<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
SCHEDULE 13D
Under the Securities Exchange Act of 1934
--------------------
PRIME RETAIL, INC.
(Name of Issuer)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
741570105
(CUSIP Number)
Michael W. Reschke
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
(312) 917-1500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
With a copy to:
Wayne D. Boberg, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
(312) 558-5600
September 29, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), or 240.13d-1(f) or 240.13d-1(g), check
the following box:
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael W. Reschke
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP,
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER -535,971
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 7,595,929
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 535,971
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 7,595,929
- --------------------------------------------------------------------------------
-2-
<PAGE>
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Individually beneficially owns 199,548 shares of Common Stock, $0.01 par value
per share, of the Issuer ("Common Stock"), 9,552 shares of Series B Preferred
Stock, $0.01 par value per share, of the Issuer ("Preferred Stock"), which is
immediately convertible into 11,424 shares of Common Stock, and certain options
to purchase 324,999 shares of Common Stock, which options have already vested or
will vest within 60 days. May be deemed to share beneficial ownership of: (i)
251,300 shares of Common Stock directly owned by Prime Group Limited
Partnership, an Illinois limited partnership ("PGLP"); (ii) 5,557,000 Common
Units of Prime Retail, L.P., a Delaware limited partnership ("Common Units"),
which Common Units are exchangeable on a one for one basis for Common Stock at
any time (or, at Issuer's election, cash of equivalent value), directly owned by
Prime Financing Limited Partnership, an Illinois limited partnership ("PFLP");
(iii) 961,085 Common Units directly owned by Prime Group II, L.P., an Illinois
limited partnership ("PG-II"); (iv) 721,912 Common Units directly owned by Prime
Group V, L.P., an Illinois limited partnership ("PG-V"); and (v) 104,632 Common
Units directly owned by Prime Group VI, L.P., an Illinois limited partnership
("PG-VI") by virtue of his position as managing general partner of PGLP and his
ability to control PGLP, Inc. ("PGLPI"), Prime Finance, Inc. ("Prime Finance"),
PFLP, PG-II, PG-V and PG-VI. PGLPI is the managing general partner of PG-II,
PG-V and PG-VI. Prime Finance is the managing general partner of PFLP.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Individually beneficially owns 199,548 shares of Common Stock, 9,552 shares of
Preferred Stock and certain options to purchase 324,999 shares of Common Stock
which, assuming conversion of the Preferred Stock and exercise of all vested
options, constitute approximately 1.2% of the outstanding shares of Common
Stock. May be deemed to share beneficial ownership of the approximately: (i)
251,300 shares of Common Stock directly owned by PGLP which constitute
approximately 0.6% of the outstanding shares of Common Stock; (ii) 5,557,000
Common Units directly owned by PFLP which, assuming exchange of the Common
Units, constitute approximately 11.4% of the outstanding shares of Common Stock;
(iii) 961,085 Common Units directly owned by PG-II which, assuming exchange of
the Common Units, constitute approximately 2.2% of the outstanding shares of
Common Stock; (iv) 721,912 Common Units directly owned by PG-V which, assuming
exchange of the Common Units, constitute approximately 1.6% of the outstanding
shares of Common Stock; and (v) 104,632 Common Units directly owned by PG-VI
which, assuming exchange of the Common Units, constitute approximately 0.2% of
the outstanding shares of Common Stock by virtue of his position as managing
general partner of PGLP and his ability to control PGLPI, Prime Finance, PFLP,
PG-II, PG-V and PG-VI.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - IN
- --------------------------------------------------------------------------------
-3-
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PGLP, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 0
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 1,787,629
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 1,787,629
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
May be deemed to share beneficial ownership of: (i) 961,085 Common Units of
Prime Retail, L.P., a Delaware limited partnership ("Common Units"), which
Common Units are exchangeable on a one for one basis for Common Stock, $0.01 par
value per share, of the Issuer ("Common Stock") at any time (or, at the Issuer's
election, cash of equivalent value), owned by Prime Group II, L.P., an Illinois
limited partnership ("PG-II"); (ii) 721,912 Common Units owned by Prime Group V,
L.P., an Illinois limited partnership ("PG-V"); and (iii) 104,632 Common Units
owned by Prime Group VI, L.P., an Illinois limited partnership ("PG-VI") by
virtue of its position as managing general partner of each of PG-II, PG-V and
PG-VI.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
-4-
<PAGE>
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
May be deemed to share beneficial ownership of: (i) 961,085 Common Units owned
by PG-II which, assuming exchange of the Common Units, constitute approximately
2.2% of the outstanding shares of Common Stock; (ii) 721,912 Common Units owned
by PG-V which, assuming exchange of the Common Units, constitute approximately
1.6% of the outstanding shares of Common Stock; and (iii) 104,632 Common Units
owned by PG-VI which, assuming exchange of the Common Units, constitute
approximately 0.2% of the outstanding shares of Common Stock by virtue of its
position as managing general partner of each of PG-II, PG-V and PG-VI.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - CO
- --------------------------------------------------------------------------------
-5-
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Finance, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
Not Applicable
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 0
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 5,557,000
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 5,557,000
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
May be deemed to share beneficial ownership of 5,557,000 Common Units of Prime
Retail, L.P., a Delaware limited partnership ("Common Units"), which Common
Units are exchangeable on a one for one basis for Common Stock, $0.01 par value
per share, of the Issuer, at any time (or, at the Issuer's election, cash of
equivalent value), directly owned by Prime Financing Limited Partnership, an
Illinois limited partnership, by virtue of its position as managing general
partner of Prime Financing Limited Partnership.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
May be deemed to share beneficial ownership of 5,557,000 Common Units owned by
Prime Financing Limited Partnership, which constitute approximately 11.4% equity
interest in the Issuer, assuming exchange of the Common Units, by virtue of its
position as managing general partner of Prime Financing Limited Partnership.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - CO
- --------------------------------------------------------------------------------
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<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Group Limited Partnership
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 251,300
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 0
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 251,300
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
251,300 shares of Common Stock, par value $0.01 per share, of the Issuer
("Common Stock")
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 0.6% equity interest in the Issuer
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - PN
- --------------------------------------------------------------------------------
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<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Financing Limited Partnership
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 5,557,000
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 0
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER -5,557,000
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,557,000 Common Units of Prime Retail, L.P., a Delaware limited partnership
("Common Units"), which Common Units are exchangeable on a one for one basis for
Common Stock of the Issuer, $0.01 par value per share ("Common Stock"), at any
time or, at the Issuer's election, cash of equivalent value.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 11.4% equity interest in the Issuer, assuming exchange of the
Common Units.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - PN
- --------------------------------------------------------------------------------
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<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Group II, L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 961,085
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 0
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 961,085
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
961,085 Common Units of Prime Retail, L.P., a Delaware limited partnership
("Common Units"), which Common Units are exchangeable on a one for one basis for
Common Stock of the Issuer, $0.01 par value per share, at any time or, at the
Issuer's election, cash of equivalent value.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 2.2% equity interest in the Issuer, assuming exchange of the
Common Units.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - PN
- --------------------------------------------------------------------------------
-9-
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Group V, L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 721,912
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 0
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 721,912
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
721,912 Common Units of Prime Retail, L.P., a Delaware limited partnership
("Common Units"), which Common Units are exchangeable on a one for one basis for
Common Stock of the Issuer, $0.01 par value per share, at any time or, at the
Issuer's election, cash of equivalent value.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 1.6% equity interest in the Issuer, assuming exchange of the
Common Units.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - PN
- --------------------------------------------------------------------------------
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<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 741570105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Prime Group VI, L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
(b) |X|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
00
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois, United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH 7. SOLE VOTING POWER - 104,632
- --------------------------------------------------------------------------------
8. SHARED VOTING POWER - 0
- --------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER - 104,632
- --------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER - 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
104,632 Common Units of Prime Retail, L.P., a Delaware limited partnership
("Common Units"), which Common Units are exchangeable on a one for one basis for
Common Stock of the Issuer, $0.01 par value per share, at any time or, at the
Issuer's election, cash of equivalent value.
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 0.2% equity interest in the Issuer, assuming exchange of the
Common Units.
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON - PN
- --------------------------------------------------------------------------------
-11-
<PAGE>
Item 1. Security and Issuer.
This Amendment No. 2 to Schedule 13D relates to shares of Common
Stock, par value $0.01 per share ("Common Stock"), of Prime Retail, Inc., a
Maryland corporation (the "Company"). The principal executive offices of the
Company are located at 100 East Pratt Street, Nineteenth Floor, Baltimore,
Maryland 21202.
Item 2. Identity and Background.
(a) and (f). This Amendment No. 2 to Schedule 13D is filed by each
of Michael W. Reschke, an individual and a citizen of the United States of
America ("Reschke"); PGLP, Inc., an Illinois corporation ("PGLPI"); Prime
Finance, Inc., an Illinois corporation ("Prime Finance"); Prime Group Limited
Partnership, an Illinois limited partnership ("PGLP"); Prime Financing Limited
Partnership, an Illinois limited partnership ("PFLP"); Prime Group II, L.P., an
Illinois limited partnership ("PG-II"); Prime Group V, L.P., an Illinois limited
partnership ("PG-V"); and Prime Group VI, L.P., an Illinois limited partnership
("PG-VI").
Reschke (i) is the managing general partner of PGLP; (ii) owns an
approximate 50.75% equity interest in PGLPI, which is the managing general
partner of PG-II, PG-V; and PG-VI and (iii) owns an approximate 50.75% equity
interest in Prime International, Inc., which owns all of the issued and
outstanding stock of Prime Finance, which is the managing general partner of
PFLP.
(b)(i) The business address of each of Reschke, PGLPI, Prime
Finance, PGLP, PFLP, PG-II, PG-V and PG-VI is:
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
(ii) Unless otherwise indicated in paragraph (c)(iii) of this Item
2, the business address of each person listed in paragraph (c)(iii) of this Item
2 is:
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
(c)(i) Reschke is the Chairman, President and Chief Executive
Officer of The Prime Group, Inc., an Illinois corporation ("PGI"), the President
and a member of the Board of Directors of PGLPI and Prime Finance and the
Chairman of the Board of Trustees and a member of the Board of Trustees of Prime
Group Realty Trust, a publicly traded real estate investment trust ("PGRT").
Reschke is also the Chairman of the Board of Directors of each of the Company, a
publicly traded corporation which qualifies for treatment as a real estate
investment trust engaged in the ownership, development and management of factory
outlet centers, and Brookdale Living Communities, Inc., a publicly traded
Delaware corporation involved in the ownership, development and operation of
senior independent and assisted living facilities and a member of the Board of
Directors of Horizon Group Properties, Inc., a publicly traded corporation which
qualifies for treatment as a real estate investment trust involved in the
ownership, development and management of factory outlet centers. The principal
business of PGI and PGLPI is the ownership, development and management of, and
investment in, directly or indirectly, real estate. The principal business of
PGRT is the acquisition, development, finance, construction, leasing, marketing,
renovation and property management of office and industrial properties.
-12-
<PAGE>
(ii) The principal business of each of PGLPI, Prime Finance, PGLP,
PFLP, PG-II, PG-V and PG-VI is the ownership, development and management of, and
investment in, directly or indirectly, real estate.
(iii) The following table sets forth the name and the principal
occupation or employment of each director and executive officer (except Reschke
(see paragraph (c)(i) of this Item 2)) of PGLPI and Prime Finance:
Name Present Principal Occupation or Employment
- ---- ------------------------------------------
Robert J. Rudnik (A)(B) .. Executive Vice President/General Counsel and
Secretary of PGI; Vice President and Secretary of
PGLPI and Prime Finance; Executive Vice President,
General Counsel and Secretary and a Director of
Brookdale Living Communities, Inc.
Gary J. Skoien ........... Executive Vice President of PGI; Vice President of
PGLPI and Prime Finance; President, Chief Executive
Officer and Chairman of the Board of Horizon Group
Properties, Inc.
Ray R. Grinvalds ......... Senior Vice President/Asset and Development
Management of PGI; Vice President and Treasurer of
PGLPI
Warren H. John (B) ....... Vice President of PGI; Vice President and Assistant
Secretary of PGLPI
Mark K. Cynkar ........... Senior Vice President and Chief Financial Officer of
PGI; Vice President of PGLPI and Prime Finance
- --------------
(A) Director of Prime Finance
(B) Director of PGLPI
All of the executive officers and directors of PGLPI and Prime
Finance are citizens of the United States of America.
(d) and (e) During the last five years, none of Reschke nor any of
the executive officers of PGLPI or Prime Finance (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On April 27, 1999, 66,376 Common Units were distributed by Prime
Group IV, L.P., an Illinois limited partnership ("PG-IV") to PGLP, and then
transferred from PGLP to PG-V as a contribution to the capital of PG-V.
On September 29, 1999, Bankers Trust Company released the pledge on
the 5,557,000 Common Units pledged by PFLP pursuant to a Pledge and Security
Agreement, dated as of June 14, 1996, as amended, by and between PFLP and
Bankers Trust Company.
On January 6, 2000, 31,080 and 45,464 Common Units were transferred
by PG-IV and PG-V to PG-II, respectively.
-13-
<PAGE>
Item 4. Purpose of Transaction.
Reschke and PGLP own shares of Common Stock and PFLP, PG-II, PG-V
and PG-VI own Common Units and intend to hold such securities for investment
purposes.
None of Reschke, PGLPI, Prime Finance, PGLP, PFLP, PG-II, PG-V or
PG-VI has any current plans or proposals which relate to or would result in the
types of transactions set forth in paragraphs (a) through (j) of the
instructions for this Item 4.
Item 5. Interest in Securities of the Issuer.
(a) Reschke beneficially owns 199,548 shares of Common Stock, 9,552
shares of Preferred Stock and certain options to purchase 324,999 shares of
Common Stock which, assuming conversion of the Preferred Stock and exercise of
all vested options, constitute approximately 1.2% of the total outstanding
shares of Common Stock. PGLP beneficially owns 251,300 shares of Common Stock
which constitute approximately 0.6% of the outstanding shares of Common Stock.
PFLP beneficially owns 5,557,000 Common Units which, assuming exchange of the
Common Units, constitute approximately 11.4% of the outstanding shares of Common
Stock. PG-II beneficially owns 961,085 Common Units which, assuming exchange of
the Common Units, constitute approximately 2.2% of the outstanding shares of
Common Stock. PG-V beneficially owns 721,912 Common Units which, assuming
exchange of the Common Units, constitute approximately 1.6% of the outstanding
shares of Common Stock. PG-VI beneficially owns 104,632 Common Units which,
assuming exchange of the Common Units, constitute approximately 0.2% of the
outstanding shares of Common Stock.
By virtue of his position as managing general partner of PGLP and
his ability to control PGLPI, Prime Finance, PFLP, PG-II, PG-V, and PG-VI,
Reschke may be deemed to share beneficial ownership of the 251,300 shares of
Common Stock directly owned by PGLP and the 5,557,000, 961,085, 721,912 and
104,632 Common Units owned by PFLP, PG-II, PG-V and PG-VI, respectively. Prime
Finance may be deemed to share beneficial ownership of the 5,557,000 Common
Units directly owned by PFLP because Prime Finance is the managing general
partner of PFLP. PGLPI may be deemed to share beneficial ownership of the
961,085, 721,912 and 104,632 Common Units directly owned by PG-II, PG-V and
PG-VI, respectively, because PGLPI is the managing general partner of each of
PG-II, PG-V and PG-VI.
(b) Reschke has the sole power to direct the vote and disposition of
199,548 shares of Common Stock and 9,552 shares of Preferred Stock directly
owned by Reschke. PGLP has the sole power to direct the vote and disposition of
the 251,300 shares of Common Stock directly owned by PGLP. PFLP has the sole
power to direct the vote and disposition of the 5,557,000 Common Units owned by
PFLP. Each of PG-II, PG-V and PG-VI has the sole power to direct the vote and
disposition of the 961,085, 721,912 and 104,632 Common Units directly owned by
PG-II, PG-V and PG-VI, respectively.
By virtue of his position as managing general partner of PGLP and
his ability to control PGLPI, Prime Finance, PFLP, PG-II, PG-V and PG-VI,
Reschke may be deemed to share the power to direct the vote and disposition of
the 251,300 shares of Common Stock directly owned by PGLP and the 5,557,000,
961,085, 721,912 and 104,632 Common Units owned by PFLP, PG-II, PG-V and PG-VI,
respectively. Prime Finance may be deemed to share the power to direct the vote
and disposition of the 5,557,000 Common Units directly owned by PFLP because
Prime Finance is the managing general partner of PFLP. PGLPI may be deemed to
share the power to direct the vote and disposition of the 961,085, 721,912 and
104,632 Common Units directly owned by PG-II, PG-V and PG-VI, respectively,
because PGLPI is the managing general partner of each of PG-II, PG-V and PG-VI.
(c) On April 27, 1999, PG-IV distributed 66,376 Common Units to
PGLP, and PGLP transferred 66,376 Common Units to PG-V as a contribution to the
capital of PG-V. During
-14-
<PAGE>
September 22, 1999 through September 28, 1999, PGLP purchased 1,300 shares of
Common Stock. On October 14, 1999, Reschke purchased 5,000 shares of Common
Stock. On January 6, 2000, PG-IV and PG-V transferred 31,080 and 45,464 Common
Units to PG-II, respectively. Other than as described above, none of Reschke,
PGLP, PFLP, PG-II, PG-V or PG-VI, nor, to the best of their knowledge, any of
the executive officers or directors of PGLPI or Prime Finance, has effected any
transaction in securities of the Company during the past 60 days.
(d) Other than the following, no person is known to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, securities held by Reschke, PGLP, PFLP, PG-II, PG-V or PG-VI,
except for Reschke, PGLP, PFLP, PG-II, PG-V, PG-VI, PGLPI or Prime Finance:
(1) Kemper Investors Life Insurance Company ("Kemper"), pursuant to
a Pledge and Security Agreement [Lake Travis], dated as of March 22, 1994, by
and between PG-II and Kemper, as amended by the First Amendment to Pledge and
Security Agreement [Lake Travis], dated as of August 31, 1994, by and between
PG-II and Kemper (the "First Amendment"), the Second Amendment to Pledge and
Security Agreement [Lake Travis], dated as of June 12, 1995, by and between
PG-II and Kemper (the "Second Amendment"), the Third Amendment to Pledge and
Security Agreement [Lake Travis], dated as of February 19, 1997, by and between
PG-II and Kemper (the "Third Amendment"), the Fourth Amendment to Pledge and
Security Agreement [Lake Travis], dated as of April 9, 1997, by and between
PG-II and Kemper (the "Fourth Amendment"), the Fifth Amendment to Pledge and
Security Agreement [Lake Travis], dated as of April 7, 1998, by and between
PG-II and Kemper (the "Fifth Amendment"), the Sixth Amendment to Pledge and
Security Agreement [Lake Travis], dated as of June 15, 1998, by and between
PG-II and Kemper, the Seventh Amendment to Pledge and Security Agreement [Lake
Travis], dated as of September 30, 1998, by and between PG-II and Kemper (the
"Seventh Amendment"), the Eighth Amendment to Pledge and Security Agreement
[Lake Travis], dated as of December 31, 1998, by and between PG-II and Kemper,
the Ninth Amendment to Pledge and Security Agreement [Lake Travis], dated as of
March 31, 1999, by and between PG-II and Kemper, the Tenth Amendment to Pledge
and Security Agreement [Lake Travis], dated as of September 1, 1999, by and
between PG-II and Kemper and the Eleventh Amendment to Pledge and Security
Agreement [Lake Travis], dated as of December 20, 1999, by and between PG-II and
Kemper (the "Eleventh Amendment") (as amended, the "Kemper Pledge Agreement");
(2) Lumbermens Mutual Casualty Company ("LMCC"), pursuant to a
Pledge and Security Agreement [150 N. Riverside] dated as of March 22, 1994 made
by KILICO Realty Corporation and Kemper to LMCC, as amended by the First
Amendment to Pledge and Security Agreement [150 N. Riverside] effective as of
September 1, 1995 by and between PG-V and LMCC (the "First Amendment to LMCC
Pledge Agreement") (as amended, the "LMCC Pledge Agreement");
(3) LaSalle Bank National Association, a national banking
association formerly known as LaSalle National Bank ("LaSalle"), pursuant to the
terms and conditions of a Pledge Agreement dated as of December 18, 1998 by and
between PG-VI and LaSalle (the "LaSalle Pledge Agreement"); and
(4) Prudential Securities Incorporated ("Prudential"), pursuant to a
Pledge and Security Agreement dated as of September 29, 1999 by and between PFLP
and Prudential (the "Prudential Pledge Agreement").
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
-15-
<PAGE>
Pursuant to the Kemper Pledge Agreement, PG-II pledged 690,276
Common Units to secure certain obligations of PG-II under the Limited Recourse
Guaranty [Lake Travis] made as of March 22, 1994 in favor of Kemper, as amended
by the First Amendment to Limited Recourse Guaranty [Lake Travis], dated as of
August 31, 1994, by and between PG-II and Kemper (the "First Amendment to Kemper
Guaranty") (as amended, the "Kemper Guaranty"), issued by PG-II with respect to
credit support issued by Kemper to an affiliate of PG-II.
Pursuant to the Second Amendment, PG-II's pledge was increased to
785,852 Common Units in order to secure certain obligations of PG-II under the
Kemper Guaranty.
Pursuant to the Third Amendment, Kemper released 40,227 Common Units
resulting in a total pledge by PG-II of 745,625 Common Units in order to secure
certain obligations of PG-II under the Kemper Guaranty.
Pursuant to the Fourth Amendment, PG-II's pledge was increased to
845,625 Common Units in order to secure certain obligations of PG-II under the
Kemper Guaranty.
Pursuant to the Fifth Amendment, Kemper released 106,292 Common
Units resulting in a total pledge by PG-II of 739,333 Common Units in order to
secure certain obligations of PG-II under the Kemper Guaranty.
Pursuant to the Seventh Amendment, PG-II's pledge was increased to
884,541 Common Units in order to secure certain obligations of PG-II under the
Kemper Guaranty.
Pursuant to the Eleventh Amendment, PG-II's pledge was increased to
961,085 Common Units in order to secure certain obligations of PG-II under the
Kemper Guaranty.
Pursuant to the LMCC Pledge Agreement, PG-V has currently pledged to
LMCC 598,346 Common Units as security for the obligations of PG-V to LMCC under
the Limited Recourse Guaranty [150 N. Riverside] made March 22, 1994 by KILICO
Realty Corporation and Kemper in favor of LMCC, as amended by the First
Amendment to Limited Recourse Guaranty [150 N. Riverside] effective as of
September 1, 1995 by and between PG-V and LMCC (the "First Amendment to LMCC
Guaranty") (as amended, the "LMCC Guaranty"), with respect to credit support
issued by LMCC to an affiliate of PG-V.
Pursuant to the terms and conditions of the LaSalle Pledge
Agreement, PG-VI pledged 104,632 Common Units (along with other collateral) to
LaSalle in order to secure its obligations under that certain Loan Agreement,
dated as of December 18, 1998, by and between PG-VI and LaSalle (the "LaSalle
Loan Agreement"), as amended by the First Amendment to Loan Documents, Consent
and Limited Release, dated January 29, 1999 (the "LaSalle First Amendment"). In
addition, PGI guaranteed the payment in full of PG-VI's obligations under the
LaSalle Loan Agreement pursuant to a Continuing Unconditional Guaranty made in
favor of LaSalle, dated as of December 18, 1998 (the "LaSalle Guaranty").
Pursuant to the terms and conditions of the Prudential Pledge
Agreement, PFLP pledged 5,557,000 Common Units to Prudential in order to secure
its obligations under that certain Credit Agreement, dated as of September 29,
1999, by and between PFLP and Prudential (the "Prudential Credit Agreement"). In
addition, PGI, PGLP, PG-II, PG-III, PGLPI and Prime International, Inc.
guaranteed the payment in full of PFLP's obligations under the Prudential Credit
Agreement pursuant to a Guaranty made in favor of Prudential, dated as of
September 29, 1999 (the "Prudential Guaranty").
Each of the LaSalle Loan Agreement, the LaSalle First Amendment, the
LaSalle Pledge Agreement and the LaSalle Guaranty are identified as Exhibits XV,
XVI, XVII and XVIII respectively, and incorporated herein by reference. The
Kemper Pledge Agreement, the First Amendment, the Second
-16-
<PAGE>
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the
Seventh Amendment, the Eleventh Amendment, the Kemper Guaranty, the First
Amendment to Kemper Guaranty, the LMCC Pledge Agreement, the First Amendment to
LMCC Pledge Agreement, the LMCC Guaranty, the First Amendment to LMCC Guaranty,
the Prudential Credit Agreement, the Prudential Pledge Agreement and the
Prudential Guaranty are attached hereto as Exhibits I, II, III, IV, V, VI, VII,
VIII, IX, X, XI, XII, XIII, XIV, XIX, XX and XXI, respectively, and incorporated
herein by reference.
Item 7. Material to be Filed as Exhibits.
Exhibit I Pledge and Security Agreement [Lake Travis] dated as
of March 22, 1994 by and between PG-II and Kemper
Exhibit II First Amendment to Pledge and Security Agreement [Lake
Travis] dated as of August 31, 1994 by and between
PG-II and Kemper
Exhibit III Second Amendment to Pledge and Security Agreement
[Lake Travis] dated as of June 12, 1995 by and between
PG-II and Kemper
Exhibit IV Third Amendment to Pledge and Security Agreement [Lake
Travis] dated as of February 19, 1997 by and between
PG-II and Kemper
Exhibit V Fourth Amendment to Pledge and Security Agreement
[Lake Travis] dated as of April 9, 1997 by and between
PG-II and Kemper
Exhibit VI Fifth Amendment to Pledge and Security Agreement [Lake
Travis] dated as of April 7, 1998 by and between PG-II
and Kemper
Exhibit VII Seventh Amendment to Pledge and Security Agreement
[Lake Travis] dated as of September 30, 1998 by and
between PG-II and Kemper
Exhibit VIII Eleventh Amendment to Pledge and Security Agreement
[Lake Travis] dated as of December 20, 1999 by and
between PG-II and Kemper
Exhibit IX Limited Recourse Guaranty [Lake Travis] made by PG-II
as of March 22, 1994 in favor of Kemper
Exhibit X First Amendment to Limited Recourse Guaranty dated as
of August 31, 1994 by and between PG-II and Kemper
Exhibit XI Pledge and Security Agreement [150 N. Riverside] dated
as of March 22, 1994 made by KILICO Realty Corporation
and Kemper to LMCC
Exhibit XII First Amendment to Pledge and Security Agreement [150
N. Riverside] effective as of September 1, 1995 by and
between PG-V and LMCC
Exhibit XIII Limited Recourse Guaranty [150 N. Riverside] made as
of March 22, 1994 by KILICO Realty Corporation and
Kemper in favor of LMCC
Exhibit XIV First Amendment to Limited Recourse Guaranty [150 N.
Riverside] effective September 1, 1995 by and between
PG-V and LMCC
Exhibit XV Loan Agreement dated as of December 18, 1998 by and
between PG-VI and LaSalle *
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<PAGE>
Exhibit XVI First Amendment to Loan Documents, Consent and Limited
Release dated as of January 29, 1999 by and between
PG-VI and LaSalle *
Exhibit XVII Pledge Agreement dated as of December 18, 1998 by and
between PG-VI and LaSalle *
Exhibit XVIII Continuing Unconditional Guaranty dated as of December
18, 1998 by and between PG-VI and LaSalle *
Exhibit XIX Credit Agreement dated as of September 29, 1999 by and
between PFLP and Prudential
Exhibit XX Pledge and Security Agreement dated as of September
29, 1999 by and between PFLP and Prudential
Exhibit XXI Guaranty dated as of September 29, 1999 by PGI, PGLP,
PG-II, PG-III, PGLPI and Prime International, Inc. in
favor of Prudential
Exhibit XXII Joint Filing Statement dated January 26, 2000 by and
among Reschke, PGLPI, Prime Finance, PGLP, PFLP,
PG-II, PG-V and PG-VI
-----------
*Previously filed
-18-
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
/s/ Michael W. Reschke
-----------------------------------
Michael W. Reschke
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PGLP, INC.
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME FINANCE, INC.
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: Managing General Partner
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME FINANCING LIMITED PARTNERSHIP
By: Prime Finance, Inc., its managing
general partner
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME GROUP II, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME GROUP V, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and
belief, the undersigned certifies that the information set forth in this
Amendment No. 2 to Schedule 13D is true, complete and correct.
PRIME GROUP VI, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
-------------------------------
Name: Michael W. Reschke
Title: President
Dated: January 26, 2000
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
----------- --------
Exhibit I Pledge and Security Agreement [Lake Travis] dated as of
March 22, 1994 by and between PG-II and Kemper
Exhibit II First Amendment to Pledge and Security Agreement [Lake
Travis] dated as of August 31, 1994 by and between PG-II
and Kemper
Exhibit III Second Amendment to Pledge and Security Agreement [Lake
Travis] dated as of June 12, 1995 by and between PG-II
and Kemper
Exhibit IV Third Amendment to Pledge and Security Agreement [Lake
Travis] dated as of February 19, 1997 by and between
PG-II and Kemper
Exhibit V Fourth Amendment to Pledge and Security Agreement [Lake
Travis] dated as of April 9, 1997 by and between PG-II
and Kemper
Exhibit VI Fifth Amendment to Pledge and Security Agreement [Lake
Travis] dated as of April 7, 1998 by and between PG-II
and Kemper
Exhibit VII Seventh Amendment to Pledge and Security Agreement [Lake
Travis] dated as of September 30, 1998 by and between
PG-II and Kemper
Exhibit VIII Eleventh Amendment to Pledge and Security Agreement
[Lake Travis] dated as of December 20, 1999 by and
between PG-II and Kemper
Exhibit IX Limited Recourse Guaranty [Lake Travis] made by PG-II as
of March 22, 1994 in favor of Kemper
Exhibit X First Amendment to Limited Recourse Guaranty dated as of
August 31, 1994 by and between PG-II and Kemper
Exhibit XI Pledge and Security Agreement [150 N. Riverside] dated
as of March 22, 1994 made by KILICO Realty Corporation
and Kemper to LMCC
Exhibit XII First Amendment to Pledge and Security Agreement [150 N.
Riverside] effective as of September 1, 1995 by and
between PG-V and LMCC
Exhibit XIII Limited Recourse Guaranty [150 N. Riverside] made as of
March 22, 1994 by KILICO Realty Corporation and Kemper
in favor of LMCC
Exhibit XIV First Amendment to Limited Recourse Guaranty [150 N.
Riverside] effective September 1, 1995 by and between
PG-V and LMCC
Exhibit XV Loan Agreement dated as of December 18, 1998 by and
between PG-VI and LaSalle *
Exhibit XVI First Amendment to Loan Documents, Consent and Limited
Release dated as of January 29, 1999 by and between
PG-VI and LaSalle *
<PAGE>
Exhibit XVII Pledge Agreement dated as of December 18, 1998 by and
between PG-VI and LaSalle *
Exhibit XVIII Continuing Unconditional Guaranty dated as of December
18, 1998 by and between PG-VI and LaSalle *
Exhibit XIX Credit Agreement dated as of September 29, 1999 by and
between PFLP and Prudential
Exhibit XX Pledge and Security Agreement dated as of September 29,
1999 by and between PFLP and Prudential
Exhibit XXI Guaranty dated as of September 29, 1999 by PGI, PGLP,
PG-II, PG-III, PGLPI and Prime International, Inc. in
favor of Prudential
Exhibit XXII Joint Filing Statement dated January 26, 2000 by and
among Reschke, PGLPI, Prime Finance, PGLP, PFLP, PG-II,
PG-V and PG-VI
-------------
*Previously filed
<PAGE>
Exhibit I
PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS]
THIS PLEDGE AND SECURITY AGREEMENT (this "Pledge and Security Agreement"),
dated as of March 22, 1994, is entered into by and between Prime Group II, L.P.,
an Illinois limited partnership (the "Pledgor" or the "Company"), and Kemper
Investors Life Insurance Company, an Illinois insurance corporation (the
"Pledgee").
W I T N E S S E T H:
WHEREAS, The Prime Group, Inc. ("Prime") and Kemper Corporation, a
Delaware corporation ("Kemper"), acting on behalf of themselves and their
respective affiliates, are parties to that certain letter agreement dated August
25, 1993 and amended and restated as of February 17, 1994 (the "Letter
Agreement"), wherein Kemper and Prime agreed to modify certain of their existing
lending and other business relationships;
WHEREAS, Pledgor is an Affiliate of Prime; and Pledgee is a direct or
indirect subsidiary of Kemper;
WHEREAS, Pledgee and certain of its Affiliates have made or provided
credit support/enhancement for loans to certain Affiliates of Pledgor, which
loans are guaranteed by certain of Guarantor's Affiliates pursuant to written
guaranties (the "Existing Guaranties");
WHEREAS, in order to induce Pledgee to release the Existing Guaranties,
concurrently herewith, Pledgor is among other things executing and delivering to
Pledgee that certain guaranty dated of even date herewith (the "Guaranty"), with
respect to the loan (such loan, as extended, modified or restated from time to
time, being referred to herein as the "Loan"), described on Exhibit A to the
borrower (such borrower, and its successors and assigns, being referred to
herein as "Borrower"), which Pledgee has made or with respect to which Pledgee
has provided credit support/enhancement;
WHEREAS, in order to further induce Pledgee to release the Existing
Guaranties concurrently herewith, Pledgor has agreed to execute and deliver this
Pledge and Security Agreement, pursuant to which (i) the Pledged Interests (as
defined herein) will be pledged to secure Pledgor's obligations under the
Guaranty and this Pledge and Security Agreement, and (ii) certain Distributions
(as defined herein) paid on or with respect to the Pledged Interests will be
paid and applied as provided herein; and
WHEREAS, the transactions contemplated by the Letter Agreement include the
execution and delivery of this Pledge and Security Agreement executed by Pledgor
for the benefit of Pledgee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
The following terms when used in this Pledge and Security Agreement,
including its preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):
"Adjusted Funds from Operations" shall mean Funds from Operations for the
most recent calendar quarter after deducting (i) the total amount of the
quarterly distribution on the Preferred Units paid in that calendar quarter plus
the amount of any Preferred Distribution Shortfall as of the end of that
calendar quarter, (ii) a 10% payment reserve based on the amount remaining after
deducting item (i), and (iii) the total amount of the quarterly distribution on
the Convertible Preferred Units paid in that calendar quarter plus the amount of
any Convertible Preferred Distribution Shortfall on the Convertible Preferred
Units as of the end of that calendar quarter.
"Borrower" shall have the meaning provided therefor in the recitals.
"Borrower Obligations" shall mean any and all obligations or liabilities
of Borrower whether direct or indirect, joint or several, absolute or
contingent, now existing or hereafter arising, due or to become due, which arise
out of or in connection with any Loan Document.
"Business Day" means any day of the week other than Saturday, Sunday or
any other day on which the New York Stock Exchange is closed.
"Closing Price" means, on any date, the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either caw as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, for the Common Stock, as reported by the
National Association of Security Dealers, Inc. Automated Quotation System or, if
such system is no longer in use, the principal other automated quotation system
that may then be in use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock as such Person is
selected from time to time by the board of directors of General Partner.
"Code" means the Uniform Commercial Code from time to time in effect in
the State of Illinois.
"Collateral" is defined in Section 2.1.
-2-
<PAGE>
"Common Stock" means shares of common stock, par value $.01 per share, of
the General Partner, including certificates representing such shares and any
interests in the entries on the books of any financial intermediary pertaining
to such shares.
"Common Units" means the Partnership Units designated as Common Units
under, and as otherwise defined and described in, the Partnership Agreement.
"Convertible Preferred Distribution Shortfall" shall have the meaning
given such term in the Partnership Agreement.
"Convertible Preferred Units" shall mean the Partnership Units designated
as Convertible Preferred Units under, and as otherwise defined and described in,
the Partnership Agreement.
"Dilution" shall mean the exercise of the rights granted to the
Partnership pursuant to Section 12.5 of the Partnership Agreement to acquire
Common Units of a Limited Partner and dilute such Limited Partner's Partnership
Interest in satisfaction of such Limited Partner's liability to the Partnership
pursuant to Sections 12.3 or 12.4 of the Partnership Agreement. Whenever in this
Pledge and Security Agreement reference is made to Dilution of Common Units, or
to Common Units subject to Dilution, any such reference shall be deemed to
include any and all rights under Section 12.7(b) and Section 12.5(d) of the
Partnership Agreement regarding Common Units with respect to which the Dilution
rights of the Partnership have terminated.
"Dilution Amount" means, with respect to any Dilution, the aggregate
dollar amount recovered from the Limited Partners under the Partnership
Agreement by reason of such Dilution.
"Discount" means an amount equal to 0.335 multiplied by a fraction, (i)
the numerator of which shall be (A) the Target Distribution Amount as of the end
of the most recent calendar quarter, minus (B) four (4) times the Adjusted Funds
from Operations for the most recent calendar quarter (but in no event shall the
numerator be less than zero), and (ii) the denominator of which shall be
$6,625,892.00.
"Distributions" means all distributions, proceeds, dividends, liquidating
proceeds or dividends, and other distributions or payments, ordinary or
extraordinary (whether similar or dissimilar to the foregoing), paid in cash, on
or with respect to any Pledged Interests.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, business trust, limited liability company, corporation or
association.
"Exchange" means the exchange of some or all or a portion of the Common
Units of a Limited Partner for Common Stock pursuant to the Partnership
Agreement.
"Exchange Rights" means the rights of a Limited Partner to exchange Common
Units for Common Stock pursuant to Article XI of the Partnership Agreement and
subject to Section 12.7(a) of the Partnership Agreement.
-3-
<PAGE>
"Event of Default" means:
(a) any failure by Pledgor to pay any amount due under the Guaranty,
or to apply any Distributions as provided in Section 2.4 hereof, or to
comply with the provisions of any section of Article 4 hereof other than
Sections 4.1 (to which subparagraph (d) below shall apply), 4.2 (to which
subparagraph (c) below shall apply) and 4.12 (to which subparagraph (d)
below shall apply), and, in each such case, the continuance of such
failure for five (5) Business Days after written notice from Pledgee;
(b) if any representation or warranty made or deemed made by Pledgor
in or under the Guaranty or this Pledge and Security Agreement shall prove
to be false or misleading in any material respect on the date made or
deemed to be made, and Pledgee gives notice to Pledgor of such default (no
grace or cure period being applicable to any such default);
(c) any sale, assignment, transfer, pledge or further encumbrance by
Pledgor of any of the Pledged Interests, or any interest therein, other
than pursuant to a Dilution under the Partnership Agreement;
(d) any default (not otherwise specified in this definition of
"Event of Default") in the performance or observance of any covenant or
agreement to be performed or observed by Pledgor under this Pledge and
Security Agreement or the Guaranty and the continuation thereof for a
period of thirty (30) days after notice of such default is given by
Pledgee to Pledgor; provided, however, that if such default cannot
reasonably be cured within such thirty (30) day time period and so long as
Pledgor promptly commences to cure such default promptly following receipt
of notice thereof and thereafter diligently prosecutes such cure, such
period will be extended for up to an additional ninety (90) days;
(e) Pledgor shall (i) in a proceeding commenced by Pledgor, be
adjudicated a bankrupt, or an order for relief shall have been entered
against Pledgor, under federal bankruptcy law, (ii) make a general
assignment for the benefit of creditors, (iii) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
liquidator or similar official for it or all or substantially all of its
property, (iv) institute any proceeding seeking an order for relief or to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or fail to have any such proceeding
instituted against it dismissed within ninety (90) days after filing or
(v) fail to contest in good faith any appointment or proceeding described
in subsection (f) below for a period of ninety (90) days after such
appointment or the institution of such proceeding; or
(f) a receiver, custodian, trustee, liquidator or similar official
shall be appointed for Pledgor or all or substantially all of its
properties, or a proceeding described in subsection (e) above, shall be
instituted against Pledgor or a warrant of attachment, execution or
similar process against all or substantially all of its property shall be
issued, and any such event continues undischarged, undismissed, unstayed,
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unvacated or unbonded for a period of ninety (90) days after such entry,
appointment or issuance.
"Funds from Operations" shall mean the net income (loss), computed in
accordance with generally accepted accounting principles consistently applied,
excluding gains or losses from debt restructuring and sales of real property,
plus depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures.
"General Partner" means Prime Retail, Inc., a Maryland corporation, and
its successors and assigns.
"Guaranty" shall have the meaning provided therefor in the recitals.
"Initial Pledge Amount" means the amount set forth in Exhibit A hereto as
the Initial Pledge Amount under this Pledge and Security Agreement.
"Initial Pledged Interests" means the Pledged Interests which are being
pledged as of the date hereof by Pledgor to Pledgee pursuant to this Pledge and
Security Agreement to secure the Secured Obligations.
"Interest Amount" shall have the meaning provided therefor in Section 2.4
hereof.
"Letter Agreement" shall have the meaning provided therefor in the
recitals.
"Limited Partner" shall mean any Person named as a Limited Partner on
Exhibit A to the Partnership Agreement, or any Person admitted as a Substituted
Limited Partner or additional Limited Partner (as such terms are defined and
described in the Partnership Agreement), in such Person's capacity as a limited
partner of the Partnership.
"Loan" shall have the meaning provided therefor in the recitals.
"Loan Documents" means, with respect to the Loan, this Pledge and Security
Agreement, the Guaranty, and any and all other documents and instruments
evidencing or securing the Loan, and, if applicable, any and all other documents
and instruments executed and delivered in connection with credit
support/enhancement with respect to the Loan.
"Lock-Up Letter" means, collectively, (i) that certain letter dated as of
March 22, 1994 by and among Prime, Prime Group Limited Partnership, and
Friedman, Billings, Ramsey & Co., Inc., (ii) that certain letter dated as of
March 22, 1994 by and among Kemper Investors Life Insurance Company, KILICO
Realty Corporation, KR Gainesville, Inc., KR Gulf Coast Factory Shops, Inc., and
Friedman, Billings, Ramsey & Co., Inc., (iii) that certain letter dated as of
March 22, 1994 by and among Abraham Rosenthal, Rosenthal Family LLC and
Friedman, Billings, Ramsey & Co., Inc., and (iv) that certain letter dated as of
March 22, 1994 by and among William H. Carpenter, Jr., Carpenter Family
Associates LLC and Friedman, Billings, Ramsey & Co., Inc., relating to certain
restrictions on the sale or other disposition of Common Units or Common Stock.
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"Market Value" means (i) with respect to Common Stock on any date, the
average of the Closing Price for the five consecutive Business Days ending on
such date, and (ii) with respect to Common Units on any date, the Market Value
of the Common Stock that would be issued if an Exchange were to occur as to such
Common Units on such date. Notwithstanding the foregoing, (i) for purposes of
this Pledge and Security Agreement, the Market Value of the Initial Pledged
Interests as of the date hereof shall be deemed to be the Initial Pledge Amount,
and (ii) for purposes of Section 4.16 only, the Market Value is subject to
adjustment as provided in said Section 4.16(d).
"Partners" means the partners in the Partnership.
"Partnership" means Prime Retail, L.P., a Delaware limited partnership.
"Partnership Agreement" means that certain Agreement of Limited
Partnership of the Partnership dated March 22, 1994.
"Preferred Units" shall mean the Partnership Units designated as Preferred
Units under, and as otherwise defined and described in, the Partnership
Agreement.
"Prime Partner(s)" shall mean the affiliate(s) of Prime which are
partner(s) of Borrower, as set forth on Exhibit A.
"Prime Pledges" shall have the meaning provided therefor in Section 2.7
hereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated March 22, 1994, among Prime Retail, Inc., the Partnership,
Prime, Prime Group Limited Partnership, Abraham Rosenthal, Rosenthal Family LLC,
William H. Carpenter, Jr., Carpenter Family Associates LLC, Kemper Investors
Life Insurance Company, KILICO Realty Corporation, KR Gainesville, Inc., and KR
Gulf Coast Factory Shops, Inc.
"Secured Obligations" shall have the meaning provided therefor in Section
2.2.
"Sharing Agreement" means that certain Retail Assets Sharing Agreement
dated of even date herewith by and among Pledgor, Prime, Prime Group Limited
Partnership, Abraham Rosenthal, Rosenthal Family LLC, William H. Carpenter, Jr.,
Carpenter Family Associates LLC, Kemper Investors Life Insurance Company, KILICO
Realty Corporation, KR Gainesville, Inc., and KR Gulf Coast Factory Shops, Inc.
"Target Distribution Amount" shall mean an amount, determined from time to
time, that would be required to pay an annual distribution at the rate of the
Preferential Distribution per Common Unit on all Common Units then issued and
outstanding, plus the amount of any accrued and unpaid Preferential Distribution
Shortfall outstanding at such time with respect to all Common Units owned by the
General Partner.
In addition to the foregoing, the definitions set forth in Section A of
Schedule 1 to Exhibit B attached hereto are hereby incorporated by this
reference.
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ARTICLE 2
PLEDGE
SECTION 2.1 Grant of Security Interest. Pledgor hereby pledges,
hypothecates, assigns, and transfers to Pledgee, and hereby grants to Pledgee, a
continuing lien and security interest in all of the following property (the
"Collateral"):
(a) subject to Sections 2.7 and 4.16(b) hereof, 690,276 Common
Units;
(b) any Pledged Interests or other collateral pledged by Pledgor to
Pledgee after the date hereof to secure the Secured Obligations pursuant
to this Pledge and Security Agreement;
(c) any and all Common Stock owned by Pledgor following an Exchange
of any Pledged Interests which are Common Units (which Common Stock shall
constitute "Pledged Interests" hereunder immediately upon issuance thereof
and without any further act required on the part of Pledgor);
(d) any and all Common Units or Common Stock or any other securities
or property received by Pledgor as a result of any exchanges, splits,
reverse splits, combinations, mergers, consolidations, reclassifications,
warrants, options, and non-cash dividends or distributions in respect of
any Pledged Interests (and any such Common Units or Common Stock or other
securities or property so received shall be deemed "Pledged Interests" for
purposes hereof);
(e) subject to Sections 2.4 and 4.7 hereof, all Distributions with
respect to any Pledged Interests; and
(f) all other proceeds of any of the foregoing. For purposes of this
Pledge and Security Agreement, "proceeds" includes, without limitation,
whatever is receivable or received when Collateral or proceeds are sold,
collected, exchanged, converted or otherwise disposed of, whether such
disposition is voluntary or involuntary.
SECTION 2.2 Security for Secured Obligations. This Pledge and Security
Agreement secures the full and prompt payment when due of all sums now or
hereafter payable by Pledgor, and timely performance of all obligations of
Pledgor, now or hereafter existing, under the Guaranty and this Pledge and
Security Agreement (the "Secured Obligations").
SECTION 2.3 [Intentionally omitted]
SECTION 2.4 Distributions. In the event that any Distribution is to be
paid on or with respect to the Pledged Interests at a time when no Event of
Default has occurred and is continuing, such Distribution shall be paid directly
to Pledgor; provided that Pledgor shall hold such Distribution in trust and
promptly, and in no event more than three (3) Business Days after receipt
thereof by Pledgor, pay such Distribution to Pledgee in an amount equal to: (a)
the amount of interest (the "Interest Amount") that has accrued since the date
of the immediately preceding Distribution (or, in the case of the first such
Distribution, since the date of this Pledge
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and Security Agreement) to the date of such Distribution at the interest rate
provided in the note evidencing the Loan, as such interest rate may change from
time to time, on a principal amount equal to the Pledge Amount, as such Pledge
Amount may change from time to time pursuant to this Pledge and Security
Agreement; and (b) if any such Distribution is in an amount less than such
Interest Amount, any such deficiency shall accumulate (with interest thereon at
the interest rate, if any, provided in the note evidencing the Loan) for
purposes of this Section 2.4 and the amount of the next Distribution (and, if
necessary, subsequent Distributions) to be paid to Pledgee shall include and be
applied first to such deficiency (and any accrued interest thereon), until such
deficiency (and all accrued interest thereon) has been paid in full, before
payment of any new Interest Amount. Unless and until an Event of Default shall
have occurred and be continuing, Pledgor shall be entitled to receive, retain
and apply Distributions in excess of the amount of the Interest Amount plus any
such accumulated deficiency (and accrued interest thereon) free and clear of the
lien and security interest of this Pledge and Security Agreement and shall not
be obligated to pay or invest such amounts to or in any Person. Any such
Distributions paid to Pledgee shall be applied by Pledgee to pay accrued and
unpaid interest on the Loan and shall be deemed to be a contribution by the
Prime Partner(s) to the capital of Borrower.
SECTION 2.5 Continuing Security Interest; Transfer of Note. This Pledge
and Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full or other
satisfaction in full of all Secured Obligations;
(b) inure to the benefit of and be binding upon the Pledgor and its
successors and assigns; and
(c) inure to the benefit of and be binding upon Pledgee and its
successors and assigns.
Without limiting the foregoing clause (c), Pledgee may assign or otherwise
transfer (in whole or in part) any of the Loan Documents held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits and subject to all of the obligations thereafter accruing in respect
thereof under any Loan Document or otherwise; provided that no such assignment
shall relieve Pledgee of any obligation thereunder accruing prior to such
assignment. Upon the payment or other satisfaction in full of all Secured
Obligations, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to Pledgor. Upon any such termination (whether in
whole or in part), Pledgee will, at Pledgor's sole expense, deliver to Pledgor,
all documents, chattel paper, agreements, certificates, notes and instruments
representing, constituting, or evidencing all Pledged Interests, together with
all other Collateral then held by Pledgee hereunder, and execute and deliver to
Pledgor, at Pledgor's sole expense, such documents as Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6 Security Interest Absolute. All rights of Pledgee and the
security interests granted to Pledgee hereunder, and all obligations of Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
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(a) any lack of validity or enforceability of any of the Loan
Documents or instruments relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term, including the applicable rate of interest, of, all or any of
the Borrower Obligations, or any other renewal, extension, amendment,
modification or waiver of or any consent to departure from any of the Loan
Documents;
(c) any act or omission of Pledgee (or other holder of the Loan
Documents) of any nature whatsoever;
(d) with respect to Pledgor, Borrower, or any other Person, (i) any
failure to obtain required authorization by all necessary corporate,
partnership or other action relating to the incurrence of the Borrower
Obligations or the Secured Obligations or to the execution, delivery or
performance of any of the Loan Documents, or (ii) any violation of any
provision of any of the articles of incorporation, by-laws, partnership
agreement or any other document, instrument or agreement occasioned by the
incurrence of the Borrower Obligations or the Secured Obligations, by the
execution, delivery, or performance of any of the Loan Documents, or by
any failure of same to have been duty authorized by all necessary
corporate or other action;
(e) any release, amendment, waiver, modification, extension or
renewal of or consent to departure from, any guaranty given to secure all
or any of the Borrower Obligations or the Secured Obligations (other than
a release of the Guaranty); or forbearance of any other action or inaction
under or in respect of any of the Loan Documents;
(f) any exchange, release, forbearance or surrender of or any other
action or inaction with respect to any collateral (including, without
limitation, the Collateral, other than a release of all of the Collateral
which would result in a termination of the Guaranty under Section 8(a)
thereof at any time and from time to time now or hereafter securing any or
all of the Borrower Obligations or the Secured Obligations or the Loan
Documents or the liability of Pledgor, Borrower, or any other Person in
respect of all or any of the Loan Documents, or any failure to perfect or
continue as perfected any security interest or other lien with respect to
any such collateral, or any loss or destruction of any such collateral, or
any matter impairing the value of such collateral as security for all or
any of the Borrower Obligations, or the liability of Pledgor, Borrower, or
any other Person, in respect of all or any of the Borrower Obligations or
Loan Documents;
(g) any guaranty now or hereafter executed by Pledgor or anyone else
or any recovery under any such other guaranty;
(h) any waiver of or assertion or enforcement or failure or refusal
to assert or enforce, in whole or in part, any of the terms and provisions
of the Loan Documents, or any claim, cause of action, right or remedy
which Pledgee may, at any time, have under any of the Loan Documents or
with respect to any guaranty or any security which may be held by Pledgee
(or other holder of the Loan Documents) with respect to the Loan;
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(i) the failure to give Pledgor any notice whatsoever, other than
any notice which Pledgee is expressly required to give pursuant to any
provision of this Pledge and Security Agreement;
(j) exculpatory provisions in any of the Loan Documents (other than
in the Guaranty or in this Pledge and Security Agreement) limiting
recourse to property encumbered by the Loan Documents or to any other
security or limiting rights to enforce a deficiency judgment against the
Borrower;
(k) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of any of the Borrower's interest in any property securing
the Loan or the occurrence of any such sale, assignment, conveyance,
merger or other voluntary or involuntary transfer which results in Pledgor
becoming the Borrower under any of the Loan Documents; provided, however,
that any such sale, assignment, conveyance, merger or other transfer shall
be subject to the limitations set forth in the Loan Documents;
(l) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of the interests of Pledgee (or other holder of the Loan
Documents) in this Pledge and Security Agreement or any of the other Loan
Documents;
(m) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, or the like, of Pledgor, Borrower
or any other Person, whether or not Pledgor shall have notice or knowledge
of any of the foregoing;
(n) any recovery (other than payment in full of all of the Secured
Obligations which would result in a termination of the Guaranty under
Section 8(a) thereof) as a result of the exercise by Pledgee (or other
holder of the Loan Documents) of any of its rights or remedies under the
Loan Documents, including any foreclosure thereof; or
(o) any other fact, circumstance or matter of any nature whatsoever
(other than payment in full of all of the Secured Obligations which would
result in a termination of the Guaranty under Section 8(a) thereof) that
might otherwise constitute a defense available to, or a discharge of, or
might otherwise operate to release or affect the obligations of, Pledgor,
Borrower, or any other Person liable to Pledgee (or other holder of the
Loan Documents) in respect of any of the Borrower Obligations, the Secured
Obligations or the Loan Documents.
SECTION 2.7 Dilution of Pledged Interests; Reallocation; Lock-Up
Provisions
(a) The Common Units now or hereafter constituting a part of the
Pledged Interests and certain other Common Units are subject to Dilution
as set forth in the Partnership Agreement and in accordance with the
Sharing Agreement which provides for the allocation of Dilution among the
parties thereto, and the pledge and security interest granted hereby is
expressly subject to any such Dilution rights. In the event of any
Dilution under the Partnership Agreement, a portion of the Dilution Amount
shall be deemed allocated to and thereupon subtracted from the Pledge
Amount, and the number
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of Common Units then constituting a part of the Pledged Interests shall be
reduced, in accordance with the formula set forth on Exhibit C attached
hereto.
(b) Simultaneously with the execution and delivery of this Pledge
and Security Agreement, Pledgee or its Affiliates have executed and
delivered certain Pledge and Security Agreements (the "Pledgee-Affiliated
Security Agreements"), in form substantially similar to this Pledge and
Security Agreement, for the purpose of securing limited recourse
guaranties (the "Pledge-Affiliated Guaranties") by Pledgee or such
Affiliates of loans made to Huntley Development Limited Partnership, an
Illinois limited partnership, and 150 N. Riverside Venture, an Illinois
general partnership (the "Pledgee-Affiliated Secured Loans"). Pursuant to
the Pledgee-Affiliated Security Agreements, Pledgee or its Affiliates have
pledged Common Units to secure the Pledgee-Affiliated Guaranties. If, as a
result of any Dilution, any such Common Units pledged by Pledgee or its
Affiliates are assigned to the Partnership, then, in order to replace the
Common Units so assigned to the Partnership by Pledgee or its Affiliates,
Pledgor agrees that Pledgee and its Affiliates shall have the right to
reallocate the same number (as are so assigned to the Partnership by
Pledgee and its Affiliates) of Common Units pledged under the Prime
Pledges to the Prime Pledges, if any, securing the Pledgee-Affiliated
Secured Loans from the Prime Pledges securing loans other than the
Pledgee-Affiliated Secured Loans, pro rata (subject to certain limitations
set forth on Exhibit A-1). In such event, Pledgee shall deliver to Pledgor
a new Exhibit A-1 (as described in subparagraph 2.7(c) below) reflecting
such reallocation. Immediately upon the delivery by Pledgee to Pledgor of
such new Exhibit A-1, the Common Units constituting a part of the Pledged
Interests and the Collateral under this Pledge and Security Agreement
shall be the number of Common Units as indicated on such new Exhibit A-1
as being pledged by Pledgor pursuant to this Pledge and Security
Agreement, and Exhibit A hereto shall be adjusted accordingly. In the
event of any such reallocation, Pledgor shall promptly deliver to Pledgee
such financing statements and such other documents and instruments as may
reasonably be required by Pledgee in connection with such reallocation,
and, to the extent not previously delivered, a limited recourse guaranty
and pledge and security agreement.
(c) Simultaneously with the execution and delivery of this Pledge
and Security Agreement, Pledgor and Affiliates of Pledgor have executed
and delivered, or may hereafter execute and deliver, other Pledge and
Security Agreements, in form substantially similar to this Pledge and
Security Agreement, for the purpose of securing guaranties by Pledgor and
such Affiliates of loans which Pledgee and Affiliates of Pledgee have made
to other Affiliates of Pledgor or with respect to which Pledgee and
Affiliates of Pledgee have provided credit support/enhancement. Such other
Pledge and Security Agreements, together with this Pledge and Security
Agreement, are referred to herein collectively as the "Prime Pledges". A
schedule of all such Prime Pledges is attached hereto as Exhibit A-1.
Exhibit A-1 specifies, inter alia, the Initial Pledge Amounts, the number
of Common Units, and the percentage of the total Common Units constituting
Pledged Interests under all of the Prime Pledges (as defined respectively
therein), which are pledged under each respective Prime Pledge as of the
date hereof. Pledgee and its Affiliates shall have the right on a single
occasion at any time during the period of eighteen (18) months after the
date hereof to substitute a new Exhibit A-1 to all
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the Prime Pledges, which reallocates the total of the Pledge Amounts among
the Prime Pledges (subject to certain limitations as set forth on Exhibit
A-1), with a reallocation of the total Common Units constituting Pledged
Interests among such Prime Pledges in the same proportion as the
reallocation of the Pledge Amounts. Such reallocation may result in an
increase or a decrease, or in no change, to the Common Units constituting
Pledged Interests hereunder. Immediately upon the delivery by Pledgee to
Pledgor of such new Exhibit A-1, the Common Units constituting a part of
the Pledged Interests and the Collateral under this Pledge and Security
Agreement shall be the number of Common Units in the Partnership as
indicated on such new Exhibit A-1 and Exhibit A hereto shall be adjusted
accordingly. In the event of any such reallocation, Pledgor shall promptly
deliver to Pledgee amended financing statements and such other documents
and instruments as may reasonably be required by Pledgee in connection
with such reallocation.
(d) Under and pursuant to the Partnership Agreement and the Lock-Up
Letter, Pledgor's Common Units and Common Stock constituting Pledged
Interests hereunder will be subject to restrictions upon transfer thereof,
and the pledge and security interest granted hereby is expressly subject
to any such transfer restrictions on Pledged Interests.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Incorporation of Representations and Warranties. The
representations and warranties set forth in Section B of Schedule I to Exhibit B
attached hereto are incorporated herein by this reference, and shall be deemed
to be made as of the date hereof and (except for paragraphs 5, 6 and 7 of
Section B of Schedule 1 to Exhibit B as of the date of each pledge and delivery
hereunder.
SECTION 3.2 Additional Representations and Warranties. Pledgor represents
and warrants to Pledgee, as of the date hereof and as of the date of each pledge
and delivery hereunder, in each case only with respect to the Collateral then
being pledged:
(a) Pledgor is the sole record, legal and beneficial owner of, and
has good and marketable title to (and has full right and authority to
pledge and assign), the Collateral, free and clear of all liens, security
interests, options, or other charges or encumbrances, except as described
in Section 2.7.
(b) The delivery of the Collateral to Pledgee, together with the
filing of the Uniform Commercial Code financing statements described in
the following sentence, is effective to create a valid, perfected,
continuing and enforceable first priority security interest in such
Collateral and all proceeds thereof, securing the Secured Obligations. All
Uniform Commercial Code financing statements necessary to perfect the
security interest of Pledgee in and to all or part of the Collateral have
been filed in the appropriate governmental office or executed and
delivered to Pledgee for filing (or, in the case of a reallocation as
provided in Section 2.7, will be so executed and delivered within five
Business Days after Pledgor's receipt of the new Exhibit A-1 under Section
2.7 above),
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and Pledgor has directed (or, in the case of a reallocation as provided in
Section 2.7, will so direct within five Business Days after Pledgor's
receipt of the new Exhibit A-1 under Section 2.7 above) the Partnership to
register the pledge to Pledgee of the Common Units then being pledged
hereunder.
(c) In the case of any Pledged Interests consisting of Common Stock,
all of such Pledged Interests are duly authorized and validly issued,
fully paid, and non-assessable and are not subject to any shareholder
agreements, voting agreements, voting trusts, trust deeds, irrevocable
proxies, or any other similar agreements or instruments, except as
contemplated by this Pledge and Security Agreement, and there are no
outstanding options, warrants or other agreements with respect thereto, in
each case, except as described in Section 2.7.
(d) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority, regulatory body or any other
Person (other than the filing contemplated by Section 3.2(b) hereof) is
required by Pledgor for the pledge by Pledgor of any Collateral pursuant
to this Pledge and Security Agreement or for the execution, delivery, and
performance of this Pledge and Security Agreement by Pledgor.
ARTICLE 4
COVENANTS
SECTION 4.1 Incorporation of Covenants. The covenants set forth in Section
C of Schedule 1 to Exhibit B attached hereto are incorporated herein by this
reference.
SECTION 4.2 Restrictions on Encumbrances; Warranty of Title. Pledgor will
not hereafter sell, assign, dispose of, transfer, pledge, encumber, or grant any
option or warrant with respect to, the Collateral (subject to the provisions of
Section 2.7). Subject to Section 2.7, Pledgor will warrant and defend the right,
title and interest in and to the Collateral, and Pledgee's interest in and to
the Collateral, against the claims and demands of all Persons whomsoever.
SECTION 4.3 Stock Powers and Instruments of Transfer. Pledgor shall (a)
upon the execution and delivery of this Pledge and Security Agreement, and
simultaneously with the delivery by Pledgor of any other or additional
Collateral as may be required hereunder (or, in the case of a reallocation
pursuant to Section 2.7, within five Business Days after Pledgor's receipt of
the new Exhibit A-1 under Section 2.7 above), and after any Exchange, promptly
deliver to Pledgee, such stock powers, stock certificates, instruments,
certificates, opinions of counsel, and similar documents, reasonably
satisfactory in form and substance to Pledgee, with respect to the Pledged
Interests as Pledgee may reasonably require in order to accomplish the purposes
of this Pledge and Security Agreement, and (b) from time to time upon the
request of Pledgee after the occurrence of any Event of Default relating to any
such Pledged Interests, promptly take whatever action is reasonably requested by
Pledgee in order to accomplish the purposes of this Pledge and Security
Agreement.
SECTION 4.4 Continuous Pledge. Subject to Sections 2.4, 2.5, 2.7, 4.7 and
4.16, Pledgor will, at all times, keep pledged to Pledgee pursuant hereto all
Pledged Interests and all
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other Collateral and other securities, instruments, proceeds, and rights from
time to time received by or distributable to Pledgor in respect of any
Collateral.
SECTION 4.5 Exchange Rights. Without the prior written consent of Pledgee,
Pledgor shall not exercise any of its Exchange Rights in respect of the
Collateral.
SECTION 4.6 Further Assurances. Pledgor agrees that at any time, and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments, including, without limitation, financing
statements, and take all further action, that may be reasonably necessary or
desirable, or that Pledgee may reasonably request, in order to perfect,
maintain, preserve, and protect the first perfected priority lien and security
interest (subject to the provisions of Section 2.7) granted or purported to be
granted hereby in compliance with applicable law and/or to enable Pledgee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 4.7 Distributions. Unless and until an Event of Default shall have
occurred and be continuing, Pledgor shall be entitled to receive, retain and
apply all Distributions, in accordance with Section 2.4 above. Upon the
occurrence and during the continuance of an Event of Default (i) the rights of
Pledgor to all Distributions shall cease and all such rights shall thereupon
become vested in Pledgee which shall exclusively be entitled to receive all
Distributions, subject to application in accordance with Section 6.4 below, (ii)
Pledgor agrees to deliver to Pledgee any and all Distributions received by
Pledgor, (iii) any and all Distributions received and held by Pledgor which
Pledgor is obligated to deliver to Pledgee shall, until delivery thereof, be
held by Pledgor separate and apart from its other property in trust for Pledgee,
and (iv) Pledgee shall have the right to notify the Pledged Interest Issuer of
the vesting in Pledgee of such rights to receive Distributions as aforesaid and
Pledgor hereby irrevocably consents to any such notification.
SECTION 4.8 [Intentionally omitted]
SECTION 4.9 Other Parties. Pledgor will not, without the prior written
consent of Pledgee, waive or release any obligation of any party with respect to
the Collateral or enter into any agreement amending or supplementing the
Collateral.
SECTION 4.10 [Intentionally omitted]
SECTION 4.11 Additional Undertakings. Pledgor will not, without the prior
written consent of Pledgee, take or omit to take an action the taking or the
omission of which would result in any impairment or alteration of any obligation
of the maker of any instrument constituting Collateral.
SECTION 4.12 Place of Business. If Pledgor shall change its principal
place of business or its chief executive office or its name or remove the
records concerning the Collateral from its principal place of business, Pledgor
shall give to Pledgee thirty (30) days advance notice thereof and, in connection
therewith, take such action, reasonably satisfactory to Pledgee, as may be
necessary to maintain the security interest of Pledgee in the Collateral
hereunder at all times fully perfected and in full force and effect.
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SECTION 4.13 Shareholder Agreements. Pledgor shall not, with respect to
any Pledged Interests that are now or hereafter pledged to Pledgee, enter into
any shareholder agreements, voting agreements, voting trusts, trust deeds,
irrevocable proxies, or any other similar agreements or instruments, except this
Pledge and Security Agreement, the Partnership Agreement, the Lock-Up Letter and
the Registration Rights Agreement.
SECTION 4.14 Payment of Taxes, Etc. Pledgor shall pay promptly when due
all taxes, assessments, charges, encumbrances and liens now or hereafter imposed
upon any Collateral, and shall discharge or cause to be discharged as a lien of
record by payment or filing of any bond required by law, or otherwise, any (i)
judgment liens or (ii) tax or other similar involuntary liens (except liens
created by Pledgee) filed or otherwise asserted against the Collateral or any
part thereof, and any proceedings for the enforcement thereof, within fifteen
(15) days after Pledgor has notice thereof; provided, however, that Pledgor
shall have the right to contest in good faith any such taxes, assessments,
charges, encumbrances and liens, including any such judgment liens or tax liens
or other such involuntary liens (and during the continuation of such contest
need not pay or discharge any such matters) upon deposit with Pledgee, within
such fifteen (15) day period, of a cash deposit, an irrevocable letter of credit
or a surety bond or other security reasonably satisfactory to Pledgee, in an
amount sufficient to pay such lien, any accrued interest thereon, and any costs
and expenses in connection therewith.
SECTION 4.15 [Intentionally omitted].
SECTION 4.16 Collateral Value.
(a) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
first Business Day of any calendar quarter beginning April 1, 1995,
Pledgee shall determine, after receipt of the calculation of Market Value
provided for in subparagraph (c) below, that the aggregate Market Value of
the Pledged Interests and the fair market value of any other Collateral
theretofore pledged by Pledgor under, this Section 4.16 and then
constituting a part of the Collateral hereunder, is less than 90% of the
Pledge Amount, then Pledgor shall promptly pledge and deliver to Pledgee
additional unencumbered Common Units and/or unencumbered Common Stock
(including certificates and transfer instruments relating thereto), and/or
other collateral acceptable to Pledgee, such that, after giving effect to
the pledge of such additional Common Units and/or Common Stock and/or
other collateral, all Pledged Interests and other Collateral pledged under
this Pledge and Security Agreement and then constituting a part of the
Collateral shall have a fair market value (valuing Pledged Interests at
Market Value) equal to or greater than the Pledge Amount. Such additional
Common Units and/or Common Stock shall constitute Pledged Interests and,
together with any other collateral pledged hereunder, shall be deemed to
be part of the Collateral hereunder.
(b) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
first Business Day of any calendar quarter beginning April 1, 1995,
Pledgee shall determine, after receipt of the calculation of Market Value
provided for in subparagraph (c) below, that the aggregate of the Market
Value of the Pledged Interests and the fair market value of any other
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<PAGE>
Collateral theretofore pledged by Pledgor under this Section 4.16 and then
constituting a part of the Collateral hereunder, is more than 110% of the
Pledge Amount, then Pledgee shall promptly release and deliver to Pledgor
Common Units and/or Common Stock and/or other Collateral (as Pledgee shall
determine in its sole discretion), such that, after giving effect to such
release and delivery, the aggregate of the Market Value of the remaining
Pledged Interests and the fair market value of any other Collateral
theretofore pledged by Pledgor under this Pledge and Security Agreement
and then constituting a part of the Collateral hereunder, shall be as
close as possible to, but in no event less than, 110% of the Pledge
Amount.
(c) Within (i) forty-five (45) days, so long as the adjustment
contemplated by subparagraph (d) below is applicable, and (ii) within five
(5) Business Days, if such adjustment contemplated by subparagraph (d)
below is no longer applicable, after the first Business Day of each
calendar quarter beginning April 1, 1995, and at such other times as the
Pledgee may request, Pledgor shall deliver to Pledgee a calculation, made
in good faith and certified as such by the Chief Financial Officer of
General Partner, or another officer of General Partner reasonably
acceptable to Pledgee, of the Market Value of the Pledged Interests
(including the adjustment contemplated by subparagraph (d) below, if
applicable) and the fair market value of any other collateral pledged by
Pledgor under this Section 4.16 and then constituting part of the
Collateral hereunder, calculated as of the first Business Day of the
applicable calendar quarter in accordance with the provisions of this
Pledge and Security Agreement.
(d) Notwithstanding anything in this Pledge and Security Agreement
to the contrary, until the earlier of (i) the Preferential Distribution
Lapse Date, or (ii) as to any Common Unit then constituting Pledged
Interests, the Exchange of such Common Unit to Common Stock, at which time
the definition of "Market Value" in Article I of this Pledge and Security
Agreement shall control, the Market Value of the Pledged Interests shall
be deemed to be (A) the amount determined in accordance with the
definition of "Market Value" in Article I of this Pledge and Security
Agreement, minus (B) an amount equal to such "Market Value" (determined in
accordance with Article (I) multiplied by the Discount, but in no event
shall the result be less than zero.
ARTICLE 5
CERTAIN RIGHTS OF PLEDGEE
SECTION 5.1 Pledgee Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints Pledgee as Pledgor's attorney-in-fact, coupled with an interest, with
full power of substitution, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, after the occurrence and during
the continuance of an Event of Default, in Pledgee's discretion, to take any
action and to execute any instrument which Pledgee may reasonably deem necessary
or advisable to accomplish the purposes of this Pledge and Security Agreement,
including, without limitation:
(a) to ask, demand, collect, sue for, recover, receive and give
receipts for moneys due and to become due under or in respect of any of
the Collateral;
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<PAGE>
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above;
(c) to file any claims or commence, maintain or discontinue any
action or institute any proceedings which Pledgee may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of Pledgee with respect to any of the Collateral;
(d) to execute and deliver any instrument required to be executed
and delivered by Pledgor under Sections 4.3 and 4.6; and
(e) to do all other things necessary and proper by Pledgor to
protect, preserve, and permit Pledgee to realize upon, the Collateral, and
the other rights contemplated by the Pledge and Security Agreement.
SECTION 5.2 Pledgee Has No Duty. The powers conferred on Pledgee hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty on it to exercise any such powers. Pledgee shall have no duty as to any
Collateral or responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Interests, whether or not Pledgee has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
execution and delivery of this Pledge and Security Agreement and the Guaranty is
not intended to be, nor shall they be construed to be, the formation of a
partnership or joint venture between Pledgor and Pledgee.
ARTICLE 6
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have occurred
and be continuing Pledgee may exercise in respect of the Collateral, all rights
and remedies provided for herein or otherwise available to Pledgee, including
without limitation, all of the rights and remedies of a secured party on default
under the Code and also may, without notice except as specified below:
(a) sell such Collateral or any part thereof in one or more parcels
at public or private sale or broker's board, at any of Pledgee's offices
or elsewhere, for cash or other property, on credit or for future
delivery, and upon such other terms as may be commercially reasonable;
Pledgor agrees that Pledgee shall be entitled to bid for or purchase any
or all of the Collateral at any such sale; Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days'
notice to Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification; Pledgee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given; Pledgee may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned;
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<PAGE>
(b) notify the parties obligated on any of such Collateral to make
payment to Pledgee of any amount due or to become due thereunder
(including, without limitation, any Distributions);
(c) enforce collection of any of such Collateral by suit or
otherwise;
(d) endorse any checks, drafts, or other writings in Pledgor's name
to allow collection of such Collateral;
(e) take control of any proceeds of such Collateral; and
(f) subject to Section 2.7(d), upon disposition of the Collateral as
provided in Section 6.1(a), execute (in the name, place and stead of
Pledgor) endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of such Collateral.
SECTION 6.2 Securities Laws. If Pledgee shall determine, subject to
Section 2.7(d), to exercise the right to sell all or any of the Collateral at
any time pursuant to Section 6.1, Pledgor agrees that, upon request of Pledgee,
Pledgor will, at its own expense:
(a) exercise its rights under the Registration Rights Agreement;
(b) use its best efforts to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by Pledgee; and
(c) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid
and binding and in compliance with applicable law.
Pledgor acknowledges the impossibility of ascertaining the amount of damages
that would be suffered by Pledgee by reason of the failure by Pledgor to perform
any of the covenants contained in this Section and, consequently, agrees that,
if Pledgor shall fail to perform any of such covenants, at Pledgee's election,
Pledgee shall have the right to have each covenant of Pledgor in this Section
6.2 specifically enforced against Pledgor, and Pledgor waives and agrees not to
assert any defenses against an action for specific performance of such
covenants.
Pledgor further acknowledges that Pledgee may be compelled to resort to
one or more private sales to a restricted group of purchasers who shall be
obliged to agree, among other things, to acquire such Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. If, at any time of any sale of Collateral, which sale is then subject
to the applicable securities law, as from time to time amended (the "Securities
Act"), the same or any part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act, Pledgee is
hereby authorized to sell such Collateral or such part thereof by private sale
in any commercially reasonable manner and under any commercially reasonable
circumstances as Pledgee may deem necessary or advisable in order that such sale
may legally be effected without registration. Pledgor acknowledges that private
sales so made may be at prices and on other terms less favorable to the seller
than if such Collateral were sold at public sales, and agrees that Pledgee shall
not have an obligation to delay the sale of any such Collateral for
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<PAGE>
the period of time necessary to permit the issuer of such Collateral, even if
such issuer would agree, to register such Collateral for public sale under the
Securities Act. Pledgor agrees that private sales made under the foregoing
circumstances shall not, because so made, be deemed to have been made in a
commercially unreasonable manner.
SECTION 6.3 Indemnity and Expenses. Pledgor hereby indemnifies and holds
harmless Pledgee and Pledgee's officers, directors, employees, agents,
representatives, successors and assigns, from and against any and all claims,
losses, and liabilities growing out of or resulting from this Pledge and
Security Agreement (including, without limitation, enforcement of this Pledge
and Security Agreement, and any underwriting fees or expenses in connection with
registration or sale of Collateral), except for claims, losses, or liabilities
resulting from Pledgee's willful misconduct or gross negligence. Upon demand,
Pledgor will pay to Pledgee the amount of any and all expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which Pledgee may incur in connection with:
(a) the enforcement of this Pledge and Security Agreement;
(b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of Pledgee
hereunder; or
(d) the failure by Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Application of Proceeds. Any and all amounts actually received
by Pledgee hereunder in respect of Collateral shall be applied in the order set
forth below (to the extent permitted by applicable law):
(a) first, to the payment of all costs, expenses, liabilities and
advances made or incurred by Pledgee in performing or enforcing any of the
provisions hereof or in protecting the liens of this Pledge and Security
Agreement or the security afforded hereby and to the payment of the fees
and other expenses, including, without limitation, reasonable attorney's
fees and disbursements, of Pledgee to the extent that they have not been
paid or reimbursed;
(b) second, to the extent proceeds remain after the application
pursuant to the preceding clause (a), an amount equal to the outstanding
Secured Obligations shall be paid to Pledgee; and
(c) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (a) and (b), and the payment in full of
all Secured Obligations, to Pledgor, its successors or assigns, or such
other Person as may be entitled thereto by law or as a court of competent
jurisdiction may otherwise direct.
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<PAGE>
ARTICLE 7
MISCELLANEOUS PROVISIONS
SECTION 7.1 Amendments. No amendment to or waiver of any provision of this
Pledge and Security Agreement, nor consent to any departure by Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 7.2 Protection of Collateral. Pledgee may from time to time, at
its option, perform any act which Pledgor agrees hereunder to perform and which
Pledgor shall fail to perform within ten (10) Business Days after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default).
SECTION 7.3 Notices. Any notice or other communication required or
permitted hereunder shall be (a) in writing and shall be deemed to have been
duly given (A) when received, if delivered in person, (B) five (5) days after
deposit in a regularly maintained receptacle of the United States mail as first
class mail, postage prepaid, (C) the Business Day after notice is sent for
overnight delivery by nationally recognized overnight courier service, or (D) on
the day on which the party to whom such notice is addressed refuses delivery by
mail or by nationally recognized courier service , and (b) addressed as follows:
To Pledgee: c/o Kemper Financial Services, Inc.
120 South LaSalle Street
13th Floor
Chicago, Illinois 60603
Attn: Real Estate Investment Group
With copies to: Kemper Corporation
Legal Department, C-3
One Kemper Drive
Long Grove, Illinois 60049
Attn: General Counsel
and
KFC Portfolio Corp.
c/o Kemper Financial Services, Inc.
120 South LaSalle Street
22nd Floor
Chicago, Illinois 60603
Attn: Legal Department
Real Estate Counsel
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<PAGE>
To Pledgor: c/o The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attention: Michael W. Reschke
With a copy to: The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attention: Robert J. Rudnik
or to any such other address as any party hereto shall designate in a written
notice to the other parties hereto.
SECTION 7.4 Caption. Article and section captions used in this Pledge and
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Pledge and Security Agreement.
SECTION 7.5 Governing Law; Submission to Jurisdiction. This Pledge and
Security Agreement shall be governed by, and construed in accordance with, the
laws of the State of Illinois without regard to principles of conflict of laws.
Pledgor and Pledgee hereby waive any plea of jurisdiction or venue as not being
a resident of Cook County, Illinois and hereby specifically authorize any action
brought upon this Pledge and Security Agreement to be instituted and prosecuted
in either the Circuit Court of Cook County, Illinois or in the United States
District Court for the Northern District of Illinois, at the election of the
party bringing the action. Pledgor and Pledgee hereby irrevocably authorize
service of process to be made upon it in the manner provided in Section 7.3
above, in any action which may be instituted against it arising out of or
relating to this Pledge and Security Agreement.
SECTION 7.6 WAIVER OF JURY TRIAL. PLEDGOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY ANY PARTY, RELATING DIRECTLY OR INDIRECTLY TO THIS PLEDGE
AND SECURITY AGREEMENT, THE GUARANTY OR THE SECURED OBLIGATIONS.
SECTION 7.7 Severability. Wherever possible each provision of this Pledge
and Security Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge and Security
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge and Security Agreement.
SECTION 7.8 Limited Recourse. Notwithstanding anything to the contrary
contained herein or in the Guaranty, except as otherwise provided in this
Section 7.8, neither Pledgor nor any of its shareholders, officers, directors,
partners, employees, agents or other representatives ("Other Persons") shall
have any personal liability for the Secured Obligations under this Pledge
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<PAGE>
and Security Agreement, or for the obligation to observe, perform or discharge
any of the terms, covenants or conditions contained herein or in the Guaranty,
and, except as otherwise provided in this Section 7.8, (a) no attachment,
execution, writ or other process shall be sought and no judicial proceeding
shall be initiated by or on behalf of Pledgee against Pledgor or any Other
Person as a result of a breach or default under this Pledge and Security
Agreement or the Guaranty, except to the extent that such attachment, execution,
writ or judicial proceeding shall be necessary to enforce any of the rights,
remedies or recourses of Pledgee against or with reference to the Collateral,
and (b) in the event that an suit is brought hereunder or under the Guaranty,
any judgment obtained in or as a result of such suit shall be enforceable and/or
enforced solely against the Collateral; provided, however, that nothing herein
contained shall be construed to: (i) be a release or impairment of Pledgor's
obligations hereunder or under the Guaranty, (ii) prevent Pledgee from
exercising and enforcing, consistent with the provisions of this Section 7.8,
any other remedy allowed at law or in equity or by statute or by the terms
hereof or of the Guaranty or (iii) prevent Pledgee from recovering from Pledgor
(or any such Other Person), or limit Pledgee's recourse against Pledgor (or any
such Other Person) for, any funds, damages or costs (including, without
limitation, reasonable legal expenses) incurred by Pledgee as a result of any
willful act or omission in bad faith, any fraudulent act or omission, or any
breach of any of the following sections of this Pledge and Security Agreement:
Section 2.4, the first sentence of Section 4.2, Section 4.3(a), Section 4.4,
Section 4.5 and Section 4.7(ii). Nothing in this Section 7.8 shall be deemed to
increase the liability of any such Other Person beyond that which any such Other
Person may have under the partnership agreement of Pledgor or under law.
SECTION 7.9 Acknowledgement and Consent. Pledgor and Pledgee hereby
consent to the execution and delivery by the Partnership and the General Partner
of an acknowledgement and consent of and to this Pledge and Security Agreement
substantially in the form of Exhibit D attached hereto.
SECTION 7.10 Credit Support/Enhancement. If Pledgee has provided credit
support/enhancement with respect to all or a part of the Loan, Pledgor agrees
that it is guaranteeing such Loan and pledging the Collateral (as herein
defined) for the benefit of Pledgee. Pledgor and Pledgee agree that
Distributions paid on or with respect to the Pledged interests and paid to
Pledgee under Section 2.4, and any proceeds of the Collateral received by
Pledgee, shall be paid and applied by Pledgee to the payment or reimbursement of
interest, and/or the payment of principal, as applicable, on such Loan in the
manner and to the extent provided in Section 2.4 and Section 6.4, and as
provided in Exhibit A, if applicable, notwithstanding that Pledgee may not be
the holder of the Loan Documents.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have duly executed and delivered this
Pledge and Security Agreement as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation
By: /s/ Michael W. Reschke
Name: Michael W. Reschke
Title: President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ John E. Neal
Name: John E. Neal
Title: Authorized Signatory
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<PAGE>
EXHIBIT A
LAKE TRAVIS(1)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO
has provided credit support/enhancement with respect to the
Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited
partnership
Prime (1) The Lake Travis Island, Ltd., a Texas limited
Partner(s): partnership, general partner (50%) [comprised of The Prime
Group, Inc., general partner (94%) and Prime International,
Inc. (6%), limited partner] and (2) Prime International,
Inc., limited partner (50%)
Loan: The Loan made pursuant to the Loan Agreement between
Capital Health Facilities Development Corporation and
Borrower dated 12/1/86 in connection with the $25,000,000
Capital Health Facilities Development Corporation Health
Facilities Development Revenue Bonds (The Island on Lake
Travis, Ltd. Project) Series 1986
Guaranty/ Limited Recourse Guaranty [Lake Travis] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KELICO
Initial
Pledge
Amount: $8,723,000
Number of
Common Units
Pledged: 690,276
- --------
(1) No reallocation pursuant to Section 2.7(c) permitted.
<PAGE>
EXHIBIT A-1
[See Attached]
<PAGE>
EXHIBIT A-1
1. DEVONSHIRE
Project: The Devonshire Senior Housing Facility, Lisle, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO
has provided credit support/enhancement with respect to the
Loan.
Borrower: The Ponds of Pembroke Limited Partnership, an Illinois
limited partnership
Prime
Partner(s): The Prime Group, Inc. (25%), general partner
Loan: Collectively: (1) the Loan made pursuant to the Amended and
Restated Loan Agreement between the Village of Lisle and
Borrower dated 12/1/87 in connection with the $27,000,000
Village of Lisle Illinois, Multi-Family Housing Revenue
Bonds (Ashley of Lisle Project) and (2) the Loan made
pursuant to the Loan Agreement between the Village of Lisle,
Illinois and Borrower dated 8/15/91 as amended and restated
on 1/15/93 in connection with the $6,000,000 Village of
Lisle, Illinois Multi-Family Housing Revenue Bonds series
1991 (Devonshire Lisle Project)
Guaranty/ Limited Recourse Guaranty [Devonshire] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $1,442,000
Number of
Common Units
Pledged: 114,110
<PAGE>
2. HUNTLEY(1)(2)(3)
Project: Vacant land in Huntley, Illinois.
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Huntley Development Limited Partnership, an Illinois limited
partnership ("HDLP") and American National Bank and Trust
Company of Chicago, not personally but as Trustee under
Trust No. 109743-01, of which HDLP is the sole beneficiary
("Trust").
Prime Partner(s): (1) Huntley Development Company (1%), general partner (owned
100% by Prime International, Inc. ("PI")) and (2) PI (99%),
limited partner
Loan: Collectively: (1) the Loan evidenced by the Amended and
Restated Promissory Note dated 11/30/92 of PI to KILICO in
the stated principal amount of $25,100,000, as amended from
time to time; (2) the Loan evidenced by the Promissory Note
dated 6/13/91 of Elite Financial, Inc. ("Elite") to KILICO,
as amended from time to time, the proceeds of which were
used by Elite to make a loan to Borrower pursuant to the
Promissory Note dated as of 6/13/91 in the original
principal amount of $7,800,000; (3) the Loan evidenced by
the Promissory Note of Elite to KILICO dated 5/31/91 in the
original principal amount of $2,279,750, which Promissory
Note was modified by an Allonge to Promissory Note dated
8/1/91 increasing the stated principal amount to $2,500,000,
as further amended or modified from time to time, the
proceeds of which were used by Elite to make a loan to
Borrower pursuant to a Promissory Note dated 5/31/91 in the
original principal amount of $2,279,750, which Promissory
Note was amended by an Allonge to Promissory Note dated
8/l/91 increasing the stated principal amount to $2,500,000;
and (4) the obligation of PI to purchase from KILICO a 50%
participation interest in those certain Tax Increment
Allocation Revenue Bonds (Huntley Redevelopment Project),
Series 1 through 32, pursuant to a Bond Participation
Agreement between KILICO and PI, dated as of March 22, 1994.
Guaranty/Guarantor: Limited Recourse Guaranty [Huntley] by Prime Group II, L.P.,
an Illinois limited partnership, in favor of KILICO
Initial Pledge
Amount: $8,858,000
Number of
Common Units
Pledged: 700,960
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<PAGE>
3. LAKE TRAVIS(3)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO
has provided credit support/enhancement with resect to the
Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
Prime Partner(s): (1) The Lake Travis Island, Ltd., a Texas limited
partnership, general partner (50%) [comprised of The Prime
Group, Inc., general partner (94%) and Prime International,
Inc. (6%), limited partner] and (2) Prime International,
Inc., limited partner (50%)
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986
Guaranty/ Limited Recourse Guaranty [Lake Travis] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $8,723,000
Number of
Common Units
Pledged: 690,276
-3-
<PAGE>
4. NAPERVILLE
Project: Vacant property in Naperville, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO") and
Federal Kemper Life Assurance Company ("FKLA"), jointly and
severally. KILICO has provided credit support/enhancement
with respect to the Shawmut Loan (defined below) and
KILICO/FKLA has made the Subordinate Loan (defined below).
Borrower: Route 59 Partners L.P., an Illinois limited partnership
Prime (1) The Prime Group, Inc. ("Prime") (5%), general partner,
Partner(s): and (2) Prime (35%), limited partner
Loan: Collectively: (1) the Loan evidenced by the Amended and
Restated Promissory Note of Borrower to Shawmut Bank
Connecticut, N.A. dated 12/30/93 in the original principal
amount of $15,500,000 (the "Shawmut Loan") and (2) the Loan
evidenced by the Promissory Note of Borrower to KILICO and
FKLA dated 12/30/92 in the original principal amount of
$1,500,000 (the "Subordinate Loan")
Guaranty/ Limited Recourse Guaranty [Naperville] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
and FKLA
Initial
Pledge
Amount: $2,608,000
Number of
Common Units
Pledged: 206,379
-4-
<PAGE>
5. 300 N. LASALLE
Project: 320 N. LaSalle, Chicago, Illinois Parking Garage
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: 300 N. LaSalle Limited Partnership, an Illinois limited
partnership and American National Bank and Trust Company of
Chicago, not personally but as trustee under Trust Number
110024-09, of which 300 N. LaSalle Limited Partnership is
the sole beneficiary
Prime (1) Prime International, Inc. (99%), general partner and
Partner(s): (2) 300 North LaSalle, Inc. (1%), limited partner (owned
100% by Michael W. Reschke)
Loan: Loan made pursuant to the Loan Agreement between Lender (as
assignee of Lumbermens Mutual Casualty Company) and Borrower
dated 2/8/90 in the original principal amount of $31,000,000
Guaranty/ Limited Recourse Guaranty [300 N. LaSalle] by Prime Group
Guarantor: II, L.P., an Illinois limited partnership, in favor of
KILICO
Initial
Pledge
Amount: $13,288,000
Number of
Common Units
Pledged: 1,051,519
-5-
<PAGE>
6. 150 N. RIVERSIDE(1)(2)(3)(4)
Project: Vacant land in Chicago, Illinois
Lender: Lumbermens Mutual Casualty Company ("Lumbermens")
Borrower: 150 N. Riverside Venture, an Illinois general partnership
Prime Partner(s): Prime International, Inc. (90%), general partner
Loan: Loan made pursuant to the Loan Agreement between Lumbermens
and Borrower dated 10/17/88 in the original principal amount
of $12,400,000
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-6-
<PAGE>
7. EAST CHICAGO ENTERPRISE CENTER(5)
Project: Industrial warehouse facility in East Chicago, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Enterprise Center I, L.P., an Illinois limited
partnership; (2) Enterprise Center II, L.P., an Illinois
limited partnership; (3) Enterprise Center III, L.P., an
Illinois limited partnership; (4) Enterprise Center IV,
L.P., an Illinois limited partnership
Prime Partner(s): For each Borrower, K-P Enterprise Centers Limited
Partnership (50%), general partner, which is comprised in
part by (1) K-P Enterprise Centers, Inc. (1%) (of which The
Prime Group, Inc. owns 50%), general partner and (2) Prime
Group Limited Partnership (49%), limited partner
Loan: Collectively, the Loans made pursuant: (1) those certain
industrial revenue bonds (Enterprise Center I, L.P.
Project), in the aggregate principal amount of $5,100,000,
issued by the Indiana Development Finance Authority (the
"Issuer"); (2) those certain industrial revenue bonds
(Enterprise Center II, L.P. Project), in the aggregate
principal amount of $5,300,000, issued by the Issuer; (3)
those certain industrial revenue bonds (Enterprise Center
III, L.P. Project), in the aggregate principal amount of
$4,500,000, issued by the Issuer; (4) those certain
industrial revenue bonds (Enterprise Center IV, L.P.
Project), in the aggregate principal amount of $3,000,000,
issued by the Issuer
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-7-
<PAGE>
8. HAMMOND ENTERPRISE CENTER(5)
Project: Industrial warehouse facility in Hammond, Indiana
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Enterprise Center V, L.P., an Illinois limited
partnership; and (2) Enterprise Center VI, L.P., an Illinois
limited partnership
Prime Partner(s): For each Borrower, K-P Enterprise Centers Limited
Partnership (50%), general partner, which is comprised in
part by (1) K-P Enterprise Centers, Inc. (1%) (of which The
Prime Group, Inc. owns 50%), general partner and (2) Prime
Group Limited Partnership (49%), limited partner
Loan: Collectively, the Loans made pursuant: (1) those certain
industrial revenue bonds (Enterprise Center V, L.P.
Project), in the aggregate principal amount of $5,700,000,
issued by the Issuer; and (2) those certain industrial
revenue bonds (Enterprise Center VI, L.P. Project), in the
aggregate principal amount of $5,000,000, issued by the
Issuer
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-8-
<PAGE>
9. ARLINGTON HEIGHTS ENTERPRISE CENTER(5)
Project: Industrial warehouse facility in Arlington Heights, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Arlington Heights I, L.P., an Illinois limited
partnership; (2) Arlington Heights II, L.P., an Illinois
limited partnership; and (3) Arlington Heights III, L.P., an
Illinois limited partnership
Prime Partner(s): For each Borrower, K-P Enterprise Centers Limited
Partnership (50%), general partner, which is comprised in
part by (1) K-P Enterprise Centers, Inc. (1%) (of which The
Prime Group, Inc. owns 50%), general partner and (2) Prime
Group Limited Partnership (49%), limited partner
Loan: Collectively, the Loans made pursuant: (1) those certain
industrial revenue bonds (Arlington Heights I, L.P.
Project), in the aggregate principal amount of $4,500,000,
issued by the Village of Arlington Heights, Illinois (the
"Issuer"); (2) those certain industrial revenue bonds
(Arlington Heights II, L.P. Project), in the aggregate
principal amount of $4,800,000, issued by the Issuer; and
(3) those certain industrial revenue bonds (Arlington
Heights III, L.P. Project) , in the aggregate principal
amount of $4,900,000, issued by the Issuer
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-9-
<PAGE>
10. NORTHGATE(5)
Project: Northgate Plaza, a retail shopping center in Addison,
Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Prime 53 North Partners, an Illinois [limited] partnership
("Prime 53") and American National Bank and Trust Company of
Chicago, not personally but as Trustee under Trust Nos.
110340-06, 11206-09 and 11205-00, of which Prime 53 is the
sole beneficiary ("Trust")
Prime Partner(s): The Prime Group, Inc. (50%), general partner
Loan: Loan evidenced by the Amended and Restated Promissory Note
dated 3/22/94 of Borrower to KILICO in the original
principal amount of $5,559,173
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-10-
<PAGE>
11. TRIAD SUPERIOR EQUITY ADVANCE(5)
Project: Eight industrial revenue bond projects located in the state
of Tennessee
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Triad Development Company, an Illinois limited partnership
Prime Partner(s): (1) Prime of Tennessee, Inc. (1%), general partner; (2) The
Prime Group, Inc. (1%), limited partner; and (3) PGC
Development, Ltd. (48%), limited partner
Loan: "Triad Superior Equity" as defined in Section 3.3 of the
Second Amended and Restated Agreement of Limited Partnership
of Borrower
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
-11-
<PAGE>
12. TRIAD NON-ASSET BONDS(5)
Project: (1) Mabry Partners, Ltd.; (2) Middlebrook Properties, Ltd.;
and (3) Watkins Partners, Ltd.
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Mabry Partners, Ltd.; (2) Middlebrook Properties, Ltd.;
and (3) Watkins Partners, Ltd.
Prime Partner(s): For each Borrower: Triad Development Company (50%), a
general partner, comprised in part by (1) Prime of
Tennessee, Inc. (1%), general partner; (2) The Prime Group,
Inc. (1%), limited partner; and (3) PGC Development, Ltd.
(48%), limited partner
Loan: Collectively: (1) those certain $6,000,000 Floating Rate
Monthly Demand Industrial Development Revenue Bonds (Mabry
Partners, Ltd., Project) issued by The Industrial
Development Board of the County of Knox, Tennessee (the
"Issuer"); (2) those certain $4,500,000 Floating Rate
Monthly Demand Industrial Development Revenue Bonds
(Middlebrook Properties, Ltd., Project) issued by the
Issuer; (3) those certain $5,100,000 Floating Rate Monthly
Demand Industrial Development Revenue Bonds (Watkins
Partners, Ltd., Project) issued by the Issuer
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
(1) Any Dilution of Common Units shall be allocated, on a pro rata basis in
accordance with the respective number of Common Units, among the projects listed
on this Exhibit A-1 other than those under the headings "Huntley" and "150 N.
Riverside" as provided in Exhibit C hereto, until such time as the Pledge Amount
for all such projects shall be $0, at which time the Dilution shall be allocated
to the project listed under the heading "Huntley", until such time as the Pledge
Amount for the project listed under the heading "Huntley" shall be $0, at which
time the Dilution shall be allocated to the project listed under the heading
"150 N. Riverside".
(2) No reallocation pursuant to Section 2.7(b) permitted.
(3) No reallocation pursuant to Section 2.7(c) permitted.
(4) Limited Recourse Guaranty and Pledge and Security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper Investors Life Insurance
Company, in the event of reallocation under Section 2.7(b) to "150 N.
Riverside." The maximum reallocation to "150 N. Riverside" pursuant to Section
2.7(b) shall be $3,351,000.
-12-
<PAGE>
(5) Limited Recourse Guaranty and Pledge and Security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper Investors Life Insurance
Company, in the event of reallocation under Section 2.7(c) to "East Chicago
Enterprise Center", "Hammond Enterprise Center", "Arlington Heights Enterprise
Center", "Northgate", "Triad Superior Equity Advance", or "Triad Non-Asset
Bonds", as the case may be.
-13-
<PAGE>
EXHIBIT B
[See Schedule 1 Attached]
<PAGE>
SCHEDULE 1
A. Definitions Applicable to Representations, Warranties Covenants:
Definitions. The following definitions shall apply to words and
phrases used in this Schedule I and the document to which this Schedule is
attached.
Affiliate means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
its controlled by, such Person. As used in this definition,
"control" (including, with its correlative meanings, "controlled by"
and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities, or partnership
or other ownership interests, by contract or otherwise).
Beneficiary means, individually and collectively, the
benefited party(ies) under the document to which this Schedule 1 is
attached.
Company means Prime Group II, L.P., an Illinois limited
partnership.
Company General Partner means PGLP, Inc., an Illinois
corporation.
Material Adverse Effect means (a) any adverse effect on the
ability of the Company to grant to Pledgee or to keep pledged to
Pledgee a perfected first lien security interest in and to the
Collateral or (b) any material adverse effect on the ability of the
Company to perform its obligations (other than those described in
clause (a) above) under the Transaction Documents.
Person means an individual, partnership, corporation, trust,
unincorporated organization, or other entity, or a government or
agency or political subdivision thereof.
Transactions means the transactions contemplated by the
document to which this Schedule 1 is attached.
Transaction Documents means (a) the document to which this
Schedule 1 is attached, (b) any document or instrument which secures
or is secured by the document to which this Schedule 1 is attached
and (c) any other document or instrument evidencing or securing the
obligations under a document described in clause (a) or (b) above,
in each case, as such document or instrument may be modified or
amended from time to time.
B. Representations and Warranties:
The Company hereby represents and warrants to Beneficiary that the
following statements are true, correct and complete:
<PAGE>
1. Organization: Power.
(a) The Company (i) is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of its
formation, (ii) is duly qualified to do business as a foreign limited
partnership under the laws of each jurisdiction in which the laws of such
jurisdiction so permit or require it to be qualified and in which the
nature of its business requires it to be so qualified (except where
failure to do so would not reasonably be expected to have a Material
Adverse Effect), and (iii) has all requisite power and authority to own,
operate and encumber its property and assets and conducts its business
substantially as presently conducted and proposed to be conducted in
connection with and following the consummation of the Transactions.
(b) The Company General Partner (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation, (ii) is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction in which the nature of its business requires it to be so
qualified (except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect), and (iii) has
all requisite corporate power and authority to own, operate and encumber
its property and assets and conduct its business substantially as
presently conducted and as proposed to be conducted in connection with and
following the consummation of the Transactions.
2. Authority: Enforceability. (i) Each of the Company and the
Company General Partner (on behalf of the Company) has the requisite power
and authority (A) to execute, deliver and perform each of the Transaction
Documents to which the Company is a party, and (B) to file the Transaction
Documents filed by the Company, or to be filed by the Company, with the
appropriate governmental authorities; (ii) the execution, delivery and
performance (or filing, as the case may be) of each of the Transaction
Documents to which the Company is a party, and the consummation of the
Transactions, have been duly approved by the Company and the Board of
Directors of the Company General Partner, and no other partnership or
corporate proceedings on the part of the Company or the Company General
Partner which have not been completed are necessary to consummate such
Transactions; (iii) each of the Transaction Documents to which the Company
is a party has been duly executed and delivered (or filed, as the case may
be) by the Company and by the Company General Partner on behalf of the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, is
in full force and effect, and no term or condition thereof has been
amended, modified or waived, without the prior written consent of the
Beneficiary, and (iv) the Company has performed and complied in all
material respects with all the terms, provisions, agreements and
conditions set forth in the Transaction Documents and required to be
performed or complied with by it on or before the date as of which this
representation is made, and no default by the Company, to the best
knowledge of the Company, exists thereunder.
3. No Conflict. The execution, delivery and performance by each of
the Company and by the Company General Partner (on behalf of the Company)
of each Transaction Document to which the Company is a party do not and
will not (i) conflict
-2-
<PAGE>
with or violate the Company's partnership agreement or the Company General
Partner's Articles or Certificate of Incorporation or other charter
documents or By-laws, or other organizational documents, as the case may
be, (ii) contravene or conflict with any statute, rule, or regulation, in
each case in effect on the date as of which this representation is made,
(iii) contravene or conflict with, result in any breach of, or constitute
a default under, any agreement or instrument binding on the Company or the
Company General Partner, (iv) result in or require the creation or
imposition of any lien whatsoever upon any of the properties or assets of
the Company (other than the liens arising pursuant to the Transaction
Documents), or (v) require any approval of stockholders or any approval or
consent of any person or entity under any agreement or instrument binding
on the Company or the Company General Partner, that has not been obtained,
which, in any case described in clauses (ii) through (v) of this paragraph
3 would reasonably be expected to result in a Material Adverse Effect.
4. Governmental Consents. The Transactions, and the execution,
delivery and, to the best of the Company's knowledge, performance by the
Company and the execution and delivery by the Company General Partner (on
behalf of the Company) of each of the Transaction Documents to which it is
a party, do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by any governmental
authority which has not been obtained or made and which, if not obtained
or made, would reasonably be expected to result in a Material Adverse
Effect, except for filings of the Transaction Documents (or notice
thereof) with appropriate governmental offices necessary (i) to perfect
any liens or security interests granted under the Transaction Documents or
(ii) in connection with any transfer of Collateral following enforcement
of any such liens or security interests.
5. Litigation; Adverse Effects.
(i) There is no action, suit, proceeding or arbitration, at
law or in equity or before any governmental authority, nor to the best
knowledge of the Company is there any governmental investigation, in each
case pending, or, to the best knowledge of the Company, threatened,
against the Company or the Company General Partner, or any property of the
Company or the Company General Partner, which relates to the Transactions
or the Transaction Documents and which would reasonably be expected to
result in a Material Adverse Effect.
(ii) Neither the Company nor the Company General Partner is
(A) in violation of any applicable law, rule or regulation, which
violation would reasonably be expected to result in a Material Adverse
Effect, or (B) subject to or in default with respect to any final
judgment, writ, order, injunction or decree of any court or governmental
authority.
(iii) Each of the Company and the Company General Partner has
obtained all licenses, permits, franchises and other governmental
authorizations necessary for the ownership of its property or for the
conduct of its business, the failure to obtain or violation of which would
reasonably be expected to result in a Material Adverse Effect.
-3-
<PAGE>
6. No Defaults. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument binding on the Company
relating to any borrowing, loan or credit arrangement, and no condition
exists which, with the giving of notice or the lapse of time or both,
would constitute a default thereunder, other than defaults that, in the
aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
7. Solvency. After due inquiry, and taking into account the
Transactions, each of the Company's and the Company General Partner's
assets exceed its liabilities. Each of the Company and the Company General
Partner is, and, to the best of the Company's knowledge, from and after
the date hereof each of the Company and the Company General Partner will
be, able to pay its debts when the same become due. Neither the Company
nor the Company General Partner has (i) made a general assignment for the
benefit of its creditors, (ii) admitted in writing its inability to pay
its debts as they mature, or (iii) been subjected to an attachment,
execution or other judicial seizure of a substantial portion of its
property which remains in effect. There is not pending any case,
proceeding or other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or recomposition of the Company or
the Company General Partner or any of its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or any similar official for
its or for all or substantially all of its property.
C. Reporting Covenants:
The Company covenants and agrees that, so long as the Company shall
have any liability or obligation outstanding under any of the Transaction
Documents, unless Beneficiary shall otherwise give prior written consent
thereto:
1. Financial Statements. The Company shall maintain or cause to be
maintained, a system of accounting established and administered in
accordance with sound business practices and consistent with past
practices to permit preparation of financial statements in conformity with
GAAP, and each of the financial statements described below shall be
prepared from such system and records. The Company shall deliver or cause
to be delivered to the Lender:
(a) As soon as practicable, and in any event within sixty (60)
days after the end of each calendar quarter, the balance sheet of
the Company as at the end of such quarter and related statements of
operations and retained earnings and changes in financial position
for such quarter, setting forth in each case in comparative form the
figures for the corresponding period of the previous fiscal year,
all in reasonable detail and certified by the chief financial
officer, treasurer or assistant treasurer of the Company General
Partner that they fairly present the financial condition of the
Company as at the dates indicated and the results of operations for
the periods indicated, subject to changes resulting from audit and
normal year-end adjustment;
-4-
<PAGE>
(b) As soon as practicable, and in any event within one
hundred twenty (120) days after the end of each fiscal year (i.e.
the twelve months ending December 31), the audited balance sheet of
the Company as at the end of such - fiscal year and the related
audited statements of operations and retained earnings and changes
in financial position for such fiscal year, setting forth in each
case in comparative form the figures for the Company for the
previous fiscal year, all in reasonable detail and reported by firm
of reputable independent public accountants.
2. Notification of Defaults. The Company, upon acquiring knowledge
thereof, shall promptly notify Lender of any event of default, or any
event which with the giving of notice or lapse of time, or both, would
constitute an event of default, under the Transaction Documents, and
describing the action the Company proposes to take with respect thereto.
3. Other Information. Upon the request of Beneficiary made from time
to time, the Company shall furnish to Beneficiary such information as may
be prepared by the Company or the Company General Partner in writing in
the ordinary course of its business respecting the Company's or the
Company General Partner's business or condition (financial or otherwise),
operations, performance, properties or prospects. Beneficiary shall treat
any non-public information so obtained as confidential.
D. Affirmative Covenants:
The Company covenants and agrees that, so long as the Company shall have
any liability or obligation outstanding under any of the Transaction Documents,
unless Beneficiary shall otherwise give prior written consent thereto:
1. Existence. The Company shall maintain its existence as a
limited partnership in good standing under the laws of the state of its
formation and maintain its qualification to do business in each
jurisdiction in which the laws of such jurisdiction so permit or require
it to be qualified and in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify would reasonably be expected to result in a
Material Adverse Effect. The Company shall cause the Company General
Partner to maintain its existence as a corporation in good standing under
the laws of the state of its incorporation and maintain its qualification
to do business in each jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of
its business is such that the failure to qualify would reasonably be
expected to result in a Material Adverse Effect. The foregoing shall not
prohibit the Company or the Company General Partner from merging with or
into a corporation or other entity organized under the laws of any state
within the United States (in which event, from and after the effective
date of such merger, all references herein to the Company or the Company
General Partner, as the case may be, shall be deemed to refer to such
successor entity); provided, however, that (a) any such successor entity
to the Company assumes in writing all of the obligations and liabilities
of the Company under the Transaction Documents and (b) before and after
giving effect to such merger, there shall not exist any event of default,
or any event
-5-
<PAGE>
which, with the giving of notice or lapse of time or both, would
constitute an event of default, under any of the Transaction Documents.
2. Taxes. The Company shall pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges upon
it, its income and its properties, or upon the Company General Partner or
the Company General Partner's income and properties, prior to the date on
which penalties are attached thereto, unless and to the extent only that
(a) failure to pay any such taxes, assessments or governmental charges
would not reasonably be expected to result in a Material Adverse Effect,
or (b) (i) such taxes, assessments and governmental charges shall be
contested in good faith and by appropriate proceedings by the Company or
the Company General Partner, as the case may be, after the Company or the
Company General Partner, as the case may be, has established a reasonable
reserve on its books for such item, and (ii) the pendency of such contest
will not result in any impairment of any lien and security interest
granted by the Company or the Company General Partner in favor of
Beneficiary.
3. Compliance with Laws, Etc. The Company shall comply with,
and cause the Company General Partner to comply with, all applicable
statutes, rules, regulations, orders and restrictions of any and all
governmental instrumentalities or agencies thereof having jurisdiction
over the conduct of the business or the ownership of the properties of the
Company or the Company General Partner, as the case may be (except for any
non-compliance therewith which would not reasonably be expected to result
in a Material Adverse Effect), unless and only to the extent that the
application of such statutes, rules, regulations, orders and restrictions
shall be contested in good faith and by appropriate proceedings by the
Company or the Company General Partner, as the case may be, in such a
manner that any enforcement action or any liability resulting from such
non-compliance shall. be stayed or held in abeyance pending the outcome of
such contest.
-6-
<PAGE>
EXHIBIT C
Allocation of Dilution Amount
In the event of a Dilution under the Partnership Agreement that is
allocated, in whole or in part, to Pledgor pursuant to the Sharing Agreement,
the Common Units then constituting a part of the Pledged Interests shall be
adjusted as follows:
a.* Multiply the Dilution Amount allocated to Pledgor pursuant to
the Partnership Agreement and the Sharing Agreement by the following
fraction:
Number of Common Units Pledged for this Pledge
----------------------------------------------
Total number of Common Units Owned by Pledgor
(excluding Common Units pledged to secure Kepro S.A.,
Huntley and 150 N. Riverside loans)
b. Divide the number resulting from (a) by the Market Value of one
Common Unit as of the date of the Dilution.
c. Subtract the number obtained in (b) from the number of Common
Units then constituting Pledged Interests under the Pledge. The result is
the adjusted number of Common Units constituting Pledged Interests under
the Pledge.
*The number resulting from (a) is subtracted from the Pledge Amount in effect
prior to the Dilution to determine the new Pledge Amount.
<PAGE>
EXHIBIT D
ACKNOWLEDGEMENT AND CONSENT
Reference is hereby made to the Pledge and Security Agreement [Lake
Travis] dated as of March 22, 1994 (the "Pledge and Security Agreement") by
Prime Group II, L.P. in favor of Kemper Investors Life Insurance Company. Each
capitalized term used herein shall have the meaning assigned thereto in the
Pledge and Security Agreement.
Notwithstanding anything in the By-laws of the General Partner to the
contrary, Prime Retail, L.P., a Delaware limited partnership (the
"Partnership"), and Prime Retail, Inc., a Maryland corporation (the "General
Partner"), hereby acknowledge receipt of a copy of the Pledge and Security
Agreement and consent to Pledgor's pledge of the Pledged Interests pursuant to
the terms thereof Notwithstanding anything in the By-laws of the General Partner
to the contrary, the Partnership and the General Partner further acknowledge and
agree (i) to recognize and consent to the pledge of all future rights and
interests in the Pledged Interests, Distributions or other Collateral to which
Pledgee may be entitled under the Pledge and Security Agreement, (ii) that, as
of the date hereof, there are, to their knowledge, no existing defaults by
Pledgor under the Partnership Agreement with respect to any of the Pledged
Interests, (iii) that, without Pledgee's consent in its sole discretion, no
further transfer or encumbrance by Pledgor of the Pledged Interests, rights to
Distributions related thereto or other Collateral will be consented to or
recognized by the Partnership and the General Partner (except in the event of a
Dilution), and (iv) in the event that either of the Partnership and the General
Partner receives written notice from Pledgee of the occurrence and continuation
of an Event of Default under the Pledge and Security Agreement and of Pledgee's
election to exercise its remedies thereunder with respect to such Event of
Default, the recipient of any such notice from Pledgee shall promptly notify
Pledgor of its receipt thereof (provided that the failure by the Partnership and
the General Partner to give Pledgor such notice shall not (x) impair, alter or
otherwise affect Pledgee's rights or remedies, or the exercise thereof, with
respect to such Event of Default or (y) create any liability on the part of the
Partnership or General Partner solely by reason of such failure (it being
understood that such clause (y) does not relive them of their obligations under
clause (A) and (B) below)), and so long as the Partnership and the General
Partner shall not have received a written objection from the Pledgor within five
(5) Business Days of receipt of such written notice from the Pledgee, the
Partnership and the General Partner will (A) consent to, and take such action as
may be reasonably necessary or appropriate to effect, the substitution of record
ownership of Pledgee for Pledgor on the Partnership's and the General Partner's
records, if Pledgee is entitled to be substituted for Pledgor following any
foreclosure upon the Pledged Interests pursuant to Section 6.1 of the Pledge and
Security Agreement, and (B) pay Distributions, and issue Common Stock, directly
to Pledgee, in accordance with the terms of the Pledge and Security Agreement.
[Signature Page Follows]
<PAGE>
PRIME RETAIL, L.P., a Delaware limited partnership
By: Prime Retail, Inc. a Maryland
corporation, its general partner
By: ___________________________________
Name:__________________________________
Title:_________________________________
PRIME RETAIL, INC., a Maryland corporation
By: _________________________________________
Name:________________________________________
Title:_______________________________________
The undersigned, being the Pledgor and Pledgee under the above-referenced
Pledge and Security Agreement, hereby consent to the execution and delivery by
the Partnership and the General Partner of the foregoing Acknowledgement and
Consent and agree with the provisions thereof.
Dated: March 22, 1994
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation
By: ___________________________________
Name:__________________________________
Title:_________________________________
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: _________________________________________
Name:________________________________________
Title:_______________________________________
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<PAGE>
Exhibit II
FIRST AMENDMENT TO PLEDGE
AND SECURITY AGREEMENT [LAKE TRAVIS]
THIS FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS] (this
Amendment") is made as of August 31, 1994, by PRIME GROUP II, L.P., an Illinois
limited partnership ("Pledgor"), and KEMPER INVESTORS LIFE INSURANCE COMPANY, an
Illinois insurance corporation ("Pledgee").
RECITALS:
WHEREAS, Pledgor has executed and delivered to Pledgee a certain Pledge
and Security Agreement [Lake Travis], made as of March 22, 1994 (the "Pledge and
Security Agreement"); and
WHEREAS, Pledgor and Pledgee desire to amend and modify the Pledge and
Security Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Pledgee hereby agree as follows:
1. The Pledge and Security Agreement is hereby amended and modified to
substitute as Exhibit A and Exhibit A-1 thereto the "Exhibit A" and "Exhibit
A-l" attached hereto and made a part hereof.
2. Except to the extent expressly amended and modified hereby, the Pledge
and Security Agreement shall remain in full force and effect, unmodified, in
accordance with its terms.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the date and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation, its
General Partner
By: /s/ Michael W. Reschke
-----------------------------------
Its: President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ John E. Neal
-----------------------------------------
Its: Authorized Signatory
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ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledge and consent to the foregoing First
Amendment to Pledge and Security Agreement [Lake Travis].
Dated: August 31, 1994
PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc., a Maryland corporation,
its general partner
By: /s/ Michael W. Reschke
------------------------------------
Name: Michael W. Reschke
Title: Chairman
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
------------------------------------------
Name: Michael W. Reschke
Title: Chairman
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EXHIBIT A
LAKE TRAVIS(1)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO") has
provided credit support/enhancement with respect to the Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
Prime (1) The Lake Travis Island, Ltd., a Texas limited
Partner(s): partnership, general partner (50%) [comprised of The Prime
Group, Inc., general partner (94%) and Prime International,
Inc. (6%), limited partner] and (2) Prime International,
Inc., limited partner (50%)
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986; the "Loan" shall include principal and
interest payable under any note or other reimbursement
obligation of Borrower to Lender relating to Lender's credit
support/enhancement of the Loan
Guaranty/ Limited Recourse Guaranty [Lake Travis] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $8,723,000
Number of
Common Units
Pledged: 690,276
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(1) No reallocation pursuant to Section 2.7(c) permitted.
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EXHIBIT A-1
1. DEVONSHIRE
Project: The Devonshire Senior Housing Facility, Lisle, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO
has provided credit support/enhancement with respect to the
Loan.
Borrower: The Ponds of Pembroke Limited Partnership, an Illinois
limited partnership
Prime The Prime Group, Inc. (25%), general partner
Partner(s):
Loan: Collectively: (1) the Loan made pursuant to the Amended and
Restated Loan Agreement between the Village of Lisle and
Borrower dated 12/1/87 in connection with the $27,000,000
Village of Lisle, Illinois Multi-Family Housing Revenue Bonds
(Ashley of Lisle Project) and (2) the Loan made pursuant to
the Loan Agreement between the Village of Lisle, Illinois and
Borrower dated 8/15/91 as amended and restated on 1/15/93 in
connection with the $6,000,000 Village of Lisle, Illinois
Multi-Family Housing Revenue Bonds Series 1991 (Devonshire of
Lisle Project); the "Loan" shall include principal and
interest payable under any note or other reimbursement
obligation of Borrower to Lender relating to Lender's credit
support/enhancement of the Loan
Guaranty/ Limited Recourse Guaranty [Devonshire] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $1,442,000
Number of
Common Units
Pledged: 114,110
2. HUNTLEY(1)(2)(3)
Project: Vacant land in Huntley, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Huntley Development Limited Partnership, an Illinois limited
partnership ("HDLP") and American National Bank and Trust
Company of Chicago, not personally but as Trustee under Trust
No. 109743-01, of which HDLP
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is the sole beneficiary ("Trust").
Prime (1) Huntley Development Company (1%), general partner (owned
Partner(s): 100% by Prime International, Inc. ("PI")) and (2) PI (99%),
limited partner
Loan: Collectively: (1) the Loan evidenced by the Amended and
Restated Promissory Note dated 11/30/92 of PI to KILICO in
the stated principal amount of $25,100,000, as amended from
time to time; (2) the Loan evidenced by the Promissory Note
dated 6/13/91 of Elite Financial, Inc. ("Elite") to KILICO,
as amended from time to time, the proceeds of which were used
by Elite to make a loan to Borrower pursuant to the
Promissory Note dated as of 6/13/91 in the original principal
amount of $7,800,000; (3) the Loan evidenced by the
Promissory Note of Elite to KILICO dated 5/31/91 in the
original principal amount of $2,279,750, which Promissory
Note was modified by an Allonge to Promissory Note dated
8/1/91 increasing the stated principal amount to $2,500,000,
as further amended or modified from time to time, the
proceeds of which were used by Elite to make a loan to
Borrower pursuant to a Promissory Note dated 5/31/91 in the
original principal amount of $2,279,750, which Promissory
Note was amended by an Allonge to Promissory Note dated
8/1/91 increasing the stated principal amount to $2,500,000;
and (4) the obligation of PI to purchase from KILICO a 50%
participation interest in those certain Tax Increment
Allocation Revenue Bonds (Huntley Redevelopment Project),
Series 1 through 32, pursuant to a Bond Participation
Agreement between KILICO and PI, dated as of March 22, 1994.
Guaranty/ Limited Recourse Guaranty [Huntley] by Prime Group II, L.P.,
Guarantor: an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $8,858,000
Number of
Common Units
Pledged: 700,960
3. LAKE TRAVIS(3)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO
has provided credit support/enhancement with respect to the
Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
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Prime (1) The Lake Travis Island, Ltd., a Texas limited
Partner(s): partnership, general partner (50%) (comprised of The Prime
Group, Inc., general partner (94%) and Prime International,
Inc. (6%), limited partner] and (2) Prime International,
Inc., limited partner (50%)
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986; the "Loan" shall include principal and
interest payable under any note or other reimbursement
obligation of Borrower to Lender relating to Lender's credit
support/enhancement of the Loan
Guaranty/ Limited Recourse Guaranty [Lake Travis] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $8,723,000
Number of
Common Units
Pledged: 690,276
4. NAPERVILLE
Project: Vacant property in Naperville, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO") and
Federal Kemper Life Assurance Company ("FKLA"), jointly and
severally. KILICO has provided credit support/enhancement
with respect to the Shawmut Loan (defined below) and
KILICO/FKLA has made the Subordinate Loan (defined below).
Borrower: Route 59 Partners L.P., an Illinois limited partnership
Prime (1) The Prime Group, Inc. ("Prime") (5%), general partner,
Partner(s): and (2) Prime (35%), limited partner
Loan: Collectively: (1) the Loan evidenced by the Amended and
Restated Promissory Note of Borrower to Shawmut Bank
Connecticut, N.A. dated 12/30/93 in the original principal
amount of $15,500,000 (the "Shawmut Loan"); such "Loan" shall
include principal and interest payable under any note or
other reimbursement obligation of Borrower to Lender relating
to Lender's credit support/enhancement of the Loan; and (2)
the Loan
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evidenced by the Promissory Note of Borrower to KILICO and
FKLA dated 12/30/93 in the original principal amount of
$1,500,000 (the "Subordinate Loan")
Guaranty/ Limited Recourse Guaranty [Naperville] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KILICO and
FKLA
Initial
Pledge
Amount: $2,608,000
Number of
Common Units
Pledged: 206,379
5. 300 NORTH LASALLE
Project: 320 North LaSalle, Chicago, Illinois Parking Garage
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: 300 North LaSalle Limited Partnership, an Illinois limited
partnership, and American National Bank and Trust Company of
Chicago, not personally but as trustee under Trust Number
110024-09, of which 300 North LaSalle Limited Partnership is
the sole beneficiary
Prime (1) Prime Group II, L.P. (98%), limited partner and (2) 300
Partner(s): North LaSalle, Inc. (2%), general partner (owned 100% by
Michael W. Reschke)
Loan: Loan made pursuant to the Loan Agreement between Lender (as
assignee of Lumbermens Mutual Casualty Company) and Borrower
dated 2/8/90 in the original principal amount of $31,000,000
Guaranty/ Limited Recourse Guaranty [300 N. LaSalle] by Prime Group
Guarantor: II, L.P., an Illinois limited partnership, in favor of KILICO
Initial
Pledge
Amount: $13,288,000
Number of Common
Units
Pledged: 1,051,519
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6. 150 N. RIVERSIDE(1)(2)(3)(5)
Project: Vacant land in Chicago, Illinois
Lender: Lumbermens Mutual Casualty Company ("Lumbermens")
Borrower: 150 N. Riverside Venture, an Illinois general partnership
Prime Prime International, Inc. (90%), general partner
Partner(s):
Loan: Loan made pursuant to the Loan Agreement between Lumbermens
and Borrower dated 10/17/88 in the original principal amount
of $12,400,000
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
7. ENTERPRISE CENTERS(6)
Projects: (1) East Chicago Enterprise Center, comprised of industrial
warehouse facilities in East Chicago, Indiana; (2) Hammond
Enterprise Center, comprised of industrial warehouse
facilities in Hammond, Indiana; (3) Arlington Heights
Enterprise Center, comprised of industrial warehouse
facilities in Arlington Heights, Illinois; and (4) Chicago
Enterprise Center, comprised of industrial warehouse
facilities in Chicago, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Enterprise Center I, L.P., an Illinois limited
partnership; (2) Enterprise Center II, L.P., an Illinois
limited partnership; (3) Enterprise Center III, L.P., an
Illinois limited partnership; (4) Enterprise Center IV, L.P.,
an Illinois limited partnership; (5) Enterprise Center V,
L.P., an Illinois limited partnership; (6) Enterprise Center
VI, L.P., an Illinois limited partnership; (7) Enterprise
Center VII, L.P., an Illinois limited partnership; (8)
Enterprise Center VIII, L.P., an Illinois limited
partnership; (9) Enterprise Center IX, L.P., an Illinois
limited partnership; (10) Enterprise Center X, L.P., an
Illinois limited partnership; (11) Arlington Heights I, L.P.,
an Illinois limited partnership; (12) Arlington Heights II,
L.P., an Illinois limited partnership; and (13) Arlington
Heights III, L.P., an Illinois limited partnership
Prime For each Borrower, K-P Enterprise Centers Limited
Partnership, general
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Partner(s): partner (50%), which is comprised in part by (1) K-P
Enterprise Centers, Inc., general partner (1%) (of which
Prime owns 50%), and (2) Prime Group Limited Partnership,
limited partner (49%)
Loan: The indebtedness evidenced by: (1) those certain industrial
revenue bonds (Enterprise Center I, L.P. Project), in the
aggregate principal amount of $5,100,000, issued by the
Indiana Development Finance Authority (the "IDFA Issuer");
(2) those certain industrial revenue bonds (Enterprise Center
II, L.P. Project), in the aggregate principal amount of
$5,300,000, issued by the IDFA Issuer; (3) those certain
industrial revenue bonds (Enterprise Center III, L.P.
Project), in the aggregate principal amount of $4,500,000,
issued by the IDFA Issuer; (4) those certain industrial
revenue bonds (Enterprise Center IV, L.P. Project), in the
aggregate principal amount of $3,000,000, issued by the IDFA
Issuer; (5) those certain industrial revenue bonds
(Enterprise Center V, L.P. Project), in the aggregate
principal amount of $5,700,000, issued by the IDFA Issuer;
(6) those certain industrial revenue bonds (Enterprise Center
VI, L.P. Project), in the aggregate principal amount of
$5,000,000, issued by the IDFA Issuer; (7) those certain
industrial revenue bonds (Enterprise Center VII, L.P.
Project), in the aggregate principal amount of $7,200,000,
issued by the City of Chicago (the "CC Issuer"); (8) those
certain industrial revenue bonds (Enterprise Center VIII,
L.P. Project), in the aggregate principal amount of
$7,000,000, issued by the CC Issuer; (9) those certain
industrial revenue bonds (Enterprise Center IX, L.P.
Project), in the aggregate principal amount of $4,750,000,
issued by the CC Issuer; (10) those certain industrial
revenue bonds (Enterprise Center X, L.P. Project), in the
aggregate principal amount of $4,300,000, issued by the CC
Issuer; (11) those certain industrial revenue bonds
(Arlington Heights I, L.P. Project), in the aggregate
principal amount of $4,500,000, issued by the Village of
Arlington Heights, Illinois (the "VAH Issuer"); (12) those
certain industrial revenue bonds (Arlington Heights II, L.P.
Project), in the aggregate principal amount of $4,800,000,
issued by the VAH Issuer; and (13) those certain industrial
revenue bonds (Arlington Heights III, L.P. Project), in the
aggregate principal amount of $4,900,000, issued by the VAH
Issuer; the "Loans" shall include principal and interest
payable under any note or other reimbursement obligation of
Borrower to Lender relating to Lender's credit
support/enhancement of the Loans, if applicable
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
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8. NORTHGATE(5)
Projects: Vacant land in Addison, Illinois, together with certain
stores in or adjacent to Northgate Plaza, a retail shopping
center in Lombard, Illinois
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Prime 53 North Partners, an Illinois general partnership
("Prime 53") and American National Bank and Trust Company of
Chicago, not personally but as Trustee under Trust Nos.
110340-06, 11206-09 and 11205-00, of which Prime 53 is the
sole beneficiary ("Trust")
Prime The Prime Group, Inc. (50%), general partner
Partner(s):
Loan: Loan evidenced by the Amended and Restated Promissory Note
dated 3/22/94 of Borrower to KILICO in the original principal
amount of $5,559,173
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
9. TRIAD SUPERIOR EQUITY ADVANCE(5)
Projects: Eight industrial revenue bond projects located in the state
of Tennessee
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: Triad Development Company, an Illinois limited partnership
Prime (1) Prime of Tennessee, Inc. (1%), general partner; (2) The
Partner(s): Prime Group, Inc. (1%), limited partner; and (3) PGC
Development, Ltd. (48%), limited partner
Loan: "Triad Superior Equity" as defined in Section 3.3 of the
Second Amended and Restated Agreement of Limited Partnership
of Borrower
Initial
Pledge
Amount: $0
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Number of
Common Units
Pledged: 0
10. TRIAD NON-ASSET BONDS(5)
Projects: (1) Mabry Partners, Ltd.; (2) Middlebrook Properties, Ltd.;
and (3) Watkins Partners, Ltd.
Lender: Kemper Investors Life Insurance Company ("KILICO")
Borrower: (1) Mabry Partners, Ltd.; (2) Middlebrook Properties, Ltd.;
and (3) Watkins Partners, Ltd.
Prime For each Borrower: Triad Development Company (50%), a general
Partner(s): partner, comprised in part by (1) Prime of Tennessee, Inc.
(1%), general partner; (2) The Prime Group, Inc. (1%),
limited partner; and (3) PGC Development, Ltd. (48%), limited
partner
Loan: Collectively: (1) those certain $6,000,000 Floating Rate
Monthly Demand Industrial Development Revenue Bonds (Mabry
Partners, Ltd., Project) issued by The Industrial Development
Board of the County of Knox, Tennessee (the "Issuer"); (2)
those certain $4,500,000 Floating Rate Monthly Demand
Industrial Development Revenue Bonds (Middlebrook Properties,
Ltd., Project) issued by the Issuer; (3) those certain
$5,100,000 Floating Rate Monthly Demand Industrial
Development Revenue Bonds (Watkins Partners, Ltd., Project)
issued by the Issuer
Initial
Pledge
Amount: $0
Number of
Common Units
Pledged: 0
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(1) Any Dilution of Common Units shall be allocated, on a pro rata basis in
accordance with the respective number of Common Units, among the projects listed
on this Exhibit A-1 other than those under the headings "Huntley" and "150 N.
Riverside" as provided in Exhibit C hereto, until such time as the Pledge Amount
for all such projects shall be $0, at which time the Dilution shall be allocated
to the project listed under the heading "Huntley", until such time as the Pledge
Amount for the project listed under the heading "Huntley" shall be $0, at which
time the Dilution shall be allocated to the project listed under the heading
"150 N. Riverside".
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(2) No reallocation pursuant to Section 2.7(b) permitted.
(3) No reallocation pursuant to Section 2.7(c) permitted.
(4) Limited Recourse Guaranty and Pledge and security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper investors Life Insurance
Company, in the event of reallocation under Section 2.7(b) to "150 N.
Riverside." The maximum reallocation to "150 N. Riverside" , pursuant to Section
2.7(b) shall be $3,351,000.
(5) Limited Recourse Guaranty and Pledge and Security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper Investors Life Insurance
Company, in the event of reallocation under Section 2.7(c) to "Enterprise
Centers", "Northgate", "Triad Superior Equity Advance", or "Triad Non-Asset
Bonds", as the case may be.
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Exhibit III
SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS]
(this "Amendment") is made and entered into as of the 12th day of June, 1995, by
and between PRIME GROUP II, L.P., an Illinois limited partnership (the
"Pledgor") and KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance
corporation (the "Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and
Security Agreement [Lake Travis], dated as of March 22, 1994 (the "Original
Pledge Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common
Units to secure Pledgor's obligations under the Guaranty;
WHEREAS, the Original Pledge Agreement was amended by that certain
First Amendment to Pledge and Security Agreement [Lake Travis], dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee (the
Original Pledge Agreement, as amended by the First Amendment, is referred to
herein as the "Pledge Agreement");
WHEREAS, Section 4.16 of the Pledge Agreement provides, in part, for
a periodic calculation of the aggregate Market Value of the Pledged Interests,
and, based on such calculation, may require Pledgor to pledge and deliver to
Pledgee additional collateral or may require Pledgee to release and deliver to
Pledgor certain Collateral; and
WHEREAS, Pledgor and Pledgee have agreed to certain revisions for
determining the Market Value of the Pledged Interests as hereinafter provided
and, in consideration thereof, Pledgor has agreed to pledge additional Common
Units.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not
specifically defined in this Amendment but which are defined in the Pledge
Agreement shall have the meanings given such terms in the Pledge Agreement.
2. Pledgor hereby pledges, hypothecates, assigns, and transfers to
Pledgee, and hereby grants to Pledgee, a continuing lien and security interest
in 95,576 Common Units (the "Additional Common Units"), subject to Sections 2.7
and 4.16(b) of the Pledge Agreement. Pledgor and Pledgee agree that the
Additional Common Units shall constitute "Pledged Interests" included within the
"Collateral" for all purposes of the Pledge Agreement. To reflect the pledge of
the Additional Common Units and other additional pledges being made concurrently
herewith under the Pledgee - Affiliated Security Agreements, "Exhibit A" and
"Exhibit A-l" attached to this Amendment are hereby substituted as Exhibit A and
Exhibit A-1 to the Pledge Agreement, in replacement of the Exhibit A and Exhibit
A-1 attached to the First Amendment.
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3. The definition "Adjusted Funds from Operations" in Article 1 of
the Pledge Agreement is hereby amended by adding the following sentence to the
end of such definition:
"For purposes of calculating the Adjusted Funds from Operations for
the calendar quarter beginning July 1, 1995 only, Funds from
Operations shall be adjusted to include reasonably estimated net
income which would be generated in a full calendar quarter from
leases signed on or before October 15, 1995, and under which tenants
have occupied space and paid rent on or before October 15, 1995, for
space in stores (including new centers and expansions of existing
centers) which opened for business to the public during the period
beginning July 1, 1995 and ending October 15, 1995".
4. The definition of "Market Value" in Article 1 of the Pledge
Agreement is hereby amended by deleting the words "the five consecutive Business
Days" in the second line thereof and replacing such words with the words "the
ten consecutive Business Days".
5. Article 1 of the Pledge Agreement is hereby amended by deleting
the definition of "Business Day" and substituting the following in lieu thereof:
"'Business Day' means any day of the week other than Saturday,
Sunday or (i) any other day on which the New York Stock Exchange is
closed, or (ii) if the Common Stock is traded in the
over-the-counter market as reported by the National Association of
Security Dealers, Inc. Automated Quotation System, any other day on
which such over-the-counter market is closed".
6. Subparagraphs (a), (b) and (c) of Section 4.16 of the Pledge
Agreement are hereby amended in their entirety to read as follows:
"(a) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
tenth (10th) Business Day following the release by the General Partner of
its earnings for any calendar quarter beginning with the calendar quarter
beginning July 1, 1995, Pledgee shall determine, after receipt of the
calculation of Market Value provided for in subparagraph (c) below, that
the aggregate Market Value of the Pledged Interests and the fair market
value of any other Collateral theretofore pledged by Pledgor under this
Section 4.16 and then constituting a part of the Collateral hereunder, is
less than 95% of the Pledge Amount, then Pledgor shall promptly pledge and
deliver to Pledgee additional unencumbered Common Units and/or
unencumbered Common Stock (including certificates and transfer instruments
relating thereto), and/or other collateral acceptable to Pledgee, such
that, after giving effect to the pledge of such additional Common Units
and/or Common Stock and/or other collateral, all Pledged Interests and
other Collateral pledged under this Pledge and Security Agreement and then
constituting a part of the Collateral shall have a fair market value
(valuing Pledged Interests at Market Value) equal to or greater than the
Pledge Amount. Such additional Common Units and/or Common Stock shall
constitute Pledged Interests and, together with
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any other collateral pledged hereunder, shall be deemed to be part of the
Collateral hereunder.
(b) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
tenth (10th) Business Day following the release by the General Partner of
its earnings for any calendar quarter beginning with the calendar quarter
beginning July 1, 1995, Pledgee shall determine, after receipt of the
calculation of Market Value provided for in subparagraph (c) below, that
the aggregate of the Market Value of the Pledged Interests and the fair
market value of any other Collateral theretofore pledged by Pledgor under
this Section 4.16 and then constituting a part of the Collateral
hereunder, is more than 110% of the Pledge Amount, then Pledgee shall
promptly release and deliver to Pledgor Common Units and/or Common Stock
and/or other Collateral (as Pledgee shall determine in its sole
discretion), such that, after giving effect to such release and delivery,
the aggregate of the Market Value of the remaining Pledged Interests and
the fair market value of any other Collateral theretofore pledged by
Pledgor under this Pledge and Security Agreement and then constituting a
part of the Collateral hereunder, shall be as close as possible to, but in
no event less than, 110% of the Pledge Amount.
(c) Within five (5) Business Days after the tenth (10th) Business
Day following the release by the General Partner of its earnings for any
calendar quarter beginning with the calendar quarter beginning July 1,
1995, and at such other times as the Pledgee may request, Pledgor shall
deliver to Pledgee a calculation, made in good faith and certified as such
by the Chief Financial Officer of General Partner, or another officer of
General Partner reasonably acceptable to Pledgee, of the Market Value of
the Pledged Interests (including the adjustment contemplated by
subparagraph (d) below, if applicable) and the fair market value of any
other collateral pledged by Pledgor under this Section 4.16 and then
constituting part of the Collateral hereunder, calculated as of the tenth
(10th) Business Day following the release by the General Partner of its
earnings for the applicable calendar quarter in accordance with the
provisions of this Pledge and Security Agreement."
7. Pledgor hereby remakes and reiterates the representations and
warranties set forth in Section B of Schedule 1 to Exhibit B to the Pledge
Agreement (except for paragraphs 5, 6 and 7 of Section B of Schedule 1 to
Exhibit B), and incorporates the same herein by this reference as of the date of
this Amendment. Pledgor further hereby remakes and reiterates the
representations and warranties set forth in Section 3.2 of the Pledge Agreement
with respect to the Additional Common Units only as of the date of this
Amendment, and incorporates the same herein by this reference.
8. The fourth sentence of subparagraph (c) of Section 2.7 of the
Pledge Agreement is hereby amended by deleting the phrase "during the period of
eighteen (18) months after the date hereof" and substituting in its place the
phrase "on or before March 22, 1996."
9. All references in the Pledge Agreement to "this Pledge and
Security Agreement" and any and all references in the Loan Documents to the
Pledge Agreement shall mean the Pledge Agreement, as amended by this Amendment.
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10. Pledgor hereby ratifies and confirms the Guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect, except
as the Pledge Agreement is amended by this Amendment.
11. The provisions of this Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
[Signature Page Follows]
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation, its
general partner
By: /s/ Michael W. Reschke
-----------------------------------
Its: President
KEMPER INVESTORS LIFE INSURANCE COMPANY, an
Illinois insurance corporation
By: /s/ Authorized Signatory
-----------------------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
-----------------------------------------
Its: Authorized Signatory
5
<PAGE>
EXHIBIT A
LAKE TRAVIS(1)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company
("KILICO"). KILICO has provided credit
support/enhancement with respect to the
Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas
limited partnership
Prime Partner(s): (1) The Lake Travis Island, Ltd., a Texas
limited partnership, general partner
(50%) [comprised of The Prime Group,
Inc., general partner (94 %) and Prime
International, Inc. (6 %), limited
partner] and (2) Prime International,
Inc., limited partner (50%)
Loan: The Loan made pursuant to the Loan
Agreement between Capital Health
Facilities Development Corporation and
Borrower dated 12/1/86 in connection with
the $25,000,000 Capital Health Facilities
Development Corporation Health Facilities
Development Revenue Bonds (The Island on
Lake Travis, Ltd. Project) Series 1986;
the "Loan" shall include principal and
interest payable under any note or other
reimbursement obligation of Borrower to
Lender relating to Lender's credit
support/enhancement of the Loan
Guaranty/ Guarantor: Limited Recourse Guaranty [Lake Travis]
by Prime Group II L.P., an Illinois
limited partnership, in favor of KILICO
Initial Pledge Amount: $8,723,000
Number of Common Units Pledged: 785,852
(1) No reallocation pursuant to Section 2.7(c) permitted.
<PAGE>
EXHIBIT A-1
1. DEVONSHIRE
Project: The Devonshire Senior Housing Facility,
Lisle, Illinois
Lender: Kemper Investors Life Insurance Company
("KILICO"). KILICO has provided credit
support/enhancement with respect to the
Loan.
Borrower: The Ponds of Pembroke Limited
Partnership, an Illinois limited
partnership
Prime Partner(s): The Prime Group, Inc. ("Prime") (25%),
general partner
Loan: Collectively: (1) the Loan made pursuant
to the Amended and Restated Loan
Agreement between the Village of Lisle
and Borrower dated 12/1/87 in connection
with the $27,000,000 Village of Lisle,
Illinois Multi-Family Housing Revenue
Bonds (Ashley of Lisle Project) and (2)
the Loan made pursuant to the Loan
Agreement between the Village of Lisle,
Illinois and Borrower dated 8/15/91 as
amended and restated on 1/15/93 in
connection with the $6,000,000 Village of
Lisle, Illinois Multi-Family Housing
Revenue Bonds Series 1991 (Devonshire of
Lisle Project); the "Loan" shall include
principal and interest payable under any
note or other reimbursement obligation of
Borrower to Lender relating to Lender's
credit support/enhancement of the Loan
Guaranty/ Guarantor: Limited Recourse Guaranty [Devonshire] by
Prime Group II, L.P., an Illinois limited
partnership, in favor of KILICO
Initial Pledge Amount: $1,442,000
Number of Common Units Pledged: 129,910
<PAGE>
2. HUNTLEY(1)(2)(3)
Project: Vacant land in Huntley, Illinois
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: With respect to the HDLP First Loan and
the Bond Participation Obligation (as
defined below), Huntley Development
Limited Partnership, an Illinois limited
partnership ("HDLP") and American
National Bank and Trust Company of
Chicago, not personally but as Trustee
under Trust No. 109743-01, of which HDLP
is the sole beneficiary ("HDLP Trust"),
and (2) with respect to the HMRV Loan (as
defined hereinbelow), Huntley Meadows
Residential Venture, an Illinois general
partnership ("HMRV"), and American
National Bank and Trust Company of
Chicago, not personally but as Trustee
under Trust No. 110482-04, of which HMRV
is the sole beneficiary (the "HMRV
Trust").
Prime Partner(s): (1) Huntley Development Company (1%),
general partner (owned 100% by Prime
International, Inc. ("PI")) and (2) PI
(99%), limited partner
Loan: Collectively: (1) the Loan (the "HDLP
First Loan") evidenced by that certain
Amended and Restated Promissory Note
dated June 12, 1995 (the "Restated First
Note") among HDLP, HDLP Trust and KILICO
in the stated principal amount of
$28,516,641.00, as amended from time to
time; (2) the obligation of HDLP to
purchase from KILICO a 50% participation
interest in those certain Tax Increment
Allocation Revenue Bonds (Huntley
Redevelopment Project), Series 1 through
32, pursuant to a Bond Participation
Agreement between KILICO, and HDLP, dated
of even date herewith (the "Bond
Participation Obligation"); and (3) the
Loan (the "HMRV Loan") evidenced by that
certain Promissory Note dated as of
September 13, 1990 made by HMRV and HMRV
Trust in favor of KILICO
2
<PAGE>
in the stated principal amount of
$5,200,000, as amended from time to time.
Guaranty/ Guarantor: Limited Recourse Guaranty [Huntley] by
Prime Group II, L.P., an Illinois limited
partnership, in favor of KILICO
Initial Pledge Amount: $5,000,000
Number of Common Units Pledged: 450,518
3
<PAGE>
3. LAKE TRAVIS(3)
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company
("KILICO"). KILICO has provided credit
support/enhancement with respect to the
Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas
limited partnership
Prime Partner(s): (1) The Lake Travis Island, Ltd., a Texas
limited partnership, general partner
(42.25%) [comprised of The Prime Group,
Inc., general partner (94%) and Prime
Group II, L.P. (6%), limited partner] and
(2) Prime Group II, L.P., limited partner
(57.75%)
Loan: The Loan made pursuant to the Loan
Agreement between Capital Health
Facilities Development Corporation and
Borrower dated 12/1/86 in connection with
the $25,000,000 Capital Health Facilities
Development Corporation Health Facilities
Development Revenue Bonds (The Island on
Lake Travis, Ltd. Project) Series 1986;
the "Loan" shall include principal and
interest payable under any note or other
reimbursement obligation of Borrower to
Lender relating to Lender's credit
support/enhancement of the Loan
Guaranty/ Guarantor: Limited Recourse Guaranty [Lake Travis]
by Prime Group II, L.P., an Illinois
limited partnership, in favor of KILICO
Initial Pledge Amount: $8,723,000
Number of Common Units Pledged: 785,852
4
<PAGE>
4. NAPERVILLE
Project: Vacant property in Naperville, Illinois
Lender: Kemper Investors Life Insurance Company
("KILICO") and Federal Kemper Life
Assurance Company ("FKLA"), jointly and
severally. KILICO has provided credit
support/enhancement with respect to the
Shawmut Loan (defined below) and
KILICO/FKLA has made the Subordinate Loan
(defined below).
Borrower: Route 59 Partners L.P., an Illinois
limited partnership
Prime Partner(s): (1) Prime/Route 59, Inc. (5%), general
partner, (2) Prime (40%), limited
partner, and (3) Prime Group II, L.P.
(55%), limited partner
Loan: Collectively: (1) the Loan evidenced by
the Amended and Restated Promissory Note
of Borrower to Shawmut Bank Connecticut,
N.A. dated 12/30/93 in the original
principal amount of $15,500,000 (the
"Shawmut Loan"); such "Loan" shall
include principal and interest payable
under any note or other reimbursement
obligation of Borrower to Lender relating
to Lender's credit support/enhancement of
the Loan; and (2) the Loan evidenced by
the Amended and Restated Promissory Note
of Borrower to KILICO and FKLA dated
1/1/95 in the original principal amount
of $3,304,084 (the "Subordinate Loan")
Guaranty/ Guarantor: Limited Recourse Guaranty [Naperville] by
Prime Group II, L.P., an Illinois limited
partnership, in favor of KILICO and FKLA
Initial Pledge Amount: $2,608,000
Number of Common Units Pledged: 234,954
5
<PAGE>
5. 300 NORTH LASALLE
Project: 320 North LaSalle, Chicago, Illinois
Parking Garage
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: 300 North LaSalle Limited Partnership, an
Illinois limited partnership, and
American National Bank and Trust Company
of Chicago, not personally but as trustee
under Trust Number 110024-09, of which
300 North LaSalle Limited Partnership is
the sole beneficiary
Prime Partner(s): (1) Prime Group II, L.P. (98%), limited
partner and (2) 300 North LaSalle, Inc.
(2%), general partner (owned 100% by
Michael W. Reschke)
Loan: Loan made pursuant to the Loan Agreement
between Lender (as assignee of Lumbermens
Mutual Casualty Company) and Borrower
dated 2/8/90 in the stated principal
amount of $31,000,000, as increased to
$41,292,087 as of 3/23/94, as the same
may be amended and/or restated from time
to time
Guaranty/ Guarantor: Limited Recourse Guaranty [300 N.
LaSalle] by Prime Group II, L.P., an
Illinois limited partnership, in favor of
KILICO
Initial Pledge Amount: $13,288,000
Number of Common Units Pledged: 1,197,112
6
<PAGE>
6. 150 N. RIVERSIDE(1)(2)(3)(4)
Project: Vacant land in Chicago, Illinois
Lender: Lumbermens Mutual Casualty Company
("Lumbermens")
Borrower: 150 N. Riverside Venture, an Illinois
general partnership
Prime Partner(s): Prime International, Inc. (90%), general
partner
Loan: Loan made pursuant to the Loan Agreement
between Lumbermens and Borrower dated
10/17/88 in the original principal amount
of $12,400,000
Initial Pledge Amount: $0
Number of Common Units Pledged: 0
7
<PAGE>
7. ENTERPRISE CENTERS(5)
Project: (1) East Chicago Enterprise Center,
comprised of industrial warehouse
facilities in East Chicago, Indiana; (2)
Hammond Enterprise Center, comprised of
industrial warehouse facilities in
Hammond, Indiana; (3) Arlington Heights
Enterprise Center, comprised of
industrial warehouse facilities in
Arlington Heights, Illinois; and (4)
Chicago Enterprise Center, comprised of
industrial warehouse facilities in
Chicago, Illinois
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: (1) Enterprise Center I, L.P., an
Illinois limited partnership ("EC-I");
(2) Enterprise Center II, L.P., an
Illinois limited partnership ("EC-II");
(3) Enterprise Center III, L.P., an
Illinois limited partnership ("EC-III");
(4) Enterprise Center IV, L.P., an
Illinois limited partnership ("EC-IV");
(5) Enterprise Center V, L.P., an
Illinois limited partnership ("EC-V");
(6) Enterprise Center VI, L.P., an
Illinois limited partnership ("EC-VI");
(7) Enterprise Center VII, L.P., an
Illinois limited partnership ("EC-VII");
(8) Enterprise Center VIII, L.P., an
Illinois limited partnership ("EC-VIII");
(9) Enterprise Center IX, L.P., an
Illinois limited partnership ("EC-IX");
(10) Enterprise Center X, L.P., an
Illinois limited partnership ("EC-X");
(11) Arlington Heights I, L.P., an
Illinois limited partnership ("AH-I");
(12) Arlington Heights II, L.P., an
Illinois limited partnership ("AH-II");
and (13) Arlington Heights III, L.P., an
Illinois limited partnership ("AH-III")
Prime Partner(s): For each of EC-I, EC-II, EC-III, EC-IV,
EC-V, EC VI, EC-VII, EC-VIII, EC-IX and
EC-X, K-P Enterprise Centers Limited
Partnership, general partner (50%), which
is comprised in part by (1) K-P
Enterprise Centers, Inc., general partner
(1%) (of which Prime owns 50% and Prime
Group IV, L.P. owns 50%), (2) Prime Group
Limited
8
<PAGE>
Partnership, limited partner (49%) and
(3) Prime Group IV, L.P., limited partner
(50%); for each of AH-I, AH II and
AH-III, (1) Prime/AH Industrial Center,
Inc., general partner (1%) (100% owned by
Prime International, Inc.), and (2) Prime
Group IV, L.P., limited partner (49%)
Loans: The indebtedness evidenced by: (1) those
certain industrial revenue bonds
(Enterprise Center I, L.P. Project), in
the aggregate principal amount of
$5,100,000, issued by the Indiana
Development Finance Authority (the "IDFA
Issuer"); (2) those certain industrial
revenue bonds (Enterprise Center II, L.P.
Project), in the aggregate principal
amount of $5,300,000, issued by the IDFA
Issuer; (3) those certain industrial
revenue bonds (Enterprise Center III,
L.P. Project), in the aggregate principal
amount of $4,500,000, issued by the IDFA
Issuer; (4) those certain industrial
revenue bonds (Enterprise Center IV, L.P.
Project), in the aggregate principal
amount of $3,000,000, issued by the IDFA
Issuer; (5) those certain industrial
revenue bonds (Enterprise Center V, L.P.
Project), in the aggregate principal
amount of $5,700,000, issued by the IDFA
Issuer; (6) those certain industrial
revenue bonds (Enterprise Center VI, L.P.
Project), in the aggregate principal
amount of $5,000,000, issued by the IDFA
Issuer; (7) those certain industrial
revenue bonds (Enterprise Center VII,
L.P. Project), in the aggregate principal
amount of $7,200,000, issued by the City
of Chicago (the "CC Issuer"); (8) those
certain industrial revenue bonds
(Enterprise Center VIII, L.P. Project),
in the aggregate principal amount of
$7,000,000, issued by the CC Issuer; (9)
those certain industrial revenue bonds
(Enterprise Center IX, L.P. Project), in
the aggregate principal amount of
$4,750,000, issued by the CC Issuer; (10)
those certain industrial revenue bonds
(Enterprise Center X, L.P. Project), in
the aggregate principal amount of
$4,300,000, issued by the CC Issuer; (11)
those certain industrial revenue bonds
(Arlington Heights I,
9
<PAGE>
L.P. Project), in the aggregate principal
amount of $4,500,000, issued by the
Village of Arlington Heights, Illinois
(the "VAH Issuer"); (12) those certain
industrial revenue bonds (Arlington
Heights II, L.P. Project), in the
aggregate principal amount of $4,800,000,
issued by the VAH Issuer; and (13) those
certain industrial revenue bonds
(Arlington Heights III, L.P. Project), in
the aggregate principal amount of
$4,900,000, issued by the VAH Issuer; the
"Loans" shall include principal and
interest payable under any note or other
reimbursement obligation of Borrower to
Lender relating to Lender's credit
support/enhancement of the Loans, if
applicable
Initial Pledge Amount: $0
Number of Common Unit Pledged: 0
10
<PAGE>
8. NORTHGATE(5)
Project: Vacant land in Addison, Illinois,
together with certain stores in or
adjacent to Northgate Plaza, a retail
shopping center in Lombard, Illinois
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: Prime 53 North Partners, an Illinois
general partnership ("Prime 53") and
American National Bank and Trust Company
of Chicago, not personally but as Trustee
under Trust Nos. 110340-06, 11206 09 and
11205-00, of which Prime 53 is the sole
beneficiary ("Trust")
Prime Partner(s): The Prime Group, Inc. (50%), general
partner
Loan: Loan evidenced by the Amended and
Restated Promissory Note dated 3/22/94 of
Borrower to KILICO in the original
principal amount of $5,559,173
Initial Pledge Amount: $0
Number of Common Units Pledged: 0
11
<PAGE>
9. TRIAD SUPERIOR EQUITY ADVANCE AND OTHER LOANS(5)
Project: Eight industrial revenue bond projects
located in the state of Tennessee
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: (1) Prime of Tennessee, Inc., an Illinois
Corporation with respect to the Triad
Superior Equity (as defined below), (2)
Triad Development Company, an Illinois
limited partnership, with respect to the
Triad Obligations (as defined below), (3)
Triad Parking Company, Ltd. with respect
to the Triad Parking Loan (as defined
below), (4) Centre Square II, Ltd. with
respect to the Centre Square Loan (as
defined below), (5) Professional Plaza,
Ltd. with respect to the Professional
Plaza Loan (as defined below), (6) Old
Kingston Properties, Ltd. with respect to
the Old Kingston Loan (as defined below),
and (7) Nashville Office Building I, Ltd.
with respect to the Nashville Office Loan
(as defined below)
Prime Partner(s): Prime of Tennessee, Inc. (1%), general
partner, and/or The Prime Group, Inc.
(1%), limited partner of Triad
Development Company, as designated by
Prime
Loan: Collectively: (1) the "Triad Superior
Equity" as defined in Section 3.3 of the
Second Amended and Restated Agreement of
Limited Partnership of Triad Development
Company, (2) the Loan evidenced by
Promissory Note of Triad Development
Company to Lender dated July 24, 1986 in
the principal amount of $665,000, as
amended, (3) the Loan evidenced by
Promissory Note of Triad Development
Company to Lender dated July 24, 1986 in
the principal amount of $475,000, as
amended, (4) the Loan (the "Triad Parking
Loan") evidenced
12
<PAGE>
by Promissory Note of Triad Parking
Company, Ltd. to Lender dated April 29,
1987 in the principal amount of
$1,440,000, as amended, (5) the
indebtedness, (the "Centre Square Loan")
evidenced by those certain industrial
revenue bonds (Centre Square II, Ltd.
Project), in the aggregate amount of
$9,000,000, issued by the Industrial
Development Board of the County of Knox,
Tennessee (the "Knox County Issuer"), (6)
the indebtedness (the "Professional Plaza
Loan") evidenced by those certain
industrial revenue bonds (Professional
Plaza, Ltd. Project), in the aggregate
amount of $9,000,000, issued by the Knox
County Issuer, (7) the indebtedness (the
"Old Kingston Loan") evidenced by those
certain industrial revenue bonds (Old
Kingston Properties, Ltd. Project), in
the aggregate amount of $3,500,000,
issued by the Knox County Issuer, and (8)
the indebtedness (the "Nashville Office
Loan") evidenced by those certain
industrial revenue bonds (Nashville
Office Building I, Ltd. Project), in the
aggregate amount of $4,800,000, issued by
the Knox County Issuer; the "Loans" shall
include principal and interest payable
under any note or other reimbursement
obligation of Borrower to Lender relating
to Lender's credit support/enhancement of
the Loans, if applicable; the "Triad
Obligations" shall mean, collectively,
the Loans described in (2) and (3) above.
Initial Pledge Amount: $0
Number of Common Units Pledged: 0
13
<PAGE>
10. TRIAD LAND LOANS (FORMERLY NON-ASSET BONDS)(5)
Project: (1) Mabry Partners, Ltd.; (2) Middlebrook
Properties, Ltd.; and (3) Watkins
Partners, Ltd.
Lender: Kemper Investors Life Insurance Company
("KILICO")
Borrower: (1) Mabry Partners, Ltd.; (2) Middlebrook
Properties, Ltd.; and (3) Watkins
Partners, Ltd.
Prime Partner(s): Prime of Tennessee, Inc. (1%), general
partner and/or The Prime Group, Inc.
(1%), limited partner, of Triad
Development Company, as designated by
Prime
Loan: Collectively: (1) the Loan evidenced by
Amended and Restated Promissory Note of
Mabry Partners, Ltd. to Lender dated as
of November 29, 1994 in the principal
amount of $2,242,275, as amended, (2) the
Loan evidenced by Amended and Restated
Promissory Note of Middlebrook
Properties, Ltd. to Lender dated as of
November 29, 1994 in the principal amount
of $1,310,373, as amended, and (3) the
Loan evidenced by Amended and Restated
Promissory Note of Watkins Partners, Ltd.
to Lender dated as of November 29, 1994
in the principal amount of $1,875,293, as
amended
Initial Pledge Amount: $0
Number of Common Units Pledged: 0
(1) Any Dilution of Common Units shall be allocated, on a pro rata basis in
accordance with the respective number of Common Units, among the projects listed
on this Exhibit A-1 other than those under the headings "Huntley" and "150 N.
Riverside" as provided in Exhibit C hereto, until such time as the Pledge Amount
for all such projects shall be $0, at which time the Dilution shall be allocated
to the project listed under the heading "Huntley", until such time as the Pledge
Amount for the project listed under the heading "Huntley" shall be $0, at which
time the Dilution shall be allocated to the project listed under the heading
"150 N. Riverside".
14
<PAGE>
(2) No reallocation pursuant to Section 2.7(b) permitted.
(3) No reallocation pursuant to Section 2.7(c) permitted.
(4) Limited Recourse Guaranty and Pledge and Security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper Investors Life Insurance
Company, in the event of reallocation under Section 2.7(b) to "150 N.
Riverside." The maximum reallocation to "150 N. Riverside" pursuant to Section
2.7(b) shall be $3,351,000.
(5) Limited Recourse Guaranty and Pledge and Security Agreement will be executed
and delivered by Prime Group II, L.P. to Kemper Investors Life Insurance
Company, in the event of reallocation under Section 2.7(c) to "Enterprise
Centers", "Northgate", "Triad Superior Equity Advance and Other Loans", or
"Triad Land Loans (Formerly Non-Asset Bonds)", as the case may be.
15
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Prime Retail, L.P., a Delaware Limited Partnership (the
"Partnership"), and Prime Retail, Inc., a Maryland corporation (the "General
Partner") hereby acknowledge receipt of a copy of the foregoing Second Amendment
to Pledge and Security Agreement [Lake Travis] (the "Second Amendment"), and
consent to Pledgor's pledge of the Additional Common Units thereunder and the
other terms and provisions thereof. Notwithstanding anything in the By-laws of
the General Partner to the contrary, the Partnership and the General Partner
further acknowledge and agree that the Acknowledgment and Consent dated March
22, 1994 entered into by the undersigned with respect to the Pledge and Security
Agreement [Lake Travis] dated March 22, 1994 by Prime Group II, L.P., as
Pledgor, in favor of Kemper Investors Life Insurance Company, as Pledgee, is
hereby ratified and confirmed and shall remain in full force and effect except
as amended by the terms and provisions of the Second Amendment.
Dated: June 12, 1995
PRIME RETAIL, L.P. a Delaware limited
partnership
By: Prime Retail, Inc., a Maryland corporation
By: /s/ Michael W. Reschke
-----------------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
-----------------------------------
Title: Chairman of the Board
<PAGE>
Exhibit IV
THIRD AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This THIRD AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS] (this
"Amendment") is made and entered into as of the 19th day of February, 1997, by
and between PRIME GROUP II, L.P., an Illinois limited partnership ("Pledgor"),
and KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance corporation
("Pledgee").
W I T N E S S E T H :
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and Security
Agreement [Lake Travis], dated as of March 22, 1994 (the "Original Pledge
Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common Units
in Prime Retail, L.P., a Delaware limited partnership, to secure Pledgor's
obligations under the Guaranty; and
WHEREAS, the Original Pledge Agreement was amended (i) by that certain
First Amendment to Pledge and Security Agreement [Lake Travis], dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee, and (ii)
by that certain Second Amendment to Pledge and Security Agreement [Lake Travis],
dated as of June 12, 1995 (the "Second Amendment"), between Pledgor and Pledgee
(the Original Pledge Agreement, as amended by the First Amendment and the Second
Amendment, is herein referred to as the "Pledge Agreement"); and
WHEREAS, pursuant to the Second Amendment, the number of Common Units
pledged by Pledgor to Pledgee was increased from 690,276 to 785,852; and
WHEREAS, pursuant to Section 4.16(b) of the Pledge Agreement, Pledgee is
required to release certain of the Pledged Interests as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not specifically
defined in this Amendment but which are defined in the Pledge Agreement shall
have the meanings given such terms in the Pledge Agreement.
2. Under the Pledge Agreement, Pledgor has pledged to Pledgee 785,852
Common Units to secure Pledgor's obligations under the Guaranty. Pledgor and
Pledgee hereby agree that 40,227 Common Units are hereby released from the
Pledge Agreement and the security interest granted thereunder, and that 745,625
Common Units shall remain as Pledged Interests under the Pledge Agreement.
3. To reflect the reduction in the number of Common Units pledged by
Pledgor to Pledgee under the Pledge Agreement, "Exhibit A" attached to the
Pledge Agreement is hereby amended by substituting the number 745,625 for the
number 785,852 as the "Number of Common Units Pledged" as indicated on "Exhibit
A" attached to the Pledge Agreement.
<PAGE>
4. All references in the Pledge Agreement to "this Pledge and Security
Agreement" and any and all references in the Loan Documents to the Pledge
Agreement shall mean the Pledge Agreement, as amended by this Amendment.
5. Pledgor hereby ratifies and confirms the Guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect except
as heretofore amended and except as amended by this Amendment.
6. The provisions of this Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
[Signature page follows]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an
Illinois limited partnership
By: PGLP, Inc. an Illinois
corporation, general partner
By: /s/ Robert J. Rudnik
-------------------------
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ Authorized Signatory
-------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
-------------------------
Its: Authorized Signatory
3
<PAGE>
ACKNOWLEDGMENT AND CONSENT
Prime Retail, L.P., a Delaware limited partnership (the "Partnership"),
and Prime Retail, Inc., a Maryland corporation (the "General Partner") hereby
acknowledge receipt of a copy of the foregoing Third Amendment to Pledge and
Security Agreement [Lake Travis] (the "Third Amendment"), and consent to the
terms and provisions thereof. Notwithstanding anything in the By-laws of the
General Partner to the contrary, the Partnership and the General Partner further
acknowledge and agree that the Acknowledgment and Consent, dated March 22, 1994,
entered into by the undersigned with respect to the Pledge and Security
Agreement [Lake Travis], dated March 22, 1994, as amended, between Prime Group
II, L.P., as Pledgor, and Kemper Investors Life Insurance Company, as Pledgee,
is hereby ratified and confirmed and shall remain in full force and effect
except as heretofore amended and except as amended by the terms and provisions
of the Third Amendment.
Dated: February 19, 1997 PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc. a Maryland
corporation
By: /s/ Michael W. Reschke
-------------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
-------------------------------
Title: Chairman of the Board
4
<PAGE>
Exhibit V
FOURTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This FOURTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS] (this
"Fourth Amendment") is made and entered into as of the 9th day of April, 1997,
by and between PRIME GROUP II, L.P., an Illinois limited partnership
("Pledgor"), and KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance
corporation ("Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and Security
Agreement [Lake Travis], dated as of March 22, 1994 (the "Original Pledge
Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common Units
in Prime Retail, L.P., a Delaware limited partnership, to secure Pledgor's
obligations under the Guaranty; and
WHEREAS, the Original Pledge Agreement was amended (i) by that certain
First Amendment to Pledge and Security Agreement [Lake Travis], dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee, (ii) by
that certain Second Amendment to Pledge and Security Agreement [Lake Travis],
dated as of June 12, 1995 (the "Second Amendment"), between Pledgor and Pledgee,
and (iii) by that certain Third Amendment to Pledge and Security Agreement [Lake
Travis], dated as of February 19, 1997 (the "Third Amendment"), between Pledgor
and Pledgee (the Original Pledge Agreement, as amended by that First Amendment,
the Second Amendment and the Third Amendment, is herein referred to as the
"Pledge Agreement"); and
WHEREAS, pursuant to the Second Amendment, the number of Common Units
pledged by Pledgor to Pledgee was increased from 690,276 to 785,852; and
WHEREAS, pursuant to the Third Amendment, the number of Common Units
pledged by Pledgor to Pledgee was decreased from 785,852 to 745,625; and
WHEREAS, the parties have agreed to modify certain provisions of the
Pledge Agreement as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not specifically
defined in this Amendment but which are defined in the Pledge Agreement shall
have the meanings given such terms in the Pledge Agreement.
2. The definition of Pledge Amount set forth in Article 1 of the Pledge
Agreement is hereby amended to read as follows:
<PAGE>
"'Pledge Amount' means $10,023,000.00"
3. Pledgor hereby pledges, hypothecates, assigns, and transfers to
Pledgee, and hereby grants to Pledgee, a continuing lien and security interest
in 100,000 Common Units (the "Additional Common Units"), subject to Section
4.16(b) of the Pledge Agreement. Pledgor and Pledgee agree that the Additional
Common Units shall constitute "Pledged Interests" included within the
"Collateral" for all purposes of the Pledge Agreement. To reflect the change in
the Pledge Amount and the pledge of the Additional Common Units, "Exhibit A"
attached to this Amendment is hereby substituted as Exhibit A to the Pledge
Agreement, in replacement of the Exhibit A attached to the Second Amendment and
amended by the Third Amendment.
4. Pledgor hereby remakes and reiterates the representations and
warranties set forth in Section B of Schedule 1 to Exhibit B to the Pledge
Agreement (except for paragraphs 5, 6 and 7 of Section B of Schedule 1 to
Exhibit B), and incorporates the same herein by this reference as of the date of
this Amendment. Pledgor further hereby remakes and reiterates the
representations and warranties set forth in Section 3.2 of the Pledge Agreement
with respect to the Additional Common Units only as of the date of this
Amendment, and incorporates the same herein by this reference.
5. The parties acknowledge that all rights of the Partnership to Dilution
have terminated, and that the reallocation rights referred to in Section 2.7(c)
of the Pledge Agreement have terminated. Accordingly, the parties agree that
Exhibit A-1 to the Pledge Agreement shall have no further force or effect.
6. All references in the Pledge Agreement to "this Pledge and Security
Agreement" and any and all references in the Loan Documents to the Pledge
Agreement shall mean the Pledge Agreement, as amended by this Amendment.
7. Pledgor hereby ratifies and confirms the Guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect except
as heretofore amended and except as amended by this Amendment.
8. The provisions of this Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
[Signature Page Follows]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc. an Illinois corporation,
general partner
By: /s/ Robert J. Rudnik
----------------------------
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ Authorized Signatory
------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
------------------------
Its: Authorized Signatory
3
<PAGE>
EXHIBIT A
LAKE TRAVIS
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KELICO"). KELICO has
provided credit support/enhancement with respect to the Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
Prime (1) The Lake Travis Island, Ltd., a Texas limited partnership,
Partner(s): general partner (42.25%) [comprised of The Prime Group, Inc.,
general partner (94%) and Prime Group II, L.P. (6%), limited
partner] and (2) Prime Group II, L.P., limited partner
(57.75%).
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986; the "Loan" shall include principal and
interest payable under any note or other reimbursement
obligation of Borrower to Lender relating to Loan: Lender's
credit support/enhancement of the Loan
Guaranty/ Limited Recourse Guaranty [Lake Travis] by Prime Group II,
Guarantor: L.P., an Illinois limited partnership, in favor of KELICO
Pledge
Amount: $10,023,000
Number of
Common Units
Pledged: 845,625
4
<PAGE>
ACKNOWLEDGMENT AND CONSENT
Prime Retail, L.P., a Delaware limited partnership (the "Partnership"),
and Prime Retail, Inc., a Maryland corporation (the "General Partner") hereby
acknowledge receipt of a copy of the foregoing Fourth Amendment to Pledge and
Security Agreement [Lake Travis] (the "Fourth Amendment"). Notwithstanding
anything in the By-laws of the General Partner to the contrary, the Partnership
and the General Partner further acknowledge and agree that the Acknowledgment
and Consent dated March 22, 1994, entered into by the undersigned with respect
to the Pledge and Security Agreement [Lake Travis], dated March 22, 1994, as
amended, between Prime Group II, L.P., as Pledgor, and Kemper Investors Life
Insurance Company, as Pledgee, is hereby ratified and confirmed and shall remain
in full force and effect except as heretofore amended and except as amended by
the terms and provisions of the Fourth Amendment.
Dated: April 10, 1997 PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc. a Maryland
corporation
By: /s/ Michael W. Reschke
----------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
--------------------------------
Title: Chairman of the Board
5
<PAGE>
Exhibit VI
FIFTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This FIFTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS] (This,
"Amendment") is made and entered into as of the 7th day of April, 1998, by and
between PRIME GROUP II, L.P., an Illinois limited partnership ("Pledgor"), and
KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance corporation
("Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and Security
Agreement [Lake Travis], dated as of March 22, 1994 (the "Original Pledge
Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common Units
in Prime Retail, L.P., a Delaware limited partnership, to secure Pledgor's
obligations under the Guaranty; and
WHEREAS, the Original Pledge Agreement was amended (i) by that certain
First Amendment to Pledge and Security Agreement [Lake Travis] , dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee; (ii) by
that certain Second Amendment to Pledge and Security Agreement [Lake Travis],
dated as of June 12, 1995 (the "Second Amendment"), between Pledgor and Pledgee;
(iii) by that certain Third Amendment to Pledge and Security Agreement [Lake
Travis] , dated as of February 19, 1997 (the "Third Amendment"), between Pledgor
and Pledgee; and by that certain Fourth Amendment to Pledge and Security
Agreement [Lake Travis], dated as of April 9, 1997, (the "Fourth Amendment")
between Pledgor and Pledgee (the Original Pledge Agreement, as amended by the
First Amendment, the Second Amendment, the Third Amendment and the Fourth
Amendment, is herein referred to as the "Pledge Agreement"); and
WHEREAS, pursuant to the Second Amendment, the number of Common Units
pledged by Pledgor to Pledgee was increased from 690,276 to 785,852; and
WHEREAS, pursuant to the Third Amendment, and in accordance with Section
4.16(b) of the Pledge Agreement, Pledgee released 40,227 Common Units pledged by
Pledgor to Pledgee; and
WHEREAS, pursuant to the Fourth Amendment Pledgor pledged to Pledgee an
additional 100,000 Common Units to secure Pledgor's obligations under the
Guaranty; and
WHEREAS, pursuant to Section 4.15(b) of the Pledge Agreement, Pledgee is
required to release certain of the Pledged Units as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not specifically
defined in this Amendment but which are defined in the Pledge Agreement shall
have the meanings given such terms in the Pledge Agreement.
<PAGE>
2. Under the Pledge Agreement, Pledgor has pledged to Pledgee 845,625
Common Units to secure Pledgor's obligations under the Guaranty. Pledgor and
Pledgee hereby agree that 106,292 Common Units are hereby released from the
Pledge Agreement with the security interest granted thereunder, and that 739,333
Common Units shall remain as Pledged Interests under the Pledge Agreement.
3. To reflect the reduction in the number of Common Units pledged by
Pledgor to Pledgee under the Pledge Agreement, "Exhibit A" attached to the
Pledge Agreement is hereby amended by substituting the number 739,333 for the
number 845,625 as the "Number of Common Units Pledged" as indicated on "Exhibit
A" attached to the Pledge Agreement.
4. All references in the Pledge Agreement to "this Pledge and Security
Agreement" and any and all references in the Loan Documents to the Pledge
Agreement shall mean the Pledge Agreement, as amended by this Amendment.
5. Pledgor hereby ratifies and confirms the guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect except
as heretofore amended and except as amended by this Amendment.
6. The provisions of this Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
[Signature page follows]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation,
general partner
By: /s/ Robert J. Rudnik
-------------------------
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ Authorized Signatory
---------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
---------------------------
Its: Authorized Signatory
3
<PAGE>
ACKNOWLEDGMENT
Prime Retail, L.P., a Delaware limited partnership (the "Partnership"),
and Prime Retail, Inc., a Maryland corporation (the "General Partner") hereby
acknowledge receipt of a copy of the foregoing Fifth Amendment to Pledge and
Security Agreement [Lake Travis] (the "Fifth Amendment"). Notwithstanding
anything in the By-laws of the General Partner to the contrary, the Partnership
and the General Partner further acknowledge and agree that the Acknowledgment
and Consent, dated March 22, 1994, entered into by the undersigned with respect
to the Pledge and Security Agreement [Lake Travis], dated March 22, 1994, as
amended, between Prime Group II, L.P., as Pledgor, and Kemper Investors Life
Insurance Company, as Pledgee, is hereby ratified and confirmed and shall remain
in full force and effect except as heretofore amended and except as amended by
the terms and provisions of the Fifth Amendment.
Dated: April 7, 1998 PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc. a Maryland
corporation
By: /s/ Michael W. Reschke
-------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland
corporation
By: /s/ Michael W. Reschke
----------------------------
Title: Chairman of the Board
4
<PAGE>
Exhibit VII
SEVENTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This SEVENTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS]
(this "Amendment") is made and entered into as of the 30th day of September,
1998, by and between PRIME GROUP II, L.P., an Illinois limited partnership
("Pledgor"), and KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance
corporation ("Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and Security
Agreement [Lake Travis], dated as of March 22, 1994 (the "Original Pledge
Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common Units
in Prime Retail, L.P., a Delaware limited partnership, to secure Pledgor's
obligations under the Guaranty; and
WHEREAS, the Original Pledge Agreement was amended (i) by that certain
First Amendment to Pledge and Security Agreement [Lake Travis], dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee; (ii) by
that certain Second Amendment to Pledge and Security Agreement [Lake Travis],
dated as of June 12, 1995 (the "Second Amendment"), between Pledgor and Pledgee;
(iii) by that certain Third Amendment to Pledge and Security Agreement [Lake
Travis], dated as of February 19, 1997 (the "Third Amendment"), between Pledgor
and Pledgee; (iv) by that certain Fourth Amendment to Pledge and Security
Agreement [Lake Travis], dated as of April 9, 1997 (the "Fourth Amendment"),
between Pledgor and Pledgee; (v) by that certain Fifth Amendment to Pledge and
Security Agreement [Lake Travis] dated as of April 7, 1998 (the "Fifth
Amendment"), between Pledgor and Pledgee; and (vi) by the certain Sixth
Amendment to Pledge and Security Agreement [Lake Travis] dated as of June 15,
1998 (the "Sixth Amendment"), between Pledgor and Pledgee (the Original Pledge
Agreement, as amended by the First Amendment, the Second Amendment, the Third
Amendment, the Fourth Amendment, the Fifth Amendment, and the Sixth Amendment,
is herein referred to as the "Pledge Agreement"); and
WHEREAS, pursuant to the Second Amendment, the number of Common Units
pledged by Pledgor to Pledgee was increased from 690,276 to 785,852; and
WHEREAS, pursuant to the Third Amendment, and in accordance with Section
4.16(b) of the Pledge Agreement, Pledgee released 40,227 Common Units pledged by
Pledgor to Pledgee; and
WHEREAS, pursuant to the Fourth Amendment Pledgor pledged to Pledgee an
additional 100,000 Common Units to secure Pledgor's obligations under the
Guaranty; and
WHEREAS, pursuant to the Fifth Amendment Pledgee released from the Pledge
Agreement 106,292 Common Units and, following such release, 739,333 Common Units
were pledged by Pledgor to Pledgee; and
<PAGE>
WHEREAS, pursuant to the Sixth Amendment Pledgor and Pledgee agreed to
certain amendments to the Pledge Agreement, and Pledgor confirmed its pledge and
grant of a security interest in 739,333 Common Units, giving effect to certain
"Merger Transactions" described therein; and
WHEREAS, pursuant to Section 4.16(a) of the Pledge Agreement Pledgor is
required to pledge to Pledgee additional Common Units and/or other collateral
acceptable to Pledgee as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not specifically
defined in this Amendment but which are defined in the Pledge Agreement shall
have the meanings given such terms in the Pledge Agreement.
2. Pledgor hereby pledges, hypothecates, assigns and transfers to Pledgee,
and hereby grants to Pledgee a continuing lien and security interest in, 145,208
Common Units (the "Additional Common Units"), subject to Section 4.16 of the
Pledge Agreement. Pledgor and Pledgee agree that said Common Units shall
constitute "Pledged Interests" included within the "Collateral" for purposes of
the Pledge Agreement.
3. Pledgor represents and warrants to Pledgee that, as of the date hereof,
Pledgor is the sole record, legal and beneficial owner of, and has good and
marketable title to (and has full right and authority to pledge and assign), the
Additional Common Units pledged hereunder, free and clear of all liens, security
interests, options or other charges or encumbrances. Pledgor hereby reiterates
and incorporates herein by this reference the representations and warranties set
forth in Paragraphs 1, 2, 3 and 4 of Section B of Schedule 1 to Exhibit B to the
Pledge Agreement. Pledgor will promptly deliver to Pledgee the certificates
evidencing the Additional Common Units, together with duly executed assignments
separate from certificate.
4. To reflect the increase in the number of Common Units pledged by
Pledgor to Pledgee under the Pledge Agreement, "Exhibit A" attached to the
Pledge Agreement is hereby amended by substituting the number 884,541 for the
number 739,333 as the "Number of Common Units Pledged" as indicated on "Exhibit
A" attached to the Pledge Agreement.
5. All references in the Pledge Agreement to "this Pledge and Security
Agreement" and any all references in the Loan Documents to the Pledge Agreement
shall mean the Pledge Agreement, as amended by this Amendment.
6. Pledgor hereby ratifies and confirms the Guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect except
as heretofore amended and except as amended by this Amendment.
7. The provisions of this Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
[SIGNATURE PAGE TO FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation,
general partner
By: /s/ Robert J. Rudnik
----------------------------
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ Authorized Signatory
-------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
-------------------------
Its: Authorized Signatory
3
<PAGE>
ACKNOWLEDGMENT
Prime Retail, L.P., a Delaware limited partnership (the "Partnership"),
and Prime Retail, Inc., a Maryland corporation (the "General Partner"), hereby
acknowledge receipt of a copy of the foregoing Seventh Amendment to Pledge and
Security Agreement [Lake Travis] (the "Seventh Amendment"). Notwithstanding
anything in the By-laws of the General Partner to the contrary, the Partnership
and the General Partner further acknowledge and agree that the Acknowledgment
and Consent, dated March 22, 1994, entered into by the undersigned with respect
to the Pledge and Security Agreement [Lake Travis], dated March 22, 1994, as
amended, between Prime Group II, L.P., as Pledgor, and Kemper Investors Life
Insurance Company, as Pledgee, is hereby ratified and confirmed and shall remain
in full force and effect except as heretofore amended and except as amended by
the terms and provisions of the Seventh Amendment.
Dated: September 30, 1998 PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc. a Maryland
corporation
By: /s/ Michael W. Reschke
--------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
----------------------------
Title: Chairman of the Board
4
<PAGE>
Exhibit VIII
ELEVENTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[LAKE TRAVIS]
This ELEVENTH AMENDMENT TO PLEDGE AND SECURITY AGREEMENT [LAKE TRAVIS]
(this "Amendment") is made and entered into as of the 20th day of December,
1999, by and between PRIME GROUP II, L.P., an Illinois limited partnership
("Pledgor"), and KEMPER INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance
corporation ("Pledge").
W I T N E S S E T H :
WHEREAS, Pledgor and Pledgee entered into that certain Pledge and Security
Agreement [Lake Travis], dated as of March 22, 1994 (the "Original Pledge
Agreement"), pursuant to which Pledgor pledged to Pledgee 690,276 Common Units
in Prime Retail, L.P., a Delaware limited partnership, to secure Pledgor's
obligations under the Guaranty; and
WHEREAS, the Original Pledge Agreement was amended (i) by that certain
First Amendment to Pledge and Security Agreement [Lake Travis], dated as of
August 31, 1994 (the "First Amendment"), between Pledgor and Pledgee; (ii) by
that certain Second Amendment to Pledge and Security Agreement [Lake Travis],
dated as of June 12, 1995 (the "Second Amendment"), between Pledgor and Pledgee;
(iii) by that certain Third Amendment to Pledge and Security Agreement [Lake
Travis], dated as of February 19, 1997 (the "Third Amendment"), between Pledgor
and Pledgee; (iv) by that certain Fourth Amendment to Pledge and Security
Agreement [Lake Travis], dated as of April 9, 1997 (the "Fourth Amendment"),
between Pledgor and Pledgee; (v) by that certain Fifth Amendment to Pledge and
Security Agreement [Lake Travis] dated as of April 7, 1998 (the "Fifth
Amendment"), between Pledgor and Pledgee; (vi) by the certain Sixth Amendment to
Pledge and Security Agreement [Lake Travis] dated as of June 15, 1998 (the
"Sixth Amendment"), between Pledgor and Pledgee; (vii) by that certain Seventh
Amendment to Pledge and Security Agreement [Lake Travis] dated as of September
30, 1998 (the "Seventh Amendment"), between Pledgor and Pledgee; (viii) by that
certain Eighth Amendment to Pledge and Security Agreement [Lake Travis] dated as
of December 31, 1998 (the "Eighth Amendment"), between Pledgor and Pledgee; (ix)
by that certain Ninth Amendment to Pledge and Security Agreement [Lake Travis]
dated as of March 31, 1999 (the "Ninth Amendment"), between Pledgor and Pledgee;
and (x) by that certain Tenth Amendment to Pledge and Security Agreement [Lake
Travis] dated as of September 1, 1999 (the "Tenth Amendment"), between Pledgor
and Pledgee (the Original Pledge Agreement, as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Eighth Amendment, the
Ninth Amendment and the Tenth Amendment, is herein referred to as the "Pledge
Agreement"); and
WHEREAS, pursuant to the Second Amendment, the number of Common Units
pledged by Pledgor to Pledgee was increased from 690,276 to 785,852; and
<PAGE>
WHEREAS, pursuant to the Third Amendment, and in accordance with Section
4.16 (b) of the Pledge Agreement, Pledgee released 40,227 Common Units pledged
by Pledgor to Pledgee; and
WHEREAS, pursuant to the Fourth Amendment Pledgor pledged to Pledgee an
additional 100,000 Common Units to secure Pledgor's obligations under the
Guaranty; and
WHEREAS, pursuant to the Fifth Amendment Pledgee released from the Pledge
Agreement 106,292 Common Units and, following such release, 739,333 Common Units
were pledged by Pledgor to Pledgee; and
WHEREAS, pursuant to the Sixth Amendment Pledgor and Pledgee agreed to
certain amendments to the Pledge Agreement, and Pledgor confirmed its pledge and
grant of a security interest in 739,333 Common Units, giving effect to certain
"Merger Transactions" described therein; and
WHEREAS, pursuant to the Seventh Amendment Pledgor pledged to Pledgee an
additional 145,208 Common Units to secure Pledgor's obligations under the
Guaranty; and
WHEREAS, pursuant to the Eighth Amendment, Pledgor pledged to Pledgee, and
Pledgee accepted as collateral, 90,035 shares of Brookdale Common Stock to
secure Pledgor's obligations under the Guaranty; and
WHEREAS, pursuant to the Ninth Amendment, Pledgor pledged to Pledgee, and
Pledgee accepted as collateral, an additional 54,441 shares of Brookdale Common
Stock to secure Pledgor's obligations under the Guaranty; and
WHEREAS, pursuant to the Tenth Amendment, Pledgor pledged to Pledgee, and
Pledgee accepted as collateral, an additional 132,612 shares of Brookdale Common
Stock to secure Pledgor's obligations under the Guaranty; and
WHEREAS, pursuant to Section 4.16(a) of the Pledge Agreement Pledgor is
required to pledge to Pledgee additional Common Units and/or other collateral
acceptable to Pledgee as hereinafter provided.
WHEREAS, Pledgor has requested that Pledgee accept as other collateral
additional shares of Brookdale Common Stock and Pledgee has agreed to accept
such collateral to satisfy a portion of Pledgor's current obligations, subject
to the terms and conditions as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. All capitalized terms used in this Amendment which are not specifically
defined in this Amendment but which are defined in the Pledge Agreement shall
have the meanings given such terms in the Pledge Agreement.
2. For purposes of subparagraphs (a), (b) and (c) of Section 4.16 of the
Pledge Agreement, the Market Value of Brookdale Common Stock pledged hereunder
shall be included in
2
<PAGE>
the calculation of the Market Value of the Pledged Interests determined in
accordance with the provisions hereof.
3. Pledgor hereby pledges, hypothecates, assigns and transfer to Pledgee,
and hereby grants to Pledgee a continuing lien and security interest in 43,545
shares of Brookdale Common Stock (the "Pledged Brookdale Common Stock"), subject
to Section 4.16 of the Pledge Agreement. Pledgor and Pledgee agree that said
Pledged Brookdale Common Stock shall constitute "Pledged Interests" included in
the "Collateral" for purposes of the Pledge Agreement. Nothing contained in this
Amendment shall be construed to require Pledgee to accept future pledges of
Brookdale Common Stock to satisfy Pledgor's obligations under Section 4.16(a) of
the Pledge Agreement.
4. Pledgor represents and warrants to Pledgee that, as of the date hereof,
Pledgor is the sole record, legal and beneficial owner of, and has good and
marketable title to (and has full right and authority to pledge and assign), the
Pledged Brookdale Common Stock pledged hereunder, free and clear of all liens,
security interests, options or other charges or encumbrances. Pledgor hereby
reiterates and incorporates herein by this reference the representations and
warranties set forth in Paragraphs 1, 2, 3 and 4 of Section B of Schedule 1 to
Exhibit B to the Pledge Agreement. Contemporaneously with the execution and
delivery of this Amendment, Pledgor has delivered to Pledgee the certificates
evidencing the Pledged Brookdale Common Stock, accompanied by assignments
separate from certificate, duly endorsed in blank for transfer, with signature
guaranty, which is effective to create a valid, perfected, continuing and
enforceable security interest in the "Pledged Brookdale Common Stock" and all
proceeds thereof, securing the Secured Obligations.
5. Pledgor hereby pledges, hypothecates, assigns and transfers to Pledgee,
and hereby grants to Pledgee a continuing lien and security interest in 76,544
Common Units (the "Additional Common Units"), subject to Section 4.16 of the
Pledge Agreement. Pledgor and Pledgee agree that said Common Units shall
constitute "Pledged Interests" included within the "Collateral" for purposes of
the Pledge Agreement.
6. Pledgor represents and warrants to Pledgee that, as of the date hereof,
Pledgor is the sole record, legal and beneficial owner of, and has good and
marketable title to (and has full right and authority to pledge and assign), the
Additional Common Units pledged hereunder, free and clear of all liens, security
interests, options or other charges or encumbrances. Pledgor hereby reiterates
and incorporates herein by this reference the representations and warranties set
forth in Paragraphs 1, 2, 3 and 4 of Section 4 of Schedule 1 to Exhibit B to the
Pledge Agreement. Pledgor will promptly deliver to Pledgee the certificates
evidencing the Additional Common Units, together with duly executed assignments
separate from certificate.
7. Exhibit A to the Pledge Agreement is hereby amended by substituting (a)
320,633 shares of Brookdale Common Stock for 277,088 shares of Brookdale Common
Stock in the description of Pledged Interests, and (b) 961,085 for 884,541 as
the "Number of Common Units Pledged" in the description of Pledged Interests.
8. All references in the Pledge Agreement to "this Pledge and Security
Agreement" and any and all references in the Loan Documents to the "Pledge
Agreement" shall mean the Pledge Agreement, as amended by this Amendment.
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9. Pledgor hereby ratifies and confirms the Guaranty and the Pledge
Agreement and agrees that the same shall remain in full force and effect except
as heretofore amended and except as amended by this Amendment.
10. The provisions of this Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the day and year first above written.
PRIME GROUP II, L.P., an Illinois
limited partnership
By: PGLP, Inc., an Illinois corporation,
general partner
By: /s/ Robert J. Rudnik
--------------------------------
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE
COMPANY, an Illinois insurance corporation
By: /s/ Authorized Signatory
-------------------------------------
Its: Authorized Signatory
By: /s/ Authorized Signatory
-------------------------------------
Its: Authorized Signatory
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ACKNOWLEDGMENT
Prime Retail, L.P., a Delaware limited partnership (the "Partnership"),
and Prime Retail, Inc., a Maryland corporation (the "General Partner"), hereby
acknowledge receipt of a copy of the foregoing Eleventh Amendment to Pledge and
Security Agreement [Lake Travis] (the "Eleventh Amendment"). Notwithstanding
anything in the By-laws of the General Partner to the contrary, the Partnership
and the General Partner further acknowledge and agree that the Acknowledgment
and Consent, dated March 22, 1994, entered into by the undersigned with respect
to the Pledge and Security Agreement [Lake Travis], dated March 22, 1994, as
amended, between Prime Group II, L.P., as Pledgor, and Kemper Investors Life
Insurance Company, as Pledgee, is hereby ratified and confirmed and shall remain
in full force and effect except as heretofore amended and except as amended by
the terms and provisions of the Eleventh Amendment.
Date: December 20, 1999 PRIME RETAIL, L.P., a Delaware limited partnership
By: Prime Retail, Inc., a Maryland
corporation
By: /s/ Michael W. Reschke
--------------------------------
Title: Chairman of the Board
PRIME RETAIL, INC., a Maryland corporation
By: /s/ Michael W. Reschke
------------------------------------
Title: Chairman of the Board
<PAGE>
Exhibit IX
LIMITED RECOURSE GUARANTY [LAKE TRAVIS]
THIS LIMITED RECOURSE GUARANTY (this "Guaranty") is made as of the
22nd, day of March, 1994 by Prime Group II, L.P., an Illinois limited
partnership ("Guarantor" or "Company"), in favor of Kemper Investors Life
Insurance Company, an Illinois insurance corporation ("Lender").
RECITALS
WHEREAS, The Prime Group, Inc. ("Prime") and Kemper Corporation, a
Delaware corporation ("Kemper"), acting on behalf of themselves and their
respective affiliates, are parties to that certain letter agreement dated August
25, 1993 and amended and restated as of February 17, 1994 (the "Letter
Agreement"), wherein Kemper and Prime agreed to modify certain of their existing
lending relationships;
WHEREAS, Guarantor is an Affiliate of Prime; and Lender is a direct
or indirect subsidiary of Kemper;
WHEREAS, Lender has made or provided credit support/enhancement for
loans to certain Affiliates of Guarantor, which loans are guaranteed by certain
of Guarantor's Affiliates pursuant to written guaranties (the "Existing
Guaranties");
WHEREAS, in order to induce Lender to release the Existing
Guaranties, concurrently herewith, Guarantor has agreed, among other things, to
execute and deliver this Guaranty with respect to the loan (such loan, as
extended, modified or restated from time to time, being referred to herein as
the "Loan") described on Exhibit A, to the borrower (such borrower, and its
successors and assigns being referred to herein as "Borrower") described on
Exhibit A, which Lender has made or with respect to which Lender has provided
credit support/enhancement;
WHEREAS, the transactions contemplated by the Letter Agreement
include the execution and delivery of this Guaranty executed by Guarantor in
favor of Lender; and
WHEREAS, this Guaranty is secured by that certain Pledge and
Security Agreement dated as of even date herewith by Guarantor in favor of
Lender, (as amended from time to time, the "Pledge Agreement").
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty.
(a) Guarantor hereby absolutely and unconditionally guarantees the
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, without set-off, counterclaim or other reduction whatsoever, of (i)
the aggregate outstanding unpaid principal
<PAGE>
amount of the Loan, (ii) all accrued and unpaid interest on the principal amount
of the Loan, and (iii) all other amounts due under the Loan from time to time or
under any documents and instruments executed and delivered or assigned to Lender
in order to evidence the Loan or evidence or perfect a lien or security interest
in collateral for the Loan (the "Collateral Documents"), and any and all
extensions, renewals or modifications of any of the foregoing (such principal,
interest and other amounts are hereinafter referred to collectively as the
"Obligations"). In addition, if Guarantor shall fail to pay any amount due
hereunder upon demand in accordance with the terms hereof Guarantor shall pay
any and all fees, costs and expenses (including reasonable attorneys' fees)
incurred by Lender to third parties, whether litigation is involved or not, and
if involved, whether at the trial or appellate levels or in pre-or post-judgment
or bankruptcy proceedings, in enforcing the obligations of Guarantor hereunder
or realizing upon any collateral securing this Guaranty (all of the foregoing
fees, costs and expenses are referred to herein collectively as the "Guaranteed
Expenses"). The Obligations and any instrument, document or agreement, express
or implied, which has been or may hereafter be made or entered into by
Guarantor, Borrower or any other person or entity in reference to the
Obligations (including, without limitation, the Collateral Documents and the
Pledge Agreement, as hereinafter defined) shall all be hereinafter collectively
referred to as the "Terms".
(b) For purposes hereof, the following terms shall have the
following respective meanings:
"Business Day" shall mean any day of the week other than Saturday,
Sunday or any other day on which banks are generally closed within the
City of Chicago, Illinois.
"Pledge Amount" has the meaning set forth in the Pledge Agreement.
(c) Notwithstanding anything to the contrary in Section 1(a),
Guarantor's maximum liability under this Guaranty shall not exceed an amount
equal to the sum of (i) the Pledge Amount, from time to time, plus (ii) the
amount of any Guaranteed Expenses incurred by Lender.
2. Limited Recourse. Notwithstanding anything to the contrary
contained herein or in the Pledge Agreement, except as otherwise provided in
this Section 2, neither Guarantor nor any of its shareholders, officers,
directors, partners, employees, agents or other representatives ("Other
Persons") shall have any personal liability for the Obligations or the
Guaranteed Expenses under this Guaranty, or for the obligation to observe,
perform or discharge any of the terms, covenants or conditions contained herein
or in the Pledge Agreement, and, except as otherwise provided in this Section 2,
(a) no attachment, execution, writ or other process shall be sought and no
judicial proceeding shall be initiated by or on behalf of Lender against
Guarantor or any Other Person as a result of a breach or default under this
Guaranty or the Pledge Agreement, except to the extent that such attachment,
execution, writ or judicial proceeding shall be necessary to enforce any of the
rights, remedies or recourses of Lender against or with reference to the
Collateral (as defined in the Pledge Agreement), and (b) in the event that any
suit is brought hereunder or under the Pledge Agreement, any judgment obtained
in or as a result of such suit shall be enforceable and/or enforced solely
against the Collateral; provided, however, that nothing herein contained shall
be construed to: (i) be a release or impairment of Guarantor's obligations
hereunder or under the Pledge Agreement, (ii) prevent
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<PAGE>
Lender from exercising and enforcing, consistent with the provisions of this
Section 2, any other remedy allowed at law or in equity or by statute or by the
terms hereof or the Pledge Agreement or (iii) prevent Lender from recovering
from Guarantor (or any such Other Person), or limit Lender's recourse against
Guarantor (or any such Other Person) for, any funds, damages or costs
(including, without limitation, reasonable legal expenses) incurred by Lender as
a result of any willful act or omission in bad faith, any fraudulent act or
omission or any breach of any of the following sections of the Pledge Agreement:
Section 2.4, the first sentence of Section 4.2, Section 4.3(a), Section 4.4,
Section 4.5 and Section 4.7(ii). Nothing in this Paragraph 2 shall be deemed to
increase the liability of any such Other Person beyond that which any such Other
Person may have under the partnership agreement of Guarantor or under law.
3. Guaranty Absolute. Guarantor guarantees that the Obligations and
the Guaranteed Expenses will be paid in accordance with the terms and provisions
of this Guaranty and, to the maximum extent permitted by law, Guarantor waives
any law, regulation, order or judgment now or hereafter in effect in any
jurisdiction affecting the obligations of Guarantor or the rights of Lender with
respect thereto. This Guaranty, and the liability of Guarantor under this
Guaranty (which liability is subject to Sections 1(c) and 2 hereof), shall
continue and be absolute and unconditional and remain in full force and effect
irrespective of:
(a) any lack of validity or enforceability of any of the
Terms;
(b) any change in the time, manner or place of payment of, or
in any other term, including the applicable rate of interest, of,
all or any of the Terms, or any other renewal, extension, amendment,
modification or waiver of or any consent to departure from any of
the Terms;
(c) any act or omission of Lender (or other holder of the
Collateral Documents) of any nature whatsoever;
(d) with respect to Guarantor, Borrower or any other person or
entity, (i) any failure to obtain required authorization by all
necessary corporate, partnership or other action relating to the
incurrence of the Obligations or to the execution, delivery or
performance of any of the Terms, or (ii) any violation of any
provision of any of the articles of incorporation, by-laws,
partnership agreement or any other document, instrument or agreement
occasioned by the incurrence of the Terms, by the execution,
delivery, or performance of any of the Terms, or by any failure of
same to have been duly authorized by all necessary corporate or
other action;
(e) any amendment, waiver, modification, extension or renewal
of or consent to departure from or forbearance of any other action
or inaction under or in respect of this Guaranty or any other of the
Terms;
(f) any exchange, release, forbearance or surrender of or any
other action or inaction with respect to any collateral (including,
without limitation, the Collateral other than a release of all of
the Collateral which results in a termination of this Guaranty under
Section 8(a) below) at any time and from time
3
<PAGE>
to time now or hereafter securing any or all of the Obligations or
Terms (including, without limitation, any reallocation of collateral
effected by or on behalf of Lender (or its affiliate) pursuant to
the Pledge Agreement) or the liability of Guarantor, Borrower or any
other person or entity in respect of all or any of the Terms or any
failure to perfect or continue as perfected any security interest or
other lien with respect to any such collateral, or any loss or
destruction of any such collateral, or any matter impairing the
value of such collateral as security for all or any of the Terms,
the liability of Guarantor, Borrower or any other person or entity,
in respect of all or any of the Obligations or Terms;
(g) any other guaranty now or hereafter executed by Guarantor
or anyone else or any recovery under any such other guaranty;
(h) any waiver of or assertion or enforcement or failure or
refusal to assert or enforce, in whole or in part, any of the terms
and provisions of the Terms, or any claim, cause of action, right or
remedy which Lender may, at any time, have under this Guaranty, the
Pledge Agreement or any of the other Collateral Documents or with
respect to any guaranty or any security which may be held by Lender
(or other holder of the Collateral Documents) with respect to the
Loan;
(i) the failure to give Guarantor any notice whatsoever, other
than any notice which Lender is expressly required to give pursuant
to any provisions of this Guaranty;
(j) exculpatory provisions in any of the Collateral Documents
limiting Lender's recourse to property encumbered by the Loan
Documents or to any other security or limiting Lender's rights to
enforce a deficiency judgment against Borrower;
(k) any sale, assignment, conveyance, merger or other
transfer, voluntary or involuntary (whether by operation of law or
otherwise), of all or any part of Borrower's interest in any
property securing the Loan or the occurrence of any such sale,
assignment, conveyance, merger or other voluntary or involuntary
transfer which results in Guarantor becoming the Borrower under the
Collateral Documents, provided, however, that any such sale,
assignment, conveyance, merger or other transfer shall be subject to
the limitations set forth in the Collateral Documents;
(l) any sale, assignment, conveyance, merger or other
transfer, voluntary or involuntary (whether by operation of law or
otherwise), of all or any part of the interest of Lender (or other
holder of the Collateral Documents) in the Collateral Documents or
this Guaranty;
(m) any failure to properly record or file any of the
Collateral Documents, or to otherwise perfect, protect, secure or
insure any security interest or lien given as security for the Loan;
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<PAGE>
(n) any recovery as a result of the exercise by Lender (or
other holder of the Collateral Documents) of any of its rights or
remedies under the Collateral Documents, including any foreclosure
thereof; or
(o) any other fact, circumstance or matter of any nature
whatsoever that might otherwise constitute a defense available to,
or a discharge of, or might otherwise operate to release or affect
the obligations of, Guarantor, Borrower or any other person or
entity liable to Lender (or other holder of the Collateral
Documents) in respect of any of the Terms.
This Guaranty shall continue to be effective or shall be reinstated, as the case
may be, regardless of whether any payment of any of the Obligations or the
Guaranteed Expenses is rescinded or must otherwise be returned by Lender upon
the insolvency, bankruptcy, or reorganization of Guarantor, Borrower, or any
other person or entity or for any reason whatsoever, all as though such payment
had not been made. Lender shall not be required to contest, dispute or litigate
its obligation to make such payment or repayment. The obligations of Guarantor
hereunder shall be absolute and primary, shall be complete and binding as to
Guarantor upon its execution of this Guaranty, shall be subject to no conditions
precedent, and shall be independent of and cumulative to any other of the Terms,
and Lender may exercise any of its rights and remedies under this Guaranty, any
other of the Terms or otherwise singly or concurrently. The obligations of
Guarantor under this Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any voluntary or involuntary
bankruptcy, insolvency, receivership, reorganization, liquidation, arrangement,
or debtor-relief proceeding of or against Borrower, or by any defense that
Borrower may have by reason of the existence of any such proceeding or any
order, decree or decision of any court or administrative body resulting from or
relating to any such proceeding.
4. Waiver; No Duties. Guarantor waives to the fullest extent
permitted by applicable law: (a) all statutes of limitations as a defense to any
action brought against Guarantor by Lender; (b) any defense based upon any legal
disability or any discharge or limitation of liability (except as provided in
Sections 1(c) and 2 above), whether consensual or arising by operation of law or
any bankruptcy, insolvency or debtor-relief proceeding, or from any other cause;
(c) promptness, diligence, presentment, demand, protest and notice of any kind
(other than as expressly required herein); (d) any defense based upon or arising
out of any defense of Borrower to the payment or performance of any part of the
obligations (other than payment); (e) any and all rights of indemnity,
contribution, reimbursement or any similar right that Guarantor may have against
Borrower as a result of any actions taken or amounts paid in connection with or
relating to this Guaranty or the Loan; (f) all rights of subrogation, including,
without limitation, all rights to enforce any remedy of Lender, and all right to
participate in any security held by Lender; (g) notice of any change in
Borrower's financial condition; (h) the right to interpose any substantive or
procedural defense of the law of guaranty, indemnification or suretyship (except
the defense of prior payment of all of the Obligations and Guaranteed Expenses
which Guarantor is called upon to pay under this Guaranty); (i) all rights and
remedies accorded by applicable law to guarantors or sureties, including without
limitation, any extension of time conferred by any law now or hereafter in
effect; (j) the right to interpose any defense (except as allowed under clause
(h) above), set-off or counterclaim of any nature or description in any action
or proceeding; and (k) any right or claim of right to cause a marshalling of
5
<PAGE>
Borrower's assets or to cause Lender to proceed against Borrower and/or any
collateral held by Lender at any time or in any particular order. Lender shall
not be obligated to exhaust any right or take any action against the Borrower or
any other person or entity or any collateral for the Obligations prior to the
enforcement of its rights hereunder. Nothing in this Paragraph 4 shall be
construed as a waiver by a Prime Partner (as defined in the Pledge Agreement) of
any right to receive any distributions to which it might be entitled under the
partnership agreement of Borrower, including any such right that may arise as a
result of a payment by Guarantor hereunder.
5. Representations, Warranties and Covenants. The representations,
warranties and covenants set forth in Exhibit B attached hereto (including,
without limitation, the definitions set forth therein) are hereby incorporated
in this Guaranty by this reference and shall be deemed to be made as of the date
hereof.
6. Notices. Any notice or other communication required or permitted
hereunder shall be (a) in writing and shall be deemed to have been duly given
(A) when received, if delivered in person, (B) five (5) days after deposit in a
regularly maintained receptacle of the United States mail as registered or
certified mail, first class postage prepaid, (C) the business day after notice
is sent for overnight delivery by nationally recognized overnight courier
service, or (D) on the day on which the party to whom such notice is addressed
refuses delivery by mail or by nationally recognized courier service, and (b)
addressed as follows:
To Lender: c/o Kemper Financial Services, Inc.
120 South LaSalle Street
13th Floor
Chicago, Illinois 60603
Attn: Real Estate Investment Group
With copies to: Kemper Corporation
Legal Department, C-3
One Kemper Drive
Long Grove, Illinois 60049
Attn: General Counsel
KFC Portfolio Corp.
c/o Kemper Financial Services, Inc.
120 South LaSalle Street
22nd Floor
Chicago, Illinois 60603
Attn: Legal Department
Real Estate Counsel
To Guarantor: c/o The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
6
<PAGE>
Attention: Michael W. Reschke
With a copy to: The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attention: Robert J. Rudnik
or to any such other address as any party hereto shall designate in a written
notice to the other parties hereto.
7. No Waiver; Cumulative Remedies. Lender may, at any time and from
time to time, waive or not insist on strict compliance with any one or more of
the provisions contained in any document relating to this Guaranty, but any such
waiver or non-insistence shall be deemed to be made pursuant to the terms of
said document and not in modification thereof. Any waiver or non-insistence in
any instance or under any particular circumstance shall not be considered a
waiver or non-insistence of such provision in any other instance or any other
circumstance. The remedies provided herein and in the other documents executed
contemporaneously herewith and referred to herein shall be cumulative, may be
exercised from time to time, singularly or concurrently or in any combination,
without Lender being obligated to exercise any such right in any other
circumstance, and, subject to Section 2 above, are not exclusive of any remedies
provided by law.
8. Continuing Guaranty; Transfer. This Guaranty is a continuing
guaranty and shall:
(a) remain in full force and effect until (i) all of the
Obligations and Guaranteed Expenses have been paid in full, or all
of the Collateral (as such term is defined in the Pledge Agreement)
securing this Guaranty has been applied toward the Obligations and
Guaranteed Expenses and (ii) any and all amounts due or claims made
under clause (iii) of Section 2 of this Guaranty have been paid,
satisfied or otherwise disposed of, as applicable, at which time
this Guaranty shall terminate (and Lender shall at such time, upon
the request and at the expense of any Guarantor, acknowledge the
release and termination of this Guaranty);
(b) be binding upon Guarantor, and its heirs, administrators,
executors, successors and assigns, who shall be jointly and
severally liable hereunder in accordance with the terms hereof;
provided, however, Guarantor may not assign any of its rights and
obligations hereunder without the prior written consent of Lender;
and
(c) inure to the benefit of and be binding on and enforceable
by Lender and its successors, transferees, participants, and
assigns. Without limiting the generality of this clause, Lender may
assign or otherwise transfer any of the Obligations and/or any of
the Terms to any other person or entity, and such other
7
<PAGE>
person or entity shall thereupon become vested with all the rights
in respect thereof granted to Lender herein or otherwise.
9. Governing Law; Submission to Jurisdiction. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of Illinois
without regard to principles of conflict of laws. Each of Lender and Guarantor
hereby waives any plea of jurisdiction or venue as not being a resident of Cook
County, Illinois and hereby specifically authorizes any action brought by the
other upon or with regard to this Guaranty to be instituted and prosecuted in
either the Circuit Court of Cook County, Illinois or in the United States
District Court for the Northern District of Illinois, at the election of the
party bringing the action. Each of Lender and Guarantor hereby irrevocably
authorizes service of process to be made upon it in the manner specified in
Section 6 above, in any action which may be instituted against it arising out of
or relating to this Guaranty.
10. Headings. Section headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose.
11. WAIVER OF JURY TRIAL. GUARANTOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY ANY PARTY, RELATING DIRECTLY OR INDIRECTLY TO THIS
GUARANTY, THE PLEDGE AGREEMENT OR THE OBLIGATIONS GUARANTEED HEREBY.
12. Estoppel. Guarantor shall, at any time and from time to time,
within ten (10) Business Days following request by Lender, execute, acknowledge
and deliver to Lender a statement certifying that this Guaranty is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating such modifications) and
that, to the best of Guarantor's knowledge, Guarantor is not in default
hereunder (or if there is such a default, describing such default in reasonable
detail).
13. Severability. The unenforceability or invalidity of any
provision or provisions of this Guaranty shall not render any other provision or
provisions herein contained unenforceable or invalid.
14. Non-Assertion. Lender covenants that it shall not assert in any
judicial or other case or proceeding that that certain Release of Guaranties and
Other Obligations and Covenant Not to Sue, of even date herewith, made by Lender
and certain affiliates of Lender in favor of Guarantor and others, is not valid,
enforceable and effective.
[Signature Page Follows]
8
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
executed and delivered on the date and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation, its
general partner
By: /s/ Michael W. Reschke
Its: President
ACKNOWLEDGED:
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ John E. Neal
Its: Authorized Signatory
9
<PAGE>
EXHIBIT A
LAKE TRAVIS
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO has
provided credit support/enhancement with resect to the Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986
<PAGE>
EXHIBIT B
[See Attached]
2
<PAGE>
SCHEDULE 1
A. Definitions Applicable to Representations, Warranties and Covenants:
Definitions. The following definitions shall apply to words and
phrases used in this Schedule 1 and the document to which this Schedule is
attached.
Affiliate means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or its controlled
by, such Person. As used in this definition, "control" (including, with
its correlative meanings, "controlled by" and "under common control with")
means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities, or partnership or other ownership interests, by contract or
otherwise).
Beneficiary means, individually and collectively, the benefited
party(ies) under the document to which this Schedule I is attached.
Company means Prime Group II, L.P., an Illinois limited partnership.
Company General Partner means PGLP, Inc., an Illinois corporation.
Material Adverse Effect means (a) any adverse effect on the ability
of the Company to grant to Pledgee or to keep pledged to Pledgee a
perfected first lien security interest in and to the Collateral or (b) any
material adverse effect on the ability of the Company to perform its
obligations (other than those described in clause (a) above) under the
Transaction Documents.
Person means an individual, partnership, corporation, trust,
unincorporated organization, or other entity, or a government or agency or
political subdivision thereof.
Transactions means the transactions contemplated by the document to
which this Schedule 1 is attached.
Transaction Documents means (a) the document to which this Schedule
1 is attached, (b) any document or instrument which secures or is secured
by the document to which this Schedule 1 is attached and (c) any other
document or instrument evidencing or securing the obligations under a
document described in clause (a) or (b) above, in each case, as such
document or instrument may be modified or amended from time to time.
B. Representations and Warranties:
The Company hereby represents and warrants to Beneficiary that the
following statements are true, correct and complete:
1. Organization; Power.
(a) The Company (i) is a limited partnership duly organized, validly
existing and in good standing under the laws of the state of its formation, (ii)
is duly qualified to do
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business as a foreign limited partnership under the laws of each jurisdiction in
which the laws of such jurisdiction so permit or require it to be qualified and
in which the nature of its business requires it to be so qualified (except where
failure to do so would not reasonably be expected to have a Material Adverse
Effect), and (iii) has all requisite power and authority to own, operate and
encumber its property and assets and conducts its business substantially as
presently conducted and proposed to be conducted in connection with and
following the consummation of the Transactions.
(b) The Company General Partner (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, (ii) is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which the nature
of its business requires it to be so qualified (except where the failure to be
so qualified would not reasonably be expected to have a Material Adverse
Effect), and (iii) has all requisite corporate power and authority to own,
operate and encumber its property and assets and conduct its business
substantially as presently conducted and as proposed to be conducted in
connection with and following the consummation of the Transactions.
2. Authority; Enforceability. (i) Each of the Company and the Company
General Partner (on behalf of the Company) has the requisite power and authority
(A) to execute, deliver and perform each of the Transaction Documents to which
the Company is a party, and (B) to file the Transaction Documents filed by the
Company, or to be filed by the Company, with the appropriate governmental
authorities; (ii) the execution, delivery and performance (or filing, as the
case may be) of each of the Transaction Documents to which the Company is a
party, and the consummation of the Transactions, have been duly approved by the
Company and the Board of Directors of the Company General Partner, and no other
partnership or corporate proceedings on the part of the Company or the Company
General Partner which have not been completed are necessary to consummate such
Transactions; (iii) each of the Transaction Documents to which the Company is a
party has been duly executed and delivered (or filed, as the case may be) by the
Company and by the Company General Partner on behalf of the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, is in full force and effect,
and no term or condition thereof has been amended, modified or waived, without
the prior written consent of the Beneficiary, and (iv) the Company has performed
and complied in all material respects with all the terms, provisions, agreements
and conditions set forth in the Transaction Documents and required to be
performed or complied with by it on or before the date as of which this
representation is made, and no default by the Company, to the best knowledge of
the Company, exists thereunder.
3. No Conflict. The execution, delivery and performance by each of the
Company and by the Company General Partner (on behalf of the Company) of each
Transaction Document to which the Company is a party do not and will not (i)
conflict with or violate the Company's partnership agreement or the Company
General Partner's Articles or Certificate of Incorporation or other charter
documents or By-laws, or other organizational documents, as the case may be,
(ii) contravene or conflict with any law, statute, rule, or regulation, in each
case in effect on the date as of which this representation is made, (iii)
contravene or conflict with, result in any breach of, or constitute a default
under, any agreement or instrument binding on the Company or the Company General
Partner, (iv) result in or require the creation or imposition of any lien
whatsoever upon any of the properties or assets of the Company (other than the
liens arising
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<PAGE>
pursuant to the Transaction Documents), or (v) require any approval of
stockholders or any approval or consent of any person or entity under any
agreement or instrument binding on the Company or the Company General Partner,
that has not been obtained, which, in any case described in clauses (ii) through
(v) of this paragraph 3 would reasonably be expected to result in a Material
Adverse Effect.
4. Governmental Consents. The Transactions, and the execution, delivery
and, to the best of the Company's knowledge, performance by the Company and the
execution and delivery by the Company General Partner (on behalf of the Company)
of each of the Transaction Documents to which it is a party, do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by any governmental authority which has not been obtained or
made and which, if not obtained or made, would reasonably be expected to result
in a Material Adverse Effect, except for filings of the Transaction Documents
(or notice thereof) with appropriate governmental offices necessary (i) to
perfect any liens or security interests granted under the Transaction Documents
or (ii) in connection with any transfer of Collateral following enforcement of
any such liens or security interests.
5. Litigation; Adverse Effects.
(i) There is no action, suit, proceeding or arbitration, at law or
in equity or before any governmental authority, nor to the best knowledge of the
Company is there any governmental investigation, in each case pending, or, to
the best knowledge of the Company, threatened, against the Company or the
Company General Partner, or any property of the Company or the Company General
Partner, which relates to the Transactions or the Transaction Documents and
which would reasonably be expected to result in a Material Adverse Effect.
(ii) Neither the Company nor the Company General Partner is (A) in
violation of any applicable law, rule or regulation, which violation would
reasonably be expected to result in a Material Adverse Effect, or (B) subject to
or in default with respect to any final judgment, writ, order, injunction or
decree of any court or governmental authority.
(iii) Each of the Company and the Company General Partner has
obtained all licenses, permits, franchises and other governmental authorizations
necessary for the ownership of its property or for the conduct of its business,
the failure to obtain or violation of which would reasonably be expected to
result in a Material Adverse Effect.
6. No Defaults. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument binding on the Company relating to any
borrowing, loan or credit arrangement, and no condition exists which, with the
giving of notice or the lapse of time or both, would constitute a default
thereunder, other than defaults that, in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.
7. Solvency. After due inquiry, and taking into account the Transactions,
each of the Company's and the Company General Partner's assets exceed its
liabilities. Each of the Company and the Company General Partner is, and, to the
best of the Company's knowledge, from and after the date hereof each of the
Company and the Company General Partner will be, able to pay
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its debts when the same become due. Neither the Company nor the Company General
Partner has (i) made a general assignment for the benefit of its creditors, (ii)
admitted in writing its inability to pay its debts as they mature, or (iii) been
subjected to an attachment, execution or other judicial seizure of a substantial
portion of its property which remains in effect. There is not pending any case,
proceeding or other action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or recomposition of the Company or the Company General
Partner or any of its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking appointment of a receiver,
trustee, custodian or any similar official for its or for all or substantially
all of its property.
C. Reporting Covenants:
The Company covenants and agrees that, so long as the Company shall
have any liability or obligation outstanding under any of the Transaction
Documents, unless Beneficiary shall otherwise give prior written consent
thereto:
1. Financial Statements. The Company shall maintain or cause to be
maintained, a system of accounting established and administered in
accordance with sound business practices and consistent with past
practices to permit preparation of financial statements in conformity with
GAAP, and each of the financial statements described below shall be
prepared from such system and records. The Company shall deliver or cause
to be delivered to the Lender:
(a) As soon as practicable, and in any event within sixty (60)
days after the end of each calendar quarter, the balance sheet of
the Company as at the end of such quarter and related statements of
operations and retained earnings and changes in financial position
for such quarter, setting forth in each case in comparative form the
figures for the corresponding period of the previous fiscal year,
all in reasonable detail and certified by the chief financial
officer, treasurer or assistant treasurer of the Company General
Partner that they fairly present the financial condition of the
Company as at the dates indicated and the results of operations for
the periods indicated, subject to changes resulting from audit and
normal year-end adjustment;
(b) As soon as practicable, and in any event within one
hundred twenty (120) days after the end of each fiscal year (i.e.
the twelve months ending December 31), the audited balance sheet of
the Company as at the end of such fiscal year and the related
audited statements of operations and retained earnings and changes
in financial position for such fiscal year, setting forth in each
case in comparative form the figures for the Company for the
previous fiscal year, all in reasonable detail and reported by a
firm of reputable independent public accountants.
2. Notification of Defaults. The Company, upon acquiring knowledge
thereof, shall promptly notify Lender of any event of default, or any event
which with the giving of notice or lapse of time, or both, would constitute an
event of default, under the Transaction Documents, and describing the action the
Company proposes to take with respect thereto.
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3. Other Information. Upon the request of Beneficiary made from time
to time, the Company shall furnish to Beneficiary such information as may be
prepared by the Company or the Company General Partner in writing in the
ordinary course of its business respecting the Company's or the Company General
Partner's business or condition (financial or otherwise), operations,
performance, properties or prospects. Beneficiary shall treat any non-public
information so obtained as confidential.
D. Affirmative Covenants:
The Company covenants and agrees that, so long as the Company shall have
any liability or obligation outstanding under any of the Transaction Documents,
unless Beneficiary shall otherwise give prior written consent thereto:
1. Existence. The Company shall maintain its existence as a
limited partnership in good standing under the laws of the state of its
formation and maintain its qualification to do business in each
jurisdiction in which the laws of such jurisdiction so permit or require
it to be qualified and in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify would reasonably be expected to result in a
Material Adverse Effect. The Company shall cause the Company General
Partner to maintain its existence as a corporation in good standing under
the laws of the state of its incorporation and maintain its to do business
in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business is such
that the failure to qualify would reasonably be expected to result in a
Material Adverse Effect. The foregoing shall not prohibit the Company or
the Company General Partner from merging with or into a corporation or
other entity organized under the laws of any state within the United
States (in which event, from and after the effective date of such merger,
all references herein to the Company or the Company General Partner, as
the case may be, shall be deemed to refer to such successor entity);
provided, however, that (a) any such successor entity to the Company
assumes in writing all of the obligations and liabilities of the Company
under the Transaction Documents and (b) before and after giving effect to
such merger, there shall not exist any event of default, or any event
which, with the giving of notice or lapse of time or both, would
constitute an event of default, under any of the Transaction Documents.
2. Taxes. The Company shall pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges upon
it, its income and its properties, or upon the Company General Partner or
the Company General Partner's income and properties, prior to the date on
which penalties are attached thereto, unless and to the extent only that
(a) failure to pay any such taxes, assessments or governmental charges
would not reasonably be expected to result in a Material Adverse Effect,
or (b) (i) such taxes, assessments and governmental charges shall be
contested in good faith and by appropriate proceedings by the Company or
the Company General Partner, as the case may be, after the Company or the
Company General Partner, as the case may be, has established a reasonable
reserve on its books for such item, and (ii) the pendency of such contest
will not result in any impairment of any lien and security interest
granted by the Company or the Company General Partner in favor of
Beneficiary.
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3. Compliance with Laws, Etc. The Company shall comply with,
and cause the Company General Partner to comply with, all applicable
statutes, rules, regulations, orders and restrictions of any and all
governmental instrumentalities or agencies thereof having jurisdiction
over the conduct of the business or the ownership of the properties of the
Company or the Company General Partner, as the case may be (except for any
non-compliance therewith which would not reasonably be expected to result
in a Material Adverse Effect), unless and only to the extent that the
application of such statutes, rules, regulations, orders and restrictions
shall be contested in good faith and by appropriate proceedings by the
Company or the Company General Partner, as the case may be, in such a
manner that any enforcement action or any liability resulting from such
non-compliance shall be stayed or held in abeyance pending the outcome of
such contest.
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Exhibit X
FIRST AMENDMENT TO LIMITED RECOURSE GUARANTY [LAKE TRAVIS]
THIS FIRST AMENDMENT TO LIMITED RECOURSE GUARANTY [LAKE TRAVIS] (this
Amendment") is made as of August 31, 1994, by PRIME GROUP II, L.P., an Illinois
limited partnership ("Guarantor"), and KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation ("Lender").
RECITALS:
WHEREAS, Guarantor has executed and delivered to Lender a certain Limited
Recourse Guaranty [Lake Travis], made as of March 22, 1994 (the "Guaranty"); and
WHEREAS, Guarantor and Lender desire to amend and modify the Guaranty as
provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor and Lender hereby agree as follows:
1. The Guaranty is hereby amended and modified to substitute as Exhibit A
thereto the "Exhibit A" attached hereto and made a part hereof.
2. Except to the extent expressly amended and modified hereby, the
Guaranty shall remain in full force and effect, unmodified, in accordance with
its terms.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the date and year first above written.
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc., an Illinois corporation, its
General Partner
By: /s/ Michael W. Reschke
Its: President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ John E. Neal
Its: Authorized Signatory
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EXHIBIT A
LAKE TRAVIS
Project: The Island on Lake Travis
Lender: Kemper Investors Life Insurance Company ("KILICO"). KILICO has
provided credit support/enhancement with resect to the Loan.
Borrower: The Island on Lake Travis, Ltd., a Texas limited partnership
Loan: The Loan made pursuant to the Loan Agreement between Capital
Health Facilities Development Corporation and Borrower dated
12/1/86 in connection with the $25,000,000 Capital Health
Facilities Development Corporation Health Facilities
Development Revenue Bonds (The Island on Lake Travis, Ltd.
Project) Series 1986; the "Loan" shall include principal and
interest payable under any note or other reimbursement
obligation of Borrower to Lender relating to Lender's credit
support/enhancement of the Loan
<PAGE>
Exhibit XI
PLEDGE AND SECURITY AGREEMENT [150 N. RIVERSIDE]
THIS PLEDGE AND SECURITY AGREEMENT (this "Pledge and Security
Agreement"), dated as of March 22, 1994, is made by KILICO Realty Corporation,
an Illinois corporation ("Kilico Realty") and Kemper Investors Life Insurance
Company, an Illinois insurance corporation ("Kilico"; Kilico Realty and Kilico
are hereinafter referred to together as the "Pledgor" or the "Company"), to
Lumbermens Mutual Casualty Company, an Illinois insurance corporation (the
"Pledgee").
W I T N E S S E T H:
WHEREAS, Pledgee made a loan (the "Loan") to 150 N. Riverside
Venture, an Illinois general partnership (together with its successors and
assigns, the "Borrower") in the amount of $12,400,000 pursuant to that certain
Loan Agreement between Lender and Borrower dated as of October 17, 1988;
WHEREAS, Kilico Realty holds an option to acquire a Fifty Percent
(50%) partnership interest in Borrower;
WHEREAS, Lender, Kemper Corporation, a Delaware corporation
("Kemper"), and The Prime Group, Inc., an Illinois corporation ("Prime"),
entered into that certain letter agreement dated February 17, 1994 (as amended,
the "Letter Agreement"), which Letter Agreement includes, among other things,
certain agreements of the parties regarding the Loan as set forth specifically
therein;
WHEREAS, Pledgor is an affiliate and subsidiary of Kemper;
WHEREAS, in accordance with the terms of the Letter Agreement, in
order to induce Lender to modify certain of the terms and conditions of the
Loan, and in order to further secure the Loan, Pledgor has agreed, among other
hings, to execute and deliver to Pledgee that certain Limited Recourse Guaranty
dated as of even date herewith (the "Guaranty") with respect to the Loan;
WHEREAS, in accordance with the terms of the Letter Agreement, in
order to further induce Pledgee to modify certain of the terms and conditions of
the Loan, and in order to further secure the Loan, Pledgor has agreed to execute
and deliver this Pledge and Security Agreement, pursuant to which (i) the
Pledged Interests (as defined herein) will be pledged to secure Pledgor's
obligations under the Guaranty and this Pledge and Security Agreement, and (ii)
certain Distributions (as defined herein) paid on or with respect to the Pledged
Interests will be paid and applied as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby agrees as follows:
<PAGE>
ARTICLE 1
DEFINITIONS; LETTER AGREEMENT
SECTION 1.1 Definitions. The following terms when used in this Pledge and
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"Adjusted Funds from Operations" shall mean Funds from Operations for the
most recent calendar quarter after deducting (i) the total amount of the
quarterly distribution on the Preferred Units paid in that calendar quarter plus
the amount of any Preferred Distribution Shortfall as of the end of that
calendar quarter, (ii) a 10 % payment reserve based on the amount remaining
after deducting item (i), and (iii) the total amount of the quarterly
distribution on the Convertible Preferred Units paid in that calendar quarter
plus the amount of any Convertible Preferred Distribution Shortfall on the
Convertible Preferred Units as of the end of that calendar quarter.
"Borrower" shall have the meaning provided therefor in the recitals.
"Borrower Obligations" shall mean any and all obligations or liabilities
of Borrower whether direct or indirect, joint or several, absolute or
contingent, now existing or hereafter arising, due or to become due, which arise
out of or in connection with any Loan Document.
"Business Day" means any day of the week other than Saturday, Sunday or
any other day on which the New York Stock Exchange is closed.
"Closing Price" means, on any date, the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, for the Common Stock, as reported by the
National Association of Security Dealers, Inc. Automated Quotation System or, if
such system is no longer in use, the principal other automated quotation system
that may then be in use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock as such Person is
selected from time to time by the board of directors of General Partner.
"Code" means the Uniform Commercial Code from time to time in effect in
the State of Illinois.
"Collateral" is defined in Section 2.1.
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<PAGE>
"Common Stock" means shares of common stock, par value $.01 per share, of
the General Partner, including certificates representing such shares and any
interests in the entries on the books of any financial intermediary pertaining
to such shares.
"Common Units" means the Partnership Units designated as Common Units
under, and as otherwise defined and described in, the Partnership Agreement.
"Convertible Preferred Distribution Shortfall" shall have the meaning
given such term in the Partnership Agreement.
"Convertible Preferred Units" shall mean the Partnership Units designated
as, Convertible Preferred Units under, and as otherwise defined and described
in, the Partnership Agreement.
"Dilution" shall mean the exercise of the rights granted to the
Partnership pursuant to Section 12.5 of the Partnership Agreement to acquire
Common Units of a Limited Partner and dilute such Limited Partner's Partnership
Interest in satisfaction of such Limited Partner's liability to the Partnership
pursuant to Sections 12.3 or 12.4 of the Partnership Agreement. Whenever in this
Pledge and Security Agreement reference is made to Dilution of Common Units, or
to Common Units subject to Dilution, any such reference shall be deemed to
include any and all rights under Section 12.7(b) and Section 12.5(d) of the
Partnership Agreement regarding Common Units with respect to which the Dilution
rights of the Partnership have terminated.
"Dilution Amount" means, with respect to any Dilution, the aggregate
dollar amount recovered from the Limited Partners under the Partnership
Agreement by reason of such Dilution.
"Discount" means an amount equal to 0.335 multiplied by a fraction, (i)
the numerator of which shall be (A) the Target Distribution Amount as of the end
of the most recent calendar quarter, minus (B) four (4) times the Adjusted Funds
from Operations for the most recent calendar quarter (but in no event shall the
numerator be less than zero), and (ii) the denominator of which shall be
$6,625,892.
"Distributions" means all distributions, proceeds, dividends, liquidating
proceeds or dividends, and other distributions or payments, ordinary or
extraordinary (whether similar or dissimilar to the foregoing), paid in cash, on
or with respect to any Pledged Interests.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, business trust, limited liability company, corporation or
association.
"Exchange" means the exchange of all or a portion of the Common Units of a
Limited Partner for Common Stock pursuant to the Partnership Agreement.
"Exchange Rights" means the rights of a Limited Partner to exchange Common
Units for Common Stock pursuant to Article XI of the Partnership Agreement and
subject to Section 12.7(a) of the Partnership Agreement.
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<PAGE>
"Event of Default" means:
(a) any failure by Pledgor to pay any amount due under the Guaranty,
or to apply any Distributions as provided in Section 2.4 hereof, or to
comply with the provisions of any section of Article 4 hereof other than
Sections 4.2 (to which subparagraph (c) below shall apply) and 4.12 (to
which subparagraph (d) below shall apply), or to comply with the
provisions of Section 2.7(b) hereof, or to comply with the provisions of
paragraph 2 of the Letter Agreement, and, in each such case, the
continuance of such failure for five (5) Business Days after written
notice from Pledgee;
(b) if any representation or warranty made or deemed made by Pledgor
in or under the Guaranty or this Pledge and Security Agreement shall prove
to be false or misleading in any material respect on the date made or
deemed to be made, and Pledgee gives notice to Pledgor of such default (no
grace or cure period being applicable to any such default);
(c) any sale, assignment, transfer, pledge or further encumbrance by
Pledgor of any of the Pledged Interests, or any interest therein, other
than pursuant to a Dilution under the Partnership Agreement;
(d) any default (not otherwise specified in this definition of
"Event of Default") in the performance or observance of any covenant or
agreement to be performed or observed by Pledgor under this Pledge and
Security Agreement or the Guaranty and the continuation thereof for a
period of thirty (30) days after notice of such default is given by
Pledgee to Pledgor, so long as such default can reasonably be expected to
be cured within thirty (30) days, Pledgor promptly commences to cure such
default promptly following receipt of notice thereof and thereafter
diligently prosecutes such cure; provided, however, that if such default
cannot reasonably be cured within such thirty (30) day time period but can
reasonably be expected to be cured within an additional ninety (90) days,
and so long as Pledgor promptly commences to cure such default promptly
following receipt of notice thereof and thereafter diligently prosecutes
such cure, such period will be extended for up to an additional ninety
(90) days;
(e) Pledgor shall (i) in a proceeding commenced by Pledgor, be
adjudicated a bankrupt, or an order for relief shall have been entered
against Pledgor, under federal bankruptcy law, (ii) make a general
assignment for the benefit of creditors, (iii) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
liquidator or similar official for it or all or substantially all of its
property, (iv) institute any proceeding seeking an order for relief or to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or fail to have any such proceeding
instituted against it dismissed within ninety (90) days after filing or
(v) fail to contest in good faith any appointment or proceeding described
in subsection (f) below for a period of ninety (90) days after such
appointment or the institution of such proceeding;
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<PAGE>
(f) a receiver, custodian, trustee, liquidator or similar official
shall be appointed for Pledgor or all or substantially all of its
properties, or a proceeding described in subsection (e) above, shall be
instituted against Pledgor or a warrant of attachment, execution or
similar process against all or substantially all of its property shall be
issued, and any such event continues undischarged, undismissed, unstayed,
unvacated or unbonded for a period of ninety (90) days after such entry,
appointment or issuance; or
(g) the occurrence of a default or event of default under any of the
Loan Documents not cured within any applicable cure or grace periods
provided therein with respect to such default or event of default.
"Funds from Operations" shall mean the net income (loss), computed in
accordance with generally accepted accounting principles consistently applied,
excluding gains or losses from debt restructuring and sales of real property,
plus depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures.
"General Partner" means Prime Retail, Inc., a Maryland corporation, and
its successors and assigns.
"Guaranty" shall have the meaning provided therefor in the recitals.
"Initial Pledge Amount" means $7,000,000.
"Initial Pledged Interests" means the Pledged Interests which are being
pledged as of the date hereof by Pledgor to Pledgee pursuant to this Pledge and
Security Agreement to secure the Secured Obligations.
"Interest Amount" shall have the meaning provided therefor in Section 2.4
hereof.
"Kemper" shall have the meaning provided therefor in the recitals.
"Kilico" shall have the meaning provided therefor in the recitals.
"Kilico Realty" shall have the meaning provided therefor in the recitals.
"Letter Agreement" shall have the meaning provided therefor in the
recitals.
"Limited Partner" shall mean any Person named as a Limited Partner on
Exhibit A to the Partnership Agreement, or any Person admitted as a Substituted
Limited Partner or additional Limited Partner (as such terms are defined and
described in the Partnership Agreement), in such Person's capacity as a limited
partner of the Partnership.
"Loan" shall have the meaning provided therefor in the recitals.
"Loan Documents" means, with respect to the Loan, this Pledge and Security
Agreement, the Guaranty, and any and all other documents and instruments
evidencing or securing the Loan,
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<PAGE>
and, if applicable, any and all other documents and instruments in connection
with credit support/enhancement with respect to the Loan.
"Lock-Up Agreement" means, collectively, (i) that certain agreement dated
as of March 22, 1994 by and among Prime, Prime Group Limited Partnership, and
Friedman, Billings, Ramsey & Co., Inc., (ii) that certain agreement dated as of
March 22, 1994 by and among Pledgor, KR Gainesville, Inc., KR Gulf Coast Factory
Shops, Inc., and Friedman, Billings, Ramsey & Co., Inc., (iii) that certain
agreement dated as of March 22, 1994 by and among Abraham Rosenthal, Rosenthal
Family LLC, and Friedman, Billings, Ramsey & Co., Inc., (iv) that certain
agreement dated as of March 22, 1994 by and among William H. Carpenter, Jr.,
Carpenter Family Associates LLC, and Friedman, Billings, Ramsey & Co., Inc.,
relating to certain restrictions on the sale or other disposition of Common
Units or Common Stock.
"Market Value" means (i) with respect to Common Stock on any date, the
average of the Closing Price for the five consecutive Business Days ending on
such date, and (ii) with respect to Common Units on any date, the Market Value
of the Common Stock that would be issued if an Exchange were to occur as to such
Common Units on such date. Notwithstanding the foregoing, (i) for purposes of
this Pledge and Security Agreement, the Market Value of the Initial Pledged
Interests as of the date hereof shall be deemed to be the Initial Pledge Amount,
and (ii) for purposes of Section 4.16 only, the Market Value is subject to
adjustment as provided in said Section 4.16(d).
"Partners" means the partners in the Partnership.
"Partnership" means Prime Retail, L.P., a Delaware limited partnership.
"Partnership Agreement" means that certain Agreement of Limited
Partnership of the Partnership dated March 22, 1994.
"Partnership Interests" means ownership interests held by Partners in the
Partnership, including, but not limited to, Partners' Partnership Units, capital
accounts, and profits and distributions relating thereto, all other payments (if
any) due or to become due in respect of such interests pursuant to the
Partnership Agreement, all rights, powers, and remedies of a Partner under the
Partnership Agreement, all proceeds of all or any of the foregoing, and all
certificates and instruments representing such interests.
"Partnership Units" means fractional, undivided shares of the Partnership
Interests issued pursuant to the Partnership Agreement.
"Person" means any individual or Entity.
"Pledge Amount" means at any time the Initial Pledge Amount minus the
cumulative amount of all Dilution Amounts in excess of the aggregate amount of
$3,351,000, as set forth more specifically in Section 2.7(b) hereof.
"Pledged Interest Issuer" means (i) the Partnership, with respect to any
Pledged Interests comprised of Common Units, and (ii) the General Partner, with
respect to any Pledged Interests comprised of Common Stock.
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<PAGE>
"Pledged Interests" means all Common Units and/or Common Stock of any
Pledged Interest Issuer, which are now or hereafter pledged to Pledgee as
Collateral to secure the Secured Obligations.
"Pledgee" shall have the meaning provided therefor in the preamble.
"Pledgor" shall have the meaning provided therefor in the preamble.
"Preferential Distribution" shall have the meaning given such term in the
Partnership Agreement.
"Preferential Distribution Lapse Date" shall have the meaning given such
term in the Partnership Agreement.
"Preferential Distribution Shortfall" shall have the meaning given such
term in the Partnership Agreement.
"Preferred Distribution Shortfall" shall have the meaning given such ten-n
in the Partnership Agreement.
"Preferred Units" shall mean the Partnership Units designated as Preferred
Units under, and as otherwise defined and described in, the Partnership
Agreement.
"Prime" shall have the meaning provided therefor in the recitals.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated March 22, 1994, among Prime Retail, Inc., Prime, Prime Group
Limited Partnership, Prime Group II, L.P., Kemper Investors Life Insurance
Company, Pledgor, KR Gainesville, Inc., KR Gulf Coast Factory Shops, Inc.,
Abraham Rosenthal, Rosenthal Family LLC, William H. Carpenter, Jr., and
Carpenter Family Associates LLC.
"Secured Obligations" shall have the meaning provided therefor in Section
2.2.
"Sharing Agreement" means that certain Retail Assets Sharing Agreement
dated of even date herewith by and among Pledgor, The Prime Group, Inc., Prime
Group Limited Partnership, Prime Group II, L.P., Abraham Rosenthal, Rosenthal
Family LLC, William H. Carpenter, Jr., and Carpenter Family Associates LLC.
"Target Distribution Amount" shall mean an amount, determined from time to
time, that would be required to pay an annual distribution at the rate of the
Preferential Distribution per Common Unit on all Common Units then issued and
outstanding, plus the amount of any accrued and unpaid Preferential Distribution
Shortfall outstanding at such time with respect to all Common Units owned by the
General Partner.
SECTION 1.2 Letter Agreement. Pledgor agrees and acknowledges that this
Pledge is made by Pledgor pursuant to, and shall be construed to be consistent
with, the terms of the Letter Agreement; provided, however, that,
notwithstanding the terms of the Letter Agreement, the collateral value
maintenance provisions set forth in Section 4.16 of this Pledge and Security
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Agreement provide for the initial collateral value maintenance determination to
be made as of April 1, 1995.
ARTICLE 2
PLEDGE
SECTION 2.1 Grant of Security Interest. Pledgor hereby pledges,
hypothecates, assigns, and transfers to Pledgee, and hereby grants to Pledgee, a
continuing lien and security interest in all of the following property (the
"Collateral"):
(a) subject to Sections 2.7 and 4.16(b) hereof, 553,797 Common
Units, of which 405,347 Common Units are pledged by Kilico Realty and
148,450 Common Units are pledged by Kilico;
(b) any Pledged Interests or other collateral pledged by Pledgor to
Pledgee after the date hereof to secure the Secured Obligations pursuant
to this Pledge and Security Agreement;
(c) any and all Common Stock owned by Pledgor following a Conversion
of any Pledged Interests which are Common Units (which Common Stock shall
constitute "Pledged Interests" hereunder immediately upon issuance thereof
and without any further act required on the part of Pledgor);
(d) any and all Common Units or Common Stock or any other securities
or property received by Pledgor as a result of any exchanges, splits,
reverse splits, combinations, mergers, consolidations, reclassifications,
warrants, options, and noncash dividends or distributions in respect of
any Pledged Interests (and any such Common Units or Common Stock or other
securities or property so received shall be deemed "Pledged Interests" for
purposes hereof);
(e) all Distributions with respect to any Pledged Interests; and
(f) all other proceeds of any of the foregoing. For purposes of this
Pledge and Security Agreement, "proceeds" includes, without limitation,
whatever is receivable or received when Collateral or proceeds are sold,
collected, exchanged, converted or otherwise disposed of, whether such
disposition is voluntary or involuntary.
SECTION 2.2 Security for Secured Obligations. This Pledge and Security
Agreement secures the full and prompt payment when due of all sums now or
hereafter payable by Pledgor, and timely performance of all obligations of
Pledgor, now or hereafter existing, under the Guaranty and this Pledge and
Security Agreement, and all obligations of Borrower under the Loan Documents
(collectively the "Secured Obligations").
SECTION 2.3 [Intentionally omitted]
SECTION 2.4 Distributions. All Distributions shall be applied to pay
accrued and unpaid interest on the Initial Pledge Amount regardless of when any
such interest accrues. If
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such Distributions are insufficient to pay such accrued interest at any
Distribution date, future Distributions shall be applied to pay the deficiency
before current accrued interest is paid.
SECTION 2.5 Continuing Security Interest; Transfer of Note. This Pledge
and Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full or other
satisfaction in full of all Secured Obligations;
(b) inure to the benefit of and be binding upon the Pledgor and its
successors and assigns; and
(c) inure to the benefit of and be binding upon Pledgee and its
successors and assigns.
Without limiting the foregoing clause (c), Pledgee may assign or otherwise
transfer (in whole or in part) any of the Loan Documents held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits and subject to all of the obligations thereafter accruing in respect
thereof under any Loan Document or otherwise; provided that no such assignment
shall relieve Pledgee of any obligation thereunder accruing prior to such
assignment. Upon the payment or other satisfaction in full of all Secured
Obligations, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to Pledgor. Upon any such termination (whether in
whole or in part), Pledgee will, at Pledgor's sole expense, deliver to Pledgor,
all documents, chattel paper, agreements, certificates, notes and instruments
representing, constituting, or evidencing all Pledged Interests, together with
all other Collateral then held by Pledgee hereunder, and execute and deliver to
Pledgor, at Pledgor's sole expense, such documents as Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6 Security Interest Absolute. All rights of Pledgee and the
security interests granted to Pledgee hereunder, and all obligations of Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any of the Loan
Documents or instruments relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term, including the applicable rate of interest, of, all or any of
the Borrower Obligations, or any other renewal, extension, amendment,
modification or waiver of or any consent to departure from any of the Loan
Documents;
(c) any act or omission of Pledgee (or other holder of the Loan
Documents) of any nature whatsoever;
(d) with respect to Pledgor, Borrower, or any other Person, (i) any
failure to obtain required authorization by all necessary corporate,
partnership or other action relating to the incurrence of the Borrower
Obligations or the Secured Obligations or to the execution, delivery or
performance of any of the Loan Documents, or (ii) any violation of any
provision of any of the articles of incorporation, by-laws, partnership
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agreement or any other document, instrument or agreement occasioned by the
incurrence of the Borrower Obligations or the Secured Obligations, by the
execution, delivery, or performance of any of the Loan Documents, or by
any failure of same to have been duly authorized by all necessary
corporate or other action;
(e) any release, amendment, waiver, modification, extension or
renewal of or consent to departure from, any guaranty given to secure all
or any of the Borrower Obligations or the Secured Obligations (other than
a release of the Guaranty), or forbearance of any other action or inaction
under or in respect of any of the Loan Documents;
(f) any exchange, release, forbearance or surrender of or any other
action or inaction with respect to any collateral (including, without
limitation, the Collateral, other than a release of all of the Collateral
which would result in a termination of the Guaranty under Section 8(a)
thereof) at any time and from time to time now or hereafter securing any
or all of the Borrower Obligations or the Secured Obligations or the Loan
Documents or the liability of Pledgor, Borrower, or any other Person in
respect of all or any of the Loan Documents, or any failure to perfect or
continue as perfected any security interest or other lien with respect to
any such collateral, or any loss or destruction of any such collateral, or
any matter impairing the value of such collateral as security for all or
any of the Borrower Obligations, or the liability of Pledgor, Borrower, or
any other Person, in respect of all or any of the Borrower Obligations or
Loan Documents;
(g) any guaranty now or hereafter executed by Pledgor or anyone else
or any recovery under any such other guaranty;
(h) any waiver of or assertion or enforcement or failure or refusal
to assert or enforce, in whole or in part, any of the terms and provisions
of the Loan Documents, or any claim, cause of action, right or remedy
which Pledgee may, at any time, have under any of the Loan Documents or
with respect to any guaranty or any security which may be held by Pledgee
(or other holder of the Loan Documents) with respect to the Loan;
(i) the failure to give Pledgor any notice whatsoever, other than
any notice which Pledgee is expressly required to give pursuant to any
provision of this Pledge and Security Agreement;
(j) exculpatory provisions in any of the Loan Documents (other than
in the Guaranty or in this Pledge and Security Agreement) limiting
recourse to property encumbered by the Loan Documents or to any other
security or limiting rights to enforce a deficiency judgment against the
Borrower;
(k) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of any of the Borrower's interest in any property securing
the Loan or the occurrence of any such sale, assignment, conveyance,
merger or other voluntary or involuntary transfer which results in Pledgor
becoming the Borrower under any of the Loan Documents; provided,
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however, that any such sale, assignment, conveyance, merger or other
transfer shall be subject to the limitations set forth in the Loan
Documents;
(l) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of the interests of Pledgee (or other holder of the Loan
Documents) in this Pledge and Security Agreement or any of the other Loan
Documents;
(m) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, or the like, of Pledgor, Borrower
or any other Person, whether or not Pledgor shall have notice or knowledge
of any of the foregoing;
(n) any recovery (other than payment in full of all of the Secured
Obligations which would result in a termination of the Guaranty under
Section 8(a) thereof) as a result of the exercise by Pledgee (or other
holder of the Loan Documents) of any of its rights or remedies under the
Loan Documents, including any foreclosure thereof; or
(o) any other fact, circumstance or matter of any nature whatsoever
(other than payment in full of all of the Secured Obligations which would
result in a termination of the Guaranty under Section 8(a) thereof) that
might otherwise constitute a defense available to, or a discharge of, or
might otherwise operate to release or affect the obligations of, Pledgor,
Borrower, or any other Person liable to Pledgee (or other holder of the
Loan Documents) in respect of any of the Borrower Obligations, the Secured
Obligations or the Loan Documents.
SECTION 2.7 Dilution of Pledged Interests, Reallocation, Lock-Up
Provisions.
(a) The Common Units now or hereafter constituting a part of the
Pledged Interests and certain other Common Units are subject to Dilution
as set forth in the Partnership Agreement and in accordance with the
Sharing Agreement which provides for the allocation of Dilution among the
parties thereto, and the pledge and security interest granted hereby is
expressly subject to any Dilution rights but only as provided in the
Letter Agreement.
(b) In the event that a portion of any Dilution Amount with respect
to any Dilution is allocated to Pledgor pursuant to the terms of the
Sharing Agreement, up to an aggregate amount of $3,351,000, Pledgor shall
promptly pledge and deliver to Pledgee, or cause to be pledged and
delivered to Pledgee, additional unencumbered Common Units and/or
unencumbered Common Stock (including certificates and transfer instruments
related thereto), and/or other collateral acceptable to Pledgee, such
that, after giving effect to the pledge of such additional Common Units
and/or Common Stock and/or other collateral, all Pledged Interests and
other Collateral pledged under this Pledge and Security Agreement and then
constituting a part of the Collateral shall have a fair market value
(valuing Pledged Interests at Market Value and subject to subparagraph
4.16(d) below) equal to or greater than the Pledge Amount. Such additional
Common Units and/or Common Stock shall constitute Pledged Interests and,
together with any other collateral pledged hereunder, shall be deemed to
be part of the Collateral hereunder.
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At such time as the aggregate amount of all Dilution Amounts with respect
to all Dilutions that is allocated to Pledgor pursuant to the Sharing
Agreement shall exceed $3,351,000, the Pledge Amount shall be reduced by
an amount equal to the aggregate amount of all Dilution Amounts so
allocated to Pledgor in excess of $3,351,000.
(c) Under and pursuant to the Partnership Agreement and the Lock-Up
Agreement, Pledgor's Common Units and Common Stock constituting Pledged
Interests hereunder will be subject to restrictions upon transfer thereof,
and the pledge and security interest granted hereby is expressly subject
to any transfer restrictions on Pledged Interests but only as provided in
the Letter Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Pledgor represents and
warrants to Pledgee, as of the date hereof and as of the date of each pledge and
delivery hereunder, in each case only with respect to the Collateral then being
pledged:
(a) Pledgor is the sole record, legal and beneficial owner of, and
has good and marketable title to (and has full right and authority to
pledge and assign), the Collateral, free and clear of all liens, security
interests, options, or other charges or encumbrances, except as described
in Section 2.7.
(b) The delivery of the Collateral to Pledgee, together with the
filing of the Uniform Commercial Code financing statements described in
the following sentence, is effective to create a valid, perfected,
continuing and enforceable first priority security interest in such
Collateral and all proceeds thereof, securing the Secured Obligations. All
Uniform Commercial Code financing statements necessary to perfect the
security interest of Pledgee in and to all or part of the Collateral have
been filed in the appropriate governmental office or executed and
delivered to Pledgee for filing and Pledgor has directed the Partnership
to register the pledge to Pledgee of the Common Units then being pledged
hereunder.
(c) In the case of any Pledged Interests consisting of Common Stock,
all of such Pledged Interests are duly authorized and validly issued,
fully paid, and non-assessable and are not subject to any shareholder
agreements, voting agreements, voting trusts, trust deeds, irrevocable
proxies, or any other similar agreements or instruments, except as
contemplated by this Pledge and Security Agreement, and there are no
outstanding options, warrants or other agreements with respect thereto, in
each case, except as described in Section 2.7.
(d) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority, regulatory body or any other
Person (other than the filing contemplated by Section 3.1(b) hereof) is
required by Pledgor for the pledge by Pledgor of any Collateral pursuant
to this Pledge and Security Agreement or for the execution, delivery, and
performance of this Pledge and Security Agreement by Pledgor.
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ARTICLE 4
COVENANTS
SECTION 4.1 [Intentionally omitted]
SECTION 4.2 Restrictions on Encumbrances; Warranty of Title. Pledgor will
not hereafter sell, assign, dispose of, transfer, pledge, encumber, or grant any
option or warrant with respect to, the Collateral (subject to the provisions of
Section 2.7). Subject to Section 2.7, Pledgor will warrant and defend the right,
title and interest in and to the Collateral, and Pledgee's interest in and to
the Collateral, against the claims and demands of all Persons whomsoever.
SECTION 4.3 Stock Powers and Instruments of Transfer. Pledgor shall (a)
upon the execution and delivery of this Pledge and Security Agreement, and
simultaneously with the delivery by Pledgor of any other or additional
Collateral as may be required hereunder and after any Exchange, promptly deliver
to Pledgee, such stock powers, stock certificates, instruments, certificates,
opinions of counsel, and similar documents, reasonably satisfactory in form and
substance to Pledgee, with respect to the Pledged Interests as Pledgee may
reasonably require in order to accomplish the purposes of this Pledge and
Security Agreement, and (b) from time to time upon the request of Pledgee after
the occurrence of any Event of Default relating to any such Pledged Interests,
promptly take whatever action is reasonably requested by Pledgee in order to
accomplish the purposes of this Pledge and Security Agreement.
SECTION 4.4 Continuous Pledge. Subject to Sections 2.5, 2.7 and 4.16,
Pledgor will, at all times, keep pledged to Pledgee pursuant hereto all Pledged
Interests and all other Collateral and other securities, instruments, proceeds,
and rights from time to time received by or distributable to Pledgor in respect
of any Collateral.
SECTION 4.5 Exchange Rights. Without the prior written consent of Pledgee,
Pledgor shall not exercise any of its Exchange Rights in respect of the
Collateral.
SECTION 4.6 Further Assurances. Pledgor agrees that at any time, and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments, including, without limitation, financing
statements, and take all further action, that may be reasonably necessary or
desirable, or that Pledgee may reasonably request, in order to perfect,
maintain, preserve, and protect the first perfected priority lien and security
interest (subject to the provisions of Section 2.7) granted or purported to be
granted hereby in compliance with applicable law and/or to enable Pledgee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 4.7 Distributions. Upon the occurrence and during the continuance
of an Event of Default (i) the rights of Pledgor to all Distributions shall
cease and all such rights shall thereupon become vested in Pledgee which shall
exclusively be entitled to receive all Distributions, subject to application in
accordance with Section 6.4 below, (ii) Pledgor agrees to deliver to Pledgee any
and all Distributions received by Pledgor, (iii) any and all Distributions
received and held by Pledgor which Pledgor is obligated to deliver to Pledgee
shall, until delivery thereof, be held by Pledgor separate and apart from its
other property in trust for Pledgee, and (iv) Pledgee shall have the right to
notify the Pledged Interest Issuer of the vesting
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in Pledgee of such rights to receive Distributions as aforesaid and Pledgor
hereby irrevocably consents to any such notification.
SECTION 4.8 [Intentionally omitted]
SECTION 4.9 Other Parties. Pledgor will not, without the prior written
consent of Pledgee, waive or release any obligation of any party with respect to
the Collateral or enter into any agreement amending or supplementing the
Collateral.
SECTION 4.10 [Intentionally omitted]
SECTION 4.11 Additional Undertakings. Pledgor will not, without the prior
written consent of Pledgee, take or omit to take any action the taking or the
omission of which would result in any impairment or alteration of any obligation
of the maker of any instrument constituting Collateral.
SECTION 4.12 Place of Business. If Pledgor shall change its principal
place of business or its chief executive office or its name or remove the
records concerning the Collateral from its principal place of business, Pledgor
shall give to Pledgee thirty (30) days advance notice thereof and, in connection
therewith, take such action, reasonably satisfactory to Pledgee, as may be
necessary to maintain the security interest of Pledgee in the Collateral
hereunder at all times fully perfected and in full force and effect.
SECTION 4.13 Shareholder Agreements. Pledgor shall not, with respect to
any Pledged Interests that are now or hereafter pledged to Pledgee, enter into
any shareholder agreements, voting agreements, voting trusts, trust deeds,
irrevocable proxies, or any other similar agreements or instruments, except this
Pledge and Security Agreement, the Partnership Agreement, the Lock-Up Agreement
and the Registration Rights Agreement.
SECTION 4.14 Payment of Taxes, Etc. Pledgor shall pay promptly when due
all taxes, assessments, charges, encumbrances and liens now or hereafter imposed
upon any Collateral, and shall discharge or cause to be discharged as a lien of
record by payment or filing of any bond required by law, or otherwise, any (i)
judgment liens or (ii) tax or other similar involuntary liens (except liens
created by Pledgee) filed or otherwise asserted against the Collateral or any
part thereof, and any proceedings for the enforcement thereof, within fifteen
(15) days after Pledgor has notice thereof; provided, however, that Pledgor
shall have the right to contest in good faith any such taxes, assessments,
charges, encumbrances and liens, including any such judgment liens or tax liens
or other such involuntary liens (and during the continuation of such contest
need not pay or discharge any such matters) upon deposit with Pledgee, within
such fifteen (15) day period, of a cash deposit, an irrevocable letter of credit
or a surety bond or other security reasonably satisfactory to Pledgee, in an
amount sufficient to pay such lien, any accrued interest thereon, and any costs
and expenses in connection therewith.
SECTION 4.15 [Intentionally omitted].
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SECTION 4.16 Collateral Value.
(a) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
first Business Day of any calendar quarter beginning April 1, 1995,
Pledgee shall determine, after receipt of the calculation of Market Value
provided for in subparagraph (c) below, that the aggregate Market Value of
the Pledged Interests and the fair market value of any other Collateral
theretofore pledged by Pledgor under this Section 4.16 and then
constituting a part of the Collateral hereunder, is less than 90% of the
Pledge Amount, then Pledgor shall promptly pledge and deliver to Pledgee
additional unencumbered Common Units and/or unencumbered Common Stock
(including certificates and transfer instruments relating thereto), and/or
other collateral acceptable to Pledgee, such that, after giving effect to
the pledge of such additional Common Units and/or Common Stock and/or
other collateral, all Pledged Interests and other Collateral pledged under
this Pledge and Security Agreement and then constituting a part of the
Collateral shall have a fair market value (valuing Pledged Interests at
Market Value) equal to or greater than the Pledge Amount. Such additional
Common Units and/or Common Stock shall constitute Pledged Interests and,
together with any other collateral pledged hereunder, shall be deemed to
be part of the Collateral hereunder.
(b) So long as this Pledge and Security Agreement remains in full
force and effect, and subject to subparagraph (d) below, if as of the
first Business Day of any calendar quarter beginning April 1, 1995,
Pledgee shall determine, after receipt of the calculation of Market Value
provided for in subparagraph (c) below, that the aggregate of the Market
Value of the Pledged Interests and the fair market value of any other
Collateral theretofore pledged by Pledgor under this Section 4.16 and then
constituting a part of the Collateral hereunder, is more than 110% of the
Pledge Amount, then Pledgee shall promptly release and deliver to Pledgor
Common Units and/or Common Stock and/or other Collateral (as Pledgee shall
determine in its sole discretion), such that, after giving effect to such
release and delivery, the aggregate of the Market Value of the remaining
Pledged Interests and the fair market value of any other Collateral
theretofore pledged by Pledgor under this Pledge and Security Agreement
and then constituting a part of the Collateral hereunder, shall be as
close as possible to, but in no event less than, 110% of the Pledge
Amount.
(c) Within (i) forty-five (45) days, so long as the adjustment
contemplated by subparagraph (d) below is applicable, and (ii) five (5)
Business Days, if such adjustment contemplated by subparagraph (d) below
is no longer applicable, after the first Business Day of each calendar
quarter beginning April 1, 1995, and at such other times as the Pledgee
may request, Pledgor shall deliver to Pledgee a calculation, made in good
faith based on publicly reported financial results of operations for
General Partner and certified as such by the Chief Financial Officer of
General Partner, or another officer of General Partner reasonably
acceptable to Pledgee, of the Market Value of the Pledged Interests
(including the adjustment contemplated by subparagraph (d) below, if
applicable) and the fair market value (determined on a reasonable basis
acceptable to Pledgee) of any other collateral pledged by Pledgor under
this Section 4.16 and then constituting part of the
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Collateral hereunder, calculated as of the first Business Day of the
applicable calendar quarter in accordance with the provisions of this
Pledge and Security Agreement.
(d) Notwithstanding anything in this Pledge and Security Agreement
to the contrary, until the earlier of (i) the Preferential Distribution
Lapse Date, or (ii) as to any Common Unit then constituting Pledged
Interests, the Exchange of such Common Unit to Common Stock, at which time
the definition of "Market Value" in Article I of this Pledge and Security
Agreement shall control, the Market Value of the Pledged Interests shall
be deemed to be (A) the amount determined in accordance with the
definition of "Market Value" in Article I of this Pledge and Security
Agreement, minus (B) an amount equal to such "Market Value" (determined in
accordance with Article I) multiplied by the Discount, but in no event
shall the result be less than zero.
ARTICLE 5
CERTAIN RIGHTS OF PLEDGEE
SECTION 5.1 Pledgee Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints Pledgee as Pledgor's attorney-in-fact, coupled with an interest, with
full power of substitution, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, after the occurrence and during
the continuance of an Event of Default, in Pledgee's discretion, to take any
action and to execute any instrument which Pledgee may reasonably deem necessary
or advisable to accomplish the purposes of this Pledge and Security Agreement,
including, without limitation:
(a) to ask, demand, collect, sue for, recover, receive and give
receipts for moneys due and to become due under or in respect of any of
the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above;
(c) to file any claims or commence, maintain or discontinue any
action or institute any proceedings which Pledgee may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of Pledgee with respect to any of the Collateral;
(d) to execute and deliver any instrument required to be executed
and delivered by Pledgor under Sections 4.3 and 4.6; and
(e) to do all other things necessary and proper by Pledgor to
protect, preserve, and permit Pledgee to realize upon, the Collateral, and
the other rights contemplated by the Pledge and Security Agreement.
SECTION 5.2 Pledgee Has No Duty. The powers conferred on Pledgee hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty on it to exercise any such powers. Pledgee shall have no duty as to any
Collateral or responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Interests, whether or not Pledgee has or is deemed to have
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knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
execution and delivery of this Pledge and Security Agreement and the Guaranty is
not intended to be, nor shall they be construed to be, the formation of a
partnership or joint venture between Pledgor and Pledgee.
SECTION 5.3 Right of Sale. At its sole option, Pledgee shall have the
right, exercisable by the giving of notice to Pledgor on or after each of the
dates set forth below (an "Annual Sale Date") to sell (or to compel Pledgor to
sell or to cause to be sold) with respect to each Annual Sale Date the
percentage of the Pledged Interests then pledged equal to the sum of (a) 25% of
the Pledged Interests then pledged plus (b) with respect to each Annual Sale
Date other than March 23, 1997, that percentage of the Pledged Interests that
Pledgee had the right to sell (or to compel Pledgor to sell or to cause to be
sold) on the immediately preceding Annual Sale Date but as to which Pledgee did
not exercise such right.
Annual Sale Date
----------------
March 23, 1997
March 23, 1998
March 23, 1999
March 23, 2000
The proceeds of any such sale shall be applied in accordance with Section 6.4.
Pledgee's rights under this Section 5.3 may be exercised in writing at any time
and the closing of any sale pursuant to this Section 5.3 shall occur as soon as
reasonably practicable following notice by Pledgee of its exercise of its rights
under this Section 5.3, subject to the dates set forth in the schedule above;
provided, however, that with respect to any sale by or caused by Pledgor, the
sale or sales of the applicable percentage of Pledged Interests to be sold shall
occur no later than 12 months after the date of giving of notice by Pledgor to
Pledgee as aforesaid. Notwithstanding anything herein to the contrary, after
March 23, 2000 Pledgee has the right to sell (or to compel Pledgor to sell or to
cause to be sold) any remaining balance of the Pledged Interests.
ARTICLE 6
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have occurred
and be continuing Pledgee may exercise in respect of the Collateral, all rights
and remedies provided for herein or otherwise available to Pledgee, including
without limitation, all of the rights and remedies of a secured party on default
under the Code and also may, without notice except as below:
(a) sell such Collateral or any part thereof in one or more parcels
at public or private sale or broker's board, at any of Pledgee's offices
or elsewhere, for cash or other property, on credit or for future
delivery, and upon such other terms as may be commercially reasonable;
Pledgor agrees that Pledgee shall be entitled to bid for or purchase any
or all of the Collateral at any such sale; Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days'
notice to Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall
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constitute reasonable notification; Pledgee shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given;
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned;
(b) notify the parties obligated on any of such Collateral to make
payment to Pledgee of any amount due or to become due thereunder
(including, without limitation, any Distributions);
(c) enforce collection of any of such Collateral by suit or
otherwise;
(d) endorse any checks, drafts, or other writings in Pledgor's name
to allow collection of such Collateral;
(e) take control of any proceeds of such Collateral; and
(f) subject to Section 2.7(c), upon disposition of the Collateral as
provided in Section 6.1(a), execute (in the name, place and stead of
Pledgor) endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of such Collateral.
SECTION 6.2 Securities Laws. If Pledgee shall determine, subject to
Section 2.7(c), to exercise the right to sell all or any of the Collateral at
any time pursuant to Section 6.1, Pledgor agrees that, upon request of Pledgee,
Pledgor will, at its own expense:
(a) exercise its rights under the Registration Rights Agreement;
(b) use its best efforts to obtain all necessary governmental
approvals for sale of the Collateral, as requested by Pledgee; and
(c) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid
and binding and compliance with applicable law.
Pledgor acknowledges the impossibility of ascertaining the amount of damages
that would be suffered by Pledgee by reason of the failure by Pledgor to perform
any of the covenants in this Section and, consequently, agrees that, if Pledgor
shall fail to perform any of such covenants, at Pledgee's election, Pledgee
shall have the right to have each covenant of this Section 6.2 specifically
enforced against Pledgor, and Pledgor waives and agrees not to assert any
defenses against an action for specific performance of such covenants.
Pledgor further acknowledges that Pledgee may be compelled to resort to
one or more private sales to a restricted group of purchasers who shall be
obliged to agree, among other things, to acquire such Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. If, at any time of any sale of Collateral, which sale is then the
applicable securities law, as from time to time amended (the "Securities Act"),
the same or any part thereof to be sold shall not, for any reason whatsoever, be
effectively under the Securities
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<PAGE>
Act, Pledgee is hereby authorized to sell such Collateral or such part thereof
by private sale in any commercially reasonable manner and under any commercially
reasonable circumstances as Pledgee may deem necessary or advisable in order
that such sale may be legally effected without registration. Pledgor
acknowledges that private sales so made may be at prices and on other terms less
favorable to the seller than if such Collateral were sold at public sales, and
agrees that Pledgee shall not have an obligation to delay the sale of any such
Collateral for the period of time necessary to permit the issuer of such
Collateral, even if such issuer would agree, to register such Collateral for
public sale under the Securities Act. Pledgor agrees that private sales made
under the foregoing circumstances shall not, because so made, be deemed to have
been made in a commercially unreasonable manner.
SECTION 6.3 Indemnity and Expenses. Pledgor hereby indemnifies and holds
harmless Pledgee and Pledgee's officers, directors, employees, agents,
representatives, successors and assigns, from and against any and all claims,
losses, and liabilities growing out of or resulting from this Pledge and
Security Agreement (including, without limitation, enforcement of this Pledge
and Security Agreement, and any underwriting fees or expenses in connection with
registration or sale of Collateral), except for claims, losses, or liabilities
resulting from Pledgee's willful misconduct or gross negligence. Upon demand,
Pledgor will pay to Pledgee the amount of any and all expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which Pledgee may incur in connection with:
(a) the enforcement of this Pledge and Security Agreement;
(b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of Pledgee
hereunder; or
(d) the failure by Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Application of Proceeds. Any and all amounts actually received
by Pledgee hereunder in respect of Collateral shall be applied in the order set
forth below (to the extent permitted by applicable law):
(a) first, to the payment of all costs, expenses, liabilities and
advances made or incurred by Pledgee in performing or enforcing any of the
provisions hereof or in protecting the liens of this Pledge and Security
Agreement or the security afforded hereby and to the payment of the fees
and other expenses, including, without limitation, reasonable attorney's
fees and disbursements, of Pledgee to the extent that they have not been
paid or reimbursed;
(b) second, to the extent proceeds remain after the application
pursuant to the preceding clause (a), an amount equal to the outstanding
Secured Obligations shall be paid to Pledgee; and
(c) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (a) and (b), and the payment in full of
all Secured Obligations, to
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<PAGE>
Pledgor, its successors or assigns, or such other Person as may be
entitled thereto by law or as a court of competent jurisdiction may
otherwise direct.
ARTICLE 7
MISCELLANEOUS PROVISIONS
SECTION 7.1 Amendments. No amendment to or waiver of any provision of this
Pledge and Security Agreement, nor consent to any departure by Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
SECTION 7.2 Protection of Collateral. Pledgee may from time to time, at
its option, perform any act which Pledgor agrees hereunder to perform and which
Pledgor shall fail to perform within ten (10) Business Days after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default).
SECTION 7.3 Notices. Any notice or other communication required or
permitted hereunder shall be (a) in writing and shall be deemed to have been
duly given (A) when received, if delivered in person, (B) five (5) days after
deposit in a regularly maintained receptacle of the United States mail as first
class mail, postage prepaid, (C) the Business Day after notice is sent for
overnight delivery by nationally recognized overnight courier service, or (D) on
the day on which the party to whom such notice is addressed refuses delivery by
mail or by nationally recognized courier service, and (b) addressed as follows:
To Pledgee: Kemper National Insurance Companies
Kemper Center
One Kemper Drive
Long Grove, Illinois 60049
Attention: Chief Financial Officer
With copy to: Kemper National Insurance Companies
Kemper Center
One Kemper Drive
Long Grove, Illinois 60049
Attention: General Counsel
To Pledgor: c/o Kemper Financial Services, Inc.
120 South LaSalle Street
13th Floor
Chicago, Illinois 60603
Attn: Real Estate Investment Group
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<PAGE>
With copy to: Kemper Corporation
Legal Department, C-3
One Kemper Drive
Long Grove, Illinois 60049
Attn: General Counsel
and
KFC Portfolio Corp.
c/o Kemper Financial Services, Inc.
120 South LaSalle Street
22nd Floor
Chicago, Illinois 60603
Attn: Legal Department
Real Estate Counsel
or to any such other address as any party hereto shall designate in a written
notice to the other parties hereto.
SECTION 7.4 Captions. Article and section captions used in this Pledge and
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Pledge and Security Agreement.
SECTION 7.5 Governing Law; Submission to Jurisdiction. This Pledge and
Security Agreement shall be governed by, and construed in accordance with, the
laws of the State of Illinois without regard to principles of conflict of laws.
Pledgor hereby waives any plea of jurisdiction or venue as not being a resident
of Cook County, Illinois and hereby specifically authorizes any action brought
upon this Pledge and Security Agreement to be instituted and prosecuted in
either the Circuit Court of Cook County, Illinois or in the United States
District Court for the Northern District of Illinois, at the election of
Pledgee. Pledgor hereby irrevocably authorizes service of process to be made
upon it in the manner provided in Section 7.3 above, in any action which may be
instituted against it arising out of or relating to this Pledge and Security
Agreement.
SECTION 7.6 WAIVER OF JURY TRIAL. PLEDGOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY ANY PARTY, RELATING DIRECTLY OR INDIRECTLY TO THIS PLEDGE
AND SECURITY AGREEMENT, THE GUARANTY OR THE SECURED OBLIGATIONS.
SECTION 7.7 Severability. Wherever possible each provision of this Pledge
and Security Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge and Security
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge and Security Agreement.
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<PAGE>
SECTION 7.8 Limited Recourse. Notwithstanding anything to the contrary
contained herein or in the Guaranty, except as otherwise provided in this
Section 7.8, neither Pledgor nor any of its shareholders, officers, directors,
partners, employees, agents or other representatives ("Other Persons") shall
have any personal liability for the Secured Obligations under this Pledge and
Security Agreement, or for the obligation to observe, perform or discharge any
of the terms, covenants or conditions contained herein or in the Guaranty, and,
except as otherwise provided in this Section 7.8, (a) no attachment, execution,
writ or other process shall be sought and no judicial proceeding shall be
initiated by or on behalf of Pledgee against Pledgor or any Other Person as a
result of a breach or default under this Pledge and Security Agreement or the
Guaranty, except to the extent that such attachment, execution, writ or judicial
proceeding shall be necessary to enforce any of the rights, remedies or
recourses of Pledgee against or with reference to the Collateral, and (b) in the
event that any suit is brought hereunder or under the Guaranty, any judgment
obtained in or as a result of such suit shall be enforceable and/or enforced
solely against the Collateral; provided, however, that nothing herein contained
shall be construed to: (i) be a release or impairment of Pledgor's obligations
hereunder or under the Guaranty or any of the Loan Documents, (ii) prevent
Pledgee from exercising and enforcing, consistent with the provisions of this
Section 7.8, any other remedy allowed at law or in equity or by statute or by
the terms hereof or of the Guaranty or of any other Loan Document, or (iii)
prevent Pledgee from recovering from Pledgor (or any such Other Person), or
limit Pledgee's recourse against Pledgor (or any such Other Person) for, any
funds, damages or costs (including, without limitation, reasonable legal
expenses) incurred by Pledgee as a result of any willful act or omission in bad
faith, any fraudulent act or omission, or any breach of any of the following
sections of this Pledge and Security Agreement: Section 2.4, the first sentence
of Section 4.2, Section 4.3(a), Section 4.4, Section 4.5 and Section 4.7(ii).
SECTION 7.9 Acknowledgement and Consent. Pledgor hereby consents to the
execution and delivery by the Partnership and the General Partner of an
acknowledgement and consent of and to this Pledge and Security Agreement
substantially in the form of Exhibit A attached hereto.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Pledgor has duly executed and delivered this Pledge
and Security Agreement as of the day and year first above written.
KILICO REALTY CORPORATION, an Illinois
corporation
By: /s/ John E. Neal
----------------------------------
Name: John E. Neal
Title: Vice President
KEMPER INVESTORS LIFE INSURANCE
COMPANY, an Illinois insurance corporation
By: /s/ John E. Neal
----------------------------------
Name: John E. Neal
Title: Authorized Signatory
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<PAGE>
EXHIBIT A
ACKNOWLEDGEMENT AND CONSENT
Reference is hereby made to the Pledge and Security Agreement [150 N.
Riverside] dated as of March 22, 1994 (the "Pledge and Security Agreement") by
Kilico Realty Corporation to Lumbermens Mutual Casualty Company. Each
capitalized term used herein shall have the meaning assigned thereto in the
Pledge and Security Agreement.
Notwithstanding anything in the By-laws of the General Partner to the
contrary, Prime Retail, L.P., a Delaware limited partnership (the "Partnership")
and Prime Retail, Inc., a Maryland corporation (the "General Partner"), hereby
acknowledges receipt of a copy of the Pledge and Security Agreement and consents
to Pledgor's pledge of the Pledged Interests pursuant to the terms thereof.
Notwithstanding anything in the By-laws of the General Partner to the contrary,
the Partnership and the General Partner further acknowledge and agree (i) to
recognize and consent to the pledge of all future rights and interests in the
Pledged Interests, Distributions or other Collateral to which Pledgee may be
entitled under the Pledge and Security Agreement, (ii) that, as of the date
hereof, there are, to their knowledge, no existing defaults by Pledgor under the
Partnership Agreement with respect to any of the Pledged Interests, (iii) that,
without Pledgee's consent in its sole discretion, no further transfer or
encumbrance by Pledgor of the Pledged Interests, rights to Distributions related
thereto or other Collateral will be consented to or recognized by the
Partnership and the General Partner (except in the event of a Dilution), and
(iv) in the event that either of the Partnership and the General Partner
receives written notice from Pledgee of the occurrence and continuation of an
Event of Default under the Pledge and Security Agreement and of Pledgee's
election to exercise its remedies thereunder with respect to such Event of
Default, the recipient of any such notice from Pledgee shall promptly notify
Pledgor of its receipt thereof (provided that the failure by the Partnership or
the General Partner to give Pledgor such notice shall not (x) impair, alter or
otherwise affect Pledgee's rights or remedies, or the exercise thereof, with
respect to such Event of Default or (y) create any liability on the part of the
Partnership or General Partner solely by reason of such failure (it being
understood that such clause (y) does not relieve them of their obligations under
clauses (A) and (B) below)), and so long as the Partnership and the General
Partner shall not have received a written objection from the Pledgor within five
(5) Business Days of receipt of such written notice from the Pledgee, the
Partnership and the General Partner undersigned will (A) consent to, and take
such action as may be reasonably necessary or appropriate to effect, the
substitution of record ownership of Pledgee for Pledgor on the undersigned's
records, if Pledgee is entitled to be substituted for Pledgor following any
foreclosure upon the Pledged
[Signature page follows.]
<PAGE>
Interests pursuant to Section 6.1 of the Pledge and Security Agreement, and (B)
pay Distributions, and issue Common Stock, directly to Pledgee, in accordance
with the terms of the Pledge and Security Agreement.
PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc., a Maryland corporation,
its general partner
By:________________________________________
Name:______________________________________
Title:_____________________________________
PRIME RETAIL, INC., a Maryland corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
The undersigned, being the Pledgor under the above-referenced Pledge and
Security Agreement, hereby consents to the execution and delivery by the
Partnership and the General Partner of the foregoing Acknowledgement and Consent
and agrees with the provisions thereof.
Dated: March 22, 1994
KILICO REALTY CORPORATION, an Illinois
corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
KEMPER INVESTORS LIFE INSURANCE
COMPANY, an Illinois insurance corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE>
May 6, 1994
Mr. Harry L. Brice
Assistant State's Attorney
500 Richard J. Daley Center
Chicago, Illinois 60602
Re: 1987 Objection No. 1316, M&M Mars
Dear Harry:
Enclosed please find photocopies of the three appraisal reports referenced
in my May 4, 1995 letter to you. I am also enclosing a photocopy of the Order
entered by Judge Murphy on April 25, 1994 setting this matter for prove-up on
May 26, 1994. We are still searching for our objection file and when we find it,
I will forward you photocopies of the objection and other necessary
documentation.
Thank you for your attention to this matter.
Very truly yours,
David S. Martin
DSM/pj
Enclosure
cc: Thomas J. McNulty, Esq.
<PAGE>
Exhibit XII
FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
[150 N. RIVERSIDE]
THIS FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT (150 N. Riverside]
(this "First Amendment") is made as of the 13th day of December, 1995, to be
effective as of September 1, 1995, by and between PRIME GROUP V, L.P., an
Illinois limited partnership ("PG5") and LUMBERMENS MUTUAL CASUALTY COMPANY, an
Illinois insurance corporation ("Pledgee").
RECITALS
A. Kemper Investors Life Insurance Company, an Illinois insurance
corporation ("KILICO") and KILICO Realty Corporation, an Illinois corporation
("KILICO Realty", and together with KILICO the "Original Pledgors") are parties
to that certain Pledge and Security Agreement [150 N. Riverside] dated as of
March 22, 1995, from the Original Pledgors, as pledgors, for the benefit of
Pledgee (the "Original Security Agreement"), which encumbers certain Common
Units (the "Original Common Units") in Prime Retail, L.P., a Delaware limited
partnership (the "Partnership"), all as described in the Original Security
Agreement. Capitalized terms used and not defined in this First Amendment shall
have the meaning given to such terms in the Original Security Agreement, as
amended hereby.
B. The Original Security Agreement secures the obligations of the Original
Pledgors under that certain Limited Recourse Guaranty [150 N. Riverside] dated
as of March 22, 1994 (the "Original Guaranty").
C. In accordance with the terms and provisions of an Assignment and
Assumption dated as of April 1, 1994, by and between KILICO, as assignor, and
KILICO Realty, as assignee, KILICO assigned to KILICO Realty all of KILICO's
rights, title and interest in and to the Common Units held by KILICO and pledged
under the Original Security Agreement, and Lender hereby acknowledges and
confirms its consent to such Assignment and Assumption. With the consent of
Pledgee, concurrently with said Assignment and Assumption, KILICO transferred
all of the Original Common Units held by it to KILICO Realty, subject to the
lien of the Original Security Agreement.
D. With the consent of Pledgee, concurrently herewith, Kilico Realty has
transferred the Original Common Units (including, without limitation, the
Original Common Units previously held by KILICO) to PG5, subject to the lien of
the Original Security Agreement, and PG5 has assumed (subject to the terms and
conditions of the Original Guaranty and the Original Security Agreement) the
obligations of the Original Pledgors arising from and after the date of such
assignment under the Original Guaranty and the Original Security Agreement.
E. PG5 and Pledgee desire to amend the Original Security Agreement as
provided herein to reflect the transfer of the Original Common Units to PG5 and
the assumption by PG5 as described above, and to provide for the pledge by PG5
to Pledgee of the Additional Common Units described below. Contemporaneously
with the execution and delivery of this First
<PAGE>
Amendment, PG5 and Pledgee are also entering into an amendment of the Original
Guaranty (the "Guaranty Amendment"), to reflect such transfer and assumption.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Substitution of PG5 as Pledgor. Subject to all of the terms and
conditions of the Original Security Agreement, as amended by this First
Amendment (as so amended, the "Security Agreement"), including, without
limitation, Section 7.8 thereof, PG5 is hereby substituted as the "Pledgor"
thereunder and, from and after the date hereof, all references in the Original
Security Agreement (including, without limitation, in Section 7.8 thereof), as
amended hereby, to the "Pledgor" or the "Company" shall be deemed to refer to
PG5.
2. References to Guaranty. From and after the date hereof, all references
in the Security Agreement to the "Guaranty" shall be deemed to refer to the
Original Guaranty as amended by the Guaranty Amendment.
3. Pledge of New Collateral. Subject to all of the terms and conditions of
the Security Agreement, PG5 hereby pledges, hypothecates, assigns and transfers
to Pledgee, and hereby grants to the Pledgee a continuing security interest in
all of the following property (the "New Collateral"):
(a) subject to Section 2.7 and 4.16(b) hereof, 147,203 Common Units;
(b) any Pledged Interests or other collateral pledged by PG5 to Pledgee
after the date hereof to secure the Secured Obligations pursuant to
the Security Agreement;
(c) any and all Common Stock owned by PG5 following a Conversion of any
New Collateral which consists of Common Units (which Common Stock
shall constitute "Pledged Interests" hereunder immediately upon
issuance thereof and without any further act required on the part of
PG5);
(d) any and all Common Units or Common Stock or any other securities or
property received by PG5 as a result of any exchanges, splits,
reverse splits, combinations, mergers, consolidations,
reclassifications, warrants, options, and noncash dividends or
distributions in respect of any Pledged Interests, and all other
Capital Distributions in respect of any Pledged Interests (and any
such Common Units or Common Stock or other securities, property or
Capital Distributions so received shall be deemed "Pledged
Interests" for purposes hereof);
(e) subject to Sections 2.4 and 4.7 hereof, all Non-Capital
Distributions with respect to any Pledged Interests; and
(f) all other proceeds of any of the foregoing. For purposes of the
Security Agreement, "proceeds" includes, without limitation,
whatever is receivable or received when New Collateral or proceeds
are sold, collected, exchanged,
2
<PAGE>
converted or otherwise disposed of, whether such disposition is
voluntary or involuntary.
Pledgee shall hold, apply and dispose of the New Collateral as "Collateral"
under the Security Agreement, and, from and after the date hereof, references in
the Security Agreement to the "Collateral" shall include the New Collateral.
4. Definitions. (a) The following definitions are hereby added to the
Original Security Agreement:
"Capital Distributions" means (i) any and all Common Units or Common
Stock or any other securities or property received by Pledgor as a
result of any exchanges, splits, reverse splits, combinations,
mergers, consolidations, reclassifications, warrants, options, and
noncash dividends or distributions in respect of any Pledged
Interests and (ii) Distributions received in respect of any Pledged
Interests in any liquidation, redemption or other similar
transaction to the extent such Distributions constitute a return of
capital.
"Non-Capital Distributions" means all Distributions other than
Capital Distributions.
(b) The definition of "Market Value" set forth in the Original Security
Agreement is hereby amended by deleting the words "the five
consecutive Business Days" in the second line thereof and replacing
such words with the words "the ten consecutive Business Days."
(c) The definition of "Pledge Amount" set forth in the Original Security
Agreement is hereby amended to read in full as follows:
"Pledge Amount" means at all times the Initial Pledge Amount or the
outstanding principal balance of the Loan, whichever is less."
5. Amendment of Section 2.1. (a) Section 2.1(d) of the Original Security
Agreement is amended to read in full as follows:
"any and all Common Units or Common Stock or any other securities or
property received by Pledgor as a result of any exchanges, splits,
reverse splits, combinations, mergers, consolidations,
reclassifications, warrants, options, and noncash dividends or
distributions in respect of any Pledged Interests, and all other
Capital Distributions in respect of any Pledged Interests (and any
such Common Units or Common Stock or other securities, property or
Capital Distributions so received shall be deemed "Pledged
Interests" for purposes hereof);
(b) Section 2.1(e) of the Original Security Agreement is hereby deleted,
and replaced by the following:
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<PAGE>
"(e) subject to Sections 2.4 and 4.7 hereof, all Non-Capital
Distributions with respect to any Pledged Interests; and"
6. Amendment of Section 2.4. Section 2.4 of the Original Security
Agreement is hereby deleted, and replaced by the following:
"SECTION 2.4 Distributions. (a) In the event that any Non-Capital
Distribution is to be paid on or with respect to the Pledged
Interests at a time when no Event of Default has occurred and is
continuing, such Non-Capital Distribution shall be paid directly to
the Pledgor; provided that Pledgor shall hold such Non-Capital
Distribution in trust and promptly, and in no event more than three
(3) Business Days after receipt thereof by Pledgor, pay such
Non-Capital Distribution to Pledgee in an amount equal to the amount
of interest (the "Interest Amount") that has accrued since the date
of the immediately preceding Non-Capital Distribution (or, in the
case of the first such Non-Capital Distribution, since September 1,
1995) to the date of such Non-Capital Distribution at the rate of
5.5% per annum, on a principal amount equal to the Pledge Amount, as
such Pledge Amount may change from time to time pursuant to this
Pledge and Security Agreement. Unless and until an Event of Default
shall have occurred and be continuing, Pledgor shall be entitled to
receive, retain and apply Non-Capital Distributions in excess of the
Interest Amount free and clear of the lien of this Pledge and
Security Agreement and shall not be obligated to pay or invest such
amounts to or in any Person (and, if Pledgee shall receive any
Non-Capital Distribution after September 1, 1995, any portion of
such Non-Capital Distribution in excess of the Interest Amount
shall, if no Event of Default shall have occurred and be continuing,
be promptly returned by Pledgee to Pledgor). Any Non-Capital
Distributions paid to Pledgee in accordance with this Pledge and
Security Agreement shall be applied by Pledgee to pay accrued and
unpaid interest on the Loan and shall be deemed to be a contribution
by the affiliates of Pledgor that are partners in Borrower to the
capital of Borrower.
(b) All Capital Distributions shall be held in trust by
Pledgor and promptly, but in no event more than three (3) Business
Days after receipt thereof by Pledgor, paid or delivered to Pledgee
and held by Pledgee as Collateral pursuant to this Pledge and
Security Agreement."
7. Amendment of Section 2.7. (a) Section 2.7(a) of the Original Security
Agreement is hereby amended by (i) deleting the words "but only as provided in
the Letter Agreement" from the last line thereof and (ii) adding the following
sentence at the end of the paragraph:
"In the event of any Dilution under the Partnership Agreement, (i)
the number of Common Units then constituting a part of the Pledged
Interests shall be reduced, in accordance with Exhibit B hereto, and
(ii) Pledgor shall promptly pledge to Pledgee additional
unencumbered Common Units as provided in Section 2.7(b) hereof."
4
<PAGE>
(b) Section 2.7(b) of the Original Security Agreement is hereby amended to
read in full as follows:
"(b) In the event that a portion of any Dilution Amount is allocated
to the Pledgor pursuant to the terms of the Sharing Agreement and Exhibit
B hereto, Pledgor shall promptly pledge and deliver to Pledgee, or cause
to be delivered to Pledgee, additional unencumbered Common Units and/or
unencumbered Common Stock (including certificates and transfer instruments
related thereto), and/or other collateral acceptable to Pledgee, such
that, after giving effect to the pledge of such additional Common Units
and/or Common Stock and/or other collateral, all Pledged Interests and
other Collateral pledged under this Pledge and Security Agreement and then
constituting Collateral shall have a fair market value (valuing Pledged
Interests at Market Value and subject to subparagraph 4.16(d) below) equal
to or greater than the Pledge Amount. Such additional Common Units and/or
Common Stock shall constitute Pledged Interests and, together with any
other Collateral pledged hereunder, shall be deemed to be part of the
Collateral hereunder."
8. Exhibit B. An "Exhibit B" is hereby added to the Original Security
Agreement, in the form of Exhibit B hereto.
9. Amendment of Section 4.4. Section 4.4 of the original Security
Agreement is hereby amended by adding the section reference "2.4," to the first
sentence thereof, following the words "Subject to Sections" and prior to the
section reference "2.5".
10. Amendment of Section 4.7. Section 4.7 of the Original Security
Agreement is hereby amended by adding the following sentence as the first
sentence thereof:
"Unless and until an Event of Default shall have occurred and be
continuing, Pledgor shall be entitled to receive, retain and apply all
Non-Capital Distributions in accordance with Section 2.4 above."
11. Amendment of Section 4.16. (a) Section 4.16(a) of the Original
Security Agreement is hereby amended by deleting the words "if as of the first
Business Day of any calendar quarter beginning April 1, 1995" in the second and
third lines thereof and replacing such words with the words "if as of the tenth
(10th) Business Day following the release by the General Partner of the earnings
for any calendar quarter beginning with the calendar quarter beginning January
1, 1996."
(b) Section 4.16(b) of the Original Security Agreement is hereby amended
by deleting the words "if as of the first Business Day of any
calendar quarter beginning April 1, 1995" in the second and third
lines thereof and replacing such words with the words "if as of the
tenth (10th) Business Day following the release by the General
Partner of its earnings for any calendar quarter beginning with the
calendar quarter beginning January 1, 1996."
(c) Section 4.16(c) of the Original Security Agreement is hereby deleted
and replaced by the following:
5
<PAGE>
"(c) Within five (5) Business Days after the tenth (10th) Business
Day following the release by the General Partner of its
earning for any calendar quarter beginning with the calendar
quarter beginning January 1, 1996, and at such other times as
the Pledgee may request, Pledgor shall deliver to Pledgee a
calculation, made in good faith and certified as such by the
Chief Financial Officer of General Partner, or another officer
of General Partner reasonably acceptable to Pledgee, of the
Market Value of the Pledged Interests and the fair market
value of any other collateral pledged by Pledgor under this
Section 4.16 and then constituting part of the Collateral
hereunder, calculated as of the tenth (10th) Business Day
following the release by the General Partner of its earnings
for the applicable calendar quarter in accordance with the
provisions of this Pledge and Security Agreement."
12. Remargining. PG5 and Pledgee agree that, notwithstanding Section 4.16
of the Security Agreement, the delivery of additional Collateral or release of
Collateral, as applicable, pursuant to Section 4.16 for calendar quarters ended
March 31, 1996 and thereafter shall be effected no later than the earlier of (i)
the tenth Business Day after the public release of earnings by Prime Retail,
Inc. for such quarter or (ii) the last day of the second month following the end
of such quarter (that is, each May 31, August 30, November 30 and February
28/29, for the preceding quarter).
13. Section 5.3. Section 5.3 of the Original Security Agreement, together
with all references thereto in the Original Security Agreement, is hereby
deleted.
14. Notices. Section 7.3 of the Original Security Agreement is amended by
deleting the addresses set forth under "To Pledgor" (including the addresses for
copies) and substituting therefor the following:
"To Pledgor: Prime Group V, L.P.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
With copies to: The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Robert J. Rudnik
and to: Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Richard S. Millard
6
<PAGE>
15. Estoppel; Waiver of Defaults. Pledgee hereby certifies to PG5 that
(other than the failure of the Original Pledgors to deliver additional
Collateral as required by Section 4.16 of the Original Security Agreement) no
default or event of default exists under the Original Security Agreement that is
not being cured concurrently herewith and, except in the case of fraud by PG5 or
PG5's intentional misrepresentation, hereby irrevocably waives any and all
defaults or events of default under the Original Security Agreement, as amended
hereby (including, without limitation, defaults or events of default under
Section 4.16), arising from events occurring or conditions existing on or prior
to the date hereof.
16. Continuing Effect. Except as amended hereby, the Original Security
Agreement shall continue in full force and effect.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amendment as of the date first above written, effective as of September 1, 1995.
PRIME GROUP V, L.P., an
Illinois limited partnership
By: PGLP, Inc., its general partner
By: /s/ Robert J. Rudnik
------------------------
Name: Robert J. Rudnik
Title: Vice President
LUMBERMENS MUTUAL CASUALTY COMPANY,
an Illinois insurance corporation
By: /s/ Walter L. White
-------------------------------
Name: Walter L. White
Title: Executive Vice President
By: /s/ Robert B. Stacy
-------------------------------
Name: Robert B. Stacy
Title: Treasurer
8
<PAGE>
EXHIBIT A
ACKNOWLEDGEMENT AND CONSENT
Reference is hereby made to the Pledge and Security Agreement [150 N.
Riverside] dated as of March 22, 1994 by Kemper Investors Life Insurance Company
and Kilico Realty Corporation to Lumbermens Mutual Casualty Company, as amended
by the First Amendment to Pledge and Security Agreement dated as of December
___, 1995 to be effective as of September 1, 1995 between Prime Group V, L.P.
and Lumbermens Mutual Casualty Company (as so amended, the "Pledge and Security
Agreement"). Each capitalized term used herein shall have the meaning assigned
thereto in the Pledge and Security Agreement.
Notwithstanding anything in the By-laws of the General Partner to the
contrary, Prime Retail, L.P., a Delaware limited partnership (the "Partnership")
and Prime Retail, Inc., a Maryland corporation (the "General Partner"), hereby
acknowledge receipt of a copy of the Pledge and Security Agreement and consent
to Pledgor's pledge of the Pledged Interests pursuant to the terms thereof.
Notwithstanding anything in the By-laws of the General Partner to the contrary,
the Partnership and the General Partner further acknowledge and agree (i) to
recognize and consent to the pledge of all future rights and interests in the
Pledged Interests, Distributions or other Collateral to which Pledgee may be
entitled under the Pledge and Security Agreement, (ii) that, as of the date
hereof, there are, to their knowledge, no existing defaults by Pledgor under the
Partnership Agreement with respect to any of the Pledged Interests, (iii) that,
without Pledgee's consent in its sole discretion, no further transfer or
encumbrance by Pledgor of the Pledged Interests, rights to Distributions related
thereto or other Collateral will be consented to or recognized by the
Partnership and the General Partner (except in the event of a Dilution), and
(iv) in the event that either of the Partnership and the General Partner
receives written notice from Pledgee of the occurrence and continuation of an
Event of Default under the Pledge and Security Agreement and of Pledgee's
election to exercise its remedies thereunder with respect to such Event of
Default, the recipient of any such notice from Pledgee shall promptly notify
Pledgor of its receipt thereof (provided that the failure by the Partnership or
the General Partner to give Pledgor such notice shall not (x) impair, alter or
otherwise affect Pledgee's rights or remedies, or the exercise thereof, with
respect to such Event of Default or (y) create any liability on the part of the
Partnership or General Partner solely by reason of such failure (it being
understood that such clause (y) does not relieve them of their obligations under
clauses (A) and (B) below)), and so long as the Partnership and the General
Partner shall not have received a written objection from the Pledgor within five
(5) Business Days of receipt of such written notice from the Pledgee, the
Partnership and the General Partner undersigned will (A) consent to, and take
such action as may be reasonably necessary or appropriate to effect, the
substitution of record ownership of Pledgee for Pledgor on the undersigned's
records, if Pledgee is entitled to be
<PAGE>
substituted for Pledgor following any foreclosure upon the Pledged Interests
pursuant to Section 6.1 of the Pledge and Security Agreement, and (B) pay
Distributions, and issue Common Stock, directly to Pledgee, in accordance with
the terms of the Pledge and Security Agreement.
PRIME RETAIL, L.P., a Delaware limited
partnership
By: Prime Retail, Inc., a Maryland corporation,
its general partner
By:________________________________________
Name:______________________________________
Title:_____________________________________
PRIME RETAIL, INC., a Maryland corporation
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
The undersigned, being the Pledgor under the above-referenced Pledge and
Security Agreement, hereby consents to the execution and delivery by the
Partnership and the General Partner of the foregoing Acknowledgement and Consent
and agrees with the provisions thereof.
Dated: December ___, 1995, effective as of September 1, 1995.
PRIME GROUP V, L.P., an Illinois limited
partnership
By: PGLP, Inc., general partner
By:________________________________________
Name:______________________________________
Title:_____________________________________
2
<PAGE>
EXHIBIT B
ALLOCATION OF DILUTION AMOUNT
1. 405,347 of the Common Units that constitute Pledged Interests (the
"KILICO Realty Units") were held by KILICO Realty Corporation ("KILICO Realty")
as of the date such Common Units were initially pledged, and an additional
148,450 the Common Units that constitute Pledged Interests (the "KILICO Units")
were held by Kemper Investors Life Insurance Company ("KILICO") as of the date
such Common Units were initially pledged. All such Common Units are treated as
if they were held by KILICO or KILICO Realty, as the case may be, for purposes
of the allocation of Dilution pursuant to the Sharing Agreement. The KILICO
Realty Units and the KILICO Units are referred to collectively as the "Kemper
Units". In the event of a Dilution under the Partnership that is allocated, in
whole or in part, to KILICO or KILICO Realty pursuant to the Sharing Agreement,
the Kemper Units then constituting a part of the Pledged Interests shall be
adjusted as follows:
a. Multiply the Dilution Amount allocated to KILICO or KILICO
Realty, as the case may be, pursuant to the Partnership Agreement and the
Sharing Agreement by the following fraction:
Number of Kemper Units then Pledged for this Pledge
Total Number of Common Units deemed to be held by KILICO or KILICO
Realty, as applicable, for purposes of the Sharing Agreement
b. Divide the number resulting from 1(a) by the Market Value of one
Common Unit as of the date of the Dilution.
c. Subtract the number obtained in (b) from the number of Kemper
Units then constituting Pledged Interests under the Pledge. The result is
the adjusted number of Kemper Units then constituting Pledged Interests
under the Pledge and Security Agreement.
2. 147,203 of the Common Units that constitute Pledged Interests (the
"PGLP Units") were initially issued to Prime Group Limited Partnership ("PGLP),
and are deemed to be held by PGLP for purposes of the allocation of Dilution
pursuant to the Sharing Agreement. PGLP has previously agreed that Dilution will
be allocated to certain Common Units initially issued to PGLP (including,
without limitation, the PGLP Units) before any Dilution is allocated to certain
units that PGLP and certain of its affiliates have pledged or may hereafter
pledge to Kemper Corporation and its affiliates (the "Kemper Pledged Units"). In
the event of a Dilution under the Partnership that is allocated, in whole or in
part, to PGLP pursuant to the Sharing Agreement, the PGLP Units then
constituting a part of the Pledged Interests shall be adjusted as follows:
a. Multiply the Dilution Amount allocated to PGLP pursuant to the
Partnership Agreement and the Sharing Agreement by the following fraction:
<PAGE>
Number of PGLP Units then Pledged for this Pledge
Total Number of Common Units (other than Kemper Pledged Units)
originally issued to PGLP
b. Divide the number resulting from 2(a) by the Market Value of one
Common Unit as of the date of the Dilution.
c. Subtract the number obtained in 2(b) from the number of PGLP
Units then constituting Pledged Interests under the Pledge. The result is
the adjusted number of PGLP Units then constituting Pledged Interests
under the Pledge and Security Agreement.
3. The calculations described in this Exhibit B shall not reduce the
Pledge Amount under the Pledge and Security Agreement. In accordance with
Section 2.7(b) of the Pledge and Security Agreement, promptly after any Dilution
that is allocated, in whole or in part, to any of the Pledged Interests as
provided in this Exhibit B, the Pledgor shall pledge to Pledgee additional
collateral, as described in Section 2.7(b) of the Pledge and Security Agreement,
so that the fair market value (determined as set forth in Section 2.7(b) of the
Pledge and Security Agreement) of the Collateral then subject to the Pledge and
Security Agreement is equal to or greater than the Pledge Amount.
2
<PAGE>
Exhibit XIII
LIMITED RECOURSE GUARANTY [150 N. RIVERSIDE]
THIS LIMITED RECOURSE GUARANTY (this "Guaranty") is made as of the
22nd day of March, 1994 by KILICO Realty Corporation, an Illinois corporation
("Kilico Realty") and Kemper Investors Life Insurance Company, an Illinois
insurance corporation ("Kilico"; Kilico Realty and Kilico are hereinafter
referred to together as "Guarantor" or "Company"), in favor of Lumbermens Mutual
Casualty Company, an Illinois insurance corporation ("Lender").
RECITALS
WHEREAS, Lender made a loan (the "Loan") to 150 N. Riverside
Venture, an Illinois general partnership (the "Borrower") in the amount of
$12,400,000 pursuant to that certain Loan Agreement between Lender and Borrower
dated as of October 17, 1988;
WHEREAS, Kilico Realty holds an option to acquire a Fifty Percent
(50%) partnership interest in the Borrower;
WHEREAS, Lender, Kemper Corporation, a Delaware corporation
("Kemper"), and The Prime Group, Inc., an Illinois corporation ("Prime"),
entered into that certain amended and restated letter agreement dated February
17, 1994 (as amended, the "Letter Agreement ), which Letter Agreement includes,
among other things, certain agreements of the parties thereto regarding the Loan
as set forth specifically therein;
WHEREAS, Guarantor is an affiliate and subsidiary of Kemper;
WHEREAS, in accordance with the terms of the Letter Agreement and in
order to induce Lender to modify certain of the terms and conditions of the
Loan, and in order to further secure the Loan, Guarantor has agreed, among other
things, to execute and deliver this Guaranty with respect to the Loan; and
WHEREAS, this Guaranty is secured by that certain Pledge and
Security Agreement dated as of even date herewith by Guarantor in favor of
Lender (as amended from time to time, the "Security Agreement"). All initially
capitalized terms used in this Guaranty and not otherwise defined herein shall
have the meaning given in the Security Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty.
(a) Guarantor hereby absolutely and unconditionally, guarantees the
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, without setoff, counterclaim or other reduction whatsoever, of (i)
the aggregate outstanding unpaid principal amount of the Loan, (ii) all accrued
and unpaid interest on the principal amount of the Loan, and
<PAGE>
(iii) all other amounts due under the Loan from time to time or under any
documents and instruments executed and delivered or assigned to Lender in order
to evidence the Loan or evidence or perfect a lien or security interest in
collateral for the Loan (the "Collateral Documents"), and any and all
extensions, renewals or modifications of any of the foregoing (such principal,
interest and other amounts are hereinafter referred to collectively as the
"Obligations"). The Obligations and any instrument, document or agreement,
express or implied, which has been or may hereafter be made or entered into by
Guarantor, Borrower or any other person or entity in reference to the
Obligations (including, without limitation, the Collateral Documents and the
Security Agreement) shall all be hereinafter collectively referred to as the
"Terms".
(b) For purposes hereof, the following terms shall have the
following respective meanings:
"Business Day" shall mean any day of the week other than Saturday,
Sunday or any other day on which banks are generally closed within the
City of Chicago, Illinois.
"Pledge Amount" shall have the meaning given in the Security
Agreement.
(c) Notwithstanding anything to the contrary in Section l(a),
Guarantor's maximum liability under this Guaranty shall not exceed an amount
equal to the Pledge Amount.
2. Limited Recourse. Notwithstanding anything to the contrary contained
herein or in the Security Agreement, except as otherwise provided in this
Section 2, neither Guarantor nor any of its shareholders, officers, directors,
partners, employees, agents or other representatives ("Other Persons") shall
have any personal liability for the Obligations under this Guaranty, or for the
obligation to observe, perform or discharge any of the terms, covenants or
conditions contained herein or in the Security Agreement, and, except as
otherwise provided in this Section 2, (a) no attachment, execution, writ or
other process shall be sought and no judicial proceeding shall be initiated by
or on behalf of Lender against Guarantor or any Other Person as a result of a
breach or default under this Guaranty or the Security Agreement, except to the
extent that such attachment, execution, writ or judicial proceeding shall be
necessary to enforce any of the rights, remedies or recourses of Lender against
or with reference to the right to receive Distributions with respect to the
Interests (as defined in the Security Agreement), and (b) in the event that any
suit is brought hereunder or under the Security Agreement, any judgment obtained
in or as a result of such suit shall be enforceable and/or enforced solely
against the right to receive Distributions with respect to the Interests;
provided, however, that nothing herein contained shall be construed to: (i) be a
release or impairment of Guarantor's obligations hereunder, under the Security
Agreement or under the Loan Documents, (ii) prevent Lender from exercising and
enforcing, consistent with the provisions of this Section 2, any other remedy
allowed at law or in equity or by statute or by the terms hereof, or by the
terms of the Security Agreement or of the Loan Documents; or (iii) prevent
Lender from recovering from Guarantor, or limit Lender's recourse against
Guarantor for, any funds, damages or costs (including, without limitation,
reasonable legal expenses) incurred by Lender as a result of any willful act or
omission in bad faith or any fraudulent act or omission.
2
<PAGE>
3. Guaranty Absolute. Guarantor guarantees that the Obligations will
be paid in accordance with the terms and provisions of this Guaranty and, to the
maximum extent permitted by law, Guarantor waives any law, regulation, order or
judgment now or hereafter in effect in any jurisdiction affecting the
obligations of Guarantor or the rights of Lender with respect thereto. This
Guaranty, and the liability of Guarantor under this Guaranty (which liability is
subject to Sections 1(c) and 2 hereof), shall continue and be absolute and
unconditional and remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of any of the Terms;
(b) any change in the time, manner or place of payment of, or in any
other term, including the applicable rate of interest, of, all or any of
the Terms, or any other renewal, extension, amendment, modification or
waiver of or any consent to departure from any of the Terms;
(c) any act or omission of Lender of any nature whatsoever;
(d) with respect to Guarantor, Borrower or any other person or
entity, (i) any failure to obtain required authorization by all necessary
corporate, partnership or other action relating to the incurrence of the
Obligations or to the execution, delivery or performance of any of the
Terms, or (ii) any violation of any provision of any of the articles of
incorporation, by-laws, partnership agreement or any other document,
instrument or agreement occasioned by the incurrence of the Terms, by the
execution, delivery, or performance of any of the Terms, or by any failure
of same to have been duly authorized by all necessary corporate or other
action;
(e) any amendment, waiver, modification, extension or renewal of or
consent to departure from or forbearance of any other action or inaction
under or in respect of this Guaranty or any other of the Terms;
(f) any exchange, release, forbearance or surrender of or any other
action or inaction with respect to any collateral (including, without
limitation, the right to receive Distributions with respect to the
Interests) at any time and from time to time now or hereafter securing any
or all of the Obligations or Terms or the liability of Guarantor, Borrower
or any other person or entity in respect of all or any of the Terms or any
failure to perfect or continue as perfected any security interest or other
lien with respect to any such collateral, or any loss or destruction of
any such collateral, or any matter impairing the value of such collateral
as security for all or any of the Terms, the liability of Guarantor,
Borrower or any other person or entity, in respect of all or any of the
Obligations or Terms;
(g) any other guaranty now or hereafter executed by Guarantor or
anyone else or any recovery under any such other guaranty;
(h) any waiver of or assertion or enforcement or failure or refusal
to assert or enforce, in whole or in part, any of the terms and provisions
of the Terms, or any claim, cause of action, right or remedy which Lender
may, at any
3
<PAGE>
time, have under this Guaranty, the Security Agreement or any of the other
Collateral Documents or with respect to any guaranty or any security which
may be held by Lender with respect to the Loan;
(i) the failure to give Guarantor any notice whatsoever, other than
any notice which Lender is expressly required to give pursuant to any
provisions of this Guaranty;
(j) exculpatory provisions in any of the Collateral Documents
limiting Lender's recourse to property encumbered by the Loan Documents or
to any other security or limiting Lender's rights to enforce a deficiency
judgment against Borrower;
(k) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of Borrower's interest in any property securing the Loan
or the occurrence of any such sale, assignment, conveyance, merger or
other voluntary or involuntary transfer which results in Guarantor
becoming the Borrower under the Collateral Documents, provided, however,
that any such sale, assignment, conveyance, merger or other transfer shall
be subject to the limitations set forth in the Collateral Documents;
(l) any sale, assignment, conveyance, merger or other transfer,
voluntary or involuntary (whether by operation of law or otherwise), of
all or any part of the interest of Lender in the Collateral Documents or
this Guaranty;
(m) any failure to properly record or file any of the Collateral
Documents, or to otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Loan;
(n) any recovery as a result of the exercise by Lender of any of its
rights or remedies under the Collateral Documents, including any
foreclosure thereof; or
(o) any other fact, circumstance or matter of any nature whatsoever
that might otherwise constitute a defense available to, or a discharge of,
or might otherwise operate to release or affect the obligations of,
Guarantor, Borrower or any other person or entity liable to Lender in
respect of any of the Terms.
This Guaranty shall continue to be effective or shall be reinstated, as the case
may be, regardless of whether any payment of any of the Obligations is rescinded
or must otherwise be returned by Lender upon the insolvency, bankruptcy, or
reorganization of Guarantor, Borrower, or any other person or entity or for any
reason whatsoever, all as though such payment had not been made. Lender shall
not be required to contest, dispute or litigate its obligation to make such
payment or repayment. The obligations of Guarantor hereunder shall be absolute
and primary, shall be complete and binding as to Guarantor upon its execution of
this Guaranty, shall be subject to no conditions precedent, and shall be
independent of and cumulative to any other of the Terms, and Lender may exercise
any of its rights and remedies under this Guaranty, any other of the Terms
4
<PAGE>
or otherwise singly or concurrently. The obligations of Guarantor under this
Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any voluntary or involuntary bankruptcy, insolvency,
receivership, reorganization, liquidation, arrangement, or debtor-relief
proceeding of or against Borrower, or by any defense that Borrower may have by
reason of the existence of any such proceeding or any order, decree or decision
of any court or administrative body resulting from or relating to any such
proceeding.
4. Waiver; No Duties. Guarantor waives to the fullest extent
permitted by applicable law: (a) all statutes of limitations as a defense to any
action brought against Guarantor by Lender; (b) any defense based upon any legal
disability or any discharge or limitation of liability (except as provided in
Section 2 above), whether consensual or arising by operation of law or any
bankruptcy, insolvency or debtor-relief proceeding, or from any other cause; (c)
promptness, diligence, presentment, demand, protest and notice of any kind
(other than as expressly required herein); (d) any defense based upon or arising
out of any defense of Borrower to the payment or performance of any part of the
Obligations (other than payment); (e) any and all rights of indemnity,
contribution, reimbursement or any similar right that Guarantor may have against
Borrower as a result of any actions taken or amounts paid in connection with or
relating to this Guaranty or the Loan; (f) all rights of subrogation, including,
without limitation, all rights to enforce any remedy of Lender, and all right to
participate in any security held by Lender; (g) notice of any change in
Borrower's financial condition; (h) the right to interpose any substantive or
procedural defense of the law of guaranty, indemnification or suretyship (except
the defense of prior payment of all of the Obligations which Guarantor is called
upon to pay under this Guaranty); (i) all rights and remedies accorded by
applicable law to guarantors or sureties, including without limitation, any
extension of time conferred by any law now or hereafter in effect; (j) the right
to interpose any defense (except as allowed under clause (h) above), setoff or
counterclaim of any nature or description in any action or proceeding; and (k)
any right or claim of right to cause a marshalling of Borrower's assets or to
cause Lender to proceed against Borrower and/or any collateral held by Lender at
any time or in any particular order. Lender shall not be obligated to exhaust
any right or take any action against the Borrower or any other person or entity
or any collateral for the Obligations prior to the enforcement of its rights
hereunder.
5. Notices. Any notice or other communication required or permitted
hereunder shall be (a) in writing and shall be deemed to have been duly given
(A) when received, if delivered in person, (B) five (5) days after deposit in a
regularly maintained receptacle of the United States mail as first class mail,
postage prepaid, (C) the business day after notice is sent for overnight
delivery by nationally recognized overnight courier service, or (D) on the day
on which the party to whom such notice is addressed refuses delivery by mail or
by private courier service, and (b) addressed as follows:
To Guarantor: c/o Kemper Financial Services, Inc.
120 South LaSalle Street
13th Floor
Chicago, Illinois 60603
Attn: Real Estate Investment Group
5
<PAGE>
With copies to: Kemper Corporation
Kemper Center, Legal Department C-3
One Kemper Drive
Long Grove, Illinois 60049
Attn: General Counsel
KFC Portfolio Corp.
c/o Kemper Financial Services, Inc.
120 South LaSalle Street - 22nd Floor
Chicago, Illinois 60603
Attn: Legal Department
Real Estate Counsel
To Lender: Kemper National Insurance Companies
Kemper Center
One Kemper Drive
Long Grove, Illinois 60049
Attn: Chief Financial Officer
With copy to: Kemper National Insurance Companies
Kemper Center
One Kemper Drive
Long Grove, Illinois 60049
Attn: General Counsel
or to any such other address as any party hereto shall designate in a written
notice to the other parties hereto.
6. No Waiver; Cumulative Remedies. Lender may, at any time and from
time to time, waive or not insist on strict compliance with any one or more of
the provisions contained in any document relating to this Guaranty, but any such
waiver or non-insistence shall be deemed to be made pursuant to the terms of
said document and not in modification thereof. Any waiver or non-insistence in
any instance or under any particular circumstance shall not be considered a
waiver or non-insistence of such provision in any other instance or any other
circumstance. The remedies provided herein and in the other documents executed
contemporaneously herewith and referred to herein shall be cumulative, may be
exercised from time to time, singularly or concurrently or in any combination,
without Lender being obligated to exercise any such right in any other
circumstance, and, subject to Section 2 above, are not exclusive of any remedies
provided by law.
7. Continuing Guaranty; Transfer. This Guaranty is a continuing
guaranty and shall:
(a) remain in full force and effect until (i) all of the
Obligations have been paid in full, or all of the Collateral (as
such term is defined in the Security Agreement) securing this
Guaranty has been applied toward the Obligations and (ii) any and
all amounts due or claims made under clause (iii) of Section 2 of
this
6
<PAGE>
Guaranty have been paid, satisfied or otherwise disposed of, as
applicable, at which time this Guaranty shall terminate (and Lender
shall at such time, upon the request and at the expense of
Guarantor, acknowledge the release and termination of this
Guaranty);
(b) be binding upon Guarantor, and its heirs, administrators,
executors, successors and assigns, who shall be jointly and
severally liable hereunder in accordance with the terms hereof;
provided, however, Guarantor may not assign any of its rights and
obligations hereunder without the prior written consent of Lender;
and
(c) inure to the benefit of and be binding on and enforceable
by Lender and its successors, transferees, participants, and
assigns. Without limiting the generality of this clause, Under may
assign or otherwise transfer any of the Obligations and/or any of
the Terms to any other person or entity, and such other person or
entity shall thereupon become vested with all the rights in respect
thereof granted to Lender herein or otherwise.
8. Governing Law; Submission to Jurisdiction. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of Illinois
without regard to principles of conflict of laws. Each of Lender and Guarantor
hereby waives any plea of jurisdiction or venue as not being a resident of Cook
County, Illinois and hereby specifically authorizes any action brought by the
other upon or with regard to this Guaranty to be instituted and prosecuted in
either the Circuit Court of Cook County, Illinois or in the United States
District Court for the Northern District of Illinois, at the election of the
party bringing the action. Each of Lender and Guarantor hereby irrevocably
authorizes service of process to be made upon it in the manner specified in
Section 5 above, in any action which may be instituted against it arising out of
or relating to this Guaranty.
9. Headings. Section headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose.
10. WAIVER OF JURY TRIAL. GUARANTOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY ANY PARTY, RELATING DIRECTLY OR INDIRECTLY TO THIS
GUARANTY, THE SECURITY AGREEMENT OR THE OBLIGATIONS GUARANTEED HEREBY.
11. Severability. The unenforceability or invalidity of any
provision or provisions of this Guaranty shall not render any other provision or
provisions herein contained unenforceable or invalid.
[Signature Page Follows]
7
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
executed and delivered on the date and year first above written.
KILICO REALTY CORPORATION, an Illinois
corporation
By: /s/ John E. Neal
------------------------------
Name: John E. Neal
Its: Vice President
KEMPER INVESTORS LIFE INSURANCE COMPANY,
an Illinois insurance corporation
By: /s/ John E. Neal
------------------------------
Name: John E. Neal
Its: Vice President
8
<PAGE>
Exhibit XIV
FIRST AMENDMENT TO LIMITED RECOURSE GUARANTY
[150 N. RIVERSIDE]
THIS FIRST AMENDMENT TO LIMITED RECOURSE GUARANTY [150 N. Riverside] (this
"First Amendment") is made as of the 13th day of December, 1995, to be effective
as of September 1, 1995, by and between PRIME GROUP V, L.P., an Illinois limited
partnership ("PG5") and LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois
insurance corporation ("Lender").
RECITALS
A. Kemper Investors Life Insurance Company, an Illinois insurance
corporation ("KILICO") and KILICO Realty Corporation, an Illinois corporation
("KILICO Realty", and together with KILICO the "Original Guarantors") are
parties to that certain Limited Recourse Guaranty [150 N. Riverside] dated as of
March 22, 1994 (the "Original Guaranty"), whereby, subject to the terms and
conditions contained therein, the Original Guarantors have guaranteed to the
Lender the payment of the "Obligations" described therein. Capitalized terms
used and not defined in this First Amendment shall have the meaning given to
such terms in the Original Guaranty, as amended hereby.
B. The obligations of the Original Guarantors under the Original Guaranty
are secured by that certain Pledge and Security Agreement [150 N. Riverside]
dated as of March 22, 1994, from the Original Guarantors, as pledgors, for the
benefit of Lender, as pledgee (the "Original Security Agreement"), which
encumbers certain Common Units (the "Common Units") in Prime Retail, L.P., a
Delaware limited partnership (the "Partnership"), all as described in the
Original Security Agreement.
C. In accordance with the terms and provisions of an Assignment and
Assumption dated as of April 1, 1994, by and between KILICO, as assignor, and
KILICO Realty, as assignee, KILICO assigned to KILICO Realty all of KILICO's
rights, title and interest in and to the Common Units held by KILICO and pledged
under the Original Security Agreement and Lender hereby confirms and
acknowledges its consent to such Assignment and Assumption. With the consent of
Lender, concurrently herewith, KILICO Realty has transferred the Common Units to
PG5, subject to the lien of the Original Security Agreement, and PG5 has assumed
(subject to the terms and conditions of the Original Guaranty and the Original
Security Agreement) the obligations of the Original Guarantors arising from and
after the date of such assignment under the Original Guaranty and the Original
Security Agreement.
D. PG5 and Lender desire to amend the Original Guaranty as provided herein
to reflect the transfer of the Common Units to PG5 and the assumption by PG5 as
described above. Contemporaneously with the execution and delivery of this First
Amendment, PG5 and Lender are also entering into an amendment of the Original
Security Agreement (the "Security Agreement Amendment"), to reflect such
transfer and assumption and to provide for the pledge by PG5 to Lender of
certain additional collateral.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Substitution of PG5 as Guarantor. Subject to all of the terms and
conditions of the Original Guaranty (including, without limitation, Section 2
thereof), PG5 is hereby substituted as the "Guarantor" thereunder and, from and
after the date hereof, all references in the Original Guaranty (including,
without limitation, in Section 2 thereof), as amended hereby, to the "Guarantor"
shall be deemed to refer to PG5.
2. References to Security Agreement. From and after the date hereof, all
references in the Original Guaranty, as amended hereby, to the "Security
Agreement" and to terms defined in the "Security Agreement" shall be deemed to
refer to the Original Security Agreement as amended by the Security Agreement
Amendment, and to the meanings of such terms as amended by the Security
Agreement Amendment, if applicable.
3. Notices. Section 5 of the Original Guaranty is amended by deleting the
addresses set forth under "To Guarantor" (including the addresses for copies)
and substituting therefor the following:
"To Guarantor: c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Michael W. Reschke
With copies to: The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attention: Robert J. Rudnik
and to: Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Richard S. Millard
4. Estoppel; Waiver of Defaults. Lender hereby certifies to PG5 that no
default or event of default exists under the Original Guaranty that is not being
cured concurrently herewith, and hereby irrevocably waives any and all defaults
or events of default under the Original Guaranty, as amended hereby, arising
from events occurring or conditions existing on or prior to the date hereof.
5. Continuing Effect. Except as amended hereby, the Original Guaranty
shall continue in full force and effect.
[signature page follows]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amendment as of the date first above written, to be effective as of September 1,
1995.
PRIME GROUP V, L.P., an
Illinois limited partnership
By: PGLP, Inc., its
general partner
By: /s/ Robert J. Rudnik
------------------------------
Name: Robert J. Rudnik
Title: Vice President
LUMBERMENS MUTUAL CASUALTY COMPANY,
an Illinois insurance corporation
By: /s/ Walter L. White
----------------------------------
Name: Walter L. White
Title: Executive Vice President
By: /s/ Robert B. Stacy
----------------------------------
Name: Robert B. Stacy
Title: Treasurer
-3-
<PAGE>
Exhibit XIX
================================================================================
================================================================================
CREDIT AGREEMENT
between
PRIME FINANCING LIMITED PARTNERSHIP
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of
September 29, 1999
================================================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS 1
Section 1.1. Certain Defined Terms 1
Section 1.2. Accounting and Banking Terms 13
Section 1.3. Discretion 13
ARTICLE 2. THE LOAN 13
Section 2.1. The Loan 13
Section 2.2. The Loan; Procedure for Borrowing 13
Section 2.3. Rate of Interest; Calculation of Interest 14
Section 2.4. Mandatory Prepayments 15
Section 2.5. Optional Prepayments 16
Section 2.6. Payments 16
Section 2.7. Use of Loan Proceeds 16
Section 2.8. Fees 16
Section 2.9. Increased Costs 16
ARTICLE 3. REPRESENTATIONS AND WARRANTIES 17
Section 3.1. Organization and Powers 17
Section 3.2. Power and Authorization 18
Section 3.3. Permits; Compliance with Laws 18
Section 3.4. No Legal Bar 19
Section 3.5. Litigation 19
Section 3.6. Solvency 19
Section 3.7. The Collateral 19
Section 3.8. Capitalization and Corporate Structure 20
Section 3.9. No Default 20
Section 3.10. Taxes 20
Section 3.11. Financial Statements and Condition 20
Section 3.12. ERISA; Labor Relations 22
Section 3.13. Correct Information 22
Section 3.14. Investment Company Act 22
Section 3.15. Margin Regulations 22
Section 3.16. Other Debt 23
Section 3.17. Year 2000 Issues 23
ARTICLE 4. CONDITIONS PRECEDENT 24
Section 4.1. Conditions Precedent to Effectiveness; Funding 24
ARTICLE 5. AFFIRMATIVE COVENANTS 26
Section 5.1. Maintenance of Existence and Properties 26
Section 5.2. [RESERVED]. 26
Section 5.3. Punctual Payment 26
Section 5.4. Payment of Liabilities 26
<PAGE>
Section 5.5. Compliance with Laws 26
Section 5.6. Payment of Taxes, Etc. 27
Section 5.7. Financial Statements and Other Information 27
Section 5.8. Accounts and Reports 29
Section 5.9. Inspection; Audit 29
Section 5.10. UCC Filings 29
Section 5.11. Registration Rights/Shelf Registration 30
Section 5.12. Year 2000 Issues 30
ARTICLE 6. NEGATIVE COVENANTS 30
Section 6.1. Indebtedness 30
Section 6.2. Liens 30
Section 6.3. Fundamental Changes 30
Section 6.4. Dispositions of Assets 30
Section 6.5. Dividends and Redemptions 31
Section 6.6. Certain Other Transactions 31
Section 6.7. Transactions with Affiliates and Certain Other Persons 31
Section 6.8. Fiscal Year 31
Section 6.9. ERISA 31
Section 6.10. Regulations T, U and X 32
Section 6.11. Borrower Partnership Agreement 32
Section 6.12. Other Financing Documents 32
ARTICLE 7. FINANCIAL COVENANT 32
ARTICLE 8. EVENTS OF DEFAULT 32
Section 8.1. Events of Default 32
Section 8.2. Remedies Upon an Event of Default 36
ARTICLE 9. MISCELLANEOUS 36
Section 9.1. Notices 36
Section 9.2. Survival of this Agreement 38
Section 9.3. Indemnity 38
Section 9.4. Costs, Expenses and Taxes 39
Section 9.5. Further Assurances 40
Section 9.6. Amendment and Waiver 41
Section 9.7. Remedies Cumulative 41
Section 9.8. Marshaling, Recourse to Security: Payments Set Aside 42
Section 9.9. Setoff 42
Section 9.10. Binding Effect 42
Section 9.11. Applicable Law 43
Section 9.12. Consent to Jurisdiction and Service of Process; Waiver
of Jury Trial 43
Section 9.13. Inconsistencies 43
Section 9.14. Performance of Obligations 43
Section 9.15. Assignment; Participation 43
Section 9.16. Confidentiality 44
<PAGE>
Section 9.17. Construction 44
Section 9.18. Entire Agreement; Binding Effect 44
Section 9.19. Severability 44
Section 9.20. Headings 45
Section 9.21. Execution of Counterparts 45
Section 9.22. Limitation of Liability 45
<PAGE>
EXHIBITS:
- ---------
Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Pledge Agreement
Exhibit D Form of Notice of Optional Prepayment
Exhibit E Form of Opinion of Borrower's Counsel
Exhibit F Form of Guaranty
Exhibit G Form of Request of Extension
Exhibit H Form of Notice of Extension
SCHEDULES:
- ----------
Schedule 1.01 Marketable Securities
Schedule 3.02 Consents
Schedule 3.08 Capitalization
Schedule 3.16 Other Debt
Schedule 8.01(q) Minimum Liquidity Calculation
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of September 29, 1999 (this "Agreement")
between Prime Financing Limited Partnership, an Illinois limited partnership
(the "Borrower") and Prudential Securities Incorporated, a Delaware corporation
(the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender extend certain
financial accommodations of up to the amount of the Commitment (as defined
below) to the Borrower in connection with the refinancing of the Existing
Agreement; and
WHEREAS, the Lender is willing to extend the financial
accommodations contemplated hereby to the Borrower on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" means any (i) officer, director, shareholder, member or
partner of the Borrower, (ii) Person that directly or indirectly controls, is
controlled by, or is under common control with the Borrower and (iii) Person in
which 10% or more of the ownership interest of such Person is owned by a
shareholder, member or partner of the Borrower. For purposes of this definition,
"control" of a person means the possession, directly or indirectly, of the power
to direct or cause the direction of its management and policies, whether through
the ownership of voting capital stock, by contract or otherwise, and the terms
"controlled" and "common control" shall have correlative meanings. In no event
shall the Lender be deemed to be an Affiliate of the Borrower.
"Agreement" and "Credit Agreement" means this Credit Agreement, as
the same from time to time may be amended, modified, supplemented, extended or
restated.
"Applicable Margin" means one hundred seventy-five (175) basis
points.
"Assigned Agreements" means the Prime Partnership Agreement and
the Registration Rights Agreement.
<PAGE>
"Authorized Officer" shall mean (i) with respect to any Person that
is a corporation or limited liability company, the president, any vice
president, the treasurer or the chief financial officer of such Person, (ii)
with respect to any Person that is a partnership, an Authorized Officer of a
general partner of such Person or (iii) with respect to any Person, such other
representative of such Person that is approved by Lender in writing. No Person
shall be deemed to be an Authorized Officer unless named on a certificate of
incumbency of such Person delivered to the Lender on the Closing Date.
"Authorized Person" means such individuals designated in writing by
the Borrower as being authorized by the Borrower to provide the Lender with any
and all notices required to be made hereunder by the Borrower, which
authorizations shall remain in full force and effect, and may be conclusively
relied on by the Lender in all circumstances, until the Lender actually receives
a written notice from the Borrower stating otherwise.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. 101 et seq.), as amended from time to time, and any successor statute.
"Borrower" shall have the meaning set forth in the preamble hereto,
and includes its successors and assigns.
"Borrower Partnership Agreement" means the Agreement of Limited
Partnership of Prime Financing Limited Partnership dated December 15, 1995 among
PFI, as the general partner, PGI, PGII LP, PGIII LP and PGLP, as the limited
partners, as it may from time to time be amended, modified or supplemented.
"Borrower Percentage Interest" shall have the meaning set forth for
the term "Percentage Interest" in the Borrower Partnership Agreement.
"Borrowing Date" means, with respect to the Loan, the Business Day
on which the Lender makes the Loan pursuant to a Notice of Borrowing given
pursuant to Section 2.02(b)(i) hereof.
"Business Day" means any day on which dealings in currencies and
between banks may be carried on in New York, New York, other than a Saturday or
Sunday or any other day on which banks in New York, New York are authorized or
required by law to close.
"Cash Equivalents" means cash and (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time and demand deposits and certificates of deposit of (A) any lender, (B) any
domestic commercial bank having capital and surplus in excess of $500,000,000 or
(C) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent
2
<PAGE>
thereof, each case with maturities of not more than 270 days from the date of
acquisition, and (iv) Investments, classified in accordance with GAAP as current
assets, in money market investment programs registered under the Investment
Company Act of 1940, as amended, that are administered by reputable financial
institutions having capital of at least $500,000,000 and the portfolios of which
are limited to Investments of the character described in the foregoing clauses
(i) and (ii).
"Change of Control" means (i) PGI, together with PII, PGLP, PGII LP,
PGIII LP, PGLP, Inc. and PFI shall, collectively, cease to beneficially own,
directly or indirectly, 100% of the Borrower and (ii) Michael W. Reschke ceases
to beneficially own, directly or indirectly, less than the percentage of equity
in each of PGI, PII, PGLP, PGII LP, PGIII LP, PGLP, Inc. and PFI that he
currently owns as of the date hereof.
"Closing Date" means September 29, 1999, the date on which the Loan
Documents are executed and delivered and all conditions precedent set forth in
Article 4 have been satisfied. The closing will take place at such place as the
Lender may determine.
"Collateral" means all property and interest in property in or
against which the owner thereof shall have granted, or purported to have
granted, a security interest or Lien in favor of the Lender under the Loan
Documents as security for the Obligations of the Borrower to the Lender,
including without limitation the Pledged Shares.
"Collateral Documents" means the Pledge Agreement and the UCC
financing statements delivered in connection therewith.
"Collateral Stock" means the REIT Stock and any Pledged Marketable
Equity Securities delivered pursuant to Section 2.04 hereof.
"Collateral Stock Value" means, at any date with respect to the
Pledged Shares, the product of (i) the per share price of the Collateral Stock
at the close of trading on a trading exchange or stock market for such REIT
Stock on the immediately preceding Business Day, as reported by such exchange or
stock market, and (ii) the number of shares of Pledged Shares then held by or
pledged to the Lender. If the REIT Stock is not then traded on an exchange or
stock market or if such closing price is not available in The Wall Street
Journal, Eastern Edition, the Collateral Stock Value shall be the average per
share price of the Collateral Stock quoted to the Lender by three (3) (or any
lesser number if three (3) are not available) national brokerage firms selected
by the Lender in its sole and absolute discretion (including without limitation
the Lender). If no such quotes are available, such Collateral Stock Value shall
be determined by the Lender in its sole and absolute discretion.
"Commitment" means $14,587,125.
3
<PAGE>
"Consents" shall mean, collectively, each of the Consents to
Assignment from (i) the REIT, (ii) Prime and (iii) each of the Prime Financing
Partners dated as of the Closing Date.
"Credit Party" means the Borrower and the Guarantors.
"Default" means any event which is, or with the lapse of time or
giving of notice, or both, would be, an Event of Default.
"Dividends Coverage Ratio" means, at any date of determination
thereof, the ratio of (i) distributions (other than extraordinary, liquidating
or partially liquidating distributions) paid per LP Unit during the fiscal
quarter ending on or most recently ended prior to such date of determination,
multiplied by four, then multiplied by the number of LP Units to (ii) the
current quarterly interest payment (calculated based upon the then outstanding
principal amount of the Loan and the rate of interest projected to be applicable
hereunder for the next quarter following such date of determination, based upon
the rate of interest in effect on the Loan on the last day of the calendar month
most recently ended prior to such date of determination) multiplied by 4.
"Dollars" and "$" means lawful money of the United States of
America. Any reference in this Agreement to payment in "Dollars" or "$" means
payment in Dollar funds immediately available for use by the Lender in New York,
New York.
"Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials, laws and regulations
with regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Materials and laws relating to the management
or use of natural resources.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA Affiliate" means each Person (as defined in Section 3(9) of
ERISA) that is a member of any "controlled group" (as defined in Section
4001(14) of ERISA) that includes the Borrower.
"ERISA Termination Event" means (i) any Reportable Event, (ii) the
withdrawal of the Borrower or any of its ERISA Affiliates from a Plan during a
Plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan
or to treat any Plan amendment as a termination under Section 4041 of ERISA,
(iv) any Plan amendment or the occurrence of any event that constitutes a
"partial termination" (within the meaning of Section 411(d)(3) of the IRC) with
respect to any Plan, (v) the institution of proceedings to terminate a Plan or
the appointment of a trustee by the PBGC
4
<PAGE>
pursuant to Section 4044 of ERISA or (vi) any event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Event of Default" means any event specified as such in Section
8.01 hereof.
"Existing Agreement" means the Credit Agreement dated as of June 14,
1996, as amended, between the Borrower and CS First Boston Mortgage Capital
Corp.
"Expiration Date" means September 29, 2000; provided, that the
Borrower may, by notice to the Lender (a "Request of Extension"), in the form of
Exhibit G hereto, not less than seven (7) prior to the last day of a Notice
Period, request that the Lender extend the Expiration Date by an additional
ninety (90) days; provided, further, that the Borrower may, in accordance with
the previous clause, request that the Lender extend each successive Expiration
Date by an additional ninety (90) days; provided, however, that any
determination to extend the Expiration Date shall be determined in the sole
absolute discretion of the Lender and which shall be conditioned by the delivery
by the Lender to the Borrower of a notice (a "Notice of Extension") in the form
of Exhibit H hereto.
"Fiscal Quarter" means each of the four periods of three months of
each year, ending on the last day of each February, May, August and November,
which in the aggregate constitute a Fiscal Year.
"Fiscal Year" means the fiscal year ending on December 31.
"GAAP" means generally accepted accounting principles (i) in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of the Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination, and (ii) which are consistently applied in form and
substance.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantors" means, collectively, PGI, PGLP, PGII LP, PGIII LP,
PGLP, Inc. and PII and each other guarantor of the Obligations.
"Guaranty" means the Guaranty made by the Guarantors dated as of the
Closing Date in favor of the Lender, in the form of Exhibit F hereto, as it may
from time to time be amended, modified or supplemented.
5
<PAGE>
"Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. ss.300.5, or defined as such
by, or regulated as such under, any Environmental Law.
"Indebtedness" means (without duplication), with respect to any
Person, all obligations, contingent and otherwise, which, in accordance with
GAAP, would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person as at any date at which the
amount thereof is to be determined, but in all events including the Note, all
other amounts due under the Loan Documents, any contingent obligations arising
due to all guarantees, endorsements (other than endorsements for collection or
deposits in the ordinary course of business), all obligations in respect of any
swap, cap, floor, collar or other similar transaction and all other contingent
obligations whether or not in respect of any Indebtedness of others, deferred
taxes and accrued obligations, all liabilities secured by any mortgage, pledge
or lien existing on property owned or acquired subject to such mortgage, pledge
or lien, whether or not the liability secured thereby shall have been assumed,
and all lease obligations.
"Interest Period" shall mean the period from the date of this
Agreement to but excluding the 30th day thereafter, and thereafter each
successive 30-day period. If any Interest Period would begin or end on a date
which is not a Business Day, such Interest Period shall begin or end, as the
case may be, on the next succeeding Business Day and any Interest Period that
would extend beyond the Expiration Date shall end on the Expiration Date. Lender
may, in its discretion, select Interest Periods of one day for any day on or
after the Note shall have become due and payable in accordance with the terms
hereof.
"IRC" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.
"Investment" in any Person means (i) the direct or indirect
acquisition (whether for cash, property, service, assumption of Indebtedness,
securities or otherwise) of assets, shares of capital stock, bonds, notes,
debentures, partnership, joint venture or other ownership interest, beneficial
interests or other securities of such other Person or (ii) any deposit with, or
advance, loan (direct or indirect) or other extension of credit to, such Person
(other than deposits made in connection with the purchase of equipment or other
assets in the ordinary course of business) or (iii) any other special capital
contribution to or investment in such Person, including, without limitation, any
guaranty obligation (including any support for a letter of credit issued on
behalf of such Person) incurred for the benefit of such Person. Investment does
not include any of the foregoing that are taken or made by a Person who is not a
Credit Party or Subsidiary even if such action or event would otherwise
constitute an Investment.
"knowledge" means, with respect to any Person, what such Person
knows or should have known, in each case, after due inquiry.
6
<PAGE>
"Lender" shall have the meaning set forth in the preamble of this
Agreement, and its successors, participants and assigns (including any Person
who becomes a holder of the Note).
"Lender's Office" means the Lender's principal office at One Seaport
Plaza, New York, New York 10292.
"LIBOR Rate" with respect to each Interest Period, shall mean for
any day, as determined by Lender, the interest rate per annum offered for
deposits in Dollars for the Interest Period in the London interbank market for a
period equal to the Interest Period which appears on Telerate Page 3750 or such
other page as may replace Telerate Page 3750 on that service or such other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying such rate (collectively, "Telerate Page 3750") as of
11:00 A.M. London time on the second Business Day prior to any such date. If the
Interest Period is of a duration falling between the Interest Periods for which
such rates appear on Telerate Page 3750, the LIBOR Rate shall be the rate
determined by interpolation between the rates for the next shorter and the next
longer Interest Periods for which such rate appears on Telerate Page 3750, as
determined by Lender, whose determination shall be conclusive in the absence of
manifest error. In the event that (i) more than one such LIBOR Rate is provided,
the average of such rates shall apply or (ii) no such LIBOR Rate is published,
then the LIBOR Rate shall be determined from such comparable financial reporting
company as Lender, in its discretion, shall determine; provided, that, if, on or
prior to the determination of the LIBOR Rate, the Lender determines, which
determination shall be conclusive, that the relevant LIBOR Rate to be applied is
likely to result in an increase of cost to the Lender of maintaining the Loan or
to reduce any amount received or receivable by the Lender hereunder, then the
LIBOR Rate shall be determined at the Lender's good faith sole discretion.
"Lien" means, with respect to any Person, (i) any lien (including,
without limitation, any statutory lien), mortgage, hypothecation, privilege,
security interest, pledge, encumbrance, charge (general or special, floating or
fixed) or conditional sale or other title retention arrangement (including,
without limitation, the rights of a lessor under a capital lease to the property
leased thereunder) or other security interest of any kind upon any property or
assets of any character of such Person, whether now owned or hereafter acquired
by such Person, or upon the income or profits therefrom, (ii) the transfer,
pledge or assignment by such Person of any of its property or assets for the
purpose of subjecting the same to the payment of any indebtedness of such Person
or others in priority to the payment by such Person of its general creditors,
(iii) any sale, assignment, pledge or other transfer by such Person of its
accounts receivable, contract rights, general intangibles or chattel paper with
recourse, and (iv) any agreement to give or do any of the foregoing; provided,
that the negative pledge contained in the PFLP Negative Pledge shall not
constitute a Lien, provided, further, that the PFLP Negative Pledge in no way
shall restrict the rights and remedies of the Lender granted hereunder or under
the Pledge Agreement with respect to the Collateral.
"Loan" means the loan made pursuant to Section 2.02(a) hereof.
7
<PAGE>
"Loan Documents" mean, collectively, this Agreement, the Note, the
Pledge Agreement, the Consents, the Guaranty, the Borrower's completed Form FR
G-3 and any and all other agreements, instruments or documents now or hereafter
evidencing or otherwise relating to the Loan and/or the other Loan Documents.
"LP Units" shall mean those units pledged as collateral from time to
time under the Pledge Agreement.
"LTV Ratio" means the amount of principal outstanding under the Loan
divided by the Collateral Stock Value.
"Margin Call" shall have the meaning set forth in Section 2.04
hereof.
"Marketable Securities" means (i) those securities listed on
Schedule 1.01 owned by the Guarantors or one or more of the Subsidiaries of the
Guarantors and (ii) all other securities owned hereafter by the Guarantors or
one or more of the Subsidiaries of the Guarantors that are (A) listed on a
national exchange and (B) freely transferable and not subject to any
restriction.
"Material Adverse Change" of the Borrower or its Subsidiaries, any
Guarantor, Prime or the REIT means a material adverse change in the business,
financial condition, assets, properties or operations of the Borrower or its
Subsidiaries, any Guarantor, Prime or the REIT.
"Material Adverse Effect" means any set of circumstances or events
which (i) would have any material adverse effect whatsoever upon the validity or
enforceability of this Agreement, the Note or any other Loan Document, (ii) is
or would reasonably be expected to have a material adverse effect on the
business, condition (financial or other), assets, prospects, properties or
operations of the Borrower or its Subsidiaries, any Guarantor, Prime or the
REIT, as the case may be and as applicable, (iii) would materially impair any
party's ability to fulfill its respective obligations under the terms and
conditions of the Loan Documents to which it is a party, or (iv) would
materially impair the Lender's rights in or to, or have a material adverse
effect on, the Collateral.
"Minimum Liquidity" means the sum of (i) the amount of cash and Cash
Equivalents on hand plus (ii) the "current value" of all Marketable Securities.
For purposes hereof, the "current value" of Marketable Securities shall be equal
to the aggregate sum of the closing sales prices of each share of Marketable
Securities as of the Business Day immediately preceding the determination of
Minimum Liquidity.
"Note" means the promissory note issued by the Borrower, evidencing
the Loan and delivered pursuant to Section 2.02(b)(ii) hereof, as the same may
be from time to time amended, modified, supplemented or extended.
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"Notice of Borrowing" shall have the meaning set forth in Section
2.02(b)(i) hereof.
"Notice of Extension" shall have the meaning set forth in the
definition of "Expiration Date".
"Notice of Optional Prepayment" shall have the meaning set forth in
Section 2.05 hereof.
"Notice Period" means the period that is ninety (90) days after the
Closing Date and thereafter each successive ninety (90) day period commencing on
the last day of a Notice Period.
"Obligations" means, as to the Borrower, all liabilities,
obligations and Indebtedness of the Borrower to the Lender of any and every kind
and nature (including, without limitation, principal payments, interest,
charges, expenses, attorneys' fees, maintenance, commitment and other fees
chargeable to the Borrower by the Lender and future advances made to or for the
benefit of such Person), whether arising under this Agreement, under any of the
Loan Documents, under any refinancing or modification of the credit facilities
provided under this Agreement or any of the Loan Documents, pursuant to any
arrangement, agreement or understanding hereafter among the Borrower and the
Lender, whether now or hereafter owing, arising, due or payable from the
Borrower to the Lender, whether before or after the filing of a proceeding under
the Bankruptcy Code by or against the Borrower, regardless of how evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, including, without limitation, obligations or
guarantees of performance or payment.
"Other Debt" shall have the meaning set forth in Section 3.16
hereof.
"Other Financing" means (i) the financing contemplated by the Other
Loan Document and (ii) an intercompany loan made by Prime Capital Holding, LLC
to the Borrower.
"Other Loan Document" means (i) the Short-Term and Security
Agreement dated as of the date hereof among FBR Asset Investment Corporation, as
lender, Prime Capital Holding, LLC and Prime Capital Funding, Inc., as the
borrowers, and Prime Capital Funding, LLC and any other document executed or
delivered in connection therewith and related thereto, including, without
limitation, the PFLP Negative Pledge.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permits" shall have the meaning set forth in Section 3.03 hereof.
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"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"PFI" means Prime Finance, Inc., an Illinois corporation.
"PFLP Negative Pledge" means the Negative Pledge Agreement dated as
of the date hereof made by the Borrower in favor of FBR Asset Investment
Corporation.
"PGI" means The Prime Group, Inc., an Illinois corporation.
"PGII LP" means Prime Group II, L.P., an Illinois limited
partnership.
"PGIII LP" means Prime Group III, L.P., an Illinois limited
partnership.
"PGLP" means Prime Group Limited Partnership, an Illinois limited
partnership.
"PGLP, Inc." means PGLP, Inc., an Illinois corporation.
"PII" means Prime International, Inc., an Illinois corporation.
"Plan" means any "Employee Benefit Plan" (as defined in Section 3(3)
of ERISA) as covered by any provision of ERISA and as maintained, or otherwise
contributed to, or at any time during the five calendar year period immediately
preceding the date of this Agreement was maintained or otherwise contributed to,
by the Borrower, or any ERISA Affiliate of the Borrower for the benefit of the
employees of the Borrower or an ERISA Affiliate of the Borrower.
"Plan of Correction" shall have the meaning set forth in Section
3.17 hereof.
"Pledge Agreement" means the Pledge and Security Agreement of the
Borrower dated as of the Closing Date in favor of the Lender, in the form of
Exhibit C hereto, as it may from time to time be amended, modified or
supplemented.
"Pledged Marketable Equity Securities" shall have the meaning set
forth in Section 2.04(a) hereof.
"Pledged Shares" shall have the meaning set forth in the Pledge
Agreement.
"Prime" means Prime Retail, L.P., a Delaware limited partnership.
"Prime Consent" means the Consent to Assignment of Prime Retail,
L.P. dated as of the date hereof, made by Prime in favor of the Lender, as it
may from time to time be amended, modified or supplemented.
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"Prime Financing Partner" means each of the partners of the Borrower
which are each of PFI, as the general partner, PGI, PGII LP, PGIII LP and PGLP,
as the limited partners.
"Prime Partnership Agreement" shall mean the Third Amended and
Restated Agreement of Limited Partnership of Prime dated as of October 15, 1998,
effective June 15, 1998, as it may from time to time be amended, modified or
supplemented.
"Prime Partnership Interest" shall have the meaning set forth for
the term "Partnership Interest" in the Prime Partnership Agreement, as it may
from time to time be amended, modified or supplemented.
"Prohibited Transaction" means any "prohibited transaction" (within
the meaning of Section 406 of ERISA or Section 4975 of the IRC) with respect to
any Plan for which transaction no statutory exemption is not available.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any property, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of June 15, 1998 of the REIT and Prime for the benefit of the
Persons named therein, as it may from time to time be amended, modified or
supplemented.
"Regulations D, T, U and/or X" means Regulations D, T, U and/or X of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Regulatory Change" means the introduction of, or any change in,
United States federal, state or local laws or regulations (including Regulation
D) or treaties or foreign laws or regulations after the date hereof or the
adoption or making after such date of any interpretations, directives,
guidelines or requests applying generally to a class of banks and/or financial
institutions, including the Lender, of or under any United States federal,
state, or local rules or regulations or any treaties or foreign laws or
regulations (whether or not having the force of law) by any court or monetary or
Governmental Authority charged with the interpretation or administration
thereof.
"REIT" means Prime Retail, Inc., a Maryland corporation.
"REIT Consent" means the Consent to Assignment of Prime Retail,
Inc. dated as of the date hereof, made by the REIT in favor of the Lender, as
it may from time to time be amended, modified or supplemented.
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"REIT Stock" means the common shares of beneficial interest of
the REIT.
"Request of Extension" shall have the meaning set forth in the
definition of "Expiration Date".
"Reportable Event" means any "reportable event" described in Section
4043(b) of ERISA with respect to which the 30-day notice requirement set forth
in Section 4043(a) of ERISA has not been waived by the PBGC that occurs or has
occurred in connection with any Plan.
"SEC" means the United States Securities and Exchange Commission
and any successor thereto.
"Securities" means all shares, options, membership interests,
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, limited liability company, partnership or
equivalent entity, whether voting or non-voting, including, without limitation,
common stock, preferred stock, warrants, convertible debentures and all
agreements, instruments and documents convertible, in whole or in part, into any
one or more of or all of the foregoing.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership or equivalent entity of which more than
50% of the outstanding Securities having ordinary voting power to elect or
appoint a majority of the Board of Directors, managers, general partners or
equivalent positions of such corporation, limited liability company, partnership
or equivalent entity is at the time directly or indirectly owned by such Person,
or by one or more other Subsidiaries of such Person.
"Systems" means any of the computer hardware, firmware or software
systems associated with information processing and delivery, operations or
services (e.g., security and alarms, elevators, communications, and HVAC)
operated by, provided to or otherwise reasonably necessary to the business or
operations of Borrower and its Subsidiaries.
"UCC" shall mean the applicable Uniform Commercial Code, as amended
from time to time.
"Year 2000 Compliant" shall have the meaning set forth in Section
3.17 hereof.
"Year 2000 Issues" means limitations in the Year 2000 Compliance of
any Systems or proprietary software set forth in Section 3.17 hereof.
Section 1.2. Accounting and Banking Terms. All accounting and
banking terms not specifically defined herein shall be construed in the case of
accounting terms, in accordance
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with GAAP and, in the case of banking terms, in accordance with general practice
among commercial banks and financial institutions in New York, New York.
Section 1.3. Discretion. Whenever it is provided in this Agreement
or in any of the Loan Documents that (i) the Lender exercises any right given to
it to approve or disapprove, (ii) any arrangement or term is to be satisfactory
to the Lender, or (iii) any other decision or determination is to be made by the
Lender, the decision of the Lender to approve or disapprove, all decisions that
arrangements or terms are satisfactory or not satisfactory and all other
decisions and determinations made by the Lender, shall be in the sole and
absolute discretion of the Lender and shall be final and conclusive, except as
may be otherwise expressly and specifically provided herein; provided, however,
that to the extent Lender assigns fifty percent (50%) or greater of the Loan to
any entity which is not an affiliate of Lender, the "sole and absolute
discretion" standard set forth above (or where otherwise set forth herein) shall
be deemed to be "reasonable discretion" with respect to the Lender after giving
effect to such assignment.
ARTICLE 2.
THE LOAN
Section 2.1. The Loan. Subject to the terms and conditions
hereinafter set forth, the Lender agrees to make available to the Borrower,
subject to Article 4 hereof, on a one-time basis, a Loan on the Closing Date, in
an aggregate principal amount which will not exceed the Commitment.
Section 2.2. The Loan; Procedure for Borrowing. (a) Subject to the
terms and conditions hereof, the Lender agrees to make a Loan to the Borrower
from the Lender's Office, as provided in this Agreement in an aggregate
principal amount requested by the Borrower in the Notice of Borrowing (as
defined below) which will not exceed the Commitment. The Loan shall mature on
the Expiration Date and bear interest for the period from the Borrowing Date
thereof to the date of payment in full thereof on the unpaid principal amount
thereof from time to time outstanding at the applicable interest rates per annum
determined and payable as specified in Section 2.03 hereof. There shall be only
one Loan made pursuant to this Agreement and it shall be disbursed on the
Closing Date.
(b) (i) The Loan shall be made upon notice, given by an Authorized
Person of the Borrower to the Lender not later than 11:00 a.m. (New York City
time) on the second (2nd) Business Day prior to the requested Borrowing Date (a
"Notice of Borrowing"). Such notice shall be made by telecopy or telephone,
confirmed immediately in writing, by delivery of a Notice of Borrowing, in the
form of Exhibit B hereto, specifying therein (A) the requested Borrowing Date,
(B) the aggregate amount of the Loan requested to be made, which amount shall
not be greater than the Commitment or less than $100,000 and (C) that the use of
such proceeds shall be as set forth in Section 2.07 hereof. Upon fulfillment of
the applicable conditions set forth herein, the Lender will make the Loan
available to the Borrower by disburs-
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ing such proceeds as an Authorized Person of the Borrower may instruct the
Lender in advance in writing.
(ii) The obligation of the Borrower to pay the principal of
and interest on the Loan shall be evidenced by the Note in favor of the Lender
duly executed and delivered by the Borrower in the form of Exhibit A hereto. The
Note shall (A) be payable to the order of the Lender, (B) be in a stated
principal amount equal to the Loan and be payable in the principal amount of the
Loan evidenced thereby, (C) be stated to mature (and the Loan shall be
repayable) in full on the Expiration Date, and (D) be entitled to the benefits
of this Agreement. At the time of the Loan, and upon each prepayment of
principal of the Loan, the Lender shall, and is hereby authorized to, make a
notation on the schedule annexed to and constituting a part of the Note, and any
such notation shall be conclusive and binding for all purposes absent manifest
error; provided, however, that the failure by the Lender to make any such
notation shall not affect the obligations of the Borrower under the Note or this
Agreement.
Section 2.3. Rate of Interest; Calculation of Interest. (a) The Loan
shall bear interest on the unpaid principal amount thereof from the date the
Loan is extended to the Borrower until such principal amount is paid in full at
a rate or rates per annum determined in accordance with this Section 2.03. The
Borrower shall pay interest on the unpaid amount of the Loan at the rate per
annum equal to the sum of (i) the LIBOR Rate in effect from time to time
applicable to each Interest Period, plus (ii) the Applicable Margin, payable in
arrears on each of February 28, May 31, August 31 and November 30 (provided,
however, that the first interest payment date shall be on November 30, 1999) and
ending on the date the principal amount of the Loan shall be paid or prepaid, to
the extent of the interest accrued on the principal amount of the Loan so paid
or prepaid.
(b) From and after the occurrence of any Event of Default under
Section 8.01 hereof, and for so long as such Event of Default shall continue
(after as well as before judgment), the unpaid principal amount of the Loan and
any other amount then due and payable but not yet paid hereunder shall bear
interest at a rate per annum equal to the then interest rate of such outstanding
Loan determined in accordance with clause (a) above plus three hundred
twenty-five (325) basis points per annum, payable on demand. Overdue interest
shall be compounded and bear interest, to the extent permitted by law, on each
date for payment of interest on the Loan hereunder. The Borrower shall pay a
late charge of five percent (5%) of each payment not paid within three (3)
Business Days after the date upon which such payment was due (which amount the
Borrower and the Lender agree is a fair and reasonable estimate of the Lender's
damages in light of all of the facts and circumstances as of the date of this
Agreement). Such late charge shall be due and payable by the Borrower
concurrently with the late payment for which such charge is assessed hereunder.
(c) Interest shall be calculated on a basis of a 360-day year for
the actual number of days elapsed during the Interest Period on the balance
outstanding during such Interest Period.
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(d) Anything herein to the contrary notwithstanding, the obligations
of the Borrower under this Agreement and the Note shall be subject to the
limitation that payments of interest shall not be required to the extent that
receipt thereof would be contrary to provisions of law applicable to the Lender
limiting rates of interest which may be charged or collected by the Lender. If
the Borrower pays the Lender interest in excess of the maximum amount permitted
by applicable law, such excess shall be applied in reduction of the principal
balance of the Note, and any remaining excess shall be refunded to the Borrower.
Section 2.4. Mandatory Prepayments. (a) Margin Maintenance Call. If
the Lender determines that the LTV Ratio exceeds fifty percent (50%), then the
Lender will give notice (whether oral or written) to the Borrower of a margin
maintenance call (a "Margin Call"), and the Borrower will, no later than 3:00
p.m. (prevailing local time in New York City) on the second (2nd) Business Day
after the date of such Margin Call, either: (A) make a mandatory prepayment of
principal and interest to the Lender equal to the amount necessary to cause the
LTV Ratio not to exceed forty percent (40%); or (B) pledge and convey to the
Lender readily marketable equity securities, other than REIT Stock, that are
acceptable to the Lender in its sole and absolute discretion (collectively,
"Pledged Marketable Equity Securities") in such amount as necessary to cause the
LTV Ratio not to exceed forty percent (40%). Any Pledged Marketable Equity
Securities pledged to the Lender shall be free and clear of any Liens or
encumbrances of a similar nature and shall be delivered together with stock
powers executed in blank and any waivers or certifications necessary to
demonstrate that the representations and warranties in Article 3 hereof are true
and correct with respect to such Pledged Marketable Equity Securities. Failure
by the Borrower to either prepay the amounts outstanding under the Loan or
pledge the Pledged Marketable Equity Securities pursuant to clauses (A) and (B)
above, or a rejection by the Lender of the Pledged Marketable Equity Securities
shall constitute an Event of Default by the Borrower.
(b) Sale of Collateral. On each date after the Closing Date on which
the Borrower receives any proceeds from selling of the Collateral, the Borrower
shall prepay the outstanding Loan in the amount equal to one hundred percent
(100%) of such proceeds.
Section 2.5. Optional Prepayments. The Borrower may, upon at least
two (2) Business Days prior notice to the Lender, voluntarily prepay the Loan in
whole at any time or in part from time to time, with accrued interest to the
date of such prepayment on the amount prepaid but without other premiums or
penalties, in an amount not less than $100,000 or, if the principal amount of
Loan is less than $100,000, all of such lesser amount. Each such notice shall be
made by an Authorized Person of the Borrower by telecopy or telephone, confirmed
immediately in writing, by delivery of a Notice of Optional Prepayment,
substantially in the form of Exhibit D hereto, specifying therein (i) the
proposed date of such prepayment, and (ii) the aggregate amount of the Loan
therein proposed to be prepaid.
Section 2.6. Payments. All payments (including prepayments) to be
made by the Borrower under this Agreement shall be made by wire transfer to the
Lender, in Dollars and in
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immediately available funds, at such place or places as the Lender may from time
to time designate by written notice to the Borrower. All payments to be made
hereunder by the Borrower shall be made without setoff, counterclaim or defense.
If any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
applicable rate during such extension; provided, however, that no such payments
of the Loan shall extend beyond the Expiration Date.
Section 2.7. Use of Loan Proceeds. The Borrower shall use the
proceeds of the Loan solely to refinance the Existing Agreement and pay the
transactions costs related thereto; provided, that no part of the proceeds of
the Loan will be used so as to cause the Loan to constitute a "purpose credit"
within the meaning of Regulation T or Regulation U of the Board of Governors of
the Federal Reserve System.
Section 2.8. Fees. (a) Borrower shall pay Lender a non-refundable,
non-creditable up-front fee of $145,871.25 which shall be payable on the Closing
Date.
(b) Borrower shall pay Lender a non-refundable, non-creditable
annual fee calculated by multiplying .0025 by the outstanding balance of the
Loan on each anniversary of the Closing Date and which shall be payable on each
anniversary of the Closing Date.
Section 2.9. Increased Costs. If any Regulatory Change: (a) subjects
the Lender to any tax of any kind whatsoever with respect to this Agreement, the
Note or the Loan or changes the basis of taxation of payments to the Lender of
principal, interest, commitment fees, or any other amount payable hereunder in
any of the foregoing (except for changes in any rate of tax on the net income of
the Lender); (b) imposes, modifies or holds applicable to the Lender (or any
corporation controlling the Lender) any reserve or capital adequacy requirements
or liquidity ratios or requires the Lender (or any corporation controlling the
Lender) to make special deposits against or in respect of assets or liabilities
of, deposits with or for the account of, or credit extended by, the Lender; or
(c) imposes on the Lender any other condition affecting this Agreement, the Note
or the Loan; and the result of any of the foregoing is (i) to increase the cost
to the Lender of making or maintaining the Loan or to reduce any amount received
or receivable by the Lender hereunder, (ii) to require the Lender (or any
corporation controlling the Lender) to make any payment to any fiscal, monetary,
regulatory or other authority calculated on or by reference to any amount
received or receivable by the Lender under this Agreement or the Note, or (iii)
to reduce the rate of return on the Lender's capital as a consequence of its
obligations hereunder to a level below that which the Lender could have achieved
but for such adoption, change or compliance (taking into consideration the
Lender's policies with respect to capital adequacy), in any case by an amount
deemed by the Lender to be material, then, in any such case, the Borrower shall,
within ten (10) days pay the Lender (or such corporation controlling the
Lender), on its written demand, any additional amount necessary to compensate
the Lender (or such corporation) for such additional cost, reduced amount
receivable or reduction in rate of return with respect to this Agreement, the
Note or the Loan, together with interest on such
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amount from the date demanded until payment in full thereof at the rate per
annum applicable to Loan, calculated on the basis of a 360-day year for the
actual days elapsed. If the Lender becomes entitled to claim any additional
amount pursuant to this Section 2.09, the Lender shall, within ten (10) days,
submit to the Borrower a certificate as to any additional amount payable
pursuant to the first sentence of this Section 2.09, which amount shall be,
absent manifest error, presumed to be correct; provided, however, that the
determination thereof is made on a reasonable basis. In determining such amount,
the Lender shall use any reasonable averaging and attribution methods.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
extend the financial accommodations hereunder, the Borrower hereby represents
and warrants to the Lender that:
Section 3.1. Organization and Powers. Each of the Borrower and Prime
is a limited partnership duly formed and validly existing and in good standing
under the laws of the state of its organization. Each of the Borrower and Prime
is duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction (other than the state of its organization) in which the
conduct of its business or the ownership or operation of its properties or
assets makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect. Each of the Borrower and Prime
has full power and authority to own its properties and assets and carry on its
business as now conducted. The REIT is a corporation duly organized and validly
existing and in good standing under the laws of the State of Maryland. The REIT
is a "real estate investment trust", as such term is defined in Section 856 of
the IRC. The REIT is a fully-integrated, self-administered and self-managed
"real estate investment trust" and is listed on the New York Stock Exchange. The
REIT is duly qualified to do business as a foreign corporation or entity and is
in good standing in each jurisdiction (other than the state of its incorporation
or organization) in which the conduct of its business or the ownership or
operation of its properties or assets makes such qualification necessary, except
where the failure to so qualify would not have a Material Adverse Effect. The
REIT has full power and authority to own its properties and assets and carry on
its business as now conducted.
Section 3.2. Power and Authorization. The Borrower has full power,
right and legal authority to execute, deliver and perform its obligations under
this Agreement, the Note and such of the other Loan Documents to which it is a
party. The Borrower has taken all partnership and other actions necessary to
authorize the execution and delivery of, and the performance of its obligations
under such documents and to make borrowings by the Borrower under this
Agreement, as the case may be. This Agreement, the Note and such of the other
Loan Documents to which it is a party, constitute legal, valid and binding
obligations of the Borrower enforceable against it in accordance with their
respective terms subject to the effect of any applicable
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bankruptcy, insolvency, reorganization or moratorium or similar laws affecting
the rights of creditors generally. Other than as set forth on Schedule 3.02
hereof, no consent of any person, and no consent, license, approval or
authorization, or registration or declaration with, any Governmental Authority,
which has not been obtained, taken or made (other than the financing statements
and filings required to be filed pursuant to this Agreement and the Loan
Documents, which have been delivered to the Lender for filing on the Closing
Date), is required in connection with the execution, delivery or performance by
the Borrower of this Agreement, the Note or the other Loan Documents to which it
is a party, or the making of borrowings by the Borrower under this Agreement.
Section 3.3. Permits; Compliance with Laws. The Borrower has all
permits, licenses and governmental franchises and other authorizations from all
Governmental Authorities (collectively, the "Permits") that are necessary to own
and operate its business as presently being conducted and as contemplated to be
conducted immediately after the Closing Date, except those permits, licenses and
governmental franchises and authorizations the failure to possess would not have
a Material Adverse Effect. All such Permits are valid and subsisting and in full
force and effect. The Borrower is in compliance with the terms of such Permits
and all statutes, laws, ordinances, governmental rules or regulations (including
applicable environmental laws) and all judgments, orders or decrees (federal,
state, local or foreign) to which it is subject, except for violations of which
would not have a Material Adverse Effect.
Section 3.4. No Legal Bar. The execution, delivery and performance
by the Borrower of this Agreement, the Note and such of the other Loan Documents
to which it is a party, and the making of borrowings hereunder by the Borrower,
except for such violations or contravention of which would not have a Material
Adverse Effect, do not and will not (i) violate or contravene any provisions of
any existing law, statute, rule, regulation or ordinance or charter document,
(ii) violate or contravene any provision of any order or decree of any court or
Governmental Authority to which the Borrower or any of its properties or assets
are subject, (iii) violate or contravene any provision of any mortgage,
indenture, security agreement, contract, undertaking or other agreement or
instrument to which the Borrower is a party or which purports to be binding upon
either of it or any of its properties or assets, or (iv) result in the creation
or imposition of any Lien on any of the properties of the Borrower (other than
as created pursuant to the Loan Documents) pursuant to the provisions of any
mortgage, indenture, security agreement, contract, undertaking or other
agreement or instrument.
Section 3.5. Litigation. There are no judgments or any litigation or
administrative proceedings of or before any court or Governmental Authority now
pending, nor, to the knowledge of the Borrower, are any such litigation or
proceedings now threatened, against the Borrower or any of its properties,
involving an individual claim in excess of $100,000 or claims in the aggregate
in excess of $250,000 which, in each case, are not covered by insurance.
Section 3.6. Solvency. Immediately after giving effect to each of
the financing transactions contemplated hereby on and after each Borrowing Date,
the Borrower is solvent.
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For purposes of this Section 3.06, the term "solvent" means that, at the time of
said determination, (i) the fair value of such Person's assets exceeds the
aggregate sum of its liabilities (including, without limitation, contingent
liabilities), (i) such Person is able to pay its debts as they mature, (ii) the
property owned by such Person has a value in excess of the total aggregate sum
required to pay its debts, and (iii) such Person has capital sufficient to carry
on its business.
Section 3.7. The Collateral. The chief place of business and chief
executive office of the Borrower, and the offices where the Borrower keeps its
books and records concerning any of the Collateral are located c/o The Prime
Group, Inc., 77 West Wacker Drive, Suite 4200, Chicago, Illinois 60601. The
Borrower owns the Collateral in which it has granted a security interest and
Lien in favor of the Lender pursuant to the Loan Documents, free and clear of
any Lien, security interest charge or encumbrance, except as otherwise expressly
permitted by Section 6.02 or as set forth in Section 3.08 hereof. All financing
statements and filings required to be filed, and all related required fees and
taxes, have been delivered to the Lender for filing and recording, and all other
steps required to be taken have been taken, so that upon proper filing and
recording in the proper offices Lender shall have, a valid, perfected, first
priority continuing and enforceable security interest in and Lien on the
Collateral and such security interest and Lien ranks prior to any other security
interest in or Lien upon the Collateral.
Section 3.8. Capitalization and Corporate Structure. (i) The
Borrower Percentage Interests of each Prime Financing Partner are set forth on
Schedule 3.08 hereof, (ii) the Prime Partnership Interest of the Borrower is set
forth on Schedule 3.08 hereof and (iii) the organizational and capital structure
of each Guarantor and its subsidiaries is set forth on Schedule 3.08 hereof.
Except (A) as set forth in the Prospectus (or incorporated by reference therein)
included in the Registration Statement on Form S-3 (Registration No. 333-65617)
filed by the REIT and declared effective by the SEC, (B) the exchange rights set
forth in the Prime Partnership Agreement and (C) the Borrower Partnership
Agreement, Declaration of Trust of the REIT or the Prime Partnership Agreement,
there are no (x) outstanding subscriptions, warrants, options, convertible
securities, or other rights (contingent or other), or commitments therefor, to
subscribe for, purchase or acquire any Securities of the Borrower, Prime or the
REIT, (y) agreements to pay any dividends on any such Securities, except in
accordance with Section 6.05 hereof or (z) agreements to distribute to any
holders of such Securities any properties or assets of the Borrower. The
Borrower has no Subsidiaries nor is it a partner in any partnership, joint
venture or other similar entity.
Section 3.9. No Default. After giving effect to the transactions
contemplated hereby including the Other Financing, the Borrower is not in
default (as defined in the applicable agreement or obligation) in any respect in
the payment or performance (i) of any of its obligations for the payment of
money, or (ii) under any franchise, license or leasehold interest and no default
has occurred and is continuing, except, in each case, for defaults that would
not have a Material Adverse Effect.
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Section 3.10. Taxes. The Borrower has timely filed, or caused to be
filed, all federal, state, local and foreign tax returns that are required to be
filed by it and has paid, or caused to be paid, all taxes, assessments, interest
and penalties thereon, on or before the due dates thereof, unless such tax,
assessment, charge, levy, claim is actively being contested in good faith by
appropriate proceedings and there has been set aside on the books of such Person
adequate reserves in accordance with GAAP applied with respect thereto. There
are no material claims pending or, to the knowledge of the Borrower, proposed or
threatened against the Borrower for past federal, state or local taxes, except
those, if any, as to which proper reserves, determined in accordance with GAAP,
are reflected in the most recent financial statements. All such tax reports or
returns fairly reflect the taxes of the Borrower for the periods covered
thereby. No Internal Revenue Service or other tax audit of the Borrower has
occurred, is pending or, to the knowledge of the Borrower, threatened, and the
results of any completed audits are properly reflected in the financial
statements.
Section 3.11. Financial Statements and Condition. (a) The audited
consolidated financial statements of PGI as of December 31, 1997 prepared by
management and audited by a nationally recognized firm of certified public
accountants (true, complete and accurate copies of which were delivered to the
Lender on or before the Closing Date), each (i) present fairly the financial
position of PGI as of the dates of said statements, and the results of
operations of PGI for the periods covered by said statements of earnings are in
accordance with GAAP, and (ii) disclose all liabilities, direct and contingent,
required to be shown in accordance with such principles. A draft of the audited
consolidated financial statements of PGI as of December 31, 1998prepared by
management and audited by a nationally recognized firm of certified public
accountants (true, complete and accurate copies of each of which were delivered
to the Lender on or before the Closing Date), each (iii) present fairly the
financial position of PGI as of the dates of said statements, and the results of
operations of PGI for the periods covered by said statements of earnings are in
accordance with GAAP, and (iv) disclose all liabilities, direct and contingent,
required to be shown in accordance with such principles.
(b) The unaudited consolidated financial statements of PII as of
December 31, 1998 prepared by management (true, complete and accurate copies of
each of which were delivered to the Lender on or before the Closing Date), each
(i) present fairly the financial position of PII as of the dates of said
statements, and the results of operations of PII for the periods covered by said
statements of earnings are in accordance with GAAP, and (ii) disclose all
liabilities, direct and contingent, required to be shown in accordance with such
principles.
(c) The audited consolidated financial statements of each of the
Borrower, PGII LP, PGLP and PGLP, Inc. as of December 31, 1998 prepared by
management and audited by a nationally recognized firm of certified public
accountants (true, complete and accurate copies of each of which were delivered
to the Lender on or before the Closing Date), each (i) present fairly the
financial position of each each of the Borrower, PGII LP, PGLP and PGLP as of
the dates of said statements, and the results of operations of each of the
Borrower, PGII LP, PGLP and PGLP for the periods covered by said statements of
earnings are in accordance with GAAP, and (ii)
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disclose all liabilities, direct and contingent, required to be shown in
accordance with such principles.
(d) The unaudited consolidated financial statements of each
Guarantor and of the Borrower as of March 31, 1999 prepared by management (true,
complete and accurate copies of each of which were delivered to the Lender on or
before the Closing Date), each (i) present fairly the financial position of each
Guarantor and of the Borrower as of the dates of said statements, and the
results of operations of each Guarantor and of the Borrower for the periods
covered by said statements of earnings are in accordance with GAAP, and (ii)
disclose all liabilities, direct and contingent, required to be shown in
accordance with such principles.
(e) The unaudited consolidated financial statements of the Borrower
as of June 30, 1999 prepared by management (true, complete and accurate copies
of each of which were delivered to the Lender on or before the Closing Date),
each (i) present fairly the financial position of the Borrower as of the dates
of said statements, and the results of operations of the Borrower for the
periods covered by said statements of earnings are in accordance with GAAP, and
(ii) disclose all liabilities, direct and contingent, required to be shown in
accordance with such principles.
(f) As of March 31, 1999, there were no material obligations or
liabilities, direct or indirect, fixed or contingent, which are not reflected in
such financial statements and that are required to be so reflected thereon under
GAAP. No Material Adverse Change has occurred since March 31, 1999.
Section 3.12. ERISA; Labor Relations. No Reportable Event has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. The present value of all accrued benefits under each Plan
maintained by the Borrower or any ERISA Affiliate (based on those assumptions
used to fund the Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits. There are no
multiemployer plans. Neither the Borrower nor any of its ERISA Affiliates has
had a complete or partial withdrawal from any multiemployer plan. The present
value (determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrower and each ERISA Affiliate for post retirement benefits
to be provided to their current and former employees under Plans which are
welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the
aggregate, exceed the assets under all such Plans allocable to such benefits.
The Borrower is not a party to any collective bargaining agreement.
Section 3.13. Correct Information. The information, exhibits and
reports furnished in writing by the Borrower and the Prime Financing Partners to
the Lender in connection with the negotiation and preparation of this Agreement
and the other Loan Documents are
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true and correct and do not contain any omissions or misstatements of fact that
would make the statements contained therein misleading or incomplete in any
material respect, which omissions or misstatements could have, individually or
in the aggregate, a Material Adverse Effect. There is no fact now known to the
Borrower and the Prime Financing Partners that has not been disclosed to the
Lender that materially adversely affects the management, business, assets,
prospects, properties, operations or condition (financial or other) of the
Borrower.
Section 3.14. Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or subject to any
other statute that regulates the incurring of Indebtedness.
Section 3.15. Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying "margin
stock" or "margin securities" (within the meaning of Regulation U); none of the
Obligations or liabilities of the Borrower are secured, directly or indirectly,
by "margin stock" or "margin securities", and no part of the proceeds of any
extension of credit hereunder will be used for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock" or "margin
securities", in each case, in a manner which would breach or contravene any of
Regulations T, U, or X.
Section 3.16. Other Debt. (a) Schedule 3.16 hereto fully and
accurately states, as of the date of this Agreement, all outstanding
indebtedness for borrowed money (other than the Loan hereunder) and committed
undrawn lines of credit of the Borrower (the "Other Debt") and (b) no default or
event of default is existing with respect to such Other Debt and to the best of
Borrower's knowledge, all representations and warranties made pursuant to the
documents relating to the Other Debt are true and correct.
Section 3.17. Year 2000 Issues. Each of the Borrower and each
Guarantor (a) has engaged in a process of assessment of the existence of the
Year 2000 Issues reasonably appropriate to the scope and complexity of its
respective Systems and proprietary software; (b) are in the process of adopting
and implementing a plan of correction ("Plan of Correction") which Borrower
believes will result in all proprietary software and Systems used by Borrower
being Year 2000 Compliant by December 31, 1999; (c) is in the process of
adopting and implementing validation procedures reasonably calculated to test on
an ongoing basis the sufficiency of the Plan of Correction, its implementation,
and the correction of Year 2000 Issues in all Systems and proprietary software;
(d) is in the process of adopting and implementing policies and procedures
requiring regular reports to, and monitoring by, management of Borrower
concerning the foregoing matters; and (e) has provided the Lender material
financial information relating to the Plan of Correction and Year 2000
Compliance. The cost to Borrower of the implementation of the Plan of Correction
will not result in a Default or a Material Adverse Effect. As used herein, "Year
2000 Compliant" and "Year 2000 Compliance" mean for all dates and times,
including, without limitation dates and times after December 31, 1999 and in the
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multi-century scenario, when used on a stand-alone system or in combination with
other proprietary software or Systems: (i) the application system functions and
receives and processes dates and times correctly without abnormal results; (ii)
all date related calculations are correct (including, without limitation, age
calculations, duration calculations and scheduling calculations); (iii) all
manipulations and comparisons of date-related data produce correct results for
all valid date values within the scope of the application; (iv) there is no
century ambiguity; (v) all reports and displays are sorted correctly; and (vi)
leap years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year). Borrower has obtained or
shall use commercially reasonable efforts to obtain appropriate assurances from
each entity that provides any material data, product or service to the Borrower
that is dependent on Year 2000 Compliance, that all of such entity's related
software and systems that are used for, or on behalf of, Borrower are or will be
Year 2000 Compliant by December 31, 1999 except where failure to be Year 2000
Compliant could not reasonably be expected to have a Material Adverse Effect.
ARTICLE 4.
CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Effectiveness; Funding. The
obligations of the Lender to execute and deliver this Agreement and to make the
Loan on the Borrowing Date are subject to the fulfillment of the following
conditions precedent. The Lender shall have received on or before the Borrowing
Date each of the following documents and instruments, each dated such date, in
form and substance satisfactory to the Lender:
(a) the Lender shall have received a Notice of Borrowing required by
Section 2.02(b) hereof within two (2) Business Days of the relevant Borrowing
Date;
(b) a certificate of an Authorized Officer of each Credit Party,
dated as of the Closing Date, certifying (i) that attached thereto are true and
complete copies of the corporate or partnership action authorizing the
execution, delivery and performance of the Loan Documents by each Credit Party
and, in the case of the Borrower, the borrowings hereunder, (ii) that such
corporate or partnership action is in full force and effect without modification
as of such date, and (iii) as to the incumbency and signatures of the Authorized
Officer of each Credit Party executing the Loan Documents to which such Credit
Party is a party;
(c) (i) copies of the constitutive governing documents of each
Credit Party, certified as of a recent date; (ii) certificates of said Secretary
of State as to the due organization, existence or good standing, as applicable,
of each Credit Party, as of a recent date; (iii) certificates of good standing
of the Secretary of State of the jurisdiction of the principal place of
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business of each Credit Party; and (iv) a certificate of an Authorized Officer
of each Credit Party dated the Closing Date, certifying (A) that attached
thereto are true, correct and complete copies of the constitutive governing
documents as is in effect on the date of such certification, and (B) that such
constitutive governing documents have not been amended since the date of the
last amendment thereto furnished pursuant to clause (i) above;
(d) the Loan Documents and all UCC financing statements required by
the Collateral Documents are duly executed by all the parties thereto (other
than the Lender);
(e) evidence that all actions necessary or, in the opinion of the
Lender and its counsel, desirable, to create and perfect the security interests
and other Liens granted under the Loan Documents, have been duly taken and that
there are no security interests senior to the security interests granted in
favor of the Lender;
(f) a legal opinion of counsel to the Borrower covering those items
set forth in Exhibit E hereto, together with such other opinions as the Lender
may reasonably request;
(g) such consents, approvals or acknowledgments with respect to such
of the transactions hereunder as may be necessary or as the Lender or its
counsel may deem appropriate;
(h) the Borrower and each Prime Financing Partner shall have
delivered to the Lender the financial statements set forth in Section 3.11
hereof;
(i) a certificate showing that, at the time of the Closing Date and
after giving effect to the initial funding hereunder and the consummation of all
other transactions contemplated by this Agreement and the Loan Documents, (i)
the representations and warranties contained in this Agreement and in the other
Loan Documents shall be true and correct on and as of such date and no
representation made or information supplied to the Lender shall have proven to
be inaccurate or misleading in any material respect; and (ii) no Event of
Default or Default shall have occurred; and the Lender shall have received a
certificate of the Borrower signed on its behalf by an Authorized Officer that
(A) no Material Adverse Change has occurred since June 30, 1999; (B) no
litigation or administrative proceeding of or before any court or governmental
body or agency in excess of $100,000 individually or $250,000 in the aggregate
is pending or threatened against the Borrower or any of its properties which
could be reasonably be expected to have a Material Adverse Effect; (C) the
Borrower is in compliance with all pertinent federal, state and local laws,
rules and regulations, including, without limitation, those with respect to
ERISA and all applicable environmental laws, except where the violation of which
would not have a Material Adverse Effect; and (D) none of the Borrower, any
Prime Financing Partner, Prime, the REIT, the Guarantors, nor any of their
Subsidiaries, shall be the subject of any bankruptcy, reorganization, insolvency
or similar proceeding;
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(j) payment in full of all amounts then due and payable under the
terms of this Agreement, including, without limitation, (i) all of the fees
payable to the Lender pursuant to this Agreement, and (ii) all of the Lender's
out-of-pocket expenses (including, without limitation, the reasonable fees and
disbursements of the Lender's counsel);
(k) such other and further documents as the Lender and its counsel
may have reasonably requested and all legal matters incident to this Agreement,
the transactions contemplated hereby and the Loan shall be reasonably
satisfactory to the Lender and its counsel;
(l) the New York Stock Exchange shall not have suspended trading in
the REIT Stock;
(m) on the Closing Date, the Borrower shall (or shall cause an
affiliate) (i) to repay in full the loans extended pursuant to the Existing
Agreement, (ii) provide evidence satisfactory to the Lender of such repayment,
(iii) terminate any commitments to lend or make other extensions of credit
thereunder and (iv) deliver to the Lender all documents or instruments necessary
to release all security interest and Liens securing Indebtedness or other
obligations of the Borrower thereunder; and
(n the Other Financing shall have been consummated in accordance
with terms and conditions satisfactory to the Lender and the Lender shall have
received evidence reasonably satisfactory to it of the foregoing.
ARTICLE 5.
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from and after the
date of execution of this Agreement and so long as any amount of the Loan is not
indefeasibly repaid in full, the Borrower shall comply with each of the
following covenants:
Section 5.1. Maintenance of Existence and Properties. The Borrower
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its existence and continue to conduct its business, as now and
proposed to be conducted. The Borrower shall (i) do or cause to be done all
things necessary to preserve and keep in full force and effect all of its
rights, franchises and intellectual property, and comply with all laws
applicable to it, except for violations thereof which would not have a Material
Adverse Effect.
Section 5.2. [RESERVED].
Section 5.3. Punctual Payment. The Borrower shall duly and
punctually pay the principal of and interest on the Note and any other amount
due under this Agreement or any of
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the Loan Documents to which it is a party, including, without limitation, the
amounts payable under Section 2.08 hereof within any grace period provided
herein.
Section 5.4. Payment of Liabilities. The Borrower shall pay and
discharge in the ordinary course of business, where applicable, all of its
obligations and liabilities (including, without limitation, tax liabilities and
other governmental charges), except where the same may be diligently contested
in good faith by appropriate proceedings, and maintain in accordance with GAAP
appropriate reserves for any of the same.
Section 5.5. Compliance with Laws. The Borrower shall observe and
comply with all applicable laws, statutes, rules, regulations or other
requirements having the force of law, including, without limitation, all
applicable environmental laws to the extent failure to so comply could have a
Material Adverse Effect.
Section 5.6. Payment of Taxes, Etc. The Borrower shall pay and
discharge all lawful taxes, assessments, and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before the same shall become in default or within ten (10) days thereafter, as
well as all lawful claims for labor, materials, and supplies which, if unpaid,
might become a Lien or charge upon such property or any part thereof within ten
(10) days thereafter, as well as all lawful claims for labor, materials, and
supplies which, if unpaid, might become a Lien or charge upon any of its
properties or any part thereof within ten (10) days of such claims being due and
payable; provided, however, that no such tax, assessment, charge, levy, claim
need be paid and discharged so long as the validity thereof shall be diligently
contested in good faith by appropriate proceedings and there shall have been set
aside on the books of the Borrower adequate reserves in accordance with GAAP
applied with respect thereto, but such tax, assessment, charge, levy, or claim
shall be paid before the property subject thereto shall be sold to satisfy any
Lien which had attached as security therefor.
Section 5.7. Financial Statements and Other Information. The
Borrower shall furnish to the Lender, in form and substance acceptable to the
Lender and at the Borrower's expense:
(a within one hundred five (105) days after the end of each Fiscal
Year, (i) audited consolidated balance sheets of the Borrower and its
Subsidiaries and of each Guarantor as at the end of such Fiscal Year and the
related audited consolidated statements of income and changes in financial
position of the Borrower and its Subsidiaries and of each Guarantor for such
Fiscal Year, prepared in accordance with GAAP, including consolidated financial
reports with all related schedules and notes attached thereto, setting forth, in
each case, in comparative form, corresponding figures from the preceding Fiscal
Year, all in reasonable detail, prepared by management and audited by, and with
an unqualified opinion of Ernst & Young, LLP or other nationally recognized
independent certified public accountants reasonably satisfactory to the Lender,
together with a statement stating whether or not such accountants have any
knowledge that the Borrower and its Subsidiaries and any Guarantor is then or
has been in violation of any
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covenants pertaining to this Agreement or the Guaranty, as applicable, or
pertaining to any other debt covenant of the Borrower or its Subsidiaries and
that, to their knowledge, no event has occurred which, with the passage of time
or the giving of notice or both, would constitute any such violation and (ii) a
certificate of an Authorized Officer that no Default or Event of Default is then
occurring;
(b within sixty (60) days after the end of each Fiscal Quarter,
quarterly unaudited consolidated balance sheets of the Borrower and its
Subsidiaries and of each Guarantor as at the end of such Fiscal Quarter and the
related unaudited consolidated statements of income and changes in financial
position of the Borrower and its Subsidiaries and of each Guarantor for such
Fiscal Quarter, prepared in accordance with GAAP and certified as to accuracy
and completeness by an Authorized Officer of the Borrower;
(c within ten (10) days of any revision to any of the financial
statements referred to in clauses (a) or (b) above, such financial statements,
as revised;
(d upon request from Lender, within ten (10) days, true, complete
and correct copies of all federal, state, local and foreign tax returns that are
required to be filed by the Borrower, including, without limitation, all related
schedules and annexes to such tax returns;
(e as soon as available, a true copy of any "management letter" or
other communication to the Borrower, its officers, general partners, managers or
members by its accountants regarding matters which arose or were ascertained
during the course of the audit and which said accountants determined ought to be
brought to management's attention;
(f copies of any notices delivered to it by Prime or the REIT;
(g immediately upon any officer, director, general partner, manager
or member of the Borrower obtaining knowledge (i) of any condition or event
which constitutes a Default or Event of Default, (ii) of any condition or event
which would have a Material Adverse Effect, (iii) that any Person has given any
notice to the Borrower or, to its knowledge, taken any other action with respect
to a claimed default or event or condition of the type referred to in clauses
(f), (g) and (j) of Section 8.01 hereof, or (iv) to its knowledge, of the
institution of any litigation involving claims against the Borrower equal to or
greater than $100,000 with respect to any single cause of action or $250,000
with respect to the aggregate of all causes of action or any adverse
determination in any litigation involving a potential liability to the Borrower
equal to or greater than $100,000 with respect to any single cause of action or
$250,000 with respect to the aggregate of all causes of action (which, in all
such cases, are not covered by insurance), an officers' certificate specifying
the nature and period of existence of any such condition or event, or specifying
the notice given or action taken by such holder or Person and the nature of such
claimed Default, Event of Default, event or condition, and what action, if any,
the Borrower has taken, is taking or proposes to take with respect thereto;
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(h immediately upon the Borrower becoming aware of the occurrence of
(i) the occurrence or expected occurrence of any Reportable Event with respect
to any Plan, or any withdrawal from, or the termination, reorganization or
insolvency of any multiemployer plan or (ii0 the institution of proceedings or
the taking of any other action by the PBGC or the Borrower, or any ERISA
Affiliate or any multiemployer plan with respect to the withdrawal from, or the
terminating, reorganization or insolvency of, any Plan;
(i promptly (i) notify Lender of any amendment to the Borrower
Partnership Agreement, (ii) provide the Lender with the full text of any such
amendment and (iii) provide the Lender with a copy of the Borrower Partnership
Agreement, as so amended;
(j as soon as practicable, such other information concerning the
financial affairs and condition (financial or otherwise) of the Borrower, the
Guarantors, Prime (to the extent available to Borrower), the REIT (to the extent
available to Borrower) or the Collateral as the Lender may from time to time
reasonably request;
(k promptly deliver to the Lender copies of all notices given or
received by the Borrower in connection with the Other Financing on the day such
notice is given by the Borrower or within two (2) Business Days after such
notice is received by the Borrower;
(l at the end of each calendar month, a written statement prepared
by the Guarantors, in form reasonably satisfactory to the Lender, setting forth
in reasonable detail the basis for calculating the Minimum Liquidity;
(m at the end of each Fiscal Quarter, a written statement prepared
by the Borrower, in form reasonably satisfactory to the Lender, setting forth in
reasonable detail the basis for calculating the Dividend Coverage Ratio; and
(n within sixty (60) days after the Closing Date, audited
consolidated financial statements of PGI as of December 31, 1998 prepared by
management and audited by a nationally recognized firm of certified public
accountants, which (i) present fairly the financial position of PGI as of the
dates of said statements, and the results of operations of PGI for the periods
covered by said statements of earnings are in accordance with GAAP, and (ii)
disclose all liabilities, direct and contingent, required to be shown in
accordance with such principles.
Section 5.8. Accounts and Reports. The Borrower shall keep accurate
records and books of account at its principal place of business in which
complete, accurate and correct entries shall be made of all dealings or
transactions in relation to its businesses and affairs, as applicable, and the
Collateral.
Section 5.9. Inspection; Audit. The Borrower shall permit any
authorized representative designated by the Lender, upon reasonable advance
notice, to visit, inspect and audit its properties and condition, including its
books and records (and to make copies thereof),
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and to discuss its affairs, finances and accounts with its officers, general
partners, managers, members or directors, employees, auditors, legal counsel and
agents at such reasonable times and as often as may be reasonably requested by
the Lender, which visit, inspection and audit shall be at the expense of the
Lender unless a Default or Event of Default shall have occurred and not been
cured at the time of the commencement of such visit, inspection or audit, in
which case such visit, inspection and audit shall be at the expense of the
Borrower.
Section 5.10. UCC Filings. Within thirty (30) days of the Closing
Date, the Borrower will deliver to the Lender UCC search reports evidencing UCC
filings made in each jurisdiction required in the Collateral Documents.
Section 5.11. Registration Rights/Shelf Registration. The Borrower
shall not amend the Registration Rights Agreement and shall, to the extent
within its rights under the Registration Rights Agreement, cause the REIT and
Prime to maintain the effectiveness of the shelf registration on SEC Form S-3 or
Form S-11 of the REIT Stock until the Loan and all other amounts due to Lender
have been paid in full.
Section 5.12. Year 2000 Issues. Borrower shall periodically report
to the Lender, in such form as the Lender may reasonably request, on the
progress of the Borrower in implementing the Plan of Correction; the budget for,
and actual financial performance with respect to, implementation of the Plan of
Correction; the assessment of the Borrower of the adequacy of the Plan of
Correction or the related implementation budget; the implementation of the Plan
of Correction, the related financial performance, and the conformity of actual
performance with related implementation budgets.
ARTICLE 6.
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, from and after the
date of execution of this Agreement and so long as any Loan is not indefeasibly
repaid in full, the Borrower shall comply with each of the following covenants:
Section 6.1. Indebtedness. The Borrower shall not directly or
indirectly, create, incur, assume or otherwise become or remain liable with
respect to any Indebtedness that is secured by or imposes any limitation on any
Collateral (other than as set forth under the PFLP Negative Pledge, provided,
that the PFLP Negative Pledge in no way shall restrict the rights and remedies
of the Lender granted hereunder or under the Pledge Agreement with respect to
such Collateral) other than Indebtedness of the Borrower to the Lender incurred
pursuant to this Agreement or the other Loan Documents.
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Section 6.2. Liens. The Borrower shall not directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral, whether now owned or hereafter acquired, except Liens arising
under the Loan Documents in favor of the Lender.
Section 6.3. Fundamental Changes. The Borrower shall not change its
capital structure, enter into any merger or consolidation, or liquidate, wind-up
or dissolve.
Section 6.4. Dispositions of Assets. The Borrower shall not assign,
sell, lease or otherwise dispose of, whether by sale, merger, consolidation,
liquidation, dissolution, abandonment or otherwise, any of the Collateral unless
the proceeds thereof are used to repay all or a portion of the Obligations
pursuant to Section 2.04(b) hereof.
Section 6.5. Dividends and Redemptions. Upon the occurrence and
continuance of a Default or an Event of Default, the Borrower shall not: (i)
declare, pay or make any dividend or other distribution of assets, properties,
cash, rights, obligations or Securities on account of any shares of its
Securities, including, without limitation, by redemption, purchase, retirement
or other acquisition, except as otherwise consented to in advance in writing by
the Lender; or (ii) make any payment, prepayment or retirement of Indebtedness
(including, without limitation, intercompany advances or loans made to Borrower
by its partners) of the Borrower other than (a) payments pursuant to this
Agreement and the other Loan Documents, (b) scheduled payments made in
accordance with the terms of such Indebtedness, and (c) payments of trade debt
made in the ordinary course of business. Upon the occurrence and continuance of
a Default or an Event of Default, the Borrower shall not directly or indirectly,
purchase, redeem or retire or otherwise acquire any shares of its Securities or
any debt securities issued by it.
Section 6.6. Certain Other Transactions. The Borrower shall not
enter into any transaction that has a Material Adverse Effect on the Collateral
or which prohibits the Borrower from pledging, encumbering or granting a
security interest in the Collateral in favor of the Lender, whether now owned or
hereafter acquired.
Section 6.7. Transactions with Affiliates and Certain Other Persons.
The Borrower shall not directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease, or
exchange of any property and guarantees and assumptions of obligations of an
Affiliate) with any stockholder, officer, director, employee, partner, member or
Affiliate of the Borrower, other than (i) the making of, and payment of
principal and interest on, intercompany transfers, advances and loans; (ii)
transactions on an arms-length basis on terms no less favorable to the Borrower
than if such Affiliate was not an Affiliate of the Borrower; (iii) the payment
of salary and other customary compensation for a similarly situated business of
its directors, officers and employees in the ordinary course of its business;
(iv) management and leasing agreements which are entered into in the ordinary
course of the Borrower's business, are consistent with existing similar
agreements of the Borrower and are customary in the industry; (v) transactions
between the Borrower and its Subsidiaries that are
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entered into in the ordinary course of business and consistent with past
practice and (vi) transactions consented to in advance in writing by the Lender,
in its reasonable discretion.
Section 6.8. Fiscal Year. The Borrower shall not change its Fiscal
Year.
Section 6.9. ERISA. The Borrower shall not be or become obligated to
PBGC in excess of $100,000 or be or become obligated to the Internal Revenue
Service with respect to excise or other penalty taxes provided for in Section
4975 of the IRC in excess of $100,000. The Borrower shall not seek any waiver
from the minimum funding standard set forth under Section 302 of ERISA or
Section 412 of the IRC or engage in any material Prohibited Transaction with
respect to any Plan.
Section 6.10. Regulations T, U and X. The Borrower shall not apply,
directly or indirectly, any part of the proceeds of the Loan for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any "margin
security" as defined in Regulation T or for the purpose of reducing or retiring
any Indebtedness which was originally incurred for any such purpose, in each
case, in violation of Regulation T, U or X.
Section 6.11. Borrower Partnership Agreement. The Borrower shall not
permit the amendment of the Borrower Partnership Agreement in any manner.
Section 6.12. Other Financing Documents. The Borrower shall not
amend the principal documents of the Other Financing without the prior written
consent of the Lender.
ARTICLE 7.
FINANCIAL COVENANT
The Borrower covenants and agrees that, from and after the date of
execution of this Agreement and so long as any amount may be borrowed hereunder
or is otherwise due to the Lender under this Agreement or any Loan Document is
not indefeasibly repaid in full, the Borrower shall not at any time permit the
Dividends Coverage Ratio to be less than 4.15 to 1.00.
ARTICLE 8.
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following events or
conditions shall constitute an Event of Default under this Agreement:
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(a the Borrower shall (i) fail to pay when due any principal
(including mandatory prepayments) of any Loan or (ii) fail to pay any interest
on any Loan or any other amount due and payable hereunder or with respect to any
Loan when due and such default shall have continued unremedied for three (3)
Business Days;
(b any representation, warranty or statement given in this Agreement
or in any other Loan Document by any party thereto (other than the Lender) or in
any certificate, opinion, report, financial statement or other written statement
furnished at any time pursuant to this Agreement shall prove to be or have been
untrue or misleading in any material respect as of the date on which it is made
or deemed to be made;
(c (i0 the Borrower shall fail to perform, keep or observe in any
respect any covenant or condition contained in Sections 2.04(a), 5.01, 5.03,
5.06, 5.07, 5.08, 5.09, 5.10 and 5.11 hereof or Articles 6 or 7 hereof, (ii) the
Borrower shall fail to perform, keep or observe in any respect any covenant or
condition contained in Section 5.04 (provided such obligations and liabilities
referred to in Section 5.04 are accelerated) hereof and such failure contained
in this clause (ii) shall not be cured to the Lender's reasonable satisfaction
within five (5) days after the occurrence of such failure or (iii) the Borrower
shall fail to perform, keep or observe in any respect any covenant or condition
contained in Section 5.04 (provided such obligations and liabilities referred to
in Section 5.04 are not accelerated) and 5.05 hereof and such failure contained
in this clause (iii) shall not be cured to the Lender's reasonable satisfaction
within fifteen (15) days after the occurrence of such failure);
(d the Borrower, any Guarantor or any other party to a Loan Document
(other than the Lender) shall fail to perform, keep or observe in any respect
any other term, provision, condition, covenant, waiver, warranty or
representation contained in this Agreement or in any other Loan Document to
which it is a party that is required to be performed, kept or observed by the
Borrower, any Guarantor or any party to a Loan Document (other than the Lender)
and the same, if curable, shall not be cured to the Lender's satisfaction within
ten (10) days after the occurrence of such failure, unless the Borrower is
diligently working to cure such failure and such failure has not resulted in a
Material Adverse Effect, in which case no Event of Default shall occur with
respect thereto until thirty (30) days after the occurrence of such failure;
(e (i0 the Lender shall not have at any time first priority
perfected Liens and security interests in all of the Collateral, (ii) any of the
Loan Documents (including, without limitation, the Guaranty) shall at any time
for any reason cease to be in full force and effect or shall be declared to be
null and void, or the validity or enforceability thereof shall be contested by
any of the parties thereto (other than the Lender), or (iii) any of such parties
shall deny that it has any or any further liability or obligation under any Loan
Document at a time when it in fact does have such liabilities or obligations
thereunder;
(f (i) the Borrower or any Guarantor shall fail to (A) pay all or
any portion of any Indebtedness in excess of $100,000 (other than the
Obligations) when due (whether by stated
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maturity, required prepayment, acceleration, demand or otherwise) after the
expiration of any applicable grace periods; or (B) perform or observe any term,
covenant or condition to be performed on its part or to be observed under any
agreement or instrument relating to such Indebtedness, when required to be
performed or observed or (ii) Prime or the REIT shall fail to (A) pay all or any
portion of any Indebtedness (1) with recourse in excess of $1,000,000 or (2)
without recourse in excess of $2,500,000 when due (whether by stated maturity,
required prepayment, acceleration, demand or otherwise) after the expiration of
any applicable grace periods; or (b) perform or observe any term, covenant or
condition to be performed on its part or to be observed under any agreement or
instrument relating to such Indebtedness, when required to be performed or
observed;
(g the Borrower permits one or more judgments against it in excess
of $100,000, individually, and $250,000, in the aggregate, to remain unstayed,
unbonded or not discharged for a period of more than thirty (30) days, unless
such judgment is being contested in good faith and the Borrower has established
reserves in accordance with GAAP that are satisfactory to the Lender;
(h any of the operations or business of the Borrower, any Guarantor,
Prime or the REIT is suspended, other than in the ordinary course of its
business, which has a Material Adverse Effect;
(i the Borrower, any Guarantor, Prime or the REIT commences any
case, proceeding or other action relating to it in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement, composition,
compromise, readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement, composition,
compromise, readjustment of debt or similar act or law of any jurisdiction, now
or hereafter existing, or consents to; approves of, or acquiesces in, any such
case, proceeding or other action, or applies for a receiver, trustee or
custodian for itself or for all or a substantial part of its properties or
assets, or makes an assignment for the benefit of creditors, or fails generally
to pay its debts as they mature or admits in writing its inability to pay its
debts as they mature, or is adjudicated insolvent or bankrupt;
(j there is commenced against the Borrower, any Guarantor, Prime or
the REIT any case or proceeding or any other action is taken against the
Borrower, Prime or the REIT in bankruptcy or seeking reorganization,
liquidation, dissolution, winding-up, arrangement, composition, compromise,
readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement, composition, compromise,
readjustment of debt or similar act or law of any jurisdiction, now or hereafter
existing; or there is appointed a receiver, trustee or custodian for the
Borrower, any Guarantor, Prime or the REIT or for all or a substantial part of
their respective properties or assets; or there is issued a warrant of
attachment, execution or similar process against any substantial part of the
properties or assets of the Borrower, any Guarantor, Prime or the REIT; and any
such event continues for thirty (30) days undismissed, unstayed, unbonded or
undischarged;
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(k (i0 the Borrower engages in any Prohibited Transaction involving
any Plan; (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA) exists with respect to any Plan; (iii) a Reportable Event occurs with
respect to, or proceedings commence to have a trustee appointed, or a trustee is
appointed, to administer or to terminate, any Plan, which Reportable Event or
institution of proceedings is likely to result in the termination of such Plan
for purposes of Title IV of ERISA and, in the case of a Reportable Event, the
continuance of such Reportable Event unremedied for 10 days after notice of such
Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or
the continuance of such proceedings for ten (10) days after commencement
thereof, as the case may be; (iv) the Borrower or any of its Subsidiaries fully
or partially withdraws from any multiemployer Plan; provided, however, that any
event or condition described in any of clauses (i) through (iv) of this
paragraph (k) shall not constitute an Event of Default unless such event or
condition, together with all other such events or conditions (if any), is likely
to subject the Borrower to any tax, penalty or other liabilities in the
aggregate material in relation to the management, business, properties, assets,
operations or condition (financial or other) of the Borrower or such Subsidiary;
or (v) any Plan terminates for purposes of Title IV of ERISA, or PBGC institutes
proceedings for the involuntary termination of any Plan, in either case, with a
vested unfunded liability of $100,000 or more;
(l there shall occur a cessation of a substantial part of the
business of the Borrower, Prime or the REIT for a period which significantly
affects the Borrower's, any Guarantors', Prime's or the REIT's capacity to
continue its business; or the Borrower, any Guarantor, Prime or the REIT shall
suffer the loss or revocation of any license or Permit now held or hereafter
acquired by such Person which is necessary to the continued or lawful operation
of a part of its business that would have a Material Adverse Effect; or the
Borrower, any Guarantor, Prime or the REIT shall be enjoined, restrained or in
any way prevented by court, governmental or administrative order from conducting
all or any part of its business affairs for a period which would have a Material
Adverse Effect;
(m a Material Adverse Change shall have occurred;
(n a Change of Control shall have occurred;
(o any of each of the borrowers, the guarantors or the pledgors,
shall Default (as defined in the applicable Other Financing document) under the
Other Financing and such Default (as defined in the applicable Other Financing
document) shall continue unremedied for such period of time during which cure of
such Default (as defined in the applicable Other Financing document) is required
thereunder;
(p any time the price at the end of a trading day of the REIT Stock
trading in the New York Stock Exchange is less than $5.00 or the REIT Stock
shall cease to be listed on the New York Stock Exchange or quoted on the
NASDAQ-NMS;
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(q any time the Minimum Liquidity of the Guarantors and the
Subsidiaries of the Guarantors, taken as a whole and calculated on a
consolidated and combined basis and in accordance with Schedule 8.01(q) hereof,
is less than $75,000,000 in the aggregate;
(r any Governmental Authority issues a final order imposing against
the Borrower liability in excess $1,000,000 in the aggregate arising out of any
failure or alleged failure to comply with any statute, requirement, rule
regulation, order or decree, of any Governmental Authority, including, without
limitation, any Environmental Laws; or
(s (i) (A) failure on the part of the REIT to comply with Section 2
of the REIT Consent or (B) the REIT enters into any of the transactions set
forth in Section 2 thereof and the Lender determines that entering into such
transaction could result in an impairment of the validity or enforceability of,
or an impairment of the rights, remedies or benefits available to the Lender or
in a material and adverse alteration of the rights, preferences and terms of the
Common Units (as defined in the Prime Partnership Agreement) or (ii) (A) failure
on the part of Prime to comply with Section 2 of the Prime Consent or (B) Prime
enters into any of the transactions set forth in Section 2 thereof and the
Lender determines that entering into such transaction could result in an
impairment of the validity or enforceability of, or an impairment of the rights,
remedies or benefits available to the Lender or in a material and adverse
alteration of the rights, preferences and terms of the Common Units (as defined
in the Prime Partnership Agreement); provided, that if the Lender waives in
writing the notice requirements in each of the REIT Consent and the Prime
Consent and the Lender consents to the type of transactions set forth in Section
2 of each of the REIT Consent and the Prime Consent it shall not be an Event of
Default; provided, further, that it is understood that the delivery of notice by
either of the REIT or Prime pursuant to the REIT Consent or the Prime Consent,
as applicable, shall be deemed to be performance of the corresponding obligation
to deliver notice under the other document and the party which did not deliver
notice shall be bound by the same .
Section 8.2. Remedies Upon an Event of Default. If any Event of
Default shall have occurred and be continuing, the Lender may by notice to the
Borrower (i) declare the commitment of the Lender to make the Loan hereunder to
be terminated, whereupon the same shall forthwith terminate, and/or (ii) declare
the Loan, all interest thereon, any accrued and unpaid fees and all other
amounts payable hereunder or in respect of the Loan to be forthwith due and
payable, whereupon they shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by each of the Borrower. Notwithstanding the foregoing,
upon the occurrence of any Event of Default described in Sections 8.01(i) or (j)
above, the commitment of the Lender to make the Loan shall automatically be
terminated and the Loan, all interest thereon and all accrued and unpaid fees
and all other amounts payable hereunder or in respect of the Loan shall
immediately become due and payable, without any requirement on the part of the
Lender to give notice, or make declaration, of any kind regarding such Event of
Default and without presentment, demand, protest or any other requirement on the
part of the Lender, all of which are hereby expressly waived by the Borrower.
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ARTICLE 9.
MISCELLANEOUS
Section 9.1. Notices. All notices, consents, demands or other
communications hereunder shall be in writing and shall be conclusively deemed to
have been received and shall be effective, except as explicitly otherwise noted,
(i) on the day on which delivered if delivered personally, or transmitted by
telecopier (followed by a mailed written confirmation), (ii) on the next
Business Day if delivered by a nationally recognized overnight courier (such as
Federal Express), or (iii) five (5) Business Days after the date on which the
same is mailed by certified United States mail, postage prepaid, return receipt
requested, and shall be addressed:
(a in the case of the Borrower, to:
Prime Financing Limited Partnership
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attention: Michael W. Reschke
Telephone No.: (312) 917-4201
Telecopier No.: (312) 917-1511
With a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attention: Robert J. Rudnik, Esq.
Telephone No.: (312) 917-4234
Telecopier No.: (312) 917-8442
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Telephone No.: (312) 558-5600
Telecopier No.: (312) 558-5700
(b in the case of the Lender, to:
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Prudential Securities Incorporated
Credit Analysis
One Seaport Plaza
New York, New York 10292
Attention: Mr. Michael Pierro
Telephone No.: (212) 214-7336
Telecopier No.: (212) 214-7678
With copies to:
Prudential Securities Incorporated
Law Department
One Seaport Plaza
29th Floor
New York, New York 10292
Attention: Felicia Smith, Esq.
Telephone No.: (212) 214-6324
Telecopier No.: (212) 214-6040
With additional copies to:
Skadden, Arps, Slate Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Robert A. Copen, Esq.
Telecopier No.: (212) 735-2000
or at such other address as the party giving such notice shall have been advised
of in writing for such purpose by the party to which the same is directed.
Section 9.2. Survival of this Agreement. Subject to the last
sentence of Section 9.03, all covenants, agreements, representations and
warranties made herein, or in the Loan Documents or in any certificate delivered
pursuant hereto or thereto shall survive the execution by the Borrower and
delivery to the Lender of this Agreement, the Note and the other Loan Documents
and the making of the Loan hereunder, and shall continue in full force and
effect so long as any part of the Loan or fees and expenses due hereunder remain
outstanding and unpaid.
Section 9.3. Indemnity. The Borrower agrees to defend, protect,
indemnify and hold harmless the Lender and each of its affiliates (as defined in
rule 405 under the Securities Act), controlling persons (as defined in Section
15 of the Securities Act), officers, directors, employees, agents, attorneys and
consultants (collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without
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limitation, the reasonable fees and disbursements of counsel for such
Indemnitees incurred in connection with any action or proceeding between or
among the Borrower and any Indemnitee or between any Indemnitee and any third
party or otherwise, whether or not relating to any investigative, administrative
or judicial proceeding and whether or not such Indemnitees shall be designated a
party thereto), imposed on, incurred by, or asserted against such Indemnitees
(whether direct, indirect, special, consequential, punitive or treble and
whether based on any federal, state or local, or foreign, laws or other
statutory regulations, including, without limitation, applicable Environmental
Laws, securities and commercial laws and regulations, under common law or at
equitable cause, or on contract or otherwise) in any manner relating to or
arising out of this Agreement or any of the Loan Documents, or any act, event or
transaction related or attendant thereto or contemplated hereby, or any action
or inaction by any Indemnitee under or in connection therewith, any commitment
of the Lender hereunder, or the making of the Loan, or the management of the
Loan, or the use or intended use of the proceeds of any Loan, advance or other
financial accommodation provided hereunder, or any ERISA liabilities, or the use
or intended use of the Collateral or any accident or injury occurring on any of
the Borrower's properties, or the payment of any brokerage commission to anyone
in connection with funding the Loan, or any misrepresentation made by the
Borrower to the Lender in the Loan Documents, including, in each such case, any
allegation of any such matters, whether meritorious or not (collectively, the
"Indemnified Matters"); provided, however, that the Borrower shall not have any
obligation to any Indemnitee hereunder with respect to Indemnified Matters
directly caused by or resulting primarily from the willful misconduct or gross
negligence of such Indemnitee. This Section 9.03 shall survive the payment in
full of all amounts due and payable under this Agreement or any of the Loan
Documents and the full satisfaction of all other Obligations of the Borrower.
Section 9.4. Costs, Expenses and Taxes. (a) The Borrower agrees to
pay on demand (i) all reasonable out-of-pocket costs and expenses incurred by
the Lender in connection with the preparation, execution, delivery, filing or
recording of this Agreement, each of the Loan Documents, and any other
documents, instruments or agreements which may be delivered in connection with
this Agreement (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Lender, and local counsel who may be
retained by said counsel, provided such local counsel expenses are incurred in
connection with the transactions contemplated by this Agreement and consummated
prior to, on or shortly after the Closing Date or upon the occurrence of a
Default or Event of Default) with respect thereto and with respect to advising
the Lender as to its rights and responsibilities under this Agreement, (ii) all
costs and expenses in connection with all third party reports, the audit,
appraisal, valuation, investigation, and the creation, perfection, priority or
protection of the Lender's Liens against the Collateral, including, without
limitation, all costs and expenses to pay or discharge taxes, Liens, security
interests or other encumbrances levied, placed or threatened against the
Collateral, (iii) all out-of-pocket costs and expenses in connection with the
audits, inspections and investigations conducted pursuant to Section 5.09
hereof, and (iv) all costs and expenses (including, without limitation, the
reasonable fees and expenses of the Lender's counsel) of the Lender in
connection with the enforcement of this Agreement and each of the Loan Documents
and such other
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documents, instruments or agreements which may be delivered in connection with
this Agreement.
(b Any and all payments by the Borrower under this Agreement or the
Note shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of the Lender,
taxes imposed on or in respect of its income (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the Lender,
(i) the sum payable shall be increased as may be necessary so that, after making
all required deductions (including deductions applicable to additional sums
payable under this Section 9.04), the Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. If a Tax credit is received by the Lender for any Taxes deducted
or withheld by the Borrower or paid or remitted by the Lender in accordance with
this section 9.04(b) and in respect of which additional amounts have been paid
by the Borrower under this section 9.04(b) then, to the extent that such Tax
credit has been received and utilized by the Lender, the Lender shall forthwith
pay to the Borrower an amount equal to such Tax credit, provided that such
amount shall not exceed the additional amounts paid by the Borrower to the
Lender under this section 9.04(b).
(c The Borrower further agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or similar
levies which arise in connection with the execution and delivery of this
Agreement, any of the Loan Documents or any of the other instruments, documents
or agreements executed and/or delivered in connection herewith or therewith, or
any payment made hereunder or in connection herewith (hereinafter collectively
referred to as "Other Taxes").
(d The Borrower shall indemnify the Lender for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable by the Borrower under this
Section 9.04) paid by the Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor. A certificate as to any additional amount payable to
the Lender under this Section 9.04 submitted to the Borrower by the Lender shall
show in reasonable detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be final, conclusive and
binding upon each of the parties hereto.
(e Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 9.04 shall
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survive the payment in full of all amounts due and payable under this Agreement
or any of the Loan Documents and the full satisfaction of all other Obligations
of the Borrower.
Section 9.5. Further Assurances. (a) At any time and from time to
time, upon the request of the Lender, the Borrower shall execute, deliver and
acknowledge, or cause to be executed, delivered and acknowledged, such further
documents and instruments (including without limitation, any and all forms
required by the Federal Reserve Board) and do such other acts and things as the
Lender may reasonably request in order to effect fully the intent and purposes
of this Agreement and the Loan Documents, and any other agreements, instruments
and documents delivered pursuant hereto or in connection with the making of the
Loan, in proper form for recording and otherwise in form and substance
reasonably satisfactory to the Lender and its counsel.
(b The Borrower agrees that from time to time, at its expense, it
shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or appropriate, or that the
Lender may reasonably request, in order to create, evidence, perfect or preserve
any security interest or Lien granted or purported to be granted hereby or by
any Loan Document or to enable the Lender to exercise and enforce its rights and
remedies hereunder or under any Loan Document with respect to any Collateral.
Section 9.6. Amendment and Waiver. No amendment or waiver of any
provision of this Agreement or any of the Loan Documents to which the Lender is
a party, nor any consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given; provided, however, that no
amendment, waiver or consent, shall, unless in writing and signed by all holders
of the Note do any of the following: (i) increase the Commitment, (ii) reduce
the principal of, or premiums or interest on, the Note or the fees payable in
accordance with Section 2.08 hereunder, (iii0 postpone any date fixed for any
payment of principal of, or interest on, the Note or such funding fee or any
other amount due hereunder or under any Loan Document to any holder of the Note,
or waive any default in the payment of principal, interest or any other amount
due hereunder or under any Loan Document to which such holder of the Note is a
party, (iv) release any portion of the Collateral, or (v) amend this Section
9.06 or any other provision requiring the consent of all of the holders of the
Note. No failure on the part of the Lender or any holder of the Note to
exercise, and no delay in exercising, any right, power or privilege hereunder or
under any of the Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstances.
Section 9.7. Remedies Cumulative. This Agreement, the Loan Documents
and the Obligations of the Borrower hereunder and thereunder are in addition to
and not in substitution for any other obligations of the Borrower or security
interests granted by the Borrower now
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or hereafter held by the Lender and shall not operate as a merger of any
contract or debt or suspend the fulfillment of or affect the rights, remedies or
powers of the Lender in respect of any such obligation or security interest held
by the Lender for the fulfillment thereof. The rights and remedies provided in
this Agreement and in any Loan Document are cumulative and not exclusive of any
other rights or remedies provided by law.
Section 9.8. Marshaling, Recourse to Security: Payments Set Aside.
The Lender shall not be under any obligation to marshal any assets in favor of
the Borrower or any other party or against or in payment of any or all of the
Obligations of the Borrower to the Lender hereunder or under the Loan Documents
or otherwise. Recourse to security shall not be required at any time. To the
extent that the Borrower makes a payment or payments to the Lender, or the
Lender enforces its security interests or exercises its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and reinstated and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
Section 9.9. Setoff. In addition to any rights and remedies of the
Lender now or hereafter provided by law, the Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived by
the Borrower to the extent permitted by applicable law, on the occurrence and
during the continuation of any Event of Default to setoff and apply against any
Obligation, whether matured or unmeasured, of the Borrower, any amount owing
from the Lender to the Borrower, at or at any time after the happening of any
such Event of Default, and such right of setoff may be exercised by the Lender
against the Borrower or against any trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, receiver or execution, judgment or
attachment creditor, notwithstanding the fact that such right of setoff shall
not have been exercised by the Lender before the making, filing or issuance, or
service on the Lender of, or of notice of, any such event or proceeding.
Section 9.10. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Lender, and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns; provided, however, that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lender. For the purposes of this
Section 9.10, an assignment shall be deemed to include the voluntary or
involuntary sale, conveyance or transfer of the Borrower's Securities (or the
Securities of any corporation directly or indirectly controlling the Borrower by
operation of law or otherwise) or the creation or issuance of a new stock by
which an aggregate of more than ten percent (10%) of the Borrower's Securities
shall be vested in a party or parties who are not now shareholders.
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Section 9.11. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the substantive law of the State of New York,
without regard to its choice of law provisions.
Section 9.12. Consent to Jurisdiction and Service of Process; Waiver
of Jury Trial. All judicial proceedings brought against the Borrower or the
Lender with respect to this Agreement or any Loan Document may be brought in any
state or federal court of competent jurisdiction situated in the Borough of
Manhattan in the City and the State of New York and, by its execution and
delivery of this Agreement, the Borrower accepts, for itself and in connection
with its properties, generally and unconditionally, the exclusive jurisdiction
of the aforesaid courts, and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with this Agreement or any of the Loan
Documents from which no appeal has been taken or is available. The Borrower
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to its notice address specified
in Section 9.01 hereof, such service to become effective five (5) Business Days
after such mailing. The Borrower and the Lender hereby knowingly, intentionally
and irrevocably waive (a) trial by jury in any action or proceeding with respect
to this Agreement or any Loan Document, and (b) any objection (including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens) which it may now or hereafter have to the bringing of
any such action or proceeding with respect to this Agreement or any Loan
Document in any jurisdiction set forth above. Nothing herein shall affect the
right of the Lender to serve process in any other manner permitted by law.
Section 9.13. Inconsistencies. This Agreement and each of the Loan
Documents shall be construed to the extent reasonable to be consistent, one with
the other, but to the extent that the terms and conditions of this Agreement or
any other Loan Document are actually inconsistent with the terms and conditions
of any Loan Document, the terms and conditions of this Agreement shall govern.
Section 9.14. Performance of Obligations. The Borrower acknowledges
and agrees that the Lender may, but shall have no obligation to, make any
payment or perform any act required of the Borrower under this Agreement or any
Loan Document or take any other action which the Lender in its discretion deems
necessary or desirable to protect or preserve the Collateral, including, without
limitation, any action to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threaten to be placed on any
Collateral.
Section 9.15. Assignment; Participation. The Lender may assign (by
novation or otherwise) or participate all or a proportionate part of its rights,
obligations and interests in the Loan and its rights hereunder and under the
Loan Documents without restriction. The Lender may, prior to or after the
execution of this Agreement syndicate the Loan with one or more financial
institutions, who will become parties to this Agreement, in which case the
Lender will be the sole and exclusive agent for such other financial
institutions upon such terms and
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conditions as the Lender deems appropriate. The Borrower hereby agrees to
reasonably cooperate with the Lender, at the Lender's expense, to effect
assignments and/or participations made with respect hereto.
Section 9.16. Confidentiality. The Lender shall maintain the
confidential nature of, and shall not use or disclose, any of the Borrower's
confidential financial information, without first obtaining the Borrower's
written consent, which consent shall not be unreasonably withheld or delayed.
Nothing in this Section 9.16 shall require the Lender to obtain the consent of
the Borrower, before exercising any of its rights under the Loan Documents upon
the occurrence of a Default or Event of Default. The obligations of the Lender
shall in no event apply to: (i) providing information about the Loan or any
party to any Loan Document to any actual or potential assignee or participant
contemplated in Section 9.15 hereof; (ii) any situation in which the Lender, in
the sole and absolute discretion of the Lender, is required by law or required
or requested by any governmental, regulatory or supervisory authority or
official to disclose information; provided, however, that Lender will give
Borrower notice thereof if permitted to do so by the requesting authority; (iii)
providing information to counsel to the Lender in connection with the
transactions contemplated by the Loan Documents; (iv) providing information to
independent auditors retained by the Lender; (v) any information that is in or
becomes part of the public domain otherwise than through a wrongful act of the
Lender or any employees or agents thereof; (vi) any information that is in the
possession of the Lender prior to receipt thereof from the Borrower or any other
Person known to the Lender to be acting on behalf of the Borrower; (vii) any
information that is independently developed by the Lender; and (viii) any
information that is disclosed to the Lender by a third party that has no
obligation of confidentiality with respect to the information disclosed.
Section 9.17. Construction. The parties hereto acknowledge that each
party and its counsel have reviewed this Agreement and each of the Loan
Documents and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any of the Loan Documents.
Section 9.18. Entire Agreement; Binding Effect. This Agreement,
taken together with all of the Loan Documents and all certificates and other
documents delivered by the Borrower to the Lender, embodies the entire agreement
and, except as otherwise contemplated herein, supersedes all prior agreements,
written and oral, relating to the subject matter hereof.
Section 9.19. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 9.20. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
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Section 9.21. Execution of Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
Section 9.22. Limitation of Liability. No claim may be made by the
Borrower or any other Person against the Lender or its Affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan Documents, or any
act, omission or event occurring in connection herewith or therewith; and the
Borrower hereby waives, releases and agrees not to sue upon any claim for any
and all special, indirect, consequential, punitive or treble damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the date
first above written.
PRIME FINANCING LIMITED PARTNERSHIP
By: PRIME FINANCE, INC., its general partner
By: /s/ MICHAEL W. RESCHKE
-------------------------------------------
Name: MICHAEL W. RESCHKE
Title: PRESIDENT
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ JEFFREY K. FRENCH
-------------------------------------------
Name: Jeffrey K. French
Title: Senior Vice President
45
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Exhibit XX
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement") dated as of September 29, 1999
made by Prime Financing Limited Partnership, an Illinois limited partnership
(the "Pledgor"), and Prudential Securities Incorporated, a Delaware corporation
(the "Lender").
W I T N E S S E T H:
WHEREAS, the Pledgor has entered into a Third Amended and Restated
Agreement of Limited Partnership (including, without limitation, all exhibits
thereto, as amended, supplemented or otherwise modified from time to time, the
"Partnership Agreement") of Prime Retail, L.P., a Delaware limited partnership
("Prime"), dated as of the date hereof among Prime Retail, Inc., a Maryland
corporation (the "REIT"), as the general partner and the Persons whose names are
set forth on Exhibit A thereto, as the limited partners;
WHEREAS, pursuant to the Partnership Agreement the Pledgor is the
beneficial and record owner of the number of certificated limited partnership
interests issued by Prime pursuant to the Partnership Agreement identified on
Schedule I hereto (the "LP Units", and the LP Units together with the REIT Stock
(as defined below) collectively, the "Pledged Shares");
WHEREAS, pursuant to the Partnership Agreement the Pledgor has the right,
subject to certain conditions, to exchange each LP Unit for one common share of
the REIT or, at the option of the REIT, cash equal to the fair market value of
such common share of the REIT at the time of exchange;
WHEREAS, the Pledgor has entered into the Credit Agreement dated as of the
date hereof (as the same may from time to time be amended, extended,
supplemented, restated or otherwise modified or replaced, the "Credit
Agreement"; terms used herein, and not otherwise defined herein, are used with
the meanings ascribed to them in the Credit Agreement) between the Pledgor and
the Lender pursuant to which the Lender has agreed to make a loan to the Pledgor
in an amount no greater than the Commitment; and
WHEREAS, as a condition precedent to the Lender's entering into the Credit
Agreement, the Lender has required the Pledgor to grant, assign and pledge, and
the Pledgor has agreed to grant, assign and pledge, to the Lender a continuing
first priority security interest in and to all its rights, title and interests
in the Pledged Collateral (as hereinafter defined) to secure all of the
obligations of the Pledgor to the Lender under the Credit Agreement, the Note
and the other Loan Documents.
<PAGE>
NOW, THEREFORE, the Pledgor, intending to be bound hereby, in
consideration of the premises hereof, in order to induce the Lender to provide
the Loan under and in accordance with the terms of the Credit Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby agrees with, and for the benefit of, the Lender as
follows:
SECTION 1. Pledge. The Pledgor hereby pledges and assigns to the Lender
and grants to the Lender a continuing first and prior security interest in all
of its rights, title and interests in and to, whether now owned or existing or
hereafter acquired or arising:
(i) Prime, including without limitation, the LP Units;
(ii) all common shares issued by the REIT in exchange for the LP Units
("REIT Stock");
(iii) all payments due or to become due to the Pledgor arising out of, as
a result of or in connection with the LP Units, whether as distributions of cash
or property or otherwise and all of the Pledgor's rights arising out of, as a
result of or in connection with the Pledged Shares, whether now existing or
hereafter arising or acquired, to exercise all voting, consensual and other
powers of ownership pertaining to the Pledged Shares (including, without
limitation, to make determinations, to exercise any election (including, without
limitation, election of remedies) or option, to give or receive any notice,
consent, amendment, waiver or approval), together with full power and authority
to demand, receive, enforce, collect or give receipt for any of the foregoing,
to enforce or execute any checks or other instruments or orders, to file any
claims and to take any action which, in the opinion of the Lender, may be
necessary or advisable in connection with any of the foregoing;
(iv) (a) that certain Registration Rights Agreement dated as of June 15,
1998 (as the same may from time to time be amended, supplemented, restated or
modified, the "Registration Rights Agreement") by the REIT and Prime for the
benefit of the Persons named therein and (b) the Partnership Agreement, (the
Partnership Agreement together with the Registration Rights Agreement
collectively, the "Assigned Agreements"), including, without limitation, (1) all
rights of the Pledgor to receive moneys due and to become due under or pursuant
to the Assigned Agreements, (2) all rights of the Pledgor to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, (3) claims of the Pledgor for damages arising out of or for breach
of or default under the Assigned Agreements, (4) all rights of the Pledgor to
terminate the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (5) the right of
the Pledgor to exchange LP Units into REIT Stock; and
(v) all proceeds and any replacements of any of the foregoing;
all of the foregoing being herein referred to as the "Pledged Collateral."
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SECTION 2. Security for Obligations. This Agreement secures the
indefeasible payment of all liabilities, obligations and indebtedness of any and
every kind and nature heretofore, now or hereafter owing, arising, due or
payable from the Pledgor to the Lender pursuant to the Credit Agreement, the
Note and all other Loan Documents to which it is a party, however evidenced,
created, incurred, acquired or owing, whether for principal, interest, fees,
indemnification, expenses or otherwise, whether primary or secondary, direct or
indirect, joint or several, contingent or fixed, or otherwise, including the
expenses of preparing for and selling any and all of the Pledged Collateral and
the reasonable attorneys' fees and legal expenses incurred in connection
therewith by the Lender and including, without limitation, obligations of
performance, now or hereafter given by the Pledgor to the Lender and whether or
not evidenced by promissory notes or other evidence of indebtedness (all such
obligations and liabilities being hereinafter collectively referred to as the
"Obligations"). The Pledgor and the Lender hereby agree that they intend the
security interest hereby granted to attach upon the execution of this Agreement.
SECTION 3. Delivery of Pledged Collateral. (a) Should any of the Pledged
Collateral at any time be represented or evidenced by a certificate or
instrument, such certificates or instruments shall be endorsed, delivered to and
held by or on behalf of the Lender pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Lender. Upon the day after the maturity of the Loan (if the Obligations have
not been paid in full) or upon the occurrence of an Event of Default under the
Credit Agreement and/or the other Loan Documents (any such event being an
"Acceleration Default"), the Lender shall have the right (i) at any time in its
discretion and without notice to the Pledgor, to transfer to or to register in
the name of the Lender or any of its nominees any or all of the Pledged
Collateral and (ii) at any time to exchange certificates or instruments
representing or evidencing the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
(b) The Pledgor shall notify Prime and request that the books and records
of Prime be marked to reflect the transfer of the Pledged Collateral and/or the
pledge and security interests granted to the Lender under this Agreement, as
applicable.
SECTION 4. Representations and Warranties. The Pledgor hereby represents
and warrants to the Lender as follows:
(a) The LP Units have been, and the REIT Stock upon the exchange of the LP
Units for the appropriate number of REIT Stock, will be duly authorized and
validly issued, are fully paid and non-assessable and represent, on the Closing
Date, the percentage of the issued limited partnership interests of Prime as is
set forth on Schedule I hereto; and, except as set forth in the REIT's most
current registration statement filed with the SEC and in Section 3.08 of the
Credit Agreement, no warrants, subscription rights or options are outstanding
with respect to the Pledged Shares.
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(b) It is the legal and beneficial owner of the LP Units as indicated on
Schedule I hereto, free and clear of any Liens, adverse claims, security
interests, options or other charges or encumbrances (other than as set forth
under the PFLP Negative Pledge, provided, that the PFLP Negative Pledge in no
way shall restrict the rights and remedies of the Lender granted hereunder or
under the Pledge Agreement with respect to such Collateral), except for the
security interests created by this Agreement.
(c) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid security interest in the Pledged Collateral to secure the
indefeasible payment and performance of the Obligations. Upon the filing of the
appropriate financing statement in the Secretary of State of the State of
Illinois such security interest will be perfected. No security interest of any
other creditor of the Borrower will be equal or prior to the security interest
granted to the Lender hereunder.
(d) Other than as set forth in the Partnership Agreement, no
authorization, consent, approval or other action by, and no notice to or filing
with, any Governmental Authority, regulatory body or other Persons is required
to be obtained or made by the Pledgor either (i) for the pledge by the Pledgor
of the Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by the Pledgor, or (ii) for the
exercise by the Lender of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, subject to applicable state and federal securities laws.
(e) There are no restrictions on the transfer of the Pledged Collateral,
except such, if any, as are imposed by operation of law or set forth in the
Partnership Agreement (or as set forth under the PFLP Negative Pledge, provided,
that the PFLP Negative Pledge in no way shall restrict the rights and remedies
of the Lender granted hereunder or under the Pledge Agreement with respect to
such Collateral). Other than as set forth in the Partnership Agreement, the
Pledgor has the right to transfer the Pledged Collateral to the Lender free of
any Liens or encumbrances and without the consent of the creditors of the
Pledgor (other than the Lender), any persons or any Governmental Authority
whatsoever.
(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) the
by-laws or the certificate of incorporation (or an equivalent organizational
document) of the Pledgor, Prime or the REIT or any agreement among the partners
of Prime, (ii) any mortgage, security agreement, indenture, evidence of
indebtedness, loan or financing agreement, trust agreement or other agreement or
instrument to which the Pledgor is a party or by which it is bound or to which
any of the Pledgor's property or assets is subject, or (iii) any provision of
law, any order of any court or administrative agency or any rule or regulation
applicable to the Pledgor or any of its properties, subject to applicable state
and federal securities laws.
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(g) The Pledgor has full power, right and legal authority to execute,
deliver and perform its obligations under this Agreement and has taken all
partnership and other actions necessary to authorize the execution and delivery
of, and the performance of its obligations hereunder.
(h) This Agreement constitutes the legal, valid and binding obligation of
the Pledgor, enforceable in accordance with its terms, subject to the effect of
any applicable bankruptcy, insolvency, reorganization or moratorium or similar
laws affecting the rights of creditors generally.
(i) Any assignee of all or any portion of the Pledged Collateral in
accordance with this Agreement, the Credit Agreement and the transactions
contemplated hereunder and thereunder, is entitled to receive payments with
respect thereto without any defense, counterclaim, setoff, abatement, reduction,
recoupment or other claim arising out of the actions of the Pledgor.
(j) There are no actions, suits or proceedings (whether or not purportedly
on behalf of the Pledgor) pending or, to the knowledge of the Pledgor,
threatened affecting the Pledgor that involve the Pledged Collateral, this
Agreement, the Credit Agreement, the Note or any of the other Loan Documents.
(k) Each Assigned Agreement, a true and complete copy of which has been
furnished to the Lender, has been duly authorized, executed and delivered by
Prime Financing Partners, Prime, and the REIT and, to the Pledgor's best
knowledge, the other parties thereto, has not been amended or otherwise
modified, is in full force and effect and is binding upon and enforceable
against all parties thereto in accordance with its terms, subject to the effect
of any applicable bankruptcy, insolvency, reorganization or moratorium or
similar laws affecting the rights of creditors generally. There exists no
default under each Assigned Agreement by any party thereto. Each of the REIT,
Prime and the Prime Financing Partners has executed and delivered to the Lender
a consent to the assignment of the Assigned Agreement pursuant to the Credit
Agreement.
SECTION 5. Further Assurances. The Pledgor hereby agrees that at any time
and from time to time, at its expense, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable and whether or not requested by Lender,
or that the Lender may reasonably request, in order to perfect and protect any
Lien or security interest granted or purported to be granted hereby or to enable
the Lender to exercise and enforce its rights and remedies hereunder, subject to
applicable state and federal securities laws, with respect to any Pledged
Collateral. The Pledgor agrees that at any time and from time to time, upon the
written request of the Lender and at the cost and expense of the Pledgor, the
Pledgor will promptly and duly execute and deliver any and all instruments and
documents and take such action as the Lender reasonably deems necessary.
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SECTION 6. Voting Rights; Distributions, Etc. (a) So long as no
Acceleration Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement, the Credit
Agreement or any other Loan Document to which the Pledgor is a party;
provided, however, that (a) the Pledgor shall not vote for or consent to
any amendment, supplement, restatement or modification to the Partnership
Agreement without the prior written consent of the Lender and (b) the
Pledgor shall not exercise any other voting right without giving the
Lender prior written notice whenever the Pledgor shall exercise or refrain
from exercising any such voting or other consensual right if such action
would have a Material Adverse Effect on the value of the Pledged
Collateral or any part thereof.
(ii) The Pledgor shall be entitled to receive and retain any and all
distributions, income, dividends and interest paid in respect of the
Pledged Collateral; provided, however, that any and all:
(A) income, dividends and distributions paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral;
(B) income, dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of contributed capital or capital surplus; and
(C) all amounts paid, payable or otherwise distributed in
respect of redemption of, or in exchange for, any Pledged
Collateral,
shall be forthwith delivered to the Lender to hold as, Pledged Collateral
and shall, if received by the Pledgor, be received in trust for the
benefit of the Lender, be segregated from the other property or funds of
the Pledgor, and be forthwith delivered to the Lender as Pledged
Collateral in the same form as so received (with all necessary
endorsements).
(iii) The Lender shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose of enabling the Pledgor
to exercise the voting and other rights which it is entitled to exercise
pursuant to clause (i) above and to receive the distributions, income,
dividends, or interest payments which it is authorized to receive and
retain pursuant to clause (ii) above.
(b) Upon the occurrence and during the continuance of an Acceleration
Default:
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(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) hereof and to receive the income, dividends
and interest payments which it would otherwise be authorized to receive
and retain pursuant to Section 6(a)(ii) hereof shall cease, and all such
rights shall thereupon become vested in the Lender who shall thereupon
have the sole right to exercise such voting and other consensual rights
and to receive and hold as Pledged Collateral such income, dividends and
interest payments.
(ii) All income, dividends and interest payments which are received
by the Pledgor contrary to the provisions of clause (i) of this Section
6(b) shall be received in trust for the benefit of the Lender, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Lender as Pledged Collateral in the same form as so received
(with all necessary endorsements).
SECTION 7. Transfers and Other Liens; Additional Interests. (a) The
Pledgor hereby agrees that it will not (i) sell or otherwise transfer or dispose
of, or grant any interest in or option with respect to, any of the Pledged
Collateral, or (ii) create or permit to exist any Lien, security interest, or
other charge or encumbrance (other than as set forth under the PFLP Negative
Pledge, provided, that the PFLP Negative Pledge in no way shall restrict the
rights and remedies of the Lender granted hereunder or under the Pledge
Agreement with respect to such Collateral) upon or with respect to any of the
Pledged Collateral, except for the security interests under this Agreement.
(b) The Pledgor shall at its expense:
(i) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements in full force and effect, enforce the Assigned Agreements in
accordance with their respective terms; and
(ii) furnish to the Lender promptly upon receipt thereof copies of
all notices, requests and other documents received by the Pledgor under or
pursuant to the Assigned Agreements, and from time to time (A) furnish to
the Lender such information and reports regarding the Assigned Agreements
as the Lender may reasonably request and (B) upon request of the Lender
make to any other party to the Assigned Agreements such demands and
requests for information and reports or as the Pledgor is entitled to make
thereunder.
(c) The Pledgor shall not, without the prior written consent of the
Lender:
(i) cancel or terminate the Assigned Agreements or consent to or
accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
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(iii) waive any default under or breach of the Assigned Agreements;
or
(iv) take any other action in connection with the Assigned
Agreements which would impair the value of the interest or rights of the
Pledgor thereunder or which would impair the interest or rights of the
Lender.
SECTION 8. Litigation Respecting the Pledged Collateral. In the event any
action, suit or other proceeding at law, in equity, in arbitration or before any
court, administrative agency or other authority involving or affecting the
Pledged Collateral becomes known to or is contemplated by the Pledgor, the
Pledgor shall give the Lender immediate notice thereof.
SECTION 9. Lender Appointed Attorney-in-Fact. (a) The Pledgor hereby
appoints the Lender (and any officer or agent of the Lender with full power of
substitution and revocation) the Pledgor's true and lawful attorney-in-fact,
coupled with an interest, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Lender's discretion to (i) if an Acceleration Default occurs and is continuing,
take any action and to execute any instrument which the Lender may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, (A) to receive, endorse and collect all instruments made
payable to the Pledgor representing any income, dividend or other distribution
in respect of the Pledged Collateral or any part or proceeds thereof and to give
full discharge for the same; (B) to transfer the Pledged Collateral, in whole or
in part, to the name of the Lender or such other Person or Persons as the Lender
may designate, or to cause the Pledged Shares to be transferred on the books of
Prime to the name of the Lender; (C) take possession of and endorse any one or
more checks, drafts, bills of exchange, money orders or any other documents
received on account of the Pledged Collateral; (D) collect, sue for and give
acquittances for moneys due on account of the foregoing; withdraw any claims,
suits, or proceedings pertaining to or arising out of the foregoing; (E) take
any other action contemplated by this Agreement; and (F) sign, execute,
acknowledge, swear to, verify, deliver, file, record and publish any one or more
of the foregoing, and (ii) at any time execute and record or file on behalf of
the Pledgor any evidence of a security interest contemplated by this Agreement
and any refilings, continuations or extensions thereof.
(b) The powers of attorney which shall be granted pursuant to Section 9(a)
hereof and all authority thereby conferred shall be granted and conferred solely
to protect the Lender's interests in the Pledged Collateral and shall not impose
any duty upon the attorney-in-fact to exercise such powers. Such powers of
attorney shall be irrevocable prior to the indefeasible payment and performance
in full of the Obligations and shall not be terminated prior thereto or affected
by any act of the Pledgor or by operation of law, including, but not limited to,
dissolution, liquidation, wind-up, death, disability or incompetency of any
Person, the termination of any trust, or the occurrence of any other event, and
if the Pledgor should become bankrupt, insolvent, or come under the direct
regulation of similar laws which affect the rights of creditors generally or any
other event should occur before the indefeasible payment and performance in full
of the Obligations and termination of the Credit Agreement, the Note and the
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other Loan Documents, such attorney-in-fact shall nevertheless be fully
authorized to act under such powers of attorney as if such event had not
occurred and regardless of notice thereof.
SECTION 10. Lender May Perform. If the Pledgor fails to perform any
agreement contained herein, the Lender may itself perform, or cause performance
of, such agreement, and the expenses of the Lender incurred in connection
therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 11. Reasonable Care. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Lender accords its own property, it being understood that the
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 12. Remedies Upon Acceleration Default.
(a) If any Acceleration Default shall have occurred and be continuing:
(i) The Lender may notify the obligors or other parties, if
any, interested in any items of Pledged Collateral of the interests of the
Lender therein and of any action proposed to be taken with respect
thereto, and inform any of those parties that all payments otherwise
payable to the Pledgor with respect thereto shall be made to the Lender
until the Loan has been indefeasibly paid in full;
(ii) The Lender may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party under the Uniform Commercial Code in effect in the State of New York
at that time (the "Code"), and the Lender may also, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange, broker's board
or at any of the Lender's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Lender may deem
commercially reasonable. The Pledgor hereby agrees that, to the extent
notice of sale shall be required by law, at least ten (10) days' notice to
the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned;
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(iii) Any cash held by the Lender as Pledged Collateral and
all cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, and thereafter applied (after payment of any amounts
payable to the Lender pursuant to Section 13 hereof) in whole or in part
by the Lender against, all or any part of the Obligations in such order as
the Lender shall elect. Any surplus of such cash or cash proceeds held by
the Lender and remaining after the indefeasible payment in full of all the
Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus; and
(iv) The Lender may otherwise use or deal from time to time
with the Pledged Collateral, in whole or in part, in all respects as if
the Lender were the outright owner thereof.
(b) Except as set forth in Section 12(a)(iii) hereof, the Lender shall
have the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, teletransmitted or hand delivered to the Pledgor at least
five (5) days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Lender shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by and in accordance
with subsection (a) above and shall apply the full proceeds in accordance with
the provisions of this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this Section
12 shall confer on the Lender any rights or privileges that are not permissible
under applicable law.
(e) In connection with the provisions of this Agreement, the Pledgor from
time to time shall promptly execute and deliver, or cause to be executed and
delivered, to the Lender such documents and instruments, and shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Lender shall deem necessary or desirable to enable it to exercise any of the
rights with respect to the Pledged Collateral granted to it pursuant to this
Agreement.
SECTION 13. Expenses. The Pledgor will, upon demand, pay to the Lender the
amount of all reasonable out-of-pocket expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the Lender may
incur in connection with (i) the perfection, custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (ii) the exercise or enforcement of any of the rights of the Lender
hereunder, (iii) the failure by the Pledgor to perform or observe any of the
provisions hereof, or (iv) any actual or attempted sale, assignment of rights or
interests, or exchange of, or any enforcement, collection, compromise or
settlement respecting the Pledged Collateral or any other property or money held
hereunder, or (v) any other action taken by the Lender hereunder whether
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directly or as attorney-in-fact pursuant to the power of attorney herein
conferred, and all such expenses shall be deemed a part of the Obligations for
all purposes of this Agreement and the Lender may apply the Pledged Collateral
or any other property or money held hereunder to payment of or reimbursement of
itself for such expenses. The Pledgor shall pay all such expenses on demand,
together with interest thereon from the date the expense is paid or incurred by
the Lender at an interest rate equal to that under the Note (computed on the
basis of the actual number of days elapsed over a 360-day year).
SECTION 14. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the Lender
shall be deemed to constitute a waiver of any power, right or remedy hereunder,
nor shall any single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other power, right or remedy. Any waiver or
consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Lender at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its rights
at a later time to enforce any such provision. No notice to or demand on a party
in any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Lender
hereunder respecting the Pledged Collateral and any other property or money held
in accordance with the terms and conditions hereunder may at the option of the
Lender be exercised as to all or any part of the same and the term the "Pledged
Collateral" wherever used herein, unless the context clearly requires otherwise,
shall be deemed to mean (and shall be read as) the "Pledged Collateral and any
other property or money held hereunder or any part thereof." This Agreement
shall not be amended nor shall any right hereunder be deemed waived except by a
written agreement expressly setting forth the amendment or waiver and signed by
the party against whom or which such amendment or waiver is sought to be
charged.
SECTION 15. Notices. Each notice to, and each demand upon, the Pledgor by
the Lender relating to this Agreement and each notice to, and each demand upon,
the Lender by the Pledgor relating to this Agreement, shall specifically refer
to this Agreement, and shall be in writing and shall be conclusively deemed to
have been received and shall be effective except as explicitly noted hereinabove
(i) on the day on which delivered if delivered personally, or transmitted by
telecopier (followed by a mailed written confirmation), (ii) on the next
Business Day if delivered by a nationally recognized overnight courier (such as
Federal Express), or (iii) five (5) Business Days after the date on which the
same is mailed by certified United States mail postage prepaid, return receipt
requested and shall be addressed:
(a) in the case of the Pledgor, to:
Prime Financing Limited Partnership
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c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attention: Michael W. Reschke
Telephone No.: (312) 917-4201
Telecopier No.: (312) 917-1511
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Telephone No.: (312) 558-5600
Telecopier No.: (312) 558-5700
(b) in the case of the Lender, to:
Prudential Securities Incorporated
Credit Analysis
One Seaport Plaza
New York, New York 10292
Attention: Michael Pierro
Telephone No.: (212) 214-7336
Telecopier No.: (212) 214-7678
With copies to:
Prudential Securities Incorporated
Law Department
One Seaport Plaza
29th Floor
New York, New York 10292
Attention: Felicia Smith, Esq.
Telephone No.: (212) 214-6324
Telecopier No.: (212) 214-6040
Skadden, Arps, Slate, Meagher & Flom LLP
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919 Third Avenue
New York, New York 10022
Attention: Robert A. Copen, Esq.
Telecopier No.: (212) 735-2000
or at such other address as the party giving such notice shall have been advised
of in writing for such purpose by the party to which the same is directed.
SECTION 16. Continuing Security Interest. This Agreement shall create a
continuing perfected and first priority Lien and security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
indefeasible payment in full or performance of the Loan, (ii) be binding upon
the Pledgor, its successors and assigns and (iii) inure to the benefit of the
Lender and its successors, transferees and assigns. Upon the indefeasible
payment in full or performance of the Loan, the Pledgor shall be entitled to the
return at its out-of-pocket expense, if any, of such of the Pledged Collateral
as shall not have been sold or otherwise applied pursuant to the terms of this
Agreement and/or applicable law.
SECTION 17. Severability. In the event that any provision of this
Agreement shall be determined to be superseded, invalid or otherwise
unenforceable pursuant to applicable law, such determination shall not affect
the validity of the remaining provisions of this Agreement, and the remaining
provisions of this Agreement shall be enforced as if the invalid provision were
deleted.
SECTION 18. Survival of Representations, etc.. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Credit Agreement, the Note and the other
Loan Documents have been indefeasibly paid in full. This Agreement shall remain
and continue in full force and effect without regard to any modification,
execution, renewal, amendment or waiver of any provision of any of the Credit
Agreement, the Note or any other Loan Document.
SECTION 19. Termination and Miscellaneous Provisions. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
indefeasibly paid and satisfied. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors, and
assigns. Section headings used herein are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof. This
Agreement may be executed in any number of counterparts with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 20. Entire Agreement. This Agreement, the Credit Agreement and the
other Loan Documents contain the entire agreement of the parties and supersedes
all other agreements, understandings and representations, oral or otherwise,
between the parties with respect to the matters contained herein.
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<PAGE>
SECTION 21. Governing Law; Terms. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 22. Disclosure; Limitation of Liability. Disclosure. No claim may
be made by the Pledgor or any other Person against the Lender or its affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
consequential, punitive or treble damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Loan Documents, or any
act, omission or event occurring in connection herewith or therewith; and the
Pledgor hereby waives, releases and agrees not to sue upon any claim for any and
all special, indirect, consequential, punitive or treble damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
[signature page follows]
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IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this
Pledge and Security Agreement to be duly executed and delivered as of the date
first above written.
PRIME FINANCING LIMITED PARTNERSHIP
By: PRIME FINANCE, INC.,
its general partner
By: /s/ Michael W. Reschke
-------------------------------------
Name: Michael W. Reschke
Title: President
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Jeffrey K. French
-------------------------------------
Name: Jeffrey K. French
Title: Senior Vice President
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SCHEDULE I
<TABLE>
<CAPTION>
No. of Pledged Percentage
Certificate Shares or of Total
Pledgor Issuer Class of Interest No. Interest Outstanding
- ------- ------ ----------------- --- -------- -----------
<S> <C> <C> <C> <C> <C>
Prime Financing Limited Prime Retail, L.P. Limited Partnership 6 5,557,000 10.256%
Partnership Interest
</TABLE>
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Exhibit XXI
GUARANTY
GUARANTY dated as of September 29, 1999 made by The Prime Group,
Inc., an Illinois corporation ("PGI"), Prime Group Limited Partnership, an
Illinois limited partnership ("PGLP"), Prime Group II, L.P., an Illinois limited
partnership ("PGII LP"), Prime Group III, L.P., an Illinois limited partnership
("PGIII LP"), PGLP, Inc., an Illinois corporation ("PGLP, Inc.") and Prime
International, Inc., an Illinois corporation ("PII" and together with PGI, PGLP,
PGII LP, PGIII LP and PGLP, Inc. collectively, the "Guarantors", and
individually, each, a "Guarantor") in favor of Prudential Securities
Incorporated, a Delaware corporation (the "Lender").
W I T N E S S E T H :
WHEREAS, Prime Financing Limited Partnership, an Illinois limited
partnership (the "Borrower"), has entered into a Credit Agreement (as amended,
extended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") with the Lender, pursuant to which the Lender has agreed,
subject to the terms and conditions set forth therein, to make a loan to the
Borrower in an amount no greater than the Commitment;
WHEREAS, as a condition precedent to the effectiveness of the Credit
Agreement, each Guarantor is required to execute and deliver a Guaranty
substantially in the form of this Guaranty;
WHEREAS, it is in the best interests of each Guarantor to execute
this Guaranty inasmuch as each Guarantor will derive substantial benefits from
the making of the Loan; and
WHEREAS, each Guarantor is willing to enter into this Guaranty;
NOW, THEREFORE, each Guarantor agrees as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions; References.
Terms used herein which are defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined. The following
additional terms, as used herein, have the following respective meanings:
"Guaranteed Obligations" means all liabilities, obligations and
Indebtedness of the Borrower to the Lender of any and every kind and nature
(including, without limitation, principal payments, interest, charges, expenses,
attorneys' fees, maintenance, commitment and other fees chargeable to the
Borrower by the Lender and future advances made to or for the benefit of such
Person) arising under the Credit Agreement, under any of the other Loan
Documents, under any refinancing or modification of the credit facilities
provided under the Credit Agreement or any of the other Loan Documents, and
pursuant to any arrangement, agreement or understanding hereafter among the
Borrower and the Lender relating to the Credit Agreement, in each case whether
now or hereafter owing, arising, due or payable from the Borrower to the Lender,
whether before or after the filing of a proceeding under the Bankruptcy Code by
or against the Borrower, regardless of how evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or
otherwise, including, without limitation, obligations or guarantees of
performance or payment.
ARTICLE II
GUARANTIES
SECTION 2.01. The Guaranty. Subject to Section 2.03, each Guarantor
hereby unconditionally and irrevocably guarantees to the Lender the due and
punctual payment of all Guaranteed Obligations as and when the same shall become
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms thereof. In case of failure by the Borrower punctually to pay the
obligations guaranteed hereby, each Guarantor, subject to Section 2.03, hereby
unconditionally agrees to pay such obligations punctually as and when the same
shall become due and payable, whether at maturity or by acceleration or
otherwise, at the
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place and in the manner specified in the applicable Loan Document, and as if
such payment were made by the Borrower.
SECTION 2.02. Guaranty Unconditional. Subject to Section 2.03, the
obligations of each Guarantor under this Article II shall be joint and several,
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by, and each
Guarantor, to the extent permitted by law, hereby waives any defense to any of
the obligations hereunder that might otherwise be available on account of:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower under any Loan
Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to any Loan
Document;
(c) any modification, amendment, waiver, release, non-perfection or
invalidity of any direct or indirect security, or of any guarantee or
other liability of any third party, for any obligation of the Borrower
under any Loan Document;
(d) any change in the corporate existence, structure or ownership of
the Borrower or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Borrower or any of its assets or any
release or discharge of any obligation of the Borrower contained in any
Loan Document;
(e) the existence of any claim, set-off or other rights which a
Guarantor may have at any time against the Borrower, the Lender or any
other Person, whether or not arising in connection with any Loan Document;
provided that nothing herein shall prevent the assertion of any such claim
by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower for any reason of any Loan Document or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower of
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the principal or interest accrued thereon or any other amount payable by
the Borrower under any Loan Document; or
(g) any other act or omission to act or delay of any kind by the
Borrower, the Lender or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of any
Guarantor under this Article II.
SECTION 2.03. Limit of Liability. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the Bankruptcy Code of 1978, as amended, or any comparable
provisions of applicable state law.
SECTION 2.04. Discharge; Reinstatement in Certain Circumstances.
Subject to Section 2.03, each Guarantor's obligations under this Article II
shall remain in full force and effect until the Commitment shall have terminated
and the principal and interest accrued thereon and any other amounts payable by
the Borrower under any Loan Document shall have been indefeasibly paid in full.
If at any time any payment of the principal or interest accrued thereon or any
other amount payable by the Borrower under any Loan Document is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, each Guarantor's obligations under
this Article II with respect to such payment shall be reinstated at such time as
though such payment had become due but had not been made at such time.
SECTION 2.05. Waiver. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Borrower or any other Person or any property subject to any Lien
securing any obligations of the Borrower or any of its Subsidiaries.
SECTION 2.06. Subrogation. Each Guarantor hereby irrevocably agrees
to subordinate any Subrogation Rights (as defined below) to the rights of the
Lender to recover from the Borrower or any Credit Party with respect to such
payment. "Subrogation Rights" shall mean any and all rights of subrogation,
reimbursement, exoneration, contribution or indemnification, any right to
participate in any claim or remedy payee now has or hereafter acquires in
connection with the payment, performance or enforcement of each Guarantor's
obligations under this
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Guaranty or any Loan Document, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law, including the right to take
or receive, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. To effectuate such subordination, each Guarantor hereby agrees that it
shall not be entitled to any payment by the Borrower or any Credit Party in
respect of any Subrogation Right until all of the Guaranteed Obligations have
been indefeasibly paid in full. If any amount shall be paid to a Guarantor in
violation of the preceding sentence and the Guaranteed Obligations shall not
have been paid in full, such amount shall be deemed to have been paid to such
Guarantor for the benefit of, and held in trust for, the Lender, and shall
forthwith be paid to the Lender to be credited and applied to the Guaranteed
Obligations, whether matured or unmatured. Each Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement and that the subordination set forth in
this Section is knowingly made in contemplation of such benefits.
SECTION 2.07. Stay of Acceleration. If acceleration of the time for
payment of any Guaranteed Obligation payable by the Borrower under any Loan
Document is stayed upon the insolvency, bankruptcy or reorganization of the
Company, all such Guaranteed Obligations otherwise subject to acceleration under
the terms of the Loan Documents shall nonetheless be payable by each Guarantor
hereunder forthwith on demand by the Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization and Powers. Each of the Guarantors is a
limited partnership or a corporation, as the case may be, duly formed and
validly existing and in good standing under the laws of the state of its
organization. Each of the Guarantors is duly qualified to do business as a
foreign entity and is in good standing in each jurisdiction (other than the
state of its organization) in which the conduct of its business or the ownership
or operation of its properties or assets makes such qualification necessary,
except where the failure to so qualify would not have a Material Adverse Effect.
Each of the Guarantors has full corporate or partnership power and authority, as
applicable, to own its properties and assets and carry on its business as now
conducted.
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<PAGE>
SECTION 3.02. Power and Authorization. Each Guarantor has full
power, right and legal authority to execute, deliver and perform its obligations
under this Guaranty. Each Guarantor has taken all partnership or corporate
action, as the case may be, and other actions necessary to authorize the
execution and delivery of, and the performance of its obligations under this
Guaranty. This Guaranty constitutes the legal, valid and binding obligations of
each Guarantor enforceable against each Guarantor in accordance with its
respective terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws affecting the rights of creditors
generally. No consent of any person, and no consent, license, approval or
authorization, or registration or declaration with, any Governmental Authority,
which has not been obtained, taken or made, is required in connection with the
execution, delivery or performance by each Guarantor of this Guaranty.
Section 3.03. Permits; Compliance with Laws. Each Guarantor has all
permits, licenses and governmental franchises and other authorizations from all
Governmental Authorities (collectively, the "Permits") that are necessary to own
and operate its business as presently being conducted and as contemplated to be
conducted immediately after the Closing Date, except those permits, licenses and
governmental franchises and authorizations of which the failure to possess would
not have a Material Adverse Effect. All such Permits are valid and subsisting
and in full force and effect. Each Guarantor is in compliance with the terms of
such Permits and all statutes, laws, ordinances, governmental rules or
regulations (including applicable environmental laws) and all judgments, orders
or decrees (federal, state, local or foreign) to which it is subject, except for
violations of which would not have a Material Adverse Effect.
Section 3.04 No Legal Bar. The execution, delivery and performance
by each Guarantor of this Guaranty and except for such violations or
contravention of which would not have a Material Adverse Effect, do not and will
not (a) violate or contravene any provisions of any existing law, statute, rule,
regulation or ordinance or charter document, (b) violate or contravene any
provision of any order or decree of any court or Governmental Authority to which
any Guarantor or any of its properties or assets are subject, (c) violate or
contravene any provision of any mortgage, indenture, security agreement,
contract, undertaking or other agreement or instrument to which any Guarantor is
a party or which purports to be binding upon either of it or any of its
properties or assets, or (d) result in the creation or imposition of any Lien on
any of the properties of any Guarantor pursuant to the provisions of any
mortgage,
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indenture, security agreement, contract, undertaking or other agreement or
instrument.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Notices. Unless otherwise specified herein, all
notices, requests and other communications to any party hereunder shall be in
writing (including bank wire, facsimile transmission or similar writing) and
shall be given in care of the Borrower at the Borrower's address or facsimile
transmission number specified in or pursuant to Section 9.01 of the Credit
Agreement. Each such notice, request or other communication shall be effective
(i) if given by facsimile, on the day when such facsimile is transmitted
(followed by a mailed written confirmation), (ii) if given by mail, five (5)
Business Days after the date on which the same is mailed by certified United
States mail, postage prepaid, return receipt requested, addressed as aforesaid,
or (iii) if given by any other means, when delivered at the address specified in
or pursuant to this Section 4.01.
SECTION 4.02. No Waiver. No failure or delay by the Lender in
exercising any right, power or privilege under any Loan Document shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 4.03. Amendments and Waivers. Any provision of this Guaranty
may be amended or waived if, and only if, such amendment or waiver is in writing
and is signed by each Guarantor and is consented to in writing by the Lender.
SECTION 4.04. Successors and Assigns. This Guaranty is for the
benefit of the Lender and its successors and assigns and in the event of an
assignment of the Loan or other amounts payable under the Loan Documents, the
rights hereunder, to the extent applicable to the indebtedness so assigned,
shall be transferred with
7
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such indebtedness. All of the provisions of this Guaranty shall be binding upon
the parties hereto and their respective successors and assigns except that the
Guarantors may not assign or transfer any of their rights or obligations under
this Guaranty.
SECTION 4.05. Non-Recourse. Anything contained herein, in the Credit
Agreement or in any other Loan Document to the contrary notwithstanding, no
recourse shall be had for the Guaranteed Obligations against any partner (to the
extent such partner is an individual person) agent, director, officer, or
employee of any Guarantor. It is understood that the preceding sentence shall
not (A) in the event of any malfeasance, such as fraud, misappropriation of
funds or intentional misrepresentation, estop the Lender from instituting or
prosecuting a legal action or proceeding or otherwise making a claim against the
Person or Persons committing such malfeasance, and (B) constitute a waiver,
release or discharge of any Guaranteed Obligation, and the same shall continue
until paid or discharged in full.
SECTION 4.06. Execution of Counterparts. This Guaranty may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 4.07. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. EACH GUARANTOR HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH GUARANTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8
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[signature page follows]
9
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
duly executed as of the date first above written.
THE PRIME GROUP, INC.
By: /s/ Robert J. Rudnik
-----------------------------
Name: Robert J. Rudnik
Title: Executive V.P.
PRIME GROUP LIMITED
PARTNERSHIP
/s/ Michael W. Reschke
-----------------------------------
By: MICHAEL W. RESCHKE, as
its managing general partner
PRIME GROUP II, L.P.
By: PGLP, INC., as
its general partner
By: /s/ Robert J. Rudnik
-----------------------------
Name: Robert J. Rudnik
Title: Vice President
PRIME GROUP III, L.P.
By: PGLP, INC., as
its general partner
By: /s/ Robert J. Rudnik
-----------------------------
Name: Robert J. Rudnik
10
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Title: Vice President
PGLP, INC.
By: /s/ Robert J. Rudnik
-----------------------------
Name: Robert J. Rudnik
Title: Vice President
PRIME INTERNATIONAL, INC.
By: /s/ Robert J. Rudnik
-----------------------------
Name: Robert J. Rudnik
Title: Vice President
11
<PAGE>
Exhibit XXII
JOINT FILING STATEMENT
PURSUANT TO RULE 13d-1(k)(1)
The undersigned acknowledge and agree that the foregoing statement
on Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
filing statements. The undersigned acknowledge that each shall be responsible
for the timely filing of such amendments, and for the completeness and accuracy
of the information concerning him or it contained therein, but shall not be
responsible for the completeness and accuracy of information concerning the
other, except to the extent that he or it knows or has reason to believe that
such information is inaccurate.
Date: January 26, 2000
/s/ Michael W. Reschke
-----------------------------------
Michael W. Reschke
PGLP, INC.
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
PRIME FINANCE, INC.
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
PRIME FINANCING LIMITED PARTNERSHIP
By: Prime Finance, Inc., its managing general
partner
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
<PAGE>
PRIME GROUP II, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
PRIME GROUP V, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
PRIME GROUP VI, L.P.
By: PGLP, Inc., its managing general partner
By: /s/ Michael W. Reschke
----------------------------
Name: Michael W. Reschke
Title: President
