-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bk5Umf/42MZ+nx5f2h4Fu0yLsr8v3Nu+zd1l8kI8/KI5vUT+wNwjlPtmK7ckz51C DUG9y/MHCkkgy1MNdEvOQg== 0000950116-02-000689.txt : 20020416 0000950116-02-000689.hdr.sgml : 20020416 ACCESSION NUMBER: 0000950116-02-000689 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020404 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CENTRAL INDEX KEY: 0000077281 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 236216339 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06300 FILM NUMBER: 02607945 BUSINESS ADDRESS: STREET 1: THE BELLEVUE STREET 2: 200 S BROAD STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155429250 MAIL ADDRESS: STREET 1: THE BELLEVUE STREET 2: 200 S BROAD STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 8-K 1 eight-k.txt 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) April 4, 2002 ------------- Pennsylvania Real Estate Investment Trust - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Pennsylvania 1-6300 23-6216339 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania 19102 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (215) 875-0700 -------------- - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets. ------------------------------------ On April 4, 2002, PR Beaver Valley Limited Partnership ("PR Beaver Valley") acquired Beaver Valley Mall from the California Public Employees' Retirement System ("CalPERS") for $60,750,000. PR Beaver Valley also exercised an option assigned to it by CalPERS for the purchase of a portion of the land on which the mall is situated for an additional $500,000. PR Beaver Valley is indirectly wholly-owned by PREIT Associates, L.P., of which Pennsylvania Real Estate Investment Trust (the "Registrant") is the sole general partner. Beaver Valley Mall is a 1.1 million square foot enclosed regional mall in Beaver Valley, Pennsylvania, located approximately fifteen miles north of Pittsburgh International Airport. The asset acquisition was consummated pursuant to the terms of a Purchase and Sale Agreement dated as of March 29, 2002 between PREIT Associates, L.P. and CalPERS. The purchase price was determined pursuant to arms' length negotiations between the Registrant and CalPERS. The majority of the purchase price was financed through a $48.0 million, ten-year mortgage from Column Financial, Inc., a Credit Suisse First Boston company, at a fixed interest rate of 7.36%. The balance of the purchase price was financed through the $175 million revolving portion of the Registrant's $250 million combined revolving credit and construction finance facility led by Wells Fargo Bank National Association. The foregoing description is qualified in its entirety by reference to the documents filed as exhibits to this report. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------ (a) Financial Statements of Business Acquired: In accordance with Item 7(a)(4) of Form 8-K, the financial statements required by this Item 7(a) will be filed by amendment to this Form 8-K no later than 60 days after April 19, 2002. (b) Pro Forma Financial Information: In accordance with Item 7(b)(2) of Form 8-K, the pro forma financial information required by this Item 7(b) will be filed by amendment to this Form 8-K no later than 60 days after April 19, 2002. (c) Exhibits: *2.1 Purchase and Sale Agreement, dated as of March 29, 2002, between California Public Employees' Retirement System and PREIT Associates, L.P. *2.2 Loan Agreement, dated as of April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. -2- *2.3 Open-End Mortgage and Security Agreement, dated April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. 2.4 Promissory Note, dated April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. * Schedules omitted. The Registrant will furnish a supplementary copy of any omitted schedules to the SEC upon request. -3- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PENNSYLVANIA REAL ESTATE INVESTMENT TRUST Date: April 11, 2002 By: /s/ Jonathan B. Weller ---------------------------------------- Jonathan B. Weller President and Chief Operating Officer -4- EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- *2.1 Purchase and Sale Agreement, dated as of March 29, 2002, between California Public Employees' Retirement System and PREIT Associates, L.P. *2.2 Loan Agreement, dated as of April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. *2.3 Open-End Mortgage and Security Agreement, dated April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. 2.4 Promissory Note, dated April 4, 2002, between PR Beaver Valley Limited Partnership and Column Financial, Inc. * Schedules omitted. The Registrant will furnish a supplementary copy of any omitted schedules to the SEC upon request. -5- EX-2.1 3 ex2-1.txt EXHIBIT 2.1 Exhibit 2.1 Beaver Valley Mall PURCHASE AND SALE AGREEMENT BETWEEN CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM a California public pension fund AS SELLER AND PREIT ASSOCIATES, L.P. a Delaware limited partnership AS PURCHASER As of March 29, 2002 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of the 29th day of March, 2002 (the "Effective Date"), by and between CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM, a California public pension fund ( "Seller" ), having its office c/o Lend Lease Real Estate Investments, Inc. at 3424 Peachtree Road, N.E. Suite 800, Atlanta, Georgia 30326 and PREIT ASSOCIATES, L.P., a Delaware limited partnership, or its assignee or nominee ("Purchaser"), having an office at The Bellevue, Third Floor, 200 South Broad Street, Philadelphia, Pennsylvania 19102. W I T N E S S E T H: ARTICLE 1 PURCHASE AND SALE 1.1 Agreement of Purchase and Sale. Subject to the terms and conditions hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to purchase the following: (a) (i) those certain tracts or parcels of land situated in Beaver County, Pennsylvania, more particularly described on Exhibit A attached hereto and made a part hereof, (ii) Seller's leasehold interest pursuant to that certain Lease between William F. Sullivan and Rosemary Sullivan, as Lessor (Lessor or its successor, herein, "Ground Lessor") and Beaver Valley Mall, Inc., as Lessee, dated November 30, 1967; as assigned by Assignment of Lessee's Interest in Ground Lease dated March 20, 1985 (as assigned, amended or renewed (the "Ground Lease") in those certain tracts or parcels of land situated in Beaver County, Pennsylvania, more particularly described on Exhibit A-1 attached hereto and made a part hereof, and (iii) Seller's undivided 50% interest in those certain tracts or parcels of land situated in Beaver County, Pennsylvania, more particularly described on Exhibit A-2 attached hereto, each of the foregoing, together with all and singular the rights and appurtenances pertaining to such property, including any right, title and interest of Seller in and to adjacent streets, alleys or rights-of-way (the property described in clause (a)(i) of this Section 1.1 being herein referred to as the "Fee Parcel", the property described in clause (a)(ii) of this Section 1.1 being herein referred to as the "Leasehold Parcel" and the property described in clause (a)(iii) of this Section 1.1 being herein referred to as the "Co-tenancy Parcel", and collectively as the "Land"); (b) the buildings, structures, fixtures and other improvements, including specifically, without limitation, that certain shopping mall located partially on the Leasehold Parcel and partially on the Fee Parcel consisting of approximately 1,173,493 square feet of gross rentable area, of which approximately 968,723 square feet are owned by Seller (to the extent located on the Leasehold Parcel "Leasehold Improvements") and other improvements on the Land (the property described in clause (b) of this Section 1.1 being herein referred to collectively as the "Improvements"); - 1 - (c) all of Seller's right, title and interest in and to all tangible personal property upon the Land or within the Improvements, including specifically, without limitation, appliances, furniture, carpeting, draperies and curtains, tools and supplies, and other items of personal property (excluding cash) used exclusively in connection with the operation of the Land and the Improvements and only as specifically described on Exhibit C attached hereto and made a part hereof and the specific personal property identified on Exhibit C-1 (herein referred to as the "Specific Personal Property" and together with the other property described in clause (c) of this Section 1.1 being herein referred to collectively as the "Personal Property"); (d) all of Seller's right, title and interest in and to all agreements listed and described on Exhibit D (the "Lease Schedule") attached hereto and made a part hereof, pursuant to which any portion of the Land or Improvements is used or occupied by anyone other than Seller or as to the Leasehold Parcel, the Ground Lessor (the property described in clause (d) of this Section 1.1 being herein referred to collectively as the "Leases"); and (e) all of Seller's right, title and interest in and to, if any, (i) all assignable contracts and agreements specifically excluding the REA Agreement (as herein defined) (collectively, the "Operating Agreements") listed and described on Exhibit E (the "Operating Agreements Schedule") attached hereto and made a part hereof, relating to the upkeep, repair, maintenance or operation of the Land, Improvements or Personal Property which will extend beyond the date of Closing (as such term is defined in Section 4.1 hereof), including specifically, without limitation, all assignable equipment leases, (ii) all assignable existing warranties and guaranties (expressed or implied) issued to Seller in connection with the Improvements or the Personal Property, (iii) the non-exclusive right to use, to the extent assignable, the trade name "Beaver Valley Mall", (iv) all current certificates of occupancy and other permits, licenses and certificates held by Seller and necessary to occupy, operate and transfer the Property, (v) to the extent assignable, all utility, security and other deposits and reserve accounts made as security for the fulfillment of any obligation of Assignor or any person claiming by or through Assignor in connection with the Property for which Assignor received a credit at Closing from Assignee and (vi) if and to the extent in Seller's possession and to the extent assignable, all reports, and other nonproprietary business records exclusively pertaining to the Property excluding the Excluded Materials (as herein defined), including without limitation those relating to any promotional fund or merchant's association relating to the Property, (the property described in this Section 1.1(e) being sometimes herein referred to collectively as the "Intangibles"). 1.2 Property Defined. The Land, the Improvements, the Personal Property, the Leases and the Intangibles are hereinafter sometimes referred to collectively as the "Property." 1.3 Permitted Exceptions. The Property shall be conveyed subject to the matters which are, or are deemed to be, Permitted Exceptions pursuant to Article II hereof (herein referred to collectively as the "Permitted Exceptions"). - 2 - 1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the (i) Leasehold Parcel, Leasehold Improvements, and the Leases and Personal Property, and Intangibles to the extent associated therewith for a purchase price (the "Leasehold Purchase Price) of SIXTY- MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($60,250,000.00), and (ii) Fee Parcel and other Improvements and Intangibles to the extent associated therewith for a purchase price (the "Fee Purchase Price") of FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($450,000.00) and (iii) the Co-Tenancy Parcel for a purchase price (the "Co-Tenancy Purchase Price") of Fifty Thousand and no/100 Dollars ($50,000.00). The Fee Purchase Price, Leasehold Purchase Price and Co-Tenancy Purchase Price (subject to adjustments and prorations and the terms of Section 3.1(c)) are collectively herein referred to as the "Purchase Price". 1.5 Payment of Purchase Price. The Purchase Price, as increased or decreased by prorations and adjustments as herein provided, shall be payable in full at Closing in cash by wire transfer of immediately available federal funds to a bank account designated by Seller in writing to Purchaser at least twenty-four hours prior to the Closing. 1.6 Earnest Money. If Purchaser does not exercise the right to terminate this Agreement in accordance with Section 3.2 or Section 10.6 hereof, Purchaser shall, on or before April 2, 2002, deposit with LandAmerica Financial Group, Inc. (the "Escrow Agent") having its office at 1700 Market Street, Suite 2110, Philadelphia, Pennsylvania 19102, Attention: Alan Keiser the sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00) (the "Deposit") in good funds, either by certified bank or cashier's check or by federal wire transfer as a deposit under this Agreement. The parties hereto mutually acknowledge and agree that time is of the essence in respect of Purchaser's timely deposit of the Deposit with Escrow Agent on or before April 2, 2002. The Escrow Agent shall hold the Deposit in an interest-bearing account in accordance with the terms and conditions of an escrow agreement entered into among Seller, Purchaser and Escrow Agent on or before April 2, 2002. The Deposit, together with all interest earned on such sums, if any, is herein referred to collectively as the "Earnest Money." All interest accruing on such sums shall become a part of the Earnest Money and shall be distributed as Earnest Money in accordance with the terms of this Agreement. If Purchaser fails to deliver the Deposit to the Escrow Agent within the time period specified above, this Agreement shall terminate automatically at 5:00 p.m E.S.T on April 2, 2002, and thereafter neither party shall have any further rights, obligations or liabilities hereunder except to the extent that any right, obligation or liability set forth herein expressly survives termination of this Agreement. Time is of the essence for the delivery of Earnest Money under this Agreement. 1.7 Independent Contract Consideration. In addition to the Earnest Money, Purchaser shall, concurrently with its execution hereof, deliver to Seller a check in the amount of ONE HUNDRED AND N0/100ths DOLLARS ($100.00), which amount Seller and Purchaser agree has been bargained for as consideration for Seller's execution and delivery of this Agreement and Purchaser's right to inspect the Property pursuant to Article III. Such sum is in addition to and independent of any other consideration or payment provided for in this Agreement and is nonrefundable in all events. - 3 - ARTICLE 2 TITLE AND SURVEY 2.1 Title Examination; Commitment for Title Insurance. Seller has obtained and delivered to Purchaser and the surveyor preparing the Survey, from Commonwealth Land Title Insurance Company (the "Title Company"), an ALTA title insurance commitment (the "Title Commitment") covering the Property and, to the extent available to Seller, a copy of each document referenced in the Title Commitment as an exception to title the Property. Purchaser has reviewed the Title Commitment. At Closing, at Purchaser's expense, shall obtain from the Title Company an Owner's Policy of Title Insurance in the full amount of the Purchase Price pursuant to Section 2.4 hereof. 2.2 Survey. Seller has delivered to Purchaser and the Title Company, at Purchaser's expense, from Bock & Clark, an ALTA survey of the Property (the "Survey") reflecting the total area of the Property, the location of all improvements, plottable recorded easements and encroachments, if any, located thereon and other matters of record with respect thereto. 2.3 Title Objections; Cure of Title Objections. Purchaser has reviewed the Title Commitment and the Survey and Purchaser agrees that any item contained in the Title Commitment as an exception (or requirement of Purchaser) or any matter shown on the Survey shall be deemed a Permitted Exception; provided that any Monetary Lien (as herein defined) objected to by Purchaser will be satisfied out of the Purchase Price at Closing and except as set forth in Section 2.5, Purchaser shall have no further rights to terminate this Agreement with respect to such matters. As used herein, the term "Monetary Lien" shall mean the following: (i) any deed of trust, mortgage, or other security title encumbering all or any portion of the Property voluntarily created by, through or under Seller, securing an indebtedness voluntarily created by Seller which remains unpaid or held by Seller; (ii) mechanics, materialmen and other similar liens created by, under or through Seller (and not by, through or under any Tenant or otherwise in connection with Purchaser's inspection); or (iii) subject to the terms and conditions of Section 4.4, the lien of ad valorem taxes, water and sewer rents and other similar charges levied by an applicable governmental authority prior to the Closing affecting the Property which are past due (and uncontested, unless bonded over). 2.4 Conveyance of Title. At Closing, Seller shall convey and transfer to Purchaser good and insurable title to the Property as will enable the Title Company to issue to Purchaser, at Purchaser's expense, an ALTA Owner's Policy (1970 form, revised 1984) of Title Insurance (the "Title Policy") covering the Property, in the full amount of the Purchase Price. Notwithstanding anything contained herein to the contrary, the Property shall be conveyed subject to the following matters, which shall be deemed to be Permitted Exceptions: (a) the rights of tenants under the Leases and any new Leases entered into between the Effective Date and Closing and, where required, approved by Purchaser in accordance with the terms of this Agreement; (b) the lien of all ad valorem real estate taxes and assessments not yet due and payable as of the date of Closing, subject to adjustment as herein provided; - 4 - (c) local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property; (d) the Ground Lease; that certain Agreement between the Sullivans, Beaver Valley Mall, Inc. and Gimbel Brothers, Inc. dated November 15, 1967, recorded in Deed Book 927, page 667, as amended by Agreement dated October 22, 1971, by a Federal Trade Commission Order dated January 13, 1974, (together with various documents attached thereto or referred to therein as affecting or modifying the original Agreement), and by that certain Amendment to Reciprocal Easement and Operating Agreement dated as of April 2, 1996 (the "REA Agreement") and other items listed on Exhibit B attached hereto; and (e) other items appearing of record or shown on the Survey and waived or deemed waived by Purchaser in accordance with Sections 2.3 or 2.5 hereof. 2.5 Pre-Closing "Gap" Title Defects. Purchaser may, at or prior to Closing, notify Seller in writing of any new objections to title (not known to Purchaser) first raised by the Title Company or the Surveyor between (a) the date hereof and (b) the date on which the transaction contemplated herein is scheduled to close. With respect to any objections to title set forth in such notice, Seller shall not be obligated to cure, satisfy or remove or obtain the Title Company's waiver of, or endorsement over, any objection other than a Monetary Lien (which Monetary Liens shall be handled as set forth above); provided that if Seller elects not to cure, satisfy or remove any objection timely made by Purchaser as set forth above, Purchaser shall have the option either (a) to close subject to such objections, in which event they will be deemed Permitted Exceptions or (b) to terminate this Agreement, in which event; the Earnest Money will be repaid to Purchaser and neither party shall have any further obligation hereunder except as expressly survives pursuant to this Agreement. If Seller elects to attempt to cure any such matters, the date for Closing shall be automatically extended by a reasonable additional time to effect such a cure, but in no event shall the extension exceed sixty (60) days after the date for Closing set forth in Section 4.1 hereof. ARTICLE 3 INSPECTION AND FINANCING CONTINGENCY PERIOD 3.1 Right of Inspection. ------------------- (a) Prior to the date hereof, Purchaser has had the right to make a physical inspection of the Property and to examine at such place or places at the Property, in the offices of the property manager or elsewhere as the same may be located, any operating files maintained by Seller or its property manager in connection with the leasing, current maintenance and/or management of the Property, including, without limitation, the Leases, lease files, Operating Agreements, insurance policies, bills, invoices, receipts and other general records relating to the income and expenses of the Property, correspondence, surveys, plans and specifications, warranties for services and materials provided to the Property, environmental audits and similar materials, - 5 - but excluding materials not directly related to the leasing, current maintenance and/or management of the Property such as, without limitation, Seller's internal memoranda, financial projections, appraisals, budgets, accounting records and similar proprietary, elective or confidential information (such excluded materials, collectively herein the "Excluded Materials"). Purchaser acknowledges that it has completed its physical and financial due diligence as well as its review of environmental matters ("Property Due Diligence") and waives any right to terminate with respect to such Property Due Diligence matters. Except as otherwise expressly provided herein in Article II (as to matters of title and survey), Purchaser shall have no further rights to terminate this Agreement with respect to such matters. Purchaser shall continue to have access to the Property until closing or the earlier termination of this Agreement, subject to the terms and conditions of this Agreement to examine at such place or places at the Property, in the offices of the property manager or elsewhere as the same may be located, provided that Purchaser understands and agrees that any additional on-site inspections of the Property shall be conducted upon at least twenty-four (24) hours' prior written notice to Seller and in the presence of Seller or its representative. Such physical inspection shall not unreasonably interfere with the use of the Property by Seller or its tenants nor shall Purchaser's inspection damage the Property in any respect. If Purchaser's inspection causes any damage to the Property, Purchaser shall promptly repair any and all such damage to the same condition as prior to the damage. Such physical inspection shall not be invasive in any respect (unless Purchaser obtains Seller's prior written consent), and in any event shall be conducted in accordance with standards customarily employed in the industry and in compliance with all governmental laws, rules and regulations. Seller shall cooperate with Purchaser in its due diligence but shall not be obligated to incur any liability or expense in connection therewith. Purchaser shall not contact any tenants of the Property without obtaining Seller's prior written consent and shall not disrupt Seller's or Seller's tenants' activities on the Property. All inspections shall occur at reasonable times agreed upon by Seller and Purchaser. Prior to exercising any of the rights and privileges granted to it under this Section 3.1, Purchaser shall (1) obtain, pay for, and maintain at all times during the term of this Agreement, relative to its activities and the activities of others acting for or on the behalf of Purchaser or at Purchaser's direction or request (a) a commercial general liability insurance policy providing coverage (including personal injury liability coverage) with the minimum per occurrence limit of at least $2,000,000.00 and general aggregate limit of $5,000,000.00, (b) an automobile liability insurance policy covering owned, hired and non-owned vehicles, providing coverage of $1,000,000.00 combined single limit for bodily injury and property damage, and (c) excess umbrella liability insurance policy providing coverage insuring losses in excess of the insurance required under (a) and (b) up to a total limit of $5,000,000.00 on an occurrence basis, and (2) provide Seller with a copy of each such policy (with the exception of the excess liability coverage) or a certificate therefor; each such policy shall name Seller as an additional insured thereunder. (b) Following each entry by Purchaser with respect to inspections and/or tests on the Property, Purchaser shall restore the Property to a condition which is as near to its original condition as existed prior to any such inspections and/or tests. Purchaser agrees to indemnify - 6 - against and hold Seller harmless from any claim for liabilities, costs, expenses (including reasonable attorneys' fees actually incurred) damages, loss or injuries arising out of or resulting from or in connection with the inspection of the Property by Purchaser or its agents, and notwithstanding anything to the contrary in this Agreement, such obligation to indemnify and hold harmless Seller shall survive Closing or any termination of this Agreement. (c) Purchaser shall have until March 29, 2002 ("Financing Contingency Period") to obtain a mortgage commitment (the "Mortgage Commitment") reasonably acceptable to it (herein, the "Financing Contingency") for a loan secured by the Property. For purposes of satisfying Purchaser's Financing Contingency, such Mortgage Commitment shall be deemed obtained if the mortgage commitment provides for a loan (i) in the original principal amount of at least $48 million (subject to reasonable reserve requirements); (ii) having an interest rate of not more than 7.4% per annum; (iii) having a term of not less than 10 years; (iv) having an amortization period of not less than 30 years; (v) issued by a reputable lender; (vi) which is nonrecourse to the Purchaser, provided that the commitment may contain customary recourse carve outs to Purchaser and (vii) may be subject to customary conditions. Purchaser shall use its best effort to obtain the Mortgage Commitment and satisfy the Financing Contingency on or prior to the expiration of the Financing Contingency; provided that Purchaser shall be deemed to have satisfied the Financing Contingency if a Mortgage Commitment meeting the foregoing is issued by the lender (subject only to payment of the commitment fee). Moreover, Purchaser may also waive the Financing Contingency and accept a loan which does not satisfy the Financing Contingency requirements above. 3.2 Right(s) of Termination (a) In addition to Purchaser's rights to terminate this Agreement pursuant to Sections 2.5 and 10.6 hereof, Seller agrees that in the event that Purchaser has not obtained the Mortgage Commitment and as a result has not satisfied (or is deemed not to have satisfied) the Financing Contingency, Purchaser shall have the right to terminate this Agreement by giving written notice thereof to Seller on or prior to the expiration of the Financing Contingency Period. If Purchaser gives such notice of termination, this Agreement shall terminate and the Earnest Money shall be returned to Purchaser and thereafter neither party hereto shall have any further rights, obligations or liabilities hereunder except to the extent that any right, obligation or liability set forth herein expressly survives termination of this Agreement. If Purchaser fails to give Seller a notice of termination with respect to such failure to satisfy the Financing Contingency prior to the expiration of the Financing Contingency Period, Purchaser shall no longer have any right to terminate this Agreement under this Section 3.2; provided that, notwithstanding the foregoing, Purchaser may terminate the Agreement if the Financing Contingency is satisfied, but the loan thereafter is not funded solely as a result of a Capital Market Event. For purposes of this Agreement, "Capital Market Event" shall mean an unforeseen material adverse capital market event (not connected with an internal credit policy) which causes the lender issuing the Mortgage Commitment to suspend meeting its obligations to borrowers generally and to suspend funding of the loan specifically but other than for conditions or reasons caused by Purchaser as borrower or related to the Property specifically. - 7 - If Purchaser does not timely elect to terminate for the reasons and during the periods as set forth in this Section 3.2 above, Purchaser shall be deemed to have waived the right to terminate hereunder and (subject to Sections 2.5 and 7.2) the Earnest Money shall be nonrefundable and Purchaser shall be bound to proceed to Closing and consummate the transaction contemplated hereby pursuant to the terms of this Agreement. ARTICLE 4 CLOSING 4.1 Time and Place. (a) The consummation of the transaction contemplated hereby ("Closing") shall be held on April 4 , 2002. Subject to the foregoing, the Closing shall take place through a "New York style" closing in escrow with Escrow Agent, in accordance with escrow instruction letters which shall be given by Seller and Purchaser to each other and to Escrow Agent no less than two (2) business days prior to the Closing Date. The Closing shall take place at such specific time and date (the "Closing Date") as shall be designated by Purchaser in a written notice to Seller not less than five (5) Business Days prior to Closing. If Purchaser fails to give such notice of the Closing Date, the Closing shall take place on the outside date for Closing as provided above. If required by Escrow Agent, Seller and Purchaser shall execute and deliver to each other and to Escrow Agent, Escrow Agent's usual form of escrow instructions for transactions of this type; provided, however that (i) in the event any portion of any escrow instructions shall be inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail to the extent of any such inconsistency unless such instructions that are inconsistent with the terms of this Agreement are executed by both Seller and Purchaser and delivered to Escrow Agent; (ii) such escrow instructions shall specifically provide that no provision thereof shall have the effect of modifying this Agreement unless it is expressly so stated and executed and delivered by both Seller and Purchaser to Escrow Agent; and (iii) Seller and Purchaser may supplement such escrow instructions consistent with the terms and provisions hereof. At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3, the performance of which obligations shall be concurrent conditions. 4.2 Seller's Obligations at Closing. At Closing, Seller shall: (a) deliver to Purchaser a duly executed special warranty deed in recordable form (the "Deed"), conveying the Fee Parcel and Co-Tenancy Parcel and Improvements, subject only to the Permitted Exceptions; the warranty of title in the Deed will be only as to claims made by, through or under Seller and not otherwise; provided that nothing in the Deed will extend or be deemed to extend the representations or warranties contained herein; such Deed to be in the form of Schedule 1 attached hereto (b) assign to Purchaser, and Purchaser shall assume, the Seller's tenant/lessee interest in and to the Ground Lease as to the Leasehold Parcel and Improvements located thereon by duly executed assignment and assumption of Ground Lease agreement ("Ground Lease Assignment"); such Ground Lease Assignment to be in the form of Schedule 2 attached hereto; - 8 - (c) deliver to Purchaser a duly executed bill of sale conveying the Personal Property without warranty of title (except a limited warranty of title as to the Specific Personal Property only) and without warranty, expressed or implied, as to use, merchantability and fitness for any purpose ("Bill of Sale"); such Bill of Sale to be in the form of Schedule 3 attached hereto; (d) assign to Purchaser, and Purchaser shall assume, the landlord/lessor interest in and to the Leases by duly executed assignment and assumption of lease agreements ("Lease Assignment"); such Lease Assignment to be in the form of Schedule 4 attached hereto; (e) to the extent assignable, assign to Purchaser, and Purchaser shall assume, Seller's interest in the Operating Agreements and the other Intangibles by duly executed assignment and assumption agreements (the "Operating Agreement Assignment"); such Operating Agreement Assignment to be in the form of Schedule 5 attached hereto; (f) deliver to Purchaser such Tenant Estoppels and REA Estoppel (as defined in and subject to the terms of Section 4.6 and 5.4(b) hereof); provided that the delivery of such Tenant Estoppels and REA Estoppel shall be a condition of Closing and the inability of Seller to deliver such Tenant Estoppels and REA Estoppel shall not constitute a default by Seller hereunder; (g) join with Purchaser to execute a notice in form and content reasonably satisfactory to Purchaser and Seller which Purchaser shall send to each tenant under each of the Leases informing such tenant of the sale of the Property and of the assignment to Purchaser of Seller's interest in, and obligations under, the Leases (including, if applicable any security deposits) and directing that all rent and other sums payable after the Closing under each such Lease shall be paid as set forth in the notice; (h) deliver to Purchaser a certificate, dated as of the date of Closing and executed on behalf of Seller by a duly authorized officer thereof, stating that the representations and warranties of Seller contained in this Agreement are true and correct in all material respects as of the date of Closing (with appropriate modifications of those representations and warranties made in Section 5.1 hereof to reflect any changes therein including without limitation any changes resulting from actions under Section 5.4 hereof) or identifying any representation or warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Seller be liable to Purchaser for, or be deemed to be in default hereunder by reason of, any breach of representation or warranty which results from any change that (i) occurs between the Effective Date and the date of Closing and (ii) is expressly permitted under the terms of this Agreement or is beyond the reasonable control of Seller to prevent; provided, however, that the occurrence of a change which is not permitted hereunder or is beyond the reasonable control of Seller to prevent shall, at Purchaser's election, if materially adverse to Purchaser constitute the non-fulfillment of the condition set forth in Section 4.6(b); if, despite changes or other matters described in such certificate, the Closing occurs, Seller's representations and warranties set forth in this Agreement shall be deemed to have been modified by all statements made in such certificate; - 9 - (i) deliver to the Title Company such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Seller and a standard Seller's Affidavit (without any indemnity of any kind) in substantially the form attached as Exhibit "G"; (j) deliver to Purchaser, an incumbency certificate for the officers signing this Agreement and the other documents to be executed and delivered by Seller pursuant to this Agreement, and a current Certificate of Good Standing for Seller from the Commonwealth of Pennsylvania; (k) deliver to Purchaser an affidavit duly executed by Seller stating that Seller is not a "foreign person" as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act; (l) deliver to Purchaser the Leases, Operating Agreements and licenses and permits if any, including certificates of occupancy, if any, for occupied portions of the Property, in the possession of Seller or Seller's agents, together with such leasing and property files and records in connection with the continued operation, leasing and maintenance of the Property (other than the Excluded Materials) . Purchaser shall cooperate with Seller for a period of seven (7) years after Closing in case of Seller's need in response to any legal requirement, a tax audit, tax return preparation or litigation threatened or brought against Seller, by allowing Seller and its agents or representatives access, upon reasonable advance notice (which notice shall identify the nature of the information sought by Seller), at all reasonable times to examine and make copies of any and all instruments, files and records, which right shall survive the Closing; (m) to the extent assignable, without cost, expense, representation, warranty or recourse to Seller, deliver to Purchaser an assignment of leases held by Seller or title to any motor vehicles owned by Seller included in this sale. (n) deliver to Purchaser, if necessary, the withdrawal by Seller of any registration by Seller of the trade name "Beaver Valley Mall"; (o) deliver to Purchaser possession and occupancy of the Property, subject to the Permitted Exceptions; and (p) deliver to Purchaser, to the extent assignable, an assignment of any and all of Seller's rights in and to bankruptcy claims or receivables arising from and after the date of Closing as to any tenant currently in possession, who files for bankruptcy or chapter 11 reorganization between the date of this Agreement and Closing, but reserving to Assignor any claims or receivables relating to the period prior to Closing; such assignment to be in a form reasonably satisfactory to Purchaser and Seller and their respective counsel; - 10 - (q) deliver to Purchaser, if and to the extent prepared by the property manager, a tenant delinquency schedule; a listing of any percentage rent paid by Tenants on account of year of the Closing and a schedule setting forth tenant alterations which have not been completed or for which allowances payable to such Tenant in lieu of such work have not been paid; provided that the property manager must deliver the schedules to Seller at least 5 business days prior to Closing, for review and comments, if any and Seller shall not be responsible for the accuracy of such schedules or the failure of the same to be prepared by the property manager; and the obligation to deliver such statements shall not be a condition of Closing and the failure to deliver such statements shall not be a default of Seller. (r) to the extent assignable, assign to Purchaser, without recourse, and Purchaser shall assume, Seller's interest in the REA Agreement by duly executed assignment and assumption agreements (the "REA Agreement Assignment"); such REA Agreement Assignment to be in the form of Schedule 6 attached hereto; (s) deliver such additional documents as shall be reasonably required to consummate the transaction expressly contemplated by this Agreement. 4.3 Purchaser's Obligations at Closing. At Closing, (a) Purchaser shall pay to Seller the full amount of the Purchase Price, as increased or decreased by prorations and adjustments as herein provided, in immediately available wire transferred funds pursuant to Section 1.5 above, it being agreed that at Closing the Earnest Money shall be delivered to Seller and applied towards payment of the Purchase Price; (b) Purchaser shall join Seller in execution of the instruments described in Sections 4.2(b), 4.2(d), 4.2(e), 4.2(g) and 4.2(r) above; (c) intentionally deleted (d) Purchaser shall deliver to Seller such evidence as Seller's counsel and/or the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser and a standard Purchaser's Affidavit in form reasonably satisfactory to the Title Company; and (e) deliver such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement. - 11 - 4.4 Credits and Prorations. (a) If the Purchase Price is received by Seller prior to 3:30 P.M. local Atlanta, Georgia time on the Closing Date, the day of Closing shall belong to Purchaser and all prorations hereinafter provided to be made "as of Closing" shall each be made as of 11:59 o'clock P.M. local Atlanta, Georgia time on the day prior to the Closing Date. If the Purchase Price is received by Seller at or after 3:30 P.M. local Atlanta, Georgia time on the Closing Date, then the day of Closing shall belong to Seller and such prorations shall each be made as of 11:59 o'clock P.M. local Atlanta, Georgia time on the Closing Date. In each such proration set forth below, the portion thereof allocable to periods beginning as of Closing shall be credited to Purchaser, or charged to Purchaser, as applicable, and the portion thereof allocable to periods ending as of Closing shall be credited to Seller, or charged to Seller, as applicable, all of which prorations shall be made at Closing or, in the case of allocations to be made after Closing, upon receipt of such payments or payment of such expenses. The following shall be apportioned with respect to the Property as of Closing as aforesaid: (i) rents, if any, as and when collected (the term "rents" as used in this Agreement includes all payments due and payable by tenants under the Leases); (ii) taxes (including personal property taxes on the Personal Property) and assessments levied against the Property; (iii) payments under the Operating Agreements; (iv) gas, electricity and other utility charges for which Seller is liable, if any, such charges to be apportioned at Closing on the basis of the most recent meter reading occurring prior to Closing; and (v) any other operating expenses or other items pertaining to the Property which are customarily prorated between a purchaser and a seller in the area in which the Property is located. (b) Notwithstanding anything contained in the foregoing provisions: (i) At Closing, (A) Seller shall, at Seller's option, either deliver to Purchaser any security deposits actually held by Seller pursuant to the Leases, together with any interest earned thereon if required by the Leases, or credit to the account of Purchaser the amount of such security deposits (to the extent such security deposits are not applied against delinquent rents or otherwise as provided in the Leases), and (B) Purchaser shall credit to the account of Seller all refundable cash or other deposits posted with utility companies serving the Property, or, at Seller's option, Seller shall be entitled to receive and retain such refundable cash and deposits. (ii) Any taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid. If taxes and assessments for the current year have not been paid before Closing, Seller shall be charged at Closing an amount equal to that portion of such taxes and assessments which relates to the period before Closing and Purchaser shall pay the taxes and assessments prior to their becoming delinquent. Any such apportionment made with respect to a tax year for which the tax rate or assessed valuation, or both, have not yet been fixed shall be based upon the tax rate and/or assessed valuation last fixed. To the extent that the actual taxes and assessments for the current year differ from the amount apportioned at Closing, the parties shall make all necessary adjustments by appropriate payments between themselves following Closing. - 12 - (iii) Charges referred to in Section 4.4(a) above which are payable by any tenant to a third party shall not be apportioned hereunder, and Purchaser shall accept title subject to any of such charges unpaid and Purchaser shall look solely to the tenant responsible therefor for the payment of the same. If Seller shall have paid any of such charges on behalf of any tenant, and shall not have been reimbursed therefor by the time of Closing, Purchaser shall pay to Seller Seller's pro rata share of any such charges at such time as Purchaser receives payment from the tenant; provided that Purchaser shall use reasonable efforts to pursue reimbursement for such charges from the tenant. (iv) The parties shall prorate the face amounts of any taxes, water rates or sewer rents. (v) As to gas, electricity and other utility charges referred to in Section 4.4(a)(iv) above, Seller may on notice to Purchaser elect to pay one or more of all of said items accrued to the date hereinabove fixed for apportionment directly to the person or entity entitled thereto, and to the extent Seller so elects, such item shall not be apportioned hereunder, and Seller's obligation to pay such item directly in such case shall survive the Closing. (vi) The Personal Property is included in this sale, without further charge, except that (A) Purchaser agrees to purchase from Seller, at Seller's cost, and pay for at Closing, the fuel and any supplies which are in unopened containers on the Property at the time of Closing, the amount of fuel and such supplies and the cost thereof to be determined as of the day before the date of Closing by a certificate of an agent or employee of Seller, and (B) Purchaser shall pay to Seller the amount of any and all sales or similar taxes payable in connection with the Personal Property and Purchaser shall execute and deliver any tax returns required of it in connection therewith, said obligations of Purchaser to survive Closing. (vii) Purchaser shall be responsible for the payment of (A) all Tenant Inducement Costs (as hereinafter defined) and leasing commissions which become due and payable (whether before or after Closing) (1) as a result of any renewals or expansions of existing Leases, approved or deemed approved in accordance with Section 5.4 hereof, between September 15, 2001 and the date of Closing, and (2) under any new Leases, approved or deemed approved in accordance with Section 5.4 hereof, entered into between the September 15, 2001 and the date of Closing, and (B) all Tenant Inducement Costs and leasing commissions which become due and payable from and after the date of Closing. Without limiting the foregoing, Seller shall be responsible for Tenant Inducement Costs and leasing commissions which were due and payable on or prior to Closing (but not for Tenant Inducement Costs for refurbishments or alterations which the landlord is obligated to make during the term of the Lease) for Leases which were existing prior September 15, 2001. If, as of the date of Closing, Seller shall have paid any Tenant Inducement Costs or leasing commissions or other expenses (excluding attorneys - 13 - fees) incurred by Seller pursuant to a renewal or expansion of any existing Lease or new Lease approved (or deemed approved) after September 15, 2001 by Purchaser hereunder for which Purchaser is responsible pursuant to the foregoing provisions, Purchaser shall reimburse Seller therefor at Closing. For purposes hereof, the term "Tenant Inducement Costs" shall mean any out-of-pocket payments required under a Lease to be paid by the landlord thereunder to or for the benefit of the tenant thereunder which is in the nature of a tenant inducement, including specifically, without limitation, tenant improvement costs, lease buyout costs, and moving, design, refurbishment and club membership allowances. The term "Tenant Inducement Costs" shall not include loss of income resulting from any free rental period, it being agreed that Seller shall bear the loss resulting from any free rental period until the date of Closing and that Purchaser shall bear such loss from and after the date of Closing. Further, notwithstanding anything in this paragraph (vii) to the contrary, Purchaser shall be responsible for, and if executed and to the extent paid by Seller prior to Closing, also agrees to credit Seller at Closing, the cost of Tenant Inducement Costs and leasing commissions associated with the Dunham's Lease in a current amount equal to $267,128.80 (two hundred sixty-seven thousand one hundred twenty-eight dollars and eighty cents) or as otherwise approved by Purchaser in accordance with the terms hereof, such approval in any event not to be unreasonably withheld or delayed. (viii) Unpaid and delinquent rent collected by Seller and Purchaser after the date of Closing shall be delivered as follows: (a) if Seller collects any unpaid or delinquent rent for the Property, Seller shall, within fifteen (15) days after the receipt thereof, deliver to Purchaser any such rent which Purchaser is entitled to hereunder relating to the date of Closing and any period thereafter, and (b) if Purchaser collects any unpaid or delinquent rent from the Property, Purchaser shall, within fifteen (15) days after the receipt thereof, deliver to Seller any such rent which Seller is entitled to hereunder relating to the period prior to the date of Closing. Seller and Purchaser agree that all delinquent rent received by Seller or Purchaser after the date of Closing shall be applied first to the month of Closing, then to current rents and then to delinquent rents, if any, in the order of their maturity. Purchaser will make a good faith effort after Closing to collect all rents in the usual course of Purchaser's operation of the Property, but Purchaser will not be obligated to institute any lawsuit or other collection procedures to collect delinquent rents. - 14 - (ix) "Percentage" or "Overage" Rent that is (1) attributable to any Percentage Rent lease year in which the Closing falls and (2) not yet due or payable as of the Closing (collectively, "Current Year Percentage Rent"), shall be prorated as follows: promptly upon receipt by Purchaser, Purchaser shall furnish to Seller copies of all sales reports from tenants relative to Current Year Percentage Rent, including, without limitation, all sales reports with respect to any tenants whose Percentage Rent lease years have expired as of the Closing but whose sales reports were not delivered to Seller as of the Closing and sales reports of any tenants whose Percentage Rent lease years expire after the Closing. The amount of any Current Year Percentage Rent shall be payable in accordance with such tenant's Lease as existing as of the Closing, and Purchaser shall (to the extent not paid to Seller by way of estimated payments prior to Closing) pay to Seller a pro rata portion of such rent based upon the apportionment being made as of the Closing [in proportion to the relative number of days in the subject year (being the "lease year" of the applicable tenant) occurring prior and subsequent to the Closing], promptly after the date when such rent is received from the tenant. (x) Any real estate taxes, common area maintenance, mall maintenance, utility charges, water and sewer charges, contributions to Promotional Organizations and other charges to or contributions by tenants under the Leases that are attributable to the operating year in which the Closing falls (collectively, "Current Year Operating Charges") shall be allocated between Seller and Purchaser as follows: Seller shall be entitled to retain amounts paid by (and shall be responsible for the refunding of excess amounts paid by) tenants for Current Year Operating Charges that are attributable to the period prior to the Closing; Purchaser shall be entitled to retain amounts paid by (and shall be responsible for the refunding of excess amounts paid by) tenants for Current Year Operating Charges attributable to the period from and after the Closing Date. Any excess Current Year Operating Charges payable by Seller may, at Seller's option, either be remitted to Purchaser for refund to the appropriate Tenants or be refunded directly to the appropriate tenants; provided that all appropriate information for such refunds has been provided to Seller by Purchaser or Purchaser's manager. Any shortfall in Current Year Operating Charges payable to Seller shall be remitted to Seller promptly upon Purchaser's receipt thereof (or Tenants shall be instructed to remit such amounts directly to Seller) and Purchaser shall use reasonable efforts to pursue reimbursements of such amounts to Seller. (c) As soon as reasonably available (but not later than 180 days following Closing unless as to taxes, applicable bills, or other relevant information has not yet been issued) Purchaser shall prepare and provide to Seller a reconciliation of adjustments and prorations in accordance with this section for review and approval by Seller. (d) The provisions of this Section 4.4 shall survive Closing. 4.5 Closing Costs. (a) Seller shall pay (i) the fees of any counsel representing it in connection with this transaction, (ii) one half of any transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property, and (iii) one-half (1/2) of any escrow fee which may be charged by the Escrow Agent or Title Company - 15 - (b) Purchaser shall (i) pay the fees of any counsel representing Purchaser in connection with this transaction, (ii) pay Seller for the amount of (x) the fee for the title examination and (y) the Title Commitment and pay the premium for the Owner's Policy of Title Insurance to be issued to Purchaser by the Title Company at Closing, (iii) pay or reimburse Seller for the cost of the Survey, (iv) pay the fees for recording the Deed and Assignment conveying the Property to Purchaser, (v) pay one half of any transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property, (vii) all costs associated with financing the Property including, without limitation, any requirements of the lender(s) providing acquisition financing, and (viii) pay one-half (1/2) of any escrow fees charged by the Escrow Agent or Title Company. (c) All other costs and expenses incident to this transaction and the closing thereof shall be paid by the party incurring same. 4.6 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion: (a) Seller shall have delivered to Purchaser all of the items required to be delivered to Purchaser pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.2 (except as limited thereby); and provided, however, that as stated in Section 4.2 (f), as to Tenant Estoppels and the REA Estoppel, the delivery of those items up to the Estoppel Threshold are conditions of Closing, but the inability of Seller to deliver the Tenant Estoppels or REA Estoppel (or any of them) shall not constitute a default by Seller hereunder and the delivery of the items in Section 4.2(q) shall not be a condition of Closing. (b) All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of Closing (with appropriate modifications permitted under this Agreement or not adverse to Purchaser). (c) Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing. (d) Seller shall have obtained Tenant Estoppels (as defined in Section 5.4) duly executed by tenants (i) from each of the following tenants (herein, the "Anchor Tenants"): JC Penney Company, Inc., Boscov's and Sears, and (ii) from a sufficient number of the tenants under the remaining in-line store or out-parcel Leases (collectively, "NonAnchor Tenants") such that a Tenant Estoppel as aforesaid shall have been obtained from the Anchor Tenants and NonAnchor Tenants occupying, in the aggregate, at least eighty percent (80%) of the occupied tenant space in the Improvements (clause (i) and (ii) collectively referred to as the "Threshold Requirement"). To the extent Seller is unable to obtain any Tenant Estoppel from a NonAnchor Tenant as necessary or required to meet the Threshold Requirement, at Closing Seller may, but shall not be obligated to, execute and deliver to Purchaser a certificate in the form attached hereto as Exhibit F-2 (herein, - 16 - "Seller's Certificate") for any such NonAnchor Tenant. Seller shall be released from any liability under any Seller's Certificate as to the particular tenant as and when Purchaser receives a Tenant Estoppel in appropriate form from any of the tenants as to which Seller delivered its Seller's Certificate as described above. The delivery of such Tenant Estoppels or Seller's Certificate up to the Threshold Requirement is a condition to Purchaser's obligation to close, but the inability of Seller to deliver Tenant Estoppels (or any of them), or the election of Seller not to deliver a Seller's Certificate as to any tenant shall not constitute a default by Seller hereunder. Seller agrees to permit Purchaser to send to each of the Anchor Tenants a Tenant Estoppel in the form attached hereto as Exhibit F-1, but Purchaser agrees to accept a Tenant Estoppel from any Tenant on the forms required by the terms of such Tenant's lease or, if no form is attached, as to Anchor Tenants, in the form customarily used by such Tenant. Purchaser acknowledges that the Tenant Estoppels returned to date as listed on Exhibit D-1, including those received from the Anchor Tenants are acceptable for purposes of satisfying the Threshold Requirement notwithstanding the changes or claims made by the Tenants (some of which are reflected on Exhibit D-1 (or Exhibit D)) and that to the extent the Anchor Tenants or other Tenants raise(d) claims against the landlord particularly as to work to be performed, Purchaser acknowledges that, Seller shall not be liable or responsible for performing such work whether arising before or after Closing and Seller shall not be responsible as to such claims. Further, if a Tenant returns an Estoppel Certificate which identifies delinquencies or tenant defaults (or increased delinquencies) or a landlord's default or other qualifications as disclosed by Exhibit D (or Exhibit D-1) attached, such Estoppel Certificates shall also be acceptable for purposes of satisfying the Threshold Requirement. (e) Purchaser shall have received an estoppel certificate (the "REA Estoppel") from May Department Stores, Inc. ("Mays") in form satisfactory to Purchaser and Seller and/or, at Purchaser's option, an acknowledgment from Mays consenting to the assignment and assumption of the REA Agreement. The delivery of such REA Estoppel is a condition to Purchaser's obligation to close, but the inability of Seller to deliver the REA Estoppel shall not constitute a default by Seller hereunder. 4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Seller in its sole discretion: (a) Seller shall have received the Purchase Price as adjusted pursuant to and payable in the manner provided for in this Agreement. (b) Purchaser shall have delivered to Seller all of the items required to be delivered to Seller pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3. - 17 - (c) All of the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the date of Closing. (d) Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the date of Closing. (e) Seller shall have received the REA Estoppel from May Department Stores, Inc. ("Mays") in form satisfactory to it and/or, at Seller's option, an acknowledgment from Mays consenting to the assignment and assumption of the REA Agreement. ARTICLE 5 REPRESENTATIONS, WARRANTIES AND COVENANTS 5.1 Representations and Warranties of Seller. Upon (and subject to) delivery of an indemnity agreement in the form of Exhibit "H" attached hereto, Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date: (a) Seller has been duly organized and is validly existing under the laws of the State of California. Seller is validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Seller has the full right and authority to enter into this Agreement and, subject to the provisions of Section 10.6 hereof, to transfer all of the Property to be conveyed by Seller pursuant hereto and to consummate or cause to be consummated the transactions contemplated herein to be made by Seller. Subject to the provisions of Section 10.6, the execution, delivery and performance by Seller of this Agreement and the documents to be executed by Seller pursuant hereto have been duly and validly authorized by all necessary corporate action on the part of Seller. Subject to the provisions of Section 10.6, this Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject as to enforceability to the effect of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or other similar laws affecting the rights of creditors generally and to general principles of equity. No bankruptcy, insolvency, reorganization, liquidation, arrangement or moratorium proceeding or allegation of fraudulent conveyance is now pending or, to Seller's knowledge, threatened against Seller or the Property. The person signing this Agreement on behalf of Seller is authorized to do so. (b) Execution by Seller of this Agreement and all documents provided for herein to be executed by Seller, and performance by Seller of the provisions hereof and thereof, (subject to Section 10.6 and 4.7(e) hereof) will not (i) violate or result in any breach of, or constitute a default under, any law, regulation, rule, order or judgment of any governmental authority to which Seller is subject, or any agreement, indenture, mortgage, deed of trust, bank loan, credit agreement or other instrument to which Seller is a part or by which Seller is bound, where such breach or default would materially adversely affect Seller's ability to perform its obligations hereunder or under such other documents or (ii) require any approval or consent of any governmental authority (other than pursuant to Section 10.6) or to Seller's knowledge, any Tenant. To Seller's knowledge, Seller is not in default under any note, evidence of indebtedness, lease, contract, license, undertaking or other agreement where the liability thereunder would in any material adverse way prevent with the consummation by Seller of the transaction contemplated by this Agreement. - 18 - (c) There is no arbitration, unsatisfied order or judgment pending, or action or suit properly served and pending or to Seller's knowledge, governmental investigation, action, suit or proceeding pending against the Property or the transaction contemplated by this Agreement, which, if adversely determined, could individually or in the aggregate have a material adverse effect on title to the Property or any portion thereof or which would in any material adverse way interfere with the consummation by Seller of the transaction contemplated by this Agreement. (d) To Seller's knowledge, no person or entity has or, as at the Closing will have, any right or option to acquire the Property by, through or under Seller. (e) No condemnation, eminent domain, zoning, land-use or similar proceeding in which Seller has been served with process or of which Seller has otherwise received written notice is pending with respect to all or any part of the Property or access thereto, and Seller has no knowledge that any such proceeding is threatened or contemplated. (f) With respect to the Leases: (i) Exhibit D attached hereto is a list of all of the Leases in effect on the Effective Date (except those Leases consisting of licenses and concession agreements which have terms, including any rights to renew or extend, not in excess of six (6) months), setting forth, with respect to each Lease: (1) the date thereof and the date of each amendment or supplement thereto; (2) the name of the Tenant thereunder; (3) to Seller's knowledge, the premises demised thereby; and (4) the amount, if any, of the security deposit held by Seller thereunder. As of the Effective Date, to Seller's knowledge, there are no leases, licenses or other rights of occupancy or use of any portion of the Property granted by Seller by which Seller is bound other than the Leases set forth in Exhibit D, except Permitted Exceptions and Leases consisting of licenses and concession agreements which have terms, including any rights to renew or extend, not in excess of six (6) months. To Seller's knowledge, none of the Leases has been modified, amended or supplemented except as set forth in Exhibit D. (ii) To Seller's knowledge, copies of the Leases, and all amendments and supplements thereto, as itemized in Exhibit D, have heretofore been made available and/or delivered to Purchaser for review. (iii) Except as set forth in Exhibit D or as otherwise disclosed, to Seller's knowledge, Seller has not received written notice which is still outstanding from any Tenant under a Lease (1) that Seller has defaulted in performing any of its material obligations under such Lease or (2) that such Tenant is entitled to any reduction in, refund of or counterclaim or offset against, any rents or other sums paid, payable or to become payable by such Tenant thereunder or is entitled to cancel or terminate such Lease or to be released of any of its material obligations thereunder. With the exception of the delinquencies in the payment of rents and other defaults and as otherwise disclosed to Purchaser, to Seller's knowledge, no material default exists under any Lease by the Tenant thereunder. - 19 - Notwithstanding anything in this section to the contrary, in the event that any Tenant Estoppel delivered to Purchaser with respect to any Lease shall contain any statement of fact, information or other matter which is inconsistent with the matters stated in Seller's representations in this Section 5.1(f), the Tenant Estoppel shall control and Seller shall have no liability for any claim based upon a breach of representation regarding such statement of fact, information or other matter contained in the Tenant Estoppel. Notwithstanding anything to the contrary contained in this Agreement, Seller does not represent or warrant that any particular Lease will be in force or effect at Closing or that the tenants under the Leases will have performed their obligations thereunder. The termination of any Lease prior to Closing by reason of the tenant's default shall not affect the obligations of Purchaser under this Agreement in any manner or entitle Purchaser to an abatement of or credit against the Purchase Price or give rise to any other claim on the part of Purchaser (g) To Seller's knowledge, Seller has not received prior to the Effective Date any written notification from any governmental or public authority that the Property is in violation of any applicable fire, health, building, use, occupancy or zoning laws where such violation remains outstanding and, if unaddressed, would have a material adverse effect on the use of the Property as currently owned and operated. (h) To Seller's knowledge, prior to the Effective date, Seller has not received written notice which is still outstanding from any party to any Operating Agreement or the REA Agreement that Seller has defaulted in performing any obligations under the Operating Agreement or the REA Agreement. To Seller's knowledge, no material default exists under any Operating Agreement or the REA Agreement on the part of the other parties thereto. (i) To Seller's knowledge, Exhibit E is a list as of the date hereof of all of the Operating Agreements affecting the Property to which Seller is bound which sets forth (1) the name of each party (other than Seller) to each of the Operating Agreements, (2) the date of each of the Operating Agreements and of each amendment thereto, and (3) a brief description of the services provided under each of the Agreements. To Seller's knowledge, copies of each of the Operating Agreements and of each amendment thereto, if any, as set forth in said Exhibit E, have been furnished or made available to Purchaser for review. (j) Copies of the most recent real estate tax bills for the Property received by Seller have been delivered to Purchaser. Except as disclosed, Seller has not filed, and has not retained anyone to file, notices of protests against, or to commence action to review, real property tax assessments against the Property. - 20 - (k) Except as set forth in the Phase I and II environmental reports prepared by URS Dames and Moore for Seller, a copy of which has been delivered to Purchaser or as otherwise disclosed to Purchaser, to Seller's knowledge, Seller has received no written notification that any governmental or quasi-governmental authority has determined that there are any violations of environmental statutes, ordinances or regulations affecting the Property. As used herein, "Hazardous Substances" means all hazardous or toxic materials, substances, pollutants, contaminants, or wastes currently identified as a hazardous substance or waste in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as "CERCLA"), as amended, the Superfund Amendments and Reauthorization Act (commonly known as "SARA"), the Resource Conservation and Recovery Act (commonly known as "RCRA"), or any other federal, state or local legislation or ordinances applicable to the Property (collectively, the "Environmental Statutes"). 5.2 Knowledge Defined. References to the "knowledge" of Seller shall refer only to the actual knowledge of the Designated Employees (as hereinafter defined) of Lend Lease Real Estate Investments, Inc. ("LL"), the manager of this asset for Seller, and shall not be construed, by imputation or otherwise, to refer to the knowledge of Seller, LL or any affiliate of either of them, to any property manager, or to any other officer, agent, manager, representative or employee of Seller or LL or any affiliate thereof or to impose upon such Designated Employees any duty to investigate the matter to which such actual knowledge, or the absence thereof, pertains. As used herein, the term "Designated Employees" shall refer to the following persons: (a) Chris J. Bussjager, (b) Marty Solomon and (c) Gary Baldwin. 5.3 Survival of Seller's Representations and Warranties. The representations and warranties of Seller set forth in Section 5.1 as updated by the certificate of Seller to be delivered to Purchaser at Closing in accordance with Section 4.2(g) hereof, shall survive Closing for a period of nine (9) months. No claim for a breach of any representation or warranty of Seller shall be actionable or payable (a) if the breach in question results from or is based on a condition, state of facts or other matter which was known to Purchaser prior to Closing, (b) unless the valid claims for all such breaches collectively aggregate more than One Hundred Thousand and 00/100th Dollars ($100,000.00), in which event the full amount of such claims shall be actionable, subject to the Cap (as defined herein), and (c) unless written notice containing a description of the specific nature of such breach shall have been given by Purchaser to Seller prior to the expiration of said nine-month period and an action shall have been commenced by Purchaser against Seller within thirty (30) days after the termination of the survival period provided for above in this Section 5.3. Purchaser agrees to first seek recovery under any insurance policies, service contracts and Leases prior to seeking recovery from Seller, and Seller shall not be liable to Purchaser if Purchaser's claim is satisfied from such insurance policies, service contracts or Leases. As used herein, the term "Cap" shall mean the total aggregate amount of One Million and 00/100th Dollars ($1,000,000.00). In no event shall Seller's aggregate liability to Purchaser for breach of any or all representations or warranties of Seller in this Agreement or the certificate to be delivered by Seller at Closing pursuant to Section 4.2(g) hereof exceed, in the aggregate for all breaches, the amount of the Cap. - 21 - 5.4 Covenants of Seller. Seller hereby covenants with Purchaser as follows: (a) From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall use reasonable efforts to operate and maintain the Property in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof; except as otherwise specifically provided or contemplated by this Agreement; provided that Seller shall not be obligated to make any capital repairs or replacements. (b) Seller shall use reasonable efforts to obtain and deliver to Purchaser prior to Closing, a written estoppel certificate substantially in the form of Exhibit F attached hereto and made a part hereof, or as to the "Anchor Tenants" (as herein defined), at the option of the Anchor Tenant or any national Tenant (i.e. a Tenant who is part of a national chain, (herein, a "National Tenant"), in substantially the form required by the terms of such Anchor Tenant's or National Tenant's lease or if no form is attached, as customarily used by such Tenant, and in each case, signed by each tenant occupying space in the Improvements. The signed certificates are referred to herein as the "Tenant Estoppels". (c) A copy of any renewal or expansion of an existing Lease or of any new Lease which Seller wishes to execute between the Effective Date and the date of Closing will be submitted to Purchaser prior to execution by Seller. Purchaser agrees to notify Seller in writing within five (5) business days after Purchaser's receipt thereof of either its approval or disapproval, including all Tenant Inducement Costs and leasing commissions to be incurred in connection therewith. On or prior to expiration of the Financing Contingency, in the event Purchaser informs Seller that Purchaser does not approve the renewal or expansion of the existing Lease or the new Lease, which approval shall not be unreasonably withheld, Seller shall have the option to cancel this Agreement by written notice thereof to Purchaser within five (5) business days after Seller's receipt of written notice of Purchaser's disapproval thereof, and upon refund and payment of the Earnest Money to Purchaser, neither party shall have any further liability or obligation hereunder. In the event that Purchaser has not terminated this Agreement on or prior to March 29, 2002, and Purchaser thereafter informs Seller that Purchaser does not approve the renewal or expansion of the existing Lease or the new Lease between expiration of the Financing Contingency and the Closing, Seller shall not enter into such renewal or expansion of the existing Lease or the new Lease and shall not have the right cancel this Agreement as a result thereof. In the event Purchaser fails to notify Seller in writing of its approval or disapproval within the five (5) business day time period for such purpose set forth above, such failure shall be deemed the approval by Purchaser. At Closing, Purchaser shall reimburse Seller for any Tenant Inducement Costs, leasing commissions or other expenses, including legal fees, incurred by Seller pursuant to a renewal, an expansion or a new Lease approved (or deemed approved) by Purchaser in accordance with Section 4.4(b)(vii). (d) From the date hereof until the Closing or earlier termination of this Agreement, Seller shall not remove (or direct the removal of) any item of Specific Personal Property except as may be required for repair or replacement or to retire obsolete property or to use in the ordinary course. - 22 - (e) From the date hereof until the Closing or earlier termination of this Agreement, Seller shall keep all existing insurance for the Property in full force and effect. (f) Seller also covenants that between the date of this Agreement and the Closing: (i) (x) Seller shall not intentionally cause any Hazardous Substances to be placed, for the first time, in, on or under the Property in a manner or in quantities that require remediation under applicable Environmental Statutes and (y) Seller shall not grant any new liens or encumbrances against the Property or grant any easements materially adversely affecting the Property. (ii) Without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed, except as to Leases or as otherwise contemplated hereby or as required by law, Seller will not execute easements, covenants, conditions, restrictions, rights-of-way or any other recorded or unrecorded contracts with respect to the Property which materially adversely affect the Property and which would survive the Closing or amend, renew or extend any Operating Agreement which would survive the Closing. (iii) Seller will not seek governmental approvals with respect to the Property except in the ordinary course of operating the Property or apply for any zoning changes not in accordance with, or as contemplated or required by, this Agreement. 5.5 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller: (a) Purchaser has been duly organized and is validly existing under the laws of the State of Delaware. Purchaser is validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Subject to the provisions of Section 10.6 hereof, Purchaser has the full right, power and authority to purchase the Property as provided in this Agreement and to carry out Purchaser's obligations hereunder, and all requisite action necessary to authorize Purchaser to enter into this Agreement and to carry out its obligations hereunder have been, or by the Closing will have been, taken. Subject to the provisions of Section 10.6 hereof, the person signing this Agreement on behalf of Purchaser is authorized to do so. This Agreement constitutes the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject as to enforceability to the effect of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or other similar laws affecting the rights of creditors generally and to general principles of equity. No bankruptcy, insolvency, reorganization, liquidation, arrangement or moratorium proceeding or allegation of fraudulent conveyance is now pending or, to Purchaser's knowledge, threatened against Purchaser or the Property. - 23 - (b) Execution by Purchaser of this Agreement and all documents provided for herein to be executed by Purchaser, and performance by Purchaser of the provisions hereof and thereof, will not (i) violate or result in any breach of, or constitute a default under, any law, regulation, rule, order or judgment of any governmental authority to which Purchaser is subject, or any agreement, indenture, mortgage, deed of trust, bank loan, credit agreement or other instrument to which Purchaser is a part or by which Purchaser is bound, where such breach or default might adversely affect Purchaser's ability to perform its obligations hereunder or under such other documents or (ii) require any approval or consent of any governmental authority or any Tenant. Purchaser is not in default under any note, evidence of indebtedness, lease, contract, license, undertaking or other agreement where the liability thereunder would materially adversely affect Purchaser's ability to perform its obligations under this Agreement or any document executed by Purchaser pursuant hereto. (c) There is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement. 5.6 Survival of Purchaser's Representations and Warranties. The representation and warranties of Purchaser set forth in Section 5.5 shall survive Closing for a period of nine (9) months. 5.7 Covenants of Purchaser. Purchaser hereby covenants with Seller that Purchaser has, in connection with its investigation of the Property, inspected the Property for the presence of Hazardous Substances (as defined in Section 5.1 (k) hereof), and shall furnish to Seller copies of any reports received by Purchaser in connection with any such inspection. Purchaser hereby assumes full responsibility for such inspections and, except for claims based on representations or warranties contained in Section 5.1(k), irrevocably waives any claim against Seller arising from the presence of Hazardous Substances on the Property. Purchaser shall also furnish to Seller, at Seller's request, copies of any other property condition reports received by Purchaser relating to any other inspections of the Property conducted on Purchaser's behalf, if any (including, specifically, without limitation, any reports analyzing compliance of the Property with the provisions of the Americans with Disabilities Act ("ADA"), 42 U.S.C. ss.12101, et seq., if applicable); provided, however, that Purchaser makes no representations or warranties of any kind to Seller with respect to any such reports. ARTICLE 6 DEFAULT 6.1 Default by Purchaser. If Purchaser defaults for any reason other than Seller's default or the permitted termination of this Agreement by either Seller or Purchaser as herein expressly provided, or if Purchaser otherwise defaults under this Agreement, Seller shall be entitled, as its sole remedy, to terminate this Agreement and receive the Earnest Money as liquidated damages for the breach of this Agreement, it being agreed between the parties hereto that the actual damages to Seller in the event of such breach are impractical to ascertain and the amount of the Earnest Money is a reasonable estimate thereof. Notwithstanding the foregoing, Seller's remedies for a breach of Section 3.1(b), 8.1 or 10.1 shall not be limited by the foregoing limitations. - 24 - 6.2 Default by Seller. In the event that Seller fails to consummate this Agreement for any reason other than Purchaser's default or the permitted termination of this Agreement by Seller or Purchaser as herein expressly provided, Purchaser shall be entitled, as its sole remedy either (a) to receive the return of the Earnest Money, which return shall operate to terminate this Agreement and release Seller from any and all liability hereunder, or (b) to enforce specific performance of Seller's obligation to execute the documents required to convey the Property to Purchaser, it being understood and agreed that the remedy of specific performance shall not be available to enforce any other obligation of Seller hereunder. Purchaser expressly waives its rights to seek damages in the event of Seller's default hereunder. Purchaser shall be deemed to have elected to terminate this Agreement and receive back the Earnest Money if Purchaser fails to file suit for specific performance against Seller in a court having jurisdiction in the county and state in which the Property is located, on or before thirty (30) days following the date upon which Closing was to have occurred. Notwithstanding the foregoing, Purchaser's remedies for a breach of Section 8.1 or 10.1 shall not be limited by the foregoing limitations. ARTICLE 7 RISK OF LOSS 7.1 Minor Damage. In the event of loss or damage to the Property or any portion thereof which is not "major" (as hereinafter defined), this Agreement shall remain in full force and effect provided Seller performs any necessary repairs or, at Seller's option, assigns to Purchaser all of Seller's right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies (including without limitation business interruption or rent insurance proceeds for the period from and after Closing) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the date of Closing shall be extended a reasonable time not to exceed ninety (90) days in order to allow for the completion of such repairs. If Seller elects to assign the casualty claim to Purchaser, the Purchase Price shall be reduced by an amount equal to the deductible amount under Seller's insurance policy. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser. 7.2 Major Damage. In the event of a "major" loss or damage, Purchaser may terminate this Agreement by written notice to Seller, in which event the Earnest Money shall be returned to Purchaser. If Purchaser does not elect to terminate this Agreement within ten (10) business days after Seller sends Purchaser written notice of the occurrence of major loss or damage, then Purchaser shall be deemed to have elected to proceed with Closing, in which event Seller shall, at Seller's option, either (a) perform any necessary repairs, or (b) assign to Purchaser all of Seller's right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies (including without limitation business interruption or rent insurance proceeds for the period from and after Closing) or condemnation awards relating to the premises in question. In the event that Seller elects to perform repairs upon the Property, Seller shall use reasonable efforts to complete such repairs promptly and the date of Closing shall be extended a reasonable time not to exceed ninety (90) days in order to allow for the completion of such repairs. If - 25 - Seller elects to assign the casualty claim to Purchaser, (a) the Purchase Price shall be reduced by an amount equal to the deductible amount under Seller's insurance policy, and (b) at the Closing (1) Seller shall, if necessary, assign to Purchaser all of its right, title and interest in and to all insurance proceeds (including, without limitation, business interruption or rent insurance proceeds) payable by reason of such damage or all awards payable by reason of such taking, (2) Seller shall assign and pay over to Purchaser the amount of such proceeds or award, if any, received by Seller prior to the date of the Closing less any reasonable expenses paid out by Seller or incurred in obtaining such award, and (3) Seller shall not settle or compromise any claim for such proceeds or award without the prior consent of Purchaser, which consent shall not be unreasonably withheld or delayed. Upon Closing, full risk of loss with respect to the Property shall pass to Purchaser. 7.3 Definition of "Major" Loss or Damage. For purposes of Sections 7.1 and 7.2, "major" loss or damage refers to the following: (i) loss or damage to the Property or any portion thereof such that the cost of repairing or restoring the premises in question to a condition substantially identical to that of the premises in question prior to the event of damage would be, in the opinion of an architect selected by Seller and reasonably approved by Purchaser, equal to or greater than One Million Seven Hundred Fifty Thousand and 00/100th Dollars ($1,750,000.00), and (ii) any loss due to a condemnation which permanently and materially impairs the current use of the Property. If Purchaser does not give written notice to Seller of Purchaser's reasons for disapproving an architect within five (5) business days after receipt of notice of the proposed architect, Purchaser shall be deemed to have approved the architect selected by Seller. ARTICLE 8 COMMISSIONS 8.1 Brokerage Commissions. In the event the transaction contemplated by this Agreement is consummated, but not otherwise, Seller agrees to pay to Granite Partners, LLC (the "Broker") at Closing a brokerage commission pursuant to a separate written agreement between Seller and Broker. Each party agrees that should any claim be made for brokerage commissions or finder's fees by any broker or finder other than the Broker by, through or on account of any acts of said party or its representatives, said party will indemnify and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense in connection therewith. The provisions of this paragraph shall survive Closing or earlier termination of this Agreement. ARTICLE 9 DISCLAIMERS AND WAIVERS 9.1 No Reliance on Documents. Except as expressly stated herein, Seller makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Seller to Purchaser in connection with the transaction contemplated hereby. Purchaser acknowledges and agrees that all materials, data and information delivered by Seller to Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein. Without limiting the generality of the foregoing provisions, Purchaser acknowledges and agrees that (a) any environmental or other report with respect to the Property which is delivered by Seller to Purchaser shall be for general informational purposes only, (b) Purchaser shall not have any right to rely on any such report delivered by Seller to Purchaser, but rather will rely on its own inspections and investigations of the Property and any reports commissioned by Purchaser with respect thereto, and (c) neither Seller, any affiliate of Seller nor the person or entity which prepared any such report delivered by Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from any such report. - 26 - 9.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S LIMITED WARRANTY OF TITLE TO BE SET FORTH IN THE DEED AND LIMITED WARRANTY OF TITLE AS TO THE SPECIFIC PERSONAL PROPERTY TO BE SET FORTH IN THE BILL OF SALE), ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT. PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OF CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER'S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, - 27 - DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY. PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF PURCHASER. NOTHING IS THIS SECTION 9.2 SHALL BE CONSTRUED AS OBLIGATING PURCHASER TO INDEMNIFY SELLER AGAINST CLAIMS BROUGHT BY THIRD PARTIES, INCLUDING BUT NOT LIMITED TO, THE PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION OR THE UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, ALLEGING THAT SELLER OR ANY OF SELLER'S PREDECESSORS IN TITLE VIOLATED ANY ENVIRONMENTAL STATUTE. 9.3 Effect and Survival of Disclaimers. Seller and Purchaser acknowledge that the compensation to be paid to Seller for the Property has been decreased to take into account that the Property is being sold subject to the provisions of this Article IX. Seller and Purchaser agree that the provisions of this Article IX shall survive Closing. ARTICLE 10 MISCELLANEOUS 10.1 Confidentiality. Purchaser, and its representatives shall hold in strictest confidence all data and information obtained with respect to Seller, its business or the Property, whether obtained before or after the execution and delivery of this Agreement, and shall not disclose the same to others and Seller, and its representatives shall hold in strictest confidence all data and - 28 - information obtained with respect to Purchaser, after the execution and delivery of this Agreement, and shall not disclose the same to others; provided, however, that it is understood and agreed that Purchaser and Seller may disclose such data and information to their employees, consultants, accountants and attorneys provided that such persons agree in writing to treat such data and information confidentially. In the event this Agreement is terminated or Purchaser fails to perform hereunder, Purchaser shall promptly return to Seller or destroy any statements, documents, schedules, exhibits or other written information obtained from Seller in connection with this Agreement or the transaction contemplated herein. It is understood and agreed that, with respect to any provision of this Agreement which refers to the termination of this Agreement and the return of the Earnest Money to Purchaser, such Earnest Money shall not be returned to Purchaser unless and until Purchaser has fulfilled its obligation to return to Seller the materials described in the preceding sentence. In the event of a breach or threatened breach of this Section 10.1, the aggrieved party shall be entitled to an injunction restraining the other party or its agents or representatives from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting either party from pursuing any other available remedy at law or in equity for such breach or threatened breach. The provisions of this Section 10.1 shall survive Closing. 10.2 Public Disclosure. Prior to Closing, any release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in the form approved by Purchaser and Seller and their respective counsel. Notwithstanding the foregoing, after April 2, 2002 and provided that the Purchaser has made the Deposit and the Earnest Money is otherwise nonrefundable, neither Seller nor Purchaser shall have the right to object to any disclosure (including public announcements) to the extent the person proposing to issue the press release reasonably believes the disclosure is required by law or applicable rules of any securities exchange; provided that the other party shall be given prior written notice of the disclosure and an opportunity to comment. In addition, after Closing, neither Seller nor Purchaser shall have the right to object to any disclosure (including public announcements) to the extent it identifies the parties, and the property and purchase price in connection with this transaction. Failure to disapprove any disclosure within three (3) business days of receipt shall be deemed an approval. 10.3 Discharge of Obligations. The acceptance of the Deed (and other Lease assignment) by Purchaser shall be deemed to be a full performance and discharge of every representation and warranty made by Seller herein and every agreement and obligation on the part of Seller to be performed pursuant to the provisions of this Agreement, except those which are herein specifically stated to survive Closing. 10.4 Assignment/1031 Exchange. Purchaser may designate its right to accept the conveyance of the Property contemplated hereby to an entity which is at least 51% owned and controlled by Purchaser and provided that the Purchaser also remains liable hereunder. As set forth herein, Seller is willing, if possible, to cooperate with Purchaser to effectuate the sale of the Property by means of an exchange of "like-kind" property (the "Exchange Property") which will qualify as such under Section 1031 of the Internal Revenue Code of 1986 and regulations thereunder, as amended, provided Seller incurs no additional expenses or liability and the date of the Closing hereunder is not delayed. It is the intent of the parties that Seller incur no income tax liability as a - 29 - result of cooperating with Purchaser in consummating a tax-deferred exchange, and that Seller incur no expenses or liability of any nature in connection with such exchange transaction. Purchaser agrees to and shall indemnify and hold harmless Seller from any and all loss, liability, costs, claims, demands, expenses, damages, actions, causes of action and suits (including, without limitation, reasonable attorney's fees and costs of litigation, if any) arising out of or related to Seller's participation in any such exchange transaction hereunder. Notwithstanding anything contained herein to the contrary, (a) Seller has entered into the agreements provided for in this Section as an accommodation to Purchaser and Seller makes no representation to Purchaser that any such exchange of properties shall constitute a tax-deferred exchange or otherwise result in any tax benefits to Purchaser and (b) Seller shall have no obligation hereunder to (i) acquire or otherwise take title to the Exchange Property or (ii) accept any party other than Purchaser or its permitted assignee as the party to which Seller is obligated under this Agreement to convey the Property; provided, however, that Seller may be required to convey title to the Exchange Property to an exchange accommodation titleholder within the meaning of Rev. Proc. 2000-37, or to an entity that, for federal income tax purposes, is disregarded as an entity separate from such exchange accommodation titleholder. 10.5 Notices. Any notice pursuant to this Agreement shall be given in writing by (a) personal delivery, or (b) reputable overnight delivery service with proof of delivery, or (c) United States Mail, postage prepaid, registered or certified mail, return receipt requested, or (d) legible facsimile transmission sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given either at the time of personal delivery, or, in the case of expedited delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of facsimile transmission, as of the date of the facsimile transmission provided that an original of such facsimile is also sent to the intended addressee by means described in clauses (a), (b) or (c) above. Unless changed in accordance with the preceding sentence, the addresses for notices given pursuant to this Agreement shall be as follows: If to Seller: ------------ c/o Lend Lease Real Estate Investments, Inc. 3424 Peachtree Road, NE Suite 800 Atlanta, GA 30326 Attention: Martin Solomon TELECOPY: 404 - 848-8905 with a copy to: Seller's Counsel: Alston & Bird LLP One Atlantic Center 1201 West Peachtree Street Atlanta, GA 30309 Attention: Marci P. Schmerler TELECOPY: 404-881-7777 ----------------------- - 30 - If to Purchaser: --------------- PREIT Associates, L.P The Bellevue, Third Floor 200 South Broad Street Philadelphia, PA 19102 Attention: Bruce Goldman, Esquire TELECOPY: 215-546-7311 ----------------------- with a copy to: Purchaser's Counsel Drinker Biddle & Reath LLP 1000 Westlakes Drive Suite 300 Berwyn, PA 19312 Attention: John W. Fischer, Esquire TELECOPY: 610-993-8585 ---------------------- 10.6 Binding Effect. This Agreement shall not be binding in any way upon Seller unless and until (a) Seller shall execute and deliver the same to Purchaser, (b) each stage of Seller's investment approval process has approved this transaction, and (c) Seller's Investment Committee has thereafter given its written approval thereof. If Seller has not given Purchaser written notice (the "Approval Notice") of such approvals on or before April 1, 2002 (the "Approval Deadline"), or if prior to the Approval Deadline Seller notifies Purchaser in writing that this Agreement has been disapproved by the persons or entities referred to in clauses (b) or (c) of the preceding sentence, then this Agreement shall be deemed terminated and Purchaser shall be entitled to the return of the Earnest Money. It is understood and agreed that at each stage of Seller's investment approval process, Seller or its investment advisor, Lend Lease Real Estate Investments, Inc., shall each have the right, in its unfettered discretion, to disapprove the transaction contemplated by this Agreement for any reason whatsoever, without obligation thereafter to proceed to the next stage of Seller's investment approval process. Seller's approval of this Agreement shall be evidenced only by both Seller's execution of this Agreement and Seller's (or Seller's representative) sending of the Approval Notice to Purchaser prior to the Approval Deadline and, accordingly, Purchaser acknowledges and agrees that Purchaser cannot and will not rely upon any other statement or action of Seller or its representatives as evidence of Seller's approval of this Agreement or the subject matter hereof. This Agreement shall not be binding in any way upon Purchaser unless and until (a) Purchaser shall execute and deliver the same to Seller, and (b) the Board of Trustees of Pennsylvania Real Estate Investment Trust ("PREIT") has thereafter given its written approval thereof. If Purchaser has not given Seller written notice (the "PREIT Notice") of such approval on or before March 29, 2002 (the "PREIT Deadline"), or if prior to the PREIT Deadline Purchaser notifies Seller in writing that this Agreement has been disapproved by the PREIT Board, then this Agreement shall be deemed terminated and Purchaser shall be entitled to the return of the Earnest Money. Purchaser's approval of this Agreement shall be evidenced only by both Purchaser's execution of this Agreement and Purchaser's sending of the PREIT Notice to Seller prior to the PREIT Deadline and, accordingly, Seller acknowledges and agrees that Seller cannot and will not rely upon any other statement or action of Purchaser or its representatives as evidence of Purchaser's approval of this Agreement or the subject matter hereof. - 31 - 10.7 Modifications. This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. 10.8 Tenant Notification Letters. Purchaser shall deliver to each and every tenant of the Property under a Lease thereof a signed statement acknowledging Purchaser's receipt and responsibility for each tenant's security deposit (to the extent delivered by Seller to Purchaser at Closing), if any, all in compliance with and pursuant to the applicable provisions of applicable law. The provisions of this paragraph shall survive Closing. 10.9 Calculation of Time Periods. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday under the laws of the State of Georgia, the State of New York, State of California, or in which the Property is located, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday or legal holiday. The final day of any such period shall be deemed to end at 5:00 p.m., local time. 10.10 Successors and Assigns. The terms and provisions of this Agreement are to apply to and bind the permitted successors and assigns of the parties hereto. 10.11 Entire Agreement. This Agreement, including the Exhibits, contains the entire agreement between the parties pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter. 10.12 Further Assurances. Each party agrees that it will without further consideration execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate more effectively the purposes or subject matter of this Agreement. Without limiting the generality of the foregoing, Purchaser shall, if requested by Seller, execute acknowledgments of receipt with respect to any materials delivered by Seller to Purchaser with respect to the Property. The provisions of this Section 10.12 shall survive Closing. 10.13 Counterparts. This Agreement may be executed in counterparts, and all such executed counterparts shall constitute the same agreement. It shall be necessary to account for only one such counterpart in proving this Agreement. - 32 - 10.14 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect. 10.15 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN THE STATE IN WHICH THE PROPERTY IS LOCATED AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF SUCH STATE. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE IN WHICH THE PROPERTY IS LOCATED IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT SITTING IN THE STATE IN WHICH THE PROPERTY IS LOCATED. PURCHASER AND SELLER AGREE THAT THE PROVISIONS OF THIS SECTION 10.15 SHALL SURVIVE THE CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT. 10.16 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing. 10.17 Exhibits and Schedules. The following schedules or exhibits attached hereto shall be deemed to be an integral part of this Agreement: Exhibits: Exhibit A - Legal Description of the Fee Parcel Exhibit A -1 Legal Description of the Leasehold Parcel Exhibit A -2 Legal Description of the Co-tenancy Parcel Exhibit B - Certain Permitted Exceptions Exhibit C - Personal Property Exhibit C-1 Specific Personal Property Exhibit D - Lease Schedule Exhibit D-1 Estoppels Received/Accepted Exhibit E - Operating Agreements Schedule Exhibit F - Tenant Estoppel Form - 33 - Exhibit F-1 - Anchor Estoppel Form Exhibit F-2 - Seller's Certificate Form Exhibit G - Form of Seller's Title Affidavit Exhibit H - Form of Manager's Indemnity Schedules: Schedule 1 - Form of Deed Schedule 2 - Form of Ground Lease Assignment Schedule 3 - Form of Bill of Sale Schedule 4 - Form of Lease Assignment Schedule 5 - Form of Operating Agreement Assignment Schedule 6 - Form of REA Agreement Assignment 10.18 Captions. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof. 10.19 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement 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 exhibits or amendments hereto. 10.20 Termination of Agreement. It is understood and agreed that if either Purchaser or Seller terminates this Agreement pursuant to a right of termination granted hereunder, such termination shall operate to relieve Seller and Purchaser from all obligations under this Agreement, except for such obligations as are specifically stated herein to survive the termination of this Agreement. 10.21. SEC Reporting Requirements. From and after the date hereof until eighteen months after the Closing (the "Reporting Period"), at no cost, expense, liability or recourse to Seller and without any representation or warranty of Seller (express or implied) of any kind, Seller agrees, from time to time, but not more frequently than twice during the Reporting Period, upon reasonable advance written notice from Purchaser and during ordinary business hours, to provide Purchaser and its representatives access to Seller's property level financial and other relevant related information pertaining exclusively to Seller's ownership and operation of the Property during Seller's period of ownership of Property (other than the Excluded Materials) as is relevant and reasonably necessary to enable Purchaser to comply with applicable reporting rules issued by the Securities and Exchange Commission and applicable to Purchaser, and then only to the extent such information is reasonably available and in Seller's possession. - 34 - 10.22 Survival. The provisions of the following Sections of this Agreement shall survive Closing and shall not be merged into the execution and delivery of the Deed: 3.1(b); 4.2(j); 4.4; 5.3; 5.6; 8.1; 9.3; 10.1; 10.4; 10.8; 10.12; 10.15, 10.21 and 10.23. 10.23 Post Closing Parking Covenants. Without limiting any other obligations or duties of Purchaser contained herein or to be contained in any closing document to be delivered by Purchaser at Closing, at and upon the Closing, Purchaser (for itself and its successors and assigns) hereby assumes all obligations, duties and liabilities of Seller under the Leases and REA Agreement to install parking or additional parking, at no cost or expense to Seller, as is necessary to satisfy the requirements of the Leases (including without limitation the JC Penney Lease) and the REA Agreement with respect to current or future parking requirements thereunder, whether or not such obligations, duties or liabilities arise or accrue before or after Closing and notwithstanding the possible existence of any default by Seller with respect to such obligations or duties. Such assumption by Purchaser of Seller's obligations, liabilities and duties with respect to parking as aforesaid shall be effective automatically at Closing without the need of any further documentation and such assumption obligation shall expressly survive the Closing of the transaction contemplated by this Agreement. [EXECUTION ON FOLLOWING PAGES] - 35 - IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date. SELLER: CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM By: /s/ Alfonso Fernandez ----------------------------- Name: Alfonso Fernandez Title: Portfolio Manager [Purchaser's Signature on Following Page] - 36 - Signature Page to Purchase Agreement (Beaver Valley Mall, PA) PURCHASER: PREIT ASSOCIATES, L.P. By: PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, its general partner By: /s/ George Rubin ------------------------------------------------- George Rubin, Trustee - 37 - EX-2.2 4 ex2-2.txt EXHIBIT 2.2 Exhibit 2.2 ================================================================================ LOAN AGREEMENT Dated as of April 4, 2002 Between PR BEAVER VALLEY LIMITED PARTNERSHIP, as Borrower and COLUMN FINANCIAL, INC., as Lender ================================================================================ TABLE OF CONTENTS
Page ---- I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION..................................................................1 Section 1.1. Definitions..........................................................................1 Section 1.2. Principles of Construction..........................................................15 II. GENERAL TERMS...........................................................................................16 Section 2.1. Loan Commitment; Disbursement to Borrower...........................................16 Section 2.2. Interest Rate.......................................................................16 Section 2.3. Loan Payment........................................................................17 Section 2.4. Prepayments.........................................................................18 Section 2.5. Defeasance..........................................................................19 Section 2.6. Release of Property.................................................................21 Section 2.7. Cash Management.....................................................................21 III. CONDITIONS PRECEDENT....................................................................................23 Section 3.1. Conditions Precedent to Closing.....................................................23 IV. REPRESENTATIONS AND WARRANTIES..........................................................................26 Section 4.1. Borrower Representations............................................................26 Section 4.2. Survival of Representations.........................................................32 V. BORROWER COVENANTS......................................................................................32 Section 5.1. Affirmative Covenants...............................................................32 Section 5.2. Negative Covenants..................................................................40 VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS.....................................................44 Section 6.1. Insurance...........................................................................44 Section 6.2. Casualty............................................................................47 Section 6.3. Condemnation........................................................................48 Section 6.4. Restoration.........................................................................48 VII. RESERVE FUNDS...........................................................................................52 Section 7.1. Required Repair Funds...............................................................52 Section 7.2. Tax and Insurance Escrow Fund.......................................................53 Section 7.3. Replacements and Replacement Reserve................................................53 Section 7.4. Rollover Reserve....................................................................54 Section 7.5. Sears Reserve.......................................................................55 Section 7.6. Reserve Funds Generally.............................................................56 VIII. DEFAULTS................................................................................................57 Section 8.1. Event of Default....................................................................57 Section 8.2. Remedies............................................................................59
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IX. SPECIAL PROVISIONS......................................................................................60 Section 9.1. Sale of Notes and Securitization....................................................60 Section 9.2. Securitization Indemnification......................................................61 Section 9.3. Achievements........................................................................64 Section 9.4. Exculpation.........................................................................64 Section 9.5. Matters Concerning Manager..........................................................66 Section 9.6. Servicer............................................................................67 X. MISCELLANEOUS...........................................................................................67 Section 10.1. Survival............................................................................67 Section 10.2. Lender's Discretion.................................................................67 Section 10.3. Governing Law.......................................................................67 Section 10.4. Modification, Waiver in Writing.....................................................68 Section 10.5. Delay Not a Waiver..................................................................68 Section 10.6. Notices.............................................................................69 Section 10.7. Trial by Jury.......................................................................70 Section 10.8. Headings............................................................................70 Section 10.9. Severability........................................................................70 Section 10.10. Preferences.........................................................................70 Section 10.11. Waiver of Notice....................................................................71 Section 10.12. Remedies of Borrower................................................................71 Section 10.13. Expenses; Indemnity.................................................................71 Section 10.14. Schedules Incorporated..............................................................72 Section 10.15. Offsets, Counterclaims and Defenses.................................................72 Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries.......................72 Section 10.17. Publicity...........................................................................73 Section 10.18. Waiver of Marshalling of Assets.....................................................73 Section 10.19. Waiver of Counterclaim..............................................................73 Section 10.20. Conflict; Construction of Documents; Reliance.......................................73 Section 10.21. Brokers and Financial Advisors......................................................73 Section 10.22. Prior Agreements....................................................................73 SCHEDULES Schedule 1 - Legal Description of Property Schedule 2 - Rent Roll Schedule 3 - Required Repairs Schedule 3.1 Parking Diagram Schedule 4.1.26 Unpaid Borrower Obligations
-ii- LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of April 4, 2002 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this "Agreement"), is between COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010-3629, Attention: Edmund Taylor (together with its successors and assigns, "Lender"), and PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership, having its principal place of business at 200 S. Broad Street, 3rd Floor, Philadelphia, Pennsylvania 19102 ("Borrower"). W I T N E S S E T H: WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined). NOW, THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows: I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent: "Additional Insolvency Opinion" shall have the meaning set forth in Section 4.1.30(c) hereof. "Affiliate" shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person. "Affiliated Manager" shall mean any managing agent in which Borrower, Principal, or any Guarantor has, directly or indirectly, any legal, beneficial or economic interest. "ALTA" shall mean American Land Title Association, or any successor thereto. "Annual Budget" shall mean the operating budget, including all planned Capital Expenditures, for the Property prepared by Borrower for the applicable Fiscal Year or other period. "Anticipated Repayment Date" shall mean April 11, 2012. "Applicable Interest Rate" shall mean (a) prior to the Anticipated Repayment Date, the Initial Term Interest Rate and (b) on and after the Anticipated Repayment Date, the Extended Term Interest Rate. "Approved Annual Budget" shall have the meaning set forth in Section 5.1.11(d). "Assignment of Leases" shall mean that certain first priority Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower's interest in and to the Leases and Rents of the Property as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Assignment of Management Agreement" shall mean that certain Assignment of Management Agreement and Subordination of Management Fees dated as of the date hereof, among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Award" shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of the Property. "Basic Carrying Costs" shall mean the sum of the following costs associated with the Property for the relevant Fiscal Year or payment period: (a) Taxes and (b) Insurance Premiums. "Borrower" shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business. "Capital Expenditures" shall mean, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements). "Cash Expenses" shall mean, for any period, the operating expenses for the operation of the Property as set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by Borrower minus any payments into the Tax and Insurance Escrow Fund. "Cash Management Account" shall have the meaning specified in Section 2.7.2(a) hereof. "Cash Management Agreement" shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Manager and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Lockbox Account. "Casualty" shall have the meaning specified in Section 6.2 hereof. "Casualty Consultant" shall have the meaning set forth in Section 6.4(b)(iii) hereof. "Casualty Retainage" shall have the meaning set forth in Section 6.4(b)(iv) hereof. "Closing Date" shall mean the date of the funding of the Loan. "Code" shall mean the Internal Revenue Code of 1986, as heretofore amended and as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. -2- "Collection Period" shall mean, with respect to any Payment Date, the period of days from the eleventh (11th) day of the month immediately preceding the Payment Date to the tenth (10th) day of the month in which such Payment Date occurs. With respect to the first Payment Date, the Collection Period shall commence on and include the date hereof and end on and include the tenth (10th) day of the calendar month of such first Payment Date. "Condemnation" shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof. "Condemnation Proceeds" shall have the meaning set forth in Section 6.4(b) hereof. "Credit Suisse First Boston" shall have the meaning set forth in Section 9.2(b) hereof. "Credit Suisse First Boston Group" shall have the meaning set forth in Section 9.2(b) hereof. "Debt" shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note, together with all interest accrued and unpaid thereon and all other sums (including the Yield Maintenance Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document. "Debt Service" shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Note. "Debt Service Coverage Ratio" shall mean a ratio for the applicable period in which: (a) the numerator is the Net Operating Income (excluding interest on credit accounts) for such period as set forth in the statements required hereunder; and (b) the denominator is the Debt Service for such period. "Default" shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default. "Default Determination Ratio" shall have the meaning set forth in Section 9.3 hereof. "Default Rate" shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law, or (b) five percent (5%) above the Applicable Interest Rate. "Defeasance Date" shall have the meaning set forth in Section 2.5.1(a)(i) hereof. "Defeasance Deposit" shall mean an amount equal to the sum of (i) the remaining principal amount of the Note, plus (ii) the amount (if any) which, when added to the remaining principal amount of the Note, will be sufficient to purchase U.S. Obligations providing the required Scheduled Defeasance Payments, plus (iii) any costs and expenses incurred or to be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments, plus (iv) any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note or otherwise required to accomplish the agreements of Sections 2.3 through 2.5 hereof. -3- "Defeasance Event" shall have the meaning set forth in Section 2.5.1(a) hereof. "Defeasance Expiration Date" shall mean, so long as a Securitization has not occurred on or prior to such date, April 11, 2006. "Disclosure Document" shall mean a preliminary or final prospectus, prospectus supplement, private placement memorandum, offering circular or other offering document (including any amendment or supplement thereto) to be used by Lender or any Affiliate of Lender in connection with a Securitization. "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Prepayment Treasury Rate when compounded semi-annually. "DSCR Determination Date" shall have the meaning set forth in Section 9.3 hereof. "Eligible Account" shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution (as hereinafter defined) or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. ss.9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument. "Eligible Institution" shall mean a depository institution or trust company, the short term unsecured debt obligations or commercial paper of which are rated at least A-1+ by Standard & Poor's Ratings Group, P-1 by Moody's Investors Service, Inc. and F-1+ by Fitch Inc. in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least "AA" by Standard & Poor's Ratings Group and Fitch Inc. and "Aa2" by Moody's Investors Service, Inc.). Notwithstanding the foregoing, Wilmington Trust of Pennsylvania shall be deemed to be an "Eligible Institution" solely for the purpose of serving as the initial "Clearing Bank" under the Cash Management Agreement; provided, however, such consent may be withdrawn by Lender upon a downgrade of Wilmington Trust of Pennsylvania current rating of "A-" by Standard & Poor's Rating Group or "Baa1" by Moody's Investors Service, Inc. "Environmental Indemnity" shall mean that certain Environmental Indemnity Agreement dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Event of Default" shall have the meaning set forth in Section 8.1(a) hereof. "Excess Cash Flow" shall have the meaning set forth in Section 2.7.2(b) hereof. "Exchange Act" shall have the meaning set forth in Section 9.2(a) hereof. -4- "Extended Term Interest Rate" shall mean a rate per annum equal to (a) the greater of (i) the Initial Term Interest Rate plus five (5) percentage points or (ii) the Treasury Rate plus five (5) percentage points, or (b) for so long as the Note is an asset of the trust, partnership, corporation or other entity formed in connection with a Securitization pursuant to which securities rated by any Rating Agency have been issued, the Initial Term Interest Rate plus two (2) percentage points. "Extraordinary Expense" shall have the meaning set forth in Section 5.1.11(e) hereof. "Fee Termination Ratio" shall have the meaning set forth in Section 9.5(b) hereof. "Fiscal Year" shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan. "Funding Limit" shall have the meaning set forth in Section 7.4.1 hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. "Governmental Authority" shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Gross Income from Operations" shall mean all income, computed in accordance with GAAP, derived from the ownership and operation of the Property from whatever source, including, but not limited to, Rents, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, and other pass-through or reimbursements paid by tenants under the Leases of any nature but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, proceeds of casualty insurance and condemnation awards (other than business interruption or other loss of income insurance), and any disbursements to Borrower from the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Sears Reserve Fund, the Rollover Reserve Fund or any other escrow fund established by the Loan Documents. "Guarantor" shall mean PREIT Associates, L.P., a Delaware limited partnership. "Guaranty" shall mean that certain Guaranty Agreement dated as of the date hereof, from Guarantor to and for the benefit of Lender. "Improvements" shall have the meaning set forth in the granting clause of the Mortgage. "Indebtedness" of a Person, at a particular date, shall mean the sum (without duplication) at such date of (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed. "Indemnified Person" shall have the meaning set forth in Section 9.2(h) hereof. -5- "Independent Director" shall mean a director of the Principal who is not at the time of initial appointment, or at any time while serving as a director of the Principal, and has not been at any time during the preceding five (5) years: (a) a shareholder of, or an officer, director (with the exception of serving as the Independent Director of the Principal), attorney, counsel, employee, partner, member or manager of the Principal, Borrower or any Affiliate of either of them; (b) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with the Principal, Borrower or any Affiliate of either of them; (c) a Person controlling or under common control with any such stockholder, officer, director, employee, partner, member, manager, customer, supplier or other Person; (d) a member of the immediate family of any such stockholder, officer, director, employee, partner, member, manager, customer, supplier or other person; or (e) a present or former advisor or consultant to Borrower or the Borrower's partner, as applicable, or any Affiliate of same. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "Initial Term Interest Rate" shall mean a rate of seven and thirty-six one-hundredths of one percent (7.36%) per annum. "Insolvency Opinion" shall mean that certain non-consolidation opinion letter dated the date hereof delivered by Drinker Biddle & Reath LLP. "Insurance Premiums" shall have the meaning set forth in Section 6.1(b) hereof. "Insurance Proceeds" shall have the meaning set forth in Section 6.4(b) hereof. "Lease" shall mean any lease, sublease or sub-sublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in the Property, and every modification, amendment or other agreement relating to such lease, sublease, sub-sublease, or other agreement entered into in connection with such lease, sublease, sub-sublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. "Legal Requirements" shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof. "Lender" shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns. "Liabilities" shall have the meaning set forth in Section 9.2(b) hereof. "Licenses" shall have the meaning set forth in Section 4.1.22 hereof. -6- "Lien" shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic's, materialmen's and other similar liens and encumbrances. "Loan" shall mean the loan made by Lender to Borrower pursuant to this Agreement. "Loan Documents" shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Leases, the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, the Cash Management Agreement and all other documents executed and/or delivered in connection with the Loan. "Lockbox Account" shall mean, collectively, the account or accounts, if any, specified in the Cash Management Agreement for deposit of Rents and other receipts from the Property. "Management Agreement" shall mean the management agreement entered into by and between Borrower and the Manager, pursuant to which the Manager is to provide management and other services with respect to the Property, or, if the context requires, the Replacement Management Agreement executed in accordance with the terms and provisions of this Agreement. "Manager" shall mean PREIT Services, LLC, a Delaware limited liability company, or, if the context requires, a Qualified Manager who is managing the Property in accordance with the terms and provisions of this Agreement. "Maturity Date" shall mean April 11, 2032, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise. "Maximum Legal Rate" shall mean the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan. "Monthly Debt Service Payment Amount" shall mean a constant monthly payment of $331,033.50. "Monthly Insurance Deposits" shall have the meaning set forth in Section 7.2 hereof. "Monthly Tax Deposits" shall have the meaning set forth in Section 7.2 hereof. "Mortgage" shall mean that certain first priority Open-End Mortgage and Security Agreement, dated as of the date hereof, executed and delivered by Borrower for the benefit of Lender as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Net Cash Flow" for any period shall mean the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period. -7- "Net Operating Income" shall mean, for any given period, the amount obtained by subtracting Operating Expenses for such period from Gross Income from Operations for such period. "Net Proceeds" shall have the meaning set forth in Section 6.4(b) hereof. "Net Proceeds Deficiency" shall have the meaning set forth in Section 6.4(b)(vi) hereof. "Note" shall mean that certain Promissory Note dated of even date herewith in the principal amount of Forty Eight Million and No/100 Dollars ($48,000,000.00), made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Offering Materials" shall have the meaning set forth in Section 9.2(b) hereof. "Officer's Certificate" shall mean a certificate delivered to Lender by Borrower which is signed by an authorized senior officer of the general partner or managing member of Borrower. "Operating Expenses" shall mean the total of all expenditures, computed in accordance with GAAP, of whatever kind relating to the operation, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including, without limitation, utilities, common area maintenance (which for the purposes of this definition shall be no less than an assumed expense of $161,800.00 per month), insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, tenant improvements and leasing commissions (which for the purposes of this definition shall be no less than an assumed expense of $43,307.00 per month), operational equipment or other lease payments as approved by Lender, and other similar costs, but excluding depreciation, Debt Service, Capital Expenditures, and contributions to the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Rollover Reserve Fund and any other reserves required under the Loan Documents. "Other Charges" shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof. "Payment Date" shall mean the eleventh (11th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day. "Permitted Encumbrances" shall mean collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due and delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender's sole discretion; which Permitted Encumbrances in the aggregate do not materially adversely affect the value or use of the Property or Borrower's ability to repay the Loan. "Permitted Investments" shall have the meaning set forth in the Cash Management Agreement. "Permitted Release Date" shall mean the date that is two (2) years from the "startup day" within the meaning of Section 860G(a)(9) of the Code of the REMIC Trust. -8- "Person" shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Personal Property" shall have the meaning set forth in the granting clause of the Mortgage. "Physical Conditions Report" shall mean a report prepared by a company satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and substance to Lender in its sole discretion. "Policies" shall have the meaning specified in Section 6.1(b) hereof. "Prepayment Date" shall have the meaning set forth in Section 2.4.4 hereof. "Prepayment Treasury Rate" shall mean the yield calculated by the linear interpolation of the yields, as reported in the Federal Reserve Statistical Release H.15 Selected Interest Rates (the "Release") under the heading "U.S. government securities" and the subheading "Treasury constant maturities" for the week ending prior to the date of prepayment, of U.S. Treasury constant maturities with maturity dates (one longer and one shorter) most nearly approximating the Anticipated Repayment Date. In the event the Release is no longer published, Lender shall select a comparable publication to determine the Prepayment Treasury Rate in its reasonable discretion. "Principal" shall mean PR Beaver Valley LLC, a Delaware limited liability company, the general partner of Borrower. "Property" shall mean each parcel of real property described on Schedule 1 attached hereto, the Improvements thereon and all personal property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clauses of the Mortgage and referred to therein as the "Property". "Provided Information" shall have the meaning set forth in Section 9.1(a) hereof. "Qualified Manager" shall mean either (a) the Manager; (b) PREIT-Rubin, Inc.; or (c) in the reasonable judgment of Lender, a reputable and experienced management organization (which may be an Affiliate of Borrower) possessing experience in managing properties similar in size, scope, use and value as the Property, provided that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that management of the Property by such Person will not cause a downgrading, withdrawal or qualification of the then current ratings of the Securities or any class thereof. "Rating Agencies" shall mean each of Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's Investors Service, Inc., and Fitch Inc., or any other nationally-recognized statistical rating agency which has been approved by Lender. "Registration Statement" shall have the meaning set forth in Section 9.2(b) hereof. "REMIC Trust" shall mean a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code that holds the Note. -9- "Rents" shall mean all rents, rent equivalents, money payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or its agents or employees from any and all sources arising from or attributable to the Property, and proceeds, if any, from business interruption or other loss of income insurance. "Replacement Management Agreement" shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided that, with respect to this subclause (ii), Lender, at its option, may require that Borrower obtain confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrading, withdrawal or qualification of the then current rating of the Securities or any class thereof; and (b) an assignment of management agreement and subordination of management fees substantially in the form then used by Lender (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower's expense. "Replacement Reserve Account" shall have the meaning set forth in Section 7.3.1 hereof. "Replacement Reserve Fund" shall have the meaning set forth in Section 7.3.1 hereof. "Replacement Reserve Monthly Deposit" shall have the meaning set forth in Section 7.3.1 hereof. "Replacements" shall have the meaning set forth in Section 7.3.1 hereof. "Required Repair Account" shall have the meaning set forth in Section 7.1.1 hereof. "Required Repair Fund" shall have the meaning set forth in Section 7.1.1 hereof. "Required Repairs" shall have the meaning set forth in Section 7.1.1 hereof. "Reserve Funds" shall mean the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Required Repair Fund, the Rollover Reserve Fund, the Sears Reserve Fund and any other escrow fund established by the Loan Documents. "Restoration" shall mean the repair and restoration of the Property after a Casualty or Condemnation as nearly as possible to the condition the Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender. "Restricted Party" shall mean Borrower, Principal, any Guarantor, or any Affiliated Manager or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of, Borrower, Principal, or any Guarantor, any Affiliated Manager or any non-member manager. "Rollover Reserve Fund" shall have the meaning set forth in Section 7.4.3 hereof. -10- "Sale or Pledge" shall mean a voluntary or involuntary sale, conveyance, transfer or pledge of a legal or beneficial interest. "Scheduled Defeasance Payments" shall have the meaning set forth in Section 2.5.1(b) hereof. "Sears Reserve Fund" shall have the meaning set forth in Section 7.5 hereof. "Sears Space" shall have the meaning set forth in Section 7.5 hereof. "Securities" shall have the meaning set forth in Section 9.1 hereof. "Securities Act" shall have the meaning set forth in Section 9.2(a) hereof. "Securitization" shall have the meaning set forth in Section 9.1 hereof. "Security Agreement" shall have the meaning set forth in Section 2.5.1(a)(v) hereof. "Servicer" shall have the meaning set forth in Section 9.6 hereof. "Servicing Agreement" shall have the meaning set forth in Section 9.6 hereof. "Special Purpose Entity" shall mean a corporation, limited partnership or limited liability company which at all times on and after the date hereof: (a) is organized solely for the purpose of (i) acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Property, entering into this Agreement with Lender, refinancing the Property in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (ii) acting as the general partner of the limited partnership that owns the Property or as the managing member of the limited liability company that owns the Property; (b) has not engaged, is not engaged and will not engage in any business unrelated to (i) the activities described in sub-clause (a)(i) above, (ii) acting as the general partner of the limited partnership that owns the Property or (iii) acting as the managing member of the limited liability company that owns the Property, as applicable; (c) has not had, does not have and will not have any assets other than those related to the Property or its partnership interest in the limited partnership or the member interest in the limited liability company that owns the Property; (d) has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of partnership or membership interests (if such entity is the general partner in a limited partnership or the managing member in a limited liability company) or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or operating agreement (as applicable) with respect to the matters set forth in this definition; -11- (e) if such entity is a limited partnership, then each general partner must be a Special Purpose Entity that is either a corporation that has at least two Independent Directors and that owns at least one percent (1.0%) of the equity of the limited partnership or a Special Purpose Entity that is a limited liability company that has at least two Independent Managers and that owns at least one percent (1.0%) of the equity of the limited partnership; (f) if such entity is a corporation, has at least two Independent Directors, and has not caused or allowed and will not cause or allow the board of directors of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless the two Independent Directors shall have participated in such vote; (g) if such entity is a limited liability company, is either (i) a Delaware limited liability company and has at least two Independent Managers and has not caused or allowed and will not cause or allow the board of managers of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of managers unless the two Independent Managers shall have participated in such vote, or (ii) has at least one (1) managing member that is a corporation that has at least two Independent Directors and that owns at least one percent (1.0%) of the equity of the limited liability company; (h) if such entity is (i) a limited liability company, has articles of organization, a certificate of formation and/or an operating agreement, as applicable, (ii) a limited partnership, has a limited partnership agreement, or (iii) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity will not: (A) dissolve, merge, liquidate, consolidate; (B) sell all or substantially all of its assets or the assets of the Borrower (as applicable); (C) engage in any other business activity, or amend its organizational documents with respect to the matters set forth in this definition, without the consent of the Lender; or (D) without the affirmative vote of two Independent Directors, or Independent Managers, as applicable, and of all other directors of the corporation or all other managers of the limited liability company, as applicable (that is such entity or the general partner or managing member of such entity), file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or any other entity in which it has a direct or indirect legal or beneficial ownership interest; (i) has been, is and will remain solvent and pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its own assets as the same shall become due, and has maintained, is maintaining and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (j) has and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of Borrower, any constituent party of Borrower, any Guarantor or any Affiliate of any constituent party or Guarantor) and has not failed and will not fail to correct any known misunderstanding regarding its status as a separate entity; (k) has maintained and will maintain its accounts, books and records separate from any other Person and will file its own tax returns, except to the extent that it is required to file consolidated tax returns by law; -12- (l) has maintained and will maintain its own records, books, resolutions and agreements; (m) has not commingled and will not commingle its funds or assets with those of any other Person and has not participated and will not participate in any cash management system with any other Person; (n) has held and will hold its assets in its own name; (o) has conducted and will conduct its business in its own name or in a name franchised or licensed to it by an entity other than an Affiliate of Borrower, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (cc) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Borrower; (p) has maintained and will maintain its financial statements, accounting records and other entity documents separate from any other Person and has not permitted and will not permit its assets to be listed as assets on the financial statement of any other entity except as required by GAAP; provided, however, that any such consolidated financial statement shall contain a note indicating that its separate assets and liabilities are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity; (q) has paid and will pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations; (r) has observed and will observe all partnership, corporate or limited liability company formalities, as applicable; (s) has and will have no Indebtedness other than (i) the Loan, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower, in amounts not to exceed $1,440,000.00 at any one time, which liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a note and are paid when due, and which amounts are normal and reasonable under the circumstances, and (iii) such other liabilities that are permitted pursuant to this Agreement; (t) has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as permitted pursuant to this Agreement; (u) has not and will not acquire obligations or securities of its partners, members or shareholders or any other Affiliate; (v) has allocated and will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including, but not limited to, paying for shared office space and services performed by any employee of an Affiliate; (w) maintained and used, maintains and uses and will maintain and use a separate telephone number and separate stationery, invoices and checks bearing its own name. The stationery, invoices, and checks utilized by the Special Purpose Entity or utilized to collect its funds or pay its expenses shall bear its own name and shall not bear the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity's agent; -13- (x) has not pledged and will not pledge its assets for the benefit of any other Person; (y) has held itself out and identified itself and will hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of Borrower and not as a division or part of any other Person, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (cc) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Borrower; (z) has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (aa) has not made and will not make loans to any Person or hold evidence of indebtedness issued by any other Person (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity); (bb) has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it, and has not identified itself and shall not identify itself as a division of any other Person; (cc) has not entered into or been a party to, and will not enter into or be a party to, any transaction with its partners, members, shareholders or Affiliates except (i) in the ordinary course of its business and on terms which are intrinsically fair, commercially reasonable and are no less favorable to it than would be obtained in a comparable arm's-length transaction with an unrelated third party and (ii) in connection with this Agreement; (dd) has not and will not have any obligation to, and will not, indemnify its partners, officers, directors or members, as the case may be, unless such an obligation is fully subordinated to the Debt and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation; (ee) if such entity is a corporation, it shall consider the interests of its creditors in connection with all corporate actions; (ff) except pursuant to the Guaranty, does not and will not have any of its obligations guaranteed by any Affiliate; and (gg) has complied and will comply with all of the terms and provisions contained in its organizational documents. The statement of facts contained in its organizational documents are true and correct and will remain true and correct. "State" shall mean the State or Commonwealth in which the Property is located. "Successor Borrower" shall have the meaning set forth in Section 2.5.3 hereof. -14- "Survey" shall mean a survey of the Property prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and containing a certification of such surveyor satisfactory to Lender. "Tax and Insurance Escrow Fund" shall have the meaning set forth in Section 7.2 hereof. "Taxes" shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof. "Threshold Amount" shall have the meaning set forth in Section 5.1.21 hereof. "Title Insurance Policy" shall mean an ALTA mortgagee title insurance policy in the form acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to the Property and insuring the lien of the Mortgage. "Transfer" shall have the meaning set forth in Section 5.2.10 hereof. "Treasury Rate" shall mean, as of the Anticipated Repayment Date, the yield, calculated by linear interpolation (rounded to the nearest one-thousandth of one percent (i.e., 0.001%) of the yields of noncallable United State Treasury obligations with terms (one longer and one shorter) most nearly approximately the period from such date of determination to the Maturity Date, as determined by Lender on the basis of Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S. Governmental Security/Treasury Constant Maturities, or other recognized source of financial market information selected by Lender. "UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in the applicable State or Commonwealth in which the Property is located. "Underwriter Group" shall have the meaning set forth in Section 9.2(b) hereof. "U.S. Obligations" shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended. "Yield Maintenance Premium" shall mean an amount equal to the greater of (a) the present value as of the date of prepayment of the remaining scheduled payments of principal and interests from the date of prepayment through the Anticipated Repayment Date (including an amount equal to the outstanding principal balance of the Loan on the Anticipated Repayment Date) determined by discounting such payments at the Discount Rate less the amount of principal being prepaid, or (b) one percent (1%) of the outstanding principal balance of the Note as of the date of prepayment. Section 1.2. Principles of Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word "including" shall mean "including, without limitation" unless the context shall indicate otherwise. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. -15- II. GENERAL TERMS Section 2.1. Loan Commitment; Disbursement to Borrower. 2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date. 2.1.2 Single Disbursement to Borrower. Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. 2.1.3 The Note, Mortgage and Loan Documents. The Loan shall be evidenced by the Note and secured by the Mortgage, the Assignment of Leases and the other Loan Documents. 2.1.4 Use of Proceeds. Borrower shall use the proceeds of the Loan to (a) finance the acquisition of the Property, (b) pay all past-due Basic Carrying Costs, if any, (c) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, (e) fund any working capital requirements of the Property, and (f) distribute the balance, if any, to Borrower. Section 2.2. Interest Rate. 2.2.1 Initial Term Interest Rate. Interest on the outstanding principal balance of the Loan shall accrue from the Closing Date to but excluding the Anticipated Repayment Date at the Initial Term Interest Rate. 2.2.2 Extended Term Interest Rate. Interest on the outstanding principal balance of the Loan shall accrue from and including the Anticipated Repayment Date to and including the Maturity Date at the Extended Term Interest Rate. 2.2.3 Interest Calculation. Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year by (c) the outstanding principal balance. 2.2.4 Default Rate. Notwithstanding anything to the contrary contained herein, in the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest in respect of the Loan, shall accrue interest at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein. 2.2.5 Usury Savings. This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. -16- Section 2.3. Loan Payment. 2.3.1 Payment Before Anticipated Repayment Date. Borrower shall pay to Lender (a) on the first Payment Date following the Closing Date, an amount equal to interest only on the outstanding principal balance of the Loan from the Closing Date up to but not including such Payment Date (unless such Closing Date is the eleventh (11th) day of the month, in which case no such interest only payment shall be due), and (b) on each Payment Date thereafter up to and including the Anticipated Repayment Date, Borrower shall make a payment to Lender of principal and interest in an amount equal to the Monthly Debt Service Payment Amount, which payments shall be applied first to accrued and unpaid interest and the balance to principal. 2.3.2 Payments After Anticipated Repayment Date. On each Payment Date occurring after the Anticipated Repayment Date, Borrower shall (a) make a payment to Lender of principal and interest in the amount of the Monthly Debt Service Payment Amount, such payment to be applied to interest in an amount equal to interest that would have accrued on the outstanding principal balance of the Loan (without adjustment for Accrued Interest) at the Initial Term Interest Rate and the balance applied to principal and (b) pay to Lender amounts to be applied to principal as set forth in Section 2.7.2(c) hereof. Interest accrued at the Extended Term Interest Rate and not paid pursuant to the preceding sentence shall be added to the outstanding principal balance on the first day following such Payment Date and shall earn interest at the Extended Term Interest Rate to the extent permitted by law (such accrued interest, "Accrued Interest"). 2.3.3 Payments Generally. The first interest accrual period hereunder shall commence on and include the date that principal is advanced hereunder and shall end on and include the next tenth (10th) day of a calendar month, unless principal is advanced on the tenth (10th) day of a month, in which case the first interest accrual period shall consist of only such tenth (10th) day. Each interest accrual period thereafter shall commence on the eleventh (11th) day of each calendar month during the term of the Note and shall end on and include the tenth (10th) day of the next occurring calendar month. For purposes of making payments hereunder, but not for purposes of calculating interest accrual periods, if the day on which such payment is due is not a Business Day, then amounts due on such date shall be due on the immediately preceding Business Day and with respect to payments of principal due on the Maturity Date, interest shall be payable at the Applicable Interest Rate or the Default Rate, as the case may be, through and including the day immediately preceding such Maturity Date. All amounts due under the Note and this Agreement shall be payable without setoff, counterclaim, defense or any other deduction whatsoever. 2.3.4 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Mortgage and the other Loan Documents. -17- 2.3.5 Late Payment Charge. If any principal, interest or any other sums due under the Loan Documents is not paid by Borrower on the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment; provided, however, that such late charge shall be waived by Lender with respect to the first overdue payment made by Borrower, if any, each calendar year. Any such amount shall be secured by the Mortgage and the other Loan Documents to the extent permitted by applicable law. 2.3.6 Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 P.M., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Lender's office, and any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Section 2.4. Prepayments. 2.4.1 Voluntary Prepayments. Except as otherwise provided herein, Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity Date. On the Payment Date that is three (3) months prior to the Anticipated Repayment Date, or on any Payment Date thereafter, Borrower may, at its option and upon at least thirty (30) days prior written notice to Lender, prepay the Debt in whole, but not in part, without payment of the Yield Maintenance Premium. 2.4.2 Mandatory Prepayments. On the next occurring Payment Date following the date on which Borrower actually receives any Net Proceeds, if Lender is not obligated to make such Net Proceeds available to Borrower for the restoration of the Property, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds. Other than following an Event of Default, no Yield Maintenance Premium shall be due in connection with any prepayment made pursuant to this Section 2.4.2. Any partial prepayment under this Section shall be applied to the last payments of principal due under the Loan. 2.4.3 Prepayments After Default. If, following and during the continuance of an Event of Default, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) made on the next occurring Payment Date together with the Monthly Debt Service Payment Amount and (b) deemed a voluntary prepayment by Borrower in violation of the prohibition against prepayment set forth in Section 2.4.1 and Borrower shall pay, in addition to the Debt, an amount equal to the Yield Maintenance Premium. 2.4.4 Expiration of Defeasance. So long as no Securitization shall have occurred as of the Defeasance Expiration Date, the Debt may be prepaid, from and after the Defeasance Expiration Date, in whole (but not in part) prior to the date permitted under Section 2.4.1 hereof upon not less than thirty (30) days prior written notice to Lender specifying the Payment Date on which prepayment is to be made (a "Prepayment Date") provided no Event of Default exists and upon payment of the Yield Maintenance Premium. Lender shall notify Borrower of the amount and the basis of determination of the required prepayment consideration. If any notice of prepayment is given, the Debt shall be due and payable on the Prepayment Date. Lender shall not be obligated to accept any prepayment of the Debt unless it is accompanied by the prepayment consideration due in connection therewith. -18- Section 2.5. Defeasance. 2.5.1 Voluntary Defeasance. (a) So long as no Event of Default shall then exist, Borrower shall have the right at any time after the Permitted Release Date and prior to the date voluntary prepayments are permitted under Section 2.4.1 or Section 2.4.4 hereof to voluntarily defease all of the Loan by and upon satisfaction of the following conditions (such event being a "Defeasance Event"): (i) Borrower shall provide not less than thirty (30) days prior written notice to Lender specifying the Payment Date (the "Defeasance Date") on which the Defeasance Event shall occur; (ii) Borrower shall pay to Lender all accrued and unpaid interest on the principal balance of the Loan to and including the Defeasance Date; (iii) Borrower shall pay to Lender all other sums, not including scheduled interest or principal payments, then due under the Note, this Agreement, the Mortgage and the other Loan Documents; (iv) Borrower shall deliver to Lender the Defeasance Deposit applicable to the Defeasance Event; (v) Borrower shall execute and deliver a pledge and security agreement, in form and substance that would be reasonably satisfactory to a prudent lender creating a first priority lien on the Defeasance Deposit and the U.S. Obligations purchased with the Defeasance Deposit in accordance with the provisions of this Section 2.5 (the "Security Agreement"); (vi) Borrower shall deliver an opinion of counsel for Borrower that is standard in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that Borrower has legally and validly transferred and assigned the U.S. Obligations and all obligations, rights and duties under and to the Note to the Successor Borrower, that Lender has a perfected first priority security interest in the Defeasance Deposit and the U.S. Obligations delivered by Borrower and that any REMIC Trust formed pursuant to a Securitization will not fail to maintain its status as a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code as a result of such Defeasance Event; (vii) Borrower shall deliver confirmation in writing from the applicable Rating Agencies to the effect that such release will not result in a downgrade, withdrawal or qualification of the respective ratings in effect immediately prior to such Defeasance Event for the Securities issued in connection with the Securitization which are then outstanding. If required by the applicable Rating Agencies, Borrower shall also deliver or cause to be delivered a non-consolidation opinion with respect to the Successor Borrower in form and substance satisfactory to Lender and the applicable Rating Agencies; (viii) Borrower shall deliver an Officer's Certificate certifying that the requirements set forth in this Section 2.5.1(a) have been satisfied; -19- (ix) Borrower shall deliver a certificate of Borrower's independent certified public accountant certifying that the U.S. Obligation purchased with the Defeasance Deposit generate monthly amounts equal to or greater than the Scheduled Defeasance Payments; (x) Borrower shall deliver such other certificates, documents or instruments as Lender may reasonably request; and (xi) Borrower shall pay all costs and expenses of Lender incurred in connection with the Defeasance Event, including (A) any costs and expenses associated with a release of the Lien of the Mortgage as provided in Section 2.6 hereof, (B) reasonable attorneys' fees and expenses incurred in connection with the Defeasance Event, (C) the costs and expenses of the Rating Agencies, and (D) any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note, or otherwise required to accomplish the defeasance. (b) In connection with each Defeasance Event, Borrower shall use the Defeasance Deposit to purchase U.S. Obligations which provide payments on or prior to, but as close as possible to, all successive scheduled payment dates after the Defeasance Date upon which interest and principal payments are required under the Note, and in amounts equal to the scheduled payments due on such dates under the Note (including, without limitation, scheduled payments of principal, interest, servicing fees (if any), and any other amounts due under the Loan Documents on such dates) and assuming the Note is prepaid in full on the Anticipated Repayment Date (the "Scheduled Defeasance Payments"). Borrower, pursuant to the Security Agreement or other appropriate document, shall authorize and direct that the payments received from the U.S. Obligations may be made directly to the Lockbox Account (unless otherwise directed by Lender) and applied to satisfy the obligations of Borrower under the Note. Any portion of the Defeasance Deposit in excess of the amount necessary to purchase the U.S. Obligations required by this Section 2.5 and satisfy Borrower's other obligations under this Section 2.5 and Section 2.6 shall be remitted to Borrower. 2.5.2 Collateral. Each of the U.S. Obligations that are part of the defeasance collateral shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of transfer in form and substance that would be satisfactory to a prudent lender (including, without limitation, such instruments as may be required by the depository institution holding such securities or by the issuer thereof, as the case may be, to effectuate book-entry transfers and pledges through the book-entry facilities of such institution) in order to perfect upon the delivery of the defeasance collateral a first priority security interest therein in favor of the Lender in conformity with all applicable state and federal laws governing the granting of such security interests. 2.5.3 Successor Borrower. In connection with any Defeasance Event, Borrower may at its option, or if so required by the applicable Rating Agencies shall, establish or designate a successor entity (the "Successor Borrower") which shall be a Single Purpose Entity with two (2) Independent Director or two (2) Independent Managers, as applicable, approved by the Rating Agencies, and Borrower shall transfer and assign all obligations, rights and duties under and to the Note, together with the pledged U.S. Obligations, to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note and the Security Agreement and Borrower shall be relieved of its obligations under such documents. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement. Notwithstanding anything in this Agreement to the contrary, no other assumption fee shall be payable upon a transfer of the Note in accordance with this Section 2.5.3, but Borrower shall pay all costs and expenses incurred by Lender, including Lender's attorneys' fees and expenses and any fees and expenses of any Rating Agencies, incurred in connection therewith. -20- Section 2.6. Release of Property. Except as set forth in this Section 2.6, no repayment, prepayment or defeasance of all or any portion of the Note shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Mortgage on the Property. 2.6.1 Release of the Property. (a) If Borrower has elected to defease the Loan and the requirements of Section 2.5 and this Section 2.6 have been satisfied, the Property shall be released from the Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security Agreement, shall be the sole source of collateral securing the Note. (b) In connection with the release of the Mortgage, Borrower shall submit to Lender, not less than thirty (30) days prior to the Defeasance Date, a release of Lien (and related Loan Documents) for the Property for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Property is located and that would be satisfactory to a prudent lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officer's Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such releases in accordance with the terms of this Agreement. 2.6.2 Release on Payment in Full. Lender shall, upon the written request and at the expense of Borrower, upon payment in full of all principal and interest due on the Loan and all other amounts due and payable under the Loan Documents in accordance with the terms and provisions of the Note and this Agreement, release the Lien of the Mortgage on the Property. Section 2.7. Cash Management. 2.7.1 Lockbox Account. (a) Borrower shall establish and maintain the Lockbox Account as a segregated Eligible Account, which Lockbox Account shall be under the sole dominion and control of Lender. Borrower hereby grants to Lender a first priority security interest in the Lockbox Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Lockbox Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof. Lender and the Servicer shall have the sole right to make withdrawals from the Lockbox Account and all costs and expenses for establishing and maintaining the Lockbox Account shall be paid by Borrower. (b) Borrower shall, or shall cause Manager to, deliver written instructions to all tenants under Leases to deliver all Rents payable thereunder directly to the Lockbox Account. Borrower shall, and shall cause Manager to, deposit all amounts received by Borrower or Manager constituting Rents into the Lockbox Account promptly upon receipt. (c) Borrower shall obtain from the Servicer its agreement to transfer to the Cash Management Account in immediately available funds by federal wire transfer all amounts on deposit in the Lockbox Account once every Business Day throughout the term of the Loan. -21- 2.7.2 Cash Management Account. (a) Borrower shall establish and maintain a segregated Eligible Account (the "Cash Management Account") to be held by the Servicer in trust for the benefit of Lender, which Cash Management Account shall be under the sole dominion and control of Lender. The Cash Management Account shall be entitled "ORIX Capital Markets, LLC, as servicer of Column Financial, Inc. as mortgagee of PR Beaver Valley Limited Partnership, Cash Collateral Account". Borrower hereby grants to Lender a first priority security interest in the Cash Management Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Cash Management Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof. Borrower will not in any way alter or modify the Cash Management Account and will notify Lender of the account number thereof. Lender and the Servicer shall have the sole right to make withdrawals from the Cash Management Account and all costs and expenses for establishing and maintaining the Cash Management Account shall be paid by Borrower. (b) So long as no Event of Default shall have occurred and be continuing, commencing on the first Business Day of each Collection Period, Lender or the Servicer shall allocate amounts deposited in the Cash Management Account from time to time during such Collection Period to subaccounts (as set forth in the Cash Management Agreement) for payment of the following items in the order indicated below and at the times set forth in the Cash Management Agreement: (i) First, payments to the Tax and Insurance Escrow Fund in accordance with the terms and conditions of Section 7.2 hereof; (ii) Second, payment of the Monthly Debt Service Payment Amount, applied first to the payment of interest computed at the Interest Rate with the remainder applied to the reduction of the outstanding principal balance of the Note; (iii) Third, payments to the Replacement Reserve Fund in accordance with the terms and conditions of Section 7.3 hereof; (iv) Fourth, scheduled monthly payments to the Sears Reserve Fund in accordance with the terms and conditions of Section 7.5.1 hereof; (v) Fifth, payment to the Lender of any other amounts then due and payable under the Loan Documents; (vi) Sixth, but only during a Sears Cash Trap Event (as hereinafter defined) or on or after the Anticipated Repayment Date, payments for monthly Cash Expenses incurred in accordance with the related Approved Annual Budget pursuant to a written request for payment submitted by Borrower to Lender specifying the individual Cash Expenses in a form acceptable to Lender; (vii) Seventh, but only during a Sears Cash Trap Event or on or after the Anticipated Repayment Date, payments for Extraordinary Expenses approved by Lender, if any; (viii) Eighth, but only during a Sears Cash Trap Event, payments to the Sears Reserve Fund in accordance with the terms and conditions of Section 7.5.1 hereof (ix) Ninth, on or after the Anticipated Repayment Date, payments to Lender in reduction of the outstanding principal balance of the Loan; (x) Tenth, on or after the Anticipated Repayment Date, payments to Lender for Accrued Interest; and -22- (xi) Lastly, payment of any excess amounts ("Excess Cash Flow") to Borrower, to be used by Borrower for any purpose determined by Borrower and not otherwise prohibited hereunder. (c) The insufficiency of funds on deposit in the Cash Management Account shall not absolve Borrower of the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance whatsoever. (d) All funds on deposit in the Cash Management Account following the occurrence and during the continuance of an Event of Default may be applied by Lender in such order and priority as Lender shall determine. 2.7.3 Payments Received Under the Cash Management Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrower's obligations with respect to the monthly payment of principal and interest and amounts due for the Tax and Insurance Escrow Fund, the Required Repair Fund, the Replacement Reserve Fund and any other payment reserves established pursuant to this Agreement or any other Loan Document shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account established pursuant to the Cash Management Agreement to satisfy such obligations on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender. III. CONDITIONS PRECEDENT Section 3.1. Conditions Precedent to Closing. The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date: 3.1.1 Representations and Warranties; Compliance with Conditions. The representations and warranties of Borrower contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and no Default or an Event of Default shall have occurred and be continuing; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed. 3.1.2 Loan Agreement and Note. Lender shall have received a copy of this Agreement and the Note, in each case, duly executed and delivered on behalf of Borrower. 3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases. (a) Mortgage, Assignment of Leases. Lender shall have received from Borrower fully executed and acknowledged counterparts of the Mortgage and the Assignment of Leases and evidence that counterparts of the Mortgage and Assignment of Leases have been delivered to the title company for recording, in the reasonable judgment of Lender, so as to effectively create upon such recording a valid and enforceable first priority Lien upon the Property in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents. Lender shall have also received from Borrower fully executed counterparts of the Environmental Indemnity, the Guaranty, the Cash Management Agreement, the Assignment of Management Agreement and the other Loan Documents. -23- (b) Title Insurance. Lender shall have received the Title Insurance Policy issued by a title company acceptable to Lender and dated as of the Closing Date, with reinsurance and direct access agreements acceptable to Lender. Such Title Insurance Policy shall (i) provide coverage in amounts satisfactory to Lender, (ii) insure Lender that the Mortgage creates a valid first priority lien on the Property, free and clear of all exceptions from coverage other than the Permitted Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (iii) contain such endorsements and affirmative coverages as Lender may reasonably request, and (iv) name Lender, its successors and assigns, as the insured. The Title Insurance Policy shall be assignable. Lender also shall have received evidence that all premiums in respect of such Title Insurance Policy have been paid. (c) Survey. Lender shall have received a current title survey for the Property, certified to the title company and Lender and its successors and assigns, in form and content reasonably satisfactory to Lender and prepared by a professional and properly licensed land surveyor satisfactory to Lender in accordance with the Accuracy Standards for ALTA/ACSM Land Title Surveys as adopted by American Land Title Association, American Congress on Surveying & Mapping and National Society of Professional Surveyors in 1999. The survey shall reflect the same legal description contained in the Title Insurance Policy relating to the Property and shall include, among other things, a metes and bounds description of the real property comprising part of the Property reasonably satisfactory to Lender. The surveyor's seal shall be affixed to the survey and the surveyor shall provide a certification for the survey in form and substance acceptable to Lender. (d) Insurance. Lender shall have received valid certificates of insurance for the policies of insurance required hereunder, satisfactory to Lender in its sole discretion, and evidence of the payment of all premiums payable for the existing policy period. (e) Environmental Reports. Lender shall have received a Phase I environmental report (and, if recommended by the Phase I environmental report, a Phase II environmental report) in respect of the Property, in each case satisfactory in form and substance to Lender. (f) Zoning. Lender shall have received copies of the final certificate or certificates of occupancy for the Improvements and, at Lender's option, letters or other evidence with respect to the Property from the appropriate municipal authorities (or other Persons) concerning applicable zoning and building laws in substance reasonably satisfactory to Lender. (g) Encumbrances. Borrower shall have taken or caused to be taken such actions in such a manner so that Lender has a valid and perfected first priority Lien as of the Closing Date with respect to the Mortgage on the Property, subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory evidence thereof. 3.1.4 Related Documents. Each additional document not specifically referenced herein, but relating to the transactions contemplated herein, shall be in form and substance reasonably satisfactory to Lender, and shall have been duly authorized, executed and delivered by all parties thereto and Lender shall have received and approved certified copies thereof. 3.1.5 Delivery of Organizational Documents. On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender copies certified by Borrower of all organizational documentation related to Borrower and/or the formation, structure, existence, good standing and/or qualification to do business of Borrower, as Lender may request in its sole discretion, including, without limitation, good standing certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates as may be requested by Lender. -24- 3.1.6 Opinions of Borrower's Counsel. Lender shall have received opinions of Borrower's counsel (a) with respect to non-consolidation, true sale or true contribution, and fraudulent transfer issues, and (b) with respect to due execution, authority, enforceability of the Loan Documents and such other matters as Lender may require, all such opinions in form, scope and substance satisfactory to Lender and Lender's counsel in their sole discretion. 3.1.7 Budgets. Borrower shall have delivered, and Lender shall have approved, the Annual Budget for the current Fiscal Year. 3.1.8 Basic Carrying Costs. Borrower shall have paid all Basic Carrying Costs relating to the Property which are in arrears, including, without limitation, (a) accrued but unpaid insurance premiums relating to the Property, (b) currently due Taxes (including any in arrears) relating to the Property, and (c) currently due Other Charges relating to the Property, which amounts shall be funded with proceeds of the Loan. 3.1.9 Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement and the other Loan Documents and all documents incidental thereto shall be satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request. 3.1.10 Payments. All payments, deposits or escrows required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid. 3.1.11 Tenant Estoppels. Lender shall have received an executed tenant estoppel letter, which shall be in form and substance satisfactory to Lender, from (a) each tenant identified by Lender as an "anchor tenant" of the Property (i.e., each tenant leasing at least 150,000 square feet of space), and (b) including the area leased by those tenants described in the preceding clause (a), tenants of not less than eighty percent (80%) of the gross leasable area of the Property. 3.1.12 Transaction Costs. Borrower shall have paid or reimbursed Lender for all title insurance premiums, recording and filing fees, costs of environmental reports, Physical Conditions Reports, appraisals and other reports, the fees and costs of Lender's counsel and all other third party out-of-pocket expenses incurred in connection with the origination of the Loan. 3.1.13 Material Adverse Change. There shall have been no material adverse change in the financial condition or business condition of Borrower or the Property since the date of the most recent financial statements delivered to Lender. The income and expenses of the Property, the occupancy and leases thereof, and all other features of the transaction shall be as represented to Lender without material adverse change. Neither Borrower nor any of its constituent Persons shall be the subject of any bankruptcy, reorganization, or insolvency proceeding. 3.1.14 Leases and Rent Roll. Lender shall have received copies of all tenant leases, certified copies of any tenant leases as requested by Lender and certified copies of all ground leases affecting the Property. Lender shall have received a current certified rent roll of the Property, reasonably satisfactory in form and substance to Lender. -25- 3.1.15 Subordination and Attornment. Lender shall have received appropriate instruments acceptable to Lender subordinating all of the Leases affecting the Property designated by Lender to the Mortgage. Lender shall have received an agreement to attorn to Lender satisfactory to Lender from any tenant under a Lease that does not provide for such attornment by its terms. 3.1.16 Tax Lot. Lender shall have received evidence that the Property constitutes one (1) or more separate tax lots, which evidence shall be reasonably satisfactory in form and substance to Lender. 3.1.17 Physical Conditions Reports. Lender shall have received a Physical Conditions Report with respect to the Property, which shall be reasonably satisfactory in form and substance to Lender. 3.1.18 Management Agreement. Lender shall have received a certified copy of the Management Agreement with respect to the Property which shall be satisfactory in form and substance to Lender. 3.1.19 Appraisal. Lender shall have received an appraisal of the Property, which shall be satisfactory in form and substance to Lender. 3.1.20 Financial Statements. Lender shall have received a balance sheet with respect to the Property for the two most recent Fiscal Years and statements of income and statements of cash flows with respect to the Property for the three most recent Fiscal Years, each in form and substance satisfactory to Lender. 3.1.21 Further Documents. Lender or its counsel shall have received such other and further approvals, opinions, documents and information as Lender or its counsel may have reasonably requested including the Loan Documents in form and substance satisfactory to Lender and its counsel. IV. REPRESENTATIONS AND WARRANTIES Section 4.1. Borrower Representations. Borrower represents and warrants as of the date hereof and as of the Closing Date that: 4.1.1 Organization. Borrower has been duly organized and is validly existing and in good standing with requisite power and authority to own its properties and to transact the businesses in which it is now engaged. Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. Borrower possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of Borrower is the ownership, management and operation of the Property. 4.1.2 Proceedings. Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower and constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). -26- 4.1.3 No Conflicts. The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of Borrower's property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of Borrower's properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower of this Agreement or any other Loan Documents has been obtained and is in full force and effect. 4.1.4 Litigation. There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or threatened against or affecting Borrower or the Property, which actions, suits or proceedings are not covered by insurance and, if determined against Borrower or the Property, might materially adversely affect the condition (financial or otherwise) or business of Borrower or the condition or ownership of the Property. 4.1.5 Agreements. Borrower is not a party to any agreement or instrument or subject to any restriction which might materially and adversely affect Borrower or the Property, or Borrower's business, properties or assets, operations or condition, financial or otherwise, that is not a Permitted Encumbrance. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or the Property is bound. Borrower has no material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property as permitted pursuant to clause (s) of the definition of "Special Purpose Entity" set forth in Section 1.1 hereof, (b) obligations under the Loan Documents, (c) maintenance and completion obligations to governmental authorities incurred in connection with the development of the Property and (d) reimbursement obligations under letters of credit issued to secure the obligations described in the preceding clause (c). 4.1.6 Title. Borrower has good, marketable and insurable fee simple title to the real property comprising part of the Property and good title to the balance of the Property, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. None of the Permitted Encumbrances materially interfere with the security intended to be provided by the Mortgage, the current primary use of the Property or the current ability of the Property to generate income sufficient to service the Loan. The Mortgage, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the Property, subject only to the Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. There are no claims for payment for work, labor or materials affecting the Property which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents. -27- 4.1.7 Solvency. Borrower (a) has not entered into the transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under such Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower's assets exceeds and will, immediately following the making of the Loan, exceed Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower's assets is and will, immediately following the making of the Loan, be greater than Borrower's probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured. Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower). Except as expressly disclosed to Lender in writing, no petition in bankruptcy has been filed against Borrower or any constituent Person, and neither Borrower nor any constituent Person has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any of its constituent Persons are contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrower's assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or such constituent Persons. 4.1.8 Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to Borrower which has not been disclosed to Lender which adversely affects, nor as far as Borrower can foresee, might adversely affect, the Property or the business, operations or condition (financial or otherwise) of Borrower in any material respect. 4.1.9 No Plan Assets. Borrower is not an "employee benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of Borrower constitutes or will constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) Borrower is not a "governmental plan" within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement. 4.1.10 Compliance. To the best of Borrower's knowledge, Borrower and the Property and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes. To the best of Borrower's knowledge, Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority. There has not been committed by Borrower or any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower's obligations under any of the Loan Documents. -28- 4.1.11 Financial Information. To the best of Borrower's knowledge, all financial data, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Lender in respect of the Property (a) are true, complete and correct in all material respects, (b) accurately represent the financial condition of the Property as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. Except for Permitted Encumbrances and obligations described in clauses (c) and (d) of Section 4.1.5 hereof, Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a materially adverse effect on the Property or the operation thereof as a retail shopping center, except as referred to or reflected in said financial statements. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower from that set forth in said financial statements. 4.1.12 Condemnation. No Condemnation or other proceeding has been commenced or, to Borrower's best knowledge, is threatened or contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property. 4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents. 4.1.14 Utilities and Public Access. The Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property for its intended uses. All public utilities necessary or convenient to the full use and enjoyment of the Property are located either in the public right-of-way abutting the Property (which are connected so as to serve the Property without passing over other property) or in recorded easements serving the Property and such easements are set forth in and insured by the Title Insurance Policy. All roads necessary for the use of the Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities. 4.1.15 Not a Foreign Person. Borrower is not a "foreign person" within the meaning of ss.1445(f)(3) of the Code. 4.1.16 Separate Lots. Except as may otherwise be disclosed to Lender, the Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of the Property. 4.1.17 Assessments. To the best of Borrower's knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments. 4.1.18 Enforceability. The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors' rights and the enforcement of debtors' obligations), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto. -29- 4.1.19 No Prior Assignment. There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding. 4.1.20 Insurance. Borrower has obtained and has delivered to Lender certified copies of all insurance policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. No claims have been made under any such policy, and no Person, including Borrower, has done, by act or omission, anything which would impair the coverage of any such policy. 4.1.21 Use of Property. The Property is used exclusively for retail purposes and other appurtenant and related uses. 4.1.22 Certificate of Occupancy; Licenses. All certifications, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Property as a retail shopping center (collectively, the "Licenses"), have been obtained and are in full force and effect. Borrower shall keep and maintain all licenses necessary for the operation of the Property as a retail shopping center. The use being made of the Property is in conformity with the certificates of occupancy issued for the Property. 4.1.23 Flood Zone. None of the Improvements on the Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards or, if so located, the flood insurance required pursuant to Section 6.1(a)(i) is in full force and effect with respect to the Property. 4.1.24 Physical Condition. Except as may be disclosed in the Physical Condition Reports delivered to Lender, the Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects, to the best of Borrower's knowledge, there exists no structural or other material defects or damages in the Property, whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. 4.1.25 Boundaries. All of the improvements which were included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvements on adjoining properties encroach upon the Property, and no easements or other encumbrances upon the Property encroach upon any of the improvements, so as to affect the value or marketability of the Property except those which are insured against by the Title Insurance Policy. 4.1.26 Leases. The Property is not subject to any Leases other than the Leases described in Schedule 2 attached hereto and made a part hereof. Borrower is the owner and lessor of landlord's interest in the Leases. No Person has any possessory interest in the Property or right to occupy the same except under and pursuant to the provisions of the Leases. The current Leases are in full force and effect and, except as set forth on Schedule 4.1.26, there are no defaults thereunder by either party and there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder (excluding Rent which is due but subject to an unexpired grace period). No Rent (including security deposits) has been paid more than one (1) month in advance of its due date. Except as set forth on Schedule 4.1.26, all work to be performed by Borrower under each Lease has been performed as required and has been accepted by the applicable tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any tenant has already been received by such tenant. Except as set forth on Schedule 4.1.26, all leasing commissions due and owing with respect to each Lease in existence on the date hereof has been paid -30- in full. There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of the Rents received therein that continues in effect. Except as set forth on Schedule 4.1.26, to the best of Borrower's knowledge, no tenant listed on Schedule 2 has assigned its Lease or sublet all or any portion of the premises demised thereby, no such tenant holds its leased premises under assignment or sublease, nor does anyone except such tenant and its employees occupy such leased premises. No tenant under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part. No tenant under any Lease has any right or option for additional space in the Improvements. To the best of Borrower's knowledge, no hazardous wastes or toxic substances, as defined by applicable federal, state or local statutes, rules and regulations, have been disposed, stored or treated by any tenant under any Lease on or about the leased premises nor does Borrower have any knowledge of any tenant's intention to use its leased premises for any activity which, directly or indirectly, involves the use, generation, treatment, storage, disposal or transportation of any petroleum product or any toxic or hazardous chemical, material, substance or waste in violation of applicable law. 4.1.27 Survey. The Survey for the Property delivered to Lender in connection with this Agreement has been prepared in accordance with the provisions of Section 3.1.3(c) hereof, and does not fail to reflect any material matter affecting the Property or the title thereto. 4.1.28 Principal Place of Business; State of Organization. Borrower's principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement. The Borrower is organized under the laws of the State of Pennsylvania. 4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the transfer of the Property to Borrower have been paid. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage, have been paid, and, under current Legal Requirements, the Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and other laws generally applicable to creditors' rights and the enforcement of debtors' obligations. 4.1.30 Special Purpose Entity/Separateness. (a) Until the Debt has been paid in full, Borrower hereby represents, warrants and covenants that (i) Borrower has been, is, shall be and shall continue to be a Special Purpose Entity, and (ii) the Principal is, shall be and shall continue to be a Special Purpose Entity. (b) The representations, warranties and covenants set forth in Section 4.1.30(a) shall survive for so long as any amount remains payable to Lender under this Agreement or any other Loan Document. (c) All of the assumptions made in the Insolvency Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all respects and any assumptions made in any subsequent non-consolidation opinion required to be delivered in connection with the Loan Documents (an "Additional Insolvency Opinion"), including, but not limited to, any exhibits attached thereto, will have been and shall be true and correct in all respects. Borrower hereby represents, warrants and covenants that: (i) Borrower has complied and will comply with, and each Principal has complied and Borrower will cause each Principal to comply with, all of the assumptions made with respect to Borrower or the Principal in the Insolvency Opinion; (ii) Borrower will have complied and will comply with all of the assumptions made with respect to Borrower or the Principal in any Additional Insolvency Opinion; and (iii) each entity other than Borrower or the Principal with respect to which an assumption shall be made in any Additional Insolvency Opinion will have complied and will comply with all of the assumptions made with respect to it in any Additional Insolvency Opinion. -31- 4.1.31 Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder. 4.1.32 Illegal Activity. No portion of the Property has been or will be purchased by Borrower with proceeds of any illegal activity. 4.1.33 No Change in Facts or Circumstances; Disclosure. All information submitted by Borrower to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects. There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the use, operation or value of the Property or the business operations or the financial condition of Borrower in any material respect. Borrower has disclosed to Lender all material facts known to Borrower and has not failed to disclose any material fact that could cause any Provided Information or representation or warranty made herein to be materially misleading. 4.1.34 Investment Company Act. Borrower is not (a) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended; (b) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money. Section 4.2. Survival of Representations. Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf. V. BORROWER COVENANTS Section 5.1. Affirmative Covenants. From the date hereof and until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage encumbering the Property (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower hereby covenants and agrees with Lender that: -32- 5.1.1 Existence; Compliance with Legal Requirements. Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and the Property. There shall never be committed by Borrower or any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording any Governmental Authority the right of forfeiture against the Property or any part thereof or any monies paid in performance of Borrower's obligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit, permit or suffe r to exist any act or omission affording such right of forfeiture. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and shall keep the Property in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the Mortgage. Borrower shall keep the Property insured at all times by financially sound and reputable insurers, to such extent and against such risks, and maintain liability and such other insurance, as is more fully provided in this Agreement. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or the Property or any alleged violation of any Legal Requirement, provided that (a) no Default or Event of Default has occurred and remains uncured; (b) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (c) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (d) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (e) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or the Property; and (f) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith. Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost. 5.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof or the Adjacent Property (as hereinafter defined) as the same become due and payable; provided, however, that Borrower's obligation to directly pay Taxes shall be suspended for so long as Borrower complies with the terms and provisions of Section 7.2 hereof. Borrower will deliver to Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other Charges have been so paid or are not then delinquent no later than ten (10) days prior to the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid. Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 7.2 hereof). Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Property or the Adjacent -33- Property, and shall promptly pay for all utility services provided to the Property. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (a) no Default or Event of Default has occurred and remains uncured; (b) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (c) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (d) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (e) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the Property; and (f) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon. Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or the Property (or part thereof or interest therein) or the Adjacent Property shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of the Mortgage being primed by any related Lien. 5.1.3 Litigation. Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against Borrower which might materially adversely affect Borrower's condition (financial or otherwise) or business or the Property. 5.1.4 Access to Property. Borrower shall permit agents, representatives and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice. 5.1.5 Notice of Default. Borrower shall promptly advise Lender of any material adverse change in Borrower's condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge. 5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings. 5.1.7 Perform Loan Documents. Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses to the extent required under the Loan Documents executed and delivered by, or applicable to, Borrower. 5.1.8 Award and Insurance Benefits. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with the Property, and Lender shall be reimbursed for any reasonable expenses incurred in connection therewith (including reasonable attorneys' fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting the Property or any part thereof) out of such Insurance Proceeds. 5.1.9 Further Assurances. Borrower shall, at Borrower's sole cost and expense: (a) furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents or reasonably requested by Lender in connection therewith; (b) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require; and (c) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time. -34- 5.1.10 Payment of Mortgage Recording Taxes. As of the date hereof, Borrower represents that it has paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage. If at any time Lender determines, based on applicable law, that the applicable taxes have not been paid with respect to the Property, Borrower agrees that Borrower shall, on demand, pay any such additional taxes. 5.1.11 Financial Reporting. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP or cash basis (or such other accounting basis acceptable to Lender), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Property. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence, and during the continuance, of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower's accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender's interest. (b) Borrower will furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year, a complete copy of Borrower's annual financial statements covering the Property for such Fiscal Year and containing statements of profit and loss for Borrower and the Property and a balance sheet for Borrower, reviewed by an independent certified public accountant acceptable to Lender. Lender agrees that Arthur Andersen LLP is acceptable to Lender, provided, however, that Lender may review such accounting firm on an annual basis. Such statements shall set forth the financial condition and the results of operations for the Property for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses. Borrower's annual financial statements shall be accompanied by (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior Fiscal Year, (ii) an Officer's Certificate stating that each such annual financial statement presents fairly the financial condition and the results of operations of Borrower and the Property being reported upon and has been prepared in accordance with GAAP, (iii) an unqualified opinion of an independent certified public accountant reasonably acceptable to Lender, and (iv) a list of tenants, if any, occupying more than twenty (20%) percent of the total floor area of the Improvements, (v) a breakdown showing the year in which each Lease then in effect expires and the percentage of total floor area of the Improvements and the percentage of base rent with respect to which Leases shall expire in each such year, each such percentage to be expressed on both a per year and cumulative basis, (vi) a schedule reviewed by such independent certified public accountant reconciling Net Operating Income to Net Cash Flow, which shall itemize all material adjustments made to Net Operating Income to arrive at Net Cash Flow, and (vii) a certification issued by the Pennsylvania Real Estate Investment Trust certifying that it remains the general partner of PREIT Associates, L.P. and that it maintains at least a fifty-one percent (51%) interest in PREIT Associates, L.P. Together with Borrower's annual financial statements, Borrower shall furnish to Lender an Officer's Certificate certifying as of the date thereof whether there exists an event or circumstance which constitutes a Default or Event of Default under the Loan Documents executed and delivered by, or applicable to, Borrower, and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same. -35- (c) Borrower will furnish, or cause to be furnished, to Lender on or before forty-five (45) days after the end of each calendar month the following items, accompanied by an Officer's Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Property (subject to normal year-end adjustments) as applicable: (i) a rent roll for the subject month accompanied by an Officer's Certificate with respect thereto; (ii) monthly and year-to-date operating statements (including Capital Expenditures) prepared for each calendar month, noting Net Operating Income, Gross Income from Operations, and Operating Expenses (not including any contributions to the Replacement Reserve Fund and the Rollover Reserve Fund), and other information necessary and sufficient to fairly represent the financial position and results of operation of the Property during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses together with a detailed explanation of any variances of five percent (5%) or more, and at least $10,000, between budgeted and actual amounts for such periods, all in form satisfactory to Lender; and (iii) a calculation reflecting the annual Debt Service Coverage Ratio for the immediately preceding twelve (12) month period as of the last day of such month accompanied by an Officer's Certificate with respect thereto. In addition, such Officer's Certificate shall also state that the representations and warranties of Borrower set forth in Section 4.1.30 are true and correct as of the date of such certificate and that there are no trade payables outstanding for more than sixty (60) days other than those which are subject to a bona fide dispute. (d) For the partial year period commencing on the date hereof, and for each Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget not later than thirty (30) days prior to the commencement of such period or Fiscal Year in form reasonably satisfactory to Lender. The Annual Budget submitted for the year in which the Anticipated Repayment Date occurs, and for each Fiscal Year thereafter, shall be subject to Lender's written approval (each such Annual Budget, an "Approved Annual Budget"). In the event that Lender objects to a proposed Annual Budget submitted by Borrower which requires the approval of Lender hereunder, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise the same in accordance with the process described in this subsection until Lender approves the Annual Budget. Until such time that Lender approves a proposed Annual Budget which requires the approval of Lender hereunder, the most recently Approved Annual Budget shall apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in real estate taxes, insurance premiums and utilities expenses. (e) In the event that, Borrower must incur an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget (each an "Extraordinary Expense") in excess of $100,000.00, then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for Lender's approval. (f) Any reports, statements or other information required to be delivered under this Agreement shall be delivered (i) in paper form, (ii) with respect to the Annual Budget and rent roll, on a diskette, and (iii) if requested by Lender and within the capabilities of Borrower's data systems without change or modification thereto, with respect to the Annual Budget and rent roll, in electronic form and prepared using a Microsoft Word for Windows or WordPerfect for Windows files (which files may be prepared using a spreadsheet program (such as Excel) and saved as word processing files). Borrower agrees that Lender may disclose information regarding the Property and Borrower that is provided to Lender pursuant to this Section in connection with the Securitization to such parties requesting such information in connection with such Securitization. -36- 5.1.12 Business and Operations. Borrower will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Property. Borrower will qualify to do business and will remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of the Property. 5.1.13 Title to the Property. Borrower will warrant and defend (a) the title to the Property and every part thereof, subject only to Liens permitted hereunder (including the Permitted Encumbrances) and (b) the validity and priority of the Liens of the Mortgage and the Assignment of Leases on the Property, subject only to Liens permitted hereunder (including the Permitted Encumbrances), in each case against the claims of all Persons whomsoever. Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys' fees and court costs) incurred by Lender if an interest in the Property, other than as permitted hereunder, is claimed by another Person. 5.1.14 Costs of Enforcement. In the event (a) that the Mortgage encumbering the Property is foreclosed in whole or in part or that the Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage other than the Mortgage encumbering the Property in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys' fees and costs, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes. 5.1.15 Estoppel Statements. (a) After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Applicable Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, the Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification. (b) Borrower shall, upon request, use commercially reasonable efforts to obtain tenant estoppel certificates from each commercial tenant leasing space at the Property in form and substance reasonably satisfactory to Lender and deliver the same to Lender, provided that Borrower shall not be required to deliver such certificates more frequently than one (1) time in any calendar year, unless such request is made in connection with a Securitization or if an Event of Default has occurred and is continuing. 5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4. -37- 5.1.17 Performance by Borrower. Borrower (a) shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Loan Document executed and delivered by, or applicable to, Borrower, and (b) shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by, or applicable to, Borrower without the prior written consent of Lender, except as otherwise permitted by the terms of this Agreement or of any other Loan Document. 5.1.18 Confirmation of Representations. Borrower shall deliver, in connection with any Securitization, (a) one or more Officer's Certificates certifying as to the accuracy of all representations made by Borrower in the Loan Documents as of the date of the closing of such Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower and its general partners as of the date of the Securitization. 5.1.19 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of the Property (a) with any other real property constituting a tax lot separate from the Property, and (b) which constitutes real property with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed, levied or charged to such real property portion of the Property. 5.1.20 Leasing Matters. Any Leases with respect to the Property written after the date hereof for more than 10,000 square feet shall be approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed. Upon request, Borrower shall furnish Lender with executed copies of all Leases. All renewals of Leases and all proposed Leases shall provide for rental rates comparable to existing local market rates. All proposed Leases shall be on commercially reasonable terms and shall not contain any terms which would materially adversely affect Lender's rights under the Loan Documents. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage encumbering the Property and that the tenant agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of sale. Lender agrees to execute an agreement in commercially reasonable form granting "non-disturbance" benefits for each tenant under a Lease approved by Lender. Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the tenant thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Property involved except that no termination by Borrower or acceptance of surrender by a tenant of any Leases shall be permitted unless by reason of a tenant default and then only in a commercially reasonable manner to preserve and protect the Property; provided, however, that no such termination or surrender of any Lease covering more than 10,000 square feet will be permitted without the written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any other assignment of lessor's interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents; and (vi) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time reasonably require. Notwithstanding anything to the contrary contained herein, Borrower shall not enter into a lease of all or substantially all of the Property without Lender's prior written consent. -38- 5.1.21 Alterations. (a) Borrower shall obtain Lender's prior written consent to any alterations to any Improvements, which consent shall not be unreasonably withheld or delayed except with respect to alterations that may have a material adverse effect on Borrower's financial condition, the value of the Property or the Net Operating Income. Notwithstanding the foregoing, Lender's consent shall not be required in connection with any alterations that will not have a material adverse effect on Borrower's financial condition, the value of the Property or the Net Operating Income, provided that such alterations are made in connection with (a) tenant improvement work performed pursuant to the terms of any Lease executed on or before the date hereof, (b) tenant improvement work performed pursuant to the terms and provisions of a Lease and not adversely affecting any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements, or (c) alterations performed in connection with the restoration of the Property after the occurrence of a Casualty or Condemnation in accordance with the terms and provisions of this Agreement. If the total unpaid amounts due and payable with respect to alterations to the Improvements at the Property (other than such amounts to be paid or reimbursed by tenants under the Leases) shall at any time exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000) (the "Threshold Amount"), Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower's obligations under the Loan Documents any of the following: (i) cash, (ii) U.S. Obligations, (iii) other securities having a rating acceptable to Lender and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned in connection with any Securitization, or (iv) a completion and performance bond or an irrevocable letter of credit (payable on sight draft only) issued by a financial institution having a rating by Standard & Poor's Ratings Group of not less than A-1+ if the term of such bond or letter of credit is no longer than three (3) months or, if such term is in excess of three (3) months, issued by a financial institution having a rating that is acceptable to Lender and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned in connection with any Securitization. Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on the Property (other than such amounts to be paid or reimbursed by tenants under the Leases) over the Threshold Amount and Lender may apply such security from time to time at the option of Lender to pay for such alterations. (b) Notwithstanding anything contained herein to the contrary, Borrower shall obtain Lender's prior written consent (which consent shall not be unreasonably withheld or delayed except with respect to any of the following that may have a material adverse effect on (1) Borrower's financial condition, (2) the value of the Property, or (3) Net Operating Income) to any alterations, additions, renewals, replacements and/or improvements to or on any of the parking lot(s) situated, or to be constructed, on either the Property or the Adjacent Property. 5.1.22 Operation of the Property. (a) Borrower shall cause the Property to be operated, in all material respects, in accordance with the Management Agreement (or Replacement Management Agreement) as applicable. In the event that the Management Agreement expires or is terminated (without limiting any obligation of Borrower to obtain Lender's consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable. (b) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material default under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of each financial statement, business plan, Capital Expenditures plan, notice, report and estimate received by it under the Management Agreement; and (iv) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Manager under the Management Agreement, in a commercially reasonable manner. -39- (c) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the covenants, conditions, obligations, prohibitions, restrictions, easements, rights of way and agreements required to be performed and observed by it in connection with any other document or instrument affecting title to the Property, or any part thereof, regardless of whether such document or instrument is superior or subordinate to this Mortgage, including, without limitation, any and all reciprocal easement, parking and access agreements, and do all things necessary to preserve and to keep unimpaired its material rights thereunder; and (ii) promptly notify Lender of any material default thereunder of which it is aware or of any notice of default received by it thereunder. Section 5.2. Negative Covenants. From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage encumbering the Property in accordance with the terms of this Agreement and the other Loan Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly, any of the following: 5.2.1 Operation of the Property. (a) Borrower shall not, without Lender's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel the Management Agreement; provided, that Borrower may, without Lender's consent, replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (ii) reduce or consent to the reduction of the term of the Management Agreement; (iii) increase or consent to the increase of the amount of any charges under the Management Agreement; or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect. (b) Following the occurrence and during the continuance of an Event of Default, Borrower shall not exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Management Agreement without the prior written consent of Lender, which consent may be granted, conditioned or withheld in Lender's sole discretion. (c) Borrower shall not grant any easement or right-of-way nor amend any existing easement or right-of-way (including, without limitation, any reciprocal easement, parking or access agreement) with respect to all or any portion of the Property without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed. 5.2.2 Liens. Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of the Property or permit any such action to be taken, except: (i) the Permitted Encumbrances; (ii) Liens created by or permitted pursuant to the Loan Documents; and (iii) Liens for Taxes or Other Charges not yet due. -40- 5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of the Property, (c) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the properties or assets of Borrower except to the extent permitted by the Loan Documents, (d) modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction, or (e) cause the Principal to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Principal would be dissolved, wound up or liquidated in whole or in part, or (ii) amend, modify, waive or terminate the organizational documents of the Principal or modify, amend, waive or terminate the qualification and good standing of the Principal in any jurisdiction, in each case, without obtaining the prior written consent of Lender. 5.2.4 Change In Business. Borrower shall not enter into any line of business other than the ownership and operation of the Property, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business. 5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower's business. 5.2.6 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender. 5.2.7 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of the Property with (a) any other real property constituting a tax lot separate from the Property, or (b) any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the Lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property. 5.2.8 Principal Place of Business and Organization. Borrower shall not change its principal place of business set forth in the introductory paragraph of this Agreement without first giving Lender thirty (30) days prior written notice. Borrower shall not change the place of its organization as set forth in Section 4.1.28 without the consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. Upon Lender's request, Borrower shall execute and deliver additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Lender's security interest in the Property as a result of such change of principal place of business or place of organization. 5.2.9 ERISA. (a) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA. -41- (b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (A) Borrower is not and does not maintain an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(3) of ERISA; (B) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (C) one or more of the following circumstances is true: (i) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. ss.2510.3-101(b)(2); (ii) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. ss.2510.3-101(f)(2); or (iii) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. ss.2510.3-101(c) or (e). 5.2.10 Transfers. (a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will continue to rely on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the other obligations under the Loan Documents. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of such other obligations, Lender can recover the Debt by a sale of the Property. (b) Without the prior written consent of Lender and except to the extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall not permit any Restricted Party to, (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Property or any part thereof or any legal or beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party (collectively, a "Transfer"), other than pursuant to Leases of space in the Improvements to tenants in accordance with the provisions of Section 5.1.20. (c) A Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation's stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests; (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal or the resignation of the managing agent (including, without limitation, an Affiliated Manager) other than in accordance with Section 5.1.22 hereof. -42- (d) Notwithstanding the provisions of this Sections 5.2.10, the following transfers shall not be deemed to be a Transfer and no assumption fee will be charged in connection therewith: (i) The (a) Sale of limited partnership interests to current limited partners of a Restricted Party (or to Affiliates of such limited partners) and (b) Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock in a Restricted Party to any Person who is not a current limited partner (or Affiliate) of a Restricted Party or under common control with such limited partner; provided, however, that no such transfers shall result in a change of voting control in the Restricted Party, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer, together with copies of all instruments effecting such transfer and such other information as shall reasonably allow Lender to determine if such transfer meets the criteria set forth herein, and Borrower shall pay all of the fees and expenses incurred by Lender in connection therewith, including, without limitation, reasonable attorneys' fees; (ii) The Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party to any Person who is not a limited partner of a Restricted Party as of the date hereof, or a Person who is wholly owned and controlled by such limited partner; provided, however, that no such transfers shall result in a change of voting control in the Restricted Party, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer, together with copies of all instruments effecting such transfer and such other information as shall reasonably allow Lender to determine if such transfer meets the criteria set forth herein, and Borrower shall pay all of the fees and expenses incurred by Lender in connection therewith, including, without limitation, reasonable attorneys' fees; (iii) So long as Pennsylvania Real Estate Investment Trust remains a publicly traded and listed entity on a nationally recognized stock exchange, the sale or transfer of shares of stock in Pennsylvania Real Estate Investment Trust; and (iv) The sale or transfer of partnership interests in PREIT Associates, L.P., provided, however, that Pennsylvania Real Estate Investment Trust remains the general partner of PREIT Associates, L.P. and maintains at all times at least a fifty-one percent (51%) interest in PREIT Associates, L.P. (e) No consent to any assumption of the Loan shall occur on or before the first anniversary of the first Payment Date. Thereafter, Lender reserves the right to condition the consent required hereunder upon (i) reasonable and necessary modifications of the non-economic terms hereof and of the Mortgage, the Note or the other Loan Documents; (ii) an assumption of this Agreement, the Note, the Mortgage and the other Loan Documents as so modified by the proposed transferee, subject to the provisions of Section 9.4 of this Agreement; (iii) payment of all of the fees and expenses incurred in connection with such Transfer, including, without limitation, the cost of any third party reports, legal fees and expenses, rating agency fees and expenses or required legal opinions; (iv) the payment of a non-refundable $5,000 application fee and an assumption fee equal to one-half percent (0.5%) of the outstanding principal balance of the Loan for the first Transfer and one percent (1.0%) of the outstanding principal balance of the Loan for each subsequent Transfer; (v) the delivery of an Additional Insolvency Opinion reflecting the proposed Transfer satisfactory in form and substance to Lender; (vi) the proposed transferee's continued compliance with the representations and covenants set forth in Section 4.1.30 of this Agreement; (vii) the delivery of evidence satisfactory to Lender that the single purpose nature and bankruptcy remoteness of Borrower, its -43- shareholders, partners or members, as the case may be, following such Transfer are in accordance with the then current standards of Lender and the Rating Agencies; (viii) prior to any release of any Guarantor, a substitute guarantor reasonably acceptable to Lender shall have assumed the Guaranty executed by such Guarantor or executed a replacement guaranty reasonably satisfactory to Lender; (ix) if required by Lender, confirmation in writing from the applicable Rating Agencies to the effect that such Transfer will not result in a re-qualification, reduction or withdrawal of the then current rating assigned to the Securities in any applicable Securitization; and (x) such other conditions as Lender shall determine in its reasonable discretion to be in the interest of Lender, including, without limitation, the creditworthiness, reputation and qualifications of the transferee with respect to the Loan and the Property. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon any Transfer by Borrower or any Restricted Party without Lender's consent to the extent such consent is required herein. This provision shall apply to every Transfer which requires Lender's consent hereunder regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer. In furtherance of Section 5.2.10(e)(viii) above, in the event that (x) PREIT Associates, L.P. sells or transfers twenty-five percent (25%) or more of its limited partnership interest in Borrower to any Person who is not a Restricted Party as of the date hereof, and (y) such sale or transfer has been consented to by Lender (to the extent required herein) and otherwise satisfies the criteria set forth above for transfers, an additional guarantor (in addition to PREIT Associates, L.P.) acceptable to Lender (including such guarantor's creditworthiness) shall be permitted to execute an additional guaranty satisfactory to Lender in an amount equal to only such transferees respective limited partnership interest in Borrower, and PREIT Associates, L.P. shall execute an amendment to the Guaranty confirming its obligations under the Guaranty and reducing the same by such amount that the additional guarantor is liable for under such additional guaranty following such sale or transfer. VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS Section 6.1. Insurance. (a) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Property providing at least the following coverages: (i) all risk or so-called "special form" insurance on the Improvements and the Personal Property, including contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each case (A) in an amount equal to one hundred percent (100%) of the "Full Replacement Cost," which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, but the amount shall in no event be less than the outstanding principal balance of the Loan; (B) containing an agreed amount endorsement with respect to the Improvements and the Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of Ten Thousand and No/100 Dollars ($10,000) for all such insurance coverage; and (D) containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses. In addition, Borrower shall obtain: (w) insurance in amounts and in form and substance satisfactory to Lender against terrorism (to the extent terrorism insurance is commercially reasonably available at commercially reasonable rates); (x) for so long as any portion of the Improvements are located in a federally designated "special flood hazard area", flood hazard insurance in an amount equal to $5,000,000; or such greater amount as Lender shall reasonably require; (y) earthquake insurance in amounts and in form and substance satisfactory to Lender in the event the Property is located in an area with a high degree of seismic activity; and (z) coastal windstorm insurance in amounts and in form and substance satisfactory to Lender in the event the Property is located in any coastal region, provided that the insurance pursuant to clauses (w), (x), (y) and (z) hereof shall be on terms consistent with the all risk or so-called "special form" insurance policy required under this subsection (i); -44- (ii) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, such insurance (A) to be on the so-called "occurrence" form with limits of One Million and No/100 Dollars ($1,000,000) per occurrence, with no deductible, Two Million and No/100 Dollars ($2,000,000) in the aggregate, with no deductible (and, if on a blanket policy, containing an "Aggregate Per Location" endorsement); (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an "if any" basis; (3) independent contractors; (4) blanket contractual liability for all legal contracts; and (5) contractual liability covering the indemnities contained in Article 9 of the Mortgage to the extent the same is available; (iii) business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and the Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twenty-four (24) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the projected gross income from the Property for a period of twenty-four (24) months from the date that the Property is repaired or replaced and operations are resumed. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower's reasonable estimate of the gross income from the Property for the succeeding twenty-four (24) month period. All proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in this Agreement, the Note and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance; (iv) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Property coverage form does not otherwise apply, (A) owner's contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called builder's risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions; -45- (v) if the Property includes commercial property, worker's compensation insurance with respect to any employees of Borrower, as required by any Governmental Authority or Legal Requirement; (vi) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above; (vii) umbrella liability insurance in an amount not less than Twenty Million and No/100 Dollars ($20,000,000.00) per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (ii) above; (viii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, including umbrella coverage, of not less than One Million and No/100 Dollars ($1,000,000.00); (ix) if the Property is or becomes a legal "non-conforming" use, ordinance or law coverage and insurance coverage to compensate for the cost of demolition of the undamaged portion of the Property, diminished value of the Property and the increased cost of construction in amounts as requested by Lender; and (x) upon sixty (60) days' written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. (b) All insurance provided for in Section 6.1(a) shall be obtained under valid and enforceable policies (collectively, the "Policies" or in the singular, the "Policy"), and shall be subject to the approval of Lender as to insurance companies, amounts, deductibles, loss payees and insureds. The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of "AA" or better (and the equivalent thereof) by Standard & Poor's Ratings Group (or "BBB-" or better with respect to any flood insurance required by Section 6.1(a)(i)) or, if a Securitization of the Loan has occurred, by at least two (2) of the Rating Agencies rating the Securities (one of which shall be Standard & Poor's Ratings Group if they are rating the Securities and one of which will be Moody's Investors Service, Inc. if they are rating the Securities), or if only one Rating Agency is rating the Securities, then only by such Rating Agency. The Policies shall contain the complete address of the Property (or a complete legal description) and shall be for a term of at least one (1) year. The Policies described in this Section 6.1 (other than those strictly limited to liability protection) shall designate Lender as mortgagee and loss payee. Not less than ten (10) days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of insurance evidencing the Policies accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the "Insurance Premiums"), shall be delivered by Borrower to Lender. (c) Any blanket insurance Policy shall specifically allocate to the Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Property in compliance with the provisions of Section 6.1(a). -46- (d) All Policies provided for or contemplated by Section 6.1(a), except for the Policy referenced in Section 6.1(a)(v), shall name Borrower as the insured and Lender as the additional insured, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender. (e) All Policies provided for in Section 6.1(a) shall contain clauses or endorsements to the effect that: (i) no act or negligence of Borrower, or anyone acting for Borrower, or of any tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned; (ii) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days' written notice to Lender and any other party named therein as an additional insured; (iii) the issuers thereof shall give written notice to Lender if the Policy has not been renewed fifteen (15) days prior to its expiration; and (iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder. (f) If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate. All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage and shall bear interest at the Default Rate. Section 6.2. Casualty. If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a "Casualty"), Borrower shall give prompt notice of such damage to Lender. In case of a Casualty covered by any of the Polices, (a) if an Event of Default has occurred and is then continuing, or if no Event of Default has occurred but Borrower fails to commence to (and thereafter diligently seek to) settle and adjust any claim within thirty (30) days after such Casualty has occurred, Lender (or, after entry of decree of foreclosure, the purchaser at the foreclosure sale or decree creditor, as the case may be) is hereby authorized to settle and adjust any claim under such Policies without the consent of Borrower, or (b) if no Event of Default has occurred, Borrower shall be permitted within thirty (30) days after such Casualty to settle and adjust such claim with the consent of Lender, which consent shall not be unreasonably withheld or delayed; provided, however, that in either case Lender shall, and is hereby authorized to, collect and receive any such Insurance Proceeds; and the reasonable expenses incurred by Lender in the adjustment and collection of such Insurance Proceeds shall be added to the Debt and shall be reimbursed to Lender within ten (10) days after the receipt by Borrower of written demand therefor or, at Lender's option, in the event and to the extent sufficient Insurance Proceeds are available, shall be deducted by Lender from such Insurance Proceeds prior to any other application thereof. Each insurance company which has issued a Policy is hereby authorized and directed to make payment for all losses covered by such Policy to Lender alone, and not to Lender and Borrower jointly. Borrower agrees to execute all documents and make all deliveries reasonably required in order to permit adjustment and payment of insurance proceeds as provided above. If the Property shall be damaged or destroyed, in whole or in part, by a Casualty, Borrower shall promptly commence and diligently prosecute the completion of the Restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4. Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance. -47- Section 6.3. Condemnation. Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of the Property and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note. If the Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of the Property and otherwise comply with the provisions of Section 6.4. If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt. Section 6.4. Restoration. The following provisions shall apply in connection with the Restoration of the Property: (a) If the Net Proceeds shall be less than Five Hundred Thousand and No/100 Dollars ($500,000.00) and the costs of completing the Restoration shall be less than Five Hundred Thousand and No/100 Dollars ($500,000.00), then the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 6.4(b)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement. (b) If the Net Proceeds are equal to or greater than Five Hundred Thousand and No/100 Dollars ($500,000.00) or the costs of completing the Restoration is equal to or greater than Five Hundred Thousand and No/100 Dollars ($500,000.00), then Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4. The term "Net Proceeds" shall mean: (i) the net amount of all insurance proceeds received by Lender pursuant to Section 6.1 (a)(i), (iv), (vi), (ix) and (x) as a result of such damage or destruction, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Insurance Proceeds"), or (ii) the net amount of the Award, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Condemnation Proceeds"), whichever the case may be. (i) The Net Proceeds shall be made available to Borrower for Restoration provided that each of the following conditions are met: (A) no Event of Default shall have occurred and be continuing; (B) (1) in the event the Net Proceeds are Insurance Proceeds, less than twenty-five percent (25%) of the total floor area of the Improvements on the Property has been damaged, destroyed or rendered unusable as a result of such fire or other casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than ten percent (10%) of the land constituting the Property is taken, and such land is located along the perimeter or periphery of the Property, and no portion of the Improvements (except for outparcel buildings) is located on such land; -48- (C) Leases demising in the aggregate ninety percent (90%) or more of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, shall remain in full force and effect during and after the completion of the Restoration, notwithstanding the occurrence of any such Casualty or Condemnation, whichever the case may be, and the tenants thereunder will make all necessary repairs and restorations thereto at their sole cost and expense; (D) Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than ninety (90) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion; (E) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(iii), if applicable, or (3) by other funds of Borrower; (F) Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (1) the date that is six (6) months prior to the Anticipated Repayment Date, (2) the earliest date required for such completion under the terms of any Leases then in effect and not cancelled by reason of such Casualty or Condemnation, (3) such time as may be required under applicable zoning law, ordinance, rule or regulation in order to repair and restore the Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable, or (4) the expiration of the insurance coverage referred to in Section 6.1(a)(iii); (G) the Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable zoning laws, ordinances, rules and regulations; (H) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable governmental laws, rules and regulations (including, without limitation, all applicable environmental laws); (I) such Casualty or Condemnation, as applicable, does not result in the loss of access to the Property or the related Improvements; (J) the Debt Service Coverage Ratio for the Property, after giving effect to the Restoration, shall be equal to or greater than 1.71 to 1.0; -49- (K) Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower's architect or engineer stating the entire cost of completing the Restoration, which budget shall be acceptable to Lender; and (L) the Net Proceeds together with any cash or cash equivalent deposited by Borrower with Lender are sufficient in Lender's reasonable discretion to cover the cost of the Restoration. Borrower shall, in good faith, undertake reasonable efforts to cause the conditions described in this Section 6.4(b)(i) to be fully satisfied (e.g., Borrower shall timely make application for necessary governmental permits, shall prepare the detailed budget, etc.). If such conditions are satisfied, Borrower shall be obligated to undertake Restoration subject to the terms of this Section 6.4. (ii) The Net Proceeds shall be held by Lender in an interest-bearing account and, until disbursed in accordance with the provisions of this Section 6.4(b), shall constitute additional security for the Debt and the other obligations under the Loan Documents. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full (other than Casualty Retainage), and (B) there exist no notices of pendency, stop orders, mechanic's or materialman's liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy. (iii) All plans and specifications required in connection with the Restoration shall be subject to prompt prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the "Casualty Consultant"). Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and acceptance by Lender and the Casualty Consultant. All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant's fees, shall be paid by Borrower. (iv) In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage" shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate Governmental Authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; -50- provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor's, subcontractor's or materialman's contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender and such lien, judgment and/or title searches as Lender may reasonably request. If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman. (v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month. (vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the "Net Proceeds Deficiency") with Lender before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.4(b) shall constitute additional security for the Debt and the other obligations under the Loan Documents. (vii) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b), and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents. (c) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 6.4(b)(vii) may be retained and applied by Lender toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its discretion. Should Lender elect to make the Net Proceeds available to Borrower for Restoration notwithstanding the fact that any of the conditions set forth above in Section 6.4(b) have not been satisfied, then Borrower shall be obligated to undertake Restoration consistent with the provisions of this Section 6.4. (d) In the event of foreclosure of the Mortgage, or other transfer of title to the Property in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title. -51- (e) Notwithstanding anything to the contrary contained in that certain Consent Agreement by and among Borrower, Lender and May (as hereinafter defined) dated March 15, 2002 (the "Consent Agreement"), Borrower acknowledges and agrees that the disbursement procedures regarding insurance proceeds contained herein shall govern. VII. RESERVE FUNDS. Section 7.1. Required Repair Funds. 7.1.1 Deposits. Borrower shall perform the repairs at the Property, as more particularly set forth on Schedule 3 attached hereto (such repairs hereinafter referred to as "Required Repairs"). Borrower shall complete all of the Required Repairs on or before the applicable date set forth on Schedule 3 attached hereto. It shall be an Event of Default under this Agreement if (a) Borrower does not complete all of the Required Repairs at the Property by the date required pursuant to the immediately preceding sentence, or (b) Borrower does not satisfy each condition contained in Section 7.1.2 hereof. Upon the occurrence of such an Event of Default, Lender, at its option, may withdraw all Required Repair Funds from the Required Repair Account and Lender may apply such funds either to completion of the Required Repairs at the Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lender's right to withdraw and apply Required Repair Funds shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents. On the Closing Date, Borrower shall deposit with Lender the amount of $1,929,025.00 as set forth on Schedule 3 hereto to perform the Required Repairs. Amounts so deposited with Lender shall be held by Lender in accordance with Section 7.7 hereof. Amounts so deposited shall hereinafter be referred to as Borrower's "Required Repair Fund" and the account in which such amounts are held shall hereinafter be referred to as Borrower's "Required Repair Account". 7.1.2 Release of Required Repair Funds. Lender shall disburse to Borrower the Required Repair Funds from the Required Repair Account from time to time upon satisfaction by Borrower of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the Required Repairs to be paid, (b) on the date such request is received by Lender and on the date such payment is to be made, no Default or Event of Default shall exist and remain uncured, (c) Lender shall have received an Officer's Certificate (i) stating that all Required Repairs at the Property to be funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, such certificate to be accompanied by a copy of any license, permit or other approval by any Governmental Authority required to commence and/or complete the Required Repairs, (ii) identifying each Person that supplied materials or labor in connection with the Required Repairs performed at the Property to be funded by the requested disbursement, and (iii) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such Officer's Certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender, (d) Lender shall have received, at Lender's option, a title search for the Property indicating that the Property is free from all liens, claims and other encumbrances not previously approved by Lender, and (e) Lender shall have received such other evidence as Lender shall reasonably request that the Required Repairs to be funded by the requested disbursement have been completed and are paid for or will be paid upon such disbursement to Borrower. Lender shall not be required to make disbursements from the Required Repair Account unless such requested disbursement is in an amount greater than $25,000 (or a lesser amount if the total amount in the Required Repair Account is less than $25,000, in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.1.2. -52- Section 7.2. Tax and Insurance Escrow Fund. On the date hereof, Borrower shall deposit with Lender an amount determined by Lender to be sufficient (when added to the monthly deposits described below) to pay the next due annual installment of Taxes on the Property and the property designated as "Parcel No. 3" on the Survey for the Property delivered to Lender in connection with this Agreement (the "Adjacent Property") at least thirty (30) days prior to their respective due dates, plus an amount equal to one-twelfth of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof. Thereafter, Borrower shall pay to Lender on each Payment Date an amount equal to one-twelfth of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes for the Property and the Adjacent Property at least thirty (30) days prior to their respective due dates (the "Monthly Tax Deposits"). In addition, if (a) not later than thirty (30) days prior to the expiration date of any Policy, Borrower fails to deliver to Lender evidence satisfactory to Lender that such Policy has been renewed for a period of at least one (1) year, or (b) not later than ten (10) days prior to the expiration date of any Policy, Borrower fails to deliver to Lender evidence satisfactory to Lender that the Insurance Premiums due under such Policy for the ensuing annual period have been paid in full, or (c) an Event of Default has occurred and is continuing, then, in any such event, commencing with the first Payment Date occurring thereafter, Borrower shall pay to Lender on each Payment Date an additional amount equal to one-twelfth of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (the "Monthly Insurance Deposits"). All such amounts so deposited shall hereinafter be called the "Tax and Insurance Escrow Fund". The Monthly Tax Deposits and, if applicable, the Monthly Insurance Deposits and the payments of interest or principal or both payable pursuant to the Note shall be added together and shall be paid as an aggregate sum by Borrower to Lender. Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and, if Monthly Insurance Deposits are then being made, Insurance Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and under the Mortgage. In making any payment relating to the Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and, if Monthly Insurance Deposits are then being made, Insurance Premiums pursuant to Section 5.1.2 hereof, plus a one (1) month reserve, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. Any amount remaining in the Tax and Insurance Escrow Fund after the Debt has been paid in full shall be promptly returned to Borrower. In allocating such excess, Lender may deal with the Person shown on the records of Lender to be the owner of the Property. If at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes for the Property and the Adjacent Property at least thirty (30) days prior to delinquency of the Taxes and, if Monthly Insurance Deposits are then required to be made by Borrower hereunder, Insurance Premiums at least thirty (30) days prior to expiration of the Policies, Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to delinquency of the Taxes and/or thirty (30) days prior to expiration of the Policies, as the case may be. Until such time as the Adjacent Property is the subject of a separate property tax assessment and Lender receives evidence in form and substance satisfactory to Lender that the Property and the Adjacent Property constitute separate tax lots, Lender shall continue to collect escrows for Taxes on the Adjacent Property; thereafter, the covenants contained herein and in Section 5.1.2 regarding the Adjacent Property shall terminate. -53- Section 7.3. Replacements and Replacement Reserve. 7.3.1 Replacement Reserve Fund. Borrower shall pay to Lender on each Payment Date beginning on May 11, 2002 and continuing on each and every Payment Date thereafter through and including April 11, 2004, one-twelfth (1/12) of $128,000.00 (the "Replacement Reserve Initial Monthly Deposit"), which amount, together with the Replacement Reserve Monthly Deposit, is reasonably estimated by Lender in its sole discretion to be due for exterior, HVAC and mechanical replacements and repairs required to be made to the Property during the calendar year (collectively, the "Replacements") to be held in the Replacement Reserve Account. In addition, Borrower shall pay to Lender on each Payment Date beginning on May 11, 2004 and continuing on each and every Payment Date thereafter through and including April 11, 2005, one-twelfth (1/12) of $74,000.00 (the "Replacement Reserve Monthly Deposit") to be held in the Replacement Reserve Account. Amounts so deposited shall hereinafter be referred to as Borrower's "Replacement Reserve Fund" and the account in which such amounts are held shall hereinafter be referred to as Borrower's "Replacement Reserve Account". Lender may reassess its estimate of the amount necessary for the Replacement Reserve Fund from time to time, and may increase the monthly amounts required to be deposited into the Replacement Reserve Fund upon thirty (30) days notice to Borrower if Lender determines in its reasonable discretion that an increase is necessary to maintain the proper maintenance and operation of the Property. 7.3.2 Disbursements from Replacement Reserve Account. Lender shall make disbursements from the Replacement Reserve Fund as requested by Borrower, and approved by Lender in its sole discretion, no more frequently than once in any thirty (30) day period of no less than $5,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender for requests in excess of $25,000.00 for a single item, lien waivers and releases from all parties furnishing materials and/or services in connection with the requested payment. Lender may require an inspection of the Property at Borrower's expense prior to making a monthly disbursement in order to verify completion of replacements and repairs of items in excess of $25,000.00 for which reimbursement is sought. 7.3.3 Balance in the Replacement Reserve Account. The insufficiency of any balance in the Replacement Reserve Account shall not relieve Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents. Section 7.4. Rollover Reserve. 7.4.1 Intentionally omitted prior to execution. 7.4.2 Intentionally omitted prior to execution. 7.4.3 Lease Termination Payments. Borrower shall pay to Lender all funds received by Borrower from tenants in connection with any cancellation, termination or surrender of any Lease, including, but not limited to, any surrender or cancellation fees, buy-out fees, penalties, and payments relating to unamortized tenant improvements and leasing commissions (collectively, "Lease Termination Payments"), which amounts shall be deposited with and held by Lender as additional security for the Loan (the "Rollover Reserve Fund"). So long as no Event of Default has occurred and is continuing, Lender shall make disbursements of Lease Termination Payments from the Rollover Reserve Fund for expenses reasonably incurred by Borrower in connection with reletting the vacated space as requested by Borrower on a quarterly basis in increments of no less than $15,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender, lien waivers and releases from all parties furnishing materials and/or services in connection with the requested payment and a copy of the subject Lease. All such expenses shall be approved by Lender in its reasonable discretion as part of Lender's approval of the subject lease. Lender may require an inspection of the Property at Borrower's expense prior to making a quarterly disbursement in order to verify completion of improvements for which reimbursement is sought. -54- Section 7.5. Sears Reserve. 7.5.1 Borrower shall pay to Lender on each Payment Date the sum of $25,000.00 (the "Monthly Sears Deposit"), which amounts shall be deposited with and held by Lender as additional security for the Loan and to be used for tenant improvements and leasing commissions to retain or replace existing tenants at the Property (the "Sears Reserve Fund") until such time as the balance in the Sears Reserve Fund is equal to an amount not less than $1,500,000.00; provided, however, that upon the occurrence of a Sears Condition (as hereinafter defined), Borrower shall no longer be required to pay to Lender on each Payment Date the Monthly Sears Deposit. Upon the occurrence and during the continuance of a Sears Cash Trap Event, any excess amounts remaining after the allocation of the amounts deposited in the Cash Management Account pursuant to Section 2.7.2 (b)(items (i) - (vii)) above shall, in addition to the Monthly Sears Deposit, be deposited into the Sears Reserve Fund to be held by Lender as additional security for the Loan and to be used for tenant improvements and leasing commissions to retain or replace existing tenants at the Property until such time as the balance in the Sears Reserve Fund is equal to or greater than $1,500,000.00. The Sears Reserve Fund shall be held by Lender in accordance with Section 7.7 hereof. Provided that no Event of Default has occurred and is then continuing hereunder, Lender shall release the amounts contained in the Sears Reserve Fund, if any, to Borrower promptly upon the occurrence of either (i) a Sears Condition, or (ii) item (B) set forth in the definition for "Sears Cash Trap Event" below, provided that the release of the funds contained in the Sears Reserve Fund due to the satisfaction of the conditions in this clause (ii) shall not terminate Borrower's obligation to continue making the Monthly Sears Deposit, and Borrower shall continue or recommence making the Monthly Sears Deposit, as applicable, for the remainder of the term of the Loan until the earlier to occur of (x) a Sears Condition, or (y) the achievement of a balance in the Sears Reserve Fund of not less than $1,500,000.00. For the purposes of this Section 7.5.1: (1) "Sears Cash Trap Event" shall mean the period of time commencing upon the earlier to occur of either (x) the receipt by Borrower of a notice from Sears, Roebuck and Co., Inc., a New York corporation ("Sears"), of its intent to vacate the premises (the "Sears Space") demised under the lease agreement with Beaver Valley Mall, Inc. (predecessor-in-interest to Borrower) dated August 1, 1969, as amended (collectively, the "Sears Lease"), and/or not renew the Sears Lease, or (y) the failure by Sears to deliver either a notice to renew the Sears Lease or to vacate the Sears Space if such notice is required pursuant to the terms of the Sears Lease, and continuing thereafter until the occurrence of either (A) a Sears Condition, or (B) the receipt by Lender of (i) evidence in form and substance satisfactory to Lender that Sears has renewed or extended the Sears Lease or entered into a new lease of the Sears Space, on economic and other terms and conditions at least as favorable as those contained in the Sears Lease and otherwise satisfactory to Beneficiary (the "Sears Renewal Lease") and for a term of not less than five (5) years (which evidence shall include, without limitation, a copy of the Sears Renewal Lease and a tenant estoppel certificate from Sears which shall be in form and substance reasonably satisfactory to Beneficiary and provide, among other things, that Sears is occupying the Sears Space, is open for business and is paying base rent in accordance with the Sears Renewal Lease and that all tenant improvements have been satisfactorily completed in accordance with the Sears Renewal Lease), and (ii) a subordination, non-disturbance and attornment agreement from Sears in form and substance reasonably satisfactory to Lender. -55- (2) "Sears Condition" shall mean the receipt by Lender of either (x) (i) evidence in form and substance satisfactory to Lender that the Sears Renewal Lease is for a term ending no earlier than April 11, 2014 (which evidence shall include, without limitation, a copy of the Sears Renewal Lease and a tenant estoppel certificate from Sears which shall be in form and substance satisfactory to Beneficiary and provide, among other things, that Sears is occupying the Sears Space, is open for business and is paying base rent in accordance with the Sears Renewal Lease and that all tenant improvements have been satisfactorily completed in accordance with the Sears Renewal Lease), and (ii) a subordination, non-disturbance and attornment agreement from Sears in form and substance satisfactory, or (y) (i) evidence in form and substance reasonably satisfactory to Lender that a replacement tenant or tenants satisfactory to Lender in its sole discretion (collectively, the "Sears Replacement Tenant") has entered into a lease or leases, as applicable, of all of the Sears Space, on economic and other terms and conditions at least as favorable as those contained in the Sears Lease and otherwise satisfactory to Lender and for a term ending no earlier than April 11, 2014 (the "Sears Replacement Lease") (which evidence shall include, without limitation, a copy of the Sears Replacement Lease and a tenant estoppel certificate from the Sears Replacement Tenant which shall be in form and substance satisfactory to Beneficiary and provide, among other things, that the Sears Replacement Tenant is occupying the Sears Space, is open for business and is paying base rent in accordance with the Sears Replacement Lease and that all tenant improvements have been satisfactorily completed in accordance with the Sears Replacement Lease), and (ii) a subordination, non-disturbance and attornment agreement from the Sears Replacement Tenant in form and substance satisfactory to Lender. 7.5.2 Intentionally omitted prior to execution. 7.5.3 Intentionally omitted prior to execution. 7.5.4 Intentionally omitted prior to execution. 7.5.5 Lender shall make disbursements from the Sears Reserve Fund for tenant improvements and leasing commissions for tenants at the Property as requested by Borrower, and approved by Lender in its sole discretion, no more frequently than once in any thirty (30) day period of no less than $5,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender for requests in excess of $25,000.00 for a single item, lien waivers and releases from all parties furnishing materials and/or services in connection with the requested payment. Lender may require an inspection of the Property at Borrower's expense prior to making a monthly disbursement in order to verify completion of tenant improvements of items in excess of $25,000.00 for which reimbursement is sought. Borrower shall reimburse Lender on a monthly basis beginning on the first month immediately succeeding such disbursement in an amount equal to the lesser of (x) the actual amount of such disbursement request, and (y) $25,000.00, provided, however, that, to the extent Borrower has not previously reimbursed Lender for such disbursement request(s), Borrower shall reimburse Lender within two (2) years of such disbursement(s) an amount equal to such disbursement(s), all of which shall be deposited with and held by Lender in the Sears Reserve Fund and shall be in addition to the Monthly Sears Deposit and any other deposits required to be made by Borrower to the Sears Reserve Fund pursuant to Section 7.5.1 above. All reasonable costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by Lender in connection with the re-tenanting of the Sears Space and disbursement of the Sears Reserve Fund shall be paid by Borrower within ten (10) Business Days after written demand and, until paid, shall be secured by the Mortgage and shall bear interest at the Default Rate. -56- Section 7.6. Intentionally omitted prior to execution. Section 7.7. Reserve Funds Generally. 7.7.1 Borrower grants to Lender a first-priority perfected security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional security for payment of the Debt. Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt. 7.7.2 Upon the occurrence of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment of the Debt in any order in its sole discretion. 7.7.3 The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender. 7.7.4 The Reserve Funds shall be held in an Eligible Account and shall bear interest at a money market rate that is customarily paid by the Deposit Bank (as defined in the Cash Management Agreement). All interest on a Reserve Fund shall be added to and become a part of such Reserve Fund and shall be disbursed in the same manner as other monies deposited in such Reserve Fund, except that interest on the Tax and Insurance Escrow Fund and the Required Repair Fund shall not be added to or become a part thereof and shall be the sole property of and shall be paid to Lender. Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned on the Reserve Funds, other than the Tax and Insurance Escrow Fund or the Required Repair Fund. 7.7.5 Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto. 7.7.6 Lender shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds, other than that which results from Lender's gross negligence or willful misconduct. 7.7.7 Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including, without limitation, litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established. Borrower shall assign to Lender all rights and claims Borrower may have against all Persons supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured. VIII. DEFAULTS. Section 8.1. Event of Default. (a) Each of the following events shall constitute an event of default hereunder (an "Event of Default"): -57- (i) if any portion of the Debt is not paid when due (subject to Section 2.7.3 hereof); (ii) if any of the Taxes or Other Charges are not paid when the same are due and payable (subject to Section 2.7.3 hereof); (iii) if the Policies are not kept in full force and effect, or if certified copies of the Policies are not delivered to Lender upon request; (iv) if Borrower transfers or encumbers any portion of the Property without Lender's prior written consent in violation of the provisions of this Agreement and Article 6 of the Mortgage; (v) if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made; (vi) if Borrower, the Principal or any guarantor under any guaranty issued in connection with the Loan shall make an assignment for the benefit of creditors; (vii) if a receiver, liquidator or trustee shall be appointed for Borrower, the Principal or any guarantor under any guaranty issued in connection with the Loan or if Borrower, the Principal or such guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, the Principal or such guarantor, or if any proceeding for the dissolution or liquidation of Borrower, the Principal or such guarantor shall be instituted; provided, however, that if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, the Principal or such guarantor, then the same shall constitute an Event of Default only upon the same not being discharged, stayed or dismissed within ninety (90) days; (viii) if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents; (ix) if Borrower breaches any of its respective negative covenants contained in Section 5.2 or any covenant contained in Section 4.1.30 or if Borrower fails to deliver any of the financial statements within thirty (30) days of the date on which such statements are required to be delivered pursuant to Section 5.1.11 hereof; (x) with respect to any term, covenant or provision set forth herein which specifically contains a notice requirement or grace period, if Borrower shall be in default under such term, covenant or condition after the giving of such notice or the expiration of such grace period; (xi) if any of the assumptions contained in the Insolvency Opinion delivered to Lender in connection with the Loan, or in the Additional Insolvency Opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect; -58- (xii) if a material default has occurred and continues beyond any applicable cure period under the Management Agreement (or any Replacement Management Agreement) if such default permits the Manager thereunder to terminate or cancel the Management Agreement (or any Replacement Management Agreement) and such default has not been waived in writing; (xiii) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xii) above, for ten (10) days after notice to Borrower from Lender, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrower shall have commenced to cure such Default within such 30-day period and thereafter diligently and expeditiously proceeds to cure the same, such 30-day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed ninety (90) days; (xiv) if there shall be a default under any of the other Loan Documents beyond any applicable cure periods contained in such documents, whether as to Borrower or the Property, or if any other such event shall occur or condition shall exist, if the effect of such event or condition is to accelerate the maturity of any portion of the Debt or to permit Lender to accelerate the maturity of all or any portion of the Debt; or (xv) if there shall be a default by Borrower under the REA (as hereinafter defined) or the Consent Agreement, which default shall continue for twenty (20) days after notice to Borrower from Lender or May (or any successor thereto). (b) Upon the occurrence of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to all or the Property, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and the Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding. Section 8.2. Remedies. (a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Property. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Lender is not subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full. -59- (b) The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon. IX. SPECIAL PROVISIONS Section 9.1. Sale of Notes and Securitization. Borrower acknowledges and agrees that the Lender may sell all or any portion of the Loan and the Loan Documents, or issue one or more participations therein, or consummate one or more private or public securitizations of rated single- or multi-class securities (the "Securities") secured by or evidencing ownership interests in all or any portion of the Loan and the Loan Documents or a pool of assets that include the Loan and the Loan Documents (such sales, participations and/or securitizations, collectively, a "Securitization"). At the request of Lender, and to the extent not already required to be provided by Borrower under this Agreement, Borrower shall use reasonable efforts to provide information not in the possession of Lender and which may be reasonably required by Lender in order to satisfy the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any such Securitization including, without limitation, to: (a) (i) provide additional financial and other information with respect to the Property, Borrower, the Principal, each Guarantor and the Manager, and (ii) provide budgets relating to the Property (collectively, the "Provided Information"), together with appropriate verification and/or consents of the Provided Information through letters of auditors or opinions of counsel of independent attorneys reasonably acceptable to Lender and the Rating Agencies; (b) assist in preparing descriptive materials for presentations to any or all of the Rating Agencies, and work with, and if requested, supervise, third-party service providers engaged by Borrower, the Principal and their respective affiliates to obtain, collect, and deliver information requested or required by Lender or the Rating Agencies; (c) deliver (i) revised opinions of counsel as to non-consolidation, due execution and enforceability with respect to the Property, Borrower, the Principal and their respective affiliates and the Loan Documents, and (ii) revised organizational documents for Borrower, which counsel opinions and organizational documents shall be reasonably satisfactory to Lender and the Rating Agencies; (d) if required by any Rating Agency, use commercially reasonable efforts to deliver such additional tenant estoppel letters, subordination agreements or other agreements from parties to agreements that affect the Property, which estoppel letters, subordination agreements or other agreements shall be reasonably satisfactory to Lender and the Rating Agencies; -60- (e) make such representations and warranties as of the closing date of the Securitization with respect to the Property, Borrower, the Principal, the Guarantor and the Loan Documents as may be reasonably requested by Lender or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof, including the representations and warranties made in the Loan Documents; (f) execute such amendments to the Loan Documents as may be requested by Lender or the Rating Agencies to effect the Securitization and/or deliver one or more new component notes to replace the original note or modify the original note to reflect multiple components of the Loan (and such new notes or modified note shall have the same initial weighted average coupon of the original note, but such new notes or modified note may change the interest rate and amortization of the Loan so long as the aggregate monthly payment of such note(s) shall be the same as the constant monthly payment due under the Note), and modify the cash management agreement with respect to the newly created components such that the pricing and marketability of the Securities and the size of each class of Securities and the rating assigned to each such class by the Rating Agencies shall provide the most favorable rating levels and achieve the optimum rating levels for the Loan; (g) if requested by Lender, review any information regarding the Property, Borrower, the Principal, the Manager, the Guarantor and the Loan which is contained in the Disclosure Documents; and (h) supply to Lender such documentation, financial statements and reports in form and substance required in order to comply with any applicable securities laws. All reasonable third party costs and expenses incurred by Borrower or Lender in connection with Borrower's compliance with requests made under this Section 9.1 (including, without limitation, the fees and expenses of the Rating Agencies) shall be paid by Borrower; provided that Borrower shall not be required to pay more than $10,000 of such cost and expenses (exclusive of Borrower's legal fees) plus the fees and expenses of Rating Agencies. Section 9.2. Securitization Indemnification. (a) Borrower understands that certain of the Provided Information may be included in the Disclosure Document in connection with the Securitization and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization. In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower will cooperate with the holder of the Note in updating the Disclosure Document by providing all current information necessary to keep the Disclosure Document accurate and complete in all material respects. -61- (b) Borrower, each Principal and Guarantor agree to provide in connection with each of (i) a preliminary and a final private placement memorandum, (ii) a preliminary and final prospectus or prospectus supplement, (iii) such other offering materials as may be used for the securitization of the Loan (such materials described in clauses (i), (ii) or (iii), as applicable, being hereinafter referred to collectively as the "Offering Materials"), an indemnification certificate (A) certifying that Borrower, each Principal and Guarantor have carefully examined the Offering Materials, including without limitation, the sections entitled "Special Considerations," "Description of the Mortgages," "Description of the Mortgage Loans and Mortgaged Property," "The Manager," "The Borrower" and "Certain Legal Aspects of the Mortgage Loan," and that such sections (and any other sections reasonably requested) and such Offering Materials as they relate to or include any Provided Information, and as they relate to the Property, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, (B) indemnifying Lender (and for purposes of this Section 9.2, Lender hereunder shall include its officers and directors), the Affiliate of Lender ("Credit Suisse First Boston") that has filed the registration statement relating to the securitization (the "Registration Statement"), each of its directors, each of its officers who have signed the Registration Statement and each Person who controls the Affiliate within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the "Credit Suisse First Boston Group"), and Credit Suisse First Boston, each of its directors and each Person who controls Credit Suisse First Boston within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the "Underwriter Group") for any losses, claims, damages or liabilities (collectively, the "Liabilities") to which Credit Suisse First Boston, the Credit Suisse First Boston Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such sections or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such sections or necessary in order to make the statements in such sections or in light of the circumstances under which they were made, not misleading and (C) agreeing to reimburse Lender, the Credit Suisse First Boston Group and the Underwriter Group for any legal or other expenses reasonably incurred by Lender and Credit Suisse First Boston in connection with investigating or defending the Liabilities; provided, however, that Borrower will be liable in any such case under clauses (B) or (C) above only to the extent that any such Liabilities arise out of or are based upon any such untrue statement or omission made therein in reliance upon and in conformity with information furnished to Lender by or on behalf of Borrower in connection with the preparation of the memorandum or prospectus or in connection with the underwriting of the Loan, including, without limitation, financial statements of Borrower and operating statements, rent rolls, environmental site assessment reports and property condition reports with respect to the Property. This indemnity agreement will be in addition to any liability which Borrower may otherwise have. Moreover, the indemnification provided for in clauses (B) and (C) above shall be effective whether or not an indemnification certificate described in clause (A) above is provided and shall be applicable based on information previously provided by Borrower or its Affiliates if Borrower does not provide the indemnification certificate. (c) In connection with filings under the Exchange Act, Borrower and Guarantor agree to (i) indemnify Lender, the Credit Suisse First Boston Group and the Underwriter Group for Liabilities to which Lender, the Credit Suisse First Boston Group or the Underwriter Group may become subject insofar as such Liabilities arise out of or are based upon any untrue statement or misstatement of any material fact in the Provided Information or the omission or alleged omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the Credit Suisse First Boston Group or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Credit Suisse First Boston Group or the Underwriter Group in connection with defending or investigating the Liabilities. -62- (d) Borrower agrees that no Indemnified Person shall have any liability to Borrower for or in connection with the Loan unless and to the extent that it is finally judicially determined that liability for losses, claims, damages, liabilities or expenses incurred by Borrower resulted directly from the fraud, illegal acts, gross negligence or willful misconduct of such Indemnified Person. (e) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against Borrower pursuant to this Section 9.2, notify Borrower in writing of the claim or the commencement of that action; provided, however, that the failure to notify Borrower shall not relieve Borrower from any liability which Borrower may have under the indemnification provisions of this Section 9.2 except to the extent that Borrower has been materially prejudiced by such failure, and provided further that the failure to notify Borrower shall not relieve Borrower from any liability which Borrower may have to an Indemnified Person otherwise than under the provisions of this Section 9.2. If any such claim or action shall be brought against an Indemnified Person, and it shall notify Borrower thereof, Borrower shall be entitled to participate therein and, to the extent that it wishes, assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from Borrower to the Indemnified Person of its election to assume the defense of such claim or action, Borrower shall not be liable to the Indemnified Person for any legal or other expenses subsequently incurred by the Indemnified Person in connection with the defense thereof except as hereinafter provided; provided, however, if the defendants in any such action include both Borrower, on the one hand, and one or more Indemnified Persons, on the other hand, and an Indemnified Person shall have reasonably concluded that there are any legal defenses available to it and/or other Indemnified Persons that are different or in addition to those available to Borrower, the Indemnified Person or Persons shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Person or Persons. The Indemnified Person shall instruct its counsel to maintain reasonably detailed billing records for fees and disbursements for which such Indemnified Person is seeking reimbursement hereunder and shall submit copies of such detailed billing records to substantiate that such counsel's fees and disbursements are solely related to the defense of a claim for which Borrower is required hereunder to indemnify such Indemnified Person. Borrower shall not be liable for the expenses of more than one (1) such separate counsel unless such Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to another Indemnified Person. (f) Without the prior written consent of Lender (which consent shall not be unreasonably withheld, delayed or conditioned), Borrower will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such claim, action, suit or proceeding) unless (A) Borrower shall have given Lender reasonable prior written notice thereof and shall have obtained an unconditional release of Lender and each other Indemnified Person hereunder from all liability arising out of such claim, action, suit or proceedings, or (B) Borrower reaffirms in writing its indemnity and contribution obligations hereunder regardless of any common, federal, state or commonwealth statutory law to the contrary. As long as Borrower has complied with its obligations to defend and indemnify hereunder, Borrower shall not be liable for any settlement made by Lender or any other Indemnified Person without the consent of Borrower (which consent shall not be unreasonably withheld or delayed). -63- (g) Borrower agrees that if any indemnification or reimbursement sought pursuant to this Section 9.2 is finally judicially determined to be unavailable for a reason other than the fraud, illegal acts, gross negligence or willful misconduct of an Indemnified Person or is insufficient to hold an Indemnified Person harmless (with respect only to the losses, claims, damages, liabilities or expenses that are the subject of this Section 9.2), then Borrower and such Indemnified Person shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable or is insufficient: (i) in such proportion as is appropriate to reflect the relative benefits to Borrower on the one hand, and such Indemnified Person on the other hand, from the transactions to which such indemnification or reimbursement relates; or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of Borrower on the one hand, and all Indemnified Persons on the other hand, as well as any other equitable considerations. Notwithstanding the provisions of this Section 9.2, (A) no party found liable for a fraudulent misrepresentation shall be entitled to contribution from any other party who is not also found liable for such fraudulent misrepresentation, and (B) Borrower and Lender agree that in no event shall the amount to be contributed by the Indemnified Persons collectively pursuant to this paragraph exceed the amount of the fees (by underwriting discount or otherwise) actually received by the Credit Suisse First Boston Group and the Underwriter Group in connection with the closing of the Loan or the Securitization. (h) Borrower agrees that the indemnification, contribution and reimbursement obligations set forth in this Section 9.2 shall apply whether or not Lender, any other Indemnified Person, the Credit Suisse First Boston Group or the Underwriter Group is a formal party to any such lawsuits, claims or other proceedings, and that such obligations shall extend upon the terms set forth in this Section 9.2 to any controlling person, director, partner, officer, employee, representative or agent of Lender, the Credit Suisse First Boston Group and the Underwriter Group (each, an "Indemnified Person"). Borrower further agrees that its indemnification, contribution and reimbursement obligations shall be in addition to any liability which Borrower may otherwise have and shall extend, upon the same terms and conditions, to each Person, if any, who controls any Indemnified Persons within the meaning of the Securities Act. (i) The liabilities and obligations of both Borrower and Lender under this Section 9.2 shall survive the termination of this Agreement and the satisfaction and discharge of the Debt. (j) Notwithstanding anything to the contrary contained herein, Borrower shall have no obligation to act as depositor with respect to the Loan or an issuer or registrant with respect to the Securities issued in any Securitization. Section 9.3. Achievements. Borrower shall achieve, and within forty-five (45) days after the end of each calendar quarter (the "DSCR Determination Date") provide evidence to Lender of the achievement of, a Debt Service Coverage Ratio for the Property. If on any DSCR Determination Date the Debt Service Coverage Ratio is not at least 1.28 to 1.0 (the "Default Determination Ratio"), then Borrower shall deposit all Excess Cash Flow in the Cash Management Account. Any such funds escrowed shall be returned to Borrower if the Default Determination Ratio is achieved for two consecutive DSCR Determination Dates. No Event of Default shall occur by reason of this Section 9.3 so long as Borrower deposits into the Cash Management Account the additional amounts required by this Section. All such deposit amounts shall be treated as a "Reserve Fund" for purposes of Section 7.7 hereof. All additional amounts deposited under this Section shall be additional security for the repayment of the Debt and may be withdrawn by Lender upon the occurrence of an Event of Default and applied by Lender in such order and priority as Lender may determine. All calculations of Debt Service Coverage Ratio shall be subject to verification by Lender. -64- Section 9.4. Exculpation. Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Mortgage or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Property, the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower's interest in the Property, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgage and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgage or the other Loan Documents. The provisions of this Section 9.4 shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (c) affect the validity or enforceability of or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment of Leases; (f) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Mortgage or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Property; or (g) constitute a waiver of the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including, without limitation, reasonable attorneys' fees and costs reasonably incurred) arising out of or in connection with the following: (i) fraud or material misrepresentation by Borrower or any guarantor in connection with the Loan; (ii) the gross negligence or willful misconduct of Borrower; (iii) the breach of any representation, warranty, covenant or indemnification provision in the Environmental Indemnity or in the Mortgage concerning environmental laws, hazardous substances and asbestos and any indemnification of Lender with respect thereto in either document, provided that so long as a secured creditor's environmental insurance policy with respect to the Property reasonably acceptable to Lender has been obtained by Borrower for the benefit of Lender and is in full force and effect, this clause (iii) shall not include any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender to the extent Lender may recover the same under said secured creditor's environmental insurance policy; (iv) the removal or disposal of any portion of the Property after the occurrence of an Event of Default; (v) the misapplication or conversion by Borrower of (A) any Insurance Proceeds paid by reason of any loss, damage or destruction to the Property, (B) any Awards received in connection with a Condemnation of all or a portion of the Property, (C) any Rents following the occurrence of an Event of Default, or (D) any Rents paid more than one month in advance; (vi) failure to pay Taxes, charges for labor or materials or other charges that can create Liens on any portion of the Property or the Adjacent Property; (vii) physical waste of the Property; (viii) any security deposits, advance deposits or any other deposits collected with respect to the Property which are not delivered to Lender upon a foreclosure of the Property or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof, and -65- (ix) (A) the failure by Borrower to promptly perform and/or observe, in all material respects, all of the terms, covenants, conditions and obligations pertaining to parking (and the amount of spaces required) for the benefit of the Property and for the site currently owned by The May Department Stores Company, a New York corporation ("May"), contained in any document or instrument affecting title to the Property including, without limitation, that certain Agreement by and among William F. Sullivan, Beaver Valley Mall, Inc., a Pennsylvania corporation, and Gimbel Brothers, Inc., a New York corporation (predecessor-in-interest to May), dated November 15, 1967 and recorded on December 5, 1967 in Deed Book Volume 927, page 667, as amended (collectively, the "REA"), (B) the failure by Borrower to install any additional parking spaces required pursuant to and in accordance with the REA and/or Section 2 of the Consent Agreement, and (C) any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including, without limitation, attorneys' fees and costs reasonably incurred) arising out of or in connection with the construction, development or creation of any additional parking spaces, parking facilities or parking structures at the Property or any adjoining property required pursuant to the REA. Notwithstanding anything to the contrary contained in this Agreement, the Note or any of the other Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower (i) in the event of: (a) Borrower filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against Borrower by any Person (other than Lender) under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law which is not dismissed within one hundred eighty (180) days after filing, provided, however, that such filing has not been consented to or acquiesced in by Borrower; provided, further, that so long as PREIT Associates, L.P. maintains in effect that certain line of credit with Wells Fargo Bank, National Association, as agent, dated December 28, 2000 (or another financing arrangement containing market standard financial covenants for net worth, leverage and liquidity), Borrower shall have no personal liability under this clause b; (c) Borrower filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it by any other Person (other than Lender) under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or Borrower soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (d) Borrower consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; or (e) Borrower making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; (ii) if the first full monthly payment of principal and interest on the Note is not paid when due; (iii) if Borrower fails to permit reasonable on-site inspections of the Property, fails to provide required financial information after expiration of any applicable notice or grace period, fails to maintain its status as a Single Purpose Entity or fails to appoint a new property manager upon the request of Lender as permitted under this Agreement, each as required by, and in accordance with, the terms and provisions of this Agreement or the Mortgage; (iv) if Borrower fails to obtain Lender's prior written consent to any subordinate financing or other voluntary lien encumbering the Property; or (v) if Borrower fails to obtain Lender's prior written consent to any assignment, transfer, or conveyance of the Property or any interest therein as required by this Agreement or the Mortgage. -66- Section 9.5. Matters Concerning Manager. (a) If (i) at any time, the Debt Service Coverage Ratio for the Property for the immediately preceding twelve (12) month period is less than 1.28 to 1.0, (ii) the Debt has been accelerated pursuant to Section 8.1(b) hereof, (iii) the Manager shall be in default (beyond any applicable grace or cure period) under the Management Agreement, (iv) at the Anticipated Repayment Date, the Debt is not repaid in full, or (v) the Manager shall become bankrupt or insolvent or a debtor in any bankruptcy or insolvency proceeding, Borrower shall, at the request of Lender, terminate the Management Agreement and replace the Manager with a Qualified Manager approved by Lender pursuant to a Replacement Management Agreement containing terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates. (b) Borrower shall achieve, and by each DSCR Determination Date provide evidence to Lender of the achievement of, a Debt Service Coverage Ratio for the Property of not less than 1.28 to 1.0. If such ratio (the "Fee Termination Ratio") is not maintained, the Borrower's right to pay, and the Manager's right to receive, a management fee shall be suspended and an amount equal to the management fee shall be retained by Lender. Subsequently, if the Fee Termination Ratio is obtained for two consecutive DSCR Determination Dates, the Borrower shall be entitled to pay, and the Manager to receive, the management fee escrowed as well as the right thereafter to pay and receive the management fee so long as the Fee Termination Ratio is maintained. No Event of Default shall occur by reason of this Section 9.5(b) so long as Borrower deposits into the Cash Management Account the additional amounts required by this Section. All such deposited amounts shall be treated as a "Reserve Fund" for purposes of Section 7.7 hereof. All additional amounts deposited under this Section shall be additional security for the repayment of the Debt and may be withdrawn by Lender upon the occurrence of an Event of Default and applied by Lender in such order and priority as Lender may determine. All calculations of the Debt Service Coverage Ratio shall be subject to verification by Lender. If Borrower fails to comply with the terms of the provisions of this Section 9.5(b) above, Borrower shall, at the request of Lender, terminate the Management Agreement and replace the Manager with a Qualified Manager approved by Lender pursuant to a Replacement Management Agreement containing terms and conditions satisfactory to Lender. Section 9.6. Servicer. At the option of Lender, the Loan may be serviced by a servicer or trustee (the "Servicer") selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement (the "Servicing Agreement") between Lender and the Servicer. Borrower shall be responsible for any reasonable and customary set-up fees or any other initial costs relating to or arising under the Servicing Agreement; provided, however, that Borrower shall not be responsible for payment of the monthly servicing fee due to the Servicer under the Servicing Agreement. X. MISCELLANEOUS Section 10.1. Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender. -67- Section 10.2. Lender's Discretion. Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive. Lender may, in Lender's sole and absolute discretion, accept or reject any proposed cure of an Event of Default. In no event shall any provision of this Agreement or any other Loan Document which provides that Lender shall have certain rights and/or remedies only during the continuance of an Event of Default be construed so as to require Lender to accept a cure of any such Event of Default. Unless and until Lender expressly accepts any proposed cure of an Event of Default, such Event of Default shall be deemed to be continuing for purposes of this Agreement and the other Loan Documents. Section 10.3. Governing Law. (A) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING; AND PROVIDED FURTHER THAT THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS IN PROPERTY LOCATED IN SUCH STATE. (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT: CT Corporate System 111 Eight Avenue New York, New York 10011 AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR. -68- Section 10.4. Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 10.5. Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount. Section 10.6. Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered against a signed receipt or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section): If to Lender: Column Financial, Inc. 11 Madison Avenue, 5th Floor New York, New York 10010-3629 Attention: Edmund Taylor Facsimile No.: (212) 325-8106 Re: Beaver Valley Mall with a copy to: Credit Suisse First Boston Mortgage Capital LLC Legal & Compliance Department One Madison Avenue, 7th Floor New York, New York 10010 Attention: Pamela L. McCormack, Esq. Facsimile No. (917) 326-7805 Re: Beaver Valley Mall and with a copy to: ORIX Real Estate Capital Markets, LLC 1717 Main Street, 12th Floor Dallas, Texas 75201 Attention: John Lloyd Facsimile No. (214) 237-2046 Re: Beaver Valley Mall or any successor Servicer of the Loan -69- and with a copy to: Winston & Strawn 200 Park Avenue New York, New York 10166 Attention: Corey A. Tessler, Esq. Facsimile No.: (212) 294-4700 If to Borrower: PR Beaver Valley Limited Partnership 200 S. Broad St., #300 Philadelphia, PA 19102 Attention: Bruce Goldman, Esq. Facsimile No. (215) 546-7311 with a copy to: PREIT Associates, L.P. 200 S. Broad St., #300 Philadelphia, PA 19102 Attention: Bruce Goldman, Esq. Facsimile No. (215) 546-7311 and: Drinker Biddle & Reath, LLP Suite 300, 1000 West Lakes Drive Berwyn, Pennsylvania 19312 Attention: John W. Fischer, Esq. Facsimile No. (610) 993-8585 A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; or in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon sender's receipt of a machine-generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming, but if such receipt is later than 5:00 PM local time, then on the next Business Day. Section 10.7. Trial by Jury. BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY HERETO IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER. Section 10.8. Headings. The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. -70- Section 10.9. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable 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 Agreement. Section 10.10. Preferences. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside 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 payment or payments received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or payments had not been received by Lender. Section 10.11. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower. Section 10.12. Remedies of Borrower. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower's sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Section 10.13. Expenses; Indemnity. (a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including, without limitation, any opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents); (ii) Borrower's ongoing performance of and compliance with Borrower's respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) Lender's ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Lender; (v) securing Borrower's compliance with any requests made pursuant to the provisions -71- of this Agreement; (vi) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Property, or any other security given for the Loan; and (viii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and expenses due and payable to Lender may be paid from any amounts in the Lockbox Account. (b) Borrower shall indemnify, defend and hold harmless Lender from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, demands, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for Lender in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Lender shall be designated a party thereto), that may be imposed on, incurred by, or asserted against Lender in any manner relating to or arising from (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the "Indemnified Liabilities"); provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Lender. To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Lender. (c) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection with any Rating Agency review of the Loan, the Loan Documents or any transaction contemplated thereby or any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of this Agreement or any other Loan Document and the Lender shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation. Section 10.14. Schedules Incorporated. The Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 10.15. Offsets, Counterclaims and Defenses. Any assignee of Lender's interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower. Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries. (a) Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender. -72- (b) This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender's sole discretion, Lender deems it advisable or desirable to do so. Section 10.17. Publicity. All news releases, publicity or advertising by Borrower or their Affiliates through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Lender, Credit Suisse First Boston, or any of their Affiliates shall be subject to the prior written approval of Lender. Section 10.18. Waiver of Marshalling of Assets. To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower's partners and others with interests in Borrower, and of the Property, or to a sale in inverse order of alienation in the event of foreclosure of the Mortgage, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Property for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Property in preference to every other claimant whatsoever. Section 10.19. Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents. Section 10.20. Conflict; Construction of Documents; Reliance. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender's exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates. -73- Section 10.21. Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement, other than First Union/Maher Partners, whose fees have been paid in full by Borrower on the date hereof. Borrower hereby agrees to indemnify, defend and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind (including Lender's attorneys' fees and expenses) in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated herein. The provisions of this Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt. Section 10.22. Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, including, without limitation, the Commitment Letter, dated March 5, 2002, between Borrower and Lender, are superseded by the terms of this Agreement and the other Loan Documents. [No Further Text on this Page; Signature Page Follows] -74- IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership By: PR Beaver Valley LLC, a Delaware limited liability company, its sole general partner By: PREIT Associates, L.P., a Delaware limited partnership, its sole member By: Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust, its general partner By: /s/ Jeffrey A. Linn ----------------------------------- Name: Jeffrey A. Linn Title: Executive Vice President COLUMN FINANCIAL, INC. By: /s/ Edmund Taylor ------------------------------ Name: Edmund Taylor Title: Vice President SCH. 3-1 EX-2.3 5 ex2-3.txt EXHIBIT 2.3 Exhibit 2.3 ================================================================================ PR BEAVER VALLEY LIMITED PARTNERSHIP, as mortgagor to COLUMN FINANCIAL, INC., as mortgagee -------------------------------------------------------- OPEN-END MORTGAGE AND SECURITY AGREEMENT -------------------------------------------------------- Dated as of April 4, 2002 PROPERTY SITUATED IN THE COUNTY OF BEAVER, COMMONWEALTH OF PENNSYLVANIA, KNOWN AS THE BEAVER VALLEY MALL, LOCATED IN CENTER TOWNSHIP. THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS UNDER THE NAMES OF MORTGAGOR, AS "DEBTOR", AND MORTGAGEE, AS "SECURED PARTY". (THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES PURSUANT TO 42 PA. C.S. ss.ss.8143 AND 8144, ACT NO. 126 OF 1990) DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO: Winston & Strawn 200 Park Avenue New York, New York 10166 Attn: Corey A. Tessler ================================================================================ OPEN-END MORTGAGE AND SECURITY AGREEMENT THIS OPEN-END MORTGAGE AND SECURITY AGREEMENT (this "Security Instrument") is made as of the 4th day of April, 2002, by PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership, having its principal place of business at 200 S. Broad St., 3rd Floor, Philadelphia, Pennsylvania 19102, as mortgagor ("Mortgagor"), to COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010-3629, Attention: Edmund Taylor, as mortgagee (together with its successors and assigns, "Mortgagee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, this Security Instrument is given to secure a loan (the "Loan") in the principal sum of Forty Eight Million and No/100 Dollars ($48,000,000.00) advanced pursuant to that certain Loan Agreement, dated as of the date hereof, between Mortgagor and Mortgagee (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement") and evidenced by that certain Promissory Note, dated the date hereof, made by Mortgagor in favor of Mortgagee (such Promissory Note, together with all extensions, renewals, replacements, restatements or modifications thereof, being hereinafter referred to as the "Note"); WHEREAS, Mortgagor desires to secure the payment of the Debt (as defined in the Loan Agreement) and the performance of all of its obligations under the Note, the Loan Agreement and the other Loan Documents (as herein defined); and WHEREAS, this Security Instrument is given pursuant to the Loan Agreement, and payment, fulfillment, and performance by Mortgagor of its obligations thereunder and under the other Loan Documents are secured hereby, and each and every term and provision of the Loan Agreement, the Note, and that certain Assignment of Leases and Rents dated as of the date hereof, made by Mortgagor in favor of Mortgagee, delivered in connection with this Security Agreement (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Assignment of Leases"), including, without limitation, the rights, remedies, obligations, covenants, conditions, agreements, indemnities, representations and warranties of the parties therein, are hereby incorporated by reference herein as though set forth in full and shall be considered a part of this Security Instrument (the Loan Agreement, the Note, this Security Instrument, the Assignment of Leases and all other documents evidencing or securing the Debt or executed or delivered in connection therewith, are hereinafter referred to collectively as the "Loan Documents"). NOW, THEREFORE, in consideration of the making of the Loan by Mortgagee to Mortgagor and the covenants, agreements, representations and warranties set forth in this Security Instrument, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor hereby agrees as follows: ARTICLE 1 - GRANTS OF SECURITY Section 1.1 Property Mortgaged. Mortgagor does hereby irrevocably MORTGAGE, GRANT, BARGAIN, SELL, PLEDGE, ASSIGN, WARRANT, TRANSFER AND CONVEY to Mortgagee and its successors and assigns the following property, rights, interests and estates now owned, or hereafter acquired by Mortgagor (collectively, the "Property"): (a) Land. The real property described in Exhibit A attached hereto and made a part hereof (the "Land"); (b) Additional Land. All additional lands, estates and development rights hereafter acquired by Mortgagor for use in connection with the Land and the development of the Land and all additional lands and estates therein which may, from time to time, by supplemental mortgage or otherwise be expressly made subject to the lien of this Security Instrument; (c) Improvements. The buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land (collectively, the "Improvements"); (d) Easements. All easements, rights-of-way or use, rights, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties, servitudes, tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating or pertaining to the Land and the Improvements and the reversions and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, to the center line thereof and all the estates, rights, titles, interests, rights of dower, rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the Land and the Improvements and every part and parcel thereof, with the appurtenances thereto; (e) Equipment. All "equipment," as such term is defined in Article 9 of the Uniform Commercial Code (as hereinafter defined), now owned or hereafter acquired by Mortgagor, which is used at or in connection with the Improvements or the Land or is located thereon or therein (including, but not limited to, all machinery, equipment, furnishings, and electronic data-processing and other office equipment now owned or hereafter acquired by Mortgagor and any and all additions, substitutions and replacements of any of the foregoing), together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto (collectively, the "Equipment"). Notwithstanding the foregoing, "Equipment" shall not include any property belonging to tenants under leases except to the extent that Mortgagor shall have any right or interest therein; 2 (f) Fixtures. All Equipment now owned, or the ownership of which is hereafter acquired, by Mortgagor which is so related to the Land and the Improvements forming part of the Property that it is deemed fixtures or real property under the law of the particular state in which the Equipment is located, including, without limitation, all building or construction materials intended for construction, reconstruction, alteration or repair of or installation on the Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now or hereafter attached to, installed in or used in connection with (temporarily or permanently) any of the Improvements or the Land, including, but not limited to, engines, devices for the operation of pumps, pipes, plumbing, call and sprinkler systems, fire extinguishing apparatuses and equipment, heating, ventilating, incinerating, electrical, air conditioning and air cooling equipment and systems, gas and electric machinery, appurtenances and equipment, pollution control equipment, security systems, disposals, dishwashers, refrigerators and ranges, recreational equipment and facilities of all kinds, and water, gas, electrical, storm and sanitary sewer facilities, utility lines and equipment (whether owned individually or jointly with others, and, if owned jointly, to the extent of Mortgagor's interest therein) and all other utilities whether or not situated in easements, all water tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply, and all other structures, together with all accessions, appurtenances, additions, replacements, betterments and substitutions for any of the foregoing and the proceeds thereof (collectively, the "Fixtures"). Notwithstanding the foregoing, "Fixtures" shall not include any property which tenants are entitled to remove pursuant to leases except to the extent that Mortgagor shall have any right or interest therein; (g) Personal Property. All furniture, furnishings, objects of art, machinery, goods, tools, supplies, appliances, general intangibles, contract rights, accounts, accounts receivable, franchises, licenses, certificates and permits, and all other personal property of any kind or character whatsoever as defined in and subject to the provisions of the Uniform Commercial Code, whether tangible or intangible, other than Fixtures, which are now or hereafter owned by Mortgagor and which are located within or about the Land and the Improvements, together with all accessories, replacements and substitutions thereto or therefor and the proceeds thereof (collectively, the "Personal Property"), and the right, title and interest of Mortgagor in and to any of the Personal Property which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Property is located (the "Uniform Commercial Code"), superior in lien to the lien of this Security Instrument and all proceeds and products of the above; (h) Leases and Rents. All leases, subleases or sub-subleases, lettings, licenses, concessions or other agreements (whether written or oral) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of the Land and the Improvements, and every modification, amendment or other agreement relating to such leases, subleases, sub-subleases, or other agreements entered into in connection with such leases, subleases, sub-subleases, or other agreements and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, heretofore or hereafter entered into (collectively, the "Leases"), whether before or after the filing by or against Mortgagor of any petition for relief under 11 U.S.C. ss.101 et seq., as the same may be amended from time to time (the "Bankruptcy Code") and all right, title and interest of Mortgagor, its successors and assigns therein and thereunder, including, without limitation, cash or securities deposited thereunder to secure the performance by the lessees of their obligations thereunder and all rents, additional rents, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements whether paid or accruing before or after the filing by or against Mortgagor of any petition for relief under the Bankruptcy Code (collectively, the "Rents"), and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt; (i) Condemnation Awards. All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property; (j) Insurance Proceeds. All proceeds in respect of the Property under any insurance policies covering the Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Property; (k) Tax Certiorari. All refunds, rebates or credits in connection with reduction in real estate taxes and assessments charged against the Property as a result of tax certiorari or any applications or proceedings for reduction; (l) Conversion. All proceeds of the conversion, voluntary or involuntary, of any of the foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash or liquidation claims; 3 (m) Rights. The right, in the name and on behalf of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interest of Mortgagee in the Property; (n) Agreements. All agreements, contracts, certificates, instruments, franchises, permits, licenses, plans, specifications and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Land and any part thereof and any Improvements or any business or activity conducted on the Land and any part thereof and all right, title and interest of Mortgagor therein and thereunder, including, without limitation, the right, upon the happening of any default hereunder, to receive and collect any sums payable to Mortgagor thereunder; (o) Trademarks. All tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records and all other general intangibles relating to or used in connection with the operation of the Property; (p) Accounts. All reserves, escrows and deposit accounts maintained by Mortgagor with respect to the Property, including, without limitation, all accounts established pursuant to the Cash Management Agreement, including, without limitation, that certain Account Number _______________ at Wilmington Trust of Pennsylvania; together with all deposits or wire transfers made to the Lockbox Account (as defined in the Loan Agreement) and all cash, checks, drafts, certificates, securities, investment property, financial assets, instruments and other property held therein from time to time and all proceeds, products, distributions or dividends or substitutions thereon and thereof; and (q) Other Rights. Any and all other rights of Mortgagor in and to the items set forth in Subsections (a) through (p) above. AND without limiting any of the other provisions of this Security Instrument, to the extent permitted by applicable law, Mortgagor expressly grants to Mortgagee, as secured party, a security interest in the portion of the Property which is or may be subject to the provisions of the Uniform Commercial Code which are applicable to secured transactions; it being understood and agreed that the Improvements and the Fixtures are part and parcel of the Land (the Land, the Improvements and the Fixtures being collectively referred to herein as the "Real Property") appropriated to the use thereof and, whether affixed or annexed to the Real Property or not, shall for the purposes of this Security Instrument be deemed conclusively to be real estate and mortgaged hereby. Section 1.2 Assignment of Rents. Mortgagor hereby absolutely and unconditionally assigns to Mortgagee all of Mortgagor's right, title and interest in and to all current and future Leases and Rents; it being intended by Mortgagor that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of the Assignment of Leases, the Cash Management Agreement and Section 7.1(h) of this Security Instrument, Mortgagee grants to Mortgagor a revocable license to collect, receive, use and enjoy the Rents and Mortgagor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums. 4 Section 1.3 Security Agreement. This Security Instrument is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Property. By executing and delivering this Security Instrument, Mortgagor hereby grants to Mortgagee, as security for the Obligations (hereinafter defined), a security interest in the Fixtures, the Equipment and the Personal Property to the full extent that the Fixtures, the Equipment and the Personal Property may be subject to the Uniform Commercial Code (said portion of the Property so subject to the Uniform Commercial Code being called the "Collateral"). If an Event of Default (as defined in the Loan Agreement) shall occur and be continuing, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Mortgagee after the occurrence and during the continuance of an Event of Default, Mortgagor shall, at its expense, assemble the Collateral and make it available to Mortgagee at a convenient place (at the Land if tangible property) reasonably acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses, including reasonable legal expenses and attorneys' fees, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral after the occurrence and during the continuance of an Event of Default. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Collateral sent to Mortgagor in accordance with the provisions hereof at least ten (10) days prior to such action, shall, except as otherwise provided by applicable law, constitute reasonable notice to Mortgagor. The proceeds of any disposition of the Collateral, or any part thereof, may, except as otherwise required by applicable law, be applied by Mortgagee to the payment of the Debt in such priority and proportions as Mortgagee in its discretion shall deem proper. Mortgagor's (debtor's) principal place of business is as set forth on page one hereof and the address of Mortgagee (secured party) is as set forth on page one hereof. Section 1.4 Fixture Filing. Certain of the Property is or will become "fixtures" (as that term is defined in the Uniform Commercial Code) on the Land, and this Security Instrument, upon being filed for record in the real estate records of the city or county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said Uniform Commercial Code upon such of the Property that is or may become fixtures. Section 1.5 Pledges of Monies Held. Mortgagor hereby pledges to Mortgagee any and all monies now or hereafter held by Mortgagee or on behalf of Mortgagee, including, without limitation, any sums deposited in the Lockbox Account, the Reserve Funds (as defined in the Loan Agreement) and Net Proceeds (as defined in the Loan Agreement), as additional security for the Obligations until expended or applied as provided in this Security Instrument. CONDITIONS TO GRANT TO HAVE AND TO HOLD the above granted and described Property unto and to the use and benefit of Mortgagee and its successors and assigns, forever; PROVIDED, HOWEVER, these presents are upon the express condition that, if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in the manner provided in the Note, the Loan Agreement and this Security Instrument, shall well and truly perform the Other Obligations (hereinafter defined) as set forth in this Security Instrument and shall well and truly abide by and comply with each and every covenant and condition set forth herein and in the Note, the Loan Agreement and the other Loan Documents, these presents and the estate hereby granted shall cease, terminate and be void; provided, however, that Mortgagor's obligation to indemnify and hold harmless Mortgagee pursuant to the provisions hereof shall survive any such payment or release. 5 ARTICLE 2 - DEBT AND OBLIGATIONS SECURED Section 2.1 Debt. This Security Instrument and the grants, assignments and transfers made in Article 1 are given for the purpose of securing the Debt. Section 2.2 Other Obligations. This Security Instrument and the grants, assignments and transfers made in Article 1 are also given for the purpose of securing the following (the "Other Obligations"): (a) the performance of all other obligations of Mortgagor contained herein; (b) the performance of each obligation of Mortgagor contained in the Loan Agreement and any other Loan Document; and (c) the performance of each obligation of Mortgagor contained in any renewal, extension, amendment, modification, consolidation, change of, or substitution or replacement for, all or any part of the Note, the Loan Agreement or any other Loan Document. Section 2.3 Debt and Other Obligations. Mortgagor's obligations for the payment of the Debt and the performance of the Other Obligations shall be referred to collectively herein as the "Obligations." ARTICLE 3 - MORTGAGOR COVENANTS Mortgagor covenants and agrees that: Section 3.1 Payment of Debt. Mortgagor will pay the Debt at the time and in the manner provided in the Loan Agreement, the Note and this Security Instrument. Section 3.2 Incorporation by Reference. All the covenants, conditions and agreements contained in (a) the Loan Agreement, (b) the Note and (c) all and any of the other Loan Documents, are hereby made a part of this Security Instrument to the same extent and with the same force as if fully set forth herein. Section 3.3 Insurance. Mortgagor shall obtain and maintain, or cause to be maintained, in full force and effect at all times insurance with respect to Mortgagor and the Property as required pursuant to the Loan Agreement. Section 3.4 Maintenance of Property. Mortgagor shall cause the Property to be maintained in a good and safe condition and repair. The Improvements, the Fixtures, the Equipment and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Fixtures, the Equipment or the Personal Property, tenant finish and refurbishment of the Improvements) without the consent of Mortgagee. Mortgagor shall promptly repair, replace or rebuild any part of the Property which may be destroyed by any Casualty (as defined in the Loan Agreement) or become damaged, worn or dilapidated or which may be affected by any Condemnation (as defined in the Loan Agreement), and shall complete and pay for any structure at any time in the process of construction or repair on the Land. 6 Section 3.5 Waste. Mortgagor shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or allow the cancellation of any Policy (as defined in the Loan Agreement), or do or permit to be done thereon anything that may in any way materially impair the value of the Property or the security of this Security Instrument. Mortgagor will not, without the prior written consent of Mortgagee, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof. Section 3.6 Payment for Labor and Materials. (a) Mortgagor will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials ("Labor and Material Costs") incurred in connection with the Property and never permit to exist beyond the due date thereof in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests hereof except for the Permitted Encumbrances (as defined in the Loan Agreement). (b) After prior written notice to Mortgagee, Mortgagor, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any of the Labor and Material Costs, provided that (i) no Event of Default has occurred and is continuing under the Loan Agreement, the Note, this Security Instrument or any of the other Loan Documents, (ii) Mortgagor is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property, (iii) such proceeding shall suspend the collection of the Labor and Material Costs from Mortgagor and from the Property or Mortgagor shall have paid all of the Labor and Material Costs under protest, (iv) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Mortgagor is subject and shall not constitute a default thereunder, (v) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, and (vi) Mortgagor shall have furnished the security as may be required in the proceeding, or as may be reasonably requested by Mortgagee to insure the payment of any contested Labor and Material Costs, together with all interest and penalties thereon. Section 3.7 Performance of Other Agreements. Mortgagor shall observe and perform each and every term, covenant and provision to be observed or performed by Mortgagor pursuant to the Loan Agreement, any other Loan Document and any other agreement or recorded instrument affecting or pertaining to the Property and any amendments, modifications or changes thereto. Section 3.8 Change of Name, Identity or Structure. Mortgagor shall not change Mortgagor's name, identity (including its trade name or names) or, if not an individual, Mortgagor's corporate, partnership or other structure without notifying Mortgagee of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Mortgagor's structure, without first obtaining the prior written consent of Mortgagee. Mortgagor shall execute and deliver to Mortgagee, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Mortgagee to establish or maintain the validity, perfection and priority of the security interest granted herein. At the request of Mortgagee, Mortgagor shall execute a certificate in form satisfactory to Mortgagee listing the trade names under which Mortgagor intends to operate the Property, and representing and warranting that Mortgagor does business under no other trade name with respect to the Property. Section 3.9 Title. Mortgagor has good, marketable and insurable fee simple title to the real property comprising part of the Property and good title to the balance of such Property, free and clear all Liens (as defined in the Loan Agreement) whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. The Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the Property or Mortgagor's ability to repay the Loan. This Security Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. There are no claims for payment for work, labor or materials affecting the Property which are past due and are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents unless such claims for payments are being contested in accordance with the terms and conditions of this Security Instrument. 7 ARTICLE 4 - OBLIGATIONS AND RELIANCES Section 4.1 Relationship of Mortgagor and Mortgagee. The relationship between Mortgagor and Mortgagee is solely that of debtor and creditor, and Mortgagee has no fiduciary or other special relationship with Mortgagor, and no term or condition of any of the Loan Agreement, the Note, this Security Instrument and the other Loan Documents shall be construed so as to deem the relationship between Mortgagor and Mortgagee to be other than that of debtor and creditor. Section 4.2 No Reliance on Mortgagee. The general partners, members, principals and (if Mortgagor is a trust) beneficial owners of Mortgagor are experienced in the ownership and operation of properties similar to the Property, and Mortgagor and Mortgagee are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property. Mortgagor is not relying on Mortgagee's expertise, business acumen or advice in connection with the Property. Section 4.3 No Mortgagee Obligations. (a) Notwithstanding the provisions of Subsections 1.1(h) and (n) or Section 1.2, Mortgagee is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents. (b) By accepting or approving anything required to be observed, performed or fulfilled or to be given to Mortgagee pursuant to this Security Instrument, the Loan Agreement, the Note or the other Loan Documents, including, without limitation, any officer's certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Mortgagee shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Mortgagee. Section 4.4 Reliance. Mortgagor recognizes and acknowledges that in accepting the Loan Agreement, the Note, this Security Instrument and the other Loan Documents, Mortgagee is expressly and primarily relying on the truth and accuracy of the warranties and representations set forth in Section 4.1 of the Loan Agreement without any obligation to investigate the Property and notwithstanding any investigation of the Property by Mortgagee; that such reliance existed on the part of Mortgagee prior to the date hereof, that the warranties and representations are a material inducement to Mortgagee in making the Loan; and that Mortgagee would not be willing to make the Loan and accept this Security Instrument in the absence of the warranties and representations as set forth in Section 4.1 of the Loan Agreement. 8 ARTICLE 5 - FURTHER ASSURANCES Section 5.1 Recording of this Security Instrument, Etc. Mortgagor forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument and any of the other Loan Documents creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Mortgagee in, the Property. Mortgagor will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, this Security Instrument, the other Loan Documents, any note, deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by law so to do. Section 5.2 Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, mortgages, assignments, notices of assignments, transfers and assurances as Mortgagee shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Mortgagee the property and rights hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument, or for complying with all Legal Requirements (as defined in the Loan Agreement). Mortgagor, on demand, will execute and deliver, and in the event it shall fail to so execute and deliver, hereby authorizes Mortgagee to execute in the name of Mortgagor or without the signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more financing statements to evidence more effectively the security interest of Mortgagee in the Property. Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Mortgagee at law and in equity, including without limitation, such rights and remedies available to Mortgagee pursuant to this Section 5.2. Section 5.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws. (a) If any law is enacted or adopted or amended after the date of this Security Instrument which deducts the Debt from the value of the Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the Property, Mortgagor will pay the tax, with interest and penalties thereon, if any. If Mortgagee is advised by counsel chosen by it that the payment of tax by Mortgagor would be unlawful or taxable to Mortgagee or unenforceable or provide the basis for a defense of usury then Mortgagee shall have the option by written notice of not less than one hundred twenty (120) days to declare the Debt immediately due and payable. 9 (b) Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges (as those terms are defined in the Loan Agreement) assessed against the Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Property, or any part thereof, for real estate tax purposes by reason of this Security Instrument or the Debt. If such claim, credit or deduction shall be required by law, Mortgagee shall have the option, by written notice of not less than one hundred twenty (120) days, to declare the Debt immediately due and payable. (c) If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument, or any of the other Loan Documents or impose any other tax or charge on the same, Mortgagor will pay for the same, with interest and penalties thereon, if any. Section 5.4 Severing of Documents. This Security Instrument and the Note shall, at any time until the same shall be fully paid and satisfied, at the sole election of Mortgagee, be severed into two or more notes and two or more security instruments in such denominations as Mortgagee shall determine in its sole discretion, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Mortgagor, upon written request of Mortgagee, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Mortgagee and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of this Security Instrument, and containing terms, provisions and clauses similar to those contained herein and in the Note, and such other documents and instruments as may be required by Mortgagee, however, any such substitute notes shall have the same initial weighted average coupon of the original note (but such substitute notes may change the interest rate and amortization of the Loan so long as the aggregate monthly payment of such note(s) shall be the same as the constant monthly payment due under the Note). Section 5.5 Replacement Documents. Upon receipt of an affidavit of an officer of Mortgagee as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Mortgagor will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor. Mortgagee, simultaneously with the delivery of a replacement Note in accordance with the forgoing sentence shall deliver to Mortgagor or cause any custodian or loan servicer who was responsible for the safekeeping of the Note at the time of its loss, theft, destruction or mutilation to deliver to Mortgage, an indemnity indemnifying and holding Mortgagor harmless from and against any liability, cost or expense arising solely as a result of the Note having been lost, stolen, destroyed or mutilated. ARTICLE 6 - DUE ON SALE/ENCUMBRANCE Section 6.1 Mortgagee Reliance. Mortgagor acknowledges that Mortgagee has examined and relied on the experience of Mortgagor and its general partners, members, principals and (if Mortgagor is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will continue to rely on Mortgagor's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the Other Obligations. Mortgagor acknowledges that Mortgagee has a valid interest in maintaining the value of the Property so as to ensure that, should Mortgagor default in the repayment of the Debt or the performance of the Other Obligations, Mortgagee can recover the Debt by a sale of the Property. 10 Section 6.2 No Sale/Encumbrance. Neither Mortgagor nor any Restricted Party (as defined in the Loan Agreement) shall Transfer (as defined in the Loan Agreement) the Property or any part thereof or any interest therein or permit or suffer the Property or any part thereof or any interest therein to be Transferred other than as expressly permitted pursuant to the terms of the Loan Agreement. ARTICLE 7 - RIGHTS AND REMEDIES UPON DEFAULT Section 7.1 Remedies. Upon the occurrence and during the continuance of any Event of Default, Mortgagor agrees that Mortgagee may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Mortgagor and in and to the Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Mortgagee may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Mortgagee: (a) declare the entire unpaid Debt to be immediately due and payable; (b) institute proceedings, judicial or otherwise, for the complete foreclosure of this Security Instrument under any applicable provision of law, in which case the Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner; (c) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Security Instrument for the portion of the Debt then due and payable, subject to the continuing lien and security interest of this Security Instrument for the balance of the Debt not then due, unimpaired and without loss of priority; (d) sell for cash or upon credit the Property or any part thereof and all estate, claim, demand, right, title and interest of Mortgagor therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law; (e) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Note, the Loan Agreement or in the other Loan Documents; (f) recover judgment on the Note either before, during or after any proceedings for the enforcement of this Security Instrument or the other Loan Documents; (g) apply for the appointment of a receiver, trustee, liquidator or conservator of the Property, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Mortgagor, any guarantor or indemnitor with respect to the Loan or any Person liable for the payment of the Debt, and Mortgagor hereby consents to the appointment of such receiver, trustee, liquidator or conservator; 11 (h) the license granted to Mortgagor under Section 1.2 hereof shall automatically be revoked and Mortgagee may enter into or upon the Property, either personally or by its agents, nominees or attorneys, and dispossess Mortgagor and its agents and servants therefrom, without liability for trespass, damages or otherwise and exclude Mortgagor and its agents or servants wholly therefrom, and take possession of all books, records and accounts relating thereto and Mortgagor agrees to surrender possession of the Property and of such books, records and accounts to Mortgagee upon demand, and thereupon Mortgagee may (i) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat; (ii) complete any construction on the Property in such manner and form as Mortgagee deems advisable; (iii) make alterations, additions, renewals, replacements and improvements to or on the Property; (iv) exercise all rights and powers of Mortgagor with respect to the Property, whether in the name of Mortgagor or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the Property and every part thereof; (v) require Mortgagor to pay monthly in advance to Mortgagee, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be occupied by Mortgagor; (vi) require Mortgagor to vacate and surrender possession of the Property to Mortgagee or to such receiver and, in default thereof, Mortgagor may be evicted by summary proceedings or otherwise; and (vii) apply the receipts from the Property to the payment of the Debt, in such order, priority and proportions as Mortgagee shall deem appropriate in its sole discretion after deducting therefrom all expenses (including reasonable attorneys' fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the Taxes, Other Charges, insurance and other expenses in connection with the Property, as well as just and reasonable compensation for the services of Mortgagee, its counsel, agents and employees; (i) exercise any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing: (i) the right to take possession of the Fixtures, the Equipment and the Personal Property or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Fixtures, the Equipment and the Personal Property, and (ii) request Mortgagor at its expense to assemble the Fixtures, the Equipment and the Personal Property and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Fixtures, the Equipment and/or the Personal Property sent to Mortgagor in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute commercially reasonable notice to Mortgagor; (j) apply any sums then deposited or held in escrow or otherwise by or on behalf of Mortgagee in accordance with the terms of the Loan Agreement, this Security Instrument or any other Loan Document to the payment of the following items in any order in its uncontrolled discretion: (i) Taxes and Other Charges, (ii) Insurance Premiums (as defined in the Loan Agreement), (iii) Interest on the unpaid principal balance of the Note, (iv) Amortization of the unpaid principal balance of the Note, and (v) All other sums payable pursuant to the Note, the Loan Agreement, this Security Instrument and the other Loan Documents, including, without limitation, advances made by Mortgagee pursuant to the terms of this Security Instrument; (k) apply the undisbursed balance of any Net Proceeds Deficiency deposit (as defined in the Loan Agreement), together with interest thereon, to the payment of the Debt in such order, priority and proportions as Mortgagee shall deem to be appropriate in its discretion; or (l) pursue such other remedies as Mortgagee may have under applicable law. 12 In the event of a sale, by foreclosure, power of sale or otherwise, of less than all of Property, this Security Instrument shall continue as a lien and security interest on the remaining portion of the Property unimpaired and without loss of priority. Section 7.2 Application of Proceeds. The purchase money, proceeds and avails of any disposition of the Property, and/or any part thereof, or any other sums collected by Mortgagee pursuant to the Note, this Security Instrument or the other Loan Documents, may be applied by Mortgagee to the payment of the Debt in such priority and proportions as Mortgagee in its discretion shall deem proper. Section 7.3 Right to Cure Defaults. Upon the occurrence and during the continuance of any Event of Default, Mortgagee may, but without any obligation to do so and without notice to or demand on Mortgagor and without releasing Mortgagor from any obligation hereunder, make any payment or do any act required of Mortgagor hereunder in such manner and to such extent as Mortgagee may deem necessary to protect the security hereof. Mortgagee is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property or to foreclose this Security Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this Section 7.3, shall constitute a portion of the Debt and shall be due and payable to Mortgagee upon demand. All such costs and expenses incurred by Mortgagee in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate (as defined in the Loan Agreement), for the period after notice from Mortgagee that such cost or expense was incurred to the date of payment to Mortgagee. All such costs and expenses incurred by Mortgagee together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument and the other Loan Documents and shall be immediately due and payable upon demand by Mortgagee therefor. Section 7.4 Actions and Proceedings. Mortgagee has the right to appear in and defend any action or proceeding brought with respect to the Property and to bring any action or proceeding, in the name and on behalf of Mortgagor, which Mortgagee, in its discretion, decides should be brought to protect its interest in the Property. Section 7.5 Recovery of Sums Required To Be Paid. Mortgagee shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Mortgagor existing at the time such earlier action was commenced. Section 7.6 Examination of Books and Records. At reasonable times and upon reasonable notice, Mortgagee, its agents, accountants and attorneys shall have the right to examine the records, books, management and other papers of Mortgagor which reflect upon its financial condition, at the Property or at any office regularly maintained by Mortgagor where the books and records are located. Mortgagee and its agents shall have the right to make copies and extracts from the foregoing records and other papers. In addition, at reasonable times and upon reasonable notice, Mortgagee, its agents, accountants and attorneys shall have the right to examine and audit the books and records of Mortgagor pertaining to the income, expenses and operation of the Property during reasonable business hours at any office of Mortgagor where the books and records are located. This Section 7.6 shall apply throughout the term of the Note and without regard to whether an Event of Default has occurred or is continuing. 13 Section 7.7 Other Rights, Etc. (a) The failure of Mortgagee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Security Instrument. Mortgagor shall not be relieved of Mortgagor's obligations hereunder by reason of (i) the failure of Mortgagee to comply with any request of Mortgagor or any guarantor or indemnitor with respect to the Loan to take any action to foreclose this Security Instrument or otherwise enforce any of the provisions hereof or of the Note or the other Loan Documents, (ii) the release, regardless of consideration, of the whole or any part of the Property, or of any person liable for the Debt or any portion thereof, or (iii) any agreement or stipulation by Mortgagee extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Security Instrument or the other Loan Documents. (b) It is agreed that the risk of loss or damage to the Property is on Mortgagor, and Mortgagee shall have no liability whatsoever for decline in value of the Property, for failure to maintain the Policies, or for failure to determine whether insurance in force is adequate as to the amount of risks insured. Possession by Mortgagee shall not be deemed an election of judicial relief if any such possession is requested or obtained with respect to any of the Property or collateral not in Mortgagee's possession. (c) Mortgagee may resort for the payment of the Debt to any other security held by Mortgagee in such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Mortgagee thereafter to foreclose this Security Instrument. The rights of Mortgagee under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. Section 7.8 Right to Release Any Portion of the Property. Mortgagee may release any portion of the Property for such consideration as Mortgagee may require without, as to the remainder of the Property, in any way impairing or affecting the lien or priority of this Security Instrument, or improving the position of any subordinate lienholder with respect thereto, except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Mortgagee for such release, and may accept by assignment, pledge or otherwise any other property in place thereof as Mortgagee may require without being accountable for so doing to any other lienholder. This Security Instrument shall continue as a lien and security interest in the remaining portion of the Property. Section 7.9 Violation of Laws. If the Property is not in material compliance with Legal Requirements, Mortgagee may impose reasonable additional requirements upon Mortgagor in connection herewith including, without limitation, monetary reserves or financial equivalents. Section 7.10 Recourse and Choice of Remedies. Notwithstanding any other provision of this Security Instrument or the Loan Agreement, including, without limitation, Section 9.4 of the Loan Agreement, Mortgagee and other Indemnified Parties (as hereinafter defined) are entitled to enforce the obligations of Mortgagor, any guarantor and indemnitor contained in Sections 9.2, 9.3 and 9.4 herein without first resorting to or exhausting any security or collateral and without first having recourse to the Note or any of the Property, through foreclosure or acceptance of a deed in lieu of foreclosure or otherwise, and in the event Mortgagee commences a foreclosure action against the Property, Mortgagee is entitled to pursue a deficiency judgment with respect to such obligations against Mortgagor and any guarantor or indemnitor with respect to the Loan. The provisions of Sections 9.2, 9.3 and 9.4 herein are exceptions to any non-recourse or exculpation provisions in the Loan Agreement, the Note, this Security Instrument or the other Loan Documents, and Mortgagor and any guarantor or indemnitor with respect to the Loan are fully and personally liable for the obligations pursuant to Sections 9.2, 9.3 and 9.4 herein. The liability of Mortgagor and any guarantor or indemnitor with respect to the Loan pursuant to Sections 9.2, 9.3 and 9.4 herein is not limited to the original principal amount of the Note. Notwithstanding the foregoing, nothing herein shall inhibit or prevent Mortgagee from foreclosing or exercising any other rights and remedies pursuant to the Loan Agreement, the Note, this Security Instrument and the other Loan Documents, whether simultaneously with foreclosure proceedings or in any other sequence. A separate action or actions may be brought and prosecuted against Mortgagor pursuant to Sections 9.2, 9.3 and 9.4 herein whether or not action is brought against any other Person or whether or not any other Person is joined in the action or actions. In addition, Mortgagee shall have the right but not the obligation to join and participate in, as a party if it so elects, any administrative or judicial proceedings or actions initiated in connection with any matter addressed in Article 8 or Section 9.4 herein. 14 Section 7.11 Right of Entry. Upon reasonable notice to Mortgagor, Mortgagee and its agents shall have the right to enter and inspect the Property at all reasonable times. ARTICLE 8 - ENVIRONMENTAL HAZARDS Section 8.1 Environmental Representations and Warranties. Except as otherwise disclosed by that certain Phase I environmental report (or Phase II environmental report, if required) with respect to the Property delivered to Mortgagee by Mortgagor in connection with the origination of the Loan (such report is referred to below as the "Environmental Report"), (a) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Property, except those that are both (i) in compliance with Environmental Laws (defined below) and with permits issued pursuant thereto and (ii) fully disclosed to Mortgagee in writing pursuant the Environmental Report; (b) there are no past, present or, to the best of Mortgagor's knowledge, threatened Releases (defined below) of Hazardous Substances in, on, under or from the Property which has not been fully remediated in accordance with Environmental Law; (c) there is, to the best of Mortgagor's knowledge, no threat of any Release of Hazardous Substances migrating to the Property; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been fully remediated in accordance with Environmental Law; (e) Mortgagor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a Governmental Authority) relating to Hazardous Substances or Remediation (defined below) thereof, of possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Mortgagor has truthfully and fully provided to Mortgagee, in writing, any and all information relating to conditions in, on, under or from the Property that is known to Mortgagor and all information that is contained in Mortgagor's files and records, including, but not limited to, any reports relating to Hazardous Substances in, on, under or from the Property and/or to the environmental condition of the Property. As used herein: (a) "Environmental Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances or relating to liability for or costs of other actual or threatened danger to human health or the environment and applicable to Mortgagor or the Property. The term "Environmental Law" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. The term "Environmental Law" also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations, permits or authorizations, and the like, as well as common law, that (i) condition transfer of property upon a negative declaration or other approval of a Governmental Authority of the environmental condition of the Property; (ii) require notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Property to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property; (iii) impose conditions or requirements in connection with permits or other authorization for lawful activity; (iv) relate to nuisance, trespass or other causes of action related to the Property; or (v) relate to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Property. 15 (b) "Hazardous Substances" include, but are not limited to, any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws. (c) "Release" of any Hazardous Substance includes but is not limited to any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances. (d) "Remediation" includes, but is not limited to, (i) any response, remedial, removal, or corrective action; (ii) any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance; (iii) any actions to prevent, cure or mitigate any Release of any Hazardous Substance; (iv) any action to comply with any Environmental Laws or with any permits issued pursuant thereto; and (v) any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to in this Article 8. 16 (e) Environmental Covenants. Mortgagor covenants and agrees that: (a) all uses and operations on or of the Property, whether by Mortgagor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (b) there shall be no Releases of Hazardous Substances in, on, under or from the Property that remain unremedied in accordance with Environmental Law for a period of thirty (30) days from the date of Mortgagor obtaining knowledge (actual or constructive) of such Release; (c) there shall be no Hazardous Substances in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto and (ii) fully disclosed to Mortgagee in writing; (d) Mortgagor shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Mortgagor or any other Person (the "Environmental Liens"); (e) Mortgagor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 8.3 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Mortgagor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any written request of Mortgagee made after the occurrence of an Event or Default or in the event that Mortgagee has reason to believe that an environmental hazard exists on the Property (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas), and share with Mortgagee the reports and other results thereof, and Mortgagee and the other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (g) Mortgagor shall, at its sole cost and expense, comply with all reasonable written requests of Mortgagee made in the event that Mortgagee has reason to believe that an environmental hazard exists on the Property (i) effectuate Remediation of any condition (including, but not limited to, a Release of a Hazardous Substance) in, on, under or from the Property, (ii) comply with any Environmental Law, (iii) comply with any directive from any Governmental Authority, provided, however, that after prior written notice to Mortgagee, Mortgagor, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the validity or application in whole or in part of any of such directive, provided that (T) no Event of Default has occurred and is continuing under the Loan Agreement, the Note, this Security Instrument or any of the other Loan Documents, (U) Mortgagor is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property, (V) such proceeding shall suspend the obligation of Mortgagor to comply with such directive, (W) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Mortgagor is subject and shall not constitute a default thereunder, (X) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, (Y) Mortgagor shall have furnished the security as may be required in the proceeding, or as may be reasonably requested by Mortgagee to insure the compliance with such directive, and (Z) such proceeding shall be permitted under and be conducted in accordance with Environmental Law; and (iv) take any other reasonable action necessary or appropriate for protection of human health or the environment; (h) Mortgagor shall not do or allow any tenant or other user of the Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Property), impairs or may impair the value of the Property, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Property; (i) Mortgagor shall immediately notify Mortgagee in writing of (i) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Property of which Mortgagor has actual knowledge, (ii) any non-compliance with any Environmental Laws related in any way to the Property of which Mortgagor has actual knowledge, (iii) any actual or potential Environmental Lien of which Mortgagor has actual knowledge, (iv) any required or proposed Remediation of environmental conditions relating to the Property of which Mortgagor has actual knowledge, and (v) any written or oral notice or other communication of which Mortgagor becomes aware from any source whatsoever (including, but not limited to, a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Article 8; and (j) Mortgagor covenants and agrees: (A) within thirty (30) days after the date hereof, to (i) notify Sears (as defined in the Loan Agreement) that it must reissue the appropriate documentation to the Pennsylvania Department of Environmental Protection correcting inconsistencies contained in the document dated October 25, 1999 in connection with the closure of the former waste oil tank as more particularly described in that certain phase II environmental site assessment for the Property prepared by URS dated March 6, 2002, and (ii) use its best efforts to ensure that same is completed to the satisfaction of Mortgagor and in compliance with all Environmental Laws, and (B) within fifteen (15) days of Mortgagor's receipt of evidence of the reissuing of such documentation, to provide copies of same to Mortgagee. 17 Section 8.2 Mortgagee's Rights. In the event that Mortgagee has reason to believe that an environmental hazard exists on the Property that does not, in Mortgagee's sole discretion, endanger any tenants or other occupants of the Property or their guests or the general public or materially and adversely affect the value of the Property, upon reasonable notice from Mortgagee, Mortgagor shall, at Mortgagor's expense, promptly cause an engineer or consultant satisfactory to Mortgagee to conduct any environmental assessment or audit (the scope of which shall be determined in Mortgagee's sole and absolute discretion) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Mortgagee and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to Mortgagee within a reasonable period or if Mortgagee has reason to believe that an environmental hazard exists on the Property that, in Mortgagee's sole judgment, endangers any tenant or other occupant of the Property or their guests or the general public or may materially and adversely affect the value of the Property, upon reasonable notice to Mortgagor, Mortgagee and any other Person designated by Mortgagee, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Property at all reasonable times to assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Mortgagee's sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Mortgagor shall cooperate with and provide Mortgagee and any such Person designated by Mortgagee with access to the Property. ARTICLE 9 - INDEMNIFICATION Section 9.1 General Indemnification. Mortgagor shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement, punitive damages, and foreseeable and unforeseeable consequential damages, of whatever kind or nature (including, but not limited to, reasonable attorneys' fees and other costs of defense) (collectively, the "Losses") imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) ownership of this Security Instrument, the Property or any interest therein or receipt of any Rents; (b) any amendment to, or restructuring of, the Debt, the Note, the Loan Agreement, this Security Instrument, or any other Loan Documents; (c) any and all lawful action that may be taken by Mortgagee in connection with the enforcement of the provisions of this Security Instrument, the Loan Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Mortgagor, any guarantor or Mortgagor and/or any partner, joint venturer or shareholder thereof becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding; (d) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (f) any failure on the part of Mortgagor to perform or be in compliance with any of the terms of this Security Instrument, the Note, the Loan Agreement or any of the other Loan Documents; (g) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (h) the failure of any person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Security Instrument, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Security Instrument is made; (i) any failure of the Property to be in compliance with any Legal Requirements; (j) the enforcement by any Indemnified Party of the provisions of this Article 9; (k) any and all claims and demands whatsoever which may be asserted against Mortgagee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (l) the payment of any commission, charge or brokerage fee to anyone claiming through Mortgagor which may be payable in connection with the funding of the Loan; or (m) any misrepresentation made by Mortgagor in this Security Instrument or any other Loan Document; excepting, in each of the foregoing events described in clauses (a) through (k), inclusive, any such Losses that arise solely out of the gross negligence or willful misconduct of any Indemnified Party. Any amounts payable to Mortgagee by reason of the application of this Section 9.1 shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Mortgagee until paid. For purposes of this Article 9, the term "Indemnified Parties" means Mortgagee and any Person who is or will have been involved in the origination of the Loan, any Person who is or will have been involved in the servicing of the Loan secured hereby, any Person in whose name the encumbrance created by this Security Instrument is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan secured hereby (including, but not limited to, investors or prospective investors in the Securities (as defined in the Loan Agreement), as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan secured hereby for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and any successors by merger, consolidation or acquisition of all or a substantial portion of Mortgagee's assets and business). 18 Section 9.2 Mortgage and/or Intangible Tax. Mortgagor shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Security Instrument, the Note or any of the other Loan Documents, but excluding any income, franchise or other similar taxes. Section 9.3 ERISA Indemnification. Mortgagor shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys' fees and costs incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Mortgagee's sole discretion) that Mortgagee may incur, directly or indirectly, as a result of a default under Sections 4.1.9 or 5.2.12 of the Loan Agreement. Section 9.4 Environmental Indemnification. Mortgagor shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses and costs of Remediation (whether or not performed voluntarily), engineers' fees, environmental consultants' fees, and costs of investigation (including, but not limited to, sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposed upon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Property; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property; (c) any activity by Mortgagor, any Person affiliated with Mortgagor or any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any tine located in, under, on or above the Property; (d) any activity by Mortgagor, any Person affiliated with Mortgagor or any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including, but not limited to, any removal, remedial or corrective action; (e) any past or present non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including, but not limited to, any failure by Mortgagor, any Affiliate of Mortgagor or any tenant or other user of the Property to comply with any order of any Governmental Authority in connection with any Environmental Laws; (f) the imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in Article 8 and this Section 9.4; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including, but not limited to, costs to investigate and assess such injury, destruction or loss; (i) any acts of Mortgagor or other users of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances owned or possessed by such Mortgagor or other users, at any facility or incineration vessel owned or operated by another Person and containing such or any similar Hazardous Substance; (j) any acts of Mortgagor or other users of the Property in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property damage arising under any statutory or common law or tort law theory, including, but not limited to, damages assessed for the maintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property in violation of any Environmental Law or resulting from the presence on the Property of any Hazardous Substance; (1) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to Article 8. This indemnity shall survive any termination, satisfaction or foreclosure of this Security Instrument, subject to the provisions of Section 10.5. 19 Section 9.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses. Upon written request by any Indemnified Party, Mortgagor shall defend such Indemnified Party (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals reasonably approved by the Indemnified Parties. Notwithstanding the foregoing, if the defendants in any such claim or proceeding include both Mortgagor and any Indemnified Party and Mortgagor and such Indemnified Party shall have reasonably concluded that there are any legal defenses available to it and/or other Indemnified Parties that are different from or additional to those available to Mortgagor, such Indemnified Party shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Party, provided that no compromise or settlement shall be entered without Mortgagor's consent, which consent shall not be unreasonably withheld. Upon demand, Mortgagor shall pay or, in the sole and absolute discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith. 20 ARTICLE 10 - WAIVERS Section 10.1 Waiver of Counterclaim. To the extent permitted by applicable law, Mortgagor hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Mortgagee arising out of or in any way connected with this Security Instrument, the Loan Agreement, the Note, any of the other Loan Documents, or the Obligations. Section 10.2 Marshalling and Other Matters. To the extent permitted by applicable law, Mortgagor hereby waives the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Further, Mortgagor hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Mortgagor, and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date of this Security Instrument and on behalf of all persons to the extent permitted by applicable law. Section 10.3 Waiver of Notice. To the extent permitted by applicable law, Mortgagor shall not be entitled to any notices of any nature whatsoever from Mortgagee except with respect to matters for which this Security Instrument specifically and expressly provides for the giving of notice by Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is required by applicable law to give notice, and Mortgagor hereby expressly waives the right to receive any notice from Mortgagee with respect to any matter for which this Security Instrument does not specifically and expressly provide for the giving of notice by Mortgagee to Mortgagor. Section 10.4 Waiver of Statute of Limitations. To the extent permitted by applicable law, Mortgagor hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its Other Obligations. Section 10.5 Survival. The indemnifications made pursuant to Sections 9.3 and 9.4 herein and the representations and warranties, covenants, and other obligations arising under Article 8 hereof, shall continue indefinitely in full force and effect and shall survive and shall in no way be impaired by any of the following: (a) any satisfaction or other termination of this Security Instrument; (b) any assignment or other transfer of all or any portion of this Security Instrument or Mortgagee's interest in the Property (but, in such case, shall benefit both Indemnified Parties and any assignee or transferee); (c) any exercise of Mortgagee's rights and remedies pursuant hereto, including, but not limited to, foreclosure or acceptance of a deed in lieu of foreclosure; (d) any exercise of any rights and remedies pursuant to the Loan Agreement, the Note or any of the other Loan Documents; (e) any transfer of all or any portion of the Property (whether by Mortgagor or by Mortgagee following foreclosure or acceptance of a deed in lieu of foreclosure or at any other time); (f) any amendment to this Security Instrument, the Loan Agreement, the Note or the other Loan Documents; and (g) any act or omission that might otherwise be construed as a release or discharge of Mortgagor from the obligations pursuant hereto. ARTICLE 11 - EXCULPATION The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by reference into this Security Instrument to the same extent and with the same force as if fully set forth herein. 21 ARTICLE 12 - NOTICES All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement. ARTICLE 13 - APPLICABLE LAW Section 13.1 Governing Law. This Security Instrument shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. Section 13.2 Usury Laws. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, (a) all agreements and communications between Mortgagor and Mortgagee are hereby and shall automatically be limited so that, after taking into account all amounts deemed interest, the interest contracted for, charged or received by Mortgagee shall never exceed the maximum lawful rate or amount; (b) in calculating whether any interest exceeds the lawful maximum, all such interest shall be amortized, prorated, allocated and spread over the full amount and term of all principal indebtedness of Mortgagor to Mortgagee; and (c) if through any contingency or event, Mortgagee receives or is deemed to receive interest in excess of the lawful maximum, any such excess shall be deemed to have been applied toward payment of the principal of any and all then outstanding indebtedness of Mortgagor to Mortgagee, or if there is no such indebtedness, shall immediately be returned to Mortgagor. Section 13.3 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Security Instrument may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Security Instrument invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law. If any term of this Security Instrument or any application thereof shall be invalid or unenforceable, the remainder of this Security Instrument and any other application of the term shall not be affected thereby. ARTICLE 14 - DEFINITIONS All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Security Instrument may be used interchangeably in singular or plural form and the word "Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the Property or any part thereof or any interest therein," the word "Mortgagee" shall mean "Mortgagee and any subsequent holder of the Note," the word "Note" shall mean "the Note and any other evidence of indebtedness secured by this Security Instrument," the word "Property" shall include any portion of the Property and any interest therein, and the phrases "attorneys' fees", "legal fees" and "counsel fees" shall include any and all attorneys', paralegal and law clerk fees and disbursements, including, but not limited to, fees and disbursements at the pre-trial, trial and appellate levels incurred or paid by Mortgagee in protecting its interest in the Property, the Leases and the Rents and enforcing its rights hereunder. 22 ARTICLE 15 - MISCELLANEOUS PROVISIONS Section 15.1 No Oral Change. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Mortgagor or Mortgagee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Section 15.2 Successors and Assigns. This Security Instrument shall be binding upon and inure to the benefit of Mortgagor and Mortgagee and their respective successors and assigns forever. Section 15.3 Inapplicable Provisions. If any term, covenant or condition of the Loan Agreement, the Note or this Security Instrument is held to be invalid, illegal or unenforceable in any respect, the Loan Agreement, the Note and this Security Instrument shall be construed without such provision. Section 15.4 Headings, etc. The headings and captions of various Sections of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Section 15.5 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Section 15.6 Subrogation. If any or all of the proceeds of the Note have been used to extinguish, extend or renew any indebtedness heretofore existing against the Property, then, to the extent of the funds so used, Mortgagee shall be subrogated to all of the rights, claims, liens, titles, and interests existing against the Property heretofore held by, or in favor of, the holder of such indebtedness and such former rights, claims, liens, titles, and interests, if any, are not waived but rather are continued in full force and effect in favor of Mortgagee and are merged with the lien and security interest created herein as cumulative security for the repayment of the Debt, the performance and discharge of Mortgagor's obligations hereunder, under the Loan Agreement, the Note and the other Loan Documents and the performance and discharge of the Other Obligations. Section 15.7 Entire Agreement. The Note, the Loan Agreement, this Security Instrument and the other Loan Documents constitute the entire understanding and agreement between Mortgagor and Mortgagee with respect to the transactions arising in connection with the Debt and supersede all prior written or oral understandings and agreements between Mortgagor and Mortgagee with respect thereto. Mortgagor hereby acknowledges that, except as incorporated in writing in the Note, the Loan Agreement, this Security Instrument and the other Loan Documents, there are not, and were not, and no persons are or were authorized by Mortgagee to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the transaction which is the subject of the Note, the Loan Agreement, this Security Instrument and the other Loan Documents. Section 15.8 Limitation on Mortgagee's Responsibility. No provision of this Security Instrument shall operate to place any obligation or liability for the control, care, management or repair of the Property upon Mortgagee, nor shall it operate to make Mortgagee responsible or liable for any waste committed on the Property by the tenants or any other Person, or for any dangerous or defective condition of the Property, or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. Nothing herein contained shall be construed as constituting Mortgagee a "mortgagee in possession." 23 ARTICLE 16 - STATE-SPECIFIC PROVISIONS Section 16.1 Principles of Construction. In the event of any inconsistencies between the terms and conditions of this Article 16 and the terms and conditions of this Security Instrument, the terms and conditions of this Article 16 shall control and be binding. Section 16.2 Future Advances. This Security Instrument is an "Open-End Mortgage" as set forth in 42 PA.C.S.A. ss. 8143 and secures obligations up to a maximum principal amount of indebtedness outstanding at any time equal to Forty Eight Million and No/100 Dollars ($48,000,000.00), plus accrued and unpaid interest, including future advances. It is understood and agreed that this Security Instrument secures present and future advances made for the benefit of Mortgagor and that the lien of such future advances shall relate back to the date of this Security Instrument, and Mortgagor and Mortgagee intend that this Security Instrument be an Open-End Mortgage as described in 42 PA.C.S.A. ss. 8143 and as such be entitled to all the benefits under 42 PA.C.S.A. ss. 8143. All notices to Mortgagee pursuant to 42 PA.C.S.A. ss. 8142 shall be given personally or by certified mail, return receipt requested, to Mortgagee at its address first set forth above. Section 16.3 Interest After Default. If any payment due hereunder or under the Loan Agreement or the Note is not paid when due, either at stated or accelerated maturity or pursuant to any of the terms hereof, then and in such event, Mortgagor shall pay interest thereon from and after the date on which such payment first becomes due at the interest rate provided for in the Loan Agreement and such interest shall be due and payable, on demand, at such rate until the entire amount due is paid to Mortgagee, whether or not any action shall have been taken or proceeding commenced to recover the same or to foreclose this Security Instrument. Nothing in this Section 16.3 or in any other provision of this Security Instrument shall constitute an extension of the time of payment of the Debt. After entry of a judgment on any of the Loan Documents or a judgment in mortgage foreclosure hereunder, interest shall continue to accrue under this Security Instrument at the rates set forth in the Loan Agreement. This Security Instrument shall not, solely for purposes of determining interest payable under the Note, merge with any judgment on any Loan Document or a judgment in mortgage foreclosure under this Security Instrument. Section 16.4 Additional Advances and Disbursements; Costs of Enforcement. If any Event of Default exists, Mortgagee shall have the right, but not the obligation, to cure such Event of Default in the name and on behalf of Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee under this Section 16.4, or otherwise under this Security Instrument or any of the other Loan Documents or applicable law, shall bear interest from the date that such sum is advanced or expense incurred, to and including the date of reimbursement, computed at the Default Rate (as defined in the Loan Agreement), and all such sums, together with interest thereon, shall be secured by this Security Instrument. Section 16.5 Acceleration Remedy. Subject to the notice and cure requirements of the Loan Agreement, upon Mortgagor's breach of any covenant or agreement contained herein, including, but not limited to, the covenants to pay when due any sums secured by this Security Instrument, Mortgagee, in its sole judgment and discretion, may declare all of the sums secured by this Security Instrument to be immediately due and payable without further demand and may foreclose this Security Instrument by judicial proceedings and may invoke any other remedies permitted by applicable law or provided herein. Mortgagee shall be entitled to collect all costs and expenses incurred in pursuing such remedies. 24 Section 16.6 Purchase Money Mortgage. If all or part of the sums secured by this Security Instrument are lent to Mortgagor to acquire title to the Property, this Security Instrument is hereby declared to be a purchase-money mortgage. Section 16.7 Release or Reconveyance. Upon payment in full of the Debt and performance in full of Mortgagor's obligations under this Security Instrument and the other Loan Documents, Mortgagee, at Mortgagor's expense, shall fully release the liens created by this Security Instrument or reconvey the Property to Mortgagor. Section 16.8 CONFESSION OF JUDGMENT FOR POSSESSION. Mortgagor hereby authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania, as attorney for Mortgagor and all persons claiming under or through Mortgagor, to sign an agreement for entering in any competent court an amicable action in ejectment of possession of the Property and to appear for and confess judgment against Mortgagor for recovery by Mortgagee of possession of the Property in the event of any default hereunder or under the Loan Agreement or the Note. This Security Instrument or a copy thereof verified by affidavit shall be a sufficient warrant therefor, and thereupon a writ of possession may issue immediately for possession of the Property, without any prior writ or proceeding and without any stay of execution. Mortgagee may bring an amicable action in ejectment and confess judgment therein before or after the institution of proceedings to foreclose the lien of this Security Instrument or to enforce the Note or the Loan Agreement, or after entry of judgment therein or on the Note or the Loan Agreement, or after a Sheriff's sale of the Property in which Mortgagee is the successful bidder. Mortgagor and Mortgagee agree that this authorization to pursue such proceedings for obtaining possession and confession of judgment is an essential part of the remedies for enforcement of this Security Instrument and the Note and the Loan Agreement and that such authorization shall survive any execution sale to Mortgagee. [No Further Text on this Page; Signature Page Follows] 25 IN WITNESS WHEREOF, this Open-End Mortgage and Security Agreement has been executed by Mortgagor as of the day and year first above written. PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership By: PR Beaver Valley LLC, a Delaware limited liability company, its sole general partner By: PREIT Associates, L.P., a Delaware limited partnership, its sole member By: Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust, its general partner By: /s/ Jeffrey A. Linn ----------------------------------- Name: Jeffrey A. Linn Title: Executive Vice President A-1 EX-2.4 6 ex2-4.txt EXHIBIT 2.4 Exhibit 2.4 PROMISSORY NOTE $48,000,000.00 Philadelphia, Pennsylvania April 4, 2002 FOR VALUE RECEIVED, PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership, as maker, having its principal place of business at 200 S. Broad Street, 3rd Floor, Philadelphia, Pennsylvania 19102 ("Borrower"), hereby unconditionally PROMISES AND AGREES TO PAY to the order of COLUMN FINANCIAL, INC., as payee, having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of FORTY EIGHT MILLION AND NO/100 DOLLARS ($48,000,000.00), in lawful money of the United States of America, with interest thereon to be computed from the date of this Note at the Interest Rate, and to be paid in accordance with the terms of this Note and that certain Loan Agreement, dated as of the date hereof, between Borrower and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement"). All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. ARTICLE 1: PAYMENT TERMS Borrower agrees to pay the principal sum of this Note and interest on the unpaid principal sum of this Note from time to time outstanding at the rates and at the times specified in Article 2 of the Loan Agreement and the outstanding balance of the principal sum of this Note and all accrued and unpaid interest thereon shall be due and payable on the Maturity Date. ARTICLE 2: DEFAULT AND ACCELERATION The Debt shall without notice become immediately due and payable at the option of Lender if any payment required in this Note is not paid on or prior to the date when due or if not paid on the Maturity Date or on the happening of any other Event of Default. ARTICLE 3: LOAN DOCUMENTS This Note is secured by the Mortgage and the other Loan Documents. All of the terms, covenants and conditions contained in the Loan Agreement, the Mortgage and the other Loan Documents are hereby made a part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event of a conflict or inconsistency between the terms of this Note and the Loan Agreement, the terms and provisions of the Loan Agreement shall govern. ARTICLE 4: SAVINGS CLAUSE Notwithstanding anything to the contrary, (a) all agreements and communications between Borrower and Lender are hereby and shall automatically be limited so that, after taking into account all amounts deemed interest, the interest contracted for, charged or received by Lender shall never exceed the maximum lawful rate or amount, (b) in calculating whether any interest exceeds the lawful maximum, all such interest shall be amortized, prorated, allocated and spread over the full amount and term of all principal indebtedness of Borrower to Lender, and (c) if through any contingency or event Lender receives or is deemed to receive interest in excess of the lawful maximum, any such excess shall be deemed to have been applied toward payment of the principal of any and all then outstanding indebtedness of Borrower to Lender. ARTICLE 5: NO ORAL CHANGE This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. ARTICLE 6: WAIVERS Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, notice of intention to accelerate, notice of acceleration, protest and notice of protest and non-payment and all other notices of any kind. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan Agreement or the other Loan Documents made by agreement between Lender or any other Person shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, or any other Person who may become liable for the payment of all or any part of the Debt, under this Note, the Loan Agreement or the other Loan Documents. No notice to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender to take further action without further notice or demand as provided for in this Note, the Loan Agreement or the other Loan Documents. If Borrower is a partnership, the agreements herein contained shall remain in full force and be applicable, notwithstanding any changes in the individuals or entities comprising the partnership, and the term "Borrower," as used herein, shall include any alternate or successor partnership, but any predecessor partnership and their partners shall not thereby be released from any liability. If Borrower is a corporation, the agreements contained herein shall remain in full force and be applicable notwithstanding any changes in the shareholders comprising, or the officers and directors relating to, the corporation, and the term "Borrower", as used herein, shall include any alternative or successor corporation, but any predecessor corporation shall not be relieved of liability hereunder. If Borrower is a limited liability company, the agreements herein contained shall remain in full force and be applicable, notwithstanding any changes in the members comprising the limited liability company, and the term "Borrower", as used herein, shall include any alternate or successor limited liability company, but any predecessor limited liability company and their members shall not thereby be released from any liability. (Nothing in the foregoing sentence shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in such partnership, corporation or limited liability company which may be set forth in the Loan Agreement, the Mortgage or any other Loan Document.) ARTICLE 7: TRANSFER Upon the transfer of this Note, Borrower hereby waiving notice of any such transfer, Lender may deliver all the collateral mortgaged, granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights herein or under applicable law given to Lender with respect thereto, and Lender shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter; but Lender shall retain all rights hereby given to it with respect to any liabilities and the collateral not so transferred. -2- ARTICLE 8: EXCULPATION The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by reference into this Note to the same extent and with the same force as if fully set forth herein. ARTICLE 9: GOVERNING LAW This Note shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. ARTICLE 10: NOTICES All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement. [No Further Text on this Page; Signature Page Follows] -3- IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note as of the day and year first above written. PR BEAVER VALLEY LIMITED PARTNERSHIP, a Pennsylvania limited partnership By: PR Beaver Valley LLC, a Delaware limited liability company, its sole general partner By: PREIT Associates, L.P., a Delaware limited partnership, its sole member By: Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust, its general partner By: /s/ Jeffrey A. Linn -------------------------------- Name: Jeffrey A. Linn Title: Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----