Ex-10.47
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made as of
January 31, 2002 ("Second Amendment Date") by and between FRIT PRT LENDING LLC,
a Delaware limited liability company ("Lender") and PRIME RETAIL, L.P., a
Delaware limited partnership ("Borrower").
W I T N E S S E T H:
WHEREAS, Lender and Borrower have entered into that certain Loan Agreement,
dated as of December 22, 2000 (as amended by First Amendment to Loan Agreement
dated as of January 11, 2002, the "Original Loan Agreement", and as further
amended by this Amendment, the "Loan Agreement"), providing for a loan to
Borrower in the original amount of $90,000,000.00 (the "Loan"); and
WHEREAS, Borrower and Lender desire to enter into this Amendment in order
to amend, modify and supplement certain terms and conditions of the Original
Loan Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto amend the Original Loan Agreement, and covenant
and agree, as follows:
1. Defined Terms. Terms used herein and not defined herein shall have the
meanings provided therefor in the Original Loan Agreement, provided, however,
that effective from (and including) January 1, 2002 and thereafter, the term
"Applicable Interest Rate" as used in the Loan Agreement shall be and hereby is
amended and restated to have the following meaning:
"Applicable Interest Rate" shall mean the rate which is the
LIBOR Rate plus 975 basis points (9.75%) per annum, which sum shall be
rounded up to the nearest one-eighth of one percent (0.125%), and which
shall be adjusted on each LIBOR Adjustment Date, provided that the
Applicable Interest Rate shall not in any event be less than 1475 basis
points (14.75%) per annum.
Further, the term "Minimum Monthly Amortization Amount" as used in the Loan
Agreement shall be and hereby is amended and restated to have the following
meaning:
"Minimum Monthly Amortization Amount" shall mean (a)
$1,000,000.00 for each of the first twelve (12) monthly Payment Dates
(ending on, and including, the Payment Date which is the first Business
Day of January, 2002), (b) $800,000.00 for each of the second twelve
(12) monthly Payment Dates (ending on, and including, the Payment Date
which is the first Business Day of January, 2003)(the Payment Dates
referred to in this clause (b) are herein sometimes referred to as the
"2002 Payment Dates"), and (c) $2,333,000.00 for the Payment Date which
is the first Business Day of February, 2003 and each monthly Payment
Date thereafter; provided, that if no Event of Default exists and
Borrower demonstrates to Lender's satisfaction (Lender's determinations
in this respect being made in Lender's sole and absolute discretion)
that Borrower has incurred net reductions in actual cash flow in
calendar year 2002 (not otherwise offset by virtue of higher revenues
or lower expenses in respect of other aspects of Borrower's direct or
indirect operations and capital programs in relation to Borrower's 2002
budget and business plan previously submitted to Lender) due to tenant
bankruptcies occurring in calendar year 2002 which were unplanned and
not foreseen by Borrower or Lender to occur in calendar year 2002,
including losses due to rent defaults on the part of bankrupt tenants
occurring prior to such tenants' bankruptcy filings, so long as such
bankruptcy filings actually occur ("Proven Unplanned Tenant Bankruptcy
Losses"), Lender may elect by written notice to Borrower, if Borrower
requests and Lender determines in Lender's sole and absolute discretion
that an adjustment to the amount of the Loan amortization is necessary
and appropriate under the circumstances (including a determination that
no other cash reserves are available to Borrower to address the Proven
Unplanned Bankruptcy Losses) and will result in increased Borrower cash
flow sufficient to pay all Borrower's operating costs and expenses for
the foreseeable future notwithstanding the occurrence of Proven
Unplanned Tenant Bankruptcy Losses, to reduce the amount of the Minimum
Monthly Amortization Amount payable on one or more of the 2002 Payment
Dates occurring after such written notice is given by Lender, in each
case in an amount determined by Lender, but in no event will the
Minimum Monthly Amortization Amount be reduced below $500,000.
In addition, the term "Applicable Current Pay Rate" as used in the Loan
Agreement shall have the following meaning:
"Applicable Current Pay Rate" shall mean the Applicable
Interest Rate less 25 basis points (0.25%) per annum.
Also, the term "Deferred Interest" as used in the Loan Agreement shall have
the following meaning:
"Deferred Interest" shall mean the amount determined by
subtracting the interest accruing on the Loan from (and including)
January 1, 2002 and thereafter calculated on the basis of the
Applicable Interest Rate and interest accruing on the Loan for the same
period calculated on the basis of the Applicable Current Pay Rate.
Finally, the definition of "Available Consolidated Cash Flow" as used in
the Loan Agreement shall be amended as follows:
(i) the parenthetical in subparagraph (b) of such definition
(as it appears in Exhibit B of the Loan Agreement), which presently
reads "(other than the payment of Available Consolidated Cash Flow)"
shall be and hereby is amended and restated to read and provide as
follows:
"(other than payments made from Available Consolidated Cash
Flow and payments made from the Special Reserve Account)"; and
(ii) at the end of the text of subparagraph (d) of such
definition, a semicolon, rather than a period, shall be and hereby is
added, followed by the addition of the word "plus" after such
semi-colon and the addition of a new subparagraph (e) to such
definition, which shall and hereby does read as follows:
"(e) actual cash payments of the Monthly Special
Reserve Deposits for deposit into the Special Reserve Account
during the immediately preceding Fiscal Quarter."
2. Amendment Fee. Borrower shall pay to Lender, in consideration of
Lender's execution and delivery of this Second Amendment, an amendment fee equal
to $123,578.69, which shall be deemed fully and irrevocably earned and shall be
paid in full on the Second Amendment Date.
3. Amendment and Restatement of Certain Provisions. Sections 2.5, 2.6,
2.7(a) and 2.7(b)(i) of the Original Loan Agreement are hereby amended and
restated to read and provide as follows, effective from (and including) January
1, 2002 and thereafter:
"2.5 Loan Interest and Amortization.
(a) Borrower shall pay in advance on the Closing Date
an amount equal to the interest accruing on the Loan from the Closing
Date until January 1, 2001. Commencing on February 1, 2001 (the "First
Payment Date"), and continuing on the first Business Day of each and
every successive calendar month thereafter (each, including the First
Payment Date, a "Payment Date") through and including the Payment Date
immediately prior to the Maturity Date, Borrower shall pay to Lender
monthly payments of accrued interest at the Applicable Interest Rate,
provided, that Borrower shall not be obligated to pay Deferred Interest
until the Maturity Date or upon the earlier occurrence of an Event of
Default or a payment or prepayment of all or any portion of the Loan,
at which time the Deferred Interest shall become due and payable in
full (or, in the case of a partial prepayment of the Loan, the Deferred
Interest shall be payable in full with respect to the portion of the
principal balance of the Loan paid or prepaid). Without limiting the
foregoing, each payment of principal of the Loan, whether required
under the provisions of Section 2.7 of this Agreement or otherwise,
shall be accompanied by the Deferred Interest allocable to such portion
of the Loan paid or prepaid.
(b) On each Payment Date, the Borrower shall pay to
Lender, (i) for application in reduction of the principal balance of
the Note, the Minimum Monthly Amortization Amount and (ii) the
Additional Fee applicable thereto.
(c) Within thirty (30) days following each Quarterly
Payment Date, the Borrower shall pay to Lender, for application pro
rata (i) in reduction of the principal balance of the Loan, (ii)
payment of the Deferred Interest allocable to the principal balance of
the Loan paid under this Section 2.5(c) and (iii) to the payment of the
Additional Fee associated with such payment of the principal balance of
the Loan, the Available Consolidated Cash Flow for the immediately
preceding Fiscal Quarter. Borrower covenants and agrees with Lender
that Available Consolidated Cash Flow applicable to each Fiscal Quarter
shall be available solely for the application to the Loan as required
hereunder. Notwithstanding the thirty (30) day grace period specified
hereunder, Borrower acknowledges and agrees that it may only apply
Available Consolidated Cash Flow with respect to the immediately
preceding Fiscal Quarter to the payment required under this Section
2.5(c) and shall not apply Revenues attributable to periods after the
applicable Quarterly Payment Date for such payment.
2.6 Maturity. The entire outstanding principal balance of the Note,
together with accrued and unpaid interest, any Additional Fee and any other
amounts due under the Note and the other Loan Documents shall be due and payable
on September 30, 2003 (the "Maturity Date"), if not sooner paid in full pursuant
to Section 2.7.
2.7 Prepayments; Commitment Reductions.
(a) Voluntary Prepayment. Except for required
principal amortization pursuant to Section 2.5, Borrower may not prepay
all or any part of the principal balance of the Loan until January 1,
2002. On or after January 1, 2002, provided no Event of Default exists,
the principal balance of the Note may be prepaid in whole or in part,
provided that (i) written irrevocable notice of such prepayment
specifying the intended date of prepayment is received by Lender not
more than sixty (60) days and not less than ten (10) days prior to the
date of such prepayment, (ii) such prepayment must be accompanied by
all interest accrued but unpaid on the Loan (including Deferred
Interest allocable to the portion of the Loan being prepaid, but
excluding Deferred Interest for the portion of the Loan which remains
outstanding), (iii) such prepayment must also be accompanied by all
Breakage Costs, if any, with respect to such prepayment, and (iv) such
prepayment must also be accompanied by the Additional Fee and all other
sums due hereunder or under the other Loan Documents through the date
of such prepayment. Notwithstanding anything to the contrary herein or
in the Note, any notice of prepayment pursuant to this Section 2.7(a)
shall be irrevocable and the principal balance of the Note specified
for prepayment in such notice shall be absolutely and unconditionally
due and payable on the date specified in such notice, unless (i)
Borrower revokes such notice of prepayment in writing at least five (5)
days prior to the date designated as the prepayment date in such notice
of prepayment, and (ii) pays all of Lender's reasonable costs and
expenses incurred related to such prospective prepayment.
(b) Mandatory Prepayment.
(i) Asset Dispositions. In the event of receipt by any Borrower Group
Member of Asset Disposition Net Proceeds, the Borrower shall prepay the Loan
(together with interest accrued on the portion of the Loan prepaid, including
Deferred Interest allocable to the portion of the Loan prepaid) and the
Additional Fee associated with such prepayment on the Business Day on which such
Asset Disposition Net Proceeds are received.
Any and all prepayments of the Loan required under this Section 2.7 shall
be in addition to any and all other payments and prepayments of the Loan
required under Section 2.5 above or otherwise under this Agreement. Any and all
expenses of sale incurred or proposed to be incurred by Borrower or its
Affiliates, and any and all closing and other prorations and other adjustments
which affect the amount of Asset Disposition Net Proceeds, shall be subject to
prior Lender review and written approval, which shall not be unreasonably
withheld with respect to customary closing expenses typical for a transaction of
the type being closed."
4. Reduction of Working Capital Reserve. The figure $4,000,000 appearing
twice in Section 2.15 of the Original Loan Agreement, once in Section 12.3 of
the Original Loan Agreement and in subpart (d) of the definition of Available
Consolidated Cash Flow in Exhibit B to the Original Loan Agreement shall be and
hereby is amended in each case to reduce such figure to $3,000,000, representing
a reduction, from $4,000,000 to $3,000,000, in the required minimum Working
Capital Reserve under the Loan Agreement. In no event shall Special Reserve
Funds in the Special Reserve Account (each as defined in the revised Section
2.7(b)(v) set forth in paragraph 6 below) be included in the Working Capital
Reserve or the determination of the amount thereof.
5. Restatement of Schedule V Covenants. Schedule V of the Original Loan
Agreement is hereby amended and restated to read as provided in Schedule V
attached to this Amendment and hereby made a part hereof and of the Loan
Agreement by this reference ("Amended Schedule V"). All references in the Loan
Agreement to "Schedule V Covenants" shall mean and refer to the covenants and
agreements set forth on Amended Schedule V.
6. Revisions to Section 12.3. The parenthetical phrase "(provided, in the
aggregate, there are sufficient funds in the six Deposit Accounts to reserve for
the payment of all interest on the Note coming due on the next Payment Date and
for the payment of the Minimum Monthly Amortization Amount plus the Additional
Fee applicable thereto coming due on the next Payment Date (collectively
referred to as the `Aggregate Deposit Requirement')", as such phrase appears in
Section 12.3(c) of the Original Loan Agreement, is hereby amended and restated
to read as follows:
"(provided, in the aggregate, there are sufficient funds in
the six Deposit Accounts to reserve for the payment of all
interest on the Note and the Monthly Special Reserve Deposit
coming due on the next Payment Date and for the payment of the
Minimum Monthly Amortization Amount plus the Additional Fee
applicable thereto coming due on the next Payment Date
(collectively referred to as the `Aggregate Deposit
Requirement'))"
7. Silverthorne/Lebanon Transaction. In connection with the
Silverthorne/Lebanon Transaction (as defined in Section 2.7(e) of the Loan
Agreement), The Prime Outlets at Silverthorne Limited Partnership acquired the
Lebanon Property (as defined in the Loan Agreement) and changed its name to The
Prime Outlets at Lebanon Limited Partnership. In connection with such name
change, certain of the Loan Documents shall be deemed amended and are hereby
changed as follows: a) Exhibit A to that certain Partnership Interest Pledge and
Security Agreement dated December 22, 2000 executed by Prime Retail Capital I,
L.L.C. for the benefit of Lender is amended by deleting the reference to "The
Prime Outlets at Silverthorne Limited Partnership" and substituting "The Prime
Outlets at Lebanon Limited Partnership (formerly known as The Prime Outlets at
Silverthorne Limited Partnership)" therefor; b) Schedule I to the Negative
Pledge Agreement dated December 22, 2000 executed by Prime Retail Finance II,
Inc. in favor of Lender is amended by deleting the reference to "The Prime
Outlets at Silverthorne Limited Partnership" and substituting "The Prime Outlets
at Lebanon Limited Partnership (formerly known as The Prime Outlets at
Silverthorne Limited Partnership)" therefor; c) Schedule I to the Negative
Pledge Agreement dated December 22, 2000 executed by Borrower in favor of Lender
is amended by deleting the reference to "The Prime Outlets at Silverthorne
Limited Partnership" and substituting "The Prime Outlets at Lebanon Limited
Partnership (formerly known as The Prime Outlets at Silverthorne Limited
Partnership)" therefor; d) Schedule 12.2A to the Loan Agreement is amended by
deleting the reference to "The Prime Outlets at Silverthorne Limited
Partnership" and substituting "The Prime Outlets at Lebanon Limited Partnership
(formerly known as The Prime Outlets at Silverthorne Limited Partnership)"
therefor; and e) Schedule 12.2A to the Loan Agreement shall be amended to delete
the reference to the Outlet Village of Lebanon Limited Partnership. Borrower,
Prime Retail Capital I, L.L.C. and Prime Retail Finance II, Inc. hereby
authorize Lender to file UCC financing statement amendments to reflect the
foregoing amendments.
8. Loan Documents. This Amendment and all of the documents executed in
connection herewith shall constitute Loan Documents.
9. Ratification. The Loan Agreement (as amended hereby) and the other Loan
Documents are hereby ratified and remain in full force and effect.
10. Execution in Counterparts. This Amendment 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
taken together shall constitute one and the same agreement.
11. Fees and Expenses. Borrower shall pay on demand the actual costs and
attorney's reasonable fees and expenses incurred by Lender and not heretofore
paid by Borrower in connection with this Amendment, the First Amendment, the
BRWH Pledge (as defined in the First Amendment) and the BRWH Membership Pledge
(as defined in the First Amendment).
12. Governing Law. This Amendment shall be governed by the laws of the
State of New York, excluding application of any principle of conflicts of laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers, thereunto duly authorized, as of the date
first above written.
LENDER:
FRIT PRT LENDING LLC,
a Delaware limited liability company
By: -----------------------------------------
Name: ---------------------------------------
Title: Authorized Signatory
The undersigned Assignee and Co-Lender hereby consents to and authorizes the
execution and delivery of the foregoing Amendment and the transactions
referenced therein.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
a Delaware corporation
By: -----------------------------------------
Name: ---------------------------------------
Title: Authorized Signatory
BORROWER:
PRIME RETAIL, L.P.,
a Delaware limited partnership
By: PRIME RETAIL, INC.,
its general partner
By: -------------------------------
Name:
Title:
The undersigned are executing this Amendment to acknowledge their agreement with
and consent to the provisions contained in Section 7 of the foregoing Amendment.
PRIME RETAIL CAPITAL I, L.L.C.,
a Delaware limited liability company
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its managing member
By: PRIME RETAIL INC.,
a Maryland corporation,
its general partner
By: --------------------------------
Name:
Title:
PRIME RETAIL FINANCE II, INC.,
a Maryland corporation
By: ----------------------------------------
Name: --------------------------------------
Title: -------------------------------------
CONSENT OF GUARANTOR
The undersigned, each being a Guarantor (as defined in the Loan Agreement
referred to in the foregoing Amendment) and party to certain other Loan
Documents (as defined in the Loan Agreement referred to in the foregoing
Amendment) do hereby consent to the foregoing Amendment, and ratify and affirm
that the Guaranty and such other Loan Documents as have been heretofore executed
by each of the undersigned remains in full force and effect for the benefit of
Lender under the Loan Agreement, as amended by the foregoing Amendment.
IN WITNESS WHEREOF, the undersigned have each executed and delivered this
Consent of Guarantor effective as of the date of the foregoing Amendment.
GUARANTORS:
PRIME RETAIL, INC.,
a Maryland corporation
By: ----------------------------------------
Name:
Title:
PRIME RETAIL CAPITAL I, L.L.C.,
a Delaware limited liability company
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its managing member
By: PRIME RETAIL INC.,
a Maryland corporation,
its general partner
By: ------------------------------
Name:
Title:
PRIME BELLPORT LAND, L.L.C.,
a Delaware limited liability company
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its managing member
By: PRIME RETAIL INC.,
a Maryland corporation,
its general partner
By: ------------------------------
Name:
Title:
PRIME HAGERSTOWN LAND, L.L.C.,
a Delaware limited liability company
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its sole member
By: PRIME RETAIL, INC.,
a Maryland corporation,
its general partner
By: ------------------------------
Name:
Title:
PRIME WAREHOUSE ROW LIMITED PARTNERSHIP,
an Illinois limited partnership
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its general partner
By: PRIME RETAIL, INC.,
a Maryland corporation,
its general partner
By: ------------------------------
Name:
Title:
SUN COAST FACTORY SHOPS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its general partner
By: PRIME RETAIL, INC.,
a Maryland corporation,
its general partner
By: ------------------------------
Name:
Title:
PRIME OUTLETS AT SAN ▇▇▇▇▇▇ ▇▇ LIMITED PARTNERSHIP,
a Delaware limited partnership
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its general partner
By: PRIME RETAIL, INC.,
a Maryland corporation,
its general partner
By: --------------------------------
Name:
Title:
CHESAPEAKE DEVELOPMENT LIMITED PARTNERSHIP,
a Delaware limited partnership
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its general partner
By: PRIME RETAIL, INC.,
a Maryland corporation,
its general partner
By: --------------------------------
Name:
Title:
CONSENT OF GUARANTOR
The undersigned, being a Guarantor (as defined in the Loan Agreement
referred to in the foregoing Amendment) and party to certain other Loan
Documents (as defined in the Loan Agreement referred to in the foregoing
Amendment) does hereby consent to the foregoing Amendment, and ratify and affirm
that that certain Guaranty executed by it on June 28, 2001 and such other Loan
Documents as have been heretofore executed by the undersigned remain in full
force and effect for the benefit of Lender under the Loan Agreement, as amended
by the foregoing Amendment.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent
of Guarantor effective as of the date of the foregoing Amendment.
GUARANTOR:
PRIME RETAIL CAPITAL IV, L.L.C.,
a Delaware limited liability company
By: PRIME RETAIL, L.P.,
a Delaware limited partnership,
its managing member
By: PRIME RETAIL INC.,
a Maryland corporation,
its general partner
By: --------------------------------
Name:
Title:
SCHEDULE V
The following covenants and agreements of the Borrower set forth in this
Schedule V shall be and hereby are incorporated by reference as if fully set
forth in the body of the Loan Agreement, and shall constitute the Schedule V
Covenants as defined and referred to in the Loan Agreement. This Schedule V
shall constitute the Amended Schedule V referred to in the Second Amendment.
1. Minimum Sale and Associated Amortization Requirements.
(a) Prior to May 1, 2002, Borrower shall cause the sale of Expanded
Properties (in each case closing after January 31, 2002; sales of Expanded
Properties closed on or prior to January 31, 2002 shall not be included in
determining compliance with this subparagraph 1(a)) resulting in prepayments of
the principal balance of the Loan from Asset Disposition Net Proceeds (after
paying the Additional Fee and Deferred Interest associated with the principal
Loan amount prepaid) of not less than $8,906,000.
(b) Prior to July 1, 2002, Borrower shall cause the sale of Expanded
Properties (in each case closing after January 31, 2002; sales of Expanded
Properties closed on or prior to January 31, 2002 shall not be included in
determining compliance with this subparagraph 1(b)) resulting in prepayments of
the principal balance of the Loan from Asset Disposition Net Proceeds (after
paying the Additional Fee and Deferred Interest associated with the principal
Loan amount prepaid) of not less than $24,406,000 (inclusive of the $8,906,000
prepayment required prior to May 1, 2002 under the preceding subparagraph 1(a));
provided, that the June 30, 2002 required date for the minimum prepayment from
Asset Disposition Net Proceeds of $24,406,000 under this subparagraph 1(b)(but
not the minimum prepayment from Asset Disposition Net Proceeds of $8,906,000
prior to May 1, 2002 required under the preceding subparagraph 1(a)) may be
extended by Lender pursuant to a written notice to Borrower to a date not later
than October 31, 2002 in the event Borrower demonstrates to Lender's
satisfaction that Borrower is actively engaged in a transaction sufficient to
satisfy the $24,406,000 threshold that has a realistic likelihood of closing in
Lender's sole determination, made in Lender's sole discretion.
(c) Prior to November 1, 2002, Borrower shall cause the sale of Expanded
Properties (in each case closing after January 31, 2002; sales of Expanded
Properties closed on or prior to January 31, 2002 shall not be included in
determining compliance with this subparagraph 1(c)) resulting in prepayments of
the principal balance of the Loan from Asset Disposition Net Proceeds (after
paying the Additional Fee and Deferred Interest associated with the principal
Loan amount prepaid) of not less than $25,367,000 (inclusive of the $24,406,000
prepayment required prior to July 1, 2002 under the preceding subparagraph
1(b)(subject to the extension of such July 1, 2002 date to not later than
November 1, 2002 as provided in the proviso in subparagraph 1(b))).
(d) Any failure to satisfy the provisions of this paragraph 1 of the
Schedule V Covenants within the time periods indicated above shall constitute an
Event of Default under the Loan Agreement.
2. Special Reserve and Amortization.
(a) Commencing on (and including) the Payment Date which is the first
Business Day of February, 2002 and continuing until (and including) the Payment
Date which is the first Business Day of January, 2003, Borrower shall pay to
Lender on each Payment Date $250,000 (the "Monthly Special Reserve Deposit"),
which Lender shall deposit into an interest bearing account (the "Special
Reserve Account"). The Monthly Special Reserve Deposits and any interest accrued
thereon (collectively, the "Special Reserve Funds") shall be held in the Special
Reserve Account and applied by Lender in accordance with this paragraph 2. The
Special Reserve Funds may be commingled with Lender's or its Servicer's or other
representative's other funds, or funds held by them in trust for others or as
security for other obligations under the Loan Documents or otherwise. The
Special Reserve Account may be maintained as a subaccount under Lender's or its
Servicer's or other designated representative's internal accounting methodology
for accounts holding funds in addition to and other than the Special Reserve
Funds. Lender shall have sole dominion, control and discretion (which may be
exercised through the Servicer) over and the sole right to make withdrawals or
transfers of funds from the Special Reserve Funds and the Special Reserve
Account, and neither Borrower nor any other Person claiming on behalf of or
through the Borrower shall have any right or authority, whether express or
implied, to withdraw any funds, investments or other properties from, the
Special Reserve Account or the Special Reserve Funds, or to give any
instructions with respect to the Special Reserve Account or the Special Reserve
Funds.
(b) Subject to the provisions of this paragraph 2, the Special Reserve
Funds shall be held for application to Loan amortization and the payment of
Additional Fees in connection therewith, provided that if Borrower actually
incurs, and produces evidence satisfactory to Lender in Lender's sole discretion
that Borrower has incurred actual reductions in cash revenues in calendar year
2002 (not otherwise offset by virtue of higher revenues or lower expenses in
respect of other aspects of Borrower's direct or indirect operations and capital
programs in relation to Borrower's 2002 budget and business plan previously
submitted to Lender) due to payment or settlement, in amounts and on terms first
approved in writing by Lender, of tenant claims (including those of Dinnerware
Plus Holdings, Inc. or other tenants operating under the name "Mikasa"
(collectively, the "Mikasa Claims") for payments from Borrower or the Expanded
Property Owners on account of alleged prior, present or future overpayment of
common area pass-through charges by operation of clauses in such tenants' leases
which purportedly provide or provided limitations on such pass-through charges
on the basis of limitations on the pass-though charges involving, among other
charges, common areas, taxes, insurance and promotional funds assessed against
other tenants at the respective outlet centers (such claims, including the
Mikasa Claims, are herein referred to as the "Tenant MFN Claims"; any actual
cash reductions in 2002 net cash revenues due to the payment or settlement of
Tenant MFN Claims on terms approved by Lender, as and when the same are actually
incurred and demonstrated to have occurred to Lender's reasonable satisfaction
from time to time, are herein referred to as the "Proven MFN Losses"), then,
Borrower may, from time to time, but no more often than once per calendar month
(and in no event after December 31, 2002), make a written request, accompanied
by Borrower's certification as to the amount and nature of the Proven MFN
Losses, for disbursement from the Special Reserve Funds in the amount of the
then Proven MFN Losses (for which disbursement has not been previously made),
whereupon Lender shall, provided no Event of Default exists and Lender has
accepted Borrower's calculation of the amount and nature of the Proven MFN
Losses, and further provided that Borrower demonstrates to Lender's reasonable
satisfaction that Borrower shall, upon receipt of the requested Special Reserve
Funds, have sufficient cash flow to pay the Proven MFN Losses and all other
operating and capital costs and expenses for the reasonably foreseeable future,
disburse to the Operating Account the requested Special Reserve Funds then
available for disbursement and not previously otherwise applied or disbursed
under this paragraph 2.
(c) On each Payment Date which is either (1) the first Business Day of May,
2002, (2) the first Business Day of August, 2002, or (3) the first Business Day
of November, 2002, the Special Reserve Funds (exclusive of the Monthly Special
Reserve Deposit made on such Payment Date (such Payment Date is herein referred
to as the "Application Date")) not previously otherwise applied or disbursed
under this paragraph 2 shall be paid to Lender for application to the prepayment
of the principal balance of the Loan and the payment of the Additional Fee
associated with such prepayment, provided, that if and to the extent Borrower
demonstrates prior to such Application Date, by means of an updated 2002
business plan and budget acceptable to Lender and provided by Borrower to Lender
not more than thirty days nor less than ten days prior to such Application Date,
that Proven MFN Losses for which disbursements have not yet been made under
subparagraph 2(b) above are sufficiently likely to actually be incurred in
calendar year 2002 in an amount which is in excess of the sum of the remaining
Monthly Special Reserve Deposits made or to be made on the Application Date and
each Payment Date thereafter (such excess is herein referred to as the "Reserve
Excess") as to justify, in Lender's reasonable determination, retaining the
Reserve Excess in the Special Reserve Account, then as long as Borrower has
dealt with Tenant MFN Claims from the Second Amendment Date in a manner
reasonably acceptable to Lender (including diligent pursuit of settlement and
payment and settlement of such claims on terms reasonably satisfactory to Lender
when appropriate), the application required on the Application Date to
prepayment of the Loan and the associated Additional Fee shall be reduced by an
amount equal to the Reserve Excess.
(d) On the Payment Date which is the first Business Day of February, 2003,
the entire remaining balance of the Special Reserve Funds shall be paid to
Lender for application to the prepayment of the principal balance of the Loan
and the payment of the Additional Fee associated with such prepayment.
(e) Borrower hereby pledges, assigns and grants to Lender a continuing
perfected security interest in and to and a first lien upon the Special Reserve
Account and the Special Reserve Funds (collectively, the "Special Reserve
Collateral") as additional security for the Loan and the payment and performance
of all of the Obligations. Borrower acknowledges that the Servicer is acting as
the agent of, and at the direction of, Lender in connection with the subject
matter of this paragraph 2. This paragraph 2, together with the remainder of the
Loan Agreement shall be deemed a security agreement within the meaning of the
Uniform Commercial Code. Borrower agrees to promptly execute, acknowledge,
deliver, file or do, at its sole cost and expense, all acts, assignments,
notices, agreements or other instruments as Lender may reasonably require in
order to effectuate, assure, convey, secure, assign, transfer and convey unto
Lender any of the rights granted by the Loan Agreement and to more fully perfect
and protect any assignment, pledge, lien and security interest confirmed or
purported to be created hereby, or to enable Lender to exercise and enforce its
rights and remedies hereunder, in respect of the Special Reserve Collateral. If
Borrower fails, after the giving of required notices, if any, and the expiration
of applicable grace periods, if any, to perform any agreement or obligation
contained herein, Lender may perform or cause the performance of such agreement
or obligation, and the reasonable expenses of Lender incurred in connection
therewith shall be payable to Lender by the Borrower.
(f) Lender may exercise in respect of the Special Reserve Collateral all
rights and remedies available to Lender hereunder or under the other Loan
Documents, or otherwise available at law or in equity. Upon the occurrence of an
Event of Default, Lender may, at any time or from time to time, in addition to
other rights and remedies provided for herein or otherwise available to it:
(1) collect, appropriate, redeem, realize upon or otherwise
enforc e its rights with respect to the Special Reserve Collateral, or
any part thereof, without notice to the Borrower and without the need
to institute any legal action, make demand to or upon the Borrower or
any other Person, exhaust any other remedies or otherwise proceed to
enforce its rights;
(2) execute (in the name, place and stead of the Borrower) any
endorsements, assignments or other instruments of conveyance which may
be required for the withdrawal and negotiation of the Special Reserve
Collateral;
(3) exercise in respect of the Special Reserve Collateral all
of the rights and remedies of a secured party upon default under the
Uniform Commercial Code then in effect in the applicable jurisdiction;
and/or
(4) exercise all other rights and remedies available to Lender
under applicable law, hereunder, or under any of the other Loan
Documents.
(g) Without limiting the generality of the foregoing or any other
provisions of this paragraph 2 or any other provision of the Loan Agreement, the
Borrower acknowledges and agrees that, upon the occurrence and during the
continuance of an Event of Default, it will have no further right to request or
otherwise require Lender to disburse, apply or transfer Special Reserve Funds or
funds from the Special Reserve Account in accordance with the terms of the Loan
Agreement, it being agreed that Lender may, at its option and among other rights
and remedies available to it, continue to hold the Special Reserve Funds in the
Special Reserve Account or transfer and apply all or any portion of the Special
Reserve Funds then or thereafter held in the Special Reserve Account to the
Obligations in any order and in such manner as Lender may determine in its sole
discretion.
