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
X. Xxxxxx 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
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,
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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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"(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."
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(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:
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"(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.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
With copies to: The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
and to: Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
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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.
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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/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
LUMBERMENS MUTUAL CASUALTY COMPANY,
an Illinois insurance corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Xxxxx: Treasurer
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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 Xxxxxx 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
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:_____________________________________
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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 Xxxxxx 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 "Xxxxxx
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 Xxxxxx 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 Xxxxxx 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 Xxxxxx
Units then constituting Pledged Interests under the Pledge. The result is
the adjusted number of Xxxxxx 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 Xxxxxx Corporation and its affiliates (the "Xxxxxx 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:
Number of PGLP Units then Pledged for this Pledge
Total Number of Common Units (other than Xxxxxx 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.
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