SECURITY AGREEMENT FOR CALL
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into
effective as of the 28th day of April, 2003, by PAN AMERICAN ASSOCIATES, a
Pennsylvania limited partnership, and IVYRIDGE INVESTMENT CORP., a Delaware
corporation (collectively called the "Class A Partners" and individually a
"Class A Partner"), for the benefit of PREIT ASSOCIATES, L.P., a Delaware
limited partnership (the "UPREIT").
DEFINITIONS
"Call Agreement" shall mean that certain Call and Put Option Agreement
dated April 28, 2003 among the Class A Partners, the UPREIT and the
general partner of the Partnership, executed pursuant to the
Contribution Agreement.
"Contribution Agreement" shall mean the Contribution Agreement dated
April 22, 2003 among the Class A Partners, the UPREIT, and Pennsylvania
Real Estate Investment Trust.
"Partnership" shall mean New Castle Associates, a Pennsylvania limited
partnership governed by an Amended and Restated Agreement of Limited
Partnership dated April 28, 2003 (the "Partnership Agreement").
"Retained Interests" shall mean the partnership interests of the Class
A Partners in the Partnership under the Partnership Agreement, as
described on Schedule A attached hereto.
RECITALS
Under the Call Agreement, the Class A Partners have granted to the
UPREIT the right and option (the "Call") to acquire all of the Retained
Interests by notice given within the Call Period (as that term is defined in the
Call Agreement).
The Call Agreement requires, as a condition to the obligations of the
UPREIT thereunder, that the Class A Partners execute and deliver this Agreement,
and in the absence of this Agreement, the UPREIT would not have consummated the
transactions described in the Call Agreement.
AGREEMENT
In consideration of the foregoing recitals, intending to be legally
bound and for good and valuable consideration, the parties agree as follows:
1. Definition of Call Obligations. If the Call is exercised, the obligations of
the Class A Partners to contribute the Retained Interests to the UPREIT in
exchange for certain partnership units in the UPREIT, and to perform all
ancillary obligations related thereto at the Closing for the Call as specified
in the Call Agreement, are collectively referred to as the "Call Obligations."
2. Grant of Security Interest; Time Limitation.
(a) The Class A Partners hereby pledge and grant to the UPREIT a lien
on and security interest in all of their Retained Interests ("Collateral") to
secure the performance of the Call Obligations. The Collateral shall include all
proceeds and products derived from or with respect to the Retained Interests.
(b) The lien and security interest granted to the UPREIT hereunder
shall be released at the expiration of the Call Period, if the Call has not
theretofore been exercised.
(c) The grant of rights under this Agreement and the provisions hereof
shall be without prejudice to, and shall not limit, restrict or modify, any
rights or remedies of the parties to the Call Agreement or the Contribution
Agreement, including without limitation any rights or remedies otherwise
available with respect to the Call Obligations and any indemnification or
set-off rights under the Contribution Agreement or the Call Agreement.
3. Financing Statements. At any time and from time to time, upon the request of
the UPREIT, the Class A Partners will promptly execute and deliver, at the cost
of the UPREIT, any and all such further instruments and documents and will take
such further action as may be deemed necessary in the reasonable judgment of the
UPREIT to obtain, maintain and perfect the security interest granted herein in
Collateral, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in the
Commonwealth of Pennsylvania or any other state with respect to the security
interest in the Collateral granted hereby. Each Class A Partner agrees to notify
the UPREIT promptly of any change in such Class A Partner's principal place of
business in order that a prompt refiling of any outstanding financing statements
may be made, if necessary. The Class A Partners hereby authorize the UPREIT to
file financing statements and continuation statements to perfect and maintain
the security interest created hereby, without the necessity for signature or
execution by the Class A Partners, if and to the extent allowable by law.
4. Retained Rights. Unless a Class A Partner is in default of the Call
Obligations, such Class A Partner shall be entitled to all of the benefits of
ownership of the Collateral, including without limitation, the right to obtain
and retain any and all distributions made by the Partnership in respect of the
Collateral. Following such default and until the satisfaction of the obligations
relating thereto, the rights of such Class A Partner shall be suspended and may
be exercised or availed of by the UPREIT.
5. Default. In the event the Call is exercised and a Class A Partner fails to
comply with its Call Obligations, then, in addition to any other rights or
remedies afforded the UPREIT under the Call Agreement or the Contribution
Agreement, or otherwise available at law or in equity:
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(a) The UPREIT may pursue its rights with respect to the Collateral as
a secured creditor under the Uniform Commercial Code, and Class A Partners agree
that 20 days prior written notice of the UPREIT's intention to sell the
Collateral shall be reasonable and sufficient; and/or
(b) The UPREIT shall have the right to immediately obtain all benefits
and privileges associated with the Collateral of the defaulting Class A Partner,
and for such purposes the Partnership Agreement shall be deemed automatically
amended so as to reflect the full and absolute ownership by the UPREIT of the
Retained Interest of such Class A Partner, and the Class A Partners hereby
designate the UPREIT as their attorney-in-fact to execute such amendments and
any related certificates to be filed of record; provided that any consideration
due on account of the transfer of such Retained Interest to the UPREIT, as
specified in the Call Agreement, net of any costs, damages, losses or
liabilities (including reasonable attorneys fees) resulting from such Class A
Partner's default, shall be paid or given to such Class A Partner upon the
UPREIT's acquisition of such Retained Interest free and clear of any liens,
claims and encumbrances of any type or nature.
6. Rights and Remedies Cumulative.
(a) The rights and remedies of the UPREIT as provided in this Agreement
or in the Call Agreement or any other documents and instruments related thereto
shall be cumulative and concurrent, may be pursued separately, successively or
together against Class A Partners, at the discretion of the UPREIT, and may be
exercised as often as occasion therefor shall arise. The failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
thereof.
(b) Any failure by the UPREIT to insist upon strict performance by
Class A Partners of any of the terms and provisions of this Agreement or the
Call Agreement, including without limitation any release of the Collateral,
shall not be deemed to be a waiver of any such terms or provisions, and the
UPREIT shall have the right thereafter to insist upon strict performance by
Class A Partners.
7. No Transfer. During the Call Period (and if the Call is exercised, thereafter
until the closing under the Call Agreement), the Class A Partners covenant and
agree that they shall not sell, assign, pledge, encumber or otherwise dispose of
all or any portion of the Collateral without the prior written consent of the
UPREIT unless (i) such disposition is permitted by the Partnership Agreement and
Call Agreement, and (ii) the transferee shall join in a copy of this Agreement
to confirm its agreement to be bound by the provisions hereof. Notwithstanding
the foregoing, the Class A Partners shall be permitted to pledge the Collateral
to financial institution(s) as security for bona-fide loan transactions,
provided that (i) such pledge is expressly under and subject to the security
interest created herein, and (ii) the financial institution(s) agree in writing
with the UPREIT that any interest they may acquire in the Collateral shall be
subject to the Call.
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7. Notices. All notices, requests, demands, consents, and other communications
required or permitted to be given or made hereunder shall be in writing and
shall be given in the manner and to the place specified for the parties hereto
in the Call Agreement.
8. Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns, and legal representatives, subject to the provisions of
Paragraph 6 above.
9. Execution in Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and which together shall
constitute one and the same instrument.
10. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the remainder of
this Agreement or the remainder of such provision.
11. Governing Law. This Agreement and the rights and obligations of the parties
hereunder shall be construed as to both validity and performance and enforced in
accordance with and governed by the laws of the Commonwealth of Pennsylvania.
All parties hereto agree to the exclusive jurisdiction of the Court of Common
Pleas of Philadelphia County, Commonwealth of Pennsylvania or the United States
District Court for the Eastern District of Pennsylvania, as well as to the
jurisdiction of all courts to which an appeal may be taken from the aforesaid
courts, in any and all actions or proceedings arising hereunder or pursuant
hereto
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
CLASS A PARTNERS
IVYRIDGE INVESTMENT CORP.
By: /s/ Arthur H. Kaplan
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Name: Arthur H. Kaplan
Title: President
PAN AMERICAN ASSOCIATES
By: Pan American Office Investments, L.P.
By: Pan American Office Investments - G.P., general partner
By: /s/ George F. Rubin
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Name: George F. Rubin
Title: President
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate Investment Trust, its general Partner
By: /s/ Bruce Goldman
---------------------------------
Name: Bruce Goldman
Title: Senior Vice President and
General Counsel
SCHEDULE A
RETAINED PARTNERSHIP INTERESTS
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Partner Retained Interest Percentage
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PAN AMERICAN ASSOCIATES, a 23.253%
Pennsylvania limited partnership
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IVYRIDGE INVESTMENT CORP., a Delaware 3.853%
Corporation
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