentiality agreement).
<PAGE>
-31- May 24, 1996
25. EXPANSION OF MORTGAGED PREMISES. Subject to clause (a)
of Paragraph 19 of this Part A, each Borrower shall have the right
to construct expansions to the improvements on its Mortgaged
Premises, provided that (i) such construction shall increase the
value of such Mortgaged Premises, (ii) such construction shall be
performed in compliance with all applicable laws, (iii) such
construction shall be funded solely by equity contributions by a
direct or indirect parent company of the Borrowers and (iv) the
method of such funding shall be addressed in the nonconsolidation
opinion to be rendered with respect to Borrowers and shall not
adversely affect the conclusion of such opinion.
26. [*]
B. MEZZANINE LOAN TERMS
1. MEZZANINE BORROWER. The borrowers of the Mezzanine Loan will be
the Borrowers.
2. FORM OF FINANCING. The Mezzanine Loan will be issued in the form
of a junior mortgage loan to each Borrower. Each such junior mortgage
loan shall be secured by substantially the same documents as are
described in Paragraph 11 of Part A hereof with respect to the Loan
(subject to the subordination thereof to the Loan and to the rights of
the Lender under the Mezzanine Loan set forth in this Part B). The
Mezzanine Loan will be securitized in the form of the Junior
Certificates.
3. PRINCIPAL AMOUNT. The initial principal amount of the Mezzanine
Loan shall be $33,500,000 (the "Anticipated Junior Size"). The actual
initial principal amount of the Mezzanine Loan will be determined (or,
if pricing of the Junior Certificates occurs subsequent to the
origination date of the Mezzanine Loan, adjusted) at the time of the
initial pricing of the Junior Certificates to be not greater than the
Selected Rating Agency Junior Size; provided that if the Lender Junior
Size exceeds the Selected Rating Agency Junior Size, the excess shall
be originated as Preferred Equity, subject to the conditions set forth
in Part C of this Commitment. In addition, in the event that any of
the Selected Rating Agencies does not permit there to be a class of
Certificates rated "BB" or its equivalent, then the Mezzanine Loan
shall not be made (or shall be repaid, if made) and in lieu of the
Mezzanine Loan, the Preferred Equity will be originated, subject to the
conditions set forth in Part C of this Commitment.
4. INTEREST. Subject to increase as provided in Paragraphs 1 and 19
of Part A of this Commitment, the interest rate on the Mezzanine Loan
prior to the Securitization Closing Date will initially be a per annum
rate equal to LIBOR plus three and one quarter percent (3.25%). At
the pricing of the Junior Certificates, the per annum rate
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-32- May 24, 1996
will be adjusted to be equal to the interpolated four year U.S.
Treasury Securities rate plus five and one half percent (5.50%) plus a
per annum rate equal to the per annum fees of the Servicer and Trustee
for the Mezzanine Loan. Interest will be calculated on a 30/360 basis,
and will be payable on the same payment dates as the Loan.
Interest, to the extent not paid on a current basis, shall accrue and
compound monthly at the Mezzanine Default Rate (as hereinafter defined)
in effect from time to time. Upon the occurrence of a breach of the
Mezzanine Loan Documents and until all breaches are cured, the yield on
the rate on the Mezzanine Loan will be increased by 300 basis points
(the "MEZZANINE DEFAULT RATE").
5. TERM. The Mezzanine Loan will have a seven (7) year term. At the
pricing of the Junior Certificates such term will be adjusted to be
seven (7) years from the Securitization Closing Date.
6. AMORTIZATION. From the Closing Date to the Securitization Closing
Date, the Mezzanine Loan shall be an interest only loan with principal
payable at maturity. From and after the Securitization Closing Date,
the Mezzanine Loan will be amortized monthly over its seven year term.
Principal and interest shall be paid on a level pay basis over such
seven (7) year period, with interest on the declining principal balance.
7. PREPAYMENT. The Mezzanine Loan may be prepaid in whole or part,
on thirty (30) days prior written notice to Lender, by paying the
portion of the outstanding principal balance being prepaid together
with interest to the date of such payment (or, if such payment is on a
date other than a payment date under the Mezzanine Loan, interest to
the next succeeding payment date following such payment) and any other
amounts which may be owing under the terms of the Mezzanine Loan
Documents (as hereinafter defined), including a prepayment fee equal to
(a) two percent (2%) of the outstanding principal balance of the
Mezzanine Loan, if such prepayment occurs in the first (1st) Mezzanine
Loan year, or (b) one percent (1%) of the outstanding principal balance
of the Mezzanine Loan, if such prepayment occurs in the second (2nd)
Mezzanine Loan year, except as otherwise permitted under Paragraph 1 of
Part A hereof. Notwithstanding the foregoing, no prepayment fee shall
be payable in connection with the application by Lender of insurance
proceeds or condemnation awards to reduce the outstanding principal
balance of the Mezzanine Loan.
If Lender exercises its right to accelerate the maturity date
following any default (beyond any applicable notice and/or grace
period) by Borrower, any tender of payment, whether made by Borrower,
its successors or assigns or by anyone on behalf of Borrower, of the
amount necessary to satisfy the entire indebtedness remaining at any
time prior to a foreclosure sale, shall be deemed (a) to constitute an
evasion of the prepayment privilege and (b) to be a voluntary
prepayment, which shall require payment of the prepayment fee set forth
herein.
<PAGE>
-33- May 24, 1996
Notwithstanding the foregoing, Borrower shall prepay the Mezzanine Loan
in part simultaneously with any release of a Mortgaged Premises from
the lien of the Mortgage as discussed under Paragraph 20 of Part A of
this Commitment, at which time:
(a) Lender shall receive payment of an amount (the "MEZZANINE RELEASE
AMOUNT") equal to the sum of (i) one hundred twenty-five percent
(125%) of the then current Mezzanine Allocated Amount for such
Mortgaged Premises plus (ii) such additional amount, to be applied
in reduction of the principal balance of the Mezzanine Loan, as
may be necessary so that, immediately after the release of the
Mortgaged Premises, the combined Loan DSCR for the Loan and the
Mezzanine Loan shall at least equal the greater of (I) the
combined Loan DSCR for the Loan and the Mezzanine Loan on the
Closing Date and (II) the combined Loan DSCR for the Loan and
the Mezzanine Loan immediately prior to release of the Mortgaged
Premises or, if permitted by the Rating Agencies (without causing
any Rating Agency to decrease its proposed rating of any class of
Certificates or the principal amount of such class that is
permitted to obtain such rating) the combined Loan DSCR for the
Loan and the Mezzanine Loan on the Closing Date; and
(b) Lender shall receive payment of all other amounts then due and
payable under the Mezzanine Loan, including, without limitation,
any prepayment fee described above payable in connection with the
Mezzanine Release Amount.
8. NET EXCESS CASH FLOW. All Excess Cash Flow less the operating
expenses of Borrower ("NET EXCESS CASH FLOW") will be transferred from
the Lockbox Account under the Loan to a sweep account under the
Mezzanine Loan to be applied to payment of amounts due under the
Mezzanine Loan. Any amounts of Net Excess Cash Flow remaining after
payment of all amounts then due under the Mezzanine Loan, subject to
Paragraph 11 of this Part B, will be released to Borrower.
9. LENDER RIGHTS. Under the Mezzanine Loan, Lender will be entitled
to the following consent rights with respect to the operation of
Borrower. Without the consent of Lender under the Mezzanine Loan,
Borrower shall not merge, consolidate, or acquire assets (except in
connection with a permitted substitution or a permitted expansion of
Mortgaged Premises under the Loan and Mezzanine Loan), amend its
organizational documents, amend or refinance the Loan, sell or transfer
any of the Mortgaged Premises (except in connection with a permitted
substitution or release under the Loan and Mezzanine Loan), permit any
transfers of ownership of Borrower to occur, incur indebtedness other
than the Loan and the Mezzanine Loan or enter into contracts with or
make payments to affiliates (except on a commercially reasonable arm's
length basis), other than the Management Agreement approved by the
Lender or replace the Manager or amend the Management Agreement (in
either case, except if directed by Lender under the Loan).
<PAGE>
-34- May 24, 1996
10. TRANSFERS. The Mezzanine Loan and the Junior Certificates will be
freely transferable by Lender. Prime Retail agrees that it (or one of
its affiliates) shall be the initial purchaser of the Junior
Certificates from Lender at a price equal to the principal amount
thereof plus accrued interest thereon.
11. DEFAULT REMEDY. In the event that payments under the Mezzanine
Loan are not made when due, or there is any other default under the
Mezzanine Loan Documents beyond any applicable notice and/or grace
period, Lender shall have standard remedies, including acceleration and
realization on its security. Notwithstanding the foregoing, for so long
as the Loan is outstanding, the remedies of Lender under the Mezzanine
Loan shall be limited to the following: (a) Lender may cause the
removal of the existing property manager and designate a replacement
property manager, and (b) all Net Excess Cash Flow in excess of
scheduled payments under the Mezzanine Loan will be applied to the
prepayment of the Mezzanine Loan. In addition, Lender will have the
right to put the Mezzanine Loan to Prime Retail at a price equal to the
principal amount thereof plus accrued and unpaid interest thereon on
the maturity date of the Mezzanine Loan or to terminate and replace the
existing Property Manager in the event that there is (i) a change in
control of the applicable Borrower, (ii) the acquisition of more than
fifty percent (50%) of the ownership in, or control of, Prime Retail,
Inc. by any party or group of related parties that does not hold such
interest or such control (either through stock ownership in Prime
Retail, Inc. or limited partnership unit ownership in Prime Retail) on
the Closing Date, or (iii) Prime Retail, Inc. ceasing to own one
hundred percent (100%) of the general partnership interest in, and to
have sole control of Prime Retail (to the same extent as Prime Retail
Inc. has control over Prime Retail under the existing terms of the
partnership agreement of Prime Retail). The holder of the Mezzanine
Loan will have the right to cure any default under the Loan, unless the
Mezzanine Loan is held by Borrower or an affiliate. Lender will also
have the right to exercise the foregoing remedies in clauses (a) and
(b) of the second sentence of this paragraph in the event that the
combined Loan DSCR is less than 1.15 for the trailing twelve (12)
month period (unless the Selected Rating Agencies shall require a
higher coverage test to rate the Junior Certificates the Minimum
Rating); provided that the right to receive Net Excess Cash Flow in
excess of the scheduled payments on the Mezzanine Loan upon a decline
in Loan DSCR will terminate in the event that the combined Loan DSCR
shall increase to 1.45 for four successive calendar quarters and the
right to receive such Net Cash Flow upon a default will terminate if
the default is cured.
12. CROSS-DEFAULT. A default under the Loan shall also constitute a default
under the Mezzanine Loan.
13. SUBORDINATION OF AFFILIATE FEES. Any fees payable by Borrowers to
affiliates, including management fees, shall be subordinate to the
Mezzanine Loan, to the same extent as under the Loan.
<PAGE>
-35- May 24, 1996
14. REPURCHASE OF JUNIOR CERTIFICATES. Lender acknowledges that [*]
has agreed to enter into a standard
Public Securities Association Repurchase Agreement with Prime Retail
with respect to the Junior Certificates, for a two year period
following the purchase of the Junior Certificates by Prime Retail,
pursuant to the terms set forth in the letter of [*]
to Prime Retail of May 24, 1996, a copy of which is or
will be attached as Exhibit B hereto (the "Repurchase Commitment").
Pursuant to such letter, 75% of the fair market value of the Junior
Certificates will be financed under such Repurchase Agreement. If so
elected by Borrower by notice given not less than five business days
prior to the Securitization Closing Date, [*]
agrees that it or an affiliate will finance the remaining
25% of the fair market value of the Junior Certificates (provided,
however, that on the Securitization Closing Date the amount of the
repurchase financing provided by [*]
on the Junior Certificates shall be such that the total amount of
repurchase agreement financing as of such date shall be not less than
the principal amount of the Junior Certificates; provided further that
at all times after the Securitization Closing Date [*]
shall not provide financing in an amount in
excess of 25% of the fair market value of the Junior Certificates, and
Prime Retail shall be required to repay or collateralize any amount of
financing in excess thereof) on the same terms as set forth in the
Repurchase Agreement and the Repurchase Commitment (including, without
limitation, recourse to Prime Retail Inc., solely in its capacity as
general partner of Prime Retail), except that the interest rate on such
additional financing will be equal to LIBOR plus a margin of seven
percent (7.00%).
C. PREFERRED EQUITY TERMS
1. TERMS OF PREFERRED EQUITY. Preferred Equity means financing in the
form of subordinate debt or preferred equity and secured by the
Preferred Equity Excess Cash Flow. The "PREFERRED EQUITY EXCESS CASH
FLOW" means the Net Excess Cash Flow of all the Borrowers less any
required payments on the Mezzanine Loan. Preferred Equity may be
issued either by the Borrowers or by a parent of the Borrowers, which
shall, if elected by Lender, be a special purpose bankruptcy remote
entity formed for the purpose of issuing the Preferred Equity.
Preferred Equity shall be issued only if the legal structure and rights
of the Preferred Equity and the legal structure of the Preferred Equity
issuer are acceptable to Lender and the Rating Agencies; provided that
such structure shall not require a pledge of the existing 98% general
partnership interest of Prime Retail in the Borrowers.
2. AMOUNT. Subject to the conditions in the preceding Paragraph 1 of
this Part C, Preferred Equity will be issued if either (i) the Lender
Junior Size exceeds the Selected Rating Agency Junior Size (a
"Sub-Mezzanine Issuance" of Preferred Equity), in which case Preferred
Equity will be issued in the amount of the excess or (ii) in the event
that any of the Selected Rating Agencies does not permit there to be a
class of Certificates
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-36- May 24, 1996
rated "BB" or its equivalent (a "Mezzanine Substitute Issuance" of
Preferred Equity), in which case Preferred Equity will be issued in
the amount that can meet the Preferred Equity DSCR; provided that in
either event, the amount of the Preferred Equity shall not be
greater than that permitted by the Selected Rating Agencies under
the Selected Structure.
3. RATE. The interest rate or preferred yield on the Preferred Equity
shall equal (i) in the case of a Sub-Mezzanine Issuance, LIBOR plus
seven percent (7.00%), and (ii) in the case of a Mezzanine
Substitute Issuance, LIBOR plus six percent (6.00%).
4. TERM. The Preferred Equity shall have a four year term or a five
year term with the first year being interest only, if a Mezzanine
Substitute Issuance and a three year term if a Sub-Mezzanine
Issuance. The Preferred Equity shall be issued on the
Securitization Closing Date.
5. AMORTIZATION. Except as otherwise provided in the preceding
Paragraph 4, the Preferred Equity shall amortize over its term based
on level payments of principal and interest, with interest on the
declining principal balance.
6. CERTAIN RIGHTS. Without limiting the condition in Paragraph 1 of this
Part C, the Preferred Equity shall, unless otherwise elected by
Lender, have the same rights as those of the Mezzanine Loan set
forth in Paragraphs 4 (second paragraph), 7, 8, 9, 11, 12 and 13 of
Part B of this Commitment.
7. TRANSFER. The Preferred Equity shall be freely transferable by
Lender.
8. DELAYED ISSUANCE. If so elected by Borrower, the Preferred Equity
issued in a Mezzanine Substitute Issuance may provide that rather
than being purchased immediately it shall be purchasable in not more
than two (2) installments during the first year of its term (in
which event there shall be no amortization during such first year).
9. INTEREST RATE CAP. Prior to the issuance of the Preferred Equity in
a Mezzanine Substitute Issuance, Borrower shall purchase an interest
rate cap from a counterparty rated "AA" or better and included in
the list of permitted counterparties for the Cap with respect to the
Loan, and having terms reasonably acceptable to Lender. Such
interest rate cap shall provide for monthly payments on the payment
dates for the Preferred Equity based on the initial principal amount
of the Preferred Equity, an actual/360 day count fraction and the
excess of LIBOR over the Preferred Equity Cap Required Strike Rate
(as hereinafter defined) and shall have a term equal to the term of
the Preferred Equity. The Preferred Equity Cap Required Strike Rate
is seven percent (7.00%). Borrower may at its option purchase an
interest rate cap that requires payments to be made in accordance
with the preceding formula except that the LIBOR rate at which the
counterparty is required to make payments is lower at all times than
<PAGE>
-37- May 24, 1996
the Preferred Equity Required Cap Strike Rate (such lower rate the
"PREFERRED EQUITY ACTUAL CAP STRIKE RATE"). Borrower shall be
obligated to replace any interest rate cap for the Preferred Equity
in the event that the rating of the counterparty shall be downgraded
below "AA" or its equivalent, qualified or withdrawn by any Rating
Agency or there shall be a breach or default thereunder. The
counterparty for any replacement cap for the Preferred Equity shall
be selected by Borrower from a list of counterparties reasonably
agreed to by Borrower and Lender, or if Borrower and Lender are
unable to agree upon a list, shall be selected by Lender in its
reasonable discretion; provided that such counterparty shall have
the required rating set forth above.
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-38- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-39- May 24, 1996
[*]
E. CONDITIONS
The Lender's obligation to make the Loan and the Mezzanine Loan to
Borrowers to purchase the Preferred Equity [*]
is subject to satisfaction of each of the following conditions:
1. LOAN DOCUMENTS, MEZZANINE LOAN DOCUMENTS [*] .
Borrowers shall have executed and delivered to Lender (i) the Note,
(ii) the Mortgage, (iii) the Assignment of Leases and Rents, (iv)
the Guaranty, (v) the Second Mortgage, (vi) the Second Assignment,
(vii) the Lockbox Agreement, (viii) all other documents required by
Lender to be executed and/or delivered by or on behalf of Borrowers
in connection with the Loan (collectively, the "LOAN DOCUMENTS"),
(ix) all documents required by Lender to be executed and/or
delivered by or on behalf of Borrowers in connection with the
Mezzanine Loan (the "MEZZANINE LOAN DOCUMENTS"), (x) all documents
required by Lender to be executed and/or delivered by or on behalf
of Prime Retail in connection with [*]
and (xi) all documents required by Lender to be
executed and delivered by or on behalf of
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-40- May 24, 1996
Borrowers, or if applicable a parent of the Borrowers in connection
with the Preferred Equity (the "PREFERRED EQUITY DOCUMENTS").
2. TITLE. Title to the fee simple estate or leasehold estate, as
applicable, in each Mortgaged Premises shall be vested in the
applicable Borrower and shall be free, clear and unencumbered,
except for taxes not yet due and payable and such other matters as
Lender's legal counsel determines to be acceptable.
3. TITLE INSURANCE. A fully paid ALTA policy of title insurance (1970
Form B) (the "TITLE POLICY") shall be issued in form and by a company
acceptable to Lender, in an amount not less than the original
principal balance of the Loan. The Title Policy shall insure that
the Loan is a valid first lien on Borrowers' fee simple estate or
leasehold estate, as applicable, in the Mortgaged Premises, free and
clear of all defects and encumbrances except as Lender and its
counsel have approved in writing, which Title Policy shall be
assignable without additional cost. The Title Policy shall, to the
extent reasonably available in the applicable jurisdiction, include:
(a) Coverage against mechanics' liens throughout the term of the Loan;
(b) comprehensive endorsement (Form 100);
(c) tie-in endorsement;
(d) usury endorsement;
(e) zoning endorsement;
(f) environmental lien endorsement;
(g) contiguity endorsement;
(h) access endorsement;
(i) survey endorsement;
(j) mineral rights endorsement;
(k) first loss endorsement;
(l) last dollar endorsement;
(m) no exclusion for creditors' rights;
(n) doing business endorsement; and
(o) such other affirmative insurance and endorsements as may be
required by Lender.
4. INGRESS, EGRESS AND EASEMENTS.
(a) Ingress and egress to the Mortgaged Premises shall be by public
road or by a deeded right-of-way easement included as part of
the Mortgaged Premises and insured under the Title Policy.
(b) All easements, servitude's, and other agreements, if any,
regarding the mutual use and/or maintenance of any access
roads, drainage and retention facilities, parking garages,
parking areas, recreation areas, party walls, common areas or
otherwise in any way affecting or appurtenant to the Mortgaged
Premises shall
<PAGE>
-41- May 24, 1996
be subject to the approval of Lender, and all appurtenant easements
or servitude's shall be insured under the Title Policy.
5. REQUIREMENTS PRIOR TO CLOSING. Prior to the Closing Date, each
Borrower shall provide Lender with the following:
(a) SURVEY. A current or updated title survey of the Mortgaged Premises
prepared by a licensed or registered land surveyor acceptable to
Lender in accordance with the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys for the classification
of an "Urban Survey" and including items from the list of
"Optional Survey Responsibilities and Specifications" (Table A)
as reasonably required by Lender. Such survey must (i) be certified
to Lender and the title insurance company issuing the Title Policy,
(ii) delineate all improvements in place, including parking areas,
driveways, walkways, exits and entrances, all easements, adjoining
public streets and alleys and access thereto, encroachments and
utilities, including water and sewer lines to the point of
connection with the public system and (iii) set forth the complete
legal description of the Mortgaged Premises. The survey must show
a state of facts acceptable to Lender and the title company issuing
the Title Policy, including all improvements within lot lines,
no encroachments by adjoining property owners, and no utility lines
running under buildings in the survey area, and be prepared and
certified to by a duly registered land surveyor or engineer.
(b) OWNER'S AFFIDAVIT. An Owner's Affidavit affirming, among other
things: (i) that all costs for labor and material for the construction
of the Improvements have been paid in full or will be paid when due,
unless being contested as permitted in the Loan Documents, (ii) that
Borrower has paid for and is the owner of all furnishings, fixtures,
and equipment free of any security interests or liens, except for such
items as are yet to be paid for in the ordinary course of business,
(iii) that no bankruptcy or insolvency proceedings have been
instituted by or against Borrower or an entity related to Borrower,
and (iv) such other matters as Lender or its legal counsel shall
require.
(c) OPINION OF COUNSEL. An opinion from counsel satisfactory to Lender
that:
(i) Borrower is a duly organized limited or general partnership
in good standing with authority to do business in each state
where a Mortgaged Premises is located;
(ii) Borrower has the power to acquire, and grant a lien on and a
security interest in, the Mortgaged Premises and the other
property securing the Loan and Mezzanine Loan, and to engage
in the transaction contemplated by this commitment;
<PAGE>
-42- May 24, 1996
(iii) the Loan Documents and Mezzanine Loan Documents have been
duly executed and are valid and binding obligations of
Borrower and enforceable in accordance with their terms;
(iv) the Loan Documents and Mezzanine Loan Documents create a
valid, perfected security interest in favor of Lender in the
Reserves and the Escrows, the Expansion Escrow, the interest
rate cap, and any collateral securing the Mezzanine Loan;
(v) Neither the Loan transaction nor the Mezzanine Loan
transaction is usurious; and
(vi) such other matters as Lender may reasonably require,
including with respect to the [*] Preferred
Equity and opinions for the Securitization.
(d) INSURANCE. Subject to such greater requirements as shall be imposed
by the Rating Agencies in connection with the Securitization, Lender
shall be furnished insurance coverage on each Mortgaged Premises (i)
issued by (A) U.S.F.&G. (if acceptable to the Rating Agencies) or (B)
a company or companies licensed to do business in each state where
such Mortgaged Premises is located and rated at least within the top
three (3) ratings categories by Standard & Poor's Rating Services and
(ii) on forms satisfactory to Lender. Such coverage shall be in the
following forms and amounts and shall be submitted to Lender for
approval twenty (20) days prior to the Closing Date.
(i) Fire and Extended Coverage insurance, and Boiler and
Machinery insurance (if applicable), with Full Replacement
Cost endorsement and Mortgagee Clause naming Lender as loss
payee.
(ii) Comprehensive General Liability insurance with Broadened
Coverage endorsement which, together with Umbrella or Excess
Coverage, provides Combined Single Limits Coverage in amounts
approved by Lender and Rating Agencies at all times.
(iii) Flood insurance, if the Mortgaged Premises are located in a
flood plain, for the maximum amount available.
(iv) Rent Loss insurance in an amount equal to the greater of (x)
twelve (12) (or, if required by the Rating Agencies, eighteen
(18)) months gross rental income from the Mortgaged Premises
or (y) twelve (12) (or, if required by the Rating Agencies,
eighteen (18)) months of operating expenses for the Mortgaged
Premises, including debt service on the applicable Allocated
Amount.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-43- May 24, 1996
Lender must be furnished with the original policy or policies
prior to closing.
(e) LEASES. Duplicate originals or certified copies of such leases as
Lender may request and of the standard form of lease used at its
Mortgaged Premises, the form and substance of which shall be subject
to the approval of Lender.
All existing leases and all future leases, and any amendments or
modifications thereto, or terminations thereof, shall be entered into
on commercially reasonable, arms length terms for the market in which
the applicable Mortgaged Premises is located; provided that the term
of such leases shall not exceed fifteen (15) years.
(f) TENANT ESTOPPEL CERTIFICATES. A written certification by the tenant
under (a) leases generating (i) at least seventy-five percent (75%)
of the Rents at each Mortgaged Premises or (ii) with respect to up to
two (2) Mortgaged Premises, leases generating at least sixty percent
(60%) of the Rents, provided that Borrower shall provide a
satisfactory certification with respect to the remainder of the
leases of such Mortgaged Premises plus (b) such other leases as the
Rating Agencies may require, setting forth the commencement date of
the lease term and confirming (except as otherwise stated therein)
that: (A) the tenant has accepted the premises, has made no
advancements for or on behalf of Borrower as landlord for which
tenant has the right to deduct from or offset against future rentals
as of the date of certification and has not paid rent for more than
the current month during which certification is made, (B) the lease
is in full force and effect, free from any default by either party,
and has not been changed, modified or amended except as stated in the
certification of the tenant, (C) all improvements required to be made
by landlord under the lease have been completed in accordance with
plans and specifications approved by tenant, tenant is in full and
complete possession thereof, and all of landlord's obligations under
the lease have been performed, (D) the term, monthly rental, square
feet of leased area, and a listing of any rental concession or
inducements granted to tenant as part of the lease transaction, (E)
tenant agrees not to pay rent more than one month in advance, (F)
tenant currently has no right to terminate the lease under any
"kick-out clause" and (G) such other matters as Lender may reasonably
request. The information provided in such certifications must be
reasonably satisfactory to Lender. Notwithstanding the foregoing, in
the event that Borrowers, using their best efforts, are not able to
obtain the required estoppel certificates by the Closing Date,
Borrowers shall be deemed to have complied with the first sentence of
this paragraph if they provide (i) estoppel certificates by the
tenant under leases generating at least fifty percent (50%) of the
Rents at each Mortgaged Premises on the Closing Date, and (ii) the
remaining estoppel certificates required by such sentence on the
earlier of September 1, 1996 and the Securitization Closing Date.
Failure to provide such remaining estoppel certificates shall
constitute a default under the Loan.
<PAGE>
-44- May 24, 1996
(g) TAXES AND ASSESSMENTS. Evidence satisfactory to Lender that all
installments of special taxes or assessments, service charges, water
and sewer charges, private maintenance charges, and other prior lien
charges by whatever name called, whether then due on the Closing Date
or payable thereafter, and all installments of general real estate
taxes due and payable, have been paid in full on or before the
Closing Date.
(h) COMPLIANCE WITH ZONING, BUILDING, ENVIRONMENTAL AND OTHER LAWS.
Evidence satisfactory to Lender that (i)(A) any required certificate
of occupancy has been validly issued for the Mortgaged Premises (ii)
the Loan and the Mortgaged Premises and the actual use thereof comply
with all laws, ordinances, rules and regulations of all governmental
authorities having jurisdiction over the same and (iii) is no action
or proceeding pending before any court, quasi-judicial body or
administrative agency at the time of any disbursement by Lender
relating to the validity of the Loan or actual use of the Mortgaged
Premises. All rights to appeal any decision rendered must have
expired prior to the Closing Date.
(i) APPRAISALS. An appraisal prepared by a third-party real estate
appraiser, and in form and substance, satisfactory to Lender. Lender
hereby approves Cushman & Wakefield as an appraiser.
(j) ENVIRONMENTAL REPORT. An Environmental Report dated within six (6)
months of the Closing Date, in form and substance, and prepared by a
qualified environmental consultant, acceptable to Lender with respect
to an investigation and audit of the Mortgaged Premises to determine
whether the Mortgaged Premises has been contaminated by any toxic
waste or hazardous materials (as such contaminants are defined by
federal and state environmental protection, "Superfund" and
hazardous waste legislation and regulations), as well as whether the
Mortgaged Premises contains any asbestos containing material in
friable form. The Environmental Report must be based on a review of
past and present uses of the Mortgaged Premises, and adjacent
properties, as well as onsite inspections, test boring reports and
other investigative methods deemed advisable or necessary by the
consultant to permit a conclusion as to any apparent or likely
contamination of the Mortgaged Premises by any toxic or hazardous
materials, including the presence of asbestos containing material in
friable form. Borrower shall pay all costs, including laboratory
analysis charges. If friable asbestos containing material or any
toxic or hazardous wastes are found to exist on the Mortgaged
Premises, then Lender shall have the option of requiring a complete
clean-up or removal of such material prior to the Closing Date or of
excluding the affected Mortgaged Premises from this transaction and
reducing the principal amount of the Loan by the Allocated Amount for
such Mortgaged Premises. With respect to any Environmental Report
that was not originally addressed to Lender, Borrower shall provide on
<PAGE>
-45- May 24, 1996
the Closing Date a reliance letter for the benefit of Lender with
respect to such Environmental Report, in form and substance
acceptable to Lender.
(k) ENGINEERING REPORT. An Engineering Report dated within six (6)
months of the Closing Date, in form and substance, and prepared by a
consulting engineer, acceptable to Lender with respect to an
inspection of the Mortgaged Premises to determine its compliance with
applicable building codes and the existence of any deferred
maintenance and physical defects at such Mortgaged Premises. Lender
hereby approves Merritt & Harris as the consulting engineer for
preparation of the Engineering Report.
(l) SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. To the extent
reasonably required by Lender, a Subordination, Non-Disturbance and
Attormnent Agreement executed by each tenant that is not by its terms
subordinate to the Mortgage providing that, among other things, (i)
the applicable lease and all of tenants rights thereunder shall be
subject and subordinate to the liens, terms, covenants and provisions
of the Mortgage and the Second Mortgage and Lender's rights
thereunder, provided that, for so long as a tenant is not in default
under its lease, Lender, shall not name tenant as a party defendant
or seek to terminate tenant's lease in connection with a foreclosure
of the Mortgage, (ii) upon Lender or its nominee or designee taking
title to the Mortgaged Premises, such tenant shall recognize Lender
as its landlord under the applicable lease and (iii) if Lender or its
nominee or designee shall take title to the Mortgaged Premises, it
shall not be liable for any damages resulting from defaults by
Borrower under the applicable lease that occurred prior to taking
such title.
(m) RECIPROCAL EASEMENT AGREEMENTS. Copies of all reciprocal easement
agreements and other documents recorded against, or affecting
operation of, the Mortgaged Premises.
(n) RENT ROLL. A statement, in affidavit form and in such reasonable
detail as Lender may require, of all Leases on the Mortgaged Premises
as of a date not more than thirty (30) days prior to the Closing Date.
(o) FINANCIAL INFORMATION. Audited financial statements for Prime Retail
for the fiscal years 1994 and 1995, audited financial statements for
each Mortgaged Premises for each fiscal year from commencement of its
operation by the applicable Borrower through 1995, and forecasted pro
forma statements for fiscal year 1996 of each Mortgaged Premises.
(p) ORGANIZATIONAL DOCUMENTS. Copies, certified as true and correct, of
the organizational documents of Borrower and, if Borrower is a
limited partnership
<PAGE>
-46- May 24, 1996
or a limited liability company, of Borrower's general partner or
managing member.
(q) ACCOUNTANTS' CONSENT. The consent of Borrowers' accountants for use
of Borrowers' financial statements in disclosure documents in
connection with the securitization.
6. APPROVAL AND RECORDING OF DOCUMENTS, CHANGE OF STANDARDS. The
form and substance of all existing or proposed Loan Documents,
Mezzanine Loan Documents, Preferred Equity Documents, [*]
, agreements, contracts, leases, plans, surveys, insurance
policies, and other documents which are necessary to satisfy any
condition of the Commitment shall be satisfactory in form and
substance in all respects to Lender and its counsel. Lender reserves
the right to require recording or filing of any document or memorandum
thereof executed or delivered in connection with the Loan or the
Mezzanine Loan [*] . Any documents, policies,
conditions or any other matters relating this Commitment shall be
subject to Lender's approval.
7. SPECIAL MORTGAGE PROVISIONS. The Mortgage and other applicable
documents shall contain, in addition to other provisions that may be
required hereby, the following provisions binding on each Borrower and
all successive owners of the Mortgaged Premises:
(a) MAINTENANCE OF IMPROVEMENTS. Borrower shall constantly
maintain, and shall not diminish in any respect, the Mortgaged
Premises including any on-site paved parking areas during the
existence of the Mortgage.
(b) RENT ROLL. Borrower shall furnish to Lender a quarterly
statement, in affidavit form and containing such information and
in such detail as Lender may reasonably require, of all leases
affecting the Mortgaged Premises and, on demand, executed
counterparts of any and all such leases.
(c) SUBORDINATE FINANCING. Borrower shall not be permitted
to place any subordinate mortgage against the Mortgaged Premises,
except a subordinate mortgage in favor of Lender to secure the
Mezzanine Loan.
(d) INSPECTION OF RECORDS AND ANNUAL STATEMENT. Lender
shall have the right, at all reasonable times, to inspect the
Mortgaged Premises and all books, records, plans, drawings or
other documents regarding the operation of or describing the
Mortgaged Premises and make copies thereof during normal business
hours and upon reasonable notice to Borrower. Borrower will
furnish Lender detailed financial and operating statements (which
shall, in the case of annual statements, be audited by a "Big Six"
accounting firm), setting forth the income and expenses of the
operation of the Mortgaged Premises in such detail as Lender
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-47- May 24, 1996
may reasonably require, within forty-five (45) days after the
close of each calendar quarter and within ninety (90) days after
the close of each calendar year. Such operating statements shall
be prepared on an accrual basis and shall attach a schedule
showing actual cash receipts. Each statement shall be accompanied
by the certification of (i) a certified public accountant approved
by Lender (with respect to annual statements) or (ii) Borrower
(with respect to quarterly statements) to the effect that the
statement has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the period
involved. In addition, Borrower will provide Lender, within
forty-five (45) days after each calendar quarter, updated
occupancy statements and tenants sales reports for each property.
If there is an event of default under the Loan or Mezzanine Loan,
or the Loan DSCR under the Loan or Mezzanine Loan shall decline
below 1.20, Borrower shall provide all the foregoing information
on a monthly basis, within fifteen (15) days after the end of each
month. Borrower shall also provide any other information
specifically required to be disseminated by it pursuant to
Paragraph 24 of Part A. Information required to be delivered under
this clause (d) (and the preceding clause (b)) shall be subject to
the provisions of such Paragraph 24 to the extent provided in such
Paragraph 24. Borrower will also provide, within fifteen (15) days
after request, such other information as Lender shall reasonably
request.
(e) TRANSFER RESTRICTIONS. In the event Borrower, by mortgage,
conveyance or encumbrance, grants to any other party a security
interest in the Mortgaged Premises or any part thereof or in any
interest in Borrower, directly or indirectly, without the written
consent of Lender in its sole discretion, except in connection with
the Mezzanine Loan, or in the event Borrower shall sell or otherwise
transfer the Mortgaged Premises or any part thereof, or agree to
do the same, by purchase agreement, land contract or otherwise
(unless Borrower's obligations under any such agreement or contract
shall be subject to the fulfillment of all conditions to such
transaction imposed by the Loan Documents), without the written
consent of Lender in its sole discretion, or in the event of a
transfer of an interest in Borrower without the written consent of
Lender in its sole discretion, then Lender may, at its election,
declare the entire indebtedness to be immediately due and payable
without notice to Borrower.
(f) NO COOPERATIVE OR CONDOMINIUM. Borrower shall not operate the
Mortgaged Premises or permit same to be operated as a cooperative
or condominium building or buildings in which the tenants or
occupants participate in the ownership, control, or management of
the Mortgaged Premises or any part thereof as tenant, stockholder
or otherwise.
(g) PREMISES TO BE SOLD AS ONE UNIT. Borrower shall waive its rights,
if any, to require that the Mortgaged Premises be sold as separate
tracts or units in the event of foreclosure.
<PAGE>
-48- May 24, 1996
(h) NOTICE AND OPPORTUNITY TO CURE. Lender will provide Borrower
with written notice of non-monetary defaults and an opportunity
to cure such defaults for thirty (30) days from such notice,
provided that in the case of any such default which is susceptible
to cure within ninety (90) days but cannot be cured within thirty
(30) days through the exercise of reasonable diligence, so long
as Borrower commences such cure within thirty (30) days, such
default remains susceptible to cure within ninety (90) days and
Borrower diligently pursues such cure, such default shall not
constitute an event of default under the Loan documents.
(i) SURVEILLANCE FEES. Borrower will pay the surveillance
fees of the Rating Agencies for so long as the Loan or (if
interests therein are rated) the Mezzanine Loan is outstanding.
(j) APPLICATION OF EXCESS CASH FLOW UPON DEFAULT. If (i) an
event of default under the Loan has occurred and shall be
continuing or (ii) the Loan DSCR shall be less than 1.20, all
Excess Cash Flow will be retained in Lender's cash collateral
account and may be applied to payment of amounts due under the
Loan at Lender's discretion. Notwithstanding the foregoing,
Lender's rights upon a default will terminate if such default is
cured and Lender's rights upon a decline in Loan DSCR will
terminate in the event that the Loan DSCR shall increase to 1.45
for four successive calendar quarters.
(k) ACCEPTANCE OF BIG SIX" ACCOUNTING FIRM. Lender agrees
that it will accept any "Big Six" accounting firm chosen by
Borrower as the accounting firm to deliver and/or perform all
accountants' certifications or audits required under the Loan
Documents, Mezzanine Loan Documents [*] or
requested by Lender pursuant to this commitment.
(l) AMENDMENTS. The applicable documents shall contain provisions
regarding the adjustments of and amendments to the Loan, the
Mezzanine Loan, the Preferred Equity and related documents,
and the returns of proceeds, provided for in this Commitment.
(m) VOTING RIGHTS. No Certificates owned by Borrower, Prime
Retail or any affiliate shall have any voting rights.
(n) SECURITIZATION EXPENSES. The Loan Documents shall permit Lender
to withdraw funds for payment of the reasonable expenses of
the Securitization (as approved by Borrowers, acting reasonably)
and the Preferred Equity issuance from funds available in the
Lockbox prior to any disbursement of funds to Borrower or any
affiliate if Borrower has not paid such expenses within 30 days
after notice.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-49- May 24, 1996
8. OBLIGATION TO CLOSE. Lender's obligation to disburse the Loan and the
Mezzanine Loan and the Preferred Equity [*]
is contingent upon the following:
(a) COMPLIANCE. Each condition of this Commitment has been satisfied in
a manner acceptable to Lender.
(b) DAMAGE OR DESTRUCTION. If the Mortgaged Premises shall
have suffered any damage or destruction affecting more than twenty
percent (20%) of the net rentable floor space of such Mortgaged
Premises, Lender may cancel this Commitment with respect to such
Mortgaged Premises and reduce the principal amount of the Loan by
the applicable Allocated Amount unless the damaged or destroyed
portion of the Mortgaged Premises has been restored or replaced in
a manner acceptable to Lender.
(c) MATERIAL ADVERSE CHANGE. If there is a change affecting
any Borrower or Prime Retail which would materially adversely
effect the ability of such Borrower or Prime Retail to perform its
obligations under the Loan, the Mezzanine Loan [*]
, as applicable, or a change that would materially,
adversely, affect the value of any Mortgaged Premises as
collateral for the Loan, Lender may cancel this Commitment with
respect to such Borrower or Mortgaged Premises, and reduce the
principal amount of the Loan by the applicable Allocated Amount
or, if such material adverse change affects Prime Retail or
affects more than three (3) Mortgaged Premises, cancel this
Commitment.
(d) DUE DILIGENCE INVESTIGATION. This commitment is subject
to the satisfactory completion by Lender of its due diligence
investigation of the Mortgaged Premises, the Borrowers and Prime
Retail.
(e) CLOSING DATE. "CLOSING DATE" shall mean the date upon which the
Loan and the Mezzanine Loan and related transactions close
[*] is established, which will be July 1, 1996
or as soon thereafter as all conditions herein are met to Lender's
satisfaction and a closing is practicable. The parties agree
to cooperate in good faith to meet such timing; provided
that the foregoing shall not be deemed in any way to diminish
Lender's conditions and approval rights hereunder.
(f) ADDITIONAL FINANCING. The Mortgaged Premises shall not be
encumbered by any superior or subordinate mortgages.
(g) INSPECTION. Disbursement of the Loan and the Mezzanine Loan is
subject to a satisfactory on-site inspection of the Mortgaged
Premises by a representative of Lender. Lender will cause
such inspections to be performed by July 1, 1996 and Borrowers
shall cooperate with and facilitate such inspections.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-50- May 24, 1996
(h) SIMULTANEOUS CLOSING. The Loan and the Mezzanine Loan must close,
[*] , simultaneously.
9. GOVERNING LAW. The rights and obligations of the parties with respect to
this commitment issued by Lender shall be determined in accordance with
the laws of the State of New York.
10. MORTGAGE/DEED OF TRUST. As used herein, Mortgage shall also mean Deed of
Trust or Deed to Secure Debt, as applicable, Borrower shall also mean
Trustor, and Mortgaged Premises shall also mean Premises encumbered by a
Deed of Trust or Deed to secure Debt in favor of Lender.
11. PROHIBITION AGAINST ASSIGNMENT OF LOAN COMMITMENT. Neither this
Commitment nor any rights hereunder are assignable by Borrowers or by
Prime Retail or Manager. Neither this Commitment nor any rights
hereunder are assignable by Lender except to an affiliate of Lender.
No change in the terms and conditions of this Commitment may be made
unless in writing and signed by the parties.
12. LOAN COMMISSION. Lender shall not be obligated to pay any loan
commissions in connection with the Loan, the Mezzanine Loan
[*] , or the application therefor.
13. CLOSING COSTS. Whether or not the Loan, the Mezzanine Loan, the
Securitization [*] closes, Borrowers shall pay all
of Lender's closing costs, title insurance premiums and charges, survey
costs, market study costs, recording fees and taxes, attorneys' fees
and expenses, accountants fees and expenses, consultants fees and
expenses, fees and expenses of third party due diligence contractors,
trustee and servicer fees and expenses, Rating Agencies fees and
expenses and all other expenses in connection with the preparation and
closing of this letter, the Loan, the Mezzanine Loan, the
Securitization [*] .
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-51- May 24, 1996
[*]
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-52- May 24, 1996
15. NO UNDERWRITING FEE. Borrowers shall not be required to pay any
underwriting or placement agency fee to Lender or any affiliate
thereof in connection with the offering and sale of the Certificates,
the Mezzanine Loan or the Preferred Equity.
16. LIABILITY AND EXCULPATORY CONDITIONS. Lender will agree that,
subject to certain customary exceptions to be determined by Lender
(e.g., fraud, hazardous substances, misapplication of rents,
insurance proceeds or condemnation awards, damage to Mortgaged
Premises caused by Borrower's gross negligence or willful
misconduct), in the event of a default under any of the instruments
evidencing or securing the Loan or the Mezzanine Loan, Lender shall
look solely to the Mortgaged Premises and the security given with
respect to the Mezzanine Loan as security for Borrowers' obligations
under the Loan and Mezzanine Loan and not to any partners of
Borrower; provided that the Repurchase Agreement and the provisions
of this letter relating thereto shall be full recourse to Prime
Retail and Prime Retail Inc., solely in its capacity as general
partner of Prime Retail.
17. LATE PAYMENT PENALTY. The Note and any note or other Mezzanine Loan
Documents evidencing the Mezzanine Loan shall include language
providing that any payment not made within five (5) days of the due
date shall be subject to a late payment charge equal to four percent
(4%) of the monthly payment due. This late payment charge shall
apply individually to all payments past due and there will be no
daily pro rata adjustment. All late charges shall accrue to the
benefit of Lender. Notwithstanding the above, should any payment not
be made when due, then the entire principal sum of the Loan or the
Mezzanine Loan, as applicable, with accrued interest and late payment
charges, shall, at the election of Lender, become due and payable.
In addition, if an event of default shall have occurred and be
continuing the entire amount of the Loan shall bear interest at a
rate of three percent (3%) more than the Initial Interest Rate or the
Increased Interest Rate, as applicable, or, in either case, the
applicable usury limit, whichever is less. Any rate payment charges
or any other charges under the Loan that are in EXCESS of the
applicable usury rate will be deemed to be penalty-free prepayments
of principal.
[*]
19. ACKNOWLEDGMENT OF BORROWER AND PRIME RETAIL. Borrower and Prime
Retail acknowledge that Lender is not a fiduciary to Borrower, Prime
Retail or its affiliates, and Prime Retail has determined to enter
into this Commitment based on its independent judgment and advice.
20. CONFIDENTIALITY. Prime Retail and Borrower will keep the terms of
this letter and the transactions described herein confidential from
any third parties, except (i) as required
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-53- May 24, 1996
by law, (ii) in connection with its permitted actions under the
second paragraph of Paragraph 14 of this Part E and (iii) to the
extent necessary to describe the basic economic terms hereof
[*]
in any registration statement, offering document or
press release issued by Prime Retail.
21. PRIME RETAIL OBLIGATIONS. All obligations of Borrowers under this
Commitment are also obligations of Prime Retail; provided that such
obligations of Prime Retail (other than those in Paragraph 23 below
and Paragraph 14 of Part B) will terminate following the
Securitization Closing Date.
22. LENDER SUCCESSORS AND ASSIGNS. All references to Lender in the
context of actions of Lender to be taken under the Loan or Mezzanine
Loan shall be deemed to include Lender's successors and assigns as
holders of the Loan or Mezzanine Loan, as applicable, including any
trustee or servicer for the Certificates.
23. INDEMNITY. Prime Retail and Borrower will indemnify and hold
harmless Lender, its parent companies and affiliates, and their
respective officers, employees, agents, counsel and controlling
persons (each an "Indemnified Party") from and against any and all
losses, claims, damages, liabilities and expenses, joint or several
("Losses"), to which any Indemnified Party may become subject in
connection with, arising out of or relating to third party claims
arising out of or relating to (i) any misstatement or omission or
alleged misstatement or omission in any prospectus, private placement
memorandum relating to the Certificates or (ii) this Commitment and
any transactions contemplated thereby (other than, in the case of
clause (i) any misstatement or omission that was made therein or
omitted therefrom in reliance upon and in conformity with information
that was provided by a person other than Borrower or Prime Retail or
any of their affiliates or agents and was not delivered or approved
by any of the foregoing) and in the case of clause (ii), any Losses
that are finally adjudicated to be caused by the gross negligence or
willful misconduct of Lender.
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
<PAGE>
-54- May 24, 1996
24. DEFINITION REGARDING DOWNGRADING. All references herein to a
downgrading or qualification of the ratings of the Certificates shall
be construed to refer to a downgrading or qualification of their
initial ratings.
Very truly yours,
[*]
By:
------------------------------
Name:
Title:
Agreed and accepted this ___ day of
May, 1996.
PRIME RETAIL, L.P.
By: Prime Retail, Inc., general partner
By:
------------------------------
Name:
Title:
- -------------------
[*] Confidential treatment requested for omitted portion of this exhibit;
complete, unredacted exhibit on file with the Securities and Exchange
Commission.
