Exhibit 10.17
MOORESTOWN MALL LLC
c/o PREIT-Xxxxx, Inc.
The Bellevue
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
June 3, 2003
Xxxxxx Brothers Bank, FSB
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: $64,250,000.00 first mortgage loan made by Xxxxxx Brothers Bank,
FSB (together with its successors and assigns, "Lender") to
Moorestown Mall LLC ("Borrower") secured by, among other things, a
first mortgage and security agreement (the "Security Instrument")
on the Moorestown Mall, Moorestown, New Jersey (the "Property")
Gentlemen:
Reference is made to the Security Instrument. All capitalized terms not defined
herein shall have the meanings ascribed to them in the Security Instrument.
The Property is subject to the following reciprocal easement and operating
agreements (each, an "ROA"):
A. Retail Center Agreement between Xxxxx-Moorestown, Inc.
("Developer") and The May Department Stores Company ("May"),
dated as of January 25, 2000 but effective as of March 26,
1999 (the "RCA").
B. Developer-Lord & Xxxxxx Supplemental Agreement between
Developer and May, dated as of January 25, 2000 but effective
as of March 26, 1999 (the "L&T Agreement").
C. Developer-Xxxxxxxxxxx'x Supplemental Agreement between
Developer and May, dated as of January 25, 2000 but effective
as of March 26, 1999 (the "Xxxxxxxxxxx Agreement").
D. Opening Date Agreement dated as of June 15, 2000 between
Developer and May.
In order to induce Lender to make the Loan, Borrower hereby agrees as follows:
1. Borrower shall not amend, modify or supplement any ROA without
Lender's prior written consent, which consent shall not be
unreasonably withheld or delayed except for amendments,
modifications or supplements of May's obligations with respect
to the operation of its premises in which instances Lender may
withhold its consent in its sole and absolute discretion.
Borrower shall pay all charges and other sums be paid by
Borrower pursuant to the terms of each ROA as the same shall
become due and payable and prior to the expiration of any
applicable grace period therein provided and perform all
services as required thereunder. Borrower shall comply, in all
material respects, with all the terms, covenants and
conditions on Borrower's part to be complied with pursuant to
the terms of each ROA. Borrower shall take all actions and
cause each other party to each ROA to take all actions, as may
be necessary from time to time to preserve and maintain the
ROA in accordance with applicable laws, rules and regulations.
Borrower shall not, without the prior written consent of
Lender, take (and hereby assigns to Lender any right it may
have to take) any action to terminate, surrender or accept any
termination or surrender of, any ROA. Borrower will promptly
provide Lender with a copy of all notices of defaults given or
received by it under each ROA in accordance with the notice
provision set forth in the Security Instrument. Borrower shall
enforce the obligations to be performed by each other party to
each ROA (including, but not limited to, any obligation to
operate a store), and shall not waive any such obligation or
release any such party from liability resulting from their
failure to perform any such obligation without Lender's prior
written consent, which consent shall not be unreasonably
withheld or delayed, except for waivers or releases of May's
obligations with respect to the operation of its premises in
which instances Lender may withhold its consent in its consent
in its sole and absolute discretion. Borrower shall not
exercise any right it may have to grant consent (or withhold
its consent) to any material requests by any party to any ROA,
except where such consent is required to be given, without
Lender's prior written approval, which approval shall not be
unreasonably withheld or delayed so long as the matter for
which Lender's approval is sought shall not affect May's
obligations with respect to the operation of its premises or
any material monetary obligation of May. Borrower shall not
assign (other than to Lender) or encumber any ROA. Borrower
shall not exercise any right it may have to perform, or
consent to, any material additions or improvements to the
Property or other properties subject to any ROA, without
Lender's prior written approval, which approval shall not be
unreasonably withheld or delayed so long as the matter for
which Lender's approval is sought shall not affect May's
obligation to operate its premises and Borrower is otherwise
permitted to make or consent to such additions pursuant to the
Loan Documents. If Lender, its nominee, designee, successor or
assignee acquires title to the Property and/or Borrower's
rights under any ROA by reason of foreclosure of the Security
Instrument, deed-in-lieu of foreclosure or otherwise, such
party shall (x) succeed to all rights of and benefits accruing
to Borrower under such ROA and (y) be entitled to exercise all
of the rights and benefits accruing to Borrower under the ROA.
Borrower agrees to promptly execute and deliver to Lender such
documents as Lender and its counsel may reasonably require in
order to ensure that the provisions of this section shall be
validly and legally enforceable and in effect against Borrower
and all parties claiming by, through, under or against
Borrower.
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2. Notwithstanding anything contained herein to the contrary, in
the event an Affiliate of Borrower, Federated Department
Stores Inc., Nordstrom, Inc., Saks Incorporated or Neiman
Marcus Group, Inc. (each a "Permitted Transferee") shall
acquire the current Lord & Xxxxxx store property (block 3000
lot 3.02) (the "Lord & Xxxxxx Property"), Borrower and such
Permitted Transferee may consent to the termination of the
covenant by May to continuously operate a Lord & Xxxxxx store
pursuant to the L&T Agreement, so long as (1) if the acquiring
party is Borrower's Affiliate, Borrower's Affiliate shall have
entered into a bona fide space lease with a tenant acceptable
to Lender having a term at least equal to the unexpired term
of the Lord & Xxxxxx operating covenant and Lender shall be
satisfied that Permitted Transferee will be able to meet all
of its obligations under the new store lease or (2) if the
Acquiring Party is another Permitted Transferee, such
Permitted Transferee shall have agreed (pursuant to a recorded
instrument benefiting Borrower, Lender and their respective
successors and assigns) to continuously operate a store under
the name of such Permitted Transferee for a period at least
equal to the unexpired term of the Lord & Xxxxxx operating
covenant and Lender shall be satisfied that all pre-conditions
to such Permitted Transferee opening and operating its store
shall be met. It is acknowledged and agreed that Federated
Department Stores Inc., Nordstrom, Inc., Saks Incorporated and
Neiman Marcus Group, Inc. shall each be a tenant acceptable to
Lender for the foregoing purposes. In connection with the
acquisition by a Permitted Transferee of the Lord & Xxxxxx
Property and termination of the Lord & Xxxxxx operating
covenant, the Permitted Transferee shall have the right to (1)
expand the store building on the Lord & Xxxxxx Property, (2)
encumber the cross-hatched portion of the Property shown on
the drawing attached hereto as Exhibit A with an easement
reasonably acceptable to Lender, which determination shall not
be unreasonably delayed, for the purpose of constructing and
maintaining a portion of such enlarged store building or such
portion of the Property and (3) have the lien of the Security
Instrument subordinated to such easement, so long as (a) the
total square footage of the expanded building does not exceed
225,000 square feet and (b) as reasonably determined by
Lender, which determination shall not be unreasonably delayed,
the expanded store building will not (I) encompass any
currently improved portions of the Property, (II) adversely
affect the use, cash flow, value, visibility or access to the
Property, (III) cause Borrower to be in default of any leases,
easements or encumbrances upon the Property (after
consideration of all consents and waivers obtained from all
other parties thereto) or in violation of any applicable
zoning, and use or building code restrictions and (IV) expose
Borrower to any present or future increased liability under
leases, easements, or encumbrances upon the Property
(including, but not limited to, with respect to having to
construct additional parking pursuant to the ROA in connection
with a Xxxxxxxxxxx'x expansion or pursuant to any lease to
maintain required parking ratios) or, if Borrower is exposed
to present or future increased liability under leases,
easements or encumbrances upon the Property, Borrower shall
have deposited with Lender cash or a Letter of Credit
(hereinafter defined) in an amount reasonably estimated by
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Lender to cover any such increased exposure, which cash or
Letter of Credit shall be held by Lender as security for the
Debt until such time as the potential liability shall be
removed (for example, by the construction of any possible
additional parking), at which time, provided no Event of
Default shall exist, such cash or Letter of Credit shall be
returned to Borrower. If, instead of a Permitted Transferee
acquiring the Lord & Xxxxxx Property and terminating the Lord
& Xxxxxx operating covenants, Borrower and May wish to allow
for expansion of the existing Lord & Xxxxxx store, Borrower
and May may do so and receive the benefit of the easement and
subordination referred to in the preceding sentence, provided
(i) Lord & Taylor's existing operating covenant shall remain
in effect with respect to the expanded store, (ii) Borrower
shall not have any obligation with respect to such expansion,
(iii) Lender shall be satisfied that all obligations to be
fulfilled by any party other than May with respect to such
expansion shall be met, and (iv) the conditions set forth in
(a) and (b) of the preceding sentence shall have been met.
Lender shall be entitled to reimbursement for all
out-of-pocket costs and expenses (including, but not limited
to, reasonable attorneys' fees and expenses) and to assess a
reasonable administrative fee in connection with any request
for approval made by Borrower under this Section 2.
Borrower shall not be required to maintain on deposit with
Lender cash or a Letter of Credit in accordance with clause
(b)(iv) above during periods in which (1) PREIT Associates,
L.P. shall have guaranteed payment and performance when due of
the related increased liabilities of Borrower in a manner
acceptable to Lender and (2) the long term unsecured debt of
Pennsylvania Real Estate Investment Trust ("PREIT") shall be
rated at least investment grade by S&P (hereinafter defined)
and Xxxxx'x (hereinafter defined) and PREIT shall be the
general partner of PREIT Associates, L.P.
3. Borrower shall have the right to terminate the current leases
with United Artists Theatre Circuit, Inc. ("UA"), Van's, Inc.
("Vans") and/or Venitor Group Specialty, Inc. ("Foot Locker")
(each, an "Existing Lease") so long as (i) a new lease or new
leases (each, a "New Leases") shall have been entered into
with replacement tenants of the same or better credit for the
entire space covered by the Existing Lease (each, an "Existing
Lease") in accordance with the Security Instrument, (ii)
Lender shall be satisfied that the debt service coverage ratio
for the Loan will not be less than 1.25x once the tenants
under the New Leases are open and paying rent, (iii) Borrower
shall have deposited cash or a Letter of Credit (hereinafter
defined) with Lender in an amount equal to the estimated costs
of all landlord obligations under the New Leases, as
reasonably determined by Lender, and (iv) at all times that
the Rent Differential (hereinafter defined) shall be greater
than zero, Borrower shall have deposited with Lender cash or a
Letter of Credit in an amount equal to twelve times the Rent
Differential. The amount deposited under clause (iv) will be
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returned to Borrower once the aggregate base rent paid by all
tenants of the Property with unexpired terms of at least one
year ("Aggregate Base Rent") is at or above $6,855,286 and
shall not be required if the Aggregate Base Rent as of the
date of the satisfaction of the conditions in (i)-(iii) above
is at or above $6,855,286. As used herein, term "Rent
Differential" shall mean, as of any date of determination, an
amount equal to the aggregate base rent payable under each
Existing Lease that has been terminated at the time of its
termination minus the base rent payable under each New Lease.
4. Borrower agrees that (i) it shall not assert any claim, and
that it shall not permit, allow or suffer the pursuit of any
claim by any other Person, against UA for past due "Center
Expenses" (as defined in UA's Lease) or current or future
Center Expenses of the type objected to by UA in its letter to
The Xxxxx Company dated as of February 28, 2003 (the "February
28 Letter") or for any other past due rents or charges under
UA's Lease that could form the basis for a claim by UA that it
has the right to reject its Lease on the grounds alleged in
the February 28 Letter, (ii) that it shall expressly waive any
such claims in connection with any attempt by UA to reject its
Lease and (iii) that, if obligated under UA's Lease, it shall
promptly perform at its sole expense the roof repair referred
to in the February 28 Letter. Borrower shall enforce all
obligations of UA under UA's Lease (except for the matters
that Borrower has agreed not to pursue in accordance with the
preceding sentence) including, but not limited to, by using
its best efforts to contest, beyond any applicable appeal, any
attempt by UA to reject UA's Lease pursuant to its Bankruptcy
Case entitled "In re: United Artists Theatre Company, et.
xx.", Xxxx Xx. 00-0000, Xxxxxx Xxxxxx Bankruptcy Court for the
District of Delaware and/or on the factors enumerated in the
February 28 Letter. Borrower's obligations under the preceding
sentence shall terminate upon the earlier to occur of (i) such
time that the Aggregate Base Rent (exclusive of any rent
payable by UA) shall be at or above $6,855,286 and (ii) UA's
rejection of UA's Lease in any future bankruptcy case
involving UA as debtor.
5. All cash deposited and Letters of Credit delivered under this
Agreement shall be security for the payment of the Debt.
Lender shall have the right, at its option, to draw on any
Letter of Credit and to apply all or any part of the proceeds
thereof to the payment of the Debt in such order, proportion
or priority as Lender may determine. In addition to any other
right Lender may have to draw upon a Letter of Credit pursuant
to the terms and conditions of this agreement, Lender shall
have the additional rights to draw in full any Letter of
Credit: (a) with respect to any evergreen Letter of Credit, if
Lender has received a notice from the issuing bank that the
Letter of Credit will not be renewed and a substitute Letter
of Credit is not provided at least thirty (30) days prior to
the date on which the outstanding Letter of Credit is
scheduled to expire; (b) with respect to any Letter of Credit
with a stated expiration date, if Lender has not received a
notice from the issuing bank that it has renewed the Letter of
Credit at least thirty (30) days prior to the date on which
such Letter of Credit is scheduled to expire and a substitute
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Letter of Credit is not provided at least thirty (30) days
prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (c) upon receipt of notice from the
issuing bank that the Letter of Credit will be terminated
(except if the termination of such Letter of Credit is
permitted pursuant to the terms and conditions of this
Agreement or a substitute Letter of Credit is provided); or
(d) if Lender has received notice that the bank issuing the
Letter of Credit shall cease to be an Eligible Institution and
Borrower has not, within thirty (30) days after notice
thereof, either (A) obtained a new Letter of Credit with an
Eligible Institution or (B) if after a Securitization,
delivered to Lender a letter from each Rating Agency in form
acceptable to Lender (a "Rating Agency Confirmation") stating
that the credit rating of the Securities will not be
qualified, downgraded or withdrawn if such Letter of Credit is
not replaced with a Letter of Credit issued by an Eligible
Institution. Lender shall hold the proceeds of such Letter of
Credit for the same purpose for which the Letter of Credit was
obtained by Borrower. Notwithstanding anything to the contrary
contained in the above, Lender is not obligated to draw any
Letter of Credit and shall not be liable for any losses
sustained by Borrower due to the insolvency of the bank
issuing the Letter of Credit if Lender has not drawn the
Letter of Credit, and Borrower acknowledges and agrees that an
Event of Default shall occur if Lender is not at any time in
possession of cash or an unexpired Letter of Credit in the
amounts required by clauses (iii) and (iv) of Section 3
hereof.
As used herein, the term "Letter of Credit" shall mean an
irrevocable, unconditional, transferable, clean sight draft
letter of credit acceptable to Lender (which shall have a term
of one (1) year, be an evergreen letter of credit or shall not
expire until at least thirty (30) Business Days after the
Maturity Date) in favor of Lender and entitling Lender to draw
thereon in New York, New York, issued by a domestic Eligible
Institution or the U.S. agency or branch of a foreign Eligible
Institution. If at any time the bank issuing any such Letter
of Credit shall cease to be an Eligible Institution, Lender
shall send notice of same to Borrower and Borrower shall have
thirty (30) days within which to either (i) obtain a new
Letter of Credit with an Eligible Institution (unless, if such
event occurs prior to a Securitization, Lender waives such
obligation or (ii) if such event occurs after a
Securitization, deliver to Lender a Rating Agency Confirmation
stating that the credit rating of the Securities will not be
qualified, downgraded or withdrawn if such Letter of Credit is
not replaced with a Letter of Credit issued by an Eligible
Institution. If a Rating Agency Confirmation or a new Letter
of Credit issued by an Eligible Institution has not been
delivered to Lender within such thirty (30) day period, or if
any Letter of Credit has not been renewed or extended at least
thirty (30) days prior to its expiration date, then Lender
shall have the right immediately to draw down the same in full
and hold the proceeds of such draw in accordance with the
applicable provisions hereof, and, upon the receipt by Lender
of 100% of the proceeds of such draw, Borrower's obligation to
obtain such new Letter of Credit with an Eligible Institution
or a Rating Agency Confirmation shall be deemed satisfied.
Under no circumstances shall Borrower have any reimbursement
or other obligation with respect to any Letter of Credit.
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As used herein, the term "Eligible Institution" shall mean a
depository institution or trust company, insured by the
Federal Deposit Insurance Corporation, (a) the short term
unsecured debt obligations or commercial paper of which are
rated at least A 1+ by Standard & Poor's Ratings Services, a
division of McGraw Hill, Inc. ("S&P"), P 1 by Xxxxx'x
Investors Service, Inc. ("Moody's") and F 1+ by Fitch, Inc.
("Fitch") in the case of accounts in which funds are held for
thirty (30) days or less, or (b) the long term unsecured debt
obligations of which are rated at least "AA" by Fitch and S&P
and "Aa2" by Moody's in the case of accounts in which funds
are held for more than thirty (30) days.
[Remainder of Page Intentionally Left Blank]
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6. The terms and conditions of this side letter agreement shall
be deemed to be terms and conditions of the Security
Instrument as if such terms and conditions were more fully set
forth therein.
Sincerely,
MOORESTOWN MALL LLC,
a Delaware limited liability company
By: PR MOORESTOWN LIMITED PARTNERSHIP,
its sole member
By: PR MOORESTOWN LLC,
its general partner
By: PREIT ASSOCIATES, L.P.,
its sole member
By: PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST,
its general partner
By: Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice
President and General
Counsel
