<PAGE>
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) September 29, 1997
----------------------------
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.)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, Pennsylvania 19034
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (215) 542-9250
--------------
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 30, 1997, the Registrant (sometimes referred to herein
as the "Trust") completed a series of related transactions pursuant to which,
inter alia, (i) the Trust capitalized PREIT Associates, L.P., a Delaware
limited partnership of which the Trust is the sole general partner (the
"Operating Partnership") by transferring to the Operating Partnership
substantially all of the assets of the Trust, or the economic benefit thereof,
subject to the liabilities of the Trust, in exchange for the issuance to the
Trust and PREIT Property Trust, a wholly-owned subsidiary of the Trust and a
limited partner of the Operating Partnership, general partner interests in the
Operating Partnership and Class A limited partner interests in the Operating
Partnership ("Class A OP Units") aggregating the number of issued and
outstanding shares of Beneficial Interest, $1.00 par value per share, of the
Trust ("Shares") as of such date; (ii) the Operating Partnership acquired all
of the non-voting common shares, constituting 95% of the equity, of The Rubin
Organization, Inc., a Pennsylvania corporation ("TRO") which changed its name
to PREIT-RUBIN, Inc., in exchange for 200,000 Class A OP Units and the
obligation to issue up to 800,000 additional Class A OP Units over the next
five (5) years determined by the per share funds from operation ("FFO") of the
Trust; (iii) the Operating Partnership acquired the interests of certain
affiliates of TRO ("TRO Affiliates") in, or their right to acquire, and did
acquire, four existing shopping centers, or portions thereof (the "Existing
Properties") and in two shopping centers currently under construction (the
"Development Properties"); (iv) the Operating Partnership acquired the
pre-development rights of certain TRO Affiliates, subject to related
obligations, in certain proposed shopping centers (the "Pre-Development
Properties") under a co-development agreement (the "Goldenberg Letter
Agreement") with a joint venture partner of TRO; (v) the Trust and TRO entered
into a number of employment agreements with members of TRO management; (vi)
Ronald Rubin, former chief executive officer of TRO, was elected chief
executive officer of the Trust, Edward Glickman, former chief financial
officer of TRO, was elected chief financial officer and executive vice
president of the Trust, and George Rubin, former President of TRO, continued
in such capacity; (vii) Sylvan M. Cohen, former chairman and chief executive
officer of the Trust, continued as chairman of the Trust and as chair of the
Property Committee of the Board of Trustees of the Trust and Jonathan B.
Weller, president and chief operating officer of the Trust, continued in such
positions with the Trust; and (viii) Ronald Rubin, George Rubin and Rosemarie
B. Greco, former President of CoreStates Financial Corp. and former President
and Chief Executive Officer of Corestates Bank, N.A., were elected as trustees
of the Trust to fill vacancies created by the resignations as trustees of
Robert Freedman, Jack Farber and Robert G. Rogers. The inter-related
transactions described
-2-
<PAGE>
above are collectively referred to below as the "TRO Transaction."
The following summary describes the principal features of the TRO
Transaction. The TRO Transaction was accomplished in several separate
transactions, the combined effect of which was to capitalize the Operating
Partnership and to transfer ownership of the Trust's direct and indirect
interests in its existing properties, or the economic benefits thereof, to the
Operating Partnership, and to effect the acquisitions described in the
immediately previous paragraph.
It is intended that the structuring of the TRO Transaction through
the Operating Partnership will enable those persons and entities conveying
assets in the TRO Transaction to defer certain tax consequences of the TRO
Transaction and will permit the Trust, through the Operating Partnership, to
subsequently acquire from third parties additional commercial properties in a
structure that may enable such parties to defer the recognition of taxable
gain.
The Operating Partnership. The Trust is the sole general partner of
the Operating Partnership and PREIT Property Trust, a business trust
wholly-owned by the Trust, is a limited partner. The Trust contributed to the
Operating Partnership, or to entities wholly-owned by the Operating
Partnership, the real estate interests owned, directly or indirectly, by the
Trust, or the economic benefits thereof, in exchange for general partnership
interests in the Operating Partnership and a number of Class A OP Units issued
to it and PREIT Property Trust which equalled, in the aggregate, the number of
Shares of beneficial interest of the Trust issued and outstanding on the
closing date of the TRO Transaction. This structure, known in the industry as
an "UPREIT" structure, is now a common method for organizing the holdings of
the real property portfolio investments of real estate investment trusts. The
Trust believes that the formation of the Operating Partnership will increase
the pool of potential property acquisitions by enabling the Trust to afford
prospective transferors the prospect of a deferral of taxable gain.
Under the Operating Partnership's First Amended and Restated
Agreement of Limited Partnership (the "Operating Partnership Agreement"), the
Trust, as the sole general partner of the Operating Partnership, has the
authority, to the exclusion of the limited partners, to make all management
decisions on behalf of the Operating Partnership. In addition, the Trust, as
general partner, will have the ability to cause the Operating Partnership to
make subsequent acquisitions of real property assets, and, in connection
therewith, to create and issue subsequent classes of limited or preferred
partner interests with terms different from the limited partner and general
partner interests issued in the TRO Transaction. The Trust has agreed in the
Operating
-3-
<PAGE>
Partnership Agreement to conduct substantially all of its business activities
through the Operating Partnership unless a majority in interest of the Class A
and Class B OP Units consent to the conduct of business activities outside the
Operating Partnership.
OP Units. The Operating Partnership Agreement authorizes the issuance
of an unlimited number of limited partner interests ("OP Units"). Holders of
Class A OP Units and Class B OP Units (which were issued in the TRO Transaction
to the Equity Property and Development Limited Partnership ("EPDLP") affiliate
with an interest in one of the Existing Properties sold to the Operating
Partnership) are entitled to distributions from the Operating Partnership as and
when made by the general partner. Since the general partner will, of necessity,
have to make distributions on the Class A OP Units held directly or indirectly
by it at the times and in the amounts as will permit it to make distributions to
shareholders of the Trust (the "Shareholders") necessary to preserve its status
as a real estate investment trust for federal income tax purposes, it is
anticipated that the holders of Class A OP Units and Class B OP Units will
receive such distributions at the approximate time, and in the same amounts, as
distributions are declared and paid by the Trust to the Shareholders.
Holders of OP Units generally will have no right to vote on any matter
voted on by holders of Shares except that prior to the date on which at least
half of the Class A and Class B OP Units issued on September 30, 1997 (other
than to the Trust or an affiliate of the Trust) have been redeemed, the holders
of Class A and Class B OP Units issued on September 30, 1997 (other than the
Trust or an affiliate of the Trust) shall be entitled to vote, as a single
class, on any proposal to merge, consolidate, or sell substantially all of the
assets of the Trust if the holders of Shares vote thereon and, in such event,
the necessary vote to effect such action shall be the sum of an absolute
majority of the outstanding Class A and Class B OP Units and the applicable vote
of the holders of the Shares, which such vote may be met by any combination of
holders of the Class A and Class B OP Units and the Shares. In such event,
holders of OP Units will be entitled to one vote for each Share issuable by the
Trust upon the redemption of one Class A or Class B OP Unit.
The Operating Partnership Agreement also provides that the Trust may
not engage in a fundamental transaction (e.g., a merger) unless, by the terms
of such transaction, the OP Units are treated in the same manner as that
number of Shares for which they are exchangeable by the Trust upon notice of
redemption are treated and that holders of OP Units will have the right to
vote on certain amendments to the Operating Partnership Agreement.
Class A and Class B OP Units are redeemable by the Operating
Partnership at the election of a limited partner holding such units, at such
time, and for such consideration, as set forth in
-4-
<PAGE>
the Operating Partnership Agreement. In general, and subject to certain
exceptions and limitations, "qualifying parties" may, beginning one year
following the respective issue dates, give one or more notices of redemption
with respect to all or any part of the Class A OP Units so received and then
held by such party. Neither the Trust nor its wholly-owned business trust
subsidiary will be qualifying parties and, accordingly, neither will have
contractual redemption rights under the Operating Partnership Agreement unless
such agreement were to be subsequently amended. Class B OP Units will be
redeemable at the option of the holder at any time after issuance.
If a notice of redemption is given, the Trust has the right to elect
to acquire the OP Units tendered for redemption for its own account, either in
exchange for the issuance of a like number of Shares (subject to adjustments
for stock splits, recapitalizations, and like events) or a cash payment equal
to the average of the closing prices of the Shares on the ten consecutive
trading days immediately prior to receipt by the Trust, in its capacity as
general partner of the Operating Partnership, of the notice of redemption. If
the Trust declines to exercise such right, then on the tenth day following
tender for redemption the Operating Partnership will pay a cash amount equal
to the number of units so tendered multiplied by such average closing price.
The TRO Equity Acquisition. Pursuant to an agreement among the TRO
Shareholders (including entities who received TRO shares in the recapitalization
of TRO contemporaneously with the closing of the TRO Transaction), TRO, a
corporate affiliate of TRO, the Trust and the Operating Partnership (the "TRO
Contribution Agreement"), (i) TRO was recapitalized, (ii) the Operating
Partnership acquired all of the non-voting common shares of TRO, constituting
95% of the total equity of TRO, (iii) a stock bonus plan created for the benefit
of TRO employees acquired all of the voting common shares of TRO, constituting
5% of the total equity of TRO, and (iv) the TRO shareholders and certain TRO
Affiliates received (x) an aggregate of 200,000 Class A OP Units, and (y) the
right to receive up to an additional 800,000 Class A OP Units over the following
five-year period, depending on the Trust's per share "adjusted funds from
operations" ("Adjusted FFO") during such period.
The TRO Contribution Agreement defines "Adjusted FFO" as the Trust's
consolidated net income for any period, plus, to the extent deducted in
computing such net income (i) depreciation attributable to real property, (ii)
certain amortization expenses, (iii) the expenses of the TRO Transaction, (iv)
losses on the sale of real estate, (v) material write-downs on real estate, (vi)
material prepayment penalties, and (vii) rents currently due in excess of rents
reported, minus (i) rental revenue reported in excess of amounts currently due,
(ii) lease termination fees, and (iii) gains on the sale of real
-5-
<PAGE>
estate. For the twelve-month periods ending August 31, 1996 and May 31, 1997,
the Trust's Adjusted FFO per share on a stand-alone basis would have been
$2.16 and $2.21, respectively.
With respect to the additional 800,000 Class A OP Units which the
Operating Partnership will be contingently obligated to issue in the future as
additional consideration to TRO Shareholders, the TRO Contribution Agreement
establishes "hurdles" and "targets" during specified "earn-out periods." The
earn-out periods consist of (i) the three month period ending December 31,
1997, (ii) the years ending December 31, 1998 through 2001, and (iii) the
nine-month period ending September 30, 2002.
The per share Adjusted FFO hurdles/targets are $0.58/$0.65 for the
first earn-out period and $2.40/$2.66, $2.53/$2.81, $2.65/$2.94, $2.83/$3.14
and $2.19/$2.43 for the second through the sixth earn-out periods,
respectively. The minimum number of earn-out units (i) for the first earn-out
period is 5,000, (ii) for the second earn-out period is 20,000, (iii) for the
third through fifth earn-out periods is 57,500, and (iv) for the sixth
earn-out period is 52,500. The maximum earn-out units (i) for the first
earn-out period is 32,500, (ii) for the second earn-out period is 130,000,
(iii) for the third through fifth earn-out periods is 167,500, and (iv) for
the sixth earn-out period is 135,000.
In general, (i) if the hurdle for any earn-out period is not met, no
units will be issued in respect of such period, (ii) if the target for any
earn-out period is met, the maximum number of units for such period will be
issued, and (iii) if Adjusted FFO for any earn-out period is between the
hurdle and the target for such period, the Operating Partnership would issue
the base units for such period plus a pro rata portion of the number of units
by which the maximum units exceeded the base units for such period equal to
the amount by which the per share Adjusted FFO exceeded the hurdle but was
less than the target. For example, the minimum number of units for the
calendar year 1998 is 20,000 and the maximum number of units is 130,000, the
per share Adjusted FFO hurdle for 1998 is $2.40 and the per share Adjusted FFO
target is $2.66. If the per share Adjusted FFO for 1998 were $2.53 (that is,
one-half of the difference between the target and the hurdle), the Operating
Partnership would issue 75,000 Units (20,000 + (.5 (130,000-20,000))).
The foregoing is subject to the right to carry back to prior earn-out
periods amounts in excess of the target in the current period, thereby earning
additional units (but never more than the maximum amount) and to carry forward
into the next, but only the next, earn-out period amounts of per share
Adjusted FFO which exceed the target in any such period, provided, in all
cases, no amounts in excess of the target in any period may be applied to
-6-
<PAGE>
result in the issuance of additional units in any other period until first
applied to eliminate all shortfalls from targets in all prior periods.
In the computation of Adjusted FFO, certain revenues received by TRO
prior to September 30, 1997 (the "TRO Closing Date") which remained as cash
assets of TRO on the TRO Closing Date will be included as a portion of
Adjusted FFO. In the computation of per share Adjusted FFO, outstanding Shares
will include the number of Shares issuable by the Trust upon redemption of all
then outstanding OP Units.
Pursuant to the TRO Contribution Agreement, the Operating Partnership
loaned TRO on the TRO Closing Date $3,358,972 (the "Closing Loan"), which was
an amount equal to (i) start-up expenses incurred by TRO in performing 23
shopping center management contracts acquired by TRO from EPDLP on December
31, 1996, plus (ii) costs incurred by TRO in connection with the purchase
agreements for the Existing Properties to be acquired from affiliates of EPDLP
and co-investors therewith, plus (iii) legal expenses incurred by TRO which
were directly related to the preparation of the proxy statement, plus (iv)
certain advances and expenses previously incurred by TRO in respect of the
Predevelopment Properties.
In addition, on September 30, 1997, the Operating Partnership advanced
$6,442,197 to TRO (and affiliates of TRO) for predevelopment expenses incurred
by TRO in respect of properties developed jointly with the Goldenberg Group.
The TRO Contribution Agreement provided that TRO would make
distributions of current assets to its shareholders immediately prior to the
closing of the TRO Transaction (the "TRO Closing"), subject to a requirement
that, on the TRO Closing Date, TRO have no liabilities other than those (i)
under scheduled contracts, (ii) with respect to scheduled contingencies, (iii)
with respect to advances made by the Operating Partnership to TRO on the TRO
Closing Date, (iv) ordinary course accounts payable, accrued salaries and taxes,
and (v) certain other specified liabilities. TRO will be obligated on the TRO
Closing Date to have cash and collectible receivables at least equal to the sum
of the amount of certain categories of permitted liabilities on the TRO Closing
Date and certain principals of TRO pledged Class A OP Units to secure the
payment of certain undischarged contingent obligations of TRO incurred prior to
the TRO Closing Date.
Indemnification. In the TRO Contribution Agreement, TRO and the
Shareholders made representations and warranties about TRO, its organization,
capitalization, financial statements and like matters and the Trust and the
Operating Partnership made like representations and warranties to TRO and the
Shareholders. The TRO Contribution Agreement provides for indemnification by
the
-7-
<PAGE>
Shareholders in respect of their representations, warranties and covenants in
the agreement. Such indemnification is subject to a general $350,000 threshold
(subject to certain exclusions therefrom) and the Operating Partnership may
set-off Class A OP Units subject to the earn-out against any such claims. The
contribution agreements for the Court at Oxford Valley and the Development
Properties also contain post-transaction indemnification obligations of the
contributing parties.
Registration Rights. At the TRO Closing, the Trust entered into
Registration Rights Agreements with those persons receiving or entitled to
receive (i) Class A OP Units in respect of shares of TRO and/or their
interests in the Existing, Development and Pre-Development Properties and (ii)
the Class B OP Units issued at the closing in respect of the purchase of one
of the Existing Properties from an affiliate of EPDLP. In general, the
Registration Rights Agreement for the holders of Class A OP Units provides
that those parties receiving and entitled to receive Class A OP Units in the
TRO Transaction will be entitled to cause the Trust, subject to exclusions and
limitations commonly found in agreements of this type, to register Shares for
resale by them in connection with other registration statements filed by the
Trust. This Registration Rights Agreement contains provisions dealing with
registration procedures, holdbacks, responsibility for expenses,
indemnification, and other customary provisions.
If the TRO Shareholders having piggyback registration rights do not
have an opportunity to exercise those rights before a specified period
following the last issuance of Class A Units pursuant to the TRO Transaction,
these TRO Shareholders will have the right to cause the Trust to file a
registration statement covering the resale of the Shares underlying the Class
A OP Units owned by these TRO Shareholders. In such event, the Trust will be
obligated to use its commercially reasonable efforts to cause the registration
statement to become effective within sixty (60) days after filing and to
remain effective for not less than two years (or until the date on which
Shares may be sold without registration, if earlier).
The Trust also entered into a Registration Rights Agreement with the
party receiving Class B OP Units in respect of the equity in one of the
Existing Properties -- Magnolia Mall -- in which the Trust has agreed to file
and maintain a registration statement covering resales from time to time by
such party of Shares obtained by it in connection with the redemption of Class
B OP Units. If the Trust files such a registration statement, it has agreed to
use its reasonable best efforts to include in such registration statement
resales of Shares issued upon redemption of Class A Units issued at the TRO
Closing.
Other Rights. If the Operating Partnership determines to
sell, before the fifth anniversary of the date on which a
-8-
<PAGE>
property is acquired by the Operating Partnership, an Existing Property,
Development Property or Predevelopment Property for which Class A OP Units were
issued in the TRO Transaction and the holders of a majority of the then
outstanding Class A OP Units issued to the TRO Affiliates object to such sale,
the sale will not be consummated unless (i) the sale constitutes an exchange
under Section 1031 of the Internal Revenue Code or (ii) the sale is in
connection with the proposed sale of all or substantially all of the real estate
assets of the Operating Partnership.
Furthermore, before September 30, 2001, the Operating Partnership may
not sell or otherwise dispose of Magnolia Mall in a transaction in which taxable
gain is recognized unless (i) the sale constitutes an exchange under Section
1031 of the Internal Revenue Code and no gain is recognized on such sale or (ii)
the sale is in connection with a program to sell substantially all of the
Operating Partnership's (and its affiliates) retail assets to an entity not
affiliated with the Operating Partnership and at least 80% of the retail
properties owned by the Operating Partnership have been sold or are under
binding contracts of sale with unaffiliated third parties and are scheduled to
close within six months of the date of the closing of the sale of Magnolia Mall.
-9-
<PAGE>
The Existing Properties Acquisition. In connection with the TRO
Transaction, the Operating Partnership acquired interests in four shopping
centers/retail properties, listed below:
Existing Properties -- General Information
================================================================================
<TABLE>
<CAPTION>
Approximate
Annualized
Contract Minimum
Gross Percentage Acquisition Percentage Rent as of
Leasable Interest Price Leased at Number of June 30, 1997
Property/Location Sq. Ft. Acquired ($Mil.)* June 30, 1997 Tenants ($ mil.)
- ----------------- ------- -------- ---------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
The Court at Oxford 692,000(1) 50% 6.1(2) 100% 15 6.6
Valley, Langhorne, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Magnolia Mall, 570,000 100% 45.4(4) 97.7% 72 3.5
Florence, SC(3)
- ------------------------------------------------------------------------------------------------------------------------------------
North Dartmouth 620,000 100% 35.0(6) 87.7% 55 4.0
Mall,
Dartmouth, MA(5)
- ------------------------------------------------------------------------------------------------------------------------------------
Former Strawbridge 207,000 (7) 3.2 (8) --- ---
Store, Springfield, PA
====================================================================================================================================
</TABLE>
* Before closing and other adjustments.
(1) Includes 235,000 sq. ft. owned by Home Depot and BJ's Warehouse Club.
(2) The equity portion of the purchase price (following initial closing
adjustments) was paid in 233,248 Class A OP Units valued at $23.40 per
unit. The equity portion of the purchase price is subject to
post-closing adjustments. The effective cost to the Trust includes
allocated mortgage debt of $24.7 million at June 30, 1997.
(3) This property was initially subject to a purchase contract between
TRO and Magnolia Retail Associates, L.L.C. TRO assigned its rights
and obligations under such contract to the Operating Partnership. The
seller was an affiliate of EPDLP.
(4) Includes assumed mortgage debt of approximately $25.2 million. The
equity portion of the purchase price was paid in 213,038 Class B OP
Units valued at $23.47 per Unit and $15.1 million in cash.
(5) TRO entered into a contract to purchase this center from Diversified
Equity Corporation of Illinois, Inc., an affiliate of EPDLP. The
Operating Partnership assumed TRO's obligations under the Agreement
of Sale at the closing.
(6) Approximately $6.0 million of the purchase price in respect of the
equity of the seller in the property was paid in cash and the balance
of the purchase price, to be applied to mortgage debt on the property
which was not assumed, was also paid in cash.
(7) The Trust is a co-tenant with an undivided one-half interest in one
of three floors in this free-standing former department store. Its
share of the costs of reconstruction is 14.98%.
(8) Vacant.
-10-
<PAGE>
The Court at Oxford Valley (Langhorne, Pennsylvania).
The Court at Oxford Valley was completed in 1996. The center has 15
units with total minimum rents of approximately $6.6 million. Its tenants
include Dick's, Best Buy, HomePlace, Phar-mor (subleased from Melville Corp.),
Baby Superstore, Sears HomeLife, Office Max, and Barnes & Noble. Home Depot
and BJ's Warehouse Club own stores (and associated land) at the center. TRO's
joint venture partner in the center is The Goldenberg Group, which also
manages the center.
The center is encumbered by a mortgage held by an institutional
lender in the principal amount of approximately $49.4 million as of June 30,
1997. The mortgage was unaffected by the Trust's acquisition of a 50% interest
in the partnership that owns the center. The mortgage is for a fifteen-year
term at a fixed interest rate of 8.02% per annum and requires level monthly
payments of principal and interest based on a twenty-five year amortization.
It is first prepayable in 2002 and any prepayment is subject to a prepayment
fee.
The Trust issued an aggregate of 233,248 Class A OP Units to certain
TRO Affiliates in respect of their 50% equity interest in Oxford Valley Road
Associates, the partnership which owns The Court at Oxford Valley. The
consideration was obtained by dividing the agreed-upon value of the equity of
the TRO Affiliates in the center ($5.5 million, after giving effect to closing
and other adjustments) by $23.40, which was the average closing price per
Share on the twenty trading days prior to July 30, 1997, the date the TRO
Transaction Documents were executed. Certain principals of TRO pledged Class A
OP Units to secure the payment of certain undischarged contingent obligations
related to The Court at Oxford Valley incurred prior to the TRO Closing Date.
Magnolia Mall (Florence, South Carolina)
This center was completed in 1979, expanded in 1986-87, and renovated
in 1992. Its anchor tenants are JC Penney, Belk and Sears. Other tenants
include Rose's and Carmike Cinema. The center has 67 other tenants (including
kiosks). TRO obtained management of the center in December 1996. Magnolia Mall
is leased pursuant to a long-term ground lease (with an option to purchase)
expiring in May 2019 with monthly rental payments of approximately $17,000.
Magnolia Mall is encumbered by a mortgage held by an institutional
lender in the principal amount of approximately $25.2 million at September 30,
1997 and was unaffected by the acquisition of the property by the Operating
Partnership. The mortgage is a ten-year fixed rate mortgage maturing in 2006.
The interest rate on the mortgage is 8.2% per annum and the mortgage provides
for level payments of principal and interest which would amortize the principal
over a twenty-year term.
-11-
<PAGE>
North Dartmouth Mall, Dartmouth, Massachusetts
This center was completed in 1971 and renovated in 1987. Its anchor
tenants include JC Penney, Sears, General Cinema, and Ames. The center
currently has approximately fifty other tenants (including kiosks). TRO
obtained management of the center from EPDLP in December, 1996. The entire
purchase price was paid by the Operating Partnership in cash.
Former Strawbridge Store (Springfield, Pennsylvania)
Target, the Trust and the Trust's co-owner acquired condominium
interests in the former Strawbridge Store on April 18, 1997. The site is at
the Intersection of Route 13, Baltimore Pike and Route 420, approximately 1/2
mile from the Springfield Mall. Target plans on occupying the lower two
levels. The Trust and its co-tenants, entities affiliated with Claude
deBotton, together own a condominium interests in the third floor of the
building and condominium interest in pads for one to three outparcels. All
levels of the building have access to at-grade parking. The Trust's projected
total investment is approximately $3.2 million.
-12-
<PAGE>
The Development Properties Acquisition. As part of the TRO
Transaction, the Operating Partnership entered into a contribution agreement
(the "Development Properties Contribution Agreement") pursuant to which it
will acquire the interests of TRO Affiliates in two properties developed by
TRO. The Operating Partnership's actual aggregate purchase price (assumed debt
and equity) for each property will be based on a formula which capitalizes
cash flow from leased and occupied space, and space leased but not yet
occupied, to credit-worthy tenants, values triple net leases with purchase
arrangements at the present value of payments in excess of related debt
amortization, and values all other space as mutually agreed or, failing
agreement, pursuant to appraisals. The equity portion of the purchase price
will be payable, in each case, in Class A OP Units valued at $23.40 per Unit
which was the average of the closing prices of the Shares on the twenty
trading days prior to July 30, 1997, the date on which the definitive
documentation for the acquisition of the Development Properties was executed.
The projected purchase prices listed below are based on certain assumptions
which may not be realized and actual results are likely to vary. Accordingly,
the actual purchase prices may differ from the projected purchase prices and
will be a function of lease-up activity, and other factors, prior to
acquisition by the Operating Partnership. Information with respect to the
Development Properties is listed below.
Development Properties -- General Information
<TABLE>
<CAPTION>
====================================================================================================================================
Projected
Annualized
Minimum Rent
Planned Gross Percentage on a Fully- Projected Anticipated
Leasable Interest to Leased Basis Purchase Acquisition
Property/Location Sq. Ft. be Acquired ($Mil.) Price ($Mil.) (1) Date by Trust
- ----------------- ------------ ----------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Hillview Shopping 341,000 50% 3.2 14.0 (2) Prior to December
Center, 31, 1998
Cherry Hill, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Northeast Tower 462,000 100% (3) 4.0 25.3 (4) Prior to December
Center, 15, 1999
Philadelphia, PA (3)
====================================================================================================================================
</TABLE>
- ----------------
(1) The projected purchase prices listed above are illustrative only and
the actual purchase prices will be a function of lease-up activity,
and other factors, prior to acquisition by the Operating Partnership.
(2) Includes allocated portion of projected assumed indebtedness of $12.9
million.
(3) The Trust will initially acquire 89% of the interest in the
partnership which owns this property and obtain the right to acquire
the remaining 11% interest not earlier than three years from the
first acquisition date.
(4) Includes projected assumed indebtedness of $20.5 million.
-13-
<PAGE>
Hillview Shopping Center (Cherry Hill, New Jersey)
This center was developed by TRO, which has a 50% interest in the
center. Affiliates of The Goldenberg Group own the balance of the center. TRO
will manage the center. Tenants in the center will be Target, Kohl's, Babies
'R Us, Home Place, PetsMart, Crown Book, and Silver Diner.
The Operating Partnership will acquire the 50% interest of certain
TRO Affiliates in the center shortly after its completion, which is currently
anticipated in autumn of 1997.
The center is currently encumbered by a floating-rate construction
loan and mortgage held by an institutional lender and having an approximate
principal balance of $18 million as of September 30, 1997. The mortgage bears
interest at the London Interbank Offered Rate plus 1.9% and is extendable
until the spring of 1998. The terms of the mortgage will be unaffected by the
acquisition by the Operating Partnership of the equity interest of TRO
Affiliates in the center, but it is anticipated that a permanent mortgage will
be placed on the property on or before its acquisition by the Operating
Partnership.
Northeast Tower Center (Philadelphia, Pennsylvania)
This center was developed by TRO and all of the equity interests in
the center are owned by TRO Affiliates. TRO will manage the center. Tenants in
the center include Home Depot, PetsMart, Staples, and Old Navy. The center
will have approximately twelve other stores.
Upon completion of the center, which is currently anticipated to be
not later than December, 1999, the Operating Partnership will initially
acquire 89% of the interests of the TRO Affiliates which own the center. The
Operating Partnership will have the absolute right to acquire the remaining
11% interests of the TRO Affiliates thirty-seven months following the original
acquisition date.
It is currently anticipated that the center will be encumbered at the
time of its acquisition by the Operating Partnership by one or more mortgages
in the aggregate amount of approximately $20.6 million. The terms of the
mortgage will be unaffected by the acquisition by the Operating Partnership of
the equity interest of TRO Affiliates in the center.
-14-
<PAGE>
The Predevelopment Properties Acquisition. Under the terms of the TRO
Transaction, the Trust has acquired all of the interests of certain TRO
Affiliates in the Predevelopment Properties listed below. Additional
permitting and other work is required on all sites. Accordingly, there can be
no assurance that any particular site will ultimately be developed and it is
possible that the right to acquire an interest in some of these properties
will be allowed to expire unexercised due to unresolved permitting issues or
other factors encountered in the development process.
Predevelopment Properties -- General Information
<TABLE>
<CAPTION>
====================================================================================================================================
Total
Projected Projected Gross Current Projected Projected
Percentage Rentable Retail Construction Cost to the Trust
Property/Location Interest Sq. Ft. Commencement Date ($Mil.) (1)
----------------- --------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Blue Route Metroplex 50%* 760,000 Autumn, 1998 38.8
Plymouth Meeting, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Christiana Strip Center 50% 279,000 Winter, 1997 14.7
(Phase 1)
Newark, DE
- ------------------------------------------------------------------------------------------------------------------------------------
Christiana Strip Center 50% (2) 445,000 Autumn, 1998 (3)
(Phase II)
Newark, DE
- ------------------------------------------------------------------------------------------------------------------------------------
Red Rose Commons 50%* 461,000 Winter, 1997 14.6
Lancaster, PA
====================================================================================================================================
</TABLE>
- ---------------
* Subject to reduction to 25% under the terms of the Goldenberg Letter
Agreement. See "The Goldenberg Letter Agreement" below.
(1) Stated projected project costs are based on current estimates and
include both attributed debt and equity but exclude amounts due
certain TRO Affiliates in respect of one-half of any positive
difference between value at completion and cost (on an aggregate
basis).
(2) This property is not currently zoned for retail use and any
participation by the Trust in the development of this property is
subject to rezoning.
(3) None as of the date of this Report.
The Basic Predevelopment Arrangements
The terms of the TRO Transaction required the Operating Partnership,
on the TRO Closing Date, to reimburse TRO in cash for its verified
out-of-pocket expenditures and advances in respect of the Predevelopment
Properties which are not covered by the funding under the Goldenberg Letter
Agreement (see "The Goldenberg Letter Agreement" below). At the TRO Closing,
the Operating Partnership acquired from TRO, for cash, the account
-15-
<PAGE>
through which TRO had made Predevelopment Property advances under the
Goldenberg Letter Agreement.
As each Predevelopment Property project is completed, it will be
valued based on the following valuation principles: (i) all space based and
occupied by credit tenants will be valued at ten times adjusted cash flow
(computed as specified in the agreement); and (ii) all space leased to a
credit tenant but unoccupied will be valued at ten times adjusted cash flow
calculated as though the space was built and occupied as set forth in the
budget in the property, and (iii) space not leased or occupied, whether built
or unbuilt, will be valued as mutually agreed on or, failing agreement, by
appraisal. Additional provisions exist for valuing triple net lease/purchase
arrangements. Although each Predevelopment Property project will be valued as
completed and an "account" established against which Class A OP Units will be
deemed to be credited, as well as deemed cash in an amount that would have
been distributed on such deemed Units and a 10% interest factor on such deemed
cash, no consideration will be paid until the earlier of (x) the completion of
the last predevelopment property, and (y) the abandonment by the Trust of any
uncompleted projects, and (z) five years following the TRO closing. At that
time, any uncompleted project will be valued and the Operating Partnership
will issue Class A OP Units equal in value to 50% of the amount, if any, by
which the value of the Operating Partnership's interest in each predevelopment
project exceeded the aggregate cost of such project at the time of completion.
Negative amounts arising in connection with the completion or abandonment of
any project will be netted back against earlier completed projects in order of
completion. Class A OP Units issued in respect of the foregoing valuations of
the Predevelopment Projects will be valued at the greater of (x) average of
the closing prices of the Shares for the twenty trading days prior to the date
of the completion valuation and (y) $19.00. If the average of the closing
prices of the Shares on the 20 trading days prior to each valuation is less
than $19.00, additional OP Units, of a new class but equal in value to those
Class A OP Units not issued because of the operation of the pricing
limitation, will be issued.
The Goldenberg Letter Agreement
TRO was party to a letter agreement with The Goldenberg Group (the
"Goldenberg Letter Agreement"), which contemplates the development of six
power centers, three by The Goldenberg Group and three by TRO. The Goldenberg
Letter Agreement provides that the entity developing the center will have the
right to manage the center but that each center will be 50% owned by The
Goldenberg Group and 50% owned by TRO. TRO was obligated under the Goldenberg
Letter Agreement to provide a $5 million revolving fund to carry
pre-development expenses on The Goldenberg Group's three projects to the
extent those expenses exceed construction loan financing proceeds and to fund
all such expenses on TRO projects directly. At the TRO Closing, the Operating
Partnership took by assignment from TRO and an affiliate of TRO all of TRO's
rights, subject to all of TRO's obligations, under the Goldenberg Letter
Agreement.
-16-
<PAGE>
The Court at Oxford Valley, an Existing Property, was developed by
Goldenberg under the Goldenberg Letter Agreement and Hillview Shopping Center,
a Development Property, was developed by TRO under the Goldenberg Letter
Agreement. Goldenberg's remaining two projects under the Goldenberg Letter
Agreement are the Blue Route/Metroplex Center, Plymouth Meeting, Pennsylvania,
and Red Rose Commons, Lancaster, Pennsylvania, both listed above as
Predevelopment Properties. TRO has not yet proposed its second and third
projects under the Goldenberg Letter Agreement. In the event that the
Operating Partnership were to fail to offer The Goldenberg Group two proposed
power center projects meeting specified criteria (one to be selected at The
Goldenberg Group's sole election) within eighteen months of the closing of a
construction loan on each of Blue Route/Metroplex and Red Rose Commons, then
the interest of the Operating Partnership in the "unmatched" project would be
subject to reduction by The Goldenberg Group, without the payment of any
consideration, from 50% to 25%.
Although TRO has performed preliminary work for the requisite
"matches" for Blue Route/Metroplex and Red Rose Commons, there can be no
assurance that either project will be successfully matched and, therefore,
that the Operating Partnership's interest in these projects will not be
reduced to 25%. However, since the Operating Partnership will only pay TRO
Affiliates in respect of one-half of the "developer profit" on the share of
the profit actually acquired, a reduction in the interest in these projects
should not result in any unrecaptured cost to the Operating Partnership.
Rights of First Refusal. The Operating Partnership obtained rights of
first refusal with respect to the interests of certain TRO Affiliates in the
three retail properties listed below. There can be no assurance that the
Operating Partnership will have the opportunity to exercise its right of first
refusal with respect to any of such properties or that, having such right, it
will elect to do so.
-17-
<PAGE>
Rights of First Refusal Properties -- General Information
<TABLE>
<CAPTION>
=============================================================================================================
Gross Leasable Percentage Interests
Property/Location Sq. Ft. Owned By TRO Affiliates
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Christiana Mall, 1,100,000 (1)
Newark, DE (1)
- -------------------------------------------------------------------------------------------------------------
Cumberland Mall, 463,143 50%
Vineland, NJ
- -------------------------------------------------------------------------------------------------------------
Fairfield Mall, 417,940 50%
Chicopee, MA
=============================================================================================================
</TABLE>
- -----------------
(1) The ownership interest in this property is to be restructured. The
interests of TRO Affiliates is subject to adjustment. The Operating
Partnership's right of first refusal does not attach to transactions
incident to such restructuring.
Management Changes. A substantial number of management changes occurred
at the Trust as a consequence of the completion of the TRO Transaction. Ronald
Rubin, formerly Chairman and Chief Executive Officer of TRO, was elected a
Trustee and Chief Executive Officer of the Trust. George Rubin, formerly
President and Chief Operating Officer of TRO, was elected a Trustee of the Trust
and President of TRO. Rosemarie B. Greco was also elected a Trustee of the Trust
as a designee of TRO. Ms. Greco has no prior affiliation with the Trust. Messrs.
Robert G. Rogers, Robert Freedman and Jack Farber resigned as Trustees of the
Trust. Set forth below is biographical and other data with respect to Ronald
Rubin, George Rubin and Rosemarie B. Greco.
-18-
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Occupation During Beneficial Ownership
Age Last Five Years of Shares of the Trust
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Ronald Rubin (1) 66 Chairman and Chief (2)
Executive Officer, The
Rubin Organization, Inc.,
since 1992
- -----------------------------------------------------------------------------------------------------------
George Rubin (1) 54 President, The Rubin (2)
Organization, Inc., since
1992
- -----------------------------------------------------------------------------------------------------------
Rosemarie B. Greco 51 Former President, -0-
CoreStates Financial Corp.
and CoreStates Bank, N.A.
since 1992
===========================================================================================================
</TABLE>
- -----------------
(1) Ronald Rubin and George Rubin are brothers.
(2) Neither Ronald Rubin nor George Rubin currently own Shares of the
Trust. George Rubin's spouse currently owns 500 Shares, and his
daughter is the beneficiary of 900 shares held in trust for her. At the
closing of the TRO Transaction, Ronald Rubin and George Rubin became
beneficial owners, after adjustments, of approximately 143,440 and
86,055 Class A OP Units, respectively, issued in respect of their
equity interests in TRO and the Court at Oxford Valley. They will be
entitled to receive additional Class A OP Units during the five-year
period following the TRO Closing to the extent the Trust meets
specified financial goals. (See "The TRO Transaction -- Principal
Features of the TRO Transaction -- The TRO Equity Acquisition.") They
own a majority of the interests of the TRO Affiliates that own
interests in the Development Properties and the Predevelopment
Properties and thus will also obtain beneficial interests in a
substantial additional number of Class A OP Units as some or all of
such interests are acquired by the Operating Partnership. Class A OP
Units become redeemable by the holder one year after issuance and, if
tendered for redemption may, at the election of the Trust, be
exchanged for Shares. Ronald Rubin and George Rubin were granted
options at the TRO Closing to purchase 150,000 and 75,000 Shares,
respectively, of the Trust, none of which are currently exercisable
within the next sixty (60) days.
Sylvan M. Cohen, a founder of the Trust and currently Chairman and
Chief Executive Officer of the Trust, will continue as Chairman of the Board
of Trustees and as Chairman of its Property Committee. Jonathan B. Weller, a
Trustee and President of the Trust, will continue in those positions and as
Chief Operating Officer of the Trust. Robert G. Rogers, formerly Executive
Vice President of the Trust, will retire effective December 31, 1997. Edward
Glickman, currently Chief Financial Officer of TRO, became Chief Financial
Officer of the Trust. A number of members of management of TRO will continue
in such capacities in TRO.
-19-
<PAGE>
Ronald Rubin Employment Agreement. The Trust has entered into an
employment agreement with Ronald Rubin for an initial term of five years and
extending year-to-year thereafter until terminated by either party. During the
period of his employment, Mr. Rubin will be required to devote his full
working time, energy, skill and best efforts to the performance of his duties
under the agreement and may not participate in any other business pursuits
except that he may maintain his existing ownership interest in approximately
35 commercial properties in which the Trust will have no interest so long as
the aggregate time he devotes to such properties is insignificant and such
activities do not interfere with, detract from or affect the performance of
his duties to the Trust. The contract precludes Mr. Rubin, directly or
indirectly, from engaging in any development opportunity in which Mr. Rubin
has an ownership interest other than three specified projects, subject to
waiver by the Special Committee of the Board of Trustees of the Trust (see
"The TRO Transaction -- The Special Committee"), upon the request of Mr.
Rubin, in exceptional circumstances.
The contract provides for annual base salary of $345,000, provided
that at all times during the term of the contract the base salary be at least
equal to the highest amount paid to any other person employed by the Trust or
TRO. For each fiscal year commencing after December 31, 1997, Mr. Rubin will
be entitled to incentive compensation under a plan to be adopted by the Trust.
(See "The TRO Transaction -- Principal Features of the TRO Transaction -- Cash
Incentive Bonus Plan"). The contract also provides for the grant pursuant to
the 1997 Stock Option Plan of non-qualified options to purchase 150,000 Shares
at an exercise price fixed in accordance with the terms of the Plan, which
will be the closing price on the TRO Closing Date. The options will vest in
four equal annual installments beginning on the first anniversary of the grant
date. (See "The 1997 Stock Option Plan").
If Mr. Rubin's employment is terminated other than for cause or a
change in control of the Trust, he will be entitled to lump sum severance
equal to the present value of his base salary and a target incentive bonus for
the remaining portion of the contract term at the time of termination. If his
employment is terminated pursuant to a change in control (including voluntary
termination by Mr. Rubin within 60 days of a change in control), the Trust
shall pay him up to three times the present value of his base salary and
target incentive compensation, subject to all necessary reductions to preserve
the deductibility of all such payments under the Internal Revenue Code.
Mr. Rubin's contract defines change in control to mean (i) the
acquisition by any person or group of the beneficial ownership of 51% of the
issued and outstanding Shares, or (ii) a circumstance in which the majority of
the Board of Trustees does not consist of persons ("Continuing Trustees") who
were Trustees of the Trust prior to the time any person or group acquired 50%
or more of the Shares, or who were recommended to succeed such persons by a
majority of such persons, or (iii) the approval by the Shareholders of a
reorganization, consolidation or merger or approval by the Shareholders of a
liquidation or dissolution of the Trust or sale of all or substantially all of
the Trust's assets unless (A) the Shareholders will, by reason of such
transaction, own at least 51% of the voting securities of
-20-
<PAGE>
the surviving entity, and (B) no person, excluding an employee benefit plan,
will own more than 49% of the voting power of any resulting entity, and (C) a
majority of the members of the board of directors or trustees of the surviving
entity consist of persons who were Continuing Trustees of the Trust
immediately prior to the transaction.
During Mr. Rubin's employment and for one year thereafter if his
employment is terminated for cause, Mr. Rubin will be prohibited from
competing, in certain defined respects, with the Trust, subject to the
permitted ownership interests described above. Any non-competition agreement
would terminate upon a change in control of the Trust.
Other Employment Agreements. The Trust and TRO have entered into
employment agreements with a number of current managers of TRO, to take effect
on the TRO Closing. Most of the contracts provide for stated rates of minimum
base cash compensation, initial option grants, and incentive compensation to
be established in the future. (See "Cash Incentive Bonus Plan.") These
individuals include George Rubin, the brother of Ronald Rubin, who is
currently President of TRO and who will become a Trustee of the Trust and
remain President of TRO, and Edward Glickman, who is currently Chief Financial
Officer of TRO and who will become the Chief Financial Officer of the Trust.
Most of the individuals executing employment agreements were granted
options to purchase an aggregate of approximately 300,000 shares at an
exercise price equal to the closing price of the Shares on the date of the
closing of the TRO Transaction. The options will be non-qualified options,
will vest in four equal annual installments beginning on the first anniversary
of the grant date.
The term of all such contracts are two years and automatically
renewable for year-to-year terms thereafter unless prior notice is given by
either party. In many respects, these contracts otherwise contain terms
similar to those of the contract with Ronald Rubin, except that most of the
contracts provide that severance upon a change in control is a multiple of
twice base and targeted incentive compensation, subject to reduction to
satisfy limitations on deductibility, and the executive may only obtain such
payment if he or she resigns for Good Reason (as defined in the agreements)
following a change in control.
TRO Stock Bonus Plan. At the Closing, TRO established a stock bonus
plan for all of its employees who have completed at least one year of service
as of the effective date of the plan (September 30, 1997). The plan will be
qualified for favorable tax treatment under section 401(a) of the Internal
Revenue Code and all of the outstanding voting common shares of TRO will be
held by the trust established under the plan.
TRO contributed all of its voting common shares to the plan for the
plan year ending December 31, 1997. The shares will be allocated to the plan
accounts of the eligible employees as of December 31, 1997, pro rata, based on
their covered compensation for 1997. The shares held by the plan will be
appraised as of the effective date, and as of each
-21-
<PAGE>
December 31 thereafter. The value of an employee's account under the plan will
be payable to the employee upon termination of service. Since TRO's Articles
of Incorporation restrict ownership of all of the outstanding voting common
shares of TRO to TRO employees or to a tax-qualified plan for the benefit of
employees, benefits to terminated employees will be paid only in cash.
Voting on major corporate transactions (including mergers,
recapitalizations, liquidations, and similar transactions) will be passed
through by the plan trustee CoreStates Bank, N.A., to the plan's participants.
Voting by the plan trustee on other matters will be directed by majority vote
of the TRO Stock Bonus Plan Committee, who will be appointed by the Board of
Directors of TRO.
Cash Incentive Bonus Plan. The Trust and TRO have established an
incentive bonus plan, effective January 1, 1998, for certain officers and key
employees of the Trust and TRO. The plan is a nonqualified, unfunded plan with
bonuses to be paid from the general assets of the Trust.
The Executive Compensation and Human Resources Committee of the Board
of Trustees of the Trust will administer the plan. The Committee will
designate which eligible officers and key employees are eligible to receive a
bonus under the plan. Each of the individuals who will be entering into
employment agreements in connection with the TRO Transaction will be eligible
to participate in the Plan. A bonus pool will be created equal to a percentage
of "Adjusted Funds Available for Distribution," and one-half of the pool will
be paid to the participants based on set individual percentages. All or a
portion of the remainder of the pool may be awarded by senior management (in
its discretion, but subject to the approval of the Committee) to any of the
participants in the plan and/or to any other employees of the Trust or TRO who
achieved the goals and objectives stated in the Trust's business plan.
Bonuses will be paid in single-sum cash payments within a
reasonable time after the Trust's fiscal year-end financial statements are
approved. Except as provided in a participant's employment agreement, only
participants who are employed by the Trust or TRO on December 31 of each plan
year will be eligible to receive payments under the plan (unless the
participant was no longer an employee due to a reorganization, or because he
retired on or after age 65, became disabled, or died).
The New Credit Agreement
Coincident with the closing of the TRO transaction, the Operating
Partnership entered into a $150 million revolving credit facility (the "New
Revolver") with a group of banks led by CoreStates Bank, N.A ("CoreStates").
The obligations of the Operating Partnership under the New Revolver have been
guaranteed by the Trust. The New Revolver replaces,
-22-
<PAGE>
effective June 30, 1997, facilities which the Trust maintained with CoreStates
and other banks in the aggregate principal amount of $75 million (of which
$39.7 million was outstanding as of September 30, 1997). The New Revolver
leaves in place a separate $35 million term loan facility previously provided
the Trust by a bank group, including CoreStates, which is secured by three
apartment properties, had a balance as of September 30, 1997, of $34.0
million, and which may be extended at the borrower's option to March, 2000.
The New Revolver is for an initial term of twenty-four months
(subject to extension upon conditions and terms set forth therein) and bears
interest, at the borrower's election, at (i) the higher of CoreStates' prime
rate, or the Federal Funds lending rate plus .5%, in each case as in effect
from time to time, or (ii) the London Interbank Offered Rate plus margins
ranging from 1.1% to 1.7%, depending on the ratio of the Operating
Partnership's Consolidated Liabilities to Gross Asset Value (the "Leverage
Ratio"), each as determined pursuant to the terms of the New Revolver.
The New Revolver contains affirmative and negative covenants normally
found in facilities of this type, as well as requirements that the Operating
Partnership maintain, on a consolidated basis: (i) a maximum Leverage Ratio of
65%; (ii) a maximum ratio of Senior Liabilities to Unencumbered Asset Value of
73%; (iii) minimum tangible net worth of $115 million plus 75% of the net
proceeds of sales of equity securities by the Operating Partnership or the
Trust; (iv) a minimum ratio of annualized consolidated property net operating
income to total annual debt service of 1.40:1; (v) a minimum ratio of
annualized consolidated property net operating income to pro forma debt
service 1.30:1; and (vi) maintain consolidated net operating income of at
least $40,000,000. After giving effect to the acquisition of the non-voting
common shares of TRO and the acquisition of the Existing Properties, the
Leverage Ratio, computed as provided in the New Revolver, is approximately
59%. Until the Operating Partnership reduces its leverage ratio to 50%, the
lending banks will hold unrecorded mortgages on thirteen unencumbered
properties which the Operating Partnership owns, directly or indirectly, and
would be entitled to record such mortgages upon any event of default. After
the Operating Partnership reduces the Leverage Ratio to 50% and the ratio of
Senior Liabilities to Unencumbered Asset Value to 60%, the Lending Banks are
to release the unrecorded mortgages, whereupon the ratios in clauses (i),
(ii), (iv) and (v) above become, respectively, 50%, 60%, 1.70 to 1 and
1.65 to 1.
On September 30, 1997, the Operating Partnership drew $89.6 million
on the New Revolver, which was used as follows: $10.1 million for the
acquisition of Magnolia Mall, Florence, S.C.; $33.9 million for the
acquisition of North Dartmouth Mall, Dartmouth, MA; $39.7 million to refinance
existing credit facilities and unsecured term loans ($5.7 million of which
remained in place from the prior $75 million revolving credit facility); $8.9
million advance to TRO for the Closing Loan and predevelopment costs; and $2.7
million for other transaction costs. Because of the operation of the
Unencumbered Asset Value covenant, the
-23-
<PAGE>
current maximum borrowings which could be made by the Operating Partnership
under the New Revolver are approximately $113.4 million.
-24-
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
i. The Rubin Organization, Inc. and Subsidiary --
Consolidated Balance Sheets as of December 31, 1996, 1995 (unaudited)
and June 30, 1997 (unaudited); Consolidated Statements of Operations,
Stockholders' Equity, and Cash Flows for the years ending December
31, 1997, 1996 (unaudited), and 1995 (unaudited) and for the six
months ended June 30, 1997 (unaudited) and 1996 (unaudited); and
related notes thereto. Filed as Exhibit F to the Trust's definitive
proxy statement for the Special Meeting of Shareholders on September
29, 1997, filed with the Securities and Exchange Commission (the
"Commission") on August 27, 1997, and incorporated herein by
reference.
ii. Oxford Valley Road Associates -- Balance Sheets as at
December 31, 1996 and 1995 and June 30, 1997 (unaudited); Statements
of Operations and Partners Capital and Cash Flows for the years
ending December 31, 1996 and 1995 and the six months ending June 30,
1997 (unaudited) and 1996 (unaudited); and related notes thereto.
Filed as Exhibit G to the Trust's definitive proxy statement for the
Special Meeting of Shareholders on September 29, 1997, filed with the
Commission on August 27, 1997, and incorporated herein by reference.
iii. Magnolia Mall -- Statement of Revenues and Certain
Expenses for the year ending December 31, 1996, and the six months
ending June 30, 1997 (unaudited); and related notes thereto. Filed as
Exhibit H to the Trust's definitive proxy statement for the Special
Meeting of Shareholders on September 29, 1997, filed with the
Commission on August 27, 1997, and incorporated herein by reference.
iv. North Dartmouth Mall -- Statement of Revenues and
Certain Expenses for the year ending December 31, 1996, and the six
months ending June 30, 1997 (unaudited); and related notes thereto.
Filed as Exhibit I to the Trust's definitive proxy statement for the
Special Meeting of Shareholders on September 29, 1997, filed with the
Commission on August 27, 1997, and incorporated herein by reference.
(b) Pro Forma Financial Information.
i. Unaudited Pro Forma Consolidating Financial Information
of Pennsylvania Real Estate Investment Trust -- Consolidated Balance
Sheet as of May 31, 1997; Consolidating Income Statements for the
year ended August 31, 1996 and the nine months ended May 31, 1997;
and related notes to Management's Assumptions. See page F-1.
-25-
<PAGE>
(c) Exhibits. The Registrant agrees to furnish supplementally a copy
of any omitted Schedule or Exhibit to the Commission upon request.
3.2 Trust Agreement, as Amended and Restated September 29, 1997.
3.3 By-Laws, as adopted on September 29, 1997.
4.12 Revolving Credit Agreement, dated September 30, 1997, among
PREIT Associates, L.P. and the lending institutions named
therein.
4.13 Revolving Credit Note, dated September 30, 1997.
4.14 Guaranty of the Trust, dated September 30, 1997, among the
Trust and the lending institutions named therein.
4.15 First Amended and Restated Agreement of Limited Partnership,
dated September 30, 1997, of PREIT Associates, L.P.
4.16 Subscription Agreement, dated September 30, 1997, between
PREIT Associates, L.P. and Florence Mall Partners.
10.15 PREIT Contribution Agreement and General Assignment and Bill
of Sale, dated as of September 30, 1997, by and between the
Trust and PREIT Associates, L.P.
10.16 Declaration of Trust, dated June 19, 1997, by Trust, as
grantor, and Trust, as initial trustee.
10.17 TRO Contribution Agreement, dated as of July 30, 1997, among
the Trust, PREIT Associates, L.P., and the persons and
entities named therein.
10.18 First Amendment to TRO Contribution Agreement, dated September
30, 1997.
10.19 Contribution Agreement (relating to the Court at Oxford
Valley, Langhorne, Pennsylvania), dated as of July 30, 1997,
among the Trust, PREIT Associates, L.P., Rubin Oxford, Inc.
and Rubin Oxford Valley Associates, L.P.
10.20 First Amendment to Contribution Agreement (relating to the
Court at Oxford Valley, Langhorne, Pennsylvania), dated
September 30, 1997.
10.21 Contribution Agreement (relating to Hillview Shopping
Center, Cherry Hill, New Jersey), dated as of July 30, 1997,
among the Trust, PREIT Associates, L.P., Cherry Hill
Partner, Inc., and Rubin Oxford Valley Associates, L.P.
-26-
<PAGE>
10.22 Contribution Agreement (relating to Northeast Tower Center,
Philadelphia, Pennsylvania), dated as of July 30, 1997,
among the Trust, PREIT Associates, L.P., Roosevelt Blvd.
Co., Inc., and the individuals named therein.
10.23 Contribution Agreement (relating to the pre-development
properties named therein), dated as of July 30, 1997, among
the Trust, PREIT Associates, L.P., and TRO Predevelopment,
LLC.
10.24 First Amendment to Contribution Agreement (relating to the
pre-development properties), dated September 30, 1997.
10.25 First Refusal Rights Agreement, effective as of September
30, 1997, by Pan American Associates, its partners and all
persons having an interest in such partners with and for the
benefit of PREIT Associates, L.P.
10.26 Purchase and Sale Agreement (relating to Magnolia Mall,
Florence, South Carolina), dated as of June 30, 1997, by and
between Magnolia Retail Associates, L.L.C. and The Rubin
Organization, Inc.
10.27 First Amendment to Purchase and Sale Agreement (relating to
Magnolia Mall, Florence, South Carolina), dated September
30, 1997.
10.28 Purchase and Sale Agreement (relating to North Dartmouth
Mall, Dartmouth, Massachusetts), dated as of June 30, 1997,
by and between Diversified Equity Corporation of Illinois,
Inc. and The Rubin Organization, Inc.
10.29 Agreement Regarding Assignment of Purchase and Sale
Agreements (relating to Magnolia Mall, Florence, South
Carolina and North Dartmouth Mall, Dartmouth,
Massachusetts), dated as of June 30, 1997, between The Rubin
Organization, Inc. and the Trust.
10.30 Registration Rights Agreement, dated as of September 30,
1997, among the Trust and the persons listed on Schedule A
thereto.
10.31 Registration Rights Agreement, dated as of September 30,
1997, between the Trust and Florence Mall Partners.
10.32 Letter Agreement, dated March 26, 1996, by and among The
Goldenberg Group, The Rubin Organization, Inc., Ronald Rubin
and Kenneth Goldenberg.
10.33 Letter Agreement dated July 30, 1997, by and between The
Goldenberg Group and Ronald Rubin.
-27-
<PAGE>
10.34 Employment Agreement, dated September 30, 1997, between the
Trust and Ronald Rubin.
10.35 Employment Agreement, dated September 30, 1997, between the
Trust and Edward Glickman.
10.36 Second Amendment to Employment Agreement, dated as of
September 29, 1997, between the Trust and Sylvan M. Cohen.
10.37 Trust Incentive Bonus Plan, effective as of January 1, 1998.
10.38 PREIT-RUBIN, Inc. Stock Bonus Plan Trust Agreement,
effective as of September 30, 1997, by and between
PREIT-RUBIN, Inc. and CoreStates Bank, N.A.
10.39 PREIT-RUBIN, Inc. Stock Bonus Plan.
10.40 Amended and Restated 1990 Incentive and Non-Qualified Stock
Option Plan of the Trust.
10.41 1997 Stock Option Plan.
23.3 Consent of Arthur Andersen LLP (Independent Public
Accountants for the Trust, The Rubin Organization, Inc.,
Magnolia Mall and North Dartmouth Mall.)
23.4 Consent of Zelenkofske, Axelrod & Co., Ltd. (Independent
Public Accountants for Oxford Valley Road Associates.)
-28-
<PAGE>
Item 8. Change in Fiscal Year.
At a meeting of the Board of Trustees of the Registrant held
September 29, 1997, the Board of Trustees resolved to change the Registrant's
fiscal year end from August 31 to December 31. The Registrant's first full
fiscal year after the change will be the twelve months ended December 31,
1998. The Registrant intends to file a report on Form 10-Q for the four month
period ending December 31, 1997, not later than February 14, 1998.
-29-
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Pennsylvania Real Estate Investment Trust
/s/ Dante J. Massimini
Date: October 13, 1997 -----------------------------------
Dante J. Massimini
Senior Vice President-Finance
and Treasurer
-30-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the pro forma consolidating balance sheet of
Pennsylvania Real Estate Investment Trust as of May 31, 1997 and the pro forma
consolidating statements of operations for the year ended August 31, 1996 and
the nine-month period ended May 31, 1997 to give effect to the TRO
Transaction.
The TRO Transaction involved a number of related transactions, the combined
effect of which was to form and capitalize an Operating Partnership and to
transfer ownership of the Trust's direct and indirect interests in its
existing properties, or the economic benefits thereof, to the Operating
Partnership, and to effect the acquisitions described below:
* TRO Equity Acquisition. The Operating Partnership acquired all of the
non-voting common shares of TRO, constituting 95% of all of the total
equity of TRO, in exchange for the issuance of 200,000 Class A OP
Units and a contingent obligation to issue up to 800,000 additional
Class A OP Units over the following five-year period if the Trust
achieves certain specified levels of funds from operations, on a per
share basis, over such period.
* Existing Properties Acquisition. The Operating Partnership acquired the
interests of certain affiliates of TRO ("TRO Affiliates") in three
existing shopping centers, or portions of shopping centers (the
"Existing Properties").
Two of the properties (Magnolia Mall and North Dartmouth Mall) were
purchased from Equity Properties and Development Limited Partnership
("EPDLP") for aggregate consideration, excluding transaction costs, of
approximately $80 million, of which (i) $25.2 million represents an
assumable mortgage, (ii) $5 million was paid through the issuance of
approximately 213,000 Class B OP units to an affiliate of EPDLP for
their interest in Magnolia Mall; and (iii) the balance was financed with
borrowings under a revolving credit facility.
The Operating Partnership issued approximately 233,000 additional
Class A OP units to TRO Affiliates in respect of their 50% equity
interest in the Court at Oxford Valley.
* Predevelopment Properties Acquisition. The Operating Partnership
acquired the rights of certain TRO Affiliates in respect of three
potential shopping center sites (the "Predevelopment Properties") in
exchange for (i) a loan of cash to TRO in the amount of $3.4 million
representing actual out-of-pocket expenditures of TRO incurred with
respect of such properties through the Closing Date, and (ii) an
obligation to issue, upon completion of any property subsequently
developed, Class A OP Units for one-half of the difference between the
aggregate value of all such properties at the time of completion and
the all-in-cost of all such properties.
* Development Properties Acquisition. The Operating Partnership became
obligated to acquire, for Class A OP Units, the interests of certain
TRO Affiliates in two shopping centers currently under development
(the "Development Properties"), upon completion of their construction,
F-1
<PAGE>
at prices based upon a pre-determined formula. As these transactions
are expected to occur in the future at amounts that are not currently
determinable, the financial impact of such future events has not been
reflected in the accompanying pro forma financial statements.
All of the acquisitions described above have been recorded by the Trust using
the purchase method of accounting.
The accompanying pro forma consolidating financial information is presented as
if the transactions described above had been consummated on May 31, 1997 for
balance sheet purposes and September 1, 1995 for purposes of the statements of
operations. This unaudited pro forma consolidating financial information should
be read in conjunction with the historical financial statements of the Trust,
including the Trust's most recently filed reports on Form 10-K and Form 10-Q,
and The Rubin Organization, Inc., Magnolia Mall, North Dartmouth Mall and
Oxford Valley Road Associates and the related notes thereto all which are
incorporated by reference in this Form 8-K or included elsewhere herein. In
management's opinion, all adjustments necessary to reflect the effects of the
transactions have been made.
The pro forma consolidating financial information is unaudited and is not
necessarily indicative of what the actual financial position or results of
operations of the Trust would have been had the TRO Transaction been
consummated as of the dates indicated, nor does it purport to represent the
future financial position and the results of operations of the Trust.
F-2
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING BALANCE SHEET
MAY 31, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Other The
PREIT Existing Pro Forma Company
Historical TRO (A) Properties(B) Adjustments Pro Forma
---------- ------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Assets
Investments in Real Estate, at cost
Apartment buildings $ 158,865 $ -- $ -- $ -- $ 158,865
Industrial properties 5,078 -- -- -- 5,078
Shopping centers and retail stores 37,393 -- 80,365 2,212 (C) 119,970
----------- ----------- ------------ ----------- ------------
Total investments in real estate 201,336 -- 80,365 2,212 283,913
Less accumulated depreciation 49,172 -- -- -- 49,172
----------- ----------- ------------ ----------- ------------
152,164 -- 80,365 2,212 234,741
Property under development -- -- -- 2,162 (D) 2,162
Investment in management company -- 4,680 -- 896 (E) 5,576
Investments in partnerships and joint
ventures, at equity 1,710 -- 5,458 778 (F) 7,946
Advances to management company -- -- -- 9,000 (G) 9,000
----------- ----------- ------------ ------------ ------------
153,874 4,680 85,823 15,048 259,425
Less allowance for possible losses 1,880 -- -- -- 1,880
----------- ----------- ------------ ----------- ------------
151,994 4,680 85,823 15,048 257,545
Other Assets:
Cash and cash equivalents 3,554 -- -- -- 3,554
Rents and sundry receivables 370 -- -- -- 370
Deferred costs, prepaid real estate
taxes and expenses, net 5,961 -- -- 775 (H) 6,736
----------- ----------- ----------- ----------- ------------
$ 161,879 $ 4,680 $ 85,823 $ 15,823 $ 268,205
=========== =========== ============ =========== ============
Liabilities and Beneficiaries' Equity
Mortgage notes payable $ 83,844 $ -- $ 25,200 $ -- $ 109,044
Bank and other loans payable 28,623 -- 50,165 15,823 (I) 94,611
Tenants' deposits and deferred rents 1,246 -- -- -- 1,246
Accrued pension and other benefits 1,117 -- -- -- 1,117
Accrued expenses and other liabilities 3,624 -- -- -- 3,624
----------- ----------- ----------- ----------- ------------
118,454 -- 75,365 15,823 209,642
----------- ----------- ------------ ----------- ------------
Minority interest 718 4,680 10,458 -- 15,856
----------- ----------- ------------ ----------- ------------
Beneficiaries' Equity
Shares of beneficial interest 8,678 -- -- -- 8,678
Capital contributed in excess of par 53,164 -- -- -- 53,164
Distributions in excess of net income (19,135) -- -- -- (19,135)
----------- ----------- ----------- ----------- ------------
42,707 -- -- -- 42,707
----------- ----------- ----------- ----------- ------------
$ 161,879 $ 4,680 $ 85,823 $ 15,823 $ 268,205
=========== =========== ============ =========== ============
</TABLE>
The accompanying notes and management's assumptions are an
integral part of this statement.
F-3
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING INCOME STATEMENT
FOR THE YEAR ENDED AUGUST 31, 1996
(Unaudited)
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
North Other The
PREIT Magnolia Dartmouth Pro Forma Company
Historical TRO (a) Mall(b) Mall (c) Adjustments Pro Forma
---------- ------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Revenues from real estate $ 38,985 $ -- $ 6,017 $ 5,823 $ -- $ 50,825
Interest and other income 171 -- 84 285 -- 540
----------- ----------- ------------ ----------- ----------- ------------
39,156 -- 6,101 6,108 -- 51,365
Expenses
Property expenses 16,102 -- 1,575 2,188 -- 19,865
Depreciation and amortization 5,908 -- 1,512 1,164 -- 8,584
General and administrative
expenses 3,119 -- -- -- -- 3,119
Interest 9,831 -- 3,280 2,800 666 (d) 16,577
----------- ----------- ------------ ----------- ----------- ------------
34,960 -- 6,367 6,152 666 48,145
----------- ----------- ------------ ----------- ----------- ------------
Income (loss) before gains
on sales of interests in
real estate, equity in
unconsolidated entities
and minority interest 4,196 -- (266) (44) (666) 3,220
Gains on sales of interests
in real estate 865 -- -- -- -- 865
Equity in loss of management
company -- (1,002) -- -- -- (1,002)
Equity in income of
partnerships and joint
ventures 6,258 -- -- -- (57) (e) 6,201
----------- -------------- ------------ ----------- ------------ ------------
Income before minority
interest 11,319 (1,002) (266) (44) (723) 9,284
Minority interest 275 -- -- -- 630 (f) 905
----------- ----------- ------------ ----------- ------------ ------------
Net income (loss) $ 11,044 $ (1,002) $ (266) $ (44) $ (1,353) $ 8,379
=========== =========== ============= ============ =========== ============
Net Income Per Share $ 1.27 $ .97
========== ===========
Weighted Average Number of
Shares Outstanding 8,676 8,767
=========== ===========
</TABLE>
The accompanying notes and management's assumptions are an
integral part of this statement.
F-4
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING INCOME STATEMENT
FOR THE NINE MONTHS ENDED MAY 31, 1997
(Unaudited)
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
North Other The
PREIT Magnolia Dartmouth Pro Forma Company
Historical TRO (a) Mall(b) Mall (c) Adjustments Pro Forma
---------- ------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Revenues from real estate $ 30,116 $ -- $ 4,730 $ 4,543 $ -- $ 39,389
Interest and other income 218 -- 15 15 -- 248
----------- ----------- ------------ ----------- ----------- ------------
30,334 -- 4,745 4,558 -- 39,637
Expenses
Property expenses 12,154 -- 1,313 1,714 -- 15,181
Depreciation and
amortization 4,661 -- 1,134 873 -- 6,668
General and administrative
expenses 2,433 -- -- -- -- 2,433
Interest 6,864 -- 2,460 2,100 703 (d) 12,127
Provisions for losses on
investments 500 -- -- -- -- 500
----------- ----------- ------------ ----------- ----------- ------------
26,612 -- 4,907 4,687 703 36,909
----------- ----------- ------------ ----------- ----------- ------------
Income (loss) before gains
on sales of interests
in real estate, equity
in unconsolidated
entities and minority
interest 3,722 -- (162) (129) (703) 2,728
Gains on sales of
interests in real estate 1,461 -- -- -- -- 1,461
Equity in loss of
management company -- (96) -- -- -- (96)
Equity in income of
partnerships and joint
ventures 3,487 -- -- -- (105) (e) 3,592
---------- ------------ ------------- ----------- ------------ ------------
Income before minority
interest 8,670 (96) (162) (129) (598) 7,685
Minority interest 265 -- -- -- 519 (f) 784
----------- ----------- ------------ ----------- ------------ ------------
Net income (loss) $ 8,405 $ (96) $ (162) $ (129) $ (1,117) $ 6,901
=========== =========== ============= ============ =========== ============
Net Income Per Share $ .97 $ .80
========== ===========
Weighted Average Number of
Shares Outstanding 8,678 8,678
=========== ===========
</TABLE>
The accompanying notes and management's assumptions are an
integral part of this statement.
F-5
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING BALANCE SHEET
(A) Acquisition of The Rubin Organization (TRO):
<TABLE>
<CAPTION>
Assets and
Liabilities
TRO Not TRO
Historical (1) Acquired (2) Other (3) Acquisition
-------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 787 $ -- $ -- $ 787
Fees and commissions receivable 3,614 2,714 -- 6,328
Real estate held for sale -- -- -- --
Prepaid expenses 165 (165) -- --
------------- ------------- ------------- ------------
Total current assets 4,566 2,549 -- 7,115
-- --
Property and Equipment, net 1,141 1,141
-- --
Leasing commissions receivable, long-term 312 312
Investment in partnerships 146 (146) -- --
Intangible assets - management contracts 6,859 -- -- 6,859
Advances to affiliated partnerships 3,525 (3,525) -- --
------------- ------------- ------------- ------------
Total Other Assets 10,842 (3,671) -- 7,171
------------- ------------- ------------- -------------
Total Assets $ 16,549 $ (1,122) -- $ 15,427
============= ============= ============== =============
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt $ 3,053 $ (2,553) $ -- $ 500
Accounts payable, trade and accrued expenses 3,281 -- -- 3,281
Accounts payable to affiliates 223 -- -- 223
Advances from Operating Partnership -- 3,359 -- 3,359
Deferred compensation payable 186 -- -- 186
------------- ------------- ------------- -------------
Total current liabilities 6,743 806 -- 7,549
Long-term debt 9,440 (3,541) -- 5,899
Deferred compensation - long term 247 -- -- 247
Minority Interest 4 (4) -- --
Stockholders' Equity
Common stock 28 (28) -- --
Additional paid-in capital 4,663 (2,931) -- 1,732
Treasury stock (1) 1 -- --
Accumulated deficit (4,575) 4,575 -- --
------------- ------------- ------------- ------------
Total stockholders' equity 115 1,617 -- 1,732
------------- ------------- ------------- -------------
Total Liabilities and Stockholders' Equity $ 16,549 $ (1,122) -- $ 15,427
============= ============== ============= =============
Operating partnership's investment in management
company (4) $ 4,680
=============
</TABLE>
(Footnote explanations appear on next page)
F-6
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING BALANCE SHEET
- ---------------------------------------------------
Footnotes to Acquisition of TRO:
(1) To reflect the historical cost basis of the assets and liabilities of
TRO.
(2) To eliminate assets and liabilities not being acquired or
assumed.
(3) Represents additional cash contribution required by TRO shareholders
to satisfy minimum working capital requirements at the Closing Date.
(4) The Operating Partnership will record its investment in the
non-voting common shares of TRO using the equity method of
accounting. The excess of purchase price paid for TRO, including
allocated transaction costs, over the fair value of the net assets
acquired will be amortized against the Operating Partnership's share
of TRO's income over 10 years.
- ---------------------------------------------------
(B) Acquisition of the EPDLP Properties and 50% interest in the Court at
Oxford Valley (the "Existing Properties"):
<TABLE>
<CAPTION>
North The Court at Total
Magnolia Dartmouth Oxford Existing
Mall (1) Mall (2) Valley (3) Properties
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Assets
Investments in Shopping Centers and Retail
Stores, at cost $ 45,365 $ 35,000 $ -- $ 80,365
Investments in Partnerships and Joint
Ventures, at equity -- -- 5,458 5,458
------------- ------------- ------------ -------------
$ 45,365 $ 35,000 $ 5,458 $ 85,823
============= ============= ============= =============
Liabilites
Mortgage Notes Payable $ 25,200 $ -- $ -- $ 25,200
Bank and Other Loans Payable 15,165 35,000 -- 50,165
Minority Interest 5,000 -- 5,458 10,458
------------- ------------ ------------- -------------
$ 45,365 $ 35,000 $ 5,458 $ 85,823
============= ============= ============= =============
</TABLE>
- ---------------------------------------------------
Footnotes to Acquisition of Existing Properties:
(1) To record the acquisition of Magnolia Mall for total consideration of
$45.4 million consisting of $25.2 million of mortgage notes payable
assumed, $15.2 million of borrowings under the revolving line of
credit and approximately 213,000 Class B OP Units valued at $23.47
per unit.
(2) To record the acquisition of North Dartmouth Mall for total
consideration of $35 million utilizing borrowings under the revolving
line of credit.
(3) To record the Operating Partnership's 50% interest in the Court at
Oxford Valley for total consideration of approximately 233,000 Class
A OP Units valued at $23.40 per unit.
- --------------------------------------------------
F-7
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING BALANCE SHEET
<TABLE>
<S> <C>
(C) To allocate transaction costs to Magnolia Mall and North Dartmouth Mall. $ 2,212
(D) To record the Operating Partnership's acquisition of the Predevelopment Properties and an
allocation of transaction costs. 2,162
(E) To allocate transaction costs to the Operating Partnership's investment in the management
company. 896
(F) To allocate transaction costs to the Operating Partnership's investment in
the Court at Oxford Vall 778
(G) To reimburse TRO for EPDLP management contract start-up costs and pre-development expenses.
9,000
(H) To record financing costs incurred relating to the $125 million revolving line of credit.
775
(I) To record additional borrowings to fund transaction costs and reimburse TRO for pre-development
expenses and EPDLP management contract start-up costs.
15,823
</TABLE>
F-8
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING INCOME STATEMENTS
(a) TRO:
<TABLE>
<CAPTION>
For the Year Ended August 31, 1996
----------------------------------
TRO Pro Forma TRO
Historical Adjustments Pro Forma
------------- ------------- -----------
<S> <C> <C> <C>
Revenues $ 14,783 -- $ 14,783
Operating Expenses
Salaries, commissions and employee benefits 9,985 300 (1) 10,285
Rent expense 795 -- 795
Other operating expenses 4,023 -- 4,023
Depreciation and amortization 351 -- 351
Property writedown 320 (320) (2) --
------------ -------------- -------------
Total Operating Expenses 15,474 (20) 15,454
------------ -------------- -------------
Income (Loss) From Operations (691) 20 (671)
(3)
Interest Expense (715) 715 --
Equity in Loss from Partnership Investments (468) 468 (4) --
------------ ------------- -------------
Pre-tax loss (1,874) 1,203 (671)
Provision for income taxes -- -- --
------------ ------------- -------------
Net loss $ (1,874) $ 1,203 $ (671)
============ ============= =============
Amortization of excess purchase price over net assets
acquired recorded in consolidation (5)
(384)
Net loss, as adjusted $ (1,055)
=============
Operating Partnership's share of net loss of TRO $ (1,002)
=============
</TABLE>
(Footnote explanations appear on next page)
F-9
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING INCOME STATEMENTS
<TABLE>
<CAPTION>
For the Nine Months Ended May 31, 1997
--------------------------------------
TRO Pro Forma TRO
Historical Adjustments Pro Forma
---------- ------------ -----------
<S> <C> <C> <C>
Revenues $ 14,155 $ -- $ 14,155
Operating Expenses
Salaries, commissions and employee benefits 8,602 225 (1) 8,827
Rent expense 581 -- 581
Other operating expenses 3,884 -- 3,884
Depreciation and amortization 676 -- 676
Property writedown -- -- --
------------ ------------- -------------
Total Operating Expenses 13,743 225 13,968
------------ ------------- -------------
Income From Operations 412 (225) 187
Interest Expense (618) 618 (3) --
Equity in Loss from Partnership Investments (131) 131 (4) --
------------ ------------- -------------
Pre-tax loss (337) 524 187
Provision for income taxes -- -- --
------------ ------------- -------------
Net (loss) income $ (337) $ 524 $ 187
============ ============= =============
Amortization of excess purchase price over net assets
acquired recorded in consolidation (5) (288)
Net loss, as adjusted $ (101)
=============
Operating Partnership's share of net loss of TRO $ (96)
=============
</TABLE>
- ---------------------------------------------------
Footnotes to TRO:
(1) To record additional compensation expense in accordance with the
proposed employment contracts. Certain employees will also be
entitled to additional incentive compensation based on their
achievement of certain financial and other performance objectives.
Additional amounts for incentive compensation expense have not been
recorded, as such amounts would not have been earned on an historical
basis.
(2) To eliminate impairment loss recorded on equity investment not being
acquired.
(3) To eliminate interest expense on debt not assumed.
(4) To eliminate equity in loss of partnerships and joint ventures not
being acquired.
(5) To record the amortization of excess purchase price, including
allocated transaction costs, over net assets acquired over 10 years.
- ---------------------------------------------------
F-10
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENTS TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING INCOME STATEMENTS
(b) Magnolia Mall:
For the Year Ended August 31, 1996
----------------------------------
<TABLE>
<CAPTION>
Magnolia Magnolia
Mall Pro Forma Mall
Historical Adjustments Pro Forma
------------ ------------ -------------
<S> <C> <C> <C>
Revenues
Gross revenues from real estate $ 6,017 $ -- $ 6,017
Interest and other income 84 -- 84
------------ ------------- -------------
6,101 -- 6,101
Expenses
Property operating expenses 1,575 -- 1,575
Depreciation and amortization -- 1,512 (1) 1,512
Mortgage and bank loan interest -- 3,280 (2) 3,280
------------ ------------- -------------
1,575 4,792 6,367
------------ ------------- -------------
Net income (loss) $ 4,526 $ (4,792) $ (266)
============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended May 31, 1997
--------------------------------------
Magnolia Magnolia
Mall Pro Forma Mall
Historical Adjustments Pro Forma
------------- ----------- --------------
<S> <C> <C> <C>
Revenues
Gross revenues from real estate $ 4,730 $ -- $ 4,730
Interest and other income 15 -- 15
------------ ------------- -------------
4,745 -- 4,745
Expenses
Property operating expenses 1,313 -- 1,313
Depreciation and amortization -- 1,134 (1) 1,134
Mortgage and bank loan interest -- 2,460 (2) 2,460
------------ ------------- -------------
1,313 3,594 4,907
------------ ------------- -------------
Net income $ 3,432 $ (3,594) $ (162)
============ ============= ==============
</TABLE>
- ---------------------------
Footnotes to Magnolia Mall:
(1) To record depreciation and amortization on assets acquired and
transaction costs capitalized.
(2) To record interest expense on $25,200 of assumed mortgage
indebtedness at 8.2% and $15,165 of short-term borrowings under the
revolving line of credit at 8%.
- ---------------------------------------------------
F-11
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING INCOME STATEMENTS
(c) North Dartmouth Mall Acquisition:
<TABLE>
<CAPTION>
For the Year Ended August 31, 1996
----------------------------------
North North
Dartmouth Pro Forma Dartmouth
Historical Adjustments Pro Forma
----------- ----------- -------------
<S> <C> <C> <C>
Revenues
Gross revenues from real estate $ 5,823 $ -- $ 5,823
Interest and other income 285 -- 285
------------ ------------ -------------
6,108 -- 6,108
Expenses
Property operating expenses 2,188 -- 2,188
Depreciation and amortization -- 1,164 (1) 1,164
Mortgage and bank loan interest -- 2,800 (2) 2,800
------------ ------------- -------------
2,188 3,964 6,152
------------ ------------- -------------
Net income (loss) $ 3,920 $ (3,964) $ (44)
============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended May 31, 1997
--------------------------------------
North North
Dartmouth Pro Forma Dartmouth
Historical Adjustments Pro Forma
------------ ------------- ---------------
<S> <C> <C> <C>
Revenues
Gross revenues from real estate $ 4,543 $ -- $ 4,543
Interest and other income 15 15
------------ ------------- -------------
4,558 -- 4,558
Expenses
Property operating expenses 1,714 -- 1,714
Depreciation and amortization -- 873 (1) 873
Mortgage and bank loan interest -- 2,100 (2) 2,100
------------ ------------- -------------
1,714 2,973 4,687
------------ ------------- -------------
Net income (loss) $ 2,844 $ (2,973) $ (129)
============ ============= ==============
</TABLE>
- ---------------------------------------------------
Footnotes to North Dartmouth Mall:
(1) To record depreciation and amortization on assets acquired and
transaction costs capitalized.
(2) To record interest expense on additional short-term borrowings under
the revolving line of credit of $35 million at 8%.
- ---------------------------------------------------
F-12
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATING INCOME STATEMENTS
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
August 31, 1996 May 31, 1997
--------------- ------------------
<S> <C> <C>
(d) To record interest expense on $15.3 million of additional borrowings
at an effective borrowing rate 8%, including amortization of deferred
financing costs, net of interest capitalized on Development
Properties. $ 666 $ 703
(e) To record the Operating Partnership's 50% equity in the income of the
Court at Oxford Valley, net of amortization of excess purchase price
over net book value of assets acquired. $ (57) $(105)
(f) To adjust the minority interest's share of income in Operating
Partnership. $ 630 $ 519
</TABLE>
F-13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<S> <C> <C>
3.2 Trust Agreement, as Amended and Restated September 29, 1997.
3.3 By-Laws, as adopted on September 29, 1997.
4.12 Revolving Credit Agreement, dated September 30, 1997, among
PREIT Associates, L.P. and the lending institutions named
therein.
4.13 Revolving Credit Note, dated September 30, 1997.
4.14 Guaranty of the Trust, dated September 30, 1997, among the Trust and the
lending institutions named therein.
4.15 First Amended and Restated Agreement of Limited Partnership,
dated September 30, 1997, of PREIT Associates, L.P.
4.16 Subscription Agreement, dated September 30, 1997, between PREIT
Associates, L.P. and Florence Mall Partners.
10.15 PREIT Contribution Agreement and General Assignment and Bill of Sale,
dated as of September 30, 1997, by and between the Trust and PREIT
Associates, L.P.
10.16 Declaration of Trust, dated June 19, 1997, by Trust, as grantor, and Trust, as
initial trustee.
10.17 TRO Contribution Agreement, dated as of July 30, 1997, among
the Trust, PREIT Associates, L.P., and the persons and
entities named therein.
10.18 First Amendment to TRO Contribution Agreement, dated September 30, 1997.
10.19 Contribution Agreement (relating to the Court at Oxford
Valley, Langhorne, Pennsylvania), dated as of July 30, 1997,
among the Trust, PREIT Associates, L.P., Rubin Oxford, Inc.
and Rubin Oxford Valley Associates, L.P.
10.20 First Amendment to Contribution Agreement (relating to the
Court at Oxford Valley, Langhorne, Pennsylvania), dated
September 30, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<S> <C> <C>
10.21 Contribution Agreement (relating to Hillview Shopping Center, Cherry Hill,
New Jersey), dated as of July 30, 1997, among the Trust, PREIT Associates,
L.P., Cherry Hill Partner, Inc., and Rubin Oxford Valley Associates, L.P.
10.22 Contribution Agreement (relating to Northeast Tower Center,
Philadelphia, Pennsylvania), dated as of July 30, 1997,
among the Trust, PREIT Associates, L.P., Roosevelt Blvd.
Co., Inc., and the individuals named therein.
10.23 Contribution Agreement (relating to the pre-development
properties named therein), dated as of July 30, 1997, among
the Trust, PREIT Associates, L.P., and TRO Predevelopment,
LLC.
10.24 First Amendment to Contribution Agreement (relating to the pre-development
properties), dated September 30, 1997.
10.25 First Refusal Rights Agreement, effective as of September
30, 1997, by Pan American Associates, its partners and all
persons having an interest in such partners with and for the
benefit of PREIT Associates, L.P.
10.26 Purchase and Sale Agreement (relating to Magnolia Mall,
Florence, South Carolina), dated as of June 30, 1997, by and
between Magnolia Retail Associates, L.L.C. and The Rubin
Organization, Inc.
10.27 First Amendment to Purchase and Sale Agreement (relating to Magnolia Mall,
Florence, South Carolina), dated September 30, 1997.
10.28 Purchase and Sale Agreement (relating to North Dartmouth Mall, Dartmouth,
Massachusetts), dated as of June 30, 1997, by and between Diversified Equity
Corporation of Illinois, Inc. and The Rubin Organization, Inc.
10.29 Agreement Regarding Assignment of Purchase and Sale
Agreements (relating to Magnolia Mall, Florence, South
Carolina and North Dartmouth Mall, Dartmouth,
Massachusetts), dated as of June 30, 1997, between The Rubin
Organization, Inc. and the Trust.
10.30 Registration Rights Agreement, dated as of September 30, 1997, among the
Trust and the persons listed on Schedule A thereto.
10.31 Registration Rights Agreement, dated as of September 30, 1997, between the
Trust and Florence Mall Partners.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ------------ ----
<S> <C> <C>
10.32 Letter Agreement, dated March 26, 1996, by and among The Goldenberg
Group, The Rubin Organization, Inc., Ronald Rubin and Kenneth Goldenberg.
10.33 Letter Agreement dated July 30, 1997, by and between The Goldenberg Group
and Ronald Rubin.
10.34 Employment Agreement, dated September 30, 1997, between the Trust and
Ronald Rubin.
10.35 Employment Agreement, dated September 30, 1997, between the Trust and
Edward Glickman.
10.36 Second Amendment to Employment Agreement, dated as of September 29,
1997, between the Trust and Sylvan M. Cohen.
10.37 Trust Incentive Bonus Plan, effective as of January 1, 1998.
10.38 PREIT-RUBIN, Inc. Stock Bonus Plan Trust Agreement, effective as of
September 30, 1997, by and between PREIT-RUBIN, Inc. and CoreStates
Bank, N.A.
10.39 PREIT-RUBIN, Inc. Stock Bonus Plan.
10.40 Amended and Restated 1990 Incentive and Non-Qualified Stock Option Plan of
the Trust.
10.41 1997 Stock Option Plan.
23.3 Consent of Arthur Andersen LLP (Independent Public Accountants for the
Trust, The Rubin Organization, Inc., Magnolia Mall and North Dartmouth
Mall.)
23.4 Consent of Zelenkofske, Axelrod & Co., Ltd. (Independent Public Accountants
for Oxford Valley Road Associates.)
</TABLE>
<PAGE>
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
TRUST AGREEMENT AS
AMENDED AND RESTATED
SEPTEMBER 29, 1997
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
TRUST AGREEMENT AS AMENDED
AND RESTATED SEPTEMBER 29, 1997
The undersigned trustees of Pennsylvania Real Estate Investment Trust
on this 29th day of September 1997, hereby amend the Trust Agreement made
December 27, 1960, and amended February 10, 1961, February 14, 1962, August 7,
1962, May 8, 1963, December 13, 1967, February 24, 1970, October 10, 1985,
November 7, 1985, February 13, 1986 and December 16, 1987 and agree that the
same as amended hereby shall be restated as follows:
1. NAME OF TRUST; REGISTERED OFFICE; DEFINITIONS
Certain trustees acting under this Trust Agreement have heretofore
formed a Trust which is designated "Pennsylvania Real Estate Investment Trust"
(hereinafter referred to as the "Trust" or "PREIT"). PREIT shall conduct all
business and the Trustees, and others authorized hereby or pursuant to the
provisions hereof, shall execute all instruments necessary or desirable and
appropriate to the performance of the purposes of PREIT.
PREIT shall exist subject to 15 Pa. C.S. Chapter 95, as
amended from time to time, and any successor statute thereto.
The address of the registered office of PREIT in the Commonwealth of
Pennsylvania is 455 Pennsylvania Avenue, Suite 135, Montgomery County, Fort
Washington, Pennsylvania 19034.
The term "Trustees," when used herein, shall mean the undersigned
trustees of PREIT and any successor or additional trustees of PREIT hereunder.
The term "Trust Property", when used herein, shall mean all property,
of all kinds, owned by PREIT.
The term "Shareholders", when used herein, shall mean holders of
Shares, as defined in Paragraph 8 of this Trust Agreement.
2. TRUSTEES
The following provisions shall apply to Trustees serving under this
Trust Agreement:
A. NUMBER
The Trustees shall have the right at any time, and from time
to time, to increase or decrease the number of Trustees then empowered to
serve to a number not in excess of fifteen (15) nor
-1-
<PAGE>
less than five (5). Commencing with the Annual Meeting of Shareholders in 1970
the Trustees shall be divided into three approximately equal classes each
consisting of not fewer than one (1) nor more than five (5) individuals.
B. TERM OF OFFICE
The term of office of each Trustee serving prior to the
Annual Meeting of Shareholders in 1970 shall terminate upon the election of
his successor. At such Annual Meeting one class of Trustees ("Class A
Trustees") shall be elected, each member of which is to hold office for a term
of one year, one class of Trustees ("Class B Trustees") shall be elected, each
member of which is to hold office for a term of two years, and one class of
Trustees ("Class C Trustees") shall be elected, each member of which is to
hold office for a term of three years, and in each case and in each class such
members shall serve until their respective successors shall have been duly
elected and qualified. Commencing with the Annual Meeting in 1971, and at each
Annual Meeting thereafter, one class of Trustees, which shall be the class
whose terms expire that year, shall be elected, each member of which is to
hold office for a term of three years and until his respective successor is
elected and qualified.
C. NOMINATION OF TRUSTEES
Nomination for election to the office of Trustee at any
Annual or Special Meeting of Shareholders shall be made by the Trustees, or by
petition in writing delivered to the Secretary of PREIT not fewer than
thirty-five (35) days prior to such Shareholders' meeting signed by the
holders of at least two percent (2%) of the Shares outstanding on the date of
such petition. Unless nominations shall have been made as aforesaid, they
shall not be considered at such meeting unless the number of persons nominated
as aforesaid shall be fewer than the number of persons to be elected to the
office of Trustee at such meeting in which event nominations for the Trustee
positions which would not otherwise be filled may be made at the meeting by
any person entitled to vote in the election of Trustees.
D. ADDITIONAL AND SUCCESSOR TRUSTEES: VACANCIES
The death, incapacity, resignation or removal of any or all
of the Trustees shall not terminate PREIT's existence or in any way affect its
continuity.
Vacancies shall be deemed to have occurred as a result of an
increase in the number of Trustees, or by reason of the death, resignation or
incapacity of any of the Trustees (unless the vacancy is eliminated by
reduction in the number of Trustees), and they shall be filled by persons to
be elected by the remaining Trustees. Any new Trustee so elected to fill a
-2-
<PAGE>
vacancy created by reason of the death, resignation or incapacity of a Trustee
shall hold office for the full remaining term of the former Trustee and until
his successor is elected and qualified. Any new Trustee so elected as a result
of an increase in the number of Trustees shall hold office until the next
Annual or Special Meeting of Shareholders and until his successor is elected
and qualified. A vacancy caused by the removal of any Trustee shall be filled
only by the Shareholders at an Annual or Special Meeting, unless by reason of
the removal of the Trustee the number of Trustees is reduced to less than five
(5), in which event the next succeeding paragraph of this Paragraph 2.D shall
apply.
Until vacancies are filled the remaining Trustees shall be
empowered to exercise all powers granted all Trustees hereunder, except that
in the event that the number of Trustees shall fall below five (5), the
Trustees shall forthwith nominate and elect at least as many Trustees as may
be required to bring the total number of trustees to five (5).
Upon the election of any Trustee or additional or successor
Trustee, the said Trustee so elected shall execute a written Acceptance of
Trust, which together with a certificate of such election executed by two
other Trustees, shall be filed with legal counsel for PREIT. Upon the delivery
of such Acceptance, the said Trustee shall have all the rights, powers and
duties of a Trustee hereunder.
E. RESIGNATION OF TRUSTEES
Any Trustee may resign at any time by delivering to any
other Trustee and to the office of PREIT written notification of his
resignation, which resignation shall be effective when received, but if the
effect of such resignation shall be to reduce the number of Trustees below
five (5), no such resignation shall be effective until a successor shall have
been elected by the remaining Trustees.
F. REMOVAL OF TRUSTEES
Any Trustee may be removed during his term by a vote of at
least two-thirds of all of the Trustees then in office for any cause by them
deemed sufficient, at any regular meeting of the Trustees, or at any meeting
specially called for that purpose.
Any individual Trustee may be removed for cause (as herein
defined) by a vote of the Shareholders at any meeting of Shareholders called
for the purpose by the affirmative vote of Shareholders entitled to cast at
least a majority of the votes of the Shares then outstanding and entitled to
vote at the annual election of Trustees. Cause for removal shall exist only if
the Trustee whose removal is proposed has been convicted of a felony
-3-
<PAGE>
by a court of competent jurisdiction and such conviction is no longer subject
to direct appeal or if the Trustee has been adjudged by a court of competent
jurisdiction to be liable for negligence or misconduct in the performance of
his duty to PREIT in a matter of substantial importance to PREIT, and such
adjudication is no longer subject to direct appeal.
No Trustee shall be removed at any meeting of Trustees or
Shareholders unless written notice of such meeting stating this purpose shall
be given or mailed to those entitled to vote thereon at least seven (7) days
prior to such meeting.
G. WAIVER OF BOND
No Trustee acting hereunder shall be required to furnish a
bond in any jurisdiction in which said Trustees may act.
H. MEETINGS
The Trustees shall hold an Annual Meeting immediately
following the Annual Meeting of Shareholders. No notice shall be required for
the Annual Meeting of Trustees. At that meeting, they shall elect officers,
including a President, a Secretary, and such other officers as they shall from
time to time deem necessary. Officers so elected by them shall remain in
office until the next Annual Meeting of Trustees, unless removed by the vote
of two-thirds of the Trustees then in office at any special meeting called on
seven (7) days notice for that purpose. Special Meetings of the Trustees shall
be called by the Chairman or by two or more of the other Trustees and shall be
held at such time and in such place as shall be designated in the notice of
the meeting. Such notice shall be given by or at the direction of the person
or persons authorized to call such meeting to each Trustee at least two (2)
days prior to the day named for the meeting, unless a different notice period
is provided for hereunder based upon the subject matter of such meeting.
I. QUORUM
A majority of the Trustees, provided that the majority
consists of at least four (4) Trustees, shall constitute a quorum. Trustees
shall be deemed present at a meeting if by means of conference telephone or
similar communications equipment all persons participating in the meeting can
hear each other. If there are fewer than five (5) Trustees, the remainder
constitutes a quorum and must act to fill vacancies to bring the total number
of Trustees to at least five (5). If a quorum is not present at any meeting, a
majority of the Trustees present at the meeting may adjourn the meeting to any
later date and the meeting may be held at such later date without any further
notice.
-4-
<PAGE>
J. VOTING REQUIREMENTS
Except as otherwise required by law and except as otherwise
contemplated by paragraph 3.R, the concurrence of a majority of the Trustees
present at any meeting at which a quorum is present shall be necessary to the
validity of any action taken by them. In lieu of a meeting, action may be
taken by the consent in writing of at least seventy-five (75%) of the Trustees
then serving. In any event, the concurrence or consent in writing of at least
four (4) Trustees shall be necessary to the validity of any action taken. The
minimum voting requirements specified in this paragraph shall apply, as a
minimum requirement, with respect to any and all action taken by the Trustees
under this Trust Agreement.
K. TRUSTEES' DEALINGS WITH PREIT
Any Trustee may be employed by PREIT to hold any office, to
perform any special business, financial or other service, and shall be
entitled to receive such additional reasonable compensation as the Trustees
may fix and determine. Moreover, no Trustee shall be disqualified by his
position as a Trustee from selling to, buying from or dealing with PREIT
either directly or indirectly as a director, officer, member, affiliate,
shareholder or fiduciary of any other party to such a transaction. No such
contract or transaction shall be void or voidable solely because of such a
relationship with or interest of a Trustee, or solely because such a Trustee
is present at or participates in the meeting of the Board of Trustees that
authorizes (or ratifies) the transaction, or solely because his or her votes
are counted for that purpose if the material facts as to the relationship or
interest are disclosed or are known to the Trustees and the Board of Trustees
authorizes (or ratifies) such contract or transaction by the affirmative votes
of a majority of the Trustees not having an interest therein, even though the
Trustees not having an interest in the contract or transaction are less than a
quorum. No Trustee shall have any liability for such a contract or transaction
so approved (or ratified) by a majority of the Trustees not having an interest
in such contract or transaction except for bad faith or gross negligence.
Those Trustees having an interest in such a transaction may be counted in
determining the existence of a quorum at any meeting of the Board of Trustees
which shall authorize (or ratify) any such contract or transaction.
3. ACTIVITIES OF PREIT; POWERS OF THE TRUSTEES
The business activities of PREIT, which shall be conducted by or
under the direction of the Trustees on behalf of PREIT, shall be (i) the
acquisition, ownership, operation, leasing, management, development and
disposition of real property and related personal property, either directly or
indirectly, and the
-5-
<PAGE>
ownership of interests in trusts, partnerships or other entities which acquire
own, operate, lease, manage, develop and dispose of real property and related
personal property, and (ii) all things that the Trustees shall deem necessary
or desirable and appropriate to the foregoing.
In furtherance of the business activities of PREIT and in addition to
any powers conferred upon the Trustees by law and by other provisions of this
Trust Agreement, the Trustees shall have the following powers, unless
otherwise restricted by any other provision of this Trust Agreement.
A. To invest in assets of any kind and nature without being limited
to so-called "legal investments", provided the amount, type or classification
will not disqualify PREIT from qualifying as a Real Estate Investment Trust
under the pertinent provisions of the Internal Revenue Code and Regulations
thereunder.
B. To make investments incorporating a variety of real property
financing techniques, including, without limitation, sale and leasebacks, net
lease financings, purchase and installment salebacks, high credit
lease-secured mortgages, convertible mortgages and mortgages of special
interests including, without limitation, leaseholds, air rights and
condominiums. PREIT's investment policy may also include new investment
techniques subsequently developed which satisfy the real estate investment
trust requirements of the Internal Revenue Code and Regulations thereunder.
C. To improve, manage, protect, subdivide, sell, mortgage, pledge,
encumber, grant easements or charges against or otherwise deal in real estate
assets and interests in real property.
D. To make such contracts as they deem expedient in the conduct of
the business of PREIT and to engage in any type of business necessary or
incidental thereto, except such business as would disqualify PREIT as a Real
Estate Investment Trust under the pertinent provisions of the Internal Revenue
Code and Regulations thereunder.
E. To borrow money to further PREIT's purposes and to pledge the
Trust Property as security therefor, provided, however, that no liability
shall be incurred except such as may be incidental to the proper management of
the property and business of PREIT and the proper execution of PREIT's
purposes.
F. To raise monies or acquire assets consistent with the purposes of
PREIT by the issuance of securities and subscriptions, options and warrants
relating thereto.
-6-
<PAGE>
G. To receive or sue for all monies at any time becoming due to
PREIT.
H. To compromise or refer to arbitration any claims against or rights
of PREIT.
I. To employ any persons (including Trustees) to assist the Trustees
in the conduct of the business of PREIT and to confer upon such persons such
titles, power and authority as the Trustees may deem expedient. Those persons
who are elected and serve as officers of PREIT in accordance with Paragraph
2.H of this Trust Agreement or otherwise shall have such powers and duties as
a resolution adopted by the Trustees or PREIT's By-laws may provide.
J. To execute and deliver any and all instruments in writing which
they may deem advisable to carry out the purposes of PREIT. In connection with
the execution of any documents, the Trustees may, from time to time, designate
one or more of the Trustees as such or as officers of PREIT, or such other
officer or person or officers or persons to execute documents on behalf of
PREIT, and such execution shall be valid for all purposes.
K. To manage, conduct and operate PREIT under such assumed or
fictitious name or names as they, from time to time, designate and in
connection therewith, to do all things necessary to register such fictitious
name or names on behalf of PREIT and its Shareholders.
L. In accordance with applicable law, to determine whether monies or
things shall, for the purposes of these presents, be considered as principal
or income, or what constitutes gross income or net income in any year, or part
of the year, and to determine the mode in which expenses or disbursements
shall be charged between principal or income.
M. To do all and such other things and incur such other obligations
as in their judgment will advance PREIT's purposes.
N. To execute and deliver any regulatory agreement or assumption of
regulatory agreement and any other instrument approved by the Trustees
required by the Federal Housing Commissioner in case of the purchase of any
property subject to a mortgage insured by the Federal Housing Administration.
O. To adopt, amend and repeal such By-Laws for the conduct of the
business of their meetings and of PREIT as they shall deem necessary, but all
such By-Laws shall be subordinate to and not inconsistent with the provisions
of this Agreement.
P. To determine the value of all or any part of the Trust Property and
of any services, securities, property or other
-7-
<PAGE>
consideration to be furnished to or acquired by PREIT, and to
revalue all or any part of the foregoing.
Q. To sell, assign, or otherwise transfer all or substantially all or
any part of the Trust Property, to merge PREIT with another business trust or
entity, and, to the extent permitted by law, to elect not to have PREIT exist
subject to 15 Pa. C.S. CHAPTER 95, or any successor thereto.
R. To establish one or more committees to consist of one or more
Trustees and to delegate such authority of the Trustees to those committees as
is permitted by law. The establishment of such committees and the delegation
of authority thereto shall be done only by resolution of a majority of all of
the Trustees then serving, and no such committee shall have the authority to
(i) amend or repeal any provision of this Agreement or the By-laws, (ii)
remove any Trustee from the Board of Trustees, or (iii) create or fill any
vacancies in the Board of Trustees.
S. In addition to the authority in Paragraph 8, to create and issue
(whether or not in connection with the issuance of Shares or other
securities), and to authorize the creation and issuance by subsidiaries and
affiliates of PREIT of, option rights or securities having conversion or
option rights entitling the holders thereof to purchase or acquire Shares,
option rights, securities having conversion or option rights, or obligations,
of any class or series, or assets of PREIT, or to purchase or acquire from
PREIT equity securities, option rights, securities having conversion or option
rights, or obligations, of any class or series, owned by PREIT and issued by
any other person or entity. The securities, contracts, warrants or other
instruments evidencing Shares, option rights, securities having option or
conversion rights, or obligations of PREIT, may contain such terms as are
fixed by the Trustees, including, without limiting the generality of such
authority, restrictions, provisions providing for adjustment of terms upon the
happening of certain events, pricing and payment terms, and conditions,
including, but not limited to, conditions that preclude any person or persons
owning or offering to acquire a specified number or percentage of Shares or
any class or series thereof or option rights, securities having conversion or
option rights, or obligations of PREIT or any class or series of the foregoing
or any transferee or transferees of the person or persons from exercising,
converting, transferring or receiving the Shares or other equity securities,
option rights, securities having conversion or option rights, obligations or
assets. The provisions of this Paragraph 3.S shall not be construed to effect
a change in the fiduciary relationship between a Trustee and PREIT or to
change the standard of care of a Trustee as provided for in Paragraph 5 of
this Agreement, 15 Pa. C.S. Section 9506, as amended from time to time, and
Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of
1988, as amended from time to time.
-8-
<PAGE>
T. To adopt and implement executive compensation, pension, profit
sharing, share option, share bonus, share purchase, share appreciation rights,
savings, thrift, retirement, incentive or benefit plans, trusts or provisions
applicable to any or all Trustees, officers, employees or agents of PREIT or
trustees, directors, officers, employees or agents of any of PREIT's
subsidiaries or affiliates or other entities in which PREIT maintains an
investment and, without limiting the foregoing authority, to create and issue
rights and options to Trustees, officers, employees and agents of PREIT and
trustees, directors, officers, employees or agents of any of PREIT's
subsidiaries or affiliates or other entities in which PREIT maintains an
investment as an incentive for service or continued service with PREIT or any
of its subsidiaries or affiliates or other entities in which PREIT maintains
an investment or for such other purposes and upon such terms as the Trustees,
who may benefit by their action, deem advantageous to PREIT.
U. To determine and alter, from time to time, the fiscal year of
PREIT.
V. To grant rights to holders of equity interests in entities
controlled by PREIT to vote on matters to be voted upon by the Shareholders of
PREIT, either as a separate class or with the Shareholders and on any such
basis as the Board shall determine.
4. PROTECTION OF PERSONS DEALING WITH TRUSTEES
A resolution of the Trustees, certified by any Trustee or by any
officer of PREIT, authorizing a particular act shall be conclusive evidence to
anyone, including strangers to PREIT, that such act is within the powers of
the Trustees. Any instrument executed by any Trustee or by the Chief Executive
Officer, President, Chief Operating Officer or any Vice President of PREIT
shall be conclusive evidence to anyone, including strangers to PREIT, that
said persons are in fact authorized to execute said instrument on behalf of
PREIT and a resolution accompanying such instrument shall not be necessary for
this purpose. A certification of incumbency of Trustees and officers of PREIT,
executed by any other Trustee or by any other officer of PREIT shall be
conclusive evidence to anyone, including strangers to PREIT, that the Trustees
and the officers of PREIT named therein are at the time stated therein then
serving under this Trust Agreement. No purchaser from PREIT shall be bound to
see to the application of the money or other consideration paid by the
purchaser to PREIT.
5. LIMITATION OF TRUSTEES' AND OFFICERS' LIABILITY
-9-
<PAGE>
A. The Trustees, when acting in such capacity, shall not be
personally liable to any person or entity for any act, omission or obligation
of PREIT.
B. The Trustees shall stand in a fiduciary relationship to PREIT. The
provisions of 15 Pa. C.S. Subchapter B and, specifically, Section 1715, shall
be applicable to the Trustees with respect to the fiduciary relationship and
the discharge of duties arising therefrom. No Trustee shall be personally
liable for monetary damages for any action taken, or any failure to take any
action, except that a Trustee shall remain personally liable for monetary
damages to the same extent that a director of a Pennsylvania business
corporation remains liable under the provisions of 15 Pa. C.S. Section 1713.
In furtherance of the purposes of the preceding sentence, such sentence shall
be deemed to have the effect of a bylaw adopted by the Shareholders (as that
term is used in 15 Pa. C.S. Section 1713).
C. An officer of PREIT shall perform his duties as an
officer of PREIT in good faith, in a manner he reasonably believes to be in
the best interests of PREIT and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by
reason of having been an officer of PREIT.
D. It is the intention of this Trust Agreement to limit the
liability of the Trustees to the fullest extent permitted by applicable law,
as amended or supplemented. No amendment of this Agreement or repeal of any of
its provisions shall adversely affect any right or protection of any Trustee
or officer of PREIT provided for hereunder for or with respect to any acts,
omissions or obligations of PREIT or any Trustee or officer of PREIT occurring
or incurred prior to such amendment or repeal.
6. RECORDS
The Trustees shall keep a record of all meetings of the Trustees and
committees of the Trustees and of the Shareholders and the officers of PREIT
shall keep books of account showing the receipts and disbursements of PREIT.
The Trustees shall arrange for the preparation, as soon as practicable, after
the close of PREIT's fiscal year, which shall be determined by the Trustees,
of a complete report of the business of PREIT during the preceding fiscal
year. A copy of this report shall be sent to each Shareholder. In addition,
the Trustees, or their appointed institutional agents, shall maintain proper
transfer books and a register of the names and interests of the Shareholders
hereunder and any other security holders of PREIT.
-10-
<PAGE>
7. LEGAL TITLE
Legal title to all Trust Property shall be held by PREIT (to the
extent permitted by law) or by Trustees as such, or by any of them or by such
other nominee or nominees as the Trustees may from time to time designate to
hold legal title for PREIT. The Trustees shall have absolute control over the
management and disposition of the Trust Property, subject only to such
limitations as are set forth herein. The Trustees shall have complete control
of the conduct of PREIT.
Any enumeration of specific duties and powers shall not be deemed a
limitation upon the general powers herein conferred.
8. BENEFICIAL INTERESTS
The beneficial interests in PREIT shall be divided into an unlimited
number of shares, each having a par value of $1.00 per share (herein referred
to as "Shares" and the holders thereof are sometimes referred to herein as
"Shareholders"). The Trustees may sell or exchange such Shares for such sums
or other consideration and on such terms as they may deem expedient, provided
that in no event shall Shares be sold for a consideration less than par, and
the Shares shall be issued only upon the payment of an amount at least equal
to such par value; provided that, in the case of Shares sold for non-cash
consideration, the value received shall be deemed to be an amount at least
equal to the par value thereof if the sale was authorized by the Trustees and,
in the case of Shares issued upon conversion or upon exercise of rights to
acquire Shares, such Shares shall be deemed to have been issued for an amount
at least equal to the par value thereof if, at the time such convertible
security was issued or at the time such exercise right was granted, such
issuance or grant was authorized by the Trustees. The said Shares when so
issued shall be fully paid and non-assessable. PREIT shall issue or cause to
be issued to subscribers for or purchasers of such Shares, certificates in
such form as the Trustees deem proper evidencing the beneficial interest of
such Share owners. The certificates shall be personal property and, except as
otherwise provided herein, shall entitle the owners thereof to participate in
all dividends and other distributions of income or principal in the proportion
which the number of Shares of each owner bears to the total number of Shares
issued and outstanding. Shareholders' rights shall be limited to those
specifically set forth in the certificate, in this Trust Agreement or in any
resolution or resolutions adopted by the Trustees with respect thereto.
The Trustees shall have the power from time to time (a) to classify
or reclassify, in one or more series or classes, any unissued Shares, (b) to
determine and alter all rights, preferences, privileges, qualifications,
limitations and
-11-
<PAGE>
restrictions thereof (including, without limitation, voting, distribution,
liquidation, conversion and/or redemption rights, and limitations and/or
exclusions thereof) granted to or imposed upon any wholly unissued series or
class of Shares and the number of Shares constituting any such series or
class, and (c) to increase or decrease (but not below the number of Shares of
such series or class then outstanding) the number of Shares of any series or
class subsequent to the issue of Shares of that series or class.
Any Trustee hereunder may acquire, hold and dispose of Shares to the
same extent and in the same manner as if such person were not a Trustee and
without affecting in any way such person's status or powers as such.
A. CHANGE IN PAR VALUE OF SHARES
The Trustees may from time to time change the par value of
the Shares outstanding or unissued, or any class or series thereof, if in
their opinion the same shall be necessary or desirable and appropriate to
further PREIT's purposes.
B. PRE-EMPTIVE RIGHTS WAIVED
No Shareholder shall have any pre-emptive right because of
his shareholdings to have first offered to him any part of any Shares or
debentures, bonds or securities convertible into or exchangeable, with or
without further consideration, for Shares of PREIT hereinafter issued,
including those now authorized and those authorized by amendments hereto.
C. TRANSFER OF SHARES
Shares may be transferred by the holders thereof in person,
or by duly authorized attorney. The transferee shall surrender such
certificate to PREIT or, if applicable, to the transfer agent designated by
the Trustees for such Shares, duly endorsed for transfer, or with an
appropriate power affixed (accompanied by the requisite documentary transfer
stamps if any are required) which shall execute a new certificate representing
the Share or Shares so transferred. The acceptance by the transferee of a
certificate so assigned, or any certificate issued in place thereof, shall
constitute the transfer, and each transferee by acceptance of the certificate
shall be deemed to have agreed to be bound by the provisions of this Trust
Agreement, as the same may be amended or supplemented, and any other document
or instrument authorized hereunder pertaining to such Shares or such
transferee. No such transfer shall be binding upon PREIT until it has been
recorded on the transfer books maintained by PREIT or its transfer agent.
Moreover, PREIT may deem the person in whose name the Share certificate is at
the time registered upon the books maintained by the transfer agent
-12-
<PAGE>
designated by PREIT to be the absolute owner of the shares for all purposes
whatsoever, and shall not be affected by any notice to the contrary. All
transfers of Shares shall be subject to Paragraph 9 of this Trust Agreement.
D. DEATH OF A SHAREHOLDER
The death of a Shareholder during the continuance of PREIT
shall not terminate PREIT's existence or entitle the legal representative of
such Shareholder to any action in the courts or otherwise against the Trust
Property, PREIT or the Trustees by virtue of the fact of death alone. The
executors, administrators, heirs, legatees or assigns of a deceased
Shareholder shall succeed to the rights and be subject to the liabilities of
the deceased Shareholder as a holder of Shares.
E. LOST OR DESTROYED CERTIFICATES
In the event of the loss or destruction of a certificate,
PREIT may, in its discretion, issue a new certificate representing the
interest evidenced by the lost or destroyed certificate upon satisfactory
proof of its loss or destruction and the furnishing of sufficient indemnity,
in the form of a bond, if required, for the benefit of all interested parties.
9. RESTRICTIONS ON OWNERSHIP AND TRANSFER OF SHARES; EXCHANGE
FOR EXCESS SHARES
A. Definitions. For the purposes of this Paragraph 9, the
following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Shares either directly
or constructively through the application of Section 544 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have correlative meanings.
Accordingly, for purposes hereof, Beneficial Ownership expressed as a
percentage shall be calculated for any Person by dividing two numbers, (a) the
number that is the numerator being the sum of (i) the number of outstanding
Shares beneficially owned by such Person plus (ii) the maximum number of
Shares issuable upon the exercise or conversion of outstanding warrants,
options or other securities exercisable for or convertible into Shares
beneficially owned by such Person and (b) the number that is the denominator
being the sum of (i) all outstanding Shares plus (ii) the maximum number of
Shares issuable upon the exercise or conversion of outstanding warrants,
options or other securities exercisable for or convertible into Shares
beneficially owned by such Person; provided that the Trustees shall retain
full
-13-
<PAGE>
authority to adopt such other formula for determining Beneficial Ownership as
they may deem appropriate.
"Constructive Ownership" shall mean ownership of Shares either
directly or constructively through the application of Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
correlative meanings. Accordingly, for purposes hereof, Constructive Ownership
expressed as a percentage shall be calculated for any Person by dividing two
numbers, (a) the number that is the numerator being the sum of (i) the number
of outstanding Shares beneficially owned by such Person plus (ii) the maximum
number of Shares issuable upon the exercise or conversion of outstanding
warrants, options or other securities exercisable for or convertible into
Shares owned by such Person and (b) the number that is the denominator being
the sum of (i) all outstanding Shares plus (ii) the maximum number of Shares
issuable upon the exercise or conversion of outstanding warrants, options or
other securities exercisable for or convertible into Shares owned by such
Person; provided that the Trustees shall retain full authority to adopt such
other formula for determining Constructive Ownership as it may deem
appropriate.
"Event" shall have the meaning assigned to it in Paragraph
9.C(iii).
"Excess Shares" shall mean Shares that are issued pursuant to
Paragraph 9.C(i) or (iii) and held in Trust in accordance with, and governed
by, Paragraph 9.N.
"Market Price" shall mean the last reported sales price reported on
the American Stock Exchange of Shares on the trading day immediately preceding
the relevant date, or if the Shares are not then traded on the American Stock
Exchange, the last reported sales price of Shares on the trading day
immediately preceding the relevant date as reported on any exchange or
quotation system over which the Shares may be traded, or if the Shares are not
then traded over any exchange or quotation system, then the fair market value
of the Shares on the relevant date as determined in good faith by the
Trustees.
"Ownership Limit" shall mean 9.9% in value of the
outstanding Shares.
"Ownership Limitation Termination Date" shall mean the first day
after the date on which the Trustees determine that it is no longer in the
best interests of PREIT to attempt to, or continue to, qualify as a REIT.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust
-14-
<PAGE>
qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation
within the meaning of Section 509(a) of the Code, joint stock company or other
entity or any government or agency or political subdivision thereof and also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, but does not include an
underwriter which participates in a public offering of Shares for a period of
25 days following the purchase by such underwriter of those Shares.
"Purported Beneficial Holder" shall mean, with respect to any event
other than a purported Transfer which results in Excess Shares, the Person for
whom the Purported Record Holder of the Shares that were, pursuant to
Paragraph 9.C, automatically exchanged for Excess Shares upon the occurrence
of such event held such Shares.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the purported beneficial
transferee for whom the Purported Record Transferee would have acquired
Shares, if such Transfer had been valid under Paragraph 9.B.
"Purported Record Holder" shall mean, with respect to any event other
than a purported Transfer which results in Excess Shares, the record holder of
the Shares that were, pursuant to Paragraph 9.C, automatically exchanged for
Excess Shares upon the occurrence of such event.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the record holder of the
Shares if such Transfer had been valid under Paragraph 9.C.
"REIT" shall mean a real estate investment trust under Section 856 of
the Code.
"Section 544 Subsidiary" of any individual or entity shall mean any
entity, over 50% of the ownership interest in which is owned, directly or
indirectly (applying the principles of Section 544 of the Code) by the
individual or entity in question.
"Special Beneficiary" shall mean the beneficiary of the Special Trust
as determined pursuant to Paragraph 9.N(v).
"Special Trust" shall mean the trust created pursuant to
Paragraph 9.N(i).
"Transfer" shall mean any issuance, sale, transfer, gift,
assignment, devise or other disposition of Shares or capital
-15-
<PAGE>
stock of any Person (including but not limited to (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Shares, (ii) the sale, transfer, exercise, assignment or other
disposition of any securities or rights convertible into or exchangeable for
Shares or (iii) the establishment of a put or the granting to a third party of
a call right with respect to Shares), whether voluntary or involuntary,
whether of record or beneficially and whether by operation of law or
otherwise.
B. Restrictions on Ownership and Transfer.
--------------------------------------
(i) Except as provided in Paragraph 9.K, prior to the
Ownership Limitation Termination Date, no Person shall Beneficially Own or
Constructively Own any Shares to the extent such ownership would exceed the
Ownership Limit.
(ii) Except as provided in Paragraph 9.K, prior to the
Ownership Limitation Termination Date, any Transfer that, if effective, would
result in any Person Beneficially Owning or Constructively Owning Shares in
excess of the Ownership Limit shall be void ab initio as to the Transfer of
such Shares which would be otherwise Beneficially Owned or Constructively
Owned by such Person in excess of such Ownership Limit; and the intended
transferee shall acquire no rights in or to such Shares.
(iii) Prior to the Ownership Limitation Termination Date,
any Transfer that, if effective, would result in Shares being beneficially
owned by less than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of such Shares which
would be otherwise beneficially owned by the transferee; and the intended
transferee shall acquire no rights in such Shares.
(iv) Prior to the Ownership Limitation Termination Date,
any Transfer that, if effective, would result in PREIT being "closely held"
within the meaning of Section 856(h) of the Code shall be void ab initio as to
the Transfer of the Shares which would cause PREIT to be "closely held" within
the meaning of Section 856(h) of the Code; and the intended transferee shall
acquire no rights in such Shares.
(v) The Trustees shall have the authority to select the
Ownership Limitation Termination Date.
C. Exchange For Excess Shares.
--------------------------
(i) If, notwithstanding the other provisions contained in
this Paragraph 9, at any time prior to the Ownership Limitation Termination
Date, there is a purported Transfer such that any Person would Beneficially
Own or Constructively Own Shares in excess of the Ownership Limit, then,
except as
-16-
<PAGE>
otherwise provided in Paragraph 9.K, such number of Shares in excess of such
Ownership Limit (rounded up to the nearest whole Share), shall be
automatically exchanged for an equal number of Excess Shares. Such exchange
shall be effective as of the close of business on the business day prior to
the date of the Transfer.
(ii) If, notwithstanding the other provisions contained in
this Paragraph 9, at any time prior to the Ownership Limitation Termination
Date, there is a purported Transfer which, if effective, would cause PREIT to
become "closely held" within the meaning of Section 856(h) of the Code, then
the Shares being Transferred which would cause PREIT to be "closely held"
within the meaning of Section 856(h) of the Code (rounded up to the nearest
whole Share) shall be automatically exchanged for an equal number of Excess
Shares. Such exchange shall be effective as of the close of business on the
business day prior to the date of the Transfer.
(iii) If, notwithstanding the other provisions contained in
this Paragraph 9, at any time prior to the Ownership Limitation Termination
Date, an event other than a purported Transfer (an "Event") occurs which would
cause any Person to Beneficially Own or Constructively Own Shares in excess of
the Ownership Limit, then, except as otherwise provided in Paragraph 9.K,
Shares Beneficially Owned or Constructively Owned by such Person (rounded up
to the nearest whole Share) shall be automatically exchanged for an equal
number of Excess Shares to the extent necessary to eliminate such excess
ownership. Such exchange shall be effective as of the close of business on the
business day prior to the date of the Event. In determining which Shares are
exchanged, Shares directly held or Beneficially Owned by any Person who caused
the Event to occur shall be exchanged before any Shares not so held are
exchanged. Where several such Persons exist, the exchange shall be pro rata
based upon the number of Shares Beneficially Owned and Constructively Owned by
such Persons.
D. Remedies For Breach. If the Trustees or their designee(s) shall at
any time determine that a Transfer has taken place in violation of Paragraph
9.B or that a Person intends to acquire or has attempted to acquire beneficial
ownership (determined without reference to any rules of attribution) of any
Shares that would result in Shares being beneficially owned by less than 100
persons as contemplated by Paragraph 9.B(iii), or in Beneficial Ownership or
Constructive Ownership of any Shares in violation of Paragraph 9.B, the
Trustees or their designee(s) shall take such action as they deem advisable to
refuse to give effect to or to prevent such Transfer (or any Transfer related
to such intent), including, but not limited to, refusing to give effect to
such Transfer on the books of PREIT or instituting proceedings to enjoin such
Transfer; provided, however, that any
-17-
<PAGE>
Transfers or attempted Transfers in violation of Paragraphs 9.B (ii), (iii) or
(iv) shall automatically result in the exchange described in Paragraph 9.C,
irrespective of any action (or non-action) by the Trustees or its designees.
E. Notice of Ownership or Attempted Ownership in Violation of
Paragraph 9.B. Any Person who acquires or attempts to acquire Beneficial
Ownership or Constructive Ownership of Shares in violation of Paragraph 9.B
shall immediately give written notice to PREIT of such acquisition or
attempted acquisition and shall provide to PREIT such other information as
PREIT may request in order to determine the effect, if any, of such
acquisition or attempted acquisition on PREIT's status as a REIT.
F. Owners Required to Provide Information. Prior to the
Ownership Limitation Termination Date:
(i) every Beneficial Owner or Constructive Owner of 1% or
more in value of the outstanding Shares shall, within 30 days after January 1
of each year, give written notice to PREIT stating the name and address of
such Beneficial Owner or Constructive Owner, the number of Shares Beneficially
Owned or Constructively Owned, and a description of how such Shares are held.
Each such Beneficial Owner or Constructive Owner shall provide to PREIT such
additional information as PREIT may request in order to determine the effect,
if any, of such Beneficial Ownership or Constructive Ownership on PREIT's
status as a REIT.
(ii) Each Person who is a Beneficial Owner or Constructive
Owner of Shares and each Person (including the shareholder of record) who is
holding Shares for a Beneficial Owner or Constructive Owner shall provide to
PREIT such information as PREIT may request in order to determine PREIT's
status as a REIT or to comply with regulations promulgated under the REIT
provisions of the Code.
G. Remedies Not Limited. Nothing contained in this Paragraph 9 shall
limit the authority of the Trustees to take such other action as it deems
necessary or advisable to protect PREIT and the interests of Shareholders by
preserving PREIT's REIT status.
H. Ambiguity. In the case of an ambiguity in the application of any
of the provisions of this Paragraph 9 including any definition contained in
Paragraph 9.A and any ambiguity with respect to which Shares are to be
exchanged for Excess Shares in a given situation, the Trustees shall have the
authority to determine the application of the provisions of this Paragraph 9
with respect to any situation based on the facts known to it.
-18-
<PAGE>
I. Increase in Ownership Limit. Subject to the limitations provided in
Paragraph 9.J the Trustees may from time to time increase the Ownership Limit.
J. Limitations on Modifications.
----------------------------
(i) The Ownership Limit may not be increased if, after
giving effect to such increase, five (5) Beneficial Owners of Shares would
Beneficially Own, in the aggregate, more than 49.9% of the outstanding Shares.
(ii) Prior to an increase in the Ownership Limit pursuant to
Paragraph 9.I, the Trustees may require such opinions of counsel or PREIT's
tax accountants, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure PREIT's status as a
REIT.
K. Exceptions. The Trustees, with a ruling from the Internal Revenue
Service or an opinion of counsel or PREIT's tax accountants to the effect that
such exemption will not result in PREIT being "closely held" within the
meaning of Section 856(h) of the Code, may exempt a Person from the Ownership
Limit if the Trustees obtain such representations and undertakings from such
Person as the Trustees may deem appropriate and such Person agrees that any
violation or attempted violation of any of such representations or
undertakings will result in, to the extent necessary or otherwise deemed
appropriate by the Trustees, the exchange of Shares held by such Person for
Excess Shares in accordance with Paragraph 9.C.
L. American Stock Exchange Transactions. Nothing in this Paragraph 9
shall preclude the settlement of any transaction entered into through the
facilities of the American Stock Exchange, any successor exchange or quotation
system thereto, or any other exchange or quotation system over which the
Shares may be traded from time to time.
M. Legend. (a) Each certificate for Common Shares hereafter issued
shall bear the following legend:
"The Shares represented by this certificate are
subject to restrictions on ownership and transfer for the
purpose of PREIT's maintenance of its status as a real
estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"). No Person may Beneficially
own or Constructively Own Shares in excess of 9.9% in value
(or such greater percentage as may be determined by the
Board of Trustees) of the outstanding Shares of PREIT. Any
Person who attempts to Beneficially Own or Constructively
Own Shares in excess of the above limitation must
immediately notify PREIT. In addition, if any Person
attempts to acquire
-19-
<PAGE>
beneficial ownership of any Shares and the result of such
acquisition would be Shares being beneficially owned by
fewer than 100 persons, such purported transfer shall be
void ab initio and the intended transferee shall acquire no
rights to such Shares. All capitalized terms used in this
legend have the meanings set forth in the Trust Agreement, a
copy of which, including the restrictions on ownership and
transfer, will be sent without charge to each Shareholder
who so requests. If the restrictions on ownership and
transfer are violated, the Shares represented hereby will be
automatically exchanged for Excess Shares which will be held
in trust by PREIT."
N. Excess Shares.
-------------
(i) Ownership in Trust. Upon any purported Transfer or Event
that results in an exchange of Shares for Excess Shares pursuant to Paragraph
9.C, such Excess Shares shall be deemed to have been transferred to PREIT, as
trustee of a Special Trust for the exclusive benefit of the Special
Beneficiary or Special Beneficiaries to whom an interest in such Excess Shares
may later be transferred pursuant to Paragraph 9.N(v). Excess Shares so held
in trust shall be issued and outstanding Shares of PREIT. The Purported Record
Transferee or Purported Record Holder shall have no rights in such Excess
Shares except as and to the extent provided in this Paragraph 9.N.
(ii) Dividend Rights. Excess Shares shall not be entitled to
any dividends or distributions. Any dividend or distribution paid prior to the
discovery by PREIT that the Shares with respect to which the dividend or
distribution was made had been exchanged for Excess Shares shall be repaid to
PREIT upon demand. Any dividend on distribution declared by PREIT and not yet
paid with respect to Shares that have been exchanged for Excess Shares shall
be void ab initio with respect to such Shares.
(iii) Rights Upon Liquidation. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of, or any distribution
of the assets of, PREIT, each holder of Excess Shares shall be entitled to
receive, ratably with each other holder of Shares and Excess Shares, that
portion of the assets of PREIT available for distribution to the holders of
Shares or Excess Shares which bears the same relation to the total amount of
such assets of PREIT as the number of Excess Shares held by such holder bears
to the total number of Shares and Excess Shares then outstanding. PREIT, as
holder of the Excess Shares in trust, or if PREIT shall have been dissolved,
any trustee appointed by PREIT prior to its dissolution, shall distribute
ratably to the Special Beneficiaries of the Special Trust, when determined,
any such assets received in respect of
-20-
<PAGE>
the Excess Shares in any liquidation, dissolution or winding up of, or any
distribution of the assets of PREIT.
(iv) Voting Rights. The holders of Excess Shares shall not
be entitled to vote with respect to such Shares on any matters (except as
required by law).
(v) Restrictions On Transfer: Designation of Special
Beneficiary.
(a) Excess Shares shall not be transferrable. The
Purported Record Transferee or Purported Record Holder may freely designate a
Special Beneficiary of an interest in the Special Trust (representing the number
of Excess Shares held by the Special Trust attributable to a purported Transfer
or Event that resulted in the Excess Shares) if (i) the Excess Shares held in
the Special Trust would not be Excess Shares in the hands of such Special
Beneficiary and (ii) the Purported Beneficial Transferee or Purported Beneficial
Holder does not receive a price, as determined on a Share-by-Share basis, for
designating such Special Beneficiary that reflects a price for such Excess
Shares that, (I) in the case of a Purported Beneficial Transferee, exceeds (x)
the price such Purported Beneficial Transferee paid for the Shares in the
purported Transfer that resulted in the exchanges of Shares for Excess Shares,
or (y) if the Purported Beneficial Transferee did not give value for such Shares
(having received such Shares pursuant to a gift, devise or other transaction),
the Market Price of such Shares on the date of the purported Transfer that
resulted in the exchange of Shares for Excess Shares or (II) in the case of a
Purported Beneficial Holder, exceeds the Market Price of the Shares that were
automatically exchanged for such Excess Shares on the date of such exchange.
Upon such a transfer of an interest in the Special Trust, the corresponding
shares of Excess Shares in the Special Trust shall be automatically exchanged
for an equal number of Shares and such Shares shall be transferred of record
to the transferee of the interest in the Special Trust if such Shares would
not be Excess Shares in the hands of such transferee. Prior to any transfer of
any interest in the Special Trust, the Purported Record Transferee or
Purported Record Holder, as the case may be, must give advance notice to PREIT
of the intended transfer and PREIT must have waived in writing its purchase
rights under Paragraph 9.N(vi).
(b) Notwithstanding the foregoing, if a Purported
Beneficial Transferee or Purported Beneficial Holder receives a price for
designating a Special Beneficiary of an interest in the Special Trust that
exceeds the amounts allowable under Paragraph 9.N(v)(a), such Purported
Beneficial Transferee or Purported Beneficial Holder shall pay, or cause such
Special Beneficiary to pay, such excess to PREIT.
-21-
<PAGE>
(vi) Purchase Right in Excess Shares. Excess Shares shall be
deemed to have been offered for sale to PREIT, or its designee, at a price per
share equal to, (I) in the case of Excess Shares resulting from a purported
Transfer, the lesser of (i) the price per share in the transaction that
created such Excess Shares (or, in the case of a gift, devise or other
transaction, the Market Price at the time of such gift, devise or other
transaction) or (ii) the Market Price on the date PREIT, or its designee,
accepts such offer or (II) in the case of Excess Shares created by an Event,
the lesser of (i) the Market Price of the Shares originally exchanged for the
Excess Shares on the date of such exchange or (ii) the Market Price of such
Shares on the date PREIT, or its designee, accepts such offer. PREIT shall
have the right to accept such offer for a period of ninety (90) days after the
later of (i) the date of the purported Transfer or Event which resulted in an
exchange of Shares for such Excess Shares and (ii) the date the Trustees
determine that a purported Transfer or other event resulting in an exchange of
Shares for such Excess Shares has occurred, if PREIT does not receive a notice
of any such Transfer pursuant to Paragraph 9.E.
O. Severability; Agent for Trust. If any provision of this Paragraph
9 or any application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the validity of
the remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court. In any event, to the extent such court holds the
Purported Record Transferee to be the record and beneficial owner of Shares
which, had the provisions of Paragraph 9 been enforced, would have been
exchanged for Excess Shares, such Purported Record Transferee shall be deemed,
at the option of PREIT, to have acted as agent on behalf of PREIT in acquiring
such transferred Shares and to hold such Shares on behalf of PREIT.
10. DISTRIBUTIONS
PREIT shall distribute to the Shareholders from the income or capital
of PREIT such sums as they shall determine. The amounts to be distributed and
the time of the distribution shall rest in the discretion of the Trustees.
However, the Trustees shall attempt to make such distribution so that PREIT
will continue to qualify as a real estate investment trust under pertinent
provisions of the Internal Revenue Code and Regulations thereunder. All other
income may be distributed or accumulated in the Trustees' sole discretion. The
Shareholders shall share in all distributions from PREIT on the record date
established by the Trustees for the purpose of determining the percentage
ownership of the holders; or, if required for tax purposes, they shall share
such distributions in such manner as may be necessary
-22-
<PAGE>
so that PREIT continues to so qualify as a real estate investment
trust.
11. SHAREHOLDERS
A. ANNUAL MEETINGS
The Annual Meeting of the Shareholders entitled to vote in
the election of Trustees shall be held at the principal office of PREIT or at
such other place as the Trustees shall by notice designate, no later than the
second Wednesday of the sixth month following the end of each fiscal year, or,
if that day falls on a holiday, the next business day following, or on such
other day as may be fixed by the Trustees. If the Annual Meeting has not been
held during a calendar year, any Shareholder may call such meeting at any time
thereafter, by following the procedure set forth in Paragraph 11.B hereof.
At said Annual Meeting, the Shareholders entitled to vote
thereat shall elect individuals to the office of Trustee as provided in
Paragraph 2.B of this Trust Agreement and shall at such meeting exercise and
discharge any other powers or duties vested in them by the Trust Agreement.
B. SPECIAL MEETINGS
Special Meetings of Shareholders may be called at any time
by the Chairman, or by the Trustees, or by the Shareholders entitled to cast
at least forty percent (40%) of the votes at the particular meeting. Upon
written request of any person or persons who have duly called a Special
Meeting, the Secretary shall affix the date of the meeting to be held not more
than sixty (60) days after receipt of the request and give due notice to the
Shareholders entitled to vote thereat. If the Secretary shall neglect or
refuse to fix such date or give such notice, the person or persons calling the
meeting may do so.
C. NOTICE OF MEETINGS
Written notice shall, unless otherwise provided, be given to
the Shareholders entitled to vote at the meeting, not less than ten (10) nor
more than forty-five (45) days prior to the date of said meeting, either
personally or by sending a copy thereof through the mail, or by telegram,
charges prepaid, to the address of the Shareholder appearing on the books of
PREIT. In said notice, the Trustees may specify the date selected by them as a
record date for the determination of Shareholders entitled to notice of or to
vote at any such meeting; only such Shareholders as were Shareholders of
record on the date so fixed and are entitled to vote at such meeting shall be
entitled to notice of such meeting.
-23-
<PAGE>
In addition, the Trustees shall in the case of Special
Meetings notify all Shareholders of the purpose or purposes of the meeting and
the nature of the business to be considered thereat, and such Special Meeting
shall be limited to the business specified in the notice. Any notice addressed
to a Shareholder at the address given on the books of PREIT and mailed to such
address shall be deemed properly addressed.
When a meeting of Shareholders is adjourned it shall not be
necessary to give any notice of the adjourned meeting or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting
at which the adjournment is taken, unless the Trustees fix a new record date
for the adjourned meeting.
D. RECORD DATE
The Trustees may fix in advance a date as the record date
for the determination of Shareholders entitled to notice of, or to vote at,
any meeting of Shareholders or Shareholders entitled to receive payment of any
dividend or distribution, or in order to make a determination of Shareholders
for any other purpose, such date in any case to be not more than sixty (60)
days and, in case of a meeting of Shareholders, not less than ten (10) days,
prior to the date for which such determination of Shareholders is necessary or
proper. In the absence of such record date fixed by the Trustees, all
Shareholders entitled to vote thereat shall be entitled to notice, except
transferees of shares transferred on the books within thirty (30) days next
preceding the date of the said meeting. The Trustees shall not be required to
set a new record date with respect to an adjourned meeting of Shareholders.
E. QUORUM
The owners of a majority of the Shares entitled to vote
thereat or their proxies shall constitute a quorum for the purpose of any
meeting. At any meeting where a quorum is present, a majority of the Shares
present and voting shall be required to adopt any resolution which is within
the province of the Shareholders unless a greater or different vote shall be
required by this Agreement or by the Board in its authorizing resolution. In
the event that a quorum is not present at the time designated for any
Shareholders Meeting, annual or special, the same shall be adjourned without
any further notice until a quorum shall be present.
F. VOTING RIGHTS AND ACTS OF SHAREHOLDERS
Unless otherwise provided in this Agreement, the certificate
for the relevant Shares or the resolutions of the Trustees with respect to
certain Shares, at all Shareholders
-24-
<PAGE>
Meetings, annual or special, each Shareholder shall be entitled to one vote
for each Share standing in his name on the books of PREIT.
Unless a greater or different vote shall be required by this
Agreement or by the Board in its authorizing resolution as to a particular
matter or under any agreement authorized by the Board pursuant to Paragraph
3.V, an act authorized by the vote of the holders of a majority of Shares
present in person or by proxy and casting a vote on the matter at a duly
organized meeting shall be the act of the Shareholders. For purposes of the
foregoing, abstentions and non-votes on a particular matter shall not be
deemed to be votes cast on the matter.
G. PROXIES
At all meetings of Shareholders, a Shareholder entitled to
vote on a particular matter may vote in person or may authorize another person
or persons to act for him by proxy. Every proxy shall be executed in writing
by the Shareholder, or by his duly authorized attorney in fact. Such proxies
shall be filed with the Secretary of PREIT before or at the time of the
meeting. A proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of the proxy shall not be effective until notice
thereof has been given to the Secretary of PREIT.
H. VOTING FOR TRUSTEES
Cumulative voting shall not be permitted. The candidates
receiving the highest number of votes shall be elected.
I. ADJOURNMENT
Any annual, regular or special meeting of Shareholders,
including one at which Trustees are to be elected, may be adjourned for such
period as the Shareholders present and entitled to vote shall direct.
12. LIMITED LIABILITY OF SHAREHOLDERS
A. The Trustees shall have no power to bind the Shareholders to
personal liability. All persons dealing with PREIT, or with any agent of PREIT
and/or the Trustees, shall look only to the Trust Property for the payment of
any sums due as a result of such dealing and personal liability shall not
attach to any Shareholder for any act, omission or liability of a Trustee or
PREIT.
-25-
<PAGE>
B. An obligation of PREIT based upon a writing may be limited to a
specific fund or other identified pool or group of assets of PREIT.
It is the intention of this Trust Agreement to limit the liability of
Shareholders for the obligations of PREIT to the fullest extent permitted by
applicable law, as amended or supplemented.
13. EXPRESS EXCULPATORY LANGUAGE IN INSTRUMENTS
Neither the Shareholders nor the Trustees, officers, employees or
agents of PREIT shall be liable under any written agreement or instrument
creating an obligation of PREIT, and all persons shall look solely to the
Trust Property for the payment of any claim under or for the performance of
that agreement or instrument. The omission of the exculpatory language from
any agreement or instrument shall not affect the validity or enforceability of
such agreement or instrument and shall not render any Shareholder, Trustee,
officer, employee or agent of PREIT liable thereunder to any third party; nor
shall the Trustees or any officer, employee or agent of PREIT be liable to
anyone for such omission.
14. INDEMNITY; INSURANCE
A. RIGHT TO INDEMNIFICATION OF TRUSTEES AND OFFICERS
Every Trustee and officer of PREIT shall be entitled as of
right to be indemnified by PREIT against reasonable expense and any liability
paid or incurred by such person in connection with an actual (whether pending
or completed) or threatened claim, action, suit or proceeding, civil,
criminal, administrative, investigative or other, whether brought by or in the
right of PREIT or otherwise, in which he or she may be involved, as a party or
otherwise, by reason of such person's being or having been a Trustee or
officer of PREIT or by reason of the fact that such person is or was serving
in any capacity at the request of PREIT as a trustee, director, officer,
employee, agent, partner, fiduciary or other representative of another real
estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or other entity (such claim, action, suit or proceeding
hereinafter being referred to as "action"); provided, however, that no such
right of indemnification shall exist with respect to an action brought by a
Trustee or Officer against PREIT (other than a suit for indemnification as
provided in Paragraph B of this Paragraph 14). Such indemnification shall
include the right to have expenses incurred by such person in connection with
an action paid in advance by PREIT prior to final disposition of such action,
subject to such conditions as may be prescribed by law provided that the
payment of such expenses incurred by such person in advance of the final
disposition of
-26-
<PAGE>
the action shall be made only upon delivery to PREIT of an undertaking by or
on behalf of such person, to repay all amounts so advanced without interest if
it shall ultimately be determined that such person is not entitled to be
indemnified under this Paragraph 14.A or otherwise. Persons who are not
Trustees or officers of PREIT may be indemnified in respect of service to
PREIT or to another such entity at the request of PREIT to the extent the
Board of Trustees at any time denominates such person as entitled to some or
all of the benefits of this Paragraph as the Trustees shall determine as to
each such Person. As used herein, "expense" shall include fees and expenses of
counsel selected by such person; and "liability" shall include amounts of
expenses, liability, loss, judgments, excise taxes, fines and penalties and
amounts paid in settlement. No indemnification pursuant to this Paragraph 14.A
shall be made, however, in any case where the act or failure to act giving
rise to the claim for indemnification is determined by the final judgment of a
court of competent jurisdiction to have constituted willful misconduct or
recklessness.
B. RIGHT OF CLAIMANT TO BRING SUIT
If a claim under Paragraph 14.A is not paid in full by PREIT
within 60 days after a written claim has been received by PREIT, the claimant
may at any time thereafter bring suit against PREIT to recover the unpaid
amount of the claim, and, if successful in whole or in part, the claimant
shall also be entitled to be paid the expense of prosecuting such claim. It
shall be a defense to any such action that the conduct of the claimant was
such that under law PREIT would be prohibited from indemnifying the claimant
for the amount claimed, but the burden of proving such defense shall be on
PREIT. Neither the failure of PREIT (including its Board of Trustees,
independent legal counsel and its Shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because the conduct of the claimant was not
such that indemnification would be prohibited by law, nor an actual
determination by PREIT (including, its Board of Trustees, independent legal
counsel or its Shareholders) that the conduct of the claimant was such that
indemnification would be prohibited by law, shall be a defense to the action
or create a presumption that the conduct of the claimant was such that
indemnification would be prohibited by law.
C. INSURANCE AND FUNDING FOR PAYMENT OF EXPENSES
PREIT may purchase and maintain insurance, at its expense, to protect
itself and any person eligible to be indemnified hereunder against any
liability or expense asserted or incurred by such person in connection with
any action, whether or not PREIT would have the power to indemnify such person
against such
-27-
<PAGE>
liability or expense by law or under the provisions of this Paragraph 14.
PREIT may create a trust fund, grant a security interest, cause a letter of
credit to be issued or use other means (whether or not similar to the
foregoing), to insure the payment of such sums as may become necessary to
effect indemnification as provided in this Paragraph 14.
D. NON-EXCLUSIVITY OF RIGHTS
The provisions of Paragraph 5 relating to the limitation of
Trustees' liability and the right to indemnification and to the advancement of
expenses provided in this Paragraph 14 shall not be exclusive of any other
rights that any person may have or hereafter acquire under any statute,
provision of this Trust Agreement, By-Laws, other agreement, vote of
Shareholders or Trustees or otherwise.
E. EXTENT OF RIGHTS
The provisions of Paragraph 5 relating to the limitations of
Trustees' liability, and the provisions of this Paragraph 14 relating to or
providing for indemnification and to the advancement of expenses (1) shall be
deemed to create contractual rights in favor of each of the Trustees, Officers
and other persons entitled to indemnification hereunder and may be modified as
to any Trustee, officer or other person only with said Trustee's, Officer's or
other such person's written consent; (2) shall continue as to persons who have
ceased to have the status pursuant to which they were entitled or were
denominated as entitled to indemnification hereunder and shall enure to the
benefit of the heirs and legal representatives of persons entitled to
indemnification hereunder; and (3) shall be applicable to actions, suits or
proceedings commenced after the adoption hereof, whether arising from acts or
omissions occurring before or after the adoption hereof. The right of
indemnification provided for herein may not be amended, modified or repealed
so as to limit in any way the indemnification provided for herein with respect
to any acts or omissions occurring prior to the adoption of such amendment or
repeal.
15. CONTROLLING LAW
This Trust Agreement has been executed in the Commonwealth of
Pennsylvania and shall be construed in accordance with the laws of that
Commonwealth.
16. TERM
The term of PREIT's existence shall be perpetual unless sooner
terminated by a vote of the Trustees as follows:
-28-
<PAGE>
PREIT may be dissolved, its affairs wound-up and its
existence terminated by the vote of two-thirds of the total number of Trustees
then in office, but in no event less than four (4). Upon PREIT's dissolution,
the Trustees may wind up PREIT's business, liquidate its assets, make adequate
provision for payment of liabilities and funding of contingencies and
distribute the net proceeds among the Shareholders in the same proportions
that the Shareholders own Shares in PREIT at the time for distribution,
subject to preferences and rights among different classes or series of Shares,
if any; or convey the property of PREIT to, or in any way merge, consolidate
or combine with, one or more persons, entities, trusts or corporations, for
consideration consisting in whole or part of cash, shares of stock or
beneficial interest, or other property of any kind, and distribute the net
proceeds among the Shareholders ratably. The Trustees in office at the time of
such dissolution shall continue in office until the process of dissolving,
winding-up, terminating the business and the distribution to the Shareholders
is completed. PREIT shall not dissolve and the term of PREIT's existence shall
not terminate for the reason that it fails to qualify, or after qualification
as such to continue to qualify, as a real estate investment trust under the
applicable tax laws.
17. AMENDMENT
This Agreement may be amended by the Trustees in any particular,
including, without limitation, such amendments as may be necessary or
desirable from time to time to implement the authority granted in the second
paragraph of Paragraph 8 hereof, provided, however, that no amendment shall be
effected to increase the liability of the Shareholders without the consent of
the holders of two-thirds of the outstanding Shares at a meeting called for
that purpose, and in no event may any amendment be adopted requiring
additional contributions from or assessments against the Shareholders. No
amendment may be considered at any meeting of the Trustees unless notice of
the proposed amendment is included in the call for the meeting. No such
amendment may be considered unless the total number of Trustees is five (5) or
more, in which event, the consent of two-thirds of the Trustees, but not fewer
than four (4), shall be necessary to adopt any such amendment. The amendment
shall become effective when certified by the chairman of the meeting which
voted it, countersigned by the secretary. As soon as may be, after such
adoption and certification, a copy of the amendment shall be recorded in every
public office where this Agreement has been recorded, but no failure to record
such amendment shall affect its validity.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day and year first above written.
TRUSTEES:
/s/ Sylvan M. Cohen /s/ William R. Dimeling
- -------------------------- ----------------------------------
Sylvan M. Cohen William R. Dimeling
/s/ Jonathan B. Weller /s/ Lee H. Javitch
- -------------------------- ----------------------------------
Jonathan B. Weller Lee H. Javitch
/s/ Leonard I. Korman /s/ Jeffrey P. Orleans
- -------------------------- ----------------------------------
Leonard I. Korman Jeffrey P. Orleans
/s/ Robert G. Roger /s/ Robert Freedman
- -------------------------- ----------------------------------
Robert G. Rogers Robert Freedman
-30-
<PAGE>
Adopted September 29, 1997
BY-LAWS
of
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
(a Pennsylvania business trust)
Article 1. MEETINGS OF SHAREHOLDERS
Section 1.01. Place of Meeting. Meetings of shareholders of
the Trust shall be held at such place, within or without the Commonwealth of
Pennsylvania, as may be fixed from time to time by the Board of Trustees. If
no place is so fixed for a meeting, it shall be held at the Trust's then
principal executive office.
Section 1.02. Annual Meeting. An annual meeting of
shareholders shall be held, unless the Board of Trustees shall fix some other
hour or date therefor, no later than the second Wednesday of the sixth month
following the end of each fiscal year of the Trust, at which the shareholders
shall elect by plurality vote individuals to the office of Trustee as provided
in Paragraph 2.B of the Trust Agreement of the Trust (the "Trust Agreement")
and transact such other business as may properly be brought before the
meeting.
Section 1.03. Special Meetings. Special meetings of the
shareholders may be called at any time by the Chairman or by the Chief
Executive Officer or by the Board of Trustees or by shareholders entitled to
cast at least 40% of the votes that all shareholders are entitled to cast at
the particular meeting.
Section 1.04. Notice of Meetings. Written notice of every
meeting of shareholders shall be given in any manner permitted by law by or at
the direction of the Secretary or such other person as is authorized by the
Board of Trustees to each shareholder of record entitled to receipt thereof,
at least ten (10) days, and not more than forty-five (45) days, prior to the
day named for the meeting, unless a greater period of notice is required by
law in a particular case.
Section 1.05. Organization. At every meeting of the
shareholders, the Chairman, or in his absence, the Chief
Executive Officer, or, in the absence of both the Chairman and
the Chief Executive Officer, the President, or, in the absence of
the Chairman, the Chief Executive Officer and the President, a
chairman chosen by the shareholders at the commencement of the
<PAGE>
meeting, shall act as chairman; and the Secretary, or in his absence, a person
appointed by the chairman, shall act as secretary.
Section 1.06. Voting. Except as otherwise specified herein
or in the Trust Agreement or required by law, whenever any action is to be
taken by vote of shareholders, it shall be authorized by a majority of the
votes cast by all shareholders on such matter and, if any shareholders are
entitled to vote thereon as a class, upon receiving a majority of the votes
cast by the shareholders entitled to vote as a class. In each election of
trustees, the candidates receiving the highest number of votes, up to the
number of trustees to be elected in such election, shall be elected.
Article 2. TRUSTEES
Section 2.01. Number and Term of Office. The number of
trustees of the Trust shall be designated from time to time by resolution of
the Board of Trustees, such number to not be more than fifteen (15) nor less
than five (5). Each trustee shall be elected for the term of three (3) years
as set forth in Paragraph 2.B of the Trust Agreement and shall serve until his
successor is elected and qualified or until his earlier death, resignation or
removal.
Section 2.02. Resignations. Any trustee may resign at any
time by delivering to any other trustee and to the principal office of the
Trust written notification of his resignation, which resignation shall be
effective when received, but if the effect of such resignation shall be to
reduce the number of trustees below five (5), no such resignation shall be
effective until a successor shall have been elected by the remaining trustees.
Section 2.03. Annual Meeting. Immediately after each annual
election of trustees, the Board of Trustees shall meet for the purpose of
organization, election of officers, appointment of the members of committees
of the Board of Trustees, and the transaction of other business, at the place
where such election of trustees was held. Notice of such meeting need not be
given. In the absence of a quorum at said meeting, the same may be held at any
other time and place specified in a notice given as hereinafter provided for
special meetings of the Board of Trustees.
Section 2.04. Regular Meetings. Regular meetings of the
Board of Trustees shall be held at such time and place as may be designated
from time to time by the Board of Trustees. If the date fixed for any such
regular meeting is a legal holiday under the laws of the State where such
meeting is to be held, then the
-2-
<PAGE>
same shall be held on the next succeeding secular day not a legal holiday
under the laws of said State, or at such other time as may be determined by
resolution of the Board of Trustees. At such meetings the Board of Trustees
may transact such business as may be brought before the meeting.
Section 2.05. Special Meetings. Special Meetings of the
Board of Trustees shall be called by the Chairman or by the Chief Executive
Officer or by two or more of the other trustees and shall be held at such time
and in such place as shall be designated in the notice of the meeting. Such
notice shall be given by or at the direction of the person or persons
authorized to call such meeting to each trustee at least two (2) days prior to
the day named for the meeting, unless a different notice period is provided
for hereunder based upon the subject matter of such meeting.
Section 2.06. (a) Organization; Quorum; Voting. Every
meeting of the Board of Trustees shall be presided over by the Chairman, if
one has been selected and is present, and, if not, the Chief Executive
Officer, or in the absence of the Chairman and the Chief Executive Officer, a
chairman chosen by a majority of the trustees present. The Secretary, or in
his absence, a person appointed by the chairman, shall act as secretary.
(b) A majority of the trustees in office, provided that the
majority consists of at least four (4) trustees, shall constitute a quorum for
the conduct of business. Subject to the provisions of Section 6.04 of these
By-Laws, trustees shall be deemed present at a meeting if by means of
conference telephone or similar communications equipment all persons
participating in the meeting can hear each other. If there are fewer than five
(5) trustees, the remainder shall constitute a quorum and must act to fill
vacancies to bring the total number of trustees to at least five (5). If a
quorum is not present at any meeting, a majority of the trustees present at
the meeting may adjourn the meeting to any later date and the meeting may be
held at such later date without any further notice.
(c) Except as otherwise required by law and except as
otherwise contemplated by Paragraph 3.R of the Trust Agreement and Section
3.01 of these By-Laws, the concurrence of a majority of the trustees present
at any meeting at which a quorum is present shall be necessary to the validity
of any action taken by them.
Section 2.07. Action By Written Consent. In lieu of a
meeting, action may be taken by the consent in writing of at
-3-
<PAGE>
least seventy-five percent (75%) of the trustees then serving. In any event,
the concurrence or consent in writing of at least four (4) trustees shall be
necessary to the validity of any action taken. The minimum voting requirements
specified in this paragraph shall apply, as a minimum requirement, with
respect to any and all action taken by the trustees under the Trust Agreement.
Section 2.08. Compensation. The Board of Trustees shall have
the authority to fix the compensation of trustees for their services as
trustees. Any person serving as a trustee may also be a salaried officer of
the Trust, but, in such event, no compensation shall be paid to such person in
respect of his or her service as a trustee or as a member of any committee of
the Board of Trustees.
Article 3. COMMITTEES
Section 3.01. General. The Board of Trustees may, by the
vote of at least a majority of those trustees then in office, establish one or
more standing or special committees to consist of one or more trustees of the
Trust. Any committee, to the extent provided by the Board of Trustees, shall
have and may exercise all of the powers and authority of the Board of Trustees
except that a committee shall not have any power or authority as to the
following: (i) the submission to shareholders of any action requiring approval
of shareholders; (ii) the removal of any Trustee from the Board of Trustees or
the creation or filling of vacancies in the Board of Trustees; (iii) the
adoption, amendment or repeal of the Trust Agreement or these By-Laws; (iv)
the amendment or repeal of any resolution of the Board that by its terms is
amendable or repealable only by the Board; (v) action on matters committed by
these By-Laws or resolution of the Board of Trustees to another committee of
the Board; and (vi) final, formal action on behalf of the Trust prior to
approval of the Board of Trustees unless final authority with respect to such
matter has been specifically delegated by the Board of Trustees to such
committee. In furtherance of the power of the Board of Trustees to establish
committees of Trustees pursuant to Paragraph 3.R of the Trust Agreement and
this Section 3.01, the Board of Trustees, by adoption of these By-Laws, has
established the standing committees of the Board of Trustees set forth in
Sections 3.02 through 3.04 hereof.
Section 3.02. The Audit Committee. (a) The Audit Committee
of the Board of Trustees shall consist of three trustees, each of whom shall
(i) not be a current or former officer or employee of the Trust or of any
affiliate of the
-4-
<PAGE>
Trust, and (ii) not receive compensation from the Trust other than in his or
her capacity as trustee. The members of the Audit Committee shall be appointed
annually by the Board of Trustees at the Annual Meeting of the Board of
Trustees and shall serve at the pleasure of the Board of Trustees until the
next Annual Meeting of the Board of Trustees and until their successors have
been appointed. Vacancies at the Audit Committee may be filled by the Board of
Trustees at any regular or special meeting of the Board of Trustees.
(b) The Board of Trustees shall appoint one member of the
Audit Committee as the Chair and a majority of the members of the Audit
Committee shall constitute a quorum for the conduct of business. Regular
meetings of the Audit Committee shall be held at such time and place as shall
be designated from time to time by the Committee or the Board of Trustees.
Special Meetings of the Audit Committee may be called by the Chair on not less
than two (2) days prior written notice. Such special meetings shall be held at
such time and place as shall be designated in the call of the meeting.
(c) The principal functions and responsibilities of the
Audit Committee shall be as follows: (i) make a recommendation to the Board of
Trustees, not less than annually, with respect to the firm to engage as the
Trust's external auditing firm and whether to terminate the Trust's
relationship with any external auditing firm previously maintained; (ii)
monitor factors which might adversely affect the independence of the Trust's
external auditing firm; (iii) review, and make recommendations to the Board of
Trustees with respect to, compensation of the Trust's external auditing firm;
(iv) review the appointment and replacement of any senior internal auditing
executives of the Trust or affiliates; (v) serve as a channel of communication
between the Trust's external auditing firm and the Board of Trustees and
between the Trust's senior internal auditor, if any, and the Board of
Trustees; (vi) review the results of each external audit, including any
qualifications in the opinion of the external auditing firm, any related
management letter, management's responses to recommendations made by the
external auditing firm in connection with the audit, reports submitted to the
Audit Committee by the internal auditing department that are material to the
Trust as a whole, and management's responses to those reports; (vii) review
the Trust's annual financial statements prior to publication; (viii) review
any significant disputes between management and the external auditing firm
that arose in connection with the preparation of the Trust's annual financial
statements; (ix) consider major changes and other major questions of choice
regarding the appropriate auditing and accounting principles and practices to
-5-
<PAGE>
be followed when preparing the Trust's financial statements; and, (x) perform
such other duties as may be assigned to the Audit Committee by the Board of
Directors.
Section 3.03. The Executive Compensation and Human Resources
Committee. (a) The Executive Compensation and Human Resources Committee of the
Board of Trustees shall consist of three trustees, each of whom shall be a
"non-employee director" as that term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934. The members of the Executive Compensation and
Human Resources Committee shall be appointed annually by the Board of Trustees
at the Annual Meeting of the Board of Trustees and shall serve at the pleasure
of the Board of Trustees until the next Annual Meeting of the Board of
Trustees and until their successors have been appointed. Vacancies at the
Executive Compensation and Human Resources Committee may be filled by the
Board of Trustees at any regular or special meeting of the Board of Trustees.
(b) The Board of Trustees shall appoint one member of the
Executive Compensation and Human Resources Committee as the Chair and a
majority of the members of the Executive Compensation and Human Resources
Committee shall constitute a quorum for the conduct of business. Regular
meetings of the Executive Compensation and Human Resources Committee shall be
held at such time and place as shall be designated from time to time by the
Committee or the Board of Trustees. Special Meetings of the Executive
Compensation and Human Resources Committee may be called by the Chair on not
less than two (2) days prior written notice. Such special meetings shall be
held at such time and place as shall be designated in the call of the meeting.
(c) The principal functions and responsibilities of the
Executive Compensation and Human Resources Committee shall be as follows: (i)
review the Trust's principal personnel policies and benefit programs and
monitor their implementation; (ii) review the compensation of senior executive
officers of the Trust and the compensation policies of the Trust and their
implementation, and make recommendations thereon to the Board of Trustees;
(iii) appoint the persons, officers of Trust or an outside investment manager,
to determine and direct the investment of the assets of any funded benefit
plans of the Trust, all in accordance with the terms and conditions of such
plans, or, if so provided in any such plan, serving in such capacity itself;
(iv) appoint the members of the benefit plans administrative committee, as
provided in the various plans; (v) review periodically the compensation of
senior executive officers and submit to the Board of Trustees recommendations
for adjustments; (vi) review periodically the compensation level of
-6-
<PAGE>
Trustees and make recommendations to the Board of Trustees with respect
thereto; (vii) recommend for approval by the Board of Trustees any performance
objectives which may be required in connection with incentive or other
programs, and, if so provided in any such plan, administering or managing the
plan itself; (viii) administer the stock option plans of the Trust, subject to
the terms of such plans, including the granting of any stock options
thereunder, each to the extent provided in such plans; (ix) consider and
recommend to the Board of Trustees prior to the annual meeting of shareholders
nominees for election or reelection to the Board of Trustees at the annual
meeting, and in the event a vacancy occurs, propose to the Board of Trustees
individuals for election by the Board of Trustees, to serve until the next
Annual Meeting of Shareholders; and, (x) perform such other duties as may be
assigned to the Executive Compensation and Human Resources Committee by the
Board of Trustees.
Section 3.04. The Property Committee. (a) The Property
Committee of the Board of Trustees shall consist of three trustees. The
Chairman shall be a member of the Property Committee and the other two members
shall be trustees who (i) are not current or former officers or employees of
the Trust or of any affiliate of the Trust, and (ii) do not receive
compensation from the Trust other than in their capacities as trustees. The
Chief Executive Officer and the President shall be non-voting ex officio
members of the Property Committee. The members of the Property Committee shall
be appointed annually by the Board of Trustees at the Annual Meeting of the
Board of Trustees and shall serve at the pleasure of the Board of Trustees
until the next Annual Meeting of the Board of Trustees and until their
successors have been appointed. Vacancies at the Property Committee may be
filled by the Board of Trustees at any regular or special meeting of the Board
of Trustees.
(b) The Chairman shall be the Chair of the Property
Committee and a majority of the voting members of the Property Committee shall
constitute a quorum for the conduct of business. Regular meetings of the
Property Committee shall be held at such time and place as shall be designated
from time to time by the Committee or the Board of Trustees. Special Meetings
of the Property Committee may be called by the Chair on not less than two (2)
days prior written notice. Such special meetings shall be held at such time
and place as shall be designated in the call of the meeting.
(c) The principal functions and responsibilities of the
Property Committee shall be as follows: (i) review and make recommendations to
the Board of Trustees with respect to all proposed acquisitions and
dispositions of real property, and
-7-
<PAGE>
direct or indirect interests therein, by the Trust and its affiliates,
including the economic and other principal terms of each such proposed
transaction and the desirability thereof; (ii) review and make recommendations
to the Board of Trustees with respect to all proposed expansions, refurbishing
or new developments on properties owned by, and properties to be acquired by,
the Trust or any of its affiliates; (iii) review on an annual basis the entire
portfolio of real property, and interests therein, owned by the Trust and its
affiliates and consider, among other matters, indications (with or without
appraisals) of the current fair market value of the Trust's real property
assets in relationship to their respective book values; (iv) review and
approve appropriate rental levels and lease terms for all properties owned, in
whole or in part, directly or indirectly, by the Trust or any affiliate
thereof and general maintenance and other expenditures and policies with
respect to such properties; and, (v) perform such other duties as may be
assigned to the Property Committee by the Board of Trustees.
Article 4. OFFICERS
Section 4.01. Number. The officers of the Trust shall be a
Chairman, a Chief Executive Officer, a President, a Chief Financial Officer, a
Treasurer, a Secretary and may include one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as the Board of Trustees may authorize from time to time.
Section 4.02. Qualifications. The officers of the Trust
shall be natural persons of full age. Any person may hold any number of
offices except that the Secretary shall not hold the office of Chief Executive
Officer or President.
Section 4.03. Election and Term of Office. The officers of
the Trust shall be elected or appointed by the Board of Trustees and each
shall serve at the pleasure of the Board of Trustees.
Section 4.04. Resignations. Any officer may resign at any
time by giving written notice to the Board of Trustees, the Chief Executive
Officer or the Secretary. The resignation shall be effective upon receipt
thereof or at such subsequent time as may be specified in the notice of
resignation. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.05. Chairman. The Chairman shall preside at
the meetings of the Board of Trustees and the Shareholders. The
-8-
<PAGE>
Chairman shall serve as Chair of the Property Committee of the Board of
Trustees. The Chairman shall also perform such other duties as may be
specified by the Board of Trustees from time to time and as do not conflict
with the duties of the Chief Executive Officer or President.
Section 4.06. The Chief Executive Officer. The Chief
Executive Officer shall be the chief executive officer of the Trust and shall
have general supervision over the business and operations of the Trust,
subject, however, to the control of the Board of Trustees. He shall have the
authority to execute and deliver, in the name and on behalf of the Trust,
deeds, mortgages, bonds, agreements and other instruments authorized by the
Board of Trustees, except in cases where the signing and execution thereof is
expressly delegated by the Board of Trustees to some other officer or agent of
the Trust; and, in general, he shall perform all duties incident to the office
of Chief Executive Officer. The Chief Executive Officer shall also perform
such other duties as may be assigned to him or her from time to time by the
Board of Trustees.
Section 4.07. President. The President shall be the chief
operating officer of the Trust and shall be responsible for the day-to-day
operations of the Trust, subject to the general supervision of the Chief
Executive Officer. In the absence or unavailability of the Chief Executive
Officer, he shall exercise the duties and responsibilities of that office and
may, whether or not the Chief Executive Officer is present or available,
execute and deliver documentation on behalf of the Trust to the same extent
that the Chief Executive Officer is authorized hereby to do so. The President
shall also perform such other duties as shall be assigned to him or her from
time to time by the Board of Trustees.
Section 4.08. The Vice Presidents. In the absence or
disability of the Chief Executive Officer or the President or when so directed
by the Chief Executive Officer or the President, any Vice President may
perform all the duties of the Chief Executive Officer or the President, and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Chief Executive Officer and the President; provided,
however, that no Vice President shall act as a member of or as chairman of any
committee of the Board of Trustees of which the Chief Executive Officer or the
President is a member or chairman by designation or ex-officio, unless such
Vice President is a member of the Board of Trustees and has been designated
expressly by the Board of Trustees as the alternate to the Chief Executive
Officer or the President for purposes of service on such committee. The Board
of Trustees may appoint Executive, Senior
-9-
<PAGE>
and Assistant Vice Presidents. The Vice Presidents shall perform such other
duties as from time to time may be assigned to them respectively by the Board
of Trustees or the Chief Executive Officer or the President.
Section 4.09. Chief Financial Officer. The Chief Financial
Officer shall be the chief financial officer of the Trust. He shall be
responsible for all internal and external financial statements and reports
relating to the financial position and results of operations of the Trust and
for the relationship between the Trust and its shareholders, institutional
creditors, and the investment community. He may exercise any and all of the
duties of the Treasurer under these By-Laws. The Chief Financial Officer shall
also perform such other duties as shall be assigned to him or her from time to
time by the Board of Trustees.
Section 4.10. The Treasurer. The Treasurer shall have charge
of all receipts and disbursements of the Trust and shall have or provide for
the custody of its funds and securities. Unless the Board of Trustees
determines otherwise, the Treasurer shall have full authority to invest such
funds and securities; to receive and give receipts for all money due and
payable to the Trust and to endorse checks, drafts, and warrants in its name
and on its behalf and to give full discharge for the same. The Treasurer shall
deposit the funds of the Trust, except such as may be invested or required for
current use, in such banks or other places of deposit as the Board of Trustees
may from time to time designate; and, in general, the Treasurer shall perform
all duties incident to the office of Treasurer and such other duties as may
from time to time be assigned to him or her by the Board of Trustees or the
Chief Executive Officer or the President.
Section 4.11. Assistant Treasurers. In the absence or
disability of the Treasurer or when so directed by the Treasurer, any
Assistant Treasurer may perform all the duties of the Treasurer, and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the Treasurer. The Assistant Treasurers shall perform such other duties
as from time to time may be assigned to them respectively by the Board of
Trustees, the President or the Treasurer.
Section 4.12. The Secretary. The Secretary shall record all
the votes of the shareholders and of the trustees and the minutes of the
meetings of the shareholders and of the Board of Trustees in a book or books
to be kept for that purpose and shall see that notices of meetings of the
Board and shareholders are given; and, in general, the Secretary shall perform
all duties incident to the office of Secretary, and such other duties
-10-
<PAGE>
as may from time to time be assigned to him or her by the Board
of Trustees or the President.
Section 4.13. Assistant Secretaries. In the absence or
disability of the Secretary or when so directed by the Secretary, any
Assistant Secretary may perform all the duties of the Secretary, and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the Secretary. The Assistant Secretaries shall perform such other duties
as from time to time may be assigned to them respectively by the Board of
Trustees, the Chief Executive Officer, the President, or the Secretary.
Article 5. INDEMNIFICATION OF
TRUSTEES AND OFFICERS
Section 5.01. Indemnification. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, including actions by or
in the right of the Trust, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a trustee or
officer of the Trust, or is or was serving while a trustee or officer of the
Trust at the request of the Trust as a trustee, officer, employee, agent,
fiduciary or other representative of another corporation for profit or
not-for-profit, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, excise taxes and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action or proceeding unless
the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
Section 5.02. Advancement of Expenses. Expenses (including
attorneys fees) incurred by an officer or trustee of the Trust in defending
any action or proceeding referred to in Section 5.01 shall be paid by the
Trust in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that the person is not entitled to be
indemnified by the Trust.
Section 5.03. Other Rights. No trustee shall be personally
liable for monetary damages for any action taken, or failure to take any
action, except to the extent set forth in Paragraph 5.B of the Trust
Agreement. The indemnification and
-11-
<PAGE>
advancement of expenses provided by or pursuant to this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Trust Agreement, any
insurance or other agreement, vote of shareholders or trustees or otherwise,
both as to actions in their official capacity and as to actions in another
capacity while holding an office, and shall continue as to a person who has
ceased to be a trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 5.04. Security Fund; Indemnity Agreements. By
resolution of the Board of Trustees (notwithstanding their interest in the
transaction), the Trust may create and fund a trust fund or fund of any
nature, and may enter into agreements with its trustees, officers, employees
and agents for the purpose of securing or insuring in any manner its
obligation to indemnify or advance expenses provided for or authorized in this
Article, the Trust Agreement, or any applicable law.
Section 5.05. Modification. The duties of the Trust to
indemnify and to advance expenses to a trustee or officer provided in this
Article shall be in the nature of a contract between the Trust and each such
trustee or officer, and no amendment or repeal of any provision of this
Article, and no amendment or termination of any trust or other fund created
pursuant to Section 5.04, shall alter, to the detriment of such trustee or
officer, the right of such person to the advance of expenses or
indemnification related to a claim based on an act or failure to act which
took place prior to such amendment, repeal or termination.
Article 6. DEPOSITS, PROXIES, ETC.
Section 6.01. Deposits and Investments. All funds of the
Trust shall be deposited from time to time to the credit of the Trust in such
banks, trust companies, or other depositaries, or invested in such manner, as
may be authorized by these By-Laws or by the Board of Trustees and all such
funds shall be withdrawn only upon checks signed by, or wire transmissions
authorized by, and all such investments shall only be disposed of by, the
Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer and such other officers or employees as the Board of Trustees may
from time to time designate.
Section 6.02. Proxies. Unless otherwise ordered by
the Board of Trustees, any officer of the Trust may appoint an
attorney or attorneys (who may be or include such officer
-12-
<PAGE>
himself), in the name and on behalf of the Trust, to cast the votes which the
Trust may be entitled to cast as a shareholder or partner or business trust or
otherwise in any other corporation, partnership, business trust or other
entity any of whose shares or other securities are held by or for the Trust,
at meetings of the holders of the shares or other securities of such other
corporation or other entity, or, in connection with the ownership of such
shares or other securities, to consent in writing to any action by such other
corporation or other entity, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and
may execute or cause to be executed in the name and on behalf of the Trust
such written proxies or other instruments as he may deem necessary or proper
in the premises.
Section 6.03. Use of Conference Telephone Equipment. One or
more persons may participate in any meeting of the Board of Trustees or any
committee thereof or the shareholders by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other. Participation in a meeting by means of
such equipment shall constitute presence in person at such meeting.
Article 7. SHARE CERTIFICATES; TRANSFER
Section 7.01. Share Certificates. Share certificates, in the
form prescribed by the Board of Trustees, shall be signed by the Chief
Executive Officer, the President or a Vice President and by the Secretary or
the Treasurer or an Assistant Secretary or an Assistant Treasurer of the
Trust, but such signatures may be facsimiles, engraved or printed. In case any
officer who has signed, or whose facsimile signature has been placed upon any
share certificate shall have ceased to be such officer because of death,
resignation, or otherwise, before the certificate is issued, it may be issued
by the Trust with the same effect as if the officer had not ceased to be such
at the date of its issue.
Section 7.02. Transfer of Shares. The Trust or a Registrar
or Transfer Agent of the Trust shall maintain books in which the ownership and
transfer of the Trust's shares shall be definitively registered. Transfer of
share certificates and the shares represented thereby shall be made only on
the books of the Trust by the owner thereof or by his attorney thereunto
authorized, by a power of attorney duly executed and filed with the Secretary
or a Transfer Agent of the Trust and on surrender of the share certificates.
-13-
<PAGE>
Section 7.03. Restrictions on Transfer. The restrictions on
transfer set forth in Paragraph 9 of the Trust Agreement shall remain in
effect unless and until terminated or modified by amendment of the Trust
Agreement or as otherwise provided for therein.
Section 7.04. Transfer Agent and Registrar; Regulations. The
Trust may, if and whenever the Board of Trustees so determines, maintain, in
the Commonwealth of Pennsylvania and/or any other state of the United States,
one or more transfer offices or agencies, each in charge of a Transfer Agent
designated by the Board of Trustees, where the shares of the Trust shall be
transferable, and also one or more registry offices, each in charge of a
Registrar (which may also be a Transfer Agent) designated by the Board, where
such shares shall be registered; and no certificates for shares of the Trust
in respect of which a Transfer Agent shall have been designated shall be valid
unless countersigned by such Transfer Agent and no certificates for shares of
the Trust in respect of which a Registrar shall have been designated shall be
valid unless registered by such Registrar. The Board of Trustees may also make
such additional rules and regulations as it may deem expedient concerning the
issue, transfer and registration of its shares.
Section 7.05. Lost, Destroyed and Mutilated Certificates.
The Board of Trustees, by standing resolution or by resolutions with respect
to particular cases, may authorize the issue of new share certificates in lieu
of share certificates lost, destroyed or mutilated, upon such terms and
conditions as the Board of Trustees may direct.
-14-
<PAGE>
Article 8. RELATION TO TRUST AGREEMENT; AMENDMENTS
Section 8.01. Relation to the Trust Agreement. These By-Laws
have been adopted by the Board of Trustees under the authority of Paragraph
3.0 of the Trust Agreement. These By-Laws are subordinate to the Trust
Agreement in all respects and in the event of any conflict between the
provisions of these By-Laws and the provisions of the Trust Agreement, the
provisions of the Trust Agreement shall control.
Section 8.02. Amendments. Except as otherwise provided by
Section 5.05 of these By-Laws, these By-Laws may be amended or repealed, or
new By-Laws may be adopted, either (i) by vote of the shareholders at any duly
organized annual or special meeting of shareholders, or (ii) with respect to
those matters that are not by statute committed exclusively to the
shareholders and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by the Board of
Trustees. Any change in these By-Laws shall take effect when adopted unless
otherwise provided in the resolution effecting the change. No provision of
these By-Laws shall vest any property right in any shareholder as such.
-15-
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT
-----------------------
PREIT ASSOCIATES, L.P.
Borrower
-----------------------
CORESTATES BANK, N.A.
Agent
CORESTATES BANK, N.A.
FIRSTRUST SAVINGS BANK
FLEET BANK, N.A.
PNC BANK, NATIONAL ASSOCIATION
SUMMIT BANK
Lenders
$150,000,000
Unsecured Revolving Credit Facility
September 30, 1997
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT
AGREEMENT, made this 30th day of September, 1997, by and
among PREIT ASSOCIATES, L.P., a Delaware limited partnership ("Borrower"), and
CORESTATES BANK, N.A., a national banking association ("Agent") in its
individual capacity as a Lender and as Agent for itself and for Firstrust
Savings Bank, Fleet Bank, N.A., PNC Bank, National Association and Summit Bank
(individually, including Agent, referred to as a "Lender" and collectively
referred to as "Lenders").
BACKGROUND
A. Borrower is a limited partnership engaged in investment
in "real estate assets," as defined in Section 856 of the Code (the
"Business"). Borrower desires to establish a committed maximum $150,000,000
credit facility (the "Facility"). The term of the Facility shall be 24 months,
such term subject to renewal as provided in this Agreement, (i) to finance the
acquisition, expansion and renovation of real estate assets wholly-owned by
Borrower and the acquisition of The Rubin Organization, Inc., a Pennsylvania
corporation, and certain of its assets, (ii) to refinance existing
indebtedness, (iii) for its working capital purposes (including without
limitation for investments in and loans to Ventures), and (iv) to fulfill
Borrower's obligations to Ventures to obtain Venture Loans. Lenders have
agreed to extend the Facility to Borrower, subject to the terms and conditions
hereinafter more particularly set forth.
B. Subject to the terms and conditions hereinafter set
forth, Loans will be funded by all Lenders in accordance with each Lender's
respective Pro Rata Share.
C. Agent is both Agent and a Lender hereunder.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
1. DEFINITIONS, CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms.
Each of the terms listed below shall have
the meaning herein ascribed to it for the purposes hereof and for each of the
Loan Documents:
<PAGE>
"Actual Debt Service" means all interest and
principal required to have been paid on Consolidated Liabilities for any
period, excluding any final payment of principal which exceeds the periodic
payments of principal on such debt.
"Adjusted LIBOR" means, for the applicable Interest
Period, (a) the rate (rounded upwards, if necessary, to the next one-hundredth
(1/100) of one percent) for deposits in Dollars which appears on the Telerate
Page 3750 as of 11:00 A.M., London time on the day that is two London Business
Days preceding the first day of such Interest Period in an amount and for a
period comparable to the principal amount requested to be lent as, maintained
as, or converted to an Adjusted LIBOR Loan and the applicable Interest Period
and in like funds, divided by (b) a number equal to one (1.0) minus the LIBOR
Reserve Percentage. Adjusted LIBOR shall be adjusted automatically on the
effective date of any change in the LIBOR Reserve Percentage, as of such
effective date.
"Adjusted LIBOR Borrowings" and "Adjusted LIBOR
Loans" mean Advances bearing interest at a rate determined with reference to
the Adjusted LIBOR.
"Adjusted Tangible Net Worth" means, at any time,
the sum of (i) Borrower's partners' equity, (ii) Borrower's cumulative
retained earnings, and (iii) Borrower's, and Borrower's Percentage Interest in
any Venture's, accumulated depreciation and amortization, less (iv) all
intangible assets carried on the books of Borrower.
"Advance" means the cash which Lenders advance to
Borrower or a Venture Borrower under the Facility (including draws under Letters
of Credit) all subject to and in accordance with the provisions of Article 2
hereof.
"Affiliate" means and refers to, as applied to any
Person, any other Person directly or indirectly controlling, or through one or
more Persons is controlled by, controlling or in common control with that
Person. "Control" (including with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and/or policies of that
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agent" means CoreStates Bank, N.A., a national
banking association, with its main office at the Northeast corner of Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19101, or its successor
designated pursuant to Section 9.2.8 hereof.
"Agreement" means this Revolving Credit Loan
Agreement, and all schedules, exhibits, riders, extensions, supplements,
amendments, or modifications to this Revolving Credit Agreement.
(2)
<PAGE>
"Applicable Margin" means, at any time, the amount
per annum determined in accordance with the following schedule, calculated on
the basis of the most recently delivered Covenant Compliance Certificate:
Borrower's Leverage Ratio Applicable Margin
------------------------- -----------------
Greater than 50% and less than or equal to 65% 1.70%
Greater than 40% and less than or equal to 50% 1.40%
Greater than 30% and less than or equal to 40% 1.20%
Less than or equal to 30% 1.10%
"Authorized Signer" means any of the Persons listed
on the certificate to be delivered to Agent at Closing in accordance with
Section 4.1.8 hereof or any replacement certificate with respect thereto
subsequently delivered to Agent.
"Bankruptcy Code" means Title 11 of the United
States Code as now or hereafter in effect, or any successor statute.
"Base Rate" shall mean, for any day, a rate per
annum equal to the greater of (a) the Prime Rate in effect on such day, or (b)
the Federal Funds Effective Rate in effect on such day plus 1/2%. If for any
reason Agent shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Federal Funds
Effective Rate for any reason, including the inability or failure of Agent to
obtain sufficient quotations in accordance with the terms thereof, the Base
Rate shall be determined without regard to clause (b) of the preceding
sentence, until the circumstances giving rise to such inability no longer
exist.
"Base Rate Borrowing" and "Base Rate Loans" mean
Advances bearing interest at a rate with reference to the Base Rate.
"Borrower" means PREIT Associates, L.P., a Delaware
limited partnership.
"Business" shall have the meaning set forth in the
Background to this Agreement.
"Business Day" means any week day except those on
which commercial banks in
Philadelphia are authorized by law to close.
"Calendar Quarter" means the three month period
ending on the last day of March, June, September and December of each year.
(3)
<PAGE>
"Capital Lease" means any lease of any property
(real, personal or mixed) which, in conformity with GAAP, is or should be
accounted for as a capital lease on the balance sheet of the lessee.
"Cash" means money, currency or a credit balance in
a Deposit Account.
"Closing" and "Closing Date" mean the day on which
all of the conditions set forth in Section 4.1 hereof have been satisfied.
"Code" means the Internal Revenue Code of 1986, as
amended, from time to time, and any successor code or statute.
"Commitment Amount" means the aggregate amount of
Lenders' commitments to lend under the Facility, which amount is $150,000,000 on
the Closing Date, or such lesser amount as Borrower shall have determined
pursuant to Section 2.2.8.3 hereof.
"Company-Prepared Financial Statements" means with
respect to Borrower and the General Partner, as appropriate, an income and
expense statement and balance sheet with respect to the operations and
financial condition of Borrower or the General Partner, which include each of
Borrower's and the General Partner's subsidiaries and Borrower's Percentage
Interest in all Ventures during and as of the last day of each Calendar
Quarter, prepared and certified as true, correct and complete by Borrower's or
the General Partner's chief financial officer, as appropriate.
"Consolidated Liabilities" means, at any time, the
sum of (i) all liabilities of Borrower, determined in accordance with GAAP, and
including all Contingent Liabilities, plus (ii) Borrower's applicable Percentage
Interest in the total liabilities of each Venture, exclusive of any amount
included in clause (i), plus (iii) the aggregate amount of indebtedness incurred
in connection with construction in progress by Borrower or any wholly-owned
subsidiary and Borrower's applicable Percentage Interest in all such
indebtedness incurred by each Venture, to the extent any such indebtedness
referred to in this clause (iii) is not included in clauses (i) and (ii), plus
(iv) an amount equal to all mandatory dividends payable by the General Partner
on issued and outstanding preferred stock.
"Consolidated NOI" means, at any time, Funds From
Operations, plus Interest Expense (from the most recent Company-Prepared
Financial Statements), which sum shall be appropriately adjusted on a rolling
four Calendar Quarter historical basis by the gross revenues and operating
expenses for each income-producing property that was placed in service or
disposed of by Borrower, by any wholly-owned subsidiary of Borrower, or by any
Venture, during such period of four Calendar Quarters. For any Property placed
in service after the acquisition of such Property, the gross revenues and
operating expenses thereof shall be measured on a pro-forma basis until
Borrower, in the good faith exercise of its business judgment, determines that
actual gross revenues and operating expenses have stabilized. Borrower's
determination that actual revenues and operating expenses have stabilized
(4)
<PAGE>
shall be subject to Lenders' reasonable approval. Adjustments as a result of
the acquisition or the disposal of any Property shall be made on the basis of
the actual gross revenues and operating expenses for such Property.
"Contingent Liabilities" means, at any time, the
sum of all indebtedness of others for borrowed monies, to the extent that
payment of such monies is guarantied by Borrower (excluding all Excluded
Guarantees).
"Covenant Compliance Certificate" means a
certificate delivered to Agent pursuant to Section 6.1.11 hereof.
"Debt" means for any Person at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable and
accrued liabilities, in each case arising in the ordinary course of business,
(iv) all Debt of others secured by a lien on any asset of such Person, whether
or not such Debt is assumed by such Person, and (v) all Debt of others
guaranteed by such Person.
"Deposit Account" means a demand, time, savings,
passbook, money-market or like account or a "repurchase agreement" with a
federally insured bank or savings and loan association, other than an account
evidenced by a negotiable certificate of deposit.
"Designated Officer" means Glenn W. Gallagher or
any other person designated in writing by Agent as its representative for the
purpose of receiving notice hereunder.
"Dollars" and the symbol "$" mean the lawful money
of the United States of America.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from
time to time.
"Event of Default" means each of the events set
forth in Section 8.1 hereof.
"Excluded Guaranties" means all guarantees
heretofore or hereafter executed by Borrower or the General Partner
guaranteeing indebtedness incurred by the owner of any Existing Project
identified in Part A of Schedule 1.1.C or of any Future Project.
"Excluded Recourse Debt" means (i) Borrower's or
any Venture's Recourse Debt incurred by Borrower in connection with Future
Projects or with the Existing Projects identified in Part B of Schedule 1.1.C,
(ii) one-half of Borrower's Contingent Liabilities that are not included in
clause (i), and (iii) issued and outstanding preferred stock of the General
Partner dividends on which are payable only as and when available from Funds
from Operations.
(5)
<PAGE>
"Existing Project" means each of the properties
identified in Schedule 1.1.C.
"Facility" means the revolving credit facility
under which Advances may be borrowed, repaid and reborrowed, Venture Loans may
be extended, and Letters of Credit may be issued and paid, in the maximum
amount of the Commitment Amount, all as more fully described in Article 2
hereof.
"Federal Funds Effective Rate" means for any day
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the succeeding Business Day by the Federal Reserve Bank of
Philadelphia, or, if such rate is not so published for any day which is a
Business Day, the average of quotations for the day of such transactions
received by Lender from three Federal funds brokers of recognized standing
selected by it.
"Fiscal Year" means the fiscal year of Borrower,
which currently ends on December 31 of each year.
"Funding Date" means the Business Day on which an
Advance is made.
"Funds from Operations" means, at any time,
Borrower's NOI, less all of Borrower's general and administrative expenses not
otherwise accounted for in determining Borrower's NOI, less gains or losses
from the sale, or the restructuring of any indebtedness secured by, real
properties, plus depreciation and amortization, and after adjustments for
unconsolidated entities in which Borrower holds an equity interest, plus
provisions for valuation reserves.
"Future Project" means each of the properties
identified on Schedule 1.1.D.
"GAAP" means generally accepted accounting
principles as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board as
in effect on the date hereof, which are applicable to the circumstances as of
the date of determination and which are applied on a consistent basis.
"General Partner" means Pennsylvania Real Estate
Investment Trust, a Pennsylvania business trust.
"Governmental Approvals" means all material
authorizations, consents, approvals, licenses and exemptions of, registrations
and filings with, and reports to all governmental bodies.
(6)
<PAGE>
"Gross Asset Value" means, at any time, the sum of
(i) Borrower's Consolidated NOI achieved during the immediately preceding four
(4) Calendar Quarters divided by .0925, plus (ii) the aggregate amount of all
costs (including expenditures for land) incurred by Borrower or any
wholly-owned subsidiary of Borrower, and Borrower's applicable Percentage
Interest of all such costs incurred by each Venture, in connection with
construction in progress, plus (iii) Borrower's cash and cash equivalents and
Borrower's Percentage Interest in all Ventures' cash and cash equivalents.
"Guaranties" means Borrower's and the General
Partner's Guaranties of the Venture Loans in favor of Lenders.
"Indebtedness" means all amounts due from Borrower
to Lender pursuant to Article 2 hereof and otherwise arising out of or in
connection with this Agreement or any other Loan Document.
"Initial Unencumbered Property Pool" means those
Properties identified on Schedule 1.1.A attached hereto.
"Interest Expense" means all payments by Borrower
with respect to interest on the Indebtedness or any other obligation of
Borrower on which interest is paid, including the interest portion of Capital
Leases.
"Interest Period" means that period of time
applicable to an Adjusted LIBOR Borrowing as determined pursuant Section 2.2.5
hereof.
"Interest Rate Determination Date" means each date
for determining the interest rate for an Interest Period in respect of an
Advance based on the Adjusted LIBOR. The Interest Rate Determination Date
shall be the second London Business Day prior to the first day of the related
Interest Period for an Adjusted LIBOR Loan.
"Interest Rate Option" means the Base Rate or the
Adjusted LIBOR selected by Borrower for all or any part of the Loans as
permitted by this Agreement.
"Land Holdings" means, at any time, land owned by
Borrower or any Venture that is (i) not part of an existing and operating real
estate development, (ii) does not have all Governmental Approvals required in
order to be developed as a multi-family apartment development or a retail
development property and (iii) in Borrower's good faith opinion, is not likely
to receive such Governmental Approvals and to be under construction for one of
the uses described in clause (ii) within twenty four (24) months.
"Last Reported Fiscal Year" means, at any time, the
most recently concluded Fiscal Year of Borrower for which financial statements
have been delivered to Agent.
(7)
<PAGE>
"Lenders" means Agent and each Lender listed in the
preamble hereto. As used herein, the term Lenders, unless the context clearly
requires to the contrary, refers to all Lenders.
"Lenders' Costs" means (i) all reasonable costs and
expenses of any kind paid or incurred by Agent in connection with the
preparation, execution, delivery, amendment, modification, administration or
termination of this Agreement or any other Loan Document, including
out-of-pocket syndication expenses, any amendments thereto, any transaction
contemplated herein or any existing or future related agreements and (ii) the
reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees) of Agent and each Lender in connection with the preservation,
enforcement, defense and protection of Lenders' rights, remedies, obligations
and liabilities in any manner concerning this Agreement or any other Loan
Document, any transaction contemplated herein or any existing or future
related agreements, including, but not limited to: (a) reasonable attorneys'
fees and other expenses paid or incurred by Agent (or, to the extent provided
in clause (ii) above, paid or incurred by any Lender) in enforcing, obtaining
legal advice in preparing, reviewing, consummating, amending, restructuring,
extending, terminating, defending, or preserving or protecting Agent's or
Lenders' rights, remedies, obligations or liabilities in any manner
concerning, this Agreement, any Loan Document or any amendments thereto, any
transaction contemplated herein or any existing or future related agreements;
and (b) wire transfer charges in such amounts as Agent may from time to time
establish for such service. "Lenders' Costs" shall not include the internal
costs of Agent or any Lender in approving or administering the Loan.
"Letter of Credit" means a letter of credit issued
pursuant to Section 2.1.8 hereof.
"Leverage Ratio" means, at any time, the ratio of
Consolidated Liabilities to Borrower's Gross Asset Value, expressed as a
percentage.
"LIBOR Reserve Percentage" means, for any Interest
Period, the daily average of the stated maximum rate (expressed as a decimal)
at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by Agent against "Eurocurrency liabilities" (as such term is used
in Regulation D) but without benefit of credit proration, exemptions, or
offsets that might otherwise be available to Agent from time to time under
Regulation D. Without limiting the effect of the foregoing, the LIBOR Reserve
Percentage shall reflect any other reserves required to be maintained by Agent
against (a) any category of liabilities which includes deposits by reference
to which the rate for Adjusted LIBOR Loans are to be determined, or (b) any
category of extension of credit or other assets which include the Adjusted
LIBOR Loans. The LIBOR Reserve Percentage on the Closing Date is zero.
"Loan Documents" means this Agreement, any Letters
of Credit, the Notes, the Guaranties, the Venture Notes, the Mortgages and
every other certificate or agreement of Borrower or the General Partner in
favor of Agent or Lenders delivered pursuant to this Agreement.
(8)
<PAGE>
"Loan(s)" means the aggregate of all Advances under
the Facility.
"London Business Day" means any Business Day on
which commercial banks are open for international business (including dealings
in Dollar deposits) in London and Philadelphia.
"Materially Adverse Effect" means, with respect to
Borrower, a materially adverse effect upon the business, assets, financial
condition, or results of operations of the Borrower and its subsidiaries taken
as a whole, or Borrower's ability to perform Borrower's obligations under the
Loan Documents in accordance with their respective terms.
"Maximum Available Credit" means the maximum amount
of Loans which may be outstanding under this Agreement as determined in
accordance with Section 2.2.12 hereof.
"Mortgage" means a mortgage and security agreement
in substantially the form of Exhibit 1.1.B attached hereto or a deed of trust
and security agreement in similar form, in each case appropriately modified in
order to conform to the customs and practices of the jurisdiction in which the
Property that is to be encumbered by such instrument is located.
"NOI" means Borrower's, plus Borrower's applicable
Percentage Interest of each Venture's, gross revenue minus operating and
servicing expenses derived from the operation by Borrower, or by any
wholly-owned subsidiary or Venture, of income-producing property wholly-owned
by Borrower, a subsidiary of Borrower or Venture plus Borrower's Percentage
Interest in the net operating income of PREIT/Rubin, during, and as shown on
the financial statements for, the Last Reported Fiscal Year, before Interest
Expense, depreciation and amortization.
"Note" means each of the notes of Borrower in favor
of Lenders to evidence Borrower's repayment obligations under this Agreement
with respect to the Facility.
"Notice of Borrowing" means a notice substantially
in the form of Schedule 2.2.2 attached hereto and made a part hereof.
"Notice of Rate Election" means a notice
substantially in the form of Schedule 2.2.3 attached hereto and made a part
hereof.
"Other Indebtedness" means Senior Liabilities other
than Indebtedness.
"PBGC" means the Pension Benefit Guaranty
Corporation.
(9)
<PAGE>
"PREIT/Rubin" means PREIT/Rubin Commercial
Management and Development Company, a Pennsylvania corporation.
"Percentage Interest" means, with respect to each
Venture and PREIT/Rubin, the aggregate ownership interests of Borrower and any
wholly-owned subsidiary of Borrower in such Venture and in PREIT/Rubin.
"Permitted Lien" means (i) liens for taxes,
assessments or governmental charges or claims which are not overdue or which
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, if a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(ii) statutory liens of carriers, warehousemen, mechanics, materialmen,
repairmen, suppliers and other like liens incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, if a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor; (iii) liens (other than any lien imposed by
ERISA) incurred or deposits made in the ordinary course of business in
connection with workers' compensation or unemployment insurance and other
types of social security; (iv) liens incurred or deposits made to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) any judgment lien;
provided that, within 45 days after the entry of the judgment secured thereby,
such judgment shall be discharged or execution thereof shall be stayed pending
appeal; and further provided that such judgment shall be discharged within 45
days after the expiration of any such stay; (vi) the rights of tenants under
leases or subleases not interfering with the ordinary conduct of the Business
of Borrower; (vii) easements, rights-of-way, encroachments, zoning provisions,
covenants, conditions, restrictions and other similar charges, encumbrances
and governmental restrictions not interfering with the ordinary conduct of the
business of Borrower; and (viii) liens created pursuant to the Loan Documents.
"Person" means an individual, corporation,
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Prime Rate" means that rate of interest per annum
established by Agent from time to time as its "prime rate", which may not
represent the lowest rate charged by Agent to other borrowers, or to any class
of borrowers, at any time, or from time to time.
"Pro Forma Debt Service" means, with respect to any
period of time, the aggregate amount of principal payments and interest that
would be payable during such period on Consolidated Liabilities, calculated
using the greater of (i) Actual Debt Service or (ii) the amount of interest
and principal payable, based on a 25 year amortization schedule, on the
principal amounts of such long term debt at a rate of interest equal to the
current yield to maturity of United States Treasury obligations having a 10
year maturity plus 1.75% percent per annum, exclusive of the amount of any
final payment of principal which would exceed the periodic payments of
principal on such debt.
(10)
<PAGE>
"Pro Rata Share" means, with respect to each
Lender, the percentage of the Commitment Amount represented by such Lender's
portion thereof, as set forth on Schedule 1.1E attached hereto and made a part
hereof, as the same may be amended, from time to time, by Lenders in
accordance with the terms of this Agreement.
"Project Specific Information" means an income and
expense statement and balance sheet with respect to individual income
producing real properties owned by Borrower or any subsidiary, and Borrower's
Percentage Interest in any Venture's income producing real property,
disclosing gross rental revenues, operating expenses, mortgage interest,
depreciation and amortization expenses and net operating income, and if
requested by Agent shall also include a current rent-roll of the property.
"Properties" means all real estate owned at any
time by Borrower, any subsidiary of Borrower, or any Venture, and "Property"
means any single parcel of such real estate.
"Recourse Debt" means Debt, the debtor's liability
for which is not limited to a specific asset of such debtor on which a lien
has been granted as security for such Debt.
"Requisite Lenders" and "Required Lenders" means
Lenders whose Pro Rata Shares aggregate at least 66 2/3%.
"Reserve Percentage" means for any day that maximum
percentage (expressed as a decimal), whether or not incurred, which is in
effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System, for determining the reserve requirement for a member bank of
the Federal Reserve System in Philadelphia with respect to the Adjusted LIBOR
"Eurocurrency liabilities" (as such term is defined in Regulation D) (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Adjusted LIBOR Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any Lender to United States residents).
"RICO" means the Racketeer Influenced and Corrupt
Organization Act, as amended by the Comprehensive Crime Control Act of 1984,
18 USC "1961-68.
"Rules" means any law, regulation, or rule of
practice whether or not having the force of law by which any Lender is bound
or to which it adheres.
"Senior Liabilities" means Borrower's obligations
to repay Recourse Debt (including, without limitation, the Indebtedness),
excluding Excluded Recourse Debt and excluding Excluded Guaranties.
(11)
<PAGE>
"Substituted Unencumbered Property" means any
Property that hereafter is made part of the Unencumbered Property Pool
pursuant to Section 3.3 hereof.
Termination Date" means September 30, 1999, or such
extension thereof as may be effected pursuant to the terms of this Agreement
or by the unanimous written agreement of Lenders.
"Unencumbered Asset Value" means, at any time, the
Gross Asset Value of all Properties then in the Unencumbered Property Pool
until such time as the Mortgages are recorded pursuant to Section 3.2.1
hereof, whereupon the term "Unencumbered Asset Value" shall mean the Gross
Asset Value of all Properties that are encumbered by Mortgages in favor of
Agent and securing the Indebtedness.
"Unencumbered NOI" means, at any time, the NOI
generated by the Unemcumbered Property Pool.
"Unencumbered Property Pool" means, at any time,
(i) those Properties that are part of the Initial Unencumbered Property Pool
and are then unencumbered and wholly-owned by Borrower and (ii) all
Substituted Unencumbered Properties that are then unencumbered and
wholly-owned by Borrower, but excluding from the Properties identified in
clauses (i) and (ii) (A) such Properties as are necessary in order that the
combined average occupancy rate of the Unencumbered Property Pool, as of the
last day of the most recently concluded Calendar Quarter, is not less than 85%
and (B) such other Properties that may have been withdrawn by Borrower
pursuant to Section 3.3 hereof.
"Unmatured Event of Default" means and refers to
any event, act or occurrence which with the passage of time or giving of
notice or both becomes an Event of Default.
"Unused Fee" means the fees provided for in Section
2.1.5 hereof.
"Venture" means each partnership, joint venture or
other entity (i) in which Borrower or any wholly-owned subsidiary of Borrower
has a 50% or more beneficial, or other controlling, ownership interest (but if
the ownership interest of Borrower or its wholly-owned subsidiary in the
Venture that owns Red Rose Commons, Lancaster, Pennsylvania or Blue Route
Metroplex, Plymouth Meeting, Pennsylvania, should be reduced below 50% by
operation of the terms of the partnership agreement or other agreement by
which such entity exists, such entity shall thereupon be deemed to be a
Venture identified on Schedule 1.1F), (ii) the entities identified on Schedule
1.1F, and (iii) any partnership, joint venture or other entity in which
Borrower or any wholly-owned subsidiary of Borrower (A) has an ownership
interest of less than 50% and (B) is either the sole general partner or has
the absolute ability to veto and prevent any proposed sale or refinancing of
the entity's assets.
(12)
<PAGE>
"Venture Borrower" means Rancocas Limited
Partnership and any other Venture to which Lenders may hereafter make a
Venture Loan.
"Venture Loans" means the Loans or commitments for
Loans made by Lenders to Ventures at the request of Borrower pursuant hereto,
including, without limitation, the following:
Venture Maximum Credit
------- --------------
Rancocas Limited Partnership $ 3,300,000
"Venture Note" means a promissory note executed by
a Venture to evidence any Venture Loan.
1.2. Construction of Definitions.
All terms defined herein shall be
construed to include the plural or the singular, and references to persons in
the masculine or neuter gender shall refer to all persons or entities, as the
context requires.
1.3. Accounting Reports and Principles.
Except for Company-prepared Consolidated Financial Statements, the character
or amount of any asset, liability, account or reserve and of any item of
income or expense to be determined, and any consolidation or other accounting
computation to be made, and the construction of any definition containing a
financial term, pursuant to this Agreement or any other Loan Document, shall
be construed, determined or made, as the case may be, in accordance with GAAP,
consistently applied, unless such principles are inconsistent with any express
provision of this Agreement.
1.4. Business Day.
Whenever any payment or other obligation
hereunder, whether under the Notes or under another Loan Document, is due on a
day other than a Business Day, such shall be paid or performed on the Business
Day next following the prescribed due date, except as otherwise specifically
provided for herein to the contrary, and such extension of time shall be
included in the computation of interest and charges. Any reference made herein
or in any other Loan Document to an hour of day shall refer to the then
prevailing Philadelphia, Pennsylvania time, unless specifically provided
herein to the contrary.
1.5. Charging Accounts.
(13)
<PAGE>
Whenever Borrower is obligated, pursuant
to Article 2 hereof, or pursuant to the Notes or any other Loan Document, to
make payments of any nature to Agent or Lenders, Agent shall be entitled, and
Borrower hereby authorizes Agent to draw, on account of such fees and expenses
or payments due, against the Deposit Account owned by Borrower at Agent that
is used by Borrower as its primary operating account.. By 10:00 a.m. on the
date on which any draw is made, Agent shall deliver to Borrower a notice
setting forth, in reasonable detail, the amount of the fees, expenses and/or
payments to be satisfied by such draw and the name or number of the account
from which the draw was made. Any such charge shall be subject to the
provisions of Section 9.3 hereof relating to the sharing of recoveries among
Lenders.
1.6. Lender's Costs.
Borrower shall, upon the request of Agent,
pay Agent the amount of all unpaid Lenders' Costs within fifteen days after
such notice. Until paid, all past due and owing interest payments, fees and
all past due Lenders' Costs shall be deemed to be part of the principal
balance of the Loan, bear interest at the rate applicable to Base Rate Loans.
1.7. Other Terms.
The words "herein", "hereof", "hereunder"
and other words of similar import refer to this Agreement as a whole,
including the exhibits hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement. Any reference to an "Article", a
"Section", an "Exhibit" or "Schedule" shall refer to the relevant Article of,
Section of, Exhibit to or Schedule to this Agreement, unless otherwise
specifically indicated.
2. THE LOAN
2.1. The Facility.
2.1.1. Extension of Credit.
Provided that no Event of Default
has occurred and is continuing and subject to the terms and conditions set
forth herein, commencing on the Closing Date and expiring on the Termination
Date, Lenders severally, in accordance with their respective Pro Rata Shares,
shall extend to Borrower the Facility pursuant to which Lender shall make
Advances to Borrower up to $150,000,000 (or such lesser amount to which the
Commitment Amount shall be reduced pursuant to Section 2.2.8.3 hereof), which
Borrower may from time to time, borrow, repay and reborrow.
2.1.2. Payment of Principal.
(14)
<PAGE>
The entire outstanding principal
balance of the Facility shall be paid in full on the Termination Date. In the
event the principal amount of all outstanding Advances and the face amounts of
all Letters of Credit issued and outstanding under Section 2.1.8 hereof at any
time exceeds, in the aggregate, the then-current Commitment Amount, Borrower
shall immediately pay such excess to Agent, without demand or notice.
2.1.3. Payment of Interest.
Interest on the Facility shall be
payable monthly, subject to Section 2.2.9 hereof in arrears through the last
Business Day of each month, with the first payment to be made on the first
Business Day of the month next following the Closing Date, and continuing
thereafter on the first Business Day of each month.
2.1.4. Interest Rate Option and Notice
of Rate Election.
Advances shall bear interest on
the unpaid principal balance thereof from the Funding Date to maturity
(whether by acceleration or otherwise): (i) with respect to Base Rate Loans at
the Base Rate per annum (calculated on the basis of a 360-day year and charged
for the actual number of days elapsed); and (ii) with respect to Adjusted
LIBOR Loans at the Adjusted LIBOR on the relevant Interest Rate Determination
Date plus the Applicable Margin on the relevant Interest Rate Determination
Date (calculated on the basis of a 360-day year and charged for the actual
number of days elapsed). The applicable basis for determining the Interest
Rate Option with respect to each Advance shall be selected by Borrower at the
time a Notice of Borrowing or Notice of Rate Election is given pursuant to
Sections 2.2.2, and 2.2.3 hereof. On and as of the fifth (5th) Business Day
after Agent's receipt of each quarterly Covenant Compliance Certificate, the
interest rate payable on each outstanding Adjusted LIBOR Loan shall be reset
at the Adjusted LIBOR on the relevant Interest Rate Determination Date plus
the then-current Applicable Margin.
2.1.5. Unused Fee.
Borrower agrees to pay to Lender
a fee at an annual rate equal to one quarter of one percent (0.25%) per annum
(calculated on the basis of the actual number of days elapsed in a year of 360
days or any part thereof) of the aggregate daily average unused portion of the
Facility after Closing and until the Termination Date, payable in arrears,
such payments to be made within five (5) Business Days after the last day of
the Calendar Quarter in which Closing occurs and thereafter within five (5)
Business Days after the last day of each Calendar Quarter and on the
Termination Date. The annual rate of such fee shall, with respect to any
Calendar Quarter, be reduced to (i) twenty one-hundredths of one percent
(0.20%) if during such Calendar Quarter the daily average outstanding
principal balance of all Advances was greater than 33% and less than 67% of
the Commitment Amount and (ii) to fifteen one-hundredths of one percent
(0.15%) if during such Calendar Quarter the daily average outstanding
principal balance of all Advances was not less than 67% of the Commitment
Amount. For purposes of calculating the Unused Fee, the principal amount of
all outstanding Letters of Credit shall be deemed to be used portions of the
Facility.
(15)
<PAGE>
2.1.6. Other Fees.
Borrower shall pay Agent for the
account of Agent or of Lenders, as the case may be, such other fees as may be
agreed upon in separate writings signed by Borrower.
2.1.7. Notes.
To evidence Borrower's
obligations under the Facility, Borrower shall execute and deliver to each
Lender a Note in the principal amount of such Lender's Pro Rata Share of the
Commitment Amount.
2.1.8. Letters of Credit.
Upon receipt of a properly
executed Notice of Borrowing submitted by Borrower to Agent at least five (5)
Business Days before the date of issuance, Agent shall issue a Letter or
Letters of Credit to a beneficiary designated by Borrower, for the purpose of
collateralizing such of Borrower's obligations as are required to be secured
by a Letter of Credit. The aggregate face amount of issued Letters of Credit
under this Section 2.1.8 shall not exceed $20,000,000 at any time. Letters of
Credit may provide for automatic renewal absent termination by Agent, provided
however, no Letter of Credit hereunder shall be issued with an expiration date
exceeding one year and no Letter of Credit shall be issued with an expiration
date after the Termination Date. Each Letter of Credit shall be subject to the
terms and conditions of Agent's standard unsecured application and agreement
in effect at the time of the issuance of the Letter of Credit, the current
form of which is attached hereto as Schedule 2.1.8.
2.1.8.1. Letter of Credit Fees.
Borrower agrees to pay (i) to Agent for the account of Lenders in accordance
with their respective Pro Rata Shares, a letter of credit fee at an annual
rate of 0.875% of the principal face amount of each issued Letter of Credit,
and (ii) to Agent, for its own account, an issuance fee at the annual rate of
0.125% of the principal face amount of each issued Letter of Credit. The fees
payable pursuant to this Section 2.1.7 shall be payable quarterly in arrears.
2.1.8.2. Reduction of Available
Credit. Letters of Credit shall reduce, dollar-for-dollar, the available
borrowings under the Facility and, upon the termination thereof, shall
increase the available borrowings, subject to the maximum amount of the
Facility as provided herein.
2.1.8.3. Draws under Letter of
Credit. All draws under Letters of Credit shall be deemed to be Advances to be
repaid in accordance with the provisions of Section 2.1.2 hereof.
(16)
<PAGE>
2.1.8.4. Other Documents.
Borrower agrees to execute and deliver such documents and instruments as Agent
may require in connection with each Letter of Credit.
2.1.9. Venture Loans.
Provided that no Event of Default
has occurred and is continuing, and subject to the terms and conditions set
forth herein, commencing on the Closing Date and expiring on the Termination
Date, Borrower may request that Loans be made to any Venture in which Borrower
or any wholly-owned subsidiary of Borrower has a 50% or more beneficial, or
other controlling, ownership interest (but excluding PREIT/Rubin), and Lenders
shall extend to such Venture such Venture Loan; provided, however, that the
aggregate face amount of all outstanding Venture Loans shall not exceed
$20,000,000 at any one time, except that the aforesaid $20,000,000 sublimit
and the available borrowings under the Facility shall be reduced, dollar for
dollar, by the amount that is outstanding from time to time under the
Promissory Note dated May 2, 1992, as amended, made by Turren Associates in
favor of CoreStates Bank, N.A. (the "Turren Note"), until the Turren Note is
replaced with Venture Notes executed by Turren Associates in favor of each
Lender in the principal amount at equal to each Lender's Pro Rata Share of the
Venture Loan to Turren Associates and the execution of a Guaranty. On the
Funding Date of any Venture Loan, Borrower shall cause the Venture which is to
be the borrower of such Venture Loan to execute and deliver to each Lender a
promissory note in the form attached hereto as Schedule 2.1.9A in the
principal amount of such Lender's Pro Rata Share of such Venture Loan and
Borrower and the General Partner shall execute and deliver to Agent a guaranty
or guaranties of such Venture Loan in the form attached hereto as Schedule
2.1.9B in favor of Lenders. Each Venture Loan shall reduce, dollar for dollar,
the available borrowings under the Facility. With respect to each Venture
Loan, the applicable Venture shall select one Interest Rate option for the
entire principal amount thereof that is outstanding at any time, except that
any subsequent extension of credit made by Lenders to a Venture during an
Interest Period shall bear interest at the Base Rate until the expiration of
the relevant Interest Period.
2.2 General Provisions.
2.2.1. Advances.
Advances shall be made by Lenders
simultaneously and proportionately to their Pro Rata Shares, it being
understood that the obligations of Lenders to advance funds to Borrower
hereunder are independent and that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make any such
Advance, nor shall the commitment of any other Lender be increased or
decreased as a result of the default of any other Lender in that other
Lender's obligation to make Advances hereunder.
(17)
<PAGE>
2.2.2. Notice of Borrowing.
Subject to the provisions of this
Article 2, whenever Borrower desires to borrow under this Agreement, Borrower
shall deliver by telecopy to Agent a properly completed and executed Notice of
Borrowing with respect to (i) Adjusted LIBOR Loans no later than 11:00 A.M. at
least three (3) London Business Days in advance of the proposed Funding Date,
or (ii) Base Rate Loans no later than 11:00 A.M. at least one (1) Business Day
in advance of the proposed Funding Date. The Notice of Borrowing shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
of the proposed Advance, if any, (iii) whether an Advance is initially to
consist of Base Rate Loans, Adjusted LIBOR Loans or a combination thereof, and
(v) if such Advance, or any portion thereof, is initially to be one or more
Adjusted LIBOR Loans, the amounts thereof and the initial Interest Periods
therefor; provided that the minimum amount of Advances shall be $500,000 for
Base Rate Loans (unless a Base Rate Loan is to be made to a Venture, in which
event the amount thereof may be less than $500,000, provided that no more than
one Advance is made to such Venture in any calendar month) and $2,000,000 for
Adjusted LIBOR Loans, except that at no time shall the aggregate number of
Interest Periods and Base Rate Loans, excluding Venture Loans, that Agent
shall be required to administer at any time exceed eight (8). Subject to the
foregoing limitations, Loans may be continued as or converted into Adjusted
LIBOR Loans in the manner provided in Section 2.2.3 hereof upon the submission
to Lender of a properly completed and executed Notice of Rate Election.
A Notice of Borrowing or a Notice
of Rate Election for an Adjusted LIBOR Loan shall be irrevocable on and after
the related Interest Rate Determination Date, and Borrower shall be bound to
make, continue or convert to an Adjusted LIBOR Loan in accordance therewith.
2.2.3. Notice of Rate Election; Failure
to Give Notice.
Whenever Borrower desires to
change or continue the Interest Rate Option on a Loan, Borrower shall deliver
to Agent a Notice of Rate Election with respect to Adjusted LIBOR Loans no
later than 11:00 A.M. at least three (3) London Business Days in advance of
the proposed change or continuation. No notice shall be necessary to continue
any Base Rate Loan at the Base Rate. The Notice of Rate Election shall
specify: (i) the proposed date of change or continuation or conversion (which
shall be a Business Day); (ii) the type of Loan and amount thereof affected;
(iii) whether such interest rate change or continuation is to consist of Base
Rate Loans, Adjusted LIBOR Loans or a combination thereof; and (iv) the
Interest Periods therefor, if applicable. If at the termination of any
Interest Period Borrower has failed to submit a Notice of Rate Election, as
aforesaid, to convert or to continue Adjusted LIBOR Loans at the interest rate
that is based on Adjusted LIBOR, then such Adjusted LIBOR Loans shall
automatically be and become Base Rate Loans as of the termination of the
relevant Interest Period.
(18)
<PAGE>
Upon the expiration of any
Interest Period applicable to portions of the Facility bearing interest based
on the Adjusted LIBOR, such portions of the Facility shall be deemed repaid
and reborrowed upon the submission to Agent of a properly completed and
executed Notice of Rate Election pertaining thereto within the requisite time
periods for a change or continuation of an Interest Rate Option, and the
succeeding Interest Period(s) of such continued portions of the Facility shall
commence on the first day of the Interest Period of the portions of the
Facility deemed to be reborrowed and continued.
Adjusted LIBOR Loans may be
converted into Base Rate Loans only on the expiration date of an Interest
Period applicable thereto. In addition, no outstanding portions of the
Facility may be continued as, or be converted into, Adjusted LIBOR Loans when
any Event of Default or Unmatured Event of Default has occurred and is
continuing.
If on any day portions of the
Facility are outstanding with respect to which a Notice of Rate Election has
not been delivered to Agent in accordance with the terms of this Agreement
specifying the basis for determining the Interest Rate Option, then such
portions of the Facility shall bear interest at the Base Rate.
2.2.4. Funding. By 5:00 p.m. on the day
Agent receives a Notice of Borrowing pursuant to Section 2.2.2, Agent shall
notify each Lender by facsimile transmission of the proposed borrowing. Except
as provided in the following paragraph of this Section 2.2.4, upon
satisfaction of the conditions precedent specified in Sections 4.1 (in the
case of the initial Advances) and 4.2 (in the case of all subsequent
Advances), not later than 11:00 A.M. on the Funding Date specified in the
Notice of Borrowing each Lender shall wire transfer to such account of Agent
as Agent shall designate an amount in immediately available funds equal to the
amount of each Lender's Pro Rata Share of the Advance to be made to Borrower
on such Funding Date. Agent shall cause such Advances to be made available to
Borrower on the Funding Date pertaining thereto by depositing the amount
thereof in the designated account of Borrower with Agent.
Each Lender shall make the amount of its Pro Rata Share of
the Advance available to Agent, in same day funds at the office of Agent
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19101, not
later than 11:00 A.M. on the Funding Date. Unless Agent shall have been
notified by any Lender prior to any Funding Date in respect of any Advances
that such Lender does not intend to make available to Agent such Lender's Pro
Rata Share of the Advance on such Funding Date, Agent may assume that such
Lender has made such amount available to Borrower on such Funding Date and
Agent in its sole discretion may, but shall not be obligated to, make
available to Borrower a corresponding amount on such Funding Date by
depositing the proceeds thereof in the designated Deposit Account of Borrower
with Agent. If any Lender's Pro Rata Share is not in fact made available
(either by a wire transfer to Agent or otherwise) to Agent by such Lender,
Agent shall not be required to advance to Borrower on the Funding Date any
amount not made available to Agent by a Lender; provided, that if Agent (or
any other Lender(s)) advances to Borrower on the Funding Date any amount not
made available to Agent by a Lender, Agent (or such Lender) shall notify
(19)
<PAGE>
Borrower that Agent (or such Lender) has advanced more than its Pro Rata Share
of such Advance and that such Advance is subject to reclamation in accordance
with the provisions of this Section. Any amount so advanced shall be deemed to
be an Advance which Borrower is obligated to repay as set forth under this
Agreement; and Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to the Agent at the daily
average Federal Funds Effective Rate for such period. If such Lender does not
pay such corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the Borrower and the Borrower shall immediately
pay such corresponding amount to the Agent, together with interest at the
Interest Rate Option chosen by Borrower for such Advance. If such Advance was
in the form of an Adjusted LIBOR Loan, any prepayment penalty under Section
2.2.8.1 for breakage of an Interest Period shall be paid by the Lender which
failed to fund its Pro Rata Share of such Advance.
In the event that any Lender fails to advance its Pro Rata
Share of any Advance, then such Lender's Pro Rata Share of the aggregate
principal, interest, fees and recoveries on all Advances will be reduced so as
to be proportionate to the amount such Lender did advance but will not cause a
comparable reduction in such Lender's Pro Rata Share of the expenses of
collection of the Indebtedness from Borrower or other costs or expenses
relating to this Agreement. Such reduction will not affect or limit such
Lender's obligation to advance its full Pro Rata Share of any and all future
Advances or other obligations.
2.2.5. Interest Periods.
In connection with each Adjusted
LIBOR Loan, Borrower shall elect an Interest Period to be applicable to such
Loan, which Interest Period shall be either a one, two, three, or six month
period; provided that:
2.2.5.1. the first Interest
Period for any Adjusted LIBOR Loan shall commence on the Funding Date of such
Adjusted LIBOR Loan;
2.2.5.2. except as provided in
subsection 2.2.5.3 hereof, if an Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day;
2.2.5.3. any Interest Period in
respect of an Adjusted LIBOR Loan which: (i) begins on the last Business Day
of a calendar month (or a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the relevant calendar month, or (ii) would expire on a
day which is not a Business Day but is a day of the month after which no
further Business Day occurs in that month, such Interest Period shall expire
on the last Business Day of the month;
2.2.5.4. no Interest Period, with
respect to any Loan, shall extend beyond the Termination Date.
(20)
<PAGE>
2.2.6. Post-Maturity Interest.
Any principal payments on the
Loans not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loans not paid when due, and any other amount due to
Agent or Lenders under this Agreement or any other Loan Document not paid when
due, in any case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest payable upon demand
at a rate which is (i) 2% per annum in excess of the applicable Interest Rate
on each Adjusted LIBOR Loan until the expiration of the then applicable
Interest Period, if any, and (ii) after the expiration of the then applicable
Interest Period, if any, and on all Base Rate Loans, at a rate which is 2% per
annum in excess of the Base Rate.
2.2.7. Adjusted LIBOR and Base Rate.
2.2.7.1. Agent shall give
Borrower prompt notice of the Adjusted LIBOR determined for an Interest
Period, and absent manifest error, each determination of such rates by Agent
shall be conclusive and binding for all purposes hereof.
2.2.7.2. If Borrower requests
that all or any portion of the outstanding Facility bear interest at the
Adjusted LIBOR and (i) Agent determines that, by reason of circumstances
affecting the interbank Eurodollar market generally, deposits in U.S. Dollars
(in the applicable amounts) are not being offered to banks in the interbank
Eurodollar market for the selected Interest Period, or (ii) the Requisite
Lenders certify that the relevant rates of interest referred to in the
definition of Adjusted LIBOR do not accurately reflect the cost to Lenders of
making or maintaining Adjusted LIBOR Loans for the Interest Periods therefor,
then Agent shall forthwith give notice thereof to Borrower, whereupon until
Agent notifies Borrower that the circumstances giving rise to such suspension
no longer exist, (a) the obligation of Lenders to permit applicable portions
of the Facility to bear interest at the Adjusted LIBOR shall be suspended so
long as such circumstances exist, and (b) Borrower shall convert the interest
rates on the applicable portions of the outstanding Facility to the Base Rate
or the available Adjusted LIBOR on the last day of the then current Interest
Period.
2.2.7.3. If, after the date of
this Agreement, the adoption of or any change in Rules, or change in the
interpretation or administration thereof, by a governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lenders with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Lender to make or maintain
or fund loans at the Adjusted LIBOR, the affected Lender or Lenders shall
promptly notify Borrower and the interest rates on the applicable portions of
the outstanding Facility shall be deemed to have been converted to the Base
Rate, or the Adjusted LIBOR, whichever is available, on either (i) the last
day of the then current Interest Period if the affected Lenders may lawfully
continue to maintain loans at the Adjusted LIBOR to such day, or (ii)
immediately if the affected Lender may not lawfully continue to maintain loans
at the Adjusted LIBOR to such day. The affected Lenders will use their best
(21)
<PAGE>
efforts to designate a different lending office if such office may lawfully
continue to maintain loans at the Adjusted LIBOR through the end of the then
current Interest Period. After Borrower's receipt of notice of the illegality
or impossibility for any Lender to make, maintain or fund loans at the
Adjusted LIBOR, Borrower shall not request future Adjusted LIBOR Loans until
the affected Lender or Lenders shall have notified Borrower of the absence or
removal of such illegality or impossibility.
2.2.7.4. If, after the date of
this Agreement, any governmental authority, central bank or other comparable
authority shall at any time impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), any tax (including without limitation, any United
States interest equalization tax or similar tax however named applicable to
the acquisition or holding of debt obligations and any interest or penalties
with respect thereto), duty, charge, fee, deduction, withholding, special
deposit or similar requirement against assets of, deposits with, or for the
account of, or credit extended by, any Lender, or shall impose on any Lender
or the interbank Eurodollar market any other condition affecting loans at the
Adjusted LIBOR, and the result of any of the foregoing is to increase the cost
to any Lender of making or maintaining the interest rate at the Adjusted LIBOR
or to reduce the amount of any sum received or receivable by any Lender under
this Agreement, the Notes or the Venture Notes by an amount deemed by such
Lender to be material, then within five days after demand by such Lender,
Borrower shall pay to such Lender such additional amount or amounts as will
compensate Lender for such increased cost or reduction. Each affected Lender
will promptly notify Borrower and Agent of any event of which it has knowledge
occurring after the date hereof, which will entitle such Lender to
compensation pursuant to this subsection 2.2.7.4. A certificate of any Lender
claiming compensation under this subsection 2.2.7.4 and setting forth the
additional amount or amounts to be paid to such Lender hereunder shall be
conclusive in the absence of manifest error.
2.2.7.5. The Adjusted LIBOR shall
be adjusted automatically on and as of the effective day of any change in the
relevant Reserve Percentage.
2.2.7.6. Promptly upon notice
from Agent to Borrower, Borrower will pay, prior to the date on which
penalties attach thereto, all present and future stamp, documentary and other
similar taxes, levies, or costs and charges whatsoever imposed, assessed,
levied or collected on or in respect of the Loans solely as a result of the
interest rate being determined by reference to the Adjusted LIBOR and/or the
provisions of this Agreement relating to the Adjusted LIBOR and/or the
recording, registration, notarization or other formalization of any thereof
and/or payments of principal, interest or other amounts made on or in respect
of a Loan when the interest rate is determined by reference to the Adjusted
LIBOR (all such taxes, levies, costs and charges being herein collectively
called "Eurodollar Rate Tax"). Promptly after the date on which payment of any
such Eurodollar Rate Tax is due pursuant to applicable law, Borrower will, at
the request of Agent, furnish to Agent evidence, in form and substance
satisfactory to Agent, that Borrower has met its obligation under this
subsection 2.2.7.6. Borrower will indemnify each Lender against, and reimburse
(22)
<PAGE>
each Lender on demand for, any Eurodollar Rate Tax, as determined by such
Lender in its good faith discretion. Each such Lender shall provide Borrower
with appropriate receipts for any payments or reimbursements made by Borrower
pursuant to this subsection 2.2.7.6. A certificate of Agent or of any Lender
as to any amount payable pursuant to this Section shall, absent manifest
error, be final, conclusive and binding on all parties hereto.
2.2.7.7. If Agent or any Lender
shall determine that (i) any current Rule, law, regulation, or guideline, the
adoption or imposition of any Rules, law, regulation, or guideline any change
in any Rules, law, regulation or guideline, or the adoption, imposition or
change in the interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the interpretation
and administration thereof, or (ii) compliance by any Lender (or any lending
office or any holding company of any Lender) with any request, guideline or
directive whether or not having the force of law regarding special deposit,
capital adequacy, risk based capital, capital or reserve maintenance, capital
ratio, or similar requirements against loans or loan commitments or any
commitments to extend credit or other assets of or any deposits or other
liabilities taken or entered into by any Lender (including the capital
adequacy guidelines promulgated by the Board of Governors of the Federal
Reserve System) and the result of any event referred to in clauses (i) or (ii)
above (x) shall be to increase the cost to Lender of making or maintaining, or
to impose upon any Lender or increase any capital requirement applicable as a
result of the making or maintenance of, the Loans or the obligation of
Borrower hereunder or (y) has or would have the effect of reducing the rate of
return or amounts receivable hereunder on any Loan as a consequence of any
Lender's obligations pursuant to this Agreement or Loans made by any Lender
pursuant hereto to a level below that which such Lender (or such Lender's
holding company) could have achieved but for such adoption, imposition, change
or compliance (taking into consideration such Lender's policies and the
policies of such Lender's holding company with respect to capital adequacy) by
an amount deemed by such holder to be material (which adoption, imposition,
change, or increase in capital requirements or reduction in amounts receivable
may be determined by such Lender's reasonable allocation of the aggregate of
such cost increase, capital increase or imposition or reductions in amounts
receivable resulting from such events), then, from time to time, Borrower
shall pay to such Lenders, on demand by such Lender as set forth below, such
additional amount or amounts as will be necessary to restore the rate of
return to such Lender from the date of such change, together with interest on
such amount from the date demanded until payment thereof in full at the rate
provided in this Agreement. Each Lender (or each Lender's holding company)
shall be entitled to compensation pursuant to this Section 2.2.7.7. A
certificate of any Lender claiming compensation under this Section 2.2.7.7 and
setting forth the increased cost, reduction in amounts receivable, additional
amount or amounts necessary to compensate such Lender (or such Lender's
holding company) hereunder shall be delivered to Borrower and shall be
conclusive in the absence of manifest error. Borrower shall pay each Lender
the amount shown as due on any such certificate delivered by such Lender
within 10 days after Borrower's receipt of same. If any Lender demands
compensation under this Section 2.2.7.7, Borrower may, upon 10 Business Days'
prior notice to Lender, prepay in full, in accordance with Section 2.2.8
hereof, the then outstanding: (i) Base Rate Loans together with accrued
interest thereon to the date of prepayment without penalty; and (ii) Adjusted
(23)
<PAGE>
LIBOR Loans, together with accrued interest thereon to the date of prepayment
along with a prepayment premium in an amount equal to the amount of any loss
or expense, including loss of margin, actually incurred by such Lender as a
direct result of such prepayment, as determined by such Lender in good faith,
in each case payable to such Lender. Concurrently with prepaying such Base
Rate Loans or Adjusted LIBOR Loans, Borrower may, subject to the terms of this
Agreement, borrow from Lenders Advances at an Interest Rate Option not so
affected.
2.2.7.8. Failure on the part of
any Lender to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect
to any period shall not constitute a waiver of such Lender's right to demand
compensation with respect to such period or any other period. The protection
of this Section 2.2.7 shall be available to Lenders regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition which shall have occurred or been
imposed.
2.2.7.9. The Base Rate shall be
determined and adjusted daily.
2.2.8. Prepayment; Repayments;
Prepayment Premium.
2.2.8.1. Voluntary Prepayments.
All prepayments shall be applied among the Lenders in accordance with the Pro
Rata Share of each. In connection with each prepayment:
(a) Borrower shall provide Agent
with at least one (1) Business Day prior notice of Borrower's intention to
prepay, specifying the amount and date of such payment.
(b) Borrower shall concurrently
with any prepayment in full of the Facility pay the full amount of all
interest accrued on the Facility and accrued fees (including without
limitation the Unused Fee attributable to the expired portion of the period
with respect to which such fees have not yet been paid), and payments received
shall be applied first to fees, then to accrued interest and thereafter in
reduction of principal.
(c) Each prepayment of principal
shall be in an amount not less than One Million Dollars ($1,000,000.00)
(exclusive of the interest and fees payable in connection therewith and of the
other amounts payable pursuant to this Agreement upon a prepayment).
(d) Borrower acknowledges that if
Borrower makes a prepayment of any Adjusted LIBOR Loan (whether voluntary or
mandatory), Lenders will not likely be able to reinvest promptly the amount so
prepaid in a loan of comparable creditworthiness and on terms equivalent to
the terms hereof. Accordingly, in the event Borrower makes a prepayment
(24)
<PAGE>
(whether voluntary or mandatory) of any portion of the Loans bearing interest
at a rate based on the Adjusted LIBOR during a specified Interest Period on a
day other than the last day of such Interest Period, Borrower will pay to the
Agent upon demand, for the account of the Lenders, any cost or expense
incurred as a result of such prepayment. Each Lender shall certify the amount
of such cost or expense to Borrower and provide Borrower with a written
statement setting forth the cost or expense claimed and the calculations used
in determining such loss and expense, which certification and statement shall
be conclusive in the absence of manifest error.
Prepayments shall be applied
first to interest (to the extent then payable), then to principal with respect
to the portions of the Loans accruing interest at a rate based upon the Base
Rate, and then to principal with respect to those portions of the Loans
accruing interest at a rate based upon the Adjusted LIBOR and among such
portions of the Loans accruing interest at rates based upon the Adjusted LIBOR
to such portions with the earliest expiring Interest Periods.
2.2.8.2. Funding Losses. If the
Borrower fails to borrow any Adjusted LIBOR Loans after a Notice of Borrowing
or Notice of Rate Election has been given to Lender as provided in this
Article 2, Borrower shall reimburse each Lender, on demand, for any resulting
loss or expense incurred by it (or by any existing or prospective participant
in the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, provided that
such Lender shall have delivered to the Borrower a certificate as to the
amount of such loss or expense and specifying the calculation thereof, which
certificate shall be conclusive in the absence of manifest error.
2.2.8.3. Termination or Reduction
in Commitments. Borrower shall have the right without premium or penalty
except as provided in Section 2.2.8.1 hereof, upon not less than three (3)
Business Days' prior written notice to Agent, at any time after the Closing
Date to reduce or terminate any or all of the commitments of Lenders regarding
the Facility. Any voluntary termination or reduction in the Commitment Amount
shall permanently reduce the Commitment Amount. No such reduction in
Commitment Amount shall be in an amount less than $3,000,000. If Borrower
desires to terminate or reduce the Commitment Amount as aforesaid, Borrower
shall execute and deliver to Agent such documents and instruments as Agent
shall require. No reduction of the Commitment Amount pursuant to this Section
2.2.8.3 shall reduce any Lender's Pro Rata Share of the reduced Commitment
Amount.
2.2.9. Manner and Time of Payment.
All payments of principal,
interest and fees hereunder and under the Notes shall be made by Borrower
without notice, set off or counterclaim and in immediately available same day
funds and delivered to Agent not later than 12:00 noon on the date due at its
office located at Broad and Chestnut Streets, Philadelphia, Pennsylvania,
19101 for the account of Lenders; funds received by Agent after that time
shall be deemed to have been paid by Borrower on the next succeeding Business
Day.
(25)
<PAGE>
2.2.10. Apportionment of Payments.
Aggregate principal and interest
payments in respect of Loans shall be apportioned among all outstanding Loans
to which such payments relate, proportionately to each Lender's respective Pro
Rata Share except to the extent a Lender fails to fund its portion of such
Loan (in which case such Lender shall be entitled to a portion of principal
and interest payments determined with respect to the ratio of Loans made by it
to all outstanding Loans). Agent shall within one Business Day distribute by
wire transfer to each Lender its share of all payments received by Agent for
the benefit of Lenders, provided that immediately available same day funds
received by Agent not later than noon on a Business Day shall be distributed
to Lenders on such Business Day.
2.2.11. Use of Proceeds.
The Facility shall be used solely
by Borrower (i) to finance the acquisition, expansion and renovation of real
estate assets wholly-owned by Borrower, (ii) to refinance existing
indebtedness, (iii) for its working capital purposes (including without
limitation for investments in and loans to Ventures), and (iv) to fulfill
Borrower's obligations to Ventures to obtain Venture Loans.
2.2.12. Maximum Available Credit.
Notwithstanding anything herein
to the contrary, the maximum amount of the Loans to Borrower that may be
outstanding at any one time shall not exceed the Commitment Amount, less (i)
the aggregate maximum amount of all Venture Loans then outstanding (including
all unfunded portions thereof), and (ii) the face amount of all outstanding
Letters of Credit.
2.2.13. Postponement of Termination Date.
2.2.13.1. If Borrower's Leverage
Ratio is, at any time prior to December 31, 1998, less than 50% (i) the
Termination Date shall automatically be postponed to December 31, 2000 and
(ii) Borrower shall have the right to request subsequent postponements of the
Termination Date by written notice received by Agent not earlier than the date
Agent receives the financial statements due pursuant to Section 6.1.9 hereof
in the year such request is made or later than the November 1st of the
calendar year immediately preceding the year in which the then-current
Termination Date occurs. Any such request shall be to extend the Termination
Date by 12 months. Agent shall advise Borrower in writing, not later than 60
days after the later to occur of (i) Agent's receipt of such request or (ii)
Agent's receipt of the financial statements due pursuant to Section 6.1.9
hereof during the calendar year immediately preceding the then-current
Termination Date, whether all Lenders have approved such request, which
approval shall be in Lenders' sole discretion. Each Lender shall advise Agent
in writing, not later than five (5) days before Agent's response to Borrower
is required, whether such Lender approves Borrower's request. If all Lenders
(26)
<PAGE>
approve such request, the Termination Date shall be postponed for 12 months
and Borrower, Agent and Lenders shall promptly execute and deliver such
documentation Agent may require to evidence such postponement. If Agent does
not give Borrower written notice of Lenders' approval of the requested
postponement, the then-current Termination Date shall remain unchanged.
2.2.13.2. In the event that
Requisite Lenders, but not all Lenders, approve Borrower's request (such
Lenders that do not approve such request being "Refusing Lenders"), Borrower
may elect to seek to obtain a replacement lender or lenders (which may be one
or more of Lenders or may be another institution acceptable to Agent in good
faith) to purchase the Refusing Lenders' Pro Rata Shares of the Facility and
to become a Lender hereunder. Upon written request of Borrower and Agent, each
Refusing Lender shall assign to the designated replacement Lender(s) all or
any portion of the Refusing Lender's Pro Rata Share of the Facility (provided
that the interest of a replacement Lender in the Facility may not be less than
$10,000,000), such assignment to be without recourse or warranty by the
Refusing Lender, other than a warranty of title to the assigned interest in
the Facility, and to be effected by an instrument of assignment in the form
attached hereto as Schedule 2.2.13.2. If substitute Lenders are so obtained
and the Pro Rata Shares of all Refusing Lenders so assigned by the September
30th immediately preceding the then-current Termination Date, the Termination
Dates shall be postponed to December 31st of the next calendar year;
otherwise, there shall be no postponement of the then-current Termination
Date.
3. SECURITY
3.1. Mortgages.
As security for its obligations under this
Agreement and the Notes, Borrower shall execute, acknowledge and deliver to
Agent a Mortgage with respect to each Property that is part of the
Initial Unencumbered Property Pool and an assignment of rents, leases and
profits and UCC-1 Financing Statements with respect to each such Property.
Borrower shall cause the General Partner to execute, acknowledge and deliver
to Agent the Mortgage, assignment of rents, leases and profits and UCC-1
Financing Statements pertaining to each Property in the Initial Unencumbered
Property Pool in which the General Partner holds legal title. Such Mortgages
shall be in the aggregate amount of the initial Commitment Amount, allocated
among such Properties as Borrower and Lenders have agreed. Within five (5)
Business Days after written notice by Agent from time to time, Borrower shall
re-execute and acknowledge the Mortgages and deliver the same to Agent.
(27)
<PAGE>
3.2. Recording of Mortgages.
3.2.1. Agent's Right to Record.
Agent and Lenders agree that no
Mortgage nor any assignment of rents, leases and profits or UCC-1 Financing
Statements will be recorded by or at the direction of Agent or Lenders unless
(i) any Event of Default occurs or (ii) at any time (A) the aggregate maximum
principal amount of all then existing outstanding construction loans (other
than non-recourse construction loans) with respect to which (I) Borrower or
any Venture is the borrower and (II) Requisite Lenders have, in the aggregate,
less than a 51% of the lender's interest, exceeds (B) the maximum amount of
Other Indebtedness then permitted under this Agreement, or (iii) as of or
before December 31, 1998, Agent's right to record Mortgages has not been
terminated as set forth in Section 3.2.2 hereof. Upon the occurrence of any of
the foregoing events, Agent shall promptly cause the Mortgages and such
assignments of rents, leases and profits and UCC-1 Financing Statements to be
recorded. If Agent is authorized to record, and does record, any or all of the
Mortgages and other security instruments, all costs incurred by Agent in the
recording of Mortgages and such other security instruments (including, without
limitation, mortgage, documentary or recording stamps or taxes, and all other
taxes payable by Agent by reason of its holding a Note that is secured by
Mortgages) shall be Lenders' Costs, shall be paid or reimbursed by Borrower
upon demand, and shall be secured by the Mortgages.
3.2.2. Termination of Agent's Right to
Record.
If (i) no event shall theretofore
have occurred that would, pursuant to Section 3.2.1 hereof, permit Agent to
record the Mortgages and, (ii) as of or before December 31, 1998, (A)
Borrower's Leverage Ratio is not more than 50% and the ratio (expressed as a
percentage) of Borrower's Senior Liabilities to Unencumbered Asset Value is
not more than 60% and (B) Borrower has delivered to Agent written notice that
Borrower elects that Agent's right to record the Mortgage be terminated, Agent
shall have no right thereafter to record any Mortgage and shall promptly
return to Borrower all Mortgages theretofore delivered to Agent pursuant to
this Agreement. If Agent's right to record the Mortgage has not so terminated
by December 31, 1998, Agent shall record the Mortgages and the other documents
referred to in Section 3.1 hereof. If Borrower satisfies the requirements of
the aforesaid clause (ii)(A) but shall not deliver the notice required
pursuant to clause (ii)(B), Borrower may, at its election, thereafter deliver
such notice to Agent and the same shall be deemed to be effective as of the
date of Agent's actual receipt thereof, but only if no Event of Default has
theretofore occurred and only if Borrower has not theretofore delivered to
Agent a subsequent Covenant Compliance Certificate indicating that Borrower no
longer satisfies the requirements of clause (ii)(A). For purposes of
determining whether Borrower has satisfied the requirements of the aforesaid
clause (ii)(A) "as of December 31, 1998," Agent shall adjust Borrower's
Company Prepared Financial Statements as of September 30, 1998 for any
offering of equity securities consummated by Borrower or the General Partner
after September 30, 1998, and if Borrower shall satisfy the requirements of
clause (ii)(A) as of December 31, 1998, and no event has theretofore occurred
(28)
<PAGE>
that would, under Section 3.2.1 hereof, permit Agent to record the Mortgages,
Agent's right to record the Mortgages shall automatically terminate without
notice from Borrower.
3.3 Removals from and Additions to
Unencumbered Property Pool.
3.3.1 Prior to the recording of Mortgages
pursuant to Section 3.2 hereof, Agent shall, within ten (10) Business Days
after each written request by Borrower to Agent, return to Borrower the
Mortgage with respect to any Property within the Unencumbered Property Pool,
provided that (i) such Property shall, retroactively as of the last day of the
most recently concluded Calendar Quarter, no longer be deemed to be part of
the Unencumbered Property Pool, (ii) as a result of the removal of such
Property from the Unencumbered Property Pool the covenant contained in Section
6.1.3 hereof would not have been breached as of the last day of the most
recently concluded Calendar Quarter, and (iii) at no time shall there be fewer
than five (5) Properties in the Unencumbered Property Pool, the combined
average occupancy of which is at least 85%. If a Property is requested to be
removed from the Unencumbered Property Pool in connection with its sale, the
Mortgage will be returned to Borrower concurrently with the closing of such
sale and, for purposes of determining Borrower's continued compliance with
Section 6.1.3 hereof following removal of such Property from the Unencumbered
Property Pool, the sale will be deemed to have occurred on the last day of the
most recently concluded Calendar Quarter.
3.3.2. Borrower may at any time, in
connection with the return of a Mortgage by Agent pursuant to Section 3.3.1
hereof, or otherwise, add Properties to the Unencumbered Property Pool by
executing, acknowledging and delivering to Agent a Mortgage encumbering a
Substituted Unencumbered Property and an assignment of rents, leases and
profits and UCC-1 Financing Statements with respect to such Property, and such
Property will thereupon become part of the Unencumbered Property Pool,
provided that (i) the Substituted Unencumbered Property, in the good faith
determination of Agent and Required Lenders, is of like quality to the
Properties that are then part of the Unencumbered Property Pool, (ii) the
Substituted Unencumbered Property will be deemed to have been added to the
Unencumbered Property Pool as of the last day of the most recently concluded
Calendar Quarter for purposes of determining compliance with the covenant
contained in Section 6.1.3 hereof, (iii) the Property that is to become part
of the Unencumbered Property Pool must be free of all liens and encumbrances,
other than Permitted Liens, and (iv) no Property shall be a Substituted
Unencumbered Property unless Agent has received such environmental reports
with respect to such Property as Agent in good faith requires and such reports
are acceptable to Agent and Required Lender in the good faith exercise of
their business judgment.
4. CONDITIONS PRECEDENT
The performance by Lenders of any of their obligations
hereunder is subject to the following conditions precedent:
4.1 Initial Funding of the Loans.
(29)
<PAGE>
Borrower shall deliver or cause to be
delivered to Agent on the Closing Date (except as otherwise indicated herein),
in form and substance satisfactory to Agent and its counsel, in addition to
this Agreement, the following documents and instruments and the following
transactions shall have been consummated:
4.1.1. The Notes;
4.1.2. A copy of Borrower's limited
partnership Agreement, certified to be a true, correct and complete copy of
the original by a trustee or officer of the General Partner;
4.1.3. A copy of Borrower's filed
certificate of limited partnership, certified by the Delaware Secretary of
State
4.1.4. A copy of Borrower's registration
as a foreign limited partnership in each jurisdiction in which Borrower
conducts business, if such registration is required by the laws of such
jurisdictions, each to be certified by the secretary of state of such
jurisdictions;
4.1.5. A guaranty and suretyship agreement
with respect to all obligations of Borrower under this Agreement and all other
Loan Documents, executed by the General Partner;
4.1.6. An environmental indemnity
agreement with respect to all Properties that at anytime are the subject of a
Mortgage (regardless of whether such Mortgage has been recorded), executed by
Borrower and the General Partner;
4.1.7. A certified copy of the General
Partner's Trust Agreement and resolutions adopted by the Board of Trustees
authorizing the execution, delivery and performance, as General Partner of
Borrower of this Agreement, the Note, the Mortgages, all other Loan Documents,
and all other documents and instruments required by Agent for the
implementation of this Agreement to which Borrower is a party, all certified
by a trustee or officer of the General Partner to be true and correct copies
of the originals and to be in full force and effect as of the Closing Date;
4.1.8. An incumbency and signature
certificate with respect to each of the trustees and officers of the General
Partner authorized to execute and deliver, as General Partner of Borrower,
this Agreement, the Notes, the Mortgages, the other Loan Documents, and all
other documents and instruments required by Agent for the implementation of
this Agreement and to be the Authorized Signers;
4.1.9. A copy of the Partnership Actions
executed by the general partner(s) of each Venture authorizing the execution,
delivery and performance of the respective Venture Note by each Venture,
together with copies of each Venture's partnership agreement;
(30)
<PAGE>
4.1.10. A Mortgage, executed and
acknowledged by Borrower, any subsidiary of Borrower or any Venture, as
appropriate, with respect to each Property in the Initial Unencumbered
Property Pool, and an assignment of rents, leases and profits and UCC-1
Financing Statements executed by Borrower with respect to each such Property.
4.1.11. The opinion of Borrower's,
Borrower's subsidiaries' and the General Partner's counsel, in form and
substance acceptable to Lender in their reasonable judgment;
4.1.12. A Notice of Borrowing with respect
to any Advances and Venture Loans requested as of the Closing Date;
4.1.13. Agent has received and Requisite
Lenders have approved the environmental reports with respect to the Initial
Unencumbered Property Pool delivered to Agent pursuant to Section 6.1.24
hereof.
4.1.14. Venture Notes evidencing, and
Borrower's and the General Partner's Guaranties of, any Venture Loans then
requested by Borrower (except that no new note evidencing the Venture Loan to
Turren Associates shall be required);
4.1.15. Such additional documents or
instruments as may be required by this Agreement or as Agent may reasonably
require; and
4.2 All Loan Fundings.
On the Funding Date of any Advance of the
Facility or Venture Loan and on the issuance date of any Letter of Credit:
4.2.1. Agent shall have received a Notice
of Borrowing as required by Section 2.2.2;
4.2.2. The representations and warranties
set forth in Articles 5 and 5A hereof shall be true and correct on and as of
such date, with the same effect as though made on and as of such date, except
to the extent such representations and warranties relate to an earlier date or
changes have been disclosed to all Lenders and accepted by Requisite Lenders;
4.2.3. No Event of Default shall have
occurred and be continuing;
4.2.4. Borrower shall be in compliance
with all of the terms and conditions hereof, of the Notes, and of all other
Loan Documents, in each case on and as of the date of the performance of such
obligations by Lenders;
4.2.5. With respect to each Venture Loan,
Borrower shall cause to be delivered to Agent (if such have not theretofore
been delivered to Agent), the organizational documents and all amendments
thereto of the Venture receiving the Venture Loan, a copy of the action or
(31)
<PAGE>
resolutions of such Venture authorizing the execution, delivery and
performance of the Venture Note to be executed by such Venture, and a
signature and incumbency certificate with respect to the officers or partners
of the entities signing on behalf of such Venture, each certified as true,
complete and correct as of the Funding Date of such Venture Loan; and
4.2.6. No event has occurred that would
have a Materially Adverse Effect upon Borrower or the General Partner.
Each Advance of the Facility or Venture
Loan and each issuance of a Letter of Credit shall be deemed to constitute a
representation and warranty by Borrower on the respective Funding Date or
issuance date as to the matters specified in Sections 4.2.2, 4.2.3, 4.2.4 and
4.2.6 hereof. Continuations and conversions of outstanding portions of the
Facility shall not be deemed to be new borrowings for purposes of this Section
4.2.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES.
5.1. Borrower represents and warrants
to each Lender as follows:
5.1.1. Good Standing.
Borrower is a limited partnership
organized under the laws of the State of Delaware; has the power and authority
to own and operate Borrower's Properties and to carry on Borrower's Business
where and as contemplated; and is duly qualified to do business in, and is in
good standing in, every jurisdiction where the nature of Borrower's Business
requires such qualification.
The General Partner is a "real
estate investment trust" as defined in Section 856 of the Code and is an
unincorporated association in business trust form duly organized and validly
existing under the laws of the Commonwealth of Pennsylvania.
5.1.2. Power and Authority.
The making, execution, issuance
and performance by Borrower and the General Partner of this Agreement, the
Notes, the Mortgages, and the other Loan Documents to which Borrower or the
General Partner is a party, have been duly authorized by all necessary action
and will not violate any provision of law or regulation or of the partnership
or trust agreement of Borrower or the General Partner; will not violate any
agreement, trust or other indenture or instrument to which Borrower or the
General Partner is a party or by which Borrower or the General Partner or any
of their respective property is bound. This Agreement, the Notes, the
Mortgages and the other Loan Documents have been duly executed and delivered
by Borrower and the General Partner and constitute legal, valid and binding
obligations of Borrower and the General Partner, respectively, enforceable in
accordance with their respective terms.
(32)
<PAGE>
5.1.3. Financial Condition.
5.1.3.1. The audited balance
sheet of the General Partner, together with income and surplus statements as
at and for the General Partner's fiscal year ended August 31, 1996, and the
unaudited balance sheet of the General Partner, together with income and
surplus statements as at and for the nine months ended May 31, 1997 heretofore
furnished to Agent are complete and correct in all respects, have been
prepared in accordance with GAAP, consistently applied, and fairly present the
financial condition of the General Partner as of said dates and the results of
the General Partner's operations for the periods then ended. Except as set
forth on such financial statements, the General Partner does not have any
fixed, accrued or contingent obligation or liability for taxes or otherwise
that is not disclosed or reserved against on its balance sheets. The General
Partner has filed all federal, state and local tax returns required to be
filed by it with any taxing authority. Since May 31, 1997, there has been no
material adverse change in the condition of the General Partner's financial
position or otherwise from that set forth in the balance sheet as of said
date, other than the acquisition by the Borrower of The Rubin Organization,
Inc. and certain of its assets. Borrower does not believe, in the exercise of
reasonable business judgment, that there has been or will likely be a change
relating to the business of the General Partner that would cause a Materially
Adverse Effect on the General Partner. Borrower is not aware of any additional
tax assessment or tax to be assessed that would have a Material Adverse Effect
on the financial condition of the General Partner.
5.1.3.2. The audited balance
sheet of Borrower, together with income and surplus statements as at and for
Borrower's Last Reported Fiscal Year are complete and correct in all respects,
have been prepared in accordance with GAAP, consistently applied, and fairly
present the financial condition of the Borrower as of said dates and the
results of Borrower's operations for the periods then ended. Except as set
forth on such financial statements, Borrower does not have any fixed, accrued
or contingent obligation or liability for taxes or otherwise that is not
disclosed or reserved against on its balance sheets. Borrower has filed all
federal, state and local tax returns required to be filed by it with any
taxing authority. Since the date of such Financial Statements, there has been
no material adverse change in the condition of Borrower's financial position
or otherwise from that set forth in the balance sheet as of said date.
Borrower does not believe, in the exercise of reasonable business judgment,
that there has been or will likely be a change relating to the Business of
Borrower that would cause a Materially Adverse Effect on Borrower. Borrower is
not aware of any additional tax assessment or tax to be assessed that would
have a Material Adverse Effect on the financial condition of Borrower. The
representation contained in this Section 5.1.3.2 shall be deemed first made
upon delivery by Borrower of the Financial Statements first delivered by
Borrower pursuant to Section 6.1.9 hereof.
5.1.4. No Litigation.
Except as set forth on Schedule
5.1.4 hereto, there are no suits or proceedings pending, or, to the knowledge
of Borrower, threatened against or affecting Borrower, any of its Properties,
any of the Properties of any Venture or the General Partner, and neither
(33)
<PAGE>
Borrower nor the General Partner is in default in the performance of any
agreement to which Borrower or the General Partner may be a party or by which
Borrower or the General Partner is bound, or with respect to any order, writ,
injunction, or any decree of any court, or any federal, state, municipal or
other government agency or instrumentality, domestic or foreign, which is
likely to have a Materially Adverse Effect on Borrower or the General Partner.
5.1.5. Compliance.
Borrower has all Governmental
Approvals necessary for the conduct of Borrower's Business, and the conduct of
Borrower's Business is not and has not been in violation of any such
Governmental Approvals or any applicable law, rule, regulation, judgment,
decree or order, the failure to obtain or with which to comply would, in any
such case, have a Materially Adverse Effect on Borrower. Neither Borrower nor
the General Partner requires any Governmental Approvals to enter into, or
perform under, this Agreement, the Notes, the Mortgages or any other Loan
Document.
5.1.6. Compliance with Regulations T, U
and X.
Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meanings of Regulations T, U and X of the Board of Governors of
the Federal Reserve System).
5.1.7. ERISA.
With respect to each employee
pension benefit plan (within the meaning of Section 3(2) of ERISA other than
any "multi-employer plan" within the meaning of Section 3(37) of ERISA)
(hereinafter, a "Plan"), maintained for employees of Borrower or of any trade
or business (whether or not incorporated) which is under common control with
Borrower (within the meaning of Section 4001(b)(1) of ERISA), (i) there is no
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), as of the last day of the most recent plan year of
such Plan heretofore ended, taking into account contributions made or to be
made within the time prescribed by Section 412(c)(10) of the Code; (ii) each
such Plan has been maintained in substantial compliance with its terms and
ERISA; and (iii) there has been no "reportable event" within the meaning of
Section 4043 of ERISA and the regulations thereunder for which the 30-day
notice requirement has not been waived. Borrower has not incurred any
liability to the PBGC other than required insurance premiums, all of which,
that have become due as of the date hereof, have been paid. Borrower is not a
party to any multi-employer plan.
(34)
<PAGE>
5.1.8. Environmental.
Except as set forth in Schedule
5.1.8 or as identified in the reports provided to Agent including those
delivered pursuant to Section 6.1.24 hereof, or where failure to comply would
not have or result in a Materially Adverse Effect on Borrower or the conduct
of Borrower's Business;
5.1.8.1. Borrower and each
Venture has, to the best of Borrower's knowledge, in the conduct of Borrower's
Business, and the ownership and use of the Properties, complied, in all
respects, with all federal, state and local, laws, rules, regulations,
judicial decisions and decrees pertaining to the use, storage or disposal of
hazardous waste or toxic materials.
5.1.8.2. To the best of
Borrower's knowledge: (i) no Hazardous Substance, is present on any of the
Properties in any quantity in excess of those allowed by applicable law; (ii)
neither Borrower nor any Venture has been identified in any litigation,
administrative proceedings or investigation as a responsible party for any
liability under any Environmental Law; (iii) all materials that are located on
any of the Properties in lawful amounts are properly stored and maintained in
containers appropriate for such purposes. For purposes of this Agreement, the
term "Environmental Law" means any and all applicable Federal, State and local
environmental statutes, laws, ordinances, rules and regulations, whether now
existing or hereafter enacted, together with all amendments, modifications,
and supplements thereto, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.
'9601, as amended by the Superfund Amendments and Re-authorization Act of 1986
(Pub. L. No. 99-499, 100 Stat. 1613 (1986) (SARA) or 40 CFR Part 261,
whichever is applicable) and the term "Hazardous Substance" means all
contaminants, hazardous substances, pollutants, hazardous waste, residual
waste, solid waste, or similar substances or wastes which may be the subject
of any Environmental Law.
5.1.8.3. Borrower has delivered
to Agent in accordance with Section 6.1.24 hereof environmental studies and
reports regarding the Properties comprising the Initial Unencumbered Property
Pool.
5.1.9. Liens.
None of the Properties that
constitute the Initial Unencumbered Property Pool is subject to any lien or
encumbrance, other than Permitted Liens.
5.1.10. Other Contractual Obligations.
The execution and delivery of
this Agreement does not, and the performance by Borrower and the General
Partner of their respective obligations and covenants under this Agreement
will not, violate any other contractual obligation of Borrower or the General
Partner.
(35)
<PAGE>
5.1.11. Investment Company Act.
Borrower is not an Investment
Company within the meaning of the Investment Company Act of 1940.
5.1.12. Public Utility Holding Company
Act.
Borrower is not a Public Utility
Holding Company within the meaning of the Public Utility Holding Company Act.
5.1.13. RICO.
To the best of Borrower's
knowledge, neither Borrower nor the General Partner has engaged in any conduct
or taken or omitted to take any action which violates RICO.
5.1.14. Borrower is the legal and
beneficial owner of not less than 95% of the issued and outstanding capital
stock of PREIT/Rubin.
5.2. Accuracy of Representations; No Default.
The information regarding the Borrower, any Venture Borrower
or the General Partner set forth herein and on each of the Schedules hereto,
in the Notes, the other Loan Documents and each document delivered by the
Borrower to Agent or Lenders in connection herewith is complete and accurate
and contains full and true disclosure of pertinent financial and other
information in connection with the Loans. None of the foregoing contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the information contained herein or therein not misleading
or incomplete. No Event of Default hereunder, under the Note or the other Loan
Documents, has occurred.
5A BORROWER'S REPRESENTATIONS AND WARRANTIES
REGARDING THE VENTURE BORROWERS.
5A.1 Borrower, as the holder of a 50% or more beneficial, or other
controlling, ownership in each of the Venture Borrowers, represents and
warrants to Lender as follows with respect to each Venture Borrower which has
executed a Venture Note:
5A.1.1 Good Standing.
Except as set forth on Schedule 5A.1.1, each
Venture Borrower is a partnership, corporation, joint venture or other entity,
as applicable, and is duly organized and validly existing under the laws of
its state of formation; has the power and authority to own and operate its
respective Properties and to carry on its respective business where and as
(36)
<PAGE>
contemplated; is duly qualified to do business in, and is in good standing in,
every jurisdiction where the nature of its business requires such
qualification.
5A.1.2 Power and Authority.
The making, execution, issuance and performance by
each Venture Borrower of its respective Venture Note have been duly authorized
by all necessary action and will not violate any provision of law or
regulation or of the organizational documents of such Venture Borrower; will
not violate any agreement, trust or other indenture or instrument to which
such Venture Borrower is a party or by which such Venture Borrower or any of
its property is bound. Each Venture Note has been duly executed and delivered
by the respective Venture Borrower and constitutes the legal, valid and
binding obligation of such Venture Borrower, enforceable in accordance with
its respective terms.
5A.1.3 No Litigation.
To the best of Borrower's knowledge, and except as
set forth on Schedule 5.1.4 hereto, there are no suits or proceedings pending,
or, to the knowledge of Borrower, threatened against or affecting any Venture
Borrower, and none of the Venture Borrowers is in default in the performance
of any agreement to which such Venture Borrower may be a party or by which
such Venture Borrower is bound, or with respect to any order, writ,
injunction, or any decree of any court, or any federal, state, municipal or
other government agency or instrumentality, domestic or foreign, which is
likely to have a Materially Adverse Effect on such Venture Borrower.
5A.1.4 Compliance.
To the best of Borrower's knowledge, each of the
Venture Borrowers has all Governmental Approvals necessary for the conduct of
their respective businesses, and the conduct of their respective businesses is
not and has not been in violation of any such Governmental Approvals or any
applicable law, rule, regulation, judgment, decree or order, the failure to
obtain or with which to comply with would, in any such case, have a Materially
Adverse Effect on any Venture Borrower. No Venture Borrower requires any
Governmental Approvals to enter into, or perform under its respective Venture
Note.
(37)
<PAGE>
5A.1.5 Compliance with Regulations T, U and X.
No Venture Borrower is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meanings of
Regulations T, U and X of the Board of Governors of the Federal Reserve
System).
5A.1.6 ERISA.
With respect to each employee pension benefit plan
(within the meaning of Section 3(2) of ERISA other than any "multi-employer
plan" within the meaning of Section 3(37) of ERISA) (hereinafter, a "Plan"),
maintained for employees of any Venture Borrower or of any trade or business
(whether or not incorporated) which is under common control with such Venture
Borrower (within the meaning of Section 4001(b)(1) of ERISA), (i) there is no
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), as of the last day of the most recent plan year of
such Plan heretofore ended, taking into account contributions made or to be
made within the time prescribed by Section 412(c)(10) of the Code; (ii) each
such Plan has been maintained in substantial compliance with its terms and
ERISA; and (iii) there has been no "reportable event" within the meaning of
Section 4043 of ERISA and the regulations thereunder for which the 30-day
notice requirement has not been waived. No Venture Borrower has incurred any
liability to the PBGC other than required insurance premiums, all of which,
that have become due as of the date hereof, have been paid. No Venture
Borrower is a party to any multi-employer plan.
5A.1.7 Other Contractual Obligations.
To the best of Borrower's knowledge, the execution
by each Venture Borrower and delivery of such Venture Borrower's Venture Note
does not, and the performance by such Venture Borrower of its obligations and
covenants thereunder will not, violate any other contractual obligation of
such Venture Borrower.
5A.1.8 Investment Company Act.
No Venture Borrower is an Investment Company within
the meaning of the Investment Company Act of 1940.
5A.1.9 Public Utility Holding Company Act.
No Venture Borrower is a Public Utility Holding
Company within the meaning of the Public Utility Holding Company Act.
5A.1.10 RICO.
To the best of Borrower's knowledge, no Venture
Borrower has engaged in any conduct or taken or omitted to take any action
which violates RICO.
(38)
<PAGE>
5A.2 Accuracy of Representations; No Default.
The information regarding any Venture Borrower set
forth herein and on each of the Schedules hereto, in the Venture Borrower's
Venture Note and each document known by Borrower to have been delivered by any
Venture Borrower to Agent or Lenders in connection herewith is complete and
accurate and contains full and true disclosure of pertinent financial and
other information in connection with the Venture Loans. None of the foregoing
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the information contained herein or therein not
misleading or incomplete. No Event of Default hereunder or under the Venture
Note has occurred.
6. AFFIRMATIVE COVENANTS
6.1. Borrower's Covenants.
As long as any portion of the Indebtedness or any
Venture Loan remains outstanding and unpaid, Lenders have any obligation to
extend Advances, or any Letter of Credit remains outstanding hereunder,
Borrower covenants and agrees that, in the absence of prior written consent of
Agent, Borrower shall:
6.1.1. Maximum Leverage Ratio Maintain the ratio
(expressed as a percentage) of Consolidated Liabilities, as reported in
Borrower's most recent Company-Prepared Financial Statements, to Gross Asset
Value at no more than 65% until the date, if any, on which the right of Agent
to record the Mortgages has been terminated pursuant to Section 3.2.2 hereof
(the "Recording Expiration Date") and thereafter at no more than 50%.
6.1.2. Consolidated NOI. Maintain Consolidated NOI
at no less than $40,000,000, tested quarterly at the end of each Calendar
Quarter on a rolling four Calendar Quarter historical basis, and provide
comparative Consolidated NOI calculations for the same Calendar Quarter of the
prior Fiscal Year on a rolling four Calendar Quarter historical basis, and
cause Consolidated NOI during any period of four consecutive Calendar Quarters
which ends with any Calendar Quarter to be at least 90% of Consolidated NOI
during the four Calendar Quarters determined at the end of the immediately
prior Calendar Quarter;
6.1.3. Minimum Unencumbered Asset Coverage.
Maintain the ratio (expressed as a percentage) of Senior Liabilities to
Unencumbered Asset Value, tested quarterly on a rolling four Calendar Quarter
historical basis, of no more than 73% until the Recording Expiration Date and
thereafter at no more than 60%;
6.1.4. Adjusted Tangible Net Worth. Maintain
Adjusted Tangible Net Worth at not less than $115,000,000, or such larger
amount determined by adding thereto amounts equal to 75% of the net proceeds
from Borrower's sale of equity securities (which shall not include limited
(39)
<PAGE>
partnership interests in Borrower issued as consideration for the conveyance
of Properties to Borrower or any wholly-owned subsidiary of Borrower) or the
General Partner's sale of equity securities from time to time, exclusive of
gross proceeds used in any acquisition of intangible assets;
6.1.5. Minimum Fixed Charge Coverage Ratio.
Maintain, the ratio of Consolidated NOI to Actual Debt Service tested at the
end of each Calendar Quarter on a rolling four Calendar Quarter historical
basis at no less than 1.4 to 1 until the Recording Expiration Date and
thereafter at no less than 1.7 to 1;
6.1.6. Prospective Minimum Fixed Charge Coverage
Ratio. Maintain, as of the last day of each Calendar Quarter, the ratio of
Consolidated NOI to Pro Forma Debt Service with respect to the next four (4)
Calendar Quarters at no less than 1.30 to 1 until the Recording Expiration
Date and thereafter at not less than 1.65 to 1;
6.1.7. Deliver to Lenders, within 60 days after the
end of each Calendar Quarter, an income and expense statement, balance sheet,
and schedule of sources and uses of funds, with respect to the operations and
financial condition of Borrower, and each of its subsidiaries, and of the
General Partner during and as of the last day of such Calendar Quarter,
prepared and certified by Borrower's or the General Partner's chief financial
officer, as appropriate;
6.1.8. Deliver to Lenders, within 60 days after the
end of each of the first three (3) Calendar Quarters, and within 120 days
after the end of each Fiscal Year, Company-Prepared Financial Statements of
Borrower and of the General Partner, which Company Prepared Financial
Statements shall be certified by Borrower's or the General Partner's chief
financial officer, as appropriate, and which annual statements of Borrower
will include a consolidating schedule;
6.1.9. Deliver to Lenders, within 120 days after
the end of each Fiscal Year, audited financial statements of the General
Partner, including an income and expense statement, balance sheet and schedule
of sources and uses of funds, which financial statements shall include the
unqualified opinion of Arthur Andersen & Co. or another national firm of
certified public accountants reasonably acceptable to Agent; provided that if
such financial statements are prepared by another national firm of certified
public accountants that is reasonably acceptable to Agent, such statements may
include a qualification with respect to the results of prior Fiscal Years for
which such other accountants were not engaged by the General Partner, and
provided that no opinion of any accountant shall be considered to be qualified
merely because such accountants have relied upon financial statements or
opinions prepared or issued by or on behalf of the Ventures;
6.1.10. Deliver to Lenders, within 120 days after
the end of each Fiscal Year of Borrower, Project Specific Information for such
Fiscal Year prepared and certified by the chief financial officer of Borrower;
(40)
<PAGE>
6.1.11. Deliver to Lenders, at the time each
financial statement is required to be delivered pursuant to Sections 6.1.7 and
6.1.9 hereof, a covenant compliance certificate, together with a
certification, signed by a senior executive officer of Borrower, both in the
form of Schedule 6.1.11 attached hereto, certifying to Lender that there
exists no breach of any of the covenants contained in this Article 6 or in
Article 7 hereof;
6.1.12. With reasonable promptness furnish to
Lenders all financial and business information provided to beneficiaries of
the General Partner, the Securities and Exchange Commission, and the American
Stock Exchange, and such additional information and data concerning the
business and financial condition of Borrower as may be reasonably requested by
Lenders; afford Lenders or their agents reasonable access to the financial
books and records, computer records and properties of Borrower at all
reasonable times after reasonable notice and permit Lenders or their agents to
make copies and abstracts of same and to remove such copies; and abstracts
from Borrower's premises and permit Lenders or their agents the right to
converse directly with the independent accounting firm then engaged by
Borrower to prepare its audited financial statements;
6.1.13. Cause the prompt payment and discharge of
all material taxes, governmental charges and assessments levied and assessed
or imposed upon Borrower's or any Venture Borrower's assets and pay all other
material claims which, if unpaid, might become liens or charges upon
Borrower's or any Venture Borrower's assets, provided, however, that nothing
in this Section shall require Borrower or any Venture Borrower to pay any such
taxes, claims or assessments which are not overdue or which are being
contested in good faith and by appropriate proceedings, with reserves therefor
in an amount acceptable to Agent being available or having been set aside;
6.1.14. Maintain the existence of Borrower as a
limited partnership and all necessary foreign qualifications in good standing;
continue to comply with all applicable statutes, rules and regulations with
respect to the conduct of Borrower's Business to the extent the same are
material to the financial condition of Borrower or the conduct of Borrower's
Business; maintain such necessary licenses and permits required for the
conduct of Borrower's Business, in each case if the failure to maintain or
comply would have a Materially Adverse Effect on Borrower; and cause the
General Partner to maintain its existence as a "real estate investment trust"
under Section 856 of the Code
6.1.15. Promptly defend all actions, proceedings or
claims which would have a Materially Adverse Effect on Borrower or Borrower's
Business and promptly notify Agent in wrting , for transmittal to Lenders of
the institution of, or any change in, any such action, proceeding or claim if
the same is in excess of $1,000,000 (other than claims covered by insurance in
the ordinary course of business and booked on Borrower's balance sheet) or
would have a Materially Adverse Effect on the financial condition of Borrower
or its property if adversely determined;
(41)
<PAGE>
6.1.16. Comply in all material respects with the
requirements of ERISA applicable to any employee pension benefit plan (within
the meaning of Section 3(2) of ERISA), sponsored by Borrower. With respect to
any such plan, other than any "multi-employer plan" (within the meaning of
Section 3(37) of ERISA), in the case of a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations thereunder for which the
30-day notice requirement has not been waived, or in the case of any other
event or condition which presents a material risk of the termination of any
such plan by action of the PBGC or Borrower, Borrower shall furnish to Agent a
certificate of the chief financial officer of Borrower identifying such
reportable event or such other event or condition and setting forth the
action, if any, that Borrower intends to take or has taken with respect
thereto, together with a copy of any notice of such reportable event or such
other event or condition filed with the PBGC or any notice received by
Borrower from the PBGC evidencing the intent of the PBGC to institute
*proceedings to terminate any such plan. Such certificate of the chief
financial officer or such other notice to be furnished to Agent in accordance
with the preceding sentence shall be given in the manner provided for in
Section 10.4 hereof: (i) within 30 days after the Borrower knows of such
reportable event or such other event or condition; (ii) as soon as possible
upon receipt of any such notice from the PBGC; or (iii) concurrently with the
filing of any such notice with the PBGC, as the case may be. For purposes of
this Section, Borrower shall be deemed to have all knowledge attributable to
the administrator of any such plan;
6.1.17. Maintain or cause to be maintained each
Property in good condition and repair, reasonable wear and tear excepted,
making as and when necessary, all material repairs of every nature;
6.1.18. Except where failure to do so would not
have a Materially Adverse Effect on Borrower: perform, as and when due, all of
Borrower's obligations (both monetary and non-monetary) under all leases,
easements, agreements, mortgages and deeds of trust that encumber any part of
the real estate assets of Borrower, within such applicable notice or cure
period allowed Borrower pursuant to the relevant lease, easement, agreement,
mortgage or deed of trust, pay and discharge, at or before maturity, all
Borrower's material obligations and liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the same;
6.1.19. Promptly after Borrower becomes aware that
any such event has occurred, Borrower shall notify Agent in writing for
transmittal to Lenders of: (i) the occurrence or imminent occurrence of any
event which causes or would imminently cause (A) any material adverse change
in the Business, property, prospects or financial condition of Borrower or the
General Partner (B) any representation or warranty made by Borrower hereunder
to be untrue, incomplete or misleading in any material respect, or (C) the
occurrence of any other Event of Default or Unmatured Event of Default
hereunder; and (ii) the institution of, or the issuance of any order,
judgment, decree or other process in, any litigation, investigation,
prosecution, proceeding or other action by any governmental authority or other
Person against Borrower or the General Partner and that does, or could, have a
Materially Adverse Affect upon Borrower or the General Partner;
(42)
<PAGE>
6.1.20. Cause each Venture Borrower and cause the
borrowers under the Turren Note to pay and perform, when due, all of such
Venture Borrower's or other borrower's respective obligations under any
Venture Note executed by such Venture Borrower or under the Turren Note, as
applicable;
6.1.21. Maintain or cause to be maintained
insurance on the Properties in such amounts, against such hazards and
liabilities, and with such companies as is consistent with sound business
practices, including without limitation:
(i) Insurance against loss to the
Properties on an "all risk" policy form, covering insurance risks no less
broad than those covered under a Standard Multi Peril (SMP) policy form, which
contains a Commercial ISO "Causes of Loss-Special Form," in the then current
form, and such other risks as Agent may reasonably require, in amounts equal
to the full replacement cost of the Properties including fixtures and
equipment, Borrower's interest in leasehold improvements, and the cost of
debris removal, with an agreed amount endorsement, and with deductibles of not
more than $50,000, except that any deductibles for any insurance covering
damage by windstorm may be in amounts up to five percent (5%) of the value of
the Property insured;
(ii) Rent and rental value/extra expense
insurance (if the Property is tenant occupied) in amounts sufficient to pay
during any period in which a Property may be damaged or destroyed, for a
period of twelve (12) months: (x) at least 80% all rents and (y) all amounts
(including, but not limited to, all taxes, assessments, utility charges and
insurance premiums) required to be paid by tenants of the Property;
(iii) Broad form boiler and machinery
insurance including business interruption/extra expense and rent and rental
value insurance, on all equipment and objects customarily covered by such
insurance and/or involved in the heating, cooling, electrical and mechanical
systems of the Properties (if any are located at the Properties), but
excluding individual HVAC equipment that serves only one residential apartment
unit, providing for full repair and replacement cost coverage, and other
insurance of the types and in amounts as Agent may reasonably require, but in
no event less than that customarily carried by persons owning or operating
like properties;
(iv) During the making of any alterations
or improvements to a Property, (x) insurance covering claims based on the
owner's or employer's contingent liability not covered by the insurance
provided in subsection (vi) below, (y) workers' compensation insurance
covering all persons engaged in such alterations or improvements, and (z)
builder's completed value risk insurance against "all risks of physical loss"
for construction projects of $1,000,000 or more;
(43)
<PAGE>
(v) Insurance against loss or damage by
flood or mud slide in compliance with the Flood Disaster Protection Act of
1973, as amended from time to time, if the Properties are now, or at any time
while the Indebtedness or any portion thereof remains unpaid shall be,
situated in any area which an appropriate governmental authority designates as
a special flood hazard area, in amounts equal to the full replacement value of
all above grade structures on the Properties, or as such lesser amounts as may
be available under Federal flood insurance programs;
(vi) Commercial general public liability
insurance, with the location of the Properties designated thereon, against
death, bodily injury and property damage arising on, about or in connection
with the Properties, with Borrower or the applicable subsidiary or Venture
listed as the named insured, with such limits as Borrower or the applicable
subsidiary or Venture may reasonably require (but in no event less than
$1,000,000 and written on a then current Standard "ISO" occurrence basis form
or equivalent form), excess umbrella liability coverage with such limits as
Borrower or the applicable subsidiary or Venture may reasonably require but in
no event less than $5,000,000; and
(vii) Such other insurance relating to the
Properties and the uses and operation thereof as Agent may, from time to time,
require in the exercise of good faith;
6.1.22. Maintain the Unencumbered Property Pool
free from any mortgage, lien, pledge, charge, security interest or other
encumbrance, whether voluntary or involuntary, other than Permitted Liens and
mortgage liens in favor or Agent pursuant to this Agreement;
6.1.23. Comply, and cause the General Partner to
comply, in all material respects with all laws, rules, regulations, judgments,
decrees, and orders, the failure with which to comply would have a Materially
Adverse Effect on Borrower, any Venture or the General Partner; and
6.1.24. With respect to any Property that now is,
or hereafter becomes, part of the Unencumbered Property Pool, deliver to Agent
(i) a copy of each complete Phase I environmental report that Borrower or the
General Partner may have as of the Closing Date; and (ii) promptly after
receipt thereof by Borrower, a copy of each report prepared by any Person at
Borrower's request regarding the presence thereon of any Hazardous Substance
requiring remedial action under Environmental Laws, provided that Borrower
shall not be required to deliver to Agent any additional environmental
reports, including, without limitation, any ongoing, periodic reports of the
monitoring of any environmental remediation undertaken with respect to any
Property, except in the event Agent requests copies of any existing additional
environmental reports due to concerns it may have based on reports previously
provided, in the reasonable exercise of Agent's business judgment.
(44)
<PAGE>
6.2. Indemnification.
Borrower hereby indemnifies and agrees to protect,
defend, and hold harmless Lenders and Lenders' directors, officers, employees,
agents, attorneys and shareholders from and against any and all losses,
damages, expenses or liabilities of any kind or nature and from any suits,
claims, or demands, including all reasonable counsel fees incurred in
investigating, evaluating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way
connected with this Agreement, the Notes, the Loans, the Venture Notes, the
Turren Note, the other Loan Documents and any transaction contemplated herein
or therein including, but not limited to, claims based upon any act or failure
to act by Agent and Lenders in connection with this Agreement, the Notes, the
Loans, the Venture Notes, the Turren Note, the other Loan Documents and any
transaction contemplated herein or therein; provided that Borrower shall not
be liable for any portion of such losses, damages, expenses or liabilities
resulting from any Lender's gross negligence or willful misconduct or that of
any Lender's directors, officers, employees, agents, attorneys and
shareholders or from any Lender's default under this Agreement. If Borrower
shall have knowledge of any claim or liability hereby indemnified against, it
shall promptly give written notice thereof to Agent for transmittal to
Lenders. THIS COVENANT SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
6.2.1. Agent shall promptly give Borrower written
notice of all suits or actions instituted against Lenders with respect to
which Borrower has indemnified Lenders, and Borrower shall timely proceed to
defend any such suit or action. Lenders shall also have the right, at the
expense of Borrower, to participate in or, at Lenders' election, assume the
defense or prosecution of such suit, action, or proceeding, and in the latter
event Borrower may employ counsel and participate therein. Each Lender shall
have the right to adjust, settle, or compromise any claim, suit, or judgment
after notice to Borrower, unless Borrower desires to litigate such claim,
defend such suit, or appeal such judgment and simultaneously therewith
deposits with Agent collateral security sufficient to pay any judgment
rendered, with interest, costs, legal fees and expenses; and the right of
Lenders to indemnification under this Agreement shall extend to any money paid
by Lenders in settlement or compromise of any such claims, suits, and
judgments in good faith, after notice to Borrower.
6.2.2. If any suit, action, or other proceeding is
brought by Lenders against Borrower for breach of Borrower's covenant of
indemnity herein contained, separate suits may be brought as causes of action
accrue, without prejudice or bar to the bringing of subsequent suits on any
other cause or causes of action, whether theretofore or thereafter accruing.
7. NEGATIVE COVENANTS
7.1. Borrower's Negative Covenants.
(45)
<PAGE>
As long as any portion of the Indebtedness or of
any Venture Loan shall remain outstanding and unpaid, Lenders have any
obligation to extend Advances or any Letter of Credit remains outstanding
hereunder, Borrower covenants and agrees that, in the absence of prior written
consent of Agent, Borrower shall not:
7.1.1. Other Indebtedness. Create, assume, incur or
otherwise be liable for Senior Liabilities, excluding Senior Liabilities
incurred pursuant to this Agreement, in amounts in excess of $20,000,000 in
the aggregate until the Recording Expiration Date and thereafter in excess of
$50,000,000 in the aggregate;
7.1.2. Dividends. Pay dividends or other
distributions to partners of Borrower in any Fiscal Year in excess of Funds
From Operations for such Fiscal Year;
7.1.3. Except with the prior consent of Requisite
Lenders or as may be permitted pursuant to Section 7.1.1 hereof, increase the
amount of Borrower's Contingent Liabilities with respect to any of the
Existing Projects identified in Part A of Schedule 1.1.C. to an amount greater
than the applicable amount set forth on Schedule 7.1.3 hereof.
7.1.4. Except with the prior consent of Requisite
Lenders or as may be permitted pursuant to Section 7.1.1 hereof, incur any
additions to Borrower's Debt, as such may exist on the date hereof, with
respect to any of the Existing Projects such that Borrower's Debt with respect
to any Existing Project would be greater than the applicable amount set forth
or Schedule 7.1.4 hereof.
7.1.5. Except with the prior consent of Requisite
Lenders, permit the aggregate value of Borrower's Land Holdings and of
Borrower's Percentage Interest in the Land Holdings of any Venture to exceed
five percent (5%) of Gross Asset Value.
7.1.6. Change the general character of Borrower's
Business from that in which it is currently engaged; enter into proceedings in
total or partial dissolution; merge or consolidate with or into any entity, or
acquire all or substantially all of the assets or securities of any other
Person, unless Borrower remains the surviving entity and Borrower continues to
be engaged primarily in the business of owning and operating shopping centers
or multi-family residential income-producing properties;
7.1.7. Use any part of the proceeds of the Loans to
purchase or carry, or to reduce, retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations T, U
and X of the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any margin stock.
If requested by Agent, Borrower will furnish Agent statements in conformity
with the requirements of Federal Reserve Form U-1 referred to in said
Regulation;
7.1.8. Except as described in Schedule 5.1.8, use,
generate, treat, store, dispose of, or otherwise introduce any Hazardous
Substances, pollutants, contaminants, hazardous waste, residual waste or solid
(46)
<PAGE>
waste (as defined above) into or on any of the Properties and will not cause,
suffer, allow, or permit anyone else to do so in material violation of any
Environmental Law, and will not knowingly acquire, or permit any subsidiary of
Borrower or any Venture to knowingly acquire, any Property on which any
Hazardous Substance, pollutant, contaminant, hazardous waste, residual waste
or solid waste has been used, generated, treated, stored, disposed of or
otherwise introduced in violation of any Environmental Law; provided that such
a Property may be acquired if (i) Borrower has received (A) a final
remediation plan, prepared by a qualified environmental engineer, for the
remediation of the violative environmental situation, Borrower's direct or
indirect liability for the cost of which remediation is reasonably estimated
to be less than $1,000,000 or (B) the written consent of Requisite Lenders or
(ii) the Property is a Property identified in Schedule 7.1.8 hereof and is
acquired under the conditions set forth on Schedule 7.1.8;
7.1.9. Engage in any conduct or take or fail to
take any action which will, or would, if the facts and circumstances relative
thereto were discovered, violate RICO.
7.1.10. Agree with any other Person not to
encumber, whether by mortgage, lien, pledge, charge, security interest, or
other encumbrance, any parcel of the Unencumbered Property Pool.
8. DEFAULT
8.1. Events of Default.
The occurrence of any one or more of the following
events, conditions or states of affairs, shall constitute an "Event of
Default" hereunder, under the Notes and under each of the other Loan
Documents, provided however, that nothing contained in this Article 8 shall be
deemed to enlarge or extend any grace period provided for in the Notes or any
other Loan Document:
8.1.1. Failure by Borrower to pay the Indebtedness
or any portion thereof within five (5) Business Days after the same becomes
due, provided that the foregoing grace period shall not apply to any payment
due on the Termination Date;
8.1.2. Failure by Borrower to observe or perform
any agreement, condition, undertaking or covenant in this Agreement, the Note,
or the other Loan Documents, which failure, if it does not consist of the
failure to pay money to Agent or a Lender and is susceptible to being cured,
is not cured within twenty (20) days after written notice from Agent or such
Lender (but if such failure cannot reasonably be cured within such twenty (20)
day period, such shall not be an Event of Default if Borrower has commenced
such cure within such twenty (20) day period and thereafter diligently pursues
such cure to its completion, but in no event shall the period to cure exceed
(47)
<PAGE>
one hundred twenty (120) days); provided that the notice and grace period
provided in this Section 8.1.2 shall not apply to the breach by Borrower of
any covenants contained in Sections 6.1.1, 6.1.2, 6.1.3, 6.1.4, 6.1.5, 6.1.6,
6.1.14, 6.1.19, 6.1.20, 7.1.1, 7.1.2, 7.1.3, 7.1.4, 7.1.5 or 7.1.6 hereof or a
voluntary or consensual breach of the covenant contained in Section 7.1.10
hereof, and provided further that the grace period with respect to a breach of
the covenants contained in Section 6.1 hereof that pertain to the delivery to
Lenders of financial information shall be limited to thirty(30) days after
delivery of Agent's or any Lender's written notice of such breach;
8.1.3. Any representation or warranty of the
Borrower made, or deemed made, in this Agreement, the Notes, the Venture
Notes, the other Loan Documents or any statement or information in any report,
certificate, Financial Statement or other instrument furnished by Borrower in
connection with making of this Agreement, the making of the Loans hereunder or
in compliance with the provisions hereof or any other Loan Document shall have
been false or misleading in any material respect when so made, deemed made or
furnished;
8.1.4. Borrower shall become insolvent or unable to
pay its debts as they mature, or file a voluntary petition or proceeding
seeking liquidation, reorganization or other relief with respect to itself
under any provision of the Bankruptcy Code or any state bankruptcy or
insolvency statute, or make an assignment or any other transfer of a material
portion of Borrower's assets for the benefit of its creditors, or apply for or
consent to the appointment of a receiver for its assets, or suffer the filing
against its property of any attachment or garnishment or take any action to
authorize any of the foregoing; or an involuntary case or other proceeding
shall be commenced against Borrower seeking liquidation, reorganization or
other relief with respect to its debts under the Bankruptcy Code or any other
bankruptcy, insolvency or similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
sixty (60) days (it being understood that no delay period applies with respect
to any default arising under this Section by reason of the filing of a
voluntary petition by Borrower under the Bankruptcy Code or any state
bankruptcy or insolvency statute or the making of an assignment or other
transfer of a material portion of Borrower's assets for the benefit of
Borrower's creditors or by reason of Borrower applying for or consenting to
the appointment of a receiver for Borrower's assets); or an order for relief
shall be entered against the Borrower under any provision of the Bankruptcy
Code or any state bankruptcy or insolvency statute as now or hereafter in
effect;
8.1.5. Entry of a final judgment or judgments
against Borrower by a court of law in an amount exceeding an aggregate of
$1,000,000 outstanding at any one time: (i) which is not fully or
unconditionally covered by insurance; or (ii) for which Borrower has not
established a cash or cash equivalent reserve in the amount of such judgment
or judgments that were entered by a court of record against Borrower; or (iii)
enforcement of such judgment or judgments has not been stayed or such judgment
or judgments shall continue in effect for a period of thirty (30) consecutive
days without being vacated, discharged, satisfied or bonded pending appeal;
(48)
<PAGE>
8.1.6. Regardless of the intent or knowledge of
Borrower, if the validity, binding nature or enforceability of any material
term, provision, condition, covenant or agreement contained in this Agreement,
any other Loan Document or in any other existing or future agreement between
Borrower and Lenders in connection with the Indebtedness shall be wrongfully
disputed by, on behalf of, or in the right or name of Borrower or if any such
material term, provision, condition, covenant or agreement shall be found or
declared to be invalid, non-binding, unenforceable or avoidable by any
governmental authority or court and the parties cannot agree upon
substitutions therefor within thirty (30) days; or
8.1.7. Borrower shall be accused of conduct in
violation of RICO which is not explained to Lenders within ten (10) days
thereafter in a manner in which Lenders, in their sole discretion, determine
that such accusation is not likely to result in a RICO indictment;
8.1.8. The occurrence of any unwaived "Event of
Default" under any Venture Note or the Turren Note;
8.1.9. Borrower shall have defaulted in the payment
when due of any Debt in an amount in excess of $1,000,000 and such default
shall have continued beyond any period of grace permitted with respect
thereto, unless waived,
whereupon, and in every such event,
upon the vote of Requisite Lenders Agent shall (i) by notice to Borrower,
terminate the commitments to lend pursuant to this Agreement and they shall
thereupon terminate, and (ii) without notice to Borrower, declare the Notes
(together with accrued interest thereupon) to be, and the Notes shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
Borrower. Notwithstanding the foregoing, upon any Event of Default arising
from any of the events or circumstances described in Section 8.1.4 hereof, the
Notes shall, without any further action, become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Borrower.
For purposes of Sections 8.1.4, 8.1.5,
8.1.7 and 8.1.9 hereof, the term "Borrower" shall include the General Partner.
8.2. Remedies on Default.
Upon the occurrence and continuation of any Event
of Default, Agent may, subject to Article 9 hereof, and shall, in accordance
with Section 8.1 hereof, forthwith declare all Indebtedness to be immediately
due and payable, without protest, demand or other notice (which are hereby
expressly waived by Borrower) and, in addition to the rights specifically
granted hereunder or now or hereafter existing in equity, at law, by virtue of
(49)
<PAGE>
statute or otherwise (each of which rights may be exercised at any time and
from time to time), Agent may exercise the rights and remedies available to
Lenders at law or in equity or under this Agreement, the Notes and any of the
other Loan Documents or any other agreement by, between or among Borrower and
Lenders in accordance with the respective provisions thereof.
8.3. Set-Off Rights Upon Default.
Upon and during the continuance of any Event of
Default, Lenders, in addition to any remedies set forth above, shall have the
right at any time and from time to time without notice to Borrower (to the
extent permitted by law) (any such notice being expressly waived by Borrower
and to the fullest extent permitted by applicable Rules, to set off, to
exercise any banker's lien or any right of attachment or garnishment and apply
any and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or monies at any time held by any Lender and
other indebtedness at any time owing by any Lender to or for the account of
Borrower (but excluding accounts in Borrower's name that constitute escrowed
funds or trust funds of others) against any and all Indebtedness or other
obligations of Borrower now or hereafter existing under this Agreement, the
Notes, or any other Loan Document, whether or not any Lender shall have made
any demand hereunder or thereunder. All net funds recovered under the rights
provided in this Section 8.3 shall be recovered by Lenders as agent for the
other Lenders and shall be distributed among Lenders according to their Pro
Rata Shares. Each Lender shall be an agent of all other Lenders for purposes
of rights of set-off.
8.4. Purchase of Venture Notes Upon Default.
Upon the occurrence and during the continuance of
any Event of Default, Agent shall, at the instruction of Requisite Lenders,
give written notice to Borrower that an Event of Default has occurred and is
continuing and that Lenders require Borrower to purchase from Lenders all of
the Venture Notes and the Turren Note. Borrower shall purchase from each
Lender each of the Venture Notes and from CoreStates Bank, N.A., the Turren
Note, for a price equal to the outstanding principal balance of, and all
accrued and unpaid interest on, each Venture Note or the Turren Note, the
aggregate amount of which for all Venture Notes or the Turren Note, as
applicable (the "Purchase Price") shall be paid in immediately available funds
to Agent on or before five (5) Business Days after receipt of Agent's notice
requiring the repurchase of all Venture Notes and the Turren Note. The sale of
the Venture Notes and Turren Note shall be on an "as is" basis and, except (i)
for Lenders' ownership thereof, and (ii) that the Venture Notes or the Turren
Note, as applicable, shall be free and clear of encumbrances and other
assignments, shall be without representation or warranty of any kind, which
Lenders disclaim, including without limitation, the execution, legality,
validity, genuineness, sufficiency, value, transferability, enforceability or
collectibility of the Venture Notes or the Turren Note, as applicable, the
existence or value of any collateral therefor, and the priority of any
interests in such collateral. Upon Lenders' receipt of collected funds in the
amount of the Purchase Price, Lenders shall deliver the original Venture Notes
or the Turren Note, as applicable, to Borrower, each endorsed by the
appropriate Lender, without recourse, together with any collateral
documentation therefor appropriately assigned to Borrower.
(50)
<PAGE>
8.5. Singular or Multiple Exercise; Non-Waiver.
The remedies provided herein, in the Notes and in
the other Loan Documents or otherwise available to Lender at law or in equity
and any warrants of attorney therein contained, shall be cumulative and
concurrent, and may be pursued singly, successively or together at the sole
discretion of Agent, and may be exercised as often as occasion therefor shall
occur; and the failure to exercise any such right or remedy shall in no event
be construed as a waiver or release of the same.
9. AGENT
9.1. Appointment.
Each Lender hereby appoints CoreStates Bank, N.A.
as agent hereunder, and each Lender hereby authorizes Agent to act hereunder
and under the other instruments and agreements referred to herein (including,
without limitation, the Notes, the Mortgages, and the other Loan Documents) as
its agent hereunder and thereunder. Agent agrees to act as such upon the
express conditions contained in this Article 9 and in the Loan Documents. The
provisions of this Article 9 are solely for the benefit of Lenders; Borrower
shall not have any rights as a third party beneficiary of any of the
provisions hereof except with respect to the provisions requiring Borrower's
consent or that certain matters be satisfactory to Borrower. In performing its
functions and duties under this Agreement, Agent shall act solely as agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrower.
9.2. Powers; General Immunity.
9.2.1. Duties Specified.
Each Lender irrevocably authorizes Agent
to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other instruments and agreements referred to herein
(including, without limitation, the Loan Documents) as are specifically
delegated to Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto. Agent shall have only those duties and
responsibilities which are expressly specified in this Agreement and the other
Loan Documents and Agent may perform such duties by or through its agents or
employees. The duties of Agent shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose
upon Agent any obligations in respect of this Agreement or the other
instruments and agreements referred to herein except as expressly set forth
herein or therein. Agent agrees promptly to transmit to Lenders any documents
which have been transmitted by Borrower to Agent for transmittal to Lenders.
Agent shall take such action as has been determined to be taken by a vote of
the applicable Lenders hereunder. In performing its duties and functions under
this Agreement and the Loan Documents, Agent will exercise the same care which
it normally exercises in making and handling loans and handling collateral in
which it alone is interested, but Agent assumes no further responsibility.
(51)
<PAGE>
9.2.2. Powers of Agent.
9.2.2.1. In General.
Unless otherwise specifically limited by
this Section 9.2.2, Agent may take all actions hereunder on behalf of all of
the Lenders without seeking the advise or consent of any of the Lenders.
9.2.2.2. Actions Requiring Certain Votes
of Lenders.
Notwithstanding anything to the contrary
herein contained, Agent agrees that it will not, without the unanimous consent
of the Lenders, take any of the following actions whether voluntary or
involuntary pursuant to this Agreement: (i) decrease any of the rates of
interest with respect to the Loan hereunder; (ii) decrease, or postpone the
required date of payment of, any fees with respect to the Loans hereunder;
(iii) reduce the principal of the Loan; (iv) postpone the date fixed for any
payment of principal of or interest on the Loan; (v) change the definitions of
Pro Rata Shares or Requisite Lenders; (vi) amend Section 3.2 (or any defined
terms or financial covenants referenced therein) or this Section 9.2.2.2;
(vii) waive Agent's duty to record the Mortgages when required pursuant to
Section 3.2.1 hereof; (viii) release any collateral for the Loan on terms
other than as specifically provided herein; (ix) increase the Commitment
Amount, or (x) make any Advance after the occurrence of, and during the
continuation of, any Event of Default.
9.2.2.3. Actions Requiring Votes of
Requisite Lenders.
Notwithstanding anything to the contrary
herein contained, Agent agrees that it will not without the vote of the
Requisite Lenders: (i) declare any Event of Default; (ii) exercise any
remedies upon and after the occurrence of an Event of Default; or (iii)
subject to Section 9.2.2.2 hereof, amend or waive any provision of this
Agreement.
9.2.2.4. Agent's Action when Lender Fails
to Respond.
If Agent requests authority to act in a
specified manner, Agent may, at Agent's option, act as if a Lender had
approved such request if such Lender fails or refuses to respond to Agent's
request within seven (7) Business Days after receipt of Agent's written
request.
9.2.3. No Responsibility for Certain Matters.
Agent shall not be responsible to any
Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement, the Notes or
the other Loan Documents, or for any representations, warranties, recitals or
(52)
<PAGE>
statements made herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports, certificates or
any other documents in connection herewith or therewith furnished or made by
Agent to Lenders or by or on behalf of Borrower to Agent or any Lender except
to the extent Agent has actual knowledge to the contrary that such
representation, warranty, recital or statement is false or incorrect, or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Loans or of the existence or
possible existence of any Event of Default or Unmatured Event of Default or
potential Event of Default or Unmatured Event of Default.
9.2.4. Exculpatory Provisions.
Agent and its officers, directors,
employees and agents shall not be liable to any Lender for any action taken or
omitted hereunder or in connection herewith (including, without limitation,
any act or omission under the Notes or the other Loan Documents) unless caused
by its or their gross negligence or willful misconduct. If Agent shall request
instructions from Lenders with respect to any act or action (including the
determination not to take an action) in connection with this Agreement, the
Notes or the other Loan Documents, Agent shall be entitled to refrain from
such act or taking such action unless and until Agent shall have received
instructions from the Requisite Lenders or the applicable percentage of
Lenders, as the case may be. Without prejudice to the generality of the
foregoing, (i) Agent shall be entitled to rely, and shall be fully protected
in relying, upon any communication, instrument or document believed by it to
be genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Borrower),
accountants, experts and other professional advisors selected by it with the
approval of Requisite Lenders; and (ii) no Lender shall have any right of
action whatsoever against Agent as a result of Agent's acting or (where so
instructed) refraining from acting under this Agreement, the Notes, or other
Loan Documents in accordance with the instructions of the Requisite Lenders or
the applicable percentage of Lenders, as the case may be. Agent shall be
entitled to refrain from exercising any power, discretion or authority vested
in it under this Agreement, the Notes, or other Loan Documents unless and
until it has obtained the instructions of the Requisite Lenders.
9.2.5. Agent Entitled to Act as Lender.
The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent in its individual capacity as a Lender hereunder. With
respect to its granting of Loans, Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the terms
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity as a Lender.
Notwithstanding the foregoing, Agent shall not be influenced to act hereunder
in a manner inconsistent with the best interests of Lenders by reason of
Agent's involvement in unrelated transactions with Borrower or with any
(53)
<PAGE>
Affiliate of Borrower. Agent and its affiliates may accept deposits from, lend
money to and generally engage in any kind of banking, trust, financial
advisory or other business with Borrower or any Affiliate of Borrower as if it
were not performing the duties specified herein, and may accept fees and other
consideration from Borrower or such Affiliate for services in connection with
this Agreement and otherwise without having to account for the same to
Lenders. Lenders acknowledge that Agent has, and may from time to time
hereafter, enter into lending arrangements with Borrower or Affiliates of
Borrower and that Borrower may grant mortgages, security interests or
otherwise encumber its assets in favor of Agent individually and not as agent
for the Lenders as collateral for such lending arrangements, which shall be
independent of the Loan hereunder, provided that Agent shall not, in
connection with any such transaction, encumber any property of Borrower that
would constitute a breach of any of Borrower's covenants under this Agreement.
9.2.6. No Responsibility for Creditworthiness.
Each Lender represents and warrants that
it has made its own independent investigation of the financial condition and
affairs of Borrower and the General Partner in connection with the making of
the Loans hereunder and has made and shall continue to make its own appraisal
of the creditworthiness of Borrower. Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or, except as
expressly provided in this Agreement, to provide any Lender with any credit or
other information with respect thereto whether coming into its possession
before the making of Loans or any time or times thereafter, and Agent shall
further have no responsibility with respect to the accuracy of or the
completeness of the information provided to Lenders.
(54)
<PAGE>
9.2.7. Right to Indemnity.
Each Lender severally agrees to indemnify
Agent, its officers, directors, employees and agents, proportionately to its
Pro Rata Share and to the extent Agent shall not have been reimbursed by
Borrower, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Agent in performing its duties hereunder or in any way relating to or
arising out of this Agreement, except in its capacity as a Lender; provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's gross negligence or willful
misconduct; and provided further that Agent shall not be entitled to be
indemnified hereunder for amounts paid by Agent in settlement of litigation
prior to final judgment unless such settlement shall be consented to by
Requisite Lenders. If any indemnity furnished to Agent for any purpose shall,
in the opinion of Agent, be insufficient or become impaired, Agent may call
for additional indemnity and cease, or not commence, to do the acts
indemnified against (other than acts constituting Agent's obligations to
Lenders hereunder) until such additional indemnity is furnished.
9.2.8. Resignation; Removal; Successor Agent.
9.2.8.1. Agent may resign from the
performance of all its functions and duties hereunder at any time by giving 45
Business Days' prior written notice to Borrower and Lenders. Agent may be
removed at any time with cause by a notice or concurrent notices in writing
delivered to Borrower and Agent and signed by all Lenders other than Agent.
Such resignation or removal shall take effect upon the acceptance by a
successor Agent pursuant to subsections 9.2.8.2 and 9.2.8.3.
9.2.8.2. Upon any such notice of
resignation or removal, Lenders upon the vote of the Requisite Lenders shall
have the right to appoint a successor Agent which shall be a Lender, or such
other Person as is satisfactory to Borrower. Such successor agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent, and the retiring or removed Agent
shall be discharged from all its duties and obligations as Agent under this
Agreement (except as otherwise provided herein).
9.2.8.3. If a successor Agent shall not
have been so appointed within said 45 Business Day period, a resigning (but
not a removed) Agent, with the consent of Borrower, shall then appoint a
successor Agent, which shall be a commercial bank with capital and surplus of
not less than $5,000,000,000 who shall serve as Agent until such time, if any,
as the Requisite Lenders, with the consent of Borrower, appoint a successor
Agent as provided above.
(55)
<PAGE>
9.2.8.4. If at the time of Agent's
resignation or removal pursuant to this Section 9.2.8 Agent's Pro-Rata Share
exceeds 33-1/3%, the term "Requisite Lenders," for purposes of this Section
9.2.8 only, shall mean either (i) Lenders whose aggregate Pro Rata Shares
equal or exceed 66.67% or (ii) all Lenders other than Agent.
9.3. Sharing of Recoveries.
Lenders hereby agree that all sums recovered (and
the proceeds of all property recovered) from Borrower by any Lender hereunder,
whether as a result of the enforcement of any Mortgage or other Loan Document
or on foreclosure of any banker's or other lien or any setoff or other claim
on or against any deposit or other balance of Borrower held by any Lender,
shall be on behalf of Lenders and shall be shared by Lenders according to
their respective Pro Rata Shares. If a Lender shall make any recovery, it will
promptly remit to the other Lenders their Pro Rata Shares thereof. No Lender's
Pro Rata Share shall have priority over any other Lender's Pro Rata Share.
9.4 Ratable Sharing.
Each Lender and each subsequent holder by
acceptance of a Note agree among themselves that with respect to all amounts
received by them which are applicable to the payment of or reduction of a
proportion of the aggregate amount of principal and interest due with respect
to the Notes held by the Lender or holder, which is greater than the
proportion received by any other holder of a Note in respect to the aggregate
amount of principal and interest due with respect to the Notes held by it, or
any other amount payable hereunder, that the Lender or holder of a Note
receiving such proportionately greater payments shall notify each other Lender
and the Agent of such receipt and remit to them such amounts as are necessary
so that all such recoveries of principal and interest with respect to the
Notes shall be proportionate to the Lenders' respective Pro Rata Shares. If
any Lender or holder of a Note receiving such proportionately greater payments
is required to return such proportionately greater payment to any trustee,
receiver or other representative of or for Borrower upon or by reason of the
bankruptcy, insolvency, reorganization or dissolution of any entity comprising
Borrower, then such other Lender(s) which received its or their Pro Rata Share
of such proportionately greater payment must also return such amounts to
Borrower as if such payment or payments from the Lender receiving such
proportionately greater payments had not been made.
10. MISCELLANEOUS
10.1 Integration.
This Agreement, the Notes, and the other Loan
Documents shall be construed as one agreement, and in the event of any
inconsistency, the provisions of the Notes shall control over the provision of
this Agreement or any other Loan Document, and the provisions of this
(56)
<PAGE>
Agreement shall control over the provisions of any other Loan Document. This
Agreement, the Notes and the other Loan Documents contain all the agreements
of the parties hereto with respect to the subject matter of each thereof and
supersede all prior or contemporaneous discussions and agreements with respect
to such subject matter.
10.2. Modification.
Except as provided in Section 9.2.2.2 hereof, and
provided that no modification of Article 9 hereof may be made without Agent's
consent, modifications or amendments of or to the provisions of this
Agreement, Notes, or any other Loan Document shall be effective only if set
forth in a written instrument signed by Requisite Lenders and Borrower. No
Lender shall amend any Note payable to such Lender without the written consent
of Requisite Lenders.
10.3. Waivers.
Except as provided in Section 9.2.2.2 hereof, any
provision of this Agreement, the Notes or any other Loan Document may be
waived if, but only if, such waiver is in writing and is signed by the
Borrower and Requisite Lenders.
10.4 Notices.
Except as hereinelsewhere specifically allowed with
respect to a Notice of Borrowing or a Notice of Rate Election, any notice or
other communication by one party hereto to the other shall be in writing and
shall be deemed to have been validly given upon receipt if by hand delivery,
or by overnight delivery service or by telecopier, or two days after mailing
if mailed, first class mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower:
PREIT Associates, L.P.
c/o Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attn: Jeffrey A. Linn, Senior Vice President - Acquisitions
Telecopier: (215) 542-9179
(57)
<PAGE>
With a copy to:
Howard A. Blum, Esq.
Drinker, Biddle & Reath
1100 PNB Building
Broad and Chestnut Streets
Philadelphia, PA 19107
Telecopier: (215) 988-2757
If to the Agent:
CoreStates Bank, N.A.
FC 1-8-10-67
Widener Building 10th Floor
1339 Chestnut Street
P.O. Box 7618
Philadelphia, PA 19107
Attn: Glenn W. Gallagher, Vice President
Telecopier (215) 786-6381
With a copy to:
CoreStates Capital Markets
1345 Chestnut Street
FC1-8-12-1
Philadelphia, PA 19101-7618
Attn: Stacey Shegda, Assistant Vice President
Telecopier (215) 973-6621
Telephone (215) 973-1887
With a copy to:
Kenneth I. Rosenberg, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telecopier (215) 994-1111
With a copy to:
Firstrust Savings Bank
1931 Cottman Avenue
Philadelphia, PA 19111
Attn: William J. Lloyd, Jr.,
(58)
<PAGE>
Manager-Commercial Real Estate
Telecopier: (215) 725-1614
With a copy to:
Fleet Bank, N.A.
22 West Marlton Pike
Cherry Hill, NJ 08002
Attn: Timothy C. Thompson, Vice President
Telecopier: (609) 795-0216
|With a copy to:
PNC Bank, National Association
1600 Market Street, 30th Floor
Philadelphia, PA 19103
Attn: Robert C. Ballard, Vice President
Telecopier: (215) 686-5806
With a copy to:
Summit Bank
1800 Chapel Avenue West, 2nd Flr.
Cherry Hill, NJ 08002
Attn: Amy L. Brown, Regional Vice President
Telecopier: (609) 486-3717
10.5. Survival.
The terms of this Agreement and all agreements,
representations, warranties and covenants made by Borrower in any other Loan
Document shall survive the issuance and payment of the Notes and shall
continue as long as any portion of the Indebtedness shall remain outstanding
and unpaid; provided, however, that the covenants set forth in Sections 2.2.7,
6.2, 10.8, and 10.9 hereof shall survive the payment of the Indebtedness.
Borrower hereby acknowledges that Lenders have relied upon the foregoing in
making the Loans.
10.6. Closing.
Closing hereunder shall occur on or before October
15, 1997 at the offices of Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market
Street, 38th Floor, Philadelphia, Pennsylvania 19103-7598 or at such other
time and place as the parties hereto may determine. In the event Closing is
not held on or before October 15, 1997, unless extended by all of the parties
hereto, the rights and obligations of the parties hereto contained herein
shall be terminated and be of no further force or effect except for the
provisions of Sections 6.2, 10.8, and 10.9.
(59)
<PAGE>
10.7. Successors and Assigns; Governing Law.
This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto;
provided, however (i) that Borrower shall not assign this Agreement, or any
rights or duties arising hereunder, without the express prior written consent
of all Lenders and (ii) no Lender may assign its rights or duties arising
hereunder or enter into any participation arrangement other than as permitted
by Section 10.10 hereof without the express prior written consent of Borrower.
This Agreement shall be construed and enforced in accordance with the internal
laws of the Commonwealth of Pennsylvania for contracts made and to be
performed in Pennsylvania.
10.8. Jurisdiction.
IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
RELATIONSHIP EVIDENCED HEREBY, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY COUNTY
IN THE COMMONWEALTH OF PENNSYLVANIA WHERE AGENT MAINTAINS AN OFFICE AND AGREES
NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR
MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. BORROWER
AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED
UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO
BORROWER.
10.9. Waiver of Jury Trial.
BORROWER, AGENT AND EACH LENDER HEREBY WAIVE TRIAL
BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS EVIDENCED HEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR LENDERS TO ENTER INTO, ACCEPT OR RELY
UPON THIS AGREEMENT.
10.10. Assignment by Lenders; Participation.
10.10.1 Each Lender may, with the consent of
Borrower that shall not unreasonably be withheld, delayed or conditioned,
assign, or enter into participation arrangements with respect to, portions of
such Lender's interest in this Agreement, the Facility and the Note and other
Loan Documents evidencing or securing such Lender's interest, provided that
(60)
<PAGE>
each Lender shall retain in its own name and not subject to participation an
interest in the Facility that is not less than the greater of (i) fifty-one
percent (51%) of such Lender's Pro Rata Share as of the date hereof or (ii)
$10,000,000. Assignees shall succeed to and assume all of the rights and
obligations hereunder; Lenders entering into participation arrangements shall
include in such arrangements that no such participant shall have any right to
consent to or approve matters hereunder except that such participation
arrangements may grant to the participant the right to approve (i) any
decrease in the rates of interest payable by Borrower with respect to the
Loans, (ii) any change of the final maturity of the Loans that is not
otherwise provided herein, and (iii) any change in the Commitment Amount.
10.10.2. Concurrently with any assignment by a
Lender pursuant to Section 10.10.1 hereof, the assigning Lender shall deliver
to Agent and Borrower a copy of the assignment instrument and shall pay to
Agent an assignment fee of $3,500. Borrower, upon request of Agent, shall
promptly execute and deliver to Agent replacement Notes, reflecting the
then-current Pro Rata Shares of each Lender, including the assignee Lender,
which replacement Notes shall be delivered to each Lender upon surrender to
Agent of Borrower's prior Note in favor of such Lender. Promptly after receipt
of each of such prior Notes, Agent shall mark the same "Replaced" and return
it to Borrower.
10.11. Conflicts Between Instruments.
In the event of any conflict between the provisions
of this Agreement and the provisions of any Note or any other Loan Document
(including, without limitation any provisions with respect to the delivery of
notice of default and the granting of any opportunity to cure) the provisions
of this Agreement shall prevail, notwithstanding any provision in any other
document to the effect that such other document shall be deemed controlling,
except that the provisions of the Notes shall control over the provisions of
this Agreement. Any Event of Default by Borrower hereunder shall, after the
granting of such notice and expiration of any grace period as may be herein
contained, constitute an event of default under the Notes and the Mortgages,
without regard for any requirement for notice or opportunity to cure contained
in the Notes or the Mortgages.
10.12. Excess Payments.
If Borrower shall pay any interest under the terms
of the Notes at a rate higher than the maximum rate allowed by applicable law,
then such excess payment shall be credited against outstanding Advances as
directed by Borrower unless Borrower notifies Lenders in writing to return the
excess payment to Borrower. Notwithstanding anything to the contrary contained
in this Agreement, crediting the excess payments hereunder as a payment of
principal shall not trigger the application of any prepayment penalties that
might otherwise apply to a prepayment of principal hereunder.
10.13. Partial Invalidity.
(61)
<PAGE>
If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
10.14. Compliance with Rules.
Lenders shall not be required by operation or
effect of any provision of this Agreement to violate any statute or regulation
under state or federal law, including all Rules.
10.15. Headings.
The heading of any Article or Section contained in
this Agreement is for convenience of reference only and shall not be deemed to
amplify, limit, modify or give full notice of the provisions thereof.
10.16. Counterparts.
This Agreement may be signed in counterparts each
of which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
10.17. Retention of Documents.
Unless otherwise provided herein, any documents,
schedules, or other papers delivered to Agent on behalf of Lenders or to any
Lender may be destroyed or otherwise disposed of by Agent or such Lender six
months after they are delivered to or received by Agent or such Lender, unless
Borrower requests the return of such documents, schedules, invoices or other
papers and makes arrangements, at Borrower's expense, for their return.
10.18. Time of the Essence.
Time is the essence of this Agreement and of each
of the Loan Documents.
10.19. Future Development Loans.
The parties contemplate that Borrower shall, from
time to time prior to the Termination Date, deliver to Agent requests to
provide construction financing for projects to be undertaken by Borrower, by a
Venture, or by an entity in which Borrower, directly or indirectly, has a
substantial interest. Agent shall review such requests in its absolute
discretion, and in no event shall Agent be required to approve any such
request. If Agent does approve a request for such construction financing and
the owner and developer of the project is either Borrower, a wholly-owned
subsidiary of Borrower or a Venture in which Borrower, directly of indirectly,
(62)
<PAGE>
is the managing partner or has the ability control the placing of such
construction financing, Agent shall present such request to each of the
Lenders, all of which shall have the right, but not the obligation, to be part
of the lending group for such loan. If the proposed developer of the project
that is the subject of the financing request is not Borrower or an entity
described in the preceding sentence, the request may be presented by Agent to
fewer than all of Lenders, as Borrower may determine. If any Lender to which
Agent presents a financing request pursuant to this Section determines not to
participate in the lending group, Agent may, with the consent of Borrower not
to be unreasonably withheld, include in such lending group financial
institutions that are not a Lender. Nothing in this Section shall obligate any
Lender to provide credit to Borrower or any other Person, other than the
Facility.
10.20. Name of General Partner.
The name and designation Pennsylvania Real Estate
Investment Trust is the designation of the Trustees from time to time under
the Trust Agreement as amended
(63)
<PAGE>
and restated as of September 29, 1997 and all persons dealing with the
Pennsylvania Real Estate Investment Trust must look solely to the Trust
property for the enforcement of any claims against the Pennsylvania Real
Estate Investment Trust, as neither the Trustees, officers, agents or
shareholders of the Pennsylvania Real Estate Investment Trust assume any
personal liability for obligations entered into by the Pennsylvania Real
Estate Investment Trust by reason of their status as said Trustee, officer,
agent or shareholder.
10.21. Counterpart Execution.
This Agreement may be executed in multiple
counterparts, and when each of the named parties hereto has executed such
counterpart copies hereof, such shall constitute a single agreement among such
parties.
IN WITNESS WHEREOF, Borrower, Agent and Lenders have executed this
Agreement under seal, intending to be legally bound hereby, as of the day and
year first above written.
BORROWER:
PREIT ASSOCIATES, L.P., a Delaware limited
partnership, by its sole general partner
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: /s/ Jeffrey A. Linn
----------------------------------------
Jeffrey A. Linn, Senior,
Title: Vice President - Acquisitions
AGENT:
CORESTATES BANK, N.A.
By: /s/ Glenn W. Gallagher
----------------------------------------
Glenn W. Gallagher, Vice President
(64)
<PAGE>
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
(65)
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LENDERS:
CORESTATES BANK, N.A.
By: /s/ Glenn W. Gallagher
----------------------------------------
Glenn W. Gallagher, Vice President
FIRSTRUST SAVINGS BANK
By: /s/ William J. Lloyd
----------------------------------------
William J. Lloyd, Jr., Manager-
Commercial Real Estate
FLEET BANK, N.A.
By: /s/ Alan B. Turner
----------------------------------------
Alan B. Turner, Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert C. Ballard
----------------------------------------
Robert C. Ballard, Vice President
SUMMIT BANK
By: /s/ Amy L. Brown
----------------------------------------
Amy L. Brown, Regional Vice-President
(66)
<PAGE>
-------------------------
Bank Officer
NOTE
Philadelphia, Pennsylvania
$65,000,000 September 30, 1997
FOR VALUE RECEIVED, PREIT ASSOCIATES, L.P., a Delaware
limited partnership (the "Borrower") promises to pay to the order of
CoreStates Bank, N.A., a national banking association ("Lender") on or before
the Termination Date (as defined in the Revolving Credit Loan Agreement of
even date by and among Borrower, Lender, CoreStates Bank, N.A., as agent,
Firstrust Savings Bank, Fleet Bank, N.A., PNC Bank, National Association, and
Summit Bank (the "Loan Agreement") with respect to the Facility), the lesser
of (x) Sixty Five Million Dollars ($65,000,000) or (y) Lender's Pro Rata Share
of the unpaid principal amount of all Advances made by the Lenders to the
Borrower under the Loan Agreement, in lawful money of the United States of
America and in immediately available funds. All initially capitalized terms
used herein shall have the same meanings ascribed to them in the Loan
Agreement unless the context clearly requires to the contrary.
Borrower also promises to pay interest on the unpaid
principal amount of Lenders' Pro Rata Share of all Advances from the Funding
Date to maturity (whether by acceleration or otherwise) with respect to Base
Rate Loans, at the Base Rate per annum, and with respect to Adjusted LIBOR
Loans, at the sum of the Adjusted LIBOR on the relevant Interest Rate
Determination Date plus the Applicable Margin. The applicable basis for
determining the rate of interest with respect to Advances shall be selected by
Borrower at the time a Notice of Borrowing is given pursuant to Section 2.2.2
of the Loan Agreement or a Notice of Rate Election is given pursuant to
Section 2.2.3 of the Loan Agreement. If on any day an Advance is outstanding
with respect to which notice has not been delivered to Agent in accordance
with the terms of the Loan Agreement specifying the basis for determining the
rate of interest, then such Advance shall bear interest as if a Base Rate
Loan. The rate of interest payable with respect to Adjusted LIBOR Loans shall
be recalculated from time to time in accordance with the provisions of Section
2.14 of the Loan Agreement.
Interest shall be payable on the Loans in arrears through
the last Business Day of each month, with the first payment to be made on the
first Business Day of the month next following the Closing Date and continuing
thereafter on the first Business Day of each month and at maturity.
Any principal payments on the Loans not paid when due and,
to the extent permitted by applicable law, any interest payment on the Loans
not paid when due, and any other amount due to Agent or Lender under the Loan
Agreement or any other Loan Document not paid when due, in any case whether at
stated maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is two percent (2%)
<PAGE>
per annum in excess of (i) with respect to Adjusted LIBOR Loans, the applicable
Interest Rate until the expiration of the then applicable Interest Period, and
after the expiration of the then applicable Interest Period at a rate which is
two percent (2%) in excess of the Base Rate and (ii) with respect to Base Rate
Loans, at a rate which is two percent (2%) per annum in excess of the Base Rate.
This Note is one of the Notes referred to in the Loan
Agreement and is issued pursuant to and entitled to the benefits of the Loan
Agreement, to which reference is hereby made for a more complete statement of
the terms and conditions on which Lender's Pro Rata Share of the Advances
evidenced hereby and by the other Notes were made and are to be repaid. All
recoveries by Lender under this Note or otherwise are subject to the
provisions of Article 9 of the Loan Agreement.
All payments of principal and interest in respect of this
Note shall be made by Borrower without setoff or counterclaim in immediately
available funds and delivered to Agent not later than 12:00 noon (Philadelphia
time) on the date due at Agent's offices located at Widener Building, 10th
Floor, 1339 Chestnut Street, FC 1-8-10-67, Philadelphia, Pennsylvania 19107 or
at such other place as shall be designated in writing for such purpose in
accordance with the terms of the Loan Agreement. Funds received by Agent after
that time shall be deemed to have been paid by the Borrower on the next
succeeding Business Day.
Whenever any payment on this Note shall be stated to be due
on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.
Borrower authorizes Agent to charge Borrower's accounts with
Agent (but only to the extent there are sufficient funds therein) in order to
cause timely payment to be made to Agent of all principal, interest and fees
hereunder as provided in Section 1.5 of the Loan Agreement.
Borrower may prepay all or any portion of the outstanding
principal balance hereof subject to the terms and conditions of the Loan
Agreement.
The liabilities and obligations of the Borrower hereunder
shall be unconditional without regard to the liability or obligations of any
other party and shall not be in any manner affected by any indulgence
whatsoever granted or consented to by Lender, including, but without being
limited to, any extension of time, renewal, waiver or other modification. Any
failure of Lender to exercise any right hereunder shall not be construed as a
waiver of the right to exercise the same or any other right at any time and
from time to time thereafter.
This Note shall be governed as to its validity,
interpretation and effect by the internal laws of the Commonwealth of
Pennsylvania for contracts made and to be performed in Pennsylvania. Borrower
consents to the jurisdiction of the courts of Philadelphia County,
Pennsylvania, or at the election of the holder hereof, the United States
District Court for the Eastern District of Pennsylvania, in any and all
actions and proceedings by Lender, and the
(2)
<PAGE>
Borrower hereby irrevocably agrees to service of process by registered mail,
return receipt requested, postage prepaid at the Borrower's address appearing on
Lender's records.
BORROWER HEREBY WAIVES, AND LENDER BY ITS ACCEPTANCE HEREOF
THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE RELATIONSHIP EVIDENCED
HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO,
ACCEPT OR RELY UPON THIS NOTE.
Borrower hereby waives presentment, demand for payment,
notice of dishonor or acceleration, protest or notice of protest and any and
all notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note.
Lender may assign a portion or portions of its rights and
obligations under this Note subject to the terms and conditions of the Loan
Agreement.
Upon the occurrence of an Event of Default, the unpaid
balance of the principal amount of this Note, together with all accrued but
unpaid interest thereon and Lender's Pro Rata Share of all other Indebtedness
may become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
The terms of this Note may not be changed or amended orally
but only by an agreement in writing and signed by all Lenders (or by such
number of Lenders as all Lenders may from time to time agree in writing) and
Borrower.
Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, as provided in Section 1.6 of the Loan Agreement,
incurred in the collection and enforcement of this Note. Borrower and
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense
to any demand hereunder.
If any provision of this Note shall for any reason be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as if such
invalid or unenforceable provision had never been contained herein.
The name and designation Pennsylvania Real Estate Investment
Trust is the designation of the Trustees from time to time under the Trust
Agreement amended and restated as of September 29, 1997, and all persons
dealing with the Pennsylvania Real Estate Investment Trust must look solely to
the Trust property for the enforcement of any claims against the Pennsylvania
Real Estate Investment Trust, as neither the Trustees, officers, agents or
shareholders of the Pennsylvania Real Estate Investment Trust assume any
personal liability for
(3)
<PAGE>
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
PREIT ASSOCIATES, L.P., a Delaware
limited partnership by its sole general partner
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jeffrey A. Linn
-------------------------------------------
Jeffrey A. Linn, Senior Vice
President - Acquisitions and Secretary
<PAGE>
GUARANTY
THIS GUARANTY is made and entered into by PENNSYLVANIA REAL
ESTATE INVESTMENT TRUST, a Pennsylvania business trust form (the "Guarantor"),
for the benefit of CoreStates Bank, N.A., Firstrust Savings Bank, Fleet Bank,
N.A., PNC Bank, National Association, and Summit Bank (the "Banks").
BACKGROUND
A. The Guarantor is the sole general partner of Obligor
(as hereinafter defined).
B. Pursuant to a Revolving Credit Loan Agreement dated
September 29, 1997 among the Obligor, CoreStates Bank, N.A., as Agent
("Agent") and the Banks (the "Loan Agreement"), the Banks agreed to make
credit facilities available to Obligor. All capitalized terms used but not
specifically defined in this Guaranty have the meanings defined in the Loan
Agreement.
C. To induce Banks to make credit facilities available to
Obligor, Banks have required Guarantor to execute and deliver this Guaranty as
a condition precedent thereto.
NOW, THEREFORE, intending to be legally bound hereby,
Guarantor agrees as follows:
1. OBLIGOR. The "Obligor" means PREIT Associates, L.P., a
Delaware limited partnership.
2. OBLIGATIONS. The "Obligations" means all existing and
hereafter incurred or arising indebtedness, obligations and liabilities of the
Obligor to the Banks, whether absolute or contingent, direct or indirect, and
arising out of the Loan Agreement and the other Loan Documents, and includes,
without limitation, all matured and unmatured indebtedness, obligations and
liabilities of the Obligor under or in connection with existing and future
Advances evidenced by the Notes or otherwise or under Letters of Credit,
including without limitation all interest, expenses, costs (including collection
costs) and fees (including reasonable attorney's fees and prepayment fees)
incurred, arising or accruing (whether prior or subsequent to the filing of any
bankruptcy petition by or against any Obligor) under or in connection with any
of the foregoing. If the term "Obligor" includes more than one person or entity,
the Obligations shall include all Obligations of any one or more of such persons
or entities, whether such Obligations are individual, joint, several or joint
and several.
3. UNCONDITIONAL GUARANTY. In consideration of any existing
Obligations and any Obligations which may hereafter arise or be incurred,
Guarantor, intending to be legally bound, absolutely and unconditionally (and
jointly and severally if more than one) guaranties to Banks, and becomes
surety for, the prompt payment, performance and satisfaction when due (whether
by stated maturity, demand, acceleration or otherwise) of all Obligations. The
obligations of Guarantor hereunder shall continue in full force and effect
irrespective of the validity, legality or enforceability of any agreements,
notes or documents pursuant to which any of the Obligations arise, or the
existence, value or condition of any collateral for any of the Obligations, or
of any other guaranty of
<PAGE>
the Obligations, or any other circumstance which might otherwise constitute a
legal or equitable discharge of a surety or guarantor.
4. COST OF ENFORCEMENT. Guarantor agrees to pay Banks all
costs and expenses (including reasonable attorney's fees) at any time incurred
by or on behalf of Banks in the enforcement of this Guaranty against
Guarantor.
5. PAYMENT BY GUARANTOR. Payment by Guarantor is due upon
demand by Banks after the occurrence of an event of default under the
Obligations and is payable in immediately available funds in lawful money of
the United States of America.
6. CONTINUING GUARANTY. This Guaranty shall continue in full
force and effect with respect to Guarantor and may not be revoked until all
existing Obligations and all Obligations hereafter incurred or arising have
been paid, performed and satisfied in full.
7. WAIVERS AND CONSENTS BY GUARANTOR. Guarantor
unconditionally consents to, and waives as a defense to liability hereunder,
each of the following: (a) any waiver, inaction, delay or lack of diligence by
Agent or Banks or others on behalf of Banks in enforcing its rights against
any Obligor or in any property, or the unenforceability of any such rights,
including any failure to perfect, protect or preserve any lien or security
interest which may be intended directly or indirectly to secure any of the
Obligations, and the absence of notice thereof to Guarantor, (b) the absence
of any notice of the incurrence or existence of any Obligation, (c) any
action, and the absence of notice thereof to Guarantor, taken by Agent or
Banks or any Obligor with respect to any of the Obligations, including any
release, subordination or substitution of any collateral or release,
termination, compromise, modification or amendment of any instrument executed
by or applicable to any Obligor or of any claim, right or remedy against any
Obligor or any property, (d) any impairment of Guarantor's right to
reimbursement by way of subrogation, indemnification or contribution, (e) any
other action taken or omitted by Agent or Banks in good faith with respect to
the Obligations, (f) the absence or inadequacy of any formalities of every
kind in connection with enforcement of the Obligations, including presentment,
demand, notice and protest, and (g) the waiver of any rights of Banks under or
any action taken or omitted by Agent or Banks with respect to any other
guaranty of the Obligations.
8. OTHER AGREEMENTS BY GUARANTOR. Guarantor agrees that
there shall be no requirement that Banks document its acceptance of this
Guaranty, evidence its reliance thereon, or that Agent or Banks take any
action against any person or any property prior to taking action against
Guarantor. Guarantor further agrees that Banks' rights and remedies hereunder
shall not be impaired or subject to any stay, suspension or other delay as a
result of any Obligor's insolvency or as a result of any proceeding applicable
to Obligor or Obligor's property under any bankruptcy or insolvency law.
Guarantor also agrees that payments and other reductions on the Obligations
may be applied to such of the Obligations and in such order as Banks may
elect.
(2)
<PAGE>
9. SUBROGATION AND SIMILAR RIGHTS. Guarantor will not
exercise any rights with respect to Banks or any Obligor related to or
acquired in connection with or as a result of its making of this Guaranty
which it may acquire by way of subrogation, indemnification or contribution,
by reason of payment made by it hereunder or otherwise, until after the date
on which all of the Obligations shall have been satisfied in full. Until such
time any such rights against the Obligor shall be fully subordinate in lien
and payment to any claim in connection with the Obligations which Banks, or
any of them, now or hereafter has against the Obligor. If any amount shall be
paid to Guarantor on account of such subrogation, indemnification or
contribution at any time when all of the Obligations and all other expenses
guaranteed pursuant hereto shall not have been paid in full, such amount shall
be held in trust for the benefit of Banks, shall be segregated from the other
funds of Guarantor and shall forthwith be paid over to Agent to be applied in
whole or in part by Banks against the Obligations, whether matured or
unmatured, in such order as the Banks shall determine in its sole discretion.
If Guarantor shall make payment to Agent or Banks of all or any portion of the
Obligations and all of the Obligations shall be paid in full, Guarantor's
right of subrogation shall be without recourse to and without any implied
warranties by Banks and shall remain fully subject and subordinate to Agent's
and Banks' right to collect any other amounts which may thereafter become due
to the Banks by the Obligor in connection with the Obligations.
10. REINSTATEMENT OF LIABILITY. If any claim is made upon
the Banks for repayment or recovery of any amount or amounts received by Banks
in payment or on account of any Obligations and Banks repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over the Banks or any of its property,
or (b) any settlement or compromise in good faith with any such claimant
(including Obligor), then, and in such event, Guarantor agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon
Guarantor, notwithstanding any termination hereof or the cancellation of any
note or other instrument evidencing any Obligation, and Guarantor shall remain
liable to the Banks hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by Banks.
11. EFFECT OF OTHER AGREEMENTS. The provisions of this
Guaranty are cumulative and concurrent with Agent's or Banks' rights and
remedies against Guarantor under any existing or future agreement pertaining
to or evidencing any of the Obligations. No such additional agreement shall be
deemed a modification or waiver hereof unless expressly so agreed by Banks in
writing. If any Bank holds any other guaranty or surety agreement applicable
to any of the Obligations, the liability of Guarantor hereunder shall be joint
and several with each party obligated on such other guaranty or surety
agreement, unless otherwise agreed by Banks in writing.
12. GUARANTOR'S ADDRESS. Guarantor warrants and represents
that the address set forth below is Guarantor's correct mailing address and
agrees immediately to notify Banks in the event of any change therein.
13. MISCELLANEOUS.
(3)
<PAGE>
(a) No amendment of any provision of this Guaranty shall
be effective unless it is in writing and signed by Guarantor and Banks, and no
waiver of any provisions of this Guaranty, and no waiver or consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Banks, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
(c) The obligations of Guarantor hereunder shall not be
subject to any counterclaim, setoff, deduction or defense based upon any related
or unrelated claim which Guarantor may now or hereafter have against Agent,
Banks or any Obligor, except payment of the Obligations, and shall not be
affected by any change in Obligor's legal status or ownership or by any change
in corporate, partnership or other organizational structure applicable to
Obligor.
(d) This Guaranty shall (i) be binding on Guarantor and
its successors and assigns, and (ii) inure, together with all rights and
remedies of Banks hereunder, to the benefit of the Banks and its successors,
transferees and assigns. Notwithstanding the foregoing clause (i), none of the
rights or obligations of any Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Banks.
(e) This Guaranty shall be governed by and construed in
accordance with the internal laws, and not the law of conflicts, of the
Commonwealth of Pennsylvania.
14. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATED TO THIS GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY, THE UNDERSIGNED
PARTY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED IN ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA
WHERE AGENT MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH
JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH
PROCEEDING IN SUCH COUNTY. THE UNDERSIGNED PARTY AGREES THAT SERVICE OF
PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY MAILING A COPY
THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO THE UNDERSIGNED PARTY.
15. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY WAIVES, AND
BANKS BY THEIR ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS
GUARANTY OR THE RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL
(4)
<PAGE>
INDUCEMENT FOR BANKS TO ENTER INTO, ACCEPT OR RELY UPON THIS GUARANTY.
16. The name and designation Pennsylvania Real Estate
Investment Trust is the designation of the Trustees from time to time under
the Trust Agreement amended and restated as of September 29, 1997 and, and all
persons dealing with the Pennsylvania Real Estate Investment Trust must look
solely to the Trust property for the enforcement of any claims against the
Pennsylvania Real Estate Investment Trust, as neither the Trustees, officers,
agents or shareholders of the Pennsylvania Real Estate Investment Trust assume
any personal liability for
(5)
<PAGE>
obligations entered into by the Pennsylvania Real Estate Investment Trust by
reason of their status as said Trustee, officer, agent or shareholder.
IN WITNESS WHEREOF, each Guarantor has executed this
Guaranty under seal as of the 30th day of September, 1997.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jeffrey A. Linn
-------------------------------
Jeffrey A. Linn,
Senior Vice President -Acquisitions
Trustee
Address: 455 Pennsylvania Avenue,
Suite 350
Fort Washington, PA 19034
(6)
<PAGE>
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF PREIT ASSOCIATES, L.P.,
a Delaware limited partnership
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS................................................... 1
ARTICLE II ORGANIZATIONAL MATTERS......................................... 17
SECTION 2.1 ORGANIZATION.................................... 17
SECTION 2.2 NAME............................................ 17
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL
OFFICE.......................................... 17
SECTION 2.4 TERM............................................ 18
Section 2.5 PARTNERSHIP ASSETS.............................. 18
Section 2.6 OFFICERS........................................ 18
Section 2.7 LIMITATION ON LIABILITY OF PERSONS
RELATED TO PARTNERS............................. 19
ARTICLE III PURPOSE....................................................... 19
SECTION 3.1 PURPOSE AND BUSINESS............................ 19
SECTION 3.2 POWERS.......................................... 19
SECTION 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED......... 20
ARTICLE IV PARTNER INTERESTS; DEBT SECURITIES............................. 20
SECTION 4.1 IN GENERAL...................................... 20
SECTION 4.2 CLASS A AND B LIMITED PARTNER INTERESTS;
GENERAL PARTNER INTERESTS....................... 21
SECTION 4.3 CREATION AND ISSUANCE OF ADDITIONAL
CLASSES AND SERIES OF PARTNER INTERESTS......... 22
SECTION 4.4 OTHER PROVISIONS RELATING TO ALL CLASSES
AND SERIES OF PARTNER INTERESTS................. 22
ARTICLE V CAPITAL CONTRIBUTIONS........................................... 23
SECTION 5.1 GENERAL PARTNER CAPITAL CONTRIBUTIONS........... 23
SECTION 5.2 LIMITED PARTNER CAPITAL CONTRIBUTIONS........... 23
SECTION 5.3 ISSUANCE OF ADDITIONAL CLASS A UNITS............ 24
SECTION 5.4 ADDITIONAL PARTNER CONTRIBUTIONS................ 25
SECTION 5.5 ADDITIONAL LIMITED PARTNERS..................... 25
SECTION 5.6 NO INTEREST; NO RETURN.......................... 26
SECTION 5.7 NO PREEMPTIVE RIGHTS; NO MANDATORY
ADDITIONAL CAPITAL CONTRIBUTIONS................ 26
ARTICLE VI DISTRIBUTIONS.................................................. 26
SECTION 6.1 DISTRIBUTIONS................................... 26
SECTION 6.2 DISTRIBUTIONS IN KIND........................... 27
SECTION 6.3 AMOUNTS WITHHELD................................ 27
SECTION 6.4 DISTRIBUTIONS UPON LIQUIDATION.................. 27
SECTION 6.5 RESTRICTED DISTRIBUTIONS........................ 27
Section 6.6 RELIANCE INSURANCE CLAIM........................ 28
<PAGE>
ARTICLE VII ALLOCATIONS AND TAX AND ACCOUNTING MATTERS..................... 28
SECTION 7.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET
INCOME AND NET LOSS.............................. 28
SECTION 7.2 ALLOCATIONS...................................... 28
ARTICLE VIII MANAGEMENT AND OPERATIONS OF BUSINESS......................... 28
SECTION 8.1 MANAGEMENT....................................... 28
SECTION 8.2 CERTIFICATE OF LIMITED PARTNERSHIP............... 32
SECTION 8.3 RESTRICTIONS ON GENERAL PARTNER'S
AUTHORITY........................................ 33
SECTION 8.4 REIMBURSEMENT OF THE GENERAL PARTNER............. 36
SECTION 8.5 CONTRACTS WITH AFFILIATES; OTHER
BUSINESS......................................... 38
SECTION 8.6 INDEMNIFICATION OF GENERAL PARTNER AND
OTHER COVERED PERSONS............................ 39
SECTION 8.7 LIABILITY OF THE GENERAL PARTNER AND
OTHER COVERED PERSONS............................ 41
SECTION 8.8 OTHER MATTERS CONCERNING THE GENERAL
PARTNER AND OTHER PERSONS........................ 43
SECTION 8.9 RELIANCE BY THIRD PARTIES........................ 44
ARTICLE IX RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS...................... 45
SECTION 9.1 LIMITATION OF LIABILITY.......................... 45
SECTION 9.2 OUTSIDE ACTIVITIES OF LIMITED PARTNERS........... 45
SECTION 9.3 RETURN OF CAPITAL................................ 46
SECTION 9.4 RIGHTS OF LIMITED PARTNERS RELATING TO
THE PARTNERSHIP.................................. 46
SECTION 9.5 REDEMPTION RIGHTS OF CLASS A AND CLASS B
UNITS............................................ 47
SECTION 9.6 ADJUSTMENTS...................................... 53
SECTION 9.7 CERTAIN COVENANTS................................ 54
SECTION 9.8 PARTNERSHIP RIGHT TO CALL LIMITED PARTNER
INTERESTS........................................ 54
SECTION 9.9 REPURCHASE OF UNITS.............................. 55
ARTICLE X BOOKS, RECORDS, ACCOUNTING AND REPORTS........................... 56
SECTION 10.1 RECORDS AND ACCOUNTING........................... 56
SECTION 10.2 FISCAL YEAR...................................... 56
SECTION 10.3 REPORTS.......................................... 56
ARTICLE XI TAX MATTERS..................................................... 57
SECTION 11.1 PREPARATION OF TAX RETURNS....................... 57
SECTION 11.2 TAX ELECTIONS.................................... 57
SECTION 11.3 TAX MATTERS PARTNER.............................. 57
SECTION 11.4 WITHHOLDING...................................... 59
ARTICLE XII TRANSFERS AND WITHDRAWALS...................................... 60
SECTION 12.1 TRANSFER......................................... 60
SECTION 12.2 TRANSFER OF GENERAL PARTNER'S PARTNER
INTEREST......................................... 60
SECTION 12.3 TRANSFER OF LIMITED PARTNER UNITS................ 61
-ii-
<PAGE>
SECTION 12.4 SUBSTITUTED LIMITED PARTNERS.....................63
SECTION 12.5 ASSIGNEES........................................64
SECTION 12.6 GENERAL PROVISIONS...............................64
ARTICLE XIII ADMISSION OF PARTNERS.........................................67
SECTION 13.1 ADMISSION OF SUCCESSOR GENERAL PARTNER...........67
SECTION 13.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS.........67
SECTION 13.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF
LIMITED PARTNERSHIP..............................68
SECTION 13.4 ADMISSION OF INITIAL LIMITED PARTNERS............68
ARTICLE XIV DISSOLUTION, LIQUIDATION AND TERMINATION.......................68
SECTION 14.1 DISSOLUTION......................................68
SECTION 14.2 WINDING UP.......................................69
SECTION 14.3 RIGHTS OF LIMITED PARTNERS.......................71
SECTION 14.4 NOTICE OF DISSOLUTION............................71
SECTION 14.5 CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP......................................71
SECTION 14.6 REASONABLE TIME FOR WINDING-UP...................71
SECTION 14.7 ACCOUNTING.......................................72
ARTICLE XV PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; MEETINGS................72
SECTION 15.1 PROCEDURES FOR ACTIONS AND CONSENTS OF
PARTNERS.........................................72
SECTION 15.2 MEETINGS OF THE PARTNERS.........................72
ARTICLE XVI GENERAL PROVISIONS.............................................73
SECTION 16.1 ADDRESSES AND NOTICE.............................73
SECTION 16.2 TITLES AND CAPTIONS..............................73
SECTION 16.3 PRONOUNS AND PLURALS.............................73
SECTION 16.4 FURTHER ACTION...................................74
SECTION 16.5 BINDING EFFECT...................................74
SECTION 16.6 WAIVER...........................................74
SECTION 16.7 COUNTERPARTS.....................................74
SECTION 16.8 APPLICABLE LAW...................................75
SECTION 16.9 ENTIRE AGREEMENT.................................75
SECTION 16.10 INVALIDITY OF PROVISIONS.........................75
SECTION 16.11 LIMITATION TO PRESERVE REIT STATUS...............75
SECTION 16.12 NO PARTITION.....................................76
SECTION 16.13 POWER OF ATTORNEY................................76
SECTION 16.14 NO THIRD-PARTY RIGHTS CREATED HEREBY.............78
SECTION 16.15 AMENDMENT........................................78
-iii-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Partners and Addresses
Exhibit B Allocations
Exhibit C Contribution Agreements
Exhibit D Notice of Redemption
Exhibit E Partnership Unit Certificate
Exhibit F Excluded PREIT Assets and Properties
Schedule I List of TRO Shareholders and Debtholders
(Section 5.3(i))
Schedule II Hillview Contributors (Section 5.3(ii))
Schedule III Predevelopment Contributors (Section 5.3(iii))
Schedule IV Northeast Contributors (Section 5.3(iv))
Schedule V Consent Required to Sell Certain
Partnership Properties (Section 8.3B)
Schedule VI Non-Continuing TRO Shareholders (Section 9.5.K)
Schedule VII List of Partners with Certain Redemption
Rights (Section 9.5.M)
-iv-
<PAGE>
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PREIT ASSOCIATES, L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PREIT ASSOCIATES, L.P., dated as of September 30, 1997 (the
"Effective Date"), is entered into by and among Pennsylvania Real Estate
Investment Trust, a Pennsylvania business trust ("PREIT"), as the initial
General Partner, and the Persons whose names are set forth on Exhibit A as
attached hereto, as the Limited Partners as of the date hereof.
RECITALS:
By an Agreement of Limited Partnership dated June 30, 1997
(the "Original Partnership Agreement") and a Certificate of Limited
Partnership dated June 30, 1997, filed in the office of the Delaware Secretary
of State on June 30, 1997, PREIT, as General Partner, and PREIT Property
Trust, a Pennsylvania business trust, all of the beneficial interests of which
are held by PREIT ("PREIT Sub"), as the Limited Partner, formed the
Partnership pursuant to the Act. Now, the General Partner and the Limited
Partners named in Exhibit A hereto, including PREIT Sub, wish to amend and
restate in its entirety the Agreement and continue the Partnership as a
limited partnership formed under the Act for the purpose of owning and
operating the business of the Partnership as hereinafter set forth with the
General Partner as the sole general partner and the Limited Partners named on
Exhibit A as the limited partners as of the date hereof.
NOW, THEREFORE, in consideration of the mutual promises and
obligations contained herein, the parties hereto, intending to be legally
bound, hereby amend and restate the Original Partnership Agreement in its
entirety and hereby agree as follows:
ARTICLE I DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section 17-101, et seq., as it may be amended from time to time,
and any successor to such statute.
"ACTIONS" has the meaning set forth in Section 8.6 hereof.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner after the date hereof
<PAGE>
pursuant to the terms of this Agreement and who is shown as such on the books
and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(a) decrease such deficit by any amounts that such Partner
is obligated to restore pursuant to this Agreement or by operation of law upon
liquidation of such Partner's Partner Interest or is deemed to be obligated to
restore pursuant to the penultimate sentence of each of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account
Deficit" is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling or controlled by or under common control
with such Person. For the purposes of this definition, "control" when used
with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"AGREEMENT" means this First Amended and Restated Agreement
of Limited Partnership of PREIT ASSOCIATES, L.P., as it may be amended,
supplemented or restated from time to time.
"APPRAISAL" means, with respect to any assets (including,
without limitation, securities), the written opinion of an independent third
party experienced in the valuation of similar assets, selected by the General
Partner in good faith. Such opinion may be in the form of an opinion by such
independent third party that the value for such property or asset as set by
the General Partner is fair, from a financial point of view, to the
Partnership.
"ASSIGNEE" means a Person to whom one or more Limited
Partner Interests have been Transferred in a manner permitted under this
Agreement, but who has not become a Limited Partner.
"AVAILABLE CASH" means, with respect to any period for which
such calculation is being made:
-2-
<PAGE>
(a) all cash received by the Partnership from any source
(including borrowings by the Partnership, cash Capital Contributions and
proceeds of the sale, exchange or other disposition of all or portions of the
Partnership's assets) and any cash released from working capital, capital
replacement, debt repayment or other reserves, less
(b) cash expended, reserved or required for:
(i) debts and expenses, interest and principal
payments on any indebtedness, capital expenditures, taxes and
fees,
(ii) investments in the acquisition, development,
construction, expansion or redevelopment of real estate or personal property
appurtenant thereto, or entities which hold direct or indirect interests in
real estate or such personal property, or
(iii) other requirements of the Partnership, in
each case as determined by the General Partner. Notwithstanding the foregoing,
Available Cash shall not include any cash received or reductions in reserves,
or take into account any disbursements made or reserves established, after
commencement of the dissolution and liquidation of the Partnership.
"BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which the American or New York Stock Exchange or the NASDAQ Stock
Market is closed.
"CAPITAL ACCOUNT" means, with respect to any Partner, the
capital account maintained by the General Partner for such Partner on the
Partnership's books and records in accordance with the following provisions:
(a) To each Partner's Capital Account, there shall be added
such Partner's Capital Contributions, such Partner's distributive share of Net
Income and any items in the nature of income or gain that are specially
allocated pursuant to Section 2 of Exhibit B hereof, and the principal amount
of any Partnership liabilities assumed by such Partner or that are secured by
any property distributed to such Partner.
(b) From each Partner's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses that are specially allocated pursuant to Section 2 of
Exhibit B hereof, and the principal amount of any liabilities of such Partner
assumed by the Partnership or that are secured by any property contributed by
such Partner to the Partnership.
-3-
<PAGE>
(c) In the event any interest in the Partnership is
Transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent that it
relates to the transferred interest.
(d) In determining the principal amount of any liability for
purposes of subsections (a) and (b) hereof, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
(e) The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. If the General Partner shall
determine that it is prudent to modify the manner in which the Capital
Accounts are maintained in order to comply with such Regulations, the General
Partner may make such modification provided that such modification will not
affect adversely the amounts distributable to any Partner without such
Partner's Consent. The General Partner also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on
the Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b) or Section
1.704-2.
"CAPITAL CONTRIBUTION" means, with respect to any Partner,
the amount of money and the initial Gross Asset Value of any Contributed
Property that such Partner contributes to the Partnership pursuant to this
Agreement, as the same may be adjusted pursuant to subsection (E) of the
definition of "Gross Asset Value."
"CASH AMOUNT" means an amount of cash equal to the product
of (x) the Value of a share of Common Stock and (y) the REIT Shares Amount,
each determined as of the applicable Valuation Date.
"CERTIFICATE" means the Certificate of Limited Partnership
of the Partnership as filed in the office of the Delaware Secretary of State,
as amended from time to time in accordance with the terms hereof and the Act.
"CHARTER" means the organizational document or documents of
the General Partner, as from time to time amended, including without
limitation and as appropriate, the General Partner's trust agreement, the
partnership agreement, limited liability company agreement, and shareholders'
agreement, certificate of incorporation, bylaws, and any other similar
document, agreements,
-4-
<PAGE>
and instruments, in each case, as the same may be amended from time to time.
The Charter of the initial General Partner is the Trust Agreement dated
December 27, 1960, as last amended and restated on September 29, 1997 and
filed with the Secretary of State of the Commonwealth of Pennsylvania on
September 29, 1997.
"CLASS A LIMITED PARTNER INTEREST" shall have the meaning
set forth in Section 4.2.
"CLASS A UNITS" means Units of Class A Limited Partner
Interest.
"CLASS B LIMITED PARTNER INTEREST" shall have the meaning
set forth in Section 4.2.
" CLASS B UNITS" means Units of Class B Limited Partner
Interest.
"CODE" means the Internal Revenue Code of 1986, as amended
and in effect from time to time or any successor statute thereto, as
interpreted by the applicable Regulations thereunder. Any reference herein to
a specific section or sections of the Code shall be deemed to include a
reference to any corresponding provision of future law.
"COMMON LIMITED PARTNER INTEREST" means any Limited Partner
Interest that is entitled to receive distributions, whether upon liquidation
or otherwise, and allocations of income, gain, loss, or deduction without
preference as to any other class or series of Partner Interest.
"COMMON STOCK" means a common share of beneficial interest
in Pennsylvania Real Estate Investment Trust, par value $1.00 per share.
"CONSENT" means the consent to, approval of, or vote on a
proposed action by, as applicable, a Partner or class of Partners given in
accordance with the pertinent provisions hereof.
"CONSENT OF THE LIMITED PARTNERS" shall be deemed to have
been obtained if (x) not less than 20 days prior to the proposed date for
taking an action for which such Consent is required hereunder, each Limited
Partner entitled to consent thereon shall have been notified in writing by the
General Partner of the proposed action and if, upon the expiration of 20 days
from the date of such notice, no Limited Partner shall have objected in
writing to the proposed action or, if there shall have been any such
objection(s), the Limited Partner(s) making such objections shall represent
the requisite percentage of the Limited Partners entitled to consent thereon
for denying the action of the Limited Partners or (y) the written consent of
the requisite percentage of the Limited Partners entitled to consent thereon
shall have been
-5-
<PAGE>
obtained to a proposed action. For purposes of this definition, the term
"Limited Partners" shall exclude the General Partner and any Affiliate of the
General Partner (other than Persons who, directly or indirectly, acquire Class
A Units pursuant to Contribution Agreements) in their capacity as a holder of
Limited Partner Interests.
"CONTRIBUTION AGREEMENT" shall mean any of the Contribution
Agreements among or between Partners and the Partnership and listed on Exhibit
C hereto.
"CONTRIBUTED PROPERTY" means each Property or other asset,
in such form as may be permitted by the Act, but excluding cash, contributed
or deemed contributed to the Partnership.
"COVERED PERSON" shall have the meaning ascribed to it
in Section 8.6.
"CUT-OFF DATE" means the ninth (9th) Business Day after the
General Partner's receipt of a Notice of Redemption.
"DEBT" means, as to any Person, as of any date of
determination,
A. All indebtedness of such Person for borrowed money
or for the deferred purchase price of property or services;
B. All amounts owed by such Person to banks or other Persons
in respect of reimbursement obligations under letters of credit, surety bonds,
surety agreements, guarantees and other similar instruments guaranteeing
payment or other performance of obligations by such Person;
C. All indebtedness for borrowed money or for the deferred
purchase price of property or services secured by any lien on any property
owned by such Person, to the extent attributable to such Person's interest in
such property, even though such Person has not assumed or become liable for
the payment thereof; and
D. Lease obligations of such Person that, in accordance with
generally accepted accounting principles, as in effect at the applicable date
of determination should be capitalized.
"DEBT SECURITIES" shall have the meaning ascribed to it
in Section 4.3.B.
"DECLINATION" has the meaning set forth in Section 9.5.E
hereof.
-6-
<PAGE>
"DEFERRED ACQUISITIONS" means the acquisition of properties
contemplated by the Hillview Contribution Agreement, the Northeast
Contribution Agreement, and the Predevelopment Properties Contribution
Agreement.
"DEPRECIATION" means, for each Fiscal Year or other
applicable period, an amount equal to the federal income tax depreciation,
amortization or other cost recovery deduction allowable with respect to an
asset for such year or other period, except that, if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such year or period, Depreciation shall be in an amount that
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
that, if the federal income tax depreciation, amortization or other cost
recovery deduction for such year or period is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partner, and provided, further, that
Depreciation shall be computed in accordance with Regulations Section
1.704-3(d)(2) with respect to any property as to which the Partnership adopts
the "remedial allocation method."
"EFFECTIVE DATE" has the meaning set forth in the
preamble to this Agreement.
"ENCUMBRANCE" means any lien, security interest, charge,
easement, equitable interest, condition, mortgage, deed of trust, pledge,
option, adverse claim, right of first refusal or offer, and any other right,
claim or interest of another of any kind or nature whatsoever, actual or
contingent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"EXCLUDED ASSETS" shall mean the assets and properties set
forth on Exhibit F attached hereto.
"FAMILY MEMBERS" means, as to a Person that is an
individual,
A. Such Person's spouse,
B. Such Person's ancestors,
C. Such Person's descendants (whether by blood or by
adoption),
-7-
<PAGE>
D. Such Person's brothers and sisters,
E. Inter vivos or testamentary trusts of which only such
Person and/or his spouse, ancestors, descendants (whether by blood or by
adoption), brothers and/or sisters are beneficiaries, and
F. Any partnership, business trust or limited liability
company all of whose partners, beneficial owners or members consist of such
Person and/or his spouse, ancestors, descendants (whether by blood or by
adoption), brothers and/or sisters and/or inter vivos or testamentary trusts
of which only such Person and/or his spouse, ancestors, descendants (whether
by blood or by adoption), brothers and/or sisters are beneficiaries.
"FISCAL YEAR" means the fiscal year of the Partnership.
"GENERAL PARTNER" means the person then acting as the
general partner of the Partnership, in its capacity as general
partner of the Partnership. The original General Partner is the
Pennsylvania Real Estate Investment Trust, a Pennsylvania business
trust.
"GENERAL PARTNER INTEREST" means the Partner Interest held
by the General Partner and designated as such, which Partner Interest is an
interest as a general partner under the Act. A General Partner Interest may be
expressed as a number of General Partner Units.
"GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
A. The initial Gross Asset Value of any asset contributed by
a Limited Partner to the Partnership shall be the fair market value of the
consideration paid by the Partnership for such asset as determined by the
General Partner.
B. The Gross Asset Values of all Partnership assets
immediately prior to the occurrence of any event described in clause (1),
clause (2) or clause (3) hereof shall be adjusted to equal their respective
gross fair market values, as determined by the General Partner using such
reasonable method of valuation as it may adopt, as of the following times:
(1) the acquisition of an additional interest in
the Partnership (other than in connection with the execution of this
Agreement) by a new or existing Partner in exchange for more than a de minimis
Capital Contribution;
-8-
<PAGE>
(2) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property
as consideration for an interest in the Partnership; and
(3) the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
C. The Gross Asset Value of any Partnership asset
distributed to a Partner shall be the gross fair market value of such asset on
the date of distribution as determined by the distributee and the General
Partner, provided that, if the distributee is the General Partner or if the
distributee and the General Partner cannot agree on such a determination, such
gross fair market value shall be determined by Appraisal.
D. The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subsection (D) to the extent that the General Partner reasonably
determines that an adjustment pursuant to subsection (B) above is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this subsection (D).
E. Notwithstanding anything to the contrary, if any of the
Limited Partners as of the date hereof receives additional Units in the future
in respect of property contributed to the Partnership on the date hereof or
contributed subsequently pursuant to agreements entered into as of the date
hereof, the Gross Asset Value of such contributed property shall be adjusted
to reflect such value as will cause the Capital Accounts of the Partners,
after taking into account such contribution and such adjustment, to be
proportionate to their Units.
F. If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subsection (A), subsection (B), subsection
(C), subsection (D) or subsection (E) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Income and Net Losses.
"HILLVIEW CONTRIBUTION AGREEMENT" means the Contribution
Agreement, dated July 30, 1997, among the Partnership, the General Partner,
Cherry Hill Partner, Inc., and Rubin Oxford Valley Associates, L.P.
"INCAPACITY" or "INCAPACITATED" means, (A) as to any
Partner who is an individual, death, total physical disability or
-9-
<PAGE>
entry by a court of competent jurisdiction adjudicating such Partner
incompetent to manage his or her person or his or her estate; (B) as to any
Partner that is a corporation or limited liability company, the filing of a
certificate of dissolution, or its equivalent, for the corporation or limited
liability company or the revocation of its charter; (C) as to any Partner that
is a partnership, the dissolution and commencement of winding up of the
partnership; (D) as to any Partner that is an estate, the distribution by the
fiduciary of the estate's entire interest in the Partnership; (E) as to any
trustee of a trust that is a Partner, the termination of the trust (but not
the substitution of a new trustee); or (F) as to any Partner, the bankruptcy
of such Partner. For purposes of this definition, bankruptcy of a Partner
shall be deemed to have occurred when (AA) the Partner commences a voluntary
proceeding seeking liquidation, reorganization or other relief of or against
such Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (BB) the Partner is adjudged as bankrupt or insolvent, or
a final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Partner,
(CC) the Partner executes and delivers a general assignment for the benefit of
the Partner's creditors, (DD) the Partner files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Partner in any proceeding of the nature described in clause (BB)
above, (EE) the Partner seeks, consents to or acquiesces in the appointment of
a trustee, receiver or liquidator for the Partner or for all or any
substantial part of the Partner's properties, (FF) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency
or other similar law now or hereafter in effect has not been dismissed within
one hundred twenty (120) days after the commencement thereof, (GG) the
appointment without the Partner's consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days
of such appointment, or (HH) an appointment referred to in clause (GG) above
is not vacated within ninety (90) days after the expiration of any such stay.
"INTEREST" means interest, original issue discount and other
similar payments or amounts paid by the Partnership for the use or forbearance
of money.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"LIMITED PARTNER" means any Person named as a Limited
Partner in Exhibit A attached hereto, as such Exhibit A may be amended from
time to time, in such Person's capacity as a Limited Partner in the
Partnership.
"LIMITED PARTNER INTEREST" means a Partner Interest of
any series or class designated as such pursuant to Section 4.2 or
-10-
<PAGE>
4.3 and held by a Person in his capacity as a Limited Partner. A Limited
Partner Interest shall be expressed as a number of Limited Partner Units.
"LIQUIDATING EVENT" has the meaning set forth in Section
14.1 hereof.
"LIQUIDATOR" has the meaning set forth in Section 14.2
hereof.
"MAJORITY IN INTEREST" shall mean, unless otherwise
qualified herein, holders of a majority of the issued and outstanding Class A
and Class B Units (excluding Limited Partner Interests held by the General
Partner or an Affiliate of the General Partner, other than Persons who,
directly or indirectly, acquire Class A Units pursuant to the Contribution
Agreements) and any other Common Limited Partner Interests of any series or
class that may hereafter be created in accordance with this Agreement and
included (by the express terms of the amendment, supplement or addendum hereto
that creates theory) within the definition of "Majority in Interest", as at
the time of determination.
"NET INCOME" or "NET LOSS" means, for each Fiscal Year, an
amount equal to the Partnership's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant
to Code Section 703(a)(1) shall be included in taxable income or loss), with
the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing Net
Income (or Net Loss) pursuant to this definition of "Net Income" or "Net Loss"
shall be added to (or subtracted from, as the case may be) such taxable income
(or loss);
(b) Any expenditure of the Partnership described in Code
Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Income (or Net Loss) pursuant to this definition
of "Net Income" or "Net Loss," shall be subtracted from (or added to, as the
case may be) such taxable income (or loss);
(c) In the event that the Gross Asset Value of any
Partnership asset is adjusted pursuant to subsection (b) or subsection (c) of
the definition of "Gross Asset Value," the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Net Income or Net Loss;
-11-
<PAGE>
(d) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions that would otherwise be taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation
for such Fiscal Year;
(f) To the extent that an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to
be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's interest in the
Partnership, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Net Income or Net
Loss; and
(g) Notwithstanding any other provision of this definition
of "Net Income" or "Net Loss," any item that is specially allocated pursuant
to Section 2 of Exhibit B hereto shall not be taken into account in computing
Net Income or Net Loss. The amounts of the items of Partnership income, gain,
loss or deduction available to be specially allocated pursuant to Section 2 of
Exhibit B hereto shall be determined by applying rules analogous to those set
forth in this definition of "Net Income" or "Net Loss."
"NEW SECURITIES" has the meaning ascribed to it in
Section 8.3.C,
"NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions
for a Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"NORTHEAST CONTRIBUTION AGREEMENT" means the Contribution
Agreement, dated July 30, 1997, among the Partnership, the General Partner,
Roosevelt Blvd. Co., Inc., and the individuals named therein.
"NOTICE OF REDEMPTION" means a Notice of Redemption
substantially in the form of Exhibit D attached to this Agreement.
-12-
<PAGE>
"ORIGINAL PARTNERSHIP AGREEMENT" shall have the meaning
ascribed to it in the Preamble hereto.
"OWNERSHIP LIMIT" means the applicable restriction on
ownership of shares of or beneficial interests in the General Partner imposed
under the Charter.
"Oxford Contributors" shall have the meaning ascribed to
it in Section 6.6.
"PARTNER" means the General Partner or a Limited Partner,
and "PARTNERS" means the General Partner and the Limited Partners, in all
cases as at the applicable time of determination.
"PARTNER INTEREST" means any equity interest in the
Partnership or any right, option, warrant or other equity security
exchangeable for or convertible into such an equity interest (other than
convertible debt securities) and includes any and all benefits to which the
holder of such a Partner Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the
terms and provisions of this Agreement. A Partner Interest may be expressed as
a number of Units of a series or class.
"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth
in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall
be determined in accordance with Regulations Section 1.704-2(i)(2).
"PARTNERSHIP" means the limited partnership formed under the
Act and continued pursuant to this Agreement, and any successor thereto.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Fiscal Year shall be determined in accordance with Regulations Section
1.704-2(d).
"PERCENTAGE INTEREST" means the percentage represented by a
Unit or group of Units, as applicable, of the aggregate of (x) the issued and
outstanding Common Limited Partner Interests
-13-
<PAGE>
and (y) the issued and outstanding General Partner Interests, in each case as
at the time of determination,
"PERMITTED TRANSFER" has the meaning set forth in Section
12.3 hereof.
"PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.
"PREDEVELOPMENT PROPERTIES CONTRIBUTION AGREEMENT" means the
Contribution Agreement, dated July 30, 1997, among the Partnership, the
General Partner, and Predevelopment Properties, L.L.C.
"PREFERRED PARTNER INTEREST" means any Partner Interest that
is entitled to receive any distribution, whether upon liquidation or
otherwise, or any allocation of income, gain, loss or deduction in preference
to any other Partner Interest.
"PROPERTIES" means any assets and property of the
Partnership, including but not limited to, interests in real property and
personal property, including, without limitation, fee interests, interests in
ground leases, interests in limited liability companies, trusts, joint
ventures and partnerships, interests in mortgages, and Debt instruments as the
Partnership may hold from time to time.
"QUALIFYING PARTY" means a holder of record of Class A Units
or Class B Units at the time a Notice of Redemption is properly given pursuant
to Section 9.5 of this Agreement and who at such time has been admitted to the
Partnership as a Limited Partner, other than the General Partner or an
Affiliate of the General Partner (other than Persons who, directly or
indirectly acquire Class A Units pursuant to the Contribution Agreements).
"REDEMPTION" has the meaning set forth in Section 9.5.A
hereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement, dated as of September 30, 1997, between the General Partner
and the other Persons named as parties thereto and any other registration
rights agreement that the General Partner may enter into from time to time
with any Person with respect to shares of Common Stock issuable in exchange
for Units.
"REGULATIONS" means the applicable income tax regulations
under the Code, whether such regulations are in proposed, temporary or final
form, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
-14-
<PAGE>
"REGULATORY ALLOCATIONS" has the meaning set forth in
Section 2(f) of Exhibit B hereof.
"REIT" means a real estate investment trust qualifying under
Code Section 856.
"REIT PARTNER" means a Partner or Assignee that is, or has
made an election to qualify as, a REIT.
"REIT PAYMENT" has the meaning set forth in Section
16.11 hereof.
"REIT REQUIREMENTS" has the meaning set forth in Section
6.1.B hereof.
"REIT SHARES AMOUNT" has the meaning set forth in
Section 9.5.N hereof.
"RIGHTS" has the meaning set forth in the definition of
"REIT Shares Amount."
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"SPECIFIED REDEMPTION DATE" means, except as otherwise
provided in Section 9.5, with respect to any redemption the first Business Day
after the Cut-Off Date; provided, however, that the Specified Redemption Date,
as well as the closing of a Redemption, or an acquisition of Tendered Units by
the General Partner pursuant to Article IX hereof, on any Specified Redemption
Date, may be deferred, in the General Partner's sole discretion, for such time
as may reasonably be required to effect, as applicable, (i) compliance with
the Securities Act or other law (including, but not limited to, (x) state
"blue sky" or other securities laws and (y) the expiration or termination of
the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) and (ii) satisfaction or waiver of other
commercially reasonable and customary closing conditions and requirements for
a transaction of such nature.
"SUBSIDIARY" means, with respect to any Person, any
corporation, business trust, partnership, limited liability company, or other
entity of which a majority of (x) the voting power of the voting equity
securities or (y) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"TAX RATE" means forty-five percent (45%), adjusted upward
or downward, as applicable, by the amount that the highest
-15-
<PAGE>
individual marginal rate of taxation under the Code is greater or less than
39.6%.
"TENDERED UNITS" has the meaning set forth in Section 9.5.A
hereof.
"TENDERING PARTY" has the meaning set forth in Section 9.5.B
hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, results in the sale or
other disposition of all or substantially all of the assets of the
Partnership.
"TRANSACTION DOCUMENTS" means, collectively, each
Contribution Agreement, the Registration Rights Agreement, and each other
instrument, document, and agreement (other than this Agreement) delivered
pursuant to the Contribution Agreements.
"TRANSFER," when used with respect to all or any portion of
a Partner Interest, means any sale, assignment, bequest, conveyance, devise,
gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage,
exchange, transfer or other disposition or act of alienation, whether
voluntary or involuntary or by operation of law; provided, however, that
Transfer does not include any Redemption of Units by the Partnership, or
acquisition of Partner Interests from the Limited Partners by the General
Partner. The terms "Transferred" and "Transferring" have correlative meanings.
"TRO CONTRIBUTION AGREEMENT" means the Contribution
Agreement, dated July 30, 1997, among the Partnership, the General Partner,
The Rubin Organization, Inc., The Rubin Organization-Illinois, Inc., and the
other Persons named as parties thereto.
"UNIT" shall have the meaning specified in Section 4.1.C
hereof.
"VALUATION DATE" means the date of receipt by the General
Partner of a Notice of Redemption or, if such date is not a Business Day, the
first Business Day thereafter.
"VALUE" means, with respect to a share of Common Stock, the
average of the daily closing prices for a share of Common Stock for the ten
(10) consecutive trading days immediately preceding the date on which the
determination is made hereunder. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to
-16-
<PAGE>
trading on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market as reported by NASDAQ
or such other system then in use on any such date, or, if the Common Stock is
not so listed or admitted to trading and bid and asked prices are not so
reported, an amount equal to the fair market value of a share as at the
applicable date of determination, determined by Appraisal.
"ZELL CONTRIBUTION AGREEMENT" means the Agreement of
Purchase and Sale which was assigned to a Subsidiary of the Partnership and
pursuant to which the Partnership indirectly acquired Magnolia Mall as more
particularly described on Exhibit A hereto.
ARTICLE II ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION
The Partnership is a limited partnership formed pursuant to
the provisions of the Act, and the Partners hereby continue the Partnership as
a limited partnership pursuant to the provisions of the Act for the purposes
and upon the terms and conditions hereinafter set forth. Except as expressly
provided herein to the contrary, the rights and obligations of the Partners
and the administration and termination of the Partnership shall be governed by
the Act.
SECTION 2.2 NAME
The name of the Partnership is PREIT ASSOCIATES, L.P. The
Partnership's business may be conducted under any other name or names selected
by the General Partner, including the name of the General Partner or any
Affiliate thereof, and all transactions of the Partnership and title to all of
the Partnership's assets, to the extent permitted by applicable law, shall be
completed in such name. The General Partner in its sole discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Partners of such change in the next regular communication to the Partners.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE
The address of the registered office of the Partnership in
the State of Delaware is located at 1209 Orange Street, Wilmington, Delaware
19801, and the registered agent for service of process on the Partnership in
the State of Delaware at such registered office is The Corporation Trust
Company. The principal office of the Partnership is located at 455
Pennsylvania Avenue,
-17-
<PAGE>
Fort Washington, PA 19034, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places and in such jurisdictions as
the General Partner deems advisable in its sole discretion.
SECTION 2.4 TERM
The term of the Partnership commenced on June 30, 1997, the
date that the original Certificate was filed in the office of the Secretary of
State of Delaware in accordance with the Act, and shall continue until
December 31, 2097 unless the Partnership is dissolved sooner pursuant to law
or this Agreement.
Section 2.5 PARTNERSHIP ASSETS.
A. The Partners shall use the Partnership's credit and
assets solely for the benefit of the Partnership. Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively with other Partners or Persons, shall have any ownership interest
in such Partnership assets or any portion thereof solely by virtue of his, her
or its status as a Partner. The General Partner hereby declares and warrants
that any Partnership assets for which legal title is held in the name of the
General Partner or any nominee or Affiliate of the General Partner in
accordance with this Agreement shall be held by the General Partner for the
use and benefit of the Partnership. All Partnership assets shall be recorded
as the property of the Partnership in its books and records, irrespective of
the name in which legal title to such Partnership assets is held.
B. No Partner shall, either directly or indirectly, take any
action to require partition or appraisal of the Partnership or of any of its
assets or properties or cause the sale of any Partnership property for other
than a Partnership purpose, and notwithstanding any provision of applicable
law to the contrary, each Partner (and such Partner's legal representatives,
successors and assigns) hereby irrevocably waives any and all right to
maintain any action for partition or to compel any sale with respect to its
Partner Interest or with respect to any assets or properties of the
Partnership, except as expressly provided in this Agreement.
Section 2.6 OFFICERS
The Partnership may have such officers, including, without
limitation, a Chief Executive Officer, a President, one or more Vice
Presidents, a Chief Financial Officer, a Treasurer, a Secretary, and one or
more Assistant Secretaries, who shall perform such duties, serve for such
periods, and have such
-18-
<PAGE>
responsibilities as the General Partner in its sole discretion may determine.
Section 2.7 LIMITATION ON LIABILITY OF PERSONS RELATED TO PARTNERS.
Except as otherwise required by applicable law or as
expressly agreed in writing, no director, trustee, officer, shareholder,
partner, employee or agent of any Partner shall be personally liable for the
payment of any sums owing by such Partner to the Partnership or any other
Partner under the terms of this Agreement or for the performance of any other
covenant or agreement of such Partner contained herein.
ARTICLE III PURPOSE
SECTION 3.1 PURPOSE AND BUSINESS
The purpose and nature of the Partnership is (A) to conduct,
directly or indirectly, any business, enterprise or activity permitted by or
under the Act, including, but not limited to acquiring, owning, holding,
developing, constructing, redeveloping, improving, maintaining, operating,
selling, leasing, renting, transferring, encumbering, mortgaging, conveying,
exchanging, disposing of, or dealing with real and personal property of any
kind, tangible and intangible, provided that such business shall be limited to
and conducted in such a manner so as to permit the General Partner at all
times to qualify as a REIT, unless the General Partner ceases to qualify as a
REIT for reasons other than the conduct of the Partnership's business, (B) to
enter into or acquire interests in any partnership, corporation, joint
venture, trust, limited liability company or other similar arrangement to
engage directly or indirectly through one or more other entities in any
business permitted by or under the Act, or to own interests in any entity
engaged in any business permitted by or under the Act, and (C) to do anything
necessary or incidental to the foregoing.
SECTION 3.2 POWERS
The Partnership shall be empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
(and for the protection and benefit) of the Partnership and in this regard
shall have and exercise all powers not prohibited by the Act. In connection
with the foregoing, the Partnership shall have full power and authority,
directly or indirectly through interests in other partnerships, trusts,
limited liability companies, corporations, joint ventures or other
associations, to enter into, perform, and carry out contracts of any kind, to
borrow and lend money and to issue
-19-
<PAGE>
evidences of indebtedness, whether or not secured by mortgages, trust deeds,
pledges or other liens, to guaranty, provide security for or cause any entity
in which the Partnership has an interest to guaranty or provide security for
indebtedness or other obligations of the General Partner, the Partnership, or
any other entity in which the Partnership has an interest. Notwithstanding the
foregoing, under no circumstances shall the General Partner be required, by
the terms of this Agreement, to cause the Partnership to take or refrain from
taking any action if, in the reasonable judgment of the General Partner, such
action or failure to act (A) could adversely affect the ability of the General
Partner to continue to qualify as a REIT, (B) could subject the General
Partner to any additional taxes under Code Section 857 or 4981, or (C) could
violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner or its securities.
SECTION 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED
This Agreement shall not be deemed to create a company,
venture or partnership between or among the Partners with respect to any
activities whatsoever other than the activities actually conducted by the
Partnership and within the purposes of the Partnership as specified in Section
3.1 hereof. Except as otherwise provided in this Agreement, no Partner shall
have any authority to act for, bind, commit or assume any obligation or
responsibility on behalf of the Partnership, its properties or any other
Partner. No Partner, in its, his or her capacity as a Partner under this
Agreement, shall be responsible or liable for any indebtedness or obligation
of another Partner, nor shall the Partnership be responsible or liable for any
indebtedness or obligation of any Partner, incurred either before or after the
execution and delivery of this Agreement by such Partner, except as to those
responsibilities, liabilities, indebtedness or obligations incurred pursuant
to and as limited by the terms of this Agreement and the Act.
ARTICLE IV PARTNER INTERESTS; DEBT SECURITIES
SECTION 4.1 IN GENERAL
A. The Partnership is authorized to issue an unlimited
number of Partner Interests of such classes and series as the General Partner,
in its sole discretion, may determine in accordance with and subject to
Sections 4.3 and 8.3.C. Except as set forth in any addendum, amendment or
supplement hereto creating a class or series of Partner Interests, the number
of Units of any class or series of Partner Interests that may be issued by the
Partnership is unlimited.
-20-
<PAGE>
B. In accordance with and subject to Sections 4.3 and 8.3.C,
the Partnership may create and issue additional classes and series of General
Partner Interests or Limited Partner Interests.
C. Each class or series of Partner Interest issued by the
Partnership shall be divided into units ("Units") with each Unit within a
class or series representing an equal undivided fractional share of each item
of Partnership income, gain, loss and deduction, and in each distribution of
Partnership assets (whether upon liquidation or otherwise), allocable to the
Units of that class or series. The ownership of Units may (but need not, in
the sole discretion of the General Partner) be evidenced by a certificate in
the form attached hereto as Exhibit E.
D. No Partner Interest shall have any right to vote on any
matter of Partnership business, except as otherwise expressly provided for in
this Agreement, or in the addendum, amendment or supplement hereto creating
such Partner Interest. Unless otherwise expressly specified herein, or in the
addendum or supplement hereto creating such Partner Interest, all Partner
Interests having a right to vote on any matter of Partnership business shall
vote as a single class.
E. Any Person may at the same time hold more than one class
or series of Partner Interest and, in such event, shall for the purposes of
this Agreement be separately entitled to the rights afforded a Partner in each
of such classes or series under this Agreement. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests, except as such rights are otherwise expressly
limited herein. If a General Partner contributes to the capital of the
Partnership as a Limited Partner or purchases any Limited Partner Interest, it
shall be treated in all respects as a Limited Partner as to such Limited
Partner Interests for so long as it holds them.
SECTION 4.2 CLASS A AND B LIMITED PARTNER INTERESTS; GENERAL PARTNER INTERESTS
A. The Partnership initially shall have two classes of
Partner Interest: General Partner Interests and Common Limited Partner
Interests. The Common Limited Partner Interests shall initially be further
subdivided into two series: "Class A Limited Partner Interests" and "Class B
Limited Partner Interests". Each of these classes and series shall be divided
into Units as required by Section 4.1.C. The Class A and Class B Units shall
be entitled to the respective rights of Redemption specified in Article IX
hereof and shall have such voting and other rights as herein expressly
specified.
-21-
<PAGE>
B. Each Class A Unit, each Class B Unit, and each General
Partner Unit shall represent the same, equal undivided fractional share of
each item of Partnership income, gain, loss, or deduction and shall entitle
its holder to share equally therein upon any allocation or distribution, after
giving effect to all allocations and distributions in respect of Preferred
Partner Interests, if any, then issued and outstanding.
SECTION 4.3 CREATION AND ISSUANCE OF ADDITIONAL CLASSES AND SERIES OF PARTNER
INTERESTS
A. Subject only to such limitations, if any, as may be
expressly set forth in this Agreement, the General Partner may from time to
time raise all or any portion of the funds required by the Partnership by
making additional Capital Contributions or soliciting and accepting additional
Capital Contributions from any Person (including Partners and Affiliates of
Partners) and/or cause the Partnership to create and issue such additional
classes and series of Partner Interests having such preferences, rights, and
designations as the General Partner may, in its business judgment, determine
to be appropriate. Any such Partner Interests may be issued for cash,
property, services, or such other type, form, and amount of consideration
(including notes and other evidences of indebtedness or obligations of the
Person acquiring the Partner Interest) as the General Partner may determine in
its business judgment to constitute fair value to the Partnership.
B. The creation of an additional class or series of Partner
Interest permitted hereunder may be made by the General Partner by setting
forth either in an amendment or an addendum or supplement to this Agreement
the relative rights, obligations, duties, and preferences of each new class or
series of Partner Interests created. A copy of this Agreement as so amended,
or the addendum or supplement as so adopted, as the case may be, shall be
provided to each other Partner. All filings necessary to be made under the Act
or applicable law in connection with the creation of such interests shall be
made by the General Partner on behalf of the Partnership.
SECTION 4.4 OTHER PROVISIONS RELATING TO ALL CLASSES AND SERIES OF PARTNER
INTERESTS
A. Fractional Units may be issued, with the amount of any
such fractional interest being rounded to the fourth decimal place.
B. By executing this Agreement, each Partner consents and
authorizes the Partnership, acting solely through the General Partner, to
issue, subject to the express requirements and limitations hereof, such
Partner Interests upon such terms and conditions as the General Partner may
from time to time determine
-22-
<PAGE>
in its business judgment to be in the best interests of the Partnership.
C. Certificates for Units may be issued at the request of
the holder of any Units as well as in the discretion of the General Partner.
SECTION 4.5 REGISTER
The General Partner shall maintain a Register at the
principal place of business of the Partnership setting forth the names,
addresses and Capital Accounts of the Partners, and the number and class
and/or series of Units held by each Partner (the "Register"). Upon any
adjustment or cancellation of any Partner's Partner Interest, the General
Partner shall make such adjustment or cancellation in the Register and send
written notice thereof to the Partner so affected. Upon an assignment or
pledge by a Partner of all or a part of its, his or her Partner Interest
pursuant to the terms hereof and as permitted hereby, the General Partner
shall register such assignment or pledge in the Register. The General Partner
shall note on the Register any restrictions on the transfer of any Partner's
Partner Interests. In the absence of manifest error, the Register shall
constitute conclusive evidence of the interest of each Partner and other
Person in Partner Interests.
ARTICLE V CAPITAL CONTRIBUTIONS
SECTION 5.1 GENERAL PARTNER CAPITAL CONTRIBUTIONS
At the time of the execution of this Agreement, the General
Partner shall make (directly or on behalf of and through PREIT sub) the
Capital Contribution shown on Exhibit A attached hereto. The General Partner
and PREIT Sub shall initially own General Partner Interests and Limited
Partner Interests in the respective amounts set forth for the General Partner
on Exhibit A attached hereto.
SECTION 5.2 LIMITED PARTNER CAPITAL CONTRIBUTIONS
A. At the time of the execution of this Agreement, each
Limited Partner shall contribute, or cause to be contributed, pursuant to a
Contribution Agreement as its initial Capital Contribution to the Partnership,
all of such Limited Partner's right, title and interest in the Contributed
Properties set forth after such Limited Partner's name on Exhibit A, and the
Partnership shall issue to and register in the name of such Limited Partner on
the Register the number of Class A or Class B Units, as applicable, set forth
opposite such Limited Partner's name on Exhibit A.
-23-
<PAGE>
B. A Limited Partner shall be unconditionally liable to the
Partnership for all or a portion of any deficit in its Capital Account if, and
only if, the Limited Partner so elects in writing to be liable for such
deficit or portion thereof. Such election may be for either a limited or an
unlimited amount and may be amended or withdrawn at any time. The election,
and any amendment thereof, shall be made by written notice to the General
Partner stating that the Limited Partner elects to be liable, and specifying
the limitations, if any, on the maximum amount or duration of such liability.
Said election, or amendment thereof, shall be effective only from the date the
written notice is received by the General Partner, and shall terminate upon
the date, if any, specified therein as a termination date or upon delivery to
the General Partner of a subsequent written notice withdrawing or otherwise
amending such election. A withdrawal, or an amendment reducing the Limited
Partner's maximum liability, shall not be effective to avoid responsibility
for any loss incurred prior to such amendment or withdrawal.
C. If the Partnership shall become entitled to payment in
respect of any indemnification undertaking pursuant to Section 10.1(b) and
10.1(c) of the TRO Contribution Agreement or in respect of the liabilities and
obligations referred to in subclauses (ii), (iii) and (vi) of Section 5.28(a)
of the TRO Contribution Agreement from a Limited Partner receiving, directly
or indirectly, Class A Units pursuant to a Contribution Agreement or pursuant
to Section 5.3 hereof, such Partner's Capital Account shall (1) be reduced by
the amount of such indemnification obligation and (2) the Partner shall have
the right to contribute as an additional Capital Contribution in cash to the
Partnership the full amount of such indemnification obligation. If such
Limited Partner shall fail to make such additional Capital Contribution, the
Partnership, at the sole option of the General Partner and in addition to any
other remedies that it may have hereunder or otherwise, may, upon notice to
such Limited Partner but without the payment of any consideration or the
taking of any action cancel the number of Class A Units as shall be equal in
value (based on the average of the high and low price of a common share of
beneficial interest in Pennsylvania Real Estate Investment Trust (as reported
on the New York Stock Exchange or such other national securities exchange or
the NASDAQ Stock Market on which the Shares are then listed or admitted to
trading) for which the Class A Units are exchangeable on the date such notice
was given to such Limited Partner) and shall apply such amount to the amount
recoverable pursuant to Section 10 of the TRO Contribution Agreement in
respect of such indemnification obligations.
SECTION 5.3 ISSUANCE OF ADDITIONAL CLASS A UNITS
Following the execution of this Agreement, the Partnership
shall issue additional Class A Units and, if
-24-
<PAGE>
applicable, cash and other consideration at the times, in the amounts, and
subject to the terms and conditions set forth in the applicable documents
referred to below, as follows:
(i) To the Persons listed on Schedule I, the number of
additional Class A Units and other consideration, if any, required by the TRO
Contribution Agreement;
(ii) To the Persons listed on Schedule II, the number of
additional Class A Units and other consideration, if any, required by the
Hillview Contribution Agreement;
(iii) To the Person(s) listed on Schedule III, the number of
additional Class A Units and other consideration, if any, required by the
Predevelopment Properties Contribution Agreement; and
(iv) To the Persons listed on Schedule IV, the number of
additional Class A Units and other consideration, if any, required by the
Northeast Contribution Agreement.
SECTION 5.4 ADDITIONAL PARTNER CONTRIBUTIONS
Subject to Sections 8.1 and 8.3.C, the General Partner may
from time to time, in its business judgment, make additional Capital
Contributions to the Partnership or solicit and accept additional Capital
Contributions from any Persons (including Partners and Affiliates of Partners)
on behalf of the Partnership.
SECTION 5.5 ADDITIONAL LIMITED PARTNERS
Subject to Section 8.3.C, the General Partner is authorized
to admit one or more Additional Limited Partners to the Partnership from time
to time, on terms and conditions and for such Capital Contributions as the
General Partner may determine. Except as provided in Section 8.3.C, no action
or consent by the Limited Partners shall be required in connection with the
admission of any Additional Limited Partner. In the sole discretion of the
General Partner, the Partnership may acquire in the future additional
Properties by means of Capital Contributions by other Persons. Persons making
such Capital Contributions shall be admitted to the Partnership as Additional
Limited Partners. To the extent that the Partnership acquires in the future
any property by the merger of any other Person into the Partnership, Persons
who receive Limited Partner Interests in exchange for their interests in the
Person merging into the Partnership shall become Limited Partners and shall be
deemed to have made Capital Contributions as provided in the applicable merger
agreement.
-25-
<PAGE>
SECTION 5.6 NO INTEREST; NO RETURN
No Partner shall be entitled to interest on its Capital
Contribution or on such Partner's Capital Account. Except as provided herein
or by law, no Partner shall have any right to demand or receive the return of
its Capital Contribution from the Partnership.
SECTION 5.7 NO PREEMPTIVE RIGHTS; NO MANDATORY ADDITIONAL CAPITAL
CONTRIBUTIONS
Except as expressly provided in Sections 5.3, 8.3.C, and
9.6 or in the addendum, amendment or supplement to this Agreement setting
forth the relative rights, obligations, duties and preferences of a class or
series of Partner Interests, or by law, no Partner shall have any right to
receive additional Partner Interests or (except as provided in Section 5.2.C)
any obligation or right to make any additional Capital Contribution or loan to
the Partnership.
ARTICLE VI DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS
A. The General Partner, in its sole discretion, may cause
the Partnership at any time or from time to time to distribute all or a
portion of Available Cash to the Partners and to provide for an appropriate
record date with respect to any such distributions, subject to the following:
(1) All distributions shall be made first to the
holders of Preferred Partner Interests, if any, until all such holders shall
have received all amounts required to be distributed to them in accordance
with the applicable designations of their Preferred Partner Interests and,
thereafter, to the General Partner and to holders of Common Limited Partner
Interests in accordance with their Percentage Interests;
(2) Each Unit of a particular class or series
shall be treated equally with respect to each distribution; and
(3) Except with respect to Preferred Partner
Interests that may be issued to the General Partner in accordance with Section
8.3.C, each Class A, Class B and General Partner Interest shall be treated
equally as to all distributions and allocations;
(4) In no event may a Partner receive a distribution
of Available Cash with respect to a Unit to the extent such Partner is
entitled to receive a distribution out of
-26-
<PAGE>
such Available Cash with respect to a share of Common Stock for which such
Unit has been exchanged.
B. Notwithstanding the foregoing, (1) The General Partner
shall take such reasonable efforts, as determined by it in its sole discretion
and consistent with the General Partner's qualification as a REIT, to cause
the Partnership to distribute sufficient amounts of Available Cash to enable
the General Partner to pay shareholder dividends that will satisfy the
requirements for qualifying as a REIT under the Code and Regulations (the
"REIT Requirements") and (2) in the event that the General Partner is not
qualified as a REIT, distributions to Partners shall, in the aggregate for
each calendar year, not be less than an amount determined by multiplying the
Tax Rate by the Net Income of the Partnership for such year.
SECTION 6.2 DISTRIBUTIONS IN KIND
No right is given to any Partner to demand and receive
property other than cash as and to the extent provided in this Agreement. The
General Partner may determine, in its sole discretion, to make a distribution
in kind of Partnership assets to the Partners, and such assets shall be
distributed in such a fashion as to ensure that the fair market value thereof
is distributed and allocated in accordance with Articles VI and VII hereof, as
amended from time to time.
SECTION 6.3 AMOUNTS WITHHELD
All amounts withheld pursuant to the Code or any provisions
of any state or local tax law and Section 11.4 hereof with respect to any
allocation, payment or distribution to any Partner shall be treated as amounts
paid or distributed to such Partner pursuant to Section 6.1 hereof for all
purposes under this Agreement.
SECTION 6.4 DISTRIBUTIONS UPON LIQUIDATION
Notwithstanding the other provisions of this Article VI, net
proceeds from a Terminating Capital Transaction, and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership, shall be distributed to the Partners in accordance with Section
14.2 hereof.
SECTION 6.5 RESTRICTED DISTRIBUTIONS
Notwithstanding any provision to the contrary contained in
this Agreement, neither the Partnership nor the General Partner, on behalf of
the Partnership, shall make a distribution to any Partner on account of its
Partner Interest or interest in Partner Units if such distribution would
violate Section 17-607 of the Act or other applicable law.
-27-
<PAGE>
Section 6.6 RELIANCE INSURANCE CLAIM
Notwithstanding anything to the contrary in this Agreement,
in the event that Oxford Valley Road Associates, L.P. ("Oxford Valley")
recovers on its pending environmental indemnity claim against Reliance
Insurance, the Partnership shall make a special distribution to the Partners
who contributed Oxford Valley interests (the "Oxford Contributors") of an
amount of cash equal to the Partnership's allocable share of any such net
proceeds (after costs of collection), and the Oxford Contributors shall be
specially allocated 100% of any income allocable to the Partnership an account
of such recovery. Any amounts distributable and/or allocable to the Oxford
Contributors pursuant to this Section 6.6 shall be divided among them in
proportion to the Class A Units received by each of them on account of the
interests in Oxford Valley contributed by them to the Partnership under the
Contribution Agreement for Oxford Valley.
ARTICLE VII ALLOCATIONS AND TAX AND ACCOUNTING MATTERS
SECTION 7.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET LOSS
Net Income and Net Loss of the Partnership shall be
determined and allocated with respect to each Fiscal Year as of the end of
each such year. Except as otherwise provided in this Article VII, an
allocation to a Partner of a share of Net Income or Net Loss shall be treated
as an allocation of the same share of each item of income, gain, loss or
deduction that is taken into account in computing Net Income or Net Loss.
SECTION 7.2 ALLOCATIONS
Subject to such preferential allocations, if any, as holders
of Preferred Partner Interests may be entitled to receive and subject to
Section 6.6, all items of Partnership income, gain, loss and deduction shall
be allocated as set forth on Exhibit B.
ARTICLE VIII MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 8.1 MANAGEMENT
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are and
shall be exclusively vested in the General Partner, and no Limited Partner, as
such, shall have any right, power or authority to bind the Partnership or to
manage or control, or to participate in the management or control of, the
business and affairs of the Partnership. The General Partner may not be
removed by the Partners with or without cause. In addition
-28-
<PAGE>
to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or that are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
the other provisions hereof including Section 8.3, shall have full power and
authority to do or refrain from doing, in its sole discretion, all things
deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, making prepayments on loans
and borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (so long as the
General Partner qualifies as a REIT) to avoid the payment of any federal
income tax (including, for this purpose, any excise tax pursuant to Code
Section 4981) and to make distributions to its shareholders sufficient to
permit the General Partner to maintain REIT status or otherwise to satisfy the
REIT Requirements), the assumption or guarantee of, or other contracting for,
Debt and other liabilities, the issuance of evidences of indebtedness ("Debt
Securities") and the securing of Debt Securities by mortgage, deed of trust or
other lien or encumbrance on the Partnership's assets, and the incurring of
any obligations that it deems necessary for the conduct of the activities of
the Partnership, in each case for cash, property, services or such other type,
form and amount of consideration and having such terms and conditions as the
General Partner may determine in its business judgment to be appropriate and
to constitute fair value to the Partnership;
(2) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, sale, transfer, exchange or
other disposition of any assets of the Partnership (including, but not limited
to, the exercise or grant of any conversion, option, privilege or subscription
right or any other right available in connection with any assets at any time
held by the Partnership) or the merger, consolidation, reorganization or other
combination of the Partnership with or into another entity;
(4) the mortgage, pledge, encumbrance or
hypothecation of any assets of the Partnership (including, without limitation,
any Contributed Property), the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms that it sees fit, including,
without limitation, the financing of the operations and activities of the
General Partner, the
-29-
<PAGE>
Partnership or any of the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the Partnership's Subsidiaries)
and the repayment of obligations of the Partnership, its Subsidiaries and any
other Person in which it has an equity investment, and the making of capital
contributions to and equity investments in the Partnership's Subsidiaries;
(5) the management, operation, leasing, landscap-
ing, repair, alteration, demolition, replacement or improvement of any
Property, including, without limitation, any Contributed Property, or other
asset of the Partnership or any Subsidiary;
(6) the negotiation, execution and performance of
any contracts, leases, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under this
Agreement, including contracting with property managers (including, without
limitation, as to any Contributed Property or other Property, contracting with
the contributing or any other Partner or its Affiliates for property
management services), contractors, developers, consultants, accountants, legal
counsel, other professional advisors and other agents and the payment of their
expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement, the holding, management,
investment and reinvestment of cash and other assets of the Partnership, and
the collection and receipt of revenues, rents and income of the Partnership;
(8) the selection and dismissal of employees,
officers and agents of the Partnership or the General Partner (including,
without limitation, officers having titles or offices such as chief executive
officer, president, chief financial officer, vice president, treasurer,
assistant vice president, secretary, and assistant secretary), and agents,
outside attorneys, accountants, consultants and contractors of the Partnership
or the General Partner and the determination of their compensation and other
terms of employment or hiring;
(9) the maintenance of such insurance for the
benefit of the Partnership and the Partners as it deems necessary or
appropriate;
(10) subject to Sections 2.5 and 8.3.C.2, the
formation of, or acquisition of an interest in, and the contribution of
property to, any limited or general partnerships, limited liability companies,
trusts, joint ventures or other relationships that it deems desirable
(including, without limitation, the acquisition of interests in, and the
contributions
-30-
<PAGE>
of property to, any Subsidiary and any other Person in which it has an
investment from time to time);
(11) the control of any matters affecting the
rights and obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of dispute resolution,
or abandonment, of any claim, cause of action, liability, debt or damages, due
or owing to or from the Partnership, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, and the representation of the Partnership in all suits or
legal proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, the incurring of legal expense, and the indemnification of
any Person against liabilities and contingencies to the extent permitted by
law and including, without limitation, the entry of a confession of judgment;
(12) the undertaking of any action in connection
with the Partnership's direct or indirect investment in any Subsidiary or any
other Person (including, without limitation, the contribution or loan of funds
by the Partnership to such Persons);
(13) the determination of the fair market value of
any Partnership property distributed in kind using such reasonable method of
valuation as it may adopt, provided that such methods are otherwise consistent
with the requirements of this Agreement;
(14) the enforcement of any rights against any
Partner pursuant to representations, warranties, covenants and indemnities
relating to such Partner's contribution of property or assets to the
Partnership;
(15) the exercise, directly or indirectly, through
any attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or investment
held by the Partnership;
(16) the exercise of any of the powers of the
General Partner enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, or jointly with any such
Subsidiary or other Person;
(17) the exercise of any of the powers of the
General Partner enumerated in this Agreement on behalf of any Person in which
the Partnership does not have an interest, pursuant to contractual or other
arrangements with such Person;
(18) the making, execution and delivery of any and
all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties, warrants
of attorney to confess judgment against the
-31-
<PAGE>
Partnership or confessions of judgment against the Partnership, indemnities,
waivers, releases or legal instruments or agreements in writing necessary or
appropriate in the discretion of the General Partner for the accomplishment of
any of the powers of the General Partner enumerated in this Agreement;
(19) the issuance of additional Partner Interests
in accordance with the terms of this Agreement;
(20) the obtaining and maintaining of (a) casualty,
liability and other insurance on the Properties of the Partnership and (b)
liability insurance for the Covered Persons hereunder; and
(21) the establishment and maintenance of working
capital and other reserves in such amounts as the General Partner, in its sole
discretion, deems appropriate and reasonable from time to time.
B. The General Partner is authorized to execute, deliver and
perform agreements and take all actions referred to in subsection A above, on
behalf of the Partnership without any further act, approval or vote of the
Partners, notwithstanding any other provision of this Agreement (except as
provided in Sections 8.3 and 16.15 hereof), the Act or any applicable law,
rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty
that the General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.
C. In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account
the tax consequences to any Partner (including the General Partner) of any
action taken by it. The General Partner and the Partnership shall not have
liability to a Limited Partner under any circumstances as a result of an
income tax liability incurred by such Limited Partner as a result of an action
(or inaction) by the General Partner pursuant to its authority under this
Agreement so long as the action or inaction is taken in good faith.
SECTION 8.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner shall file amendments to and
restatements of the Certificate and do all the things to maintain the
Partnership as a limited partnership (or an entity in which those Persons who
are Limited Partners hereunder have limited liability) under the laws of the
State of Delaware and each other state, the District of Columbia or any other
jurisdiction in which the Partnership may elect to do business or own
property. The General Partner shall use all reasonable efforts to cause to be
-32-
<PAGE>
filed such other certificates or documents as may be reasonable and necessary
or appropriate for the formation, continuation, qualification and operation of
a limited partnership (or a partnership in which the limited partners have
limited liability to the extent provided by applicable law) in the State of
Delaware and any other state, or the District of Columbia or other
jurisdiction in which the Partnership may elect to do business or own
property.
SECTION 8.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY
A. (1) For so long as not less than fifty percent (50%) of
the aggregate number of Class A Units held by Persons other than the General
Partner or Affiliates of the General Partner (excluding Persons who, directly
or indirectly, acquire Class A Units pursuant to the Contribution Agreements)
and Class B Units issued and outstanding on the Effective Date remain
outstanding, the holders of such originally issued Class A Units and the Class
A Units issued pursuant to Section 5.3 and the holders of such Class B Units
issued on the Effective Date shall have the right to vote (as provided below)
on any merger, consolidation, or sale of all or substantially all of the
assets of the General Partner if the holders of the Common Stock vote on such
transaction. In the event of any such vote, the General Partner shall not
undertake the transaction in question unless the General Partner shall have
received (from the holders of Common Stock and the holders of Class A Units
and Class B Units, all of which Common Stock and Units shall be deemed for
purposes of this Section 8.3.A to be voting as one class) a number of
affirmative votes that is equal to or greater than the number that is obtained
by adding (x) the minimum number of affirmative votes of the holders of the
Common Stock required under the Charter or by law, plus (y) the number that is
equal to a majority of the aggregate number of votes of the holders of the
then outstanding Class A and Class B Units not held by the General Partner or
an Affiliate of the General Partner (excluding Persons who, directly or
indirectly, acquired such Class A Units pursuant to the Contribution
Agreements). For the purpose of the vote described in the preceding sentence,
each such Class A and Class B Unit shall have one vote for each share of
Common Stock issuable by the General Partner in respect of such Unit upon an
exercise of the General Partner's right to acquire such Units in exchange for
Common Stock pursuant to Section 9.5.C hereof and votes shall be tallied by
treating the holders of Class A and B Units and the holders of Common Stock of
the General Partner as a single class.
(2) The General Partner shall not merge,
consolidate, or combine with or into, or transfer all or substantially all of
its assets to, any other entity, unless each holder of Class A and Class B
Units shall receive in respect of each Class A or Class B Unit held by such
Person immediately prior to the effectiveness of the transaction, the same
form, amount,
-33-
<PAGE>
and type of consideration that such person would have received had such Class
A or Class B Unit, as applicable, been acquired for Common Stock pursuant to
Section 9.5.C immediately prior to the consummation of the transaction.
B. The General Partner shall not, without the consent of the
holders of record of a majority of the Class A Units issued to the Persons
indicated on Schedule V, voluntarily sell any Property in respect of which
Class A Units are issued pursuant to the Contribution Agreements for a period
of five years after the date such Property is contributed to the Partnership
unless such sale constitutes an exchange under Section 1031 of the Code or is
made in connection with a sale of substantially all or all of the real estate
assets of the Partnership.
C. Without the Consent of a Majority in Interest, the
General Partner shall not:
1. issue any additional equity securities or Debt
Securities or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for, purchase or otherwise
acquire any equity securities or Debt Securities of the General Partner
(collectively, "New Securities"), unless (a)(i) as promptly as is reasonably
practicable thereafter, the General Partner shall cause the Partnership to
issue Partner Interests or Debt Securities of the Partnership, as applicable,
to the General Partner (or a wholly owned Subsidiary of the General Partner)
having substantially equivalent economic terms in all respects including,
without limitation, with regard to allocations of income, gain, loss,
deduction and credit, the right to receive distributions and to vote or
consent as the New Securities and (ii) the General Partner shall contribute
the net proceeds from the issuance of the New Securities and from the exercise
of any rights thereof to the Partnership or (b) the New Securities are issued
to all holders of Common Stock pro rata in accordance with the respective
number of shares of Common Stock held by them;
2. (a) directly or indirectly, enter into or
conduct any business, other than in connection with the Excluded Assets or the
direct or indirect ownership through subsidiaries, acquisition and disposition
of Partner Interests as a General Partner or Limited Partner and the
management of the business of the Partnership, the ownership, acquisition and
disposition of direct or indirect economic or voting interests (representing
not more than a one percent (1%) interest) in entities in which the remaining
economic or voting interests are held directly or indirectly by the
Partnership, and such activities as are incidental thereto or (b) own or enter
into any agreement to acquire any assets other than (i) Partnership Interests
as a General Partner or Limited Partner, (ii) the direct or indirect economic
or voting interests referred to above, (iii) such
-34-
<PAGE>
commercial or other loans and borrowings (subject to Section 8.3.C(4)), bank
accounts or similar instruments or accounts as it deems necessary to carry out
its responsibilities contemplated under this Agreement and the Charter, or
(iv) Excluded Assets; or
3. cause the Partnership to issue any additional
Partner Interests or Debt Securities to the General Partner or any of its
Subsidiaries unless either (a)(i) the additional Partner Interests or Debt
Securities, as applicable, are issued in connection with an issuance of New
Securities and the economic interests of the additional Partner Interests or
Debt Securities, as applicable, are substantially equivalent to the economic
interests of the New Securities, and (ii) the General Partner shall make a
Capital Contribution to the Partnership in an amount equal to the proceeds
received in connection with the issuance of such New Securities of the General
Partner, less any direct, out-of-pocket costs incurred in connection with such
issuance, or (b) the additional Partner Interests or Debt Securities are
issued to Partners in proportion to their respective Percentage Interests. The
intent and purpose of the provisions contained in this Subparagraph 8.3.C, are
that, as nearly as practicable, the aggregate Partner Interests held by the
General Partner will mirror the capitalization of the General Partner with the
consequence that each security or evidence of indebtedness issued by the
General Partner will be mirrored by a corresponding security or evidence of
indebtedness issued by the Partnership to the General Partner having terms
substantially equivalent to the economic interests of such securities issued
or evidences of indebtedness incurred by the General Partner, unless the
requisite consent of the Limited Partners has been obtained. In furtherance of
this purpose, the General Partner may, in its sole discretion, amend the
provisions of this Section 8.3.C in order to more fully elaborate the types of
securities (including, without limitation, options, warrants, rights,
preferred stock, convertible debt, and debt instruments) that may be issued by
the Partnership to the General Partner in exchange for the proceeds of the
corresponding securities issued by the General Partner; or
4. Incur any indebtedness for borrowed money unless the
proceeds of such indebtedness are advanced to the Partnership (a "General
Partner Loan") on such terms and conditions, including interest rate,
repayment schedule, security, and cost and expenses as are applicable to the
instruments governing the General Partner's borrowing. Except to the extent
that the cost and expenses of any such borrowing are treated as reimbursable
expenses pursuant to Section 8.4 and reimbursed, such cost and expenses shall
be deemed to be a part of the General Partner Loan and bear interest and be
repaid on the such terms and conditions as the General Partner Loan.
-35-
<PAGE>
SECTION 8.4 REIMBURSEMENT OF THE GENERAL PARTNER
A. The General Partner shall not be compensated for its
services as general partner of the Partnership or receive distributions,
payments or allocations except as expressly provided in this Agreement
(including the provisions of Articles VI and VII hereof regarding
distributions, payments and allocations to which it may be entitled in its
capacity as the General Partner).
B. Subject to Section 16.11 hereof, the Partnership shall be
liable, and shall reimburse the General Partner on a monthly basis (or such
other basis as the General Partner may determine in its sole discretion), for
all sums expended and expenses (including, without limitation, overhead and
salaries and other compensation expense) incurred in connection with the
Partnership's operations and business; provided that the amount of such
reimbursement shall be reduced by any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of or for the account of the Partnership unless such interest shall
have either been paid to the Partnership or used to reduce amounts otherwise
distributable to the General Partner by the Partnership. Any such
reimbursements shall be in addition to any reimbursement of the General
Partner as a result of indemnification pursuant to Section 8.6. The General
Partner represents and warrants to the Partnership and the Limited Partners
that the General Partner's expenses charged to the Partnership will be
incurred for the benefit of Partnership and it is expected that, unless other
activities of the General Partner are authorized pursuant to Section 8.3.C,
all or substantially all, expenses of the General Partner, will be charged to
the Partnership.
C. (1) In the event that the General Partner shall elect to
purchase from stockholders securities of the General Partner utilizing funds
provided by the Partnership for such purpose rather than funds distributed
with respect to the General Partner's Interest, the Partner Interests of the
General Partner attributable to such securities shall be redeemed, with such
redemption first to be applied to the extent, if any, that Limited Partner
Interests are held by the General Partner or any wholly-owned Subsidiary of
the General Partner or are obtained by the General Partner by means of an
exchange therefor of Common Stock. The General Partner may so utilize
Partnership funds to purchase from its stockholders securities (a) for the
purpose of any stock repurchase program or any similar obligation or
arrangement undertaken by the General Partner, (b) for the purpose of
satisfying any redemption obligation under Section 9.5 (to the extent
authorized but unissued securities of the General Partner are not so used), or
(c) for any other proper purposes of the General Partner.
-36-
<PAGE>
(2) In the event that the General Partner shall
elect to purchase from stockholders securities of the General Partner pursuant
to any employee stock purchase plan (or any similar obligation or arrangement
undertaken by the General Partner for its employees or for the employees of
the Partnership or any Subsidiary) utilizing funds provided by the Partnership
for such purpose rather than funds distributed with respect to the General
Partner Interests or Limited Partner Interests held by the General Partner or
any wholly-owned Subsidiary of the General Partner, the purchase price paid by
the General Partner for such securities and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses
of the General Partner and shall be reimbursed to the General Partner by the
Partnership, subject to the condition that, if such reacquired shares are
subsequently sold by the General Partner, the General Partner shall return
such reimbursement to the extent of any proceeds and dividends received by the
General Partner for such shares.
D. (1) In the event the General Partner exercises its rights
under Article 9 of the Trust Agreement of the General Partner, or any
successor provision thereto, to acquire or redeem shares of Common Stock and
such shares are cancelled by the General Partner, then the General Partner
shall cause the Partnership to redeem from the General Partner, or any of its
Subsidiaries, a number of General Partner Interests and Common Limited Partner
Interests (such redemption to be first of Limited Partner Interests and second
of General Partner Interests), equal to that number of Partner Interests
obtained by multiplying the number of shares of Common Stock to be redeemed by
the General Partner by a fraction, the numerator of which is one (1) and the
denominator of which is the REIT Shares Amount, in each case on the same terms
and for the same aggregate price that the General Partner redeemed such
shares.
E. To the extent practicable, Partnership expenses shall be
billed directly to and paid by the Partnership; however, subject to Section
16.11 hereof, reimbursements to the General Partner or any of its Affiliates
by the Partnership shall be allowed for the actual cost to (or expenses
incurred by) the General Partner or any of its Affiliates of operating and
other expenses of the Partnership or its business, including, without
limitation, the actual cost of overhead (including depreciation, amortization,
salaries and other compensation and personnel costs and expenses), materials
and administrative services related to (1) Partnership operations, (2)
Partnership accounting, (3) communications with Partners, (4) legal services,
(5) tax services, (6) computer services, (7) the fees and costs of obtaining
Debt for the Partnership to the extent not included in a General Partner Loan,
(8) risk management, (9) mileage and travel expenses and (10) such other
related overhead, operational and administrative expenses as are necessary for
the organization and
-37-
<PAGE>
operation of the Partnership and reasonably allocable to the conduct by the
General Partner of the business and operations of the Partnership. "Actual
cost of goods and materials" means the actual cost to the General Partner or
any of its Affiliates of goods and materials used for or by the Partnership
obtained from entities not affiliated with the General Partner, and "actual
cost or expense incurred of administrative services" means the allocable cost
of personnel and other items of overhead (as if such persons were employees of
the Partnership and such overhead expenses of the Partnership) of providing
administrative and other services to the Partnership.
SECTION 8.5 CONTRACTS WITH AFFILIATES; OTHER BUSINESS
A. The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity
investment, and such Persons may borrow funds from the Partnership, on terms
and conditions established in the sole discretion of the General Partner and
that, in its business judgment, is in the best interests of the Partnership.
The foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Subject to Sections 2.5 and 8.3.C.2, the Partnership may
transfer assets to joint ventures, limited liability companies, partnerships,
corporations, trusts or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions
consistent with this Agreement and applicable law as the General Partner, in
its sole discretion, believes to be advisable and, in its business judgment,
in the best interests of the Partnership.
C. Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey
any property to the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner to be no less
favorable to the Partnership than if the transaction were with an unaffiliated
party and which have been approved by a disinterested majority of the Board of
Trustees of the General Partner.
D. The General Partner is expressly authorized to enter
into, in the name and on behalf of the Partnership, a right of first
opportunity arrangement and other conflict avoidance agreements with various
Affiliates of the Partnership and the General Partner, on such terms as the
General Partner, in its sole discretion, believes are no less favorable to the
Partnership than if the transaction were with an unaffiliated party.
E. The General Partner or any Affiliate may contract or
otherwise deal with the Partnership for the provision of goods or services
(including, without limitation, property management
-38-
<PAGE>
services), if the compensation paid or promised for such goods and services is
no less favorable to the Partnership than if the transaction were with an
unaffiliated party.
F. Nothing in this Agreement shall be deemed to prohibit the
General Partner or any Affiliate of the General Partner from dealing, or
otherwise engaging in business with, Persons transacting business with the
Partnership, or from providing services related to the purchase, sale,
financing, management, development or operation of real or personal property
and receiving compensation therefor, not involving any rebate or reciprocal
arrangement that would have the effect of circumventing any restriction set
forth herein upon dealings with the General Partner or any Affiliate of the
General Partner.
G. Except as otherwise agreed to in a writing signed by the
appropriate Partner and on behalf of the Partnership or the General Partner or
as provided in the Act, no Partner or Affiliate thereof shall be obligated to
present any particular investment opportunity to the Partnership even if such
opportunity is of a character which, if presented to the Partnership, could be
taken by the Partnership and any Partner or Affiliate thereof shall have the
right to take for his own account or to recommend to others any such
particular investment opportunity.
SECTION 8.6 INDEMNIFICATION OF GENERAL PARTNER AND OTHER COVERED PERSONS
A. To the fullest extent permitted by applicable law, the
Partnership shall indemnify and hold harmless the General Partner, each
Limited Partner, each officer of the Partnership, each of its or their
respective Affiliates and each of its or their respective trustees, directors,
officers, employees, agents, representatives, shareholders, partners and
owners (each, such indemnitee a "Covered Person") from and against any and all
losses, claims, damages, liabilities, (including joint and/or several
liabilities), expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate to
the Partnership ("Actions") in which such Covered Person may be involved, or
is threatened to be involved, as a party or otherwise and regardless of
whether the liability or expense accrued at or relates to, in whole or in
part, any time before, on or after the Effective Date; provided, however, that
the Partnership shall not indemnify a Covered Person for (1) willful
misconduct or a knowing violation of the law, (2) any transaction for which
such Covered Person received an improper personal benefit in violation or
breach of any express provision of this Agreement, (3) any violation of this
Agreement or (4) any liability that such Covered Person may have to the
Partnership under any Transaction Document. Without
-39-
<PAGE>
limitation, the foregoing indemnity shall extend to any liability of any
Covered Person, pursuant to a loan guaranty or otherwise, for any indebtedness
of the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into
one or more additional indemnity agreements consistent with the provisions of
this Section 8.6 in favor of any Covered Person having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Covered
Person did not meet the requisite standard of conduct set forth in this
Section 8.6.A. The termination of any proceeding by conviction of a Covered
Person or upon a plea of nolo contendere or its equivalent by a Covered
Person, or an entry of an order of probation against a Covered Person prior to
judgment, does not create a presumption that such Covered Person acted in a
manner contrary to that specified in this Section 8.6.A with respect to the
subject matter of such proceeding. Any indemnification pursuant to this
Section 8.6 shall be made only out of the assets of the Partnership, and
neither the General Partner nor any Limited Partner shall have any obligation
to contribute to the capital of the Partnership or otherwise provide funds to
enable the Partnership to fund its obligations under this Section 8.6.
B. To the fullest extent permitted by law, expenses incurred
by a Covered Person who is a party to a proceeding or otherwise subject to or
the focus of or is involved in any Action subject to indemnification pursuant
to Section 8.6.A shall be paid or reimbursed by the Partnership as incurred by
the Covered Person in advance of the final disposition of the Action upon
receipt by the Partnership of a written undertaking by or on behalf of the
Covered Person to repay the amount if it shall ultimately be determined that
the standard of conduct has not been met.
C. The indemnification provided by this Section 8.6 shall be
in addition to any other rights to which a Covered Person or any other Person
may be entitled under any agreement, pursuant to any vote of the Partners, as
a matter of law or otherwise, and shall continue as to a Covered Person who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns, and administrators of the Covered Person unless
otherwise provided in a written agreement with such Covered Person or in the
writing pursuant to which such Covered Person is indemnified.
D. The Partnership shall purchase and maintain insurance in
such amounts as the General Partner shall determine to be appropriate, on
behalf of its officers, if any, and such Covered Persons and such other
Persons as the General Partner shall determine, against any liabilities that
may be asserted
-40-
<PAGE>
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. Any liabilities which a Covered Person incurs as a result
of acting on behalf of the Partnership or the General Partner (whether as a
fiduciary or otherwise) in connection with the operation, administration or
maintenance of an employee benefit plan or any related trust or funding
mechanism (whether such liabilities are in the form of excise taxes assessed
by the IRS, penalties assessed by the Department of Labor, restitutions to
such a plan or trust or other funding mechanism or to a participant or
beneficiary of such plan, trust or other funding mechanism, or otherwise)
shall be treated as liabilities or judgments or fines under this Section 8.6,
unless such liabilities arise as a result of (1) such Covered Person's
intentional misconduct or knowing violation of the law, or (2) any transaction
in which such Covered Person received a personal benefit in violation or
breach of any express provision of this Agreement or applicable law.
F. In no event may a Covered Person subject any of the
Partners to personal liability by reason of the indemnification provisions set
forth in this Agreement.
G. A Covered Person shall not be denied indemnification in
whole or in part under this Section 8.6 because the Covered Person had an
interest in the transaction with respect to which the indemnification applies
if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 8.6 are for the exclusive
benefit of the Covered Persons, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of
any other Persons. Any amendment, modification or repeal of this Section 8.6
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the Partnership's liability to any Covered Person
under this Section 8.6 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when such claims may arise or be asserted.
SECTION 8.7 LIABILITY OF THE GENERAL PARTNER AND OTHER COVERED PERSONS
A. Notwithstanding anything to the contrary set forth in
this Agreement, no Covered Person shall be liable or account- able in damages
or otherwise to the Partnership, any Partner or
-41-
<PAGE>
any Assignees for losses sustained, liabilities incurred or benefits not
derived as a result of errors in judgment or mistakes of fact or law or of any
act or omission if the General Partner's or such other Person's conduct did
not (1) constitute willful misconduct or a knowing violation of the law, or
(2) result in an improper personal benefit for the General Partner or such
other Covered Person in violation or breach of any express provision of this
Agreement.
B. The Limited Partners expressly acknowledge that the
General Partner is acting for the benefit of the Partnership, the Limited
Partners and the General Partner and the General Partner's shareholders
collectively and that the General Partner is under no obligation to regard any
interest or the interests of any particular group as a dominant or controlling
interest or factor or to give priority to the separate interests of the
Limited Partners or the General Partner's shareholders, or the holders of any
interest in the General Partner (including, without limitation, the tax
consequences to Limited Partners, Assignees or the General Partner's
shareholders) in deciding whether to cause the Partnership to take (or decline
to take) any action.
C. Whenever in this Agreement the General Partner is
permitted or required to make a decision in its "sole discretion" or
"discretion," the General Partner shall be entitled to consider only such
interests and factors as it deems appropriate. Whenever the General Partner is
permitted or required under a particular provision of this Agreement to make a
decision in its "sole discretion", its "business judgment" or "discretion" or
in "good faith" or under another express standard, the General Partner shall
act under such express standard and shall not be subject to any other or
different standards imposed by a different provision of this Agreement, any
other agreement contemplated herein or by provision of law or principles in
equity or otherwise.
D. Subject to its obligations and duties as General Partner
set forth in Section 8.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its officers, employees or
agents (subject to the supervision and control of the General Partner). The
General Partner shall not be responsible for any misconduct or negligence on
the part of any such Person appointed by the General Partner in good faith and
without gross negligence.
E. Any amendment, modification or repeal of this Section 8.7
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on any Covered Person's liability to the Partnership
and the Limited Partners under this Section 8.7 as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising from
or relating to matters occurring, in whole or in part, prior
-42-
<PAGE>
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
F. To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to
the Partnership or the Limited Partners, a Covered Person shall not be liable
to the Partnership or to any other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of a Covered Person otherwise
existing at law or in equity, are agreed by the Partners to replace such other
duties and liabilities of such Covered Person.
G. This Agreement is executed by or on behalf of the
Trustees of the Pennsylvania Real Estate Investment Trust, an unincorporated
association in business trust form created in Pennsylvania pursuant to a Trust
Agreement dated December 27, 1960, as last amended and restated on September
29, 1997, and shall not constitute the personal obligation of the Trustees
either jointly or severally in their individual capacities. The liability of
the Trustees of the Pennsylvania Real Estate Investment Trust shall be
restricted and limited solely to property held or owned in their capacity as
Trustees for and on behalf of Pennsylvania Real Estate Investment Trust. No
Trustee, officer, agent or shareholder of the Pennsylvania Real Estate
Investment Trust shall be personally liable for any obligations of the
Pennsylvania Real Estate Investment Trust.
SECTION 8.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER AND OTHER PERSONS
A. A Covered Person may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture
or other paper or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. A Covered Person may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters that the Covered Person
reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed
-43-
<PAGE>
attorney or attorneys-in-fact. Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform all and every act and duty that is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission
is necessary or advisable in order (1) to protect the ability of the General
Partner to continue to qualify as a REIT, (2) for the General Partner
otherwise to satisfy the REIT Requirements or (3) to avoid the General Partner
incurring any taxes under Code Section 857 or Code Section 4981, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners; provided, however, that nothing in this Agreement shall be deemed to
give rise to any liability on the part of the Limited Partners for the General
Partner's failure to qualify or continue to qualify as a REIT or failure to
avoid incurring any taxes under the foregoing sections of the Code, or to give
rise to any liability of the General Partner for such failure so to qualify.
SECTION 8.9 RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without the consent or approval
of any other Partner or Person, to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General
Partner as if it were the Partnership's sole party in interest, both legally
and beneficially. Each Limited Partner hereby waives any and all defenses or
other remedies that may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such
dealing. In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expediency of any
act or action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming
thereunder that (1) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (2) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
-44-
<PAGE>
Partnership and (3) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement
and is binding upon the Partnership. This Section 8.9 shall not negate or
diminish the obligations of the General Partner to the Partners contained in
other Sections of this Agreement.
ARTICLE IX RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 9.1 LIMITATION OF LIABILITY; MANAGEMENT OF BUSINESS
No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, member, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such) shall participate in the
operations, management or control (within the meaning of the Act) of the
Partnership's business, transact any business in the Partnership's name or
have the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, member, employee, partner, agent, representative, or
trustee of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such, shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
SECTION 9.2 OUTSIDE ACTIVITIES OF LIMITED PARTNERS
Subject to any written agreements entered into by a Limited
Partner or its Affiliates with the General Partner, the Partnership or a
Subsidiary (including, without limitation, any employment agreement), any
Limited Partner and any Assignee, officer, trustee, director, employee, agent,
trustee, partner, member, manager, Affiliate or shareholder of any Limited
Partner shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership,
including business interests and activities that are in direct or indirect
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partner shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. Subject to such agreements, none of the Limited Partners nor any
other Person shall have any rights by virtue of this Agreement or the
partnership relationship established hereby in any business ventures of any
other Person, and, subject to such agreements, such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any other Person,
even if such opportunity is of a character that, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
-45-
<PAGE>
SECTION 9.3 RETURN OF CAPITAL
Except pursuant to the rights of Redemption set forth in
Section 9.5 hereof, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided in one or more amendments, supplements
or addenda to this Agreement creating one or more series or classes of Partner
Interests entitled to priority, no Limited Partner or Assignee shall have
priority over any other Limited Partner or Assignee either as to the return of
Capital Contributions or as to profits, losses or distributions.
SECTION 9.4 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP
A. In addition to other rights provided by this Agreement or
by the Act, and except as limited by Section 9.4.B. hereof, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, on written demand
with a statement of the purpose of such demand and at such Limited Partner's
own expense:
(1) to obtain a copy of (a) the most recent annual
and quarterly reports filed with the SEC by the General Partner pursuant to
the Exchange Act and (b) each report or other written communication sent to
the shareholders of the General Partner during the twelve months preceding
such request;
(2) to obtain a copy of the Partnership's federal,
state and local income tax returns for each Fiscal Year;
(3) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
B. Notwithstanding any other provision of this Section 9.4,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole discretion to be
reasonable, any information that (1) the General Partner believes to be in the
nature of trade secrets or other information the disclosure of which the
General Partner in good faith believes is not in the best interests of the
Partnership or (2) the Partnership or the General Partner is required by law
or by agreements with unaffiliated third parties to keep confidential.
-46-
<PAGE>
SECTION 9.5 REDEMPTION RIGHTS OF CLASS A AND CLASS B UNITS
A. Except as otherwise expressly provided in this Agreement
or in a writing executed by the Partners, (i) in the case of Class B Units, at
any time after the Effective Date and (ii) in the case of Class A Units, at
any time after the one (1) year anniversary of the date on which such Class A
Units are issued, a Qualifying Party or the Assignee of any Qualifying Party
shall have the right (subject to the terms and conditions set forth herein) to
require the Partnership to redeem all or a portion of the Class A or Class B
Units, as applicable which are held by such Qualifying Party or the Assignee
of any Qualifying Party ("Tendered Units") in exchange (a "Redemption") for
the Cash Amount.
If the Assignee of any Qualifying Party shall
exercise the Redemption right of such Qualifying Party pursuant to this
Section 9.5, such Qualifying Party shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Qualifying Party's Assignee. In connection with any exercise of the
Redemption rights by such Assignee on behalf of such Qualifying Party, the
Cash Amount (whether paid by the Partnership pursuant to Section 9.5.B or the
General Partner pursuant to Section 9.5.C) or shares of Common Stock shall be
paid or delivered by the Partnership or the General Partner, as the case may
be, directly to such Assignee and not to such Qualifying Party.
B. Any Redemption shall be exercised pursuant to a Notice of
Redemption delivered to the General Partner by the Qualifying Party or the
Assignee of any Qualifying Party then exercising the Redemption right (the
"Tendering Party"). The Partnership's obligation to effect a Redemption,
however, shall not arise or be binding against the Partnership (1) until and
unless there has been a Declination and (2) before the first Business Day
following the Cut-Off Date. In the event of a Redemption, the Cash Amount
shall be delivered as a certified check payable to the Tendering Party or, in
the General Partner's sole discretion, in immediately available funds on the
Specified Redemption Date.
C. Notwithstanding the provisions of Section 9.5.A and 9.5.B
hereof, on or before the close of business on the Cut-Off Date, the General
Partner may, in its sole discretion but subject to the Ownership Limit and the
transfer restrictions and other limitations of the Charter, elect to acquire
some or all of the Tendered Units from the Tendering Party in exchange for
Common Stock or the Cash Amount. If the General Partner so elects, on the
Specified Redemption Date the Tendering Party shall sell such number of the
Tendered Units to the General Partner for the Cash Amount or, at the option of
the General Partner, in exchange for a number of shares of Common Stock equal
to the REIT Shares Amount.
-47-
<PAGE>
The Tendering Party shall submit (1) such information, certification or
affidavit as the General Partner may reasonably require in connection with the
application of the Ownership Limit and other restrictions and limitations of
the Charter to any such acquisition and (2) such written representations,
investment letters, legal opinions or other instruments necessary, in the
General Partner's judgment, to effect compliance with the Securities Act. In
the event of a purchase of the Tendered Units pursuant to this Section 9.5.C,
the Tendering Party shall no longer have the right to cause the Partnership to
effect a Redemption of such Tendered Units, and, upon notice to the Tendering
Party by the General Partner, given on or before the close of business on the
Cut-Off Date, that the General Partner has elected to acquire some or all of
the Tendered Units pursuant to this Section 9.5.C, the obligation of the
Partnership to effect a Redemption of such Tendered Units shall not accrue or
arise. Shares of Common Stock delivered pursuant to this Section 9.5.C shall
be delivered by the General Partner as duly authorized, validly issued, fully
paid and nonassessable and such shares of Common Stock and, if applicable,
Rights, shall be delivered free of any Encumbrances, other than the Ownership
Limit and other restrictions provided in the Charter, the Bylaws of the
General Partner, any Registration Rights Agreement between the General Partner
and such Tendering Party, the Securities Act and relevant state securities or
"blue sky" laws and restrictions, if any, imposed by other, if any, applicable
laws. Neither any Tendering Party whose Tendered Units are acquired by the
General Partner pursuant to this Section 9.5.C, any other Partner, any
Assignee nor any other interested Person shall have any right to require or
cause the General Partner to register, qualify or list any shares of Common
Stock owned or held by such Person, whether or not such shares of Common Stock
are issued pursuant to this Section 9.5.C, with the SEC, with any state
securities commission, department or agency, under the Securities Act or the
Exchange Act or with any stock exchange; provided, however, that this
limitation shall not be in derogation of any registration or similar rights
granted pursuant to any other written agreement between the General Partner
and any such Person, including without limitation, the Registration Rights
Agreement between the General Partner and such Person, if any. Notwithstanding
any delay in such delivery, the Tendering Party shall be deemed the owner of
such shares of Common Stock and Rights for all purposes, including, without
limitation, rights to vote or consent, receive dividends, and exercise rights,
as of the Specified Redemption Date, as the same may be extended pursuant to
the definition thereof. Shares of Common Stock issued upon an acquisition of
the Tendered Units by the General Partner pursuant to this Section 9.5.C may
contain such legends regarding restrictions under the Securities Act and
applicable state securities laws as the General Partner in good faith
determines to be necessary or advisable in order to ensure compliance with
such laws.
-48-
<PAGE>
D. Reserved.
E. In the event that the General Partner declines or fails
to exercise its purchase rights pursuant to Section 9.5.C hereof following
receipt of a Notice of Redemption (a "Declination"), the General Partner shall
give notice of such Declination to the Tendering Party on or before the close
of business on the Cut-Off Date. The failure of the General Partner to give
notice of such Declination by the close of business on the Cut-Off date shall
itself constitute a Declination.
Subject to Section 8.3, the Partnership may elect
to raise funds for the payment of the Cash Amount from such sources as the
General Partner may determine to be appropriate, including, but not limited
to, the sale of any Property and the incurrence of additional Debt.
F. Notwithstanding the provisions of Sections 9.5.A, 9.5.B,
and 9.5.C hereof, no Tendering Party shall have any rights under this
Agreement that would otherwise be prohibited under the Charter. To the extent
that any attempted Redemption or acquisition of the Tendered Units by the
General Partner pursuant to Section 9.5.C hereof would be in violation of this
Section 9.5.F, it shall be null and void ab initio, and the Tendering Party
shall not acquire any rights or economic interests in shares of Common Stock
otherwise issuable by the General Partner under Section 9.5.C hereof.
G. Notwithstanding the provisions of Section 9.5.C hereof,
the General Partner shall not, under any circumstances, elect to acquire
Tendered Units in exchange for shares of Common Stock if such exchange would
be prohibited under the Charter.
H. Subject to the Ownership Limit, no Tendering Party may
effect a Redemption for fewer than one hundred (100) Class A Units or Class B
Units or, if such Tendering Party holds fewer than one hundred (100) Class A
Units or Class B Units, as the case may be, all of the Class A Units or Class
B Units held by such Tendering Party.
I. The Tendering Party shall continue to own (subject, in
the case of an Assignee, to the provisions of Section 12.5 hereof) all Class A
Units and Class B Units subject to any Redemption, and be treated as a Limited
Partner or an Assignee, as applicable, with respect to such Units for all
purposes of this Agreement, until such Units are either paid for by the
Partnership or transferred to the General Partner and paid for by the issuance
of the shares of Common Stock as provided herein, on the Specified Redemption
Date. Until a Specified Redemption Date and an acquisition of the Tendered
Units by the General Partner in exchange for shares of Common Stock pursuant
to Section 9.5.C hereof, the Tendering Party shall have no rights as a
shareholder
-49-
<PAGE>
of the General Partner with respect to the shares of Common Stock issuable in
connection with such acquisition, except as otherwise expressly provided
herein.
J. In connection with an exercise of Redemption rights
pursuant to this Section 9.5, the Tendering Party shall submit the following
to the General Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as,
and accompanying, the Notice of Redemption, (a) disclosing the actual and
constructive ownership, as determined for purposes of Code Sections 856(a)(6)
and 856(h), of shares of Common Stock by (i) such Tendering Party and (ii) any
Related Party and (b) representing that, after giving effect to the Redemption
or an acquisition of the Tendered Units by the General Partner pursuant to
Section 9.5.C hereof, neither the Tendering Party nor any Related Party will
own, beneficially or constructively, shares of Common Stock in excess of the
Ownership Limit;
(2) A written representation that neither the
Tendering Party nor any Related Party has any intention to acquire any
additional shares of Common Stock prior to the closing of the Redemption or an
acquisition of the Tendered Units by the General Partner pursuant to Section
9.5.C hereof on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a
condition to the closing of (a) the Redemption or (b) the acquisition of the
Tendered Units by the General Partner pursuant to Section 9.5.C hereof on the
Specified Redemption Date, that either (aa) the actual and constructive
ownership of shares of Common Stock by the Tendering Party and any Related
Party remain unchanged from that disclosed in the affidavit required by
Section 9.5.J(1) or (bb) after giving effect to the Redemption or an
acquisition of the Tendered Units by the General Partner pursuant to Section
9.5.C hereof, neither the Tendering Party nor any Related Party shall own,
beneficially or constructively, shares of Common Stock in violation of the
Ownership Limit.
K. The General Partner and the Partnership shall each have
the right, at any time during the five (5) month period following the
Effective Date, or, if not then permitted pursuant to the provisions of the
Pennsylvania Securities Act and the rules and regulations thereunder, during
the thirty (30) day period following the first anniversary of the Effective
Date, to purchase all of the Class A Units held by the Limited Partners listed
on Schedule VI hereto for the Cash Amount. If neither the General Partner nor
the Partnership exercises its right to purchase such Limited Partner's Class A
Units pursuant to the previous sentence, then such Limited Partner shall be
deemed to have delivered a Notice of Redemption to the General Partner as of
the expiration
-50-
<PAGE>
of the applicable period specified in the prior sentence and shall have the
right to receive shares of Common Stock in exchange for its Class A Units as
if redeemed pursuant to Section 9.5.C (except that the Specified Redemption
Date shall be deemed to be the date on which the registration statement with
respect to such shares has been declared effective by the SEC) and the rights
with respect to those shares of Common Stock set forth in the Registration
Rights Agreement among such Persons and the Partnership of even date herewith.
L. If the General Partner exercises its rights to deliver
shares of Common Stock in lieu of the Cash Amount, then such Tendering Party
shall have the right, by written notice to the General Partner within ten (10)
calendar days after such date, to withdraw its Notice of Redemption. If a
Tendering Party delivers a Notice of Redemption in connection with the
exercise by such Tendering Party of its registration rights pursuant to a
Registration Rights Agreement, the General Partner shall, prior to the date on
which the registration statement becomes effective, elect whether it will
exercise its rights under Section 9.5.C and will notify the Tendering Party of
its intention to deliver cash or shares. If the General Partner exercises its
right to deliver shares of Common Stock in lieu of the Cash Amount with
respect to such redemption, then (A) a registration statement covering the
resale by such Tendering Party of the shares of Common Stock must become
effective within the time, if any, specified in the Registration Rights
Agreement and (B) the Specified Redemption Date shall be deemed to be the
date, if any, on which such registration statement is declared effective by
the SEC; provided, however that if the registration statement has not become
effective in accordance with clause (A) or if the General Partner has
abandoned the registration as to which the Tendering Party had piggyback
registration rights and has notified the Tendering Party of such abandonment,
the Tendering Party shall have the right by written notice to the General
Partner within ten (10) calendar days after the date on which the registration
statement was required to be effective or the date the Tendering Party
received notice of such abandonment, to withdraw its Notice of Redemption. If
a registration statement fails to become effective, a Limited Partner shall
have such rights and remedies, if any, as are provided under the Registration
Rights Agreement or applicable law, but no right under this Agreement to
require payment of the applicable Cash Amount, unless the General Partner
shall have agreed, in its sole discretion, within such ten (10) days to
deliver cash in respect of the Units for which redemption was sought.
M. In addition to their other rights, if any, set forth in
this Section 9.5, each of the Persons listed on Schedule VII shall have the
right to elect, at any time that a redemption is otherwise permissible
hereunder and prior to the sixth anniversary of the Effective Date to require
that Class A Units
-51-
<PAGE>
issued to them on the Effective Date be redeemed solely for cash by indicating
such election in their Notice of Redemption with respect to such Class A
Units, in which event such Notice of Redemption shall be subject to this
Section 9.5.M and not Section 9.5.B or 9.5.C, subject to the following
conditions:
(1) payment of the Cash Amounts with respect to
such Redemptions will be made only twice annually, once on or before August 15
with respect to all Notices received after January 1 and before June 30 of
such year, and once on or before February 15 with respect to all Notices
received after June 30 and before December 31 of the prior year (each, a
"Payment Period"); and (2) the Partnership shall not be required to pay Cash
Amounts exceeding $500,000 in the aggregate for any two consecutive payment
periods; and
(2) If the General Partner receives Notices of
Redemption pursuant to this Section 9.5.M during any Payment Period requesting
payments of Cash Amounts so that the aggregate Cash Amounts requested in such
Payment Period, added together with the aggregate Cash Amounts requested in
the immediately preceding Payment Period, would exceed $500,000, the
Redemptions pursuant to this Section 9.5.M for such Payment Period for which
Cash Amounts have been requested shall only be made pro rata among the holders
requesting Redemption pursuant to this Section 9.5.M according to the
respective number of Class A Units for which redemption was timely requested
by each of them, up to a maximum of $500,000 in the aggregate for any two
consecutive Payment Periods; provided that, no Person exercising its rights
pursuant to this Section 9.5.M and whose Units are not redeemed for cash shall
be precluded from thereafter exercising its rights pursuant to Section 9.5.A.
(3) The foregoing rights of certain Limited
Partners may be limited by the application of the Pennsylvania Securities Act,
which prohibits redemption of securities in certain circumstances within
twelve (12) months after their issuance. Unless a waiver of this provision of
the Pennsylvania Securities Act is obtained from the Pennsylvania Securities
Commission, the rights of the Limited Partners under this Section M. will not
be exercisable during the first year after the issuance of Class A Units.
N. As used in this Section 9.5, the term "REIT Shares
Amount" shall mean a number of shares of Common Stock equal to the product of
the number of Tendered Units multiplied by 1.0, as the same may be increased
or decreased pursuant to Section 9.6; provided, however, that, in the event
that the General Partner issues to all holders of Common Stock as of a certain
record date rights, options, warrants or convertible or exchangeable
securities entitling the General Partner's shareholders to subscribe for or
purchase Common Stock, or any other securities or property (collectively, the
"Rights"), with the record date for
-52-
<PAGE>
such Rights issuance falling within the period starting on the date of the
Notice of Redemption and ending on the day immediately preceding the Specified
Redemption Date, which Rights will not be distributed before the relevant
Specified Redemption Date, then the REIT Shares Amount shall also include such
Rights that a holder of that number of shares of Common Stock would be
entitled to receive, expressed, where relevant hereunder, in a number of
shares of Common Stock determined by the General Partner in good faith.
SECTION 9.6 ADJUSTMENTS
The number of shares of Common Stock comprising the REIT
Shares Amount shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
A. Adjustment for Change in Capital Stock. If at any
time after the date of this Agreement, the General Partner:
(1) pays a dividend or makes a
distribution on its Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of
Common Stock into a greater number of shares;
(3) combines its outstanding shares of
Common Stock into a smaller number of shares
(4) makes a distribution on its Common
Stock in shares of its capital stock, rights, or other equity interests other
than Common Stock; or
(5) issues by reclassification of its
Common Stock any shares of its capital stock;
then the number of shares of Common Stock comprising the REIT Shares Amount
shall be adjusted so that the holder of a Class A or Class B Unit may receive
in an exchange therefor pursuant to Section 9.5, the number of shares of
capital stock of the General Partner which the holder of the Class A or Class
B Unit would have owned immediately following such action if such Unit had
been exchanged immediately prior thereto.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution, and immediately after
the effective date in the case of a subdivision, combination or
reclassification.
B. Adjustment for Other Distributions. If at any time after
the date of this Agreement, the General Partner distributes to all holders of
its Common Stock any of its assets, Debt Securities, or New Securities without
receiving fair value
-53-
<PAGE>
therefor as determined in the business judgment of the General Partner, the
number of shares of Common Stock comprising the REIT Shares Amount that are
issuable in respect of each Class A or Class B Unit in an exchange therefor
pursuant to Section 9.5 following the record date for such distribution shall
(unless adjusted pursuant to Section 9.6.A) be adjusted by multiplying the
REIT Shares Amount immediately prior to the distribution by a fraction, the
numerator of which is CMP and the denominator of which is X:
Where X = (CMP x NO) - F
-------------------
NO
where: NO = Total number of shares of Common Stock
outstanding.
CMP = the Value of Common Stock on the record date
of the distribution.
F = the aggregate fair market value
(determined in good faith by the Board of
Trustees of the General Partner) on the
record date of the distribution of the
assets or securities being distributed.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the
distribution or the effective date of such issuance, as applicable. In the
event that such distribution or issuance is not actually made, the number of
shares issuable in respect of each Class A and Class B Unit shall be
readjusted to eliminate the effect to the calculation provided hereby.
This subsection does not apply to cash dividends or cash
distributions made on the Common Stock, to any event pursuant to which an
adjustment is made under Section 9.6.A, or to a distribution of Rights covered
by Section 9.5.N.
SECTION 9.7 CERTAIN COVENANTS
Each Limited Partner covenants and agrees with the General
Partner that all Class A or Class B Units delivered for Redemption by it
pursuant to this Article IX shall be delivered to the Partnership or the
General Partner, as the case may be, free and clear of all Encumbrances.
SECTION 9.8 PARTNERSHIP RIGHT TO CALL LIMITED PARTNER INTERESTS
Notwithstanding any other provision of this Agreement, on
and after the date on which the aggregate number of outstanding Class A or
Class B Units, as the case may be, is less than five
-54-
<PAGE>
percent (5%) of the aggregate number of Class A Units issued under the
Contribution Agreements or five percent (5%) of the aggregate number of Class
B Units issued under the Zell Contribution Agreements, the Partnership shall
have the right, but not the obligation, from time to time and at any time to
redeem any and all outstanding Class A or Class B Units, as applicable for the
Cash Amount, by treating any Limited Partner as a Tendering Party who has
delivered a Notice of Redemption pursuant to Section 9.5 hereof for the amount
of Class A or Class B Units to be specified by the General Partner, in its
sole discretion, by notice to such Limited Partner that the Partnership has
elected to exercise its rights under this Section 9.8; provided, however, that
no Class A Units may be repurchased pursuant to this Section 9.8 until all
Class A Units required to be issued under the Contribution Agreements shall
have been issued. Such notice given by the General Partner to a Limited
Partner pursuant to this Section 9.8 shall be treated as if it were a Notice
of Redemption delivered to the General Partner by such Limited Partner. For
purposes of this Section 9.8, (a) any Limited Partner holding Class A or Class
B Units (whether or not otherwise a Qualifying Party) may, in the General
Partner's sole discretion, be treated as a Qualifying Party that is a
Tendering Party and (b) the provisions of Sections 9.5.C, 9.5.E, 9.5.H and
9.5.L hereof shall not apply, but the remainder of Section 9.5 hereof shall
apply with such adjustments as shall be necessary in the circumstances.
SECTION 9.9 REPURCHASE OF UNITS
Notwithstanding the provisions of Section 9.6 hereof,
nothing in this Agreement shall preclude the repurchase of a Limited Partner
Interest or Partner Units by the Partnership upon such terms and conditions as
may be negotiated between the Limited Partner or Assignee holding such Limited
Partner Interest or Partner Units, on the one hand, and the General Partner,
on the other hand, in their sole discretion. Such a repurchase may include,
without limitation, the payment of cash by the Partnership to the Limited
Partner or Assignee, in a lump sum or in installments, or the distribution in
kind of Partnership assets to such Limited Partner or Assignee (which assets
may be encumbered), including assets to be designated by the Limited Partner
or Assignee and acquired (with or without debt financing) by the Partnership.
Upon any such repurchase, the Partner Units and Limited Partner Interest
repurchased and the applicable Partner Schedule shall be cancelled and Exhibit
A shall be amended as appropriate to reflect such repurchase. In effecting any
such repurchase by negotiated agreement, none of the Partnership, the General
Partner, the Limited Partner or the Assignee, as the case may be, shall incur
any liability to any other holder of Partner Units or have any duty to offer
the same or similar terms for repurchase of any other Limited Partner Interest
or Partner Units.
-55-
<PAGE>
SECTION 9.10
In the event that the General Partner elects to issue to a
Tendering Party shares of Common Stock and/or cash for some or all the Partner
Interests proposed to be redeemed pursuant to Section 9.5, the Partnership
shall reflect the cancellation of such Partner Interest or the transfer of
such Partner Interest to the General Partner, as the case may be, in the
Register.
ARTICLE X BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 10.1 RECORDS AND ACCOUNTING
A. The General Partner shall keep or cause to be kept at the
principal office of the Partnership those records and documents required to be
maintained by the Act and other books and records deemed by the General
Partner to be appropriate with respect to the Partnership's business,
including, without limitation, all books and records necessary to provide to
the Limited Partners any information and copies of documents required to be
provided hereunder. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time.
B. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles, or on such other basis as the
General Partner determines to be necessary or appropriate. To the extent
permitted by accounting practices and principles, the Partnership and the
General Partner may operate with integrated or consolidated accounting
records, operations and principles.
SECTION 10.2 FISCAL YEAR
The Fiscal Year shall be the calendar year.
SECTION 10.3 REPORTS
A. As soon as practicable, but in no event later than the
date on which the General Partner mails its annual report to its shareholders,
the General Partner shall cause to be mailed to each Limited Partner, of
record as of the close of the Fiscal Year, an annual report containing audited
financial statements of the Partnership and audited consolidated financial
statements of the General Partner for such Fiscal Year, presented in
accordance with generally accepted accounting principles.
B. As soon as practicable, but in no event later than the
date on which the General Partner mails its quarterly reports to its
shareholders, the General Partner shall cause to be mailed
-56-
<PAGE>
to each Limited Partner, of record as of the last day of the calendar quarter,
a report containing unaudited financial statements of the Partnership and
unaudited consolidated financial statements of the General Partner, and such
other information as may be required by applicable law or regulation or as the
General Partner determines to be appropriate.
ARTICLE XI TAX MATTERS
SECTION 11.1 PREPARATION OF TAX RETURNS
The General Partner shall arrange for the preparation and
timely filing of all returns with respect to Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within ninety (90) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for federal and state income tax
reporting purposes. The Limited Partners shall promptly provide the General
Partner with such information relating to the Contributed Properties,
including tax basis and other relevant information, as may be reasonably
requested by the General Partner from time to time, provided that such
information is in the possession of or available to the Limited Partners
without unreasonable effort or expense.
SECTION 11.2 TAX ELECTIONS
Except as otherwise provided herein, the General Partner
shall, in its sole discretion, determine whether to make any available
election pursuant to the Code, including, but not limited to, the election
under Code Section 754 and the election to use the "recurring item" method of
accounting provided under Code Section 461(h) with respect to property taxes
imposed on the Partnership's Properties. The General Partner shall have the
right to seek to revoke any such election (including, without limitation, any
election under Code Sections 461(h) and 754) upon the General Partner's
determination in its sole discretion that such revocation is in the best
interests of the Partners.
SECTION 11.3 TAX MATTERS PARTNER
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. The tax matters partner shall
receive no compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees and expenses) shall be borne by the
Partnership in addition to any reimbursement pursuant Section 8.4 hereof.
Nothing herein shall be construed to restrict the Partnership from engaging an
accounting firm or counsel to assist the tax matters
-57-
<PAGE>
partner in discharging its duties hereunder. At the request of any Limited
Partner, the General Partner agrees to consult with such Limited Partner with
respect to the preparation and filing of any returns and with respect to any
subsequent audit or litigation relating to such returns; provided, however,
that the filing of such returns shall be in the sole discretion of the General
Partner.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income
tax purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial review"),
and in the settlement agreement the tax matters partner may expressly state
that such agreement shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the time prescribed
pursuant to the Code and Regulations) files a statement with the IRS providing
that the tax matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or (ii) who is a "notice
partner" (as defined in Code Section 6231) or a member of a "notice group" (as
defined in Code Section 6223(b)(2));
(2) in the event that a notice of a final
administrative adjustment at the Partnership level of any item required to be
taken into account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of such final
adjustment, including the filing of a petition for readjustment with the
United States Tax Court, the United States Claims Court or the District Court
of the United States for the district in which the Partnership's principal
place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative
adjustment with the IRS from time to time and, if any part of such request is
not allowed by the IRS, to file an appropriate pleading (petition or
complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to
extend the period for assessing any tax that is attributable to any item
required to be taken into account by a Partner for tax purposes, or an item
affected by such item; and
-58-
<PAGE>
(6) to take any other action on behalf of the
Partners in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any
expense by the tax matters partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole discretion of
the tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 8.6 hereof shall be fully applicable to
the tax matters partner in its capacity as such.
SECTION 11.4 WITHHOLDING
Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Code Section 1441, Code Section 1442, Code
Section 1445 or Code Section 1446. Any amount paid on behalf of or with
respect to a Limited Partner shall constitute a loan by the Partnership to
such Limited Partner, which loan shall be repaid by such Limited Partner
within fifteen (15) days after notice unless (1) the Partnership withholds
such payment from a distribution that would otherwise be made to the Limited
Partner or (2) the General Partner determines, in its sole discretion, that
such payment may be satisfied out of the Available Funds of the Partnership
that would, but for such payment, be distributed to the Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's Partner Interest to
secure such Limited Partner's obligation to pay to the Partnership any amounts
required to be paid pursuant to this Section 11.4. In the event that a Limited
Partner fails to pay any amounts owed to the Partnership pursuant to this
Section 11.4 when due, the General Partner may, in its sole discretion, elect
to make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner (including, without
limitation, the right to receive distributions). Any amounts payable by a
Limited Partner hereunder shall bear interest at the prime rate, as published
from time to time in the WALL STREET JOURNAL, plus four (4) percentage points
(but not higher than the maximum lawful rate) from the date such amount is due
(i.e., fifteen (15) days after demand) until such amount is paid in full. Each
Limited Partner shall take such actions as the Partnership or
-59-
<PAGE>
the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE XII TRANSFERS AND WITHDRAWALS
SECTION 12.1 TRANSFER
No Partner Interest shall be Transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article XII. Any Transfer or purported Transfer of a Partner Interest not made
in accordance with this Article XII shall be null and void ab initio.
SECTION 12.2 TRANSFER OF GENERAL PARTNER'S PARTNER INTEREST
A. Except as provided in Sections 12.2.B and 12.2.C hereof,
the General Partner may not Transfer any of its General Partner Interest or
withdraw from the Partnership without the Consent of the Limited Partners.
B. Subject to Section 8.3.A, the General Partner may at any
time or from time to time Transfer all or any portion of its General Partner
Interest to any Person with whom the General Partner may consolidate or merge
or to any Person to whom the General Partner may sell all or substantially all
of its assets.
C. Subject to Section 8.3.A, the General Partner may
withdraw from the Partnership upon a transfer of all of its General Partner
Interest to a transferee of its interest as provided in Section 12.2.B hereof,
and designate the transferee as its successor General Partner.
D. Upon any Transfer of such a Partner Interest pursuant to
the Consent of the Limited Partners or in accordance with the provisions of
Section 12.2.B, and concurrently with such Transfer and the withdrawal of the
General Partner, the transferee shall be admitted to the Partnership as a
successor General Partner for all purposes herein, and shall be vested with
the powers and rights of the transferor General Partner. If such transferee
has executed such instruments as may be necessary to effectuate such admission
and to confirm the agreement of such transferee to be bound by all the terms
and provisions of this Agreement with respect to the Partner Interest so
acquired or the transferee assumes, by operation of law or express agreement,
all of the obligations of the transferor General Partner under this Agreement
with respect to such Transferred Partner Interest, such Transfer shall relieve
the transferor General Partner of its obligations under this Agreement without
the Consent of the Limited Partners.
-60-
<PAGE>
E. Except as limited by Section 12.2.D, any General Partner
who shall commit or suffer an event of withdrawal under the Act or shall
otherwise withdraw from the Partnership shall remain liable for obligations
and liabilities incurred by it as General Partner prior to the occurrence of
such event of withdrawal or other withdrawal, but it shall be free of any such
obligation or liability incurred on account of the activities of the
Partnership thereafter.
F. Upon the occurrence of an event of withdrawal of the
General Partner under the Act, the General Partner shall pay to the
Partnership in cash the amount of any deficit balance in its Capital Account
unless the event of withdrawal results from a Transfer that is permitted by
Section 12.2.
G. Notwithstanding the foregoing, the General Partner shall
not engage in any Terminating Capital Transaction, unless, in connection
therewith, all Limited Partners (other than the General Partner and its
Subsidiaries) will have the right to elect to receive, or will receive, for
each Unit an amount of cash, securities or other property equal to the product
of the REIT Shares Amount and the greatest amount of cash, securities or other
property paid to a holder of Common Stock in respect of one share of Common
Stock; provided that if, in connection with such Terminating Capital
Transaction, a purchase, tender or exchange offer shall have first been made
to and accepted by the holders of more than fifty percent (50%) of the
outstanding Common Stock, and a holder of Limited Partner Units did not
receive advance written notice (whether from the General Partner, the offeror
or otherwise) of the offer and an opportunity to redeem its Units
substantially in accordance with the provisions of Section 9.5, then such
holder shall receive, or shall have the right to elect to receive, the
greatest amount of cash, securities or other property that such holder would
have received had it exercised its right of Redemption and received Common
Stock in exchange for its Units immediately prior to such purchase, tender or
exchange offer and had thereupon accepted such purchase, tender or exchange
offer and to the extent required by the terms thereon applicable to all other
holders of Common Stock participating in the purchase, tender or exchange
offer, participated in all other phases of such Terminating Capital
Transaction as well.
H. Notwithstanding the foregoing or any other provision of
this Agreement, the entire General Partner Interest in the Partnership shall
at all times be held by the General Partner and there shall not at any time be
more than one General Partner, except for such temporary period as may be
required to prevent the dissolution of the Partnership upon the withdrawal of
a General Partner and the substitution of a replacement General Partner
therefor.
-61-
<PAGE>
SECTION 12.3 TRANSFER OF LIMITED PARTNER UNITS
A. GENERAL. Prior to the first anniversary of the Issuance
Date, no Limited Partner shall Transfer all or any portion of its Limited
Partner Units to any Person without the consent of the General Partner, which
consent may be withheld in its sole discretion; except for (i) Transfers to a
Family Member pursuant to the laws of descent or devise or to either a trust
established for the benefit of such Partner or of such Partner's Family
Members or to any entity all of the beneficial interests of which are owned by
such Partner or such Partner's Family Members, (ii) Transfers by partnerships
and other entities owning interests in Units to Limited Partners or other
beneficial owners of such entities; and the transferees in each such case
described in this subpart (ii) or in subpart (i) shall be admitted as
Additional Limited Partners simultaneously with such transfer and (iii)
pledges by any Limited Partner of all or any portion of its Limited Partner
Units to financial institutions as collateral or security for a bona fide loan
or other extension of credit ("Pledges"), and Transfers of such pledged
Limited Partner Units to such lending institutions in connection with the
exercise of remedies under such loan or extension of credit (any such
Transfer, a "Permitted Transfer"); provided, that, in each and every case,
such Transfers shall comply with all other provisions of this Article XII.
Except as limited by the preceding sentence or any other agreement among the
pertinent parties, each holder of record of Limited Partner Units shall have
the right to Transfer all or any portion of such Units to any Person, subject
to the provisions of Section 12.6 hereof and to satisfaction of each of the
conditions set forth herein.
B. It is a condition to any Transfer otherwise permitted
hereunder (excluding Pledges of a Limited Partner Unit, but including any
Transfer of the pledged Limited Partner Unit, whether to the secured party or
otherwise, pursuant to the secured party's exercise of its remedies under such
Pledge or the related loan or extension of credit) that the transferee assume
by operation of law or express agreement all of the obligations of the
transferor under this Agreement with respect to such transferred Partner
Interest, and no such Transfer (other than pursuant to a statutory merger or
consolidation wherein all obligations and liabilities of the transferor
Partner are assumed by its successor by operation of law) shall relieve the
transferor Partner of its obligations under this Agreement without the
approval of the General Partner, in its sole discretion. Notwithstanding the
foregoing, any transferee of any transferred Partner Interest shall be subject
to any and all ownership limitations (including, without limitation, the
Ownership Limit) contained in the Charter that may limit or restrict such
transferee's ability to exercise its Redemption rights, including, without
limitation, the Ownership Limit. Any transferee, whether or not admitted as a
Limited Partner, shall take its Partner Interest subject to the obligations of
the transferor hereunder. Unless admitted as a Limited Partner, no transferee,
whether by a
-62-
<PAGE>
voluntary Transfer, by operation of law or otherwise, shall have any rights
hereunder, other than the rights of an Assignee as provided in Section 12.5
hereof.
C. INCAPACITY. If a Limited Partner is subject to
Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate, and such
power as the Incapacitated Limited Partner possessed to Transfer all or any
part of its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
D. OPINION OF COUNSEL. In connection with any Transfer of a
Limited Partner Interest, the General Partner shall have the right to receive
an opinion of counsel reasonably satisfactory to it to the effect that the
proposed Transfer may be effected without registration under the Securities
Act or any state or foreign securities law and will not otherwise violate any
federal or state securities laws or regulations applicable to the Partnership
or the Partner Interests transferred. If, in the opinion of such counsel, such
Transfer would require the filing of a registration statement under the
Securities Act or subject the Partnership to registration under either the
Exchange Act or either the Partnership or the General Partner to the
Investment Company Act or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Units, the
General Partner may prohibit any Transfer otherwise permitted under this
Section 12.3.
E. ADVERSE TAX CONSEQUENCES. No Transfer by a Limited
Partner of its Units (including any Redemption, any other acquisition of Units
by the General Partner or any acquisition of Units by the Partnership) may be
made to any person if (i) in the opinion of legal counsel for the Partnership,
it would result in the Partnership being treated as an association taxable as
a corporation, or (ii) such Transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Code Section 7704.
SECTION 12.4 SUBSTITUTED LIMITED PARTNERS
A. No Limited Partner shall have the right to substitute a
transferee or other transferees pursuant to Transfers permitted by this
Agreement as a Limited Partner in its place. A transferee of a Limited Partner
Interest may be admitted as a Limited Partner only with the Consent of the
General Partner, which Consent may not be unreasonably withheld. The
reasonable failure or refusal by the General Partner to permit a transferee
-63-
<PAGE>
of any such interests to become a Limited Partner shall not give rise to any
cause of action against the Partnership or the General Partner. In addition,
an Assignee shall not be admitted as a Limited Partner until and unless it
furnishes to the General Partner (1) evidence of acceptance, in form and
substance satisfactory to the General Partner, of all the terms, conditions
and applicable obligations of this Agreement, including, without limitation,
the power granted in Section 16.13 hereof, and, if applicable, the
Registration Rights Agreement, and (2) such other documents and instruments as
may be required or advisable, in the sole discretion of the General Partner,
to effect such Assignee's admission as a Limited Partner.
B. A transferee who has been admitted as a Limited Partner
in accordance with this Agreement shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under
this Agreement.
C. Upon the admission of a Limited Partner, the General
Partner shall amend Exhibit A to reflect the admission of such Limited
Partner.
SECTION 12.5 ASSIGNEES
If the General Partner does not consent to the admission of
any permitted transferee under Section 12.3 hereof as a Limited Partner, as
described in Section 12.4 hereof, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be entitled to all
the rights of an assignee of a limited partner interest under the Act,
including the rights granted to the Limited Partners under Section 9.5, but
shall not be deemed to be a Partner for any other purpose under this
Agreement, and shall not be entitled to effect a Consent or vote on any matter
presented to the Limited Partners for approval (any such right to Consent or
vote, to the extent provided in this Agreement or under the Act, fully
remaining with the transferor Limited Partner). In the event that any such
transferee desires to make a further assignment of its interest in the
Partnership, such transferee shall be subject to all the provisions of this
Article XII to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of its Partner Interests.
SECTION 12.6 GENERAL PROVISIONS
A. No Limited Partner may withdraw from the Partnership
other than as a result of a Transfer of all of such Limited Partner's Units in
accordance with this Article XII, with respect to which the transferee becomes
a Limited Partner, or pursuant to a Redemption (or acquisition by the General
Partner) of all of its Units under Sections 9.5, 9.8 and 9.9 hereof.
-64-
<PAGE>
B. Any Limited Partner who shall Transfer all of its Units
in a Transfer (1) permitted pursuant to this Article XII where such transferee
was admitted as a Limited Partner, (2) pursuant to the exercise of its rights
to effect a Redemption of all of its Units under Section 9.5 hereof or (iii)
to the General Partner or the Partnership, shall cease to be a Limited
Partner.
C. If any Limited Partner Unit is Transferred in compliance
with the provisions of this Article XII, or is redeemed pursuant to Section
9.5 or acquired by the General Partner or the Partnership pursuant to Sections
9.8 and 9.9 hereof, on any day other than the first day of a Fiscal Year, then
Net Income, Net Losses, each item thereof and all other items of income, gain,
loss, deduction and credit attributable to such Unit for such Fiscal Year
shall be allocated to the transferor Partner or the Tendering Party, as the
case may be, and, in the case of a Transfer or assignment other than a
Redemption, to the transferee Partner (including, without limitation, the
General Partner) or Assignee, by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using the
"daily proration" or "interim closing of the books" method or another
permissible method selected by a General Partner. Solely for purposes of
making such allocations, the General Partner, in its sole discretion, may
determine that each of such items for the calendar month in which a Transfer
occurs shall be allocated to the transferee Partner or Assignee and none of
such items for the calendar month in which a Transfer or a Redemption occurs
shall be allocated to the transferor Partner or the Tendering Party, as the
case may be, if such Transfer occurs on or before the fifteenth (15th) day of
the month; otherwise such items for such calendar month shall be allocated to
the transferor. All distributions of Available Cash attributable to such Unit
with respect to which the record date for such distribution is before the date
of such Transfer, assignment or Redemption shall be made to the transferor
Partner or the Tendering Party, as the case may be, and, in the case of a
Transfer other than a Redemption, all distributions of Available Cash
thereafter attributable to such Unit shall be made to the transferee Partner
or Assignee.
D. In addition to any other restrictions on Transfer herein
contained, in no event may any Transfer of a Partner Interest by any Partner
(including any Redemption, any acquisition of Partner Interests by the General
Partner or any other acquisition of Partner Interests by the Partnership) be
made:
(1) to any person or entity who lacks the legal
right, power or capacity to own a Partner Interest;
(2) in violation of applicable law;
(3) of any component portion of a Partner Interest,
such as the Capital Account, or rights to distributions,
-65-
<PAGE>
separate and apart from all other components of a Partner
Interest;
(4) in the event that such Transfer would violate
the provisions of the General Partner's Charter or would cause the General
Partner to cease to qualify as a REIT under the Code or Regulations;
(5) if such Transfer would, in the opinion of
counsel to the Partnership or the General Partner, cause a termination of the
Partnership, in either case for federal or state income tax purposes (except
as a result of the Redemption (or acquisition by the General Partner) of all
Units held by all Limited Partners) and such termination would have a
significant adverse economic effect on the Partners taken as a whole;
(6) if such Transfer would, in the opinion of legal
counsel to the Partnership, cause the Partnership either (i) to cease to be
classified as a partnership or (ii) to be classified as a publicly traded
partnership, in either case for federal income tax purposes (except as a
result of the Redemption (or acquisition by the General Partner) of all Units
held by all Limited Partners);
(7) if such Transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA,
a "party-in-interest" (as defined in ERISA Section 3(14)) or a "disqualified
person" (as defined in Code Section 4975(c));
(8) if such Transfer would, in the opinion of legal
counsel to the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101;
(9) if such Transfer requires the registration of
such Partner Interest pursuant to any applicable federal or state securities
laws or result in any prior private placement of securities being treated as a
public offering;
(10) if such Transfer causes the Partnership (as
opposed to the General Partner) to become a reporting company under the
Exchange Act; or
(11) if such Transfer subjects the Partnership or
the General Partner to registration under the Investment Company Act of 1940
or the Investment Advisors Act of 1940 or regulation under ERISA, each as
amended.
-66-
<PAGE>
ARTICLE XIII ADMISSION OF PARTNERS
SECTION 13.1 ADMISSION OF SUCCESSOR GENERAL PARTNER
A successor to all of the General Partner's General Partner
Interest pursuant to Section 12.2 hereof who is proposed to be admitted as a
successor General Partner shall be admitted to the Partnership as the General
Partner, effective concurrently with such Transfer. Any such successor shall
carry on the business of the Partnership without dissolution. In each case,
the admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms, conditions
and applicable obligations of this Agreement and such other documents or
instruments as may be required to effect the admission.
SECTION 13.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS
A. After the admission to the Partnership of the initial
Limited Partners on the date hereof, a Person (other than an existing Partner)
who makes a Capital Contribution to the Partnership in accordance with this
Agreement or who acquires a Limited Partner Interest in accordance with this
Agreement shall be admitted to the Partnership as an Additional Limited
Partner only upon furnishing to the General Partner (1) a counterpart
signature page to this Agreement and such other evidence of acceptance, in
form and substance satisfactory to the General Partner, of all of the terms
and conditions applicable of this Agreement, including, without limitation,
the power of attorney granted in Section 16.13 hereof, and (2) such other
documents or instruments as may be required in the sole discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section
13.2, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission. The General
Partner hereby grants its consent to the admission as an Additional Limited
Partner to any bona fide financial institution that loans money or otherwise
extends credit to a holder of Limited Partner Units and thereafter becomes the
owner of such pledged Limited Partner Units pursuant to the exercise by such
financial institution of its rights under a Pledge of such Limited Partner
Units granted in connection with such loan or extension of credit and to
transferees permitted under subsections 12.3.A(i) and (ii), subject in all
cases to the compliance of such Transfer and transferee with the other
provisions of this Article XII.
-67-
<PAGE>
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Fiscal Year, then Net
Income, Net Losses, each item thereof and all other items of income, gain,
loss, deduction and credit allocable among Partners and Assignees for such
Fiscal Year shall be allocated among such Additional Limited Partner and all
other Partners and Assignees by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using the
"interim closing of the books" method or another permissible method selected
by the General Partner. Solely for purposes of making such allocations, each
of such items for the calendar month in which an admission of any Additional
Limited Partner occurs shall be allocated among all the Partners and Assignees
including such Additional Limited Partner, in accordance with the principles
described in Section 12.6.C hereof. All distributions of Available Cash with
respect to which the record date for such distribution is before the date of
such admission shall be made solely to Partners and Assignees other than the
Additional Limited Partner, and all distributions of Available Cash thereafter
shall be made to all the Partners and Assignees including such Additional
Limited Partner.
SECTION 13.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
For the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the Act
to amend the records of the Partnership and, if necessary, to prepare as soon
as practical an amendment of this Agreement (including an amendment of Exhibit
A) and, if required by law, shall prepare and file an amendment to the
Certificate and may for this purpose exercise the power of attorney granted
pursuant to Section 16.13 hereof.
SECTION 13.4 ADMISSION OF INITIAL LIMITED PARTNERS
The Persons listed on Exhibit A as limited partners of the
Partnership shall be admitted to the Partnership as Limited Partners upon
their execution and delivery of this Agreement.
ARTICLE XIV DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 14.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of
Limited Partners or Additional Limited Partners or by the admission of any
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner admitted
in accordance with Article XII of this Agreement shall continue the business
of the Partnership without dissolution. However, the Partnership shall
-68-
<PAGE>
dissolve, and its affairs shall be wound up, upon the first to occur of any of
the following (each a "Liquidating Event"):
A. The expiration of its term as provided in Section 2.4
hereof;
B. An event of withdrawal, as defined in the Act (including,
without limitation, bankruptcy), of the sole General Partner unless, within
ninety (90) days after the withdrawal, a majority in interest of the remaining
Partners agree in writing, in their sole discretion, to continue the business
of the Partnership and to the appointment, effective as of the date of
withdrawal, of a successor General Partner;
C. An election to dissolve the Partnership made by the
General Partner, with the consent of ninety percent (90%) of the Limited
Partners;
D. Entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act; or
E. The occurrence of a Terminating Capital Transaction.
SECTION 14.2 WINDING UP
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs
in an orderly manner, liquidating its assets and satisfying the claims of its
creditors and Partners. After the occurrence of a Liquidating Event, no
Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner (or, in the event that there is no remaining General
Partner or the General Partner has dissolved, become bankrupt with the meaning
of the Act or ceased to operate, any Person elected by a Majority in Interest
of the Limited Partners (the General Partner or such other Person being
referred to herein as the "Liquidator")) shall be responsible for overseeing
the winding up and dissolution of the Partnership and shall take full account
of the Partnership's liabilities and property, and the Partnership property
shall be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom (which may, to the extent determined by
the General Partner, include shares of stock in the General Partner) shall be
applied and distributed in the following order:
(1) First, to the satisfaction of all of the
Partnership's debts and liabilities to creditors other than the Partners and
their Assignees (whether by payment or the making of reasonable provision for
payment thereof);
-69-
<PAGE>
(2) Second, to the satisfaction of all the
Partnership's debts and liabilities to the Partners (whether by payment or the
making of reasonable provision for payment thereof), including, but not
limited to, amounts due as reimbursements to the General Partner under Section
8.4 hereof; and
(3) The balance, if any, to the General Partner,
the Limited Partners and any Assignees in accordance with and proportion to
their positive Capital Account balances, after giving effect to all
contributions, distributions and allocations for all periods.
B. Notwithstanding the provisions of Section 14.2.A hereof
that require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole discretion, defer for a reasonable
time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors)
and/or, with the Consent of a Majority in Interest of the Partners, distribute
to the Partners, in lieu of cash, as tenants in common and in accordance with
the provisions of Section 14.2.A hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any
property distributed in kind using such reasonable method of valuation as it
may adopt.
C. In the event that the Partnership is "liquidated" within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall
be made pursuant to this Article 13 to the Partners and Assignees that have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive
Capital Account balances. If any Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions and
allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever. In the sole discretion of the
General Partner or the Liquidator, a pro rata portion of the
-70-
<PAGE>
distributions that would otherwise be made to the Partners pursuant to this
Article 14 may be withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority set
forth in Section 14.2.A hereof as soon as practicable.
SECTION 14.3 RIGHTS OF LIMITED PARTNERS
Except as otherwise provided in this Agreement, (A) each
Limited Partner shall look solely to the assets of the Partnership for the
return of its Capital Contribution, (B) no Limited Partner shall have the
right or power to demand or receive property other than cash from the
Partnership and (C) no Limited Partner shall have priority over any other
Limited Partner as to the return of its Capital Contributions, distributions
or allocations.
SECTION 14.4 NOTICE OF DISSOLUTION
In the event that a Liquidating Event occurs or an event
occurs that would, but for an election or objection by one or more Partners
pursuant to Section 14.1 hereof, result in a dissolution of the Partnership,
the General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners and, in the General Partner's sole
discretion or as required by the Act, to all other parties with whom the
Partnership regularly conducts business (as determined in the sole discretion
of the General Partner), and the General Partner may, or, if required by the
Act, shall, publish notice thereof in a newspaper of general circulation in
each place in which the Partnership regularly conducts business (as determined
in the sole discretion of the General Partner).
SECTION 14.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership
cash and property as provided in Section 14.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed with the Delaware
Secretary of State, all qualifications of the Partnership as a foreign limited
partnership or association in jurisdictions other than the State of Delaware
shall be cancelled, and such other actions as may be necessary to terminate
the Partnership shall be taken.
SECTION 14.6 REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly
winding-up of the business and affairs of the Partnership and the liquidation
of its assets pursuant to Section 14.2 hereof, in order to minimize any losses
otherwise attendant upon such
-71-
<PAGE>
winding-up, and the provisions of this Agreement shall remain in effect
between the Partners during the period of liquidation.
SECTION 14.7 ACCOUNTING
In the event of the dissolution, liquidation and winding up
of the Partnership, a proper accounting (which shall be certified) shall be
made of the Capital Account of each Partner and of the Net Profits or Net
Losses of the Partnership from the date of the last previous accounting to the
date of the dissolution. Financial statements presenting such accounting shall
include a report of a certified public accountant selected by the Liquidator.
ARTICLE XV PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; MEETINGS
SECTION 15.1 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
The actions requiring consent or approval of Limited
Partners pursuant to this Agreement are subject to the procedures set forth in
this Article XV.
SECTION 15.2 MEETINGS OF THE PARTNERS
A. Meetings of the Partners may be called by the General
Partner. The call shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than seven
(7) days nor more than forty-five (45) days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of Partners is permitted or required under this Agreement, such vote
or Consent may be given at a meeting of Partners or of only those Partners
entitled to consent or may be given in accordance with the procedure
prescribed below.
B. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by Partners holding a majority of the
Units whose Consent is required (or such other percentage as is expressly
required by this Agreement for the action in question). Such consent may be in
one instrument or in several instruments, and shall have the same force and
effect as a vote of Partners holding a majority of the Units whose Consent is
required (or such other percentage as is expressly required by this
Agreement). Evidence of such Consent shall be filed with the records of the
Partnership and shall be effective when so filed.
C. Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which he is entitled to participate,
including waiving notice of any meeting,
-72-
<PAGE>
or voting or participating at a meeting. Every proxy must be signed by the
Limited Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy (or there is receipt of a proxy authorizing a later
date). Every proxy shall be revocable at the pleasure of the Limited Partner
executing it, such revocation to be effective upon the Partnership's receipt
of written notice of such revocation from the Limited Partner executing such
proxy.
D. Each meeting of Partners shall be conducted by the
General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner
or such other Person deems appropriate in its sole discretion. Without
limitation, meetings of Partners may be conducted in the same manner as
meetings of the General Partner's shareholders and may be held at the same
time as, and as part of, the meetings of the General Partner's shareholders.
ARTICLE XVI GENERAL PROVISIONS
SECTION 16.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted
to be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when
sent by first class United States mail or by other means of written
communication (including by telecopy, facsimile, or commercial courier
service) (i) in the case of a Partner, to such Partner at the address set
forth in Exhibit A or such other address of which the Partner shall notify the
General Partner in writing and (ii) in the case of an Assignee, to an address
of which such Assignee shall notify the General Partner in writing.
SECTION 16.2 TITLES AND CAPTIONS
All article or section titles or captions in this Agreement
are for convenience only. They shall not be deemed part of this Agreement and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references to
"Articles" or "Sections" are to Articles and Sections of this Agreement.
SECTION 16.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural
and vice versa.
-73-
<PAGE>
SECTION 16.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 16.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
SECTION 16.6 WAIVER
A. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
B. The restrictions, conditions and other limitations on the
rights and benefits of the Limited Partners contained in this Agreement, and
the representations, duties, covenants and other requirements of performance
or notice by the Limited Partners, are for the benefit of the Partnership and,
except for an obligation to pay money to the Partnership, may be waived or
relinquished by the General Partner, in its sole discretion, on behalf of the
Partnership in one or more instances from time to time and at any time;
provided, however, that any such waiver or relinquishment may not be made if
it would have the effect of (i) creating liability for any other Limited
Partner, (ii) causing the Partnership to cease to qualify as a limited
partnership, (iii) reducing the amount of cash otherwise distributable to the
Limited Partners, (iv) resulting in the classification of the Partnership as
an association or publicly traded partnership taxable as a corporation or (v)
violating the Securities Act, the Exchange Act or any state "blue sky" or
other securities laws; provided, further, that any waiver relating to
compliance with the Ownership Limit or other restrictions in the Charter shall
be made and shall be effective only as provided in the Charter.
SECTION 16.7 COUNTERPARTS
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto or upon execution of a Partner
Schedule.
-74-
<PAGE>
SECTION 16.8 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law. In the event of a conflict between any
provision of this Agreement and any non-mandatory provision of the Act, the
provisions of this Agreement shall control and take precedence.
SECTION 16.9 ENTIRE AGREEMENT
This Agreement contains all of the understandings and
agreements between and among the Partners with respect to the subject matter
of this Agreement and the rights, interests and obligations of the Partners
with respect to the Partnership.
SECTION 16.10 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
SECTION 16.11 LIMITATION TO PRESERVE REIT STATUS
Notwithstanding anything else in this Agreement, to the
extent that the amount paid, credited, distributed or reimbursed by the
Partnership to, for or with respect to any REIT Partner or its officers,
directors, employees or agents, whether as a reimbursement, fee, expense or
indemnity (a "REIT PAYMENT"), would constitute gross income to the REIT
Partner for purposes of Code Section 856(c)(2) or Code Section 856(c)(3),
then, notwithstanding any other provision of this Agreement, the amount of
such REIT Payments, as selected by the General Partner in its discretion from
among items of potential distribution, reimbursement, fees, expenses and
indemnities, shall be reduced for any Fiscal Year so that the REIT Payments,
as so reduced, to, for or with respect to such REIT Partner shall not exceed
the lesser of:
A. an amount equal to the excess, if any, of (1) four and
nine-tenths percent (4.9%) of the REIT Partner's total gross income (but
excluding the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Code Section 8.56(c)(2) over (2)
the amount of gross income (within the meaning of Code Section 856(c)(2))
derived by the REIT Partner from sources other than those described in
subsections (A) through (H) of Code Section 856(c)(2) (but not including the
amount of any REIT Payments); or
B. an amount equal to the excess, if any, of (1) twenty-four
percent (24%) of the REIT Partner's total gross income (but excluding the
amount of any REIT Payments) for the Fiscal
-75-
<PAGE>
Year that is described in subsections (A) through (1) of Code Section
856(c)(3) over (2) the amount of gross income (within the meaning of Code
Section 856(c)(3)) derived by the REIT Partner from sources other than those
described in subsections (A) through (I) of Code Section 856(c)(3) (but not
including the amount of any REIT Payments); provided, however, that REIT
Payments in excess of the amounts set forth in clauses (a) and (b) above may
be made if the General Partner, as a condition precedent, obtains an opinion
of tax counsel that the receipt of such excess amounts shall not adversely
affect the REIT Partner's ability to qualify as a REIT. To the extent that
REIT Payments may not be made in a Fiscal Year as a consequence of the
limitations set forth in this Section 16.11, such REIT Payments shall carry
over and shall be treated as arising in the following Fiscal Year. The purpose
of the limitations contained in this Section 16.11 is to prevent any REIT
Partner from failing to qualify as a REIT under the Code by reason of such
REIT Partner's share of items, including distributions, reimbursements, fees,
expenses or indemnities, receivable directly or indirectly from the
Partnership, and this Section 16.11 shall be interpreted and applied to
effectuate such purpose.
SECTION 16.12 NO PARTITION
No Partner nor any successor-in-interest to a Partner shall
have the right while this Agreement remains in effect to have any property of
the Partnership partitioned, or to file a complaint or to institute any
proceeding at law or in equity to have such property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors and
assigns hereby waives any such right. It is the intention of the Partners that
the rights of the parties hereto and their successors-in-interest to
Partnership property, as among themselves, shall be governed by the terms of
this Agreement, and that the rights of the Partners and their
successors-in-interest shall be subject to the limitations and restrictions as
set forth in this Agreement.
SECTION 16.13 POWER OF ATTORNEY
A. Each Limited Partner and each Assignee hereby irrevocably
constitutes and appoints the General Partner, any Liquidator, and authorized
officers and attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:
(1) execute, swear to, seal, acknowledge, deliver,
file and record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this Agreement
and the Certificate and all amendments, supplements or restatements thereof)
that the General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Partnership
as a
-76-
<PAGE>
limited partnership (or a partnership in which the limited partners have
limited liability to the extent provided by applicable law) in the State of
Delaware and in all other jurisdictions in which the Partnership may conduct
business or own property; (b) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (c) all
conveyances and other instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation; (d) all
conveyances and other instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the distribution or
exchange of assets of the Partnership pursuant to the terms of this Agreement;
(e) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in, Article
XI, Article XII or Article XIII hereof or the Capital Contribution of any
Partner; and (f) all certificates, documents and other instruments relating to
the determination of the rights, preferences and privileges relating to
Partner Interests; and
(2) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole discretion of the General Partner, to
make, evidence, give, confirm or ratify any vote, consent, approval, agreement
or other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or appropriate or necessary, in
the sole discretion of the General Partner, to effectuate the terms or intent
of this Agreement.
Nothing contained herein shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Section
16.15 hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of
the fact that each of the Limited Partners and Assignees will be relying upon
the power of the General Partner to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited
Partner or Assignee and the Transfer of all or any portion of such Limited
Partner's or Assignee's Partner Units or Partner Interest and shall extend to
such Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be
bound by any representation made by the General Partner, acting in good faith
pursuant to such power of attorney; and each such Limited Partner
-77-
<PAGE>
or Assignee hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner, taken in good
faith under such power of attorney. Each Limited Partner or Assignee shall
execute and deliver to the General Partner or the Liquidator, within fifteen
(15) days after receipt of the General Partner's or the Liquidator's request
therefor, such further designation, powers of attorney and other instruments
as the General Partner or the Liquidator, as the case may be, deems necessary
to effectuate this Agreement and the purposes of the Partnership.
SECTION 16.14 NO THIRD-PARTY RIGHTS CREATED HEREBY
The provisions of this Agreement are solely for the purpose
of defining the interests of the Partners, inter se; and no other person, firm
or entity (i.e., a party who is not a signatory hereto or a permitted
successor to such signatory hereto) shall have any right, power, title or
interest by way of subrogation or otherwise, in and to the rights, powers,
title and provisions of this Agreement. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans to the
Partnership or to pursue any other right or remedy hereunder or at law or in
equity. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an
asset of the Partnership for any purpose by any creditor or other third party,
nor may any such rights or obligations be sold, transferred or assigned by the
Partnership or pledged or encumbered by the Partnership to secure any debt or
other obligation of the Partnership or any of the Partners.
SECTION 16.15 AMENDMENT
A. Except as set forth below, the General Partner shall have
the power and authority, in its sole discretion and without the consent of any
other Partner, to amend any and all of the provisions of this Agreement to
issue additional Partner Interests or Debt Securities, or to establish the
rights, privileges, duties and obligations of any Partner or class or series
of Partner Interests or Debt Securities, to admit Additional Limited Partners,
or otherwise, except that without the consent of each Partner adversely
affected thereby, the General Partner shall not (except, in each and every
case, as may be necessary to correct plain errors or clarify ambiguities in
this Agreement) amend this Agreement so as to (A) require any Partner to make
any additional contribution to the capital of the Partnership; or (B) require
any Partner to restore any negative balance in its Capital Account or
otherwise contribute any capital to the Partnership, except as may be required
under the Act, the Code or other applicable laws or as expressly provided
herein or (C) convert a Limited Partner Interest in the Partnership into a
-78-
<PAGE>
General Partner Interest, or (D) modify the limited liability of a Limited
Partner.
B. Without the Consent of a Majority in Interest of the
Limited Partners, the General Partner shall not amend any of the following
Articles or Sections of this Agreement (except, in each and every case, as may
be necessary to correct plain errors or to clarify ambiguities in this
Agreement): Article III, Article IV, Article V, Article XV, Section 8.4(C),
(E) and (F), Section 8.5, Section 8.6, Section 8.8, Section 12.2, Section
14.1, Section 14.2, Section 15.2 or any of the defined terms used in any of
the foregoing Articles or Sections.
C. In addition, without the consent of each Partner
adversely affected thereby, the General Partner shall not amend any of the
provisions of Article VI, Article VII, Article IX, or Sections 2.7, 3.3,
4.1(C), 4.2, 5.2(b), 5.7, 8.3, 8.5(G), 11.4, 12.3, 13.2(B), 14.3, 16.13 or
16.15 or any of the defined terms used in any of the foregoing Articles or
Sections for the purpose of such Articles or Sections.
For the purposes of interpreting Sections 16.15.B and
16.15.C, no issuance of additional Class A or Class B Units or of options,
warrants, rights, or other securities convertible into or exchangeable for
Class A or Class B Units and no creation or issuance of any additional class
or series of securities, or of options, rights, warrants or other securities
by the Partnership in accordance with the other provisions of this Agreement
shall be deemed to adversely affect any Limited Partner or to require the
consent of any Limited Partner, unless such consent is required by a provision
of this Agreement other than this Section 16.15.
-79-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: /s/ Jonathan B. Weller
---------------------------
Trustee
By: /s/ Sylvan M. Cohen
---------------------------
Trustee
LIMITED PARTNERS:
/s/ Ronald Rubin
---------------------------
Ronald Rubin
*/s/ George Rubin
---------------------------
George Rubin
/s/ Edward Glickman
---------------------------
Edward Glickman
*/s/ Alan Feldman
---------------------------
Alan Feldman
*/s/ Douglas Grayson
---------------------------
Douglas Grayson
*/s/ Eric Mallory
---------------------------
Eric Mallory
*/s/ James Paterno
---------------------------
James Paterno
*/s/ Judith Garfinkel
---------------------------
Judith Garfinkel
*/s/ David Bryant
---------------------------
David Bryant
*/s/ Joseph Straus
---------------------------
Joseph Straus
-80-
<PAGE>
*/s/ Leonard Shore
---------------------------
Leonard Shore
*/s/ Joseph Coradino
---------------------------
Joseph Coradino
*/s/ Lewis Stone
---------------------------
Lewis Stone
*/s/ Gerald Broker
---------------------------
Gerald Broker
*/s/ Patricia Berns
---------------------------
Patricia Berns
*/s/ Susan Valentine
---------------------------
Susan Valentine
*By:/s/ Ronald Rubin
---------------------------
Name:
Attorney-in-Fact
DELAWARE ASSOCIATES, L.P.
By: /s/ Ronald Rubin
---------------------------
Ronald Rubin, General Partner
RICHARD I. RUBIN CO., INC.
By: /s/ George Rubin
---------------------------
George Rubin
President
RR LOANCO ASSOCIATES
By: Richard I. Rubin & Co., Inc., its
---------------------------------------
Managing Partner
By: /s/ George Rubin
---------------------------------------
Name:
Title:
-81-
<PAGE>
RUBIN OXFORD, INC.
By:/s/ Ronald Rubin
---------------------------------------
Name:
Title:
RUBIN OXFORD VALLEY ASSOCIATES, L.P.
By: RUBIN OXFORD, INC., its General Partner
By:/s/ Ronald Rubin
---------------------------------------
Name:
Title:
FLORENCE MALL PARTNERS, an Illinois
limited partnership
By: Samuel Zell Robert Lurie
General Partners, an Illinois
general partnership, its General
Partner
By: Zell General Partnership, Inc.,
its General Partner
By:
---------------------------------------
Name: Shelly Z. Rosenberg
Title: Vice President
-82-
<PAGE>
September 30, 1997
SUBSCRIPTION AGREEMENT
PREIT ASSOCIATES, L.P.
455 Pennsylvania Avenue, Suite 135
Fort Washington, Pennsylvania 19034
Attention: President
Gentlemen:
1. Subscription: Desiring to become a Class B Limited
Partner ("Class B Limited Partner") in PREIT ASSOCIATES, L.P., a Delaware
limited partnership (the "Partnership"), and intending to be legally bound
hereby, the undersigned Class B Limited Partner hereby subscribes for and
agrees to accept the number of Class B Units of limited partnership interest
(the "Class B Units") in the Partnership set forth on the signature page of
this Subscription Agreement in exchange for the contribution by or on behalf
of the Class B Limited Partner of an undivided interest in the Magnolia Mall,
Florence, South Carolina (the "Magnolia Mall") contributed by or on behalf of
the Class B Limited Partner valued at $23.47 per Class B Unit received by the
Class B Limited Partner, such Class B Units to be issued upon acceptance of
this Subscription Agreement by Pennsylvania Real Estate Investment Trust (the
"General Partner") as the General Partner of the Partnership. Capitalized
terms used in this Subscription Agreement and not defined herein shall have
their respective meanings set forth in the Partnership Agreement.
2. Representations and Warranties. The Class B Limited
Partner hereby represents and warrants to the General Partner and the
Partnership, and acknowledges, understands and agrees, that: a. the Class B
Limited Partner is an Accredited Investor as defined in Regulation D issued by
the Securities and Exchange Commission; b. the Class B Limited Partner has set
forth on the signature page of this Subscription Agreement the Class B Limited
Partner's social security number or EIN, the Class B Limited Partner's
principal legal address and the basis by which the Class B Limited Partner
believes that it is an Accredited Investor; c. the Class B Limited Partner has
received and reviewed to the extent that the Class B Limited Partner has
deemed necessary or desirable the Proxy Statement, the Partnership Agreement
and the Registration Rights Agreement and has consulted with such of the Class
B Limited Partner's own attorney, accountant, tax adviser or investment
counselor as the Class B Limited Partner has determined to be necessary or
desirable; d. the Class B Limited Partner has been given an adequate
opportunity to ask questions of and receive answers from the officers of the
General Partner with respect to the Trust, the Partnership, the Partnership
Agreement, the Registration Rights Agreement and the TRO transaction described
in the Proxy Statement; e. the Class B Limited Partner understands that the
sale or transfer of Class B Units issued to the Class B Limited Partner are
restricted and the Class B Limited Partner cannot sell or transfer the Class B
<PAGE>
Units without the consent of the General Partner (unless waived by such General
Partner), except as provided in the Partnership Agreement; the requirement that
if the Class B Limited Partner desires to sell or transfer Class B Units, the
Class B Limited Partner must furnish an opinion of counsel that any such
proposed sale or transfer will not violate federal or state securities laws; and
that there will be no public market for Class B Units; f. the Class B Limited
Partner understands that the consummation of the transactions contemplated
hereby and/or the sale or refinancing of the Magnolia Mall and/or the redemption
of the Class B Units for cash or shares of the Trust may cause the Class B
Limited Partner to incur taxable income or gain; g. the Class B Limited Partner
understands that the Class B Units and shares of the Trust which may be issued
at the option of the Trust upon the redemption of the Class B Units will not be
registered under the Securities Act of 1933, as amended, and, therefore, cannot
be sold unless such resale is registered under such Act or an exemption from
registration is available; h. the Class B Limited Partner has knowledge and
experience in business and financial matters, is capable of evaluating and has
evaluated the merits and risks of the Class B Limited Partner's investment in
the Class B Units and understands that it must bear the economic risks of its
investment for an indefinite period of time; and i. the Class B Limited Partner
is acquiring the Class B Units for its own account, not on behalf of other
persons, and for investment purposes only and not with a view to the resale or
distribution thereof.
3. Acknowledgement.
a. The Class B Limited Partner acknowledges that the
exemption from registration under federal and applicable state securities laws
of the issuance of the Class B Units to the Class B Limited Partner is
dependent, in part, on the representations, warranties, agreements and
acknowledgments contained herein being true and correct and that, after such
consultation with counsel to the extent the Class B Limited Partner has deemed
necessary, the Class B Limited Partner understands the meaning of the foregoing
representations, warranties, agreements and acknowledgements.
b. The Class B Limited Partner hereby acknowledges that its
right to dispose of the Class B Units is subject to significant restrictions set
forth in the Partnership Agreement, including, without limitation, the
requirement to obtain the consent of the General Partner (unless waived by the
General Partner), except as provided in the Partnership Agreement.
4. Bound by Partnership Agreement. By executing the attached
signature page, the Class B Limited Partner agrees to be bound by all of the
terms and provisions of the Partnership Agreement of PREIT Associates, L.P.
dated as of September 30, 1997 (the "Partnership Agreement"), to which this
signature page will be attached, including, without limitation, Section 16.13
(Power of Attorney) thereof.
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement on and as of the date set forth above.
<PAGE>
CLASS B LIMITED PARTNER SIGNATURE PAGE
CLASS B LIMITED PARTNER:
FLORENCE MALL PARTNERS, an Illinois limited
partnership, a member
By Samuel Zell Robert Lurie General
Partners, an Illinois general
partnership, its General Partner
By Zell General Partnership, Inc., its
General Partner
By See Attached
------------------------------------------
Name:
Title:
ACCREDITED INVESTOR
Please check below the reason the Class B Limited Partner
believes that the Class B Limited Partner is an Accredited Investor:
A corporation, business trust or partnership not formed for
the specific purpose of acquiring Class B Units with total
assets in excess of $5 million. [X]
A person whose individual net worth, or joint net worth with his or her
spouse, at the time of the execution hereof, exceeds $1 million. [ ]
A person who has an individual income in excess of $200,000 in each of the two
most recent years, or joint income with his or her spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year. [ ]
A trust with total assets in excess of $5 million, not formed for the specific
purpose of acquiring the Class B Units, whose purpose is directed by a
sophisticated person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the merits and
risks of investing in the Class B Units. [ ]
An entity in which all of the equity owners are Accredited Investors. [ ]
<TABLE>
<CAPTION>
==========================================================================================================================
Name and Principal
Legal Address of Social Security No. or EIN No. of
Class B Limited Partner of Class B Limited Partner Class B Units
==========================================================================================================================
<S> <C> <C>
Florence Mall Partners, an 36-304991 213,038
Illinois limited partnership
2 North Riverside Plaza,
Suite 1000
Chicago, Illinois 60606
==========================================================================================================================
</TABLE>
ACCEPTANCE BY THE GENERAL PARTNER
The General Partner hereby accepts the subscription by the Class B
Limited Partner on behalf of the Partnership.
GENERAL PARTNER:
Pennsylvania Real Estate Investment Trust
By /s/ Jeffrey A. Linn
------------------------
Name:
Dated: September 30, 199 Title:
<PAGE>
Florence Mall Partners, an Illinois General
Partnership, its general partner
By: Samuel Zell Robert Lurie General
Partners, an Illinois general
partnership, its general partner
By: Zell General Partnership, Inc.,
its General Partner
By: /s/ Donald J. Lieberfritt
-------------------------------
Name: Donald J. Lieberfritt
Title: Vice President
<PAGE>
PREIT CONTRIBUTION AGREEMENT AND
GENERAL ASSIGNMENT AND BILL OF SALE
THIS PREIT CONTRIBUTION AGREEMENT AND GENERAL ASSIGNMENT AND
BILL OF SALE (the "Agreement") is made as of the 30th day of September, 1997
by and between PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a Pennsylvania
business trust ("PREIT"), and PREIT ASSOCIATES, L.P., a Delaware limited
partnership (the "Partnership").
Background
The parties hereto are parties to the TRO Contribution
Agreement dated as of July 30, 1997, among PREIT, the Partnership, The Rubin
Organization, Inc. ("TRO"), The Rubin Organization-Illinois, Inc. and the
shareholders of TRO, as amended by the First Amendment to TRO Contribution
Agreement dated as of September 30, 1997 (as amended, the "TRO Contribution
Agreement"). Closing under the TRO Contribution Agreement is occurring on the
date hereof.
The Partnership was formed on June 30, 1997 in view of the
transactions contemplated in the TRO Contribution Agreement. PREIT is the sole
general partner of the Partnership. PREIT Property Trust, a Pennsylvania
business trust ("PREIT Subsidiary"), has been the sole limited partner of the
Partnership prior to the issuance of limited partner interests on the date
hereof as contemplated in the TRO Contribution Agreement.
Pursuant to the TRO Contribution Agreement, PREIT agreed to
contribute all or substantially all of its assets to the Partnership in
accordance with a plan of contribution set forth as an exhibit to the TRO
Contribution Agreement.
The parties hereto desire to enter into this Agreement to
memorialize the contemplated contribution and the issuance by the Partnership
to PREIT and PREIT Subsidiary of general partner interests and Class A limited
partner interests in the Partnership in exchange therefor.
In order to take title to certain of the assets and
properties held by PREIT and its subsidiaries, the Partnership has organized
several limited liability companies, trusts and limited partnerships, all of
the equity of which is owned, directly or indirectly, by the Partnership (such
entities, together with the Partnership, the "Partnership Group").
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. Capitalized terms not otherwise
defined herein shall have the meanings assigned to them in the
TRO Contribution Agreement.
2. Contribution of PREIT Assets. On the date hereof, PREIT
is contributing to the Partnership Group all of the assets and properties of
PREIT other than the assets and properties specifically listed on Exhibit A
hereto. The Partnership acknowledges that all of such contributions are being
made "as is", without recourse of any kind whatsoever and without the benefit
of any representations or warranties of any kind or nature. It is understood
by PREIT and the Partnership that PREIT and certain of its subsidiaries,
contemporaneously with the execution and delivery of this Agreement, are
further executing and delivering to the Partnership Group certain assignments,
deeds and other instruments of transfer in addition to the general assignment
and bill of sale set forth in Section 4 below. The purpose of these other
instruments, together with such general assignment and bill of sale, is to
implement, facilitate and otherwise effect the transfers contemplated by the
first sentence of this Section 2.
3. Issuance of Units. In consideration of the contributions
referred to in Section 2 above, the Partnership is issuing on the date hereof
(i) to PREIT 93,258.8424 units of general partner interest in the Partnership
and (ii) at the direction of PREIT, to PREIT Subsidiary 8,586,339.158 Class A
Units.
4. General Assignment and Bill of Sale. PREIT ("Assignor"),
for value received from the Partnership ("Assignee"), does hereby sell,
convey, transfer, assign and deliver to Assignee, its successors and assigns
all of the right, title and interest of Assignor in and to all of Assignor's
assets and properties other than those listed in Exhibit A hereto and those
listed in the plan of contribution listed in Exhibit B hereto, together with
the appurtenances thereof, to have and to hold the same forever to its and
their own proper use and benefit.
Assignor shall, at any time and from time to time, at the
written request of Assignee, execute and deliver to Assignee all other and
further instruments as are reasonably necessary to vest in Assignee full
right, title and interest in or to any of the assets intended to be conveyed
hereby.
-2-
<PAGE>
Assignor hereby constitutes and appoints Assignee, its
successors and assigns, its true and lawful attorney, with full power of
substitution, in the name of the Assignor and on behalf and for the benefit of
Assignee, its successors and assigns, to demand and receive from time to time
any and all property of Assignor hereby conveyed, transferred, assigned and
delivered or intended so to be; to give receipts, releases and acquittances
for or in respect of the same or any part thereof; from time to time to
institute and prosecute in the name of Assignor or otherwise any and all
proceedings at law or in equity or otherwise, which Assignee, its successors
and assigns may deem proper to collect, assert or enforce any claim, title,
right or debt and to defend and compromise any and all actions, suits or
proceedings in respect of any of the properties hereby assigned and
transferred or intended so to be, that Assignee, its successors or assigns
shall deem desirable.
5. Assumption of Liabilities. PREIT hereby assigns,
transfers, sets over and delegates to the Partnership, and the Partnership
hereby assumes, agrees to pay and become liable for payment, performance and
discharge of, when due, all of the liabilities and obligations of PREIT.
6. Assignment and Benefit.
(a) The parties hereto shall not assign this
Agreement or any rights hereunder, or delegate any obligations hereunder,
without prior written consent of the other party. Subject to the foregoing,
this Agreement and the rights and obligations set forth herein shall inure to
the benefit of, and be binding upon, the parties hereto, and each of their
respective successors, heirs and assigns.
(b) This Agreement shall not be construed as
giving any person, other than the parties hereto and their permitted
successors, heirs and assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any of the provisions herein
contained, this Agreement and all provisions and conditions hereof being
intended to be, and being, for the sole and exclusive benefit of such parties,
and permitted successors, heirs and assigns and for the benefit of no other
person or entity.
7. Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
8. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an orig-
-3-
<PAGE>
inal, but all of such counterparts together shall be deemed to be
one and the same instrument.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings.
10. Governing Law. This Agreement is made pursuant to, and
shall be construed and enforced in accordance with, the laws of the
Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Sylvan M. Cohen
-------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By: /s/ Sylvan M. Cohen
-------------------
Name:
Title:
-4-
<PAGE>
DECLARATION OF TRUST
This Declaration of Trust is made this 19th day of June, 1997 by
Pennsylvania Real Estate Investment Trust, an unincorporated association in
business trust form created in Pennsylvania pursuant to that certain Trust
Agreement dated December 27, 1960 as last amended and restated on December 16,
1987, as grantor of the trust (hereinafter "Grantor") and Pennsylvania Real
Estate Investment Trust, in its capacity as initial trustee (hereinafter the
"NCF Trustee").
The Grantor is the record title owner of the real estate described on
Exhibit A attached hereto and made a part hereof (the "Real Property") and
desires to create an irrevocable trust with the NCF Trustee, as trustee, for
the purpose of collecting, holding, managing and distributing the Net Cash
Flow (as that term is defined hereinafter below in Section 1.01) generated by
the Real Property.
All rights, title and interest with respect to the Real Property,
including without limitation the right to sell, mortgage, lease or otherwise
dispose or encumber any or all of the Real Property shall be and hereby are
reserved exclusively to the Grantor. Nothing contained herein shall be
construed, interpreted, intended or deemed to convey record title to, or the
right to manage and/or operate, all or any portion of the Real Property.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,the
Grantor and Trustee hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Declaration
of Trust, the capitalized terms set forth below shall have the
following meanings:
"Beneficiary" shall mean the Person or Persons holding one hundred
(100%) percent of the beneficial interest in the Trust at any given time.
"Net Cash Flow" shall mean with respect to any period for which such
calculation is made (a) the sum of the all of the following: (1) all sums
received from tenants, licensees or other occupants of the Real Property, or
any part thereof, related to use and occupancy of space within any of the Real
Property
1
<PAGE>
("Gross Income"), including without limitation, minimum annual rent;
additional rent; late charges; escalation charges; parking fees and/or other
license fees; payments for common area maintenance, real estate taxes,
insurance, utilities and/or other operating expenses; payment for repairs,
renovations and replacements within tenant spaces or within common areas; sums
paid in lieu of rent such as use and occupancy charges payable by a bankrupt
or its trustees; damages and expenses recovered from defaulting tenants, lease
termination fees or charges paid to Grantor; any insurance proceeds or taking
proceeds to the extent received by Grantor and not applied (or held for
application) to repair or reconstruct all or any part of the Real Property; or
the payment of any debt service due in connection with such Real Property; (2)
the excess, if any, of the net cash proceeds from the sale, exchange,
disposition, financing or refinancing of any or all of the Real Property over
the gain (or loss, as the case may be) recognized from such sale, exchange,
disposition, financing or refinancing during such period; and (3) all other
cash received by Grantor in connection with the ownership, operation or
management of the Real Property; (b) LESS the sum of the following: (1)
expenditures relating to the Real Property ("Expenditures") including
leasing/brokerage commissions, if any, actually paid to licensed real estate
brokers, but only to the extent such commissions do not exceed then prevailing
rates for comparable transactions in comparable buildings in the immediate
area of the subject Real Property; expenditures reasonably required to make
space ready for occupancy by tenants, generally known as "tenant
improvements"; normal and customary building operating expenses, including
without limitation, ad valorem real estate taxes (including escrows deposited
with any mortgagee or lender), insurance premiums, repairs and maintenance,
utilities, reasonable salaries and fringe benefits paid to employees directly
required to operate, maintain and manage any or all of the Real Property, and
reasonable legal and accounting expenses directly related to management and
operation of all or any part of the Real Property; capital and non-capital
expenditures reasonably required for normal operation, repair, replacement and
maintenance of the Real Property, payments of principal or interest on any
debt instruments encumbering any of the Real Property; depreciation or
amortization of leasehold improvements or other capital expenditures;
depreciation of the Real Property; any other non-cash items which are
deductible for tax or normal accounting purposes; and the amount of any
reserves established by the Grantor or the amount of any increases contributed
by Grantor to any then currently existing reserves.
"Person" shall mean a natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank trust company, land trust, real estate
investment trust, business trust, limited liability company or other
organization.
2
<PAGE>
"NCF Trustee or NCF Trustees" shall mean the person or persons
serving from time to time as the trustee or trustees of the Trust and are
referred to collectively as "NCF Trustees" or individually as "NCF Trustee".
"Trust Corpus" shall mean all right, title and interest of the Trust
in and to any property contributed to the Trust by the Grantor or otherwise
acquired by the Trust.
ARTICLE II
Transfer to Initial Trustee
Section 2.01. Initial Transfer.
(a) The Grantor has transferred and does hereby transfer to the
Trustee on the date hereof the Net Cash Flow and may from time to time
transfer additional property to the Trust, it being intended however, that the
Trust Corpus shall not include real estate. The NCF Trustee shall hold the
Trust Corpus in trust for the uses and purposes herein contained.
(b) Powers of and Reservations by Grantor. The Grantor hereby
reserves unto itself and its successors and assigns, the absolute and
exclusive power and authority to manage the Real Property, exercisable without
consent of the NCF Trustee or Beneficiary hereunder, and to do all such acts
and things as in its sole discretion and judgment are necessary or incidental
to or desirable for the ownership, management, and operation of the Real
Property. The Grantor shall have all the specific rights and powers required,
appropriate or desirable to the ownership, operation and management of the
Real Property, which, by way of illustration but not by way of limitation,
shall include the following:
(i) to acquire, construct, operate, maintain, improve,
extend, expand, buy, own, sell, convey, assign, mortgage, pledge, hypothecate
or otherwise encumber, refinance, rent or lease all or any portion of the Real
Property;
(ii) to borrow funds and grant mortgages, liens and security
interests in all or any portion of the Real Property as security therefor;
(iii) to execute warrants of attorney to confess judgments
and to confess judgments in connection with any obligation of Grantor;
(iv) to engage in any kind of activity, and to engage in,
perform and execute and carry out contracts and agreements of any kind
necessary to, in connection with, or incidental to, the ownership, operation
and management of the Real Property;
3
<PAGE>
(v) to obtain governmental or other approvals, licenses,
permits and authorizations, if any, which may be required for the
construction, maintenance, development, ownership and/or operation of the Real
Property;
(vi) to negotiate with utility companies concerning
contracts or agreement for utility service to the Real Property;
(vii) to establish reasonable reserve funds for any purpose
in connection with such Real Property;
(viii) to expend such funds and to employ agents, attorneys,
brokers, managing agents, contractors, subcontractors, architects and
accountants provided such expenditures and services are necessary or
advisable, in the Grantor's sole discretion, in connection with the ownership,
operation and management of the Real Property and to obtain reimbursement for
such expenditures, costs, fees and expenses from the Real Property and from
the NCF Trustee out of the Trust Corpus;
(ix) to bring, defend, pay, collect, compromise, arbitrate,
engage legal action or otherwise adjust claims or demands of or against the
Real Property;
(x) to purchase and pay for insurance policies insuring the
Real Property against any and all risks and insuring the Grantor and its
officers, trustees, partners, beneficiaries, shareholders, employees or agents
against any and all claims and liabilities of every nature asserted by any
Person arising by any reason of any action alleged to have been taken or
omitted by the Grantor, and its officers, directors, partners, beneficiaries,
trustees, shareholders, employees or agents; and
(xi) to execute, acknowledge and deliver any and all
instruments and/or documents necessary to effectuate the foregoing.
ARTICLE III
Formation of the Trust
Section 3.01. Name. The Trust created hereby shall be known as The NCF Trust.
Section 3.02. Office. The principal office of the Trust shall be care of the NCF
Trustee at 455 Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania
19034.
Section 3.03. Term. The Trust shall be in full force and effect until the date
which is twenty-one (21) years from the date of death of the last survivor of
the present Trustees of the Pennsylvania Real Estate Investment Trust, Scott
Richard
4
<PAGE>
Silberman and Darius James Copland upon which date the Trust shall terminate
and be at an end and of no further force and effect, unless sooner terminated
by a unanimous decision of the Beneficiary of the Trust.
Section 3.04. Continuation of Trust. The death, insolvency, or incompetency of
an individual Beneficiary, the dissolution, merger, or insolvency of any other
Beneficiary which is a corporation, partnership, trust, limited liability
company or partnership or other entity or the transfer of beneficial interest
shall not terminate the Trust or entitle the legal representative of the
Beneficiary, or any transferee, to any accounting or to any legal action
against the Trust Corpus or the NCF Trustee. Upon the death, insolvency, or
incompetency of any individual Beneficiary, the legal representative of such
Beneficiary shall succeed as a Beneficiary and shall be bound by the
provisions of this Trust.
ARTICLE IV
Trustees
Section 4.01. Appointment of Initial Trustee; Number of Trustees.
(a)The Grantor hereby appoints Pennsylvania Real Estate Investment
Trust as the initial NCF Trustee under this instrument to serve as NCF Trustee.
Section 4.02. Resignation and Successors.
(a)The Grantor hereby retains and reserves the right at any time and
from time to time: (1) to remove any NCF Trustee acting hereunder, and (2) to
appoint a successor to any NCF Trustee who for any reason ceases to act as NCF
Trustee.
(b)The NCF Trustee or any successor may resign at any time without
cause by giving at least sixty (60) days prior written notice to the
Beneficiary, and the holders of one hundred (100%) percent of the beneficial
interest may, at any time, remove any NCF Trustee without cause by written
notice to said NCF Trustee, such resignation or removal to be effective upon
the acceptance of appointment by a successor trustee as hereinafter provided.
In the case of the resignation or removal of a NCF Trustee, a successor may be
appointed by written instrument executed by the Beneficiary. If a successor
trustee shall not have been appointed within sixty (60) days after the giving
of such notice by all of the Beneficiaries to the then current NCF Trustee,
said NCF Trustee or the Beneficiary may apply to any court of competent
jurisdiction in the United States to appoint a successor trustee to act until
such time, if any, as a successor trustee shall have been appointed as
provided hereinabove. Any
5
<PAGE>
successor so appointed by such court shall immediately and without further act
be superseded by any successor appointed as provided above within one year
from the date of the appointment by such court. Any successor, however
appointed, shall execute and deliver to its predecessor trustee an instrument
accepting such appointment, and thereupon such successor without further act
shall become vested with all the estates, properties, rights, powers, duties
and trusts of the predecessor trustee as if originally named NCF Trustee
herein.
Section 4.03. Compensation. Any NCF Trustee hereunder shall not be entitled to
any compensation in connection with the NCF Trustee's performance of its
duties and powers hereunder. However, notwithstanding the foregoing, the
Beneficiary shall pay or reimburse, as appropriate, the NCF Trustee for all
reasonable fees, costs and expenses of the NCF Trustee incurred in connection
with the NCF Trustee's performance of said duties and powers.
Section 4.04. Liability of Trustee. No NCF Trustee when acting in such
capacity shall be personally liable to any third party for any act, omission
or obligation of the Trust. The liability of the NCF Trustee hereunder and the
trustees of Grantor shall be restricted and limited solely to the Trust
Corpus. No trustee, officer, agent or shareholder of the Grantor or
Beneficiary shall be personally liable for any obligations of the Trust.
Section 4.05. Indemnification of NCF Trustee.
(a) The Beneficiary hereunder shall pay (or reimburse the NCF
Trustee) for all fees and expenses of the NCF Trustee hereunder, including
without limitation, the reasonable compensation, expenses and disbursements of
such agents, representatives, accountants and counsel as the NCF Trustee may
employ in connection with the exercise and performance of its duties and
powers under this Declaration of Trust, whether or not the transactions
contemplated hereby or thereby are consummated. The Beneficiary and its
successors and/or assigns hereby agree to assume all liability for, and to
indemnify and hold harmless the NCF Trustee, from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions, suits,
costs, expenses and disbursements (including attorneys' fees and
disbursements) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the NCF Trustee at any time and which in any
way relate to or arise from or out of the Trust Corpus, the administration of
the Trust Corpus or any action or inaction of the NCF Trustee hereunder. The
liabilities of the Beneficiary hereunder shall be joint and several, in the
event there are more than one Beneficiary hereunder at any time during the
term of the Trust.
6
<PAGE>
(b) The NCF Trustee shall be entitled to payment from the Net Cash
Flow for any payments, reimbursement and/or indemnification owing to the NCF
Trustee pursuant to the terms of this Declaration of Trust, but only to the
extent such monies are not promptly paid by the Beneficiary or others, and
without releasing said Beneficiary from its respective obligations of payment,
reimbursement and indemnification.
Section 4.06. Exculpation of NCF Trustee. No NCF Trustee shall be personally
liable to the Trust or any Beneficiary for any act or omission except for its
own willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
Section 4.07. Persons Dealing with the NCF Trustee. Any act of the NCF Trustee
purporting to be done in its capacity as such, shall, as to any Person dealing
with such NCF Trustee, be deemed conclusively within the purposes of this
Trust and the powers of the NCF Trustee.
ARTICLE V
Duties and Powers of the NCF Trustee
Section 5.01. Acceptance of Duties. The NCF Trustee hereby accepts the trusts
hereby created and agrees to perform the same but only upon and to the extent
of the terms of this Declaration of Trust.
Section 5.02. Powers of the NCF Trustee. The NCF Trustee shall have the
absolute and exclusive power and authority to manage the Trust Corpus,
exercisable without consent of the Beneficiary or Grantor, to the same extent
as if the NCF Trustee were the owner of the Trust Corpus and to do all such
acts and things as in its sole discretion and judgment are necessary or
incidental to or desirable for the carrying out the purposes of this Trust.
The concurrence of all the NCF Trustees shall be necessary to the validity of
any action taken by them, provided that (a) if there is only one NCF Trustee
serving, such NCF Trustee may act alone until a co-trustee is appointed, if
ever, in which event the two NCF Trustees must act together, and (b) if, at
any time there are more than two NCF Trustees serving, the concurrence of a
majority of the NCF Trustees shall be necessary to the validity of any action
taken by them. The NCF Trustee shall have all the specific rights and powers
required, appropriate or desirable to collect, manage and distribute the Trust
Corpus and the Net Cash Flow in accordance with the terms of this Declaration
of Trust, which shall include, but not be limited to, the following:
(i) to open separate bank accounts for the Trust with such
bank or banks as the NCF Trustee may from time to time select, in its sole
discretion, and to designate and change signatories on such accounts;
7
<PAGE>
(ii) to confess a judgment against the Trust or Trust
Corpus;
(iii) to bring, defend, pay, collect, compromise, arbitrate,
engage legal action or otherwise adjust claims or demands of or against the
Trust;
(iv) to incur and pay out any charges or expenses and
disburse any of the Net Cash Flow which are, in the opinion of the NCF Trustee
necessary or incidental to or desirable for the carrying out of any of the
purposes of the Trust;
(v) to receive, collect and deposit monies to be held by the
Trust and which comprise all or a portion of the Net Cash Flow into banks,
trust companies, savings and loan association or other investment institutions
or vehicles, whether or not such deposits will draw interest, and the same
shall be subject to withdrawal on such terms and in such manner and by such
Persons or Person as the NCF Trustee may determine;
(vi) to make any distributions of the Net Cash Flow as
required hereunder in cash or in kind;
(vii) to employ agents, attorneys, and accountants on behalf
of the Trust, provided such services are necessary or advisable in connection
with the collection, management and distribution of the Trust Corpus and the
Net Cash Flow and to pay out from such Net Cash Flow the reasonable
compensation, costs and expenses therefor as the same is determined by the NCF
Trustee in its sole business judgment;
(viii) to purchase and pay for insurance policies insuring
the Trust, Trust Corpus, NCF Trustee and Beneficiary, and their respective
partners, officers, trustees, directors, shareholders, employees and agents
against any and all risks and insuring and against any and all claims and
liabilities of every nature asserted by any Person arising by any reason of
any action alleged to have been taken or omitted by the NCF Trustee or
Beneficiary, and their respective partners, officers, directors, trustees,
shareholders, employees or agents;
(ix) to execute and cause the Beneficiary hereunder to
execute any agreement, document or instrument necessary to confirm, evidence
and effectuate the provisions set forth in Section 11.03 hereof;
(x) to do all other acts and things as are incident to the
foregoing and to exercise all powers which are necessary or useful to carry
out the purpose of the Trust and the provisions of the Declaration of Trust;
and
8
<PAGE>
(xi) to execute, acknowledge and deliver any and all
instruments and/or documents necessary to effectuate the foregoing.
ARTICLE VI
Transfer of Beneficial Interest
Section 6.01. Beneficial Interest. The initial sole beneficiary of the Trust
shall hold one hundred percent (100%) of the beneficial interest in the Trust
("Beneficial Interest") as set forth in the Schedule of Beneficiaries.
Section 6.02. Transfers. All or any portion of the beneficial interest of any
Beneficiary may be assigned or transferred without the prior written consent
of any other Beneficiary. Upon the occurrence of an assignment or transfer of
all of a Beneficiary's interest in the Trust, the Beneficiary shall be
released from any and all liability or obligations hereunder arising out of or
caused by any event occurring after the effective date of such transfer.
Section 6.03. Procedures for Transfer. Any assignee shall become a Beneficiary
upon the assignor and the assignee executing and delivering such instruments
as any other Beneficiary and the NCF Trustee may reasonably deem necessary or
desirable in order to effectuate the assignment, and which shall include,
without limitation, a written acceptance and adoption of the terms and
provisions of this Trust together with an assumption or all reimbursement and
indemnification obligations of the Trust by the assignee and delivery to the
NCF Trustee of an Assignment of Beneficial Interest fully executed and
acknowledged by the assignor and assignee.
Section 6.04. Allocation of Beneficial Interests. The Beneficiary may, from
time to time, elect to allocate among themselves differing pro rata percentage
interests (from 0% to 100%) in the Trust Corpus and the NCF Trustee shall take
such actions and execute such documents as the Beneficiary shall direct to
reflect such allocation, including without limitation an Amended Schedule of
Beneficiaries, executed by the NCF Trustee and all of the then current
Beneficiary.
Section 6.05. Legal Ownership of the Trust Corpus. The legal
title to and ownership of the Trust Corpus is vested exclusively
in the NCF Trustee.
Section 6.06. Nature of Beneficial Interest. The Beneficial Interest shall be
personal property and shall confer upon the Beneficiary only the interest and
rights specifically set forth in this Declaration of Trust and as provided by
applicable law.
9
<PAGE>
Section 6.07. Evidence of Interest. The Beneficial Interest shall be evidenced
solely by reference thereto in this Declaration of Trust and as set forth in
the Schedule of Beneficiaries and not by certificate or otherwise.
ARTICLE VII
Termination of Trust
Section 7.01. Termination in General.
(a) This Declaration of Trust shall remain in existence, except as
otherwise provided for in Section 3.03 hereof.
Section 7.02. Evidence of Termination. After termination of the Trust and
distribution of the Trust Corpus and Net Cash Flow, the NCF Trustee shall
execute, acknowledge and record (if this Declaration of Trust has been
recorded) an instrument evidencing such termination and shall file a copy of
such instrument with the records of the Trust. Upon completion of the
foregoing, the NCF Trustee shall thereupon be discharged from all further
liabilities and duties hereunder and the rights and interests of the
Beneficiary hereunder shall thereupon cease.
ARTICLE VIII
Accounting and Fiscal Matters
Section 8.01. Fiscal Year. The fiscal year of the Trust shall
end on each August 31.
Section 8.02. Method of Accounting. The NCF Trustee shall utilize the cash
method of accounting for the Trust and shall keep, or cause to be kept, full
and accurate records of all transactions of the Trust and/or involving the
Trust Corpus and Net Cash Flow in accordance with generally accepted
accounting principles consistently applied.
Section 8.03. Financial Books and Records. All books of account shall, at all
times, be maintained at the principal office of the Trust or at such other
location as specified by the NCF Trustee and notice of same shall be given to
the Beneficiary hereunder. All determinations by the NCF Trustee with respect
to the treatment of any portion of the Net Cash Flow or its respective
allocation for federal, state or local tax purposes shall be binding upon the
Beneficiary. Any Beneficiary shall have the right upon reasonable advanced
notice to the NCF Trustee, during normal business hours and at its own cost
and expense to have its accountants and/or representatives examine and/or
audit the books and records of the Trust and the NCF Trustee shall make such
books and record available for same.
10
<PAGE>
Section 8.04. Accounting to the Beneficiaries. Within 90 days of (i) the end
of the Fiscal Year, (ii) the distribution of any of the Net Cash Flow in
accordance with Article IX hereof, or (iii) the date of receipt by the NCF
Trustee of a written request by any Beneficiary for an accounting, the NCF
Trustee shall provide to all the then current Beneficiaries a detailed written
accounting of all transactions, distributions and other activity involving the
Net Cash Flow as of (a) the end of the Fiscal Year, (b) the date of such
distribution, or (c) the date such written request is received by the NCF
Trustee, as the case may be.
ARTICLE IX
Distributions
Section 9.01. Distributions of Net Cash Flow . The NCF Trustee shall
distribute to the Beneficiary or Beneficiaries in accordance with their
respective Beneficial Interest hereunder on a quarterly basis commencing on
the first day of October, 1997 or as required or permitted by applicable law,
all of the Net Cash Flow as is then being held in trust by the NCF Trustee
hereunder.
ARTICLE X
Amendment
Section 10.01. Amendment. This Declaration of Trust may be amended in any
particular, by consent of the holders of one hundred (100%) percent of
Beneficial Interest hereunder. Such amendment shall be in writing and executed
by all such holders and the NCF Trustee hereunder.
ARTICLE XI
No Conflict with Mortgagees/Joinder in Documents
Section 11.01. No Conflict with Mortgagees. Notwithstanding anything to the
contrary contained herein, none of the terms and provision, duties or powers
shall be deemed to be in derogation of or in conflict with the rights of any
mortgage holder under any mortgage, deed of trust or like instrument effecting
a lien on any of the Real Property, Trust Corpus or Net Cash Flow, now or
hereinafter encumbering any of the Real Property, the Trust Corpus or Net Cash
Flow. This Section 11.01 shall further confirm that the Grantor hereunder is
possessed of all the right, power and authority to grant and/or create any
mortgage, lien or other encumbrance upon such Real Property.
Section 11.02. Subordination of Financing. All of the NCF Trustee's and
Beneficiary's right, title and interest in the Trust Corpus, Net Cash Flow and
the Trust itself, is subject and subordinate in all respects to any mortgage,
deed of trust,
11
<PAGE>
installment sale agreement, sale-leaseback or other like documents utilized to
secure any financing or refinancing of the Real Property (collectively the
"Security Documents") now or hereafter existing, and any and all extensions,
replacements, amendments and modifications thereto, and any and all present
and future advances thereunder under any such Security Documents and the NCF
Trustee and the Beneficiary hereby agree to the subordination this Trust, the
Trust Corpus and the Net Cash Flow to any such mortgage, deed or trust or
other such encumbrance required in connection with such financing or
refinancing.
Section 11.03. Joinder by NCF Trustee and Beneficiary. Upon the written
request of Grantor, the NCF Trustee and the then current Beneficiary shall
join in the execution of any agreement, document or instrument (including, but
not limited to any note, mortgage, deed, lease or like document involving the
Real Property), necessary to confirm, evidence and effectuate the following:
(a) the Grantor holds record, legal and equitable
title to all or any portion of the Real Property, and
(b) the Grantor has the right, power and authority to
acquire, construct, maintain, operate, manage, improve, extend, expand, own,
sell, grant, convey, assign, mortgage, pledge, hypothecate or otherwise
encumber, finance, refinance, rent, lease or dispose of all or any portion of
the Real Property.
ARTICLE XII
Miscellaneous
Section 12.01. No legal title to Trust Corpus or Net Cash Flow in the
Beneficiary. The Beneficiary shall not have legal title to any part of the
Trust Corpus or the Net Cash Flow. Except as expressly set forth herein, the
Beneficiary shall not be liable for any liabilities or obligations of the
Trust or NCF Trustee or for the performance of terms and the provisions of
this Declaration of Trust.
Section 12.02. Unanimous Consent of Beneficiary. Except as otherwise expressly
provided herein, any and all actions or consents of the Beneficiary referred
to in this Declaration of Trust shall require the unanimous written consent of
the then current holders of one hundred percent (100%) of the Beneficial
Interests hereunder.
Section 12.03. Separate Counterparts. This Declaration of Trust may executed
by the parties hereto in separate counterparts, each of which when so
executed, acknowledged and delivered shall be an original, but all such
counterparts together shall constitute but one and the same instrument.
12
<PAGE>
Section 12.04. Severability. Any provision of this Declaration of Trust which
is prohibited or unenforceable in any jurisdiction shall, as such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provisions in any other jurisdiction.
Section 12.05. Successors and Assigns. All covenants and agreements contained
herein shall be binding upon and inure to the benefit of the NCF Trustee and
its successors and assigns and the Beneficiary and their respective successors
and assigns, all as herein provided. Any request, notice, direction, consent,
waiver or other writing or action by any of the Beneficiary shall bind each of
their successors and assigns.
Section 12.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 12.08. Governing Law. This Declaration of Trust shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Pennsylvania
without reference to conflict of laws principles.
Section 12.09. Gender, etc. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number singular or plural, any other gender, masculine, feminine or neuter, as
the context requires.
ARTICLE XIII
Irrevocability
Section 13.01. Irrevocability. This Declaration of Trust shall be irrevocable.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and sealed this
Declaration of Trust the date first above written.
This Declaration is executed by or on behalf of the Trustees of the
Pennsylvania Real Estate Investment Trust, an unincorporated association in
business trust form created in Pennsylvania pursuant to a Trust Agreement
dated December 27, 1960, as last amended and restated on December 18, 1987 and
shall not constitute the personal obligation of the Trustees either jointly or
severally in their individual capacities.
GRANTOR: Pennsylvania Real Estate Investment Trust
By: /s/ Sylvan M. Cohen
---------------------------------
Trustee
By: /s/ Jonathan B. Weller
---------------------------------
Trustee
NCF TRUSTEE: Pennsylvania Real Estate Investment Trust
By: /s/ Sylvan M. Cohen
--------------------------------
Trustee
By: /s/ Jonathan B. Weller
--------------------------------
Trustee
14
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
On this 19th day of June, 1997, before me, a Notary Public in and for
the Commonwealth of Pennsylvania, the undersigned officer, personally appeared
Sylvan M. Cohen, who acknowledged himself to be a Trustee of the Pennsylvania
Real Estate Investment Trust, known to me (or satisfactorily proven) to be the
person whose name is subscribed to the within instrument and acknowledged that
he executed the same on behalf of said Trust for the purposes therein
contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Honor B. Mahoney
-----------------------------
Notary Public
My Commission Expires: 9/17/98
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
On this 19th day of June, 1997, before me, a Notary Public in and for
the Commonwealth of Pennsylvania, the undersigned officer, personally appeared
Jonathan B. Weller, who acknowledged himself to be a Trustee of the
Pennsylvania Real Estate Investment Trust, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same on behalf of said Trust for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Honor B. Mahoney
------------------------------
Notary Public
My Commission Expires: 9/17/98
15
<PAGE>
TRO CONTRIBUTION AGREEMENT
<PAGE>
TABLE OF CONTENTS
SECTION 1. ACQUISITION OF PREFERRED SHARES AND
NON-VOTING COMMON SHARES.......................... 3
1.1 Sale and Contribution of Shares....................... 3
1.2 Issuance of Class A Units............................. 4
SECTION 2. CONTINGENT RIGHT TO ADDITIONAL UNITS............................ 4
2.1 Certain Definitions................................... 4
2.2 Earn-Out.............................................. 8
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANIES AND THE TRO SHAREHOLDERS............. 9
3.1 Organization.......................................... 9
3.2 Power and Authority................................... 10
3.3 No Conflicts.......................................... 11
3.4 Capitalization; Ownership of TRO Shares............... 12
3.5 Investments........................................... 13
3.6 Compliance with Laws.................................. 14
3.7 Litigation; Orders.................................... 15
3.8 Financial Statements.................................. 16
3.9 Undisclosed Liabilities............................... 16
3.10 Title to Property; Encumbrances....................... 18
3.11 Real Property......................................... 19
3.12 List of Properties, Contracts, etc.................... 19
3.13 Contracts............................................. 22
3.14 Intellectual Property................................. 22
3.15 Clients............................................... 23
3.16 Taxes................................................. 23
3.17 Employee Benefits..................................... 25
3.18 Labor Matters......................................... 27
3.19 Relationships With Related Persons.................... 29
3.20 Environmental Matters................................. 30
3.21 Absence of Certain Changes and Events................. 32
3.22 Books and Records..................................... 33
3.23 Insurance............................................. 34
3.24 Proxy Statement....................................... 34
3.25 Brokers............................................... 35
3.26 Accurate Disclosure................................... 35
3.27 Knowledge............................................. 35
3.28 Investment Representations............................ 35
3.29 First Refusal Rights Agreement........................ 36
3.30 One Meridian Plaza.................................... 36
3.31 Equity Fund........................................... 36
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING
PREIT AND THE PARTNERSHIP........................... 36
4.1 Organization.......................................... 37
4.2 Power and Authority................................... 37
4.3 No Conflicts.......................................... 38
4.4 Capitalization........................................ 39
-i-
<PAGE>
4.5 PREIT Reports......................................... 39
4.6 Information Included in Proxy Statement............... 40
4.7 Litigation............................................ 40
4.8 Material Adverse Change............................... 40
4.9 Brokers............................................... 40
SECTION 5. AGREEMENTS AND COVENANTS........................................ 41
5.1 Special Shareholders Meeting.......................... 41
5.2 Proxy Statement....................................... 41
5.3 Reasonable Efforts.................................... 41
5.4 Access to Information; Confidentiality................ 42
5.5 Public Announcements.................................. 42
5.6 No Solicitation....................................... 43
5.7 Notifications......................................... 43
5.8 Conduct of the Companies' Business.................... 43
5.9 Sale of Shares of TRO................................. 45
5.10 Financial Information................................. 45
5.11 Costs and Expenses.................................... 45
5.12 Confidentiality....................................... 46
5.13 Voting Agreements of Sylvan M. Cohen and Leonard
I. Korman............................................. 46
5.14 TRO Consolidation..................................... 46
5.15 TRO Recap............................................. 46
5.16 Predevelopment Properties; Concord Pike; Girard
Estate................................................ 47
5.17 Closing Loan; Purchase of Equity Fund................. 47
5.18 Acquisitions by TRO Affiliates........................ 48
5.19 Board of Trustees..................................... 48
5.20 Distributions Prior to Closing........................ 49
5.21 Employees............................................. 51
5.22 Employment Agreements................................. 51
5.23 PREIT Fiscal Year..................................... 51
5.24 Contribution of PREIT Assets.......................... 51
5.25 TRO Board Meetings.................................... 52
5.26 Receivables........................................... 52
5.27 Life Insurance........................................ 52
5.28 Liabilities........................................... 52
5.29 Accounts Receivable................................... 54
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO PREIT'S AND
THE PARTNERSHIP'S OBLIGATIONS....................... 55
6.1 Representations and Warranties........................ 55
6.2 Performance of Covenants.............................. 55
6.3 Legal Matters......................................... 55
6.4 Consents and Approvals................................ 56
6.5 Opinion of Counsel.................................... 56
6.6 (Intentionally Omitted)............................... 56
6.7 Material Adverse Change............................... 56
6.8 Predevelopment Partnership............................ 56
6.9 Existing Properties................................... 56
6.10 EPD Properties........................................ 57
6.11 TRO Consolidation..................................... 57
-ii-
<PAGE>
6.12 TRO Recap............................................. 57
6.13 Rights of First Refusal............................... 57
6.14 Opinions of Financial Advisor......................... 57
6.15 Ronald Rubin.......................................... 57
6.16 Shareholder Approval.................................. 57
6.17 Registration Rights Agreement......................... 57
6.18 Lock-Up Letter Agreements............................. 58
6.19 Partnership Agreement................................. 58
6.20 Satisfaction of Section 5.28(a)....................... 58
6.21 Listing of PREIT Shares............................... 58
6.22 Goldenberg Estoppel Certificate....................... 58
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO THE TRO
SHAREHOLDERS' AND THE COMPANIES' OBLIGATIONS...... 58
7.1 Representations and Warranties........................ 58
7.2 Performance of Covenants.............................. 59
7.3 Legal Matters......................................... 59
7.4 Predevelopment Properties............................. 59
7.5 EPD Properties........................................ 59
7.6 Existing Properties................................... 59
7.7 Contribution of PREIT Assets.......................... 59
7.8 Opinion of Counsel.................................... 60
7.9 Registration Rights Agreement......................... 60
7.10 Partnership Agreement................................. 60
7.11 (Intentionally Omitted)............................... 60
7.12 Consents and Approvals................................ 60
7.13 Material Adverse Change............................... 60
SECTION 8. CLOSING......................................................... 60
8.1 Time and Place of the Closing......................... 60
8.2 Deliveries at the Closing............................. 60
SECTION 9. TERMINATION AND ABANDONMENT...................................... 62
9.1 Termination........................................... 62
9.2 Procedure for Termination; Effect of
Termination........................................... 63
SECTION 10. INDEMNIFICATION................................................. 64
10.1 Indemnification by TRO Shareholders................... 64
10.2 Indemnification by PREIT.............................. 64
10.3 Limitations on Liability.............................. 64
10.4 Procedure For Indemnification - Third Party
Claims................................................ 67
10.5 Procedure for Indemnification - Other Claims.......... 69
10.6 Acknowledgement....................................... 69
10.7 Right of Set-Off...................................... 69
10.8 Indemnification Payments.............................. 69
10.9 Transfer of Units..................................... 69
SECTION 11. MISCELLANEOUS................................................... 70
11.1 Survival of Representations and Warranties............ 70
11.2 Further Assurances.................................... 70
-iii-
<PAGE>
11.3 Notices............................................... 70
11.4 Assignment and Benefit................................ 72
11.5 Amendment, Modification and Waiver.................... 72
11.6 Governing Law; Consent to Jurisdiction................ 72
11.7 Section Headings and Defined Terms.................... 73
11.8 Severability.......................................... 73
11.9 Counterparts.......................................... 73
11.10 Entire Agreement...................................... 73
11.11 Guaranty of Performance by TRO Predevelopment,
LLC................................................... 73
-iv-
<PAGE>
TRO CONTRIBUTION AGREEMENT
THIS TRO CONTRIBUTION AGREEMENT (the "Agreement") is made as of the
30th day of July, 1997, by and among PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, an unincorporated association in business trust form created under
Pennsylvania law pursuant to a Trust Agreement dated December 27, 1960, as
last amended and restated on December 16, 1987 ("PREIT"), PREIT ASSOCIATES,
L.P., a Delaware limited partnership (the "Partnership"), THE RUBIN
ORGANIZATION, INC., a Pennsylvania corporation ("TRO"), THE RUBIN
ORGANIZATION-ILLINOIS, INC., an Illinois corporation ("TRO Illinois" and,
together with TRO, the "Companies" and each, a "Company"), the persons
identified on Schedule A hereto, constituting all of the shareholders of TRO
(collectively, the "Current TRO Shareholders"), and the entities identified on
Schedule B hereto (collectively, the "Former TRO Debtholders," and together
with the Current TRO Shareholders, the "TRO Shareholders"). An index of
defined terms is attached as an appendix hereto.
Background
PREIT has qualified as a real estate investment trust under Section
856(c) of the Internal Revenue Code of 1986, as amended (the "Code").
The Companies are engaged in the business of managing and developing,
and providing consulting, brokerage and related services with respect to, real
estate (the "Business").
PREIT is the sole general partner of the Partnership. PREIT Property
Trust, a Pennsylvania business trust, the beneficial interests in which are
held entirely by PREIT ("PREIT Subsidiary"), is currently the sole limited
partner of the Partnership.
The Current TRO Shareholders are the record and beneficial owners of
all of the outstanding capital stock of TRO.
Prior to the closing of the acquisition by the Partnership of TRO
capital stock contemplated herein: (i) TRO shall be recapitalized so that its
capital stock shall consist of Class A Voting Common Shares, par value $.01
per share (the "Voting Common Shares"), Class B Non-Voting Common Shares, par
value $.01 per share (the "Non-Voting Common Shares"), and Convertible
NonParticipating Preferred Shares, par value $.01 per share (the "Preferred
Shares"), each of which is convertible on a one-for-one basis into Non-Voting
Common Shares; (ii) in connection with such recapitalization, the Current TRO
Shareholders shall exchange all of the currently outstanding capital stock of
TRO for newly-issued Non-Voting Common Shares, and the Former TRO Debtholders
shall exchange approximately $6,000,000 of
<PAGE>
indebtedness owed by TRO to such parties for newly-issued Preferred Shares;
(iii) TRO shall issue Voting Common Shares authorized as part of such
recapitalization to the PREIT-RUBIN, Inc. Employee Stock Ownership Trust (the
"Employee Stock Ownership Trust"), which shall thereupon own all of the
outstanding Voting Common Shares and hold all such shares pursuant to the
terms of the PREIT-RUBIN, Inc. Employee Stock Ownership Plan (the "Employee
Stock Ownership Plan"); and (iv) the outstanding capital stock of TRO Illinois
shall be transferred to TRO (the "TRO Consolidation").
As a result of the transactions described in subclauses (i) through
(iii) of the immediately preceding paragraph (collectively, the "TRO Recap"),
immediately prior to the closing of the acquisition of the Preferred Shares
and Non-Voting Common Shares by the Partnership as contemplated herein, all of
the outstanding Preferred Shares shall be owned by the Former TRO Debtholders,
all of the outstanding Voting Common Shares shall be owned by the Employee
Stock Ownership Trust and all of the outstanding Non-Voting Common Shares
shall be owned by the Current TRO Shareholders.
Immediately prior to or concurrent with the closing of the
acquisition of the Preferred Shares and Non-Voting Common Shares contemplated
herein, PREIT intends to contribute substantially all of its assets to the
Partnership in return for the issuance to PREIT Subsidiary of Class A limited
partner interests in the Partnership ("Class A Units") as contemplated by the
First Amended and Restated Agreement of Limited Partnership of PREIT
Associates, L.P. that is to be executed and delivered at such closing (the
"Amended Partnership Agreement").
The parties hereto desire to set forth, inter alia, the terms and
conditions by which the Partnership will acquire all of the outstanding
Preferred Shares from the Former TRO Debtholders and all of the outstanding
Non-Voting Common Shares from the Current TRO Shareholders in return for the
issuance of Class A Units.
The acquisition of the outstanding Preferred Shares and NonVoting
Common Shares contemplated herein is part of a larger transaction in which,
inter alia: (i) the Partnership will acquire from TRO or TRO Affiliates (as
hereinafter defined) all of the right, title and interest of TRO or the TRO
Affiliates in and to The Court at Oxford Valley, Hillview Shopping Center and
Northeast Tower Center (collectively, the "Existing Properties") pursuant to
the terms and conditions of the Contribution Agreement dated as of the date
hereof (the "Court at Oxford Valley Contribution Agreement") among the
Partnership, PREIT, Rubin Oxford, Inc. and Rubin Oxford Valley Associates,
L.P., the Contribution Agreement dated the date hereof (the "Hillview
Contribution Agreement") among the Partnership, PREIT, Cherry
-2-
<PAGE>
Hill Partner, Inc. and Rubin Oxford Valley Associates, L.P. and the
Contribution Agreement dated the date hereof (the "Northeast Contribution
Agreement") among PREIT, the Partnership, Roosevelt Blvd. Co., Inc. and
certain individuals; (ii) the Partnership will acquire all the right, title
and interest of (1) Magnolia Retail Associates, L.L.C. in and to Magnolia
Mall, Florence, South Carolina (the "Magnolia Mall") pursuant to an assignment
by PREIT to the Partnership of all of PREIT's rights and obligations under
that certain Purchase and Sale Agreement dated June 30, 1997 (the "Magnolia
Agreement") by and between TRO, as buyer, and Magnolia Retail Associates,
L.L.C., as seller, obtained by an assignment by TRO to PREIT pursuant to an
Agreement Regarding Assignment of Purchase and Sale Agreements dated June 30,
1997 (the "EPD Assignment Agreement") by and between TRO and PREIT; and (2)
Diversified Equity Corporation of Illinois, Inc. in and to North Dartmouth
Mall, Dartmouth, Massachusetts (the "North Dartmouth Mall" and, together with
Magnolia Mall, the "EPD Properties") pursuant to an assignment by TRO to PREIT
to be made, in accordance with the terms of the EPD Assignment Agreement, on
the Closing Date hereunder of all of TRO's rights and obligations under the
Purchase and Sale Agreement dated June 30, 1997 by and between TRO, as buyer,
and Diversified Equity Corporation of Illinois, Inc., as seller (the "North
Dartmouth Agreement") and a subsequent assignment to be made on the Closing
Date hereunder of all of PREIT's rights and obligations under the North
Dartmouth Agreement to the Partnership; and (iii) the Partnership will acquire
from TRO Predevelopment, LLC, a limited liability company controlled by
certain TRO Affiliates and TRO Shareholders, all of the right, title and
interest of such limited liability company (the "Predevelopment Partnership")
in and to the following predevelopment properties: the Blue Route Metroplex,
Christiana Strip Shopping Center, Red Rose Commons, certain properties in York
and Warrington, Pennsylvania and, under certain circumstances described in the
Predevelopment Properties Contribution Agreement, other properties
(collectively, the "Predevelopment Properties") pursuant to the terms and
conditions of the Predevelopment Properties Contribution Agreement dated as of
the date hereof (the "Predevelopment Properties Contribution Agreement") among
PREIT, the Partnership and TRO Predevelopment, LLC.
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
SECTION 1. ACQUISITION OF PREFERRED SHARES AND
NON-VOTING COMMON SHARES
1.1 Sale and Contribution of Shares. Subject to the terms and
conditions of this Agreement, at the Closing: (i) the
-3-
<PAGE>
Current TRO Shareholders shall sell, transfer, contribute and deliver to the
Partnership, free and clear of all Encumbrances (other than applicable
securities law restrictions), all of the issued and outstanding Non-Voting
Common Shares, (ii) the Former TRO Debtholders shall sell, transfer,
contribute and deliver to the Partnership, free and clear of all Encumbrances
(other than applicable securities law restrictions), all of the issued and
outstanding Preferred Shares (together with the shares referred to in
subclause (i), the "Contributed TRO Shares"), and (iii) in the event Howell
Shopping Center is not a Predevelopment Property as of the Closing as provided
in Section 5.20, the TRO Shareholders shall sell, contribute and deliver to
the Partnership (or its designee), free and clear of all Encumbrances, 50% of
the outstanding member interests in the Howell LLC. Immediately following the
Closing, the Partnership shall convert all of the Preferred Shares into
additional NonVoting Common Shares. The TRO Shareholders shall cause the
number of Contributed TRO Shares to be equal, as of the Closing, to 95% of the
sum of (x) the number of Contributed TRO Shares and (y) the number of Voting
Common Shares outstanding as of the Closing.
1.2 Issuance of Class A Units.
(a) In consideration for the sale, transfer,
contribution and delivery of the Contributed TRO Shares described in Section
1.1, subject to the terms and conditions of this Agreement, at the Closing,
the Partnership shall issue to the TRO Shareholders 200,000 Class A Units and
the contingent right to receive up to an aggregate of 800,000 (subject to
adjustment as specified in Section 2.2) additional Class A Units as described
in Section 2.2 hereof; provided, however, that in the event the record date
for a PREIT Recapitalization occurs prior to Closing, the number of Class A
Units issuable at Closing shall be proportionately adjusted as appropriate to
reflect such event.
(b) The Class A Units issued at Closing pursuant to
Section 1.2 and after Closing pursuant to Section 2.2 shall be allocated among
the TRO Shareholders in accordance with Schedule C hereto unless, at least
five business days prior to Closing, all of the TRO Shareholders and the TRO
Debtholders shall have signed and delivered to PREIT a new Schedule C which
shall replace Schedule C hereto.
SECTION 2. CONTINGENT RIGHT TO ADDITIONAL UNITS
2.1 Certain Definitions. For purposes of this Agreement, the
following capitalized terms shall have the following meanings:
-4-
<PAGE>
"Accumulated FFO Shortfall" as of a particular date
means the aggregate of any and all FFO Shortfalls as of such date in respect
of then-completed Earn-Out Periods.
"Adjusted FFO" means PREIT's consolidated net income
or loss before extraordinary items and the cumulative effect of any changes in
accounting principles, computed in accordance with United States generally
accepted accounting principles ("GAAP"), plus, to the extent deducted in
computing such consolidated net income or loss, (x)(i) depreciation expense
attributable to real property, (ii) amortization expense attributable to
capitalized leasing costs, tenant allowances and improvements and any
goodwill, management contracts and similar items arising from the allocation
of the purchase price under this Agreement, the Oxford Valley Contribution
Agreement, the Hillview Contribution Agreement, the Northeast Contribution
Agreement and the Predevelopment Properties Contribution Agreement among the
assets contributed pursuant to such agreements, (iii) expenses of the
transactions contemplated herein, (iv) losses on the sale of real estate
assets whether directly or indirectly owned, (v) material provisions for the
write-down or impairment of any real estate investments (including
predevelopment costs), (vi) material prepayment penalties, and (vii) rents
currently due under the terms of leases in excess of rental revenues reported
minus, to the extent included in computing such consolidated net income or
loss (y)(i) rental revenues reported in excess of amounts currently due under
the terms of leases, (ii) revenue relating to lease termination fees (which
excluded revenue shall be treated as revenue ratably over the balance of the
original lease term) and (iii) gains on the sale of directly or indirectly
owned real estate; provided, however, that (I) all fees that are described in
subclause (VIII) of Section 3.9(b) shall, notwithstanding their prepayment or
acceleration, be deemed to have been received at the times they would have
been payable assuming no acceleration or prepayment had occurred; (II)
$528,000 shall be deemed to have been received by TRO in respect of the South
Park rent roll at the following times: 50% of such amount in 1998 and 50% in
1999; (III) all Development Fees that are described in subclause (IV) of
Section 3.9(b) shall be deemed to have been received by TRO at the time such
fees were scheduled to have been received pursuant to Schedule 5.26; and (IV)
all Development Fees described in subclause (V) of Section 3.9(b) shall be
deemed to have been received by TRO either in the fourth calendar quarter of
1997 (if Closing occurs on or prior to September 30, 1997) or in 1998 (if
Closing occurs after September 30, 1997).
"Adjusted FFO Per Share with Carryforward" means a
quotient, the numerator of which equals the sum of (x) Adjusted FFO for an
Earn-Out Period and (y) any Carryforward FFO includable in such Earn-Out
Period and the denominator of which equals the Share Denominator for such
Earn-Out Period.
-5-
<PAGE>
"Annual Hurdle" means: (i) if the Closing occurs
after September 30, 1997, $2.40 for the First Earn-Out Period; $2.53 for the
Second Earn-Out Period; $2.65 for the Third Earn-Out Period; $2.83 for the
Fourth Earn-Out Period; and $2.92 for the Fifth Earn-Out Period; and (ii) if
the Closing occurs on or prior to September 30, 1997, $0.58 for the First
Earn-Out Period; $2.40 for the Second Earn-Out Period; $2.53 for the Third
Earn-Out Period; $2.65 for the Fourth Earn-Out Period; $2.83 for the Fifth
Earn-Out Period; and $2.19 for the Sixth Earn-Out Period; provided, however,
that in the event of a PREIT Recapitalization, the foregoing values shall be
proportionately adjusted as appropriate for all Post-Recapitalization Earn-Out
Periods with respect to such PREIT Recapitalization.
"Annual Target" means: (i) if the Closing occurs
after September 30, 1997, $2.66 for the First Earn-Out Period; $2.81 for the
Second Earn-Out Period; $2.94 for the Third Earn-Out Period; $3.14 for the
Fourth Earn-Out Period; and $3.24 for the Fifth Earn-Out Period; or (ii) if
the Closing occurs on or prior to September 30, 1997, $0.65 for the First
Earn-Out Period; $2.66 for the Second Earn-Out Period; $2.81 for the Third
Earn-Out Period; $2.94 for the Fourth Earn-Out Period; $3.14 for the Fifth
Earn-Out Period; and $2.43 for the Sixth Earn-Out Period; provided, however,
that in the event of a PREIT Recapitalization, the foregoing values shall be
proportionately adjusted as appropriate for all Post-Recapitalization Earn-Out
Periods with respect to such PREIT Recapitalization.
"Base Earn-Out Units" for an Earn-Out Period means
20,000 for the First Earn-Out Period and 57,500 for each other Earn-Out
Period; provided, however, that if the Closing occurs on or prior to September
30, 1997, Base Earn-Out Units for the First Earn-Out Period means 5,000 and
Base Earn-Out Units for the Sixth Earn-Out Period means 52,500 and provided
further that in the event of a PREIT Recapitalization, the foregoing numbers
shall be proportionately adjusted as appropriate for all Post-Recapitalization
Earn-Out Periods with respect to such PREIT Recapitalization.
"Carryforward FFO" includable in an Earn-Out Period
(the "Current Period") means the amount, if any, by which Adjusted FFO for the
Earn-Out Period immediately preceding the Current Period (the "Preceding
Period") exceeded the sum of (x) the Target FFO for such Preceding Period and
(y) the Accumulated FFO Shortfall immediately prior to the commencement of the
Preceding Period.
"Earn-Out Period" means the following periods:
(i) if the Closing occurs after September
30, 1997: (A) the First Earn-Out Period, the calendar year 1998; (B) the
Second Earn-Out Period, the calendar year 1999; (C) the
-6-
<PAGE>
Third Earn-Out Period, the calendar year 2000; (D) the Fourth Earn-Out Period,
the calendar year 2001; and (E) the Fifth Earn-Out Period, the calendar year
2002; or
(ii) if the Closing occurs on or prior to
September 30, 1997: (A) the First Earn-Out Period, the three month period
beginning October 1, 1997 and ending December 31, 1997; (B) the Second
Earn-Out Period, the calendar year 1998; (C) the Third Earn-Out Period, the
calendar year 1999; (D) the Fourth Earn-Out Period, the calendar year 2000;
(E) the Fifth Earn-Out Period, the calendar year 2001; and (F) the Sixth
Earn-Out Period, the nine months beginning January 1, 2002 and ending
September 30, 2002.
"Excess FFO" for an Earn-Out Period means the amount,
if any, by which Adjusted FFO for such Earn-Out Period exceeds the Target FFO
for such Earn-Out Period.
"FFO Per Share Spread" for an Earn-Out Period means
an amount equal to the Annual Target for such Earn-Out Period minus the Annual
Hurdle for such Earn-Out Period.
"FFO Shortfall" for an Earn-Out Period means the
amount, if any, by which Adjusted FFO for such Earn-Out Period is less than
the Target FFO for such Earn-Out Period minus the amount of Excess FFO that
has been carried back and credited to such Earn-Out Period from one or more
later Earn-Out Periods pursuant to Section 2.2(b)(ii).
"Gap Period" means the period beginning on the day
immediately following the end of an Earn-Out Period and ending on the date
immediately preceding the date on which the Current TRO Shareholders become
the record owners of additional Class A Units issued in respect of such
Earn-Out Period in accordance with Section 2.2(b) hereof.
"Maximum Earn-Out Units" for an Earn-Out Period means
130,000 for the First Earn-Out Period and 167,500 for each other Earn-Out
Period; provided, however, that if the Closing occurs on or prior to September
30, 1997, Maximum Earn-Out Units for the First Earn-Out Period means 32,500
and Maximum Earn-Out Units for the Sixth Earn-Out Period means 135,000 and
provided further that in the event of a PREIT Recapitalization, the foregoing
numbers shall be proportionately adjusted as appropriate for all
Post-Recapitalization Earn-Out Periods with respect to such PREIT
Recapitalization.
"Post-Recapitalization Earn-Out Periods" with respect
to a PREIT Recapitalization means all Earn-Out Periods other than those
Earn-Out Periods with respect to which additional Class A Units have been
issued prior to the record date for such PREIT Recapitalization.
-7-
<PAGE>
"PREIT Recapitalization" means that the issued and
outstanding PREIT Shares shall have been changed into a different number of or
class of shares as the result of a stock dividend, a stock split, a reverse
split, recapitalization, reclassification or any other similar change in
capitalization of PREIT without the receipt of any consideration by PREIT.
"PREIT Shares" means shares of beneficial interest in
PREIT, par value $1 per share.
"Share Denominator" for an Earn-Out Period means the
sum of: (x) the weighted average number of PREIT Shares outstanding during
such Earn-Out Period, (y) the aggregate number of PREIT Shares issuable as of
the end of such Earn-Out Period in order to redeem or otherwise retire the
weighted average number of the Class A Units, other securities of the
Partnership and, to the extent includable in the calculation of FFO per share
under the conventions currently followed by PREIT, other securities
outstanding during such Earn-Out Period and (z) the aggregate number of PREIT
Shares issuable as of the end of such Earn-Out Period in order to redeem all
of the Class A Units and other securities of the Partnership that are issuable
as of the end of such Earn-Out Period in respect of the Predevelopment
Properties that have been "completed" (as defined in the Predevelopment
Properties Contribution Agreement) or for which the Class A Units and other
securities of the Partnership issuable in consideration thereof have been
fixed as of the end of such Earn-Out Period.
"Target FFO" for an Earn-Out Period means the amount
of Adjusted FFO that is required to earn the Maximum Earn-Out Units for such
Earn-Out Period pursuant to Section 2.2(b)(i).
"Unit Spread" for an Earn-Out Period means an amount
equal to the Maximum Earn-Out Units for such Earn-Out Period
minus the Base Earn-Out Units for such Earn-Out Period.
2.2 Earn-Out.
(a) Promptly after the issuance of an audit
report with respect to PREIT's consolidated annual financial statements for
the fiscal year in which an Earn-Out Period ends, the Partnership shall issue
and deliver to the TRO Shareholders: (i) the number of additional Class A
Units that are to be issued in respect of such Earn-Out Period in accordance
with Section 2.2(b), if any, and (ii) an amount of cash equal to the
distributions to which the holder of such additional Class A Units would have
been entitled, if any, under the Partnership Agreement during the Gap Period
immediately following such Earn-Out Period if such additional Class A Units
had been issued to the TRO Shareholders on the first day of such Gap Period.
-8-
<PAGE>
(b) The number of additional Class A Units, if any, issuable
in respect of an Earn-Out Period shall be equal to the sum of "x" and "y"
where:
(i) "x" equals: (A) if Adjusted FFO Per Share with
Carryforward for such Earn-Out Period is less than the Annual Hurdle for such
period, zero; or (B) if Adjusted FFO Per Share with Carryforward for such
Earn-Out Period equals or exceeds the Annual Hurdle for such Earn-Out Period,
an amount equal to the sum of: (I) the Base Earn-Out Units for such Earn-Out
Period and (II) the product of the Unit Spread for such Earn-Out Period and a
fraction (not to exceed 1.0) the numerator of which equals the excess, if any,
of Adjusted FFO Per Share with Carryforward for such Earn-Out Period over the
Annual Hurdle for such period and the denominator of which equals the FFO Per
Share Spread for such Earn-Out Period; provided, however, that under no
circumstances shall the number of Class A Units issuable pursuant to this
subparagraph (b)(i) in respect of an Earn-Out Period exceed the Maximum
Earn-Out Units for such Earn-Out Period; and
(ii) "y" equals: (A) if there is no Excess FFO for
such Earn-Out Period, zero; and (B) if there is Excess FFO for such Earn-Out
Period, the number of additional Class A Units, if any, that results from the
following: Excess FFO for an Earn-Out Period shall be carried back and
credited to earlier Earn-Out Periods, if any, with existing FFO Shortfalls
(such excess being credited first to the earliest such deficit period, if
there is more than one such period, and being credited to any such period only
to the extent necessary to eliminate any FFO Shortfall for such period) and
the number of units deliverable pursuant to subparagraph (b)(i) above with
respect to any such earlier period to which such Excess FFO has been credited
shall be recalculated with carried back Excess FFO being added to the actual
Adjusted FFO for such prior period; the number of additional Class A Units
issuable as a result of such recalculations shall be aggregated.
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANIES AND THE TRO SHAREHOLDERS
Each TRO Shareholder hereby represents and warrants to PREIT and the
Partnership as follows (provided that to the extent a representation or
warranty set forth in Section 3 relates solely to the business, affairs or
status of a TRO Shareholder, such representation and warranty shall be deemed
to be made solely by the applicable TRO Shareholder to which such
representation and warranty relates):
3.1 Organization. Each Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has all corporate power to carry on its business as
presently conducted, to own and
-9-
<PAGE>
lease the assets and properties which it owns and leases and to perform all
its obligations under each agreement and instrument to which it is a party or
by which it is bound. Each Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction identified in Section 3.1 of the Disclosure Letter delivered by
the TRO Shareholders to PREIT and the Partnership on the date hereof (the "TRO
Disclosure Letter"), which includes each jurisdiction in which its ownership
or leasing of assets or properties or the nature of its activities requires
such qualification except where the failure to be so qualified would not have
a material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of such Company (a "Material Adverse
Effect").
3.2 Power and Authority.
(a) Each TRO Shareholder has full capacity, legal right,
power and authority to enter into and perform his or its obligations under
this Agreement and under the other agreements and documents required to be
delivered by him or it prior to or at the Closing (collectively, the
"Shareholder Transaction Documents"). This Agreement has been duly and validly
executed and delivered by each TRO Shareholder and constitutes the legal,
valid and binding obligation of each TRO Shareholder enforceable against him
or it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally or by general equitable principles. When executed
and delivered as contemplated herein, the other Shareholder Transaction
Documents shall, assuming due authorization, execution and delivery thereof by
the other parties thereto, constitute the legal, valid and binding obligation
of each TRO Shareholder that is a party thereto enforceable against him or it
in accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally or by general equitable principles.
(b) Each Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and all other Shareholder Transaction Documents to which such Company is a
party. The execution, delivery and performance by each Company of this
Agreement and the other Shareholder Transaction Documents to which it is a
party have been duly authorized by all necessary corporate action on the part
of such Company. This Agreement has been duly and validly executed and
delivered by each Company and constitutes the legal, valid and binding
obligation of each Company enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general
-10-
<PAGE>
equitable principles. When executed and delivered as contemplated herein, each
of the other Shareholder Transaction Documents to which a Company is a party
shall, assuming due authorization, execution and delivery thereof by the other
parties thereto, constitute a legal, valid and binding obligation of such
Company enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
3.3 No Conflicts.
(a) Except as described in Section 3.3(a) of the TRO
Disclosure Letter, the execution and delivery by the Companies and the TRO
Shareholders of this Agreement do not, and the execution and delivery by the
Companies and the TRO Shareholders of the other Shareholder Transaction
Documents and the performance by the Companies and the TRO Shareholders of all
of the Shareholder Transaction Documents will not (in each case, with or
without the passage of time or the giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A) the
articles of incorporation, bylaws or partnership agreement (or other
organizational documents) of either Company or any TRO Shareholder or (B) any
Law applicable to any TRO Shareholder or either Company or by or to which any
assets or properties of any TRO Shareholder or either Company is bound or
subject;
(ii) violate or conflict with, result in a breach
of, constitute a default or otherwise cause any loss of benefit under, or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any Authorization or
Contract to which any TRO Shareholder or either Company is a party or by which
either Company or any TRO Shareholder or any assets or properties of either
Company is bound or affected including, without limitation, any existing
agreement among the TRO Shareholders or any thereof; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to either Company or any of
their respective assets or properties or the Class A Units issuable hereunder
to any TRO Shareholder.
(b) Except as described in Section 3.3(b) of the TRO
Disclosure Letter, the execution and delivery by the Companies and the TRO
Shareholders of this Agreement do not, and the execution and delivery by the
Companies and the TRO Shareholders of the other Shareholder Transaction
Documents and the performance by the Companies and the TRO Shareholders of all
of the Shareholder Transaction Documents will not, require any TRO
-11-
<PAGE>
Shareholder or either Company to obtain any authorization of, or to make any
filing, registration or declaration with or notification to, any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the consent, waiver or approval of, or give any notice
to, any natural person, company, corporation, partnership, estate, trust,
limited liability company, unincorporated association or entity of any kind or
governmental authority or instrumentality (each, a "Person").
(c) Except as described in Section 3.3(c) of the
TRO Disclosure Letter, there are no actions, proceedings or investigations
pending or, to the knowledge of the TRO Shareholders, threatened, that
question any of the transactions contemplated by this Agreement or the
validity of any of the Shareholder Transaction Documents or which, if
adversely determined, could have a Material Adverse Effect or could materially
and adversely affect any TRO Shareholder's or either Company's ability to
enter into or perform its or his obligations under any of the Shareholder
Transaction Documents.
3.4 Capitalization; Ownership of TRO Shares.
(a) Each Company's authorized, issued and outstanding
capital stock and its other securities as of the date hereof and, in the case
of TRO, as of immediately prior to Closing following the TRO Recap, are fully
and accurately described in Section 3.4(a) of the TRO Disclosure Letter.
Except as described in Section 3.4(a) of the TRO Disclosure Letter, no Person
has any preemptive or other similar rights with respect to any capital stock
or other securities of either Company, and there are no offers, options,
warrants, rights, agreements or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, registration, voting, sale or
transfer of any equity interests or other securities of either Company
(including, without limitation, the Contributed TRO Shares) or obligating
either Company or any other Person to purchase or redeem any such equity
interests or other securities. Immediately prior to the Closing, the Preferred
Shares, Non-Voting Common Shares and Voting Common Shares issued in the TRO
Recap shall constitute all of the issued and outstanding shares of capital
stock of TRO and each such share shall have been duly authorized, shall be
validly issued and outstanding, fully paid and non-assessable, and shall have
been issued in compliance with all applicable securities and other Laws. Upon
the conversion of the Preferred Shares into Non-Voting Common Shares as
contemplated by Section 1.1, all of such Non-Voting Common Shares shall be
validly issued and outstanding, fully paid and non-assessable and shall have
been issued in compliance with all applicable securities and other laws.
-12-
<PAGE>
(b) As of the date hereof, each Current TRO Shareholder
owns, beneficially and of record, the number of common shares, par value $0.10
per share, of TRO set forth in Section 3.4(b) of the TRO Disclosure Letter,
free and clear of all Encumbrances. Immediately prior to the Closing, the
Former TRO Debtholders shall own beneficially and of record all of the
then-outstanding Preferred Shares, the Employee Stock Ownership Trust shall
own of record all of the then-outstanding Voting Common Shares and the Current
TRO Shareholders shall own beneficially and of record all of the
then-outstanding Non-Voting Common Shares, in each case free and clear of all
Encumbrances other than the Employee Stock Ownership Trust, applicable
securities law restrictions and this Agreement. Except as described in Section
3.4(b) of the TRO Disclosure Letter, immediately prior to the consummation of
the TRO Recap, there will be no shareholder, partnership or other agreement
affecting the right of any Current TRO Shareholder to exchange the common
shares of TRO currently owned by him for Non-Voting Common Shares or the right
of any Former TRO Debtholder to exchange indebtedness of TRO owned by it for
Preferred Shares, and following the TRO Recap, there will be no such agreement
affecting the right of any of the TRO Shareholders to convey the Contributed
TRO Shares to the Partnership or any other right of any TRO Shareholder or
other Person with respect to any shares of capital stock of TRO. As of the
Closing, the TRO Shareholders shall have the absolute right, authority, power
and capacity to sell, assign, transfer, contribute and deliver all of the
Contributed TRO Shares to the Partnership, free and clear of all Encumbrances
(except for restrictions imposed generally by applicable securities laws), as
contemplated herein. Upon delivery to the Partnership of the certificates for
the Contributed TRO Shares at the Closing as contemplated herein, the
Partnership will acquire good and valid title to the Contributed TRO Shares,
free and clear of all Encumbrances (except for applicable securities laws
restrictions).
(c) No securities of either Company are or ever have been:
(i) registered or required to be registered under the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or equivalent laws of any state, local or foreign
jurisdiction; (ii) offered to the public; or (iii) listed for trading on any
stock exchange, market or system; and no registration statement or application
has been filed, nor agreement entered into, to so register or list any such
securities or to offer them to the public.
3.5 Investments. Except as disclosed in Section 3.5 of the TRO
Disclosure Letter, neither Company, directly or indirectly, beneficially or of
record, owns, controls or has (and since January 1, 1995 has not owned,
controlled or had) any investment, capital stock, membership or other interest
in any Person.
-13-
<PAGE>
Except for TRO Illinois, all of whose capital stock will be acquired by TRO as
a result of the TRO Consolidation, and except as disclosed in Section 3.5 of
the TRO Disclosure Letter, the Business is, and since January 1, 1994, has
been, conducted solely by and through TRO and through or by no other Person.
3.6 Compliance with Laws.
(a) Except as described in Section 3.6(a) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in compliance in
all material respects with all laws, statutes, regulations, permits, licenses,
certificates, judgments, orders, awards and other decisions of any arbitrator,
court, government or governmental agency or instrumentality (federal, state,
local or foreign) (collectively, "Laws") that are or were applicable to it or
to the conduct or operation of the Business or the use of any of its assets or
properties. Except as disclosed in Section 3.6(a) of the TRO Disclosure
Letter, neither Company has received any notice, order or other communication
from any government or governmental agency or instrumentality (federal, state,
local or foreign) of any alleged, actual or potential material violation of or
material failure to comply with any Law, and no event has occurred or
circumstance exists that may constitute or result in (with or without notice
or lapse of time) a material violation by either Company, or a material
failure by either Company to comply with, any Law.
(b) Except as described in Section 3.6(b) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in possession of
all federal, foreign, state, local and other governmental consents, licenses,
permits, variances, exemptions, franchises, grants and authorizations
(collectively, "Authorizations") necessary to own, lease or operate its assets
and properties or to carry on the Business. Such Authorizations currently in
effect are in full force and effect without any default or violation
thereunder by either Company or, to the knowledge of the TRO Shareholders, by
any other party thereto. Except as described in Section 3.6(b) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in compliance
with all Authorizations applicable to it or to the conduct or operation of the
Business or the use of any of its assets or properties, and no such
Authorization shall be affected by the TRO Consolidation, the TRO Recap, the
transfer, sale, contribution and transfer of the Contributed TRO Shares or any
other transaction contemplated herein. Neither Company has received any notice
that any such Authorization currently in effect may be revoked or may not in
the ordinary course be renewed upon its expiration or that by virtue of the
transactions
-14-
<PAGE>
contemplated hereby that any such Authorization may be revoked or may not be
granted, renewed or issued to such Company.
(c) Without limiting the generality of the foregoing,
Section 3.6(c) of the TRO Disclosure Letter sets forth a list of each state in
which either Company is currently licensed to render real estate brokerage or
other real estate activities. All of such licenses are in full force and
effect and are sufficient to permit the conduct of the real estate activities
conducted by the Companies.
3.7 Litigation; Orders.
(a) Except as described in Section 3.7(a) of the TRO
Disclosure Letter, there are no, and since January 1, 1996 there have not been
any, claims, actions, suits, proceedings (arbitration or otherwise) or, to the
knowledge of the TRO Shareholders, investigations involving or affecting any
TRO Shareholder in respect of the Business or other matters pertaining to TRO
or involving or affecting either Company or any of either Company's assets or
properties or any of either Company's directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign),
or before an arbitrator of any kind. Except as described in Section 3.7(a) of
the TRO Disclosure Letter, no such pending claim, action, suit, proceeding or
investigation, if determined adversely, would result in a liability that is
not covered by insurance in excess of $25,000 in the case of any single action
or $100,000 in the case of all such actions in the aggregate. To the knowledge
of the TRO Shareholders, except as described in Section 3.7(a) of the TRO
Disclosure Letter, no such claim, action, suit, proceeding or investigation is
presently threatened or contemplated. Except as disclosed in Section 3.7(a) of
the TRO Disclosure Letter, there are no unsatisfied judgments, penalties or
awards against or affecting either Company or any of their assets or
properties.
(b) Except as described in Section 3.7(b) of the TRO
Disclosure Letter, there is no material award, injunction, judgment, order,
ruling, subpoena or verdict or other decision entered, issued, made or
rendered by any court, arbitrator, government or governmental agency or
instrumentality, or agreement with any government or governmental agency or
instrumentality (federal, state, local or foreign) (collectively, "Orders") to
which either Company or any of their assets or properties is subject. To the
knowledge of the TRO Shareholders, no officer, director, partner, shareholder
or employee of either Company is subject to any Order that prohibits such
officer, director, partner, shareholder or employee from engaging in or
continuing any conduct, activity or practice relating to the Business. The
Companies have each complied in all respects with
-15-
<PAGE>
the terms and conditions of each Order applicable to either of them.
3.8 Financial Statements. Section 3.8 of the TRO Disclosure Letter
includes: (i) the consolidated balance sheet of TRO as at December 31, 1996
(including the notes thereto, the "Balance Sheet") and as at December 31 1995,
and the related statements of operations and shareholders' equity and cash
flow for each of the fiscal years then ended, including all notes thereto,
together with the unqualified report on the fiscal 1996 financial statements
of Arthur Andersen LLP, independent certified public accountants to TRO, and
(ii) a unaudited consolidated balance sheet of TRO as at March 31, 1997 (the
"Interim TRO Balance Sheet") and the related unaudited statements of
operations and cash flow for the period then ended. All such financial
statements, including the related notes, fairly present the consolidated
financial condition, results of operations and cash flow of TRO as at the
respective dates thereof and for the periods therein referred to, all in
accordance with GAAP consistently applied, subject, in the case of the interim
financial statements, to normal year-end adjustments and the absence of notes.
3.9 Undisclosed Liabilities.
(a) As of the date hereof, to the knowledge of the TRO
Shareholders, there are no liabilities or obligations of either Company of any
nature (whether absolute, accrued, contingent, liquidated, unliquidated or
otherwise) except: (i) those described in Section 3.9(a) of the TRO Disclosure
Letter; (ii) those reflected or reserved against in the Interim TRO Balance
Sheet or disclosed in the notes thereto; (iii) liabilities incurred in the
ordinary course of business consistent with past practice after May 31, 1997
and prior to the date hereof; or (iv) obligations to perform services under
Contracts entered into in the ordinary course of business, consistent with
past practice.
(b) As of the Closing, there shall be no liabilities,
contingencies or obligations of either Company of any nature (whether
absolute, accrued, contingent, liquidated, unliquidated or otherwise) except:
(i) obligations and liabilities to perform services after the Closing under
Contracts identified in Section 3.9(b) of the TRO Disclosure Letter; (ii)
threatened or asserted claims of third parties against or involving TRO that
are identified in Section 5.28(a)(iv) and (a)(vi) of the TRO Disclosure
Letter; (iii) the Closing Loan contemplated by Section 5.17; (iv) ordinary
course of business current liabilities consisting solely of accounts payable
for goods and services arising in the ordinary course of business, salaries,
commissions not required under Section 5.28 hereof to be satisfied prior to
Closing, and taxes payable; (v) liabilities of TRO under the deferred
compensation arrangements for the benefit of Joseph
-16-
<PAGE>
Straus, Jr. as described in the TRO Disclosure Letter (but in no event shall
such liability exceed $185,000); and (vi) all liabilities and obligations of
TRO to pay bonuses for 1997 described in Schedule 3.9(b) hereto. The
liabilities and obligations described in subclause (i) above shall not be
attributable, in whole or in part, to any breach or default under any Contract
by either Company occurring on or prior to Closing. As of Closing, the only
claims described in subclause (ii) above shall be those that TRO contests in
good faith. The aggregate amount of cash, cash equivalents and fully
collectible accounts receivable (other than rent roll receivables), such
accounts receivable being valued at their net realizable value in accordance
with GAAP (but with no reserve or other offset in respect of possible
uncollectibility) , owned by TRO as of the Closing shall not be less than the
sum of: (I) the aggregate amount of liabilities described in subclause (v)
above as of the Closing; (II) the aggregate amount of the bonuses for 1997
described in Schedule 3.9(b) hereto in respect to periods prior to Closing
(the amount for each yearly bonus to be prorated based upon the percentage of
1997 occurring prior to Closing); (III) $528,000 (in respect of prepayments of
the rent roll receivable for the South Park Shopping Center); (IV) the
aggregate amount of the Development Fees (other than the development fee in
respect of Hillview Shopping Center) that have been paid prior to Closing to
either Company, any TRO Affiliate or any of the TRO Shareholders other than
the portions of such fees that are scheduled, in accordance with Schedule 5.26
hereto, to be received by TRO prior to the Closing Date and that have been
earned by TRO prior to the Closing Date in accordance with the percentage of
completion method under GAAP; (V) the aggregate amount of the Development Fees
in respect of Hillview Shopping Center that has been paid prior to Closing to
either Company, any TRO Affiliate or any of the TRO Shareholders; (VI) the
aggregate amount of ordinary course of business current liabilities described
in subclause (iv) above as of the Closing; (VII) the amount of revenues in
respect of liabilities and obligations described in subclause (i) above that
have been paid to either Company on or prior to Closing (i.e., prepaid
revenues); (VIII) the amount of all leasing, management and other fees
(including, without limitation, rent roll proceeds other than the South Park
rent roll receivable) paid to either Company after May 31, 1997 and prior to
Closing to the extent such fees are paid by third parties prior to the date on
which such payments were originally due and payable and such original due date
is after the Closing Date (including, without limitation, any accelerated
payment of rent roll receivables other than the South Park rent roll
receivable); and (IX) 50% of all net proceeds, if any, received by TRO, any
TRO Shareholder or any TRO Affiliate prior to Closing in respect of any
Predevelopment Property. The amounts referred to in the foregoing subclauses
(I) through (IX) may be covered by any combination of cash, cash equivalents
or such accounts receivable of TRO except that the amount referred to in
subclause
-17-
<PAGE>
(III) shall be covered by cash. The Development Fees in respect of the
Hillview Shopping Center that TRO shall receive, net of all sums necessary to
satisfy obligations to Persons other than TRO that are entitled to a portion
of such fees or are entitled to receive any compensation in respect of
services compensated in whole or in part by such fees, shall equal or exceed
$1.3 million.
(c) The Balance Sheet and the Interim TRO Balance Sheet
reflect reserves or other appropriate provisions at least equal to reasonably
anticipated liabilities (including, without limitation, all losses and
expenses) of TRO and TRO Illinois as of the respective dates thereof,
including, without limitation, those with respect to bad debts, salaries,
vacation pay, and plans and programs (including medical and other benefits
programs) for the benefit of present and former employees.
3.10 Title to Property; Encumbrances.
(a) Each Company has either good and valid title to, or has
a valid, subsisting and unchallenged leasehold interest in or right to use,
all assets and properties owned, used or leased by it. Each Company owns all
of the assets and properties (whether tangible or intangible) that are
reflected as owned in its books and records (including, without limitation,
all assets reflected in the interim financial statements referred to in
Section 3.8 other than the assets listed in Section 3.12 of the TRO Disclosure
Letter as being held under capitalized leases), free and clear of all security
interests, liens, claims, pledges, charges, easements, equitable interests,
conditions, options, rights of first refusal, mortgages, deeds of trust,
restrictions of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership, or other
encumbrances of any nature whatsoever (each, an "Encumbrance" and
collectively, "Encumbrances") other than liens for current taxes not yet due
and, in the case of real property, the Encumbrances set forth in Section
3.10(a) of the TRO Disclosure Letter. All properties and assets owned or
leased by the Companies are in the possession or under the control of the
Companies and are suitable for the purposes for which they are being used, are
in good condition and repair, ordinary wear and tear excepted, and are of a
condition and nature sufficient for the conduct of the Business as it has been
conducted since January 1, 1997.
(b) Upon consummation of the TRO Consolidation contemplated
by Section 5.14, TRO will acquire good and valid title to all of the
outstanding shares of capital stock of TRO Illinois, free and clear of all
Encumbrances (other than applicable securities law restrictions).
-18-
<PAGE>
3.11 Real Property.
(a) Section 3.11(a) of the TRO Disclosure Letter sets forth
a true, correct, and complete list of each parcel of real property owned,
leased, occupied or otherwise used by either Company other than real property
in which the Companies have no equity or other interest except their interests
as providers of management, consulting or related services (such real
property, together with all buildings, structures, fixtures and improvements
located thereon or appurtenant thereto, are, collectively, the "Real
Property").
(b) Section 3.11(b) of the TRO Disclosure Letter sets forth
a complete list of all real property in which either Company, any TRO
Shareholder or any TRO Affiliate has or has the right to acquire, directly or
indirectly, any equity or other interest (including, without limitation, as a
provider of management, consulting or other related services in respect of
real estate or as a holder of development or other rights with respect to real
estate) other than (i) real property that constitutes a single-family
residence or (ii) in the case of all such Persons other than Ronald Rubin,
George Rubin, Joseph Strauss and their affiliates, real property in which such
Person's only interest is passive ownership. Such list accurately and fully
describes each parcel of such real property and the nature of each such
Person's interest therein. For purposes of this Agreement, "TRO Affiliate"
means: (i) any corporation of which one or more TRO Shareholders owns or
otherwise possesses the power to direct the vote, directly or indirectly, of
an amount of voting securities sufficient to elect a majority of the board of
directors of such corporation and (ii) any other Person controlled by,
controlling, or under common control with one or more TRO Shareholders. For
the purposes of this definition, "control" means the power to direct the
management or policies of a Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; provided that
any Person of which any one or more TRO Shareholders owns beneficially or of
record, either directly or through one or more intermediaries, more than 35%
of the ownership interests shall be conclusively presumed to be a TRO
Affiliate except that a Person that holds or that will hold title to a
Predevelopment Property or to an Existing Property, that is managed
exclusively by Ken Goldenberg or one of his affiliates and in which Ken
Goldenberg or one of his affiliates owns 50% or more of the outstanding equity
interests shall not constitute a TRO Affiliate hereunder.
3.12 List of Properties, Contracts, etc. Section 3.12 of the TRO
Disclosure Letter contains a complete and accurate list of each item described
below, and the Companies have delivered to PREIT true and complete copies of
each document (or summaries of oral agreements) described below.
-19-
<PAGE>
(a) Each of the following types of Contracts, whether oral
or written, to which either Company is a party or by which it or any of its
assets are bound:
(i) All Contracts which restrict or purport to
restrict any business activities or freedom of either Company (or, to the best
knowledge of the Companies, any of either Company's officers or employees) to
engage in any business or to compete with any Person;
(ii) All currently pending or outstanding Contracts
(whether written or oral) for capital expenditures;
(iii) All Contracts that:
(A) involve performance of services or sale
or lease of goods or materials by either Company of an
amount or value in excess of $25,000 in any annual period or
$100,000 in the aggregate;
(B) involve performance of services or sale
or lease of goods or materials to either Company of an
amount or value in excess of $25,000 in any annual period or
$100,000 in the aggregate;
(C) are not in the ordinary course of
business and involve expenditures or receipts by either
Company of more than $25,000;
(D) involve the performance by either
Company of management, consulting, development or related
services in respect of real property;
(E) are not terminable by the applicable
Company without penalty or premium upon less than 60 days'
notice; or
(F) are otherwise material to the business,
operations, financial condition or prospects of either
Company.
For purposes of this Agreement, "Contracts" means all
purchase orders, contracts, instruments, leases and other agreements and
commitments, whether oral or written, provided, however, that in the case of
Contracts to which either Company is a party or by which it or any of its
assets or properties is bound, the term "Contracts" shall not include any
purchase order, contract, instrument, lease or other agreement or commitment,
whether oral or written, entered into by such Company solely in its capacity
as agent for or on behalf of the owner (other than TRO, a TRO Shareholder or a
TRO Affiliate) of a property that such Company manages or is developing,
provided that neither
-20-
<PAGE>
Company has any liability thereunder or the applicable Company has full
recourse against the property owner with respect thereto.
(b) All forms of Contracts used by either Company as a
standard form in the ordinary course of business, including, without
limitation, all forms of waivers of rights to payment and waivers of
liability;
(c) All amendments, supplements and modifications (whether
oral or written) in respect of any of the Contracts required to be listed
pursuant to Section 3.12(a) or (b) hereof;
(d) All Authorizations held by either Company;
(e) All of the following: (i) fictitious business names,
tradenames, registered and unregistered trademarks, service marks and related
applications (collectively, "Marks"), (ii) patents, patent rights and patent
applications, if any (collectively, "Patents"), (iii) registered and
unregistered copyrights in published and material unpublished works
("Copyrights"), computer programs and software (other than commercially
available programs such as WordPerfect) ("Software"), (iv) proprietary
formulae, trade secrets, formulations, and inventions ("Trade Secrets"), and
(v) Contracts relating to any of the foregoing to which either Company is a
party or by which either Company is bound (other than standard shrink wrap
licenses accompanying commercially available computer programs and software),
and all Contracts (including secrecy and non-disclosure agreements) to which
either Company is a party or by which either Company is bound relating to:
know-how, confidential information, trade secrets, software (other than
standard shrink wrap licenses accompanying commercially available computer
programs and software), technical information, process technology, plans,
drawings and blue prints (the items referred to in clauses (i)-(iv) above and
following the preceding colon are collectively referred to herein as
"Intellectual Property"), in each case owned, leased, used, held by, granted
to or licensed by, as either licensor or licensee, either Company;
(f) All outstanding loans and advances by either Company to
any shareholder, director, trustee, officer or employee of either Company or
any TRO Affiliate;
(g) All notes, debt instruments, other evidences of
indebtedness, letters of credit and guaranties (whether written or oral)
issued by or for the benefit of either Company, and all loan and other
agreements relating thereto;
(h) All leases, rental and occupancy agreements, licenses,
installment and conditional sale agreements, and any other Contracts (in each
case, whether written or oral) affecting
-21-
<PAGE>
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any asset (whether real or personal property) used, owned or
leased by either Company; and
(i) A list of all of the agreements and commitments made by
any TRO Shareholder, either Company or any TRO Affiliate to any third party
that involve, in whole or in part, any of the Predevelopment Properties, the
Existing Properties or the EPD Properties.
3.13 Contracts.
(a) Except as described in Section 3.13(a) of the TRO
Disclosure Letter, each Contract referred to in Section 3.12(a)(iii) was made
in the ordinary course of business, is in full force and effect and is valid,
binding and enforceable against the parties thereto in accordance with its
terms. Except as described in Section 3.13(a) of the TRO Disclosure Letter,
each Company has performed in all material respects all obligations required
to be performed by it under each such Contract to which it is a party or by
which it is bound, and, to the knowledge of the TRO Shareholders, no condition
exists or event has occurred which with notice or lapse of time would
constitute a default thereunder or a basis for delay, non-performance,
termination, modification or acceleration of maturity or performance by any
party thereto.
(b) Except as otherwise described in Section 3.13(b) of the
TRO Disclosure Letter, there are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to either Company under any current or completed Contracts.
3.14 Intellectual Property.
(a) Except as otherwise described in Section 3.14(a) of the
TRO Disclosure Letter: (i) each Company is the sole owner of or has the
exclusive perpetual right to use all Intellectual Property owned, leased, held
or used by it, free and clear of all Encumbrances; (ii) neither Company has
granted or licensed to any Person any rights with respect to any such
Intellectual Property and no other Person has any rights in or to any of such
Intellectual Property (including, without limitation, any rights to market or
distribute any of such Intellectual Property); (iii) the rights of each
Company in and to any of such Intellectual Property will not be limited or
otherwise affected by reason of any of the transactions contemplated hereby;
and (iv) such Intellectual Property is sufficient for the conduct of the
Business as such has been conducted since January 1, 1997.
(b) All of the Marks, Copyrights and Patents held, owned or
used by either Company are valid and enforceable and are
-22-
<PAGE>
not subject to any maintenance fees or taxes or actions due within ninety days
after the Closing. To the knowledge of the TRO Shareholders, there is no
patent or patent application, or trademark or trademark application pending
which interferes or potentially interferes with any such Patent or Mark or any
rights of either Company therein. To the knowledge of the TRO Shareholders, no
such Mark, Copyright or Patent has been infringed or challenged in any way. No
such Mark or Patent has been or is involved in any interference, reissue,
re-examination, opposition, invalidation or cancellation proceeding and, to
the knowledge of the TRO Shareholders, no such proceeding is threatened. None
of such Marks, Patents or Copyrights nor any services provided by either
Company, nor any processes or other Intellectual Property infringe or, to the
knowledge of the TRO Shareholders, are alleged to infringe any trademark,
copyright, patent or other proprietary right of any Person. Each Company has
taken all reasonable precautions to preserve and document its Trade Secrets
and to protect the secrecy, confidentiality and value of its Trade Secrets.
All documentation relating to Trade Secrets and Software of either Company has
been maintained only at such Company's principal office.
3.15 Clients. Section 3.15 of the TRO Disclosure Letter lists the
names of the twenty (20) clients of TRO from whom TRO received the most
revenues during 1995 and 1996 and the aggregate revenues attributable to each
in each such year. Except as disclosed in Section 3.15 of the TRO Disclosure
Letter, no client that accounted for more than $50,000 of the revenues of
either Company during the last twelve months has terminated or materially
reduced, or has given notice that it intends to terminate or materially
reduce, the amount of business done with such Company. None of the TRO
Shareholders is aware of any intention on the part of any such client, whether
or not in connection with the transactions contemplated hereunder. Except as
described in Section 3.15 of the TRO Disclosure Letter, there are no and since
January 1, 1997 there have not been any disputes or controversies involving,
in the aggregate, more than $50,000 between either Company and any client
regarding the quality of, or involving a claim of breach of contract which has
not been fully resolved with respect to any service rendered by either
Company. To the knowledge of the TRO Shareholders, each Company enjoys good
working relationships under all arrangements and agreements with its clients.
3.16 Taxes.
(a) All federal, state, local and foreign income, profits,
franchise, sales, use, value added, payroll, premium, occupancy, property,
severance, excise, business privilege, withholding, customs, unemployment,
social security, transfer and other taxes, including interest, additions to
tax and penalties (collectively, "Taxes"), due from or required to be remitted
by
-23-
<PAGE>
the Companies with respect to taxable periods ending on or prior to, and the
portion of any interim period up to, the Closing Date have been fully and
timely paid or, to the extent not yet due or payable, have been adequately
provided for on the balance sheets referred to in Section 3.8 or on the books
and records of either Company. There are no levies, liens or other
Encumbrances relating to Taxes existing or pending, or to the best knowledge
of the Companies, threatened with respect to any of the assets of either
Company.
(b) All federal, state, local and foreign returns and
reports relating to Taxes, or extensions relating thereto, required to be
filed by or with respect to either Company have been timely and properly
filed, and all such returns and reports are correct and complete.
(c) No issues have been raised with any representative or
employee of either Company (and are currently pending) by the Internal Revenue
Service ("IRS") or any other taxing authority in connection with any of the
returns and reports referred to in subsection (b) above and no waivers of
statutes of limitations have been given or requested with respect to any such
returns and reports or with respect to any Taxes.
(d) Section 3.16(d) of the TRO Disclosure Letter identifies
all federal, state, local and foreign income, franchise and sales and use tax
returns of or with respect to either Company which have been examined since
January 1, 1992, or which are currently under examination, by the IRS or by
other taxing authorities, or with respect to which the applicable statute of
limitations (including all extensions and tolling periods) has not yet run.
Except as and to the extent shown therein, all deficiencies asserted or
assessments made as a result of such examinations have been fully paid, and
there are no other unpaid deficiencies asserted or assessments made by any
taxing authority against either Company.
(e) Section 3.16(e) of the TRO Disclosure Letter lists all
elections by or with respect to either Company for federal or state income or
franchise tax purposes that are currently applicable. Neither Company has
filed any consent under section 341(f)(1) of the Code, or agreed to have the
provisions of Code section 341(f)(2) apply to any dispositions of "subsection
(f) assets" as such term is defined in Code section 341(f)(4). Neither Company
has agreed to or is required to make any adjustments under Code section 481(a)
by reason of a change in accounting method or otherwise. The books and records
of each Company are sufficient to prove the correctness of all tax returns for
open tax years and to determine and to prove the adjusted tax basis for
federal income tax purposes of each asset of such Company.
-24-
<PAGE>
(f) Neither Company is a party to any tax sharing agreement
or tax indemnification agreement.
(g) Neither Company is obligated to make any payments that
would constitute an "excess parachute payment" as defined in Code Section
280G.
3.17 Employee Benefits.
(a) Section 3.17(a) of the TRO Disclosure Letter contains a
complete and correct list of all benefit plans, arrangements, commitments and
payroll practices (whether or not employee benefit plans ("Employee Benefit
Plans") as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), including, without limitation, sick leave,
vacation pay, severance pay, salary continuation for disability, consulting or
other compensation arrangements, retirement, deferred compensation, bonus,
incentive compensation, stock purchase, stock option, health including
hospitalization, medical and dental, and life insurance programs maintained
for the benefit of any present or former employees of either Company.
(b) With respect to each Employee Benefit Plan required to
be listed in Section 3.17(a) of the TRO Disclosure Letter: (i) each Employee
Benefit Plan has been administered in compliance in all material respects with
its terms, and is in compliance both in form and operation in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable Laws (including, without limitation funding, filing, termination,
reporting and disclosure); (ii) each Company and each ERISA Affiliate have
made or provided for all contributions required under the terms of such Plans
and any applicable Laws for all periods through Closing except to the extent
appropriately reflected on the Interim Balance Sheet of such Company; (iii) no
"Employee Pension Benefit Plan" (as defined in Section 3(2) of ERISA) has been
the subject of a "reportable event" (as defined in Section 4043 of ERISA) or
any event requiring disclosure under Section 4062(e) or 4063(a) of ERISA and
there have been no "prohibited transactions" (as described in Section 4975 of
the Code or in Part 4 of Subtitle B of Title I of ERISA) with respect to any
Employee Benefit Plan; (iv) except as described in Section 3.17(b) of the TRO
Disclosure Letter, there are, and during the past three years there have been,
no inquiries, proceedings, claims or suits pending or threatened by any
governmental agency or authority or by any participant or beneficiary against
any of the Employee Benefit Plans, the assets of any of the trusts under such
Plans or the Plan sponsor or the Plan administrator, or against any fiduciary
of any of such Employee Benefit Plans with respect to the design or operation
of the Employee Benefit Plans; (v) the actuarial present value of accumulated
benefits (both vested and unvested) of each of the Employee Pension Benefit
Plans which are defined benefit plans
-25-
<PAGE>
are fully funded in accordance with the actuarial assumptions used by the
Pension Benefit Guaranty Corporation to determine the level of funding
required in the event of the termination of such Plan; (vi) no Employee
Pension Benefit Plan that is subject to the minimum funding requirements of
Part 3 of subtitle B of Title I of ERISA or subject to Section 412 of the Code
has incurred any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code and there has been no waived
funding deficiency within the meaning of Section 303 of ERISA or Section 412
of the Code; (vii) each Employee Pension Benefit Plan which is intended to be
"qualified," within the meaning of Section 401(a) of the Code has from its
inception received from the IRS favorable determination letters which are
currently applicable; (viii) any trust created pursuant to any such Employee
Pension Benefit Plan is exempt from federal income tax under Section 501(a) of
the Code and has not at any time had any "unrelated Business taxable income"
as that term is defined in Section 512 of the Code, nor has any such trust
been subject to tax thereon under Section 511 of the Code; (ix) neither
Company and no ERISA Affiliate is aware of any circumstance or event which
would jeopardize the tax-qualified status of any such Employee Pension Benefit
Plan or the tax-exempt status of any related trust; and (x) neither Company
and no ERISA Affiliate has incurred any liability under any provision of
ERISA, the Code or other applicable Law relating to any Employee Benefit Plan
other than funding and payment of benefits in accordance with the terms of
such Employee Benefit Plan. As used herein, "ERISA Affiliate" refers to any
trade or business, whether or not incorporated, under common control with
either Company within the meaning of Section 414(b), (c), (m) or (o) of the
Code.
(c) Neither Company and no ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a "Multiemployer Plan" (as
such term is defined by Section 4001(a)(3) of ERISA).
(d) Except as described in Section 3.17(d) of the TRO
Disclosure Letter, neither Company is bound by any collective bargaining
agreement or legally binding arrangement to maintain or contribute to any
Employee Benefit Plan and all such Plans may be amended, terminated or
otherwise discontinued except as specifically prohibited by federal law.
(e) All reports and information required to be filed with
the Department of Labor, Internal Revenue Service and Pension Benefit Guaranty
Corporation or with plan participants and their beneficiaries with respect to
each Employee Benefit Plan have been timely filed, and all annual reports
(including Form 5500 series) of such Plans were certified without
qualification by each Plan's accountants and actuaries to the extent, and in
the manner, required under ERISA. Any annual reports which are not yet due but
are required to be filed with
-26-
<PAGE>
respect to a plan year which ends on or prior to the Closing Date shall be
filed by the appropriate Company on or before the date on which they are due.
(f) To the knowledge of the TRO Shareholders, there has been
no violation of the "continuation coverage requirements" of former Section
162(k) of the Code (as in effect for tax years beginning on or before December
31, 1988), of Section 4980B of the Code (as in effect for tax years beginning
on and after January 1, 1989) or of Part 6 of Subtitle B of Title I of ERISA
with respect to any Welfare Plan to which such continuation coverage
requirements apply.
(g) Except as described in Section 3.17(g) of the TRO
Disclosure Letter, neither Company and no ERISA Affiliate formerly maintained
or contributed to any Pension Plan which has been terminated ("Terminated
Pension Plan"). The representations and warranties set forth above are, if
applicable to such terminated plan, also true with respect to each Terminated
Pension Plan. With respect to each Terminated Pension Plan which was intended
to be a qualified plan within the meaning of Section 401 of the Code, the IRS
determined that the termination of the Plan did not adversely affect its
tax-qualified status. All of the liabilities of each Terminated Pension Plan
to participants and beneficiaries have been fully satisfied, and there are no
outstanding liabilities or potential liabilities with respect to such Plans.
(h) Except as set forth in Section 3.17(h) of the TRO
Disclosure Letter, neither Company and no ERISA Affiliate maintains any
retiree life and/or retiree health insurance plans that provide for continuing
benefits or coverage for any employee or any beneficiary of an employee after
such employee's termination of employment, other than as required by Section
601 et seq. of ERISA.
(i) Except as set forth in Section 3.17(i) of the TRO
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not, alone or together with any other event, (i) entitle any
person to severance pay, an excess parachute payment within the meaning of
Section 280G of the Code, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or (iii) result in any liability under
Title IV of ERISA or otherwise.
3.18 Labor Matters.
(a) Except as described in Section 3.18(a) of the TRO
Disclosure Letter: (i) neither Company is, and during the last three years has
not been, bound by any collective bargaining or other labor agreement,
contract or commitment; (ii) no
-27-
<PAGE>
application or petition for certification of a collective bargaining agent is
pending or, to the knowledge of the TRO Shareholders, is threatened, and none
of the employees of either Company are, or during the last three years have
been, represented by any union or other bargaining representative; (iii) to
the knowledge of the TRO Shareholders, during the last three years, no union
and no other Person has attempted to organize any group of employees of either
Company, and no such group has sought to organize into a union or similar
organization for the purpose of collective bargaining, and, to the knowledge
of the TRO Shareholders, no such organizational activity is threatened or
contemplated by any Person; (iv) during the last three years there has not
been, there is not presently pending or existing and, to the knowledge of the
TRO Shareholders, there is not now threatened, any strike, slowdown,
picketing, work stoppage, grievance, labor arbitration, or proceeding in
respect of or arising from any labor dispute against or affecting either
Company, any of the Real Property or any real property that is managed by
either Company; (v) there is no lockout of any employees by either Company,
and no such action is contemplated by Company; and (vi) except as described in
Section 3.18(a) of the TRO Disclosure Letter, no agreement restricts either
Company from relocating, closing or terminating any of its operations or
facilities or any portion thereof.
(b) TRO has provided PREIT with the following information
for each current officer and employee of each Company and for each consultant
and independent contractor regularly retained by the Companies (including each
such person on leave or layoff status): employee name and job title, current
annual rate of compensation (identifying bonuses separately), any change in
compensation since December 31, 1996, vacation accrued and service credited
for purposes of vesting and eligibility to participate in applicable Employee
Benefit Plans, and any automobile leased or owned by either Company primarily
for use by any of the foregoing persons. Other than as described in Section
3.18(b) of the TRO Disclosure Letter, there exist no employment, severance,
change of control, consulting, commission, agency or representative Contracts
to which either Company is a party or is otherwise bound, including, without
limitation, any Contract relating to wages, hours, severance, retirement
benefits or annuities, or other terms or conditions of employment (other than
unwritten employment arrangements terminable at will without payment of any
contractual severance or other amount).
(c) Except as described in Section 3.18(c) of the TRO
Disclosure Letter: (i) neither Company has been cited for violations of the
Occupational Safety and Health Act of 1970, as amended ("OSHA"), any
regulation promulgated pursuant to OSHA, or any other statute, ordinance, rule
or regulation establishing standards of workplace safety, or paid any fines or
penalties with respect to any such citation; (ii) there have not been any
-28-
<PAGE>
inspections of any of the facilities of either Company by representatives of
the Occupational Safety and Health Administration or any other federal or
state government agency vested with authority to enforce any statute,
ordinance, rule or regulation establishing standards of workplace safety;
(iii) no representative of any such government agency has attempted to conduct
any such inspection or sought entry to any of such facilities for that
purpose; (iv) neither Company has been notified of any complaint or charge
filed by any employee or employee representative with any such government
agency which alleges that either Company has violated OSHA or any other
statute, ordinance, rule or regulation establishing standards of workplace
safety; (v) neither Company has been notified that any employee or employee
representative has requested that any such government agency conduct an
inspection of any facilities of either Company to determine whether violations
of OSHA or any other such statute, ordinance, rule or regulation may exist;
and (vi) neither Company maintains any condition, process, practice or
procedure at any of its facilities which violates OSHA or any other statute,
ordinance, regulation or rule establishing standards or workplace safety.
3.19 Relationships With Related Persons. Except as described in
Section 3.19 of the TRO Disclosure Letter: (i) no present officer, director,
or shareholder of either Company (collectively, "Current Affiliated Persons");
(ii) no member of the immediate family of any Current Affiliated Person; and
(iii) no Person controlled by, directly or indirectly, any of the foregoing
(all Persons referred to in subclauses (i), (ii) and (iii), collectively,
"Affiliated Persons") (A) in the case of Current Affiliated Persons has, or
has had since January 1, 1995, and (B) in the case of Affiliated Persons other
than Current Affiliated Persons, to the knowledge of the TRO Shareholders,
has, or has had since January 1, 1995, any interest (other than the interest
that derives solely by virtue of being a Shareholder of a Company) in any
property (whether real, personal or mixed and whether tangible or intangible)
used in or pertaining to the Business other than the assets or properties that
are to be distributed to the Current TRO Shareholders prior to Closing as
contemplated herein. Except as described in Section 3.19 of the TRO Disclosure
Letter, neither Ronald Rubin or George Rubin or, to the knowledge of Ronald
Rubin and George Rubin, any other Current Affiliated Person owns of record or
as a beneficial owner an equity interest or any other financial or profit
interest in any Person that has either had business dealings or a material
financial interest in any transaction with either Company, or engaged in
competition with either Company with respect to any services of either Company
(a "Competing Business") in any market presently served by either Company
except for interests in less than five percent (5%) of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market.
-29-
<PAGE>
3.20 Environmental Matters.
(a) Except as described in Section 3.20 of the TRO
Disclosure Letter:
(i) each Company, including all of its business and
operations, is and at all times within the applicable statutes of limitations
has been in compliance in all material respects with all applicable
Environmental Laws;
(ii) To the knowledge of the TRO Shareholders,
there are no conditions on, beneath or arising from, and there are no
Hazardous Substances migrating from, any of the Real Property or any of the
properties for which either Company provides management services which might
under any Environmental Law (A) give rise to liability or the imposition of a
statutory lien upon either Company or (B) require any "Response," "Removal" or
"Remedial Action" (as those terms are defined below) by either Company, in
either case, with respect to properties managed by a Company, only to the
extent the applicable Company does not have a right to full recourse against
an unrelated third-party property owner in respect any liability or obligation
of such Company with respect thereto;
(iii) During the period of either Company's
ownership, lease or use of any real property which is no longer owned, used or
leased to or by either Company ("Former Real Property") there were, to the
knowledge of the TRO Shareholders, no conditions on, beneath or arising from,
and no Hazardous Substances migrated from any Former Real Property which might
under any Environmental Law (A) give rise to liability or the imposition of a
statutory lien upon TRO, PREIT or either Company or (B) require any
"Response," "Removal" or "Remedial Action" by either Company;
(iv) Neither Company has received any notification,
or is otherwise aware, of a Release or threat of a Release of a "Hazardous
Substance" at any Real Property or Former Real Property;
(v) To the knowledge of the TRO Shareholders, no
Hazardous Substances have been transported to or from, released, discharged or
disposed of in any material amount by either Company or any third party on or
beneath any Real Property or, during the ownership, use or lease of any Former
Real Property by a Company, any Former Real Property, in either case which
could give rise to liability upon either Company;
(vi) To the knowledge of the TRO Shareholders,
there are not now any above or underground storage tanks or transformers
containing or contaminated with PCBs on or beneath any Real Property;
-30-
<PAGE>
(vii) There is not:
(A) any material governmental claim, demand,
investigation, enforcement, Response, Removal,
Remedial Action, statutory lien or other
governmental or regulatory action instituted or,
to the knowledge of the TRO Shareholders,
threatened against either Company, any Real
Property or any Former Real Property pursuant to
any of the Environmental Laws;
(B) any material claim, demand, suit or action,
made or, to the knowledge of the TRO
Shareholders, threatened by any Person against
either Company, any Real Property or any Former
Real Property relating to (1) any form of damage,
loss or injury resulting from, or claimed to
result from, any Hazardous Substance on beneath
or arising from, or migrating from, any Real
Property or any Former Real Property or (2) any
alleged violation of the Environmental Laws by
either Company; or
(C) any communication to or from any governmental
or regulatory agency arising out of or in
connection with Hazardous Substances on beneath
or arising from, migrating from or generated at
any Real Property or any Former Real Property,
including, without limitation, any notice of
violation, citation, complaint, order, directive,
request for information or response thereto,
notice letter, demand letter or compliance
schedule; and
(viii) Neither Company has, or will have, any material
liability for any wastes generated by either Company which have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or to any site listed in
any state list of sites requiring or recommended for investigation or
clean-up.
(b) As used in this Agreement:
(i) The term "Environmental Laws" means any and all
Laws and Authorizations concerning or relating to the protection of health
and/or the environment, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., as amended ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., as amended, the Federal Water Pollution Control
Act, 33 Section 7401 et seq., as amended, the Toxic Substances Control Act, 15
-31-
<PAGE>
U.S.C. Section 2601 et seq., as amended, the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., as amended,
or the Safe Drinking Water Act, 42 U.S.C. Section 300 et seq., as
amended, or regulations promulgated thereunder;
(ii) The terms "Release," "Response," "Removal" and
"Remedial Action" shall have the meanings ascribed to them in Sections
101(22)-101(25) of CERCLA.
(iii) The term "Hazardous Substances" or "Hazardous
Substance" shall mean any substance now regulated under any of the Environmental
Laws, including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material; (B) a "hazardous substance,"
"pollutant" or "contaminant" (as defined in Sections 101(14), and (33) of CERCLA
or the regulations designated pursuant to Section 102 of CERCLA), including any
element, compound, mixture, solution or substance that is designated pursuant to
Section 102 of CERCLA; (C) listed in the United States Department of
Transportation Hazardous Material Tables, 49 C.F.R. Section 172.101; (D)
defined, designated or listed as a "Hazardous Waste" pursuant to the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, ss.5903(5),
6921); (E) listed as a "Hazardous Air Pollutant" under Section 112 of the Clean
Air Act, as amended (42 U.S.C. Section 7412) or (F) does or may physically,
chemically, biologically or otherwise breakdown or transform into, or otherwise
produce, become, promote or result in the presence or an increase of any of the
above when released on, at, beneath or to the environment.
3.21 Absence of Certain Changes and Events.
(a) Except as described in Section 3.21 of the TRO
Disclosure Letter and except as contemplated herein (including, without
limitation, as necessary to effect the TRO Recap), since December 31, 1996,
each Company has conducted its business and activities only in the usual and
ordinary course consistent with past practice and there has not been any:
(i) declaration or payment of any distribution or
payment in respect of the ownership interest in either Company, or any
repurchase or redemption of any such interests;
(ii) amendment to the articles of incorporation,
bylaws or other organizational documents of either Company;
(iii) payment or increase by either Company of any
bonuses, salaries, or other compensation (except for payment of salary and
increases thereto in the ordinary course consistent with past practice) to any
shareholder, director, trustee, officer or employee or entry into (or
amendment of) any employment, severance or similar agreement with any
shareholder, director, trustee, officer or employee;
-32-
<PAGE>
(iv) adoption of, change in or increase in the
payments to or benefits under any Employee Benefit Plan or labor policy;
(v) damage, destruction or loss to any material
asset or property of either Company, whether or not covered by insurance;
(vi) entry into, amendment, termination or receipt
of notice of termination of, any Contract which is, is required to be, or
would have been required to be (if entered into prior to the date hereof)
disclosed in the TRO Disclosure Letter as the result of Section 3.12(a)(iii)
or which relates to any material transaction, whether or not in the ordinary
course of business;
(vii) borrowing or incurring of any indebtedness,
obligation or liability, contingent or otherwise, except current indebtedness
incurred in the ordinary course of business;
(viii) endorsement, assumption or guarantee of
payment or performance of any loan or obligation of any other Person;
(ix) loan or advance made to any Person except for
advances made in the ordinary course of business consistent with past
practice;
(x) sale, assignment, conveyance, lease, or other
disposition of any asset or property of either Company (other than the
disposition of office equipment and furniture in the ordinary course of
business consistent with past practice), or mortgage, pledge, or imposition of
any lien or other Encumbrance on any asset or property of either Company;
(xi) cancellation or waiver of any material claims
or rights of either Company;
(xii) change in the accounting methods, principles
or practices followed by either Company or any change in any of the
assumptions underlying, or methods of calculating, any bad debt, contingency
or other reserve; or
(xiii) agreement or commitment, whether or not in
writing, to do any of the foregoing.
(b) Since December 31, 1996, there has been no event,
circumstance, condition or contingency that has resulted in a Material Adverse
Effect or that is reasonably likely to result in a Material Adverse Effect.
3.22 Books and Records. The books and records of each Company,
including financial records and books of account, are complete and accurate in
all material respects and have been
-33-
<PAGE>
maintained in accordance with sound business practices. To the extent such
books and records constitute financial records or books of account, they
fairly present revenues, expenses, assets and liabilities, all in a manner
that will allow the preparation of financial statements that comply with GAAP.
3.23 Insurance.
(a) Section 3.23(a) of the TRO Disclosure Letter contains a
complete and accurate list of all policies and binders of insurance
(including, without limitation, property, casualty, liability, professional
liability, life, health, accident, workers' compensation and disability
insurance and bonding arrangements) owned by or maintained for the benefit of
either Company or to which either Company is a party or under which either
Company or any shareholder, director, trustee, officer or employee thereof is
covered and all self-insurance programs or arrangements. Such policies and
binders are issued by insurance companies reasonably believed by the TRO
Shareholders to be financially sound and reputable, are sufficient for
compliance with all requirements of Laws and all agreements to which either
Company is a party or by which it or its assets are bound, are valid and
enforceable policies, provide insurance coverage against all risks normally
insured against by a person or entity carrying on the same or similar business
as that conducted by the Companies and will not be affected by, terminate or
lapse by reason of the transactions contemplated by this Agreement.
(b) Each Company has paid all premiums due, and has
otherwise performed its obligations, under each policy listed or required to
be listed in Schedule 3.23(a) of the TRO Disclosure Letter.
(c) Except as described in Schedule 3.23(c) of the TRO
Disclosure Letter, neither Company has received: (i) any notice of
cancellation of any policy or binder of insurance required to be identified in
Schedule 3.23(a) of the TRO Disclosure Letter or refusal of coverage
thereunder; (ii) any notice that any issuer of such policy or binder has filed
for protection under applicable bankruptcy or insolvency laws or is otherwise
in the process of liquidating or has been liquidated; or (iii) any notice that
any such policy or binder may no longer be in full force or effect or that the
issuer of any such policy or binder may be unwilling or unable to perform its
obligations thereunder.
3.24 Proxy Statement. None of the information supplied or to be
supplied by any TRO Shareholder, any TRO Affiliate or either Company for
inclusion or incorporation by reference in the Proxy Statement shall, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the shareholders of PREIT, or at any time thereafter up to and
including the time of the PREIT Shareholders' Meeting, contain
-34-
<PAGE>
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
3.25 Brokers. No Person acting on behalf of either Company or any TRO
Shareholder or any of their respective affiliates or under the authority of
any of the foregoing is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
3.26 Accurate Disclosure. All documents and other papers delivered by
or on behalf of any TRO Shareholder or either Company in connection with the
transactions contemplated by this Agreement are accurate and complete in all
material respects.
3.27 Knowledge. For purposes of this Agreement, "to the knowledge of
the TRO Shareholders" and correlative terms shall mean the actual knowledge of
any and all TRO Shareholders, after due inquiry except that, as applied in
Section 3.20 with respect to properties managed but not owned in whole or in
part by TRO, it shall mean such knowledge as a prudent manager would have as
to such properties.
3.28 Investment Representations.
(a) Each TRO Shareholder acknowledges that the Class A Units
to be issued pursuant to Sections 1.2 and 2.2 will not be registered under the
1933 Act on the grounds that the issuance of such units is exempt from
registration pursuant to Section 4(2) of the 1933 Act and/or Regulation D
promulgated under the 1933 Act, and that the reliance of the Partnership on
such exemptions is predicated in part on the TRO Shareholders'
representations, warranties and acknowledgements set forth in this section.
(b) The Class A Units issued in accordance with this
Agreement will be acquired by each TRO Shareholder for its own account, not as
a nominee or agent, and without a view to resale or other distribution within
the meaning of the 1933 Act, and the rules and regulations thereunder except
as contemplated hereunder, and no TRO Shareholder will distribute any of such
units in violation of the 1933 Act.
(c) Each TRO Shareholder (i) acknowledges that the Class A
Units, when issued, will not be registered under the 1933 Act and such units
will have to be held indefinitely by it or him unless they are subsequently
registered under the 1933 Act or an exemption from registration is available,
(ii) is aware that any sales of such units made under Rule 144 of the
Securities and Exchange Commission under the 1933 Act may be made only in
-35-
<PAGE>
limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, (iii) is aware that Rule 144
may not be available for use by any TRO Shareholder for resale of the units,
(iv) is aware that the Partnership is under no obligation to register, and has
no current intention of registering any of such units under the 1933 Act, and
(v) acknowledges that he has received and read a private placement memorandum
relating to the offer of Class A Units.
(d) Each TRO Shareholder is well versed in financial
matters, has had dealings over the years in securities, including "restricted
securities," and is fully capable of understanding the type of investment
being made in the Class A Units and the risks involved in connection
therewith.
3.29 First Refusal Rights Agreement. The parties to the First Refusal
Rights Agreement referred to in Section 6.13 are the only TRO Shareholders and
TRO Affiliates with interests in the properties referred to therein.
3.30 One Meridian Plaza. Robert W. Hayes delivered under cover of
letter dated June 5, 1997 to Mark M. Wilcox copies of certain releases
relating to claims arising out of the fire at One Meridian Plaza,
Philadelphia, Pennsylvania on or about February 23-24, 1991. To the knowledge
of the TRO Shareholders, other than the Persons identified in such releases,
there are no Persons that may assert, or that have asserted, claims of any
nature arising directly or indirectly out of such fire. As a result, inter
alia, of such releases, neither Ronald Rubin nor either Company has any
uninsured liability or potential liability as a result of such fire.
3.31 Equity Fund. As of the time that TRO assigns, sells and
transfers the Equity Fund (as used in the Goldenberg Letter Agreement, the
"Equity Fund") to the Partnership, TRO shall own all of the rights with
respect to the Equity Fund, and the amount of the Equity Fund shall be as set
forth in the statement accompanying the Closing Loan Statement as contemplated
by Section 5.17. The assignment, sale and transfer of the Equity Fund
contemplated by Section 5.17 will not breach or otherwise conflict with the
Goldenberg Letter Agreement (the "Goldenberg Letter Agreement") dated March
26, 1996, and, as of the Closing, the Partnership shall be entitled to be paid
the amount of the Equity Fund and interest factor thereon pursuant to the
terms of the Goldenberg Letter Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING
PREIT AND THE PARTNERSHIP.
-36-
<PAGE>
PREIT hereby represents and warrants to the TRO Shareholders as
follows:
4.1 Organization.
(a) PREIT is an unincorporated association in business trust
form duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania. PREIT has all necessary trust power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform all its obligations under each agreement and instrument to
which it is a party or by which it is bound.
4.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). Subject to approval thereof by PREIT's
shareholders, the execution, delivery and performance by PREIT and the
Partnership of this Agreement and the other Buyer Transaction Documents have
been duly authorized by all necessary trust or partnership action. This
Agreement has been duly and validly executed and delivered by PREIT and the
Partnership and constitutes the legal, valid and binding obligation of PREIT
and the Partnership enforceable against each of them in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Buyer Transaction Documents shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally or by general equitable principles.
-37-
<PAGE>
4.3 No Conflicts.
(a) Except as described in Section 4.3(a) of the disclosure
letter delivered by PREIT to TRO on the date hereof ("PREIT Disclosure
Letter"), the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership
of the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not (in each case,
with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the
trust or partnership agreement (or other organizational documents) of PREIT or
the Partnership or (B) any Law applicable to PREIT or the Partnership, or by
or to which any assets or properties of PREIT or the Partnership is bound or
subject;
(ii) violate or conflict with, result in a breach
of, constitute a default or otherwise cause any loss of benefit under, or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any material
Authorization or material Contract to which PREIT or the Partnership is a
party or by which either PREIT or the Partnership or any assets or properties
of either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any material Encumbrance upon or with respect to either PREIT or
the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 4.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership
of the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT
or the Partnership to obtain any material Authorization of or make any
material filing, registration or declaration with or notification to, any
court, government or governmental agency or instrumentality (federal, state,
local or foreign) or to obtain the material consent, waiver or approval of, or
give any material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to
the best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this
-38-
<PAGE>
Agreement or the validity of any of the Buyer Transaction Documents or which,
if adversely determined, could have a material adverse effect on the
consolidated financial condition, assets, business or results of operations of
PREIT or could materially and adversely affect PREIT's or the Partnership's
ability to enter into or perform its obligations under the Buyer Transaction
Documents.
4.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests
in PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 4.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated herein, in
the Amended Partnership Agreement or in the Employment Agreements referred to
herein, and except as disclosed in Section 4.4(a) of the PREIT Disclosure
Letter as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character
(including, without limitation, voting agreements or arrangements known to
PREIT) relating to the issuance of beneficial interests in PREIT or
partnership interests in the Partnership. As of the Closing, the outstanding
partner interests in the Partnership shall consist of the interests
outstanding on the date hereof, the Class A Units contemplated by Section 1.2
hereof and by the Oxford Valley Contribution Agreement, and, if applicable,
the Class B Units contemplated by the EPD Purchase Agreements and an
additional number of units issued to PREIT Subsidiary in exchange for the
contribution contemplated by Section 5.24.
(b) All Class A Units to be issued and delivered pursuant to
Sections 1.2 and 2.2 hereof will be, at the time of issuance and delivery in
accordance with the terms of this Agreement, duly authorized and validly
issued by the Partnership. Assuming the accuracy of the representations and
warranties of the TRO Shareholders set forth herein, such issuance will be
exempt from registration under the 1933 Act as an offering described in
Section 4(2) of such Act and/or pursuant to Regulation D promulgated
thereunder.
4.5 PREIT Reports. PREIT has delivered to the Current TRO
Shareholders copies of PREIT's (a) Proxy Statement dated November 15, 1996,
(b) Annual Report on Form 10-K for the fiscal year ending August 31, 1996
containing audited financial statements for fiscal year 1996, as amended by
its Report on Form 10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports
on Form 10-Q for the quarters ended November 30, 1996, February 28, 1997 and
May 31, 1997, all of which have been filed by PREIT with the Securities and
Exchange Commission (the "PREIT Reports"). The audited consolidated financial
statements and unaudited interim
-39-
<PAGE>
financial statements of PREIT included in such reports have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present the consolidated financial condition and
results of operations of PREIT as at the dates thereof and for the periods
then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein. The PREIT Reports do not contain any untrue statements of a material
fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading.
4.6 Information Included in Proxy Statement. The information to be
included or incorporated in the Proxy Statement, other than information
provided by either Company or any TRO Shareholder for the express purpose of
including the same in the Proxy Statement, shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
shareholders of PREIT, or at any time thereafter up to and including the time
of the PREIT Shareholders' Meeting, be false or misleading with respect to any
material fact required to be stated therein, or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
shall comply in all material respects as to form and substance with the
requirements of the 1934 Act and the rules and regulations thereunder.
Notwithstanding the foregoing, PREIT makes no representation or warranty with
respect to any information about, or supplied or omitted by, either Company or
any TRO Shareholder which is contained in the Proxy Statement.
4.7 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign)
or before any arbitrator of any kind, in each case of a nature that is
required to be disclosed in PREIT's 1934 Act reports.
4.8 Material Adverse Change. Except as disclosed in filings with the
Securities and Exchange Commission, since May 31, 1997, there has not been any
material adverse change in the condition (financial or otherwise), assets,
results of operations or business of PREIT on a consolidated basis.
4.9 Brokers. Except for Lehman Brothers Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or
-40-
<PAGE>
the Partnership or any of their affiliates or under the authority of any of
the foregoing is or will be entitled to any brokers' or finders' fee or any
other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
SECTION 5. AGREEMENTS AND COVENANTS.
5.1 Special Shareholders Meeting. PREIT shall duly call, give notice
of, convene and hold a special shareholders meeting (the "PREIT Shareholders'
Meeting") to approve, among other things, the transactions contemplated by
this Agreement and PREIT's 1997 Stock Option Plan.
5.2 Proxy Statement. PREIT shall prepare as promptly as practicable,
with the cooperation of the Companies and the TRO Shareholders and the TRO
Affiliates, a proxy statement (the "Proxy Statement") in compliance with the
provisions of the 1934 Act, for purposes of soliciting the approval of the
shareholders of PREIT in respect of, among other things, the approval items
set forth in Section 5.1 above. The Companies and each TRO Shareholder shall,
and the TRO Shareholders shall cause each TRO Affiliate to, provide promptly
to PREIT for inclusion in the Proxy Statement, or any amendments or
supplements thereto, such information concerning its business and affairs and
its financial statements as, in the reasonable judgment of PREIT or its
counsel, may be required by applicable Law or the rules and regulations of the
Securities and Exchange Commission (including, without limitation, audited
financial statements of the Companies and the TRO Affiliates and unaudited
interim financial statements of the Companies and the TRO Affiliates) and to
cause its counsel, auditors and other representatives to cooperate with
PREIT's counsel, auditors and other representatives in the preparation of the
Proxy Statement. The Companies and the TRO Shareholders will promptly advise
PREIT in writing if at any time prior to the Closing either Company or any TRO
Shareholder shall obtain knowledge of any facts that might make it necessary
or appropriate to amend or supplement the Proxy Statement in order to correct
any misstatements of material fact or to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
Law.
5.3 Reasonable Efforts. Upon the terms and subject to the conditions
hereof, between the date hereof and the Closing Date, each of the parties
hereto shall use its reasonable efforts to take, or cause to be taken, all
appropriate action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in the preparation and filing of the Proxy Statement, (ii)
using its or his reasonable efforts to make all
-41-
<PAGE>
required regulatory filings and applications and to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to Contracts as are necessary for the
consummation of the transactions contemplated by this Agreement, and (iii)
using its or his reasonable efforts to cause the conditions to the
consummation of the acquisition of the Contributed TRO Shares to be satisfied.
5.4 Access to Information; Confidentiality. Between the date of this
Agreement and the Closing Date, PREIT, on the one hand, and the Companies and
the TRO Shareholders, on the other hand, will give to the other party and its
officers, employees, counsel, accountants and other representatives free and
full access to and the right to inspect, during normal business hours, all of
the assets, records, facilities, properties and Contracts relating to its
business as the other party may reasonably request. The TRO Shareholders shall
cause the TRO Affiliates that are parties to the transactions contemplated
herein to afford PREIT and its representatives comparable access to the
assets, records, facilities, properties and Contracts relating to the business
of the TRO Affiliates. Each party shall acquire and hold all confidential
information that has been made available by another party hereto subject to
the terms and conditions of Section IV of the Letter Agreement dated as of
April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the terms of
which section are hereby incorporated by reference and which shall remain in
force through the Closing.
5.5 Public Announcements. Except as and to the extent required by Law
or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the Companies and the TRO Shareholders, on the one
hand, and PREIT and the Partnership, on the other hand, will not, and each
will direct its representatives not to, directly or indirectly, make any
public comment, statement or communication with respect to, or otherwise
disclose or permit the disclosure of any of the terms, conditions or other
aspects of the transactions contemplated hereby; provided, however, that PREIT
may issue a press release, in the form previously circulated by PREIT to TRO,
regarding, among other things, the execution of this Agreement; and further
provided that PREIT and TRO may each continue such communications with
principals, partners, lenders, trustees, attorneys, accountants, investment
bankers, consultants engaged by PREIT and TRO, including abstract companies,
title companies, engineers and architects, Claude de Botton and his
affiliates, Albert Marta and his affiliates, Kenneth N. Goldenberg and his
affiliates, EPD and its affiliates, and, if agreed in each case by PREIT and
TRO, others as may be legally required or necessary in connection with the
consummation of the transactions contemplated by this Agreement.
-42-
<PAGE>
5.6 No Solicitation. Each Company and each TRO Shareholder shall not,
each Company shall cause its officers, employees, representatives and agents
not to, and the TRO Shareholders shall cause the TRO Affiliates not to,
directly or indirectly, continue, encourage, solicit, initiate or participate
in discussions or negotiations with, or provide any nonpublic information to,
any Person (other than PREIT and the Partnership and their respective
representatives in connection with the transactions contemplated by this
Agreement) concerning any sale of assets (other than in the ordinary course of
its business consistent with past practice) or shares of capital stock of
either Company or any TRO Affiliate that is a party to any of the transactions
contemplated herein or any merger, consolidation, recapitalization,
liquidation or similar transaction involving either Company or any such TRO
Affiliate (collectively, an "Acquisition Transaction"). Each Company and each
TRO Shareholder will promptly communicate to PREIT the terms of any inquiry or
proposal that it or he may receive in respect of an Acquisition Transaction.
5.7 Notifications. Each party hereto shall give prompt notice to the
other parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its or his representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a breach of
or any inaccuracy in any of its or his representations and warranties
contained in this Agreement had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition; (ii) any
material failure of it or him or any of its officers, directors, employees or
agents, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it or him hereunder; (iii) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and (iv) any
actions, suits, claims, investigations or proceedings commenced or, to the
best of its or his knowledge, threatened against, relating to or involving or
otherwise affecting either Company, any TRO Shareholder or PREIT, as the case
may be, or any of the transactions contemplated by this Agreement.
5.8 Conduct of the Companies' Business. Except as expressly provided
herein, between the date hereof and the Closing, except with the prior written
consent of PREIT, each Company shall (and the TRO Shareholders will cause each
Company to):
(a) carry on its business in, and only in, the usual,
regular and ordinary course, consistent with past practice and the provisions
hereof and in compliance with all applicable Laws,
-43-
<PAGE>
Authorizations and Contracts (including, without limitation, those required to
be identified in the TRO Disclosure Letter), preserve intact its present
business organization, maintain its corporate existence and use all reasonable
efforts to keep available the services of its present officers and employees
and to preserve its relationships with clients, contractors, and others having
business dealings with it to the end that its goodwill and business shall be
unimpaired at the Closing;
(b) pay and discharge all of its debts, liabilities and
obligations as they become due;
(c) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(d) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear
and tear excepted;
(e) maintain its books of account and records in the usual,
regular and ordinary manner and use best efforts to maintain in full force and
effect all of its Authorizations;
(f) maintain its S corporation status for federal and state
income tax purposes (it being expressly understood that the consummation of
the TRO Recap and the TRO Consolidation immediately prior to Closing will,
however, result in a termination of such status);
(g) not enter into, assume or amend any Contract of a type
described in Section 3.12(a)(iii);
(h) not take any action, fail to take any action or permit
to occur any event that would cause or constitute a breach of or inaccuracy in
any representation or warranty of the TRO Shareholders set forth herein if
made immediately after such event or at the Closing or that would have been
required (or result in any situation that would be required) to be disclosed
hereunder had such action or inaction been taken or failed to have occurred or
had such event occurred prior to the date hereof;
(i) not increase salaries or other compensation of its
officers or directors or any other employee other than normal year-end merit
increases for employees (other than employees with which employment agreements
are to be executed as contemplated herein) made in the ordinary course of such
Company's business consistent with past practice;
(j) not make any change in its authorized or issued capital
stock, grant any stock option or other right to purchase its shares of capital
stock or other securities, issue or make
-44-
<PAGE>
any commitment to issue any of its securities including any securities
convertible into capital stock, grant any registration rights or purchase,
redeem, retire or make any other acquisition of any shares of its capital
stock or other securities (except, in each case, as may be required in
connection with the TRO Recap and as described in Sections 3.4(a) and 3.21 of
the TRO Disclosure Letter);
(k) not amend its certificate or articles of incorporation
or bylaws (or equivalent governing documents) (except, in each case, as may be
required in connection with the TRO Recap and as described in Sections 3.4(a)
and 3.21 of the TRO Disclosure Letter);
(l) not enter any Contract with any TRO Shareholder or TRO
Affiliate; and
(m) not enter into any agreement or understanding to do or
engage in any of the foregoing actions.
5.9 Sale of Shares of TRO. Between the date hereof and the Closing,
except as expressly contemplated herein, except with the prior written consent
of PREIT, no TRO Shareholder shall sell, assign, transfer, or otherwise
encumber any of his shares of capital stock of TRO, or any rights of such
shareholder in such shares.
5.10 Financial Information. Until the Closing, each Company shall
provide PREIT, as soon as practicable and in any event no later than the 30th
day after the end of each month, with an unaudited balance sheet and income
statement of such Company as of and for the month then ended, prepared on the
same basis as the interim financial statements referred to in Section 3.8 and
certified as such by the chief executive officer and chief financial officer
of such Company.
5.11 Costs and Expenses. Except as otherwise provided herein, the
parties hereto shall each pay their own fees and expenses and those of their
respective agents and advisors incurred in connection with the transactions
contemplated by this Agreement (including, without limitation, all legal and
accounting fees (collectively, "Transaction Costs")). TRO shall provide, at
its cost and expense, all audited and unaudited financial statements relating
to The Court at Oxford Valley, TRO and TRO Illinois as of any date and for any
period ending prior to Closing that PREIT or its counsel reasonably requests
be furnished in order to prepare the Proxy Statement or to satisfy future
Securities and Exchange Commission filing requirements applicable to PREIT.
Except for the financial statements described in the preceding sentence, PREIT
shall bear all costs and expenses arising from the preparation of the Proxy
Statement and the financial statements required to be filed by PREIT with
-45-
<PAGE>
the Securities and Exchange Commission, and PREIT shall pay TRO, at the
Closing or promptly following termination of this Agreement, upon submission
to PREIT of reasonably detailed invoices with respect thereto, an amount equal
to the reasonable legal fees (the "Requested Legal Expenses") incurred by TRO
as the result of a written request of PREIT, or its counsel, to assist in the
preparation of the Proxy Statement or the compliance by PREIT with the
Securities and Exchange Commission or American Stock Exchange rules and
regulations; provided that if there is a Closing, such amount shall be
included in the Closing Loan provided for in Section 5.17 hereof and provided
further that if this Agreement is terminated following a breach of this
Agreement by either Company or by any TRO Shareholder, such payment to TRO by
PREIT shall not be required. Notwithstanding the foregoing, if this Agreement
is terminated pursuant to Section 9.2 hereof solely on account of the failure
to fulfill the condition set forth in Section 9.1(f) herein, then PREIT shall
pay up to a maximum of $1,000,000 in the aggregate of all reasonable
Transaction Costs incurred by the Companies and the TRO Shareholders upon
submission to PREIT of reasonably detailed invoices and such other information
related thereto as PREIT may reasonably request. TRO shall pay all of its
Transaction Costs, other than the Transaction Costs to be reimbursed by PREIT
as described above, prior to Closing.
5.12 Confidentiality. From and after the Closing Date, no TRO
Shareholder shall disclose directly or indirectly to any Person, other than in
the ordinary course of the employ of such TRO Shareholder by PREIT or any
affiliate thereof, without the prior written authorization of PREIT, any
client lists, pricing strategies, client and employee files and records, any
proprietary data or trade secrets of either Company, or any financial or other
information about either Company not in the public domain.
5.13 Voting Agreements of Sylvan M. Cohen and Leonard I. Korman.
Contemporaneously with the execution and delivery of this Agreement, Sylvan M.
Cohen and Leonard I. Korman shall each deliver to TRO a duly executed voting
agreement in the form attached hereto as Exhibit 5.13.
5.14 TRO Consolidation. Immediately prior to Closing, the TRO
Shareholders that own shares of capital stock of TRO Illinois will convey all
of such shares, free and clear of all Encumbrances and constituting all of the
outstanding shares of capital stock of TRO Illinois, to TRO.
5.15 TRO Recap. Prior to Closing, TRO shall take, and the TRO
Shareholders shall cause TRO to take, all actions necessary or appropriate to
effect the TRO Recap. In connection with the consummation of the TRO Recap,
the TRO Shareholders shall, inter alia. (i) cause TRO to amend and restate its
articles of
-46-
<PAGE>
incorporation and bylaws in the forms set forth in Exhibit 5.15-A hereto,
thereby changing its corporate name and effecting changes in its capital stock
necessary to effect the TRO Recap and (ii) cause TRO to adopt the Employee
Stock Ownership Trust in the form set forth in Exhibit 5.15-B hereto and to
create the Employee Stock Ownership Trust pursuant to the trust agreement set
forth in Exhibit 5.15-C hereto.
5.16 Predevelopment Properties; Concord Pike; Girard Estate. After
Closing, no TRO Shareholder or TRO Affiliate shall have any interest in the
development or ownership of any Predevelopment Property, the Girard Estate
project or the Concord Pike property other than as a result of the
participation of TRO, the Partnership or an affiliate thereof and other than
as provided in the Predevelopment Properties Contribution Agreement.
5.17 Closing Loan; Purchase of Equity Fund.
(a) On the date hereof, TRO has delivered to PREIT a
preliminary statement and no later than 5 business days prior to Closing TRO
shall deliver to PREIT a final statement (the "Closing Loan Statement")
setting forth in reasonable detail the nature and amount of: (i) all
reasonable out-of-pocket expenses (other than amounts advanced under the
Goldenberg Letter Agreement that are included in the Equity Fund) theretofore
paid or incurred but not yet paid by TRO, any TRO Shareholder or any TRO
Affiliate to third parties in connection with the acquisition and development
of the EPD Properties and those properties that constitute Predevelopment
Properties as of the Closing, in each case to the extent not theretofore
reimbursed out of proceeds arising from the Predevelopment Properties; (ii)
all reasonable start-up expenses theretofore incurred by TRO with respect to
the management of the EPD portfolio of properties up to a maximum of
$1,500,000; and (iii) the Requested Legal Expenses described in Section 5.11,
in each case together with detailed invoices and other documentation that
PREIT may reasonably request in order to verify the foregoing. At the Closing,
either PREIT or the Partnership shall loan (the "Closing Loan") to TRO an
amount equal to the aggregate amount of the expenses set forth on the Closing
Loan Statement. Promptly following the Closing, TRO shall use the proceeds of
the Closing Loan to retire all indebtedness of TRO to third parties with
respect to the expenses set forth on the Closing Loan Statement.
(b) The Closing Loan Statement shall be accompanied by a
statement of the outstanding principal amount of the Equity Fund and the
interest factor thereon then payable in accordance with the terms of the
Goldenberg Letter Agreement. Immediately prior to the Closing, TRO will sell,
assign and transfer to the Partnership all of TRO's right, title and interest
in the Equity Fund, and the Partnership will pay TRO an amount of cash equal
to the amount of the Equity Fund and interest factor. To the extent
-47-
<PAGE>
that TRO does not own the entirety of the Equity Fund and the interest factor
on the date hereof, it shall acquire rights thereto from the TRO Shareholders,
together with written representations and warranties in such form and
substance as PREIT shall reasonably request with respect to ownership and
right to assign.
(c) At the Closing, the Partnership shall assume all of the
liabilities and obligations of TRO and TRO Shareholders under the Goldenberg
Letter Agreement arising after Closing other than liabilities or obligations
arising from a breach of or default under such agreement prior to Closing.
5.18 Acquisitions by TRO Affiliates. Prior to Closing, the TRO
Shareholders shall cause the TRO Affiliates not to, without the prior written
consent of PREIT, acquire, directly or indirectly, any ownership or other
interest in any retail or residential real property that is not currently
listed in Section 3.11(b) of the TRO Disclosure Letter and that is of a type
that would have been includable in such list if such interest had been held
prior to the date hereof.
5.19 Board of Trustees.
(a) The Board of Trustees of PREIT (the "Board") shall take
all actions necessary or appropriate to appoint or elect Ronald Rubin, George
Rubin and Rosemarie Greco to be trustees of the Trust as of the Closing so
that, after such appointment or election, the Board of Trustees will consist
of six current members as of the date hereof and the three new members so
elected or appointed. In the event that any of the foregoing is unavailable to
serve as trustees as of the Closing, the Board shall elect or appoint one or
more substitutes therefor designated by TRO, provided, however, that if
Rosemarie Greco is unavailable, TRO shall designate a substitute that is
wholly independent of PREIT, the Companies, the TRO Shareholders and the TRO
Affiliates that is of recognized standing and is otherwise acceptable to the
Board.
(b) Immediately following the Closing, the Board shall cause
a special committee of the Board to be formed (the "Special Committee"). The
Special Committee shall consist of three independent trustees of PREIT, one of
whom shall initially be Rosemarie Greco (or her substitute). The
responsibilities of the Special Committee shall be to address and resolve
following Closing matters pertaining to the transactions contemplated herein.
If following Closing the holders of more than 33-1/3% of the then-outstanding
Class A Units issued to TRO Shareholders or TRO Affiliates or any trustee of
PREIT request from time to time that the Special Committee consider (x)
whether the contemplated incurrence by PREIT of non-project specific
indebtedness or the raising by PREIT of equity capital may have an unintended
and
-48-
<PAGE>
inequitable effect on PREIT or the holders of the Class A Units or (y) whether
the breach by PREIT of any of its representations and warranties set forth
herein has had any adverse effect upon PREIT's Adjusted FFO, the Special
Committee shall consider such request and may, but shall not be required to,
make any adjustments that the Special Committee deems appropriate in its sole
discretion, including, without limitation, any adjustment to the applicable
Annual Hurdles and Annual Targets (and the TRO Shareholders acknowledge that
the members of the Special Committee shall have no personal liability for
their decisions). If after Closing, there is a final judgment or settlement
with respect to litigation instituted prior to the date hereof by [the
Bermans] and as a result thereof PREIT or one of its affiliates is required to
pay an amount greater than the amount currently reserved therefor on PREIT's
financial statements, PREIT is required to write off revenues that were
recorded on PREIT's financial statements prior to the date hereof or the
percentage interest of PREIT in any property as it is currently accounted for
is reduced, such percentage of such holders shall have the right to cause the
Special Committee to consider the adverse effect of any such event upon the
earn-out set forth in Section 2.2. The Special Committee shall, in respect of
matters described in the immediately preceding sentence, be required to make
appropriate adjustments. In considering the appropriateness of any such
adjustment, the Special Committee shall consider adjustments as may be
appropriate to address any adverse effect on the earn-out specified in Section
2.2.
5.20 Distributions Prior to Closing; Howell Shopping Center.
(a) Notwithstanding anything to the contrary set forth
herein, prior to the Closing Date (and therefore prior to the consummation of
the TRO Recap and TRO Consolidation), TRO may, to the extent lawful, pay a
dividend to its shareholders consisting of: (i) all cash and cash equivalents
owned by TRO, including, without limitation, cash proceeds of the Closing Loan
(but excluding any cash and cash equivalents that are to be used in order to
satisfy the representation and warranty set forth in Section 3.9(b) hereof);
(ii) all accounts receivable other than rent roll receivables, tenant
deposits, funds held on behalf of others, and fully collectible accounts
receivable identified by TRO on a schedule delivered to the Partnership
pursuant to Section 5.29 that are to be retained by TRO in order to satisfy
the representation and warranty set forth in Section 3.9(b) hereof; and (iii)
all assets specifically listed on Schedule 5.20(a) hereto. No account
receivable shall be distributed to shareholders if treatment as a receivable
or the distribution would be a breach of Section 5.26 hereof.
(b) Notwithstanding anything to the contrary herein, prior
to the Closing, TRO shall cause all of TRO's right, title and interest in and
to predevelopment rights described on
-49-
<PAGE>
Schedule 5.20(b) hereto to be transferred to the Predevelopment Partnership.
(c) (i) Unless a contract approved in form and substance by
PREIT (such approval not to be unreasonably withheld) giving Home Depot the
right to purchase Howell Shopping Center is in effect as of Closing, Howell
Shopping Center shall constitute a Predevelopment Property. If such a contract
(the "Howell Purchase Agreement") is in effect as of Closing, Howell Shopping
Center shall not constitute a Predevelopment Property except under the
circumstances described below.
(ii) This subparagraph shall apply only if Howell
Shopping Center is not a Predevelopment Property as of Closing. Prior to the
Closing Date, TRO, the TRO Affiliates and the TRO Shareholders shall assign to
a newly-formed New Jersey limited liability company (the "Howell LLC") all of
their rights to the proceeds of the disposition of their interest in the
Howell Shopping Center. The TRO Shareholders shall cause the Howell LLC to
have no assets or liabilities (other than for payment of current services
rendered by third parties and any debt incurred by Howell LLC to acquire the
property constituting the Howell Shopping Center) except for its rights under
the Howell Purchase Agreement and all beneficial interests in the Howell
Shopping Center held by TRO, the TRO Shareholders or its TRO Affiliates prior
to Closing and the obligation to reimburse the TRO Shareholders and the TRO
Affiliates for the expenses and fees accrued as of the Closing (the expenses
and fees incurred as of the date hereof are set forth on Schedule 5.20(c)),
provided that such obligation shall be payable only out of the proceeds of the
disposition of the Howell Shopping Center that are received by the Howell LLC.
The Partnership and TRO Shareholders shall cause the Howell LLC, following its
receipt of the proceeds of a sale of Howell Shopping Center to Home Depot
pursuant to the Howell Purchase Agreement and the satisfaction of such
obligation and the other permitted liabilities referred to in the preceding
sentence, to distribute the net proceeds to its members. If the Howell
Purchase Agreement expires, terminates or is otherwise abandoned by Howell LLC
or Home Depot at any time, the Partnership shall have the right and option to
have Howell LLC assign all of its right, title and interest in and to Howell
Shopping Center to the Partnership (or its designee) in exchange for the
Partnerships's membership interest in Howell LLC, in which case Howell
Shopping Center shall from and after such date be treated as a Predevelopment
Property under the Predevelopment Properties Contribution Agreement, all
predevelopment costs and expenses with respect thereto will be paid by the
Partnership to Howell LLC which shall use the payment to satisfy the
obligations of Howell LLC and the TRO Shareholders shall cause Howell LLC to
become a party to the Predevelopment Properties Contribution Agreement. If the
Partnership does not exercise its option to take an assignment within 30 days
of written notice from the
-50-
<PAGE>
Howell LLC that such option has arisen as aforementioned, the Partnership
shall have no further rights or obligations in respect of the Howell Shopping
Center or the Howell LLC and Howell LLC shall have the right, subject to the
terms of the other agreements referred to herein, to develop, own or dispose
of such property.
5.21 Employees. No later than 15 days prior to Closing, TRO shall
deliver to PREIT a list of current employees whose employment shall be
terminated by TRO prior to Closing. TRO shall be solely responsible for any
severance pay, accrued salary, pension benefits, unemployment compensation,
vacation pay and any other obligations created or owing as a consequence of
such termination of employment, and the TRO Shareholders shall cause TRO to
take all actions necessary to discharge all of such liabilities and
obligations in full prior to Closing so that as of Closing TRO shall have no
further liabilities or obligations with respect thereto.
5.22 Employment Agreements. Contemporaneously with the execution and
delivery of this Agreement, TRO has executed and delivered Employment
Agreements with George Rubin, Joseph Coradino, Patricia Berns, Leonard Shore,
Alan Feldman, Doug Grayson and Eric Mallory and PREIT has executed and
delivered Employment Agreements with Ronald Rubin and Edward Glickman, in all
cases to be effective upon Closing. Prior to Closing, TRO and Joseph Straus,
Jr. may enter into an employment agreement satisfactory to PREIT. All
employment and other commission, compensation, equity participation or similar
agreements between any of the foregoing Persons and either Company shall be
terminated as of the Closing and neither Company shall have any further
obligation thereunder (other than to pay accrued and unpaid salary that is
included in the amount described in subclause (iv) of Section 3.9(b) and
accrued and unpaid bonuses that are included in subclause (v) of Section
3.9(b)).
5.23 PREIT Fiscal Year. After the Closing, PREIT shall take all
action necessary or appropriate to change its fiscal year for financial
reporting purposes to a calendar year basis effective no later than the fourth
calendar quarter of 1997.
5.24 Contribution of PREIT Assets. PREIT shall take all action that
may be necessary or appropriate, as of the Closing or promptly thereafter, to
effect the contribution of substantially all of PREIT's assets to the
Partnership substantially in accordance with the plan of contribution set
forth in Exhibit 5.24 hereto. In exchange for such contribution, the
Partnership shall issue to PREIT Subsidiary that number of additional Class A
Units that, when aggregated with the numbers of Class A Units issued to PREIT
Subsidiary as of the date hereof, equals the number of outstanding PREIT
Shares as of the Closing.
-51-
<PAGE>
5.25 TRO Board Meetings. After Closing, TRO shall give PREIT advance
written notice of all meetings of its board of directors and PREIT shall be
entitled to designate, from time to time, a representative who shall be
entitled to be present at all of such meetings but who shall not have any vote
in any such proceedings of the TRO board of directors.
5.26 Receivables. For the period from January 1, 1997 to the Closing
Date, neither Company shall recognize any revenues or related receivables from
management fees, leasing commissions, consulting fees, brokerage fees,
shopping center advertising agency fees and all other items of revenue other
than the Development Fees (which shall be handled in accordance with the last
sentence hereof) and the South Park rent roll receivable paid prior to Closing
unless both of the following conditions are met: (1) the applicable Company
does not have any substantive obligation for future performance relating to
the amounts recognized as revenues or receivables, whether imposed by written
contract or otherwise; and (2) collection of the amount recorded as a
receivable is reasonably assured and if amounts are due more than one-year
from the transaction date, any such amounts recorded shall be discounted to
their net present value using the prime rate of interest in effect at the time
as recorded in The Wall Street Journal. Any amounts received on account of any
item of revenue shall be reflected as a deposit liability on the applicable
Company's balance sheet until both of these conditions are met.
Notwithstanding the foregoing, the development fees listed on Schedule 5.26
hereto (the "Development Fees") shall be recognized as receivables of either
Company for purposes of Sections 3.9 or 5.20 or any other provision of this
Agreement only to the extent such fees remain unpaid as of the Closing, are
scheduled to be paid pursuant to Schedule 5.26 prior to Closing and have been
earned by either Company prior to Closing in accordance with the percentage of
completion method of accounting under GAAP.
5.27 Life Insurance. If requested by PREIT to do so, Ronald Rubin
will promptly take all action, including undergoing medical examinations,
required in order to secure the issuance of the life insurance policy
contemplated in Section 6.15.
5.28 Liabilities.
(a) The TRO Shareholders and PREIT acknowledge that their
original expectation was that, at Closing, the Companies would be free of all
liabilities and obligations except (x) obligations to perform future services
under Contracts disclosed pursuant to this Agreement; (y) contested claims by
third parties identified pursuant to this Agreement that PREIT agreed to
accept, and (z) ordinary course of business accounts and taxes payable. The
TRO Shareholders have advised PREIT that there are other liabilities and
obligations which may not be fully
-52-
<PAGE>
discharged prior to Closing. In order to induce PREIT to enter into this
Agreement and to accept the existence at Closing of certain liabilities and
obligations:
(i) Prior to the distribution of the Proxy Statement to the
shareholders of PREIT and, in any event, within 24 days
from the date hereof, the TRO Shareholders shall cause
TRO to be irrevocably and absolutely released by
writings reasonably satisfactory in form and substance
to PREIT from all guarantees, indemnities, obligations,
undertakings or liabilities of any nature whatsoever
(other than non-contractual obligations or liabilities
which might arise solely from TRO's status as a former
general partner in Twelfth Street Hotel Associates,
L.P. of which the TRO Shareholders are unaware) in
respect of the PSFS Building in Philadelphia,
Pennsylvania, including, without limitation,
contractual liabilities or obligations (whether
absolute, accrued, contingent, liquidated, unliquidated
or otherwise) arising by virtue of any interest that
TRO may have had, directly or indirectly, in such
property and those set forth in Section 5.28(i) of the
TRO Disclosure Letter, which the TRO Shareholders
represent and warrant are the only such guarantees,
indemnities, obligations, undertakings or liabilities
in connection with the PSFS Building that affect either
Company;
(ii) Prior to the distribution of the Proxy Statement to the
shareholders of PREIT and, in any event, within 24 days
from the date hereof, the TRO Shareholders shall cause
each beneficiary of the guarantee by TRO identified in
Section 5.28(ii) of the TRO Disclosure Letter to have
irrevocably and absolutely released TRO from all
obligations and liabilities in respect thereto by a
writing reasonably satisfactory in form and substance
to PREIT;
(iii) The TRO Shareholders shall cause the Companies as of Closing
to be free and clear of all liabilities and obligations of any
nature (whether absolute, accrued, contingent, liquidated,
unliquidated or otherwise) that (A) are due and payable or
performable at or prior to Closing and that are not otherwise
expressly identified and dealt with pursuant to this Section
5.28, including, without limitation, those liabilities and
obligations set forth in Section 5.28(iii) of the TRO
Disclosure Letter, and (B) that are due or payable or
performable at or after the Closing and that are not otherwise
expressly identified and dealt with pursuant to this Section
5.28;
-53-
<PAGE>
(iv) All Damages arising out of claims identified in Section
5.28(iv) of the TRO Disclosure Letter shall, to the
extent not satisfied in full prior to Closing, be
subject to indemnification pursuant to Section 10.1(b)
hereof by Ronald Rubin and George Rubin (who, for
purposes of this Section 5.28 and Section 10 hereof,
shall include all entities controlled by either or both
thereof which receive Class A Units issued on the
Closing Date);
(v) The TRO Shareholders shall cause the representations and
warranties set forth in Section 3.9(b) with respect to the
liabilities and obligations referred to in subclauses (i),
(iii), (iv), (v) and (vi) of the first sentence of Section
3.9(b) to be true and correct as of Closing; and
(vi) Ronald Rubin and George Rubin shall indemnify and hold
harmless PREIT and the Partnership pursuant to Section
10.1(b) against any Damages arising from any of the
liabilities or obligations listed in Section 5.28(vi) of the
TRO Disclosure Letter.
(b) At Closing, Ronald Rubin and George Rubin (and the
entities referred to in (iv) above) shall execute and deliver a pledge
agreement in form and substance reasonably satisfactory to PREIT by which they
shall pledge to the Partnership (in order to secure their indemnification
undertakings in Section 10.1(b) and 10.1(c)) such number of Class A Units
issued to them hereunder and under the Court at Oxford Valley Contribution
Agreement on the Closing Date as shall be equal in value to 150% of the
maximum amount of all liabilities and obligations referred to in subclauses
(i), (ii), (iii) and (vi) above (except as otherwise specifically provided
under Section 5.28(vi) of the TRO Disclosure Letter) which have not been fully
released or paid prior to Closing as security for their indemnities hereunder
with respect to such obligations and liabilities pursuant to Section 10.1(b)
and 10.1(c) hereof. For this purpose, each Class A Unit shall be deemed to
have a value of $_____. The requirement for a pledge to cover potential
Damages resulting from non-compliance with subclauses (i), (ii) and (iii) if
Closing occurs shall not affect any condition to Closing in favor of PREIT
with respect to such covenants or the obligations under 10.1(b) or 10.1(c) for
breaches of the covenants set forth in this Section 5.28.
5.29 Accounts Receivable. (a) The TRO Shareholders shall deliver to
PREIT at least 5 business days prior to Closing a schedule identifying any
accounts receivable that are to be retained by TRO in order for the TRO
Shareholders to satisfy their representations and warranties set forth in
Section 3.9(b). TRO shall provide PREIT with all information and documentation
-54-
<PAGE>
reasonably requested by PREIT in order for PREIT to confirm the nature and
status of such accounts receivable.
(b) The TRO Shareholders acknowledge that if any account
receivable is used to cover an amount referred to in subclause (I) through
(IX) of Section 3.9(b) and such account receivable is not paid as of the
earlier of (i) 90 days after it is due and payable or (ii) one year following
Closing, such account receivable shall be deemed not to have constituted a
"fully collectible" account receivable, and the TRO Shareholders shall be
responsible under Section 10.1(b) to pay TRO the amount of such account
receivable promptly after such date. Upon payment therefor by the TRO
Shareholders, TRO shall assign its right, title and interest in and to any
such account receivable to the Person designated by Ronald Rubin.
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO PREIT'S AND
THE PARTNERSHIP'S OBLIGATIONS.
The obligation of PREIT and the Partnership to consummate the
acquisition of the Contributed TRO Shares and to take the other actions
required to be taken by them at the Closing is subject to the fulfillment by
or at the Closing of each of the following conditions, any or all of which may
be waived by PREIT in its sole discretion:
6.1 Representations and Warranties. Each of the representations and
warranties of the TRO Shareholders set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of the TRO Shareholders set forth in this
Agreement that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
6.2 Performance of Covenants. All of the agreements, covenants and
obligations that either Company or any TRO Shareholder is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been duly performed and complied with in all material respects. The TRO
Shareholders shall have delivered each of the documents required to be
delivered by them pursuant to Section 8.2(a) hereof.
6.3 Legal Matters. The performance of the Buyer and Shareholder
Transaction Documents and the consummation of the Closing shall not, directly
or indirectly (with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not violate any
Order of any court or governmental body of competent jurisdiction, and no
suit, action, investigation or legal or administrative proceeding shall have
been brought or threatened by any Person (other than
-55-
<PAGE>
by PREIT or the Partnership) that questions the validity or legality of this
Agreement or the transactions contemplated hereby.
6.4 Consents and Approvals. Each consent, approval, ratification,
waiver or other authorization of any Person necessary, in the reasonable
opinion of PREIT, for the consummation of the transactions contemplated
hereby, the continuation of the Business without interruption after the
Closing in the same manner in which the Business is presently conducted shall
have been obtained and shall be in full force and effect, and no such consent,
approval, ratification, waiver or other authorization: (i) shall have been
conditioned upon the modification, cancellation or termination of any
Contract, right or Authorization of TRO, PREIT or the Partnership or (ii)
shall impose on TRO, PREIT or the Partnership any condition, provision or
requirement not presently imposed upon the Companies or any condition that
would be more restrictive after the Closing on the Companies than the
conditions presently imposed on the Companies.
6.5 Opinion of Counsel. PREIT shall have received an opinion of
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, counsel for the Companies,
dated as of the Closing Date, substantially in the form set forth in Exhibit
6.5 hereto.
6.6 (Intentionally Omitted).
6.7 Material Adverse Change. There shall not have been since the date
hereof any event, circumstance condition or contingency that has resulted in a
Material Adverse Effect or that is reasonably likely to result in a Material
Adverse Effect.
6.8 Predevelopment Partnership. The transfer to the Predevelopment
Partnership of rights with respect to the Predevelopment Properties
contemplated by Section 5.20(b) hereof shall have occurred, all of the parties
to the Predevelopment Properties Contribution Agreement (other than the
Partnership and PREIT) shall be prepared and able to consummate simultaneously
with the Closing hereunder the initial closing under such agreement and to
satisfy their respective obligations with respect thereto, and all conditions
to the Partnership's and PREIT's obligation to proceed with the initial
closing thereunder shall have been satisfied or waived.
6.9 Existing Properties. All of the parties to the Court at Oxford
Valley Contribution Agreement (other than the Partnership) shall be prepared
and able to consummate immediately following the Closing hereunder the closing
under such agreement and to satisfy their respective obligations with respect
thereto and all conditions to the Partnership's and PREIT's obligation to
proceed with the closing thereunder shall have been satisfied or waived. The
conditions set forth in Section 7.2(a)(xiv) of the
-56-
<PAGE>
Hillview Contribution Agreement and Section 7.2(a)(xiv) of the Northeast
Contribution Agreement shall be satisfied as of the Closing Date as if the
Closing Date were the closing date under such agreements.
6.10 EPD Properties. All of the parties to the EPD Purchase
Agreements shall be prepared and able to consummate immediately following the
Closing hereunder the closings under such Purchase Agreements and the
assignments contemplated in the EPD Assignment Agreement and to satisfy their
respective obligations with respect thereto and all conditions to TRO's or
PREIT's obligation to proceed to close under such agreements shall have been
satisfied or waived.
6.11 TRO Consolidation. The TRO Consolidation shall have been
consummated in accordance with Section 5.14 hereof.
6.12 TRO Recap. The TRO Recap shall have been consummated in
accordance with Section 5.15 hereof.
6.13 Rights of First Refusal. All of the parties to the First Refusal
Rights Agreement other than PREIT and the Partnership shall have duly executed
and delivered the First Refusal Rights Agreement substantially in the form set
forth in Exhibit 6.13 hereto.
6.14 Opinions of Financial Advisor. PREIT shall have received the
written opinion of its financial advisor, Lehman Brothers Inc., dated the date
on which the Proxy Statement is first mailed to PREIT shareholders, stating
that the consideration paid by PREIT and the Partnership in connection
herewith is fair to PREIT from a financial point of view.
6.15 Ronald Rubin. PREIT shall be reasonably satisfied that Ronald
Rubin is in good health as of the Closing Date, and, if requested by PREIT and
at its sole cost and expense, PREIT shall have been designated the beneficiary
of a policy on the life of Ronald Rubin issued by an insurance carrier
selected by PREIT, which policy shall be issued at rates generally applicable
to persons of Mr. Rubin's age and gender and which policy shall contain no
exceptions other than those customary for a person of Mr. Rubin's age and
gender.
6.16 Shareholder Approval. The transactions contemplated hereby shall
have been approved by the affirmative vote of the shareholders of PREIT by the
requisite vote in accordance with PREIT's trust agreement, Pennsylvania law,
and the American Stock Exchange.
6.17 Registration Rights Agreement. All parties to the Registration
Rights Agreement other than PREIT shall have duly
-57-
<PAGE>
executed and delivered the Registration Rights Agreement substantially in the
form set forth in Exhibit 6.17 hereto.
6.18 Lock-Up Letter Agreements. Each of Ronald Rubin, George Rubin
and Edward Glickman shall have duly executed and delivered a Lock-Up Letter
Agreement substantially in the form set forth in Exhibit 6.18 hereto.
6.19 Partnership Agreement. Each TRO Shareholder and each of the
parties to the Court at Oxford Valley Contribution Agreement and the EPD
Purchase Agreements that has a right to receive limited partner interests in
the Partnership shall have executed and delivered the Amended Partnership
Agreement substantially in the form set forth in Exhibit 6.19 hereto.
6.20 Satisfaction of Section 5.28(a). Each of the agreements,
covenants and obligations that any of the TRO Shareholders is required to
perform or comply with pursuant to Section 5.28(a) at or prior to Closing
shall have been duly performed and complied with.
6.21 Listing of PREIT Shares. The PREIT Shares that may be used by
PREIT to redeem the Class A Units issuable as a result of the transactions
contemplated hereby shall have been approved for listing on the American Stock
Exchange upon official notice of issuance.
6.22 Goldenberg Estoppel Certificate. The Goldenberg Group shall have
executed and delivered to the Partnership an estoppel certificate providing
that as of the Closing Date neither TRO nor any TRO Affiliate or TRO
Shareholder has defaulted or breached any of its or his obligations under the
Goldenberg Letter Agreement (or any partnership agreement implementing the
Goldenberg Letter Agreement).
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO THE TRO
SHAREHOLDERS' AND THE COMPANIES' OBLIGATIONS.
The obligation of the TRO Shareholders and the Companies to
consummate the contribution of the Contributed TRO Shares contemplated by this
Agreement and to take the other actions required to be taken by them at the
Closing is subject to the fulfillment by or at the Closing of each of the
following conditions, any or all of which may be waived by TRO in its sole
discretion:
7.1 Representations and Warranties. Each of the representations and
warranties of PREIT set forth in this Agreement that is qualified by
materiality shall be true and correct, and each of the representations and
warranties of PREIT set forth in this Agreement that is not so qualified shall
be
-58-
<PAGE>
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date.
7.2 Performance of Covenants. Each of the agreements, covenants and
obligations that PREIT or the Partnership is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing shall have been
duly performed and complied with in all material respects. PREIT shall have
delivered each of the documents required to be delivered by it pursuant to
Section 8.2(b) hereof.
7.3 Legal Matters. The performance of the Buyer and Shareholder
Transaction Documents and the consummation of the Closing shall not, directly
or indirectly (with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not violate any
Order of any court or governmental body of competent jurisdiction, and no
suit, action, investigation or legal or administrative proceeding shall have
been brought or threatened by any Person that questions the validity or
legality of this Agreement or the transactions contemplated hereby.
7.4 Predevelopment Properties. The Partnership shall be prepared and
able to consummate simultaneously with the Closing hereunder the initial
closing under the Predevelopment Properties Contribution Agreement and to
satisfy its obligations with respect thereto and all of the conditions to the
obligation of the parties to such agreement other than the Partnership to
proceed with such closing shall have been satisfied or waived.
7.5 EPD Properties. The Partnership shall be prepared and able to
consummate immediately following the Closing hereunder the closings under the
EPD Purchase Agreements and to satisfy its obligations with respect thereto
and all of the conditions to the obligation of the parties to such agreements
other than TRO to proceed with such closings shall have been satisfied or
waived.
7.6 Existing Properties. The Partnership shall be prepared and able
to consummate simultaneously with Closing hereunder the closing under the
Court at Oxford Valley Contribution Agreement and to satisfy its obligations
with respect thereto and all of the conditions to the obligation of the
parties to such agreement other than the Partnership to proceed with such
closing shall have been satisfied or waived. The conditions set forth in
Section 7.2(b)(vi) of the Hillview Contribution Agreement and Section
7.2(b)(vi) of the Northeast Contribution Agreement shall be satisfied as of
the Closing Date as if the Closing Date were the closing date under such
agreements.
7.7 Contribution of PREIT Assets. PREIT shall be prepared and able to
satisfy its obligations pursuant to Section 5.24
-59-
<PAGE>
7.8 Opinion of Counsel. PREIT shall have received an opinion of
Drinker Biddle & Reath LLP, counsel for PREIT, dated as of the Closing Date,
substantially in the form set forth in Exhibit 7.8 hereto.
7.9 Registration Rights Agreement. PREIT shall have duly executed and
delivered the Registration Rights Agreement substantially in the form set
forth in Exhibit 6.17 hereto.
7.10 Partnership Agreement. PREIT and PREIT Subsidiary shall have
executed and delivered the Amended Partnership Agreement in the form set forth
in Exhibit 6.19 hereto.
7.11 (Intentionally Omitted).
7.12 Consents and Approvals. All consents, approvals, ratifications,
waivers or other authorizations of any Person necessary for the consummation
of the transactions contemplated hereby (other than consents, approvals,
ratifications, waivers or other authorizations the absence of which will not
have a material adverse effect upon PREIT's consolidated financial condition,
results of operations or Adjusted FFO) shall have been obtained and shall be
in full force and effect.
7.13 Material Adverse Change. There shall not have been since the
date hereof any event, circumstance, condition or contingency that has
resulted in a material adverse effect upon PREIT's consolidated financial
condition, results of operations, assets or business or that is reasonably
likely to result in such a material adverse effect.
SECTION 8. CLOSING.
8.1 Time and Place of the Closing. The closing of the acquisition by
the Partnership of the Contributed TRO Shares (the "Closing") pursuant to this
Agreement shall take place on the later to occur of (i) September 30, 1997 or
(ii) the fifth business day following the first date on which the conditions
set forth in Sections 6.4, 6.16 and 7.12 are satisfied (or waived in writing
by the applicable party), at the offices of Drinker Biddle & Reath LLP, 1100
PNB Building, 1345 Chestnut Street, Philadelphia, PA 19107, commencing at
10:00 A.M., local time, or at such other date, time or place as may be agreed
to by PREIT and TRO (the "Closing Date"). Subject to Section 9, failure to
consummate the Closing shall not result in the termination of this Agreement
or relieve any Person of any obligation hereunder.
8.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
-60-
<PAGE>
(a) The TRO Shareholders shall deliver or cause to be
delivered to the Partnership:
(i) stock certificates representing the Contributed
TRO Shares, duly endorsed for transfer or with stock powers affixed thereto
executed in blank in proper form for transfer;
(ii) certificates, dated the Closing Date and
executed by the chief executive officer and chief financial officer of TRO to
the effect that the conditions set forth in Sections 6.1, 6.2 and 6.7 have
been satisfied;
(iii) certificates of good standing of a recent
date for TRO certified by the Secretary of State or corresponding certifying
authority of the state of incorporation of TRO and of each state in which TRO
is qualified to do business as a foreign corporation;
(iv) copies of the resolutions of the board of
directors of TRO and its shareholders authorizing the transactions
contemplated under this Agreement and the Shareholder Transaction Documents to
which TRO is a party;
(v) evidence of the consummation of the TRO
Consolidation;
(vi) evidence of the amendment and restatement of
the articles of incorporation and bylaws of TRO contemplated by Section 5.15
hereof;
(vii) an assignment of the Equity Fund and interest
factor thereon contemplated by Section 5.17 (together with the representations
and warranties referred to in Section 5.17); and
(viii) such other documents and instruments as the
Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) PREIT and the Partnership shall deliver or cause to be
delivered to the TRO Shareholders or TRO, as the case may be, the following:
(i) to the TRO Shareholders, the Class A Units to
be delivered at Closing as contemplated by Section 1.2 hereof;
(ii) to the TRO Shareholders, the Registration
Rights Agreement, duly executed by PREIT;
(iii) to TRO, the Closing Loan and amounts due in
respect of the Equity Fund pursuant to Section 5.17 and an
-61-
<PAGE>
assumption agreement in a form reasonably satisfactory to TRO reflecting the
assumption set forth in Section 5.17(c);
(iv) to the TRO Shareholders, copies of resolutions
of the board of trustees of PREIT and its shareholders authorizing the
transactions contemplated hereunder and under the Buyer Transaction Documents;
and
(v) to the TRO Shareholders, a certificate, dated
the Closing Date, executed by the chief executive officer and chief financial
officer of PREIT, to the effect that the conditions set forth in Sections 7.1,
7.2 and 7.13 have been satisfied.
(c) Each party shall deliver or cause to be delivered, as
the case may be, to the other parties hereto such other documents,
instruments, certificates and opinions as may be required by this Agreement.
SECTION 9. TERMINATION AND ABANDONMENT.
9.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(a) by PREIT or TRO, if the Closing has not occurred (other
than through the failure of the party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1997, or such later date as the parties may mutually agree upon;
(b) by mutual consent of PREIT and TRO;
(c) by TRO and the TRO Shareholders, on the one hand, or
PREIT and the Partnership, on the other hand, if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(d) by PREIT, if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of PREIT or the
Partnership to comply with its obligations under this Agreement) and PREIT has
not waived all such unsatisfied conditions before termination pursuant to this
subparagraph (d); or
(e) by TRO, if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of either Company or
any TRO Shareholder to comply with its obligations under this Agreement) and
TRO has not waived all
-62-
<PAGE>
such unsatisfied conditions on or before termination pursuant to this
subparagraph (e);
(f) by PREIT or TRO, if the required approval of
shareholders of PREIT contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at the PREIT
Shareholders' Meeting or at any adjournment or postponement thereof; or
(g) by PREIT, if: (i) the Board shall have determined in
good faith that the consummation of the transactions contemplated herein would
preclude PREIT or its affiliates from consummating (A) a merger, consolidation
or similar transaction, (B) a purchase by PREIT or its affiliates of all or
any significant portion of the assets or equity securities of a third party,
or (C) a purchase by a third party of all or any significant portion of the
assets or equity securities of PREIT or its affiliates (any such transaction,
an "Alternative Transaction"); (ii) the Board shall have determined in good
faith that the Alternative Transaction is reasonably likely to be consummated;
and (iii) after consultation with its financial advisors, the Board shall have
determined in good faith that the Alternative Transaction would be more
favorable to PREIT's shareholders than the transactions contemplated by this
Agreement.
9.2 Procedure for Termination; Effect of Termination.
(a) A party terminating this Agreement pursuant to Section
9.1 shall give written notice thereof to each other party hereto, whereupon
this Agreement shall terminate and the transactions contemplated hereby shall
be abandoned without further action by any party and all further obligations
of the parties under this Agreement will terminate; provided, however, that if
such termination is pursuant to Section 9.1(c), the terminating party's right
to pursue all legal remedies (including damages and/or specific performance)
contemplated by Section 10 will survive such termination unimpaired except as
limited by Section 9.2(b) and provided further that if such termination is
pursuant to Section 9.1(g), PREIT shall promptly thereafter pay TRO the sum of
$2 million and provided further that if such termination is pursuant to
Section 9.1(f), the obligations of the parties pursuant to Section 5.11 shall
survive termination.
(b) Following a termination pursuant to Section 9.1(c), each
TRO Shareholder other than Ronald Rubin and George Rubin shall have no
liability for breaches of covenants, agreements, obligations, representations
or warranties set forth herein except to the extent that such TRO Shareholder
(i) breached a covenant, agreement or obligation set forth herein the
performance of which was within his power to control, (ii) made an intentional
misrepresentation or (iii) is the only TRO
-63-
<PAGE>
Shareholder that made the representation or warranty that was breached.
Following a termination pursuant to Section 9.1(c), neither Ronald Rubin,
George Rubin, the Companies, PREIT nor the Partnership shall have any
liability for breaches of covenants, agreements or obligations set forth
herein to the extent that such breaches arise from the actions of, or failure
to act by, Persons other than the parties hereto and the TRO Affiliates and
notwithstanding such party's best efforts to cause such Person to act in a
manner that would result in the satisfaction of such party's covenants,
agreements and obligations hereunder.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by TRO Shareholders. Subject to the limitations
set forth in Section 10.3, each TRO Shareholder shall indemnify, defend and
hold harmless PREIT, the Partnership and TRO (collectively, "Buyer Indemnified
Persons") against and in respect of any and all losses, costs, expenses
(including, without limitation, costs of investigation and reasonable defense
and attorneys' fees), claims, damages, obligations, liabilities or diminutions
in value, whether or not involving a third party claim (collectively,
"Damages"), arising out of, based upon or otherwise in respect of: (a) any
inaccuracy in or breach of any representation or warranty of such TRO
Shareholder made in or pursuant to this Agreement (including, without
limitation, the certificate referred to in Section 8.2(a)(ii) which, for this
purpose, will be deemed to have stated, inter alia, that the TRO Shareholders'
representations and warranties in this Agreement were true and correct as of
the Closing Date as if made on the Closing Date); (b) any breach or
nonfulfillment of any covenant or obligation of any TRO Shareholder contained
in this Agreement; or (c) any of the matters described in Schedule 10.1
hereto.
10.2 Indemnification by PREIT. PREIT shall indemnify, defend and hold
harmless the TRO Shareholders against and in respect of any and all Damages
arising out of, based upon or otherwise in respect of: (a) any inaccuracy in
or breach of any representation or warranty of PREIT made in or pursuant to
this Agreement (including, without limitation, the certificate referred to in
Section 8.2(b)(v) which, for this purpose, will be deemed to have stated,
inter alia, that PREIT's representations and warranties in this Agreement were
true and correct as of the Closing Date as if made on the Closing Date); or
(b) any breach or nonfulfillment of any covenant or obligation of PREIT or the
Partnership contained in this Agreement.
10.3 Limitations on Liability.
(a) No TRO Shareholder shall have any obligation to
indemnify any Buyer Indemnified Person against Damages pursuant to Section
10.1(a) of this Agreement arising out of or
-64-
<PAGE>
based upon any inaccuracy in or breach of any representation or warranty
(other than those set forth in Section 3.6) made in or pursuant to this
Agreement unless and until the aggregate of all such Damages suffered or
incurred by Buyer Indemnified Persons exceeds $350,000; in which event the
Buyer Indemnified Persons shall be entitled to indemnification for the full
amount of all Damages suffered or incurred; provided, however, that the above
limitation shall not be applicable to any claim for Damages pursuant to
Sections 10.1(b) (other than an indemnity claim based upon a breach of Section
5.28(a)(iii)(B), which shall be subject to such limitation to the same extent
as a claim for breach of Section 3.9 as described below) or 10.1(c) or based
upon a breach of any representation or warranty made in or pursuant to (x)
Sections 3.1, 3.2, 3.3, 3.4, 3.10(b), 3.28 or 3.31 or (y) Section 3.9, in the
case of a breach of any of the representations and warranties set forth in
Section 3.9 other than due to the existence of liabilities of a nature not
required to be reflected in financial statements prepared in accordance with
GAAP of which the TRO Shareholders had no knowledge prior to Closing.
(b) No TRO Shareholder shall have any obligation
to indemnify any Buyer Indemnified Person against Damages based upon any
inaccuracy in or breach of any representation or warranty set forth in Section
3.6 unless and until the aggregate of all such Damages suffered or incurred by
Buyer Indemnified Persons exceeds $50,000; in which event the Buyer
Indemnified Persons shall be entitled to indemnification for the full amount
of all such Damages suffered or incurred.
(c) Following Closing, (i) the TRO Shareholders
shall not be obligated to indemnify Buyer Indemnified Persons against Damages
pursuant to Section 10.1 to the extent that such indemnification payment
(other than indemnification payments in respect of fraud or intentional
misrepresentation), when aggregated with all prior indemnification payments
(other than indemnification payments in respect of fraud or intentional
misrepresentation) by or on behalf of the TRO Shareholders to Buyer
Indemnified Persons or reasonably paid by or on behalf of the TRO Shareholders
to third parties for the benefit of Buyer Indemnified Persons pursuant to this
Agreement, would exceed the Aggregate Value (as hereafter defined), and (ii)
each TRO Shareholder other than Ronald Rubin and George Rubin shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 10.1 to the extent that such indemnification payment, when aggregated
with all prior indemnification payments by or on behalf of such TRO
Shareholder to Buyer Indemnified Persons or reasonably paid by or on behalf of
such TRO Shareholder to third parties for the benefit of Buyer Indemnified
Persons pursuant to this Agreement, would exceed the Proportionate Aggregate
Value (as defined below) attributable to such TRO Shareholder, provided that
the limitation of this subclause (ii) shall not apply to the extent an
indemnity claim
-65-
<PAGE>
is brought with respect to a breach of a representation and warranty made
solely by such TRO Shareholder and not by such TRO Shareholder and other TRO
Shareholders or with respect to a matter involving fraud or intentional
misrepresentation by such TRO Shareholder. The "Aggregate Value" means an
amount equal to the value of all Class A Units theretofore issued pursuant to
Sections 1.2 and 2.2 (it being acknowledged that for this purpose units that
would have been issued but for an exercise of the set-off rights specified in
Section 10.7 shall be deemed to have been issued), such value to be calculated
by multiplying the number of units times the per share Value (as defined in
the Amended Partnership Agreement) of a PREIT Share as of the date of issuance
of such units.
(d) Following Closing, the liability of each TRO Shareholder
other than Ronald Rubin and George Rubin for each indemnity claim pursuant to
Section 10.1 shall be limited to that fraction of the aggregate Damages
incurred by Buyer Indemnified Persons with respect to such claim that is equal
to the quotient whose numerator equals the portion of the Aggregate Value
attributable to units theretofore issued to such TRO Shareholder (for this
purpose units that would have been issued but for an exercise of the set-off
rights specified in Section 10.7 shall be deemed to have been issued) (the
"Proportionate Aggregate Value") and the denominator of which equals the
Aggregate Value; provided, however, that the foregoing shall not limit the
liability of Ronald Rubin or George Rubin, each of whom shall be jointly and
severally liable for 100% of the aggregate Damages incurred (subject to the
cap on aggregate Damages set forth above in subclause (i) of Section 10.3(c)),
and provided further that the foregoing limitation shall not apply to the
extent that an indemnity claim is brought with respect to a breach of a
representation and warranty made solely by such TRO Shareholder and not by
such TRO Shareholder and other TRO Shareholders or with respect to a matter
involving fraud or intentional misrepresentation by such TRO Shareholder.
(e) No claim arising out of or based upon any inaccuracy in
or breach of any representation or warranty made in or pursuant to this
Agreement shall be made unless a claim arises and written notice is delivered
to the indemnifying party within the Basic Claims Period (as defined below);
provided that any such claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to (x) Sections
3.16, 3.17 or 3.20 may be made at any time before the expiration of the latest
to expire statute of limitations period applicable to an action brought by the
appropriate taxing or other regulatory agency with respect to the matters
forming the basis for such claim and (y) Sections 3.4, 3.25 or 3.28 may be
made at any time. For purposes hereof, "Basic Claims Period" means the period
beginning on the date hereof and ending on the
-66-
<PAGE>
date five months after the fiscal year end for first full fiscal year of PREIT
after Closing.
(f) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the TRO Disclosure Letter. The waiver by PREIT of any condition based on
the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT. To the extent that any claim for
indemnification may be made under Section 10.1(a) and Section 10.1(c), then
such claim shall be deemed for all purposes to have arisen only under Section
10.1(c) and not under Section 10.1(a).
(g) Each party's rights under this Section 10 shall be its
sole remedy against the other parties in respect of any matters arising under
this Agreement, subject to a party's rights, if any, to seek and obtain
specific performance with respect to covenants, agreements and obligations set
forth herein.
(h) No party may assert a claim for indemnification pursuant
to Section 10.1 unless the Closing has occurred or this Agreement has been
terminated pursuant to Section 9.
(i) The limitations of this Section 10.3 shall not be
applicable in respect of Damages arising from or relating to any breach of
representations or warranties with respect to the Equity Fund.
10.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 10 *relates, such indemnified party shall, if
a claim is to be made against an indemnifying party under Section 10, give
notice to the indemnifying party of the commencement of such proceeding, but
the failure to so notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such proceeding is materially prejudiced by the indemnified party's failure
to give such notice.
-67-
<PAGE>
(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under Section 11 for any fees of
other counsel or any other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a proceeding,
(A) it will be conclusively established for purposes of this Agreement that
the claims made in that proceeding are within the scope of and subject to
indemnification; (B) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (1) there is no finding or admission of any violation of Law by the
indemnified party (or any affiliate thereof) or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party, and (2) the sole relief provided is monetary damages that
are paid in full by the indemnifying party. The indemnified party will have no
liability with respect to any compromise or settlement of the claims
underlying such proceeding effected without its consent. If notice is given to
an indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice
to the indemnifying party, assume the exclusive right to defend, compromise,
or settle such proceeding, but the indemnifying party will not be bound by any
determination of a
-68-
<PAGE>
proceeding so defended or any compromise or settlement effected without its
consent.
10.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the
party from whom indemnification is sought.
10.6 Acknowledgement. Each TRO Shareholder hereby acknowledges that
the representations, warranties and covenants made by him herein are made in
his capacity as a shareholder of TRO and not as director, officer or employee
of either Company; accordingly, each TRO Shareholder acknowledges and confirms
that following the Closing he shall not have any claim for indemnification by
TRO, the Partnership, PREIT or any affiliate thereof as an officer, trustee,
director or employee thereof in respect of any Damages due or owing by such
TRO Shareholder pursuant to the terms of this Agreement.
10.7 Right of Set-Off. PREIT and the Partnership shall have the right
to set-off, against any Class A Units which may be owed by PREIT or the
Partnership to any TRO Shareholder, any amount owed by such TRO Shareholder to
any Buyer Indemnified Person pursuant to this Section 10. To the extent that a
TRO Shareholder contests an indemnification claim of PREIT or the Partnership
that would be the basis for the exercise of a right to set off against any
Class A Units owed to such TRO Shareholder, the Partnership shall issue such
Class A Units and deposit them with an escrow agent reasonably satisfactory to
such TRO Shareholder until the earlier to occur of (i) resolution of such
dispute by a final nonappealable order of a court of competent jurisdiction or
(ii) the mutual agreement of such TRO Shareholder and PREIT that such units
should be released from escrow.
10.8 Indemnification Payments. The TRO Shareholders shall be entitled
to use cash or Class A Units to make indemnification payments hereunder. In
the event Class A Units are used, each such unit shall be valued based on the
per share Value (as defined in the Amended Partnership Agreement) of a PREIT
Share as of the date such unit is tendered to PREIT as an indemnification
payment hereunder.
10.9 Transfer of Units. Ronald Rubin and George Rubin shall not, and
each shall cause their affiliates not to, transfer any Class A Units issued
pursuant to this Agreement to any of them (or any interest therein) for one
year following such issuance unless the transferee executes and delivers to
PREIT prior to such transfer an agreement, in form and substance reasonably
satisfactory to PREIT, by which such transferee shall agree that all such
transferred units (and proceeds thereof)
-69-
<PAGE>
shall be subject to and available to pay the indemnification undertakings of
the TRO Shareholders pursuant to Section 10.1.
SECTION 11. MISCELLANEOUS.
11.1 Survival of Representations and Warranties.
(a) The representations and warranties made by the parties
in this Agreement and in the certificates, documents and other agreements
delivered pursuant hereto shall survive the Closing. Anything in this
Agreement to the contrary notwithstanding: (i) the representations and
warranties of the TRO Shareholders hereunder, and the right of the Buyer
Indemnified Persons to indemnification for breach thereof, shall not be
affected by any investigation of the Companies, any TRO Shareholder or any TRO
Affiliate made by PREIT or its agents or representatives and (ii) the
representations and warranties of PREIT hereunder, and the right of the TRO
Shareholders to indemnification for breach thereof, shall not be affected by
any investigation of PREIT or the Partnership or its affiliates made by TRO or
its agents or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the TRO Disclosure
Letter (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
11.2 Further Assurances. Each party hereto shall use best efforts to
comply with all requirements imposed hereby on such party and to cause the
transactions contemplated hereby to be consummated as contemplated hereby and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other
actions as any other party hereto shall reasonably request in order to fulfill
its obligations under this Agreement and to effectuate the purposes of this
Agreement and the transactions contemplated herein. Each party shall promptly
notify the other parties of any event or circumstance known to such party that
could prevent or delay the consummation of the transactions contemplated
hereby or which would indicate a breach or non-compliance with any of the
terms, conditions, representations, warranties or agreements of any of the
parties to this Agreement.
11.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or
-70-
<PAGE>
addresses as shall be furnished in writing by any party hereto to the others.
Any such notice or communication shall be deemed to have been given as of the
date received, in the case of personal delivery, or on the date shown on the
receipt or confirmation therefor in all other cases.
To PREIT, the Partnership or (following the Closing)
TRO:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
(215) 542-9250
Telecopy (215) 542-9179
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the TRO Shareholders or (prior to Closing) the
Companies:
The Rubin Organization, Inc.
The Bellevue
200 South Broad Street
Philadelphia, PA 19102
(215) 875-0700
Telecopy (215) 546-7311
Attention: Ronald Rubin and George Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6060
Telecopy (215) 568-6603
Attention: Leonard M. Klehr, Esquire
-71-
<PAGE>
11.4 Assignment and Benefit.
(a) The parties hereto shall not assign this Agreement or
any rights hereunder, or delegate any obligations hereunder, without prior
written consent of the other party. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the benefit of,
and be binding upon, the parties hereto, and each of their respective
successors, heirs and assigns.
(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors, heirs
and assigns, any legal or equitable right, remedy or claim under or in respect
of this Agreement or any of the provisions herein contained, this Agreement
and all provisions and conditions hereof being intended to be, and being, for
the sole and exclusive benefit of such parties, and permitted successors,
heirs and assigns and for the benefit of no other person or entity.
11.5 Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect, and PREIT and TRO may: (a) extend the
time for the performance of any of the obligations of the other, (b) waive any
inaccuracies in representations and warranties by the other, (c) waive
compliance by the other with any of the obligations contained in this
Agreement, or (d) waive the fulfillment of any condition precedent to the
performance under this Agreement of the waiving party; provided, however, that
after the approval of the transactions contemplated by this Agreement by the
shareholders of PREIT, there shall be no material amendment or modification of
this Agreement unless the Board of Trustees of PREIT concludes that such
amendment or modification is in the best interests of the PREIT shareholders.
Any such amendment, or modification, extension or waiver shall be in writing.
The waiver by a party of any breach of any provision of this Agreement shall
not constitute or operate as a waiver of any other breach of such provision or
of any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
11.6 Governing Law; Consent to Jurisdiction. This Agreement is made
pursuant to, and shall be construed and enforced in accordance with, the laws
of the Commonwealth of Pennsylvania (and United States federal law, to the
extent applicable), irrespective of the principal place of business, residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Any legal action, suit or
proceeding arising out of or relating to this Agreement may be instituted in
any federal court or in any state court in the Commonwealth of Pennsylvania,
and each party waives any objection which such party may now or hereafter
-72-
<PAGE>
have to the laying of the venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court. Any and all service
of process and any other notice in any such action, suit or proceeding shall
be effective against any party if given as provided herein. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any jurisdiction other than
Pennsylvania. Nothing contained herein or in any Transaction Document shall
prevent or delay PREIT or the Partnership from seeking, in any court of
competent jurisdiction, specific performance or other equitable remedies in
the event of any breach or intended breach by any TRO Shareholder or either
Company of any of its or his obligations hereunder.
11.7 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way
affect the meaning and interpretation of this Agreement. The terms defined
herein and in any agreement executed in connection herewith include the plural
as well as the singular and the singular as well as the plural, and the use of
masculine pronouns shall include the feminine and neuter. Except as otherwise
indicated, all agreements defined herein refer to the same as from time to
time amended or supplemented or the terms thereof waived or modified in
accordance herewith and therewith.
11.8 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
11.10 Entire Agreement. This Agreement, together with the TRO
Disclosure Letter and the agreements, exhibits, and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, including without limitation, the Letter
Agreement (other than Section IV thereof).
11.11 Guaranty of Performance by TRO Predevelopment, LLC. Ronald
Rubin and George Rubin hereby guarantee that TRO Predevelopment, LLC will
perform its indemnification obligations
-73-
<PAGE>
set forth in Section 10 of the Predevelopment Properties Contribution
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
duly executed this Agreement, all as of the date first above
written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By:/s/ Jonathan B. Weller
----------------------------
Name:
Title:
By:/s/ Jeffrey A. Linn
----------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By:/s/ Jonathan B. Weller
----------------------------
Name:
Title:
By:/s/ Jeffrey A. Linn
----------------------------
Name:
Title:
THE RUBIN ORGANIZATION, INC.
By: /s/ Ronald Rubin
----------------------------
Name:
Title:
THE RUBIN ORGANIZATION-ILLINOIS, INC.
By: /s/ Ronald Rubin
----------------------------
Name:
Title:
-74-
<PAGE>
SCHEDULE A
to
TRO CONTRIBUTION AGREEMENT
Each Current TRO Shareholder, by executing this Schedule A,
evidences that such person has become a party to, and is bound by, the TRO
Contribution Agreement.
All signatures need not appear on the same copy of this
Schedule A.
/s/ Ronald Rubin /s/ Joseph Straus, Jr.
------------------------ ---------------------------
Ronald Rubin Joseph Straus, Jr.
/s/ George Rubin /s/ Alan Feldman
------------------------ ---------------------------
George Rubin Alan Feldman
/s/ Leonard Shore /s/ Doug Grayson
------------------------ ---------------------------
Leonard Shore Doug Grayson
/s/ Joseph Coradino /s/ Eric Mallory
------------------------ ---------------------------
Joseph Coradino Eric Mallory
/s/ Lewis Stone /s/ James Paterno
------------------------ ---------------------------
Lewis Stone James Paterno
/s/ Gerry Broker /s/ Judith Garfinkel
------------------------ ---------------------------
Gerry Broker Judith Garfinkel
/s/ Patricia Berns /s/ David Bryant
------------------------ ---------------------------
Patricia Berns David Bryant
/s/ Edward Glickman /s/ Susan Valentine
------------------------ ---------------------------
Edward Glickman Susan Valentine
-75-
<PAGE>
SCHEDULE B
to
TRO CONTRIBUTION AGREEMENT
Each Former TRO Debtholder, by executing this Schedule B,
evidences that it has become a party to, and is bound by, the TRO Contribution
Agreement.
All signatures need not appear on the same copy of this
Schedule B.
DELAWARE ASSOCIATES
/s/ Ronald Rubin
---------------------------
Ronald Rubin, General Partner
RICHARD I. RUBIN & CO., INC.
By: /s/ Ronald Rubin
---------------------------
Name:
Title:
RR LOANCO ASSOCIATES
By: Richard I Rubin & Co.,
Inc., its Managing Partner
By: /s/ George Rubin
---------------------------
Name:
Title:
-76-
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Page
1933 Act ....................................................................13
1934 Act ....................................................................13
Affiliated Persons...........................................................29
Agreement ....................................................................1
Amended Partnership Agreement.................................................2
Authorizations ..............................................................14
Balance Sheet ...............................................................16
Board .......................................................................48
Business .....................................................................1
Buyer Indemnified Persons.........................................5, 30, 64, 66
Buyer Transaction Documents..................................................37
CERCLA ......................................................................31
Class A Units ................................................................2
Closing .....................................................................60
Closing Date ................................................................60
Closing Loan ................................................................47
Closing Loan Statement.......................................................47
Code .........................................................................1
Companies ....................................................................1
Company ......................................................................1
Company Acquisition Transaction..............................................43
Competing Business...........................................................29
Contracts ...................................................................20
Contributed TRO Shares........................................................4
Copyrights ..................................................................21
Court at Oxford Valley Contribution Agreement.................................2
Current Affiliated Persons...................................................29
Current Period ...............................................................6
Current TRO Shareholders......................................................1
Damages .....................................................................64
Employee Benefit Plans.......................................................25
Employee Stock Ownership Plan.................................................2
Employee Stock Ownership Trust................................................2
Encumbrance .................................................................18
Encumbrances ................................................................18
EPD Assignment Agreement......................................................3
EPD Properties ...............................................................3
Equity Fund .................................................................36
ERISA .......................................................................25
ERISA Affiliate .............................................................26
Existing Properties...........................................................2
Former TRO Debtholders........................................................1
GAAP .........................................................................5
Hazardous Substance..........................................................30
Hillview Contribution Agreement...............................................2
Howell Partnership...........................................................50
Intellectual Property........................................................21
-77-
<PAGE>
Interim Balance Sheet........................................................16
IRS..........................................................................24
Laws.........................................................................14
Letter Agreement.............................................................42
Magnolia Agreement............................................................3
Magnolia Mall.................................................................3
Marks........................................................................21
Material Adverse Effect......................................................10
Non-Voting Common Shares......................................................1
North Dartmouth Agreement.....................................................3
North Dartmouth Mall..........................................................3
Northeast Contribution Agreement..............................................3
Orders.......................................................................15
OSHA.........................................................................28
Partnership...................................................................1
Patents......................................................................21
Person.......................................................................12
Preceding Period..............................................................6
Predevelopment Partnership....................................................3
Predevelopment Properties.....................................................3
Predevelopment Properties Contribution Agreement..............................3
Preferred Shares..............................................................1
PREIT.........................................................................1
PREIT Disclosure Letter......................................................38
PREIT Reports................................................................39
PREIT Shareholders' Meeting..................................................41
PREIT Subsidiary..............................................................1
Proportionate Aggregate Value................................................66
Proxy Statement..............................................................41
Real Property................................................................19
Requested Legal Expenses.....................................................46
Shareholder Transaction Documents............................................10
Software.....................................................................21
Special Committee............................................................48
Taxes........................................................................23
Terminated Pension Plan......................................................27
Trade Secrets................................................................21
Transaction Costs............................................................45
TRO...........................................................................1
TRO Affiliate................................................................19
TRO Consolidation.............................................................2
TRO Disclosure Letter........................................................10
TRO Illinois..................................................................1
TRO Recap.....................................................................2
TRO Shareholders..............................................................1
Voting Common Shares..........................................................1
-78-
<PAGE>
FIRST AMENDMENT TO
TRO CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO TRO CONTRIBUTION AGREEMENT is made
as of September 30, 1997 by and among PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, a Pennsylvania business trust, PREIT ASSOCIATES, L.P., a Delaware
limited partnership, PREIT-RUBIN, INC., a Pennsylvania corporation formerly
known as The Rubin Organization, Inc., THE RUBIN ORGANIZATION-ILLINOIS, INC.,
an Illinois corporation, the persons identified on Schedule A hereto, and the
entities identified on Schedule B hereto.
Background
The parties hereto are parties to the TRO Contribution
Agreement dated as of July 30, 1997 (the "Original Agreement").
The parties desire to enter into this Agreement to (i)
correct a mutual mistake in the Original Agreement relating to the earn-out
units issuable in the event that Closing occurs on or prior to September 30,
1997, (ii) modify the plan of contribution set forth in Exhibit 5.24 to the
Original Agreement, (iii) amend certain provisions in Section 5.24 of the
Original Agreement, and (iv) provide for a post-closing adjustment.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the
Original Agreement.
2. Correcting Amendment.
(a) The definition of "Base Earn-Out Units" set
forth in Section 2.1 of the Original Agreement is hereby amended by the
insertion of the following clause between the number "5,000" and prior to the
word "and" that follows the number "5,000":
", Base Earn-Out Units for the Second Earn-
Out Period means 20,000, Base Earn-Out Units
for the Third through Fifth Earn-Out Periods
means 57,500,"
<PAGE>
(b) The definition of "Maximum Earn-Out Units"
set forth in Section 2.1 of the Original Agreement is hereby amended by the
insertion of the following clause between the number "32,500" and the word
"and" that follows the number "32,500":
", Maximum Earn-Out Units for the Second
Earn-Out Period means 130,000, Maximum Earn-
Out Units for the Third through Fifth Earn-
Out Periods means 167,500,"
3. Amendment relating to PREIT Contributions.
(a) Exhibit 5.24 to the Original Agreement is
hereby deleted and replaced in its entirety with Exhibit 5.24
attached hereto.
(b) The first sentence in Section 5.24 of the
Original Agreement is hereby amended by the insertion of the words "or its
subsidiaries" immediately after the word "Partnership" where it appears in
such sentence.
(c) The second sentence in Section 5.24 of the
Original Agreement is hereby amended and restated in its entirety as follows:
"In exchange for such contribution, the Partnership shall
issue: (i) to PREIT, a number of general partner interests
in the Partnership equal to 1% of the sum of (x) the number
of outstanding PREIT Shares as of the Closing, (y) the
aggregate number of Class A Units issued on the Closing Date
to the TRO Shareholders and TRO Affiliates pursuant to this
Agreement and the Court at Oxford Valley Contribution
Agreement and (z) the aggregate number of Class B Units of
limited partner interest in the Partnership issued on the
Closing Date and (ii) to PREIT Subsidiary, that number of
Class A Units such that following such issuance PREIT
Subsidiary owns a number of Class A Units equal to the
number of outstanding PREIT Shares as of the Closing minus
the number of general partner interests issued to PREIT
pursuant to the foregoing subclause (i)."
4. Post-Closing Adjustment. Section 5 of the Original
Agreement is hereby amended by the addition of a new Section 5.30 to read in
its entirety as follows:
"Section 5.30 Statement of Working Capital; Post-
Closing Adjustment.
(a) Prior to Closing, the TRO Shareholders shall
cause to be prepared and delivered to PREIT: (i) a statement of
-2-
<PAGE>
consolidated working capital (showing total current assets and total current
liabilities, calculated and presented in accordance with GAAP, provided that
the only accounts receivable of the Companies as of the Closing that shall be
taken into account for this purpose shall be those that satisfy the
requirements of Section 5.26 and that do not constitute rent roll receivables,
tenant deposits or funds held on behalf of others and provided further that no
account receivable with respect to the approximately $177,394 of development
fees owed by Oxford Valley Road Associates to TRO as of the Closing Date shall
be included as a current asset (all such accounts receivable that are
includable in such calculation, collectively, the "Creditable Accounts
Receivable")) for the Companies as of the Closing based upon TRO's good faith
estimates of all such working capital items as of Closing and (ii) a statement
listing each of the accounts receivable that are to be distributed prior to
Closing in accordance with Section 5.20(a)(ii).
(b) Following Closing, the Partnership shall
cause a statement of consolidated working capital for the Companies as of
Closing (the "Working Capital Statement") to be prepared in accordance with
GAAP (provided that the only accounts receivable of the Companies includable
therein shall be Creditable Accounts Receivable which shall be valued at their
net realizable value in accordance with GAAP, but with no reserve or other
offset in respect of possible uncollectibility) and the Companies shall
cooperate with the Partnership and its representatives in the preparation of
such statement and provide full access to their respective books and records
in connection therewith. The Partnership shall use all reasonable efforts to
deliver a copy of the Working Capital Statement to TRO Liquidating L.L.C., a
Delaware limited liability company, within 60 days of the Closing Date. Unless
TRO Liquidating L.L.C. notifies the Special Committee within 10 days after
receipt of the Working Capital Statement of any objections thereto (specifying
in reasonable detail the basis therefor), such Working Capital Statement shall
be deemed the definitive Working Capital Statement. If TRO Liquidating L.L.C.
timely notifies the Special Committee of any such objection, TRO Liquidating
L.L.C. and the Special Committee shall attempt in good faith to reach an
agreement as to the matters in dispute. If TRO Liquidating L.L.C. and the
Special Committee shall have failed to resolve such disputed matter within 10
business days after receipt of timely notice of such objection, then any such
disputed matter shall, at the instance of the Special Committee or TRO
Liquidating L.L.C., be submitted to and resolved by any nationally recognized
accounting firm mutually acceptable to the Special Committee and TRO
Liquidating L.L.C. The fees and expenses of such accounting firm incurred in
resolving the disputed matters shall be equitably apportioned by such
accountants based upon the extent to which the Special Committee, on the one
hand, or TRO Liquidating L.L.C., on the other hand, is
-3-
<PAGE>
determined by such accountants to be the prevailing party in the resolution of
such disputed matters. The Working Capital Statement shall, after resolution
of any disputes pursuant to this Section 5.30(b), be deemed to be the
definitive Working Capital Statement.
(c) If there is a Net Deficit (as defined below)
as of the Closing Date, determined based upon the definitive Working Capital
Statement, then the TRO Shareholders shall cause TRO Liquidating L.L.C. either
(i) to pay TRO cash in an amount equal to the aggregate amount of the Net
Deficit or (ii) to assign to TRO, free and clear of all Encumbrances, an
amount of fully-collectible accounts receivable that satisfy the requirements
of Section 5.26 and that were distributed out of TRO prior to Closing in
accordance with Section 5.20(a) equal to the aggregate amount of the Net
Deficit, and such accounts receivable shall thereafter be subject to the
collectibility guarantee of the TRO Shareholders set forth in Section 5.29(b).
If there is a Net Surplus (as defined below) as of the Closing Date,
determined based upon the definitive Working Capital Statement, then the
Partnership shall pay TRO Liquidating L.L.C. cash in an amount equal to the
aggregate amount of such Net Surplus.
(d) Any payment or assignment pursuant to
subparagraph (c) above shall be made within 5 days following the date on which
the Working Capital Statement becomes the definitive Working Capital Statement
as contemplated above, provided, however, that if at any time prior to the
time the Working Capital Statement becomes definitive the Special Committee
and TRO Liquidating L.L.C. mutually agree that following final determination
of the Working Capital Statement (and the relevant calculation based thereon)
a payment or an assignment will be required to be made pursuant to
subparagraph (c), the amount of such payment or assignment that the parties do
not dispute shall then be paid.
(e) Payments made pursuant to this Section 5.30
shall be made by certified check or wire transfer of immediately available
funds in accordance with instructions provided by the party to be paid.
(f) For purposes of this Section 5.30, "Net
Deficit" means the excess, if any, of (x) the sum of the amounts described in
Section 3.9(b)(II) and Section 3.9(b)(IV) through (IX) over (y) the total
current assets (i.e., cash, cash equivalents and accounts receivable) of the
Companies, the amount of such current assets and the current liabilities
described in subclause (VI) being calculated in accordance with GAAP (provided
that the only accounts receivable of the Companies includable therein shall be
Creditable Accounts Receivable, which shall be valued at their net realizable
value in accordance with GAAP, but with no reserve or other offset in respect
of possible
-4-
<PAGE>
uncollectibility), and "Net Surplus" means the excess, if any, of (i) the
total current assets (i.e., cash, cash equivalents and accounts receivable) of
the Companies as of the Closing over (ii) the sum of the amounts described in
Section 3.9(b)(II) and Section 3.9(b)(IV) through (IX), the amount of such
current assets and the current liabilities described in subclause (VI) being
calculated in accordance with GAAP (provided that the only accounts receivable
of the Companies includable therein shall be Creditable Accounts Receivable,
which shall be valued at their net realizable value in accordance with GAAP,
but with no reserve or other offset in respect of possible uncollectibility).
(g) The provisions of this Section 5.30 shall in
no way limit or alter any of the representations, warranties and covenants of
the parties made herein and following the preparation of the Working Capital
Statement and the payment of any amounts due pursuant to this Section 5.30,
PREIT and the Partnership shall continue, inter alia, to have all rights
available to them pursuant to Section 10 hereof.
(h) Notwithstanding anything to the contrary in
this Agreement, TRO shall not distribute, assign or otherwise transfer on or
prior to Closing any rights it has to be paid approximately $177,394 of
development fees by Oxford Valley Road Associates."
5. Schedule C. Schedule C to the Original Agreement is
hereby deleted and replaced in its entirety with Schedule C attached hereto.
6. Schedule 10.1. The Original Agreement is hereby amended
by the addition of Schedule 10.1 in the form attached hereto.
7. Confirmation. The Original Agreement, as amended hereby,
is ratified and confirmed in all respects.
-5-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement, all as of the date first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
----------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By: /s/ Jonathan B. Weller
------------------------
Name:
Title:
PREIT-RUBIN, INC.
By: /s/ Ronald Rubin
------------------
Name:
Title:
THE RUBIN ORGANIZATION-ILLINOIS,
INC.
By: /s/ Alan Feldman
-------------------
Name:
Title:
-6-
<PAGE>
SCHEDULE A
to
FIRST AMENDMENT
TO
TRO CONTRIBUTION AGREEMENT
Each Current TRO Shareholder, by executing this Schedule A,
evidences that such person has become a party to, and is bound by, the First
Amendment to TRO Contribution Agreement.
All signatures need not appear on the same copy of this
Schedule A.
/s/ Ronald Rubin */s/ Joseph Straus, Jr.
- ------------------------------ ----------------------------
Ronald Rubin Joseph Straus, Jr.
*/s/ George Rubin */s/ Alan Feldman
- ------------------------------ ----------------------------
George Rubin Alan Feldman
*/s/ Leonard Shore */s/ Doug Grayson
- ------------------------------ ----------------------------
Leonard Shore Doug Grayson
*/s/ Joseph Coradino */s/ Eric Mallory
- ------------------------------ ----------------------------
Joseph Coradino Eric Mallory
*/s/ Lewis Stone */s/ James Paterno
- ------------------------------ ----------------------------
Lewis Stone James Paterno
*/s/ Gerry Broker */s/ Judith Garfinkel
- ------------------------------ ----------------------------
Gerry Broker Judith Garfinkel
*/s/ Patricia Berns */s/ David Bryant
- ------------------------------ ----------------------------
Patricia Berns David Bryant
/s/ Edward Glickman */s/ Susan Valentine
- ------------------------------ ----------------------------
Edward Glickman Susan Valentine
* By: /s/ Edward Glickman
- ------------------------------
Attorney-in-Fact
<PAGE>
SCHEDULE B
to
FIRST AMENDMENT
TO
TRO CONTRIBUTION AGREEMENT
Each Former TRO Debtholder, by executing this Schedule B,
evidences that it has become a party to, and is bound by, the First Amendment
to TRO Contribution Agreement.
All signatures need not appear on the same copy of this
Schedule B.
DELAWARE ASSOCIATES
/s/ Ronald Rubin
-----------------------------
Ronald Rubin, General Partner
RICHARD I. RUBIN & CO., INC.
By: /s/ George Rubin
------------------------
Name:
Title:
RR LOANCO ASSOCIATES
By: Richard I Rubin & Co.,
Inc., its Managing Partner
By: /s/ George Rubin
------------------------
Name:
Title:
<PAGE>
CONTRIBUTION AGREEMENT
relating to
The Court at Oxford Valley, Langhorne, Pennsylvania
Rubin Oxford, Inc.
Rubin Oxford Valley Associates, L.P.
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS............................................................................... 2
SECTION 2. CONTRIBUTIONS............................................................................. 2
SECTION 3. CONSIDERATION............................................................................. 2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTORS.............................................................................. 2
4.1 As To the Contributors.................................................................... 2
4.2 As to the Project Partnership............................................................. 8
4.3 As to the Shopping Center................................................................. 15
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT............................................ 20
5.1 Organization.............................................................................. 20
5.2 Power and Authority....................................................................... 21
5.3 No Conflicts.............................................................................. 21
5.4 Capitalization............................................................................ 22
5.5 PREIT Reports............................................................................. 23
5.6 Litigation................................................................................ 23
5.7 Material Adverse Change................................................................... 23
5.8 Brokers................................................................................... 24
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS.......................................................... 24
6.1 Conduct of Business....................................................................... 24
6.2 Reasonable Efforts........................................................................ 25
6.3 Notifications............................................................................. 26
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES........................................... 26
7.1 Time of Closing........................................................................... 26
7.2 Closing Conditions........................................................................ 26
7.3 Deliveries at the Closing................................................................. 30
SECTION 8. CLOSING ADJUSTMENTS....................................................................... 32
8.1 Casualty or Condemnation.................................................................. 32
SECTION 9. INDEMNIFICATION........................................................................... 33
9.1 Indemnification by Contributors........................................................... 33
9.2 Indemnification by PREIT.................................................................. 33
9.3 Limitations on Liability.................................................................. 33
9.4 Procedure For Indemnification - Third Party Claims........................................ 35
9.5 Procedure for Indemnification - Other Claims.............................................. 37
9.6 Distributions of Class A Units by Contributors............................................ 37
9.7 Indemnification Payments.................................................................. 37
SECTION 10. TERMINATION AND ABANDONMENT............................................................... 37
10.1 Termination............................................................................... 37
10.2 Procedure for Termination; Effect of
Termination............................................................................... 38
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 11. GENERAL PROVISIONS........................................................................ 38
11.1 Survival of Representations and Warranties................................................ 38
11.2 Costs and Expenses........................................................................ 39
11.3 Notices................................................................................... 39
11.4 Access to Information; Confidentiality.................................................... 40
11.5 Public Announcements...................................................................... 40
11.6 No Solicitation........................................................................... 41
11.7 Entire Agreement.......................................................................... 41
11.8 Counterparts.............................................................................. 41
11.9 Governing Law............................................................................. 41
11.10 Section Headings, Captions and Defined Terms.............................................. 42
11.11 Amendments, Modifications and Waiver...................................................... 42
11.12 Severability.............................................................................. 42
11.13 Liability of Trustees, etc................................................................ 42
</TABLE>
-ii-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
The Court at Oxford Valley, Langhorne, Pennsylvania
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 30th
day of July, 1997, by and among RUBIN OXFORD, INC., a Pennsylvania corporation
("RO,Inc."), RUBIN OXFORD VALLEY ASSOCIATES, L.P., a Pennsylvania limited
partnership ("RO,L.P." and, together with RO,Inc., the "Contributors," and,
each, a "Contributor"), PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an
unincorporated association in business trust form created under Pennsylvania
law pursuant to a Trust Agreement dated December 27, 1960, as last amended and
restated on December 16, 1987 ("PREIT"), and PREIT ASSOCIATES, L.P., a
Delaware limited partnership (the "Partnership").
Background
The Contributors are affiliates of The Rubin Organization, Inc., a
Pennsylvania corporation ("TRO").
This Contribution Agreement is part of a larger transaction described
in the TRO Contribution Agreement of even date herewith (the "TRO Contribution
Agreement") among PREIT, TRO, The Rubin Organization-Illinois, Inc. and the
shareholders of TRO.
The Partnership has been formed by PREIT and PREIT Property Trust, a
Pennsylvania business trust ("PREIT Subsidiary"), pursuant to the terms of the
Agreement of Limited Partnership of PREIT Associates, L.P. dated as of June
30, 1997 (the "Partnership Agreement") between PREIT, as general partner, and
PREIT Subsidiary, as limited partner.
Subject to the terms and conditions of this Agreement and the TRO
Contribution Agreement, the parties intend that immediately following the
closing under the TRO Contribution Agreement (the "TRO Closing"), the
Contributors will contribute substantially all of their partnership interests
(the "Interests") in Oxford Valley Road Associates, L.P., a Pennsylvania
limited partnership (the "Project Partnership"), which holds title to Units
3-11 of The Court at Oxford Valley Condominium created under Declaration of
Condominium dated April 13, 1995, which Declaration was recorded in the Office
of the Recorder of Deeds of Bucks County on November 3, 1995, in Book 1053,
page 99, as amended by First Amendment to Declaration dated July 1, 1996,
which condominium units comprise the majority of the shopping center known as
The Court at Oxford Valley, Langhorne, Pennsylvania (such majority portion
hereinafter
<PAGE>
referred to as the "Shopping Center"), in exchange for Class A limited partner
interests in the Partnership ("Class A Units").
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall
have the same meanings as ascribed to such terms in the TRO Contribution
Agreement.
SECTION 2. CONTRIBUTIONS.
Subject to the terms and conditions of this Agreement, at the Closing
(as defined in Section 7.1), the Contributors shall contribute to the
Partnership, and the Partnership shall acquire from the Contributors, free and
clear of all Encumbrances (other than applicable securities law restrictions
and subject to the terms and conditions of the limited partnership agreement
for the Project Partnership), the Interests and all benefits and advantages to
be derived therefrom, including, without limitation, all right, title and
interest associated with the Interests in and to the capital accounts of the
Contributors, rights of the Contributors to distributions made after Closing
and allocable shares of the Contributors with respect to profits and losses.
SECTION 3. CONSIDERATION.
In consideration for the contributions described in Section 2, subject
to the terms and conditions of this Agreement, at the Closing, the Partnership
shall issue to the Contributors that number of Class A Units to be issued at the
Closing as set forth in Schedule A hereto.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.
The Contributors hereby jointly and severally represent and warrant to
PREIT and the Partnership as follows:
4.1 As To the Contributors.
(a) Organization. Each Contributor is duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has all corporate or partnership power to carry on its business
as presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is
-2-
<PAGE>
bound. Each Contributor is duly qualified to do business as a foreign
corporation or foreign partnership and is in good standing under the laws of
each jurisdiction in which its ownership or leasing of assets or properties or
the nature of its activities requires such qualification except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), assets, results of operations or business
of such Contributor (a "Material Adverse Effect").
(b) Power and Authority. Each Contributor has all
requisite corporate or partnership power and authority to execute, deliver and
perform its obligations under this Agreement and under the other agreements
and documents required to be delivered by it prior to or at the Closing
(collectively, the "Contributor Transaction Documents"). The execution,
delivery and performance by each Contributor of this Agreement and the other
Contributor Transaction Documents to which it is a party have been duly
authorized by all necessary corporate or partnership action on the part of
such Contributor. This Agreement has been duly and validly executed and
delivered by each Contributor and constitutes a legal, valid and binding
obligation of each Contributor enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Contributor Transaction Documents to which a
Contributor is a party shall, assuming due authorization, execution and
delivery thereof by the other parties thereto, constitute a legal, valid and
binding obligation of such Contributor enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally or by general equitable principles.
(c) No Conflicts; etc. Except as described in
Section 4.1(c) of the disclosure letter delivered by the Contributors to PREIT
on the date hereof (the "Contributor Disclosure Letter"), the execution and
delivery by the Contributors of this Agreement do not, and the performance by
the Contributors of all of the Contributor Transaction Documents will not
(with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A)
the articles of incorporation, bylaws or partnership agreement (or other
organizational documents) of either Contributor or (B) any Law applicable to
either Contributor, or by or to which any assets or properties of either
Contributor is bound or subject;
-3-
<PAGE>
(ii) violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of benefit under,
or give to others any rights (including rights of termination, amendment,
foreclosure, cancellation or acceleration) in or with respect to, any
Authorization or Contract to which either Contributor is a party or by which
either Contributor or any assets or properties thereof is bound or affected;
or
(iii) result in, require or permit the
creation or imposition of any Encumbrance upon or with respect to either
Contributor, the Interests or any of their other assets or properties.
(d) Except as set forth in Section 4.1(d) of the
Contributor Disclosure Letter, the execution and delivery by the Contributors
of this Agreement do not, and the execution and delivery by the Contributors
of the other Contributor Transaction Documents, and the performance by the
Contributors of all of the Contributor Transaction Documents will not, require
either Contributor to obtain any authorization of, or to make any filing,
registration or declaration with or notification to, any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
to obtain the consent, waiver or approval of, or give any notice to, any other
Person.
(e) Except as set forth in Section 4.1(e) of the
Contributor Disclosure Letter, there are no actions, proceedings or
investigations pending or, to the knowledge of the Contributors, threatened,
that question any of the transactions contemplated by this Agreement or which,
if adversely determined, could have a Material Adverse Effect or could
materially and adversely affect either Contributor's ability to enter into or
perform its obligations under this Agreement.
(f) Litigation; Orders.
(i) Except as set forth in Section 4.1(f) of
the Contributor Disclosure Letter, there are no, and since January 1, 1996
there have not been any, claims, actions, suits, proceedings (arbitration or
otherwise) or, to the knowledge of the Contributors, investigations involving
or affecting either Contributor or any of their assets or properties or any of
their directors, officers, partners or shareholders in their capacities as
such, before or by any court, government or governmental agency or
instrumentality (federal, state, local or foreign), or before an arbitrator of
any kind. To the knowledge of the Contributors, no such claim, action, suit,
proceeding or investigation is presently threatened or contemplated. There are
no unsatisfied judgments, penalties or awards against or affecting either
Contributor or any of their assets or properties.
-4-
<PAGE>
(ii) There is no material Order to which
either Contributor or any of their assets or properties is subject. To the
knowledge of the Contributors, no officer, director, partner, shareholder or
employee of either Contributor is subject to any Order that prohibits such
officer, director, partner, shareholder or employee from engaging in or
continuing any conduct, activity or practice relating to its business. The
Contributors have each complied in all respects with the terms and conditions
of each Order applicable to them.
(g) Undisclosed Liabilities. Except as set forth
in Section 4.1(g) of the Contributor Disclosure Letter, there are no
liabilities or obligations of the Contributors of any nature (whether
absolute, accrued, contingent, liquidated or unliquidated or otherwise) except
the obligations under the limited partnership agreement governing RO,L.P. and
under the Amended and Restated Agreement of Limited Partnership dated as of
June 27, 1996 (the "Project Partnership Agreement") among RO,Inc., RO,L.P.,
OVG General, Inc. ("OVG"), Goldenberg Investors, L.P., Goldenberg Partners,
L.P. and Milton S. Schneider, the partnership agreement governing the Project
Partnership, and the obligations of RO,L.P. under the Limited Partnership
Agreement of Cherry Hill Associates, L.P. dated as of November 1, 1996, among
RO,L.P., Cherry Hill Partner, Inc., and Goldenberg CH Partners, L.P., and that
certain Contribution Agreement relating to Hillview Shopping Center of even
date herewith among Cherry Hill Partner, Inc., RO,L.P., PREIT and the
Partnership.
(h) The Interests.
(i) Section 4.1(h) of the Contributor Disclosure
Letter contains an accurate and complete description of the partnership
interests in the Project Partnership that have been issued of record, but the
Contributors make no representation or warranty that the partnership interests
originally issued to Persons other than the Contributors have not been later
assigned or encumbered. Except as described therein, no Person has any
partnership or other interest in the Project Partnership or any right to receive
any distributions from the Project Partnership or be allocated any profits or
losses of the Project Partnership (provided, however, that with respect to the
ownership of the partner interests in the Project Partnership other than the
Interests, this representation is limited to the Contributors' knowledge). Each
Contributor owns, beneficially and of record, the portion of the Interests
described in Schedule A hereto, free and clear of all Encumbrances other than
the Project Partnership Agreement. The Persons listed in Section 4.1(h) of the
Contributor Disclosure Letter are the sole partners in the Project Partnership
(provided, however, that with respect to the ownership of the partner interests
in the Project Partnership other than the Interests, this representation is
-5-
<PAGE>
limited to the Contributors' knowledge). The issued and outstanding partnership
interests in the Project Partnership have been issued by the Project Partnership
in compliance with the Project Partnership Agreement, and such interests were
not issued by the Project Partnership in violation of any federal or state
securities laws.
(ii) Except for this Agreement and except as
provided in the Project Partnership Agreement or in the leases with tenants
listed in Section 4.2(k) of the Contributor Disclosure Letter, there are no
rights, subscriptions, warrants, options, rights of first refusal, conversion
rights or agreements of any kind outstanding to purchase or to otherwise
acquire any partnership interests or other securities or obligations of any
kind convertible into any partnership interest or other securities or any
participation interests of any kind in the Shopping Center (or any portion
thereof) or, to the knowledge of the Contributors, the Project Partnership;
(provided, however, that with respect to the partner interests in the Project
Partnership other than the Interests, this representation is limited to the
Contributors' knowledge).
(iii) Upon execution and delivery by the
Contributors and the Partnership of the assignment and assumption agreement
contemplated by Section 7.3, the Partnership will acquire good and valid title
to the portion of the Interests that is to be conveyed at Closing in
accordance with Schedule A hereto, free and clear of all Encumbrances (except
for applicable securities law restrictions and for the Project Partnership
Agreement).
(iv) The Contributors have delivered to the
Partnership on the date hereof a true and complete copy of the Project
Partnership Agreement, as amended to date.
(i) Brokers. No Person acting on behalf of either
Contributor or any of their respective affiliates or under the authority of
any of the foregoing is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the contribution transactions contemplated
by this Agreement.
(j) Accurate Disclosure. All documents and other
papers prepared by or on behalf of the Contributors and delivered by or on
behalf of either Contributor in connection with the transactions contemplated
by this Agreement are accurate and complete in all material respects, and all
of such documents and papers prepared or supplied by OVG or its affiliates
(collectively, the "Goldenberg Group") are, to the knowledge of the
Contributors, accurate and complete in all material respects.
-6-
<PAGE>
(k) Knowledge. For purposes of this Agreement, "to
the knowledge of the Contributors" and correlative terms means the actual
knowledge of Ronald Rubin, George Rubin and the other officers and senior
management of each Contributor (or in the case of RO,L.P., its partners),
after reasonable inquiry, except that (i) as to the matters stated in Sections
4.1(e), 4.1(f)(i), 4.1(f)(ii), 4.1(j) and 4.2(e)(ii) [second sentence] of this
Agreement, such terms mean that Ronald Rubin and George Rubin, together with
Richard Brown, Edward Glickman and Doug Grayson, who are the officers and
senior management persons with responsibility for monitoring the Contributor's
interest in the Shopping Center, have received no notice and have no actual
knowledge to the contrary, but no affirmative inquiry or investigation has
been made, and (ii) as to the matters stated in Sections 4.1(h)(i),
4.1(h)(ii), 4.2(b)(ii), 4.2(d), 4.2(e)(i), 4.2(e)(ii) [first and third
sentences], 4.2(f), 4.2(h), 4.2(i), 4.2(k), 4.2(l)(ii), 4.3(a)(i), 4.3(a)(iv),
4.3(c)(i), 4.3(c)(ii), 4.3(d), 4.3(e)(i), 4.3(e)(ii), 4.3(f) and 4.3(g) of
this Agreement, the phrase "after reasonable inquiry" means that inquiry has
been made of the Project Partnership's Managing General Partner by the
Contributors, and the Contributors have received no response to the contrary.
(l) Investment Representations.
(i) Each Contributor acknowledges that the Class A
Units to be issued pursuant to Section 3 and Schedule A hereto will not be
registered under the 1933 Act on the grounds that the issuance of such units is
exempt from registration pursuant to Section 4(2) of the 1933 Act and/or
Regulation D promulgated under the 1933 Act, and that the reliance of the
Partnership on such exemptions is predicated in part on the Contributors'
representations, warranties and acknowledgements set forth in this section.
(ii) The Class A Units issued in accordance with this
Agreement will be acquired by each Contributor for its own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the 1933 Act, and the rules and regulations thereunder, and neither
Contributor will distribute any of such units in violation of the 1933 Act.
(iii) Each Contributor (v) acknowledges that
the Class A Units, when issued, will not be registered under the 1933 Act and
such units will have to be held indefinitely by it unless they are
subsequently registered under the 1933 Act or an exemption from registration
is available, (w) is aware that any sales of such units made under Rule 144 of
the Securities and Exchange Commission under the 1933 Act may be made only in
limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption
-7-
<PAGE>
will be required, (x) is aware that Rule 144 may not be available for use by
either Contributor for resale of the units, (y) is aware that the Partnership
is under no obligation to register, and has no current intention of
registering any of such units under the 1933 Act and (z) acknowledges that
such Contributor has received and read a private placement memorandum relating
to the offer of Class A Units.
(iv) Each Contributor is well versed in financial matters,
has had dealings over the years in securities, including "restricted
securities," and is fully capable of understanding the type of investment being
made in the Class A Units and the risks involved in connection therewith.
4.2 As to the Project Partnership.
(a) Organization. The Project Partnership is a partnership duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all partnership power to carry on its
business as presently conducted, to own and lease the assets and properties
which it owns and leases and to perform all its obligations under each agreement
and instrument to which it is a party or by which it is bound. The Project
Partnership is duly qualified to do business as a foreign partnership and is in
good standing under the laws of each jurisdiction in which its ownership or
leasing of assets or properties or the nature of its activities requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of the Project Partnership.
(b) No Conflicts. Except as described in Section 4.2(b) of the
Contributor Disclosure Letter, the execution and delivery by the Contributors of
this Agreement do not, and the execution and delivery by the Contributors of the
other Contributor Transaction Documents and the performance by the Contributors
of all of the Contributor Transaction Documents will not (with or without the
passage of time or the giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A) the Project
Partnership Agreement, or (B) any Law applicable to the Project Partnership or
to the Shopping Center;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit under, or give to
others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or material Contract, or the knowledge of the Contributors, any other
Authorization or Contract, to which the Project Partnership
-8-
<PAGE>
is a party or by which the Project Partnership or the Shopping Center is bound
or affected; or
(iii) result in, require or permit the creation or imposition
of any Encumbrance upon or with respect to the Project Partnership, the Shopping
Center or any other material assets or properties of the Project Partnership.
(c) Except as set forth in Section 4.2(c) of the Contributor
Disclosure Letter, the execution and delivery by the Contributors of this
Agreement do not, and the performance by the Contributors of all of the
Contributor Transaction Documents will not, require the Project Partnership to
obtain any authorization of, or to make any filing, registration or declaration
with or notification to, any court, government or governmental agency or
instrumentality (federal, state, local or foreign) or to obtain the consent,
waiver or approval of, or give any notice to, any other Person.
(d) Compliance with Laws.
To the knowledge of the Contributors and except as disclosed in
Section 4.2(d) of the Contributor Disclosure Letter:
(i) The Project Partnership is, and at all times since its
inception has been, in compliance in all material respects with all Laws that
are or were applicable to it or to the conduct or operation of its business or
the use of the Shopping Center. The Project Partnership has not since its
inception received, and there is no basis upon which the Project Partnership may
expect to receive, any notice, order or other communication from any government
or governmental agency or instrumentality (federal, state, local or foreign) of
any alleged, actual or potential material violation of or material failure to
comply with any Law applicable to the Project Partnership or the Shopping
Center, and no event has occurred or circumstance exists that may constitute or
result in (with or without notice or lapse of time) a material violation by the
Project Partnership, or a material failure by the Project Partnership, to comply
with, any Law applicable to the Project Partnership or the Shopping Center.
(ii) The Project Partnership is, and at all times since its
inception has been, in possession of all Authorizations necessary to own, lease
or operate the Shopping Center or to carry on its business. The Authorizations
currently in effect are in full force and effect without any default or
violation thereunder by the Project Partnership or by any other party thereto.
The Project Partnership is, and at all times since its inception has been, in
compliance with all Authorizations applicable to it or to the conduct or
operation of
-9-
<PAGE>
its business or the use of the Shopping Center. Neither the Project
Partnership nor any partner therein has received any notice that any such
Authorization currently in effect may be revoked or may not in the ordinary
course be renewed upon its expiration or that by virtue of the transactions
contemplated hereby that any such Authorization may be revoked or may not be
granted, renewed or issued to the Project Partnership.
(e) Litigation; Orders.
Except as disclosed in Section 4.2(e) of the Contributor
Disclosure Letter:
(i) To the knowledge of the Contributors, there are no, and
since inception of the Project Partnership there have not been any, claims,
actions, suits, proceedings (arbitration or otherwise) or investigations
involving or affecting the Project Partnership or any of its assets or
properties or any of its partners in their capacities as such, before or by
any court, government or governmental agency or instrumentality (federal,
state, local or foreign), or before an arbitrator of any kind (each, a
"Claim") other than Claims customarily arising in connection with the
ownership and operation of shopping centers similar to the Shopping Center
that are covered by insurance or are within the limits of current insurance
deductibles. To the knowledge of the Contributors, no such Claim is presently
threatened or contemplated. To the knowledge of the Contributors, there are no
unsatisfied judgments, penalties or awards against or affecting the Project
Partnership or any of its assets or properties.
(ii) To the knowledge of the Contributors, there is no Order
to which the Project Partnership or the Shopping Center is subject. To the
knowledge of the Contributors, no partner, officer of any general partner of
the Project Partnership or employee of the Project Partnership is subject to
any Order that prohibits such partner, officer or employee from engaging in or
continuing any conduct, activity or practice relating to the Shopping Center.
To the knowledge of the Contributors, the Project Partnership has complied in
all material respects with the terms and conditions of each Order applicable
to it.
(iii) There are no, and since January 1, 1996 there have not
been any, Claims involving or affecting the Shopping Center or the Project
Partnership to which either Contributor (or any of its partners or
shareholders) has been named or joined as a party.
(f) Financial Statements. Section 4.2(f) of the
Contributor Disclosure Letter describes the Project Partnership's audited
financial statements for the fiscal years ending December
-10-
<PAGE>
31, 1995, and December 31, 1996. To the knowledge of the Contributors, all
such financial statements, including the related notes, fairly present the
financial condition, results of operations and cash flow of the Project
Partnership, as of the respective dates thereof and for the periods therein
referred to, all in accordance with GAAP (other than those statements which
indicate that they were not prepared in accordance with GAAP) consistently
applied, subject, in the case of the interim financial statements, to normal
year-end adjustments and the absence of notes.
(g) Undisclosed Liabilities.
(i) As of the date hereof, there are no liabilities of the
Project Partnership of a nature required to be reflected in a balance sheet
prepared in accordance with GAAP except: (x) those described in Section
4.2(g)(i) of the Contributor Disclosure Letter; (y) those reflected or
reserved against in the audited balance sheet of the Project Partnership dated
as of December 31, 1996, or disclosed in the notes thereto; or (z) current
liabilities incurred in the ordinary course of business consistent with past
practice after December 31, 1996, and which are neither material in amount nor
inconsistent with any of the representations or warranties made herein.
(ii) As of the Closing, there shall be no liabilities of the
Project Partnership of any nature (whether absolute, accrued, contingent,
liquidated, unliquidated or otherwise) except the Loan Obligations and the
current liabilities that are taken into account in calculating Deemed Value
pursuant to Section 3 of Schedule A hereto.
(h) Taxes.
To the knowledge of the Contributors:
(i) All Taxes due from or required to be remitted by the
Project Partnership with respect to taxable periods ending on or prior to, and
the portion of any interim period up to, the Closing Date have been fully and
timely paid or, to the extent not yet due or payable, have been adequately
provided for on the balance sheets referred to in Section 4.2(f) of the
Contributor Disclosure Letter or on the books and records of the Project
Partnership. There are no levies, liens or other Encumbrances relating to
Taxes existing, pending or threatened with respect to any of the assets of the
Project Partnership.
(ii) All federal, state, local and foreign returns and
reports relating to Taxes, or extensions relating thereto, required to be
filed by or with respect to the Project Partnership have been timely and
properly filed, and all such returns and reports are correct and complete.
-11-
<PAGE>
(iii) No issues have been raised with any representative or
employee of the Project Partnership (and are currently pending) by the IRS or
any other taxing authority in connection with any of the returns and reports
referred to in subsection (ii) above and no waivers of statutes of limitations
have been given or requested with respect to any such returns and reports or
with respect to any Taxes.
(iv) Section 4.2(h) of the Contributor Disclosure Letter
identifies all federal, state, local and foreign income, franchise and sales
and use tax returns of or with respect to the Project Partnership which have
been examined since the Project Partnership's inception, or which are
currently under examination, by the IRS or by other taxing authorities, or
with respect to which the applicable statute of limitations (including all
extensions and tolling periods) has not yet run. Except as and to the extent
shown therein, all deficiencies asserted or assessments made as a result of
such examinations have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any taxing authority against the
Project Partnership.
(i) Absence of Certain Changes and Events.
To the knowledge of the Contributors:
(i) Except as described in Section 4.2(i) of the
Contributor Disclosure Letter and except as contemplated or disclosed herein,
since December 31, 1996, the Project Partnership has conducted its business and
activities only in the usual and ordinary course consistent with past practice
and there has not been any:
(A) declaration or payment of any distribution or
payment in respect of any interest in the Project Partnership that
relates to an obligation or liability of the Project Partnership after
Closing or any issuance, repurchase or redemption of any such interest;
(B) amendment to the Project Partnership Agreement;
(C) damage, destruction or loss to any material asset
or property of the Project Partnership, whether or not covered by
insurance, that has not been fully repaired, restored or replaced;
(D) except for current trade debt incurred in the
ordinary course of business consistent with past practice, borrowing or
incurring of any indebtedness, obligation or liability, contingent or
otherwise, by the Project Partnership;
-12-
<PAGE>
(E) endorsement, assumption or guarantee of payment or
performance by the Project Partnership of any loan or obligation of any
other Person;
(F) loan or advance made by the Project Partnership to
any Person except for advances not material in amount made in the
ordinary course of business;
(G) sale (other than sales of inventory in the ordinary
course of business), assignment, conveyance, lease, or other
disposition of any asset or property of the Project Partnership, or
mortgage, pledge, or imposition of any lien or other Encumbrance on any
asset or property of the Project Partnership;
(H) cancellation or waiver of any material claims or
rights of the Project Partnership that requires the consent of RO,
Inc.;
(I) change in the accounting methods, principles or
practices followed by the Project Partnership or any change in any of
the assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserve; or
(J) binding agreement, whether or not in writing, to do
any of the foregoing.
(ii) Since December 31, 1996, there has been no event,
circumstance, condition or contingency that has resulted in a material adverse
effect on the business, assets, financial condition or results of operations
of the Project Partnership or that is reasonably likely to result in such a
material adverse effect.
(j) FIRPTA. The Project Partnership is neither a "foreign person"
within the meaning of Section 1445(f) of the Code nor a "foreign partner" within
the meaning of Section 1446 of the Code.
(k) List of Properties, Contracts, etc. Section 4.2(k) of the
Contributor Disclosure Letter contains a complete and accurate list of each item
described below, and the Contributors have delivered to PREIT (or given PREIT
access to) true and complete copies of each document (or, in the case of
documents not within the Contributors' possession and oral agreements,
summaries) described below.
(i) Each of the following types of Contracts, whether oral or
written, to which the Project Partnership or any of its general partners (in
their capacities as such) is a party or by which it or any of its assets is
bound:
-13-
<PAGE>
(A) To the knowledge of the Contributors, all
Contracts that:
(I) involve performance of services
or sale or lease of goods, materials or space by the
Project Partnership or any of its general partners of an
amount or value in excess of $25,000 in any annual
period or $100,000 in the aggregate;
(II) involve performance of services
or sale or lease of goods, materials or space to the
Project Partnership or any of its general partners of an
amount or value in excess of $25,000 in any annual period
or $100,000 in the aggregate;
(III) are not in the ordinary course
of business and involve expenditures or receipts by the
Project Partnership or any of its general partners of more
than $25,000;
(IV) are not terminable by the
Project Partnership or any of its general partners without
penalty or premium upon less than 60 days' notice; or
(V) are otherwise material to the
business, operations, financial condition or prospects
of the Project Partnership or to the ownership, operation
or management of the Shopping Center.
(B) To the knowledge of the Contributors, all
Authorizations that relate to the Shopping Center;
(C) To the knowledge of the Contributors,
all outstanding loans and advances by the Project Partnership to any
partner, officer or employee of the Project Partnership; and
(D) Other than trade debt incurred in the
ordinary course of business, all notes, debt instruments, other
evidences of indebtedness, letters of credit and guaranties (whether
written or oral) issued by or for the benefit of the Project
Partnership and all loan and other agreements relating thereto.
(l) Contracts.
(i) Except as described in Section 4.2(l) of the Contributor
Disclosure Letter and subject to the terms and conditions of Section
7.2(a)(ii) below, each Contract required to be identified in Section
4.2(k)(i)(A) of the Contributor
-14-
<PAGE>
Disclosure Letter is in full force and effect and is valid, binding and
enforceable against the parties thereto in accordance with its terms. Except
as described in Section 4.2(l) of the Contributor Disclosure Letter, the
Project Partnership and its general partners have each performed in all
material respects all obligations required to be performed by them under each
such Contract to which any of them is a party or by which any of them is
bound, and, to the knowledge of the Contributors, no condition exists or event
has occurred which with notice or lapse of time would constitute a default
thereunder or a basis for delay, non-performance, termination, modification or
acceleration of maturity or performance by any party thereto.
(ii) To the knowledge of the Contributors, there are no
renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Project Partnership or
any of its general partners (in their capacity as such) under any Contracts
referred to in subparagraph (i) above. All of such Contracts that relate to
the provision of services, goods or space by the Project Partnership or any of
its general partners (in their capacity as such) have been entered into in the
ordinary course of business and have been entered into without the commission
of any act or any consideration having been paid or promised that is in
violation of any Law.
(iii) Except as described in Section 4.2(l) of the
Contributor Disclosure Letter, without limiting the generality of the
foregoing, the Project Partnership Agreement is in full force and effect and
each of the parties thereto has performed all obligations required to be
performed by it under such agreement.
4.3 As to the Shopping Center.
(a) Title
(i) Based solely on Owner's Policy No. 573280
issued by First American Title Insurance Company (the "Title Policy"), the
Project Partnership owns fee simple title to the Shopping Center, free and
clear of all Encumbrances except as set forth in the Title Policy and Section
4.3(a) of the Contributor Disclosure Letter (the "Permitted Encumbrances"). To
the knowledge of the Contributors, there have been no changes in the state of
such title as reflected in the Title Policy other than those encumbrances
required to complete the development and construction of the Shopping Center
that are of a nature customary for development projects similar to the
Shopping Center.
(ii) The Project Partnership is the owner of, or the lessee
under subsisting leases of, or otherwise has the
-15-
<PAGE>
right to use, the material personal property used by the Project Partnership
in the operation of the Shopping Center. All of such property that is
reflected on the Project Partnership's records as owned by the Project
Partnership is free and clear of all Encumbrances, except for Permitted
Encumbrances.
(iii) Except as provided in the Project Partnership
Agreement, the Title Policy or in the tenant leases listed in Schedule 4.2(k)
of the Contributor Disclosure Letter, there are no rights of first refusal on,
or options to purchase, any portion of the Shopping Center or any right to
participation interests (whether of profits, sale or refinancing proceeds, or
calculated based on fair market value) with respect to any portion of the
Shopping Center in favor of any tenant, lender or any other Person other than
the Project Partnership. None of the tenant leases provides for any such right
or option except that one or more of such leases may provide for a purchase
option in favor of the tenant but only in respect of the space leased to such
tenant. Any such purchase option is on terms and conditions that are customary
for development projects similar to the Shopping Center.
(iv) To the Contributors' knowledge, no eminent domain,
condemnation, incorporation, annexation or moratorium or similar proceeding
has been commenced or threatened by an authority having the power of eminent
domain to condemn any part of the Shopping Center. To the Contributors'
knowledge, there are no pending or threatened governmental rules, regulations,
plans, studies, or court orders or decisions, which do or could materially
adversely affect the use or value of the Shopping Center for its present use.
(b) Mortgage Obligations.
(i) As reflected in the Title Policy, the Shopping Center is
subject to the mortgage(s) securing obligation(s) in the amount(s) set forth
in Section 4.3(b) of the Contributor Disclosure Letter (the "Loan
Obligations") and is subject to no other mortgage. Section 4.3(b) of the
Contributor Disclosure Letter sets forth the original principal amount,
approximate outstanding principal amount, interest rate, term and other
material economic provisions of each of the Loan Obligations.
(ii) The documents identified in Section 4.3(b) of the
Contributor Disclosure Letter, true and correct copies of which have been
delivered to PREIT (or to which PREIT has been given access), constitute all
of the material documents evidencing, defining or securing the Loan
Obligations (the "Loan Documents").
-16-
<PAGE>
(iii) The Project Partnership has complied with the Loan
Documents, and there are no events of default thereunder now outstanding. No
event has occurred, which with the passage of time or the giving of notice or
both, could ripen into an event of default under the terms of the Loan
Documents.
(c) Leases.
(i) The Rent Roll attached to Section 4.3(c) of the
Contributor Disclosure Letter (the "Rent Roll") lists each of the material
leases (including all amendments), and, to the knowledge of the Contributors,
all of the leases, in effect with respect to any portion of the Shopping
Center and identifies any of such leases that have been amended since May 1,
1997.
(ii) Except as set forth in Section 4.3(c) of the Contributor
Disclosure Letter, to the knowledge of the Contributors, there are no leases,
licenses or other rights of occupancy now in force which affect the Shopping
Center or any portion thereof other than the leases listed in the Rent Roll.
Except as set forth on the Rent Roll and in Sections 4.2(e) and Section 4.3(c)
of the Contributor Disclosure Letter, no uncured event of default of the
Project Partnership or, to the knowledge of the Contributors, any tenant has
occurred and is continuing under any such lease, and, to the knowledge of the
Contributors, no tenant has asserted a defense to or offset or claim against
its rent or the performance of its obligations under its lease, and no tenant
has asserted a default on the part of the Project Partnership which would give
it the right to terminate its lease or a setoff against rent.
(iii) With respect to the leases involving the Shopping
Center and except as set forth in Section 4.3(c) of the Contributor Disclosure
Letter or reflected in or reserved against in the December 31, 1996, audited
financial statement described in Section 4.2(f) above or in the Notes thereto:
(A) there are no proposed modifications to any such lease
that would reduce:
(I) the space leased to any tenant;
(II) the amount of any tenant's rent; or
(III) the term of any lease;
(B) except for (x) security deposits or (y) the first
full month's rent, whether or not the term of a lease has commenced, no
prepayments of rent more than thirty (30) days in advance have been
made under any such lease;
-17-
<PAGE>
(C) all decorating, repairs, alterations or other work
performed by the Project Partnership under each of the leases as of
the date hereof, or the cost of any such work performed by the tenant
and to be reimbursed by the Project Partnership prior to the date
hereof, has been performed or reimbursed, as applicable;
(D) no rent or security deposit under any such lease has
been assigned or encumbered, except as security for the Loan Documents;
(E) there are no agreements or understandings, written or
oral, with any tenant other than as set forth in its lease or on the
Rent Roll; and
(F) all brokerage commissions and other compensation or
fees due and payable as of the date hereof by reason of the leases have
been paid in full.
(d) Compliance with Laws and Recorded Declarations. The
Contributors have not received from the Project Partnership or any other Person
any notice of any violation of applicable Law asserted by any federal, state or
municipal entity or notice of an intention by any such governmental entity to
revoke any certificate of occupancy or other Authorization issued by it in
connection with the ownership, use and occupancy of the Shopping Center that in
each case has not been fully cured or otherwise fully resolved to the
satisfaction of such governmental entity. To the Contributors' knowledge: (i)
any and all charges, including condominium fees, common area expenses, or
assessments (collectively the "Common Expenses") and special assessments under
declarations and like instruments to which the Shopping Center or the Project
Partnership is subject, have been paid to date, and no new special assessments
or increases in any Common Expenses are contemplated, (ii) all the current
Common Expenses and special assessments for the Shopping Center which are set
forth in Section 4.3(d) of the Contributor Disclosure Letter are true and
correct as of the date hereof, (iii) all consents and approvals required to be
obtained under such declarations or like instruments in connection with the
ownership, use, operation and/or management of the Shopping Center have been
obtained, (iv) all uses made, conducted or permitted on or with respect to the
Shopping Center are in compliance with any and all rules and regulations
promulgated by the Oxford Valley Condominium Association and the provisions of
any declaration or like instrument to which the Shopping Center is subject,
(v) no additional condominium units have been created within the Shopping
Center or the Court at Oxford Valley Condominium and no units within the
Shopping Center or said Condominium have been withdrawn or eliminated, (vi) as
of the date hereof there are no more than forty (40) condominium units
comprising the Court at Oxford Valley Condominium, (vii) no agreement to
terminate the
-18-
<PAGE>
Condominium has been submitted to the Project Partnership for approval, and
(viii) there are no claims, actions, suits, proceedings, or investigations
pending or threatened before any court, governmental unit or any mediator or
arbitrator against or in connection with the Oxford Valley Condominium
Association, or any of the directors or officers of said Association.
(e) Environmental Matters.
(i) Except as described in Section 4.3(e) of the Contributor
Disclosure Letter, the Contributors have no knowledge of any fact, condition
or circumstance that would suggest that the environmental reports listed in
Section 4.3(e) of the Contributor Disclosure Letter (which constitute all
environmental reports relating to the Shopping Center received by the
Contributors) contains any misstatement of material fact or omits to state any
material fact. To the knowledge of the Contributors, except for matters set
forth in Section 4.3(e) of the Contributor Disclosure Letter, there are no
conditions on, beneath or arising from, and there are no Hazardous Substances
migrating from, the Shopping Center which might under any Environmental Law
(A) give rise to liability or the imposition of a statutory lien upon the
Project Partnership or (B) require any Response, Removal or Remedial Action by
the Project Partnership.
(ii) To the knowledge of the Contributors, no wastes
generated by either Contributor or the Project Partnership have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or to any site listed in
any state list of sites requiring or recommended for investigation or
clean-up.
(f) Reassessments. To the Contributors' knowledge, there is no
proposed reassessment of the Shopping Center by any taxing authority, and there
are no threatened or pending special assessments or other actions or proceedings
(other than county-wide reassessments and/or the usual increases in millage
rates that may be under consideration by the taxing authorities in the
jurisdictions where the Shopping Center is located) that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against the Shopping Center.
(g) Property Improvements. Except as disclosed in any engineering
studies or reports obtained by or delivered by the Contributors to PREIT as
set forth in Section 4.3(h) of the Contributor Disclosure Letter, to the
knowledge of the Contributors, the Shopping Center is in good condition and
repair, ordinary wear and tear excepted, and has not suffered any casualty or
other material damage which has not been repaired in all material respects. To
the best of the Contributors'
-19-
<PAGE>
knowledge, there are no material latent or patent structural, mechanical or
other significant defects, soil conditions or deficiencies in the improvements
included in the Shopping Center, or any other defects, soil conditions or
deficiencies which, in the aggregate, would materially adversely affect the
value of the Shopping Center as a whole.
(h) Employees and Service Contracts.
(i) Section 4.3(h) of the Contributor Disclosure Letter sets
forth a complete and correct list of all existing and proposed union or
collective bargaining agreements to which either Contributor or the Project
Partnership is a party with respect to or affecting the Shopping Center.
(ii) Section 4.3(h) of the Contributor Disclosure Letter sets
forth a complete and correct list of all persons who are employed by the
Project Partnership or its partners in connection with the management,
operation or maintenance of the Shopping Center, setting forth, with respect
to each of them, his or her name, position or duties, regular wages or salary,
accrued vacation pay and bonus and other benefits to which he or she is
entitled. Each of such persons is an employee-at-will and none of such persons
is covered by a written employment agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND
THE PARTNERSHIP.
PREIT hereby represents and warrants to the Contributors as follows:
5.1 Organization.
(a) PREIT is an unincorporated association in
business trust form duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania. PREIT has all necessary trust power to carry on
its business as presently conducted, to own and lease the assets and
properties that it owns and leases and to perform all its obligations under
each agreement and instrument to which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware and has all necessary partnership power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound.
-20-
<PAGE>
5.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). The execution, delivery and performance by
PREIT and the Partnership of this Agreement and the other Buyer Transaction
Documents have been duly authorized by all necessary corporate or partnership
action. This Agreement has been duly and validly executed and delivered by
PREIT and the Partnership and constitutes the legal, valid and binding
obligation of PREIT and the Partnership enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors
rights generally or by general equitable principles. When executed and
delivered as contemplated herein, each of the other Buyer Transaction
Documents shall, assuming due authorization, execution and delivery thereof by
the other parties thereto, constitute the legal, valid and binding obligation
of each of PREIT and the Partnership that is a party thereto enforceable
against it in accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors rights generally or by general equitable principles.
5.3 No Conflicts.
(a) Except as described in Section 5.3 of the
disclosure letter delivered by PREIT to the Contributors on the date hereof
(the "PREIT Disclosure Letter"), the execution and delivery by PREIT and the
Partnership of this Agreement do not, and the execution and delivery by PREIT
and the Partnership of the other Buyer Transaction Documents and the
performance by PREIT and the Partnership of all of the Buyer Transaction
Documents will not (in each case, with or without the passage of time or the
giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A)
the trust or partnership agreement (or other organizational documents) of
PREIT or the Partnership or (B) any Law applicable to PREIT or the
Partnership, or by or to which any assets or properties of PREIT or the
Partnership is bound or subject; or
(ii) violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of benefit or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or material Contract to which PREIT or the Partnership is a party or by which
either PREIT or the Partnership is bound or affected; or
-21-
<PAGE>
(iii) result in, require or permit the creation
or imposition of any material Encumbrance upon or with respect to either PREIT
or the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 5.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership
of the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT
or the Partnership to obtain any material Authorization of or make any
material filing, registration or declaration with or notification to any
court, government or governmental agency or instrumentality (federal, state,
local or foreign) or to obtain the material consent, waiver or approval of, or
give any material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to
the best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Buyer Transaction
Documents or which, if adversely determined, could have a material adverse
effect on the consolidated financial condition, assets, business or results of
operations of PREIT or could materially and adversely affect PREIT's or the
Partnership's ability to enter into or perform its obligations under the Buyer
Transaction Documents.
5.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests
in PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 5.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated in the TRO
Contribution Agreement, in the Amended Partnership Agreement or in the
Employment Agreements referred to in the TRO Contribution Agreement, and
except as disclosed in Section 5.4(a) of the PREIT Disclosure Letter, as of
the date of this Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character (including, without
limitation, voting agreements or arrangements known to PREIT) relating to the
issuance of beneficial interests in PREIT or partnership interests in the
Partnership. As of the Closing, the outstanding partner interests in the
Partnership shall consist of the interests outstanding on the date hereof, the
Class A Units to be
-22-
<PAGE>
issued as contemplated in the TRO Contribution Agreement, this Agreement and
the EPD Purchase Agreements.
(b) All Class A Units to be issued and delivered pursuant to
Section 3 hereof will be, at the time of issuance and delivery in accordance
with the terms of this Agreement, duly authorized and validly issued by the
Partnership. Assuming the accuracy of the representations and warranties of
the Contributors set forth herein, such issuance will be exempt from
registration under the 1933 Act as an offering described in Section 4(2) of
such Act and/or pursuant to Regulation D promulgated thereunder.
5.5 PREIT Reports. PREIT has delivered to the Contributors copies of
PREIT's (a) Proxy Statement dated November 15, 1996, (b) Annual Report on Form
10-K for the fiscal year ending August 31, 1996, as amended by its report on
10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports on Form 10-Q for
the quarters ended November 30, 1996, February 28, 1997 and May 31, 1997, all
of which have been filed by PREIT with the Securities and Exchange Commission
(the "PREIT Reports"). The audited consolidated financial statements and
unaudited interim financial statements of PREIT included in such reports have
been prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
condition and results of operations of PREIT as at the dates thereof and for
the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein. The PREIT Reports do not contain any untrue statements of a
material fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
5.6 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the best knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign)
or before any arbitrator of any kind, in each case of a nature that is
required to be disclosed in PREIT's 1934 Act reports.
5.7 Material Adverse Change. Except as disclosed in filings with the
Securities and Exchange Commission, since May 31, 1997, there has not been any
material adverse change in the condition (financial or otherwise), assets,
results of operations or business of PREIT on a consolidated basis.
-23-
<PAGE>
5.8 Brokers. Except for Lehman Brothers, Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or the Partnership or any
of their affiliates or under the authority of any of the foregoing is or will
be entitled to any brokers' or finders' fee or any other commission or similar
fee, directly or indirectly, from any of such parties in connection with any
of the transactions contemplated by this Agreement.
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT, each
Contributor shall, and the Contributors shall use reasonable efforts to cause
the Project Partnership to:
(i) carry on its business in, and only in, the usual, regular
and ordinary course, consistent with past practice and the provisions hereof and
in compliance with all applicable Laws, Authorizations;
(ii) pay and discharge all of its debts, liabilities and
obligations as they become due and pay all debt service payments, real estate
taxes and other liabilities arising from the operation of the Shopping Center
that in the ordinary course of business would have been paid prior to the
Closing Date (with the exception of those liabilities and obligations which the
Project Partnership is contesting in good faith and for which the Project
Partnership has established adequate reserves on its books);
(iii) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(iv) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(v) maintain its books of account and records in the usual,
regular and ordinary manner and use best efforts to maintain in full force and
effect all of its Authorizations; and
(vi) operate the Shopping Center in the ordinary course in a
manner consistent with past practice, maintaining the Shopping Center in the
same state of repair, order and condition as it is on the date hereof,
reasonable wear and tear, damage by insured fire or other casualty excepted.
-24-
<PAGE>
(b) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT,
neither Contributor shall:
(i) enter into, assume or amend, or consent
to the amendment or assumption of, any Contract, other than ordinary course of
business Contracts that are not of a type described in Section 4.2(m) hereof;
(ii) take any action, fail to take any action or permit to
occur any event that would cause or constitute a material breach of or
inaccuracy in any representation or warranty set forth herein if made
immediately after such event or at the Closing or that would have been required
(or result in any situation that would be required) to be disclosed hereunder
had such action or inaction been taken or failed to have occurred or had such
event occurred prior to the date hereof;
(iii) except as described in Section 6.1(b)(iii) of the
Contributor Disclosure Letter and the TRO Contribution Agreement, make any
change in its authorized or issued capital stock or partnership interests, grant
any stock option or other right to purchase its shares of capital stock,
partnership interests or other securities, issue or make any commitment to issue
any of its securities, including any securities convertible into capital stock
or partnership interests, grant any registration rights or purchase, redeem,
retire or make any other acquisition of any shares of its capital stock,
partnership interests or other securities;
(iv) amend or grant any waivers under the Project
Partnership Agreement; or
(v) enter into any agreement or understanding to do or
engage in any of the foregoing actions.
6.2 Reasonable Efforts. Upon the terms and subject to the condition
hereof, between the date hereof and the Closing Date, each of the parties
hereto shall use its reasonable efforts to take, or cause to be taken, all
appropriate action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) using its or his reasonable efforts to make all required regulatory
filings and applications and to obtain all Authorizations and consents,
approvals, amendments and waivers from parties to Contracts as are necessary
for the consummation of the transactions contemplated by this Agreement and
(ii) using its reasonable efforts to cause the conditions to the consummation
of the acquisition of the Interests to be satisfied.
-25-
<PAGE>
6.3 Notifications. Each party hereto shall give prompt notice to the
other parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a breach of
or any inaccuracy in any of its representations and warranties contained in
this Agreement had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure
of it or any of its officers, directors, employees or agents, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; (iii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and (iv) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its
knowledge, threatened against, relating to or involving or otherwise affecting
either Contributor, the Project Partnership or PREIT, as the case may be, or
any of the transactions contemplated by this Agreement.
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES.
7.1 Time of Closing. The closing (the "Closing") of the acquisition
by the Partnership pursuant to this Agreement of the portion of the Interests
to be conveyed at such closing in accordance with Schedule A hereto shall take
place at the time and place specified in Schedule A hereto on the Closing Date
(as defined in Schedule A hereto).
7.2 Closing Conditions.
(a) Conditions Precedent to PREIT's and the Partnership's
Obligations. The obligation of PREIT and the Partnership to consummate the
acquisition of the Interests and to take the other actions required to be
taken by them at the Closing is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of which may be waived
by PREIT in its sole discretion:
(i) Condition of Title. The Project
Partnership shall own fee simple title to the Shopping Center and such title
shall be good and marketable and insured as such by First American Title
Insurance Company, Commonwealth Land Title Insurance Company, Lawyers Title
Insurance Corporation or Chicago Title Insurance Company, as selected by the
Partnership (the "Title Insurance Company"), free and clear of all
Encumbrances other than Permitted Encumbrances, the existing leases set forth
on the Rent Roll or as such leases may have changed in the ordinary course of
the operation of the Shopping Center, and
-26-
<PAGE>
those encumbrances required to complete the development and construction of
the Shopping Center that are of the nature customary for development projects
similar to the Shopping Center provided that such encumbrances do not
constitute liens in liquidated amounts and do not individually or in the
aggregate materially or adversely affect the value or use of the property as a
Shopping Center. A vested owners title insurance policy with "non-imputation"
and fairways endorsements for the value of the interest in the Project
Partnership as determined in accordance with Schedule "A" or a marked-up
commitment reflecting the effectiveness of such issuance, shall have been
issued to the Partnership (unless such insurance is not issued or effective
solely due to the Partnership's failure to pay the premiums therefor).
(ii) Tenant Estoppels. The Contributors
shall have used their reasonable efforts to cause the tenants in the Shopping
Center listed on Exhibit 7.2(a)(ii) to execute and deliver to the Partnership
estoppel certificates in form and substance reasonably satisfactory to PREIT.
The Contributors shall keep the Partnership reasonably apprised as to the
status of receipt of the estoppel certificates. The failure to obtain and
deliver any or all of the estoppel certificates shall not constitute a default
by the Contributors hereunder or allow PREIT or the Partnership to terminate
this Agreement so long as the Contributors have used reasonable efforts to
obtain the estoppel certificates. The Contributors' liability under the
representations and warranties under Sections 4.2(l)(i) and 4.3(c) as to a
particular tenant shall terminate if the Partnership subsequently receives an
estoppel certificate for the applicable tenant which confirms the
Contributors' representations under Sections 4.2(l)(i) and 4.3(c) above
(provided, if the Partnership receives an estoppel certificate which confirms
some but not all of the matters which are the subject of the representations
and warranties under Sections 4.2(l)(i) and 4.3(c), then as to such tenant,
(x) if the estoppel certificate was received prior to Closing, the
representations and warranties set forth in Sections 4.2(l)(i) and 4.3(c)
shall be deemed to omit such matters stated on the estoppel certificate as to
such matters provided the certifications contained in such estoppel remain
true and correct until the Closing Date and (y) if received after Closing, the
representations and warranties under Sections 4.2(l)(i) and 4.3(c) shall cease
to survive as to such matters but shall continue to survive as to matters not
contained in such Estoppel Certificate.)
(iii) Survey, Etc. The Partnership shall
have received updated environmental and engineering reports and surveys for
the Shopping Center, at PREIT's sole cost and expense, certified to the
Partnership and the Title Insurance Company, in form reasonably satisfactory
to PREIT and the Title Insurance Company, and such reports and surveys shall
not
-27-
<PAGE>
disclose any material adverse condition not disclosed in the original reports
and surveys for the Shopping Center delivered to PREIT, or to which PREIT was
given access, prior to the date of this Agreement.
(iv) No Mortgage Defaults. All payments of
principal and interest on all Loan Obligations shall be current and no Loan
Obligation shall be in default. The Contributors shall have used reasonable
efforts to cause the holder of each Loan Obligation to issue to the
Partnership a letter or certification confirming the principal balance of such
Loan Obligation, the date of the last payment and that, to its knowledge,
there are no events of default thereunder. The failure to obtain or deliver
such letter or certification shall not constitute a default by the
Contributors hereunder or allow PREIT or the Partnership to terminate this
Agreement provided that the Contributors have used reasonable efforts to
obtain such letter or certificate. In the event the letter or certification
from the holder of each Loan Obligation contains a certification containing
information which confirms the Contributors' representations under Section
4.3(b) above, the Contributors' liability for such representation shall
terminate upon delivery of the letter or certificate to the Partnership
provided the certifications contained in such estoppel remain true and correct
until the Closing Date.
(v) Representations and Warranties. Each of
the representations and warranties of the Contributors set forth in this
Agreement that is qualified by materiality shall be true and correct, and each
of the representations and warranties of the Contributors set forth in this
Agreement that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
(vi) Performance of Covenants. All of the
agreements, covenants and obligations that either Contributor is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing shall have been duly performed and complied with in all material
respects. The Contributors shall have delivered each of the documents required
to be delivered by them pursuant to Section 7.3(a) hereof.
(vii) Legal Matters. The performance of the
Buyer and Contributor Transaction Documents and the consummation of the
Closing shall not, directly or indirectly (with or without notice or lapse of
time), violate, contravene, conflict with or result in a violation of any Law
and shall not violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or administrative
proceeding shall have been brought or threatened by any Person (other than by
PREIT or the Partnership) that questions the
-28-
<PAGE>
validity or legality of this Agreement or the transactions
contemplated hereby.
(viii) Consents and Approvals. Each
consent, approval, ratification, waiver or other authorization of any Person
necessary, in the reasonable opinion of PREIT, for the consummation of the
transactions contemplated hereby shall have been obtained and shall be in full
force and effect, and no such consent, approval, ratification, waiver or other
authorization: (x) shall have been conditioned upon the modification,
cancellation or termination of any Contract, right or Authorization of PREIT,
the Partnership or the Project Partnership or (y) shall impose on PREIT, the
Project Partnership or the Partnership any condition, provision or requirement
not presently imposed upon the Contributors or the Project Partnership or any
condition that would be more restrictive after the Closing on the Project
Partnership or the Partnership than the conditions presently imposed on the
Contributors or the Project Partnership.
(ix) Opinion of Counsel. PREIT shall have
received an opinion of counsel for the Contributors, dated the Closing Date,
in form and substance reasonably satisfactory to PREIT and its counsel.
(x) TRO Closing. The TRO Closing shall
have occurred.
(xi) Casualty or Condemnation. There shall
not have occurred any damage or destruction to, or condemnation of, any portion
of the Shopping Center or the facilities constituting units within the
condominium association of which the Shopping Center is a part that is
reasonably likely to have a material adverse effect on the operations or
profitability of the Shopping Center as a whole.
(xii) Material Adverse Change. There shall
not have been since the date hereof any event, circumstance, condition or
contingency that has resulted in a material adverse effect on the business,
assets, financial condition or results of operations of the Project Partnership
or that is reasonably likely to result in such a change.
(xiii) Compliance Certificate. The
Contributors shall have obtained (to the extent such certifications or letters
are made available in such jurisdiction) a certification or letter from the
appropriate governmental officer having jurisdiction to the effect that the
Shopping Center and its use are in compliance with applicable fire, health,
safety and zoning ordinances, rules and regulations.
-29-
<PAGE>
(b) Conditions Precedent to the Contributors' Obligations.
The obligation of the Contributors to consummate the contribution of the
Interests contemplated by this Agreement and to take the other actions
required to be taken by them at the Closing is subject to the fulfillment by
or at the Closing of each of the following conditions, any or all of which may
be waived by RO,Inc. in its sole discretion:
(i) Representations and Warranties. Each of
the representations and warranties of PREIT set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of PREIT set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(ii) Performance of Covenants. Each of the
agreements, covenants and obligations that PREIT or the Partnership is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing shall have been duly performed and complied with in all material
respects. PREIT shall have delivered each of the documents required to be
delivered by it pursuant to Section 7.3(b) hereof.
(iii) Legal Matters. The performance of the
Buyer and Contributor Transaction Documents and the consummation of the Closing
shall not, directly or indirectly (with or without notice or lapse of time),
violate, contravene, conflict with or result in a violation of any Law and shall
not violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or administrative
proceeding shall have been brought or threatened by any Person that questions
the validity or legality of this Agreement or the transactions contemplated
hereby.
(iv) TRO Closing. The TRO Closing shall
have occurred.
(v) The Contributors shall have received an
opinion of counsel for PREIT, dated the Closing Date, in form and substance
reasonably satisfactory to the Contributors and their counsel.
7.3 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) The Contributors shall deliver or cause to be
delivered to the Partnership:
(i) each of the instruments, agreements or
documents listed on Schedule A-1 hereto, in each case in a form
-30-
<PAGE>
reasonably satisfactory to the Contributors and the Partnership, duly executed
by each of the signatories thereto other than PREIT or the Partnership;
(ii) certificates, dated the Closing Date and executed by the
president of RO,Inc. to the effect that the conditions set forth in Sections
7.2(a)(v) and (vi) have been satisfied;
(iii) certificates of good standing of a recent date for
RO,Inc. and RO,L.P. certified by the Secretary of State or corresponding
certifying authority of the state of incorporation or organization of RO,Inc.
and RO,L.P. and of each state in which RO,Inc. or RO,L.P. is qualified to do
business as a foreign corporation or foreign partnership;
(iv) copies of the resolutions of the board of directors of
RO,Inc. and its shareholders authorizing the transactions contemplated under
this Agreement and the Contributor Transaction Documents to which RO,Inc. or
RO,L.P. is a party;
(v) all consents and approvals under the Project Partnership
Agreement necessary or appropriate in connection with the transactions
contemplated herein;
(vi) a certification from the condominium association to the
effect that the Contributors are current in the payment of all condominium fees
and assessments;
(vii) a certification from the Goldenberg Group to the effect
that the Project Partnership Agreement is in full force and effect, that the
Project Partnership Agreement has not been amended, and that no partner in the
Project Partnership is in default of its obligations under the Project
Partnership Agreement; and
(viii) such other documents and instruments as the Partnership
or PREIT may reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
(b) The Partnership shall deliver or cause to be delivered
to the Contributors the following:
(i) the Class A Units to be delivered at Closing as
contemplated by Section 3 and Schedule A hereto;
(ii) copies of resolutions of the board of trustees of PREIT
authorizing the transactions contemplated hereunder and under the Buyer
Transaction Documents;
-31-
<PAGE>
(iii) a certificate, dated the Closing Date,
executed by the chief executive officer and chief financial officer of PREIT,
to the effect that the conditions set forth in Sections 7.2(b)(i) and (ii)
have been satisfied; and
(iv) each of the instruments, agreements and
documents listed on Schedule A-1 in a form reasonably satisfactory to the
Contributors and the Partnership, duly executed by each of the Partnership or
PREIT that is a signatory thereto.
(c) Each party shall deliver or cause to be delivered, as
the case may be, to the other parties hereto such other documents,
instruments, certificates and opinions as may be required by this Agreement.
SECTION 8. CLOSING ADJUSTMENTS.
8.1 Casualty or Condemnation.
(a) If, prior to the Closing Date, there shall be any damage
or destruction to all or any portion of the Shopping Center by fire or other
casualty, the Contributors shall give notice thereof to PREIT promptly after
the Contributors become aware of it. Unless such damage or destruction is
reasonably likely to result in a material adverse effect on the operations or
profitability of the Shopping Center, such damage or destruction shall not
entitle PREIT or the Partnership to terminate this Agreement; provided,
however, that the number of Class A Units deliverable pursuant to Section 3
and Schedule A shall be reduced by 50% of the value of all material damage or
destruction to the extent that such damage or destruction is not fully insured
by insurance carried by the Project Partnership or reimbursed by tenants.
(b) If prior to the Closing Date, condemnation or eminent
domain proceedings are commenced against the Shopping Center, the Contributors
shall give notice thereof to PREIT promptly after the Contributors become
aware of the same. Unless the taking contemplated by such condemnation or
eminent domain proceeding is reasonably likely to result in a material adverse
effect on the operations or profitability of the Shopping Center as a whole,
such condemnation or eminent domain proceeding shall not entitle PREIT or the
Partnership to terminate this Agreement; provided, however, that the number of
Class A Units deliverable pursuant to Section 3 and Schedule A hereto shall be
reduced by the excess, if any, of the Deemed Value (as defined in Schedule A
hereto) over 50% of the aggregate condemnation proceeds received or to be
received by the Project Partnership in respect of such condemnation. PREIT
shall have the right to participate in the negotiation of the award to be made
for such taking (to the extent that the Contributors have such right), and the
-32-
<PAGE>
Contributors shall not agree to any proposed award or execute a deed in lieu
of condemnation without PREIT's prior written consent. The applicable
percentage of any condemnation award payable with respect to the taking of all
or any portion the Shopping Center shall be assigned to the Partnership.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by Contributors. The Contributors shall jointly
and severally indemnify, defend and hold harmless PREIT and the Partnership
(collectively, "Buyer Indemnified Persons") against and in respect of any and
all losses, costs, expenses (including, without limitation, costs of
investigation and reasonable defense and attorneys' fees), claims, damages,
obligations, liabilities or diminutions in value, whether or not involving a
third party claim (collectively, "Damages"), arising out of, based upon or
otherwise in respect of: (a) any inaccuracy in or breach of any representation
or warranty of either Contributor made in or pursuant to this Agreement
(including, without limitation, the certificate referred in Section
7.3(a)(ii), which, for this purpose will be deemed to have stated, inter alia,
that the Contributors' representations and warranties in this Agreement were
true and correct as of the Closing Date as if made on the Closing Date); (b)
any breach or nonfulfillment of any covenant or obligation of either
Contributor contained in this Agreement; or (c) any of the matters set forth
on Schedule 9.1(c) hereto.
9.2 Indemnification by PREIT. PREIT shall indemnify, defend and hold
harmless each Contributor against and in respect of any and all Damages
arising out of, based upon or otherwise in respect of: (a) any inaccuracy in
or breach of any representation or warranty of PREIT made in or pursuant to
this Agreement; (b) any breach or nonfulfillment of any covenant or obligation
of PREIT or the Partnership contained in this Agreement; or (c) claims
relating solely to actions taken by the Partnership (or its affiliates) as a
partner in the Project Partnership after Closing as the result of events and
circumstances first occurring after Closing.
9.3 Limitations on Liability.
(a) Neither Contributor shall have any obligation to
indemnify any Buyer Indemnified Person against Damages pursuant to Section
9.1(a) of this Agreement arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to this Agreement
unless and until the aggregate of all such Damages suffered or incurred by the
Buyer Indemnified Persons exceeds $100,000; in which event the Buyer
Indemnified Persons shall be entitled to indemnification for the full amount
of all Damages suffered or incurred; provided, however, that the above
limitation shall not be applicable to any
-33-
<PAGE>
claim for Damages pursuant to Section 9.1(b) or (c) or based upon a breach of
any representation or warranty made in or pursuant to Sections 4.1(a), 4.1(b),
4.1(c), 4.1(g), 4.1(h), 4.2(a), 4.2(b) or 4.2(g) (in the case of a breach of
any of the representations and warranties set forth in Section 4.2(g), other
than due to the existence of liabilities of a nature not required to be
reflected in financial statements prepared in accordance with GAAP of which
the Contributors had no knowledge prior to Closing).
(b) Following Closing, (i) the Contributors shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 9.1 to the extent that such indemnification payment (other than
indemnification payments in respect of fraud or intentional
misrepresentation), when aggregated with all prior indemnification payments
(other than indemnification payments in respect of fraud or intentional
misrepresentation) by or on behalf of the Contributors to Buyer Indemnified
Persons or reasonably paid by or on behalf of the Contributors to third
parties for the benefit of Buyer Indemnified Persons pursuant to this
Agreement, would exceed the Aggregate Value (as hereafter defined) and (ii)
each partner or shareholder of either Contributor (collectively, "Applicable
Beneficial Owners") other than Ronald Rubin and George Rubin (or affiliates
controlled by either of them or members of their families) shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 9.1 to the extent that such indemnification payment, when aggregated
with all prior indemnification payments by or on behalf of such Applicable
Beneficial Owner to Buyer Indemnified Persons or reasonably paid by or on
behalf of such Applicable Beneficial Owner to third parties for the benefit of
Buyer Indemnified Persons pursuant to this Agreement, would exceed the
Proportionate Aggregate Value (as defined below) attributable to such
Applicable Beneficial Owner; provided, however, that the limitation of this
subclause (ii) shall not apply to the extent an indemnity claim is brought
with respect to a matter involving fraud or intentional misrepresentation by
such Applicable Beneficial Owner. The "Aggregate Value" means an amount equal
to the value of all Class A Units theretofore issued pursuant to Section 3,
such value to be calculated by multiplying the number of units times the per
share Value (as defined in the Amended Partnership Agreement) of a PREIT Share
as of the date of issuance of such units.
(c) Following Closing, the liability of each Applicable
Beneficial Owner for each indemnity claim pursuant to Section 9.1 shall be
limited to that fraction of the aggregate Damages incurred by Buyer
Indemnified Persons with respect to such claim that is equal to the quotient
whose numerator equals the portion of the Aggregate Value attributable to
units (or proceeds of units) theretofore distributed to such Applicable
Beneficial Owner by a Contributor (the "Proportionate Aggregate Value") and
the denominator of which equals the Aggregate Value;
-34-
<PAGE>
provided, however, that the foregoing shall not limit the liability of Ronald
Rubin or George Rubin (or affiliates controlled by either of them or members
of their families), each of whom shall be jointly and severally liable for
100% of the aggregate Damages incurred (subject to the cap on aggregate
Damages set forth above in subclause (i) of Section 9.3(b)) and provided
further that the foregoing limitation shall not apply to the extent that an
indemnity claim is brought with respect to a matter involving fraud or
intentional misrepresentation by such Applicable Beneficial Owner.
(d) No claim arising out of or based upon any inaccuracy in
or breach of any representation or warranty made in or pursuant to this
Agreement shall be made unless a claim arises and written notice is delivered
to the indemnifying party within the Basic Claims Period (as defined below);
provided that any such claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to Sections
4.1(a), 4.1(b) or 4.1(h) may be made at any time. For purposes hereof, "Basic
Claims Period" means the period beginning on the date hereof and ending on the
date five months after the fiscal year end for the first full fiscal year of
PREIT after the closing under the TRO Contribution Agreement.
(e) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the Contributor Disclosure Letter. The waiver by PREIT of any condition
based on the accuracy of any representation or warranty, or compliance with
any covenant or obligation, will not affect any right to indemnification based
on such representations, warranties, covenants and obligations unless
otherwise expressly agreed in writing by PREIT. To the extent that any claim
for indemnification may be made under Section 9.1(a) and Section 9.1(c), then
such claim shall be deemed for all purposes to have arisen only under Section
9.1(c) and not under Section 9.1(a).
(f) Each party's rights under this Section 9 shall be its
sole remedy against the other parties in respect of the subject matter hereof,
subject to a party's rights, if any, to seek and obtain specific performance.
9.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 9 relates, such indemnified party shall, if a
claim is to be made against an
-35-
<PAGE>
indemnifying party under Section 9, give notice to the indemnifying party of
the commencement of such proceeding, but the failure to so notify the
indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such proceeding is
materially prejudiced by the indemnified party's failure to give such notice.
(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under Section 9 for any fees of
other counsel or any other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a proceeding,
(A) it will be conclusively established for purposes of this Agreement that
the claims made in that proceeding are within the scope of and subject to
indemnification; (B) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (1) there is no finding or admission of any violation of Law by the
indemnified party (or any affiliate thereof) or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party, and (2) the sole relief provided is monetary damages that
are paid in full by the indemnifying party. The indemnified party will have no
liability with respect to any compromise or settlement of the claims
underlying such proceeding effected without its consent. If notice is given to
an indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding or any compromise or settlement
effected by the indemnified party.
-36-
<PAGE>
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice
to the indemnifying party, assume the exclusive right to defend, compromise,
or settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent.
9.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the
party from whom indemnification is sought.
9.6 Distributions of Class A Units by Contributors. Neither
Contributor shall distribute or otherwise transfer to any of its partners or
shareholders or any other Person Class A Units issued pursuant to this
Agreement (or proceeds thereof other than distributions on such units) unless
such partner, shareholder or other Person first executes and delivers to PREIT
an agreement, in form and substance reasonably satisfactory to PREIT, by which
such Person would join in and become a party to this Agreement for purposes of
the indemnification provisions hereof.
9.7 Indemnification Payments. The Contributors and the Applicable
Beneficial Owners shall be entitled to use cash or Class A Units to make
indemnification payments hereunder. In the event Class A Units are used, each
such unit shall be valued based on the per share Value (as defined in the
Amended Partnership Agreement) of a PREIT Share as of the date such unit is
tendered to PREIT as an indemnification payment hereunder.
SECTION 10. TERMINATION AND ABANDONMENT.
10.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(i) by PREIT or RO,Inc., if the Closing has
not occurred (other than through the failure of the party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on
or before December 31, 1997, or such later date as the parties may mutually
agree upon in writing;
(ii) by mutual consent of PREIT and RO,Inc.;
(iii) by the Contributors, on the one hand,
or PREIT and the Partnership, on the other hand, if a material
breach of any provision of this Agreement has been committed by
-37-
<PAGE>
the other and such breach has not been waived or cured on or
before the Closing Date to the sole satisfaction of PREIT; or
(iv) by PREIT, if any of the conditions in
Section 7.2(a) have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of PREIT or the Partnership to comply with its obligations under
this Agreement) and PREIT has not waived all such unsatisfied conditions
before termination pursuant to this subparagraph (iv); or
(v) by RO,Inc. if any of the conditions in
Section 7.2(b) have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of either Contributor to comply with its obligations hereunder)
and RO,Inc. has not waived all such unsatisfied conditions before termination
pursuant to this subparagraph (v); or
(vi) by any party hereto if the TRO Contribution Agreement is
terminated prior to the consummation of the TRO Closing.
10.2 Procedure for Termination; Effect of Termination. A party
terminating this Agreement pursuant to this Section 10 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by any party and all further obligations of the parties under this Agreement
will terminate; provided, however, that if such termination is pursuant to
Section 10.1(iii), the terminating party's right to pursue all legal remedies
(including damages and/or specific performance) contemplated by Section 9 will
survive such termination unimpaired.
SECTION 11. GENERAL PROVISIONS.
11.1 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties
in this Agreement and in the certificates, documents and other agreements
delivered pursuant hereto shall survive the Closing, subject to the terms and
conditions of Section 9 above. Anything in this Agreement to the contrary
notwithstanding: (i) the representations and warranties of the Contributors
and the right of the Buyer Indemnified Persons to indemnification for breach
thereof, shall not be affected by any investigation of the Contributors or the
Project Partnership made by PREIT or its agents or representatives; and (ii)
the representations and warranties of PREIT hereunder, and the right of the
Contributors to indemnification for breach thereof, shall not be affected by
-38-
<PAGE>
any investigation of PREIT or its affiliates made by the Contributors or its
agents or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the Contributor
Disclosure Letter (other than an express exception to a specifically
identified statement), those in this Agreement shall control.
11.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer taxes, recording and filing fees and all costs associated with
obtaining the title insurance or endorsements thereto contemplated herein in
connection with the transactions contemplated herein shall be borne by PREIT
or the Partnership. The parties contemplate that the transfer of the Interests
in accordance with the procedures and the time periods set forth in Schedule A
will not be subject to transfer tax. In the event either the Project
Partnership or a Contributor makes or causes a transfer of Interests not in
accordance with the procedures and time periods set forth herein and in the
Partnership Agreement, then the Project Partnership or such Contributor making
or causing such transfer shall be responsible for the payment of any transfer
tax and all title insurance premiums and title company charges and recording
costs due as a result thereof.
11.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be
deemed to have been given as of the date received, in the case of personal
delivery, or on the date shown on the receipt or confirmation therefor in all
other cases.
-39-
<PAGE>
To PREIT or the Partnership:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the Contributors:
c/o The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esquire
11.4 Access to Information; Confidentiality. Between the date of this
Agreement and the Closing Date, PREIT, on the one hand, and the Contributors,
on the other hand, will give to the other party and its officers, employees,
counsel, accountants and other representatives free and full access to and the
right to inspect, during normal business hours, all of the assets, records,
facilities, properties and Contracts relating to its business as the other
party may reasonably request. Each party shall acquire and hold all
confidential information that has been made available by another party hereto
subject to the terms and conditions of Section IV of the Letter Agreement
dated as of April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the
terms of which section are hereby incorporated by reference and which shall
remain in force through the Closing.
11.5 Public Announcements. Except as and to the extent required by Law
or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the
-40-
<PAGE>
Contributors, on the one hand, and PREIT and the Partnership, on the other
hand, will not, and each will direct its representatives not to, directly or
indirectly, make any public comment, statement or communication with respect
to, or otherwise disclose or permit the disclosure of any of the terms,
conditions or other aspects of the transactions contemplated hereby; provided,
however, that PREIT may issue a press release, in the form previously
circulated by PREIT to TRO, regarding, among other things, the execution of
this Agreement; and further provided that PREIT and TRO may each continue such
communications with principals, partners, lenders, trustees, attorneys,
accountants, investment bankers, consultants engaged by PREIT and TRO,
including abstract companies, title companies, engineers and architects,
Claude de Botton and his affiliates, Kenneth N. Goldenberg and his affiliates,
EPD and its affiliates, and, if agreed in each case by PREIT and TRO, others
as may be legally required or necessary in connection with the consummation of
the transactions contemplated by this Agreement.
11.6 No Solicitation. Each Contributor shall not, each Contributor
shall cause its officers, employees, partners, representatives and agents not
to, directly or indirectly, continue, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any nonpublic
information to, any Person (other than PREIT and the Partnership and their
respective representatives in connection with the transactions contemplated by
this Agreement) concerning any sale of assets (other than in the ordinary
course of its business consistent with past practice) or shares of capital
stock or partnership interests of either Contributor or any merger,
consolidation, recapitalization, liquidation or similar transaction involving
either Contributor (collectively, an "Acquisition Transaction"). Each
Contributor will promptly communicate to PREIT the terms of any inquiry or
proposal that it or he may receive in respect of an Acquisition Transaction.
11.7 Entire Agreement. This Agreement, together with the Schedules,
Contributor Disclosure Letter, and certificates referred to herein or
delivered pursuant hereto, constitute the entire agreement between the parties
hereto with respect to its subject matter and supersede all prior and
contemporaneous agreements and understandings with respect to the subject
matter hereof.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to
constitute but one and the same Agreement.
11.9 Governing Law. This Agreement is made pursuant to, and
shall be construed and enforced in accordance with, the laws of
-41-
<PAGE>
the Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of laws.
11.10 Section Headings, Captions and Defined Terms. The section
headings and captions contained herein are for reference purposes only and
shall not in any way affect the meaning and interpretation of this Agreement.
The terms defined herein and in any agreement executed in connection herewith
include the plural as well as the singular, and the use of masculine pronouns
include the feminine and neuter. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented
or the terms thereof waived or modified in accordance herewith and therewith.
11.11 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing. The waiver by any party of any provision of this Agreement
shall not constitute or operate as a waiver of any other provision hereof, nor
shall any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision.
11.12 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.13 Liability of Trustees, etc. No recourse shall be had for any
obligation of PREIT hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of PREIT, whether by virtue of any statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by each other party hereto.
-42-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement, all as of the date first written above.
RUBIN OXFORD, INC.
By: /s/ Ronald Rubin
---------------------------------
Name:
Title:
RUBIN OXFORD VALLEY ASSOCIATES,
L.P.
By: Rubin Oxford, Inc., its
general partner
By: /s/ Ronald Rubin
-------------------
Name:
Title
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
-----------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
-----------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general
partner
By: /s/ Jonathan B. Weller
----------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
----------------------------
Name:
Title:
-43-
<PAGE>
FIRST AMENDMENT TO
CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION AGREEMENT is made as of
September 30, 1997 by and among RUBIN OXFORD, INC. ("RO, Inc."), a Pennsylvania
corporation, RUBIN OXFORD VALLEY ASSOCIATES, L.P. ("RO,L.P."), a Pennsylvania
limited partnership, PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a Pennsylvania
business trust ("PREIT"), and PREIT ASSOCIATES, L.P., a Delaware limited
partnership (the "Partnership").
Background
The parties hereto are parties to a Contribution Agreement
dated as of July 30, 1997 (the "Original Agreement") relating to The Court at
Oxford Valley, Langhorne, Pennsylvania.
The parties desire to enter into this Agreement to (i) amend
the Original Agreement to provide for the contribution of RO,Inc.'s Interests
in the Project Partnership to PR Oxford Valley Trust, a Pennsylvania business
trust ("PROV"), the outstanding beneficial interests in which are owned by the
Partnership and (ii) to provide for a post-closing adjustment.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Original Agreement.
2. Amendment Relating to Contributors. Section 2 of the
Original Agreement is hereby amended as follows:
(a) by inserting the words "and PR Oxford Valley
Trust, a Pennsylvania business trust," immediately following the word
"Partnership" each time it appears in the third line of Section 2;
(b) by inserting the words "(in accordance with
Sections 4(a) and 4(b) of Schedule A hereto)" immediately following the word
"Interests" in line seven of Section 2.
3. Amendment Relating to Certain Actions at Closing.
(a) Section 4(a) of Schedule A to the Original
Agreement is hereby amended by substituting the words "PR Oxford Valley Trust,
a Pennsylvania business trust ("PROV")," for the
<PAGE>
words "the Partnership" appearing in the second line of Section 4(a).
(b) Section 4(c) of Schedule A to the Original
Agreement is hereby amended by:
(i) substituting the words "Each of the
Partnership and PROV" for the words "The Partnership" in the first line of
Section 4(c);
(ii) inserting the words "PROV and"
immediately prior to the words "the Partnership" in the seventh
line of Section 4(c); and
(iii) inserting the word ",respectively"
immediately following the word "partner" in the last line of Section 4(c).
(c) Section 4(d) of Schedule A to the Original
Agreement is hereby amended by:
(i) substituting the words "Each of the
Partnership and PROV" for the words "the Partnership" in the first line of
Section 4(d); and
(ii) inserting the words "and/or PROV"
immediately following the word "Partnership" in the second and eighth lines of
Section 4(d).
4. Indemnity. In connection with PROV's assumption of
RO,Inc.'s general partner interest, the Partnership shall indemnify and hold
RO,Inc. harmless from and against any and all obligations and liabilities
arising from a breach of or a default under the Project Partnership Agreement by
PROV from and after the date hereof in its capacity as general partner of the
Project Partnership other than any breach or default under the Project
Partnership Agreement that arises on or prior to the date hereof.
5. Post-Closing Adjustment. Section 6 of the Original
Agreement is hereby amended by the addition of a new Section 6.3 to read in its
entirety as follows:
"Section 6.3 Closing Balance Sheet; Post-Closing
Adjustment.
(a) Prior to Closing, the Contributors shall cause to
be prepared and delivered to PREIT a balance sheet of the Project Partnership as
of the Closing Date, prepared in accordance with GAAP, provided that the
accounts receivable of the Project Partnership as of the Closing shall be
accounted for in accordance with the applicable parenthetical in Section 3(b) of
Schedule A to the Original Agreement (the "Estimated Closing
-2-
<PAGE>
Balance Sheet"). The calculation of Deemed Value on the Closing Date shall be
based upon the Estimated Closing Balance Sheet.
(b) Following Closing, the Partnership shall cause a
balance sheet of the Project Partnership as of Closing (the "Closing Balance
Sheet") to be prepared in accordance with GAAP (provided that the accounts
receivable of the Project Partnership shall be accounted for in accordance with
the applicable parenthetical in Section 3(b) of Schedule A to the Original
Agreement) and the TRO Shareholders shall use their best efforts to cause the
Project Partnership and its managing general partner to cooperate with the
Partnership and its representatives in the preparation of such balance sheet and
to provide full access to the Project Partnership's books and records in
connection therewith. The Partnership shall use all reasonable efforts to
deliver to RO,L.P. a copy of the Closing Balance Sheet within 60 days of the
Closing Date. Unless RO,L.P. notifies the Special Committee within 10 days after
receipt of the Closing Balance Sheet of any objections thereto (specifying in
reasonable detail the basis therefor), such Closing Balance Sheet shall be
deemed the definitive Closing Balance Sheet. If RO,L.P. timely notifies the
Special Committee of any such objection, RO,L.P. and the Special Committee shall
attempt in good faith to reach an agreement as to the matters in dispute. If
RO,L.P. and the Special Committee shall have failed to resolve such disputed
matter within 10 business days after receipt of timely notice of such objection,
then any such disputed matter shall, at the instance of the Special Committee or
RO,L.P., be submitted to and resolved by any nationally recognized accounting
firm mutually acceptable to the Special Committee and RO,L.P. The fees and
expenses of such accounting firm incurred in resolving the disputed matters
shall be equitably apportioned by such accountants based upon the extent to
which the Special Committee, on the one hand, or RO,L.P., on the other hand, is
determined by such accountants to be the prevailing party in the resolution of
such disputed matters. The Closing Balance Sheet shall, after resolution of any
disputes pursuant to this Section 6.3(b), be deemed to be the definitive Closing
Balance Sheet.
(c) If there is a Net Deficit (as defined below) as
of the Closing Date, as conclusively determined based upon the definitive
Closing Balance Sheet, then RO,L.P. shall transfer, assign and convey, free and
clear of all Encumbrances, to the Partnership for cancellation a number of Class
A Units having a value (based upon a value of $23.40 per Class A Unit) equal to
the aggregate amount of the Net Deficit. If there is a Net Surplus (as defined
below) as of the Closing Date, as conclusively determined based upon the
definitive Closing Balance Sheet, then the Partnership shall issue and deliver
to RO,L.P. an additional number of Class A Units having a value (based upon a
value of $23.40 per Unit) equal to the aggregate amount of such Net Surplus.
-3-
<PAGE>
(d) Any payment pursuant to subparagraph (c) above
shall be made within 5 days following the date on which the Closing Balance
Sheet becomes the definitive Closing Balance Sheet as contemplated above,
provided, however, that if at any time prior to the time the Closing Balance
Sheet becomes definitive the Special Committee and RO,L.P. mutually agree that
following final determination of the Closing Balance Sheet (and the relevant
calculation based thereon) a payment will be required to be made pursuant to
subparagraph (c), the amount of such payment that the parties do not dispute
shall then be paid.
(e) For purposes of this Section 6.3, "Net Deficit"
means the excess, if any, of the Deemed Value (as defined in paragraph 3 of
Schedule A) calculated based upon the Estimated Closing Balance Sheet over the
Deemed Value calculated based upon the definitive Closing Balance Sheet, and
"Net Surplus" means the excess, if any, of Deemed Value calculated based upon
the definitive Closing Balance Sheet over the Deemed Value calculated based upon
the Estimated Closing Balance Sheet.
(f) The provisions of this Section 6.3 shall in no
way limit or alter any of the representations, warranties and covenants of the
parties made herein and following the preparation of the Closing Balance Sheet
and the payment of any amounts due pursuant to this Section 6.3, PREIT and the
Partnership shall continue, inter alia, to have all rights available to them
pursuant to Section 9 hereof."
6. Confirmation. The Original Agreement, as amended hereby, is
ratified and confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement, all as of the date first above written.
RUBIN OXFORD, INC.
By: /s/ Ronald Rubin
---------------------------------------
Name:
Title:
RUBIN OXFORD VALLEY ASSOCIATES, L.P.
By: Rubin Oxford, Inc., its
general partner
By: /s/ Ronald Rubin
-----------------------------
Name:
Title:
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
---------------------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By: /s/ Jonathan B. Weller
-----------------------------
Name:
Title:
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Hillview Shopping Center, Cherry Hill, New Jersey
Cherry Hill Partner, Inc.
Rubin Oxford Valley Associates, L.P.
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................... 2
SECTION 2. CONTRIBUTIONS......................................... 2
SECTION 3. CONSIDERATION......................................... 2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTORS.......................................... 2
4.1 As to the Contributors................................ 2
4.2 As to the Project Partnership......................... 7
4.3 As to the Shopping Center............................. 15
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT........ 21
5.1 Organization.......................................... 21
5.2 Power and Authority................................... 21
5.3 No Conflicts.......................................... 22
5.4 Capitalization........................................ 23
5.5 PREIT Reports......................................... 23
5.6 Litigation............................................ 24
5.7 Material Adverse Change............................... 24
5.8 Brokers............................................... 24
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS...................... 24
6.1 Conduct of Business................................... 24
6.2 Reasonable Efforts.................................... 26
6.3 Notifications......................................... 26
6.4 Operation of Shopping Center.......................... 27
6.5 Preference Amount..................................... 27
6.6 Interest Rate Swap.................................... 27
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES....... 28
7.1 Time of Closing....................................... 28
7.2 Closing Conditions.................................... 28
7.3 Deliveries at the Closing............................. 33
SECTION 8. CLOSING ADJUSTMENTS................................... 34
8.1 Adjustment for Breaches by the Contributors........... 34
8.2 Casualty or Condemnation.............................. 34
SECTION 9. INDEMNIFICATION....................................... 35
9.1 Indemnification by Contributors....................... 35
9.2 Indemnification by PREIT.............................. 36
9.3 Limitations on Liability.............................. 36
9.4 Procedure For Indemnification - Third Party Claims.... 38
9.5 Procedure for Indemnification - Other Claims.......... 39
9.6 Distributions of Class A Units by Contributors........ 40
9.7 Right of Set-Off...................................... 40
9.8 Indemnification Payments.............................. 40
-i-
<PAGE>
SECTION 10. TERMINATION AND ABANDONMENT........................... 40
10.1 Termination........................................... 40
10.2 Procedure for Termination; Effect of
Termination........................................... 41
SECTION 11. GENERAL PROVISIONS.................................... 41
11.1 Survival of Representations and Warranties............ 41
11.2 Costs and Expenses.................................... 42
11.3 Notices............................................... 42
11.4 Access to Information; Confidentiality................ 43
11.5 Public Announcements.................................. 43
11.6 No Solicitation....................................... 44
11.7 Entire Agreement...................................... 44
11.8 Counterparts.......................................... 44
11.9 Governing Law......................................... 44
11.10 Section Headings, Captions and Defined Terms.......... 45
11.11 Amendments, Modifications and Waiver.................. 45
11.12 Severability.......................................... 45
11.13 Liability of Trustees, etc............................ 45
-ii-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Hillview Shopping Center, Cherry Hill, New Jersey
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 30th
day of July, 1997, by and among CHERRY HILL PARTNER, INC., a New Jersey
corporation ("CHP,Inc."), RUBIN OXFORD VALLEY ASSOCIATES, L.P., a Pennsylvania
limited partnership ("RO,L.P." and, together with CHP,Inc., the "Contributors,"
and, each, a "Contributor"), PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an
unincorporated association in business trust form created under Pennsylvania law
pursuant to a Trust Agreement dated December 27, 1960, as last amended and
restated on December 16, 1987 ("PREIT"), and PREIT ASSOCIATES, L.P., a Delaware
limited partnership (the "Partnership").
Background
The Contributors are affiliates of The Rubin Organization, Inc., a
Pennsylvania corporation ("TRO").
This Contribution Agreement is part of a larger transaction described
in the TRO Contribution Agreement of even date herewith (the "TRO Contribution
Agreement") among PREIT, TRO, The Rubin Organization-Illinois, Inc. and the
shareholders of TRO.
The Partnership has been formed by PREIT and PREIT Property Trust, a
Pennsylvania business trust ("PREIT Subsidiary"), pursuant to the terms of the
Agreement of Limited Partnership dated as of June 30, 1997 (the "Partnership
Agreement") of PREIT Associates, L.P. between PREIT, as general partner, and
PREIT Subsidiary, as limited partner.
Subject to the terms and conditions of this Agreement and the TRO
Contribution Agreement, the parties intend that the Contributors will contribute
their partnership interests (the "Interests") in Cherry Hill Associates, L.P., a
New Jersey limited partnership (the "Project Partnership"), which holds title to
the shopping center known as the Hillview Shopping Center, Cherry Hill, New
Jersey, as more fully described in Schedule B attached hereto and made a part
hereof (the "Shopping Center"), in exchange for Class A limited partner
interests in the Partnership ("Class A Units").
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
SECTION 1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall
have the same meanings as ascribed to such terms in the TRO Contribution
Agreement.
SECTION 2. CONTRIBUTIONS.
Subject to the terms and conditions of this Agreement, at the Closing
(as defined in Section 7.1), the Contributors shall contribute to the
Partnership, and the Partnership shall acquire from the Contributors, free and
clear of all Encumbrances (other than applicable securities law restrictions and
subject to the terms and conditions of the limited partnership agreement for the
Project Partnership), the Interests and all benefits and advantages to be
derived therefrom, including, without limitation, all right, title and interest
associated with the Interests in and to the capital accounts of the
Contributors, rights of the Contributors to distributions made after the Closing
and allocable shares of the Contributors with respect to profits and losses.
SECTION 3. CONSIDERATION.
In consideration for the contributions described in Section 2, subject
to the terms and conditions of this Agreement, at the Closing, the Partnership
shall issue to the Contributors that number of Class A Units as is set forth in
Schedule A hereto (which is incorporated by reference herein) as being issuable
at the Closing. Following Closing, the Partnership shall issue to the
Contributors at the times specified in Schedule A that number of Class A Units
as are issuable, in accordance with Schedule A, following Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.
The Contributors hereby jointly and severally represent and warrant
to PREIT and the Partnership as follows:
4.1 As to the Contributors.
(a) Organization. Each Contributor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all corporate or partnership power to carry on its business
as presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. Each Contributor is
duly qualified to do business as a foreign corporation or foreign partnership
and is in good standing under the laws of each jurisdiction in which its
ownership or leasing of assets or properties or the nature of its
-2-
<PAGE>
activities requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the condition (financial
or otherwise), assets, results of operations or business of such Contributor (a
"Material Adverse Effect").
(b) Power and Authority. Each Contributor has all requisite
corporate or partnership power and authority to execute, deliver and perform its
obligations under this Agreement and under the other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Contributor Transaction Documents"). The execution, delivery and performance by
each Contributor of this Agreement and the other Contributor Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate or partnership action on the part of such Contributor. This Agreement
has been duly and validly executed and delivered by each Contributor and
constitutes a legal, valid and binding obligation of each Contributor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles. When executed and delivered as contemplated herein, each of the
other Contributor Transaction Documents to which a Contributor is a party shall,
assuming due authorization, execution and delivery thereof by the other parties
thereto, constitute a legal, valid and binding obligation of such Contributor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
(c) No Conflicts; etc. Except as described in Section 4.1(c)
of the disclosure letter delivered by the Contributors to PREIT on the date
hereof (the "Contributor Disclosure Letter"), the execution and delivery by the
Contributors of this Agreement do not, and the performance by the Contributors
of all of the Contributor Transaction Documents will not (with or without the
passage of time or the giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A) the
articles of incorporation, bylaws or partnership agreement (or other
organizational documents) of either Contributor or (B) any Law applicable to
either Contributor, or by or to which any assets or properties of either
Contributor is bound or subject;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit under, or give to
others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any Authorization or
-3-
<PAGE>
Contract to which either Contributor is a party or by which either Contributor
or any assets or properties thereof is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to either Contributor, the
Interests or any of their other assets or properties.
(d) Except as set forth in Section 4.1(d) of the Contributor
Disclosure Letter, the execution and delivery by the Contributors of this
Agreement do not, and the execution and delivery by the Contributors of the
other Contributor Transaction Documents, and the performance by the Contributors
of all of the Contributor Transaction Documents will not, require either
Contributor to obtain any authorization of, or to make any filing, registration
or declaration with or notification to, any court, government or governmental
agency or instrumentality (federal, state, local or foreign) or to obtain the
consent, waiver or approval of, or give any notice to, any other Person.
(e) Except as set forth in Section 4.1(e) of the Contributor
Disclosure Letter, there are no actions, proceedings or investigations pending
or, to the knowledge of the Contributors, threatened, that question any of the
transactions contemplated by this Agreement or which, if adversely determined,
would have a Material Adverse Effect or could materially and adversely affect
either Contributor's ability to enter into or perform its obligations under this
Agreement.
(f) Litigation; Orders.
(i) Except as set forth in Section 4.1(f) of the
Contributor Disclosure Letter, there are no, and since January 1, 1996 there
have not been any, claims, actions, suits, proceedings (arbitration or
otherwise) or, to the knowledge of the Contributors, investigations involving or
affecting either Contributor or any of their assets or properties or any of
their directors, officers, partners or shareholders in their capacities as such,
before or by any court, government or governmental agency or instrumentality
(federal, state, local or foreign), or before an arbitrator of any kind. To the
knowledge of the Contributors, no such claim, action, suit, proceeding or
investigation is presently threatened or contemplated. There are no unsatisfied
judgments, penalties or awards against or affecting either Contributor or any of
their assets or properties.
(ii) There is no material Order to which either
Contributor or any of their assets or properties is subject. No officer,
director, partner, shareholder or, to the knowledge of the Contributors,
employee of either Contributor is
-4-
<PAGE>
subject to any Order that prohibits such officer, director, partner, shareholder
or employee from engaging in or continuing any conduct, activity or practice
relating to its business. The Contributors have each complied in all respects
with the terms and conditions of each Order applicable to them.
(g) Undisclosed Liabilities. Except as set forth in Section
4.1 (g) of the Contribution Disclosure Letter, there are no liabilities or
obligations of the Contributors of any nature (whether absolute, accrued,
contingent, liquidated or unliquidated or otherwise) except the obligations
under the limited partnership agreement governing RO,L.P. and under the
Agreement of Limited Partnership dated as of November 1, 1996 (the "Project
Partnership Agreement") among RO,L.P., Cherry Hill Partner, Inc., and Goldenberg
CH Partners, L.P. ("Goldenberg CH"), the partnership agreement governing the
Project Partnership, and the obligations of RO,L.P. under the Amended and
Restated Limited Partnership Agreement of Oxford Valley Road Associates dated
June 27, 1996, among Rubin Oxford, Inc., RO,L.P., OVG General, Inc. ("OVG"),
Goldenberg Investors, L.P., Goldenberg Partners, L.P. and Milton S. Schneider,
and that certain Contribution Agreement relating to The Court at Oxford Valley
of even date herewith among Rubin Oxford, Inc., RO,L.P., PREIT and the
Partnership.
(h) The Interests.
(i) Section 4.1(h) of the Contributor Disclosure Letter
contains an accurate and complete description of the partnership interests in
the Project Partnership that have been issued of record, but the Contributors
make no representation or warranty that the partnership interests or equity
issued to Persons other than the Contributors have not been later assigned or
encumbered. Except as described therein, no Person has any partnership or other
interest in the Project Partnership or any right to receive any distributions
from the Project Partnership or be allocated any profits or losses of the
Project Partnership (provided, however, that with respect to the ownership of
the partner interests in the Project Partnership other than the Interests, this
representation is limited to the Contributors' knowledge). Each Contributor
owns, beneficially and of record, the portion of the Interests described in
Schedule A hereto, free and clear of all Encumbrances other than the Project
Partnership Agreement. The Persons listed in Section 4.1(h) of the Contributor
Disclosure Letter are the sole partners in the Project Partnership (provided,
however, that with respect to the ownership of the partner interests in the
Project Partnership other than the Interests, this representation is limited to
the Contributors' knowledge). The issued and outstanding partnership interests
in the Project Partnership have been issued by the Project Partnership in
compliance with the Project Partnership Agreement, and such interests were not
issued
-5-
<PAGE>
by the Project Partnership in violation of any federal or state securities laws.
(ii) Except for this Agreement and except as provided in
the Project Partnership Agreement or in leases with tenants (any such rights in
leases shall be customary in projects comparable to the Shopping Center and
shall not prejudice the value of the Shopping Center as calculated in Schedule A
hereto), there are no rights, subscriptions, warrants, options, rights of first
refusal, conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any partnership interests or other securities or
obligations of any kind convertible into any partnership interest or other
securities or any participation interests of any kind in the Shopping Center (or
any portion thereof) or the Project Partnership; (provided, however, that with
respect to the partner interests in the Project Partnership other than the
Interests, this representation is limited to the Contributors' knowledge).
(iii) Upon execution and delivery by the Contributors and
the Partnership of the assignment and assumption agreement contemplated by
Section 7.3, the Partnership will acquire good and valid title to the Interests,
free and clear of all Encumbrances (except for applicable securities law
restrictions and for the Project Partnership Agreement).
(iv) The Contributors have delivered to the Partnership
on the date hereof a true and complete copy of the Project Partnership
Agreement, as amended to date.
(i) Brokers. No Person acting on behalf of either Contributor
or any of their respective affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, from any of such parties in
connection with any of the contribution transactions contemplated by this
Agreement.
(j) Accurate Disclosure. All documents and other papers
delivered by or on behalf of either Contributor in connection with the
transactions contemplated by this Agreement are accurate and complete in all
material respects.
(k) Knowledge. For purposes of this Agreement, "to the
knowledge of the Contributors" and correlative terms means the actual knowledge
of Ronald Rubin, George Rubin, Edward Glickman and the officers and other senior
management of each Contributor (or in the case of RO,L.P., its partners), after
reasonable inquiry (with respect to Sections 4.1(h)(i) and 4.1(h)(ii),
reasonable inquiry shall be construed to mean that inquiry has been made to
Goldenberg CH or its affiliates (the "Goldenberg Group") by the Contributors).
-6-
<PAGE>
(l) Investment Representations.
(i) Each Contributor acknowledges that the Class A Units
to be issued pursuant to Section 3 and Schedule A hereto will not be registered
under the 1933 Act on the grounds that the issuance of such units is exempt from
registration pursuant to Section 4(2) of the 1933 Act and/or Regulation D
promulgated under the 1933 Act, and that the reliance of the Partnership on such
exemptions is predicated in part on the Contributors' representations,
warranties and acknowledgements set forth in this section.
(ii) The Class A Units issued in accordance with this
Agreement will be acquired by each Contributor for its own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the 1933 Act, and the rules and regulations thereunder, and neither
Contributor will distribute any of such units in violation of the 1933 Act.
(iii) Each Contributor (v) acknowledges that the Class A
Units, when issued, will not be registered under the 1933 Act and such units
will have to be held indefinitely by it unless they are subsequently registered
under the 1933 Act or an exemption from registration is available, (w) is aware
that any sales of such units made under Rule 144 of the Securities and Exchange
Commission under the 1933 Act may be made only in limited amounts and in
accordance with the terms and conditions for that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (x) is aware that Rule 144 may not be available for
use by either Contributor for resale of the units, (y) is aware that the
Partnership is under no obligation to register, and has no current intention of
registering any of such units under the 1933 Act and (z) acknowledges that such
Contributor has received and read a private placement memorandum relating to the
offer of Class A Units.
(iv) Each Contributor is well versed in financial
matters, has had dealings over the years in securities, including "restricted
securities," and is fully capable of understanding the type of investment being
made in the Class A Units and the risks involved in connection therewith.
4.2 As to the Project Partnership.
(a) Organization. The Project Partnership is a partnership
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has all partnership power to carry on its business as
presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. The Project
-7-
<PAGE>
Partnership is duly qualified to do business as a foreign partnership and is in
good standing under the laws of each jurisdiction in which its ownership or
leasing of assets or properties or the nature of its activities requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of the Project Partnership.
(b) No Conflicts. Except as described in Section 4.2(b) of
the Contributor Disclosure Letter, the execution and delivery by the
Contributors of this Agreement do not, and the execution and delivery by the
Contributors of the other Contributor Transaction Documents and the performance
by the Contributors of all of the Contributor Transaction Documents will not
(with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the Project
Partnership Agreement, or (B) any Law applicable to the Project Partnership or
to the Shopping Center;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit under, or give to
others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or Contract to which the Project Partnership is a party or by which the Project
Partnership or the Shopping Center is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to the Project Partnership,
the Shopping Center or any other material assets or properties of the Project
Partnership.
(c) Except as set forth in Section 4.2(c) of the Contributor
Disclosure Letter, the execution and delivery by the Contributors of this
Agreement do not, and the performance by the Contributors of all of the
Contributor Transaction Documents will not, require the Project Partnership to
obtain any authorization of, or to make any filing, registration or declaration
with or notification to, any court, government or governmental agency or
instrumentality (federal, state, local or foreign) or to obtain the consent,
waiver or approval of, or give any notice to, any other Person.
(d) Compliance with Laws.
(i) Except as disclosed in Section 4.2(d) of the
Contributor Disclosure Letter, the Project Partnership is, and, to the knowledge
of the Contributors, at all times since its
-8-
<PAGE>
inception has been, in compliance in all material respects with all Laws that
are or were applicable to it or to the conduct or operation of its business or
the use of the Shopping Center. The Project Partnership has not received, and
there is no basis upon which the Project Partnership may expect to receive, any
notice, order or other communication from any government or governmental agency
or instrumentality (federal, state, local or foreign) of any alleged, actual or
potential material violation of or material failure to comply with any Law
applicable to the Project Partnership or the Shopping Center, and no event has
occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a material violation by the Project
Partnership, or a material failure by the Project Partnership, to comply with,
any Law applicable to the Project Partnership or the Shopping Center.
(ii) The Project Partnership is in possession of all
Authorizations required as of the date hereof to own, lease or operate its
assets and properties or to carry on its business. The Project Partnership shall
obtain as and when required by applicable law, all required Authorizations not
presently in its possession, recognizing that the Shopping Center is an ongoing
construction project as of the date of this Agreement. The Authorizations
currently in effect are in full force and effect without any default or
violation thereunder by the Project Partnership or, to the knowledge of the
Contributors, by any other party thereto. The Project Partnership is in
compliance with all existing Authorizations applicable to it or to the conduct
or operation of its business or the use of any of its assets or properties, and
no such Authorization shall be affected by the transactions contemplated hereby.
Neither the Project Partnership nor, to the best knowledge of the Contributors,
any partner therein has received any notice that any such Authorization
currently in effect may be revoked or may not in the ordinary course be renewed
upon its expiration or that by virtue of the transactions contemplated hereby
that any such Authorization may be revoked or may not be granted, renewed or
issued to the Project Partnership.
(e) Litigation; Orders.
(i) Except as set forth in Section 4.2(e) of the
Contributor Disclosure Letter, there are no, and since inception of the Project
Partnership there have not been any, claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of the Contributors,
investigations involving or affecting the Project Partnership or any of its
assets or properties or, to the knowledge of the Contributors, any of its
partners in their capacities as such, before or by any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
before an arbitrator of any kind (each, a "Claim") other than Claims customarily
arising in
-9-
<PAGE>
connection with the ownership and operation of shopping centers similar to the
Shopping Center that are covered by insurance or are within the limits of
current insurance deductibles. To the knowledge of the Contributors, no such
Claim is presently threatened or contemplated. There are no unsatisfied
judgments, penalties or awards against or affecting the Project Partnership or
any of its assets or properties.
(ii) Except as set forth in Section 4.2(e) of the
Contributor Disclosure Letter, there is no Order to which the Project
Partnership or any of its assets or properties is subject. No partner or
employee of the Project Partnership is subject to any Order that prohibits such
partner or employee from engaging in or continuing any conduct, activity or
practice relating to its business. The Project Partnership has complied in all
respects with the terms and conditions of each Order applicable to it.
(f) Cost Reports. Section 4.2(f) of the Contributor
Disclosure Letter includes the cost report reflecting the costs and liabilities
of constructing the Shopping Center as of the date of this Agreement (the "Cost
Report") incurred by the Project Partnership. As of the date hereof, no
financial statements have been prepared for the Project Partnership.
(g) Undisclosed Liabilities.
(i) As of the date hereof, there are no liabilities of
the Project Partnership of a nature required to be reflected in a balance sheet
prepared in accordance with GAAP except: (x) those described in Section 4.2(g)
of the Contributor Disclosure Letter; (y) those reflected or reserved against in
the Cost Report; or (z) current liabilities incurred in the ordinary course of
business consistent with past practice after the date of the Cost Report and
which are neither material in amount nor inconsistent with any of the
representations or warranties made herein.
(ii) As of the Closing, there shall be no liabilities of
the Project Partnership of any nature (whether absolute, accrued, contingent,
liquidated, unliquidated or otherwise) except the liabilities that are taken
into account in the calculation of Attributable Debt pursuant to Schedule A
hereto.
(h) Title to Property; Encumbrances. The Project Partnership
has either good and valid title to, or has a valid, subsisting and unchallenged
leasehold interest in or right to use, all personal property owned, used or
leased by it. The Project Partnership owns all of the personal property (whether
tangible or intangible) that is reflected as owned in its books and records,
free and clear of all Encumbrances other than liens
-10-
<PAGE>
for current taxes not yet due, the Encumbrances set forth in Section 4.2(h) of
the Contributor Disclosure Letter and Encumbrances arising after the date hereof
in the ordinary course of business or as the result of the Permitted
Refinancing.
(i) Taxes.
(i) All Taxes due from or required to be remitted by the
Project Partnership with respect to taxable periods ending on or prior to, and
the portion of any interim period up to, the Closing Date have been fully and
timely paid or, to the extent not yet due or payable, have been adequately
provided for on the Cost Report referred to in Section 4.2(f) of the Contributor
Disclosure Letter or on the books and records of the Project Partnership. There
are no levies, liens or other Encumbrances relating to Taxes existing or
pending, or to the best knowledge of the Contributors, threatened with respect
to any of the assets of the Project Partnership.
(ii) Except as disclosed in Section 4.2(i) of the
Contributor Disclosure Letter, all federal, state, local and foreign returns and
reports relating to Taxes, or extensions relating thereto, required to be filed
by or with respect to the Project Partnership have been timely and properly
filed, and all such returns and reports are correct and complete.
(iii) No issues have been raised with any representative
or employee of the Project Partnership (and are currently pending) by the IRS or
any other taxing authority in connection with any of the returns and reports
referred to in subsection (ii) above and no waivers of statutes of limitations
have been given or requested with respect to any such returns and reports or
with respect to any Taxes.
(iv) Section 4.2(i) of the Contributor Disclosure Letter
identifies all federal, state, local and foreign income, franchise and sales and
use tax returns of or with respect to the Project Partnership which have been
examined since its date of inception, or which are currently under examination,
by the IRS or by other taxing authorities, or with respect to which the
applicable statute of limitations (including all extensions and tolling periods)
has not yet run. Except as and to the extent shown therein, all deficiencies
asserted or assessments made as a result of such examinations have been fully
paid, and there are no other unpaid deficiencies asserted or assessments made by
any taxing authority against the Project Partnership.
-11-
<PAGE>
(j) Absence of Certain Changes and Events.
(i) The parties acknowledge that the Shopping Center is
not fully developed or constructed and the Shopping Center will not be
substantially completed until approximately November 1, 1997. Except as
described in Section 4.2(j) of the Contributor Disclosure Letter and except as
contemplated or disclosed herein, since its date of inception, the Project
Partnership has conducted its business and activities only in the usual and
ordinary course consistent with past practice and consistent with the
development and construction of a retail shopping center and there has not been
any:
(A) declaration or payment of any distribution or
payment in respect of any interest in the Project Partnership to the
extent that such payment or distribution relates to an obligation or
liability of the Project Partnership after Closing or any issuance,
repurchase or redemption of any such interest;
(B) amendment to the Project Partnership Agreement;
(C) damage, destruction or loss to any material
asset or property of the Project Partnership, whether or not covered by
insurance, that has not been fully repaired, restored or replaced;
(D) except for current trade debt incurred in the
ordinary course of business consistent with past practice and except
for the Permitted Refinancing, borrowing or incurring of any
indebtedness, obligation or liability, contingent or otherwise by the
Project Partnership;
(E) sale (other than sales of inventory in the
ordinary course of business), assignment, conveyance, lease (other than
to tenants for occupancy of space in the Shopping Center), or other
disposition of any asset or property of the Project Partnership other
than in the ordinary course of development and construction of the
Shopping Center;
(F) cancellation or waiver of any material claims or
rights of the Project Partnership; or
(G) agreement or commitment, whether or not in
writing, to do any of the foregoing.
(k) Books and Records. The books and records of the Project
Partnership, including financial records and books of
-12-
<PAGE>
account, are complete and accurate in all material respects and have been
maintained in accordance with sound business practices. To the extent such books
and records constitute financial records or books of account, they fairly
present revenues, expenses, assets and liabilities, all in a manner that will
allow the preparation of financial statements that comply with GAAP.
(l) FIRPTA. The Project Partnership is neither a "foreign
person" within the meaning of Section 1445(f) of the Code nor a "foreign
partner" within the meaning of Section 1446 of the Code.
(m) List of Properties, Contracts, etc. Section 4.2(m) of the
Contributor Disclosure Letter contains a complete and accurate list as of the
date hereof of each item described below, and the Contributors have delivered to
PREIT (or given PREIT access to) true and complete copies of each document (or
summaries of oral agreements) described below.
(i) Each of the following types of Contracts, whether
oral or written, to which the Project Partnership or, to the Contributors'
knowledge, any of its general partners (in their capacities as such) is a party
or by which it or any of its assets is bound:
(A) All Contracts that:
(I) involve performance of services or sale or
lease of goods, materials or space by the Project Partnership
or any of its general partners of an amount or value in excess
of $25,000 in any annual period or $100,000 in the aggregate;
(II) involve performance of services or sale or
lease of goods, materials or space to the Project Partnership
or any of its general partners of an amount or value in excess
of $25,000 in any annual period or $100,000 in the aggregate;
(III) are not in the ordinary course of business
and involve expenditures or receipts by the Project
Partnership or any of its general partners of more than
$25,000;
(IV) are not terminable by the Project
Partnership or any of its general partners without penalty or
premium upon less than 60 days' notice; or
(V) are otherwise material to the business,
operations, financial condition or prospects of the Project
Partnership or to the ownership, operation or management of
the Shopping Center.
-13-
<PAGE>
(B) All Authorizations held by the Project
Partnership that relate to any of the assets or properties owned, used
or leased by the Project Partnership;
(C) All outstanding loans and advances by the
Project Partnership to any partner, officer or employee of the Project
Partnership; and
(D) Other than trade debt incurred in the ordinary
course of business, all notes, debt instruments, other evidences of
indebtedness, letters of credit and guaranties (whether written or
oral) issued by or for the benefit of the Project Partnership and all
loan and other agreements relating thereto.
(n) Contracts.
(i) Except as described in Section 4.2(n) of the
Contributor Disclosure Letter and subject to the terms and conditions of Section
7.2(a)(ii) below, each Contract of a type required to be identified in Section
4.2(m)(i)(A) of the Contributor Disclosure Letter was made in the ordinary
course of business, is in full force and effect and is valid, binding and
enforceable against the parties thereto in accordance with its terms. Except as
described in Section 4.2(n) of the Contributor Disclosure Letter, the Project
Partnership and its general partners have each performed in all material
respects all obligations required to be performed by them under each such
Contract to which any of them is a party or by which any of them is bound, and,
to the knowledge of the Contributors, no condition exists or event has occurred
which with notice or lapse of time would constitute a default thereunder or a
basis for delay, non-performance, termination, modification or acceleration of
maturity or performance by any party thereto.
(ii) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Project Partnership or any of its general partners (in their
capacity as such) under any of the Contracts referred to in subparagraph (i)
above. All of such Contracts that relate to the provision of services or goods
by the Project Partnership or any of its general partners (in their capacity as
such) have been entered into in the ordinary course of business and have been
entered into without the commission of any act or any consideration having been
paid or promised that is or would be in violation of any Law.
(iii) Except as set forth in Section 4.2(n) of the
Contributor Disclosure Letter, without limiting the
-14-
<PAGE>
generality of the foregoing, the Project Partnership Agreement is in full force
and effect and each of the parties thereto has performed all obligations
required to be performed by it under such agreement.
(o) Preference Amount. As of the date hereof, TRO and an
affiliate of Ronald Rubin have the right to receive preferential distributions
from the Project Partnership pursuant to Sections 7.2.1.1, 7.2.1.2 and 7.2.1.3
of the Project Partnership Agreement. As of the date hereof, the sum of the
Unpaid Preference Amount and the Unpaid Cumulative Special Operating
Distributions (each as defined in the Project Partnership Agreement) equals
$1,540,000. Prior to the closing date under the TRO Contribution Agreement, TRO
and the affiliate of Ronald Rubin will assign all of their rights with respect
to such preferential distributions to TRO Liquidating LLC. If TRO Liquidating
LLC's rights with respect to such preferential distributions are assigned at
Closing as contemplated by Section 4(e) hereof, the assignee of such rights will
succeed to all rights to preferential distributions pursuant to Sections
7.2.1.1, 7.2.1.2 and 7.2.1.3 of the Project Partnership Agreement, and such
assignee shall be entitled to receive, subject to the terms of the Project
Partnership Agreement, preferential distributions from the Project Partnership
in an amount equal to the amount the Partnership is required to pay pursuant to
Section 4(e) of Schedule A hereto. Neither the Unpaid Preference Amount nor the
Unpaid Cumulative Special Operating Distributions are a part of the Equity Fund
(as defined in the TRO Contribution Agreement) and thus the payment of such
amounts pursuant to the Project Partnership Agreement will not reduce the
balance of the Equity Fund. As of the Closing, assuming a September 30 closing,
the sum of the Unpaid Preference Amount and the Unpaid Cumulative Special
Operating Distributions shall not exceed $1,600,000.
4.3 As to the Shopping Center.
(a) Title
(i) Based solely on Owner's Policy Nos. 206-103319 and
206-103324 issued by Commonwealth Land Title Insurance Company (the "Title
Policy"), as of the date hereof the Project Partnership owns fee simple title to
the Shopping Center, free and clear of all Encumbrances except as set forth in
the Title Policy and Section 4.3(a) of the Contributor Disclosure Letter (the
"Permitted Encumbrances"). To the knowledge of the Contributors, there have been
no changes in the state of such title as reflected in the Title Policy other
than the Title Policy Encumbrances and those encumbrances required to complete
the development and construction of the Shopping Center that are of a nature
customary for development projects similar to the Shopping Center.
-15-
<PAGE>
(ii) The Project Partnership is the owner of, or the
lessee under subsisting leases of, or otherwise has the right to use the
personal property used by the Project Partnership in the operation of the
Shopping Center. All of such property that is reflected on the Project
Partnership's records as owned by the Project Partnership is free and clear of
all Encumbrances, except for Permitted Encumbrances.
(iii) Except as set forth in Section 4.3(a) of the
Contributor Disclosure Letter, the Title Policy and except as provided in tenant
leases, there are no rights of first refusal on, or options to purchase, any
portion of the Shopping Center or any right to participation interests (whether
of profits, sale or refinancing proceeds, or calculated based on fair market
value) with respect to any portion of the Shopping Center in favor of any
tenant, lender or any other Person other than the Project Partnership. None of
the tenant leases provides for any such right or option except that one or more
of such leases may provide for a purchase option in favor of the tenant but only
in respect of the space leased to such tenant.
(iv) To the knowledge of the Contributors, no eminent
domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn any part of the Shopping Center. To the Contributors'
knowledge, as of the date hereof, there are no pending or threatened
governmental rules, regulations, plans, studies, or court orders or decisions,
which do or could materially adversely affect the use or value of the Shopping
Center as a retail shopping center.
(b) Mortgage Obligations.
(i) As reflected in the Title Policy, the Shopping
Center is subject as of the date hereof to the mortgage(s) securing
obligation(s) in the amount(s) set forth in Section 4.3(b) of the Contributor
Disclosure Letter (such obligations and any other obligations incurred to
refinance such obligations, the "Loan Obligations") and is subject as of the
date hereof to no other mortgage. Section 4.3(b) of the Contributor Disclosure
Letter sets forth the original principal amount, approximate outstanding
principal amount, interest rate, term and other material economic provisions of
each of the Loan Obligations.
(ii) The documents identified in Section 4.3(b) of the
Contributor Disclosure Letter, true and correct copies of which have been
delivered to PREIT (or to which PREIT has been given access), constitute all of
the material documents evidencing, defining or securing the Loan Obligations
(the "Loan Documents").
-16-
<PAGE>
(iii) The Project Partnership has complied with the Loan
Documents, and there are no events of default thereunder now outstanding. To the
Contributors' knowledge, no event has occurred, which with the passage of time
or the giving of notice or both, could ripen into an event of default under the
terms of the Loan Documents.
(c) Leases.
(i) The Rent Roll attached to Section 4.3(c) of the
Contributor Disclosure Letter (the "Rent Roll") lists each of the leases in
existence as of the date hereof with respect to any portion of the Shopping
Center.
(ii) Except as set forth in Section 4.3(c) of the
Contributor Disclosure Letter, as of the date hereof, there are no leases,
licenses or other rights of occupancy in force which affect the Shopping Center
or any portion thereof other than the leases listed in the Rent Roll. The
Contributors have made available to PREIT copies of all of the leases (including
all amendments) listed on the Rent Roll. Except as set forth on the Rent Roll,
no uncured event of default of the Project Partnership or, to the knowledge of
the Contributors, any tenant has occurred and is continuing under any lease of
premises within the Shopping Center, no tenant has asserted a defense to or
offset or claim against its rent or the performance of its obligations under its
lease, and no tenant has asserted a default on the part of the Project
Partnership which would give it the right to terminate its lease or a setoff
against rent.
(iii) With respect to the leases involving the Shopping
Center, except as set forth in Section 4.3(c) of the Contributor Disclosure
Letter or in the leases, as of the date hereof:
(A) there are no proposed modifications to any such
lease that would reduce:
(I) the space leased to any tenant;
(II) the amount of any tenant's rent; or
(III) the term of any lease;
(B) no free rent or other concession is due any
tenant;
(C) the Project Partnership is not required to
provide tenant improvements or refurbishments with respect any such
lease other than tenant improvements
-17-
<PAGE>
that the Project Partnership may be required to construct if an
expansion option provided in a lease is exercised;
(D) no tenant has an option to terminate its lease
prior to its stated expiration date;
(E) except for (x) security deposits or (y) the
first full month's rent, whether or not the term of a lease has
commenced, no prepayments of rent more than thirty (30) days in advance
have been made under any such lease;
(F) no rent or security deposit under any such lease
has been assigned or encumbered, except as security for the Loan
Documents;
(G) there are no agreements or understandings,
written or oral, with any tenant other than as set forth in its lease
or on the Rent Roll; and
(H) all brokerage commissions and other compensation
or fees payable by reason of the leases have not been paid in full.
Attached to Section 4.3(c) of the Contributor Disclosure Letter is a
list of brokers commissions due with respect to the Shopping Center and
the status of such commissions.
(d) Zoning. The zoning classification for the Shopping Center
is I-R/B Shopping Center Overlay Zone, and the contemplated uses of the Shopping
Center are in compliance with the applicable zoning ordinances and regulations.
(e) Compliance with Laws and Recorded Declarations. The
Project Partnership has complied in all material respects with all Laws
(including, without limitation, the Americans with Disabilities Act of 1990) and
requirements of insurance bodies applicable to the ownership, leasing, use and
operation of the Shopping Center, including, without limitation, parking,
dimensional and building setback requirements, and has performed all work and
secured all required consents and approvals, or will do so in a timely fashion,
and obtained and fully paid, or will do so in a timely fashion, for all
Authorizations and any other items and documents required by applicable Law, by
contract, or as a condition of any approval granted by or agreement entered into
with any applicable municipal authority, required of the Project Partnership for
the completion, ownership, leasing, use and occupancy of the Shopping Center,
including, but not limited to, final certificates of occupancy for each of the
current tenancies in the Shopping Center other than where construction of tenant
improvements for new tenancies is not yet completed or timely applications
remain pending or where the tenants are required to obtain such consents,
approvals or authorizations
-18-
<PAGE>
under the leases. All such existing Authorizations and other items and documents
are in full force and effect. The Project Partnership has not taken any action
that would (or failed to take any action, the omission of which might) result in
the revocation or suspension of any such Authorization or other item or
document, and the Project Partnership has not received any notice of any
violation from any federal, state or municipal entity or notice of an intention
by any such governmental entity to revoke any certificate of occupancy or other
Authorization issued by it in connection with the ownership, use and occupancy
of the Shopping Center that in each case has not been cured or otherwise
resolved to the satisfaction of such governmental entity. Except as set forth in
Section 4.3(e) of the Contributor Disclosure Letter, to the Contributors'
knowledge, (i) any and all charges and other assessments under declarations and
like agreements and special assessments to which the Shopping Center or the
Project Partnership is subject have been paid to date, and (ii) all consents and
approvals required to be obtained under such declarations and like agreements
with respect to the Shopping Center have been obtained or are in the process of
being obtained. Notwithstanding anything to the contrary contained herein, the
Contributors do not represent or warrant compliance by any of the tenants with
respect to Laws or that the Contributors are obtaining any Authorizations that
are required to be obtained by any tenants, but the Contributors shall enforce
the leases and obligations of tenants thereunder.
(f) Environmental Matters.
(i) Except as described in Section 4.3(f) of the
Contributor Disclosure Letter, the Contributors have no knowledge of any fact,
condition or circumstance that would suggest that the environmental reports
listed in Section 4.3(f) of the Contributor Disclosure Letter (which constitute
all environmental reports relating to the Shopping Center received by the
Contributors) contains any misstatement of material fact or omits to state any
material fact. To the knowledge of the Contributors, except for matters set
forth in Section 4.3(e) of the Contributor Disclosure Letter, there are no
conditions on, beneath or arising from, and there are no Hazardous Substances
migrating from, the Shopping Center which might under any Environmental Law (A)
give rise to liability or the imposition of a statutory lien upon the Project
Partnership or (B) require any Response, Removal or Remedial Action by the
Project Partnership.
(ii) To the knowledge of the Contributors, no wastes
generated by either Contributor or the Project Partnership have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the National
Priority List promulgated pursuant to CERCLA or to any site listed in any state
list of sites requiring or recommended for investigation or clean-up.
-19-
<PAGE>
(g) Reassessments. The Shopping Center has not been fully
assessed and the Contributors have been informed that the Shopping Center will
be reassessed upon its completion. To the Contributors' knowledge, there are no
special assessments or other actions or proceedings that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against the Shopping Center.
(h) Property Improvements. PREIT acknowledges that the
Shopping Center is currently under construction and that the improvements to be
built thereon are not complete. Except as disclosed in any engineering studies
or reports obtained by or delivered by the Contributors to PREIT as set forth in
Section 4.3(h) of the Contributor Disclosure Letter, the Shopping Center is, to
the extent completed, in good condition and repair, ordinary wear and tear
excepted, consistent with a Shopping Center project that is still under
construction, and has not suffered any casualty or other material damage which
has not been repaired in all material respects. To the best of the Contributors'
knowledge, there is no material latent or patent structural, mechanical or other
significant defect, soil condition or deficiency in the improvements constructed
on the Shopping Center, or any other defects, soil conditions or deficiencies
which, in the aggregate, would materially adversely affect the value of the
Shopping Center as a whole.
(i) Employees and Service Contracts.
(i) Section 4.3(i) of the Contributor Disclosure Letter
sets forth a complete and correct list of all existing and proposed union or
collective bargaining agreements to which either Contributor or the Project
Partnership is a party with respect to or affecting the Shopping Center.
(ii) Section 4.3(i) of the Contributor Disclosure Letter
sets forth a complete and correct list of all persons who are employed by the
Project Partnership or its partners in connection with the management, operation
or maintenance of the Shopping Center, setting forth, with respect to each of
them, his or her name, position or duties, regular wages or salary, accrued
vacation pay and bonus and other benefits to which he or she is entitled. Each
of such persons is an employee-at-will and none of such persons is covered by a
written employment agreement.
-20-
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE
PARTNERSHIP.
PREIT hereby represents and warrants to the Contributors as follows:
5.1 Organization.
(a) PREIT is an unincorporated association in business trust
form duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania. PREIT has all necessary trust power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns and
leases and to perform all its obligations under each agreement and instrument to
which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform all its obligations under each agreement and instrument to which
it is a party or by which it is bound.
5.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). The execution, delivery and performance by PREIT
and the Partnership of this Agreement and the other Buyer Transaction Documents
have been duly authorized by all necessary corporate or partnership action. This
Agreement has been duly and validly executed and delivered by PREIT and the
Partnership and constitutes the legal, valid and binding obligation of PREIT and
the Partnership enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Buyer Transaction Documents shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally
or by general equitable principles.
-21-
<PAGE>
5.3 No Conflicts.
(a) Except as described in Section 5.3 of the disclosure letter
delivered by PREIT to the Contributors on the date hereof (the "PREIT Disclosure
Letter"), the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not (in each case,
with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the trust
or partnership agreement (or other organizational documents) of PREIT or the
Partnership or (B) any Law applicable to PREIT or the Partnership, or by or to
which any assets or properties of PREIT or the Partnership is bound or subject;
or
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit or give to others
any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or material Contract to which PREIT or the Partnership is a party or by which
either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any material Encumbrance upon or with respect to either PREIT or
the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 5.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT or
the Partnership to obtain any material Authorization of or make any material
filing, registration or declaration with or notification to any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the material consent, waiver or approval of, or give any
material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to the
best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Buyer Transaction
Documents or which, if adversely determined, could have a
-22-
<PAGE>
material adverse effect on the consolidated financial condition, assets,
business or results of operations of PREIT or could materially and adversely
affect PREIT's or the Partnership's ability to enter into or perform its
obligations under the Buyer Transaction Documents.
5.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests in
PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 5.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated in the TRO
Contribution Agreement, in the Amended Partnership Agreement or in the
Employment Agreements referred to in the TRO Contribution Agreement, and except
as disclosed in Section 5.4(a) of the PREIT Disclosure Letter, as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character (including, without limitation,
voting agreements or arrangements known to PREIT) relating to the issuance of
beneficial interests in PREIT or partnership interests in the Partnership. As of
the Closing, the outstanding partner interests in the Partnership shall consist
of the interests outstanding on the date hereof, the Class A Units to be issued
as contemplated in the TRO Contribution Agreement, this Agreement and the EPD
Purchase Agreements.
(b) All Class A Units to be issued and delivered pursuant to
Section 3 hereof will be, at the time of issuance and delivery in accordance
with the terms of this Agreement, duly authorized and validly issued by the
Partnership. Assuming the accuracy of the representations and warranties of the
Contributors set forth herein, such issuance will be exempt from registration
under the 1933 Act as an offering described in Section 4(2) of such Act and/or
pursuant to Regulation D promulgated thereunder.
5.5 PREIT Reports. PREIT has delivered to the Contributors copies
of PREIT's (a) Proxy Statement dated November 15, 1996, (b) Annual Report on
Form 10-K for the fiscal year ending August 31, 1996, as amended by its Report
on 10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports on Form 10-Q for
the quarters ended November 30, 1996, February 28, 1997 and May 31, 1997, all of
which have been filed by PREIT with the Securities and Exchange Commission (the
"PREIT Reports"). The audited consolidated financial statements and unaudited
interim financial statements of PREIT included in such reports have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
condition and results of operations of PREIT as at the dates thereof and for the
periods then ended,
-23-
<PAGE>
subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein. The PREIT
Reports do not contain any untrue statements of a material fact or omit to state
a material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
5.6 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the best knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
before any arbitrator of any kind, in each case of a nature that is required to
be disclosed in PREIT's 1934 Act reports.
5.7 Material Adverse Change. Except as disclosed in filings with
the Securities and Exchange Commission, since May 31, 1997 and through the date
hereof, there has not been any material adverse change in the condition
(financial or otherwise), assets, results of operations or business of PREIT on
a consolidated basis.
5.8 Brokers. Except for Lehman Brothers, Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or the Partnership or any of
their affiliates or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT, each
Contributor shall, and the Contributors shall cause the Project Partnership to:
(i) carry on its business in, and only in, the usual,
regular and ordinary course, consistent with past practice and consistent with
the development and construction of a retail shopping center and the provisions
hereof and in compliance with all applicable Laws, Authorizations and Contracts;
-24-
<PAGE>
(ii) pay and discharge all of its debts, liabilities and
obligations as they become due and pay all debt service payments, real estate
taxes, payables and other liabilities arising from the construction or operation
of the Shopping Center that in the ordinary course of business would have been
paid prior to the Closing Date (with the exception of those liabilities and
obligations which the Contributors are contesting in good faith and for which
the Contributors have established adequate reserves on the Project Partnership's
books);
(iii) keep in full force and effect insurance comparable
in amount and scope of coverage to insurance now carried by it;
(iv) maintain its facilities and assets in the same state
of repair, order and condition as they were on the date hereof, reasonable wear
and tear excepted;
(v) maintain its books of account and records in the
usual, regular and ordinary manner and use diligent efforts to maintain in full
force and effect all of its Authorizations;
(vi) not take any action, fail to take any action or
permit to occur any event that would cause or constitute a material breach of or
inaccuracy in any representation or warranty set forth herein if made
immediately after such event or at the Closing or that would have been required
(or result in any situation that would be required) to be disclosed hereunder
had such action or inaction been taken or failed to have occurred or had such
event occurred prior to the date hereof;
(vii) except as described in Section 6.1(a) of the
Contributor Disclosure Letter and the TRO Contribution Agreement, not make any
change in its authorized or issued capital stock or partnership interests, grant
any stock option or other right to purchase its shares of capital stock,
partnership interests or other securities, issue or make any commitment to issue
any of its securities, including any securities convertible into capital stock
or partnership interests, grant any registration rights or purchase, redeem,
retire or make any other acquisition of any shares of its capital stock,
partnership interests or other securities;
(viii) not amend or grant any waivers under the Project
Partnership Agreement;
(ix) not enter into any agreement or understanding to do
or engage in any of the foregoing actions; and
-25-
<PAGE>
(x) construct and operate the Shopping Center in the
ordinary course in a manner consistent with past practice, maintaining the
Shopping Center in a reasonable state of repair, order and condition consistent
with a development project which is still under construction. Without limiting
the foregoing, the Project Partnership shall not defer any required maintenance
or repair unless such maintenance or repair would otherwise be deferred in the
ordinary course of business.
6.2 Reasonable Efforts. Upon the terms and subject to the condition
hereof, between the date hereof and the Closing Date, each of the parties hereto
shall use its reasonable efforts to take, or cause to be taken, all appropriate
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable Law to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) using its or
his reasonable efforts to make all required regulatory filings and applications
and to obtain all Authorizations and consents, approvals, amendments and waivers
from parties to Contracts as are necessary for the consummation of the
transactions contemplated by this Agreement and (ii) using its reasonable
efforts to cause the conditions to the consummation of the acquisition of the
Interests to be satisfied.
6.3 Notifications. Each party hereto shall give prompt notice to
the other parties upon becoming aware of: (i) any fact or condition that causes
or constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of or any
inaccuracy in any of its representations and warranties contained in this
Agreement had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure of
it or any of its officers, directors, employees or agents, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iv) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting either Contributor, the Project
Partnership or PREIT, as the case may be, or any of the transactions
contemplated by this Agreement.
-26-
<PAGE>
6.4 Operation of Shopping Center.
(a) The Contributors shall take all actions necessary so that
as of the Closing Date:
(i) Payments of rent or other monies due from Shopping
Center tenants (except reimbursements under leases for site improvements or
improvements to tenants' space) that fall due after the Closing Date and are
received prior to the Closing Date shall continue to be held in the Project
Partnership bank account or by the managing agent through the Closing Date;
(ii) All security deposits under leases and all interest
required to be paid thereon pursuant to the terms of such leases shall continue
to be held in the Project Partnership bank account, or by the managing agent as
the case may be, on the Closing Date; and
(iii) All debt service payments, real estate taxes and
payments due under service contracts and service providers in respect of the
operation of the Shopping Center that in the ordinary course of business would
have been paid prior to the Closing Date shall have been paid prior to the
Closing Date by or on behalf of the Project Partnership.
(b) No delinquent rent payments shall be apportioned on the
Closing Date. All rent receivables shall remain the property of the Project
Partnership.
(c) Notwithstanding anything to the contrary set forth in this
Agreement, the Contributors shall be entitled to cause the Project Partnership
to refinance its construction loan prior to Closing, provided that the new loan
expressly permits the transfer of the Interests contemplated herein and provides
that such transfer will not result in any acceleration of indebtedness or other
penalties and further provided that the Partnership approves the terms of the
refinancing, including, but not limited to, the amount of the refinancing, and
the loan documents evidencing and securing the refinancing, which approvals
shall not be unreasonably withheld (the "Permitted Refinancing").
6.5 Preference Amount. If rights to preferential distributions from
the Project Partnership are to be assigned at Closing as contemplated by Section
4(e) of Schedule A hereto, the Contributors shall deliver to PREIT at least five
business days prior to Closing a statement setting forth the sum of the Unpaid
Preference Amount and the Unpaid Cumulative Special Operating Distributions as
of the Closing.
6.6 Interest Rate Swap. The Contributors shall cause the Project
Partnership to liquidate or otherwise terminate prior to
-27-
<PAGE>
Closing the interest rate swap arrangements that are currently in effect in
connection with the Project Partnership's financing.
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES.
7.1 Time of Closing. The closing (the "Closing") of the acquisition
by the Partnership pursuant to this Agreement of the Interests shall take place
at the time and place specified in Schedule A hereto on the Closing Date (as
defined in Schedule A hereto).
7.2 Closing Conditions.
(a) Conditions Precedent to PREIT's and the Partnership's
Obligations. The obligation of PREIT and the Partnership to consummate the
acquisition of the Interests and to take the other actions required to be taken
by them at the Closing is subject to the fulfillment by or at the Closing of
each of the following conditions, any or all of which may be waived by PREIT in
its sole discretion:
(i) Condition of Title. The Project Partnership shall
own fee simple title to the Shopping Center and such title shall be good and
marketable and insured as such by First American Title Insurance Company,
Commonwealth Land Title Insurance Company, Lawyers Title Insurance Corporation
or Chicago Title Insurance Company, as selected by the Partnership (the "Title
Insurance Company"), free and clear of all Encumbrances other than Permitted
Encumbrances, the existing leases set forth on the Rent Roll or as such leases
may have changed in the ordinary course of the operation of the Shopping Center,
the mortgage securing the Permitted Refinancing and those encumbrances required
to complete the development and construction of the Shopping Center that are of
a nature customary for development projects similar to the Shopping Center
provided that such encumbrances do not constitute liens in liquidated amounts
and do not individually or in the aggregate materially or adversely affect the
value or use of the property as a Shopping Center. A vested owners title
insurance policy with "non-imputation" and fairways endorsements for the value
of the interest in the Project Partnership as determined in accordance with
Schedule "A" shall have been issued to the Partnership or a marked-up commitment
reflecting the effectiveness of such issuance shall have been delivered (unless
such insurance is not issued or effective solely due to the Partnership's
failure to pay the premiums therefor).
(ii) Tenant Estoppels. The Contributors shall have used
their reasonable efforts to cause the tenants in the Shopping Center to execute
and deliver to the Partnership estoppel certificates in form and substance
reasonably satisfactory to PREIT. The Contributors shall keep the
-28-
<PAGE>
Partnership reasonably apprised as to the status of receipt of the estoppel
certificates. The failure to obtain and deliver any or all of the estoppel
certificates shall not constitute a default by the Contributors hereunder or
allow PREIT or the Partnership to terminate this Agreement so long as the
Contributors have used reasonable efforts to obtain the estoppel certificates.
The Contributors' liability under the representations and warranties under
Sections 4.2(m)(i) and 4.3(c) as to a particular tenant shall terminate if the
Partnership subsequently receives an estoppel certificate for the applicable
tenant which confirms the Contributors' representations under Sections 4.2(l)(i)
and 4.3(c) above (provided, if the Partnership receives an estoppel certificate
which confirms some but not all of the matters which are the subject of the
representations and warranties under Sections 4.2(m)(i) and 4.3(c), then as to
such tenant, (x) if the estoppel certificate was received prior to Closing, the
representations and warranties set forth in Sections 4.2(m)(i) and 4.3(c) shall
be deemed to omit such matters stated on the estoppel certificate as to such
matters provided the certifications contained in such estoppel remain true and
correct until the Closing Date and (y) if received after Closing, the
representations and warranties under Sections 4.2(m)(i) and 4.3(c) shall cease
to survive as to such matters but shall continue to survive as to matters not
contained in such Estoppel Certificate.)
(iii) Survey, Etc. The Partnership shall have received, at
the Partnership's sole cost and expense, updated environmental and engineering
reports and surveys for the Shopping Center certified to the Partnership and the
Title Insurance Company, in form reasonably satisfactory to PREIT and the Title
Insurance Company, and such reports and surveys shall not disclose any material
adverse condition not disclosed in the original reports and surveys for the
Shopping Center delivered to PREIT or to which PREIT was given access prior to
the date of this Agreement.
(iv) No Mortgage Defaults. All payments of principal and
interest on all Loan Obligations shall be current and no Loan Obligation shall
be in default. The Contributors shall have used their reasonable efforts to
cause the holder of each Loan Obligation to issue to the Partnership a letter or
certification confirming the principal balance of such Loan Obligation, the date
of the last payment and that, to its knowledge, there are no events of default
thereunder. The failure to obtain or deliver such letter or certification shall
not constitute a default by the Contributors hereunder or allow PREIT or the
Partnership to terminate this Agreement provided that the Contributors have used
reasonable efforts to obtain such letter or certificate. In the event the letter
or certification from the holder of each Loan Obligation contains a
certification containing information which confirms the Contributors'
-29-
<PAGE>
representations under Section 4.3(b) above, the Contributors' liability for such
representation shall terminate upon delivery of the letter or certificate to the
Partnership provided the certifications contained in such estoppel remain true
and correct until the Closing Date.
(v) Representations and Warranties. Except as otherwise
expressly provided herein, each of the representations and warranties of the
Contributors set forth in this Agreement that is qualified by materiality shall
be true and correct, and each of the representations and warranties of the
Contributors set forth in this Agreement that is not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date; provided that the failure of one or more representations and warranties to
be true and correct as of the Closing Date shall not entitle PREIT to decline to
close if the Damages therefrom do not exceed 50% of the value referred to in
Section 7.2(a)(xiv) and if the other conditions in this Section 7.2(a) shall be
satisfied.
(vi) Performance of Covenants. All of the agreements,
covenants and obligations that either Contributor is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing shall have
been duly performed and complied with in all material respects. The Contributors
shall have delivered each of the documents required to be delivered by them
pursuant to Section 7.3(a) hereof.
(vii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person (other than by PREIT or the
Partnership) that questions the validity or legality of this Agreement or the
transactions contemplated hereby.
(viii) Consents and Approvals. Each consent, approval,
ratification, waiver or other authorization of any Person necessary, in the
reasonable opinion of PREIT, for the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, and no such consent, approval, ratification, waiver or other
authorization: (x) shall have been conditioned upon the modification,
cancellation or termination of any Contract, right or Authorization of PREIT,
the Partnership or the Project Partnership or (y) shall impose on PREIT, the
Project Partnership or the Partnership any condition, provision or requirement
not presently imposed upon
-30-
<PAGE>
the Contributors or the Project Partnership or any condition that would be more
restrictive after the Closing on the Project Partnership or the Partnership than
the conditions presently imposed on the Contributors or the Project Partnership.
(ix) Opinion of Counsel. PREIT shall have received an
opinion of counsel for the Contributors, dated the Closing Date, in form and
substance reasonably satisfactory to PREIT and its counsel.
(x) TRO Closing. The TRO Closing shall have occurred.
(xi) Casualty or Condemnation. There shall not have
occurred any damage or destruction to, or condemnation of, any portion of the
Shopping Center that is reasonably likely to have a material adverse effect on
the operations or profitability of the Shopping Center.
(xii) Material Adverse Change. There shall not have been
since the date hereof any event, circumstance, condition or contingency that has
resulted in a material adverse effect on the business, assets, financial
condition or results of operations of the Project Partnership or that is
reasonably likely to result in such an change.
(xiii) Compliance Certificate. The Contributors shall have
obtained (to the extent such certifications or letters are made available in
such jurisdiction prior to substantial completion of the Shopping Center) a
certification or letter from the appropriate governmental officer having
jurisdiction to the effect that the Shopping Center and its use are in
compliance with applicable fire, health, safety and zoning ordinances, rules and
regulations.
(xiv) Adjustment for Breaches. The aggregate amount of
all Damages arising from breaches entitling PREIT and the Partnership to an
adjustment to the aggregate consideration as specified in Section 8.1 shall not
exceed 50% of the value of what the Contributors would receive pursuant to
Section 4 of Schedule A absent such adjustment. Neither the Contributors nor the
Project Partnership shall have violated any criminal or other material Law and
the consummation of the closing shall not violate or conflict with any material
Law.
(b) Conditions Precedent to the Contributors' Obligations. The
obligation of the Contributors to consummate the contribution of the Interests
contemplated by this Agreement and to take the other actions required to be
taken by them at the Closing is subject to the fulfillment by or at the Closing
of
-31-
<PAGE>
each of the following conditions, any or all of what may be waived by CHP,Inc.
in its sole discretion:
(i) Representations and Warranties. Each of the
representations and warranties of PREIT set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of PREIT set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(ii) Performance of Covenants. Each of the agreements,
covenants and obligations that PREIT or the Partnership is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been duly performed and complied with in all material respects. PREIT shall
have delivered each of the documents required to be delivered by it pursuant to
Section 7.3(b) hereof.
(iii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person that questions the validity or
legality of this Agreement or the transactions contemplated hereby.
(iv) TRO Closing. The TRO Closing shall have occurred.
(v) Opinion. The Contributors shall have received an
opinion of counsel for PREIT, dated the Closing Date, in form and substance
reasonably satisfactory to the Contributors and their counsel.
(vi) Adjustment for Breaches. The aggregate amount of all
Damages arising from breaches entitling PREIT and the Partnership to an
adjustment to the aggregate consideration as specified in Section 8.1 shall not
exceed 50% of the value of what the Contributors would receive pursuant to
Section 4 of Schedule A absent such adjustment; provided that if PREIT exercises
the PREIT Option (as defined below), this condition shall be deemed to have been
satisfied.
-32-
<PAGE>
7.3 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) The Contributors shall deliver or cause to be delivered to
the Partnership:
(i) each of the instruments, agreements or documents
listed on Schedule A-1 hereto, in each case in a form reasonably satisfactory to
the Contributors and the Partnership, duly executed by each of the signatories
thereto other than PREIT or the Partnership;
(ii) certificates, dated the Closing Date and executed by
the president of CHP,Inc. to the effect that the conditions set forth in
Sections 7.2(a)(v) and (vi) have been satisfied;
(iii) certificates of good standing of a recent date for
CHP,Inc. and RO,L.P. certified by the Secretary of State or corresponding
certifying authority of the state of incorporation or organization of CHP,Inc.
and RO,L.P. and of each state in which CHP,Inc. or RO,L.P. is qualified to do
business as a foreign corporation or foreign partnership;
(iv) copies of the resolutions of the board of directors
of CHP,Inc. and its shareholders authorizing the transactions contemplated under
this Agreement and the Contributor Transaction Documents to which CHP,Inc. or
RO,L.P. is a party;
(v) all consents and approvals under the Project
Partnership Agreement necessary or appropriate in connection with the
transactions contemplated herein; and
(vi) such other documents and instruments as the
Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) The Partnership shall deliver or cause to be delivered to
the Contributors the following:
(i) the Class A Units to be delivered at Closing as
contemplated by Section 3 and Schedule A hereto;
(ii) copies of resolutions of the board of trustees of
PREIT authorizing the transactions contemplated hereunder and under the Buyer
Transaction Documents;
(iii) a certificate, dated the Closing Date, executed by
the chief executive officer and chief financial
-33-
<PAGE>
officer of PREIT, to the effect that the conditions set forth in Sections
7.2(b)(i) and (ii) have been satisfied; and
(iv) each of the instruments, agreements and documents
listed on Schedule A-1, in a form reasonably satisfactory to the Contributors
and the Partnership, duly executed by each of the Partnership or PREIT that is a
signatory thereto.
(c) Each party shall deliver or cause to be delivered, as the
case may be, to the other parties hereto such other documents, instruments,
certificates and opinions as may be required by this Agreement.
SECTION 8. CLOSING ADJUSTMENTS.
8.1 Adjustment for Breaches by the Contributors. It is the intent
of the parties that breaches of the representations and warranties of the
Contributors set forth in this Agreement (as brought down to the Closing Date in
the certificate referred to in Section 7.3(a)(ii), which for this purpose will
be deemed to state, inter alia, that the Contributors' representations and
warranties in this Agreement were true and correct as of the Closing Date as if
made on the Closing Date) that are discovered prior to Closing shall, in
addition to giving PREIT and the Partnership the right, under certain
circumstances described in Section 7.2, not to close hereunder, cause the
consideration otherwise deliverable pursuant to Section 4 of Schedule A to be
adjusted downward by the aggregate value of all Damages arising from such
breaches; provided, however, that if such downward adjustment would reduce by
more than 50% the value of the aggregate consideration the Contributors would
receive pursuant to Section 4 of Schedule A absent such adjustment, PREIT shall
have the right and option (but not the obligation) to notify the Contributors in
writing that the downward adjustment pursuant to this Section 8.1 shall be equal
to 50% of the value of such aggregate consideration (the "PREIT Option"). In
determining the value of any breaches, there shall be taken into account any
insurance recovery that may be available to PREIT or the Partnership, and any
insurance proceeds received by the Contributors prior to the Closing that are
assigned to the Partnership at Closing.
8.2 Casualty or Condemnation.
(a) If, prior to the Closing Date, there shall be any damage or
destruction to all or any portion of the Shopping Center by fire or other
casualty, the Contributors shall give prompt notice thereof to PREIT. Unless
such damage or destruction is reasonably likely to result in a material adverse
effect on the operations or profitability of the Shopping Center, such damage or
destruction shall not entitle PREIT or the
-34-
<PAGE>
Partnership to terminate this Agreement; provided, however, that the number of
Class A Units deliverable pursuant to Section 3 and Schedule A shall be reduced
by 50% of the value of all material damage or destruction to the extent that
such damage or destruction is not fully insured by insurance carried by the
Project Partnership or reimbursed by tenants.
(b) If prior to the Closing Date, condemnation or eminent
domain proceedings are commenced against the Shopping Center, the Contributors
shall give prompt notice thereof to PREIT. Unless the taking contemplated by
such condemnation or eminent domain proceeding is reasonably likely to result in
a material adverse effect on the operations or profitability of the Shopping
Center as a whole, such condemnation or eminent domain proceeding shall not
entitle PREIT or the Partnership to terminate this Agreement; provided, however,
that the number of Class A Units deliverable pursuant to Section 3 and Schedule
A hereto shall be reduced by the excess, if any, of the sum of Deemed Closing
Value, Non-Credit Tenant Value and the Post-Adjustment Value (each as defined in
Schedule A hereto) over 50% of the aggregate condemnation proceeds received or
to be received by the Project Partnership in respect of such condemnation. PREIT
shall have the right to participate in the negotiation of the award to be made
for such taking, and neither the Contributors nor the Project Partnership shall
agree to any proposed award or execute a deed in lieu of condemnation without
PREIT's prior written consent. The applicable percentage of any condemnation
award payable with respect to the taking of all or any portion the Shopping
Center shall be assigned to the Partnership.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by Contributors. The Contributors shall jointly and
severally indemnify, defend and hold harmless PREIT and the Partnership
(collectively, "Buyer Indemnified Persons") against and in respect of any and
all losses, costs, expenses (including, without limitation, costs of
investigation and reasonable defense and attorneys' fees), claims, damages,
obligations, liabilities or diminutions in value, whether or not involving a
third party claim (collectively, "Damages"), arising out of, based upon or
otherwise in respect of: (a) any inaccuracy in or breach of any representation
or warranty of either Contributor made in or pursuant to this Agreement
(including, without limitation, the certificate referred in Section 7.3(a)(ii),
which, for this purpose will be deemed to have stated, inter alia, that the
Contributors' representations and warranties in this Agreement were true and
correct as of the Closing Date as if made on the Closing Date); (b) any breach
or nonfulfillment of any covenant or obligation of either Contributor contained
in this Agreement or (c) any of the matters set forth on Schedule 9.1(c) hereto;
provided, however, that to
-35-
<PAGE>
the extent that Damages arising from breaches of representations and warranties
were taken into account in reducing the Deemed Closing Value, the Non-Credit
Tenant Value or the Post-Adjustment Value (as defined in Schedule A), such
Damages shall not be recoverable by Buyer Indemnified Persons pursuant to this
Agreement.
9.2 Indemnification by PREIT. PREIT shall indemnify, defend and
hold harmless each Contributor against and in respect of any and all Damages
arising out of, based upon or otherwise in respect of: (a) any inaccuracy in or
breach of any representation or warranty of PREIT made in or pursuant to this
Agreement; (b) any breach or nonfulfillment of any covenant or obligation of
PREIT or the Partnership contained in this Agreement; or (c) claims relating
solely to actions taken by the Partnership ( or its affiliates) as a partner in
the Project Partnership after Closing as the result of events and circumstances
first occurring after Closing.
9.3 Limitations on Liability.
(a) Neither Contributor shall have any obligation to indemnify
any Buyer Indemnified Person against Damages pursuant to Section 9.1(a) of this
Agreement arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to this Agreement unless and
until the aggregate of all such Damages suffered or incurred by the Buyer
Indemnified Persons exceeds $100,000; in which event the Buyer Indemnified
Persons shall be entitled to indemnification for the full amount of all Damages
suffered or incurred; provided, however, that the above limitation shall not be
applicable to any claim for Damages pursuant to Sections 9.1(b) or (c) or based
upon a breach of any representation or warranty made in or pursuant to Sections
4.1(a), 4.1(b), 4.1(c), 4.1(g), 4.1(h), 4.2(a), 4.2(b), 4.2(o), or 4.2(g) (in
the case of a breach of any of the representations and warranties set forth in
Section 4.2(g), other than due to the existence of liabilities of a nature not
required to be reflected in financial statements prepared in accordance with
GAAP of which the Contributors had no knowledge prior to Closing).
(b) Following Closing, (i) the Contributors shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 9.1 to the extent that such indemnification payment (other than
indemnification payments in respect of fraud or intentional misrepresentation),
when aggregated with all prior indemnification payments (other than
indemnification payments in respect of fraud or intentional misrepresentation)
by or on behalf of the Contributors to Buyer Indemnified Persons or reasonably
paid by or on behalf of the Contributors to third parties for the benefit of
Buyer Indemnified Persons pursuant to this Agreement, would exceed the
-36-
<PAGE>
Aggregate Value (as hereafter defined) and (ii) each partner or shareholder of
either Contributor (collectively, "Applicable Beneficial Owners") other than
Ronald Rubin and George Rubin (or affiliates controlled by either of them or
members of their families) shall not be obligated to indemnify Buyer Indemnified
Persons against Damages pursuant to Section 9.1 to the extent that such
indemnification payment, when aggregated with all prior indemnification payments
by or on behalf of such Applicable Beneficial Owner to Buyer Indemnified Persons
or reasonably paid by or on behalf of such Applicable Beneficial Owner to third
parties for the benefit of Buyer Indemnified Persons pursuant to this Agreement,
would exceed the Proportionate Aggregate Value (as defined below) attributable
to such Applicable Beneficial Owner; provided, however, that the limitation of
this subclause (ii) shall not apply to the extent an indemnity claim is brought
with respect to a matter involving fraud or intentional misrepresentation by
such Applicable Beneficial Owner. The "Aggregate Value" means an amount equal to
the value of all Class A Units theretofore issued pursuant to Section 3 (it
being acknowledged that for this purpose units that would have been issued but
for an exercise of the set-off rights specified in Section 9.7 shall be deemed
to have been issued), such value to be calculated by multiplying the number of
units times the per share Value (as defined in the Amended Partnership
Agreement) of a PREIT Share as of the date of issuance of such units.
(c) Following Closing, the liability of each Applicable
Beneficial Owner for each indemnity claim pursuant to Section 9.1 shall be
limited to that fraction of the aggregate Damages incurred by Buyer Indemnified
Persons with respect to such claim that is equal to the quotient whose numerator
equals the portion of the Aggregate Value attributable to units (or proceeds of
units) theretofore distributed to such Applicable Beneficial Owner by a
Contributor (for this purpose units that would have been issued but for an
exercise of the set-off rights specified in Section 9.7 shall be deemed to have
been issued) (the "Proportionate Aggregate Value") and the denominator of which
equals the Aggregate Value; provided, however, that the foregoing shall not
limit the liability of Ronald Rubin or George Rubin (or affiliates controlled by
either of them or members of their families), each of whom shall be jointly and
severally liable for 100% of the aggregate Damages incurred (subject to the cap
on aggregate Damages set forth above in subclause (i) of Section 9.3(b)), and
provided further that the foregoing limitation shall not apply to the extent an
indemnity claim is brought with respect to a matter involving fraud or
intentional misrepresentation by such Applicable Beneficial Owner.
(d) No claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to this Agreement
shall be made unless a claim arises and written notice is delivered to the
indemnifying party within
-37-
<PAGE>
the Basic Claims Period (as defined below); provided that any such claim arising
out of or based upon any inaccuracy in or breach of any representation or
warranty made in or pursuant to Sections 4.1(a), 4.1(b) or 4.1(h) may be made at
any time. For purposes hereof, "Basic Claims Period" means the period beginning
on the date hereof and ending on the date five months after the fiscal year end
for the first full fiscal year of PREIT after the Closing under this Agreement.
(e) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the Contributor Disclosure Letter. The waiver by PREIT of any condition
based on the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT. To the extent that any claim for
indemnification may be made under Section 9.1(a) and Section 9.1(c), then such
claim shall be deemed for all purposes to have arisen only under Section 9.1(c)
and not under Section 9.1(a).
(f) Each party's rights under this Section 9 shall be its sole
remedy against the other parties in respect of the subject matter hereof,
subject to a party's rights, if any, to seek and obtain specific performance.
9.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 9 relates, such indemnified party shall, if a
claim is to be made against an indemnifying party under Section 9, give notice
to the indemnifying party of the commencement of such proceeding, but the
failure to so notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
proceeding is materially prejudiced by the indemnified party's failure to give
such notice.
(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
-38-
<PAGE>
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under Section 9 for any fees of other counsel or
any other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (A) it will be
conclusively established for purposes of this Agreement that the claims made in
that proceeding are within the scope of and subject to indemnification; (B) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (1) there is no finding or
admission of any violation of Law by the indemnified party (or any affiliate
thereof) or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (2) the sole relief
provided is monetary damages that are paid in full by the indemnifying party.
The indemnified party will have no liability with respect to any compromise or
settlement of the claims underlying such proceeding effected without its
consent. If notice is given to an indemnifying party of the commencement of any
proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
be bound by any determination made in such proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent.
9.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the party
from whom indemnification is sought.
-39-
<PAGE>
9.6 Distributions of Class A Units by Contributors. Neither Contributor
shall distribute or otherwise transfer to any of its partners or shareholders or
any other Person Class A Units issued pursuant to this Agreement (or proceeds
thereof other than distributions on such units) unless such partner, shareholder
or other Person first executes and delivers to PREIT an agreement, in form and
substance reasonably satisfactory to PREIT, by which such Person would join in
and become a party to this Agreement for purposes of the indemnification
provisions hereof.
9.7 Right of Set-Off. PREIT and the Partnership shall have the
right to set-off, against any Class A Units which may be owed by PREIT or the
Partnership to either Contributor, any amount owed by any Applicable Beneficial
Owner to any Buyer Indemnified Person pursuant to Section 10 of the TRO
Contribution Agreement. To the extent that a Contributor contests an
indemnification claim of PREIT or the Partnership that would be the basis for
the exercise of a right to set off against any Class A Units owed to such
Contributor, the Partnership shall issue such Class A Units and deposit them
with an escrow agent reasonably satisfactory to such Contributor until the
earlier to occur of (i) resolution of such dispute by a final nonappealable
order of a court of competent jurisdiction or (ii) the mutual agreement of such
Contributor and PREIT that such units should be released from escrow.
9.8 Indemnification Payments. The Contributors and the Applicable
Beneficial Owners shall be entitled to use cash or Class A Units to make
indemnification payments hereunder. In the event Class A Units are used, each
such unit shall be valued based on the per share Value (as defined in the
Amended Partnership Agreement) of a PREIT Share as of the date such unit is
tendered to PREIT as an indemnification payment hereunder.
SECTION 10. TERMINATION AND ABANDONMENT.
10.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(i) by PREIT or CHP,Inc., if the Closing has not occurred
(other than through the failure of the party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before February
15, 1999, or such later date as the parties may mutually agree upon in writing;
(ii) by mutual consent of PREIT and CHP,Inc.;
(iii) by the Contributors, on the one hand, or PREIT and the
Partnership, on the other hand, if a material breach (other than a breach of
representations and warranties
-40-
<PAGE>
that would not constitute a failure of the condition set forth in Section
7.2(a)(xiv)) of any provision of this Agreement has been committed by the other
and such breach has not been waived; or
(iv) by PREIT, if any of the conditions in Section 7.2(a) have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of PREIT or the
Partnership to comply with its obligations under this Agreement) and PREIT has
not waived all such unsatisfied conditions before termination pursuant to this
subparagraph (iv); or
(v) by CHP,Inc. if any of the conditions in Section 7.2(b)
have not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of either
Contributor to comply with its obligations hereunder) and CHP,Inc. has not
waived all such unsatisfied conditions before termination pursuant to this
subparagraph (v); or
(vi) by any party hereto if the TRO Contribution Agreement is
terminated prior to the consummation of the TRO Closing.
10.2 Procedure for Termination; Effect of Termination. A party
terminating this Agreement pursuant to this Section 10 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by any party and all further obligations of the parties under this Agreement
will terminate; provided, however, that if such termination is pursuant to
Section 10.1(iii), the terminating party's right to pursue all legal remedies
(including damages and/or specific performance) contemplated by Section 9 will
survive such termination unimpaired.
SECTION 11. GENERAL PROVISIONS.
11.1 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties in
this Agreement and in the certificates, documents and other agreements delivered
pursuant hereto shall survive the Closing, subject to the terms and conditions
of Section 9 above. Anything in this Agreement to the contrary notwithstanding:
(i) the representations and warranties of the Contributors and the right of the
Buyer Indemnified Persons to indemnification for breach thereof, shall not be
affected by any investigation of the Contributors or the Project Partnership
made by PREIT or its agents or representatives; and (ii) the representations and
warranties of PREIT hereunder, and the right of the Contributors to
indemnification for breach thereof, shall not be affected by
-41-
<PAGE>
any investigation of PREIT or its affiliates made by the Contributors or its
agents or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the Contributor
Disclosure Letter (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
11.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer taxes, recording and filing fees and all costs associated with
obtaining the title insurance or endorsements thereto contemplated herein in
connection with the transactions contemplated herein shall be borne by PREIT or
the Partnership. The parties contemplate that the transfer of the Interests in
accordance with the procedures and the time periods set forth in Schedule A will
not be subject to transfer tax. In the event either the Project Partnership or a
Contributor makes or causes a transfer of Interests not in accordance with the
procedures and time periods set forth herein and in the Partnership Agreement,
then the Project Partnership or such Contributor making or causing such transfer
shall be responsible for the payment of any transfer tax and all title insurance
premiums and title company charges and recording costs due as a result thereof.
11.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
-42-
<PAGE>
To PREIT or the Partnership:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the Contributors:
c/o The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esquire
11.4 Access to Information; Confidentiality. Between the date of
this Agreement and the Closing Date, PREIT, on the one hand, and the
Contributors, on the other hand, will give to the other party and its officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the assets,
records, facilities, properties and Contracts relating to its business as the
other party may reasonably request. Each party shall acquire and hold all
confidential information that has been made available by another party hereto
subject to the terms and conditions of Section IV of the Letter Agreement dated
as of April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the terms
of which section are hereby incorporated by reference and which shall remain in
force through the Closing.
11.5 Public Announcements. Except as and to the extent required by
Law or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the
-43-
<PAGE>
Contributors, on the one hand, and PREIT and the Partnership, on the other hand,
will not, and each will direct its representatives not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of any of the terms, conditions
or other aspects of the transactions contemplated hereby; provided, however,
that PREIT may issue a press release, in the form previously circulated by PREIT
to TRO, regarding, among other things, the execution of this Agreement; and
further provided that PREIT and TRO may each continue such communications with
principals, partners, lenders, trustees, attorneys, accountants, investment
bankers, consultants engaged by PREIT and TRO, including abstract companies,
title companies, engineers and architects, Claude de Botton and his affiliates,
Kenneth N. Goldenberg and his affiliates, EPD and its affiliates, and, if agreed
in each case by PREIT and TRO, others as may be legally required or necessary in
connection with the consummation of the transactions contemplated by this
Agreement.
11.6 No Solicitation. Each Contributor shall not, each Contributor
shall cause its officers, employees, partners, representatives and agents not
to, directly or indirectly, continue, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any nonpublic
information to, any Person (other than PREIT and the Partnership and their
respective representatives in connection with the transactions contemplated by
this Agreement) concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice) or shares of capital stock or
partnership interests of either Contributor or any merger, consolidation,
recapitalization, liquidation or similar transaction involving either
Contributor (collectively, an "Acquisition Transaction"). Each Contributor will
promptly communicate to PREIT the terms of any inquiry or proposal that it or he
may receive in respect of an Acquisition Transaction.
11.7 Entire Agreement. This Agreement, together with the Schedules,
Contributor Disclosure Letter, and certificates referred to herein or
delivered pursuant hereto, constitute the entire agreement between the parties
hereto with respect to its subject matter and supersede all prior and
contemporaneous agreements and understandings with respect to the subject
matter hereof.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
11.9 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of
-44-
<PAGE>
the Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of laws.
11.10 Section Headings, Captions and Defined Terms. The section
headings and captions contained herein are for reference purposes only and shall
not in any way affect the meaning and interpretation of this Agreement. The
terms defined herein and in any agreement executed in connection herewith
include the plural as well as the singular, and the use of masculine pronouns
include the feminine and neuter. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and therewith.
11.11 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing. The waiver by any party of any provision of this Agreement shall
not constitute or operate as a waiver of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision.
11.12 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.13 Liability of Trustees, etc. No recourse shall be had for any
obligation of PREIT hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of PREIT, whether by virtue of any statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by each other party hereto.
-45-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement, all as of the date first written above.
CHERRY HILL PARTNER, INC.
By: /s/ George Rubin
-------------------------------------------
Name:
Title:
RUBIN OXFORD VALLEY ASSOCIATES, L.P.
By: Rubin Oxford, Inc., its
general partner
By: /s/ Ronald Rubin
---------------------------------------
Name:
Title
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: /s/ Jonathan B. Weller
---------------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
---------------------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general partner
By: /s/ Jonathan B. Weller
-----------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
-----------------------------------
Name:
Title:
-46-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Northeast Tower Center, Philadelphia, Pennsylvania
Roosevelt Blvd. Co., Inc.
Ronald Rubin, George Rubin, Gerald Broker, Leonard B. Shore
Joseph Coradino, Lewis M. Stone, Pat Berns, Edward Glickman,
Douglas Grayson and Judith Garfinkel
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS......................................... 2
SECTION 2. CONTRIBUTIONS....................................... 2
SECTION 3. CONSIDERATION....................................... 4
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTORS........................................ 5
4.1 As to the Contributors.............................. 5
4.2 As to the Project Partnership....................... 10
4.3 As to the Shopping Center........................... 18
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT...... 23
5.1 Organization........................................ 23
5.2 Power and Authority................................. 24
5.3 No Conflicts........................................ 24
5.4 Capitalization...................................... 25
5.5 PREIT Reports....................................... 26
5.6 Litigation.......................................... 26
5.7 Material Adverse Change............................. 26
5.8 Brokers............................................. 27
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS.................... 27
6.1 Conduct of Business................................. 27
6.2 Reasonable Efforts.................................. 28
6.3 Notifications....................................... 29
6.4 Operation of Shopping Center........................ 29
6.5 Transfer of Shares or Retained Interests............ 30
6.6 Bankruptcy Claim.................................... 30
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES..... 31
7.1 Time of Closing..................................... 31
7.2 Closing Conditions.................................. 31
7.3 Deliveries at the Closing........................... 35
SECTION 8. CLOSING ADJUSTMENTS................................. 37
8.1 Adjustment for Breaches by the Contributors......... 37
8.2 Casualty or Condemnation............................ 37
SECTION 9. INDEMNIFICATION..................................... 38
9.1 Indemnification by Contributors..................... 38
9.2 Indemnification by PREIT............................ 39
9.3 Limitations on Liability............................ 39
9.4 Procedure For Indemnification - Third Party Claims.. 41
9.5 Procedure for Indemnification - Other Claims........ 42
9.6 Distributions of Class A Units by Contributors...... 42
9.7 Right of Set-Off.................................... 43
9.8 Indemnification Payments............................ 43
-i-
<PAGE>
SECTION 10. TERMINATION AND ABANDONMENT......................... 43
10.1 Termination......................................... 43
10.2 Procedure for Termination; Effect of
Termination......................................... 44
SECTION 11. GENERAL PROVISIONS.................................. 45
11.1 Survival of Representations and Warranties.......... 45
11.2 Costs and Expenses.................................. 45
11.3 Notices............................................. 46
11.4 Access to Information; Confidentiality.............. 47
11.5 Public Announcements................................ 47
11.6 No Solicitation..................................... 47
11.7 Entire Agreement.................................... 48
11.8 Counterparts........................................ 48
11.9 Governing Law....................................... 48
11.10 Section Headings, Captions and Defined Terms........ 48
11.11 Amendments, Modifications and Waiver................ 48
11.12 Severability........................................ 48
11.13 Liability of Trustees, etc.......................... 48
11.14 Sears Power Plant................................... 49
-ii-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Northeast Tower Center, Philadelphia, Pennsylvania
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 30th
day of July, 1997, by and among ROOSEVELT BLVD. CO., INC., a Pennsylvania
corporation ("RBC, Inc."), RONALD RUBIN, GEORGE RUBIN, GERARD BROKER, LEONARD
B. SHORE, JOSEPH CORADINO, LEWIS M. STONE, PAT BERNS, EDWARD GLICKMAN, DOUGLAS
GRAYSON and JUDITH GARFINKEL (collectively the "Limited Partners" and together
with RBC, Inc. the "Contributors," and, each, a "Contributor"), PENNSYLVANIA
REAL ESTATE INVESTMENT TRUST, an unincorporated association in business trust
form created under Pennsylvania law pursuant to a Trust Agreement dated
December 27, 1960, as last amended and restated on December 16, 1987
("PREIT"), and PREIT ASSOCIATES, L.P., a Delaware limited partnership (the
"Partnership").
Background
The Contributors are affiliates of The Rubin Organization, Inc., a
Pennsylvania corporation ("TRO").
This Contribution Agreement is part of a larger transaction described
in the TRO Contribution Agreement of even date herewith (the "TRO Contribution
Agreement") among PREIT, TRO, The Rubin Organization-Illinois, Inc. and the
shareholders of TRO.
The Partnership has been formed by PREIT and PREIT Property Trust, a
Pennsylvania business trust ("PREIT Subsidiary"), pursuant to the terms of the
Agreement of Limited Partnership dated as of June 30, 1997 (the "Partnership
Agreement") of PREIT Associates, L.P. between PREIT, as general partner, and
PREIT Subsidiary, as limited partner.
Subject to the terms and conditions of this Agreement and the TRO
Contribution Agreement, the parties intend that the Contributors will
contribute, in exchange for Class A limited partner interests in the
Partnership ("Class A Units"), all of their partner interests (the
"Interests") in each of Roosevelt Associates, L.P., a Pennsylvania limited
partnership ("RA, L.P."), and Roosevelt II Associates, L.P., a Pennsylvania
limited partnership ("RAII, L.P." and together with RA, L.P., the "Project
Partnerships") other than an eleven (11%) percent capital interest and profits
interest in each of the Project Partnerships (the "Retained Interests") which
shall be retained by Ronald Rubin (7.96%) and George Rubin (3.04%) (Ronald
Rubin and George Rubin are herein collectively referred to as the
<PAGE>
"Rubins"), subject to the terms and conditions set forth herein. RAII, L.P.
holds fee title to Parcels 1, 4, 6, and 9 as shown on the plan entitled
"Relocation of Lot Lines", Drawing Number 5.01, dated April 20, 1994, last
revised December 22, 1994, prepared by Langan Engineering and Environmental
Services, Inc. [Parcel 9 was subsequently eliminated and became part of Parcel
1], as modified by "Relocation of Lot Lines Parcels 1 and 2", Drawing Number
5.05, dated January 26, 1995, prepared by Langan Engineering and Environmental
Services, Inc., and "Relocation of Lot Lines Parcels 6 and 7", dated November
11, 1994, prepared by Langan Engineering and Environmental Services, Inc.
(collectively the foregoing plans are hereinafter referred to as the "Plan"),
which comprise, together with Parcel 3 as shown on the Plan, the property of
which the shopping center known as the Northeast Tower Center, Philadelphia,
Pennsylvania (the "Shopping Center") is a part and RA, L.P. holds a leasehold
interest in Parcel 3 as shown on the Plan.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall
have the same meanings as ascribed to such terms in the TRO Contribution
Agreement.
SECTION 2. CONTRIBUTIONS.
(a) Contributions at Closing. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 7.1), the Contributors
shall contribute to the Partnership, and the Partnership shall acquire from
the Contributors, free and clear of all Encumbrances (other than applicable
securities law restrictions and subject to the terms and conditions of the
limited partnership agreements for the Project Partnerships), the Interests
(other than the Retained Interests) and all benefits and advantages to be
derived therefrom, including, without limitation, all right, title and
interest associated with the Interests (other than the Retained Interests) in
and to the capital accounts of the Contributors, rights of the Contributors to
distributions made after the Closing and allocable shares of the Contributors
with respect to profits and losses.
(b) Option to Acquire Retained Interests.
(i) Each of the Rubins hereby grants to the
Partnership the irrevocable right and option to acquire all of the Retained
Interests owned by him, free and clear of all
-2-
<PAGE>
Encumbrances (other than applicable securities law restrictions and subject to
the terms and conditions of the limited partnership agreements for the Project
Partnerships), in exchange for the number of Class A Units specified in
Schedule A hereto as being issuable at the Second Closing, upon written notice
to such effect being given by the Partnership to either or both Rubins, as the
case may be, at least ten days prior to the closing of the exercise of such
option. Such option may be exercised by the Partnership at any time prior to
the third anniversary of the Closing Date.
(ii) If the option granted pursuant to the preceding
paragraph has not been exercised prior to the third anniversary of the Closing
Date, then on the first business day following the third anniversary of the
Closing Date, the Partnership shall be obligated to acquire from the Rubins, and
the Rubins shall be obligated to transfer to the Partnership, all Retained
Interests, free and clear of all Encumbrances (other than applicable securities
law restrictions and subject to the terms and conditions of the limited
partnership agreements for the Project Partnerships), in exchange for the number
of Class A Units specified in Schedule A as being issuable at the Second
Closing.
(iii) The closing for the transfer of the Retained
Interests to the Partnership in accordance with paragraphs (b)(i) or (ii) above
is referred to herein as the Second Closing. The date of the Second Closing
shall be the date specified in subparagraph (b)(ii) above or the closing date
specified in the notice of exercise of the option pursuant to subparagraph
(b)(i).
(c) The Bradlees Property. In the event the Contributors (or any of
them or any of their affiliates or family members) shall acquire the right to
purchase Parcel 2 on the Plan (the "Bradlees Property") and in the further
event the Bradlees Property is then subject to a lease or an agreement to
lease with Walmart or another tenant acceptable to the Partnership, the
Contributors agree to cause the Bradlees Parcel to be offered for sale to a
third party and shall grant to the Partnership a right of first refusal
exercisable within twenty (20) days after receipt of written notice from the
Contributors to purchase the Bradlees Property on the same terms and
conditions which are acceptable to the third party purchaser. In the event the
Contributors (or any of them or any of their affiliates or family members)
shall acquire the right to purchase the Bradlees Property and the Bradlees
property is not then subject to a lease as set forth above, the Contributors
(or their affiliates or family members) shall grant to the Partnership the
irrevocable right and option exercisable within twenty (20) days after receipt
of written notice setting forth all material terms to succeed to such
Contributor's right to acquire the Bradlees
-3-
<PAGE>
Property by taking an assignment of the purchase agreement. Upon the closing
of the exercise of any such option, the Partnership shall acquire fee title to
the Bradlees Property for a purchase price equal to the Appraised Value. In
the event the purchase price payable for the Bradlees Property is greater than
the Appraised Value, the Contributors shall pay to the seller of the Bradlees
Property the difference between the purchase price and the Appraised Value. In
the event the purchase price for the Bradlees Parcel is less than the
Appraised Value, the Partnership shall pay such difference to the
Contributors.
(d) Rubin II, Inc.
(i) At the Closing, Ronald Rubin shall contribute
to the Partnership, and the Partnership shall acquire, that number of common
shares of Rubin II, Inc., a Pennsylvania corporation ("RII, Inc."), that shall
(A) represent eighty-nine (89%) percent of the then-issued and outstanding
shares of capital stock in RII, Inc. and (B) possess the power to direct the
vote of an amount of voting securities of RII, Inc. sufficient to elect a
majority of the board of directors of RII, Inc. (such contributed RII, Inc.
common shares, the "Contributed RII Shares"). The parties acknowledge that
RII, Inc. is merely a fee title trustee of Parcel 3.
(ii) At the Second Closing, the Partnership shall
have the option (but not the obligation) to acquire, and upon written notice
of exercise of such option from the Partnership given prior to the Second
Closing, Ronald Rubin shall be obligated to contribute to the Partnership,
free and clear of all Encumbrances (other than applicable securities law
restrictions), all of the common shares of RII, Inc. other than the
Contributed RII Shares.
(iii) The contributions referred to in this
subparagraph (d) shall be made without the payment by the Partnership of any
consideration other than the Class A Units which are otherwise issuable
hereunder.
SECTION 3. CONSIDERATION.
(a) In consideration for the contributions described in Section 2,
subject to the terms and conditions of this Agreement, at the Closing, the
Partnership shall issue to the Contributors that number of Class A Units as is
set forth in Schedule A hereto (which is incorporated by reference herein) as
being issuable at the Closing and, at the Second Closing, the Partnership
shall issue to the Rubins that number of Class A Units as is set forth in
Schedule A as being issuable at the Second Closing. Upon the closing of an
exercise of any option specific in Section 2(c), the Partnership shall issue
to the applicable Contributors the number of Class A Units specified in
Section 2(c).
-4-
<PAGE>
(b) Notwithstanding anything to the contrary set forth herein, the
Partnership shall deliver to the Contributor who is not an "accredited
investor," as such term is defined under Regulation D promulgated pursuant to
the 1933 Act, in lieu of any Class A Units which would otherwise be issuable
to such Contributor pursuant to Section 3(a) of this Agreement (and Schedule A
hereto), an amount of cash equal to the product of (i) the number of Class A
Units otherwise issuable to such Contributor pursuant to Schedule A of this
Agreement and (ii) $23.40.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.
Each Contributor hereby represents and warrants to PREIT and the
Partnership as follows (provided that to the extent a representation or
warranty set forth in Section 4 relates solely to the business, affairs or
status of a Contributor, such representation and warranty shall be deemed to
be made solely by the applicable Contributor to which such representation and
warranty relates):
4.1 As to the Contributors.
(a) Organization. RBC, Inc. is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization and has all corporate power to carry on its business as
presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. RBC, Inc. is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which its ownership or leasing of
assets or properties or the nature of its activities requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of RBC, Inc. (a "Material Adverse Effect").
(b) Power and Authority. RBC, Inc. has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and under the other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, and
together with all documents and agreements required to be delivered by the
other Contributors on or prior to the Second Closing, the "Contributor
Transaction Documents"). The execution, delivery and performance by RBC, Inc.
of this Agreement and the other Contributor Transaction Documents to which it
is a party have been duly authorized by all necessary corporate action on the
part of RBC, Inc. This Agreement has been duly and validly executed and
delivered by each Contributor and constitutes a legal, valid and binding
-5-
<PAGE>
obligation of each Contributor enforceable against it or him in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally or by general equitable principles. When executed and delivered as
contemplated herein, each of the other Contributor Transaction Documents to
which a Contributor is a party shall, assuming due authorization, execution
and delivery thereof by the other parties thereto, constitute a legal, valid
and binding obligation of such Contributor enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or by general equitable principles.
(c) No Conflicts; etc. Except as described in
Section 4.1(c) of the disclosure letter delivered by the Contributors to PREIT
on the date hereof (the "Contributor Disclosure Letter"), the execution and
delivery by the Contributors of this Agreement do not, and the performance by
the Contributors of all of the Contributor Transaction Documents will not
(with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the
articles of incorporation, bylaws (or other organizational documents) of RBC,
Inc. or (B) any Law applicable to any Contributor, or by or to which any assets
or properties of any Contributor is bound or subject;
(ii) violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of benefit under, or
give to others any rights (including rights of termination, amendment,
foreclosure, cancellation or acceleration) in or with respect to, any
Authorization or Contract to which any Contributor is a party or by which any
Contributor or any assets or properties thereof is bound or affected; or
(iii) result in, require or permit the creation
or imposition of any Encumbrance upon or with respect to any Contributor, the
Interests, the Contributed RII Shares or any of the Contributors' other assets
or properties.
(d) Except as set forth in Section 4.1(d) of the
Contributor Disclosure Letter, the execution and delivery by the Contributors of
this Agreement does not, and the execution and delivery by the Contributors of
the other Contributor Transaction Documents, and the performance by the
Contributors of all of the Contributor Transaction Documents will not, require
any Contributor to obtain any authorization of, or to make any filing,
registration or declaration with or notification to, any court, government or
governmental agency or instrumentality
-6-
<PAGE>
(federal, state, local or foreign) or to obtain the consent, waiver or
approval of, or give any notice to, any other Person.
(e) Except as set forth in Section 4.1(e) of the
Contributor Disclosure Letter, there are no actions, proceedings or
investigations pending or, to the knowledge of the Contributors, threatened,
that question any of the transactions contemplated by this Agreement or which,
if adversely determined, would have a Material Adverse Effect or could
materially and adversely affect any Contributor's ability to enter into or
perform its obligations under this Agreement.
(f) Litigation; Orders.
(i) Except as set forth in Section 4.1(f) of
the Contributor Disclosure Letter, there are no, and since January 1, 1996,
there have not been any, claims, actions, suits, proceedings (arbitration or
otherwise) or, to the knowledge of the Contributors, investigations involving
or affecting any Contributor or any of their assets or properties or any of
their directors, officers, partners or shareholders in their capacities as
such, before or by any court, government or governmental agency or
instrumentality (federal, state, local or foreign), or before an arbitrator of
any kind. To the knowledge of the Contributors, no such claim, action, suit,
proceeding or investigation is presently threatened or contemplated. There are
no unsatisfied judgments, penalties or awards against or affecting any
Contributor or any of their assets or properties.
(ii) There is no material Order to which any
Contributor or any of their assets or properties is subject. No officer,
director, partner, shareholder or, to the knowledge of the Contributors,
employee of any corporate Contributor is subject to any Order that prohibits
such officer, director, partner, shareholder or employee from engaging in or
continuing any conduct, activity or practice relating to its business. The
Contributors have each complied in all respects with the terms and conditions
of each Order applicable to them.
(g) Undisclosed Liabilities. Except as set forth in
Section 4.1(g) of the Contributor Disclosure Letter, there are no liabilities or
obligations of the Contributors or RII, Inc. of any nature (whether absolute,
accrued, contingent, liquidated or unliquidated or otherwise) except the
obligations under the Limited Partnership Agreement dated April 2, 1993,
governing RA, L.P. and the Limited Partnership Agreement dated April 13, 1994,
governing RAII, L.P (collectively, the "Project Partnership Agreements").
(h) The Interests; The Contributed RII Shares.
-7-
<PAGE>
(i) Section 4.1(h) of the Contributor Disclosure
Letter contains an accurate and complete description of the Interests that have
been issued of record. Except as described therein, to the knowledge of the
Contributors, no Person has any partnership or other interest in the Project
Partnerships or any right to receive any distributions from the Project
Partnerships or be allocated any profits or losses of the Project Partnerships.
Each Contributor owns, beneficially and of record, the portion of the Interests
described in Schedule A hereto, free and clear of all Encumbrances other than
the Project Partnership Agreements. The Persons listed in Section 4.1(h) of the
Contributor Disclosure Letter are the sole partners in the Project Partnerships.
The issued and outstanding partnership interest in the Project Partnerships have
been issued by the Project Partnerships in compliance with the Project
Partnership Agreements, and such interests were not issued by the Project
Partnerships in violation of any federal or state securities laws.
(ii) Except for this Agreement and except as
provided in the Project Partnership Agreements or in leases with tenants (any
such rights in leases shall be customary in projects comparable to the Shopping
Center and shall not prejudice the value of the Shopping Center as calculated in
Schedule A hereto), there are no rights, subscriptions, warrants, options,
rights of first refusal, conversion rights or agreements of any kind outstanding
to purchase or to otherwise acquire any partnership interest or other securities
or obligations of any kind convertible into any partnership interest or other
securities or any participation interests of any kind in the Shopping Center (or
any portion thereof) or the Project Partnerships.
(iii) Upon execution and delivery by the
Contributors and the Partnership of the assignment and assumption agreement
contemplated by Section 7.3, the Partnership will acquire good and valid title
to the Interests, free and clear of all Encumbrances (except for applicable
securities law restrictions and for the Project Partnership Agreements).
(iv) The Contributors have delivered to the
Partnership on the date hereof true and complete copies of the Project
Partnership Agreements, as amended to date.
(v) Ronald Rubin owns, beneficially and of
record, all of the outstanding common shares of RII, Inc. There are no
shareholder, partnership or other agreements affecting the right of Ronald Rubin
to convey the Contributed RII Shares to the Partnership as contemplated herein.
Ronald Rubin has the absolute right, power and capacity to sell, assign,
transfer, contribute and deliver all of the Contributed RII Shares to the
Partnership, free and clear of all Encumbrances (except for restrictions imposed
generally by applicable securities laws), as
-8-
<PAGE>
contemplated herein. Upon delivery to the Partnership of the certificates for
the Contributed RII Shares at the Closing as contemplated herein, the
Partnership will acquire good and valid title to the Contributed RII Shares,
free and clear of all Encumbrances (except for applicable securities law
restrictions). No Person has any preemptive or other similar rights with
respect to any capital stock or other securities of RII, Inc., and except for
this Agreement, there are no offers, options, warrants, rights, agreements or
commitments of any kind (contingent or otherwise) relating to the issuance,
conversion, registration, voting, sale or transfer of any equity interests or
other securities of RII, Inc. or obligating RII, Inc. or any other Person to
purchase or redeem any such equity interests or other securities. The
outstanding capital stock of RII, Inc. consists of 1,000 common shares. Each
such share has been duly authorized, is validly issued and outstanding, fully
paid and non-assessable.
(i) Brokers. No Person acting on behalf of any Contributor
or any of their respective affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, from any of such parties in
connection with any of the contribution transactions contemplated by this
Agreement.
(j) Accurate Disclosure. All documents and other papers
delivered by or on behalf of any Contributor in connection with the transactions
contemplated by this Agreement are accurate and complete in all material
respects.
(k) Knowledge. For purposes of this Agreement, "to the
knowledge of the Contributors" and correlative terms means the actual knowledge
of Ronald Rubin, Larry Trachtman and Douglas Grayson and the officers and other
senior management of RBC,Inc. and Ronald Rubin, George Rubin, Leonard Shore,
Joseph Coradino, Lewis Stone, Pat Berns, Edward Glickman and Judith Garfinkel,
after reasonable inquiry.
(l) Investment Representations.
(i) Each Contributor acknowledges that the
Class A Units to be issued pursuant to Section 3 and Schedule A hereto will
not be registered under the 1933 Act on the grounds that the issuance of such
units is exempt from registration pursuant to Section 4(2) of the 1933 Act
and/or Regulation D promulgated under the 1933 Act, and that the reliance of
the Partnership on such exemptions is predicated in part on the Contributors'
representations, warranties and acknowledgements set forth in this section.
-9-
<PAGE>
(ii) Each of the Contributors other than Douglas
Grayson is an accredited investor as defined in Regulation D promulgated under
the 1933 Act. The Class A Units issued in accordance with this Agreement will be
acquired by each Contributor that is acquiring Class A Units hereunder for its
or his own account, not as a nominee or agent, and without a view to resale or
other distribution within the meaning of the 1933 Act, and the rules and
regulations thereunder, and none of the Contributors will distribute any of such
units in violation of the 1933 Act.
(iii) Each Contributor (v) acknowledges that the
Class A Units, when issued, will not be registered under the 1933 Act and such
units will have to be held indefinitely by it or him unless they are
subsequently registered under the 1933 Act or an exemption from registration is
available, (w) is aware that any sales of such units made under Rule 144 of the
Securities and Exchange Commission under the 1933 Act may be made only in
limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, (x) is aware that Rule 144 may
not be available for use by any Contributor for resale of the units, (y) is
aware that the Partnership is under no obligation to register, and has no
current intention of registering any of such units under the 1933 Act and (z)
acknowledges that such Contributor has received and read a private placement
memorandum relating to the offer of Class A Units.
(iv) Each Contributor is well versed in
financial matters, has had dealings over the years in securities, including
"restricted securities," and is fully capable of understanding the type of
investment being made in the Class A Units and the risks involved in connection
therewith.
4.2 As to the Project Partnerships.
(a) Organization. Each Project Partnership is a
partnership duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and each Project Partnership has all
partnership power to carry on its business as presently conducted, to own and
lease the assets and properties which it owns and leases and to perform all
its obligations under each agreement and instrument to which it is a party or
by which it is bound. Each Project Partnership is duly qualified to do
business as a foreign partnership and is in good standing under the laws of
each jurisdiction in which its ownership or leasing of assets or properties or
the nature of their activities requires such qualification except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), assets, results of operations or business
of such Project Partnership.
-10-
<PAGE>
(b) No Conflicts. Except as described in Section 4.2(b) of
the Contributor Disclosure Letter, the execution and delivery by the
Contributors of this Agreement do not, and the execution and delivery by the
Contributors of the other Contributor Transaction Documents and the performance
by the Contributors of all of the Contributor Transaction Documents will not
(with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A)
either Project Partnership Agreement, or (B) any Law applicable
to the Project Partnerships or to the Shopping Center;
(ii) violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of benefit under,
or give to others any rights (including rights of termination, amendment,
foreclosure, cancellation or acceleration) in or with respect to any material
Authorization or Contract to which either Project Partnership is a party or by
which either Project Partnership or the Shopping Center is bound or affected;
or
(iii) result in, require or permit the
creation or imposition of any Encumbrance upon or with respect to either of
the Project Partnerships, the Shopping Center or any other material assets or
properties of either of the Project Partnerships.
(c) Except as set forth in Section 4.2(c) of the
Contributor Disclosure Letter, the execution and delivery by the Contributors of
this Agreement do not, and the performance by the Contributors of all of the
Contributor Transaction Documents will not, require the Project Partnerships to
obtain any authorization of, or to make any filing, registration or declaration
with or notification to, any court, government or governmental agency or
instrumentality (federal, state, local or foreign) or to obtain the consent,
waiver or approval of, or give any notice to, any other Person.
(d) Compliance with Laws.
(i) Except as disclosed in Section 4.2(d) of
the Contributor Disclosure Letter, the Project Partnerships are, and, to the
knowledge of the Contributors, at all times since their respective inceptions
have been, in compliance in all material respects with all Laws that are or
were applicable to either of them or to the conduct or operation of its
business or the use of the Shopping Center. The Project Partnerships have not
received, and there is no basis upon which the Project Partnerships may expect
to receive, any notice, order or other communication from any government or
governmental agency or instrumentality (federal, state, local or foreign) of
any
-11-
<PAGE>
alleged, actual or potential material violation of or material failure to
comply with any Law applicable to either of the Project Partnerships or the
Shopping Center, and no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a material
violation by either of the Project Partnerships, or a material failure by
either of the Project Partnerships, to comply with, any Law applicable to
either of the Project Partnerships or the Shopping Center.
(ii) Each Project Partnership is in possession
of all Authorizations required as of the date hereof to own, lease or operate
its assets and properties or to carry on its business. Each Project Partnership
shall obtain, as and when required by applicable law, all required
Authorizations not presently in its possession, recognizing that the Shopping
Center is an ongoing construction project as of the date of this Agreement. The
Authorizations currently in effect are in full force and effect without any
default or violation thereunder by either of the Project Partnerships or, to the
knowledge of the Contributors, by any other party thereto. Each Project
Partnership is in compliance with all existing Authorizations applicable to it
or to the conduct or operation of its business or the use of any of its assets
or properties, and no such Authorization shall be affected by the transactions
contemplated hereby. Neither Project Partnership nor, to the knowledge of the
Contributors, any partner therein has received any notice that any such
Authorization currently in effect may be revoked or may not in the ordinary
course be renewed upon its expiration or that by virtue of the transactions
contemplated hereby that any such Authorization may be revoked or may not be
granted, renewed or issued to either of the Project Partnerships.
(e) Litigation; Orders.
(i) Except as set forth in Section 4.2(e) of the
Contributor Disclosure Letter, there are no, and since the respective inceptions
of the Project Partnerships there have not been any, claims, actions, suits,
proceedings (arbitration or otherwise) or, to the knowledge of the Contributors,
investigations involving or affecting either of the Project Partnership or any
of their respective assets or properties or, to the knowledge of the
Contributors, any of their respective partners in their capacities as such,
before or by any court, government or governmental agency or instrumentality
(federal, state, local or foreign) or before an arbitrator of any kind (each, a
"Claim") other than Claims customarily arising in connection with the ownership
and operation of shopping centers similar to the Shopping Center that are
covered by insurance or are within the limits of current insurance deductibles.
To the knowledge of the Contributors, no such Claim is presently threatened or
contemplated. There are no unsatisfied judgments,
-12-
<PAGE>
penalties or awards against or affecting either of the Project Partnerships or
any of their respective assets or properties.
(ii) Except as set forth in Section 4.2(e) of
the Contributor Disclosure Letter, there is no Order to which either of the
Project Partnerships or any of their respective assets or properties is subject.
No partner or employee of either of the Project Partnerships is subject to any
Order that prohibits such partner or employee from engaging in or continuing any
conduct, activity or practice relating to its business. Each of the Project
Partnerships has complied in all respects with the terms and conditions of each
Order applicable to it.
(f) Cost Reports. Section 4.2(f) of the Contributor
Disclosure Letter includes the cost report reflecting the costs and liabilities
of constructing the Shopping Center as of the date of this Agreement (the "Cost
Report") incurred by each of the Project Partnerships. As of the date hereof, no
financial statements have been prepared for either of the Project Partnerships.
(g) Undisclosed Liabilities.
(i) As of the date hereof, there are no
liabilities of either of the Project Partnerships of a nature required to be
reflected in a balance sheet prepared in accordance with GAAP except: (x) those
described in Section 4.2(g) of the Contributor Disclosure Letter; (y) those
reflected or reserved against in the Cost Report; or (z) current liabilities
incurred in the ordinary course of business consistent with past practice after
the date of the Cost Report and which are neither material in amount nor
inconsistent with any of the representations or warranties made herein.
(ii) As of the Closing, there shall be no
liabilities of either of the Project Partnerships of any nature (whether
absolute, accrued, contingent, liquidated, unliquidated or otherwise) except the
liabilities that are taken into account in the calculation of Attributable Debt
pursuant to Schedule A hereto.
(h) Title to Property; Encumbrances. Each of the Project
Partnerships has good and valid title to, or has a valid, subsisting and
unchallenged leasehold interest in or right to use, all personal property owned,
used or leased by them. Each of the Project Partnerships owns all the personal
property (whether tangible or intangible) that is reflected as owned in its
books and records, free and clear of all Encumbrances other than liens for
current taxes not yet due, the Encumbrances set forth in Section 4.2(h) of the
Contributor Disclosure Letter and Encumbrances arising after the date hereof in
the ordinary course of business.
-13-
<PAGE>
(i) Taxes.
(i) All Taxes due from or required to be
remitted by either of the Project Partnerships with respect to taxable periods
ending on or prior to, and the portion of any interim period up to, the Closing
Date have been fully and timely paid or, to the extent not yet due or payable,
have been adequately provided for on the Cost Report referred to in Section
4.2(f) of the Contributor Disclosure Letter or on the books and records of the
applicable Project Partnership. There are no levies, liens or other Encumbrances
relating to Taxes existing or pending, or to the best knowledge of the
Contributors, threatened with respect to any of the assets of either of the
Project Partnerships.
(ii) Except as disclosed in Section 4.2(i) of
the Contributor Disclosure Letter, all federal, state, local and foreign returns
and reports relating to Taxes, or extensions relating thereto, required to be
filed by or with respect to either of the Project Partnerships have been timely
and properly filed, and all such returns and reports are correct and complete.
(iii) No issues have been raised with any
representative or employee of either of the Project Partnerships (and are
currently pending) by the IRS or any other taxing authority in connection with
any of the returns and reports referred to in subsection (ii) above and no
waivers of statutes of limitations have been given or requested with respect to
any such returns and reports or with respect to any Taxes.
(iv) Section 4.2(i) of the Contributor
Disclosure Letter identifies all federal, state, local and foreign income,
franchise and sales and use tax returns of or with respect to either of the
Project Partnerships which have been examined since their respective dates of
inception, or which are currently under examination, by the IRS or by other
taxing authorities, or with respect to which the applicable statute of
limitations (including all extensions and tolling periods) has not yet run.
Except as and to the extent shown therein, all deficiencies asserted or
assessments made as a result of such examinations have been fully paid, and
there are no other unpaid deficiencies asserted or assessments made by any
taxing authority against either of the Project Partnerships.
(j) Absence of Certain Changes and Events.
(i) The parties acknowledge that the Shopping
Center is not fully developed or constructed and the Shopping Center will not be
substantially completed until approximately December 15, 1999. Except as
described in Section 4.2(j) of the Contributor Disclosure Letter and except as
contemplated or
-14-
<PAGE>
disclosed herein, since their respective dates of inception, each Project
Partnership has conducted its business and activities only in the usual and
ordinary course consistent with past practice and consistent with the
development and construction of a retail shopping center, and there has not
been any:
(A) declaration or payment of any distribution
or payment in respect of any interest in either of the Project Partnerships to
the extent that such payment or distribution relates to an obligation or
liability of such Project Partnership after Closing or any issuance, repurchase
or redemption of any such interest;
(B) amendment to either of the Project
Partnership Agreements;
(C) damage, destruction or loss to any material
asset or property of either of the Project Partnerships, whether or not covered
by insurance, that has not been fully repaired, restored or replaced;
(D) except for current trade debt incurred in
the ordinary course of business consistent with past practice and except for the
Permitted Refinancing (as hereinafter defined), borrowing or incurring of any
indebtedness, obligation or liability, contingent or otherwise by either of the
Project Partnerships;
(E) sale (other than sales of inventory in the
ordinary course of business), assignment, conveyance, lease (other than to
tenants for occupancy of space in the Shopping Center), or other disposition of
any asset or property of either of the Project Partnerships other than in the
ordinary course of development and construction of the Shopping Center;
(F) cancellation or waiver of any material
claims or rights of either of the Project Partnerships; or
(G) agreement or commitment, whether or not in
writing, to do any of the foregoing.
(k) Books and Records. The books and records of the
Project Partnerships, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices. To the extent such books and records
constitute financial records or books of account, they fairly present revenues,
expenses, assets and liabilities, all in a manner that will allow the
preparation of financial statements that comply with GAAP.
-15-
<PAGE>
(l) FIRPTA. Neither Project Partnership is a "foreign
person" within the meaning of Section 1445(f) of the Code or a "foreign partner"
within the meaning of Section 1446 of the Code.
(m) List of Properties, Contracts, etc. Section 4.2(m) of
the Contributor Disclosure Letter contains a complete and accurate list as of
the date hereof of each item described below, and the Contributors have
delivered to PREIT (or given PREIT access to) true and complete copies of each
document (or summaries of oral agreements) described below.
(i) Each of the following types of Contracts,
whether oral or written, to which either or both of the Project Partnerships or,
to the Contributors' knowledge, any of their respective general partners (in
their capacities as such) is a party or by which they or any of their respective
assets are bound:
(A) All Contracts that:
(I) involve performance of services or
sale or lease of goods, materials or space by either of
the Project Partnerships or any of their respective
general partners of an amount or value in excess of
$25,000 in any annual period or $100,000 in the aggregate;
(II) involve performance of services
or sale or lease of goods, materials or space to either of
the Project Partnerships or any of their respective
general partners of an amount or value in excess of
$25,000 in any annual period or $100,000 in the aggregate;
(III) are not in the ordinary course
of business and involve expenditures or receipts by either
of the Project Partnerships or any of their respective
general partners of more than $25,000;
(IV) are not terminable by either of
the Project Partnerships or any of their respective
general partners without penalty or premium upon less than
60 days' notice; or
(V) are otherwise material to the
business, operations, financial condition or prospects of
either of the Project Partnerships or to the ownership,
operation or management of the Shopping Center.
-16-
<PAGE>
(B) All Authorizations held by either
of the Project Partnerships that relate to any of the
assets or properties owned, used or leased by either of
the Project Partnerships;
(C) All outstanding loans and advances
by either of the Project Partnerships to any partner,
officer or employee of either of the Project Partnerships;
and
(D) Other than trade debt incurred in
the ordinary course of business, all notes, debt
instruments, other evidences of indebtedness, letters of
credit and guaranties (whether written or oral) issued by
or for the benefit of either of the Project Partnerships
and all loan and other agreements relating thereto.
(n) Contracts.
(i) Except as described in Section 4.2(n) of the
Contributor Disclosure Letter and subject to the terms and conditions of Section
7.2(a)(ii) below, each Contract of a type required to be identified in Section
4.2(m)(i)(A) of the Contributor Disclosure Letter was made in the ordinary
course of business, is in full force and effect and is valid, binding and
enforceable against the parties thereto in accordance with its terms. Except as
described in Section 4.2(n) of the Contributor Disclosure Letter, the Project
Partnerships and their respective general partners have each performed in all
material respects all obligations required to be performed by them under each
such Contract to which any of them is a party or by which any of them is bound,
and, to the knowledge of the Contributors, no condition exists or event has
occurred which with notice or lapse of time would constitute a default
thereunder or a basis for delay, non-performance, termination, modification or
acceleration of maturity or performance by any party thereto.
(ii) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to either of the Project Partnerships or any of their respective general
partners (in their capacity as such) under any of the Contracts referred to in
subparagraph (i) above. All of such Contracts that relate to the provision of
services or goods by either of the Project Partnership or any of their
respective general partners (in their capacity as such) have been entered into
in the ordinary course of business and have been entered into without the
commission of any act or any consideration having been paid or promised that is
or would be in violation of any Law.
(iii) Except as set forth in Section 4.2(n) of
the Contributor Disclosure Letter, without limiting the generality of the
foregoing, the Project Partnership Agreements
-17-
<PAGE>
are in full force and effect and each of the parties thereto has performed all
obligations required to be performed by it under such agreements.
4.3 As to the Shopping Center.
(a) Title
(i) Based solely on Owner's Policy Nos. 485954
and 485957 issued by First American Title Insurance Company (the "Title
Policy"), as of the date hereof RAII, L.P. and RII, Inc. own fee simple title to
the Shopping Center, free and clear of all Encumbrances except as set forth in
Section 4.3(a) of the Contributor Disclosure Letter (the "Title Policy
Encumbrances"). To the knowledge of the Contributors, there have been no changes
in the state of such title as reflected in the Title Policy other than Title
Policy Encumbrances and those encumbrances required to complete the development
and construction of the Shopping Center that are of a nature customary for
development projects similar to the Shopping Center (collectively, the
"Permitted Encumbrances").
(ii) RA, L.P. is the tenant under a valid and
subsisting lease of Parcel 3 dated April 25, 1994 by and between RII, Inc., as
Declarant under a Declaration and Agreement of Trust dated April 25, 1994, as
landlord, and RA, L.P., as tenant, a Memorandum of which was recorded in the
Department of Records of the City of Philadelphia May 20, 1994 in Deed Book VCS
577, Page 387; and RA, L.P. is the sublandlord under a valid and subsisting
sublease dated April 25, 1994, by and between RA, L.P., as sublandlord, and Home
Depot USA, Inc., as subtenant.
(iii) The Project Partnerships are the owners
of, or the lessees under subsisting leases of, or otherwise have the right to
use the personal property used by the Project Partnerships in the operation of
the Shopping Center. All of such property that is reflected on the records of
either of the Project Partnerships as owned by either of the Project
Partnerships is free and clear of all Encumbrances, except for Permitted
Encumbrances.
(iv) Except as set forth in Section 4.3(a) of
the Contributor Disclosure Letter and except as provided in tenant leases, there
are no rights of first refusal on, or options to purchase, any portion of the
Shopping Center or any right to participation interests (whether of profits,
sale or refinancing proceeds, or calculated based on fair market value) with
respect to any portion of the Shopping Center in favor of any tenant, lender or
any other Person other than either of the Project Partnerships or RII, Inc. None
of the tenant leases provides for any such right or option except that one or
more of
-18-
<PAGE>
such leases may provide for a purchase option in favor of the tenant but only
in respect of the space leased to such tenant.
(v) To the knowledge of the Contributors, no
eminent domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn any part of the Shopping Center. To the Contributors'
knowledge, as of the date hereof, there are no pending or threatened
governmental rules, regulations, plans, studies, or court orders or decisions,
which do or could materially adversely affect the use or value of the Shopping
Center as a retail shopping center.
(b) Mortgage Obligations.
(i) The Shopping Center is subject as of the
date hereof to the mortgage(s) securing obligation(s) in the amount(s) set forth
in Section 4.3(b) of the Contributor Disclosure Letter (such obligations and any
other obligations incurred to refinance such obligations, the "Loan
Obligations") and is subject as of the date hereof to no other mortgage. Section
4.3(b) of the Contributor Disclosure Letter sets forth the original principal
amount, approximate outstanding principal amount, interest rate, term and other
material economic provisions of each of the Loan Obligations.
(ii) The documents identified in Section 4.3(b)
of the Contributor Disclosure Letter, true and correct copies of which have been
delivered to PREIT (or to which PREIT has been given access), constitute all of
the material documents evidencing, defining or securing the Loan Obligations
(the "Loan Documents").
(iii) The Project Partnerships and RII, Inc.
have complied with the Loan Documents, and there are no events of default
thereunder now outstanding. To the Contributors' knowledge, no event has
occurred, which with the passage of time or the giving of notice or both, could
ripen into an event of default under the terms of the Loan Documents.
(c) Leases.
(i) The Rent Roll attached to Section 4.3(c) of
the Contributor Disclosure Letter (the "Rent Roll") lists each of the leases in
existence as of the date hereof with respect to any portion of the Shopping
Center.
(ii) Except as set forth in Section 4.3(c) of
the Contributor Disclosure Letter, as of the date hereof, there are no leases,
licenses or other rights of occupancy in force which affect the Shopping Center
or any portion thereof other than the leases listed in the Rent Roll. The
Contributors have
-19-
<PAGE>
made available to PREIT copies of all of the leases (including all amendments)
listed on the Rent Roll. Except as set forth on the Rent Roll, no uncured
event of default of either of the Project Partnerships or, to the knowledge of
the Contributors, any tenant has occurred and is continuing under any lease of
premises within the Shopping Center, no tenant has asserted a defense to or
offset or claim against its rent or the performance of its obligations under
its lease, and no tenant has asserted a default on the part of either of the
Project Partnerships which would give it the right to terminate its lease or a
setoff against rent.
(iii) With respect to the leases involving the
Shopping Center, except as set forth in Section 4.3(c) of the Contributor
Disclosure Letter or in the leases, as of the date hereof:
(A) there are no proposed modifications to
any such lease that would reduce:
(I) the space leased to any tenant;
(II) the amount of any tenant's rent;
or
(III) the term of any lease;
(B) no free rent or other concession is
due any tenant;
(C) Neither Project Partnership is
required to provide tenant improvements or refurbishments with respect any such
lease other than tenant improvements that either Project Partnership may be
required to construct if an expansion option provided in a lease is exercised;
(D) no tenant has an option to terminate
its lease prior to its stated expiration date;
(E) except for (x) security deposits or
(y) the first full month's rent, whether or not the term of a lease has
commenced, no prepayments of rent more than thirty (30) days in advance have
been made under any such lease;
(F) no rent or security deposit under any
such lease has been assigned or encumbered, except as security for the Loan
Documents;
(G) there are no agreements or
understandings, written or oral, with any tenant other than as set forth in its
lease or on the Rent Roll; and
-20-
<PAGE>
(H) all brokerage commissions and other
compensation or fees payable by reason of the leases have not been paid in full.
Attached to Section 4.3(c) of the Contributor Disclosure Letter is a list of
brokers commissions due with respect to the Shopping Center and the status of
such commissions.
(d) Zoning. The zoning classification for the Shopping
Center is C-3 Commercial, and the contemplated uses of the Shopping Center are
in compliance with the applicable zoning ordinances and regulations.
(e) Compliance with Laws and Recorded Declarations. The
Project Partnerships have complied in all material respects with all Laws
(including, without limitation, the Americans with Disabilities Act of 1990) and
requirements of insurance bodies applicable to the ownership, leasing, use and
operation of the Shopping Center, including, without limitation, parking,
dimensional and building setback requirements, and have performed all work and
secured all required consents and approvals, or will do so in a timely fashion,
and obtained and fully paid, or will do so in a timely fashion, for all
Authorizations and any other items and documents required by applicable Law, by
contract, or as a condition of any approval granted by or agreement entered into
with any applicable municipal authority, required of either of the Project
Partnerships for the completion, ownership, leasing, use and occupancy of the
Shopping Center, including, but not limited to, final certificates of occupancy
for each of the current tenancies in the Shopping Center other than where
construction of tenant improvements for new tenancies is not yet completed or
timely applications remain pending or where the tenants are required to obtain
such consents, approvals or authorizations under the leases. All such existing
Authorizations and other items and documents are in full force and effect.
Neither of the Project Partnerships has taken any action that would (or failed
to take any action, the omission of which might) result in the revocation or
suspension of any such Authorization or other item or document, and neither of
the Project Partnerships has received any notice of any violation from any
federal, state or municipal entity or notice of an intention by any such
governmental entity to revoke any certificate of occupancy or other
Authorization issued by it in connection with the ownership, use and occupancy
of the Shopping Center that in each case has not been cured or otherwise
resolved to the satisfaction of such governmental entity. Except as set forth in
Section 4.3(e) of the Contributor Disclosure Letter, to the Contributors'
knowledge, (i) any and all charges and other assessments under declarations and
like agreements and special assessments to which the Shopping Center or either
of the Project Partnerships is subject have been paid to date, and (ii) all
consents and approvals required to be obtained under such declarations and like
agreements with respect to the Shopping
-21-
<PAGE>
Center have been obtained or are in the process of being obtained.
Notwithstanding anything to the contrary contained herein, the Contributors do
not represent or warrant compliance by any of the tenants with respect to Laws
or that the Contributors are obtaining any Authorizations that are required to
be obtained by any tenants, but the Contributors shall enforce the leases and
obligations of tenants thereunder.
(f) Environmental Matters.
(i) Except as described in Section 4.3(f) of
the Contributor Disclosure Letter, the Contributors have no knowledge of any
fact, condition or circumstance that would suggest that the environmental
reports listed in Section 4.3(f) of the Contributor Disclosure Letter (which
constitute all environmental reports relating to the Shopping Center received
by the Contributors) contains any misstatement of material fact or omits to
state any material fact. To the knowledge of the Contributors, except for
matters set forth in Section 4.3(e) of the Contributor Disclosure Letter,
there are no conditions on, beneath or arising from, and there are no
Hazardous Substances migrating from, the Shopping Center which might under any
Environmental Law (A) give rise to liability or the imposition of a statutory
lien upon either of the Project Partnerships or RII, Inc. or (B) require any
Response, Removal or Remedial Action by either of the Project Partnerships or
RII, Inc.
(ii) To the knowledge of the Contributors, no
wastes generated by any Contributor or the Project Partnerships have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the National
Priority List promulgated pursuant to CERCLA or to any site listed in any state
list of sites requiring or recommended for investigation or clean-up.
(g) Reassessments. The Shopping Center has not been fully
assessed and the Contributors have been informed that the Shopping Center will
be reassessed upon its completion. To the Contributors' knowledge, there are no
special assessments or other actions or proceedings that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against the Shopping Center.
(h) Property Improvements. PREIT acknowledges that the
Shopping Center is currently under construction and that the improvements to be
built thereon are not complete. Except as disclosed in any engineering studies
or reports obtained by or delivered by the Contributors to PREIT as set forth in
Section 4.3(h) of the Contributor Disclosure Letter, the Shopping Center is, to
the extent completed, in good condition and repair, ordinary wear and tear
excepted, consistent with a shopping
-22-
<PAGE>
center project that is still under construction, and has not suffered any
casualty or other material damage which has not been repaired in all material
respects. To the Contributors' knowledge, there is no material latent or
patent structural, mechanical or other significant defect, soil condition or
deficiency in the improvements constructed on the Shopping Center, or any
other defects, soil conditions or deficiencies which, in the aggregate, would
materially adversely affect the value of the Shopping Center as a whole.
(i) Employees and Service Contracts.
(i) Section 4.3(i) of the Contributor Disclosure
Letter sets forth a complete and correct list of all existing and proposed union
or collective bargaining agreements to which any Contributor or either of the
Project Partnerships is a party with respect to or affecting the Shopping
Center.
(ii) Section 4.3(i) of the Contributor
Disclosure Letter sets forth a complete and correct list of all persons who are
employed by either of the Project Partnerships or their respective partners in
connection with the management, operation or maintenance of the Shopping Center,
setting forth, with respect to each of them, his or her name, position or
duties, regular wages or salary, accrued vacation pay and bonus and other
benefits to which he or she is entitled. Each of such persons is an
employee-at-will and none of such persons is covered by a written employment
agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE PARTNERSHIP.
PREIT hereby represents and warrants to the Contributors as follows:
5.1 Organization.
(a) PREIT is an unincorporated association in business
trust form duly organized and validly existing under the laws of the
Commonwealth of Pennsylvania. PREIT has all necessary trust power to carry on
its business as presently conducted, to own and lease the assets and properties
that it owns and leases and to perform all its obligations under each agreement
and instrument to which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform
-23-
<PAGE>
all its obligations under each agreement and instrument to which it is a party
or by which it is bound.
5.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). The execution, delivery and performance by PREIT
and the Partnership of this Agreement and the other Buyer Transaction Documents
have been duly authorized by all necessary corporate or partnership action. This
Agreement has been duly and validly executed and delivered by PREIT and the
Partnership and constitutes the legal, valid and binding obligation of PREIT and
the Partnership enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Buyer Transaction Documents shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally
or by general equitable principles.
5.3 No Conflicts.
(a) Except as described in Section 5.3 of the disclosure
letter delivered by PREIT to the Contributors on the date hereof (the "PREIT
Disclosure Letter"), the execution and delivery by PREIT and the Partnership of
this Agreement do not, and the execution and delivery by PREIT and the
Partnership of the other Buyer Transaction Documents and the performance by
PREIT and the Partnership of all of the Buyer Transaction Documents will not (in
each case, with or without the passage of time or the giving of notice),
directly or indirectly:
(i) contravene, violate or conflict with (A) the
trust or partnership agreement (or other organizational documents) of PREIT or
the Partnership or (B) any Law applicable to PREIT or the Partnership, or by or
to which any assets or properties of PREIT or the Partnership is bound or
subject; or
(ii) violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of benefit or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or
-24-
<PAGE>
material Contract to which PREIT or the Partnership is a party or by which
either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation
or imposition of any material Encumbrance upon or with respect to either PREIT
or the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 5.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT or
the Partnership to obtain any material Authorization of or make any material
filing, registration or declaration with or notification to any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the material consent, waiver or approval of, or give any
material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to the
best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Buyer Transaction
Documents or which, if adversely determined, could have a material adverse
effect on the consolidated financial condition, assets, business or results of
operations of PREIT or could materially and adversely affect PREIT's or the
Partnership's ability to enter into or perform its obligations under the Buyer
Transaction Documents.
5.4 Capitalization.
(a) On the date hereof, the outstanding beneficial
interests in PREIT consist of 8,679,598 PREIT Shares, and the outstanding
partnership interest in the Partnership are as described in Section 5.4(a) of
the PREIT Disclosure Letter. Except for 483,875 PREIT Shares reserved for
issuance pursuant to outstanding stock options and except as contemplated in the
TRO Contribution Agreement, in the Amended Partnership Agreement or in the
Employment Agreements referred to in the TRO Contribution Agreement, and except
as disclosed in Section 5.4(a) of the PREIT Disclosure Letter, as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character (including, without limitation,
voting agreements or arrangements known to PREIT) relating to the issuance of
beneficial interests in PREIT or partnership interest in the Partnership. As of
the Closing, the outstanding partner
-25-
<PAGE>
interests in the Partnership shall consist of the interests outstanding on the
date hereof, the Class A Units to be issued as contemplated in the TRO
Contribution Agreement, this Agreement and the EPD Purchase Agreements.
(b) All Class A Units to be issued and delivered pursuant
to Section 3 hereof will be, at the time of issuance and delivery in accordance
with the terms of this Agreement, duly authorized and validly issued by the
Partnership. Assuming the accuracy of the representations and warranties of the
Contributors set forth herein, such issuance will be exempt from registration
under the 1933 Act as an offering described in Section 4(2) of such Act and/or
pursuant to Regulation D promulgated thereunder.
5.5 PREIT Reports. PREIT has delivered to the Contributors copies of
PREIT's (a) Proxy Statement dated November 15, 1996, (b) Annual Report on Form
10-K for the fiscal year ending August 31, 1996, as amended by its Report on
10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports on Form 10-Q for the
quarters ended November 30, 1996, February 28, 1997 and May 31, 1997, all of
which have been filed by PREIT with the Securities and Exchange Commission (the
"PREIT Reports"). The audited consolidated financial statements and unaudited
interim financial statements of PREIT included in such reports have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
condition and results of operations of PREIT as at the dates thereof and for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein. The PREIT Reports do not contain any untrue statements of a material
fact or omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
5.6 Litigation. Except as disclosed in filings with the Securities and
Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the best knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
before any arbitrator of any kind, in each case of a nature that is required to
be disclosed in PREIT's 1934 Act reports.
5.7 Material Adverse Change. Except as disclosed in filings with the
Securities and Exchange Commission, since May 31, 1997 and through the date
hereof, there has not been any
-26-
<PAGE>
material adverse change in the condition (financial or otherwise), assets,
results of operations or business of PREIT on a consolidated basis.
5.8 Brokers. Except for Lehman Brothers, Inc., whose fees shall be paid
by PREIT, no Person acting on behalf of PREIT or the Partnership or any of their
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT, RBC,
Inc. shall, and the Contributors shall cause each of the Project Partnerships
to:
(i) carry on its business in, and only in, the
usual, regular and ordinary course, consistent with past practice and consistent
with the development and construction of a retail shopping center and the
provisions hereof and in compliance with all applicable Laws, Authorizations and
Contracts;
(ii) pay and discharge all of its debts,
liabilities and obligations as they become due and pay all debt service
payments, real estate taxes, payables and other liabilities arising from the
construction or operation of the Shopping Center that in the ordinary course of
business would have been paid prior to the Closing Date (with the exception of
those liabilities and obligations which the Contributors are contesting in good
faith and for which the Contributors have established adequate reserves on the
Project Partnerships' books);
(iii) keep in full force and effect insurance
comparable in amount and scope of coverage to insurance now carried by it;
(iv) maintain its facilities and assets in the
same state of repair, order and condition as they were on the date hereof,
reasonable wear and tear excepted;
(v) maintain its books of account and records in
the usual, regular and ordinary manner and use diligent efforts to maintain in
full force and effect all of its Authorizations;
-27-
<PAGE>
(vi) not take any action, fail to take any
action or permit to occur any event that would cause or constitute a material
breach of or inaccuracy in any representation or warranty set forth herein if
made immediately after such event or at the Closing or that would have been
required (or result in any situation that would be required) to be disclosed
hereunder had such action or inaction been taken or failed to have occurred or
had such event occurred prior to the date hereof;
(vii) except as described in Section 6.1(a) of
the Contributor Disclosure Letter and the TRO Contribution Agreement, not make
any change in its authorized or issued capital stock or partnership interest,
grant any stock option or other right to purchase its shares of capital stock,
partnership interest or other securities, issue or make any commitment to issue
any of its securities, including any securities convertible into capital stock
or partnership interest, grant any registration rights or purchase, redeem,
retire or make any other acquisition of any shares of its capital stock,
partnership interest or other securities;
(viii) not amend or grant any waivers under
either of the Project Partnership Agreements;
(ix) not enter into any agreement or
understanding to do or engage in any of the foregoing actions; and
(x) construct and operate the Shopping Center in
the ordinary course in a manner consistent with past practice, maintaining the
Shopping Center in a reasonable state of repair, order and condition consistent
with a development project which is still under construction. Without limiting
the foregoing, the Project Partnerships shall not defer any required maintenance
or repair unless such maintenance or repair would otherwise be deferred in the
ordinary course of business.
6.2 Reasonable Efforts. Upon the terms and subject to the condition
hereof, between the date hereof and the Closing Date, each of the parties hereto
shall use its reasonable efforts to take, or cause to be taken, all appropriate
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable Law to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) using its or
his reasonable efforts to make all required regulatory filings and applications
and to obtain all Authorizations and consents, approvals, amendments and waivers
from parties to Contracts as are necessary for the consummation of the
transactions contemplated by this Agreement and (ii) using its reasonable
efforts to cause the conditions to the consummation of the acquisition of the
Interests to be satisfied.
-28-
<PAGE>
6.3 Notifications. Each party hereto shall give prompt notice to the
other parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of or any
inaccuracy in any of its representations and warranties contained in this
Agreement had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure of
it or any of its officers, directors, employees or agents, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iv) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting any Contributor, either of the
Project Partnerships or PREIT, as the case may be, or any of the transactions
contemplated by this Agreement.
6.4 Operation of Shopping Center.
(a) RBC, Inc. shall take all actions, and the Contributors
shall cause the Project Partnerships to take all actions necessary, so that as
of the Closing Date:
(i) Payments of rent or other monies due from
Shopping Center tenants (except reimbursements under leases for site
improvements or improvements to tenants' space) that fall due after the Closing
Date and are received prior to the Closing Date shall continue to be held in the
applicable Project Partnership bank account, as the case may be, or by the
managing agent through the Closing Date;
(ii) All security deposits under leases and all
interest required to be paid thereon pursuant to the terms of such leases shall
continue to be held in the applicable Project Partnership bank account, as the
case may be, or by the managing agent as the case may be, on the Closing Date;
and
(iii) All debt service payments, real estate
taxes and payments due under service contracts and service providers in respect
of the operation of the Shopping Center that in the ordinary course of business
would have been paid prior to the Closing Date shall have been paid prior to the
Closing Date by or on behalf of either of the Project Partnerships.
(b) No delinquent rent payments shall be apportioned on the
Closing Date. All rent receivables shall remain the
-29-
<PAGE>
property of the appropriate Project Partnership, as the case may be.
(c) Notwithstanding anything to the contrary as set forth
in this Agreement, the Contributors shall be entitled to cause the Project
Partnerships either to extend the current construction loans (pursuant to
extension options currently provided for in the loan agreements) or to refinance
their construction loans prior to Closing provided that the new loan(s)
expressly permits the transfer of the interests contemplated herein and provided
that such transfer will not result in any acceleration of indebtedness or other
penalties and further provided that the Partnership approves the terms of the
refinancing, including, but not limited to, the amount of the refinancing, and
the loan documents evidencing and securing the refinancing, which approval shall
not be unreasonably withheld (the "Permitted Refinancing").
6.5 Transfer of Shares or Retained Interests. Between the date hereof
and the Second Closing, except as expressly contemplated herein, except with the
prior written consent of PREIT: (i) neither of the Rubins shall sell, assign,
transfer or otherwise encumber all or any portion of the Retained Interests or
any rights of either of them relating to the Retained Interests, and (ii) Ronald
Rubin shall not sell, assign, transfer or otherwise encumber any shares of
capital stock of RII, Inc. or any rights of Ronald Rubin in such shares. Each of
the Rubins shall take all action necessary or appropriate to provide that the
Retained Interests and shares of capital stock of RII, Inc. owned by him shall,
in the event of his death prior to the date of the Second Closing, pass by the
laws of descent and distribution only to a member of his family (as defined
under the Philadelphia Code Section 19-1402(8) and in Philadelphia Realty
Transfer Tax Regulation Section 503(b)(6)(i)(C)). Any such heir who acquires an
interest in any portion of the Retained Interests or capital stock of RII, Inc.
shall acquire such interest subject to the terms and conditions of this
Agreement.
6.6 Bankruptcy Claim. As of the date hereof, RAII, L.P. has asserted a
$2,436,932.63, plus interest, claim against Bradlees Department Store in the
bankruptcy proceedings involving Bradlees. If as of the Closing such claim has
not been liquidated, the Contributors shall be entitled to cause RAII, L.P. to
distribute all rights to such claim to one or more of the Contributors
immediately prior to the Closing. If as of Closing either Project Partnership
has any potential future liability to Bradlees or to the trustee in the Bradlees
bankruptcy proceedings, the Contributors shall execute and deliver a pledge
agreement in form and substance reasonably satisfactory to PREIT by which they
shall pledge to the Partnership (in order to secure their indemnification
undertakings with respect to Section 9.1(c)) such number of Class A Units issued
to them hereunder as
-30-
<PAGE>
shall be equal to 100% of the maximum amount of all such potential liabilities.
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES.
7.1 Time of Closing. The closing (the "Closing") of the acquisition by
the Partnership pursuant to this Agreement of the Interests (other than the
Retained Interests) and the other contributions to the Partnership contemplated
herein shall take place at the time and place specified in Schedule A hereto on
the Closing Date (as defined in Schedule A hereto).
7.2 Closing Conditions.
(a) Conditions Precedent to PREIT's and the Partnership's
Obligations. The obligation of PREIT and the Partnership to consummate the
acquisition of the Interests and to take the other actions required to be taken
by them at the Closing is subject to the fulfillment by or at the Closing of
each of the following conditions, any or all of which may be waived by PREIT in
its sole discretion:
(i) Condition of Title. RAII, L.P. and RII, Inc.
shall own fee simple title to the Shopping Center and such title shall be good
and marketable and insured as such by First American Title Insurance Company,
Commonwealth Land Title Insurance Company, Lawyers Title Insurance Corporation
or Chicago Title Insurance Company, as selected by the Partnership (the "Title
Insurance Company"), free and clear of all Encumbrances other than Permitted
Encumbrances and the existing leases set forth on the Rent Roll or as such
leases may have changed in the ordinary course of the operation of the Shopping
Center and the mortgage securing the Permitted Refinancing. The following owners
title insurance policies (or a marked-up title commitment reflecting the
effectiveness of such issuance) shall have been issued and delivered to the
Partnership (unless such insurance is not issued or effective solely due to the
Partnership's failure to pay the premiums therefor) a vested owners title
insurance policy or policies with "non-imputation" and fairways endorsements for
the value of the Interests in the Project Partnerships as determined in
accordance with Schedule A hereto.
(ii) Tenant Estoppels. The Contributors shall
have used their reasonable efforts to cause the tenants in the Shopping Center
to execute and deliver to the Partnership estoppel certificates in form and
substance reasonably satisfactory to PREIT. The Contributors shall keep the
Partnership reasonably apprised as to the status of receipt of the estoppel
certificates. The failure to obtain and deliver any or all of the estoppel
certificates shall not constitute a default by the Contributors hereunder or
allow PREIT or the Partnership to terminate this Agreement provided the
Contributors
-31-
<PAGE>
have used reasonable efforts to obtain the estoppel certificates. The
Contributors' liability under the representations and warranties under
Sections 4.2(m)(i) and 4.3(c) as to a particular tenant shall terminate if the
Partnership subsequently receives an estoppel certificate for the applicable
tenant which confirms the Contributor's representations under Sections 4.2
(e)(i) and 4.3 (c) (provided, if the Partnership receives an estoppel
certificate which confirms some but not all of the matters which are the
subject of the representations and warranties under Sections 4.2(m)(i) and
4.3(c), then as to such tenant, (x) if the estoppel certificate was received
prior to Closing, the representations and warranties set forth in Sections
4.2(m)(i) and 4.3(c) shall be deemed to omit such matters stated on the
estoppel certificate as to such matters provided the certifications contained
in such estoppel remain true and correct until the Closing Date and (y) if
received after Closing, the representations and warranties under Sections
4.2(m)(i) and 4.3(c) shall cease to survive as to such matters but shall
continue to survive as to matters not contained in such Estoppel Certificate.)
(iii) Survey, Etc. The Partnership shall have
received, at the Partnership's sole cost and expense, updated environmental and
engineering reports and surveys for the Shopping Center certified to the
Partnership and the Title Insurance Company, in form reasonably satisfactory to
PREIT and the Title Insurance Company, and such reports and surveys shall not
disclose any material adverse condition not disclosed in the original reports
and surveys for the Shopping Center delivered to PREIT or to which PREIT was
given access prior to the date of this Agreement.
(iv) No Mortgage Defaults. All payments of
principal and interest on all Loan Obligations shall be current and no Loan
Obligation shall be in default. The Contributors shall have used their
reasonable efforts to cause the holder of each Loan Obligation to issue to the
Partnership a letter or certification confirming the principal balance of such
Loan Obligation, the date of the last payment and that, to its knowledge, there
are no events of default thereunder. The failure to obtain or deliver such
letter or certification shall not constitute a default by the Contributors
hereunder or allow PREIT or the Partnership to terminate this Agreement provided
that the Contributors have used reasonable efforts to obtain such letter or
certificate. In the event the letter or certification from the holder of each
Loan Obligation contains a certification containing information which confirms
the Contributors' representations under Section 4.3(b) above, the Contributors'
liability for such representation shall terminate upon delivery of the letter or
certificate to the Partnership provided the certifications contained in such
estoppel remain true and correct until the Closing Date.
-32-
<PAGE>
(v) Representations and Warranties. Except as
otherwise expressly provided herein, each of the representations and warranties
of the Contributors set forth in this Agreement that is qualified by materiality
shall be true and correct, and each of the representations and warranties of the
Contributors set forth in this Agreement that is not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, provided that the failure of one or more representations and warranties to
be true and correct as of the Closing Date shall not entitle PREIT to decline to
close if the Damages therefrom do not exceed 50% of the value referred to in
Section 7.2(a)(xiv) and if the other conditions of this Section 7.2(a) shall be
satisfied.
(vi) Performance of Covenants. All of the
agreements, covenants and obligations that any Contributor is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
shall have been duly performed and complied with in all material respects. The
Contributors shall have delivered each of the documents required to be delivered
by them pursuant to Section 7.3(a) hereof.
(vii) Legal Matters. The performance of the
Buyer and Contributor Transaction Documents and the consummation of the Closing
shall not, directly or indirectly (with or without notice or lapse of time),
violate, contravene, conflict with or result in a violation of any Law and shall
not violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or administrative
proceeding shall have been brought or threatened by any Person (other than by
PREIT or the Partnership) that questions the validity or legality of this
Agreement or the transactions contemplated hereby.
(viii) Consents and Approvals. Each consent,
approval, ratification, waiver or other authorization of any Person necessary,
in the reasonable opinion of PREIT, for the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, and no such consent, approval, ratification, waiver or other
authorization: (x) shall have been conditioned upon the modification,
cancellation or termination of any Contract, right or Authorization of PREIT,
the Partnership or either of the Project Partnerships or (y) shall impose on
PREIT, either of the Project Partnerships or the Partnership any condition,
provision or requirement not presently imposed upon the Contributors or either
of the Project Partnerships or any condition that would be more restrictive
after the Closing on either of the Project Partnership or the Partnership than
the conditions presently imposed on the Contributors or either of the Project
Partnerships.
-33-
<PAGE>
(ix) Opinion of Counsel. PREIT shall have
received an opinion of counsel for the Contributors, dated the Closing Date, in
form and substance reasonably satisfactory to PREIT and its counsel.
(x) TRO Closing. The TRO Closing shall have
occurred.
(xi) Casualty or Condemnation. There shall not
have occurred any damage or destruction to, or condemnation of, any portion of
the Shopping Center that is reasonably likely to have a material adverse effect
on the operations or profitability of the Shopping Center.
(xii) Material Adverse Change. There shall not
have been since the date hereof any event, circumstance, condition or
contingency that has resulted in a material adverse effect on the business,
assets, financial condition or results of operations of either of the Project
Partnerships or that is reasonably likely to result in such an change.
(xiii) Compliance Certificate. The Contributors
shall have obtained (to the extent such certifications or letters are made
available in such jurisdiction prior to substantial completion of the Shopping
Center) a certification or letter from the appropriate governmental officer
having jurisdiction to the effect that the Shopping Center and its use are in
compliance with applicable fire, health, safety and zoning ordinances, rules and
regulations.
(xiv) Adjustment for Breaches. The aggregate
amount of all Damages arising from breaches entitling PREIT and the Partnership
to an adjustment to the aggregate consideration as specified in Section 8.1
shall not exceed 50% of the value of what the Contributors would receive
pursuant to Section 4 of Schedule A absent such adjustment. None of the
Contributors and neither of the Project Partnerships shall have violated any
criminal or other material Law and the consummation of the Closing shall not
violate or conflict with any material Law.
(b) Conditions Precedent to the Contributors' Obligations.
The obligation of the Contributors to consummate the contribution of the
Interests contemplated by this Agreement and to take the other actions required
to be taken by them at the Closing is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of what may be waived by
the Contributors in their sole discretion:
(i) Representations and Warranties. Each of the
representations and warranties of PREIT set forth in this Agreement that is
qualified by materiality shall be true and
-34-
<PAGE>
correct, and each of the representations and warranties of PREIT set forth in
this Agreement that is not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date.
(ii) Performance of Covenants. Each of the
agreements, covenants and obligations that PREIT or the Partnership is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing shall have been duly performed and complied with in all material
respects. PREIT shall have delivered each of the documents required to be
delivered by it pursuant to Section 7.3(b) hereof.
(iii) Legal Matters. The performance of the
Buyer and Contributor Transaction Documents and the consummation of the Closing
shall not, directly or indirectly (with or without notice or lapse of time),
violate, contravene, conflict with or result in a violation of any Law and shall
not violate any Order of any court or governmental body of competent
jurisdiction, and no suit, action, investigation or legal or administrative
proceeding shall have been brought or threatened by any Person that questions
the validity or legality of this Agreement or the transactions contemplated
hereby.
(iv) TRO Closing. The TRO Closing shall have
occurred.
(v) Opinion. The Contributors shall have
received an opinion of counsel for PREIT, dated the Closing Date, in form and
substance reasonably satisfactory to the Contributors and their counsel.
(vi) Adjustment for Breaches. The aggregate
amount of all Damages arising from breaches entitling PREIT and the Partnership
to an adjustment to the aggregate consideration as specified in Section 8.1
shall not exceed 50% of the value of what the Contributors would receive
pursuant to Section 4 of Schedule A absent such adjustment; provided that if
PREIT exercises the PREIT Option (as defined below), this condition shall be
deemed to have been satisfied.
7.3 Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
(a) The Contributors shall deliver or cause to be
delivered to the Partnership:
(i) each of the instruments, agreements or
documents listed on Schedule A-1 hereto, in each case in a form reasonably
satisfactory to the Contributors and the Partnership,
-35-
<PAGE>
duly executed by each of the signatories thereto other than PREIT or the
Partnership;
(ii) certificates, dated the Closing Date and
executed by the president of RBC, Inc. to the effect that the conditions set
forth in Sections 7.2(a)(v) and (vi) have been satisfied;
(iii) certificates of good standing of a recent
date for RBC, Inc., RII, Inc., RA, L.P. and RAII, L.P. certified by the
Secretary of State or corresponding certifying authority of the state of
incorporation or organization of RBC, Inc., RII, Inc., RA, L.P. and RAII, L.P.
and of each state in which RBC, Inc., RII, Inc., RA, L.P. and RAII, L.P. are
qualified to do business as a foreign corporation or foreign partnership;
(iv) copies of the resolutions of the board of
directors of RBC, Inc. and its shareholders authorizing the transactions
contemplated under this Agreement and the Contributor Transaction Documents to
which RBC, Inc. is a party;
(v) all consents and approvals under the Project
Partnership Agreements necessary or appropriate in connection with the
transactions contemplated herein;
(vi) stock certificates representing the
Contributed RII Shares, duly endorsed for transfer or with stock powers affixed
thereto executed in blank in proper form for transfer; and
(vii) such other documents and instruments as
the Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) The Partnership shall deliver or cause to be delivered
to the Contributors the following:
(i) the Class A Units to be delivered at Closing
as contemplated by Section 3 and Schedule A hereto;
(ii) copies of resolutions of the board of
trustees of PREIT authorizing the transactions contemplated hereunder and under
the Buyer Transaction Documents;
(iii) a certificate, dated the Closing Date,
executed by the chief executive officer and chief financial officer of PREIT, to
the effect that the conditions set forth in Sections 7.2(b)(i) and (ii) have
been satisfied; and
(iv) each of the instruments, agreements and
documents listed on Schedule A-1, in a form reasonably satisfactory to the
Contributors and the Partnership, duly
-36-
<PAGE>
executed by each of the Partnership or PREIT that is a signatory thereto.
(c) Each party shall deliver or cause to be delivered, as
the case may be, to the other parties hereto such other documents, instruments,
certificates and opinions as may be required by this Agreement.
SECTION 8. CLOSING ADJUSTMENTS.
8.1 Adjustment for Breaches by the Contributors. It is the intent of
the parties that breaches of the representations and warranties of the
Contributors set forth in this Agreement (as brought down to the Closing Date
in the certificate referred to in Section 7.3(a)(ii), which for this purpose
will be deemed to state, inter alia, that the Contributors' representations
and warranties in this Agreement were true and correct as of the Closing Date
as if made on the Closing Date) that are discovered prior to Closing shall, in
addition to giving PREIT and the Partnership the right, under certain
circumstances described in Section 7.2, not to close hereunder, cause the
consideration otherwise deliverable pursuant to Section 4 of Schedule A to be
adjusted downward by the aggregate value of all Damages arising from such
breaches; provided, however, that if such downward adjustment would reduce by
more than 50% the value of the aggregate consideration the Contributors would
receive pursuant to Section 4 of Schedule A absent such adjustment, PREIT
shall have the right and option (but not the obligation) to notify the
Contributors in writing that the downward adjustment pursuant to this Section
8.1 shall be equal to 50% of the value of such aggregate consideration (the
"PREIT Option"). In determining the value of any breaches, there shall be
taken into account any insurance recovery that may be available to PREIT or
the Partnership, and any insurance proceeds received by the Contributors prior
to the Closing that are assigned to the Partnership at Closing.
8.2 Casualty or Condemnation.
(a) If, prior to the Closing Date, there shall be any damage
or destruction to all or any portion of the Shopping Center by fire or other
casualty, the Contributors shall give prompt notice thereof to PREIT. Unless
such damage or destruction is reasonably likely to result in a material
adverse effect on the operations or profitability of the Shopping Center, such
damage or destruction shall not entitle PREIT or the Partnership to terminate
this Agreement; provided, however, that the number of Class A Units
deliverable pursuant to Section 3 and Schedule A shall be reduced by the value
of all material damage or destruction to the extent that such damage or
destruction is not fully insured by insurance carried by either of the Project
Partnerships or reimbursed by tenants.
-37-
<PAGE>
(b) If prior to the Closing Date, condemnation or eminent
domain proceedings are commenced against the Shopping Center, the Contributors
shall give prompt notice thereof to PREIT. Unless the taking contemplated by
such condemnation or eminent domain proceeding is reasonably likely to result in
a material adverse effect on the operations or profitability of the Shopping
Center as a whole, such condemnation or eminent domain proceeding shall not
entitle PREIT or the Partnership to terminate this Agreement; provided, however,
that the number of Class A Units deliverable pursuant to Section 3 and Schedule
A hereto shall be reduced by the excess, if any, of the sum of the Deemed
Closing Value, Non-Credit Tenant Value and Post-Adjustment Value (each as
defined in Schedule A hereto) over the aggregate condemnation proceeds received
or to be received by either of the Project Partnerships in respect of such
condemnation. PREIT shall have the right to participate in the negotiation of
the award to be made for such taking, and neither the Contributors nor either of
the Project Partnerships shall agree to any proposed award or execute a deed in
lieu of condemnation without PREIT's prior written consent. The applicable
percentage of any condemnation award payable with respect to the taking of all
or any portion the Shopping Center shall be assigned to the Partnership.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by Contributors. Subject to the limitations on
liability set forth in Section 9.3, each Contributor shall indemnify, defend and
hold harmless PREIT and the Partnership (collectively, "Buyer Indemnified
Persons") against and in respect of any and all losses, costs, expenses
(including, without limitation, costs of investigation and reasonable defense
and attorneys' fees), claims, damages, obligations, liabilities or diminutions
in value, whether or not involving a third party claim (collectively,
"Damages"), arising out of, based upon or otherwise in respect of: (a) any
inaccuracy in or breach of any representation or warranty of such Contributor
made in or pursuant to this Agreement (including, without limitation, the
certificate referred in Section 7.3(a)(ii), which, for this purpose will be
deemed to have stated, inter alia, that the Contributors' representations and
warranties in this Agreement were true and correct as of the Closing Date as if
made on the Closing Date); (b) any breach or nonfulfillment of any covenant or
obligation of any Contributor contained in this Agreement; or (c) any of the
matters set forth on Schedule 9.1(c) hereto; provided, however, that to the
extent that Damages arising from breaches of representations and warranties were
taken into account in reducing the Deemed Closing Value, the Non-Credit Tenant
Value or the Post-Adjustment Value (as defined in Schedule A), such Damages
shall not be recoverable by Buyer Indemnified Persons pursuant to this
Agreement.
-38-
<PAGE>
9.2 Indemnification by PREIT. PREIT shall indemnify, defend and hold
harmless each Contributor against and in respect of any and all Damages arising
out of, based upon or otherwise in respect of: (a) any inaccuracy in or breach
of any representation or warranty of PREIT made in or pursuant to this
Agreement; (b) any breach or nonfulfillment of any covenant or obligation of
PREIT or the Partnership contained in this Agreement; or (c) claims relating
solely to actions taken by the Partnership (or its affiliates) as a partner in
either of the Project Partnerships after Closing as the result of events and
circumstances first occurring after Closing.
9.3 Limitations on Liability.
(a) No Contributor shall have any obligation to indemnify
any Buyer Indemnified Person against Damages pursuant to Section 9.1(a) of this
Agreement arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to this Agreement unless and
until the aggregate of all such Damages suffered or incurred by the Buyer
Indemnified Persons exceeds $100,000; in which event the Buyer Indemnified
Persons shall be entitled to indemnification for the full amount of all Damages
suffered or incurred; provided, however, that the above limitation shall not be
applicable to any claim for Damages pursuant to Sections 9.1(b) or (c) or based
upon a breach of any representation or warranty made in or pursuant to Sections
4.1(a), 4.1(b), 4.1(c), 4.1(g), 4.1(h), 4.2(a), 4.2(b) or 4.2(g) (in the case of
a breach of any of the representations and warranties set forth in Section
4.2(g), other than due to the existence of liabilities of a nature not required
to be reflected in financial statements prepared in accordance with GAAP of
which the Contributors had no knowledge prior to Closing).
(b) Following Closing, (i) the Contributors shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 9.1 to the extent that such indemnification payment (other than
indemnification payments in respect of fraud or intentional misrepresentation),
when aggregated with all prior indemnification payments (other than
indemnification payments in respect of fraud or intentional misrepresentation)
by or on behalf of the Contributors to Buyer Indemnified Persons or reasonably
paid by or on behalf of the Contributors to third parties for the benefit of
Buyer Indemnified Persons pursuant to this Agreement, would exceed the Aggregate
Value (as hereafter defined) and (ii) each Contributor other than Ronald Rubin,
George Rubin and RBC, Inc. shall not be obligated to indemnify Buyer Indemnified
Persons against Damages pursuant to Section 9.1 to the extent that such
indemnification payment, when aggregated with all prior indemnification payments
by or on behalf of such Contributor to Buyer Indemnified Persons or reasonably
paid by or on behalf of such Contributor to third parties for the benefit of
Buyer Indemnified Persons pursuant to
-39-
<PAGE>
this Agreement, would exceed the Proportionate Aggregate Value (as defined
below) attributable to such Contributor; provided, however, that the
limitation of this subclause (ii) shall not apply to the extent an indemnity
claim is brought with respect to a breach of a representation and warranty
made solely by such Contributor and not by such Contributor and other
Contributors or with respect to a matter involving fraud or intentional
misrepresentation by such Contributor. The "Aggregate Value" means an amount
equal to the value of all Class A Units theretofore issued pursuant to Section
3 (it being acknowledged that for this purpose units that would have been
issued but for an exercise of the set-off rights specified in Section 9.7
shall be deemed to have been issued), such value to be calculated by
multiplying the number of units times the per share Value (as defined in the
Amended Partnership Agreement) of a PREIT Share as of the date of issuance of
such units.
(c) Following Closing, the liability of each Contributor
for each indemnity claim pursuant to Section 9.1 shall be limited to that
fraction of the aggregate Damages incurred by Buyer Indemnified Persons with
respect to such claim that is equal to the quotient whose numerator equals the
portion of the Aggregate Value attributable to units theretofore distributed to
such Contributor (for this purpose units that would have been issued but for an
exercise of the set-off rights specified in Section 9.7 shall be deemed to have
been issued) (the "Proportionate Aggregate Value") and the denominator of which
equals the Aggregate Value; provided, however, that the foregoing shall not
limit the liability of Ronald Rubin, George Rubin or RBC, Inc., each of whom
shall be jointly and severally liable for 100% of the aggregate Damages incurred
(subject to the cap on aggregate Damages set forth above in subclause (i) of
Section 9.3(b)) and provided further that the foregoing limitation shall not
apply to the extent that an indemnity claim is brought with respect to a breach
of a representation and warranty made solely by such Contributor and not by such
Contributor and other Contributors or with respect to a matter involving fraud
or intentional misrepresentation by such Contributor.
(d) No claim arising out of or based upon any inaccuracy
in or breach of any representation or warranty made in or pursuant to this
Agreement shall be made unless a claim arises and written notice is delivered to
the indemnifying party within the Basic Claims Period (as defined below);
provided that any such claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to Sections 4.1(a),
4.1(b) or 4.1(h) may be made at any time. For purposes hereof, "Basic Claims
Period" means the period beginning on the date hereof and ending on the date
five months after the fiscal year end for the first full fiscal year of PREIT
after the Closing under this Agreement.
-40-
<PAGE>
(e) Disclosures made after the date hereof and any
knowledge that is acquired about the accuracy or inaccuracy of or compliance
with any representation, warranty, covenant or obligation set forth herein shall
not in any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the Contributor Disclosure Letter. The waiver by PREIT of any condition
based on the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT. To the extent that any claim for
indemnification may be made under Section 9.1(a) and Section 9.1(c), then such
claim shall be deemed for all purposes to have arisen only under Section 9.1(c)
and not under Section 9.1(a).
(f) Each party's rights under this Section 9 shall be its
sole remedy against the other parties in respect of the subject matter hereof,
subject to a party's rights, if any, to seek and obtain specific performance.
(g) No party may assert a claim for indemnification
pursuant to this Section 9 unless the Closing has occurred or this Agreement has
been terminated pursuant to Section 10.
9.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified
party of notice of the commencement of any proceeding against it to which the
indemnification in this Section 9 relates, such indemnified party shall, if a
claim is to be made against an indemnifying party under Section 9, give notice
to the indemnifying party of the commencement of such proceeding, but the
failure to so notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
proceeding is materially prejudiced by the indemnified party's failure to give
such notice.
(b) If any proceeding referred to in paragraph (a) above
is brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
-41-
<PAGE>
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under Section 9 for any fees of
other counsel or any other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a proceeding,
(A) it will be conclusively established for purposes of this Agreement that
the claims made in that proceeding are within the scope of and subject to
indemnification; (B) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (1) there is no finding or admission of any violation of Law by the
indemnified party (or any affiliate thereof) or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party, and (2) the sole relief provided is monetary damages that
are paid in full by the indemnifying party. The indemnified party will have no
liability with respect to any compromise or settlement of the claims
underlying such proceeding effected without its consent. If notice is given to
an indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent.
9.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the party
from whom indemnification is sought.
9.6 Distributions of Class A Units by Contributors. No Contributor
shall distribute or otherwise transfer to any other Person Class A Units issued
pursuant to this Agreement (or proceeds thereof other than contributions on such
units) unless
-42-
<PAGE>
such Person first executes and delivers to PREIT an agreement, in form and
substance reasonably satisfactory to PREIT, by which such Person would join in
and become a party to this Agreement for purposes of the indemnification
provisions hereof.
9.7 Right of Set-Off. PREIT and the Partnership shall have the right
to set-off, against any Class A Units which may be owed by PREIT or the
Partnership to any Contributor, any amount owed by any Contributor to any
Buyer Indemnified Person pursuant to Section 10 of the TRO Contribution
Agreement. To the extent that a Contributor contests an indemnification claim
of PREIT or the Partnership that would be the basis for the exercise of a
right to set off against any Class A Units owed to such Contributor, the
Partnership shall issue such Class A Units and deposit them with an escrow
agent reasonably satisfactory to such Contributor until the earlier to occur
of (i) resolution of such dispute by a final nonappealable order of a court of
competent jurisdiction or (ii) the mutual agreement of such Contributor and
PREIT that such units should be released from escrow.
9.8 Indemnification Payments. The Contributors shall be entitled to
use cash or Class A Units to make indemnification payments hereunder. In the
event Class A Units are used, each such unit shall be valued based on the per
share Value (as defined in the Amended Partnership Agreement) of a PREIT Share
as of the date such unit is tendered to PREIT as an indemnification payment
hereunder.
SECTION 10. TERMINATION AND ABANDONMENT.
10.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(i) by PREIT or the Contributors, if the Closing
has not occurred (other than through the failure of the party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before February 15, 2000, or such later date as the parties may
mutually agree upon in writing;
(ii) by mutual consent of PREIT and the
Contributors;
(iii) by the Contributors, on the one hand, or
PREIT and the Partnership, on the other hand, if a material breach (other than a
breach of representations and warranties that would not constitute a failure of
the condition set forth in Section 7.2(a)(xiv)) of any provision of this
Agreement has been committed by the other and such breach has not been waived;
or
-43-
<PAGE>
(iv) by PREIT, if any of the conditions in
Section 7.2(a) have not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through the failure of
PREIT or the Partnership to comply with its obligations under this Agreement)
and PREIT has not waived all such unsatisfied conditions before termination
pursuant to this subparagraph (iv); or
(v) by the Contributors if any of the conditions
in Section 7.2(b) have not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of any Contributor to comply with its obligations hereunder) and the
Contributors have not waived all such unsatisfied conditions before termination
pursuant to this subparagraph (v); or
(vi) by any party hereto if the TRO Contribution
Agreement is terminated prior to the consummation of the TRO Closing.
10.2 Procedure for Termination; Effect of Termination.
(a) A party terminating this Agreement pursuant to this
Section 10 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any party and all further
obligations of the parties under this Agreement will terminate; provided,
however, that if such termination is pursuant to Section 10.1(iii), the
terminating party's right to pursue all legal remedies (including damages and/or
specific performance) contemplated by Section 9 will survive such termination
unimpaired, except as limited by Section 10.2(b) below.
(b) Following a termination pursuant to Section 10.1(iii),
each Contributor other than Ronald Rubin, George Rubin and RBC, Inc. shall have
no liability for breaches of covenants, agreements, obligations, representations
or warranties set forth herein except to the extent that such Contributor (i)
breached a covenant, agreement or obligation set forth herein the performance of
which was within his power to control, (ii) made an intentional
misrepresentation, or (iii) is the only Contributor that made the representation
or warranty that was breached. Following a termination pursuant to Section
10.1(iii), neither Ronald Rubin, George Rubin, RBC, Inc., PREIT nor the
Partnership shall have any liability for breaches of covenants, agreements or
obligations set forth herein to the extent that such breaches arise from the
actions of, or failure to act, by Persons other than the parties hereto and
notwithstanding such party's best efforts to cause such Person to act in a
manner that would result in the satisfaction of such party's covenants,
agreements and obligations hereunder.
-44-
<PAGE>
SECTION 11. GENERAL PROVISIONS.
11.1 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties
in this Agreement and in the certificates, documents and other agreements
delivered pursuant hereto shall survive the Closing, subject to the terms and
conditions of Section 9 above. Anything in this Agreement to the contrary
notwithstanding: (i) the representations and warranties of the Contributors and
the right of the Buyer Indemnified Persons to indemnification for breach
thereof, shall not be affected by any investigation of the Contributors or the
Project Partnerships made by PREIT or its agents or representatives; and (ii)
the representations and warranties of PREIT hereunder, and the right of the
Contributors to indemnification for breach thereof, shall not be affected by any
investigation of PREIT or its affiliates made by the Contributors or its agents
or representatives.
(b) In the event of any inconsistency between the
statements made in the body of this Agreement and those contained in the
Contributor Disclosure Letter (other than an express exception to a specifically
identified statement), those in this Agreement shall control.
11.2 Costs and Expenses. Except as otherwise expressly provided herein,
each party shall bear its own expenses in connection herewith. Except as
otherwise provided herein, any and all recording and filing fees and all costs
associated with obtaining the title insurance or endorsements thereto
contemplated herein in connection with the transactions contemplated herein
shall be borne by PREIT or the Partnership. The parties contemplate that the
transfer of the Interests in accordance with the procedures and the time periods
set forth in Schedule A will not be subject to transfer tax. In the event that
any party hereto makes or causes a transfer of Interests not in accordance with
the procedures and time periods set forth herein, then the party making or
causing such transfer shall be responsible for the payment of any transfer tax
and all title insurance premiums and title company charges and recording costs
due as a result thereof; provided, however, that if such transfer tax results
from the exercise by the Partnership of its options set forth in Section 2(b)(i)
or 2(d)(ii) prior to the third anniversary of the Closing Date, the Partnership
shall pay all such tax, premiums, charges and costs arising therefrom. In the
event that a determination is made by the applicable taxing authorities that the
transactions contemplated by this Agreement are subject to the real estate
transfer taxes imposed by either the City of Philadelphia and/or the
Commonwealth of Pennsylvania notwithstanding that neither party violated the
restrictions set forth in the previous sentence and the Partnership did not
exercise its options set forth in Section 2(b)(i) or 2(d)(ii),
-45-
<PAGE>
the Partnership, on the one hand, and the Contributors, on the other hand,
shall each pay one-half of any transfer taxes which are ultimately imposed on
such transactions.
11.3 Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To PREIT or the Partnership:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the Contributors:
c/o The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esquire
-46-
<PAGE>
11.4 Access to Information; Confidentiality. Between the date of this
Agreement and the Closing Date, PREIT, on the one hand, and the Contributors, on
the other hand, will give to the other party and its officers, employees,
counsel, accountants and other representatives free and full access to and the
right to inspect, during normal business hours, all of the assets, records,
facilities, properties and Contracts relating to its business as the other party
may reasonably request. Each party shall acquire and hold all confidential
information that has been made available by another party hereto subject to the
terms and conditions of Section IV of the Letter Agreement dated as of April 16,
1997 (the "Letter Agreement") between TRO and PREIT, the terms of which section
are hereby incorporated by reference and which shall remain in force through the
Closing.
11.5 Public Announcements. Except as and to the extent required by Law
or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the Contributors, on the one hand, and PREIT and the
Partnership, on the other hand, will not, and each will direct its
representatives not to, directly or indirectly, make any public comment,
statement or communication with respect to, or otherwise disclose or permit the
disclosure of any of the terms, conditions or other aspects of the transactions
contemplated hereby; provided, however, that PREIT may issue a press release, in
the form previously circulated by PREIT to TRO, regarding, among other things,
the execution of this Agreement; and further provided that PREIT and TRO may
each continue such communications with principals, partners, lenders, trustees,
attorneys, accountants, investment bankers, consultants engaged by PREIT and
TRO, including abstract companies, title companies, engineers and architects,
Claude de Botton and his affiliates, Kenneth N. Goldenberg and his affiliates,
EPD and its affiliates, and, if agreed in each case by PREIT and TRO, others as
may be legally required or necessary in connection with the consummation of the
transactions contemplated by this Agreement.
11.6 No Solicitation. Each Contributor shall not, each Contributor
shall cause its officers, employees, partners, representatives and agents not
to, directly or indirectly, continue, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any nonpublic
information to, any Person (other than PREIT and the Partnership and their
respective representatives in connection with the transactions contemplated by
this Agreement) concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice) or shares of capital stock or
partnership interest of any Contributor or any merger, consolidation,
recapitalization, liquidation or similar transaction involving any Contributor
(collectively, an "Acquisition Transaction"). Each Contributor will promptly
-47-
<PAGE>
communicate to PREIT the terms of any inquiry or proposal that it or he may
receive in respect of an Acquisition Transaction.
11.7 Entire Agreement. This Agreement, together with the Schedules,
Contributor Disclosure Letter, and certificates referred to herein or delivered
pursuant hereto, constitute the entire agreement between the parties hereto with
respect to its subject matter and supersede all prior and contemporaneous
agreements and understandings with respect to the subject matter hereof.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
11.9 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable),
irrespective of the principal place of business, residence or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of laws.
11.10 Section Headings, Captions and Defined Terms. The section
headings and captions contained herein are for reference purposes only and shall
not in any way affect the meaning and interpretation of this Agreement. The
terms defined herein and in any agreement executed in connection herewith
include the plural as well as the singular, and the use of masculine pronouns
include the feminine and neuter. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and therewith.
11.11 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing. The waiver by any party of any provision of this Agreement shall
not constitute or operate as a waiver of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision.
11.12 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.13 Liability of Trustees, etc. No recourse shall be had for any
obligation of PREIT hereunder, or for any claim based
-48-
<PAGE>
thereon or otherwise in respect thereof, against any past, present or future
trustee, shareholder, officer or employee of PREIT, whether by virtue of any
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being expressly waived and released by each
other party hereto.
11.14 Sears Power Plant. The former Sears Power Plant, which is located
between the Home Depot store and the Bradlees Store site, contains certain
Hazardous Substances. The Contributors shall have the right either to cause the
removal of the drums and barrels presently located inside the Power Plant and to
cause the encapsulation of the building (collectively, the "Remediation") to the
reasonable satisfaction of the Partnership or to subdivide the Power Plant from
the balance of the Shopping Center and transfer title to the parcel on which the
Power Plant is located to a third party or to an entity owned by one or more
Contributors. In the event the Contributors elect to retain title to the Power
Plant site, the parcel to be subdivided from the balance of the Shopping Center
shall be no larger than the footprint of the existing Power Plant building (the
Partnership hereby agreeing to consent to appropriate access, parking and other
such easements to the subdivided parcel as may be required for the development
and use of the Power Plant consistent with current zoning and to such other
conditions as shall be a requirement to the grant of subdivision approval so
long as such conditions do not require that the sudivided parcel be enlarged
beyond the footprint of the building and do not adversely affect the use or
value of the Shopping Center) and the subdivision and transfer of title must be
completed prior to the Closing Date. In the event the Contributors elect to
commence the Remediation and the Remediation is not completed prior to the
Closing Date or in the event the Contributors fail to subdivide the Power Plant
parcel and transfer title prior to the Closing Date, the terms of Paragraph C of
Schedule 9.1(c) shall be applicable.
IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement, all as of the date first written above.
RUBIN BLVD. CO., INC.
By: /s/ Ronald Rubin
- -------------------------
Name:
Title:
/s/ Ronald Rubin (SEAL) /s/ Leonard Shore (SEAL)
- ------------------------- ------------------------
Ronald Rubin Leonard Shore
-49-
<PAGE>
/s/ George Rubin (SEAL) /s/ Joseph Cardino (SEAL)
- ------------------------- ------------------------
George Rubin Joseph Coradino
/s/ Lewis Stone (SEAL) /s/ Pat Berns (SEAL)
- ------------------------- ------------------------
Lewis Stone Pat Berns
/s/ Edward Glickman (SEAL) /s/ Douglas Grayson (SEAL)
- ------------------------- ------------------------
Edward Glickman Douglas Grayson
/s/ Judith Garfinkel (SEAL) /s/ Gerald Broker (SEAL)
- ------------------------- ------------------------
Judith Garfinkel Gerald Broker
-50-
<PAGE>
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
--------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
--------------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general
partner
By: /s/ Jonathan B. Weller
--------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
--------------------------------
Name:
Title:
-51-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Blue Route Metroplex, Plymouth Meeting, Pennsylvania
Red Rose Commons, Lancaster, Pennsylvania
Christiana Strip Shopping Center, Christiana, Delaware,
and Howell Township, New Jersey
TRO Predevelopment, LLC
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS........................................... 2
SECTION 2. CONTRIBUTIONS......................................... 3
2.1 At Closing............................................ 3
2.2 Post-Closing.......................................... 3
SECTION 3. CONSIDERATION......................................... 3
3.1 At Closing............................................ 3
3.2 Post-Closing.......................................... 4
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTOR........................................... 4
4.1 Organization.......................................... 4
4.2 Power and Authority................................... 4
4.3 No Conflicts.......................................... 5
4.4 Litigation; Orders; Development Contingencies......... 6
4.5 Undisclosed Liabilities............................... 7
4.6 Assigned Contracts.................................... 7
4.7 Contracts............................................. 9
4.8 Environmental Matters................................. 10
4.9 Brokers............................................... 10
4.10 Accurate Disclosure................................... 10
4.11 Knowledge............................................. 10
4.12 FIRPTA................................................ 11
4.13 Investment Representations............................ 11
SECTION 5. WARRANTIES AND REPRESENTATIONS AS TO
THE PRE-DEVELOPMENT PROPERTIES...................... 12
5.1 Blue Route Metroplex, Plymouth Meeting,
Pennsylvania.......................................... 12
5.2 Red Rose Commons, Lancaster, Pennsylvania............. 13
5.3 Christiana Strip Shopping Center, Christiana,
Delaware.............................................. 13
5.4 West Farms Road and Route 9, Howell Township,
New Jersey............................................ 14
SECTION 6. REPRESENTATIONS AND WARRANTIES REGARDING
PREIT............................................... 15
6.1 Organization.......................................... 15
6.2 Power and Authority................................... 15
6.3 No Conflicts.......................................... 16
6.4 Capitalization........................................ 17
6.5 PREIT Reports......................................... 17
6.6 Litigation............................................ 18
6.7 Material Adverse Change............................... 18
6.8 Brokers............................................... 18
-i-
<PAGE>
SECTION 7. CERTAIN COVENANTS AND AGREEMENTS...................... 18
7.1 Conduct of Business................................... 18
7.2 Reasonable Efforts.................................... 20
7.3 Notifications......................................... 20
7.4 Rezoning of Christiana Site - Phase II................ 20
SECTION 8. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES....... 21
8.1 Time of Closing....................................... 21
8.2 Closing Conditions.................................... 21
8.3 Deliveries at the Closing............................. 23
SECTION 9. [INTENTIONALLY OMITTED]............................... 24
SECTION 10. INDEMNIFICATION....................................... 24
10.1 Indemnification by the Contributor.................... 25
10.2 Indemnification by PREIT.............................. 25
10.3 Limitations on Liability.............................. 25
10.4 Procedure For Indemnification - Third Party
Claims................................................ 26
10.5 Procedure for Indemnification - Other Claims.......... 28
10.6 Indemnification Payments.............................. 28
SECTION 11. TERMINATION AND ABANDONMENT........................... 28
11.1 Termination........................................... 28
11.2 Procedure for Termination; Effect of
Termination........................................... 29
SECTION 12. GENERAL PROVISIONS.................................... 29
12.1 Survival of Representations and Warranties............ 29
12.2 Costs and Expenses.................................... 29
12.3 Condemnation.......................................... 30
12.4 Notices............................................... 30
12.5 Access to Information; Confidentiality................ 31
12.6 Public Announcements.................................. 31
12.7 No Solicitation....................................... 31
12.8 Entire Agreement...................................... 32
12.9 Counterparts.......................................... 32
12.10 Governing Law......................................... 32
12.11 Section Headings, Captions and Defined Terms.......... 32
12.12 Amendments, Modifications and Waiver.................. 32
12.13 Severability.......................................... 32
12.14 Liability of Trustees, etc............................ 33
12.15 Future Projects....................................... 33
12.16 Concord Pike.......................................... 34
-ii-
<PAGE>
CONTRIBUTION AGREEMENT
relating to
Blue Route Metroplex, Plymouth Meeting, Pennsylvania
Red Rose Commons, Lancaster, Pennsylvania
Christiana Strip Shopping Center, Christiana, Delaware
and Howell Township, New Jersey
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 30th
day of July, 1997, by and among TRO PREDEVELOPMENT, LLC, a Delaware limited
liability company (the "Contributor"), PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, an unincorporated association in business trust form created under
Pennsylvania law pursuant to a Trust Agreement dated December 27, 1960, as
last amended and restated on December 16, 1987 ("PREIT"), and PREIT
ASSOCIATES, L.P., a Delaware limited partnership (the "Partnership").
Background
This Contribution Agreement is part of a larger transaction described
in the TRO Contribution Agreement of even date herewith (the "TRO Contribution
Agreement") among PREIT, The Rubin Organization, Inc. ("TRO"), The Rubin
Organization-Illinois, Inc. and the shareholders of TRO. The Contributor is an
affiliate of TRO, and its members are shareholders of TRO or affiliates of
such shareholders.
The Partnership has been formed by PREIT and PREIT Property Trust, a
Pennsylvania business trust ("PREIT Subsidiary"), pursuant to the terms of the
Agreement of Limited Partnership dated as of June 30, 1997 (the "Partnership
Agreement") of PREIT Associates, L.P. between PREIT, as general partner, and
PREIT Subsidiary, as limited partner.
Subject to the terms and conditions of this Agreement and the TRO
Contribution Agreement, the parties intend that immediately following the
closing under the TRO Contribution Agreement (the "TRO Closing"), the
Contributor will assign, transfer and contribute to the Partnership, in
exchange for certain reimbursements under the TRO Contribution Agreement and
for Class A limited partner interests in the Partnership ("Class A Units"),
(i) all of the Contributor's rights to become an equity owner of one or more
partnerships or other entities that own, and otherwise to participate in the
development, leasing, management and ownership of, the Metroplex Site and RRC
Site (collectively, the "Goldenberg Properties") arising under that certain
letter agreement dated March 26, 1996 by and between The Rubin Organization,
Inc. and the Goldenberg Group (the
<PAGE>
"Goldenberg Agreement"), and (ii) all of the Contributor's right, title and
interest in, to and under certain partnership agreements relating to the
Christiana Site and, in the event that the Howell Site is a BCRH Property as
of the Closing, certain purchase and/or ground lease agreements relating to
the Howell Site (each as defined in Schedule B-2 hereto).
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall
have the same meanings as ascribed to such terms in the TRO Contribution
Agreement. In addition, the following capitalized terms shall have the
following definitions when used herein.
"Assigned Contracts" shall mean the Contracts listed under the
heading "Assigned Contracts" in Schedule B-1 hereto; provided, however, that
the Assigned Contracts shall not include items II, III, IV, V and VI on such
schedule unless and until the Howell Site constitutes a BCRH Property
hereunder. If the Howell Site becomes a BCRH Property after the Closing, the
Assigned Contracts shall include items II, III, IV, V and VI on such schedule,
together with any amendments thereto and supplements thereto and other
agreements relating to the Howell Site that have been approved in writing by
PREIT prior to the date on which the Howell Site becomes a BCRH Property
hereunder.
"BCRH Properties" shall mean the Metroplex Site, the RRC Site and the
Christiana Site. The Howell Site shall constitute a BCRH Property as of the
Closing hereunder if, in accordance with Section 5.20 of the TRO Contribution
Agreement, a contract, in form and substance satisfactory to PREIT, has not
been entered into prior to the TRO Closing giving Home Depot the right to
acquire the Howell Site. If such a contract is entered into and is in effect
as of the TRO Closing, the Howell Site shall not constitute a BCRH Property
hereunder unless and until, in accordance with Section 5.20 of the TRO
Contribution Agreement, the Partnership exercises its option to treat the site
as a BCRH Property hereunder. The BCRH Properties are more specifically
described on Schedule B-2 hereto.
"Pre-Development Properties" shall mean those properties set forth in
Schedule B-2 hereto and those properties, if any, added thereto with the
consent of PREIT given pursuant to Section 12.15 and any property that becomes
a Pre-Development Property pursuant to Section 12.16; provided, however, that
the Howell Site shall
-2-
<PAGE>
not constitute a Pre-Development Property unless and until it constitutes a BCRH
Property hereunder.
"Third Party Contracts" shall mean those Contracts designated as
"Third Party Contracts" on Schedule B-1 hereto.
SECTION 2. CONTRIBUTIONS.
2.1 At Closing. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Schedule A hereto), the Contributor
shall sell, transfer, assign and contribute to the Partnership, free and clear
of all Encumbrances, all of the Contributor's right, title and interest in, to
and under the Assigned Contracts and the Partnership shall assume all
obligations of the Contributor arising after Closing under the Assigned
Contracts other than liabilities or obligations arising from a breach of or a
default under such Assigned Contracts prior to the Closing.
2.2 Post-Closing. If the Howell Site is not a BCRH Property as of the
Closing and if the Partnership subsequently elects pursuant to Section 5.20 of
the TRO Contribution Agreement to accept the Howell Site as a BCRH Property
(the "Post-Closing Election to Acquire") and Howell LLC has become a party
hereto, then, on the business day specified by the Partnership in its notice
of exercise of the Post-Closing Election to Acquire, Howell LLC shall sell,
transfer, assign and contribute to the Partnership, free and clear of all
Encumbrances, all right, title and interest of Howell LLC in, to and under the
Assigned Contracts specified in items II, III, IV, V and VI of Schedule B- 1
hereto, as theretofore amended and supplemented by Contracts executed after
the date hereof that have been approved in writing by the Partnership (as so
amended and supplemented, the "Howell Assigned Contracts"), and the
Partnership shall assume all obligations of Howell LLC under the Howell
Assigned Contracts arising after such contribution to the Partnership other
than liabilities or obligations arising from a breach of or a default under
such Assigned Contracts prior to Closing. The Contributor's interests in the
Assigned Contracts and the Howell Assigned Contracts which are assigned to the
Partnership pursuant to the terms and conditions of this Agreement are
sometimes hereinafter referred to collectively as the "Contract Interests."
SECTION 3. CONSIDERATION.
3.1 At Closing. In consideration for the contributions described in
Section 2.1, subject to the terms and conditions of this Agreement, the
Partnership shall issue to the Contributor, at the time specified in Schedule
A-2, that number of Class A Units, if any, specified in Schedule A-2 as being
issuable after Closing.
-3-
<PAGE>
3.2 Post-Closing. In consideration for the contributions specified in
Section 2.2, subject to the terms and conditions of this Agreement, the
Partnership shall, at the closing of the contribution of the Howell Assigned
Contracts (the "Howell Closing"), (i) transfer and assign to Howell LLC, free
and clear of all Encumbrances, all membership interests in Howell LLC issued
to the Partnership at the TRO Closing and (ii) pay Howell LLC an amount of
cash equal to all reasonable out-of-pocket expenses theretofore paid or
incurred but not yet paid by Howell LLC, any TRO Shareholder or any TRO
Affiliate to third parties in connection with the acquisition and development
of the Howell Site to the extent not theretofore reimbursed out of cash flow
from the Howell Site (the amount of such predevelopment costs and expenses
being set forth in a statement delivered to the Partnership in response to a
request therefor in connection with the Partnership's preparation of the
Post-Closing Election to Acquire).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR.
The Contributor hereby represents and warrants to PREIT and the
Partnership as follows (if there is a Howell Closing, the term "Contributor"
as used in this Section 4 shall be deemed to mean each of Howell LLC and TRO
Predevelopment, LLC and the term "Closing" shall be deemed to mean each of the
Closing and the Howell Closing):
4.1 Organization. The Contributor is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all power to carry on its business as
presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. The Contributor is
duly qualified to do business as a foreign limited liability company and is in
good standing under the laws of each jurisdiction in which its ownership or
leasing of assets or properties or the nature of its activities requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of the Contributor (a "Material Adverse
Effect").
4.2 Power and Authority. The Contributor has all requisite power,
authority and legal right to enter into and perform its obligations under this
Agreement and under the other agreements and documents required to be
delivered by it prior to or at the Closing (collectively, the "Contributor
Transaction Documents"). The execution, delivery and performance by the
Contributor of this Agreement and the other Contributor Transaction Documents
to which it is a party have been duly authorized by all necessary action on
the part of the
-4-
<PAGE>
Contributor. This Agreement has been duly and validly executed and delivered
by the Contributor and constitutes the legal, valid and binding obligation of
the Contributor enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally or by general equitable
principles. When executed and delivered as contemplated herein, each of the
other Contributor Transaction Documents to which the Contributor is a party
shall, assuming due authorization, execution and delivery thereof by the other
parties thereto, constitute the legal, valid and binding obligation of the
Contributor enforceable against it in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
4.3 No Conflicts.
(a) Except as described in Section 4.3(a) of the Contributor
Disclosure Letter delivered by the Contributor to PREIT and the Partnership on
the date hereof (the "Contributor Disclosure Letter"), the execution and
delivery by the Contributor of this Agreement do not, and the execution and
delivery by the Contributor of the other Contributor Transaction Documents and
the performance by the Contributor of all of the Contributor Transaction
Documents will not (in each case, with or without the passage of time or the
giving of notice), directly or indirectly:
(i) contravene, violate or conflict with the
organizational documents of the Contributor or any Law applicable to the
Contributor or by or to which any assets or properties of the Contributor is
bound or subject;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of any benefit under, or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any Authorization or any
Howell Assigned Contract, any Assigned Contract or any other Contract to which
the Contributor is a party or by which the Contributor or any assets or
properties thereof is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to the Contributor or any of
its assets or properties.
(b) Except as described in Section 4.3(b) of the Contributor
Disclosure Letter, the execution and delivery by the Contributor of this
Agreement do not, and the execution and
-5-
<PAGE>
delivery by the Contributor of the other Contributor Transaction Documents and
the performance by the Contributor of all of the Contributor Transaction
Documents will not, require the Contributor to obtain any authorization of, or
to make any filing, registration or declaration with or notification to, any
court, government or governmental agency or instrumentality (federal, state,
local or foreign) or to obtain the consent, waiver or approval of, or give any
notice to any other Person.
(c) Except as described in Section 4.3(c) of the Contributor
Disclosure Letter, there are no actions, proceedings or investigations pending
or, to the knowledge of the Contributor, threatened, that question any of the
transactions contemplated by this Agreement or the validity of any of the
Contributor Transaction Documents or which, if adversely determined, could have
a Material Adverse Effect or could materially and adversely effect the
Contributor's ability to enter into or perform its obligations under any of the
Contributor Transaction Documents.
(d) At the Closing and upon execution and delivery by the
Contributor and the Partnership (or its affiliates) of an assignment and
assumption agreement with respect to the Assigned Contracts, the Partnership
will acquire all right, title and interest of the Contributor in, to and under
the Assigned Contracts, free and clear of all Encumbrances.
4.4 Litigation; Orders; Development Contingencies.
(a) Except as described in Section 4.4(a) of the Contributor
Disclosure Letter, there are no, and since the Contributor's inception there
have not been, any, claims, actions, suits, proceedings (arbitration or
otherwise) or, to the knowledge of the Contributor, investigations involving or
affecting the Contributor or any of its assets or properties or any of its
directors, officers, partners or members in their capacities as such, before or
by any court, government or governmental agency or instrumentality (federal,
state, local or foreign), or before an arbitrator of any kind that could, if
adversely decided, have a Material Adverse Effect. Except as described in
Section 4.4(a) of the Contributor Disclosure Letter, no such pending claim,
action, suit, proceeding or investigation, if determined adversely, would either
individually or in the aggregate, result in a liability in excess of $5,000 in
the case of any single action or $10,000 in the case of all such actions in the
aggregate or could result in the loss or diminution of any benefit or privilege
presently available to or enjoyed by the Contributor. To the knowledge of the
Contributor, except as described in Section 4.4(a) of the Contributor Disclosure
Letter, no such claim, action, suit, proceeding or investigation is presently
threatened or contemplated. There are no unsatisfied
-6-
<PAGE>
judgments, penalties or awards against or affecting the Contributor or any of
its assets or properties.
(b) Except as described in Section 4.4(b) of the Contributor
Disclosure Letter, there is no award, injunction, judgment, order, ruling,
subpoena or verdict or other decision entered, issued, made or rendered by any
court, arbitrator, government or governmental agency or instrumentality, or
agreement with any government or governmental agency or instrumentality
(federal, state, local or foreign) (collectively, "Orders") to which the
Contributor or any of its assets or properties is subject. To the knowledge of
the Contributor, no officer, director, partner, member or employee of the
Contributor is subject to any Order that prohibits such officer, director,
partner, member or employee from engaging in or continuing any conduct, activity
or practice relating to its business. The Contributor has complied in all
respects with the terms and conditions of each Order applicable to it.
(c) PREIT and the Partnership recognize that the Howell
Assigned Contracts and the Assigned Contracts relate to real estate projects
that are not yet fully developed. Accordingly, each project is subject to
contingencies such as land use planning, due diligence investigations, and
obtaining financing. Notwithstanding anything to the contrary contained herein,
the Contributor makes and shall make no representation or warranty that any such
project will proceed beyond its present state or that if it does, that it will
be developed or completed ("Development Contingencies").
4.5 Undisclosed Liabilities.
(a) There are no liabilities or obligations of the Contributor
of any nature (whether absolute, accrued, contingent, liquidated, unliquidated
or otherwise) except: (i) those under the Howell Assigned Contracts and the
Assigned Contracts; and (ii) those described in Section 4.5 of the Contributor
Disclosure Letter.
(b) Except for the Internal Commissions (as hereinafter
defined), as of the Closing, there shall be no liabilities or obligations of the
Contributor of any nature (whether absolute, accrued, contingent, liquidated,
unliquidated or otherwise) except for the Contributor's obligations under the
Howell Assigned Contracts (if applicable) and the Assigned Contracts and, in the
case of Howell LLC, the predevelopment costs and expenses relating to Howell
Site.
4.6 Assigned Contracts
(a) Except for the Goldenberg Agreement and this Agreement,
the Contracts listed under the heading "Assigned
-7-
<PAGE>
Contracts" in Schedule B-1 are the only Contracts that relate, in whole or in
part, to any of the properties described on Schedule B-2 to which either
Company, any TRO Shareholder or any TRO Affiliate is, as of the date hereof
and as of the TRO Closing, or was, at any time prior to the date hereof, a
party or is or was otherwise bound or affected.
(b) To the knowledge of the Contributor, except for the
Goldenberg Agreement and non-material contracts entered into in the ordinary
course of business for the development and construction of retail shopping
centers and consistent with industry norms, the Third Party Contracts are the
only Contracts that relate, in whole or in part, to any BCRH Property to which
the Goldenberg Group (or any affiliate thereof) is, as of the date hereof, a
party or is otherwise bound or affected. To the knowledge of the Contributor,
the description of the Third Party Contracts set forth in Schedule B-1 is
accurate and complete in all material respects.
(c) There has been no amendment or modification of, or waiver
by the Contributor, either Company, the TRO Affiliates or the TRO Shareholders
of rights under the Goldenberg Agreement.
(d) Prior to the TRO Closing, all of the rights of the
Companies, the TRO Shareholders and the TRO Affiliates in, to and under (i) the
Assigned Contracts shall be assigned, transferred and conveyed, free and clear
of all Encumbrances, to the Contributor and (ii) if the Howell Assigned
Contracts are not included in the Assigned Contracts as of the Closing, the
Howell Assigned Contracts shall be assigned, free and clear of all Encumbrances,
to Howell LLC. No such assignment shall violate or conflict with, result in a
breach of, constitute a default or otherwise cause any loss of any benefit
under, or give to others any rights (including rights of termination, amendment,
foreclosure, cancellation or acceleration) in or with respect to, any of the
Howell Assigned Contracts or any of the Assigned Contracts.
(e) Except as described in Schedule B-1 or in the Goldenberg
Agreement or as otherwise set forth in Section 4.6(e) of the Contributor
Disclosure Letter and except, as of the date hereof (but not as of the Closing),
for the interests of TRO, the TRO Shareholders and the TRO Affiliates, no Person
has any equity or other interest in the Contributor (other than TRO Shareholders
who are the members of the Contributor) or any equity or other interest in, to
or under any of the Howell Assigned Contracts or the Assigned Contracts (other
than Howell LLC if the Howell Assigned Contracts are not a part of the Assigned
Contracts as of the Closing).
(f) Except for this Agreement and as otherwise disclosed or
contemplated herein and as contemplated under the
-8-
<PAGE>
Goldenberg Agreement, there are no rights, subscriptions, warrants, options,
rights of first refusal, conversion rights or agreements of any kind
outstanding to purchase or to otherwise acquire any interest of the Companies,
the TRO Shareholders or the TRO Affiliates in any of the Howell Assigned
Contracts or the Assigned Contracts. To the Contributor's knowledge, except
for this Agreement and except as described in Schedule B-1 or in Section 4.6
of the Contributor Disclosure Letter and except as described in Section 5.20
of the TRO Contribution Agreement, there are no rights, subscriptions,
warrants, options, rights of first refusal, conversion rights or agreements of
any kind outstanding to purchase or to otherwise acquire any interest in any
of the Pre-Development Properties. None of the Companies, the TRO Shareholders
or the TRO Affiliates has any agreement or commitment, whether oral or
written, to share any profits or cash flow resulting from the ownership,
development, management or leasing of the Howell Site, except that if the
Howell Site is sold to Home Depot certain current employees of TRO will be
entitled to receive commissions consistent with TRO's past practices (the
"Internal Commissions").
4.7 Contracts.
(a) Except as described in Section 4.7 of the Contributor
Disclosure Letter, each of the Howell Assigned Contracts, the Assigned Contracts
and the Goldenberg Agreement is in full force and effect and is valid, binding
and enforceable against the parties thereto in accordance with its terms. Except
as described in Section 4.7 of the Contributor Disclosure Letter, the
Contributor, the Companies, the TRO Shareholders and the TRO Affiliates have
each (i) performed, in all material respects, all obligations required to be
performed by it or him under each of the Howell Assigned Contracts, the Assigned
Contracts and the Goldenberg Agreement; (ii) not waived the performance of any
obligation on the part of any other party under any such Contract. No condition
exists or event has occurred which with notice or lapse of time would constitute
a default thereunder or a basis for delay, non-performance, termination,
modification or acceleration of maturity or performance by any party thereto.
(b) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Contributor or any other material provisions of any of the Howell Assigned
Contracts, the Assigned Contracts or the Goldenberg Agreement.
(c) Except as described in Section 4.7 of the Contributor
Disclosure Letter, to the Contributor's knowledge, each Third Party Contract
(other than those listed in Schedule B-1 as "drafts" or as "possible
amendments") is in full force and effect and is valid, binding and enforceable
against the parties thereto in accordance with its terms.
-9-
<PAGE>
4.8 Environmental Matters.
(a) Except as described in Section 4.8 of the Contributor
Disclosure Letter:
(i) the Contributor has no knowledge of any fact,
condition or circumstance that would suggest that the environmental reports
listed in Section 4.8 of the Contributor Disclosure Letter (which constitute all
environmental reports relating to the Pre-Development Properties received by the
Contributor or its affiliates for which the Contributor can, after exercising
reasonable efforts, locate a copy) contains any misstatement of material fact or
omits to state any material fact. To the knowledge of the Contributor, except
for matters set forth in Section 4.8 of the Contributor Disclosure Letter, there
are no conditions on, beneath or arising from, and there are no Hazardous
Substances migrating from, any Pre-Development Property which might under any
Environmental Law (A) give rise to liability or the imposition of a statutory
lien upon the owner of the Pre-Development Property or (B) require any Response,
Removal or Remedial Action by the owner of the Pre-Development Property.
(ii) To the knowledge of the Contributor, no wastes
generated by any owner of any of the Pre-Development Properties have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the National
Priority List promulgated pursuant to CERCLA or to any site listed in any state
list of sites requiring or recommended for investigation or clean-up.
4.9 Brokers. No Person acting on behalf of the Contributor or any of
its respective affiliates or under the authority of any of the foregoing is or
will be entitled to any brokers' or finders' fee or any other commission or
similar fee, directly or indirectly, from any of such parties in connection
with the transfer of any Contract Interest to the Partnership.
4.10 Accurate Disclosure. All documents and other papers prepared by
or on behalf of the Contributor and delivered by or on behalf of the
Contributor in connection with the transactions contemplated by this Agreement
are accurate and complete in all material respects, and all of such documents
and papers prepared or supplied by the Goldenberg Group are, to the knowledge
of the Contributor, accurate and complete in all material respects.
4.11 Knowledge. For purposes of this Agreement, "to the knowledge of
the Contributor" and correlative terms means the actual knowledge of Ronald
Rubin, George Rubin and the other officers and senior management of the
Contributor, after reasonable inquiry, except that (i) as to the matters
stated in Sections 4.3(c), 4.4(a), 4.4(b), 4.6(f), 4.8(a), 5.1(a), 5.3(a),
-10-
<PAGE>
and 5.4(a) of this Agreement, such terms mean that Ronald Rubin and George
Rubin, together with Richard Brown, Edward Glickman and Douglas Grayson, who
are the officers and senior management persons with responsibility for
monitoring TRO's (and its affiliates) interest in the Pre-Development
Properties, have received no notice and have no actual knowledge to the
contrary, but no affirmative inquiry or investigation has been made, and (ii)
as to the matters stated in Sections 4.6(b) and 4.10 of this Agreement, the
phrase "after reasonable inquiry" means that inquiry has been made of The
Goldenberg Group by the Contributor, and the Contributor has received no
response to the contrary.
4.12 FIRPTA. The Contributor is neither a "foreign person" within the
meaning of Section 1445(f) of the Code nor a "foreign partner" within the
meaning of Section 1446 of the Code.
4.13 Investment Representations.
(a) The Contributor acknowledges that the Class A Units to be
issued pursuant to Section 3 will not be registered under the 1933 Act on the
grounds that the issuance of such units is exempt from registration pursuant to
Section 4(2) of the 1933 Act and/or Regulation D promulgated under the 1933 Act,
and that the reliance of the Partnership on such exemptions is predicated in
part on the Contributor' representations, warranties and acknowledgements set
forth in this section.
(b) The Class A Units issued in accordance with this Agreement
will be acquired by the Contributor for its own account, not as a nominee or
agent, and without a view to resale or other distribution within the meaning of
the 1933 Act, and the rules and regulations thereunder except as contemplated
hereunder, and the Contributor will not distribute any of such units in
violation of the 1933 Act.
(c) The Contributor (i) acknowledges that the Class A Units,
when issued, will not be registered under the 1933 Act and such units will have
to be held indefinitely by it unless they are subsequently registered under the
1933 Act or an exemption from registration is available, (ii) is aware that any
sales of such units made under Rule 144 of the Securities and Exchange
Commission under the 1933 Act may be made only in limited amounts and in
accordance with the terms and conditions for that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (iii) is aware that Rule 144 may not be available
for use by the Contributor for resale of the units, (iv) is aware that the
Partnership is under no obligation to register, and has no current intention of
registering any of such units under the 1933 Act, and (v) acknowledges that he
has received and read a private placement memorandum relating to the offer of
Class A Units.
-11-
<PAGE>
(d) The Contributor is well versed in financial matters, has
had dealings over the years in securities, including "restricted securities,"
and is fully capable of understanding the type of investment being made in the
Class A Units and the risks involved in connection therewith.
SECTION 5. WARRANTIES AND REPRESENTATIONS AS TO THE PRE-DEVELOPMENT PROPERTIES
The Contributor hereby warrants and represents to PREIT and the
Partnership with respect to the Pre-Development Properties as follows:
5.1 Blue Route Metroplex, Plymouth Meeting, Pennsylvania
(a) To the Contributor's knowledge, except for the Agreements
of Sale and amendments thereto set forth on Schedule B-1 hereto and the
Goldenberg Agreement, and except as set forth in Section 5.1(a) of the
Contributor's Disclosure Letter, there are, as of the date hereof, no third
party rights of first refusal on, or options or agreements to purchase all or
any portion of, the Metroplex Site or any right to participation interests
(whether of profits, sale or refinancing proceeds, or calculated based on fair
market value) with respect to any portion of the Metroplex Site in favor of any
tenant, lender or any other Person.
(b) To the Contributor's knowledge, except as set forth in
Section 5.1(b) of the Contributor's Disclosure Letter, as of the date hereof, no
eminent domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn all or any part of the Metroplex Site. To the
Contributor's knowledge, as of the date hereof, there are no pending or
threatened governmental rules, regulations, plans, studies, or court orders or
decisions, which could materially adversely affect the development of the
Metroplex Site for its intended use as a retail shopping center.
(c) Attached hereto as Schedule B-3 is a list that was
delivered to the Contributor by the Goldenberg Group of all executed leases,
executed letters of intent and executed term letters with respect to all
proposed tenants for the Metroplex Site as of the date of said list. The
Contributor has no reason to believe that the list attached hereto as Schedule
B-3 is not accurate as of the date hereof.
(d) The Contributor has no reason to believe that (i) the
zoning classifications for parcels comprising the Metroplex Site are other than
as set forth in Schedule B-4, or (ii) the proposed/intended use of said Site as
a retail shopping center is not permitted under such classifications.
-12-
<PAGE>
5.2 Red Rose Commons, Lancaster, Pennsylvania
(a) To the Contributor's knowledge, except for the Agreements
of Sale and amendments thereto set forth on Schedule B-1 hereto and the
Goldenberg Agreement, and except as set forth in Section 5.2(a) of the
Contributor's Disclosure Letter, there are, as of the date hereof, no third
party rights of first refusal on, or options or agreements to purchase any
portion of the property comprising the RRC Site or any right to participation
interests (whether of profits, sale or refinancing proceeds, or calculated based
on fair market value) with respect to any portion of the RRC Site in favor of
any tenant, lender or any other Person.
(b) To the Contributor's knowledge, except as set forth in
Section 5.2(b) of the Contributor's Disclosure Letter, as of the date hereof, no
eminent domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn any part of the RRC Site. To the Contributor's
knowledge, as of the date hereof, there are no pending or threatened
governmental rules, regulations, plans, studies, or court orders or decisions,
which could materially adversely affect the development of the RRC Site for its
intended use as a retail shopping center.
(c) Attached hereto as Schedule B-3 is a list that was
delivered to the Contributor from the Goldenberg Group of all executed leases,
executed letters of intent and executed term letters with respect to all
proposed tenants for the RRC Site as of the date of said list. The Contributor
has no reason to believe that the list attached hereto as Schedule B-3 is not
accurate as of the date hereof.
(d) The Contributor has no reason to believe that (i) the
zoning classifications for parcels comprising the RRC Site are other than as set
forth in Schedule B-4, and (ii) the proposed/intended uses of said Site as a
retail shopping center are not permitted under such classifications.
5.3 Christiana Strip Shopping Center, Christiana, Delaware
(a) To the Contributor's knowledge, except for the Agreements
of Sale and amendments thereto set forth on Schedule B-1 hereto, and except as
set forth in Section 5.3(a) of the Contributor's Disclosure Letter, there are,
as of the date hereof, no third party rights of first refusal on, or options or
agreements to purchase all or any portion of, the Christiana Site or any right
to participation interests (whether of profits, sale or refinancing proceeds, or
calculated based on fair market value) with respect to any portion of the
Christiana Site in favor of any tenant, lender or any other Person.
-13-
<PAGE>
(b) To the Contributor's knowledge, except as set forth in
Section 5.3(b) of the Contributor's Disclosure Letter, as of the date hereof, no
eminent domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn all or any part of the Christiana Site. To the
Contributor's knowledge, as of the date hereof, there are no pending or
threatened governmental rules, regulations, plans, studies, or court orders or
decisions, which could materially adversely affect the development of the
Christiana Site for its intended use as a retail power center.
(c) Attached hereto as Schedule B-3 is a list of all executed
leases, executed letters of intent and executed term letters with respect to all
proposed tenants for the Christiana Site as of the date of said list.
(d) The Contributor has no reason to believe that (i) the
zoning classifications for parcels comprising the Christiana Site are other
than as set forth in Schedule B-4, and (ii) the proposed/intended uses of
Phase I of said Site as a retail shopping center are not permitted under such
classifications.
5.4 West Farms Road and Route 9, Howell Township, New Jersey
(a) To the Contributor's knowledge, except for the Agreements
of Sale and amendments thereto set forth on Schedule B-1 hereto and except as
otherwise provided herein or in Section 5.20 of the TRO Agreement, and except as
set forth in Section 5.4(a) of the Contributor's Disclosure Letter, there are,
as of the date hereof, no third party rights of first refusal on, or options or
agreements to purchase all or any portion of, the Howell Site or any right to
participation interests (whether of profits, sale or refinancing proceeds, or
calculated based on fair market value) with respect to any portion of the Howell
Site in favor of any tenant, lender or any other Person.
(b) To the Contributor's knowledge, except as set forth in
Section 5.4(b) of the Contributor's Disclosure Letter, as of the date hereof, no
eminent domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn all or any part of the Howell Site. To the
Contributor's knowledge, as of the date hereof, there are no pending or
threatened governmental rules, regulations, plans, studies, or court orders or
decisions, which could materially adversely affect the development of the Howell
Site for its intended use as a retail shopping center.
-14-
<PAGE>
(c) Attached hereto as Schedule B-3 is a list of all executed
leases, executed letters of intent and executed term letters with respect to all
proposed tenants for the Howell Site as of the date of said list.
(d) The Contributor has no reason to believe that (i) the
zoning classifications for parcels comprising the Howell Site are other than
as set forth in Schedule B-4, and (ii) the proposed/intended uses of the
Howell Site as a retail shopping center are not permitted under such
classifications.
SECTION 6. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE PARTNERSHIP.
PREIT hereby represents and warrants to the Contributor as follows:
6.1 Organization.
(a) PREIT is an unincorporated association in business trust
form duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania. PREIT has all necessary trust power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform all its obligations under each agreement and instrument to which
it is a party or by which it is bound.
6.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). The execution, delivery and performance by
PREIT and the Partnership of this Agreement and the other Buyer Transaction
Documents have been duly authorized by all necessary corporate or partnership
action. This Agreement has been duly and validly executed and delivered by
PREIT and the Partnership and constitutes the legal, valid and binding
obligation of PREIT and the Partnership enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors
rights generally or by general equitable principles. When executed and
delivered as contemplated herein, each of the other Buyer Transaction
Documents shall, assuming due
-15-
<PAGE>
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights
generally or by general equitable principles.
6.3 No Conflicts.
(a) Except as described in Section 6.3 of the disclosure
letter delivered by PREIT to the Contributors on the date hereof (the "PREIT
Disclosure Letter"), the execution and delivery by PREIT and the Partnership of
this Agreement do not, and the execution and delivery by PREIT and the
Partnership of the other Buyer Transaction Documents and the performance by
PREIT and the Partnership of all of the Buyer Transaction Documents will not (in
each case, with or without the passage of time or the giving of notice),
directly or indirectly:
(i) contravene, violate or conflict with (A) the
trust or partnership agreement (or other organizational documents) of PREIT or
the Partnership or (B) any Law applicable to PREIT or the Partnership, or by or
to which any assets or properties of PREIT or the Partnership is bound or
subject; or
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit or give to others
any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or material Contract to which PREIT or the Partnership is a party or by which
either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any material Encumbrance upon or with respect to either PREIT or
the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 6.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT or
the Partnership to obtain any material Authorization of or make any material
filing, registration or declaration with or notification to any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the material consent, waiver or approval of, or give any
material notice to, any Person.
-16-
<PAGE>
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to the
best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Buyer Transaction
Documents or which, if adversely determined, could have a material adverse
effect on the consolidated financial condition, assets, business or results of
operations of PREIT or could materially and adversely affect PREIT's or the
Partnership's ability to enter into or perform its obligations under the Buyer
Transaction Documents.
6.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests
in PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 6.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated in the TRO
Contribution Agreement, in the Amended Partnership Agreement or in the
Employment Agreements referred to in the TRO Contribution Agreement, and except
as disclosed in Section 6.4(a) of the PREIT Disclosure Letter, as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character (including, without limitation,
voting agreements or arrangements known to PREIT) relating to the issuance of
beneficial interests in PREIT or partnership interests in the Partnership. As of
the Closing, the outstanding partner interests in the Partnership shall consist
of the interests outstanding on the date hereof and the Class A Units to be
issued as contemplated in the TRO Contribution Agreement, the Oxford Valley
Contribution Agreement and the EPD Purchase Agreements.
(b) All Class A Units to be issued and delivered pursuant to
Section 3 hereof will be, at the time of issuance and delivery in accordance
with the terms of this Agreement, duly authorized and validly issued by the
Partnership. Assuming the accuracy of the representations and warranties of the
Contributor set forth herein, such issuance will be exempt from registration
under the 1933 Act as an offering described in Section 4(2) of such Act and/or
pursuant to Regulation D promulgated thereunder.
6.5 PREIT Reports. PREIT has delivered to the Contributor copies of
PREIT's (a) Proxy Statement dated November 15, 1996, (b) Annual Report on Form
10-K for the fiscal year ending August 31, 1996, as amended by its Report on
10-K/A-1 dated December 2, 1996,and (c) Quarterly Reports on Form 10-Q for the
quarters ended November 30, 1996, February 28, 1997 and May 31, 1997, all of
which have been filed by PREIT with the Securities and
-17-
<PAGE>
Exchange Commission (the "PREIT Reports"). The audited consolidated financial
statements and unaudited interim financial statements of PREIT included in
such reports have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial condition and results of operations of PREIT as at the
dates thereof and for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments and any
other adjustments described therein. The PREIT Reports do not contain any
untrue statements of a material fact or omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.6 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the best knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign)
or before any arbitrator of any kind, in each case of a nature that is
required to be disclosed in PREIT's 1934 Act reports.
6.7 Material Adverse Change. Except as disclosed in filings with the
Securities and Exchange Commission, since May 31, 1997, there has not been any
material adverse change in the condition (financial or otherwise), assets,
results of operations or business of PREIT on a consolidated basis.
6.8 Brokers. Except for Lehman Brothers, Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or the Partnership or any
of their affiliates or under the authority of any of the foregoing is or will
be entitled to any brokers' or finders' fee or any other commission or similar
fee, directly or indirectly, from any of such parties in connection with any
of the transactions contemplated by this Agreement.
SECTION 7. CERTAIN COVENANTS AND AGREEMENTS
7.1 Conduct of Business.
(a) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT, the
Contributor shall:
(i) carry on its business in the usual, regular and
ordinary course, consistent with past practice and the provisions hereof and in
compliance with all applicable Laws,
-18-
<PAGE>
Authorizations and Contracts, preserve intact its present business
organization, maintain its existence as a limited liability company, and cause
TRO to use reasonable efforts to preserve its relationships with the other
parties to the Howell Assigned Contracts and the Assigned Contracts and to
monitor and obtain all relevant information relating to the development of the
Pre-Development Properties;
(ii) pay and discharge all of its debts, liabilities
and obligations as they become due to the extent they are not disputed;
(iii) keep in full force and effect insurance
comparable in amount and scope of coverage to insurance now carried by it;
(iv) maintain its books of account and records in the
usual, regular and ordinary manner and use diligent efforts to maintain in full
force and effect all of its Authorizations and insurance policies;
(v) not, and shall cause TRO, the TRO Shareholders
and the TRO Affiliates not to, amend any of the Howell Assigned Contracts or the
Assigned Contracts or the Goldenberg Agreement or consent to an amendment of any
Third Party Contract;
(vi) not, and shall cause TRO, the TRO Shareholders
and the TRO Affiliates not to, enter into any Contract relating, in whole or in
part, to any of the properties listed on Schedule B-2 hereto;
(vii) not take any action, fail to take any action or
permit to occur any event that would cause or constitute a breach of or
inaccuracy in any representation or warranty set forth herein if made
immediately after such event or at the Closing or that would have been required
(or result in any situation that would be required) to be disclosed hereunder
had such action or inaction been taken or failed to have occurred or had such
event occurred prior to the date hereof; provided, however, that this
undertaking is subject to the qualification that the Contributor does not
currently have a direct involvement in the development of the Goldenberg
Properties and that the future development of all Pre-Development Properties is
subject to Development Contingencies;
(viii) not make any change in its ownership
interests, grant any option or other right to purchase its ownership shares,
issue or make any commitment to issue any new ownership shares or purchase,
redeem, retire or make any other acquisition of any shares, except that nothing
contained in this Section (vii) shall be deemed or construed to limit or
preclude
-19-
<PAGE>
transfers of interests between or among the members of the Contributor, or
transfers by members to family members or to trusts for estate planning
purposes; and
(ix) not enter into any agreement or understanding to
do or engage in any of the foregoing actions.
7.2 Reasonable Efforts. Upon the terms and subject to the condition
hereof, between the date hereof and the Closing Date, each of the parties
hereto shall use its reasonable efforts to take, or cause to be taken, all
appropriate action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to complete the Closing under this
Agreement, including, without limitation, (i) using its reasonable efforts to
make all required regulatory filings and applications and to obtain all
Authorizations and consents, approvals, amendments and waivers from parties to
Contracts as are necessary for the completion of the Closing under this
Agreement and (ii) using its reasonable efforts to cause to be satisfied the
conditions to the consummation of the contribution of the Contract Interests.
7.3 Notifications. Each party hereto shall give prompt notice to the
other parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a breach of
or any inaccuracy in any of its representations and warranties contained in
this Agreement had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure
of it or any of its members, officers, directors, employees or agents, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; (iii) any notice or other communication
from any governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and (iv) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its
knowledge, threatened against, relating to or involving or otherwise affecting
the Contributor, or PREIT, as the case may be, or any of the transactions
contemplated by this Agreement.
7.4 Rezoning of Christiana Site - Phase II. The Christiana Site
consists of an unsubdivided parcel. A portion of such parcel ("Phase I") is
zoned to permit retail development. The remaining portion ("Phase II") is zoned
office and residential. In the event Phase II is rezoned to permit retail
development, the entire parcel will remain a Pre-Development Property governed
by the terms of this Agreement. Upon the earlier to occur of (i) final rejection
(no longer subject to appeal) by the governmental
-20-
<PAGE>
entity having jurisdiction of an application to rezone Phase II to permit
retail development, (ii) a joint decision by the Contributor and the Special
Committee to the effect that a rezoning of Phase II to permit retail
development is not feasible, or (iii) the fifth (5th) anniversary of the
Closing, Phase II will, assuming that it is not then rezoned to permit retail
development, no longer be considered a Pre-Development Property, and the
Contributor shall be permitted to develop Phase II for its own account so long
as Phase II is not developed for retail use and the proposed development of
Phase II does not violate the terms and conditions of this Agreement, the TRO
Contribution Agreement, or any other agreement executed by PREIT, TRO, any of
the TRO Shareholders or any of the TRO Affiliates in conjunction with the
transactions contemplated in the TRO Contribution Agreement. If Phase II
ceases to constitute a Pre-Development Property as described above, PREIT and
the Partnership shall cooperate with the Contributor, at the Contributor's
sole cost and expense, in subdividing Phase II from Phase I and in conveying
Phase II to the Contributor or its designee.
SECTION 8. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES.
8.1 Time of Closing. The closing (the "Closing") of the contributions
to the Partnership contemplated by Section 2.1 shall take place immediately
following the TRO Closing at the place that the TRO Closing occurs.
8.2 Closing Conditions.
(a) Conditions Precedent to PREIT's and the Partnership's
Obligations. The obligation of PREIT and the Partnership to consummate the
acquisition of the Assigned Contracts and to take the other actions required to
be taken by them at the Closing is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of which may be waived
by PREIT in its sole discretion:
(i) Representations and Warranties. Each of the
representations and warranties of the Contributor set forth in this Agreement
that is qualified by materiality shall be true and correct, and each of the
representations and warranties of the Contributor set forth in this Agreement
that is not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date.
(ii) Performance of Covenants. All of the agreements,
covenants and obligations that the Contributor is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing shall have
been duly performed and complied with in all material respects. The Contributor
shall
-21-
<PAGE>
have delivered each of the documents required to be delivered by it pursuant
to Section 8.3 hereof.
(iii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person (other than by PREIT or the
Partnership) that questions the validity or legality of this Agreement or the
transactions contemplated hereby.
(iv) Consents and Approvals. Each consent, approval,
ratification, waiver or other authorization of any Person necessary, in the
reasonable opinion of PREIT, for the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, and no such consent, approval, ratification, waiver or other
authorization: (x) shall have been conditioned upon the modification,
cancellation or termination of any of the Howell Assigned Contracts or Assigned
Contracts, or any other Contract, right or Authorization of PREIT, the
Partnership or the Contributor or (y) shall impose on PREIT or the Partnership
any condition, provision or requirement not presently imposed upon the
Contributor or TRO or any condition that would be more restrictive after the
Closing on the Partnership than the conditions presently imposed on the
Contributor or TRO.
(v) Opinion of Counsel. PREIT shall have received an
opinion of counsel for the Contributor, dated the Closing Date, in form and
substance reasonably satisfactory to PREIT and its counsel.
(vi) TRO Closing. The TRO Closing shall have
occurred.
(vii) Casualty or Condemnation. There shall not have
occurred any damage or destruction to, or condemnation of, any portion of the
Pre-Development Properties that has a material adverse effect on the proposed or
intended development of all or any of the Pre-Development Properties.
(b) Conditions Precedent to the Contributor's Obligations. The
obligation of the Contributor to consummate the contribution of the Assigned
Contracts contemplated by this Agreement and to take the other actions required
to be taken by it at the Closing is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of which may be waived
by the Contributor in its sole discretion:
-22-
<PAGE>
(i) Representations and Warranties. Each of the
representations and warranties of PREIT set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of PREIT set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(ii) Performance of Covenants. Each of the
agreements, covenants and obligations that PREIT or the Partnership is required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing shall have been duly performed and complied with in all material
respects. PREIT shall have delivered each of the documents required to be
delivered by it pursuant to Section 8.3(b) hereof.
(iii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person that questions the validity or
legality of this Agreement or the transactions contemplated hereby.
(iv) TRO Closing. The TRO Closing shall have
occurred.
(v) Partnership Counsel Opinion. The Contributor
shall have received an opinion of counsel for the Partnership, dated the Closing
Date, in form and substance reasonably satisfactory to the Contributor and its
counsel.
8.3 Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
(a) The Contributor shall deliver or cause to be
delivered to the Partnership:
(i) each of the instruments, agreements or documents
listed on Schedule A-1, in a form reasonably satisfactory to the Contributor and
the Partnership, in each case duly executed by each of the signatories thereto
other than PREIT or the Partnership;
(ii) certificates, dated the Closing Date and
executed by an authorized member of the Contributor to the effect that the
conditions set forth in Sections 8.2(a)(i) and (ii) have been satisfied;
-23-
<PAGE>
(iii) certificates of good standing of a recent date
for the Contributor certified by the Secretary of State or corresponding
certifying authority of the state of organization of the Contributor and of each
state in which the Contributor is qualified to do business as a foreign limited
liability company;
(iv) copies of the resolutions of the Contributor and
its members authorizing the transactions contemplated under this Agreement and
the Contributor Transaction Documents to which the Contributor is a party or
confirmation reasonably satisfactory to PREIT and the Partnership that the
Contributor's Operating Agreement provides such authorization;
(v) all consents and approvals under the Goldenberg
Agreement and the Howell Assigned Contracts and the Assigned Contracts (if and
to the extent then in existence) necessary or appropriate in connection with the
transactions contemplated herein; and
(vi) such other documents and instruments as the
Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) The Partnership shall deliver or cause to be
delivered to the Contributor the following:
(i) copies of resolutions of the board of trustees of
PREIT authorizing the transactions contemplated hereunder and under the Buyer
Transaction Documents;
(ii) a certificate, dated the Closing Date, executed
by the chief executive officer and chief financial officer of PREIT, to the
effect that the conditions set forth in Sections 8.2(b)(i) and (ii) have been
satisfied; and
(iii) each of the instruments, agreements and
documents listed on Schedule A-1, in a form mutually satisfactory to the
Contributor and the Partnership, duly executed by each of the Partnership or
PREIT that is a signatory thereto.
(c) Each party shall deliver or cause to be delivered, as the
case may be, to the other parties hereto such other documents, instruments,
certificates and opinions as may be required by this Agreement.
SECTION 9. [INTENTIONALLY OMITTED]
SECTION 10. INDEMNIFICATION.
-24-
<PAGE>
10.1 Indemnification by the Contributor. The Contributor shall
indemnify, defend and hold harmless PREIT and the Partnership (collectively,
"Buyer Indemnified Persons") against and in respect of any and all losses,
costs, expenses (including, without limitation, costs of investigation and
defense and attorneys' fees), claims, damages, obligations, liabilities or
diminutions in value, whether or not involving a third party claim
(collectively, "Damages"), arising out of, based upon or otherwise in respect
of: (a) any inaccuracy in or breach of any representation or warranty of the
Contributor made in or pursuant to this Agreement (including, without
limitation, the certificate referred in Section 8.3(a)(ii), which, for this
purpose will be deemed to have stated, inter alia, that the Contributor's
representations and warranties in this Agreement were true and correct as of the
Closing Date as if made on the Closing Date); or (b) any breach or
nonfulfillment of any covenant or obligation of the Contributor contained in
this Agreement.
10.2 Indemnification by PREIT. PREIT shall indemnify, defend and hold
harmless the Contributor against and in respect of any and all Damages arising
out of, based upon or otherwise in respect of: (a) any inaccuracy in or breach
of any representation or warranty of PREIT made in or pursuant to this
Agreement; (b) any breach or nonfulfillment of any covenant or obligation of
PREIT or the Partnership contained in this Agreement; or (c) claims relating
solely to actions taken by the Partnership (or its affiliates) as a party to or
in connection with the Assigned Contracts after Closing as the result of events
and circumstances first occurring after Closing or, in the case of the Howell
Assigned Contracts, after the Howell Closing.
10.3 Limitations on Liability.
(a) The Contributor shall not have any obligation to indemnify
any Buyer Indemnified Person against Damages pursuant to Section 10.1 of this
Agreement arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to this Agreement unless and
until the aggregate of all such Damages suffered or incurred by the Buyer
Indemnified Persons exceeds $100,000; in which event the Buyer Indemnified
Persons shall be entitled to indemnification for the full amount of all Damages
suffered or incurred; provided, however, that the above limitation shall not be
applicable to any claim for Damages pursuant to Sections 10.1(b) or based upon a
breach of any representation or warranty made in or pursuant to Sections 4.1,
4.2, 4.3, 4.5, 4.6 or 4.7.
(b) No claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to this Agreement
shall be made unless a claim arises and written notice is delivered to the
indemnifying party within the Basic Claims Period (as defined below); provided
that any
-25-
<PAGE>
such claim arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to Sections 4.1 or 4.2 may be
made at any time. For purposes hereof, "Basic Claims Period" means the period
beginning on the date hereof and ending on the date five months after the
fiscal year end for the first full fiscal year of PREIT after the TRO Closing.
(c) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the Contributor Disclosure Letter. The waiver by PREIT of any condition
based on the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT.
(d) Each party's rights under this Section 10 shall be its
sole remedy against the other parties in respect of the subject matter hereof,
subject to a party's rights, if any, to seek and obtain specific performance.
(e) If there is a Howell Closing, the terms set forth in this
Section 10 shall be adjusted as appropriate so that PREIT and the Partnership
achieve indemnification protection comparable to that which they would have had
in respect of the Howell Site and the Howell Assigned Contracts if the Howell
Site had been a Pre-Development Property as of the Closing.
10.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 10 relates, such indemnified party shall, if a
claim is to be made against an indemnifying party under Section 10, give notice
to the indemnifying party of the commencement of such proceeding, but the
failure to so notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
proceeding is materially prejudiced by the indemnified party's failure to give
such notice.
(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such
-26-
<PAGE>
proceeding and, to the extent that it wishes (unless (i) the indemnifying
party is also a party to such proceeding and the indemnified party determines
in good faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the defense of
such proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under Section 10 for any fees of other counsel or any other
expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense
of such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (A) it will be
conclusively established for purposes of this Agreement that the claims made
in that proceeding are within the scope of and subject to indemnification; (B)
no compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (1) there is no finding
or admission of any violation of Law by the indemnified party (or any
affiliate thereof) or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified party, and (2)
the sole relief provided is monetary damages that are paid in full by the
indemnifying party. The indemnified party will have no liability with respect
to any compromise or settlement of the claims underlying such proceeding
effected without its consent. If notice is given to an indemnifying party of
the commencement of any proceeding and the indemnifying party does not, within
ten days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will be bound by any determination made in such
proceeding or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent.
-27-
<PAGE>
10.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the party
from whom indemnification is sought.
10.6 Indemnification Payments. The Contributors shall be entitled to
use cash or Class A Units to make indemnification payments hereunder. In the
event Class A Units are used, each such Unit shall be valued based on the per
share value (as defined in the Amended Partnership Agreement) of a PREIT share
as of the date such Unit is tendered to PREIT as an indemnification payment
hereunder.
SECTION 11. TERMINATION AND ABANDONMENT.
11.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(i) by PREIT or the Contributor, if the Closing has
not occurred (other than through the failure of the party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before December 31, 1997, or such later date as the parties may mutually agree
upon in writing;
(ii) by mutual consent of PREIT and the Contributor;
(iii) by the Contributor, on the one hand, or PREIT
and the Partnership, on the other hand, if a material breach of any provision of
this Agreement has been committed by the other and such breach has not been
waived; or
(iv) by PREIT, if any of the conditions in Section
8.2(a) have not been satisfied as of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of PREIT or
the Partnership to comply with its obligations under this Agreement) and PREIT
has not waived all such unsatisfied conditions before termination pursuant to
this subparagraph (iv); or
(v) by the Contributor if any of the conditions in
Section 8.2(b) have not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through the failure of
the Contributor to comply with its obligations hereunder) and the Contributor
has not waived all such unsatisfied conditions before termination pursuant to
this subparagraph (v); or
(vi) by any party hereto if the TRO Contribution
Agreement is terminated prior to the consummation of the TRO Closing.
-28-
<PAGE>
11.2 Procedure for Termination; Effect of Termination. A party
terminating this Agreement pursuant to this Section 11 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by any party and all further obligations of the parties under this Agreement
will terminate; provided, however, that if such termination is pursuant to
Section 11.1(iii), the terminating party's right to pursue all legal remedies
(including damages and/or specific performance) contemplated by Section 10 will
survive such termination unimpaired.
SECTION 12. GENERAL PROVISIONS.
12.1 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties in
this Agreement and in the certificates, documents and other agreements delivered
pursuant hereto shall survive the Closing, subject to the terms and conditions
of Section 10 above. Anything in this Agreement to the contrary notwithstanding:
(i) the representations and warranties of the Contributor and the right of the
Buyer Indemnified Persons to indemnification for breach thereof, shall not be
affected by any investigation of the Contributor or the Pre-Development
Properties made by PREIT or its agents or representatives; and (ii) the
representations and warranties of PREIT hereunder, and the right of the
Contributor to indemnification for breach thereof, shall not be affected by any
investigation of PREIT or its affiliates made by the Contributor or its agents
or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the Contributor
Disclosure Letter (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
12.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer taxes, recording and filing fees and all costs associated with
obtaining the title insurance or endorsements thereto contemplated herein in
connection with the transactions contemplated herein shall be borne by PREIT
or the Partnership. The parties contemplate that the transfer of the Assigned
Contracts in accordance with the procedures and the time periods set forth in
Schedule A-2 will not be subject to transfer tax. In the event the Contributor
makes or causes a transfer of Assigned Contracts not in accordance with the
procedures and time periods set forth herein and in the Partnership Agreement,
then the Contributor making or causing such transfer shall be responsible for
the payment of any
-29-
<PAGE>
transfer tax and all title insurance premiums and title company charges and
recording costs due as a result thereof.
12.3 Condemnation. If prior to the Closing Date, condemnation or
eminent domain proceedings are commenced against all or any portion of any of
the Pre-Development Properties, the Contributor shall give notice thereof to
PREIT promptly after the Contributor becomes aware of it.
12.4 Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To PREIT or the Partnership:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the Contributor:
c/o The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzberg & Ellers, LLP
-30-
<PAGE>
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esq.
12.5 Access to Information; Confidentiality. Between the date of this
Agreement and the Closing Date, PREIT, on the one hand, and the Contributor,
on the other hand, will give to the other party and its officers, employees,
counsel, accountants and other representatives free and full access to and the
right to inspect, during normal business hours, all of the assets, records,
facilities, properties and contracts relating to its business as the other
party may reasonably request. Each party shall acquire and hold all
confidential information that has been made available by another party hereto
subject to the terms and conditions of Section IV of the Letter Agreement
dated as of April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the
terms of which section are hereby incorporated by reference and which shall
remain in force through the Closing.
12.6 Public Announcements. Except as and to the extent required by
Law or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the Contributor, on the one hand, and PREIT and
the Partnership, on the other hand, will not, and each will direct its
representatives not to, directly or indirectly, make any public comment,
statement or communication with respect to, or otherwise disclose or permit
the disclosure of any of the terms, conditions or other aspects of the
transactions contemplated hereby; provided, however, that PREIT may issue a
press release, in the form previously circulated by PREIT to TRO, regarding,
among other things, the execution of this Agreement; and further provided that
PREIT and TRO may each continue such communications with principals, partners,
lenders, trustees, attorneys, accountants, investment bankers, consultants
engaged by PREIT and TRO, including abstract companies, title companies,
engineers and architects, Kenneth N. Goldenberg and his affiliates, EPD and
its affiliates, and, if agreed in each case by PREIT and TRO, others as may be
legally required or necessary in connection with the consummation of the
transactions contemplated by this Agreement.
12.7 No Solicitation. The Contributor shall not and it shall cause
its officers, employees, partners, representatives and agents not to, directly
or indirectly, continue, encourage, solicit, initiate or participate in
discussions or negotiations with, or provide any nonpublic information to, any
Person (other than PREIT and the Partnership and their respective
representatives in connection with the transactions contemplated by this
Agreement) concerning any sale of assets (other than in the ordinary course of
its business consistent with past practice) or shares of capital stock or
partnership interests of the Contributor or any merger, consolidation,
recapitalization, liquidation or similar transaction involving the Contributor
-31-
<PAGE>
(collectively, an "Acquisition Transaction"). The Contributor will promptly
communicate to PREIT the terms of any inquiry or proposal that it may receive
in respect of an Acquisition Transaction.
12.8 Entire Agreement. This Agreement, together with the Schedules,
Contributor Disclosure Letter, and certificates referred to herein or delivered
pursuant hereto, constitute the entire agreement between the parties hereto with
respect to its subject matter and supersede all prior and contemporaneous
agreements and understandings with respect to the subject matter hereof.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
12.10 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable),
irrespective of the principal place of business, residence or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of laws.
12.11 Section Headings, Captions and Defined Terms. The section
headings and captions contained herein are for reference purposes only and shall
not in any way affect the meaning and interpretation of this Agreement. The
terms defined herein and in any agreement executed in connection herewith
include the plural as well as the singular, and the use of masculine pronouns
include the feminine and neuter. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and therewith.
12.12 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing executed by PREIT, the Partnership and the Contributor. Ronald
Rubin and/or George Rubin have been granted authority under the operating
agreement for the Contributor to execute any and all amendments to this
Agreement as Ronald Rubin and George Rubin deem appropriate. The waiver by any
party of any provision of this Agreement shall not constitute or operate as a
waiver of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other
provision.
12.13 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this
-32-
<PAGE>
Agreement shall not affect the other provisions or parts hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions or parts were omitted.
12.14 Liability of Trustees, etc. No recourse shall be had for any
obligation of PREIT hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of PREIT, whether by virtue of any statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by each other party hereto.
12.15 Future Projects.
(a) If prior to the Closing, the Contributor, any of the TRO
Shareholders, TRO or any other TRO Affiliate shall enter into discussions to
acquire any direct or indirect ownership interests in or rights to acquire
additional retail or residential properties not referred to herein, the
Contributor shall cause TRO to promptly advise and continue to advise PREIT and
the Partnership as to the terms and status of each such proposed project. If TRO
or any TRO Affiliate shall desire to enter into any contractual arrangement or
agreement with respect to any such proposed project prior to Closing, the
Contributor shall cause TRO to present, in writing, the terms and conditions of
each such proposed project to PREIT. The Contributor shall cause TRO, the TRO
Shareholders and the TRO Affiliates not to enter into any such contractual
arrangement or agreement concerning such proposed project prior to Closing
unless and until PREIT has given its prior written consent to same. If PREIT has
given its consent for TRO or the TRO Affiliates to enter into any such
arrangement or agreement, the Contributor shall cause all rights of TRO, the TRO
Affiliates and the TRO Shareholders with respect to such project to be assigned
at the Closing to the Partnership, and such project shall constitute a
Pre-Development Property hereunder and shall therefore be eligible for cost
reimbursement as provided in Section 5.17(a) of the TRO Contribution Agreement;
provided, however, that no such property shall be deemed to be a BCRH Property.
(b) The Partnership acknowledges receipt of a notice from TRO
dated July 2, 1997 regarding the potential development of shopping centers in
York, Pennsylvania and Warrington, Pennsylvania. The Partnership hereby elects
to include the York and Warrington projects as described in the July 2 letter as
Pre-Development Properties hereunder, eligible for cost reimbursement as
provided in Section 5.17(a) of the TRO Contribution Agreement (but such
properties shall not constitute BCRH Properties). Accordingly, the Contributor
shall cause all rights of TRO, the TRO Shareholders and the TRO Shareholders
with respect to such project to be assigned at the Closing to the Partnership.
-33-
<PAGE>
12.16 Concord Pike.
(a) In the event the Contributor demonstrates to PREIT's sole
reasonable satisfaction that the Option Agreement dated May 10, 1995, by and
between Al-Zar, Ltd. and BMR Associates, L.P. for Concord Pike (the "Option
Agreement") is extended for at least one (1) year and the Concord Pike Property
is rezoned to permit retail development, the Concord Pike Property shall become
a Pre-Development Property, the rights in respect thereof shall be assigned to
the Partnership, free and clear of all Encumbrances (except that the Option
Agreement will be subject to any Agreement of Sale entered into by the
Contributor pursuant to subparagraph (b) below prior to Closing) and the
Partnership shall reimburse the Contributor for all reasonable out-of-pocket
predevelopment costs and expenses of the Contributor or any TRO Affiliate to the
extent not theretofore reimbursed out of the cash flow of Concord Pike. The
Partnership shall have the right at any time to waive the requirements as to the
extension of the Option Agreement and/or the rezoning and to acquire the
Contributor's interest in Concord Pike as a Pre-Development Property. In the
event the Concord Pike Property does not become a Pre-Development Property, the
Contributor shall be permitted to develop the Concord Pike Property for its own
account so long as the Concord Pike Property is not developed for retail or
multi-family use and the proposed development of the Concord Pike Property does
not violate the terms and conditions of this Agreement, the TRO Contribution
Agreement, or any other agreement executed by PREIT, TRO, any of the TRO
Shareholders or any of the TRO Affiliates in conjunction with the transactions
contemplated in the TRO Contribution Agreement.
(b) Notwithstanding subparagraph (a) above, the Contributor
shall have the right between the date hereof and the Closing to enter into an
agreement to acquire the Concord Pike Property without a rezoning for a purchase
price not to exceed Three Million Dollars ($3,000,000); provided, however, that
any such agreement shall provide that the Contributor has the right to assign
its rights under such purchase agreement to the Partnership. The Contributor
shall provide to the Partnership all materials pertaining to the Concord Pike
Property and its right to acquire same and any agreement the Contributor or any
TRO Affiliate or TRO Shareholder has with any partner or other co-venturer in
respect of such property as the Partnership reasonably requests. The Partnership
shall have thirty (30) days after receipt of all such materials to determine
whether the Concord Pike Property will become a Pre-Development Property. If the
Partnership elects to have the Concord Pike Property become a Pre-Development
Property pursuant to this subparagraph (b), the Contributor will assign its
rights to acquire the property to the Partnership and the Partnership will
acquire the Concord Pike Property from the current owner of the property at the
closing provided for under the agreement of sale with such owner (the
-34-
<PAGE>
Contributor shall ensure that any such agreement shall provide that closing
thereunder shall not occur until the later of (x) a date at least 30 days
after receipt by the Partnership of materials as aforesaid or (y) the Closing
Date). Upon the acquisition by the Partnership of the Concord Pike Property,
such property shall thereupon become a Pre-Development Property hereunder.
-35-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, all as of the date first written above.
TRO PREDEVELOPMENT, LLC
By: /s/ Ronald Rubin
--------------------------
Name:
Title:
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
--------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
--------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general
partner
By: /s/ Jonathan B. Weller
--------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
--------------------------
Name:
Title:
-36-
<PAGE>
FIRST AMENDMENT TO
CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION AGREEMENT is made as of
September 30, 1997 by and among TRO PREDEVELOPMENT, LLC, a Delaware limited
liability company (the "Contributors"), PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, a Pennsylvania business trust ("PREIT"), and PREIT ASSOCIATES, L.P., a
Delaware limited partnership (the "Partnership").
Background
The parties hereto are parties to a Contribution Agreement
dated as of July 30, 1997 (the "Original Agreement").
The parties desire to enter into this Agreement to make
certain amendments to the Original Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Original Agreement. The
term Designee shall mean an entity that is wholly owned directly or in
directly by the Partnership and that is designated by the Partnership to the
Contributor.
2. Amendment Relating to Contributors.
(a) Section 2.1 of the Original Agreement is hereby
amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in both places such word appears in Section
2.1.
(b) Section 2.2 of the Original Agreement is hereby
amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in the ninth, fifteenth, seventeenth and
twenty-first lines of Section 2.2.
(c) Section 3.2 of the Original Agreement is hereby
amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in the seventh line.
(d) Section 12.15(a) of the Original Agreement is
hereby amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in the fifth line from the bottom of the
paragraph.
<PAGE>
(e) Section 12.15(b) of the Original Agreement is
hereby amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in the last line of the paragraph.
(f) Section 12.16(a) of the Original Agreement is
hereby amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" in the eighth line of the paragraph.
(g) Section 12.16(b) of the Original Agreement is
hereby amended by the insertion of the words "and/or the Designee" immediately
following the word "Partnership" the first time it appears in the eighth and
each time it appears in nineteenth and twenty-sixth lines of such paragraph.
3. Amendment Relating to Certain Actions at Closing.
(a) Sections 3(a) and 3(b) of Schedule A to the
Original Agreement are hereby amended by inserting the words "and/or the
Designee" immediately following the words "Partnership" where it appears in the
first line of Sections 3(a) and 3(b).
(b) Section B-1 to the Original Agreement is amended
by inserting the following paragraph under the Section entitled "Assigned
Contracts":
"VII. Letter Agreement dated March 26, 1996,
among The Goldenberg Group, Kenneth B. Goldenberg, Ronald Rubin and The Rubin
Organization, Inc. and the Letter Agreement of July 30, 1997, among The
Goldenberg Group and Ronald Rubin, with respect to all rights to become an
equity owner of one or more partnerships or other entities that own or will own,
and to otherwise participate in the development, leasing, management and
ownership of the Metroplex Site and RRC Site."
4. Acknowledgement Regarding the Goldenberg Agreement and
Equity Fund. The parties hereto acknowledge that all rights under the Goldenberg
Agreement relating to the Equity Fund are being conveyed on the date hereof to
the Partnership in accordance with the terms of the TRO Contribution Agreement.
The Contributors hereby represent and warrant to the Partnership that they have
no interest in the Equity Fund or any rights with respect thereto.
5. Confirmation. The Original Agreement, as amended hereby, is
ratified and confirmed in all respects.
6. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, and
delivered by means of facsimile
-1-
<PAGE>
transmission or otherwise, each of which when so executed and delivered shall
be deemed to be an original and all of which when taken together shall
constitute but one and the same Amendment. If any party hereto elects to
execute and deliver a counterpart signature page by means of facsimile
transmission, it shall deliver an original of such counterpart to each of the
other parties hereto within ten business days of the date hereof, but in no
event will the failure to do so affect in any way the validity of the
facsimile signature or its delivery.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement, all as of the date first above written.
TRO PREDEVELOPMENT, LLC
By: /s/ Ronald Rubin
--------------------------------
Name:
Title:
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
--------------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By: /s/ Jonathan B. Weller
----------------------------
Name:
Title:
-3-
<PAGE>
FIRST REFUSAL RIGHTS AGREEMENT
Pan American Associates, a Pennsylvania
limited partnership, and constituents in
favor of PREIT Associates, L.P.,
a Delaware limited partnership
The parties to this Agreement, effective as of the 30th day of
September, 1997, are Pan American Associates, a Pennsylvania limited
partnership ("Pan American"), its partners, and all persons having an interest
in such partners (Pan American and such partners and persons, sometimes
hereinafter collectively referred to as the "Undersigned"), with and for the
benefit of PREIT Associates, L.P., a Delaware limited partnership ("PREIT
Associates").
Background
The Undersigned are affiliated with PREIT-RUBIN, Inc., a Pennsylvania
corporation formerly known as The Rubin Organization, Inc., ("TRO"), or
certain of its principals. This Agreement is part of a larger transaction
described in the TRO Contribution Agreement dated as of July 30, 1997 (the
"TRO Contribution Agreement") among the Pennsylvania Real Estate Investment
Trust, PREIT Associates, TRO, The Rubin Organization-Illinois, Inc. and the
shareholders of TRO.
Pan American has interests in certain partnerships that own various
real estate investments as expressly set forth on Exhibit A hereto attached
and made a part hereof (such partnerships, individually, an "Investment
Partnership" and, collectively, the "Investment Partnerships"). As part of the
larger transaction described above, the Undersigned have agreed to grant to
PREIT Associates a first refusal option to acquire their respective interests
in the Investment Partnerships as herein provided.
NOW, THEREFORE, in consideration of the execution of the TRO
Contribution Agreement and the other documents to be executed in respect of
the larger transaction described above, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:
1. Warranties. The Undersigned do hereby warrant and represent that,
(a) all of the general and limited partners of Pan American,
and all persons having an interest in such partners, are designated as
signatories to this Agreement;
<PAGE>
(b) the information set forth in Exhibit A is true, correct
and complete; and
(c) The copies of the governing documents of each of the
Investment Partnerships designated on Exhibit "A", which have been delivered
to PREIT Associates, have not been further amended or modified and are true
and correct copies of the documents now in force among the partners of the
Investment Partnerships constituting the respective partnership agreements of
the Investment Partnerships.
2. Definition of Investment Partnership Interest. The term
"Investment Partnership Interest" when used herein shall refer to
(a) All or any part of any partnership interest (beneficial or
otherwise, direct or indirect) now owned or hereafter
acquired by Pan American in any Investment Partnership;
and
(b) All or part of any partnership interest hereinafter
acquired (beneficial or otherwise, direct or indirect) by
any of the Undersigned in any Investment Partnership.
3. Grant of First Refusal Rights. Except for the dispositions
referred to in paragraph 6 below, each of the Undersigned hereby grants to
PREIT Associates the right of first refusal with respect to the disposition of
any Investment Partnership Interest. Each of the Undersigned shall not sell,
assign, transfer, convey or otherwise dispose of any Investment Partnership
Interest except in compliance with this Agreement.
4. Procedures.
(a) Advance Notice. If any Undersigned shall commence the
negotiation for the sale, assignment or transfer of an Investment Partnership
Interest to a third party (the "Third Party"), then the applicable Undersigned
shall give PREIT Associates as much advance written notification and
information as practicable with respect to such negotiations; however, the
proposed price so disclosed may not necessarily be the final price.
(b) Offer. Except as provided in paragraph 6 below, none of
the Undersigned shall transfer, assign or sell an Investment Partnership
Interest to a Third Party without first offering the same to PREIT Associates
in accordance with this subparagraph (b). If any of the Undersigned (the
"Offering Undersigned") desire to sell, assign or transfer an Investment
Partnership Interest to a Third Party who or which have made a bona fide offer
in writing for the purchase of such interest (any
-2-
<PAGE>
such offer, the "Third Party Offer"), the Offering Undersigned shall first
identify the Third Party and shall offer in writing to sell, assign or
transfer such Investment Partnership Interest to PREIT Associates (the
"Offer") at the same price and on the same terms set forth in the Third Party
Offer, which Offer shall include a machine reproduction copy of the executed
Third Party Offer.
(c) Acceptance. PREIT Associates shall have the right to
accept the Offer by giving written notice thereof within fourteen (14) days
after receipt of the Offer. If the Offer is not accepted in writing within
such fourteen (14) day period, the Offer shall expire and the Offering
Undersigned may then proceed with the sale or other transfer to the Third
Party, provided, however, that such sale or other transfer is consummated (a)
within one hundred twenty (120) days after the expiration of such fourteen
(14) day period, and (b) without any change in the original price or material
change in the other terms of the Third Party Offer.
5. Violative Transfers Ineffective. No transfer of any Investment
Partnership Interest subject to the First Refusal Rights set forth herein
shall be effective if in violation of the rights of PREIT Associates under this
Agreement.
6. Exceptions to First Refusal Rights. The First Refusal Rights
granted pursuant to Paragraph 3 above shall not apply to the disposition of
any Investment Partnership Interest by any of the Undersigned to:
(a) Any of the Undersigned or to any adult member of the
immediate family of any of the Undersigned, or in trust
for any member of the immediate family of any of the
Undersigned. "Member of the immediate family" as used
herein shall mean any parent, or any ancestor of a parent,
a spouse and any descendants (which shall include adopted
children), any spouse of such descendants, any brothers
and sisters and any descendants of such brothers or
sisters.
(b) Any corporation, business trust, limited liability
company, partnership (general or limited) or any other
entity in which the Undersigned, or any of them, or any of
the persons referred to in subsection (a) above shall hold
a 100% interest.
(c) Prior to the transfer of any Investment Partnership
Interest to any transferee described in subparagraphs (a)
or (b) above (individually, a "Permitted Transferee" and,
collectively, "Permitted Transferees"), written notice of
such
-3-
<PAGE>
transfer shall be given to PREIT Associates
together with an agreement in form reasonably
satisfactory to counsel for PREIT Associates
executed by the Permitted Transferee(s) agreeing to
be bound by the provisions of this Agreement with
like force and effect as if the Permitted
Transferee(s) had been an original signatory
hereto.
7. Prior First Refusal Rights. The First Refusal Rights granted in
this Agreement shall be subject to such first refusal rights in favor of the
Investment Partnerships or the other partners therein previously granted by
the terms of organizational documents of the Investment Partnerships.
8. Individual Responsibility. Each of the Undersigned shall not be
responsible or liable by reason of violation or breach of the terms of this
Agreement by any other Undersigned.
9. Term. This Agreement shall remain in full force and effect until
the date which is twenty-one (21) years from the date of death of the last
survivor of the present Trustees of the Pennsylvania Real Estate Investment
Trust, Scott Richard Silberman and Darious James Copeland, upon which this
Agreement shall terminate and be at an end, and of no further force and
effect, unless sooner terminated by PREIT Associates.
10. Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth on Exhibit B, or if
sent by documented overnight delivery service or registered or certified mail,
postage prepaid, return receipt requested, or by telegram, telex or telecopy,
confirmation acknowledged, addressed as set forth on Exhibit B, or to such
other person or persons and/or at such other address or addresses as shall be
furnished in writing by any party hereof to the others, provided, however,
that if such communication is given via telecopier or facsimile transmission,
an original counterpart of such communication shall concurrently be sent by
first class mail. Any such notice or communication shall be deemed to have
been given as of the date received, in the case of personal delivery, or on
the date shown on the receipt or confirmation therefor in all other cases.
11. Future Opportunity. Should any of the Undersigned be offered an
Investment Partnership Interest, then written notice thereof shall be given to
PREIT Associates, and PREIT Associates shall have the right, by written notice
to the applicable Undersigned within fourteen (14) days after receipt of
written notice of such offer, to cause the applicable Undersigned to accept
said offer on behalf of PREIT Associates at PREIT Associates' sole cost and
expense. If PREIT Associates notifies
-4-
<PAGE>
the applicable Undersigned to accept said offer, said Undersigned shall
promptly thereafter execute and deliver an assignment of such Investment
Partnership Interest in favor of PREIT Associates or its designee; and PREIT
Associates shall assume all of the obligations set forth in the offer and
shall indemnify, defend, and hold harmless the applicable Undersigned for any
loss, cost, liability or expense paid or incurred by such Undersigned arising
out of the failure of PREIT Associates to comply with the terms of the offer.
12. Interference. The Undersigned shall not perform any act or do
anything or omit to perform any act with the intent to interfere with or
defeat the First Refusal Rights granted pursuant to this agreement.
13. Miscellaneous.
(a) Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed,
acknowledged and delivered shall be an original, but all such counterparts
together shall constitute but one and the same instrument.
(b) Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provisions in any other jurisdiction.
(c) Successors and Assigns. All covenants and agreements
contained herein shall be binding upon the Undersigned, their respective
heirs, successors and assigns, and inure to the benefit of PREIT Associates
and its successors and assigns.
(d) Headings. The headings of the various paragraphs and
sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
(e) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania
without reference to conflict of laws principles.
(f) Gender, etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number singular or plural, any other gender, masculine, feminine or
neuter, as the context requires.
-5-
<PAGE>
IN WITNESS WHEREOF, the Undersigned have executed this
Agreement as of the date first above written.
Pan American Associates, a PA
limited partnership
By: Pan American Office Investments, Inc., a PA
corporation, its sole general partner
Attest:/s/ Cynthia Wong By:/s/ Ronald Rubin
----------------------- ------------------------
-6-
<PAGE>
The following are all of the limited partners
of Pan American Associates, and are individually
bound by the terms of the within Agreement:
*/s/ Lewis M. Stone */s/ Leonard B. Shore
- ---------------------------- ---------------------------
Lewis M. Stone Leonard B. Shore
Richard I Rubin & Co., a PA general
partnership
/s/ Ronald Rubin */s/ George F. Rubin
- ---------------------------- ---------------------------
Ronald Rubin, Partner George F. Rubin, Partner
Ronald Rubin, George F. Rubin and the Estate of
Richard I. Rubin, deceased are the sole shareholders
of Pan American Office Investments, Inc.
and together with Judith Garfinkle are the
sole partners of Richard I. Rubin & Co. Each
of said parties are individually bound by the terms
of the within Agreement.
/s/ Ronald Rubin */s/ George F. Rubin
- ---------------------------- ---------------------------
Ronald Rubin George F. Rubin
*/s/ Judith Garfinkle Estate of Richard I. Rubin,
- ---------------------------- deceased
Judith Garfinkle
By:/s/ Ronald Rubin
---------------------------
Ronald Rubin, Executor
* By:/s/ Ronald Rubin
- --------------------------
Attorney-in-Fact
-7-
<PAGE>
PURCHASE AND SALE AGREEMENT
[Magnolia Mall, Florence, South Carolina]
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
30th day of June, 1997 by and between MAGNOLIA RETAIL ASSOCIATES, L.L.C., a
Delaware limited liability company ("Seller") with an office at c/o Equity
Group Investments, Inc., Two North Riverside Plaza, Suite 1000, Chicago,
Illinois 60606; and The Rubin Organization, Inc. ("Purchaser"), a Pennsylvania
corporation with an office at The Bellevue, 200 South Broad Street,
Philadelphia, Pennsylvania 19102.
RECITALS:
A. Seller is the owner of (a) a certain parcel of real estate (the
"Tract 10-B Property") in the City of Florence, County of Florence, State of
South Carolina, which parcel is more particularly described in Exhibit A
attached hereto; (b) the leasehold estate under the ground lease described in
Exhibit B attached hereto (the "Ground Lease") which demises, among other
things, the real property located in the City of Florence, County of Florence,
State of South Carolina, which parcel is more particularly described in
Exhibit C attached hereto (the "Shopping Mall Property"), and upon which is
located a retail shopping center commonly known as "Magnolia Mall"; (c) rights
to purchase all or a portion of the Shopping Mall Property from the Ground
Lessor (as such term is defined in Exhibit B) in accordance with the terms and
provisions of the Option Agreement and the Anchor Pad Purchase Agreement
described in Exhibit B attached hereto. For reference purposes herein, the
Tract 10-B Property, the Shopping Mall Property and all of Seller's rights and
interests under the Option Agreement and the Anchor Pad Purchase Agreement
shall sometimes collectively be referred to as the "Real Property".
B. Purchaser is the manager of the Shopping Mall Property pursuant to
a Management and Operating Agreement dated as of January 1, 1995 ("Management
Agreement") between Seller and Equity Properties and Development Limited
Partnership, an Illinois limited partnership ("EPDLP") as assigned by EPDLP to
Purchaser.
C. Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Property (as such term is hereinafter defined), each
in accordance with and subject to the terms and conditions set forth in this
Agreement.
D. Purchaser and Seller originally intended that the closing would
occur no later than June 30, 1997. Accordingly, certain provisions of this
Agreement provide that certain attributes and risks of ownership not
customarily borne by purchasers until the transfer of title will be borne by
Purchaser from and after June 30, 1997.
THEREFORE, in consideration of the above Recitals, the mutual
covenants and agreements herein set forth and the benefits to be derived
therefrom, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Seller agree as
follows:
<PAGE>
1. PURCHASE AND SALE
Subject to and in accordance with the terms and conditions set forth
in this Agreement, Purchaser shall purchase from Seller, and Seller shall sell
or cause to be sold to Purchaser, all of Seller's right, title and interest in
and to (i) the Real Property, including without limitation Seller's fee
interest in the Tract 10-B Property, Seller's leasehold interest in the
Shopping Mall Property pursuant to the Ground Lease, and all of Seller's
rights and interests under the Option Agreement and Anchor Pad Purchase
Agreement; (ii) all buildings and improvements owned by Seller and located on
the Real Property as well as any and all of Seller's rights, easements and
privileges presently thereon or appertaining thereto; (iii) the leases of the
Real Property as of the date hereof and other leases entered into in
accordance with this Agreement, and all amendments thereto (the "Leases")
affecting the Real Property or any part thereof and all unapplied security or
other deposits paid under the Leases; (iv) all tangible personal property
owned or leased by Seller and used or useful in the ownership, operation or
maintenance of Real Property (or any portion thereof) and located at the Real
Property or used solely in connection with the Property, including without
limitation the personal property set forth on Exhibit E attached hereto
(subject to ordinary depletion) and all additions to or substitutions for the
foregoing or any part thereof between the date hereof and the date of Closing
(the "Tangible Personal Property"); (v) any and all of the maintenance,
service, advertising and other like contracts and agreements and equipment
leases (to the extent assignable and to the extent Purchaser is to accept an
assignment thereof, as provided below) with respect to the ownership and
operation of the Real Property and/or the improvements thereon and other
agreements entered into in accordance with this Agreement, and all amendments
thereto (the "Service Contracts"); and (vi) all other intangible personal
property owned by the Seller and used in the ownership, operation or
maintenance of the Property or any portion thereof, including without
limitation (A) to the extent assignable, the right to use the trade name
"Magnolia Mall" and all other trade names; (B) to the extent assignable and
obtained, all certificates of occupancy and other permits, licenses and
certificates held by Seller and necessary to occupy, operate and transfer the
Real Property (collectively, "Permits and Licenses"); (C) to the extent
assignable, all utility, security and other deposits and reserve accounts made
(and any refunds thereof) as security for the fulfillment of any obligation of
Seller or any person claiming by or through Seller in connection with the Real
Property; (D) if and to the extent in Seller's possession or control, all
files, budgets, reports, and other business records pertaining to the Real
Property including without limitation those relating to any marketing,
advertising or similar promotional fund or merchant's association
(collectively, "Promotional Organizations") relating to the Property
(collectively, "Business Records"); (E) all matured and unmatured claims and
causes of action which arise from events occurring from and after Closing; (F)
to the extent assignable, all warranties, guaranties and other assurances of
performance ("Guaranties and Warranties"); (G) to the extent assignable, all
telephone numbers and directory advertising agreements; and (H) to the extent
assignable, all surveys, drawings, plans, specifications, diagrams, reports,
environmental assessments and other architectural or engineering work product
if and to the extent in Seller's possession or control (collectively, the
"Plans and Reports"), all to the extent applicable to the period from and
after the Closing (as such term is hereinafter defined); (items (i) through
(vi) above are collectively referred to in this Agreement as the "Property").
All of the foregoing expressly excludes all property owned by the Ground
Lessor under the Ground Lease or by tenants or other users or occupants of the
Property.
<PAGE>
Notwithstanding the foregoing, "Business Records" shall exclude (a)
internal memoranda, correspondence, analyses, documents or reports prepared by
or for Seller in connection with this Agreement or in connection with the
transaction contemplated by this Agreement, (b) appraisals, assessments or
other valuations of the Real Property in the possession of Seller, and (c)
communications between Seller and its attorneys (collectively, the "Excluded
Items").
2. PURCHASE PRICE
The purchase price to be paid by Purchaser to Seller for the Property
is Forty-Five Million Three Hundred Sixty-Five Thousand and No/100 Dollars
($45,365,000.00) (the "Purchase Price"). The Purchase Price shall be paid as
follows:
A. Down Payment. Purchaser shall, within one (1) business
day from the date of this Agreement, deliver to Seller the sum of One Hundred
Thousand and No/100 Dollars ($100,000.00) (the "Initial Down Payment"). If
Purchaser does not terminate this Agreement pursuant to and in accordance with
Section 10 (A) below, then (i) prior to the end of the Review Period (as
hereinafter defined), Purchaser shall deliver to Seller the additional sum of
Nine Hundred Thousand and No/100 Dollars ($900,000.00) (the "Interim Down
Payment"), and (ii) on or before July 9, 1997, Purchaser shall deliver to
Seller the additional sum of Four Million Dollars ($4,000,000.00) (the "Final
Down Payment"). The Initial Down Payment and the Interim Down Payment and, if
delivered to Seller or required to be delivered to Seller, the Final Down
Payment, together with interest on such payments at the rate per annum equal
to 5.5%, are collectively referred to as the "Down Payment".
If Purchaser fails to timely terminate this Agreement in
accordance with Section 10.A. hereof, and fails to timely deposit the Final
Down Payment, Purchaser shall be in default, Seller may retain the Initial
Down Payment and the Interim Down Payment, as Seller's sole remedy, and this
Agreement shall automatically terminate.
B. Cash at Closing. At Closing, Purchaser shall pay to
Seller, by wire transferred current federal funds to a bank located in the
continental United States, an amount (the "Cash Portion") equal to the
Purchase Price minus the sum of (i) the Down Payment, plus (ii) the total
dollar amount of the "OP Units" (as defined below), if any, plus (iii) the
outstanding principal balance of the Existing Loan (as defined in Section 3.C.
hereof), and (iv) plus or minus, as the case may require, the closing
prorations and adjustments to be made pursuant to Section 4(C) below. Seller
shall give Purchaser its wiring instructions at least three (3) business days
before Closing. If the Down Payment exceeds the Cash Portion, Seller shall
return the balance to Purchaser at Closing.
C. OP Units. In accordance with the provisions set forth
below, if this Agreement is assigned by Purchaser to a TRO Assignee (as
defined in the Asset Purchase Agreement) (which hereinafter shall be referred
to as a "REIT Assignee"), Seller may elect to receive a portion of the
Purchase Price in the form of limited partnership interests ("OP Units") in
the REIT Assignee's operating partnership ("Operating Partnership"), which OP
Units shall be redeemable
<PAGE>
as provided in the partnership agreement of the Operating Partnership into
unregistered common shares of beneficial interest ("Shares") in the REIT
Assignee (as defined in the Management Agreement) or into cash. In connection
with an assignment to a REIT Assignee, the REIT Assignee may designate a
controlled (directly or indirectly) affiliate of the REIT Assignee to accept
title to the Property ("Titleholder").
(i) As soon as reasonably practicable after the date
of this Agreement, but in no event later than July 31, 1997, Purchaser shall (A)
notify Seller in writing of the identity of Purchaser's proposed assignee, if
any, and (B) provide to Seller, or cause to be provided to Seller, information
(the "Information") regarding the ownership structure of the REIT Assignee, the
Operating Partnership and the Titleholder as each will be structured as of
Closing, including a description of the form of the ownership interests therein,
as each will be structured as of Closing, any applicable rights or restrictions
regarding the ownership interests, as each will be structured as of Closing, and
including all information regarding the REIT Assignee, the Operating Partnership
and the Titleholder, and the ownership interests therein as are generally
provided by the Operating Partnership to prospective sophisticated and
experienced investors including, without limitation, as applicable, partnership
agreements, certificates of limited partnership, and the REIT Assignee's
existing Trust Agreement and such other items as Seller may reasonably request.
Seller's sole remedy in the event of Purchaser's failure to deliver the
Information in a timely fashion shall be to have a corresponding extension of
time to deliver the Election Notice (defined below).
(ii) Seller shall have twenty-one (21) days from
Seller's receipt of such notice and copies of the Operating Partnership's
partnership agreement (or the most current draft thereof), the REIT Assignee's
existing trust agreement and the proxy statement in substantially the form to be
filed by REIT Assignee (and Purchaser will send final documents to Seller as
soon as available) to notify Purchaser in writing ("Election Notice") (A)
whether it elects to receive a portion of the Purchase Price as OP Units, (B)
the total dollar amount of the Purchase Price it would like to receive in OP
Units and (C) the identity of the proposed recipients of the OP Units and the
dollar amount to be received by each. Failure by Seller to elect to receive a
portion of the Purchase Price as OP Units on or prior to said 21st day shall be
deemed to be an election to receive the entire Purchase Price in cash.
(iii) If Seller elects to accept any OP Units, then
between the receipt of the Election Notice and Closing, (A) Seller shall provide
Purchaser with such information as Purchaser may reasonably request to determine
whether the issuance of the OP Units would comply with federal and state
securities laws and to determine accredited investor status as to each
prospective recipient of OP Units and (B) Purchaser shall provide Seller with
such additional information regarding the REIT Assignee, the Operating
Partnership, the Titleholder, the OP Units and the Shares in Purchaser's
possession or control or which is readily available to Purchaser, the REIT
Assignee or Titleholder as Seller may reasonably request. A proposed recipient
of OP Units which is not an accredited investor shall not be eligible to receive
OP Units and shall instead receive its portion of the Purchase Price solely in
cash.
(iv) Notwithstanding the foregoing, (a) the maximum
number of OP Units which Seller and/or its affiliates may receive at Closing may
not, when aggregated with
<PAGE>
the number of OP Units received by Diversified Equity Corporation of Illinois,
Inc. ("North Dartmouth Seller") and its affiliates in connection with the sale
of North Dartmouth Mall to the REIT Assignee (or its nominee), exceed 1,300,000
OP Units; (b) Samuel Zell and affiliates thereof (excluding The Northwestern
Mutual Life Insurance Company and affiliates thereof) may not elect to receive
directly or indirectly OP Units which, when aggregated with the number of OP
Units received by Samuel Zell and affiliates thereof (excluding Arthur Cohen and
affiliates thereof) in connection with the sale of North Dartmouth Mall, exceed
650,000 OP Units; and (c) if Seller elects to receive a portion of the Purchase
Price as OP Units, the minimum number of OP Units which Seller and/or its
affiliates may receive at Closing may not, when aggregated with the number of OP
Units received by North Dartmouth Seller and its affiliates in connection with
the sale of North Dartmouth Mall to the REIT Assignee (or its nominee), be less
than 135,000 OP Units. Upon consummation of the Closing, Seller shall be issued
the number of OP Units determined by dividing (i) the total dollar amount of
consideration to be paid to Seller as OP Units by (ii) the "Market Price".
"Market Price" means the average closing sales price of the Shares on its
publicly traded exchange for the 20 business days prior to the earlier of (A)
the first public announcement of Purchaser's intended transaction with the REIT
Assignee (or any affiliate thereof) or (B) the first public announcement that
Samuel Zell or his affiliates may invest in the REIT Assignee (or any affiliate
thereof).
(v) Seller's election to accept a portion of the
Purchase Price as OP Units shall be conditioned upon (x) Seller's receipt at or
prior to Closing, of (1) confirmation that the issuance of the OP Units to
Seller has been duly authorized by the Operating Partnership and the REIT
Assignee or its general partner(s) and that all necessary consents to such
issuance have been obtained; (2) confirmation that the OP Units will be
redeemable at any time or times after Closing in accordance with the Operating
Partnership's partnership agreement; (3) confirmation that the Shares have been
duly authorized and reserved, for issuance upon the election of the holders of
OP Units to convert OP Units to Shares; (4) confirmation of such other legal
issues as are customarily and reasonably confirmed by sophisticated investors in
investments similar to the OP Units (and Purchaser shall use reasonable efforts
to cause such items to be delivered to Seller); and (5) evidence of the
unconditional obligation of the REIT Assignee and Operating Partnership to
provide the holders of the OP Units with the registration rights described on
Exhibit F attached hereto; and (Y) there being no material adverse change in the
attributes of the Operating Partnership, REIT Assignee, OP Units or Shares from
those disclosed to Seller in the Information. If such conditions are not
satisfied, then at Seller's election the Purchase Price shall be paid by
Purchaser entirely in cash.
(vi) There shall be no restrictions upon the holders
of OP Units with respect to (a) the purchase or acquisition by such holders of
additional OP Units or Shares or (b) the time period during which OP Units can
be redeemed as described above, except that such holders may not take any such
action which would cause REIT Assignee to lose its status as a real estate
investment trust under any applicable Law.
D. Allocation. Prior to Closing, and if requested by Seller or
Purchaser, Purchaser and Seller shall act reasonably in agreeing upon the
allocation of the Purchase Price among the land, improvements and personal
property.
<PAGE>
3. EVIDENCE OF TITLE
A. Title Examination; Commitment for Title Insurance. Except
as otherwise provided in this Section 3, Purchaser shall have until the
expiration of the Review Period to examine title to the Property. Purchaser
shall be responsible for obtaining from Chicago Title Insurance Company (in
such capacity, the "Title Insurer"), at Purchaser's expense, a title insurance
commitment (the "Title Commitment") covering the Shopping Mall Property and
the Tract 10-B Property, under which the Title Insurer agrees to insure title
to the Shopping Mall Property and the Tract 10-B Property at customary rates
in the full amount of the Purchase Price under an ALTA Leasehold Title Policy
(as to the Shopping Mall Property) and an ALTA Form B (1992) owner's policy
(as to the Tract 10-B Property), in each case free and clear of all
restrictions, encumbrances and title objections, except for the "Permitted
Exceptions" (as defined below), and endorsing over the exclusion with respect
to rights of creditors (collectively, "Insurable Title"). Purchaser shall
instruct the Title Insurer to deliver to Purchaser and Seller copies of the
Title Commitment and all instruments referenced in Schedule B thereof.
B. Survey.
(i) During the Review Period, Purchaser shall, at
Purchaser's expense, be responsible for employing a surveyor or surveying firm
to prepare a survey (the "Survey") of the Property. Purchaser shall instruct
said surveyor to deliver a copy of the Survey to Purchaser, Seller and the Title
Insurer.
(ii) If Purchaser causes a Survey of the Property to
be made, the metes and bounds description in the Deed and Ground Lease
Assignment referred to in Section 4(B)(i) below shall, at Purchaser's option, be
based on and conform to the Survey provided said description accurately
describes the Real Property owned by Seller.
C. Title Objections; Cure of Title Objections.
(i) Seller shall convey and transfer all of Seller's
right, title and interest in and to the Real Property at Closing to Purchaser
subject only to Permitted Exceptions. The "Permitted Exceptions" shall consist
of only (a) the first mortgage (the "Existing Loan Mortgage") encumbering the
Property as security for the $25,500,000 loan (the "Existing Loan") heretofore
made to Seller by Teachers Insurance and Annuity Association of America
("Existing Lender"), which Existing Loan is evidenced and secured by the
documents described on the attached Exhibit G; (b) the Option Agreement and
Anchor Pad Purchase Agreement; and (c) those additional title exceptions and
survey items which are noted on the attached Exhibit H. If a Title Commitment
exception or Survey item arises between the date the Review Period expires and
the Closing (a "New Exception"), and such New Exception is not a Permitted
Exception, Purchaser shall have five (5) business days after it has been made
aware of same within which to notify Seller of any such New Exception (other
than a New Exception which is a Permitted
<PAGE>
Exception on the attached Exhibit H) to which it objects. Any such New Exception
not objected to by Purchaser as aforesaid shall become a Permitted Exception.
(ii) Notwithstanding anything to the contrary
contained in the preceding paragraph (i):
(A) With respect to New Exceptions which are
not Permitted Exceptions and were caused by an intentional violation by Seller
of an obligation of Seller hereunder, Seller shall be obligated to remove or to
obtain Title Insurer's waiver of, or endorsement over, such New Exception. Any
violation of Section 5.C. shall be deemed "intentional" for purposes of this
Section.
(B) With respect to New Exceptions which are
not Permitted Exceptions but arose from events occurring prior to June 30, 1997,
Seller shall be obligated to remove or to obtain Title Insurer's waiver of, or
endorsement over, such New Exceptions but shall not be required to spend, in the
aggregate, more than $500,000. If such New Exceptions require the expenditure of
amounts in excess of $500,000 to be so cured, and Seller elects not to cure such
New Exceptions, Seller shall not be in breach under Section 9.A., but Purchaser
may elect either (a) to close subject to such New Exceptions (in which event
Seller shall credit Purchaser in the amount of $500,000 at Closing), or (b) to
terminate this Agreement in which event the Down Payment will promptly be
re-paid to Purchaser and neither party shall have any further obligation
hereunder except as expressly survives pursuant to this Agreement.
(C) With respect to New Exceptions which are
Permitted Exceptions, Seller shall have no obligation to cure the same. Seller
shall, upon receipt of any notice of a claim or lawsuit related to an event
occurring after June 30, 1997 which could result in a New Exception, forward a
copy of such notice to Purchaser and respond thereto in such manner as Purchaser
may reasonably direct, at Purchaser's sole cost and expense.
(D) Seller may delay Closing as necessary
for up to thirty (30) days in order to cure any exception which it is required
or may elect to cure hereunder.
(iii) If this Agreement is not terminated in
accordance with Section 9.A. as a result of a New Exception, Purchaser shall
consummate the Closing without any adjustment in the Purchase Price (except as
provided in paragraph (ii)B above) and accept title to the property subject to
all such exceptions and items (in which event, all such exceptions and items
shall be deemed Permitted Exceptions).
4. CLOSING
A. Closing Date. The "Closing" of the transaction
contemplated by this Agreement (that is, the payment of the Purchase Price,
the transfer of title to the Property and the satisfaction of all other terms
and conditions of this Agreement) shall occur at the Philadelphia office of
the Title Insurer at 10:00 a.m. on either (i) September 30, 1997, (ii) such
earlier date (provided all conditions precedent to Closing required in
accordance with Section 10 hereof have
<PAGE>
been satisfied) as may be set forth in a written notice from Purchaser to Seller
received by Seller at least five (5) business days prior to such designated
date, or (iii) at such other time and place as Seller and Purchaser shall agree
in writing. The "Closing Date" shall be the date of Closing, provided the Cash
Portion (net of Seller's closing costs) has been wired to Seller and the OP
Units (if any) have been duly issued by 2:00 p.m. C.S.T. on that day; otherwise
the Closing Date shall be deemed to be the next business day. If the date for
Closing above provided for falls on a Saturday, Sunday or legal holiday, then
the Closing Date shall be the next business day.
B. Closing Documents
(i) Seller. In addition to the other items and
documents required elsewhere under this Agreement to be delivered to Purchaser
at Closing, Seller shall also execute and/or deliver (or cause to be delivered)
to Purchaser the following at Closing:
(a) a special warranty deed (the "Deed") in
form attached as Exhibit I duly acknowledged and in proper form for recording;
(b) a bill of sale in form attached as
Exhibit J, to which will be attached an updated list of the Tangible Personal
Property;
(c) a letter advising tenants under the
Leases of the change in ownership of the property in form attached as Exhibit K;
(d) assignments and assumptions of the
Leases and the Service Contracts that are to be transferred to Purchaser
pursuant to this Agreement, in the form attached as Exhibits L and M;
(e) if and to the extent not previously
delivered to Purchaser pursuant to the Management Agreement, (i) the originals
(or if not available, copies certified as true to Seller's Knowledge) of the
Leases and the Service Contracts, (ii) to the extent in the possession or
control of Seller, the originals (or if not available, copies) of the Permits
and Licenses, Business Records, Guaranties and Warranties and Plans and Reports,
and (iii) the originals (or if not available, copies certified as true) of the
Ground Lease, Option Agreement, Anchor Pad Purchase Agreement and the documents
(collectively, the "Existing Loan Documents") evidencing, securing, guarantying
or otherwise pertaining to the Existing Loan;
(f) a Non-Foreign Certification in form
attached as Exhibit N;
(g) a closing statement to be executed by
Seller and Purchaser, setting forth the prorations and adjustments to the
Purchase Price as required by Section 4(C) below;
(h) the schedule of past-due rents for the
Property, if any, as described in Section 4(C)(i)(b) below;
<PAGE>
(i) at Purchaser's option, either (A) a
termination of the Management Agreement or (B) an assignment and assumption from
Seller to Purchaser of Seller's rights and obligations thereunder;
(j) an affidavit of title, in such form and
containing such reasonable terms and conditions as may be required by the Title
Insurer to enable Title Insurer to insure Purchaser's title to the Property in
conformity with Section 3 of this Agreement which Affidavit will not require
Seller to make any statements that would expand or increase any of Seller's
statements or obligations set forth herein, and specifically, (i) will not
require Seller to make any statements regarding the operation of the Property
(a) to the extent relating to the period following the end of the Review Period
or (b) which relate to matters which are the responsibility of Purchaser as
Manager of the Property and (ii) which will state that the knowledge of
Purchaser (as manager) shall not be imputed to Seller;
(k) a written statement of Seller setting
forth, to Seller's Knowledge, any changes in Seller's representations and
warranties which have occurred since the effective date of such representations
and warranties, which statement is to be delivered for informational purposes
only and any error therein shall not subject Seller to any liability whatsoever
or entitle Purchaser to any remedy whatsoever;
(l) corporate resolutions of Seller's
managing member's general partner authorizing this transaction, and an
incumbency certificate for the officers signing this Agreement and the other
documents to be executed and delivered by Seller pursuant to this Agreement;
(m) a current Certificate of Good Standing
for Seller;
(n) Intentionally Omitted;
(o) appropriate documents transferring
unencumbered title to any motor vehicles included in this sale for which
ownership must be evidenced by a separate title certificate;
(p) if necessary, the withdrawal by Seller
of any registration of the trade name "Magnolia Mall";
(q) assignment and assumption of the Ground
Lease (the "Ground Lease Assignment") in form attached as Exhibit O-1,
assignment of Option Agreement in form attached as Exhibit O-2 ("Option
Assignment"), and assignment of Anchor Pad Purchase Agreement in form attached
as Exhibit O-3 ("Anchor Pad Assignment"), each duly acknowledged and in proper
form for recording;
(r) assignment and assumption of the
Existing Loan together with such other documents as may be reasonably required
by Seller or Existing Lender (which will not provide that Purchaser shall have
any obligations materially in excess of those contemplated
<PAGE>
by Exhibit P hereto) to evidence Purchaser's assumption of Seller's obligations
under the Existing Loan (including a release of Seller's obligations (unless
such release is waived by Seller as provided below) under the Existing Loan
documents with respect to events arising after the Closing Date) (collectively,
"Loan Assumption Documents") (Purchaser and Seller agree that an assignment and
assumption in substantially the form of Exhibit P, although not a required form
of assignment and assumption, is an acceptable form of such assignment and
assumption); and
(s) such other documents requested by
Purchaser, and consistent with the provisions of this Agreement, as may be
reasonably required to complete this transaction.
(ii) Purchaser. At Closing, Purchaser shall deliver
or cause to be delivered to Seller the following:
(a) the Cash Portion;
(b) such duly executed instruments and
verifications as are standard in the securities industry and are necessary to
evidence that the OP Units have been legally and irrevocably transferred and
which are in form reasonably satisfactory to Purchaser and Seller;
(c) a counterpart of the termination or
assignment of the Management Agreement, as the case may be;
(d) assignments and assumptions of the
Leases and the Service Contracts that are to be transferred to Purchaser
pursuant to this Agreement, in the form attached as Exhibits K and L;
(e) the closing statement referred to in
Section 4(B)(i)(g) above;
(f) a certificate that the representations
and warranties of Purchaser contained in this Agreement remain true and correct;
(g) resolutions/consents of Purchaser
authorizing this transaction, and an incumbency certificate for the officer(s)
signing this Agreement and the other documents to be executed and delivered by
Purchaser pursuant to this Agreement;
(h) a then current lease schedule for the
Property, containing the same types of information set forth on Exhibit B, and
certified by The Rubin Organization, Inc., to be complete and accurate to
"Purchaser's Knowledge" (as defined below) and in reliance in part on Seller's
representation set forth in 6.A(v)(a)(i);
(i) a written statement of Purchaser setting
forth, to Purchaser's Knowledge, any changes in Purchaser's representations and
warranties which have
<PAGE>
occurred since the effective date of such representations and warranties, which
statement is to be delivered for informational purposes only and any error
therein shall not subject Purchaser to any liability whatsoever or entitle
Seller to any remedy whatsoever;
(j) the Ground Lease Assignment, Option
Assignment and Anchor Pad Assignment, each duly acknowledged and in proper form
for recording;
(k) the Loan Assumption Documents and such
documentation as may be reasonably required in replacement of the Guarantee and
Indemnity [as such terms are defined in Exhibit G hereto] required to be
released at Closing in accordance with the provisions of Section 10.D. hereof;
and
(l) such other documents requested by
Seller, and consistent with the provisions of this Agreement, as may be
reasonably required to complete this transaction.
(iii) Tenant Estoppels. Seller shall use diligent
efforts (which shall be limited to filling out the certificate for each tenant,
delivering the certificate to all tenants with a request that it be returned to
Seller within 10 days and if a tenant fails to timely return an executed
certificate, sending a written request to such tenant that the certificate be
promptly executed and returned) to furnish Purchaser with estoppel certificates
substantially in the form attached as Exhibit Q ("Estoppel Certificates") from
all tenants which are tenants of the Property as of sixty (60) days prior to the
Closing Date. Seller shall keep Purchaser reasonably apprised as to the status
of receipt of the estoppel certificates. Seller's liability under the
representations or warranties under Section 6.A.(v) as to a particular tenant
shall terminate upon the sooner of: (i) 270 days from the Closing Date, and (ii)
if Purchaser subsequently receives an Estoppel Certificate for the applicable
tenant (provided, if Purchaser receives an Estoppel Certificate which confirms
some but not all of the matters which are the subject of the representations and
warranties under Section 6.A.(v), then as to such Tenant, (x) if the Estoppel
Certificate was received prior to Closing, the representations and warranties
set forth in Section 6.A.(v) shall be deemed to omit such matters stated on the
Estoppel Certificate as to such matters and (y) if received after Closing, the
representations and warranties under Section 6.A.(v) shall cease to survive as
to such matters but shall continue to survive for the remainder of the survival
period described in clause (i) above as to matters not contained in such
Estoppel Certificate). Purchaser's failure to receive any Estoppel Certificate
shall not entitle Purchaser to terminate this Agreement or to exercise any
remedy hereunder except in the event of a breach by Seller (when made) of any
representation or warranty set forth in Section 6A(v), until the Representations
Expiration Date.
<PAGE>
C. Closing Prorations and Adjustments
(i) The following items are to be prorated or
adjusted (as appropriate) as of 11:59 p.m. on the day before the Closing Date
and reprorated (if necessary) pursuant to Section 4(C)(ii) below, it being
understood that for purposes of prorations and adjustments, Seller shall be
deemed the owner of the Property on the day before the Closing Date, and
Purchaser shall be deemed the owner of the Property on the Closing Date:
(a) real estate and personal property taxes
based on the fiscal year used by the taxing authority and assessments for
improvements commenced after the date of this Agreement (on the basis of the
most recent ascertainable tax or assessment bill if the current bill is not then
available), with Seller obligated to pay all assessments relating to
improvements in progress or completed as of the date of this Agreement;
(b) the "minimum" or "base" rent payable by
tenants under the Leases; provided, however, that rent and all other sums which
are due and payable to Seller by any tenant but uncollected as of the Closing
shall not be adjusted, but Purchaser shall cause the rent and other sums for the
period prior to Closing to be remitted to Seller if, as and when collected. At
Closing, Seller shall deliver to Purchaser a schedule, certified to be complete
and accurate by Purchaser and Seller (to their knowledge), of all such past due
but uncollected rent and other sums owed by tenants (including without
limitation those described in paragraphs (c) and (d) below). Purchaser shall
include the amount of such rent and other sums in the first bills thereafter
submitted to the tenants in question after the Closing, and shall continue to do
so for twelve (12) months thereafter. In connection with the allocation of such
uncollected rent and other sums, the parties shall disregard any purported or
attempted designation by tenants of the months or periods to which their
payments should be applied. Purchaser shall not be obligated to start a law suit
to collect any such sums or to evict any tenant for the failure to pay any such
sums but Seller shall retain the right to do so after the Closing provided
Purchaser may not seek to terminate any Lease or evict any tenant. However,
Purchaser shall promptly remit to Seller any such rent or other sums paid by
scheduled tenants, but only if there is no deficiency in the then current rent
and such other sums;
(c) to the extent not set forth on the
schedule of uncollected rent described in Section 4(C)(i)(b) above, "percentage"
or "overage" rent that is (1) attributable to any Percentage Rent lease year in
which the Closing Date falls and (2) not yet due or payable (not including
estimated payments) as of the Closing Date (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 Date and sales reports of any tenants whose Percentage
Rent lease years expire after the Closing, and the amount of any Current Year
Percentage Rent shall be payable in accordance with such tenant's Lease as
existing as of the Closing Date, 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
Date (in
<PAGE>
proportion to the relative number of days in the subject year occurring prior
and subsequent to the Closing Date), promptly after the date when such rent is
received from the tenant. The schedule referred to in Section 4(C)(i)(b) above
shall include an itemized breakdown of the total estimated payments made by each
tenant as of the Closing Date on account of Current Year Percentage Rent;
(d) to the extent not set forth on the
schedule of uncollected rent described in Section 4(C)(i)(b) above, 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 Date 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 Date; 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 shall be refunded directly to the
appropriate tenants. The schedule referred to in Section 4(C)(i)(b) above shall
include an itemized breakdown of the total estimated payments made by each
tenant as of the Closing Date on account of Current Year Operating Charges;
(e) Seller and Purchaser shall, as to each
of the Leases set forth on Exhibit S and any lease or amendment entered into
after the date hereof, allocate the responsibility for all leasing costs
(including but not limited to tenant improvement costs, tenant allowances,
leasing commissions, and attorneys' fees) as follows: Leasing costs payable
pursuant to leases and lease amendments to be assigned to Purchaser are to be
prorated between Purchaser and Seller as follows: Purchaser shall pay
"Purchaser's Pro Rata Share" and shall credit Seller for any part of
"Purchaser's Pro Rata Share" that has already been paid by Seller as of Closing,
and Seller shall pay "Seller's Pro Rata Share" and shall credit Purchaser for
any portion of "Seller's Pro Rata Share" that has not yet been paid by Seller as
of Closing. "Purchaser's Pro Rata Share" shall be a portion of the leasing costs
equal to the percentage that the base rent required to be paid under the
applicable Lease for the period from and after the Closing Date bears to the
total base rent required to be paid under the Lease over the entire term,
without regard to extension or cancellation options. "Seller's Pro Rata Share"
shall be the portion of leasing costs equal to the percentage that the base rent
required to be paid under the applicable Lease prior to Closing bears to the
base rent required to be paid under the Lease over the entire term, without
regard to extension or cancellation options. Except as aforesaid, Purchaser will
be responsible for and pay when due, if Closing occurs, all leasing costs for
Leases, to the party entitled to such payment and in accordance with the
Management Agreement, as fully as if the Management Agreement had terminated on
the Closing Date (whether or not the Management Agreement is in fact terminated
as of the Closing Date). Seller and Purchaser agree to pay when due all leasing
costs for which each is responsible, and to pay any leasing commissions payable
by each under this Agreement in accordance with the Management Agreement;
<PAGE>
(f) the amount of unapplied security
deposits and other tenant deposits paid under the Leases, and the tenants'
portion of any interest required to be paid thereon, if any, which shall be paid
or credited to Purchaser at Closing;
(g) to the extent not paid by tenants, gas,
water, electric, telephone and all other utility and fuel charges, fuel on hand
(at cost plus sales tax), and any deposits with utility companies (to the extent
possible, utility prorations will be handled by final meter readings obtained
from the utility providers on the day immediately preceding the Closing Date);
(h) amounts due and prepayments under the
Service Contracts assigned to Purchaser under this Agreement;
(i) assignable license and permit fees;
(j) contributions of Seller to the
Promotional Organizations shall be adjusted and prorated by the parties based
upon the period to which such charges relate and any transferable deposits by
tenants with respect to such Promotional Organizations, all cash on hand and in
bank accounts and all reserves of such Promotional Organizations shall be paid
or credited to Purchaser at the Closing;
(k) rent payable under the Ground Lease,
together with any deposits with the Ground Lessor thereunder which will be held
by the Ground Lessor for the benefit of Purchaser following the Closing, if any;
(l) all interest and other required payments
related to the Existing Loan, together with any escrows on deposit with Existing
Lender which will be held by Existing Lender for the benefit of Purchaser
following the Closing;
(m) all costs and expenses incurred in
connection with work at the Property involving the installation of irrigation
equipment, including the cost of the equipment itself, shall be paid fifty
percent (50%) by Seller and fifty percent (50%) by Purchaser; and
(n) other similar items of income and
expenses of operation if and to the extent not paid or reimbursed by Tenants.
(ii) If any item of income or expense set forth in
this Section 4(C) is subject to final adjustment after Closing, then Seller and
Purchaser shall make, and each shall be entitled to, an appropriate reproration
to each such item promptly when accurate information becomes available. Any such
reproration shall be paid promptly in cash to the party entitled thereto.
(iii) For purposes of this Section 4(C). the amount
of any expense credited by one party to the other shall be deemed an expense
paid by that party. The terms of
<PAGE>
this Section 4(C), to the extent they call for adjustments, prorations or
payments after Closing (collectively, "Post-Closing Adjustments"), shall survive
the Closing.
(iv)(a) It is the intention of the parties that
except as otherwise specifically provided above, Seller shall be entitled to all
income and responsible for all expenses accrued during the period of time up to
but not including the Closing Date, and the Purchaser shall be entitled to all
income and responsible for all expenses accrued during the period of time from,
after and including the Closing Date (as if the Management Agreement terminated
at Closing, even if the Management Agreement is instead assigned at Closing)
(b) Except as otherwise provided herein, in
the Management Agreement or in any document or instrument to be executed at the
Closing, as between Seller and Purchaser, if the closing occurs: (1) Seller
shall pay and be responsible for any liabilities resulting from claims for
injury to or death of persons which arise prior to June 30, 1997, (and if any
such amount is subject to a judgment lien as of Closing, then, subject to
Section 3.C.(ii)(b), Seller shall either credit Purchaser for such amount at
Closing or discharge such liability or provide adequate security for the contest
of such liability), and (2) Purchaser shall pay and be responsible for any
liabilities resulting from claims for injury to or death of persons which arise
from and after June 30, 1997. Purchaser and Seller shall cooperate with each
other to the extent reasonably necessary in connection with the defense of any
such claims. The provisions of this subparagraph (iv) shall survive the Closing,
and shall not benefit any third party.
D. Transaction Costs
Purchaser shall pay the cost of the title insurance premium
and the survey. Seller shall pay the cost of all transfer taxes or document
stamps attributable to the Deed, the Ground Lease Assignment, the Option
Assignment and the Anchor Pad Assignment. All other closing and transaction
costs (including, without limitation, sales and use taxes, mortgage or
intangible taxes and similar taxes or charges and recording charges) shall be
paid by Purchaser, except that escrow fees shall be divided equally between
Purchaser and Seller. Seller and Purchaser shall, however, be responsible for
the fees of their respective attorneys.
E. Possession
Upon Closing, Seller shall deliver to Purchaser possession
of the Property.
5. OPERATION OF PROPERTY PRIOR TO CLOSING
A. (i) Notwithstanding anything to the contrary contained in
the Management Agreement:
(a) Prior to expiration of the Review
Period, and except for the "Consent Transactions" (as defined below), Seller may
in the ordinary course of business modify, extend, renew, cancel or permit the
expiration of any Lease or Service Contract, or enter into any
<PAGE>
proposed Lease or Service Contract which Service Contract is terminable as of
Closing or upon 30 days notice without any fee, without Purchaser's consent,
except that Seller may not without Purchaser's advice and consent in each
instance (which shall not be unreasonably withheld or delayed) modify, extend,
renew or cancel, or enter into, any lease for any space now occupied or
hereafter vacated by any of the tenants described in Exhibit T attached hereto
(each, an "Anchor Tenant"), or enter into a Service Contract which Service
Contract is not terminable upon 30 days notice or as of Closing (collectively,
"Consent Transactions").
(b) After the expiration of the Review
Period, Seller may not, without Purchaser's prior consent, which may not be
unreasonably delayed or withheld, (i) modify, extend, renew, cancel or permit
the expiration of the any Lease or Service Contract, (ii) enter into any
proposed Lease or Service Contract, or (iii) modify, extend, renew, cancel or
permit the expiration of the Ground Lease, Option Agreement, Anchor Pad Purchase
Agreement or any of the Existing Loan Documents.
(c) Should Seller seek in writing
Purchaser's consent for any such action, Purchaser shall respond in writing to
Seller (therein giving consent or specifying the precise nature of Purchaser's
objection to the action) within five (5) business days of receipt of Seller's
request. If Purchaser does not respond within said five (5) business day period,
Purchaser shall be deemed conclusively to have consented to the action requested
by Seller.
(ii) At least thirty (30) days prior to the Closing,
Purchaser will advise Seller as to which Service Contracts, if any, will be
assigned to Purchaser at the Closing. As to any of the other Service Contracts,
Seller shall upon written request by Purchaser give written notice canceling
such Service Contract as of the Closing Date and Purchaser shall pay any
cancellation fee in connection therewith.
B. 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 Tangible Personal Property except as may be required for
repair or replacement or to retire obsolete property; Seller shall cause any
property so removed to be promptly replaced by property of equal function and
of equal or greater quality.
C. From the date hereof until the Closing or earlier
termination, Seller shall keep all existing insurance for the Property (as
described in Exhibit U) in full force and effect. Promptly after execution of
this Agreement, Seller agrees (a) to purchase such additional insurance as may
be necessary to reduce the deductible under Seller's property/business
interruption/boiler and machinery insurance coverage to $5,000 and (b) to name
Purchaser and Pennsylvania Real Estate Investment Trust (or Titleholder,
provided Pennsylvania Real Estate Investment Trust notifies Seller in writing
of the identity of Titleholder) as named insureds as their interest may
appear, under the Seller's general and umbrella liability (including
automobile liability) insurance coverage and as loss payees under the Seller's
property/business interruption/boiler and machinery insurance coverage.
<PAGE>
D. Seller also covenants that between the date of this
Agreement and the Closing Date:
(i) Seller shall not take any action which violates
the Management Agreement, or fail to take any action required to be taken under
the Management Agreement (including without limitation the failure to spend
money in accordance with an approved budget pursuant to the Management Agreement
or in order to comply with the Management Agreement), and shall not direct
Purchaser as manager under the Management Agreement to take any action which
violates the Management Agreement, or to fail to take any action required to be
taken under the Management Agreement (including without limitation the failure
to spend money in accordance with an approved budget pursuant to the Management
Agreement or in order to comply with the Management Agreement), (1) which would
cause the Property to be operated, managed and maintained other than in a
substantially similar manner as the Property is currently operated, managed and
maintained, (2) which would violate or continue the violation of any Law (as
defined below), (3) which would violate the provisions of this Agreement, or (4)
which would cause any of the representations and warranties of Seller contained
in this Agreement to be incorrect, in any material respect as of the Closing, or
(5) which would cause any improvements, painting, repairs, alterations or any
other tenant finish work required to be performed by the landlord under the
Leases (or any amendments or extensions thereof) by their terms prior to Closing
not to be performed on or prior to Closing.
(ii) Without limiting the generality of the preceding
paragraph (i):
(a) Seller shall timely comply with its
obligations as Owner under the Management Agreement.
(b) Seller shall not cause any "Hazardous
Substances" (as defined below) to be placed in, on or under the Property in a
manner or in quantities that require remediation under applicable "Environmental
Laws" (as defined below).
(c) Seller shall not grant any new liens or
encumbrances against the Property, or grant any easements affecting the
Property.
(d) Seller shall not release or modify any
of the Guaranties and Warranties without the Purchaser's prior consent.
(e) Intentionally Omitted.
(f) Unless a Lease is terminated, Seller may
not apply the tenant security or other deposits under that Lease to cure any
defaults under that Lease.
E. Seller shall not be deemed to have breached any covenant
set forth in this Section 5 if the failure of such covenant to be complied
with is the result of an act or omission of Purchaser which is not authorized
by, or is in violation of, the Management Agreement.
<PAGE>
6. REPRESENTATIONS
A. Seller's Representations and Warranties: Seller represents
and warrants to Purchaser that as of the date of this Agreement (unless
otherwise stated below):
(i) Seller is a duly formed and validly existing
limited liability company organized under the laws of Delaware. Seller is
authorized to own and convey title to land in the State of South Carolina.
(ii) Subject to obtaining the consent required in
accordance with Section 10.G. hereof, Seller has the full legal right, power and
authority to execute and deliver this Agreement and all documents now or
hereafter to be executed by it pursuant hereto (collectively, the "Seller's
Documents"), to consummate the transaction contemplated in this Agreement, and
to perform its obligations under this Agreement and the Seller's Documents. The
person signing this Agreement on behalf of Seller is authorized to do so.
(iii) Seller has not been served with any litigation
which is still pending with respect to the Property that would adversely affect
Seller's ability to perform its obligations under this Agreement, or that would
affect title to the Property after Closing or the enforcement of any of the
Leases, or that would materially and adversely affect the financial condition or
operation of the Property.
(iv) Purchaser has been given access to, or
possession of, complete and accurate copies of (a) the Ground Lease, the Option
Agreement, the Anchor Pad Purchase Agreement, and the Existing Loan Documents
existing as of the date of this Agreement, and (b) to Seller's Knowledge, the
Leases, the Permits and Licenses, the Guaranties and Warranties, the Service
Contracts and the Plans and Reports (and all amendments thereto) existing of as
December 31, 1996.
(v) (a)(1) the information contained in the schedule
of leases attached to and made a part of this Agreement as Exhibit D (the "Lease
Schedule") is complete and accurate as of December 31, 1996; and (2) there were
no leases, or to Seller's Knowledge, tenancies or other rights to occupy the
Property as of December 31, 1996 other than those set forth in the Lease
Schedule.
(b) Except as set forth in the Lease
Schedule or as previously disclosed to or learned by Purchaser as manager under
the Management Agreement:
(1) No action or proceeding has been
instituted against Seller (in which Seller has received process) by any tenant
of the Property which is presently pending in any court, except with respect to
claims involving personal injury or property damage, other than those referred
to in Exhibit V attached to and made a part of this Agreement and, with the
exception of claims or offsets referred to in Exhibit W, there are no
outstanding written claims for rent offsets or otherwise by any tenants against
Seller.
<PAGE>
(2) Seller holds no security or other tenant
deposits.
(3) All security and other tenant deposits
have been held and, where applicable, returned in compliance with all applicable
rules, ordinances and statutes.
(4) There are no leasing commissions
outstanding which are payable out of rents.
(5) To Seller's Knowledge, each Lease is in
full force and effect.
(6) No default exists on the part of Seller,
or to Seller's Knowledge, any tenant under any Lease.
(7) No tenant has any defense, offset or
counterclaim against or with respect to rent and other sums payable by it under
its Lease except as set forth in its Lease.
(8) There are no concessions, free rent
periods, tenant improvement obligations or improvement allowances to any tenant
not specified in the applicable Lease.
If any Lease contains provisions which are inconsistent with the foregoing
representations and warranties, such representations and warranties shall be
deemed modified to the extent necessary to eliminate such inconsistency and to
conform such representations and warranties to the provisions of such Lease.
(vi) Intentionally Omitted.
(vii)(a) Except as may have been previously disclosed
to or learned by Purchaser as manager under the Management Agreement or as
described in the documents set forth on Exhibit X ("Environmental Reports"):
(1) Seller has no Knowledge of any failure
to comply with any applicable laws, regulations, ordinances, codes, judgments,
or other governmental requirements (collectively, "Laws") with respect to the
use, occupancy, construction or condition of the Property (collectively,
"Violations"), including without limitation zoning, planning, building, safety,
health, electrical, plumbing, or fire Laws and "Environmental Laws" (as defined
below) which has not been corrected to the satisfaction of the appropriate
governmental authority prior to the date of this Agreement.
(2) No written notice has been received from
any insurer of the Property requesting any improvements, alterations, additions,
corrections, or other work in, on or about the Property. Purchaser shall be
promptly notified if any such notice is received that Seller did not obtain from
Purchaser as manager under the Management Agreement.
<PAGE>
(b) Without limiting the preceding subparagraph (a),
except as may have been previously disclosed to or learned by Purchaser as
manager under the Management Agreement or as described in the Environmental
Reports, to Seller's Knowledge:
(1) No enforcement action for violation of
Environmental Laws has been taken while Seller owned the Property, or is now
pending or threatened by any governmental authority with respect to the
Property.
(2) No Hazardous Substance is present on the
Property that is handled or stored in a manner, or is present in quantities,
which require remediation under applicable Environmental Laws.
(3) There are no underground or above ground
storage tanks at the Property.
As used in this Agreement, the term "Hazardous Substances" means any
hazardous, toxic, corrosive or flammable substance or waste, pollutant or
contaminant, including without limitation petroleum, petroleum products, PCBs
and asbestos containing materials and including those defined as such under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss.9601, et. seq.; the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. ss.6903(5); the Clean Water Act, 42 U.S.C. ss.7401, et.
seq.; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et. seq.; or under other
similar applicable federal or state laws and regulations (collectively,
"Environmental Laws").
(viii) To Seller's Knowledge, Exhibit E attached to
and made a part of this Agreement is a complete and accurate schedule of
material items of Tangible Personal Property as of the date of this Agreement.
(ix) To Seller's Knowledge, Exhibit Y attached to and
made a part of this Agreement is a complete list of the Service Contracts and
Seller is not in default under any of the Service Contracts.
(x) Attached to and made a part of this Agreement as
Exhibit Z is a complete and accurate list of all Permits and Licenses affecting
the Property. To Seller's Knowledge, none of the Permits and Licenses have been
revoked and Seller has received no notice that any Permit or License is subject
to revocation.
(xi) Attached to and made a part of this Agreement as
Exhibit U is a complete and accurate schedule of all insurance now carried by
Seller with respect to the Property.
(xii) Seller is not a party to an unrecorded
agreement relating to the installation or use of any water, sanitary sewer or
septic system.
<PAGE>
(xiii) Except as disclosed on Exhibit AA, there are
no existing claims under any of the Guaranties and Warranties.
(xiv) Exhibit G attached to and made a part of this
Agreement is a complete and accurate schedule of all material Existing Loan
Documents.
B. Purchaser's Representations and Warranties Purchaser
represents and warrants to Seller that as of the date of this Agreement:
(i) Purchaser is a duly formed and validly existing
corporation organized under the laws of Pennsylvania.
(ii) Purchaser has the full legal right, power and
authority to execute and deliver this Agreement and all documents now or
hereafter to be executed by Purchaser pursuant to this Agreement (collectively,
the "Purchaser's Documents"), to consummate the transaction contemplated hereby,
and to perform its obligations hereunder and under Purchaser's Documents.
C. Seller (as of the end of the Review Period) and Purchaser
(as of Closing) shall be deemed to remake and restate the representations and
warranties set forth in this Section 6 above. Should Seller proceed to Closing
with the Knowledge of Purchaser's violation of any representation or warranty
contained in this Section 6, Seller will be conclusively deemed to have waived
any remedy therefor. Should Purchaser proceed to Closing with Knowledge
obtained prior to the end of the Review Period, of Seller's violation of any
representation or warranty of Seller contained in this Section 6, Purchaser
will be conclusively deemed to have waived any remedy therefor, including any
adjustment in Purchase Price.
D. The representations and warranties set forth in Section 6
above, as of the date made (or deemed made) shall survive the Closing, but any
"Claims" (as defined below) thereunder must be made in writing within 270 days
after Closing (the "Representations Expiration Date") or they shall thereafter
be deemed to have lapsed and to be null, void and of no further force or
effect.
E. No inspection or examination by Purchaser shall limit
Purchaser's right to rely on the representations and warranties of Seller
contained herein except as set forth in Section 6.C. Purchaser agrees to
promptly notify Seller if Purchaser becomes aware that any representation or
warranty is untrue.
7. CASUALTY LOSS AND CONDEMNATION
If, prior to the end of the Review Period, the Property or any
material part thereof shall be condemned, or destroyed or damaged by fire or
other casualty, Seller shall promptly so notify Purchaser. In the event the
effect of such condemnation or casualty occurring prior to the end of the
Review Period is material (as hereinafter defined), Purchaser shall have the
option either to terminate this Agreement
<PAGE>
or to consummate the transaction contemplated by this Agreement notwithstanding
such condemnation, destruction or damage. If Purchaser elects to consummate the
transaction contemplated by this Agreement or if a casualty or condemnation is
immaterial or occurs after the end of the Review Period, Purchaser may not
terminate this Agreement but, providing Closing occurs, shall be entitled (a) in
the event of a condemnation, to receive the condemnation proceeds, subject to
the prior rights thereto of Existing Lender under the Existing Loan Documents
and the Ground Lessor under the Ground Lease; provided, however, that in the
event any portion of any condemnation award relates solely to Seller's leasehold
interest under the Ground Lease and either Ground Lessor retains such portion in
accordance with the terms of the Ground Lease or Lender applies such portion in
reduction of the principal balance of the Existing Loan in accordance with the
provisions of the Existing Loan Documents, then Purchaser shall be entitled at
Closing to a credit against the Purchase Price in the amount of such portion;
and (b) in the event of a casualty, to settle the loss under all policies of
insurance applicable to the destruction or damage and receive the proceeds of
insurance applicable thereto, subject to the prior rights thereto of Existing
Lender under the Existing Loan Documents, and Seller shall, at Closing, execute
and deliver to Purchaser all customary proofs of loss, assignments of claims and
other similar items; provided, however, that in the event Existing Lender
applies any such insurance proceeds in reduction of the principal balance of the
Existing Loan in accordance with the provisions of the Existing Loan Documents,
then Purchaser shall be entitled at Closing to a credit against the Purchase
Price in the amount of the insurance proceeds so applied. If, upon a material
condemnation or casualty prior to the end of the Review Period, Purchaser elects
to terminate this Agreement, the Initial Down Payment shall be returned to
Purchaser by the Seller, in which event this Agreement shall, without further
action of the parties, become null and void and neither party shall have any
further rights or obligations under this Agreement. For purposes of this
provision, a condemnation or casualty loss shall be deemed to be "material" if
(i) the cost of repairing or restoring the premises in question would be, in the
opinion of an independent architect selected by Seller and reasonably approved
by Purchaser, equal to or greater than One Million and No/100 Dollars
($1,000,000.00), (ii) such loss would materially and detrimentally impair access
to the Property or its improvements or common areas after Closing, or (iii) such
loss results in the termination of the Lease of an Anchor Tenant or (iv) such
loss results in the termination of Leases for other tenants occupying, in the
aggregate, fifteen percent (15%) or more of the gross leasable area of the
Property. The provisions of this Section 7 shall supersede the provisions of any
Law regarding the allocation of the risk of loss between buyers and sellers.
8. BROKERAGE
Purchaser and Seller each hereby represents and warrants to the other
that it has not dealt with any broker, finder or other party in connection
with the negotiation of this Agreement or otherwise in connection with the
Property. Seller and Purchaser shall each indemnify and hold the other
harmless from and against any and all claims of all other brokers and finders
claiming by, through or under the indemnifying party and in any way related to
the sale and purchase of the Property, this Agreement or otherwise, including,
without limitation, attorneys' fees and expenses incurred by the indemnified
party in connection with such claim.
<PAGE>
9. DEFAULT AND REMEDIES
A. Notwithstanding anything to the contrary contained in
this Agreement, if Seller has breached a representation or warranty hereunder
(as of the date made or deemed made) or breaches an obligation under this
Agreement at any time after the end of the Review Period, then: (1) Purchaser
shall be obligated to close in accordance with this Agreement and (2) as
Purchaser's sole remedy, Purchaser may make a claim in accordance with Section
12.L hereof if Seller fails to cure such breach after written notice from
Purchaser, except that:
(i) if Seller's breach consists of (x) a failure to
deliver title to the Property at Closing subject only to Permitted
Exceptions, or (y) a failure to deliver the items described in
Sections 4.B.(i)(a) through (s) duly executed by Seller as required,
or (z) a breach of Section 5.C. hereof which results in an actual
loss to Purchaser for which Seller refuses to credit or does not
credit Purchaser at Closing (any of the foregoing, a "Major Breach"),
and the Major Breach continues for ten (10) days after Purchaser has
given Seller notice thereof, then, as Purchaser's sole and exclusive
remedy hereunder, Purchaser may terminate this Agreement, in which
event the Down Payment theretofore delivered to Seller shall be
returned to Purchaser, together with Purchaser's actual out-of-pocket
costs incurred in connection with this transaction as of the date of
such termination not to exceed $75,000 in the aggregate (and
Purchaser shall provide documentation evidencing such costs to
Seller) ("Termination Damages"), and this Agreement shall be null and
void, and neither party shall have any rights or obligations under
this Agreement, and in no event shall Purchaser be entitled to
recover additional money damages against Seller or to compel Seller
to spend any sums of money in excess of those specifically required
under this Agreement;
(ii) if Closing does not occur solely as a result
of a failure to deliver either (A) the Ground Lessor Estoppel
Certificate (as hereinafter defined), or (B) the Existing Lender
Certificate (as hereinafter defined) (each, an "Estoppel Failure"),
then (1) Seller may elect to extend the Closing Date for up to sixty
(60) days in order to obtain the applicable certificate, and (2) in
the event Seller does not make such election, or upon expiration of
such extension period, Purchaser may terminate this Agreement, in
which event either (a) the Down Payment theretofore delivered to
Seller shall be returned to Purchaser, and this Agreement shall be
null and void, and neither party shall have any rights or obligations
under this Agreement, and in no event shall Purchaser be entitled to
recover any money damages (including without limitation Termination
Damages) against Seller or to compel Seller to spend any sums of
money in excess of those specifically required under this Agreement,
or (b) in the event the Estoppel Failure occurs as a result of a
Noncooperation Event (as hereinafter defined), the Down Payment shall
be retained by Seller as Seller's sole remedy and as liquidated
damages; and
(iii) Purchaser shall retain all rights and
remedies available to Purchaser at law, in equity or under this
Agreement, and to sue for return of the Down Payment and payment of
the Termination Damages, if Seller made any intentional
misrepresentation when initially made or commits fraud in connection
with this Agreement; provided in no
<PAGE>
event shall Purchaser be entitled to seek punitive, exemplary, special
or consequential damages, and any action for damages shall be limited
to actual damages.
Purchaser and Seller acknowledge and agree that any
representation or warranty of Seller which is true as of the end of the Review
Period but becomes untrue thereafter, shall not be deemed a default or breach
by Seller (unless caused by an intentional breach by Seller of a covenant set
forth in this Agreement) in any event and shall not excuse Purchaser from
proceeding to Closing.
Purchaser and Seller agree that the remedy of termination of
this Agreement shall be available to Purchaser only in the event of a Major
Breach or an Estoppel Failure.
B. If Purchaser fails to complete closing in accordance with
the terms of this Agreement, then this Agreement shall be terminated and the
Down Payment shall be retained by Seller as Seller's sole remedy and as
liquidated damages.
C. In the event there is a failure of the condition
precedent required in accordance with clause (ii) in Section 10.D. below (a
"Release Failure"), then Seller may elect either (i) to terminate this
Agreement, in which event the Down Payment shall be returned to Purchaser
unless the Release Failure occurs as a result of a Noncooperation Event, (ii)
to extend the Closing Date for up to sixty (60) days in order to obtain a
satisfactory release from Existing Lender in accordance with Section 10.D., or
(iii) to proceed to Closing notwithstanding the failure of such condition
precedent and to rely, in lieu thereof, on the indemnification provisions set
forth in Section 12.AA. hereof. Notwithstanding the foregoing, no
Noncooperation Event shall be deemed to have occurred if Purchaser (a) prepays
the Existing Loan at Closing with Existing Lender's consent, and (b) otherwise
satisfies Seller, in Seller's reasonable discretion, that Seller will have no
continuing liabilities or obligations under the Existing Loan Documents.
D. As used in this Section 9, the term "Noncooperation
Event" shall mean Purchaser's failure to use diligent efforts (i) to deliver
to Existing Lender such documentation as Existing Lender reasonably requires
or requests, and to otherwise cooperate with Existing Lender, (a) in order to
enable Existing Lender to determine the acceptability of Purchaser as the
obligor under the Existing Loan Documents, and (b) in connection with the
issuance of the Existing Lender Certificate and the release required in
Section 10.D. hereof; and (ii) to cooperate with Seller, including delivery to
Ground Lessor of such documentation as Ground Lessor reasonably requests, in
connection with Ground Lessor's issuance of the Ground Lessor Estoppel
Certificate (unless Purchaser waives the condition precedent that it be
obtained). Notwithstanding the foregoing, in no event shall Purchaser be
required to deliver or disclose information to Existing Lender or Ground
Lessor which violates any Law or any confidentiality agreement to which
Purchaser is a party or otherwise exposes Purchaser to liability as a result
of such disclosure. Seller and Purchaser acknowledge and agree that: (i) the
Down Payment is a reasonable estimate of and bears a reasonable relationship
to the damages that would be suffered and costs incurred by Seller as a result
of having withdrawn the Property from sale and the failure of Closing to occur
due to a default of Purchaser under this Agreement or due to a Noncooperation
Event; (ii) the actual damages suffered and costs incurred by Seller as a
result of
<PAGE>
such withdrawal and failure to close due to a default of Purchaser under this
Agreement or Noncooperation Event would be extremely difficult and impractical
to determine; (iii) Purchaser seeks to limit its liability under this Agreement
to the amount of the Down Payment in the event this Agreement does not close due
to a default of Purchaser under this Agreement or a Noncooperation Event; and
(iv) such amount shall constitute valid liquidated damages.
E. After Closing and subject to any limitations set forth in
this Agreement, including but not limited to Section 12.L, Seller and
Purchaser shall, subject to the terms and conditions of this Agreement, have
such rights and remedies as are available at law or in equity, but only for
such obligations as expressly survive Closing; except that neither Seller nor
Purchaser shall be entitled to recover from the other consequential,
exemplary, punitive or special damages.
10. CONDITIONS PRECEDENT
A. (i) Subject to Sections 11, 12(G) and 12(H) below,
Purchaser shall have the period of time beginning on the date hereof and
ending on June 30, 1997, within which to inspect and investigate the Property
and its operations (the "Review Period"). If Purchaser determines that the
Property is unsuitable for its purposes and notifies Seller of such decision
within the Review Period (or if Purchaser fails to deposit the Interim Down
Payment by expiration of the Review Period), the Initial Down Payment shall be
returned to Purchaser, at which time this Agreement shall be null and void and
neither party shall have any further rights or obligations under this
Agreement, except those which by their terms expressly survive such
termination. Purchaser need not disclose its reasons for termination. Seller
shall cooperate with Purchaser to allow Purchaser and Purchaser's
Representatives free access to the Property, to allow Purchaser and
Purchaser's Representatives free access to all information and documentation,
and otherwise to promptly provide such information and documentation, relating
to the Property and its operations as Purchaser may reasonably request
(including, without limitation, tenant sales reports and other financial
information, income and expense statements for the prior three years and
appraisals in Seller's possession (with such material deleted from the
appraisals as Seller may, in its reasonable discretion, elect to delete)) but
excluding Excluded Items, to the extent such information and documentation has
not been previously delivered to or generated by Purchaser pursuant to the
Management Agreement and is in Seller's possession or control, and to the
extent Seller is not prohibited by written agreement from disclosing such
information and documentation. Purchaser's failure to object within the Review
Period shall be deemed a waiver by Purchaser of the condition contained in
this Section 10.
(ii) Purchaser acknowledges that, notwithstanding any
contrary provision contained in the Management Agreement (and all other
management agreements between Purchaser and Seller's affiliates), if Purchaser
terminates this Agreement in accordance with this paragraph, the Management
Agreement (and all other management agreements between Purchaser and Seller's
affiliates), may be terminated by an owner due to Purchaser's failure to acquire
the Property, unless and only if Purchaser has terminated this Agreement due to
a Major Breach which remains uncured during, and as of the end of, the cure
period set forth for a Major Breach in Section 9.A. hereof or if Purchaser
terminates this Agreement under Section 3.C.(ii) hereof.
<PAGE>
B. As a condition of Purchaser's obligation to complete
Closing, Seller must not have committed a Major Breach which continues beyond
applicable notice and cure periods.
C. As a condition of Seller's obligation to complete
Closing, Purchaser must complete Closing in accordance with this Agreement
(including, without limitation, satisfaction of the condition precedent set
forth in Section 10.D. below).
D. As conditions to Seller's obligation to complete Closing,
Purchaser shall be obligated to take such actions and to execute such
documentation (i) as are required in accordance with the terms of the Existing
Loan Documents so as to cause (a) all indemnitors under the Indemnity
described in Exhibit G to be released of all Released Environmental
Obligations (as such term is defined in Paragraph 25 of the Existing Loan
Mortgage), and (b) all guarantors under the Guarantee described in Exhibit G
to be released of all obligations thereunder, and (ii) as may be reasonably
required by Seller to cause Seller to be released of all obligations under the
other Existing Loan Documents, except those obligations preceding Closing
which, in accordance with the terms of the Existing Loan Documents, survive
Purchaser's assumption of the Existing Loan.
E. As a condition to Purchaser's obligation to complete
Closing, Seller shall furnish Purchaser with an estoppel certificate (the
"Ground Lessor Estoppel Certificate") from Ground Lessor in a form consistent
with the requirements set forth in the Ground Lease, the Option Agreement and
the Anchor Pad Purchase Agreement, collectively. Purchaser hereby acknowledges
that a Ground Lessor Estoppel Certificate substantially in the form attached
hereto as Exhibit R-1 shall also be acceptable and shall satisfy the
requirements of this Section 10.E.
F. As a condition to Purchaser's obligation to complete
Closing, Seller shall furnish Purchaser with one or more certificate(s)
(collectively, the "Existing Lender's Certificate") from the Existing Lender
consenting to the transfer of Seller's interest in the Property to Purchaser
and the assumption of all obligations under the Existing Loan Documents by
Purchaser, and certifying (i) that to Existing Lender's knowledge, there are
no defaults under the Existing Loan Documents, and (ii) as to the outstanding
principal balance of the Existing Loan as of the date of the certificate.
Purchaser hereby acknowledges that (i) the form of Existing Lender's
Certificate attached hereto as Exhibit R-2 contains more information than is
required in accordance with this paragraph, and that such form shall also be
acceptable and shall satisfy the requirements of this Section 10.F. In the
event the Existing Lender's Certificate contains a certification from Existing
Lender substantially or substantively identical to Seller's representation
under Section 6.A.(xiv) hereof, Seller's liability for such representation
shall terminate upon delivery of the Existing Lender's Certificate to
Purchaser.
G. As a condition to Seller's and Purchaser's obligations to
complete Closing, Seller shall by August 1, 1997 obtain the consent of The
Northwestern Mutual Life Insurance Company to the transaction contemplated by
this Agreement. Seller shall promptly notify Purchaser if and when Seller
receives any response or correspondence with respect to such consent. If
Closing does not occur solely as a result of a failure to satisfy this
condition
<PAGE>
precedent, this Agreement shall be automatically terminated, null and void, the
Down Payment shall be returned to Purchaser, and neither party hereto shall have
any further obligation to the other under this Agreement.
11. PROPERTY INFORMATION AND CONFIDENTIALITY
A. Purchaser agrees that, prior to the Closing, Purchaser
shall use diligent efforts to keep all "Property Information" (as defined
below) confidential, and that Property Information shall not, without the
prior consent of Seller, be disclosed by Purchaser or Purchaser's
Representatives (as hereinafter defined), except to a REIT Assignee and its
Purchaser Representatives, and that Property Information will not be used for
any purpose other than investigating and evaluating the Property or fulfilling
Purchaser's responsibilities as manager under the Management Agreement.
Moreover, Purchaser agrees that, prior to the Closing, the Property
Information will be transmitted only to a REIT Assignee, and to the
Purchaser's, Representatives and such REIT Assignee, who need to know the
Property Information for the purpose of investigating and evaluating the
Property, and who are informed by Purchaser of the confidential nature of the
Property Information and who agree in writing to comply with and be bound by
this Section 11 for the benefit of Seller. The provisions of this Section
11(A) shall not apply to Property Information which is disclosed in compliance
with the Management Agreement, or which is a matter of public record and shall
not be used or construed by Seller to impede Purchaser from complying with its
obligations under the Management Agreement or from complying with laws,
including, without limitation, governmental regulatory, disclosure, tax and
reporting requirements, subpoenas or court orders.
B. Purchaser and Seller, for the benefit of each other,
hereby agree that between the date of this Agreement and the Closing Date,
they will not release or cause or permit to be released any press notices,
publicity (oral or written) or advertising promotion relating to, or otherwise
announce or disclose or cause or permit to be announced or disclosed, in any
manner whatsoever, the terms, conditions, parties to or substance of this
Agreement or the transactions contemplated herein, without first obtaining the
written consent of the other party hereto, as to the portion of the disclosure
relating to this transaction, the Property or such party and its affiliates,
which consent shall not be unreasonably withheld. Seller agrees not to object
to any disclosure (including public announcements) required by law to the
extent it identifies the parties, property and purchase price (and method of
payment thereof) in connection with this transaction. Failure to disapprove
any disclosure within two (2) business days of receipt shall be deemed an
approval. It is understood that the foregoing shall not preclude either party
from discussing the substance or any relevant details of the transactions
contemplated in this Agreement, subject to the terms of this Section 11, with
a REIT Assignee or any of Purchaser's or such REIT Assignee's attorneys,
accountants, professional consultants or potential lenders, as the case may
be, or prevent either party hereto from complying with applicable laws,
including, without limitation, governmental regulatory, disclosure, tax and
reporting requirements, subpoenas or court orders, or prevent Seller from
coordinating with tenants to obtain the Estoppel Certificates.
C. Deleted Prior to Execution.
<PAGE>
D. In the event this Agreement is terminated, Purchaser and
Purchaser's Representatives shall promptly return to Seller all originals and
copies of the "New Seller-Supplied Information" (defined below) in the
possession of Purchaser and Purchaser's Representatives (or certify to Seller
that the same has been destroyed).
E. As used in this Agreement, the term "Property Information"
shall mean:
(i) All information and documents relating to the
Property, the operation thereof or the sale thereof (including, without
limitation, the Ground Lease, Option Agreement, Anchor Pad Purchase Agreement,
Existing Loan Documents, Leases, Service Contracts, labor contracts and
licenses) generated by Purchaser pursuant to the Management Agreement, or
furnished to, or otherwise made available by Seller or any of Seller's
Affiliates for review by, Purchaser or a REIT Assignee, or their respective
directors, officers, employees, affiliates, partners, brokers, agents, title
insurers, surveyors or other representatives, including, without limitation,
attorneys, accountants, contractors, consultants, engineers and financial
advisors (collectively, "Purchaser's Representatives"), and if and to the extent
such information and documents have not been previously furnished to or
otherwise made available to Purchaser, or generated by Purchaser, under the
Management Agreement such Property Information shall constitute "New
Seller-Supplied Information".
(ii) All analyses, compilations, data, studies,
reports or other information or documents prepared or obtained by Purchaser or
Purchaser's Representatives containing or based in any material part on any
information or documents described in the preceding clause (i).
F. In addition to any other remedies available to Seller
under this Agreement, Seller shall have the right to seek equitable relief,
including, without limitation, injunctive relief or specific performance,
against Purchaser or Purchaser's Representatives in order to enforce the
provisions of this Section 11.
G. The provisions of this Section 11 shall survive the
termination of this Agreement.
H. Notwithstanding anything to the contrary contained in
this Section 11 or in the Management Agreement, no failure by Purchaser to
comply with this Section 11 shall give Seller the right to terminate the
Management Agreement or any other Management Agreement between Seller (or its
affiliates) and Purchaser.
12. MISCELLANEOUS
A. All understandings and agreements heretofore had between
Seller and Purchaser with respect to the Property are merged in this
Agreement, which alone fully and completely expresses the agreement of the
parties.
<PAGE>
B. Neither this Agreement nor any interest hereunder shall
be assigned or transferred by Purchaser or Seller without the prior written
consent of the other party, except that Purchaser may assign its rights under
this Agreement to a "TRO Assignee", as such term is defined in the Asset
Purchase Agreement (defined below) or to Pennsylvania Real Estate Investment
Trust or a limited partnership controlled thereby (any of the foregoing,
together with any TRO Assignee, shall be referred to as a "Permitted Assignee"
and shall be deemed a "REIT Assignee") and the Permitted TRO Assignee may
assign such rights back to The Rubin Organization, Inc., in either event
without having to first obtain Seller's consent, provided Seller shall receive
written notice of the identity of the ultimate assignee at least five (5)
business days prior to Closing.
C. This Agreement shall not be modified or amended except in
a written document signed by Seller (or its attorneys) and Purchaser (or its
attorneys).
D. Time is of the essence of this Agreement.
E. This Agreement shall be governed and interpreted in
accordance with the laws of the State of South Carolina.
F. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and delivered
personally, by certified mail, return receipt requested, postage prepaid, by
overnight courier (such as Federal express), or by facsimile transmission
(with confirmation of transmission), addressed as follows:
If to Seller: Magnolia Retail Associates, L.L.C.
c/o Equity Group Investments, Inc.
Two North Riverside Plaza, Suite 1000
Chicago, Illinois 60606
Attention: George C. Touras
Telephone: 312/466-3635
Facsimile: 312/454-0826
With copies to: Richard Schnell
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue, 16th Floor
Milwaukee, Wisconsin 53202
Telephone: 414/299-7036
Facsimile: 414/299-1557
and
<PAGE>
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
Attention: Douglas J. Lubelchek, Esquire
Telephone: 312/466-3598
Facsimile: 312/454-0335
If to Purchaser: The Rubin Organization, Inc.
The Bellevue
200 South Broad Street
Philadelphia, Pennsylvania 19102
Attention: Alan F. Feldman
Vice President and Secretary
Attention: Gerald Broker, Esquire
Telephone: 215/875-0700
Facsimile: 215/546-0240
With a copy to: Gary W. Levi, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
457 Haddonfield Road
Suite 510
Cherry Hill, New Jersey 08002-2220
Telephone: 609/486-7900
Facsimile: 609/486-4875
John W. Fischer, Esquire
Drinker Biddle & Reath
Suite 300
1000 Westlakes Drive
Berwyn, Pennsylvania 19312
Telephone: 610/993-2221
Facsimile: 610/993-8585
All notices given in accordance with the terms hereof shall be deemed received
three (3) business days after posting (in the case of notices sent by
certified mail), or when delivered personally or otherwise received or receipt
is refused (in the case of all other methods of notice). Either party hereto
may change the address for receiving notices, requests, demands or other
communication by notice sent in accordance with the terms of this Section
12(F).
G. (i) Purchaser's right of inspection pursuant to Section
10 above shall include the right to enter on the Property, but shall be
subject to the rights of Ground Lessor under the Ground Lease and tenants
under the Leases and other occupants and users of the Property. No inspection
shall be undertaken without reasonable prior notice to Seller. Seller shall
have the right to be present at any or all inspections. No inspection shall
involve the taking of samples or other physically invasive procedures without
the prior consent of Seller, which consent
<PAGE>
may be withheld in Seller's sole discretion. Notwithstanding anything to the
contrary contained in this Agreement, Purchaser shall restore the Property to
its condition existing prior to Purchaser's entry thereon, and indemnify and
hold Seller and Seller's Affiliates, and each of them, harmless from and against
any and all losses, claims, damages and liabilities (including, without
limitation, attorneys' fees incurred in connection therewith) arising out of or
resulting from Purchaser's exercise of its rights under this Agreement,
including, without limitation, its right of inspection as provided for in
Section 10 above. The terms of this the preceding sentence shall survive the
termination of this Agreement.
(ii) Nothing contained in the preceding paragraph (i)
shall be deemed to limit Purchaser's rights as Manager under, or limit its
ability to comply with its obligations as Manager under, the Management
Agreement.
H. Except as provided for in, or as may be done pursuant to,
the Management Agreement, Purchaser or Purchaser's Representatives shall not
contact Ground Lessor or a tenant or prospective tenant for the Property
regarding this transaction unless Purchaser or Purchaser's Representatives
first obtains Seller's prior written approval therefor (not to be unreasonably
withheld or delayed). Seller shall have the right to be present for all such
tenant interviews.
I. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
MANAGEMENT AGREEMENT (TO THE EXTENT SET FORTH THEREIN AND SUBJECT TO THE TERMS
THEREOF) OR, AS CONCERNS EQUITY PROPERTIES AND DEVELOPMENT LIMITED PARTNERSHIP
("EPDLP") ONLY, THAT CERTAIN ASSET PURCHASE AGREEMENT DATED DECEMBER 31, 1996
BY AND BETWEEN EPDLP AND THE RUBIN ORGANIZATION, INC. (THE "ASSET PURCHASE
AGREEMENT"), IT IS UNDERSTOOD AND AGREED THAT NEITHER SELLER NOR ANY OF
SELLER'S AFFILIATES IS 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, 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
INFORMATION 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 EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT,
AT CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL
ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS" AS OF THE END OF THE
REVIEW PERIOD. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS
AGREEMENT, THE ASSET PURCHASE AGREEMENT (AS TO EPDLP ONLY), OR THE MANAGEMENT
AGREEMENT (TO THE EXTENT SET FORTH THEREIN AND SUBJECT TO THE TERMS THEREOF),
PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND NEITHER
<PAGE>
SELLER NOR ANY OF SELLER'S AFFILIATES IS 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, ANY REAL
ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, OR ANY
THIRD-PARTY, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN
WRITING. PURCHASER ACKNOWLEDGES 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 OR 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
AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON
EXPIRATION OF THE REVIEW PERIOD, EXCEPT FOR SELLER'S REPRESENTATIONS AND
WARRANTIES THAT WILL SURVIVE CLOSING, AND EXCEPT FOR THE SURVIVING
REPRESENTATIONS AND WARRANTIES UNDER THE ASSET PURCHASE AGREEMENT (AS TO EPDLP
ONLY), OR THE MANAGEMENT AGREEMENT (TO THE EXTENT SET FORTH THEREIN AND SUBJECT
TO THE TERMS THEREOF), 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 EXPIRATION OF THE REVIEW PERIOD, SHALL BE
DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER AND SELLER'S AFFILIATES
FROM AND AGAINST ANY AND ALL CLAIMS, 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 EXCEPT FOR
CLAIMS BASED ON FRAUD, CRIMINAL CONDUCT OR INTENTIONAL TORTS, KNOWN OR UNKNOWN,
WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER OR SELLER'S
AFFILIATES 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.
J. In any lawsuit or other proceeding initiated under or
with respect to this Agreement, Purchaser and Seller waive any right they may
have to trial by jury.
<PAGE>
K. If for any reason Purchaser does not consummate the
Closing, then Purchaser shall, upon Seller's request, assign and transfer to
Seller, without representation, warranty or recourse, all of its right, title
and interest in and to any and all studies, reports, surveys and other
information, data and/or documents relating to the Property or any part
thereof prepared by or at the request of Purchaser, its employees and agents,
and shall deliver to Seller copies of all of the foregoing
L. (i) After Closing, Seller shall not be liable to
Purchaser in respect of obligations under this Agreement which survive Closing
for any amounts in excess of the amount of the "Holdback Funds" (as defined
below), or for any amounts less than Fifty Thousand Dollars ($50,000.00) (the
"Deductible Amount") in the aggregate, Purchaser hereby waiving any and all
claims it may have to such recoveries in excess of, or less than, the
foregoing amounts. The foregoing limitations shall apply only to liabilities
admitted by Seller to exist or proven by Purchaser to exist through the final
adjudication thereof in an appropriate judicial proceeding (a "Final
Judgment"), and not to reprorations made pursuant to Section 4(C)(ii) above.
(ii) In order to secure the obligations and
liabilities of Seller under this Agreement that survive Closing, including
without limitation the obligation to make Post-Closing Adjustments pursuant to
Section 4 above (collectively, "Seller's Surviving Obligations"), and the
obligations of Seller under the Management Agreement which survive if the
Management Agreement is terminated, Seller covenants not to distribute to its
equity owners (except in accordance with clauses (v), (vi) and (vii) below), an
amount of consideration (referred to below as the "Holdback Funds") with a value
equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (either in the form
of cash or a portion of the OP Units, at Seller's election). The term "Holdback
Funds" shall include all interest earned thereon, if any.
(iii) If Purchaser incurs any loss, damage, cost or
expense (including attorneys' fees) for any matter Purchaser believes is covered
under Seller's Surviving Obligations (a "Claim"), and desires to seek recovery
from Seller, Purchaser shall give Seller written notice thereof ("Claim Notice")
describing the Claim in reasonable detail. The Claim Notice shall, if
applicable, be accompanied by appropriate documentation (including by way of
illustration, but not of limitation, receipted bills or canceled checks) and any
appropriate calculations which demonstrate that the Deductible Amount has been
satisfied. If the Claim Notice states a Claim for a specified amount of money,
the Claim Notice shall also be accompanied by appropriate documentation thereof
(including by way of illustration, but not of limitation, estimates by
independent and reputable vendors, contractors, engineers or architects or other
responsible estimators unaffiliated with Purchaser, third party invoices,
receipted bills or canceled checks).
(iv) Seller and Purchaser, acting reasonably and in
good faith, shall attempt to amicably resolve each Claim within thirty (30) days
after its Claim Notice becomes effective. If such amicable resolution results in
an agreed amount payable to Purchaser, Seller shall promptly pay the appropriate
amount to Purchaser out of the Holdback Funds. If such Claim is not amicably
resolved, then Purchaser may proceed to litigate the Claim, and if Purchaser
obtains Final Judgment in its favor with respect to the Claim, Seller shall
disburse the appropriate amount to Purchaser out of the Holdback Funds. As used
herein, "Final Judgment"
<PAGE>
means a final judgment or verdict rendered by a court of competent jurisdiction,
after all appeals (or expiration of all appeal periods, if no appeal is taken).
(v) If no Claim is made before the Representations
Expiration Date, then the Holdback Funds may thereafter be distributed by
Seller.
(vi) If any Claim Notice is given before the
Representations Expiration Date (collectively, "Eligible Claim[s]") Seller shall
not distribute an amount of Holdback Funds in the amount of 150% of such Claims
(but in no event more than $750,000 in the aggregate), and retain such amount
until such time as (i) Purchaser and Seller jointly agree upon disposition of
such funds or (ii) a Final Judgment is entered with respect to such funds. Any
balance may be distributed by Seller as of the Representation Expiration Date.
(vii) Promptly after Purchaser and Seller jointly
agree upon disposition of such funds or Final Judgment with respect to all
Eligible Claims has been entered, Seller shall pay the appropriate amount(s) to
Purchaser, and may distribute the balance of the Holdback Funds, if any, and
this holdback arrangement shall thereupon terminate. Purchaser may in such event
take such legal action to convert any OP Units delivered to Purchaser into cash.
M. Seller and Purchaser hereby designate Title Insurer to
act as and perform the duties and obligations of the "reporting person" with
respect to the transaction contemplated by this Agreement for purposes of 26
C.F.R. Section 1.6045-4(e)(5) relating to the requirements for information
reporting on real estate transaction closed on or after January 1, 1991. In
this regard, Seller and Purchaser each agree to execute at Closing, and to
cause the Title Insurer to execute at Closing, a Designation Agreement,
designating Title Insurer as the reporting person with respect to the
transaction contemplated by this Agreement.
N. Purchaser agrees that it does not have and will not have
any claims or causes of action against any disclosed or undisclosed trustee,
partner, affiliate, beneficiary, principal, member, agent, managing entity,
shareholder, director, officer, or employee of Seller (whether direct or
indirect), including, without limitation, their attorneys, accountants,
consultants, engineers, brokers, and advisors (collectively, "Seller's
Affiliates"), arising out of or in connection with this Agreement or the
transactions contemplated hereby except in the event of fraud, criminal
conduct or intentional tort by such person. Purchaser agrees to look solely to
the Holdback Funds for the satisfaction of any liability or obligation arising
under this Agreement or the transactions contemplated hereby, or for the
performance of any of the covenants, warranties or other agreements contained
herein, and further agrees not to sue or otherwise seek to enforce any
personal obligation against any of Seller's Affiliates with respect to any
matters arising out of or in connection with this Agreement or the
transactions contemplated hereby, except in the event of fraud, criminal
conduct or intentional tort by such person.
O. Seller shall have the exclusive right to file and control
any tax appeal for the real estate taxes attributable to the period prior to
and including the calendar year 1996 (the "Pre-1997 Tax Period") but shall
keep Purchaser informed of the progress and outcome of any such appeal. To the
extent that Seller shall receive a refund therefor, Seller shall disburse to
any
<PAGE>
tenant not in default under its Lease a portion of such refund as may be due
that tenant under its Lease. To the extent that Purchaser's assistance is
required in disbursing the refund to the tenants, Purchaser agrees to assist
Seller in that regard at Seller's cost. Purchaser shall have the exclusive right
to file and control any tax appeal for the real estate taxes attributable to the
period after and including the calendar year 1997 (the "1997 Tax Period"), but
shall keep Seller informed of the progress and outcome of such appeal and
subject to Seller's consent as to calendar year 1997 (which consent shall not be
unreasonably withheld or delayed). To the extent that Purchaser shall receive a
refund therefor, Purchaser shall disburse to any tenant not in default under its
Lease a portion of such refund as may be due that tenant under its Lease. The
remainder of the refund, if any, shall be prorated between Purchaser and Seller
as of the proration date provided in Section 4(C) after deducting therefrom the
cost and expenses reasonably incurred in pursuing the appeal and not charged to
tenants. The terms of this Section 12(O) shall survive the Closing.
P. At Seller's request, Purchaser shall furnish to Seller
copies of any reports prepared by third parties unaffiliated with Purchaser
received by Purchaser relating to any 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).
Q. This Agreement may be executed in any number of
counterparts, any or all of which may contain the signatures of less than all
of the parties, and all of which shall be construed together as a single
instrument. For purposes of this Agreement, a telecopy of an executed
counterpart shall constitute an original.
R. In the event of litigation between the parties with
respect to this Agreement or the transactions contemplated hereby, the
prevailing party therein shall be entitled to recover from the losing party
therein its attorney's fees and costs of suit.
S. Neither party shall record this Agreement or a memorandum
thereof.
T. Seller agrees, at all times prior to and after the
Closing, at Purchaser's cost and with no additional liability to Seller, to
execute and deliver, or cause to be executed and delivered, and to do, or
cause to be done, such other documents and acts as Purchaser may reasonably
deem necessary or desirable to assure the effectiveness and benefits of this
Agreement and to vest in Purchaser title to and ownership of all of the assets
and property being sold to Purchaser under this Agreement.
U. The term "Seller's Knowledge" as used in this Agreement
means (i) actual knowledge possessed by, Sharon Polonia, Robert Tanaka, or
George Touras or (ii) any written notice respecting any of the matters
contained in this Agreement that has been received by any of such persons but
shall exclude any actual knowledge of (or notice received by) Purchaser or its
agents or employees which may be imputed to such persons as a result of the
relationship between Seller and Purchaser created by the Management Agreement.
Seller represents to Purchaser that, as of the date of this Agreement, such
persons are the persons within Seller's organization who have management or
supervisory responsibility in connection with the Property and who
<PAGE>
would likely have Knowledge of the matters represented by Seller in this
Agreement. The term "Purchaser's Knowledge" as used in this Agreement means (i)
actual knowledge possessed by Pat Berns, Gerald Broker, Tim Colby, Betty
Hampilos, Alan Feldman, Ed Glickman, George Rubin, Richard Brown or Bob
Wahlquist or (ii) any written notice respecting any of the matters contained in
this Agreement that has been received by any of such persons. Purchaser
represents to Seller that such persons are the persons within Purchaser's
organization who would likely have knowledge of the matters represented by
Purchaser in this Agreement.
V. For purposes of this Agreement, the masculine shall be
deemed to include the feminine and the neuter, and the singular shall be
deemed to include the plural, and the plural the singular, as the context may
require.
W. The invalidity or unenforceability of any provision of
this Agreement shall in no way affect the validity or enforceability of any
other provision.
X. The captions contained in this Agreement are not a part
of this Agreement. They are only for the convenience of the parties and do not
in any way modify, amplify or give full notice of any of the terms, covenants
or conditions of this Agreement.
Y. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal or personal
representatives, heirs, executors, administrators, successors, and permitted
assigns.
Z. Purchaser shall cooperate with Seller and shall execute
any and all documents necessary to allow Seller (or its affiliates) to
effectuate the conveyance of the Property as an exchange under Section 1031 of
the Internal Revenue Code; provided however, that at no time shall Purchaser
be required to take title to real estate other than the Property or incur any
obligations other than those set forth elsewhere in this Agreement. Seller
shall pay all reasonable costs which may be incurred by Purchaser in
connection with such tax free exchange and Seller shall indemnify Purchaser
and hold it harmless from any loss, cost, damage, expense or liability
incurred in connection therewith. Purchaser acknowledges and agrees that
Seller may, if necessary, in order for one or more of its affiliates to
qualify for an exchange, distribute the Property to its equity owners prior to
Closing provided the same shall not relieve Seller of its obligations
hereunder and such distributees shall assume the obligations of Seller
hereunder (to the extent of such distribution). No such exchange may result in
the transfer of OP Units to any party other than a recipient described in
Section 2.C.
hereof.
AA. Purchaser hereby agrees, from and after Closing, to
indemnify, defend and hold harmless (i) to the extent the release required in
accordance with Section 10.D. hereof has not been obtained and Seller
nonetheless elects to proceed to Closing, (a) all guarantors under the
Guarantee described in Exhibit G from and against any and all loss, cost,
liability or expense that may be incurred by such parties thereunder; (b) all
indemnitors under the Indemnity described in Exhibit G from and against any
and all loss, cost, liability or expense incurred by such parties thereunder
with respect to Released Environmental Obligations (as such term is defined in
Paragraph 25 of the Existing Loan Mortgage); and (c) Seller and all of
Seller's affiliates from and
<PAGE>
against any and all loss, cost, liability or expense arising under any of the
other Existing Loan Documents for events occurring after Closing; and (ii)
Seller and all of Seller's affiliates from and against any and all loss, cost,
liability or expense arising under the Ground Lease, the Option Agreement, and
Anchor Pad Purchase Agreement for events occurring after Closing. The provisions
of this Section 12.AA. shall survive Closing, and shall not operate in
limitation of any other provision set forth in this Agreement.
<PAGE>
BB. By signing this Agreement, Samuel Zell, personally and
unconditionally, guarantees that to the extent that the Down Payment is
required to be re-paid to Purchaser hereunder, such amount shall be re-paid to
Purchaser, and guarantees payment of Holdback Funds to Purchaser if, as and
when required under Section 12.L. of this Agreement. The provisions of this
paragraph shall not be affected by any amendment to this Agreement except as
otherwise set forth in such amendment. If and to the extent Samuel Zell makes
or is required to make any payment in accordance with the provisions of this
paragraph, Samuel Zell shall be subrogated to Purchaser's rights against
Seller hereunder.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered
this Agreement as of the date first above written.
SELLER:
MAGNOLIA RETAIL ASSOCIATES, L.L.C., a Delaware limited liability company
By: Florence Mall Partners, an Illinois limited partnership, a member
By: Samuel Zell Robert Lurie General Partners, an Illinois general
partnership, its general partner
By: Zell General Partnership, Inc., its general partner
By:/S/ Sheil Z. Rosenberg
-------------------------
Name: Sheli Z. Rosenberg
Its: Vice President
PURCHASER:
THE RUBIN ORGANIZATION, INC., a Pennsylvania corporation
By: /S/ Ronald Rubin
--------------------------------------------
Its:____________________________________________
JOINDER
The undersigned, Samuel Zell, hereby executes this
Agreement for the sole purpose of reflecting his agreement to be bound by the
provisions of Section 12.BB. hereof.
/S/ Sheli Z. Rosenberg
----------------------
Sheli Z. Rosenberg as attorney-in-fact for Samuel Zell, pursuant to
Power of Attorney dated May 15, 1997
<PAGE>
FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is
entered into as of the 30th day of September, 1997 between MAGNOLIA RETAIL
ASSOCIATES, L.L.C. ("Seller"), a Delaware limited liability company, and PREIT
ASSOCIATES, L.P. (the "Operating Partnership"), a Delaware limited
partnership.
RECITALS:
A. Seller and The Rubin Organization, Inc. ("TRO") entered
into that certain Purchase and Sale Agreement dated as of June 30, 1997 (the
"Contract") for the sale of certain property located in Florence, South
Carolina (the "Property").
B. TRO assigned its rights under the Contract to
Pennsylvania Real Estate Investment Trust (referred to in the Contract as
"REIT Assignee", but hereinafter referred to as the "Trust") and the Trust
assumed the obligations of TRO under the Contract, pursuant to that certain
Agreement Regarding Assignment of Purchase and Sale Agreements dated June 30,
1997 from TRO to the Trust.
C. At a Closing to be held on the Closing Date, as such
terms are defined in the Contract, the Trust will assign its rights in the
Contract to the Operating Partnership, and the Operating Partnership will
assume the obligations of the Trust under the Contract and designate a special
purpose subsidiary, PR Magnolia LLC (the "Title Holder"), as the entity to
take title to the Property. The Operating Partnership is the operating
partnership for the Trust and the Trust is its sole general partner.
D. Seller and the Operating Partnership desire to amend the
Contract as hereafter set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Seller agree as follows:
1. Effective Date. This Amendment shall become effective
upon the assignment by the Trust of the Contract to the Operating Partnership.
If such assignment is not made on or before the Closing Date, as such Closing
Date may be extended, this Amendment shall be null and void and of no force
and effect.
2. Defined Terms. All capitalized terms used, but not defined
herein, shall have the meanings ascribed to them in the Contract.
<PAGE>
3. Class B Units. Section 2.C of the Contract is amended to
read as follows:
"C. Class B Units. Seller hereby agrees to contribute an
undivided interest in the Property to the Operating Partnership at
Closing for 213,038 Class B Units (the "Class B Units") (as such term
is defined in the Amended and Restated Agreement of Limited
Partnership substantially in the form attached hereto as Exhibit "B"
(the "Partnership Agreement") of PREIT Associates, L.P. (the
"Operating Partnership") with no changes having a material effect on
the holders of the Class B Units) in lieu of $5,000,000 of the
Purchase Price to be otherwise paid in cash. Seller hereby directs
the Operating Partnership to issue the Class B Units directly to the
entity listed on Exhibit "A" attached hereto and made a part hereof
(the "Beneficial Owner") which is a member of Seller.
"The Class B Units shall be redeemable as provided
in the Partnership Agreement into cash in the amount per Class B Unit
determined as provided in the Partnership Agreement, or at the
election of the Trust, into an equivalent number of unregistered
common shares of beneficial interest (the "Shares") in the Trust. The
Operating Partnership hereby designates PR Magnolia, LLC, a Delaware
limited liability company, to accept title to the Property (the
"Titleholder") in connection with Seller's contribution of the
Property to the Operating Partnership.
"(i) Omitted.
"(ii) Omitted.
"(iii) Between the date hereof and Closing, (A)
Seller shall provide Purchaser with such information as Purchaser may
reasonably request to determine whether the issuance of the Class B
Units would comply with federal and state securities laws and to
confirm that the Beneficial Owner is an "Accredited Investor" as such
term is defined in Regulation D promulgated by the Securities and
Exchange Commission and (B) the Operating Partnership shall provide
Seller with such additional information regarding the Trust, the
Operating Partnership, the Titleholder, the Class B Units and the
Shares which is readily available to the Operating Partnership as
Seller may reasonably request.
"(iv) Omitted.
-2-
<PAGE>
"(v) Seller's election to contribute a portion of
the Property for Class B Units shall be conditioned upon (x) Seller's
receipt at or prior to Closing of (1) confirmation that the issuance of
the Class B Units to the Beneficial Owner has been duly authorized by
the Operating Partnership and the Trust and that all necessary consents
to such issuance have been obtained; (2) confirmation that the Class B
Units will be redeemable at any time or times after Closing in
accordance with the Partnership Agreement; (3) confirmation that the
Shares relative to the Class B Units have been duly authorized and
reserved for issuance; (4) confirmation of such other legal issues as
are customarily and reasonably confirmed by sophisticated investors in
investments similar to the Class B Units (and the Operating Partnership
shall use reasonable efforts to cause such items to be delivered to
Seller); and (5) execution by the Trust of the Registration Rights
Agreement in the form attached hereto as Exhibit "C" and (y) there
being no material adverse change in the attributes of the Operating
Partnership, the Trust, the Class B Units or the Shares from those
disclosed to Seller prior to the execution hereof. If such conditions
are not satisfied, then Seller may either waive any unfulfilled
condition or elect that the Purchase Price shall be paid by the
Operating Partnership entirely in cash.
"(vi) There shall be no restrictions upon the
holders of the Class B Units with respect to (a) the purchase or
acquisition by such holders of additional Class B Units or the Shares
or (b) the time period during which the Class B Units can be redeemed
as described above, except that (x) such holders may not take any such
action which would cause the Trust to lose its status as a real estate
investment trust under any applicable law and (y) the Class B Units
acquired by any Beneficial Owner hereunder or otherwise shall be
subject to all of the terms and provisions of the Partnership
Agreement.
"(vii)(a) The Operating Partnership agrees that,
following the Closing, the Titleholder will not sell or otherwise
dispose of the Property in a transaction in which taxable gain is
recognized for a period of five (5) years after the Closing Date (such
five (5) year period following the Closing Date being referred to
herein as the "Tax Protection Period"), except that the Titleholder may
sell the Property in connection with a tax deferred exchange
transaction entered into pursuant to Section 1031 of the Code pursuant
to which no taxable gain is recognized by the Titleholder or the
Operating Partnership. In the event the Titleholder consummates any
such tax deferred exchange transaction during the Tax
-3-
<PAGE>
Protection Period, the provisions of this Section shall apply to the
property received by the Titleholder (or any other affiliate thereof)
in such transaction for the remainder of the Tax Protection Period.
"(b) The Property Debt (as hereinafter defined)
shall, at all times during the Tax Protection Period, equal or exceed
the Required Minimum Amount (as hereinafter defined). As used herein,
"Property Debt" shall mean the aggregate amount of debt which is
secured only by first priority liens on the Property and which
otherwise qualifies as "qualified nonrecourse financing" under Section
465(b)(6) of the Code. As used herein, "Required Minimum Amount" means
the principal balance of the Existing Loan on the Closing Date, at any
time reduced by the regularly scheduled payments of principal
amortization under the Existing Loan Documents, as they exist on the
date hereof.
"(c) Notwithstanding the foregoing, the Operating
Partnership may sell the Property during the Tax Protection Period if
the Operating Partnership has at the time of sale entered into a
program to sell substantially all of its (and its affiliates') retail
assets to an entity or entities not affiliated with the Operating
Partnership, and at least eighty percent (80%) of the retail properties
owned by the Operating Partnership have been sold or are under binding
contracts of sale with unaffiliated third parties and are scheduled to
close within six (6) months of the date of the closing of the sale of
the Property.
"(d) In order to account for the book-tax
disparity with respect to the assets contributed (or deemed
contributed) to the Operating Partnership by Seller, the Operating
Partnership will elect to use the "traditional method" in accordance
with Treasury Regulation Section 1.704-3(b) and shall not use the
traditional method with curative allocations or the remedial method.
The Operating Partnership shall elect to use the traditional method in
accounting for the book-tax disparity with respect to the assets
treated as contributed to the Operating Partnership by Seller upon
"termination" of the Operating Partnership under Section 708(b)(1) of
the Code."
4. Additional Representations by Seller. The following is
added at the end of Section 6.A of the Contract:
"(xv) Beneficial Owner. The Beneficial Owner is
an Illinois limited partnership which is presently a member of Seller
and has the power and
-4-
<PAGE>
authority to execute and deliver the Subscription Agreement and the
Registration Rights Agreement. The address set forth for the
Beneficial Owner on Exhibit "A" is the principal legal address of the
Beneficial Owner.
"(xvi) Authorization and Allocation. The
direction by Seller to deliver the Class B Units directly to the
Beneficial Owner has been duly and validly authorized by all requisite
action of Seller and the allocation to the Beneficial Owner (together
with cash, if any, which the Beneficial Owner will receive as a result
of the transactions contemplated by the Contract) is a correct
allocation of the portion of the Purchase Price to which such
Beneficial Owner is entitled under the organizational documents of
Seller or as the members of Seller have agreed.
"(xvii) Consents. To Seller's knowledge, no
consent, approval or other authorization or order of, and no filing
with or waiver of rights by, any governmental authority or any other
person is required in connection with the direction by Seller to
deliver the Class B Units directly to the Beneficial Owner.
"(xviii) No Conflict. The issuance of the Class B
Units directly to the Beneficial Owner does not (1) violate or conflict
with any provision of the Operating Agreement of Seller or (2) to
Seller's knowledge, result in a breach of, or constitute default under
(or with notice or lapse or time or both, result or a breach or
constitute a default under) any contract or other agreement or
instrument to which Seller or the Beneficial Owner is a party or by
which either of them are bound."
5. Additional Representations of the Operating Partnership.
The following is added to the end of Section 6.B of the Contract:
"(iii) Upon Closing, the Operating Partner- ship
shall deliver to the Beneficial Owner good and marketable title to the
Class B Units free and clear of all liens, claims, encumbrances and
restrictions, except (x) as contained in the Registration Rights
Agreement and the Partnership Agreement and (y) as imposed by federal
and state securities laws.
"(iv) At Closing, the Partnership Agreement shall
be substantially in the form attached to this Amendment as Exhibit "B",
with no changes having a material effect on the holders of the Class B
Units, and the Partnership Agreement shall be in full force and
-5-
<PAGE>
effect. There are no uncured defaults or breaches by the Trust or any
limited partner under the Partnership Agreement.
"(v) At Closing, the capitalization of the
Operating Partnership will be as set forth in the Partnership
Agreement. There are no restrictions on the transfer of the Class B
Units other than those contained in the Partnership Agreement and the
Registration Rights Agreement and those arising from federal and
applicable state securities laws. All Class B Units to be issued and
outstanding in accordance with the terms of this Agreement are or will
be duly authorized and validly issued in accordance with the terms of
the Partnership Agreement and in compliance with applicable laws and
are redeemable for cash or Shares as provided in the Partnership
Agreement. As of the date hereof, there are no outstanding
subscriptions, options, warrants, preemptive or other rights or other
arrangements or commitments obligating the Operating Partnership to
issue any Units in the Operating Partnership, except as described in
the Proxy Statement dated August 27, 1997 (the "Proxy"), a true and
complete copy of which has been delivered to Seller. If and when
issued, the Shares issuable upon exchange of the Class B Units will be
duly authorized, validly issued, fully paid and non-assessable. At the
Closing, the Beneficial Owner will be admitted as a limited partner of
the Operating Partnership. The issuance of the Class B Units at Closing
will not require any approval or consent of any person or entity,
except any such approval that shall have been obtained on or prior to
Closing.
"(vi) To the Operating Partnership's knowledge,
the Proxy taken as a whole does not, as of the date thereof, contain
any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which such
statements were made and there has been no material adverse effect on
the business, assets, financial condition or results of operation on
the Operating Partnership or the Trust since the dates thereof.
"(vii) The Trust is duly organized, validly
existing, in good standing and qualified and empowered to conduct its
business, and has full power and authority to take the actions
necessary for the Operating Partnership to fully perform under this
Agreement and to fully perform under the Registration Rights Agreement.
Neither the execution and delivery of the Registration Rights
-6-
<PAGE>
Agreement, nor the performance of the Trust's obligations thereunder,
will conflict with or result in the breach of any material contract,
agreement, law, rule or regulation to which the Trust is a party or
by which the Trust is bound.
"(viii) The Registration Rights Agreement, and
each instrument to be executed by the Trust in connection with this
Agreement or therewith, will, when executed and delivered, be valid and
enforceable against the Trust in accordance with its terms.
"(ix) At Closing, the Trust Agreement of the
Trust, a true, complete and correct copy of which has been delivered to
Seller, will be in full force and effect. There are no distribution,
termination or liquidation proceedings pending or contemplated with
respect to the Trust.
"(x) The Trust will elect to be taxed as a real
estate investment trust for its taxable year ending December 31, 1997
and the Trust is organized and will be operated in such a manner as to
qualify for taxation as a "real estate investment trust" as defined in
Section 856 of the Code for the taxable year ending December 31, 1997.
"(xi) There are no pending or threatened actions,
suits or proceedings against or affecting the Trust at law or in equity
or before or by any governmental entity which would prevent or impair
the transactions contemplated hereby."
6. Conditions Precedent. The following is added at the end
of Section 10 of the Contract, but shall be applicable only to the issuance of
the Class B Units at Closing. If any such condition is not fulfilled or
waived, the Operating Partnership shall not be entitled to issue, and Seller
and/or the Beneficial Owner shall not be required to accept, as the case may
be, the Class B Units at Closing, and in lieu thereof, the Operating
Partnership shall pay $5,000,000 in cash to Seller:
"H. TRO Transaction. The TRO transaction described in the
Proxy shall have closed and the Operating Partnership shall have been
capitalized substantially in the manner described in the Proxy.
"I. Subscription Agreement; Investor Status. The Beneficial
Owner shall have executed and delivered to the Operating Partnership a
Subscription Agreement in the form attached hereto as Exhibit "D" and
indicated on the
-7-
<PAGE>
signature page thereof the basis by which the Beneficial Owner
believes that it is an Accredited Investor.
"J. Deliveries. All deliveries required to be made hereunder
shall have been made."
7. Transfer of Class B Units. By its execution of this
Amendment as the General Partner of the Operating Partnership, the Trust
hereby agrees that the transfer of any or all of the Class B Units to any
affiliate(s) of the Beneficial Owner which are Accredited Investors shall be
permitted at any time and from time to time, and that any such transferee will
be admitted as a Limited Partner of the Operating Partnership without the
consent of the General Partner; provided, however, such transfer shall comply
with all of the other terms, requirements and conditions of Article XII of the
Partnership Agreement.
8. Closing Deliveries. The following is added at the end of
Section 4 of the Contract:
"F. Additional Deliveries. In addition to the documents
delivered at Closing under Section 4.B, the following additional
documents shall be delivered at Closing in connection with the issuance
of the Class B Units:
"(i) The Beneficial Owner shall execute and
deliver to the Operating Partnership a Subscription Agreement which has
been fully filled in.
"(ii) The Trust and the Beneficial Owner shall
execute and deliver the Registration Rights Agreement to each other.
"(iii) Upon the request of the Beneficial Owner,
the Trust will deliver a Certificate to the Beneficial Owner of the
Class B Units owned by it."
9. Capital Contributions. The Operating Partnership and
Seller hereby agree that the undivided interest in the Property being
contributed to the Operating Partnership by or on behalf of the Beneficial
Owner as and for the capital contribution of the Beneficial Owner and in
exchange for the Class B Units has a market value of $5,000,000, which shall
be allocated to the Beneficial Owner on the basis of $23.47 per Class B Unit
issued to the Beneficial Owner.
10. Notices. All notices required or permitted to be given
hereunder shall be in writing and sent by registered or certified mail, or by
hand delivery, overnight delivery service or facsimile transmission, in each
case addressed as follows:
-8-
<PAGE>
If to the Operating Partnership or the Trust:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, Pennsylvania 19034
Attn: President
Fax No. 215-542-9179
With a copy to:
Howard A. Blum, Esquire
Clifford H. Swain, Esquire
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
Fax No. 215-988-2757
If to Seller:
Equity Group Investments, Inc.
2 North Riverside Plaza, Suite 600
Chicago, Illinois 60606
Attn: Cheryl Engel
Fax No. 312-454-0610
With a copy to:
Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Attn: John S. Santa Lucia, Esquire and Douglas
Lubelchek, Esquire
Fax No. 312-454-0335
or to such person or address as the party to be charged with such notice may
designate by notice given in the aforesaid manner. Notices shall be deemed to
have been given (a) if mailed, two Business Days following the date on which
such notice is deposited in the United States mail, or (b) if hand delivered
or sent by an overnight delivery service or by facsimile transmission, then if
and when delivered to and received by the respective parties, if received by
5:00 p.m. on a Business Day; otherwise on the next following Business Day.
11. Contract Affirmed. Except as amended and modified hereby
or inconsistent with the provisions hereof, the Contract is hereby ratified
and shall remain in full force and effect.
12. Counterpart Copies. This Agreement may be executed in one
or more counterpart copies which shall be taken together as one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been executed
and delivered as of the date first above written.
SELLER:
MAGNOLIA RETAIL ASSOCIATES, L.L.C.,
a Delaware limited liability
company
By Florence Mall Partners, an
Illinois limited partnership, a
member
By Samuel Zell Robert Lurie General
Partners, an Illinois general
partnership, its General Partner
By Zell General Partnership, Inc.,
its General Partner
By__________________________________________
Name:
Title:
PURCHASER:
PREIT ASSOCIATES, L.P.
By Pennsylvania Real Estate Investment Trust
By /s/ Jeffrey A. Linn
------------------------------------------
Name:
Title: Trustee
-10-
<PAGE>
MAGNOLIA RETAIL ASSOCIATES, L.L.C.,
a Delaware limited liability company
By: Florence Mall Partners, an
Illinois General Partnership,
its general partner
By: Samuel Zell Robert Lurie
General Partners, an Illinois
general partnership, its
general partner
By: Zell General Partnership,
Inc., its General Partner
By:/s/ Donald Liebentritt
-------------------------
Name:____________________
Title:___________________
-11-
<PAGE>
PURCHASE AND SALE AGREEMENT
[North Dartmouth Mall, Dartmouth, Massachusetts]
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of the
30th day of June, 1997 by and between DIVERSIFIED EQUITY CORPORATION OF
ILLINOIS, INC., an Illinois corporation ("Seller") with an office at Two North
Riverside Plaza, Suite 1000, Chicago, Illinois 60606; and The Rubin
Organization, Inc. ("Purchaser"), a Pennsylvania corporation with an office at
The Bellevue, 200 South Broad Street, Philadelphia, Pennsylvania 19102.
RECITALS:
A. Seller is the owner of a certain parcel of real estate (the "Real
Property") in the City of Dartmouth, Commonwealth of Massachusetts, which
parcel is more particularly described in Exhibit A attached hereto and upon
which is located a retail shopping center commonly known as "North Dartmouth
Mall".
B. Purchaser is the manager of the Real Property pursuant to a
Property Management Agreement dated as of December 31, 1996 ("Management
Agreement") between Seller and Equity Properties and Development Limited
Partnership, an Illinois limited partnership ("EPDLP") as assigned by EPDLP to
Purchaser.
C. Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Property (as such term is hereinafter defined), each
in accordance with and subject to the terms and conditions set forth in this
Agreement.
D. Purchaser and Seller originally intended that the closing would
occur no later than June 30, 1997. Accordingly, certain provisions of this
Agreement provide that certain attributes and risks of ownership not
customarily borne by purchasers until the transfer of title will be borne by
Purchaser from and after June 30, 1997.
THEREFORE, in consideration of the above Recitals, the mutual
covenants and agreements herein set forth and the benefits to be derived
therefrom, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Seller agree as
follows:
1. PURCHASE AND SALE
Subject to and in accordance with the terms and conditions set forth
in this Agreement, Purchaser shall purchase from Seller, and Seller shall sell
or cause to be sold to Purchaser, the Real Property together with: (i) all
buildings and improvements owned by Seller and located on the Real Property as
well as any and all of Seller's rights, easements and privileges presently
thereon or appertaining thereto; (ii) Seller's right, title and interest in
and to the leases of the Real Property as of the date hereof, and other leases
entered into in accordance with this Agreement, and all amendments thereto
(the "Leases") affecting the Real Property or any part thereof and all
<PAGE>
unapplied security or other deposits paid under the Leases; (iii) all tangible
personal property owned or leased by Seller and used or useful in the
ownership, operation or maintenance of Real Property (or any portion thereof)
and located at the Real Property or used solely in connection with the
Property, including without limitation the personal property set forth on
Exhibit C attached hereto (subject to ordinary depletion) and all additions to
or substitutions for the foregoing or any part thereof between the date hereof
and the date of Closing (the "Tangible Personal Property"); (iv) all right,
title and interest of Seller under any and all of the maintenance, service,
advertising and other like contracts and agreements and equipment leases (to
the extent assignable and to the extent Purchaser is to accept an assignment
thereof, as provided below) with respect to the ownership and operation of the
Real Property and/or the improvements thereon and other agreements entered
into in accordance with this Agreement, and all amendments thereto (the
"Service Contracts"); and (v) all other intangible personal property owned by
the Seller and used in the ownership, operation or maintenance of the Property
or any portion thereof, including without limitation (A) to the extent
assignable, the right to use the trade name "North Dartmouth Mall" and all
other trade names; (B) to the extent assignable and obtained, all certificates
of occupancy and other permits, licenses and certificates held by Seller and
necessary to occupy, operate and transfer the Real Property (collectively,
"Permits and Licenses"); (C) to the extent assignable, all utility, security
and other deposits and reserve accounts made (and any refunds thereof) as
security for the fulfillment of any obligation of Seller or any person
claiming by or through Seller in connection with the Real Property; (D) if and
to the extent in Seller's possession or control, all files, budgets, reports,
and other business records pertaining to the Real Property including without
limitation those relating to any marketing, advertising or similar promotional
fund or merchant's association (collectively, "Promotional Organizations")
relating to the Property (collectively, "Business Records"); (E) all matured
and unmatured claims and causes of action which arise from events occurring
from and after Closing; (F) to the extent assignable, all warranties,
guaranties and other assurances of performance ("Guaranties and Warranties");
(G) to the extent assignable, all telephone numbers and directory advertising
agreements; and (H) to the extent assignable, all surveys, drawings, plans,
specifications, diagrams, reports, environmental assessments and other
architectural or engineering work product if and to the extent in Seller's
possession or control (collectively, the "Plans and Reports"), all to the
extent applicable to the period from and after the Closing (as such term is
hereinafter defined); (items (i) through (v) above, together with the Real
Property, are collectively referred to in this Agreement as the "Property").
All of the foregoing expressly excludes all property owned by tenants or other
users or occupants of the Property.
Notwithstanding the foregoing, "Business Records" shall exclude (a)
internal memoranda, correspondence, analyses, documents or reports prepared by
or for Seller in connection with this Agreement or in connection with the
transaction contemplated by this Agreement, (b) appraisals, assessments or
other valuations of the Real Property in the possession of Seller, and (c)
communications between Seller and its attorneys (collectively, the "Excluded
Items").
<PAGE>
2. PURCHASE PRICE
The purchase price to be paid by Purchaser to Seller for the Property
is Thirty-Five Million and No/100 Dollars ($35,000,000.00) (the "Purchase
Price"). The Purchase Price shall be paid as follows:
A. Down Payment
Purchaser shall, within one (1) business day from the
date of this Agreement, deliver to Seller the sum of One Hundred Thousand and
No/100 Dollars ($100,000.00) ("Initial Down Payment"). If Purchaser does not
terminate this Agreement pursuant to and in accordance with Section 10 (A)
below, then prior to the end of the Review Period (as hereinafter defined),
Purchaser shall deliver to Seller the additional sum of Nine Hundred Thousand
and No/100 Dollars ($900,000.00) ("Final Down Payment"). The Initial Down
Payment and the Final Down Payment (together with interest on such payments at
the rate per annum equal to 5.5%), are referred to as the "Down Payment."
B. Cash at Closing. At Closing, Purchaser shall pay to
Seller, by wire transferred current federal funds to a bank located in the
continental United States, an amount equal to the Purchase Price, minus the
Down Payment, minus the total dollar amount of the "OP Units" (as defined
below), if any, and plus or minus, as the case may require, the closing
prorations and adjustments to be made pursuant to Section 4(C) below ("Cash
Portion"). Seller shall give Purchaser its wiring instructions at least three
(3) business days before Closing. If the Down Payment exceeds the Cash
Portion, Seller shall return the balance to Purchaser at Closing.
C. OP Units. In accordance with the provisions set forth
below, if this Agreement is assigned by Purchaser to a REIT Assignee (as
defined in the Management Agreement) Seller may elect to receive a portion of
the Purchase Price in the form of limited partnership interests ("OP Units")
in the REIT Assignee's operating partnership ("Operating Partnership"), which
OP Units shall be redeemable as provided in the partnership agreement of the
Operating Partnership into unregistered common shares of beneficial interest
("Shares") in the REIT Assignee (as defined in the Management Agreement) or
into cash. In connection with an assignment to a REIT Assignee, the REIT
Assignee may designate a controlled (directly or indirectly) affiliate of the
REIT Assignee to accept title to the Property ("Titleholder").
(i) As soon as reasonably practicable after the date
of this Agreement, but in no event later than July 31, 1997, Purchaser shall (A)
notify Seller in writing of the identity of Purchaser's proposed assignee, if
any, and (B) provide to Seller, or cause to be provided to Seller, information
(the "Information") regarding the ownership structure of the REIT Assignee, the
Operating Partnership and the Titleholder as each will be structured as of
Closing, including a description of the form of the ownership interests therein,
as each will be structured as of Closing, any applicable rights or restrictions
regarding the ownership interests, as each will be structured as of Closing, and
including all information regarding the REIT Assignee, the Operating Partnership
and the Titleholder, and the ownership interests therein as are generally
provided by the Operating Partnership to prospective sophisticated and
experienced investors including, without limitation,
<PAGE>
as applicable, partnership agreements, certificates of limited partnership and
the REIT Assignee's existing Trust Agreement and such other items as Seller may
reasonably request. Seller's sole remedy in the event of Purchaser's failure to
deliver the Information in a timely fashion shall be to have a corresponding
extension of time to deliver the Election Notice (defined below).
(ii) Seller shall have twenty-one (21) days from
Seller's receipt of such notice and copies of the Operating Partnership's
partnership agreement (or the most current draft thereof), the REIT Assignee's
existing trust agreement and the proxy statement in substantially the form to be
filed by REIT Assignee (and Purchaser will send final documents to Seller as
soon as available) to notify Purchaser in writing ("Election Notice") (A)
whether it elects to receive a portion of the Purchase Price as OP Units, (B)
the total dollar amount of the Purchase Price it would like to receive in OP
Units and (C) the identity of the proposed recipients of the OP Units and the
dollar amount to be received by each. Failure by Seller to elect to receive a
portion of the Purchase Price as OP Units on or prior to said 21st day shall be
deemed to be an election to receive the entire Purchase Price in cash.
(iii) If Seller elects to accept any OP Units, then
between the receipt of the Election Notice and Closing, (A) Seller shall provide
Purchaser with such information as Purchaser may reasonably request to determine
whether the issuance of the OP Units would comply with federal and state
securities laws and to determine accredited investor status as to each
prospective recipient of OP Units and (B) Purchaser shall provide Seller with
such additional information regarding the REIT Assignee, the Operating
Partnership, the Titleholder, the OP Units and the Shares in Purchaser's
possession or control or which is readily available to Purchaser, the REIT
Assignee or Titleholder as Seller may reasonably request. A proposed recipient
of OP Units which is not an accredited investor shall not be eligible to receive
OP Units and shall instead receive its portion of the Purchase Price solely in
cash.
(iv) Notwithstanding the foregoing, (a) the maximum
number of OP Units which Seller and/or Seller's affiliates may receive at
Closing may not, when aggregated with the number of OP Units received by
Magnolia Retail Associates, L.L.C. ("Magnolia Seller") and its affiliates in
connection with the sale of Magnolia Mall to the REIT Assignee (or its nominee),
exceed 1,300,000 OP Units; (b) Samuel Zell and affiliates thereof (excluding
Arthur Cohen and affiliates thereof) may not elect to receive directly or
indirectly OP Units which, when aggregated with the number of OP Units received
by Samuel Zell and affiliates thereof (excluding the Northwestern Mutual Life
Insurance Company and affiliates thereof) in connection with the sale of
Magnolia Mall, exceed 650,000 OP Units; and (c) if Seller elects to receive a
portion of the Purchase Price as OP Units, the minimum number of OP Units which
Seller and/or its affiliates may receive at Closing may not, when aggregated
with the number of OP Units received by Magnolia Seller and its affiliates in
connection with the sale of Magnolia Mall to the REIT Assignee (or its nominee),
be less than 135,000 OP Units. Upon consummation of the Closing, Seller shall be
issued the number of OP Units determined by dividing (i) the total dollar amount
of consideration to be paid to Seller as OP Units by (ii) the "Market Price".
"Market Price" means the average closing sales price of the Shares on it
publicly traded exchange for the 20 business days prior to the earlier of (A)
the first public announcement of Purchaser's intended transaction
<PAGE>
with the REIT Assignee (or any affiliate thereof) or (B) the first public
announcement that Samuel Zell or his affiliates may invest in the REIT Assignee
(or any affiliate thereof).
(v) Seller's election to accept a portion of the
Purchase Price as OP Units shall be conditioned upon (x) Seller's receipt at or
prior to Closing, of (1) confirmation that the issuance of the OP Units to
Seller has been duly authorized by the Operating Partnership and the REIT
Assignee or its general partner(s) and that all necessary consents to such
issuance have been obtained; (2) confirmation that the OP Units will be
redeemable at any time or times after Closing in accordance with the Operating
Partnership's partnership agreement; (3) confirmation that the Shares have been
duly authorized and reserved, for issuance upon the election of the holders of
OP Units to convert OP Units to Shares; (4) confirmation of such other legal
issues as are customarily and reasonably confirmed by sophisticated investors in
investments similar to the OP Units (and Purchaser shall use reasonable efforts
to cause such items to be delivered to Seller) and (5) evidence of the
unconditional obligation of the REIT Assignee and Operating Partnership to
provide the holders of the OP Units with the registration rights described on
Exhibit D attached hereto; and (Y) there being no material adverse change in the
attributes of the Operating Partnership, REIT Assignee, OP Units or Shares from
those disclosed to Seller in the Information. If such conditions are not
satisfied, then at Seller's election the Purchase Price shall be paid by
Purchaser entirely in cash.
(vi) There shall be no restrictions upon the holders
of OP Units with respect to (i) the purchase or acquisition by such holders of
additional OP Units or Shares or (ii) the time period during which OP Units can
be redeemed as described above, except that such holders may not take any such
action which would cause REIT Assignee to lose its status as a real estate
investment trust under any applicable Law.
D. Allocation. Prior to Closing, and if requested by Seller or
Purchaser, Purchaser and Seller shall act reasonably in agreeing upon the
allocation of the Purchase Price among the land, improvements and personal
property.
3. EVIDENCE OF TITLE
A. Title Examination; Commitment for Title Insurance. Except
as otherwise provided in this Section 3, Purchaser shall have until the
expiration of the Review Period to examine title to the Property. Purchaser
shall be responsible for obtaining from Chicago Title Insurance Company (in
such capacity, the "Title Insurer"), at Purchaser's expense, a title insurance
commitment (the "Title Commitment") covering the Property, under which the
Title Insurer agrees to insure title to the Property at customary rates in the
full amount of the Purchase Price under an ALTA Form B (1992) owner's policy
and free and clear of all restrictions, encumbrances and title objections,
except for the "Permitted Exceptions" (as defined below), and endorsing over
the standard exclusion with respect to rights of creditors (collectively,
"Insurable Title"). Purchaser shall instruct the Title Insurer to deliver to
Purchaser and Seller copies of the Title Commitment and all instruments
referenced in Schedule B thereof.
<PAGE>
B. Survey. (i) During the Review Period, Purchaser shall, at
Purchaser's expense, be responsible for employing a surveyor or surveying firm
to prepare a survey (the "Survey") of the Property. Purchaser shall instruct
said surveyor to deliver a copy of the Survey to Purchaser, Seller and the
Title Insurer.
(ii) If Purchaser causes a Survey of the Property to
be made, the metes and bounds description in the Deed referred to in Section
4(B)(i)(a) below shall, at Purchaser's option, be based on and conform to the
Survey provided said description accurately describes the Real Property owned by
Seller.
C. Title Objections; Cure of Title Objections. (i) Seller
shall convey and transfer title to the Real Property at Closing to Purchaser
subject only to Permitted Exceptions. The "Permitted Exceptions" shall consist
of only those title exceptions and survey items which are noted on the
attached Exhibit E. If a Title Commitment exception or Survey item arises
between the date the Review Period expires and the Closing (a "New
Exception"), and such New Exception is not a Permitted Exception, Purchaser
shall have five (5) business days after it has been made aware of same within
which to notify Seller of any such New Exception (other than a New Exception
which is a Permitted Exception on the attached Exhibit E) to which it objects.
Any such New Exception not objected to by Purchaser as aforesaid shall become
a Permitted Exception.
(ii) Notwithstanding anything to the contrary
contained in the preceding paragraph (i): (A) Seller shall be obligated to pay
and cause to be removed as an exception to title the existing first mortgage
encumbering the Property); and
(B) (1) With respect to New Exceptions which are not
Permitted Exceptions and were caused by an intentional violation by Seller of
an obligation of Seller hereunder, Seller shall be obligated to remove or to
obtain Title Insurer's waiver of, or endorsement over, such New Exception. Any
violation of Section 5.C. shall be deemed "intentional" for purposes of this
Section.
(2) With respect to New Exceptions which are not
Permitted Exceptions but arose from events occurring prior to June 30, 1997,
Seller shall be obligated to remove or to obtain Title Insurer's waiver of, or
endorsement over, such New Exceptions but shall not be required to spend, in the
aggregate, more than $500,000. If such New Exceptions require the expenditure of
amounts in excess of $500,000 to be so cured, and Seller elects not to cure such
New Exceptions, Seller shall not be in breach under Section 9.A., but Purchaser
may elect either (a) to close subject to such New Exceptions (in which event
Seller shall credit Purchaser in the amount of $500,000 at Closing), or (b) to
terminate this Agreement in which event the Down Payment will promptly be
re-paid to Purchaser and neither party shall have any further obligation
hereunder except as expressly survives pursuant to this Agreement.
(3) With respect to New Exceptions which are
Permitted Exceptions, Seller shall have no obligation to cure the same. Seller
shall, upon receipt of any notice of a claim
<PAGE>
or lawsuit related to an event occurring after June 30, 1997 which could result
in a New Exception, forward a copy of such notice to Purchaser and respond
thereto in such manner as Purchaser may reasonably direct, at Purchaser's sole
cost and expense.
(4) Seller may delay Closing as necessary for up to
thirty (30) days in order to cure any exception which it is required or may
elect to cure hereunder.
(iii) If this Agreement is not terminated in
accordance with Section 9.A. as a result of a New Exception, Purchaser shall
consummate the Closing without any adjustment in the Purchase Price (except as
provided in paragraph (B)(2) above) and accept title to the property subject to
all such exceptions and items (in which event, all such exceptions and items
shall be deemed Permitted Exceptions).
4. CLOSING
A. Closing Date. The "Closing" of the transaction
contemplated by this Agreement (that is, the payment of the Purchase Price,
the transfer of title to the Property and the satisfaction of all other terms
and conditions of this Agreement) shall occur at the Philadelphia office of
the Title Insurer at 10:00 a.m. on either (i) September 30, 1997, (ii) such
earlier date as may be set forth in a written notice from Purchaser to Seller
received by Seller at least five business days prior to such designated date,
or (iii) at such other time and place as Seller and Purchaser shall agree in
writing. The "Closing Date" shall be the date of Closing, provided the Cash
Portion (net of Seller's closing costs) has been wired to Seller and the OP
Units (if any) have been duly issued by 2:00 p.m. C.S.T. on that day;
otherwise the Closing Date shall be deemed to be the next business day. If the
date for Closing above provided for falls on a Saturday, Sunday or legal
holiday, then the Closing Date shall be the next business day.
B. Closing Documents
(i) Seller. In addition to the other items and
documents required elsewhere under this Agreement to be delivered to Purchaser
at Closing, Seller shall also execute and/or deliver (or cause to be delivered)
to Purchaser the following at Closing:
(a) a special warranty deed (the "Deed") in
form attached as Exhibit F duly acknowledged and in proper form for recording;
(b) a bill of sale in form attached as
Exhibit G, to which will be attached an updated list of the Tangible Personal
Property;
(c) a letter advising tenants under the
Leases of the change in ownership of the property in form attached as Exhibit H;
(d) assignments and assumptions of the
Leases and the Service Contracts that are to be transferred to Purchaser
pursuant to this Agreement, in the form attached as Exhibits I-1 and I-2;
<PAGE>
(e) if and to the extent not previously
delivered to Purchaser pursuant to the Management Agreement, the originals (or
if not available, copies (certified as true to Seller's Knowledge)) of the
Leases, the Service Contracts and to the extent in the possession or control of
Seller, the originals (or if not available, copies) of the Permits and Licenses,
Business Records, Guaranties and Warranties and Plans and Reports;
(f) a Non-Foreign Certification in form
attached as Exhibit J;
(g) a closing statement to be executed by
Seller and Purchaser, setting forth the prorations and adjustments to the
Purchase Price as required by Section 4(C) below;
(h) the schedule of past-due rents for the
Property, if any, as described in Section 4(C)(i)(b) below;
(i) at Purchaser's option, either (A) a
termination of the Management Agreement or (B) an assignment and assumption from
Seller to Purchaser of Seller's rights and obligations thereunder;
(j) an affidavit of title, in such form and
containing such reasonable terms and conditions as may be required by the Title
Insurer to enable Title Insurer to insure Purchaser's title to the Property in
conformity with Section 3 of this Agreement which Affidavit will not require
Seller to make any statements that would expand or increase any of Seller's
statements or obligations set forth herein, and specifically, (i) will not
require Seller to make any statements regarding the operation of the Property
(a) to the extent relating to the period following the end of the Review Period
or (b) which relate to matters which are the responsibility of Purchaser as
Manager of the Property and (ii) which will state that the knowledge of
Purchaser (as manager) shall not be imputed to Seller;
(k) a written statement of Seller setting
forth, to Seller's Knowledge, any changes in Seller's representations and
warranties which have occurred since the effective date of such representations
and warranties, which statement is to be delivered for informational purposes
only and any error therein shall not subject Seller to any liability whatsoever
or entitle Purchaser to any remedy whatsoever;
(l) corporate resolutions of Seller
authorizing this transaction, and an incumbency certificate for the officers
signing this Agreement and the other documents to be executed and delivered by
Seller pursuant to this Agreement;
(m) a current Certificate of Good Standing
for Seller;
(n) Intentionally omitted.
<PAGE>
(o) appropriate documents transferring
unencumbered title to any motor vehicles included in this sale for which
ownership must be evidenced by a separate title certificate;
(p) if necessary, the withdrawal by Seller
of any registration of the trade name "North Dartmouth Mall";
(q) if required by the Title Insurer, a
corporate excise tax lien waiver issued by the Commonwealth of Massachusetts;
and
(r) such other documents requested by
Purchaser, and consistent with the provisions of this Agreement, as may be
reasonably required to complete this transaction.
(ii) Purchaser. At Closing, Purchaser shall deliver
or cause to be delivered to Seller the following:
(a) the Cash Portion;
(b) such duly executed instruments and
verifications as are standard in the securities industry and are necessary to
evidence that the OP Units have been legally and irrevocably transferred and
which are in form reasonably satisfactory to Purchaser and Seller;
(c) a counterpart of the termination or
assignment of the Management Agreement, as the case may be;
(d) assignments and assumptions of the
Leases and the Service Contracts that are to be transferred to Purchaser
pursuant to this Agreement, in the form attached as Exhibits I-1 and I-2;
(e) the closing statement referred to in
Section 4(B)(i)(g) above;
(f) a certificate that the representations
and warranties of Purchaser contained in this Agreement remain true and correct;
(g) resolutions/consents of Purchaser
authorizing this transaction, and an incumbency certificate for the officer(s)
signing this Agreement and the other documents to be executed and delivered by
Purchaser pursuant to this Agreement; and
(h) a then current lease schedule for the
Property, containing the same types of information set forth on Exhibit B, and
certified by The Rubin Organization, Inc., to be complete and accurate to
"Purchaser's Knowledge" (as defined below), in reliance in part on Seller's
representation set forth in 6.A(v)(a)(i)
<PAGE>
(i) a written statement of Purchaser setting
forth, to Purchaser's Knowledge, any changes in Purchaser's representations and
warranties which have occurred since the effective date of such representations
and warranties, which statement is to be delivered for informational purposes
only and any error therein shall not subject Purchaser to any liability
whatsoever or entitle Seller to any remedy whatsoever;
(j) such other documents requested by
Seller, and consistent with the provisions of this Agreement, as may be
reasonably required to complete this transaction.
(iii) Tenant Estoppels
Seller shall use diligent efforts (which shall be limited to
filling out the certificate for each tenant, delivering the certificate to all
tenants with a request that it be returned to Seller within 10 days, and if a
tenant fails to timely return an executed certificate sending a written
request to such tenant that the certificate be promptly executed and returned)
to furnish Purchaser with estoppel certificates substantially in the form
attached as Exhibit S ("Estoppel Certificates") from all tenants which are
tenants of the Property as of sixty (60) days prior to the Closing Date.
Seller shall keep Purchaser reasonably apprised as to the status of receipt of
the estoppel certificates. Seller's liability under the representations or
warranties under Section 6.A.(v) as to a particular tenant shall terminate
upon the sooner of: (i) 270 days from the Closing Date, and (ii) if Purchaser
subsequently receives an Estoppel Certificate for the applicable tenant
(provided, if Purchaser receives an Estoppel Certificate which confirms some
but not all of the matters which are the subject of the representations and
warranties under Section 6.A.(v), then as to such Tenant, (x) if the Estoppel
Certificate was received prior to Closing, the representations and warranties
set forth in Section 6.A.(v) shall be deemed to omit such matters stated on
the Estoppel Certificate as to such matters and (y) if received after Closing,
the representations and warranties under Section 6.A.(v) shall cease to
survive as to such matters, but shall continue to survive for the remainder of
the survival period described in clause (i) above as to matters not contained
in such Estoppel Certificate. Purchaser's failure to receive any Estoppel
Certificate shall not entitle Purchaser to terminate this Agreement or to
exercise any remedy hereunder except in the event of a breach by Seller (when
made) of any representation or warranty set forth in Section 6A(v), until the
Representations Expiration Date.
C. Closing Prorations and Adjustments
(i) The following items are to be prorated or
adjusted (as appropriate) as of 11:59 p.m. on the day before the Closing Date
and reprorated (if necessary) pursuant to Section 4(C)(ii) below, it being
understood that for purposes of prorations and adjustments, Seller shall be
deemed the owner of the Property on the day before the Closing Date, and
Purchaser shall be deemed the owner of the Property on the Closing Date:
(a) real estate and personal property taxes
based on the fiscal year used by the taxing authority and assessments for
improvements commenced after the date of this Agreement (on the basis of the
most recent ascertainable tax or assessment bill if the current
<PAGE>
bill is not then available), with Seller obligated to pay all assessments
relating to improvements in progress or completed as of the date of this
Agreement;
(b) the "minimum" or "base" rent payable by
tenants under the Leases; provided, however, that rent and all other sums which
are due and payable to Seller by any tenant but uncollected as of the Closing
shall not be adjusted, but Purchaser shall cause the rent and other sums for the
period prior to Closing to be remitted to Seller if, as and when collected. At
Closing, Seller shall deliver to Purchaser a schedule, certified to be complete
and accurate by Purchaser and Seller (to their knowledge), of all such past due
but uncollected rent and other sums owed by tenants (including without
limitation those described in paragraphs (c) and (d) below). Purchaser shall
include the amount of such rent and other sums in the first bills thereafter
submitted to the tenants in question after the Closing, and shall continue to do
so for twelve (12) months thereafter. In connection with the allocation of such
uncollected rent and other sums, the parties shall disregard any purported or
attempted designation by tenants of the months or periods to which their
payments should be applied. Purchaser shall not be obligated to start a law suit
to collect any such sums or to evict any tenant for the failure to pay any such
sums but Seller shall retain the right to do so after the Closing provided
Purchaser may not seek to terminate any Lease or evict any tenant. However,
Purchaser shall promptly remit to Seller any such rent or other sums paid by
scheduled tenants, but only if there is no deficiency in the then current rent
and such other sums;
(c) to the extent not set forth on the
schedule of uncollected rent described in Section 4(C)(i)(b) above, "percentage"
or "overage" rent that is (1) attributable to any Percentage Rent lease year in
which the Closing Date falls and (2) not yet due or payable (not including
estimated payments) as of the Closing Date (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 Date and sales reports of any tenants whose Percentage
Rent lease years expire after the Closing, and the amount of any Current Year
Percentage Rent shall be payable in accordance with such tenant's Lease as
existing as of the Closing Date, 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
Date (in proportion to the relative number of days in the subject year occurring
prior and subsequent to the Closing Date), promptly after the date when such
rent is received from the tenant. The schedule referred to in Section 4(C)(i)(b)
above shall include an itemized breakdown of the total estimated payments made
by each tenant as of the Closing Date on account of Current Year Percentage
Rent;
(d) to the extent not set forth on the
schedule of uncollected rent described in Section 4(C)(i)(b) above, 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 Date falls (collectively, "Current Year
<PAGE>
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 Date; 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 shall be refunded directly to the
appropriate tenants. The schedule referred to in Section 4(C)(i)(b) above shall
include an itemized breakdown of the total estimated payments made by each
tenant as of the Closing Date on account of Current Year Operating Charges;
(e) Seller and Purchaser shall, as to each
of the Leases set forth on Exhibit V and any lease or amendment entered into
after the date hereof, allocate the responsibility for all leasing costs
(including but not limited to tenant improvement costs, tenant allowances,
leasing commissions, and attorneys' fees), as follows: Leasing costs payable
pursuant to leases and lease amendments to be assigned to Purchaser are to be
prorated between Purchaser and Seller as follows: Purchaser shall pay
"Purchaser's Pro Rata Share" and shall credit Seller for any part of
"Purchaser's Pro Rata Share" that has already been paid by Seller as of Closing,
and Seller shall pay "Seller's Pro Rata Share" and shall credit Purchaser for
any portion of "Seller's Pro Rata Share" that has not yet been paid by Seller as
of Closing. "Purchaser's Pro Rata Share" shall be a portion of the leasing costs
equal to the percentage that the base rent required to be paid under the
applicable Lease for the period from and after the Closing Date bears to the
total base rent required to be paid under the Lease over the entire term,
without regard to extension or cancellation options. "Seller's Pro Rata Share"
shall be the portion of leasing costs equal to the percentage that the base rent
required to be paid under the applicable Lease prior to Closing bears to the
base rent required to be paid under the Lease over the entire term, without
regard to extension or cancellation options. Except as aforesaid, Purchaser will
be responsible for and pay when due, if Closing occurs, all leasing costs for
Leases, to the party entitled to such payment and in accordance with the
Management Agreement, as fully as if the Management Agreement had terminated on
the Closing Date (whether or not the Management Agreement is in fact terminated
as of the Closing Date). Seller and Purchaser agree to pay when due all leasing
costs for which each is responsible, and to pay any leasing commissions payable
by each under this Agreement in accordance with the Management Agreement;
(f) the amount of unapplied security
deposits and other tenant deposits paid under the Leases, and the tenants'
portion of any interest required to be paid thereon, if any, which shall be paid
or credited to Purchaser at Closing;
(g) to the extent not paid by tenants, gas,
water, electric, telephone and all other utility and fuel charges, fuel on hand
(at cost plus sales tax), and any deposits with utility companies (to the extent
possible, utility prorations will be handled by final meter readings obtained
from the utility providers on the day immediately preceding the Closing Date);
<PAGE>
(h) amounts due and prepayments under the
Service Contracts assigned to Purchaser under this Agreement;
(i) assignable license and permit fees;
(j) contributions of Seller to the
Promotional Organizations shall be adjusted and prorated by the parties based
upon the period to which such charges relate and any transferable deposits by
tenants with respect to such Promotional Organizations, all cash on hand and in
bank accounts and all reserves of such Promotional Organizations shall be paid
or credited to Purchaser at the Closing; and
(k) other similar items of income and
expenses of operation if and to the extent not paid or reimbursed by Tenants.
(ii) If any item of income or expense set forth in
this Section 4(C) is subject to final adjustment after Closing, then Seller and
Purchaser shall make, and each shall be entitled to, an appropriate reproration
to each such item promptly when accurate information becomes available. Any such
reproration shall be paid promptly in cash to the party entitled thereto.
(iii) For purposes of this Section 4(C). the amount
of any expense credited by one party to the other shall be deemed an expense
paid by that party. The terms of this Section 4(C), to the extent they call for
adjustments, prorations or payments after Closing (collectively, "Post-Closing
Adjustments"), shall survive the Closing.
(iv)(a) It is the intention of the parties that
except as otherwise specifically provided above, Seller shall be entitled to all
income and responsible for all expenses accrued during the period of time up to
but not including the Closing Date, and the Purchaser shall be entitled to all
income and responsible for all expenses accrued during the period of time from,
after and including the Closing Date (as if the Management Agreement terminated
at Closing, even if the Management Agreement is instead assigned at Closing)
(b) Except as otherwise provided herein, in
the Management Agreement or in any document or instrument to be executed at the
Closing, as between Seller and Purchaser, if the closing occurs: (1) Seller
shall pay and be responsible for any liabilities resulting from claims for
injury to or death of persons which arise prior to June 30, 1997, (and if any
such amount is subject to a judgment lien as of Closing, then, subject to
Section 3.C.(ii)(b), Seller shall either credit Purchaser for such amount at
Closing or discharge such liability or provide adequate security for the contest
of such liability), and (2) Purchaser shall pay and be responsible for any
liabilities resulting from claims for injury to or death of persons which arise
from and after June 30, 1997. Purchaser and Seller shall cooperate with each
other to the extent reasonably necessary in connection with the defense of any
such claims. The provisions of this subparagraph (iv) shall survive the Closing,
and shall not benefit any third party.
<PAGE>
D. Transaction Costs
Purchaser shall pay the cost of the title insurance premium
and the survey. Seller shall pay the cost of all transfer taxes or document
stamps attributable to the Deed. All other closing and transaction costs
(including, without limitation, sales and use taxes, mortgage or intangible
taxes and similar taxes or charges and recording charges) shall be paid by
Purchaser, except that escrow fees shall be divided equally between Purchaser
and Seller. Seller and Purchaser shall, however, be responsible for the fees
of their respective attorneys.
E. Possession
Upon Closing, Seller shall deliver to Purchaser possession
of the Property.
5. OPERATION OF PROPERTY PRIOR TO CLOSING
A. (i) Notwithstanding anything to the contrary contained in
the Management Agreement:
(a) Prior to expiration of the Review
Period, and except for the "Consent Transactions" (as defined below), Seller may
in the ordinary course of business modify, extend, renew, cancel or permit the
expiration of any Lease or Service Contract, or enter into any proposed Lease or
Service Contract which Service Contract is terminable as of Closing or upon 30
days notice without any fee, without Purchaser's consent, except that Seller may
not without Purchaser's advice and consent in each instance (which shall not be
unreasonably withheld or delayed) modify, extend, renew or cancel, or enter
into, any lease (I) for any space now occupied or hereafter vacated by any
"Anchor Tenant" or "Major Tenant" (as those terms are defined on Exhibit T) (II)
for any movie theater, or (III) for an Ames Stores, or enter into a Service
Contract which Service Contract is not terminable upon 30 days notice, or as of
Closing (collectively, "Consent Transactions"). Seller will cooperate with
Purchaser, as Purchaser may reasonably request, to cause General Cinema to amend
its Lease in the manner described on Exhibit X.
(b) After the expiration of the Review
Period, Seller may not modify, extend, renew, cancel or permit the expiration of
any Lease or Service Contract, or enter into any proposed Lease or Service
Contract, without Purchaser's prior consent, which may not be unreasonably
delayed or withheld.
(c) Should Seller seek in writing
Purchaser's consent for any such action, Purchaser shall respond in writing to
Seller (therein giving consent or specifying the precise nature of Purchaser's
objection to the action) within five (5) business days of receipt of Seller's
request. If Purchaser does not respond within said five (5) business day period,
Purchaser shall be deemed conclusively to have consented to the action requested
by Seller.
(ii) At least thirty (30) days prior to the Closing,
Purchaser will advise Seller as to which Service Contracts, if any, will be
assigned to Purchaser at the Closing. As to
<PAGE>
any of the other Service Contracts, Seller shall upon written request by
Purchaser give written notice canceling such Service Contract as of the Closing
Date and Purchaser shall pay any cancellation fee in connection therewith.
B. 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 Tangible Personal Property except as may be required for
repair or replacement or to retire obsolete property; Seller shall cause any
property so removed to be promptly replaced by property of equal function and
of equal or greater quality.
C. From the date hereof until the Closing or earlier
termination, Seller shall keep all existing insurance for the Property (as
described in Exhibit L) in full force and effect. Promptly after execution of
this Agreement, Seller agrees (a) to purchase such additional insurance as may
be necessary to reduce the deductible under Seller's property/business
interruption/boiler and machinery insurance coverage to $5,000 and (b) to name
Purchaser and Pennsylvania Real Estate Investment Trust (or Titleholder,
provided Pennsylvania Real Estate Investment Trust notifies Seller in writing
of the identity of Titleholder) as named insureds as their interests may
appear, under the Seller's general and umbrella liability (including
automobile liability) insurance coverage and as loss payees under the Seller's
property/business interruption/boiler and machinery insurance coverage.
D. Seller also covenants that between the date of this
Agreement and the Closing Date:
(i) Seller shall not take any action which violates
the Management Agreement, or fail to take any action required to be taken under
the Management Agreement (including without limitation the failure to spend
money in accordance with an Approved Budget pursuant to the Management Agreement
or in order to comply with the Management Agreement), and shall not direct
Purchaser as manager under the Management Agreement to take any action which
violates the Management Agreement, or to fail to take any action required to be
taken under the Management Agreement (including without limitation the failure
to spend money in accordance with an Approved Budget pursuant to the Management
Agreement or in order to comply with the Management Agreement), (1) which would
cause the Property to be operated, managed and maintained other than in a
substantially similar manner as the Property is currently operated, managed and
maintained, (2) which would violate or continue the violation of any Law (as
defined below), (3) which would violate the provisions of this Agreement, or (4)
which would cause any of the representations and warranties of Seller contained
in this Agreement to be incorrect, in any material respect as of the Closing, or
(5) which would cause any improvements, painting, repairs, alterations or any
other tenant finish work required to be performed by the landlord under the
Leases (or any amendments or extensions thereof) by their terms prior to Closing
not to be performed on or prior to Closing.
(ii) Without limiting the generality of the preceding
paragraph (i):
<PAGE>
(a) Seller shall timely comply with its
obligations as Owner under the Management Agreement.
(b) Seller shall not cause any "Hazardous
Substances" (as defined below) to be placed in, on or under the Property in a
manner or in quantities that require remediation under applicable "Environmental
Laws" (as defined below).
(c) Seller shall not grant any new liens or
encumbrances against the Property, or grant any easements affecting the
Property.
(d) Seller shall not release or modify any
of the Guaranties and Warranties without the Purchaser's prior consent.
(e) Intentionally Omitted.
(f) Unless a Lease is terminated, Seller may
not apply the tenant security or other deposits under that Lease to cure any
defaults under that Lease.
E. Seller shall not be deemed to have breached any covenant
set forth in this Section 5 if the failure of such covenant to be complied
with is the result of an act or omission of Purchaser which is not authorized
by, or is in violation of, the Management Agreement.
6. REPRESENTATIONS
A. Seller's Representations and Warranties: Seller represents
and warrants to Purchaser that as of the date of this Agreement (unless
otherwise stated below):
(i) Seller is a duly formed and validly existing
corporation organized under the laws of Illinois. Seller is authorized to own
and convey title to land in the State of Massachusetts.
(ii) Seller has the full legal right, power and
authority to execute and deliver this Agreement and all documents now or
hereafter to be executed by it pursuant hereto (collectively, the "Seller's
Documents"), to consummate the transaction contemplated in this Agreement, and
to perform its obligations under this Agreement and the Seller's Documents. The
person signing this Agreement on behalf of Seller is authorized to do so.
(iii) Seller has not been served with any litigation
which is still pending with respect to the Property that would adversely affect
Seller's ability to perform its obligations under this Agreement, or that would
affect title to the Property after Closing or the enforcement of any of the
Leases, or that would materially and adversely affect the financial condition or
operation of the Property.
(iv) To Seller's knowledge, Purchaser has been given
access to, or possession of, complete and accurate copies of the Leases, the
Permits and Licenses, the
<PAGE>
Guaranties and Warranties, the Service Contracts and the Plans and Reports (and
all amendments thereto) existing of as December 31, 1996.
(v) (a)(1) the information contained in the schedule
of leases attached to and made a part of this Agreement as Exhibit B (the "Lease
Schedule") is complete and accurate as of December 31, 1996; and (2) there were
no leases, or to Seller's Knowledge, tenancies or other rights to occupy the
Property as of December 31, 1996 other than those set forth in the Lease
Schedule.
(b) Except as set forth in the Lease Schedule or as
previously disclosed to or learned by Purchaser as manager under the Management
Agreement:
(1) No action or proceeding has been
instituted against Seller (in which Seller has received process) by any tenant
of the Property which is presently pending in any court, except with respect to
claims involving personal injury or property damage, other than those referred
to in Exhibit M attached to and made a part of this Agreement and, with the
exception of claims or offsets referred to in Exhibit N, there are no
outstanding written claims for rent offsets or otherwise by any tenants against
Seller.
(2) Seller holds no security or other tenant
deposits.
(3) All security and other tenant deposits
have been held and, where applicable, returned in compliance with all applicable
rules, ordinances and statutes.
(4) There are no leasing commissions
outstanding which are payable out of rents.
(5) To Seller's Knowledge, each Lease is in
full force and effect.
(6) No default exists on the part of Seller,
or to Seller's Knowledge, any tenant under any Lease.
(7) No tenant has any defense, offset or
counterclaim against or with respect to rent and other sums payable by it under
its Lease except as set forth in its Lease.
(8) There are no concessions, free rent
periods, tenant improvement obligations or improvement allowances to any tenant
not specified in the applicable Lease.
If any Lease contains provisions which are inconsistent with the foregoing
representations and warranties, such representations and warranties shall be
deemed modified to the extent necessary to eliminate such inconsistency and to
conform such representations and warranties to the provisions of such Lease.
<PAGE>
(vi) Intentionally Omitted.
(vii)(a) Except as may have been previously disclosed
to or learned by Purchaser as manager under the Management Agreement or as
described in the documents set forth on Exhibit Y ("Environmental Reports"):
(1) Seller has no Knowledge of any failure
to comply with any applicable laws, regulations, ordinances, codes, judgments,
or other governmental requirements (collectively, "Laws") with respect to the
use, occupancy, construction or condition of the Property (collectively,
"Violations"), including without limitation zoning, planning, building, safety,
health, electrical, plumbing, or fire Laws and "Environmental Laws" (as defined
below) which has not been corrected to the satisfaction of the appropriate
governmental authority prior to the date of this Agreement.
(2) No written notice has been received from
any insurer of the Property requesting any improvements, alterations, additions,
corrections, or other work in, on or about the Property. Purchaser shall be
promptly notified if any such notice is received that Seller did not obtain from
Purchaser as manager under the Management Agreement.
(b) Without limiting the preceding subparagraph (a),
except as may have been previously disclosed to or learned by Purchaser as
manager under the Management Agreement or as described in the Environmental
Reports, to Seller's Knowledge:
(1) No enforcement action for violation of
Environmental Laws has been taken while Seller owned the Property, or is now
pending or threatened by any governmental authority with respect to the
Property.
(2) No Hazardous Substance is present on the
Property that is handled or stored in a manner, or is present in quantities,
which require remediation under applicable Environmental Laws.
(3) There are no underground or above ground
storage tanks at the Property.
As used in this Agreement, the term "Hazardous Substances" means any
hazardous, toxic, corrosive or flammable substance or waste, pollutant or
contaminant, including without limitation petroleum, petroleum products, PCBs
and asbestos containing materials and including those defined as such under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. Section 9601, et. seq.; the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6903(5); the Clean Water Act, 42 U.S.C.
Section 7401, et. seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et.
seq.; or under other similar applicable federal or state laws and regulations
(collectively, "Environmental Laws").
<PAGE>
(viii) To Seller's Knowledge, Exhibit C attached to
and made a part of this Agreement is a complete and accurate schedule of
material items of Tangible Personal Property as of the date of this Agreement.
(ix) To Seller's Knowledge, Exhibit W attached to and
made a part of this Agreement is a complete list of the Service Contracts and
Seller is not in default under any of the Service Contracts.
(x) Attached to and made a part of this Agreement as
Exhibit Q is a complete and accurate list of all Permits and Licenses affecting
the Property. To Seller's Knowledge, none of the Permits and Licenses have been
revoked and Seller has received no notice that any Permit or License is subject
to revocation.
(xi) Attached to and made a part of this Agreement as
Exhibit L is a complete and accurate schedule of all insurance now carried by
Seller with respect to the Property.
(xii) Seller is not a party to an unrecorded
agreement relating to the installation or use of any water, sanitary sewer or
septic system.
(xiii) Except as disclosed on Exhibit R, there are no
existing claims under any of the Guaranties and Warranties.
(xiv) Seller has received no written notices that it
is in default under the mortgage loan encumbering the Property.
B. Purchaser's Representations and Warranties Purchaser
represents and warrants to Seller that as of the date of this Agreement:
(i) Purchaser is a duly formed and validly existing
corporation organized under the laws of Pennsylvania.
(ii) Purchaser has the full legal right, power and
authority to execute and deliver this Agreement and all documents now or
hereafter to be executed by Purchaser pursuant to this Agreement (collectively,
the "Purchaser's Documents"), to consummate the transaction contemplated hereby,
and to perform its obligations hereunder and under Purchaser's Documents.
C. Seller (as of the end of the Review Period) and Purchaser
(as of Closing) shall be deemed to remake and restate the representations and
warranties set forth in this Section 6 above. Should Seller proceed to Closing
with the Knowledge of Purchaser's violation of any representation or warranty
contained in this Section 6, Seller will be conclusively deemed to have waived
any remedy therefor. Should Purchaser proceed to Closing with Knowledge
obtained prior to the end of the Review Period, of Seller's violation of any
representation or
<PAGE>
warranty of Seller contained in this Section 6, Purchaser will be conclusively
deemed to have waived any remedy therefor, including any adjustment in Purchase
Price.
D. The representations and warranties set forth in Section 6
above, as of the date made (or deemed made) shall survive the Closing, but any
"Claims" (as defined below) thereunder must be made in writing within 270 days
after Closing (the "Representations Expiration Date") or they shall thereafter
be deemed to have lapsed and to be null, void and of no further force or
effect.
E. No inspection or examination by Purchaser shall limit
Purchaser's right to rely on the representations and warranties of Seller
contained herein except as set forth in Section 6.C. Purchaser agrees to
promptly notify Seller if Purchaser becomes aware that any representation or
warranty is untrue.
7. CASUALTY LOSS AND CONDEMNATION
If, prior to the end of the Review Period, the Property or any
material part thereof shall be condemned, or destroyed or damaged by fire or
other casualty, Seller shall promptly so notify Purchaser. In the event the
effect of such condemnation or casualty occurring prior to the end of the
Review Period is material (as hereinafter defined), Purchaser shall have the
option either to terminate this Agreement or to consummate the transaction
contemplated by this Agreement notwithstanding such condemnation, destruction
or damage. If Purchaser elects to consummate the transaction contemplated by
this Agreement or if a casualty or condemnation is immaterial or occurs after
the end of the Review Period, Purchaser may not terminate this Agreement but,
providing Closing occurs, shall be entitled to receive the condemnation
proceeds or settle the loss under all policies of insurance applicable to the
destruction or damage and receive the proceeds of insurance applicable
thereto, subject to the prior rights thereto of holder of the existing first
mortgage covering the Property ("Existing Lender"), and Seller shall, at
Closing, execute and deliver to Purchaser all customary proofs of loss,
assignments of claims and other similar items; provided, however, that in the
event Existing Lender applies any such insurance proceeds in reduction of the
principal balance of the existing loan in accordance with the provisions of
the existing loan documents, then Purchaser shall be entitled at Closing to a
credit against the Purchase Price in the amount of the insurance proceeds so
applied. If, upon a material condemnation or casualty prior to the end of the
Review Period, Purchaser elects to terminate this Agreement, the Initial Down
Payment shall be returned to Purchaser by the Seller, in which event this
Agreement shall, without further action of the parties, become null and void
and neither party shall have any further rights or obligations under this
Agreement. For purposes of this provision, a condemnation or casualty loss
shall be deemed to be "material" if (i) the cost of repairing or restoring the
premises in question would be, in the opinion of an independent architect
selected by Seller and reasonably approved by Purchaser, equal to or greater
than One Million and No/100 Dollars ($1,000,000.00), (ii) such loss would
materially and detrimentally impair access to the Property or its improvements
or common areas after Closing, or (iii) such loss results in the termination
of the Lease of an "Anchor Tenant" (defined in Exhibit T) or two (2) or more
"Major Tenants" (defined in Exhibit T) or (iv) such loss results in the
termination of Leases for other tenants occupying, in the aggregate, fifteen
percent (15%) or more of the gross leasable
<PAGE>
area of the Property. The provisions of this Section shall supersede the
provisions of any Law regarding the allocation of the risk of loss between
buyers and sellers.
8. BROKERAGE
Purchaser and Seller each hereby represents and warrants to the other
that it has not dealt with any broker, finder or other party in connection
with the negotiation of this Agreement or otherwise in connection with the
Property. Seller and Purchaser shall each indemnify and hold the other
harmless from and against any and all claims of all other brokers and finders
claiming by, through or under the indemnifying party and in any way related to
the sale and purchase of the Property, this Agreement or otherwise, including,
without limitation, attorneys' fees and expenses incurred by the indemnified
party in connection with such claim.
9. DEFAULT AND REMEDIES
A. Notwithstanding anything to the contrary contained in
this Agreement, if Seller has breached a representation or warranty hereunder
(as of the date made or deemed made) or breaches an obligation under this
Agreement at any time after the end of the Review Period, then: (1) Purchaser
shall be obligated to close in accordance with this Agreement and (2) as
Purchaser's sole remedy, Purchaser may make a claim in accordance with Section
12.L hereof if Seller fails to cure such breach after written notice from
Purchaser, except that:
(i) if Seller's breach consists of (w) Seller's
failure to deliver to Purchaser evidence of the consent of The
Northwestern Mutual Life Insurance Co. as provided in section 10.G of
that certain Purchase and Sale Agreement dated June 30, 1997 between
Magnolia Retail Associates, L.L.C. and Purchaser for Magnolia Mall,
Florence, South Carolina and/or (x) a failure to deliver title to the
Property at Closing subject only to Permitted Exceptions and/or (y) a
failure to deliver the items described in Sections 4.B.(i)(a) through
(q) duly executed by Seller as required and/or (z) a breach of
Section 5.C hereof which results in an actual loss to Purchaser which
Seller refuses to credit or does not credit Purchaser at Closing (any
of the foregoing, "Major Breach"), and the Major Breach continues for
ten (10) days after Purchaser has given Seller notice thereof, then,
as Purchaser's sole and exclusive remedy hereunder, Purchaser may
terminate this Agreement, in which event the Down Payment theretofore
delivered to Seller shall be returned to Purchaser, together with
(except in the case of a Major Breach described in clause (w) above)
Purchaser's actual out-of-pocket costs incurred in connection with
this transaction as of the date of such termination not to exceed
$75,000 in the aggregate (and Purchaser shall provide documentation
evidencing such costs to Seller) ("Termination Damages"), and this
Agreement shall be null and void, and neither party shall have any
rights or obligations under this Agreement, and in no event shall
Purchaser be entitled to recover additional money damages against
Seller or to compel Seller to spend any sums of money in excess of
those specifically required under this Agreement; and
(ii) Purchaser shall retain all rights and remedies
available to Purchaser at law, in equity or under this Agreement, and
to sue for return of the Down Payment and
<PAGE>
payment of the Termination Damages, if Seller made any intentional
misrepresentation when initially made or commits fraud in connection
with this Agreement; provided in no event shall Purchaser be entitled
to seek punitive, exemplary, special or consequential damages, and any
action for damages shall be limited to actual damages.
Purchaser and Seller acknowledge and agree that any
representation or warranty of Seller which is true as of the end of the Review
Period but becomes untrue thereafter, shall not be deemed a default or breach
by Seller (unless caused by an intentional breach by Seller of a covenant set
forth in this Agreement) in any event and shall not excuse Purchaser from
proceeding to Closing.
Purchaser and Seller agree that the remedy of termination of
this Agreement shall be available to Purchaser only in the event of a Major
Breach.
B. If Purchaser fails to close in accordance with the terms
of this Agreement, the Down Payment shall be retained by Seller as liquidated
damages which shall be Seller's sole remedy for such failure. Seller and
Purchaser acknowledge and agree that: (i) the Down Payment is a reasonable
estimate of and bears a reasonable relationship to the damages that would be
suffered and costs incurred by Seller as a result of having withdrawn the
Property from sale and the failure of Closing to occur due to a default of
Purchaser under this Agreement; (ii) the actual damages suffered and costs
incurred by Seller as a result of such withdrawal and failure to close due to
a default of Purchaser under this Agreement would be extremely difficult and
impractical to determine; (iii) Purchaser seeks to limit its liability under
this Agreement to the amount of the Down Payment in the event this Agreement
does not close due to a default of Purchaser under this Agreement; and (iv)
such amount shall constitute valid liquidated damages.
C. After Closing and subject to any limitations set forth in
this Agreement, including but not limited to Section 12.L, Seller and
Purchaser shall, subject to the terms and conditions of this Agreement, have
such rights and remedies as are available at law or in equity, but only for
such obligations as expressly survive Closing; except that neither Seller nor
Purchaser shall be entitled to recover from the other consequential,
exemplary, punitive or special damages.
10. CONDITIONS PRECEDENT
A.(i) Subject to Sections 11, 12(G) and 12(H) below, Purchaser
shall have the period of time beginning on the date hereof and ending on June
30, 1997, within which to inspect and investigate the Property and its
operations (the "Review Period"). If Purchaser determines that the Property is
unsuitable for its purposes and notifies Seller of such decision within the
Review Period (or if Purchaser fails to deposit the Final Down Payment by
expiration of the Review Period), the Initial Down Payment shall be returned to
Purchaser, at which time this Agreement shall be null and void and neither party
shall have any further rights or obligations under this Agreement, except those
which by their terms expressly survive such termination. Purchaser need not
disclose its reasons for termination. Seller shall cooperate with Purchaser to
allow Purchaser and Purchaser's Representatives free access to the Property, to
allow Purchaser and Purchaser's Representatives free access to all information
and documentation, and otherwise
<PAGE>
to promptly provide such information and documentation, relating to the Property
and its operations as Purchaser may reasonably request (including, without
limitation, tenant sales reports and other financial information, income and
expense statements for the prior three years and appraisals in Seller's
possession (with such material deleted from the appraisals as Seller may, in its
reasonable discretion, elect to delete)) but excluding Excluded Items, to the
extent such information and documentation has not been previously delivered to
or generated by Purchaser pursuant to the Management Agreement and is in
Seller's possession or control, and to the extent Seller is not prohibited by
written agreement from disclosing such information and documentation.
Purchaser's failure to object within the Review Period shall be deemed a waiver
by Purchaser of the condition contained in this Section 10.
(ii) Purchaser acknowledges that, notwithstanding
Section 9.1(g) of the Management Agreement (and all other management agreements
between Purchaser and Seller's affiliates), if Purchaser terminates this
Agreement in accordance with this paragraph, the Management Agreement (and all
other management agreements between Purchaser and Seller's affiliates), may be
terminated by an owner due to Purchaser's failure to acquire the Property,
unless and only if Purchaser has terminated this Agreement due to a Major Breach
which remains uncured during, and as of the end of, the cure period set forth
for a Major Breach in Section 9.A. hereof or if Purchaser terminates this
Agreement under Section 3.C.(ii)(B)(2) hereof.
B. As the only condition of Purchaser's obligation to
complete Closing, Seller must not have committed a Major Breach which
continues beyond applicable notice and cure periods.
C. As a condition of Seller's obligation to complete
Closing, Purchaser must close in accordance with the provisions of this
Agreement (beyond applicable notice and cure periods).
11. PROPERTY INFORMATION AND CONFIDENTIALITY
A. Purchaser agrees that, prior to the Closing, Purchaser
shall use diligent efforts to keep all "Property Information" (as defined
below) confidential, and that Property Information shall not, without the
prior consent of Seller, be disclosed by Purchaser or Purchaser's
Representatives (as hereinafter defined), except to a REIT Assignee and its
Purchaser Representatives, and that Property Information will not be used for
any purpose other than investigating and evaluating the Property or fulfilling
Purchaser's responsibilities as manager under the Management Agreement.
Moreover, Purchaser agrees that, prior to the Closing, the Property
Information will be transmitted only to a REIT Assignee, and to the
Purchaser's, Representatives and such REIT Assignee, who need to know the
Property Information for the purpose of investigating and evaluating the
Property, and who are informed by Purchaser of the confidential nature of the
Property Information and who agree in writing to comply with and be bound by
this Section 11 for the benefit of Seller. The provisions of this Section
11(A) shall not apply to Property Information which is disclosed in compliance
with the Management Agreement, or which is a matter of public record and shall
not be used or construed by Seller to impede Purchaser from complying with its
obligations under the Management Agreement or from
<PAGE>
complying with laws, including, without limitation, governmental regulatory,
disclosure, tax and reporting requirements, subpoenas or court orders.
B. Purchaser and Seller, for the benefit of each other,
hereby agree that between the date of this Agreement and the Closing Date,
they will not release or cause or permit to be released any press notices,
publicity (oral or written) or advertising promotion relating to, or otherwise
announce or disclose or cause or permit to be announced or disclosed, in any
manner whatsoever, the terms, conditions, parties to or substance of this
Agreement or the transactions contemplated herein, without first obtaining the
written consent of the other party hereto as to the portion of the disclosure
relating to this transaction, the Property or such party and its affiliates,
which consent shall not be unreasonably withheld. Seller agrees not to object
to any disclosure (including public announcements) required by law to the
extent it identifies the parties, property and purchase price (and method of
payment thereof) in connection with this transaction. Failure to disapprove
any disclosure within two (2) business days of receipt shall be deemed an
approval. It is understood that the foregoing shall not preclude either party
from discussing the substance or any relevant details of the transactions
contemplated in this Agreement, subject to the terms of this Section 11, with
a REIT Assignee or any of Purchaser's or such REIT Assignee's attorneys,
accountants, professional consultants or potential lenders, as the case may
be, or prevent either party hereto from complying with applicable laws,
including, without limitation, governmental regulatory, disclosure, tax and
reporting requirements, subpoenas or court orders, or prevent Seller from
coordinating with tenants to obtain the Estoppel Certificates.
C. Deleted Prior to Execution.
D. In the event this Agreement is terminated, Purchaser and
Purchaser's Representatives shall promptly return to Seller all originals and
copies of the "New Seller-Supplied Information" (defined below) in the
possession of Purchaser and Purchaser's Representatives (or certify to Seller
that the same has been destroyed).
E. As used in this Agreement, the term "Property Information"
shall mean:
(i) All information and documents relating to the
Property, the operation thereof or the sale thereof (including, without
limitation, Leases, Service Contracts, labor contracts and licenses) generated
by Purchaser pursuant to the Management Agreement, or furnished to, or otherwise
made available by Seller or any of Seller's Affiliates for review by, Purchaser
or a REIT Assignee, or their respective directors, officers, employees,
affiliates, partners, brokers, agents, title insurers, surveyors or other
representatives, including, without limitation, attorneys, accountants,
contractors, consultants, engineers and financial advisors (collectively,
"Purchaser's Representatives"), and if and to the extent such information and
documents have not been previously furnished to or otherwise made available to
Purchaser, or generated by Purchaser, under the Management Agreement such
Property Information shall constitute "New Seller-Supplied Information".
(ii) All analyses, compilations, data, studies,
reports or other information or documents prepared or obtained by Purchaser or
Purchaser's Representatives
<PAGE>
containing or based in any material part on any information or documents
described in the preceding clause (i).
F. In addition to any other remedies available to Seller
under this Agreement, Seller shall have the right to seek equitable relief,
including, without limitation, injunctive relief or specific performance,
against Purchaser or Purchaser's Representatives in order to enforce the
provisions of this Section 11.
G. The provisions of this Section 11 shall survive the
termination of this Agreement.
H. Notwithstanding anything to the contrary contained in
this Section 11 or in the Management Agreement, no failure by Purchaser to
comply with this Section 11 shall give Seller the right to terminate the
Management Agreement or any other Management Agreement between Seller (or its
affiliates) and Purchaser.
12. MISCELLANEOUS
A. All understandings and agreements heretofore had between
Seller and Purchaser with respect to the Property are merged in this
Agreement, which alone fully and completely expresses the agreement of the
parties.
B. Neither this Agreement nor any interest hereunder shall
be assigned or transferred by Purchaser or Seller without the prior written
consent of the other party, except that Purchaser may assign its rights under
this Agreement, to a "TRO Assignee" (as that term is defined in the Management
Agreement) and the TRO Assignee may assign such rights back to The Rubin
Organization, Inc., in either event, without having to first obtain Seller's
consent, provided Seller shall receive written notice of the identity of the
ultimate assignee at least five (5) business days prior to Closing.
C. This Agreement shall not be modified or amended except in
a written document signed by Seller (or its attorneys) and Purchaser (or its
attorneys).
D. Time is of the essence of this Agreement.
E. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Massachusetts.
F. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and delivered
personally, by certified mail, return receipt requested, postage prepaid, by
overnight courier (such as Federal express), or by facsimile transmission
(with confirmation of transmission), addressed as follows:
<PAGE>
If to Seller: Two North Riverside Plaza, Suite 1000
Chicago, Illinois 60606
Attention: George C. Touras
Telephone: 312/466-3635
Facsimile: 312/454-0826
With a copy to: Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
Attention: Douglas J. Lubelchek, Esquire
Telephone: 312/466-3598
Facsimile: 312/454-0335
If to Purchaser: The Rubin Organization, Inc.
The Bellevue
200 South Broad Street
Philadelphia, Pennsylvania 19102
Attention: Alan F. Feldman
Vice President and Secretary
Attention: Gerald Broker, Esquire
Telephone: 215/875-0700
Facsimile: 215/546-0240
With a copy to: Gary W. Levi, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
457 Haddonfield Road
Suite 510
Cherry Hill, New Jersey 08002-2220
Telephone: 609/486-7900
Facsimile: 609/486-4875
John W. Fischer, Esquire
Drinker Biddle & Reath
Suite 300
1000 Westlakes Drive
Berwyn, Pennsylvania 19312
Telephone: 610/993-2221
Facsimile: 610/993-8585
All notices given in accordance with the terms hereof shall be deemed received
three (3) business days after posting (in the case of notices sent by
certified mail), or when delivered personally or otherwise received or receipt
is refused (in the case of all other methods of notice). Either party hereto
may change the address for receiving notices, requests, demands or other
communication by notice sent in accordance with the terms of this Section
12(F).
<PAGE>
G. (i) Purchaser's right of inspection pursuant to Section
10 above shall include the right to enter on the Property, but shall be
subject to the rights of tenants under the Leases and other occupants and
users of the Property. No inspection shall be undertaken without reasonable
prior notice to Seller. Seller shall have the right to be present at any or
all inspections. No inspection shall involve the taking of samples or other
physically invasive procedures without the prior consent of Seller, which
consent may be withheld in Seller's sole discretion. Notwithstanding anything
to the contrary contained in this Agreement, Purchaser shall restore the
Property to its condition existing prior to Purchaser's entry thereon, and
indemnify and hold Seller and Seller's Affiliates, and each of them, harmless
from and against any and all losses, claims, damages and liabilities
(including, without limitation, attorneys' fees incurred in connection
therewith) arising out of or resulting from Purchaser's exercise of its rights
under this Agreement, including, without limitation, its right of inspection
as provided for in Section 10 above. The terms of this the preceding sentence
shall survive the termination of this Agreement.
(ii) Nothing contained in the preceding paragraph (i)
shall be deemed to limit Purchaser's rights as Manager under, or limit its
ability to comply with its obligations as Manager under, the Management
Agreement.
H. Except as provided for in, or as may be done pursuant to,
the Management Agreement, Purchaser or Purchaser's Representatives shall not
contact a tenant or prospective tenant for the Property regarding this
transaction unless Purchaser or Purchaser's Representatives first obtains
Seller's prior written approval therefor (not to be unreasonably withheld or
delayed). Seller shall have the right to be present for all such tenant
interviews.
I. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THAT
CERTAIN ASSET PURCHASE AGREEMENT DATED DECEMBER 31, 1996 BY AND BETWEEN EQUITY
PROPERTIES AND DEVELOPMENT LIMITED PARTNERSHIP AND THE RUBIN ORGANIZATION,
INC. (THE "ASSET PURCHASE AGREEMENT") OR THE MANAGEMENT AGREEMENT (TO THE
EXTENT SET FORTH THEREIN AND SUBJECT TO THE TERMS THEREOF) IT IS UNDERSTOOD
AND AGREED THAT NEITHER SELLER NOR ANY OF SELLER'S AFFILIATES IS 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, 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 INFORMATION 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 EXCEPT AS OTHERWISE
PROVIDED IN THIS AGREEMENT, AT CLOSING SELLER SHALL SELL AND CONVEY TO
PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL
FAULTS" AS OF THE
<PAGE>
END OF THE REVIEW PERIOD. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN
THIS AGREEMENT, THE ASSET PURCHASE AGREEMENT, OR THE MANAGEMENT AGREEMENT (TO
THE EXTENT SET FORTH THEREIN AND SUBJECT TO THE TERMS THEREOF), PURCHASER HAS
NOT RELIED AND WILL NOT RELY ON, AND NEITHER SELLER NOR ANY OF SELLER'S
AFFILIATES IS 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, ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, OR ANY THIRD-PARTY, TO
WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING. PURCHASER
ACKNOWLEDGES 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 OR
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 AND COVENANTS OF SELLER AS ARE
EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON EXPIRATION OF THE REVIEW PERIOD,
EXCEPT FOR SELLER'S REPRESENTATIONS AND WARRANTIES THAT WILL SURVIVE CLOSING,
AND EXCEPT FOR THE SURVIVING REPRESENTATIONS AND WARRANTIES UNDER THE ASSET
PURCHASE AGREEMENT, OR THE MANAGEMENT AGREEMENT (TO THE EXTENT SET FORTH THEREIN
AND SUBJECT TO THE TERMS THEREOF), 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 EXPIRATION OF THE REVIEW PERIOD, SHALL BE
DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER AND SELLER'S AFFILIATES
FROM AND AGAINST ANY AND ALL CLAIMS, 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 EXCEPT FOR
CLAIMS BASED ON FRAUD, CRIMINAL CONDUCT OR INTENTIONAL TORTS, KNOWN OR UNKNOWN,
WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER OR SELLER'S
AFFILIATES 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
<PAGE>
AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE
PROPERTY.
J. In any lawsuit or other proceeding initiated under or
with respect to this Agreement, Purchaser and Seller waive any right they may
have to trial by jury.
K. INTENTIONALLY OMITTED.
L. (i) After Closing, Seller shall not be liable to
Purchaser in respect of obligations under this Agreement which survive Closing
for any amounts in excess of the amount of the "Holdback Funds" (as defined
below), or for any amounts less than Fifty Thousand Dollars ($50,000.00) (the
"Deductible Amount") in the aggregate, Purchaser hereby waiving any and all
claims it may have to such recoveries in excess of, or less than, the
foregoing amounts. The foregoing limitations shall apply only to liabilities
admitted by Seller to exist or proven by Purchaser to exist through the final
adjudication thereof in an appropriate judicial proceeding (a "Final
Judgment"), and not to reprorations made pursuant to Section 4(C)(ii) above.
(ii) In order to secure the obligations and
liabilities of Seller under this Agreement that survive Closing, including
without limitation the obligation to make Post-Closing Adjustments pursuant to
Section 4 above (collectively, "Seller's Surviving Obligations"), and the
obligations of Seller under the Management Agreement which survive if the
Management Agreement is terminated, Seller covenants not to distribute to its
equity owners (except in accordance with clauses (v), (vi) and (vii) below), an
amount of consideration (referred to below as the "Holdback Funds") with a value
equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (either in the form
of cash or a portion of the OP Units, at Seller's election). The term "Holdback
Funds" shall include all interest earned thereon, if any.
(iii) If Purchaser incurs any loss, damage, cost or
expense (including attorneys' fees) for any matter Purchaser believes is covered
under Seller's Surviving Obligations (a "Claim"), and desires to seek recovery
from Seller, Purchaser shall give Seller written notice thereof ("Claim Notice")
describing the Claim in reasonable detail. The Claim Notice shall, if
applicable, be accompanied by appropriate documentation (including by way of
illustration, but not of limitation, receipted bills or canceled checks) and any
appropriate calculations which demonstrate that the Deductible Amount has been
satisfied. If the Claim Notice states a Claim for a specified amount of money,
the Claim Notice shall also be accompanied by appropriate documentation thereof
(including by way of illustration, but not of limitation, estimates by
independent and reputable vendors, contractors, engineers or architects or other
responsible estimators unaffiliated with Purchaser, third party invoices,
receipted bills or canceled checks).
(iv) Seller and Purchaser, acting reasonably and in
good faith, shall attempt to amicably resolve each Claim within thirty (30) days
after its Claim Notice becomes effective. If such amicable resolution results in
an agreed amount payable to Purchaser, Seller shall promptly pay the appropriate
amount to Purchaser out of the Holdback Funds. If such Claim is not amicably
resolved, then Purchaser may proceed to litigate the Claim, and if Purchaser
<PAGE>
obtains Final Judgment in its favor with respect to the Claim, Seller shall
disburse the appropriate amount to Purchaser out of the Holdback Funds.
As used herein, "Final Judgment" means a final
judgment or verdict rendered by a court of competent jurisdiction, after all
appeals (or expiration of all appeal periods, if no appeal is taken).
(v) If no Claim is made before the Representations
Expiration Date, then the Holdback Funds may thereafter be distributed by
Seller.
(vi) If any Claim Notice is given before the
Representations Expiration Date (collectively, "Eligible Claim[s]") Seller shall
not distribute an amount of Holdback Funds in the amount of 150% of such Claims
(but in no event more than $750,000 in the aggregate), and retain such amount
until such time as (i) Purchaser and Seller jointly agree upon disposition of
such funds or (ii) a Final Judgment is entered with respect to such funds. Any
balance may be distributed by Seller as of the Representation Expiration Date.
(vii) Promptly after Purchaser and Seller jointly
agree upon disposition of such funds or Final Judgment with respect to all
Eligible Claims has been entered, Seller shall pay the appropriate amount(s) to
Purchaser, and may distribute the balance of the Holdback Funds, if any, and
this holdback arrangement shall thereupon terminate. Purchaser may in such event
take such legal action to convert any OP Units delivered to Purchaser into cash.
M. Seller and Purchaser hereby designate Title Insurer to
act as and perform the duties and obligations of the "reporting person" with
respect to the transaction contemplated by this Agreement for purposes of 26
C.F.R. Section 1.6045-4(e)(5) relating to the requirements for information
reporting on real estate transaction closed on or after January 1, 1991. In
this regard, Seller and Purchaser each agree to execute at Closing, and to
cause the Title Insurer to execute at Closing, a Designation Agreement,
designating Title Insurer as the reporting person with respect to the
transaction contemplated by this Agreement.
N. Purchaser agrees that it does not have and will not have
any claims or causes of action against any disclosed or undisclosed trustee,
partner, affiliate, beneficiary, principal, member, agent, managing entity,
shareholder, director, officer, or employee of Seller (whether direct or
indirect), including, without limitation, their attorneys, accountants,
consultants, engineers, brokers, and advisors (collectively, "Seller's
Affiliates"), arising out of or in connection with this Agreement or the
transactions contemplated hereby except in the event of fraud, criminal
conduct or intentional tort by such person. Purchaser agrees to look solely to
the Holdback Funds for the satisfaction of any liability or obligation arising
under this Agreement or the transactions contemplated hereby, or for the
performance of any of the covenants, warranties or other agreements contained
herein, and further agrees not to sue or otherwise seek to enforce any
personal obligation against any of Seller's Affiliates with respect to any
matters arising out of or in connection with this Agreement or the
transactions contemplated hereby, except in the event of fraud, criminal
conduct or intentional tort by such person.
<PAGE>
O. Seller shall have the exclusive right to file and control
any tax appeal for the real estate taxes attributable to the period prior to
and including the calendar year 1996 (the "Pre-1997 Tax Period") but shall
keep Purchaser informed of the progress and outcome of any such appeal. To the
extent that Seller shall receive a refund therefor, Seller shall disburse to
any tenant not in default under its Lease a portion of such refund as may be
due that tenant under its Lease. To the extent that Purchaser's assistance is
required in disbursing the refund to the tenants, Purchaser agrees to assist
Seller in that regard at Seller's cost. Purchaser shall have the exclusive
right to file and control any tax appeal for the real estate taxes
attributable to the period after and including the calendar year 1997 (the
"1997 Tax Period"), but shall keep Seller informed of the progress and outcome
of such appeal and subject to Seller's consent as to calendar year 1997 (which
consent shall not be unreasonably withheld or delayed). To the extent that
Purchaser shall receive a refund therefor, Purchaser shall disburse to any
tenant not in default under its Lease a portion of such refund as may be due
that tenant under its Lease. The remainder of the refund, if any, shall be
prorated between Purchaser and Seller as of the proration date provided in
Section 4(C) after deducting therefrom the cost and expenses reasonably
incurred in pursuing the appeal and not charged to tenants. The terms of this
Section 12(O) shall survive the Closing.
P. At Seller's request, Purchaser shall furnish to Seller
copies of any reports prepared by third parties unaffiliated with Purchaser
received by Purchaser relating to any 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).
Q. This Agreement may be executed in any number of
counterparts, any or all of which may contain the signatures of less than all
of the parties, and all of which shall be construed together as a single
instrument. For purposes of this Agreement, a telecopy of an executed
counterpart shall constitute an original.
R. In the event of litigation between the parties with
respect to this Agreement or the transactions contemplated hereby, the
prevailing party therein shall be entitled to recover from the losing party
therein its attorney's fees and costs of suit.
S. Neither party shall record this Agreement or a memorandum
thereof.
T. Seller agrees, at all times prior to and after the
Closing, at Purchaser's cost and with no additional liability to Seller, to
execute and deliver, or cause to be executed and delivered, and to do, or
cause to be done, such other documents and acts as Purchaser may reasonably
deem necessary or desirable to assure the effectiveness and benefits of this
Agreement and to vest in Purchaser title to and ownership of all of the assets
and property being sold to Purchaser under this Agreement.
U. The term "Seller's Knowledge" as used in this Agreement
means (i) actual knowledge possessed by Sharon Polonia, Andrew Levin, or
George Touras or (ii) any written notice respecting any of the matters
contained in this Agreement that has been received by any of such persons but
shall exclude any actual knowledge of (or notice received by) Purchaser or its
<PAGE>
agents or employees which may be imputed to such persons as a result of the
relationship between Seller and Purchaser created by the Management Agreement.
Seller represents to Purchaser that, as of the date of this Agreement, such
persons are the persons within Seller's organization who have management or
supervisory responsibility in connection with the Property and who would
likely have Knowledge of the matters represented by Seller in this Agreement.
The term "Purchaser's Knowledge" as used in this Agreement means (i) actual
knowledge possessed by Pat Berns, Gerald Broker, Tim Colby, Betty Hampilos,
Alan Feldman, Ed Glickman, George Rubin or Richard Brown or (ii) any written
notice respecting any of the matters contained in this Agreement that has been
received by any of such persons. Purchaser represents to Seller that such
persons are the persons within Purchaser's organization who would likely have
knowledge of the matters represented by Purchaser in this Agreement.
V. For purposes of this Agreement, the masculine shall be
deemed to include the feminine and the neuter, and the singular shall be
deemed to include the plural, and the plural the singular, as the context may
require.
W. The invalidity or unenforceability of any provision of
this Agreement shall in no way affect the validity or enforceability of any
other provision.
X. The captions contained in this Agreement are not a part
of this Agreement. They are only for the convenience of the parties and do not
in any way modify, amplify or give full notice of any of the terms, covenants
or conditions of this Agreement.
Y. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal or personal
representatives, heirs, executors, administrators, successors, and permitted
assigns.
Z. Purchaser shall cooperate with Seller and shall execute
any and all documents necessary to allow Seller (or its affiliates) to
effectuate the conveyance of the Property as an exchange under Section 1031 of
the Internal Revenue Code; provided however, that at no time shall Purchaser
be required to take title to real estate other than the Property or incur any
obligations other than those set forth elsewhere in this Agreement. Seller
shall pay all reasonable costs which may be incurred by Purchaser in
connection with such tax free exchange and Seller shall indemnify Purchaser
and hold it harmless from any loss, cost, damage, expense or liability
incurred in connection therewith. Purchaser acknowledges and agrees that
Seller may, if necessary, in order for one or more of its affiliates to
qualify for an exchange, distribute the Property (or one or more undivided
interests therein) to one or more of its equity owners prior to Closing
provided the same shall not relieve Seller of its obligations hereunder and
such distributees shall take subject to the obligations of Seller hereunder
(to the extent of such distribution) without personal liability. No such
exchange may result in the transfer of OP Units to any party other than a
recipient described in Section 2.C. hereof.
AA. By signing this Agreement, Samuel Zell, personally and
unconditionally, guarantees that to the extent that the Down Payment is
required to be re-paid to Purchaser hereunder, such amount shall be re-paid to
Purchaser, and guarantees payment of Holdback Funds
<PAGE>
to Purchaser if, as and when required under Section 12.L. of this Agreement. The
provisions of this paragraph shall not be affected by any amendment to this
Agreement except as otherwise set forth in such amendment. If and to the extent
Samuel Zell makes or is required to make any payment in accordance with the
provisions of this paragraph, Samuel Zell shall be subrogated to Purchaser's
rights against Seller hereunder.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered
this Agreement as of the date first above written.
SELLER:
DIVERSIFIED EQUITY CORPORATION OF ILLINOIS, INC.,
an Illinois corporation
By: /S/ Kelly Stonebraker
-------------------------------------
Its: Vice President
PURCHASER:
THE RUBIN ORGANIZATION, INC., a Pennsylvania corporation
By: /S/ Ronald Rubin
-------------------------------------
Its: CEO
JOINDER
The undersigned, Samuel Zell, hereby executes this
Agreement for the sole purpose of reflecting his agreement to be bound by the
provisions of Section 12.AA. hereof.
/S/ Sheli Z. Rosenberg
------------------------------------------
Sheli Z. Rosenberg as attorney-in-fact for
Samuel Zell, pursuant to
Power of Attorney dated May 15, 1997.
<PAGE>
AGREEMENT REGARDING ASSIGNMENT OF PURCHASE AND SALE
AGREEMENTS
THIS AGREEMENT is made as of the 30th day of June, 1997 between THE
RUBIN ORGANIZATION, INC. (the "Assignor"), a Pennsylvania Corporation, with an
office at The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania,
19102, and PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an unincorporated
association in business trust form created in Pennsylvania pursuant to a Trust
Agreement dated December 27, 1960, as last amended and restated on December
16, 1987 (the "Assignee"), each having an office at 455 Pennsylvania Avenue,
Suite 135, Fort Washington, Pennsylvania 19034.
BACKGROUND
On June 30, 1997, the Assignor entered into the following Purchase
and Sale Agreements (collectively, the "Mall Purchase Agreements"):
A. Purchase and Sale Agreement (the "Dartmouth Mall Agreement") with
Diversified Equity Corporation of Illinois, Inc. (the "Dartmouth Seller") for
the sale and purchase of the real property located in the City of Dartmouth,
Massachusetts, commonly known as the North Dartmouth Mall, and more
particularly described in the Dartmouth Mall Agreement.
B. Purchase and Sale Agreement (the "Magnolia Mall Agreement") with
Magnolia Retail Associates, L.L.C. (the "Magnolia Seller") for the sale and
purchase of various interests in and relating to the retail shopping center
located in the City of Florence, South Carolina, commonly known as Magnolia
Mall, and more particularly described in the Magnolia Mall Agreement.
<PAGE>
In this Agreement, the Assignor and the Assignee desire to set forth
the terms and conditions under which the Assignor will assign all of its
right, title and interest in and to the Mall Purchase Agreements to the
Assignee, and the Assignee will assume the same. Capitalized terms which are
not defined in this Agreement shall have the same meanings ascribed to them in
the Magnolia Mall Agreement.
TERMS
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is acknowledged, the Assignor and the Assignee, intending to be
legally bound, agree as follows:
1. MAGNOLIA MALL AGREEMENT. (a) (i) Concurrently with the
execution of this Agreement, the Assignee shall deposit $1,000,000.00 on account
of the purchase price as required under the Magnolia Mall Agreement.
(ii) Subject to and simultaneously with compliance
by the Assignee with the preceding paragraph (i), the Assignor hereby assigns to
the Assignee, without representation, warranty, or recourse (except as otherwise
expressly provided in this Agreement), all of the Assignor's right, title and
interest in and to the Magnolia Mall Agreement, and the Assignee hereby assumes,
all of the Assignor's obligations under the Magnolia Mall Agreement, including
without limitation the obligation to complete closing thereunder.
(b) On or before July 9, 1997, the Assignee shall pay the
Final Down Payment, in the amount of $4,000,000.00, to the Magnolia Seller as
required under the Magnolia Mall Agreement.
-2-
<PAGE>
(c) The Assignee hereby indemnifies and agrees to hold the
Assignor harmless from and against all cost, loss, liability and expense,
including reasonable attorneys' fees, incurred by the Assignor as a result or
arising out of the Assignee's failure to timely pay the Down Payment.
(d) If (i) closing of the transaction described in the
Letter of Intent (the "Letter of Intent") between the Assignor and the
Assignee dated April 16, 1997 (the "PREIT/TRO Closing"), is not completed for
any reason other than a material default by the Assignor beyond applicable
notice and cure periods under the definitive agreement governing the
transaction described in the Letter of Intent, as a result of which the
Assignee has the right to cancel, and does cancel, such agreement, and (ii)
the Assignee purchases the Magnolia Mall pursuant to the Magnolia Mall
Agreement, then the Assignee shall, effective as of closing thereof, enter
into a management agreement with the Assignor as exclusive management and
leasing agent, on a month-to-month basis upon the same terms and conditions
contained in the Management and Operating Agreement dated as of January 1,
1995 between the Magnolia Seller, as Owner, and Equity Properties and
Development Limited Partnership ("EPDLP"), as Operator, as assigned by EPDLP
to the Assignor as of December 31, 1996.
(e) If the Assignee does not for any reason complete the
closing under the Magnolia Mall Agreement, then the Assignor shall have the
right and option (but not the obligation) to require the Assignee to reassign
all of its rights, title and interest in and to the Magnolia Mall Agreement to
the Assignor for a consideration of $1.00 and upon reimbursement to the
Assignee of the Down Payment under the Magnolia Mall Agreement.
-3-
<PAGE>
2. DARTMOUTH MALL AGREEMENT. (a) The Assignor has deposited the sum
of $1,000,000.00 on account of the purchase price as required thereunder (the
"Dartmouth Deposit").
(b) If and when the PREIT/TRO Closing is completed, then
concurrently with the PREIT/TRO Closing:
(i) The Assignor shall assign to the Assignee all of
the Assignor's right, title and interest in and to the Dartmouth Mall Agreement,
and the Assignee shall assume all of the Assignor's obligations under the
Dartmouth Mall Agreement including without limitation the obligation to complete
closing thereunder, and the Assignor and the Assignee shall execute and deliver
an Assignment and Assumption of Purchase and Sale Agreement consistent with the
provisions of this Agreement.
(ii) The Assignee shall pay or reimburse to the
Assignor the sum of $1,000,000.00 representing the Dartmouth Deposit.
3. REPRESENTATIONS OF ASSIGNOR. As material inducement for the Assignee
to enter into this Agreement, the Assignor represents and warrants to the
Assignee as follows:
(a) As of the date hereof, no fact or condition has been disclosed
to or learned by the Assignor that is in any material respect contrary to or in
conflict with any of the representations or warranties that are made by the
Magnolia Seller "to the Seller's Knowledge" under the Magnolia Mall Agreement
or that are otherwise qualified thereunder to the extent that information may
have been previously disclosed to or learned by the Assignor as manager of the
Magnolia Mall.
-4-
<PAGE>
(b) The Assignor is a duly formed and validly existing corporation
organized under the laws of Pennsylvania. The Assignor has the full legal right,
power and authority to execute and deliver the Magnolia Mall Agreement and this
Agreement and to perform its obligations under this Agreement. The person
signing this Agreement on behalf of the Assignor is authorized to do so.
(c) The Magnolia Mall Agreement has been duly executed by the
Assignor, and assuming due execution by the Magnolia Seller, is in full force
and effect.
4. REPRESENTATIONS OF ASSIGNEE. As material inducement for the Assignor
to enter into this Agreement, the Assignee represents and warrants to the
Assignor as follows:
(a) The Assignee is a duly formed and organized, and validly
existing, unincorporated association in business trust form under the laws of
Pennsylvania. The Assignee has the full legal right, power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement and the Magnolia Mall Agreement. The person signing this Agreement
on behalf of the Assignor is authorized to do so.
(b) The Assignee has paid the Initial Down Payment and the Interim
Down Payment under the Magnolia Mall Agreement.
5. COVENANTS. (a) The Assignee agrees that it shall not further
assign or encumber the Magnolia Mall Agreement, or amend the Magnolia Mall
Agreement in any manner that would materially increase the Purchaser's
obligations thereunder, or enter into any contract to do any of the foregoing
(except as otherwise provided in this Agreement), without the prior written
consent of the Assignor, except that the Assignee may, without the Assignor's
consent, further assign the Magnolia Mall Agreement to a controlled affiliate
of the Assignee.
-5-
<PAGE>
(b) The Assignor and the Assignee each agree that neither shall
further assign or encumber the Dartmouth Mall Agreement, or amend the Dartmouth
Mall Agreement in any manner that would materially increase the Purchaser's
obligations thereunder, or enter into any contract to do any of the foregoing
(except as otherwise provided in this Agreement), without the prior written
consent of the other, except that the Assignee may, without the Assignor's
consent, assign its rights under this Agreement to a controlled affiliate of the
Assignee, and the Assignor's obligations under this paragraph (b) shall no
longer apply if for any reason the transaction contemplated in the Letter of
Intent is canceled or if the PREIT/TRO Closing is not completed.
(c) The Assignor agrees to provide to the Assignee and the Magnolia
Seller the current lease schedule referenced in Section 4.B(ii)(h) of the
Magnolia Mall Agreement, and to provide an affidavit as reasonably requested by
the Title Insurer which relates to matters which are the responsibility of the
Assignor as manager of the Magnolia Mall.
(d) If the Dartmouth Mall Agreement is assigned as contemplated
under this Agreement, the Assignor agrees to provide to the Assignee and the
Dartmouth Seller the current lease schedule referenced in Section 4.B(ii)(h) of
the Dartmouth Mall Agreement, and to provide an affidavit as reasonably
requested by the Title Insurer which relates to matters which are the
responsibility of the Assignor as manager of the North Dartmouth Mall.
6. ENTIRE AGREEMENT. This Agreement expresses the entire agreement
of, and the entire intention of, the parties hereto with respect to subject
matter hereof, and supersedes all prior understandings and agreements, whether
written or oral, among the parties relating to
-6-
<PAGE>
the transaction provided for herein. No prior discussions or drafts of this
Agreement shall have any legal effect or consequence.
7. MODIFICATION. This Agreement may not be modified or amended except
by a written instrument executed by the Assignor and the Assignee.
8. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
9. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
10. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the Seller and the Buyer and their respective legal or
personal representatives, heirs, administrators, executors, successors and
permitted assigns.
11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and all of which taken
together shall constitute
-7-
<PAGE>
a single agreement, with the same effect as if the signatures thereto and
hereto were upon the same instrument. For purposes of this Agreement, a
telecopy of an executed counterpart shall constitute an original.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Agreement to be duly executed the day and year first above written.
WITNESS OR ATTEST: ASSIGNOR:
THE RUBIN ORGANIZATION, INC.,
a Pennsylvania Corporation
/s/ Alan Feldman By:/s/ Ron Rubin
- --------------------------- --------------------------
Name: Alan Feldman Name: Ron Rubin
Title: Vice President & Secretary Title: CEO
WITNESS OR ATTEST: ASSIGNEE:
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
/s/ Jeffrey A. Linn By:/s/ Jonathan B. Weller
- ---------------------------- ---------------------------
Name: Jeffrey A. Linn Name: Jonathan B. Weller
Title: Senior Vice President & Secretary Title: President/CEO
-8-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of this 30th day of September, 1997, among Pennsylvania Real
Estate Investment Trust, a Pennsylvania business trust (the "Trust"), and the
persons listed on Schedule A hereto (collectively, the "Beneficial Owners", and
each, a "Beneficial Owner").
Background
Pursuant to the TRO Contribution Agreement dated as of July
30, 1997 (the "TRO Contribution Agreement") among the Trust, PREIT Associates,
L.P.(the "Partnership"), The Rubin Organization, Inc. ("TRO"), The Rubin
Organization-Illinois, Inc., and the TRO shareholders, the Partnership is
acquiring on the date hereof from the TRO shareholders 95% of the capital stock
of TRO in exchange for Class A Units and a contingent right to receive
additional Class A Units.
The transactions contemplated in the TRO Contribution
Agreement are part of a larger transaction in which, inter alia: (i) the
Partnership will acquire the right, title and interest of certain Persons in and
to partner interests in partnerships that own The Court at Oxford Valley, the
Hillview Shopping Center and the Northeast Tower Center pursuant to the terms
and conditions of the Court at Oxford Valley Contribution Agreement, the
Hillview Contribution Agreement and the Northeast Contribution Agreement, and
(ii) the Partnership will acquire from a limited liability company certain
rights with respect to the Predevelopment Properties pursuant to the terms and
conditions of the Predevelopment Properties Contribution Agreement.
As holders of Class A Units, the Beneficial Owners will have
certain redemption rights pursuant to the terms and conditions of the
Partnership Agreement. Under the Partnership Agreement, a holder of Class A
Units that exercises his right of redemption with respect to Class A Units will
either (i) have such Class A Units redeemed by the Partnership for cash or for
shares of beneficial interest in the Trust, par value $1 per share ("Shares"),
or (ii) have such Class A Units purchased by the Trust for cash or for Shares.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
1. Certain Definitions.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the TRO Contribution Agreement. In addition
to the other terms defined in this Agreement, the following terms shall have the
following meanings:
"Applicable Units" means the Class A Units issued pursuant to
the TRO Contribution Agreement, the Court at Oxford Valley Contribution
Agreement, the Hillview Contribution Agreement, the Northeast Contribution
Agreement and the Predevelopment Properties Contribution Agreement.
"Commission" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Eligible Registrable Securities" as of a particular date
means (i) Registrable Securities theretofore issued by the Trust and owned,
beneficially and of record, by a Beneficial Owner and (ii) Registrable
Securities to which such Beneficial Owner is entitled as the result of the
exercise, on or prior to such date, by such person of redemption rights pursuant
to Section 9.5 of the Partnership Agreement (based on the assumption, for this
purpose only, that the Trust and the Partnership will satisfy such redemption
using Shares and not cash); provided, however, that Eligible Registrable
Securities that are included in the Six-Month Registration described in Section
3(c) shall cease to constitute Eligible Registrable Securities sixty days
following the date on which the registration statement with respect thereto is
declared effective.
"EPD Registration Statement" has the meaning set forth
in Section 3(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the relevant time.
"Holder" means each Beneficial Owner for so long as (and to
the extent that) such Beneficial Owner or his Holding Company owns any
Registrable Securities, and each transferee of a Beneficial Owner that becomes a
registered owner of all (or less than all, in the case of a transfer to or for
the benefit of an Immediate Family Member (as defined below)) of the Registrable
Securities and Applicable Units owned by such Beneficial Owner (or his Holding
Company on his behalf) at the time of such transfer, provided that such
transferee, prior to such transfer, agrees in writing, in form and substance
satisfactory to the
-2-
<PAGE>
Trust, to be bound by this Agreement. "Immediate Family Member" means a
Beneficial Owner's spouse and each of his natural or adopted children.
"Holding Company" of a Beneficial Owner means any partnership
or corporation to which Applicable Units are issued by the Partnership as long
as such Beneficial Owner is a partner or shareholder of such partnership or
corporation.
"Last Issue Date" means the last date on which Applicable
Units may be issued pursuant to the Predevelopment Contribution Agreement, the
Hillview Contribution Agreement or the Northeast Contribution Agreement.
"NASD" means National Association of Securities Dealers, Inc.
"Partnership Agreement" means the First Amended and Restated
Agreement of Limited Partnership of PREIT Associates, L.P., dated as of
September 30, 1997, by and among the Trust, as general partner, and those
Persons listed on Exhibit A thereto, as limited partners, as amended from time
to time.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
"Piggyback Period" means the period commencing twelve months
after the date hereof and ending on the earlier to occur of (i) eighteen months
following the Last Issue Date or (ii) the date on which any registration
statement filed by the Trust as a result of the Demand Registration becomes
effective under the Securities Act.
"Redemption Notice" means notice of redemption pursuant to
Section 9.5 of the Partnership Agreement, duly executed by a Beneficial Owner.
"Registrable Securities" means (i) any Shares issued or
issuable by the Trust in order to redeem or purchase Applicable Units or another
interest issued by the Partnership, if any, which is intended to give tax
deferred treatment to the Holders, as described in Section 4(i) of Schedule A-2
to the Predevelopment Properties Contribution Agreement and (ii) any additional
Shares or other equity securities of the Trust issued by the Trust in respect of
Shares described in subclause (i) after the issuance of such Shares, in
connection with a stock
-3-
<PAGE>
dividend, stock split, combination, exchange, reorganization, recapitalization
or similar reclassification of the Trust's securities; provided that, as to any
particular Registrable Securities, such securities shall cease to constitute
Registrable Securities when: (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of thereunder; (ii) such securities
shall have been sold in satisfaction of all applicable conditions to the resale
provisions of Rule 144 under the Securities Act (or any similar provision then
in force); (iii) such securities are eligible to be publicly sold without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act (or any successor provision to such Rule); or (iv) such
securities shall have ceased to be issued and outstanding. The term Registrable
Securities shall not include the Applicable Units or any other securities of the
Partnership.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
2. Piggy-Back Registration. If the Trust proposes to file
during the Piggy-Back Period a registration statement under the Securities Act
with respect to an offering of Shares by the Trust for its own account and for
cash (other than a registration statement on Form S-4 or S-8 (or any form
substituting therefor) filed in connection with an exchange offer or an offering
of securities solely for the Trust's existing shareholders or employees), the
Trust shall in each such case give written notice (the "Piggyback Notice") of
such proposed filing and the proposed method of distribution of securities
covered by such proposed filing to the Holders at least fifteen (15) days before
the anticipated filing date. If any Holder delivers to the Trust within fifteen
(15) days of the date of the Piggyback Notice a written request (a "Written
Request") to register Registrable Securities (other than Registrable Securities
registered, or that were eligible for registration, in the EPD Registration
Statement), together with a copy of all Redemption Notices delivered by such
Holder to the Partnership in connection with such request, the Trust will use
commercially reasonable efforts to include in the registration statement
proposed to be filed by the Trust all Eligible Registrable Securities (other
than Registrable Securities registered, or that were eligible for registration,
in the EPD Registration Statement) with respect to which the Trust has received
Written Requests for inclusion therein within fifteen (15) days of the date of
the Piggyback Notice (other than any Lock-Up Securities, as defined in the
Lock-Up Agreements) so as to permit the offering of such Eligible Registrable
Securities. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering deliver a
-4-
<PAGE>
written opinion to the Holders of Registrable Securities to be included therein
("Participating Piggyback Holders") to the effect that the total amount of
securities that the Participating Piggyback Holders, the Trust and any other
Persons intend to include in such offering would materially and adversely affect
the success of such offering, then the amount of securities to be offered for
the account of the Participating Piggyback Holders shall be reduced (pro rata
among the Participating Piggyback Holders) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided that if
securities are being offered for the account of other Persons as well as the
Trust, such reduction shall not represent a greater fraction of the number of
securities requested to be registered by the Participating Piggyback Holders
than the fraction of similar reductions imposed on such other Persons.
Notwithstanding anything to the contrary herein, if the Trust determines, in its
business judgment, that there are business reasons to delay the effectiveness
of, or to withdraw, a registration statement covering Registrable Securities
prior to its becoming effective under the Securities Act pursuant to this
Section 2, the Trust shall not be deemed to have breached any of its obligations
hereunder.
3. Registration Upon Request, Six-Month Registration and EPD
Registration Statement.
(a) If the Trust has not given pursuant to
Section 2 any Piggyback Notice during the six months beginning one year
following the Last Issue Date in respect of a registration statement that
becomes effective under the Securities Act, the Holders owning at least a
majority of the Registrable Securities may request in writing that the Trust
effect the registration under the Securities Act of such of their Eligible
Registrable Securities (other than Eligible Registrable Securities registered,
or that were eligible for registration, in the EPD Registration Statement and
Eligible Registrable Securities that could have been issued and included in any
registration statement that was declared effective and for which the Trust gave
Piggyback Notice pursuant to Section 2 during the eighteen months following the
Last Issue Date) as they shall specify in such request (the "Demand Request")
pursuant to a registration statement on Form S-3 (or any similar short-form
registration statement that is a successor to Form S-3) or, in the Trust's sole
discretion, any other appropriate form. The Holders delivering the Demand
Request shall concurrently deliver to the Trust copies of the Redemption
Notices, if any, delivered by such Holders in connection with such demand. The
Trust shall promptly give written notice (the "Registration Notice") of such
request to other Holders of Registrable Securities and afford them the
opportunity of including in the requested registration statement such of their
Eligible Registrable Securities as they
-5-
<PAGE>
shall specify in a written notice given to the Trust within fifteen (15) days
(the "Notice Period") after the date of the Registration Notice. Following the
expiration of the Notice Period, the Trust shall prepare and file a registration
statement under the Securities Act (the "Demand Registration") as provided in
Section 5 hereof, covering the resale by the Holders of the Eligible Registrable
Securities which the Trust has been requested to register, all to the extent
required to permit the disposition of such Eligible Registrable Securities, and
thereafter use commercially reasonable efforts to cause such registration
statement to become effective within sixty (60) days after its filing. The Trust
shall not be required to effect more than one Demand Registration for the
Holders of Registrable Securities pursuant to this Section 3(a). An exercise of
the demand registration right described herein will not count as the use of such
right unless the registration statement to which it relates is declared
effective under the Securities Act and such effectiveness is maintained in
accordance with Section 5 hereof, except that such exercise shall count if such
registration statement is withdrawn because (x) the Holders of Registrable
Securities to be included in the Demand Registration determine not to proceed
with such registration for any reason other than the default of the Trust
hereunder or cancellation of the registration statement pursuant to Section 6(b)
hereof and (y) the Holders of Registrable Securities to be included in the
Demand Registration do not reimburse the Trust for all fees and expenses
incurred in connection with the preparation and filing of such registration
statement, except in the case of cancellation pursuant to Section 6(b) hereof.
(b) With respect to the Demand Registration, the
Trust may defer the filing of or effectiveness of any registration statement for
a reasonable period of time not to exceed 180 days after such request if (i) the
Trust is, at such time, working on an underwritten public offering of Shares and
is advised by its managing underwriter(s) that such offering would in its or
their opinion be adversely affected by such filing or (ii) the Trust in good
faith determines that any such filing or the offering of any Registrable
Securities would materially impede, delay or interfere with any proposed
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction involving the Trust which began prior to the date
on which notice of the registration was given hereunder.
(c) In the event that, on or before the 150th day
after the date hereof, neither the Partnership nor the Trust shall have acquired
for cash all of the Applicable Units then owned by Beneficial Owners listed on
Schedule B hereto and there has been no EPD Registration Statement in effect
during such period, the Trust shall use its commercially reasonable efforts to
register, as provided in Section 5, the Registrable Securities
-6-
<PAGE>
that are issuable to such Beneficial Owners in respect of the Applicable Units
that are owned by such Beneficial Owners as of the 151st day after the date
hereof under the Securities Act (the "Six-Month Registration"), pursuant to a
registration statement on Form S-3 (or any similar short-form registration
statement that is a successor to form S-3), covering the offering and sale of
such Registrable Securities by such Beneficial Owners in "brokers' transactions"
or in transactions directly with a "market maker" as defined in paragraphs (f)
and (g) of Rule 144 under the Securities Act and to cause such registration
statement to be declared effective as soon as practicable thereafter. The Trust
shall not be required to effect more than one registration for the Beneficial
Owners pursuant to this Section 3(c). The registration statement filed pursuant
to this Section 3(c) may be withdrawn by the Trust within 60 days after it has
been declared effective.
(d) If the Trust has filed a registration statement
registering Shares underlying Units issued in respect of the purchase of
Magnolia Mall by PR Magnolia LLC, the Trust shall use all commercially
reasonable efforts to register all Eligible Registrable Securities of the
Beneficial Owners in such registration statement (the "EPD Registration
Statement"); provided, however, that the Trust shall have no obligation to
maintain the effectiveness of such registration statement except to the extent
that the Trust is obligated to do so under an agreement with the sellers of the
EPD Properties. The Trust's obligation under this subparagraph (d) to include
Eligible Registrable Securities in the EPD Registration Statement shall extend
only to all Eligible Registrable Securities that are issued or issuable in
respect of Applicable Units issued at the closing under the TRO Contribution
Agreement (other than Registrable Securities includable in the Six-Month
Registration). At the Trust's option, the Trust may offer to include in such
registration statement other Eligible Registrable Securities. Notwithstanding
the foregoing, in the event that an EPD Registration Statement is filed, the
Trust shall take such steps as are within its power to ensure that Shares that
may be issued upon redemption of Applicable Units issued at the closing of the
TRO Contribution Agreement (other than Registrable Securities includable in the
Six Month Registration) are registered for resale by the Beneficial Owners as
promptly as practicable after such Shares become Registrable Securities, subject
to applicable SEC rules and regulations.
-7-
<PAGE>
(e) In addition to the other restrictions contained
in this Agreement, in the event the Trust is issuing equity securities to the
public in an underwritten offering, and, if requested by the managing
underwriter or underwriters for such underwritten offering, a Beneficial Owner
who has Eligible Registrable Securities registered in the EPD Registration
Statement as contemplated by paragraph (d) above shall not effect any public
sale or distribution of Registrable Securities or any securities convertible
into or exchangeable or exercisable for such Registrable Securities, including a
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, for a period commencing on the tenth (10th) day prior to the
date such underwritten offering commences (such offering being deemed to
commence for this purpose on the later of the effective date for the
registration statement for such offering or, if applicable, the date of the
prospectus supplement for such offering) and ending on the earlier to occur of
(i) 90 days after such underwritten offering commences or (ii) one (1) day after
the date (following the commencement of such underwritten offering) on which the
closing price of the Shares (as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Shares are
listed or admitted to trading) shall have averaged for a period of twenty (20)
consecutive days 105% or more of the offering price listed in the prospectus or
prospectus supplement for such underwritten offering (or if no such offering
price is listed in such prospectus or prospectus supplement, the closing price
on the date of such offering commences); provided, however, that this subclause
(ii) shall not apply if so requested by the managing underwriter or underwriters
for such underwritten offering.
4. Holdbacks and Other Restrictions. Each Holder shall:
(a) not, if requested by the managing underwriter in
an underwritten offering that includes Registrable Securities of such Holder,
effect any public sale or distribution of securities of the Trust of the same
class as the securities included in such registration statement (or convertible
into such class), including a sale pursuant to Rule 144(k) under the Securities
Act (except as part of such underwritten registration): (i) during the ten (10)
day period prior to, and during the ninety (90) day period (or such longer
period of not more than one hundred eighty (180) days if such longer period is
also required of the Trust and all other Persons having securities included in
such registration) beginning on the closing date of each underwritten offering
made pursuant to such registration statement, to the extent timely notified in
writing by the Trust or the managing underwriter; and (ii) in the event of a
primary offering by the Trust, to the extent such Holder
-8-
<PAGE>
does not elect to sell such securities in connection with such offering, during
the period of distribution of the Trust's securities in such offering and during
the period in which the underwriting syndicate, if any, participates in the
aftermarket. In any such case, the Trust shall require the underwriters to
notify the Trust and the Trust, in turn, shall notify each Holder of Registrable
Securities included in the offering promptly after such participation ceases;
(b) not, during any period in which any of his
Registrable Securities are included in any effective registration statement: (i)
effect any stabilization transactions or engage in any stabilization activity in
connection with the Shares or other equity securities of the Trust in
contravention of Rule 104 of Regulation M under the Exchange Act; or (ii) permit
any Affiliated Purchaser (as that term is defined in Rule 101 of Regulation M
under the Exchange Act) to bid for or purchase for any account in which such
Holder has a beneficial interest, or attempt to induce any other person to
purchase, any Shares in contravention of Rule 102 of Regulation M under the
Exchange Act; and
(c) in the case of a registration including
Registrable Securities to be offered by it for sale through "broker
transactions" (as defined pursuant to Rule 144 promulgated under the Securities
Act), furnish each broker through whom such Holder offers Registrable Securities
such number of copies of the prospectus as the broker may require and in any
event, comply with the prospectus delivery requirements under the Securities
Act.
5. Registration Procedures.
(a) If and whenever the Trust is required by the
provisions of this Agreement (except for Section 3(d) hereof, in which case only
Subsections (ii), if applicable, through (x) below shall apply) to effect or
cause the registration of any Registrable Securities under the Securities Act as
provided in this Agreement, the Trust shall:
(i) as expeditiously as practicable (but,
with respect to the Demand Registration, in no event later than 60 days after
the date the request for registration was given and, in the case of the Six
Month Registration, 180 days after the date hereof), prepare and file with the
Commission a registration statement on Form S-3 (or a successor form) or, in the
sole discretion of the Trust, another appropriate form and use its commercially
reasonable efforts to cause such registration statement to become effective
under the Securities Act and, in the case of the Demand Registration only, to
remain effective for not less than two years and in the case of the Six- Month
Registration only to remain effective for not less than 60
-9-
<PAGE>
days; provided, however, that at such time as the number of Registrable
Securities held by any Holder that is subject to a then effective registration
statement is not more than the number of Shares that such Holder would then be
permitted to sell or dispose of pursuant to Rule 144 under the Securities Act
and Rule 144 is otherwise applicable to (and available for) such sale or
disposition, the Trust shall no longer be required to maintain the effectiveness
of the registration statement with respect to such Registrable Securities;
(ii) prepare and file with the Commission
such amendments, post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for such period of time as is
necessary to allow the distribution of the Registrable Securities contemplated
therein (but in no event longer than 60 days in the case of the Six-Month
Registration and 2 years in the case of the Demand Registration) and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during the period during which
any such registration statement is required to be effective;
(iii) furnish to each selling Holder of
Registrable Securities and each underwriter, if any, of the securities being
sold by such Holder, (A) such number of copies (including manually executed and
conformed copies) of such registration statement and of each such amendment
thereof and supplement thereto (including all annexes, appendices, schedules and
exhibits), (B) such number of copies of the prospectus used in connection with
such registration statement (including each preliminary prospectus and any
summary prospectus and the final prospectus filed pursuant to Rule 424(b) under
the Securities Act), and (C) such number of copies of other documents, as such
seller and underwriter may reasonably request in order to facilitate the
disposition of Registrable Securities in accordance with the methods intended
by, in the case of the Demand Registration, the sellers thereof;
(iv) use its commercially reasonable efforts
to register or qualify the Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of such jurisdictions as any
selling Holder and each underwriter, if any, of the Registrable Securities shall
reasonably request, and do any and all other acts and things which may be
necessary or desirable to enable such Non-Continuing Owner, Holder and
underwriter to consummate the offering and disposition of Registrable Securities
in such jurisdictions; provided, however, that the Trust shall not be required
to qualify generally to do business as a foreign business trust, subject itself
to taxation, or consent to general service of process, in any jurisdiction
-10-
<PAGE>
wherein it would not, but for the requirements of this Section 5, be obligated
to be qualified;
(v) use its commercially reasonable efforts
to cause the Registrable Securities covered by such registration statement to be
registered with, or approved by, such other public, governmental or regulatory
authorities as may be necessary to facilitate the disposition of such
Registrable Securities in accordance with the methods of disposition intended
by, in the case of the Demand Registration and Six-Month Registration, the
sellers thereof;
(vi) notify each selling Holder of any
Registrable Securities covered by such registration statement and the Managing
Underwriter (as such term is defined in Rule 12b-2 under the Exchange Act), if
any, promptly and, if requested by any such Person, confirm such notification in
writing, (A) when a prospectus or any prospectus supplement has been filed with
the Commission, and, with respect to a registration statement or any
post-effective amendment thereto, when the same has been declared effective by
the Commission, (B) of any request by the Commission for amendments or
supplements to a registration statement or related prospectus, or for additional
information, (C) of the issuance by the Commission of any stop order or the
initiation of any proceedings for such or a similar purpose (and the Trust shall
make every reasonable effort to obtain the withdrawal of any such order at the
earliest practicable moment), (D) of the receipt by the Trust of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose (and the Trust shall make every
commercially reasonable effort to obtain the withdrawal of any such suspension
at the earliest practicable moment), (E) of the occurrence of any event that
requires the making of any changes to a registration statement or related
prospectus so that such documents will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (and the Trust shall promptly prepare and
furnish to such seller and Managing Underwriter a reasonable number of copies of
a supplemented or amended prospectus such that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading), and (F) of the Trust's
determination that the filing of a post-effective amendment to the registration
statement shall be necessary or appropriate. Each Holder of Registrable
Securities shall be deemed to have agreed by acquisition of such Registrable
Securities that upon
-11-
<PAGE>
the receipt of any notice from the Trust of the occurrence of any event of the
kind described in clause (E) of this Section 5(a)(vi), such Holder shall
forthwith discontinue his offer and disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until he shall have received copies of a supplemented or amended prospectus
which is no longer defective as contemplated by clause (E) of this Section
5(a)(vi) and, if so directed by the Trust, shall deliver to the Trust, at the
Trust's expense, all copies (other than permanent file copies) of the defective
prospectus covering such Registrable Securities which are then in his
possession;
(vii) otherwise use its commercially
reasonable efforts to comply with all applicable rules and regulations of the
Commission, as the same may hereafter be amended, and make available to its
security holders, as soon as reasonably practicable, earnings statements
satisfying the provisions of Section 11(a) of the Securities Act;
(viii) in the case of an underwritten
offering of Registrable Securities, obtain an opinion from counsel to the Trust
and a "cold comfort" letter from an independent certified public accounting firm
of national recognition and standing who have certified the Trust's financial
statements included in the registration statement or any amendment thereto, in
customary form addressed to the managing underwriter or underwriters and to the
selling Holders of Registrable Securities included in a registration statement
filed by the Trust;
(ix) permit any Holder of Registrable
Securities to be included in a registration statement filed by the Trust, which
Holder reasonably concludes that he may be deemed to be a "control person" of
the Trust (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), to participate in the preparation of such registration
statement and include therein material furnished to the Trust in writing which,
in the reasonable judgment of such Holder and his counsel, is required to be
included therein; and
(x) if such Person could have liability
under Section 11, 12 or 15 of the Securities Act, make available for inspection
by any Holder of Registrable Securities to be included in any registration
statement filed by the Trust, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any Holder (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties and
other pertinent information of the Trust (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise their due diligence
-12-
<PAGE>
responsibility, and cause the Trust's officers, trustees and employees to supply
all pertinent information reasonably requested by any such Inspector in
connection with such registration statement. Records which the Trust determines,
in good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the registration statement, (B) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public.
(b) A Holder shall not participate in any
underwritten registration hereunder unless such Holder (i) agrees to sell his
securities on the basis provided in any underwriting arrangements approved by
the Trust (in the case of a registration pursuant to Section 2) or by the
Holders (in the case of the Demand Registration) and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Information Blackout.
(a) At any time when a registration statement
effected pursuant to Sections 2 or 3 relating to Registrable Securities is
effective, upon written notice from the Trust to the Holders of Registrable
Securities included therein that the Trust has determined in good faith that
sale of Registrable Securities pursuant to such registration statement would
require disclosure of non-public material information not otherwise required to
be disclosed under applicable law having a material adverse effect on the Trust
(an "Information Blackout"), all such Holders shall suspend sales of Registrable
Securities pursuant to such registration statement until the earlier of:
(i) thirty (30) days after the Trust
notifies such Holders of such good
faith determination, or
(ii) such time as the Trust notifies such
Holders that such material information
has been disclosed to the public or has
ceased to be material or that sales
pursuant to such registration statement
may otherwise be resumed (the number of
days from such suspension of sales by
such Holders until the day when such
sale may be resumed hereunder is
hereinafter called a "Sales Blackout
Period").
-13-
<PAGE>
(b) Any delivery by the Trust of notice of an
Information Blackout during the thirty (30) days immediately following
effectiveness of any registration statement effected pursuant to Section 3
hereof shall give the Holders of Registrable Securities included in such
registration statement the right, by written notice to the Trust within twenty
(20) days after the end of such Sales Blackout Period, to cancel such
registration, in which event the Holders shall have one additional registration
right under Section 3 which shall be exercisable within six (6) months of such
cancellation.
(c) Notwithstanding the foregoing, there shall be no
more than two (2) Information Blackouts during any fiscal year of the Trust and
no Sales Blackout Period shall continue for more than thirty (30) consecutive
days.
7. Registration Expenses. Whether or not any registration
statement prepared and filed pursuant to Sections 2 or 3 is declared effective
by the Commission (except where the Demand Registration is terminated, withdrawn
or abandoned at the written request of the Holders of Registrable Securities to
be included therein (other than as required by Section 6(b)) and such Holders
elect to have such registration statement not count as the Demand Registration
hereunder by paying all such fees and expenses), the Trust shall pay all of the
following arising in connection with any registration pursuant to Section 2 or 3
(except as specified in the following sentence): (a) all Commission and any NASD
registration and filing fees and expenses; (b) any and all expenses incident to
the Trust's performance of, or compliance with, this Agreement, including,
without limitation, any allocation of salaries and expenses of Trust personnel
or other general overhead expenses of the Trust, or other expenses for the
preparation of historical and pro forma financial statements or other data
normally prepared by the Trust in the ordinary course of its business; (c) all
listing, transfer and/or exchange agent and registrar fees; (d) fees and
expenses in connection with the qualification of the Registrable Securities
under securities or "blue sky" laws, including reasonable fees and disbursements
of counsel for the underwriters in connection therewith; (e) printing and
delivery expenses; and (f) fees and out-of-pocket expenses of counsel for the
Trust and its independent certified public accountants and other persons,
including special experts, retained by the Trust. Notwithstanding the foregoing,
the Trust shall not be required to pay fees and out-of-pocket expenses of
counsel selected by the Holders, any fees or disbursements of Managing
Underwriters and their counsel, participating underwriters and brokers-dealers
or any discounts, commissions or fees of underwriters, selling brokers and
dealers relating to the distribution of the Registrable Securities, and the
Holders of Registrable Securities included in any underwritten Demand
Registration shall reimburse the Trust for all incremental costs and expenses
incurred by the
-14-
<PAGE>
Trust to the extent that the Trust agrees, in response to the request of any
Managing Underwriter, to include any disclosure in such registration statement
that goes beyond the disclosure required by Form S-3.
8. Indemnification; Contribution.
(a) The Trust hereby indemnifies, to the fullest
extent permitted by law, each Holder of Registrable Securities included in any
registration statement filed by the Trust and the directors, officers, partners,
employees, agents and each Person who controls any Holder within the meaning of
the Securities Act and the Exchange Act, if any, against all losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act, common law and otherwise), joint or several, which arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any such registration statement or in any prospectus,
preliminary prospectus, any amendment or supplement thereto or any document
incorporated by reference relating thereto or in any filing made in connection
with the registration or qualification of the offering under "blue sky" or other
securities laws of jurisdictions in which the Registrable Securities are
offered, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and the
Trust shall reimburse such Holders for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or proceeding, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus, if
used prior to the effective date of such registration statement (unless such
statement is corrected in the final prospectus and the Trust has previously
furnished copies thereof to any holder of Registrable Securities seeking such
indemnification and to the underwriters of the registration in question), or
contained in the final prospectus (as amended or supplemented if the Trust shall
have filed with the Commission any amendment thereof or supplement thereto) if
used within the period during which the Trust is required to keep the
registration statement to which such prospectus relates current, or the omission
or alleged omission to state therein a material fact necessary in order to make
the statements therein in light of the circumstances under which they were made,
not misleading; provided, however, that such indemnification shall not extend to
any such losses, claims, damages, liabilities (or proceedings in respect
thereof) or expenses that are caused by any untrue statement or alleged untrue
statement contained in, or by any omission or alleged omission from, information
furnished in writing to the Trust by such Holder in such capacity specifically
-15-
<PAGE>
and expressly for use in any such registration statement or prospectus.
(b) In the case of an underwritten offering pursuant
to Section 3 hereof in which the registration statement covers Registrable
Securities, the Trust shall enter into an underwriting agreement in customary
form and substance with such underwriters and, if so requested, a contribution
agreement in customary form and substance with such underwriters and shall
indemnify the underwriters, their officers and directors, if any, and each
person, if any, who controls such underwriters within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act, to the same extent as
provided in the preceding paragraph with respect to the indemnification of the
Holders of Registrable Securities and to the same extent as then customary in
underwriting agreements of such underwriter; provided, however, that the Trust
shall not be required to indemnify any such underwriter, or any officer or
director of such underwriter or any person who controls such underwriter within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act, to the extent that the loss, claim, damage, liability (or proceedings in
respect thereof) or expense for which indemnification is sought results from
such underwriter's failure to deliver or otherwise provide a copy of the final
prospectus to the Person asserting an untrue statement or omission or alleged
untrue statement or omission at or prior to the written confirmation of the sale
of securities to such Person, if such statement or omission was in fact
corrected in such final prospectus.
(c) In connection with any registration statement
with respect to which a Holder of Registrable Securities is participating, each
such Holder shall furnish to the Trust in writing such information regarding
such Holder included in a registration statement and the intended method of
distribution as shall be reasonably requested by the Trust for use in any such
registration statement or prospectus and each of the Holders hereby indemnifies,
severally but not jointly, to the fullest extent permitted by law, the Trust,
its officers and directors and each person, if any, who controls the Trust
within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, against any losses, claims, damages, liabilities (or proceedings
in respect thereof) and expenses resulting from any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated or necessary to make the statements in the
registration statement or prospectus, or any amendment thereof or supplement
thereto, not misleading; provided, however, that each of the Holders shall be
liable hereunder if and only to the extent that any such loss, claim, damage,
liability (or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement, or alleged untrue statement or
-16-
<PAGE>
omission or alleged omission, made in reliance upon and in conformity with
information pertaining to such Holder which is requested by the Trust and
furnished in writing to the Trust by such Holder specifically and expressly for
use in any such registration statement or prospectus.
(d) Any Person seeking indemnification under the
provisions of this Section 8 shall, promptly after receipt by such Person of
notice of the commencement of any action, suit, claim or proceeding, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof; provided, however, that the failure so to notify an
indemnifying party shall not relieve the indemnifying party from any liability
which it or he may have under this Section 8 (except to the extent that it has
been prejudiced in any material respect by such failure) or from any liability
which the indemnifying party may otherwise have. In case any such action, suit,
claim or proceeding is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent it or he may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party shall have the right to employ its or his own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying party in connection
with the defense of such suit, action, claim or proceeding, (ii) the
indemnifying party shall not have employed counsel (reasonably satisfactory to
the indemnified party) to take charge of the defense of such action, suit, claim
or proceeding within a reasonable time after notice of commencement of the
action, suit, claim or proceeding, or (iii) such indemnified party shall have
reasonably concluded, based on the advice of counsel, that there may be defenses
available to it which are different from or additional to those available to the
indemnifying party which, if the indemnifying party and the indemnified party
were to be represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of the
defenses available to such indemnified party. If any of the events specified in
clauses (ii) or (iii) of the preceding sentence shall have occurred or shall
otherwise be applicable, then the fees and expenses of one counsel or firm of
counsel selected by a majority in interest of the indemnified parties shall be
borne by the indemnifying party. If, in any case, the indemnified party employs
separate counsel, the indemnifying party shall not have the right to direct the
defense of such action, suit, claim or proceeding on behalf of the indemnified
party. Anything in this paragraph to the contrary notwithstanding, an
indemnifying party
-17-
<PAGE>
shall not be liable for the settlement of any action, suit, claim or proceeding
effected without its prior written consent (which consent in the case of an
action, suit, claim or proceeding exclusively seeking monetary relief shall not
be unreasonably withheld or delayed). Such indemnification shall remain in full
force and effect irrespective of any investigation made by or on behalf of an
indemnified party.
(e) If the indemnification from the indemnifying
party as provided in this Section 8 is unavailable or is otherwise insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses. The relative fault of such
indemnifying party shall be determined by reference to, among other things,
whether any action in question, including any untrue (or alleged untrue)
statement of a material fact or omission (or alleged omission) to state a
material fact, has been made, or relates to information supplied by such
indemnifying party or such indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(e) hereof, any legal or other
fees or expenses reasonably incurred by such party in connection with any such
investigation or proceeding.
The parties hereto acknowledge that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation other than as described above.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If, however, indemnification is available under this Section
8, the indemnifying parties shall indemnify each indemnified party to the
fullest extent provided in Sections 8(a) through 8(e) hereof without regard to
the relative fault of said indemnifying party or indemnified party or any other
equitable consideration.
9. Investment Representations and Covenants of the
Beneficial Owners.
-18-
<PAGE>
(a) Each Beneficial Owner acknowledges (subject to
the express obligation of the Trust to register Registrable Securities as
provided herein) that any Shares be issued to him in connection with the
redemption or purchase of Applicable Units will not be registered under the
Securities Act on the grounds that the issuance of such Shares is exempt from
registration pursuant to Section 4(2) of the Securities Act or Regulation D
promulgated under the Securities Act, and that the reliance of the Trust on such
exemptions is predicated in part on such Beneficial Owner's and such
Non-Continuing Owner's representations, warranties, covenants and
acknowledgements set forth in this section.
(b) Each Beneficial Owner (other than those names
marked with a "1" on Schedule A on the date hereof) represents and warrants that
he is an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act.
(c) Each Beneficial Owner represents and warrants
that the Registrable Securities will be acquired by him for his own account, not
as a nominee or agent, and without a view to resale or other distribution within
the meaning of the Securities Act, and the rules and regulations thereunder
except as contemplated hereunder, and each Beneficial Owner will not distribute
any of the Registrable Securities in violation of the Securities Act.
(d) Each Beneficial Owner (i) acknowledges that the
Registrable Securities are not registered under the Securities Act and the
Registrable Securities must be held indefinitely by him unless they are
subsequently registered under the Securities Act or an exemption from
registration is available, (ii) is aware that any routine sales of Registrable
Securities made under Rule 144 under the Securities Act may be made only in
limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, and (iii) is aware that Rule 144
is not presently available for use by any Beneficial Owner for resale of
Registrable Securities.
(e) Each Beneficial Owner represents and warrants to
the Trust that he is well versed in financial matters, has had dealings over the
years in securities, including "restricted securities," and is fully capable of
understanding the type of investment represented by the Registrable Securities
and the risks involved in connection therewith.
(f) Each Beneficial Owner acknowledges and confirms
that the Trust has made available to him the opportunity to ask questions of and
receive answers from the Trust's officers and directors concerning the terms and
conditions of the
-19-
<PAGE>
investment in the Applicable Units and the business and financial condition of
the Trust, and to acquire, and such Beneficial Owner has received to his
satisfaction, such additional information, in addition to that set forth herein,
about the business and financial condition of the Trust and the terms and
conditions of the offering as he has requested.
(g) In order to ensure compliance with the provisions
of subparagraph (c) above, no Beneficial Owner will sell or otherwise transfer
or dispose of any of the Registrable Securities or any interest therein (unless
such Registrable Securities have been registered under the Securities Act)
without first having complied with either of the following conditions:
(i) the Trust shall have received a written
opinion of counsel to such Beneficial Owner in form and substance satisfactory
to the Trust, in the exercise of its reasonable judgment, or a copy of a
"no-action" or interpretive letter of the Commission, specifying the nature and
circumstances of the proposed transfer and indicating that the proposed transfer
will not be in violation of any of the registration provisions of the Securities
Act and the rules and regulations promulgated thereunder; or
(ii) the Trust shall have received an
opinion from its own counsel to the effect that the proposed transfer will not
be in violation of any of the registration provisions of the Securities Act and
the rules and regulations promulgated thereunder.
Each Beneficial Owner acknowledges that the certificates representing the
Registrable Securities may contain a restrictive legend noting the restrictions
on transfer described in this section and required by federal and applicable
state securities laws, and that appropriate "stop-transfer" instructions will be
given to the Trust's stock transfer agent, provided that this paragraph (g)
shall not be applicable to the Registrable Securities registered hereunder for
so long as such registration statement remains in effect.
10. Reports Under the Exchange Act.
With a view to making available to the Beneficial Owners the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Beneficial Owners
to sell Registrable Securities to the public without registration ("Rule 144"),
the Trust shall:
(a) make and keep public information available as
those terms are understood and defined in Rule 144;
-20-
<PAGE>
(b) file with the SEC in a timely manner all reports
and other documents required of the Trust under the Securities Act and the
Exchange Act so long as the Trust remains subject to such requirements and the
filing of such reports and other documents is required for the applicable
provisions of Rule 144; and
(c) furnish to each Beneficial Owner so long as such
Beneficial Owner owns Registrable Securities, promptly upon request (i) a
written statement by the Trust that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Trust and such other
reports and documents so filed by the Trust, and (iii) such other information as
may be reasonably requested to permit the Beneficial Owner to sell such
securities pursuant to Rule 144 without registration.
11. Notices.
Except as otherwise provided below, whenever it is provided in
this Agreement that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties hereto, or whenever any of the parties hereto, desires to provide to or
serve upon any person any other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person or
sent by telecopy, addressed as follows:
(a) If to the Trust, to:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
- With a copy to -
Drinker Biddle & Reath LLP
PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Howard A. Blum, Esq.
Telecopy Number: (215) 988-2757
(b) If to the Holders to:
The addresses set forth on Schedule C hereto.
-21-
<PAGE>
- With a copy to -
Klehr Harrison Harvey Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esq.
Telecopy Number: (215) 568-6060
or at such other address as may be substituted by notice delivered as provided
therein. The furnishing of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder shall
be deemed to have been duly furnished or served on the party to which it is
addressed, in the case of delivery in person or by telecopy, on the date when
sent. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
12. Entire Agreement.
This Agreement represents the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior oral and written agreements, arrangements and
understandings among the parties hereto with respect to such subject matter; and
this Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by a written instrument making specific reference to this
Agreement signed by the Trust on the one hand, and each affected Beneficial
Owner on the other hand; provided, however, that the Trust shall be entitled to
amend this Agreement to permit the following Persons to be added to Schedule A
hereto as Beneficial Owners and to enter into an agreement, in form and
substance satisfactory to the Trust, with one or more of such Persons in order
to make such Persons parties to this Agreement: (A) those Persons listed on
Schedules II, III and IV to the Partnership Agreement, upon the issuance of
additional Class A Units to such Persons in accordance with Sections 5.3(ii),
(iii) and (iv) of the Partnership Agreement, and (B) those Persons to whom
Permitted Transfers are made pursuant to Section 12.3.A(ii) of the Partnership
Agreement.
13. Successors.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and personal
representatives.
-22-
<PAGE>
14. Paragraph Headings.
The paragraph headings contained in this Agreement are for
general reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
15. Applicable Law.
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, applicable to
contracts to be made, executed, delivered and performed wholly within such state
and, in any case, without regard to the conflicts of law principles of such
state.
16. Consent to Jurisdiction.
Each of the parties hereto hereby irrevocably consents that
any legal action or proceeding against it under, arising out of or in any manner
relating to this Agreement may be brought in U.S. Federal Court in the Eastern
District of Pennsylvania. Each of the parties hereto, by the execution and
delivery of this Agreement, expressly and irrevocably consents to the service of
any complaint, summons, notice or other process relating to any action or
proceeding by delivery to him by hand, by telecopy or by certified mail, return
receipt requested, at the addresses specified in Section 10. Each of the parties
hereto hereby expressly and irrevocably waives any claim or defense in any
action or proceeding based on any alleged lack of personal jurisdiction,
improper venue, forum non conveniens or any similar basis. No party shall be
entitled in any such action or proceeding to assert any defense given or allowed
under the laws of any jurisdiction other than the Commonwealth of Pennsylvania
unless such defense is also given or allowed by the laws of the Commonwealth of
Pennsylvania. The consents and waivers provided for in this Section 15 are
personal and solely for the benefit of the parties to this Agreement and their
respective successors and are not intended for the benefit of, and may not be
invoked by, any other person or third party.
17. Severability.
If at any time subsequent to the date hereof, any provision of
this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or enforceability of such provision shall have no effect upon
and shall not impair the enforceability of any other provision of this
Agreement.
-23-
<PAGE>
18. Equitable Remedies.
The parties hereto agree that irreparable harm would occur in
the event that any of the agreements and provisions of this Agreement were not
performed fully by the parties hereto in accordance with their specific terms or
conditions or were otherwise breached, and that money damages are an inadequate
remedy for breach of this Agreement because of the difficulty of ascertaining
and quantifying the amount of damage that will be suffered by the parties hereto
in the event that this Agreement is not performed in accordance with its terms
or conditions or is otherwise breached. It is accordingly hereby agreed that the
parties hereto shall be entitled to an injunction or injunctions to restrain,
enjoin and prevent breaches of this Agreement by the other parties and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to and
not in lieu of, any other rights and remedies to which the other parties are
entitled to at law or in equity.
19. No Waiver.
The failure of any party at any time or times to require
performance of any provision hereof shall not affect the right at a later time
to enforce the same. No waiver by any party of any condition, and no breach of
any provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
20. Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same original instrument.
21. Trust Assets.
Each Beneficial Owner acknowledges that no trustee, officer or
shareholder of the Trust is liable to such holder in respect of this Agreement
and that such holder shall look only to the income and assets of the Trust in
respect of any payments or claims related to this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
-24-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST
By: /s/ Jonathan B. Weller
-------------------------------
Name:
Title: Trustee
<PAGE>
SCHEDULE A
TO
REGISTRATION RIGHTS AGREEMENT
Each Beneficial Owner, by executing this Schedule A, evidences
that such person has become a party to, and is bound by, the Registration Rights
Agreement.
All signatures need not appear on the same copy of this
Schedule A.
/s/ Ronald Rubin */s/ Joseph Straus, Jr.
- ----------------------------- ------------------------------------
Ronald Rubin Joseph Straus, Jr.
*/s/ George Rubin */s/ Alan Feldman
- ----------------------------- ------------------------------------
George Rubin Alan Feldman
*/s/ Leonard Shore (1)*/s/ Doug Grayson
- ----------------------------- ------------------------------------
Leonard Shore Doug Grayson
*/s/ Joseph Coradino (1)*/s/ Eric Mallory
- ----------------------------- ------------------------------------
Joseph Coradino Eric Mallory
*/s/ Lewis Stone (1)*/s/ James Paterno
- ----------------------------- ------------------------------------
Lewis Stone James Paterno
*/s/ Gerry Broker */s/ Judith Garfinkel
- ----------------------------- ------------------------------------
Gerry Broker Judith Garfinkel
*/s/ Patricia Berns (1)*/s/ David Bryant
- ----------------------------- ------------------------------------
Patricia Berns David Bryant
/s/ Edward Glickman (1)*/s/ Susan Valentine
- ----------------------------- ------------------------------------
Edward Glickman Susan Valentine
*By:/s/ Edward Glickman
- -----------------------------
Attorney-in-Fact
(1) Unacredited Investors
-26-
<PAGE>
DELAWARE ASSOCIATES RICHARD I. RUBIN & CO., INC.
/s/ Ronald Rubin By:/s/ George Rubin
- ----------------------------- ------------------------------------
Ronald Rubin, General Partner Name:
Title:
RR LOANCO ASSOCIATES
By: Richard I. Rubin & Co.,
its Managing Partner
By: /s/ Ronald Rubin
-------------------------
Name:
Title
RUBIN OXFORD, INC.
By: /s/ Ronald Rubin
-------------------------
Name:
Title
RUBIN OXFORD VALLEY ASSOCIATES, L.P.
By: Rubin Oxford, Inc., its
General Partner
By: /s/ Ronald Rubin
-------------------------
Name:
Title
-27-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
made and entered into as of this 30th day of September, 1997 between
Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the
"Trust"), and Florence Mall Partners, an Illinois limited partnership (the
"Beneficial Owner").
Background
Pursuant to the Agreement Regarding Assignment of Purchase
and Sale Agreements dated as of June 30, 1997 (the "Assignment Agreement") by
and between The Rubin Organization, Inc. ("TRO") and the Trust, the Purchase
and Sale Agreement dated as of June 30, 1997 between TRO and Magnolia Retail
Associates, L.L.C. (the "Mall Purchase Agreement") and the First Amendment to
Purchase and Sale Agreement dated as of September 30, 1997 (the "First
Amendment") between Magnolia Retail Associates, L.L.C. and PREIT Associates,
L.P., a Delaware limited partnership (the "Partnership"), the Trust has
acquired all of TRO's rights under the Mall Purchase Agreement and the Trust
has in turn assigned all of such rights to the Partnership, which has
designated a special purpose subsidiary, PR Magnolia LLC, as the entity to
take title to the property being conveyed under the Mall Purchase Agreement.
In accordance with the First Amendment, a portion of the
purchase price payable under the Mall Purchase Agreement consists of Class B
limited partner interests in the Partnership ("Class B Units").
The Beneficial Owner owns an equity interest in the seller
under the Mall Purchase Agreement. Under the First Amendment, such seller has
directed that the Class B Units be issued by the Partnership directly to the
Beneficial Owner. As a holder of Class B Units, the Beneficial Owner will have
certain redemption rights pursuant to the terms and conditions of the First
Amended and Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"). Under the Partnership Agreement, a holder of Class B
Units that exercises its right of redemption with respect to Class B Units
may, at the election of the Trust, have such Class B Units purchased by the
Trust for cash or for shares of beneficial interest in the Trust, par value
$1.00 per share ("Shares").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and other good and
<PAGE>
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Certain Definitions.
In addition to the other terms defined in this Agreement,
the following terms shall have the following meanings:
"Applicable Units" means the Class B Units issued by the
Partnership on the date hereof pursuant to the First Amendment.
"Commission" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the relevant time.
"NASD" means National Association of Securities Dealers, Inc.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business
trust, cooperative, association or other form of business organization,
whether or not regarded as a legal entity under applicable law, a trust (inter
vivos or testamentary), an estate, a quasi-governmental entity, a government
or any agency, authority, political subdivision or other instrumentality
thereof, or any other entity.
"Registrable Securities" means (i) any Shares issued or
issuable by the Trust in order to redeem or acquire Applicable Units and (ii)
any additional Shares or other equity securities of the Trust issued by the
Trust in respect of Shares described in subclause (i) after the issuance of
such Shares, in connection with a stock dividend, stock split, combination,
exchange, reorganization, recapitalization or similar reclassification of the
Trust's securities; provided that, as to any particular Registrable
Securities, such securities shall cease to constitute Registrable Securities
when: (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of thereunder; (ii) such securities shall have been sold in
satisfaction of all applicable conditions to the resale provisions of Rule 144
under the Securities Act (or any similar provision then in force); (iii) such
securities are eligible to be publicly sold without limitation as to amount or
manner of
-2-
<PAGE>
sale pursuant to Rule 144(k) under the Securities Act (or any successor
provision to such Rule); or (iv) such securities shall have ceased to be
issued and outstanding. The term Registrable Securities shall not include the
Applicable Units or any other securities of the Partnership.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the relevant time.
2. Registration. Within 90 days following the date hereof,
the Trust shall register under the Securities Act all of the Registrable
Securities pursuant to a shelf registration statement on Form S-3 (or any
similar short-form registration statement that is a successor to Form S-3) or,
in the Trust's sole discretion, any other appropriate form, and the Trust
shall use its best efforts to cause such registration statement to be declared
effective as promptly as shall be reasonably practicable after it has been
filed. The Trust shall not be required to effect more than one registration
pursuant to this Section 2. The Trust shall use its commercially reasonable
efforts to keep such registration statement effective until all securities
included in such registration statement have ceased to constitute Registrable
Securities (the "Lapse Date").
3. Holdbacks and Other Restrictions. The Beneficial Owner
shall:
(a) in the event the Trust is issuing equity
securities to the public in an underwritten offering, and, if requested by the
managing underwriter or underwriters for such underwritten offering, not effect
any public sale or distribution of Registrable Securities or any securities
convertible into or exchangeable or exercisable for such Registrable Securities,
including a sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, for a period commencing on the tenth (10th) day prior
to the date such underwritten offering commences (such offering being deemed to
commence for this purpose on the later of the effective date for the
registration statement for such offering or, if applicable, the date of the
prospectus supplement for such offering) and ending on the earlier to occur of
(i) 90 days after such underwritten offering commences or (ii) one (1) day after
the date (following the commencement of such underwritten offering) on which the
closing price of the Shares (as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Shares are
listed or admitted to trading) shall have averaged for a period of twenty (20)
consecutive days 105% or more of the offering price listed in the prospectus or
prospectus supplement for such underwritten
-3-
<PAGE>
offering (or if no such offering price is listed in such prospectus or
prospectus supplement, the closing price on the date of such offering
commences); provided, however, that this subclause (ii) shall not apply if so
requested by the managing underwriter or underwriters for such underwritten
offering;
(b) not, during any period in which any of his
Registrable Securities are included in any effective registration statement: (i)
effect any stabilization transactions or engage in any stabilization activity in
connection with the Shares or other equity securities of the Trust in
contravention of Rule 104 of Regulation M under the Exchange Act; or (ii) permit
any Affiliated Purchaser (as that term is defined in Rule 101 of Regulation M
under the Exchange Act) to bid for or purchase for any account in which the
Beneficial Owner has a beneficial interest, or attempt to induce any other
person to purchase, any Shares in contravention of Rule 102 of Regulation M
under the Exchange Act; and
(c) furnish each broker through whom the Beneficial
Owner offers Registrable Securities such number of copies of the prospectus as
the broker may require and in any event, comply with the prospectus delivery
requirements under the Securities Act.
4. Registration Procedures.
(a) In connection with the filing of the registration
statement contemplated by Section 2, the Trust shall:
(i) prepare and file with the Commission,
within the time period set forth in Section 2, a shelf registration statement,
which shelf registration statement shall (x) be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution by the Beneficial Owner and (y) comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the Commission to be filed therewith;
(ii) prepare and file with the Commission
such amendments, post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for such period of time as is
necessary to allow the distribution of the Registrable Securities contemplated
therein and to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement during
the period during which any such registration statement is required to be
effective;
-4-
<PAGE>
(iii) furnish to the Beneficial Owner (A)
such number of copies (including manually executed and conformed copies) of such
registration statement and of each such amendment thereof and supplement thereto
(including all annexes, appendices, schedules and exhibits), (B) such number of
copies of the prospectus used in connection with such registration statement
(including each preliminary prospectus and any summary prospectus and the final
prospectus filed pursuant to Rule 424(b) under the Securities Act), and (C) such
number of copies of other documents, as such seller may reasonably request in
order to facilitate the disposition of Registrable Securities;
(iv) use its commercially reasonable efforts
to register or qualify the Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of such jurisdictions as the
Beneficial Owner shall reasonably request, and do any and all other acts and
things which may be necessary or desirable to enable the Beneficial Owner to
consummate the offering and disposition of Registrable Securities in such
jurisdictions; provided, however, that the Trust shall not be required to
qualify generally to do business as a foreign business trust, subject itself to
taxation, or consent to general service of process, in any jurisdiction wherein
it would not, but for the requirements of this Section 4, be obligated to be
qualified;
(v) use its commercially reasonable efforts
to cause the Registrable Securities covered by such registration statement to be
registered with, or approved by, such other public, governmental or regulatory
authorities as may be necessary to facilitate the disposition of such
Registrable Securities in accordance with the methods of disposition intended
herein;
(vi) notify the Beneficial Owner promptly
and, if requested by the Beneficial Owner, confirm such notification in writing,
(A) when a prospectus or any prospectus supplement has been filed with the
Commission, and, with respect to such registration statement or any
post-effective amendment thereto, when the same has been declared effective by
the Commission, (B) of any request by the Commission for amendments or
supplements to such registration statement or related prospectus, or for
additional information, (C) of the issuance by the Commission of any stop order
or the initiation of any proceedings for such or a similar purpose (and the
Trust shall make every reasonable effort to obtain the withdrawal of any such
order at the earliest practicable moment), (D) of the receipt by the Trust of
any notification with respect to the suspension of the qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose (and the Trust shall make every
commercially reasonable effort to obtain the withdrawal of any
-5-
<PAGE>
such suspension at the earliest practicable moment), (E) of the occurrence of
any event that requires the making of any changes to such registration
statement or related prospectus so that such documents will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (and the
Trust shall, subject to Section 5, promptly prepare and furnish to the
Beneficial Owner a reasonable number of copies of a supplemented or amended
prospectus such that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading), and (F) of the
Trust's determination that the filing of a post-effective amendment to such
registration statement shall be necessary or appropriate. The Beneficial Owner
shall be deemed to have agreed by acquisition of such Registrable Securities
that, upon the receipt of any notice from the Trust of the occurrence of any
event of the kind described in clause (E) of this Section 4(a)(vi), the
Beneficial Owner shall forthwith discontinue its offer and disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until it shall have received copies of a supplemented
or amended prospectus which is no longer defective as contemplated by clause
(E) of this Section 4(a)(vi) and, if so directed by the Trust, shall deliver
to the Trust, at the Trust's expense, all copies (other than permanent file
copies) of the defective prospectus covering such Registrable Securities which
are then in its possession;
(vii) otherwise use its commercially
reasonable efforts to comply with all applicable rules and regulations of the
Commission, as the same may hereafter be amended, and make available to its
security holders, as soon as reasonably practicable, earnings statements
satisfying the provisions of Section 11(a) of the Securities Act;
(viii) cooperate with the Beneficial Owner
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold; and use reasonable efforts to cause the
Registrar and Transfer Agent for the Trust to issue, upon request of the
Beneficial Owner, certificates for such numbers of Registrable Securities
registered in such names as the Beneficial Owner may reasonably request at least
two business days prior to any sale of Registrable Securities;
(ix) make available for inspection by the
Beneficial Owner who wishes to sell under the shelf registration statement and
any counsel, accountants or other representatives
-6-
<PAGE>
retained by the Beneficial Owner all financial and other records, pertinent
documents and properties of the Trust reasonably necessary to enable them to
exercise due diligence, and cause the officers, trustees and employees of the
Trust to supply all such records, documents or information reasonably
requested by the Beneficial Owner or such counsel, accountants or
representatives in connection with the shelf registration statement; provided,
however, that such records, documents or information which the Trust
determines in good faith to be confidential and which it notifies the
Beneficial Owner in writing are confidential shall not be disclosed by the
Beneficial Owner or such counsel, accountants or representatives unless (i)
such disclosure is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, or (i) such records, documents or information
become generally available to the public other than through a breach of this
Agreement;
(x) use its reasonable efforts to cause all
Shares that constitute Registrable Securities to be listed on the primary
securities exchange on which similar securities issued by the Trust are then
listed;
(xi) provide a CUSIP number for the Shares,
not later than the effective date of the shelf registration statement; and
(xii) if requested by the Beneficial Owner
and any underwriters engaged by the Beneficial Owner for purposes of
distributing the Registrable Securities, enter into such agreements (including
an underwriting agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the underwriters or the
Beneficial Owner) in order to expedite or facilitate the disposition of such
Registrable Securities, and in such connection, assuming the following are then
customary and reasonable, (A) make such representations and warranties to the
underwriters with respect to the business of the Trust and the shelf
registration statement, prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings by a selling shareholder, and confirm the same if and when requested;
(B) obtain opinions of counsel to the Trust and updates thereof (which shall be
in form and substance reasonably satisfactory to the underwriters and their
counsel), addressed to the Beneficial Owner and each of the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings by a selling shareholder and such other matters as may be reasonably
requested by such counsel and underwriters; (C) obtain "cold comfort" letters
and updates thereof from the independent certified public accountants of the
Trust, addressed
-7-
<PAGE>
to the Beneficial Owner and each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings by a selling
shareholder (in each case, to the extent permitted by applicable accounting
rules and guidelines); (D) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the underwriters than those set forth in Section 7 hereof and cross
indemnification by the underwriters similar to that set forth in Section 7
hereof in favor of the Trust or the Beneficial Owner, as the case may be; and
(E) deliver such documents and certificates as may be reasonably requested by
the managing underwriters and their counsel to evidence the continued validity
of the representations and warranties made pursuant to clause (A) above of
this Section 4(xii) and to evidence compliance with any customary conditions
contained in the underwriting agreement entered into by the Trust.
5. Information Blackout.
(a) At any time when the registration statement
effected pursuant to this Agreement is effective, upon written notice from the
Trust to the Beneficial Owner that the Trust has determined in good faith that
sale of Registrable Securities pursuant to such registration statement would
require disclosure of non-public material information not otherwise required to
be disclosed under applicable law having a material adverse effect on the Trust
(an "Information Blackout"), the Beneficial Owner shall suspend sales of
Registrable Securities pursuant to such registration statement until the earlier
of:
(i) sixty (60) days after the Trust
notifies the Beneficial Owner of such
good faith determination, or
(ii) such time as the Trust notifies the
Beneficial Owner that such material
information has been disclosed to the
public or has ceased to be material
or that sales pursuant to such
registration statement may otherwise
be resumed (the number of days from
such suspension of sales by the
Beneficial Owner until the day when
such sale may be resumed hereunder is
hereinafter called a "Sales Blackout
Period").
(b) Notwithstanding the foregoing, there shall be no
more than two (2) Information Blackouts during any fiscal year of the Trust and
no Sales Blackout Period shall continue for more than sixty (60) consecutive
days.
-8-
<PAGE>
6. Registration Expenses. Whether or not a registration
statement prepared and filed pursuant to this Agreement is declared effective by
the Commission, the Trust shall pay all of the following arising in connection
with the registration pursuant to this Agreement (except as specified in the
following sentence): (a) all Commission and any NASD registration and filing
fees and expenses; (b) any and all expenses incident to the Trust's performance
of, or compliance with, this Agreement, including, without limitation, any
allocation of salaries and expenses of Trust personnel or other general overhead
expenses of the Trust, or other expenses for the preparation of historical and
pro forma financial statements or other data normally prepared by the Trust in
the ordinary course of its business; (c) all listing, transfer and/or exchange
agent and registrar fees; (d) fees and expenses in connection with the
qualification of the Registrable Securities under securities or "blue sky" laws;
(e) printing and delivery expenses; and (f) fees and out-of-pocket expenses of
counsel for the Trust and its independent certified public accountants and other
persons, including special experts, retained by the Trust. Notwithstanding the
foregoing, the Trust shall not be required to pay fees and out-of-pocket
expenses of counsel selected by the Beneficial Owner, or any discounts,
commissions or fees of selling brokers and dealers relating to the distribution
of the Registrable Securities.
7. Indemnification; Contribution.
(a) The Trust hereby indemnifies, to the fullest
extent permitted by law, the Beneficial Owner, its general partners and its
officers and each Person, if any, who controls the Beneficial Owner within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act,
against all losses, claims, damages, liabilities (or proceedings in respect
thereof) and expenses (under the Securities Act, common law and otherwise),
joint or several, which arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement contemplated hereby or in any prospectus, preliminary prospectus, any
amendment or supplement thereto or any document incorporated by reference
relating thereto or in any filing made in connection with the registration or
qualification of the offering under "blue sky" or other securities laws of
jurisdictions in which the Registrable Securities are offered, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Trust shall
reimburse the Beneficial Owner for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or proceeding, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
-9-
<PAGE>
prospectus, if used prior to the effective date of such registration statement
(unless such statement is corrected in the final prospectus and the Trust has
previously furnished copies thereof to the Beneficial Owner seeking such
indemnification), or contained in the final prospectus (as amended or
supplemented if the Trust shall have filed with the Commission any amendment
thereof or supplement thereto) if used within the period during which the
Trust is required to keep the registration statement to which such prospectus
relates current, or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein in light of
the circumstances under which they were made, not misleading; provided,
however, that such indemnification shall not extend to any such losses,
claims, damages, liabilities (or proceedings in respect thereof) or expenses
that are caused by any untrue statement or alleged untrue statement contained
in, or by any omission or alleged omission from, information furnished in
writing to the Trust by the Beneficial Owner in such capacity specifically and
expressly for use in any such registration statement or prospectus.
(b) In connection with the registration statement
contemplated herein, the Beneficial Owner shall furnish to the Trust in writing
such information regarding such Person as shall be reasonably requested by the
Trust for use in such registration statement or prospectus and the Beneficial
Owner hereby indemnifies, to the fullest extent permitted by law, the Trust, its
officers and trustees and each Person, if any, who controls the Trust within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act,
against any losses, claims, damages, liabilities (or proceedings in respect
thereof) and expenses resulting from any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated or necessary to make the statements in the
registration statement or prospectus, or any amendment thereof or supplement
thereto, not misleading; provided, however, that the Beneficial Owner shall be
liable hereunder if and only to the extent that any such loss, claim, damage,
liability (or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement, or alleged untrue statement or omission or
alleged omission, made in reliance upon and in conformity with information
pertaining to the Beneficial Owner which is requested by the Trust and furnished
in writing to the Trust by the Beneficial Owner specifically and expressly for
use in any such registration statement or prospectus.
(c) Any Person seeking indemnification under the
provisions of this Section 7 shall, promptly after receipt by such Person of
notice of the commencement of any action, suit, claim or proceeding, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof; provided, however, that the failure so to notify an
-10-
<PAGE>
indemnifying party shall not relieve the indemnifying party from any liability
which it or he may have under this Section 7 (except to the extent that it has
been prejudiced in any material respect by such failure) or from any liability
which the indemnifying party may otherwise have. In case any such action,
suit, claim or proceeding is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent it or he may
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such suit, action, claim
or proceeding, (ii) the indemnifying party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of the
defense of such action, suit, claim or proceeding within a reasonable time
after notice of commencement of the action, suit, claim or proceeding, or
(iii) such indemnified party shall have reasonably concluded, based on the
advice of counsel, that there may be defenses available to it which are
different from or additional to those available to the indemnifying party
which, if the indemnifying party and the indemnified party were to be
represented by the same counsel, could result in a conflict of interest for
such counsel or materially prejudice the prosecution of the defenses available
to such indemnified party. If any of the events specified in clauses (ii) or
(iii) of the preceding sentence shall have occurred or shall otherwise be
applicable, then the fees and expenses of one counsel or firm of counsel
selected by a majority in interest of the indemnified parties shall be borne
by the indemnifying party. If, in any case, the indemnified party employs
separate counsel, the indemnifying party shall not have the right to direct
the defense of such action, suit, claim or proceeding on behalf of the
indemnified party. Anything in this paragraph to the contrary notwithstanding,
an indemnifying party shall not be liable for the settlement of any action,
suit, claim or proceeding effected without its prior written consent (which
consent in the case of an action, suit, claim or proceeding exclusively
seeking monetary relief shall not be unreasonably withheld or delayed). Such
indemnification shall remain in full force and effect irrespective of any
investigation made by or on behalf of an indemnified party.
(d) If the indemnification from the indemnifying
party as provided in this Section 7 is unavailable or is otherwise insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses
-11-
<PAGE>
referred to therein, then the indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and indemnified
parties in connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses. The relative fault of such indemnifying
party shall be determined by reference to, among other things, whether any
action in question, including any untrue (or alleged untrue) statement of a
material fact or omission (or alleged omission) to state a material fact, has
been made, or relates to information supplied by such indemnifying party or
such indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 7(d) hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with any such
investigation or proceeding.
The parties hereto acknowledge that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation other than as described
above. Notwithstanding the provisions of this Section 7(d), the Beneficial
Owner shall not be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities of the Beneficial
Owner were offered to the public exceeds the amount of any damages which the
Beneficial Owner has otherwise been required to pay or become liable to pay by
reason of such untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
If, however, indemnification is available under this Section
7, the indemnifying parties shall indemnify each indemnified party to the
fullest extent provided in Sections 7(a) through 7(d) hereof without regard to
the relative fault of said indemnifying party or indemnified party or any
other equitable consideration.
8. Investment Representations and Covenants of the Beneficial
Owner.
(a) The Beneficial Owner acknowledges (subject to the
express obligation of the Trust to register Registrable Securities as provided
herein) that any Shares be issued to it in connection with the redemption or
purchase of Applicable Units will not be registered under the Securities Act on
the grounds that the issuance of such Shares is exempt from registration
-12-
<PAGE>
pursuant to Section 4(2) of the Securities Act or Regulation D promulgated
under the Securities Act, and that the reliance of the Trust on such
exemptions is predicated in part on the Beneficial Owner's representations,
warranties, covenants and acknowledgements set forth in this section.
(b) The Beneficial Owner represents and warrants that
it is an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act.
(c) The Beneficial Owner represents and warrants that
the Registrable Securities will be acquired by it for its own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the Securities Act, and the rules and regulations thereunder except
as contemplated hereunder, and the Beneficial Owner will not distribute any of
the Registrable Securities in violation of the Securities Act.
(d) The Beneficial Owner (i) acknowledges that the
Registrable Securities are not registered under the Securities Act and the
Registrable Securities must be held indefinitely by it unless they are
subsequently registered under the Securities Act or an exemption from
registration is available, (ii) is aware that any routine sales of Registrable
Securities made under Rule 144 under the Securities Act may be made only in
limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, and (iii) is aware that Rule 144
is not presently available for use by the Beneficial Owner for resale of
Registrable Securities.
(e) The Beneficial Owner represents and warrants to
the Trust that it is well versed in financial matters, has had dealings over the
years in securities, including "restricted securities," and is fully capable of
understanding the type of investment represented by the Registrable Securities
and the risks involved in connection therewith.
(f) The Beneficial Owner acknowledges that it has
received and read the Proxy Statement of the Trust dated August 27, 1997, has
reviewed such publicly available information concerning the Trust as it has
determined is advisable in connection herewith and confirms that the Trust has
made available to it the opportunity to ask questions of and receive answers
from the Trust's officers and trustees concerning the terms and conditions of
the investment in the Applicable Units and the business and financial condition
of the Trust, and to acquire, and the Beneficial Owner has received to its
satisfaction, such additional information, in addition to that set forth herein,
about the business and financial condition of
-13-
<PAGE>
the Trust and the terms and conditions of the offering as it has requested.
(g) In order to ensure compliance with the provisions
of subparagraph (c) above, the Beneficial Owner will not sell or otherwise
transfer or dispose of any of the Registrable Securities or Applicable Units or
any interest therein (unless such Registrable Securities have been registered
under the Securities Act) without first having complied with either of the
following conditions:
(i) the Trust shall have received a written
opinion of counsel to the Beneficial Owner in form and substance satisfactory to
the Trust, in the exercise of its reasonable judgment, or a copy of a
"no-action" or interpretive letter of the Commission, specifying the nature and
circumstances of the proposed transfer and indicating that the proposed transfer
will not be in violation of any of the registration provisions of the Securities
Act and the rules and regulations promulgated thereunder; or
(ii) the Trust shall have received an
opinion from its own counsel to the effect that the proposed transfer will not
be in violation of any of the registration provisions of the Securities Act and
the rules and regulations promulgated thereunder.
The Beneficial Owner acknowledges that the certificates representing the
Registrable Securities may contain a restrictive legend noting the
restrictions on transfer described in this section and required by federal and
applicable state securities laws, and that appropriate "stop-transfer"
instructions will be given to the Trust's stock transfer agent, provided that
this paragraph (g) shall not be applicable to the Registrable Securities
registered hereunder for so long as such registration statement remains in
effect.
9. Notices.
Except as otherwise provided below, whenever it is provided in
this Agreement that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties hereto, or whenever any of the parties hereto, desires to provide to or
serve upon any person any other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person or
sent by telecopy, addressed as follows:
-14-
<PAGE>
(a) If to the Trust, to:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President
- With a copy to -
Drinker Biddle & Reath LLP
PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Howard A. Blum, Esq.
Telecopy Number: (215) 988-2757
(b) If to the Beneficial Owner, to:
[Address]
- With a copy to -
Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza, Suite 1515
Chicago, Illinois 60605
Attention: John Santa Lucia, Esquire
or at such other address as may be substituted by notice delivered as provided
therein. The furnishing of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder shall
be deemed to have been duly furnished or served on the party to which it is
addressed, in the case of delivery in person or by telecopy, on the date when
sent. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
10. Entire Agreement.
This Agreement represents the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior oral and written agreements, arrangements and
understandings among the parties hereto with respect to such subject matter; and
this Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by a written instrument
-15-
<PAGE>
making specific reference to this Agreement signed by the Trust on the one
hand, and the Beneficial Owner on the other hand.
11. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and personal
representatives. The Beneficial Owner shall not assign this Agreement without
the prior written consent of the Trust.
12. Paragraph Headings.
The paragraph headings contained in this Agreement are for
general reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
13. Applicable Law.
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, applicable to
contracts to be made, executed, delivered and performed wholly within such state
and, in any case, without regard to the conflicts of law principles of such
state.
14. Consent to Jurisdiction.
Each of the parties hereto hereby irrevocably consents that
any legal action or proceeding against it under, arising out of or in any manner
relating to this Agreement may be brought in U.S. Federal Court in the Eastern
District of Pennsylvania. Each of the parties hereto, by the execution and
delivery of this Agreement, expressly and irrevocably consents to the service of
any complaint, summons, notice or other process relating to any action or
proceeding by delivery to him by hand, by telecopy or by certified mail, return
receipt requested, at the addresses specified in Section 9. Each of the parties
hereto hereby expressly and irrevocably waives any claim or defense in any
action or proceeding based on any alleged lack of personal jurisdiction,
improper venue, forum non conveniens or any similar basis. No party shall be
entitled in any such action or proceeding to assert any defense given or allowed
under the laws of any jurisdiction other than the Commonwealth of Pennsylvania
unless such defense is also given or allowed by the laws of the Commonwealth of
Pennsylvania. The consents and waivers provided for in this Section 14 are
personal and solely for the benefit of the parties to this Agreement and their
respective successors and are not intended for the benefit of, and may not be
invoked by, any other person or third party.
-16-
<PAGE>
15. Severability.
If at any time subsequent to the date hereof, any provision of
this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or enforceability of such provision shall have no effect upon
and shall not impair the enforceability of any other provision of this
Agreement.
16. Equitable Remedies.
The parties hereto agree that irreparable harm would occur in
the event that any of the agreements and provisions of this Agreement were not
performed fully by the parties hereto in accordance with their specific terms or
conditions or were otherwise breached, and that money damages are an inadequate
remedy for breach of this Agreement because of the difficulty of ascertaining
and quantifying the amount of damage that will be suffered by the parties hereto
in the event that this Agreement is not performed in accordance with its terms
or conditions or is otherwise breached. It is accordingly hereby agreed that the
parties hereto shall be entitled to an injunction or injunctions to restrain,
enjoin and prevent breaches of this Agreement by the other parties and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to and
not in lieu of, any other rights and remedies to which the other parties are
entitled to at law or in equity.
17. No Waiver.
The failure of any party at any time or times to require
performance of any provision hereof shall not affect the right at a later time
to enforce the same. No waiver by any party of any condition, and no breach of
any provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
18. Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same original instrument.
-17-
<PAGE>
19. Trust Assets.
The Beneficial Owner acknowledges that no trustee, officer or
shareholder of the Trust is liable to such holder in respect of this Agreement
and that such holder shall look only to the income and assets of the Trust in
respect of any payments or claims related to this Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
TRUST:
PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST
By /s/ Jeffrey A. Linn
--------------------------------------
Name:
Title:
BENEFICIAL OWNER:
FLORENCE MALL PARTNERS, an Illinois
limited partnership
By Samuel Zell Robert Lurie General
Partners, an Illinois general
partnership, its General
Partner
By Zell General Partnership, Inc.,
its General Partner
By __________________________________
Name: Shell Z. Rosenberg
Title: Vice President
-19-
<PAGE>
Florence Mall Partners, an Illinois
General Partnership, its general
partner
By: Samuel Zell Robert Lurie
General Partners, an Illinois
general partnership, its
general partner
By: Zell General Partnership,
Inc., its General Partner
By:/s/ Donald Liebentritt
-------------------------
Name:____________________
Title:___________________
-20-
<PAGE>
THE GOLDENBERG GROUP
A Real Estate Development Company
March 26, 1996
The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin, CEO ("Rubin")
Gentlemen:
This letter, when approved by you, will constitute our new
agreement pertaining to the joint development by the Goldenberg Group
("Goldenberg") and The Rubin Organization, Inc. ("TRO") of various Shopping
Center projects specified and determined as herein provided (the "Projects").
This letter is intended to and will on its execution supersede, in all
respects, the letter agreement dated May 10, 1994 between Goldenberg and
Ronald Rubin ("Rubin").
1. OWNERSHIP: The aggregate interest of Goldenberg, and its
affiliates, and TRO, and its affiliates, in all shopping centers developed in
accordance with this letter agreement will be owned by limited partnerships (a
"Partnership") which will be owned 50% by Goldenberg or its affiliates, and
50% by TRO or its affiliates. Each of us may, however, allocate a portion of
our respective interests in each Partnership to others, as limited partners.
At the time of the initial construction loan closing on each Project, the
parties will enter into a limited Partnership Agreement in form and substance
in all material respects identical to the Amended and Restated Limited
Partnership Agreement for Oxford Valley Road Associates (to be
<PAGE>
executed following the execution of this Letter Agreement as provided in
Section 9 hereof) and which will reflect this division of interests and will
reflect any other applicable provisions of this Letter Agreement.
2. NO PARTNERSHIP NOW: This is not intended to be a
partnership agreement and we do not contemplate by this Letter Agreement to
share any profits or losses unless and until a formal limited partnership or
other agreement is actually executed for a Project and an entity is formed to
acquire, own and physically develop such Project.
3. PERSONNEL, PROJECTS AND RESPONSIBILITIES:
A. Personnel: Goldenberg and TRO will agree on the
assignment of personnel from our respective organizations to each Project.
Goldenberg and TRO will each independently absorb the expenses of its own
employees unless otherwise agreed to by Goldenberg and TRO.
B. Projects: The following "power" shopping center
Projects and no others are subject to this Letter Agreement:
(1) Goldenberg Projects: Oxford Valley (on
which a construction loan closing has been completed and a Limited Partnership
Agreement executed), Lancaster (at Route 30 By-Pass and Fruitville Pike) and
"Metroplex" (at Chemical Road and Germantown Pike).
(2) TRO Projects: TRO Projects in which
Goldenberg shall have an interest, as herein provided, shall be
-2-
<PAGE>
one (1) TRO Project for each Goldenberg Project for which an initial
construction loan closing occurs. Cherry Hill, (including any expansion
thereof, if any, which could include the site of the current Cherry Hill Inn)
is hereby designated as the Project in which Goldenberg shall have an interest
in exchange for Oxford Valley, provided a construction loan closing occurs and
construction actually commences for such Project. The other TRO Projects shall
be determined in the following manner:
(a) TRO shall provide to Goldenberg, within
thirty (30) days after the closing of a construction loan on either Lancaster or
Metroplex (or the abandonment of a TRO Project chosen, by Goldenberg, including
Cherry Hill, before an initial construction loan closing thereon) and with an
update every one hundred (100) days thereafter, until Goldenberg selects and
acquires its interest in two (2) additional TRO Projects (or three (3) if no
construction loan closing in fact occurs for Cherry Hill) to which Goldenberg
may be entitled under the terms of this Letter Agreement (by virtue of the one
(1) to one (1) matching), the following:
(i) A list of all TRO Projects
completed or in progress from and after May 10, 1994 (other than the TRO Sears
Project, the TRO Delaware Avenue Project and the TRO Christiana Project) for
"power" shopping centers, which are defined, for this purpose, as those shopping
centers containing or which are intended to contain over 300,000 square feet
including at least two (2) "category killer" tenants (e.g. Toys
-3-
<PAGE>
R'Us, Circuit City, Sports Authority, etc.), located as to all TRO Projects in
Pennsylvania, New Jersey, New York, Delaware or Maryland;
(ii) Whatever pro-forma projections,
preliminary plans, schedules, status reports and any other relevant financial
and other information on all such TRO Projects which would allow Goldenberg to
evaluate its prospective investment are then available;
(iii) The extent to which each such
TRO Project will have ownership vested in other than TRO and his affiliates
provided that unless otherwise agreed by Goldenberg no Project of TRO shall
qualify as an eligible TRO Project unless TRO and its affiliates own, prior to
any interest of Goldenberg, at least ninety (90%) percent of such Project.
(b) Within one hundred and eighty (180) days
after the construction loan closing on each of Lancaster and Metroplex, but not
earlier than April 1, 1997, Goldenberg shall select by written notice to TRO the
TRO Project in which Goldenberg shall have an interest based on the Goldenberg
Project which has closed on a construction loan, provided that Goldenberg had,
at the time its selection is required, at least two (2) TRO Projects to choose
from. If Goldenberg does not have, at the time when such selection is required,
at least two (2) eligible TRO Projects to choose from, Goldenberg may either (1)
elect the one (1) eligible TRO Project available, if any, or (2) elect, by
notice to TRO, to reduce the aggregate interest of TRO and its
-4-
<PAGE>
affiliates in such corresponding Goldenberg Project, i.e. Lancaster or
Metroplex, by fifty (50%) percent. In such notice, Goldenberg shall also elect
whether its interest will include a general partner interest similar to that
of TRO in Oxford Valley, in which event Kenneth Goldenberg ("Ken") shall match
any guaranty of debt service and completion given by Rubin with respect to
such TRO Project, or whether the interest of Goldenberg shall be that of a
limited partner.
(c) In the event the TRO Project chosen by
Goldenberg under subparagraph (b) above had not at that time proceeded to a
successful construction loan closing or thereafter does not, within eighteen
(18) months of such choice, proceed to a successful construction loan closing
(or is aborted prior thereto), Goldenberg shall, within ninety (90) days
thereafter, be entitled to elect an interest in another TRO Project, as provided
in subparagraph (b) above, provided that if Goldenberg does not have, at the
time when such selection is required, at least two (2) eligible TRO Projects to
choose from, Goldenberg may either (1) elect to choose the one (1) eligible TRO
Project available, if any, or (2) elect, by notice to TRO, to reduce the
aggregate interest of TRO and its affiliates, in such corresponding Goldenberg
Project, i.e. Lancaster or Metroplex, by fifty (50%) percent. In addition, if
the TRO Cherry Hill Project does not proceed to successful construction loan
closing, by August 31, 1997 (or is aborted prior thereto) Goldenberg shall,
within ninety (90) days thereafter, be entitled to elect an
-5-
<PAGE>
interest in another TRO Project, as provided in subparagraph (b) above,
provided that if Goldenberg does not have, at the time when such election is
required, at least two (2) eligible TRO Projects to choose from, Goldenberg
may either (1) elect to choose the one (1) eligible TRO Project available, if
any, or (2) elect, by notice to TRO, to reduce the aggregate interest of TRO
and its affiliates in the corresponding Goldenberg Project, i.e. Oxford
Valley, by fifty (50%) percent. TRO's obligation to provide Goldenberg with an
interest in a TRO Project for each Goldenberg Project which proceeds to a
successful construction loan closing shall only be satisfied if and when
Goldenberg receives an interest for each in a TRO Project for which, a
successful construction loan closing has occurred or does occur or, if
applicable, when TRO's interest in the corresponding Goldenberg Project is
reduced.
C. Responsibilities: Goldenberg and TRO agree to meet
regularly (at least monthly) and provide to each other status reports and other
information relating to all Projects in development which could be subject to
this Agreement and, to the extent possible, provide assistance and support to
enhance the value of each other's Project.
4. EQUITY:
A. (1) The term "Pre-Acquisition Expenses" as
used in this Letter Agreement shall include for each Goldenberg Project all
third party pre-acquisition expenses and any third party pre-construction
expenses that arise after acquisition but
-6-
<PAGE>
which may not be drawn from the construction loan for such Project.
(2) The term "Gap Equity" as used in this
Agreement means for each Project the amount by which the actual cost of such
Project exceeds the funds available from the construction and initial long term
financing of such Project.
(3) For all Goldenberg Projects, TRO will
provide a revolving Equity Fund (the "Equity Fund") pursuant to subparagraph C
below against which draws may be made by Goldenberg in accordance with the
practice heretofore followed by Goldenberg and TRO with respect to the Oxford
Valley Project (but in no event more than fourteen (14) days after requisition)
to pay Pre-Acquisition Expenses for each Goldenberg Project (e.g. land deposits,
engineering, environmental and architectural services, etc.) and the Gap Equity
required for each Goldenberg Project. The Equity Fund will be revolving as
contemplated by subparagraph D below.
B. For all TRO Projects, TRO shall provide all of the
equity (including Pre-Acquisition Expenses and Gap Equity) independent of the
Equity Fund or any other provisions for equity in this Letter Agreement.
C. The Equity Fund referred to in subparagraph A (3)
above will be funded by TRO up to, but not more than, Five Million Dollars
($5,000,000), (which Goldenberg acknowledges has been funded and fully advanced
for Goldenberg Projects at the date hereof), all of which, together with the
amounts repaid from
-7-
<PAGE>
time to time to the Equity Fund (exclusive of the "Interest Factor," as
hereafter defined) per subparagraph E below, will be available and unless
otherwise agreed to by Goldenberg and TRO, used only for the purposes set
forth in subparagraph A above as such expenses arise.
D. If the Equity Fund is fully expended pursuant to
this Letter Agreement and additional funds are then required beyond the limit
specified in subparagraph C above, Ken and Rubin will, on terms acceptable to
both parties, procure debt or other financing to satisfy such needs. Whether
such additional funds are borrowed by Ken and Rubin and advanced to a Goldenberg
Project, or borrowed from a third party by a partnership owning such Goldenberg
Project, the repayment thereof to Ken and Rubin, including an Interest Factor as
defined in subparagraph F below, or to the third party lender, will be made
first from the Equity Fund from repayments made to the Equity Fund to the extent
such repayments have occurred from other Goldenberg Projects and second from
such Goldenberg Project in the same manner as but prior to repayment of funds
advanced to such Goldenberg Project from the Equity Fund. TRO and Goldenberg
acknowledge that at the date hereof monies have been advanced by Goldenberg to
fund joint obligations of Ken and Rubin to the Lancaster and Metroplex Projects,
on which interest has accrued since the Equity Fund had been advanced in full.
Upon execution hereof, Oxford Valley shall reimburse Goldenberg for the amount
of such advances plus
-8-
<PAGE>
interest, from the $3,000,000 borrowing described in Section 10 hereof.
E. Since the Equity Fund is to be a revolving fund,
it will be considered to be fully expended only when and if all of TRO's initial
Five Million Dollar ($5,000,000) contribution and any amounts returned to the
Equity Fund (exclusive of the "Interest Factor," as hereafter defined) from time
to time in accordance with this Letter Agreement, have all been expended as
herein provided, provided however that to the extent the Equity Fund is
reimbursed from funds generated from a TRO Project, the Equity Fund availability
shall be reduced dollar for dollar, but not below Two Million Five Hundred
Thousand ($2,500,000).
F. TRO will be paid an "Interest Factor" equal to an
annual interest rate of 2% over prime on funds disbursed from the Equity Fund to
each Goldenberg Project for the period such monies are advanced to such
Goldenberg Project. The Interest Factor and repayment of principal advanced to a
Goldenberg Project from the Equity Fund will be repaid, whether such advances
are structured as preferred equity, as in the Oxford Valley Road Limited
Partnership Agreement, or loans, if permitted by construction lenders on the
remaining Goldenberg Projects, as and when and in the same manner provided in
the Amended and Restated Oxford Valley Road Associates Limited Partnership
Agreement with respect to the Preference Amount, as defined therein, which
Limited Partnership Agreement shall also
-9-
<PAGE>
include provisions to comply with the terms set forth in Exhibit "A" hereto.
G. TRO's obligation to provide the Equity Fund will
be terminated when the Equity Fund's obligations to all Goldenberg Projects
covered by this Agreement have been fully satisfied.
H. If TRO fails to satisfy its equity obligations
under this Paragraph 4, TRO's interest in such Goldenberg Projects for which its
equity obligations were not satisfied shall be limited to a return of sums
advanced from the Equity Fund to such Goldenberg Project. TRO will, under such
circumstances, have no other interest in such Goldenberg Project(s).
I. Except for failure to apply such funds to a
Goldenberg Project, neither Goldenberg, Ken nor any affiliate of Goldenberg
shall have any personal liability to TRO or Rubin or any of TRO's affiliates for
any sums TRO advances pursuant to this Letter Agreement, or for payment of any
interest on any such sums.
5. DEVELOPMENT AND LEASING FEES:
A. Each Goldenberg Project and each TRO Project will
pay a total leasing fee of $2.00 per square foot, exclusive of co-broker's fees,
of leased, land leased or sold (collectively "GLA") to the lead developer.
B. Each Goldenberg Project and each TRO Project will
pay a total development fee of $1.00 per square foot of GLA.
-10-
<PAGE>
The lead development party will receive two-thirds of this fee; the other
party will receive one-third of this fee. This fee and the leasing fee will be
paid to the extent available out of construction loan financing with the
balance, if any, to be paid pari passu with the reimbursement to the Equity
Fund and any funds to be repaid under the provisions of subparagraph 4D above.
6. MANAGEMENT: An affiliate of the party that develops a
Project will become the manager and will earn a 4% management fee for its
effort. Should a Project sell units, pads or spaces to its occupants and thus
have no rental stream from such occupants, the management fee will be adjusted
to reflect an "imputed" rental stream equal to the average per square foot rent
paid by tenants in the shopping center times the square footage of the buildings
erected on the sold property. If however, for such sale "tenants," the
"tenant-buyer" itself assumes all maintenance responsibility, etc. the
management fee will only be 2 1/2% times such imputed rent on such space. Such
manager will also be entitled to a $2.00 per square foot releasing commissions
(exclusive of co-broker commissions) in the event of a successful releasing
effort to a new tenant for vacant space.
7. DEFAULT:
A. In the event TRO fails to provide any advance they
are required to make pursuant to the mechanism established in this Letter
Agreement after notice from Goldenberg to make such advance, Goldenberg shall
have the option but not the obligation to advance the funds which TRO failed to
advance. Any
-11-
<PAGE>
sums Goldenberg actually so advanced shall constitute TRO's obligation to
Goldenberg and shall bear interest at a rate equal to two (2) percentage
points above the prime rate or its equivalent charged from time to time by
CoreStates Bank. (TRO acknowledges that as a result of the foregoing,
Goldenberg is owed monies representing interest on advances made by Goldenberg
to the Oxford Valley Project pending timely disbursements from the Equity
Fund, the principal of such Goldenberg advances having been repaid.) If TRO
has not previously repaid the same to Goldenberg, Goldenberg shall have a
first claim to such reimbursement and interest out of sums which on any basis
would be payable to TRO or its affiliates out of the cash flow, refinancing or
sale of any Goldenberg Project.
8. NO CONFLICTS: No party may hire or court for hiring the
other party's management, leasing or development employees during this
relationship or for three years thereafter.
9. Termination of April 13, 1995 Agreement. Upon execution
hereof, all rights and obligations provided for in the Letter Agreement of April
13, 1995 between Goldenberg and Rubin shall be terminated, except that Ken and
Rubin agree to negotiate in good faith and execute an Amendment to the April 13,
1995 Limited Partnership Agreement for Oxford Valley Road Associates to
encompass the terms of this Letter Agreement.
10. $3,000,000 Loan. Concurrently upon execution hereof, TRO
and Rubin shall cause to be executed by Rubin or its affiliates all documents
with CoreStates Bank providing for an
-12-
<PAGE>
increase of $3,000,000 under its current loan, provided that the proceeds of
said loan shall be distributed as set forth in Exhibit "B" hereof.
Sincerely,
GOLDENBERG GROUP
/s/ Kenneth N. Goldenberg
-------------------------
Kenneth N. Goldenberg
AGREED AND ACCEPTED:
THE RUBIN ORGANIZATION
By:/s/ Ronald Rubin
- ----------------------------
Ronald Rubin, CEO
Agreed insofar as the foregoing contains personal undertakings of the
undersigned.
/s/ Ronald Rubin /s/ Kenneth N. Goldenberg
- ---------------- -------------------------
Ronald Rubin Kenneth N. Goldenberg
March 26, 1996
-13-
<PAGE>
July 30, 1997
VIA TELECOPIER (610) 260-0268
Mr. Ken Goldenberg
The Goldenberg Group
350 Sentry Parkway
Building 630, Suite 300
Blue Bell, PA 19422-2136
Re: Goldenberg/Rubin Projects
Dear Ken:
To follow up on the various Goldenberg/Rubin conversations, we would
clarify and confirm the following matters:
1. Retail Management Fees. With respect to Oxford Valley and
Cherry Hill, retail management fees will be calculated in accordance with the
Letter Agreement which imputes rent for pad sales, but does not impute rent
for ground leases. With respect to the other projects envisioned, i.e.,
Lancaster, Blue Route and the two matching Rubin projects, the Letter
Agreement is hereby modified to provide that an imputed charge of $4/PSF rent
will be added to the actual ground lease rents for purposes of computing the
retail management fee.
2. Put Rights. You have expressed an interest in acquiring
the right to put your interests in some or all of the various Goldenberg/Rubin
projects into PREIT, or its affiliated operating partnership. PREIT is very
interested in discussing these items. However, PREIT, on the one hand, and
Goldenberg, on the other hand, cannot agree on the terms of any put agreement
over the next day or two. Rather, we suggest that when the PREIT Proxy becomes
available, PREIT will deliver it to you. If you are interested in acquiring an
interest in PREIT, after reviewing the Proxy, you may enter into negotiations
regarding the acquisition of such Goldenberg interests as you desire to
transfer to PREIT or its operating partnership.
3. Distributions from Equity Fund. In a matter that related
to Oxford Valley, we agree that the attached schedule illustrates the
methodology used to reconcile the equity fund. The exact accounting is subject
to a final audit utilizing this method.
<PAGE>
Mr. Ken Goldenberg
July 30, 1997
Page 2
4. Reimbursement of In-House Costs. With respect to all
projects, you have asked for clarification that the development projects will
not pay overhead, administrative or in-house legal or consulting fees to
employees or entities controlled by the managing partner. We agree with this
statement. However, we have agreed to the reimbursement of in-house legal fees
for the preparation and negotiation of leases at Cherry Hill and reimbursement
of the direct payroll costs, as previously presented to us, for your on-site
construction supervision at Oxford Valley. In the future, in-house legal or
other charges will only be reimbursable if approved by each of us, in advance.
5. Funding Goldenberg Projects. The intent of the Letter
Agreement was that if funds in excess of the Equity Fund are needed for
Lancaster and Blue Route, that Rubin and Goldenberg will each put up such
necessary funds equally and in a timely fashion (within fifteen (15) days of a
requisition). That obligation and procedure is hereby confirmed.
6. Non-Retail Fees. At Blue Route, there is a significant
possibility that a parcel of land will be used for non-retail purposes. You
have asked for clarification on how development, leasing and management fees
will be paid on the non-retail portion of the project. We confirm our
understanding that you would be entitled to a development fee of $1 per square
foot of GLA (which is shared with Rubin) and a leasing fee of $2 per square
foot of GLA as provided in the Letter Agreement with respect to the non-retail
GLA of an office building or hotel (not including parking structures or
parking areas). In terms of management, you would be entitled to a 4%
management fee for an office property as per the Letter Agreement if you build
and lease space to tenants. For a land lease or sale of an office building or
hotel, you will be entitled to management fees only if your contract with the
office or hotel user, or owner, provides that you will be the managing entity
or property manager, in which case you will be paid whatever the tenant or
purchaser agrees to pay you, so long as such fees are reasonable.
7. Construction Financing. You have asked that construction
financing on Goldenberg projects be guaranteed by PREIT. Ron has explained to
Ken, in great detail, the limitations placed upon PREIT. The operating
partnership, as referenced in the Proxy, will obligate itself to guarantee
construction financing on the Goldenberg projects, as long as this financing
is with "Required Lenders." "Required Lenders" will have the definition to be
given in the Loan Agreement between PREIT and CoreStates Bank, as lead lender,
which is
<PAGE>
Mr. Ken Goldenberg
July 30, 1997
Page 3
currently under negotiation. We believe that Required Lenders will mean those
Lenders holding 2/3 by commitment amounts of the amount of the CoreStates loan
to PREIT. We have agreed to both work with PREIT to approach CoreStates to
allow the operating partnership to guarantee construction financing with other
lenders. In the event that Goldenberg desires to utilize another lender, and
if PREIT cannot obtain CoreStates' consent for the operating partnership loan
to guarantee such a construction loan, Ron Rubin will sign personally to
guarantee such loan if required by the construction lender. Conversely, you
have asked us to agree that Ken will not be required to guarantee construction
financing for projects by Rubin or the operating partnership if Ken elects to
forsake his general partner status. This is agreeable, in principle, with us.
However, if a lender requires Ken's signature, we ask that Ken work with us,
in a similar manner to how Ken Goldenberg worked with Rubin with respect to
Hillview.
8. Accounting Fees. This will confirm that Rubin will pay
Zelenkofske Axelrod fees incurred in connection with the proposed PREIT
transaction in an amount not to exceed $50,000.
9. York Project. This will confirm that if Rubin, or the
operating partnership as successor to Rubin, desires to go forward with a
shopping center development at York, that it will be a 50/50 joint venture
with Goldenberg outside the scope of the Letter Agreement. Further, the
respective responsibilities will be discussed and decided upon between
Goldenberg, on the one hand, and Rubin and/or the operating partnership, on
the other hand. However, no agreements have yet been signed with respect to
York, Pennsylvania, and this is not a commitment by Rubin or the operating
partnership to go forward with the ownership of a power center development in
York, Pennsylvania. However, should we decide not to go forward, we will give
you timely notice.
10. Affiliate Obligations. It is expressly agreed that
neither party hereto, nor its successors and assigns, may use affiliates to
avoid their obligations under the Letter Agreement.
<PAGE>
Mr. Ken Goldenberg
July 30, 1997
Page 4
If you agree that this letter accurately sets forth our
understandings, please sign and return a copy to me.
Very truly yours,
/s/ Ronald Rubin
---------------------------
RONALD RUBIN
cc: Mr. Alan Feldman
Mr. Edward Glickman
Jonathan B. Weller, President
Lawrence J. Arem, Esquire
Agreed and Accepted this 30th
day of July, 1997.
THE GOLDENBERG GROUP
By:/s/ Ken Goldenberg
-------------------------
Ken Goldenberg
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 30, 1997, between the
Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the
"Trust") and Ronald Rubin (the "Executive").
BACKGROUND
Pursuant to the Contribution Agreement dated as of even date
herewith (the "Contribution Agreement") among the Trust, PREIT Associates,
L.P. (the "Partnership"), The Rubin Organization, Inc. ("TRO") (to be known as
PREIT-RUBIN as of the Effective Date hereof), The Rubin Organization-Illinois,
Inc. and certain individuals affiliated with TRO, the Partnership is acquiring
on the Effective Date hereof 95% of the equity of TRO. This Agreement is
entered into in anticipation of the closing of the transactions contemplated
by the Contribution Agreement (the "TRO Transactions"). The Effective Date
shall be the date of closing of the TRO Transactions.
The Trust desires to employ Executive as Chief Executive
Officer of the Trust, and Executive desires to be so employed on the terms and
conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1 Employment; Acceptance of Employment. Commencing on the
Effective Date, the Trust employs Executive and Executive accepts employment
by the Trust for the period and upon the terms and conditions hereinafter set
forth.
1.2 Capacity and Duties.
(a) Executive shall be employed by the Trust
generally as its Chief Executive Officer and shall have the duties and authority
consistent with his office. Executive shall report directly to the Board of
Trustees of the Trust (the "Board") or an appropriate Committee of the Board
and, in performing his duties hereunder, he shall be subject to the direction
and control of the Board or an appropriate Committee thereof.
<PAGE>
(b) Except as provided in paragraph 1.2(c) hereof,
Executive shall devote his full working time, energy, skill and best efforts to
the performance of his duties hereunder and shall not be employed by or
participate or engage in or be a part of in any manner the management or
operation of any business enterprise or pursuit other than the Trust and its
direct or indirect Affiliates without the prior written consent of the Board,
which consent may be granted or withheld in its sole discretion. For purposes of
this Agreement, "Affiliate" means any person or entity controlling, controlled
by or under common control with either the Trust or TRO. "Control," as used
herein, means the power to direct management and policies of a person or entity
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the term "controlling" and "controlled" shall have
correlative meanings; provided that, any person or entity that owns
beneficially, either directly or through one or more intermediaries, more than
20% of the ownership interests in a specified entity shall be presumed to
control such entity for purposes of the definition of "Affiliate."
(c) Executive may (i) engage in community activities,
including service as a director on the boards of charitable institutions, (ii)
serve on the boards of directors of publicly owned corporations and (iii)
continue his investments in the properties listed on Schedule I hereto (the
"Properties"), provided that:
(A) he shall not devote more than an insignificant
amount of his time to such investments in the aggregate;
(B) his activities described in this Section
1.2(c)(i)-(iii) do not interfere with, detract from or affect the
performance of Executive's duties for the Trust under this Agreement;
and
(C) except for Executive's "Development Activities"
(as defined below) with respect to the Six Penn Center and the PSFS
Building Properties, Executive shall not directly or indirectly
engage in any Development Activities in respect of any of the
Properties or other properties in which he or any of his Affiliates
has an ownership interest, provided, however, that under exceptional
circumstances, Executive may request an exception to this clause (C),
which may be granted subject to conditions, or withheld, in the sole
discretion of the Special Committee of the Board. Executive has
advised that he may have the opportunity of acquiring an ownership
interest in One Meridian Plaza and that TRO would then
-2-
<PAGE>
serve as the developer and manager of the office building project. It
is agreed that, so long as the Committee is provided with adequate
information concerning such activities and is reasonably satisfied
that the arrangements are fair and reasonable to the Trust and will
not consume a significant amount of Executive's working time or
energy, the Committee shall grant the exception referred to in the
preceding sentence.
For purposes of this Agreement, "Development Activities" means
activities involved in preparing a property for its intended use, including,
without limitation, planning, construction, design, engineering, financing,
marketing, zoning, remediation, preparation of market or use studies, or other
activities customarily related to the development of property.
(d) Notwithstanding the foregoing, it is understood
that Executive may, on a regular or occasional basis, perform services to one or
more entities in which the Trust has an investment.
SECTION 2. TERM OF EMPLOYMENT
2.1 Term. The initial term of Executive's employment
hereunder shall be five years commencing on the Effective Date and shall
thereafter automatically be renewed from year to year unless and until either
party shall give notice of his or its election to terminate Executive's
employment at least six months prior to the end of the then-current term, in
each case unless earlier terminated as hereinafter provided.
SECTION 3. COMPENSATION
3.1 Basic Compensation.
As compensation for Executive's services
hereunder, the Trust shall pay to Executive a salary at the annual rate of
$345,000 (the "Base Salary"), payable in accordance with the Trust's regular
payroll practices in effect from time to time during the term of Executive's
employment; provided that the Base Salary shall equal or exceed the annual
base salary payable to any person who is an employee of the Trust or of the
Partnership.
3.2 Incentive Compensation. In addition to the Base Salary,
the Trust shall pay Executive additional compensation (the "Incentive
Compensation") for the services to be rendered by Executive pursuant to this
Agreement, with respect to each fiscal year during the term of this Agreement
commencing after December 31, 1997, such amount to be determined according to an
-3-
<PAGE>
incentive compensation plan to be adopted prior to the Effective Date. In
approving the incentive plan, the Executive Compensation and Human Resources
Committee of the Board of Trustees of the Trust shall determine that, in its
judgment, the incentive compensation plan is reasonable for the Trust and fair
to Executive.
3.3 Executive Benefits. In addition to the compensation
provided for in Sections 3.1 and 3.2, Executive shall be entitled during the
term of his employment to participate in the Trust's benefit plan(s) listed on
Schedule 3.3 hereof at the Trust's cost, subject to such (i) co-payments and
deductibles as are provided for in such plans and (ii) modifications as shall
be generally applicable to senior executives of the Trust.
3.4 Vacation. Executive shall be entitled to no fewer than
the number of vacation days during each calendar year during the term of his
employment as is provided to other senior officers of the Trust (and, in any
event, at least six weeks), during which time his compensation shall be paid
in full.
3.5 Expense Reimbursement. During the term of his
employment, the Trust shall reimburse Executive for all reasonable expenses
incurred by him in connection with the performance of his duties hereunder in
accordance with its regular reimbursement policies as in effect from time to
time and upon receipt of itemized vouchers therefor and such other supporting
information as the Trust may reasonably require.
3.6 Options. Concurrently with the Effective Date, the Trust
shall grant Executive, pursuant to the Trust's 1997 Stock Option Plan adopted
by the Trust on July 8, 1997 (the "Option Plan"), non-qualified options to
purchase 150,000 shares of beneficial interest of the Trust (the "Shares") at
a cash price per share as provided for under the Option Plan. The shares shall
be exercisable as follows: the first 25% on or after January 1, 1999, the next
25% on or after January 1, 2000, the next 25% on or after January 1, 2001 and
the final 25% on or after January 1, 2002.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 Death of Executive. Executive's employment hereunder
shall immediately terminate upon his death, upon which the Trust shall not
thereafter be obligated to make any further payments hereunder other than
amounts (including salary, incentive compensation, expense reimbursement,
etc.) accrued as of the date of Executive's death, in accordance with GAAP as
conclusively determined in the absence of manifest error by the auditors of
the Trust.
-4-
<PAGE>
4.2 Disability of Executive. If Executive, in the reasonable
opinion of a physician selected by the Board, is or has been unable, for any
reason due to his physical, mental or emotional illness or condition to
perform his duties hereunder for a period of 120 days within five consecutive
months, then the Trust shall have the right to terminate Executive's
employment upon 30 days' prior written notice to Executive at any time during
the continuation of such inability, in which event the Trust shall not
thereafter be obligated to make any further payments hereunder other than
amounts (including salary, bonuses, expense reimbursement, etc.) accrued as of
the date of such termination in accordance with GAAP, as conclusively
determined in the absence of manifest error by the auditors of the Trust.
4.3 Termination for Cause. Executive's employment hereunder
shall terminate immediately upon notice that the Board is terminating
Executive for "cause" (as defined herein), in which event the Trust shall not
thereafter be obligated to make any further payments hereunder other than
amounts (including salary, incentive compensation, expense reimbursement,
etc.) accrued under this Agreement as of the date of such termination, in
accordance with GAAP, as conclusively determined in the absence of manifest
error by the auditors of the Trust. As used herein, "cause" shall mean the
following
(i) fraud, theft or misappropriation or
embezzlement of the assets or funds of the Trust or an Affiliate of the Trust;
(ii) indictment for a crime involving moral
turpitude;
(iii) material breach of Executive's
obligations under this Agreement;
(iv) failure of Executive to perform his
duties to the Trust, which persists for more than twenty (20) days after written
notice or which recurs; or
(v) repeated abuse of alcohol or other
drugs.
4.4 Termination without Cause; Change in Control.
(a) In the event:
(i) Executive's employment is terminated for any
reason other than Cause, death or disability then, unless (ii) below shall be
applicable as a result of voluntary termination by the Executive or
termination by the Trust other than for disability of Cause, the Trust shall
pay Executive, in a single
-5-
<PAGE>
lump sum, all of the consideration provided for in Section 3.1 during the
remainder of the then-current term of Executive's employment discounted to
present value at the prime rate of interest in effect on the date of such
termination, as reported in The Wall Street Journal and any amounts due under
Section 3.2 for the period of his employment and the Trust shall pay for the
continuation of Executive's health benefits (or comparable benefits) during
the remainder of the then-current term of Executive's employment unless health
benefits shall be available to Executive from a new employer; or
(ii) of voluntary termination by the
Executive within sixty (60) days following a Change in Control (as defined
herein) or by the Trust other than for Cause or disability at any time following
a Change of Control, the Trust shall pay Executive up to three times the annual
Base Salary and Incentive Compensation provided for in Sections 3.1 and 3.2,
respectively, but in no event more than 2.99 times the "base amount" as defined
in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"), reduced by the present value of non-cash payments determined under
Section 280G(b)(2)(A)(ii) of the Code and the regulations promulgated thereunder
or successor provisions of similar import. The determination by the auditors of
the Trust as to any amounts due Executive pursuant to this Section 4.4(a)(ii)
shall be conclusive in the absence of manifest error.
Upon making the payments described in this Section 4.4(a),
Company shall have no further obligation to Executive hereunder.
(b) As used in this Section 4.4, a "Change in
Control" of the Trust means:
(i) the acquisition by any person, entity or
group required to file a Schedule 13D or Schedule 14D-1 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this
purpose, the Trust, its affiliates, any employee benefit plan (or related trust)
of the Trust or its affiliates which acquires beneficial ownership of voting
securities of the Trust) or any acquisition by any person entitled to file Form
13G under the Exchange Act with respect to such acquisition of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 51% or more of either the then outstanding shares of beneficial interest or
the combined voting power of the Trust's then outstanding voting securities
entitled to vote generally in the election of trustees (the "Outstanding
Shares"); or
(ii) the election or appointment to the
Board, or resignation of or removal from the Board by virtue of which the
-6-
<PAGE>
Continuing Trustees (as defined below) no longer constitute at least a majority
of the Board of Trustees; or
(iii) approval by the shareholders of the
Trust of: (A) a reorganization, merger or consolidation, or (B) a liquidation or
dissolution of the Trust or the sale, transfer, lease or other disposition of
all or substantially all of the assets of the Trust, whether such assets are
held directly or indirectly, (the events referred to in this Section
4.4(b)(iii)(A) and (B) being referred to hereafter as a "Business Combination")
unless, following such Business Combination, (x) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Shares immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 51% of, respectively, the then outstanding shares of
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of trustees, as the case may be, of
the entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transactions owns the Trust or
all or substantially all of the Trust's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Shares, (y) no
person, excluding any employee benefit plan (or related trust) of the Trust or
such entity resulting from such Business Combination, beneficially owns,
directly or indirectly, 49% or more of, respectively, the then outstanding
shares of stock of the entity resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such entity
except to the extent that such ownership existed prior to the Business
Combination and (z) at least a majority of the members of the board of trustees
or directors of the entity resulting from such Business Combination were
Continuing Trustees at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(iv) a change in control of the Trust that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, as in effect on the date
hereof, whether or not the Trust is then subject to such reporting requirements.
As used in this Section 4.4, the terms "person" and
"beneficial owner" have the same meanings as such terms under Section 13(d) of
the Securities Exchange Act of 1934 and the rules and regulations thereunder.
As used herein, "Continuing Trustees" means those trustees duly elected prior
to the time that any person, entity or group of associated persons acting in
concert has acquired beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of 50% or more
-7-
<PAGE>
of the then outstanding shares of capital stock of the Trust entitled to vote
for the election of trustees of the Trust, and those trustees who were
recommended to succeed Continuing Trustees by a majority of Continuing
Trustees including but not limited to the trustees designated by TRO who are
elected by the Continuing Trustees in connection with the TRO Transactions.
4.5 Voluntary Termination. In the event Executive's
employment is voluntarily terminated by Executive, Company shall not be
obligated to make any further payments hereunder other than amounts (including
salary, incentive compensation, expense reimbursement, etc.) accrued as of the
date of Executive's termination, in accordance with GAAP, as conclusively
determined in the absence of manifest error by the auditors of the Trust. Upon
making the payments described in this Section 4.5, the Trust shall have no
further obligation to Executive hereunder.
SECTION 5. RESTRICTIVE COVENANTS
5.1 Confidentiality. Executive acknowledges a duty of
confidentiality owed to the Trust and shall not, directly or indirectly, at
any time during or after his employment by the Trust, retain in writing, use,
divulge, furnish, or make accessible to anyone, without the express
authorization of the Board, any trade secret, private or confidential
information or knowledge of the Trust or any of its affiliates obtained or
acquired by him while employed by the Trust and TRO. All computer software,
books, records, and files and know-how generated or acquired while an employee
of the Trust or TRO, are acknowledged to be the property of the Trust and
shall not be duplicated, removed from the Trust's possession or made use of
other than in pursuit of the Trust's or its affiliates' businesses and, upon
termination of employment for any reason, Executive shall deliver to the
Trust, without further demand, all copies thereof which are then in his
possession or under his control. The provisions of this Section 5.1 shall not
apply to information which (i) is or becomes generally available to the public
other than as a result of disclosure by Executive, (ii) was available to
Executive on a non-confidential basis prior to its disclosure to Executive,
(iii) becomes available to Executive on a non-confidential basis from a source
other than the Trust or its affiliates, or (iv) is required to be disclosed by
law or by order of a court or governmental authority.
5.2 Noncompetition. During the term of Executive's
employment and for one year after termination of Executive's employment for
Cause, Executive shall not directly or indirectly: (a) engage, anywhere within
twenty-five (25) miles of any property in which the Trust or an Affiliate of
the Trust has a direct or indirect ownership interest (the "Trust
Properties"),
-8-
<PAGE>
(i) in the acquisition or development of any apartment properties or shopping
centers in competition with any apartment properties or shopping centers which
at any time during the term of Executive's employment the Trust or an
Affiliate has had an ownership interest or (ii) in the management or leasing
of any property in competition with the Trust Properties; or (b) be or become
a stockholder, partner, owner, officer, director or employee or agent of, or a
consultant to or give financial or other assistance to, any person or entity
considering engaging in any such activities or so engaged; provided, however,
that nothing herein shall prohibit the Executive and his affiliates from (i)
owning, as passive investors, in the aggregate not more than 2% of the
outstanding publicly traded stock of any corporation so engaged; or (ii)
acquiring or developing any properties not in competition with the Trust or
any affiliate thereof, subject to Sections 1.2(b) and (c) hereof. The duration
of the Executive's covenants set forth in this Section 5.2 shall be extended
by a period of time equal to the number of days, if any, during which the
Executive is in violation of the provisions hereof.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges that the covenants
contained in Sections 5 and 6.3 herein are fair and reasonable in light of the
consideration paid hereunder and to protect investments under the Contribution
Agreement, and damages alone shall not be an adequate remedy for any breach by
Executive of his covenants contained herein and accordingly, in addition to any
other remedies which the Trust may have, the Trust shall be entitled to
injunctive relief in any court of competent jurisdiction for any breach or
threatened breach of any such covenants by Executive. Nothing contained herein
shall prevent or delay the Trust from seeking, in any court of competent
jurisdiction, specific performance or other equitable remedies in the event of
any breach or intended breach by Executive of any of its obligations hereunder.
(b) In addition to such equitable relief, the Trust
shall be entitled to monetary damages for any breach in an amount deemed
reasonable to cover all actual and consequential losses, plus all monies
received by Executive as a result of said breach and all costs and attorneys'
fees incurred by the Trust in enforcing this Agreement.
SECTION 6. MISCELLANEOUS
6.1 Arbitration.
(a) All disputes arising out of or relating to this
Agreement which cannot be settled by the parties shall be
-9-
<PAGE>
settled by arbitration in Philadelphia, Pennsylvania, pursuant to the rules
and regulations then obtaining of the American Arbitration Association;
provided that nothing herein shall preclude the Trust from seeking, in any
court of competent jurisdiction, damages, specific performance or other
equitable remedies in the case of any breach or threatened breach by Executive
of Sections 5 or 6.3 hereof. The decision of the arbitrators shall be final
and binding upon the parties, and judgment upon such decision may be entered
in any court of competent jurisdiction.
(b) Discovery shall be allowed pursuant to the
intendment of the United States Federal Rules of Civil Procedure and as the
arbitrators determine appropriate under the circumstances.
(c) The arbitration tribunal shall be formed of three
(3) arbitrators, one to be appointed by each party, and the third to be
appointed by the first two arbitrators. Such arbitrators shall be required to
apply the contractual provisions hereof in deciding any matter submitted to them
and shall not have any authority, by reason of this Agreement or otherwise, to
render a decision that is contrary to the mutual intent of the parties as set
forth in this Agreement.
6.2 Prior Employment. Executive represents and warrants
that, on the date hereof, he is not a party to any other employment,
non-competition, joint venture, partnership or other agreement or restriction
that could interfere with his employment with the Trust or his or the Trust's
rights and obligations hereunder; and that his acceptance of employment with
the Trust and the performance of his duties hereunder will not breach the
provisions of any contract, agreement, or understanding to which he is party
or any duty owed by him to any other person. Executive warrants and covenants
that he will not hereafter become a party to or be bound by any such
conflicting agreement.
6.3 Trust Employees. During the term of Executive's
employment and for two years thereafter, Executive shall not directly or
indirectly solicit or contact any person who is employed by the Trust or the
Partnership or any Affiliate of either thereof with a view to the engagement
or employment of such person by any person or entity or otherwise interfere
with the employment relationship of any employee of the Trust, the Partnership
or of any Affiliate of either thereof.
6.4 Indemnification. During the term of this Agreement, the
Trust shall indemnify and defend Executive against all claims arising out of
Executive's activities as an officer or employee of the Trust to the fullest
extent permitted under the Trust's Trust Agreement, provided that the Trust
shall not
-10-
<PAGE>
indemnify Executive for any claims in connection with liabilities arising
under the Contribution Agreement or any document contemplated therein. In
addition to the foregoing, Executive shall, upon reasonable notice, furnish
such information and proper assistance to the Trust as may reasonably be
required by the Trust in connection with any litigation in which it or its
affiliates are, or may become, parties.
6.5 Key Man Life Insurance. Prior to or after the Effective
Date, the Trust shall have the right at its expense to purchase insurance on
the life of Executive, in such amounts as it shall from time to time
determine, of which the Trust or a nominee of the Trust shall be the
beneficiary. Executive shall submit to such physical examinations as may be
required, and shall otherwise cooperate with the Trust, in connection with the
Trust obtaining such insurance.
6.6 Severability. The invalidity or unenforceability of any
particular provision or part of any provision of this Agreement shall not
affect the other provisions or parts hereof. If any provision hereof is
determined to be invalid or unenforce-able by a court of competent
jurisdiction by reason of the duration or geographical scope of the covenants
contained therein, such duration or geographical scope, or both, shall be
considered to be reduced to a duration or geographical scope to the extent
necessary to cure such invalidity.
6.7 Assignment. This Agreement shall not be assignable by
Executive, and shall be assignable by the Trust only to any person or entity
which may become a successor in interest (by purchase of assets or shares, or
by merger, or otherwise) to the Trust in the business or a portion of the
business presently operated by it or to an affiliate controlled by the Trust.
Subject to the foregoing, this Agreement and the rights and obligations set
forth herein shall inure to the benefit of, and be binding upon, the parties
hereto and each of their respective permitted successors, assigns, heirs,
executors and administrators.
6.8 Notices. All notices hereunder shall be in writing and
shall be sufficiently given if hand-delivered, sent by documented overnight
delivery service or registered or certified mail, postage prepaid, return
receipt requested or by telegram, fax or telecopy (confirmed by U.S. mail),
receipt acknowledged, addressed as set forth below or to such other person
and/or at such other address as may be furnished in writing by any party
hereto to the other. Any such notice shall be deemed to have been given as of
the date received, in the case of personal delivery, or on the date shown on
the receipt or confirmation therefor, in all other cases. Any and all service
of process and any other notice in any action, suit or proceeding
-11-
<PAGE>
shall be effective against any party if given as provided in this Agreement;
provided that nothing herein shall be deemed to affect the right of any party
to serve process in any other manner permitted by law.
(a) If to the Trust:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Tel: (215) 542-4180
Fax: (215) 542-9179
Attention: Special Committee of the Board of
Trustees
With a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Tel: (215) 988-2794
Fax: (215) 988-2757
Attention: Howard A. Blum, Esq.
(b) If to Executive:
Ronald Rubin
200 South Broad Street, 3rd Floor
Philadelphia, PA 19102
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
Tel: (215) 569-6060
Fax: (215) 568-6603
Attn: Leonard H. Klehr, Esq.
6.9 Entire Agreement and Modification. This Agreement
constitutes the entire agreement between the parties hereto with respect to
the matters contemplated herein and supersedes all prior agreements and
understandings with respect thereto. Any amendment, modification, or waiver of
this Agreement shall not be effective unless in writing. Neither the failure
nor any delay on the part of any party to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall
-12-
<PAGE>
any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any other right,
remedy, power, or privilege with respect to any occurrence or be construed as
a waiver of any right, remedy, power, or privilege with respect to any other
occurrence.
6.10 Governing Law. This Agreement is made pursuant to, and
shall be construed and enforced in accordance with, the internal laws of the
Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), without giving effect to otherwise applicable principles of
conflicts of law.
6.11 Headings; Counterparts. The headings of paragraphs in
this Agreement are for convenience only and shall not affect its interpretation.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which, when taken together, shall be
deemed to constitute but one and the same Agreement.
6.12 Delegation. Any action hereunder that may be taken or
directed by the Board may be delegated by the Board to a Committee consisting
entirely or principally of trustees or officers or to an individual trustee or
officer and the determination of such Committee or individual shall have the
same effect hereunder as a determination of the Board.
6.13 Trust Assets. Executive acknowledges that no trustee,
officer or shareholder of the Trust is liable to Executive in respect of the
payments or other matters set forth herein and that Executive shall look only to
the income and assets of the Trust in respect hereof.
6.14 Effective Date. This Agreement shall take effect on the
Effective Date. If the Contribution Agreement shall be terminated prior to the
Effective Date, this Agreement shall have no force or effect and neither the
Trust nor Executive shall have any liability to the other by reason of the
provisions of this Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
--------------------------
Name:
Title:
/s/ Ronald Rubin
---------------------------
Ronald Rubin
-14-
<PAGE>
FORM EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 30, 1997, between the
Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the
"Trust"), and Edward Glickman (the "Executive").
BACKGROUND
Pursuant to the Contribution Agreement dated of even date
herewith (the "Contribution Agreement") among the Trust, PREIT Associates, L.P.
(the "Partnership"), The Rubin Organization, Inc. ("TRO") (to be known as
PREIT-RUBIN, Inc. as of the Effective Date), The Rubin Organization-Illinois,
Inc. and certain individuals affiliated with TRO, the Partnership is acquiring
on the Effective Date 95% of the equity of TRO. This Agreement is entered into
in anticipation of the closing of the transactions contemplated by the
Contribution Agreement (the "TRO Transactions"). The Effective Date shall be the
date of closing of the TRO Transactions.
The Trust desires to employ Executive as Chief Financial
Officer of the Trust, and Executive desires to be so employed on the terms and
conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1 Employment; Acceptance of Employment. Commencing on the
Effective Date, the Trust employs Executive and Executive accepts employment by
the Trust for the period and upon the terms and conditions hereinafter set
forth.
1.2 Capacity and Duties.
(a) Executive shall be employed by the Trust
generally as its Chief Financial Officer and, subject to the supervision and
control of the Chief Executive Officer of the Trust (the "CEO"), shall have the
duties and authority consistent with his office and as may from time to time be
specified by the CEO so long as such duties are consistent with his office.
Executive shall report directly to the CEO in performing his duties hereunder.
(b) Except as provided in paragraph 1.2(c) hereof,
Executive shall devote his full working time, energy,
<PAGE>
skill and best efforts to the performance of his duties hereunder and shall
not be employed by or participate or engage in or be a part of in any manner
the management or operation of any business enterprise or pursuit other than
the Trust and its direct or indirect Affiliates without the prior written
consent of the Board, which consent may be granted or withheld in its sole
discretion. For purposes of this Agreement, "Affiliate" means any person or
entity controlling, controlled by or under common control with either the
Trust or TRO. "Control," as used herein, means the power to direct management
and policies of a person or entity directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" shall have correlative meanings; provided that,
any person or entity that owns beneficially, either directly or through one or
more intermediaries, more than 20% of the ownership interests in a specified
entity shall be presumed to control such entity for purposes of the definition
of "Affiliate."
(c) Executive may continue his investments in the
properties listed on Schedule 1 hereto and, subject to the provisions of Section
5.2 hereof, subsequent properties (the "Properties") provided that Executive's
activities with respect to such subsequent properties comply with the procedures
adopted by the Board of Trustees governing Executive's non-trust related real
estate activities (the "Procedures") and further provided that:
(A) he shall not devote more than an insignificant
amount of his time to such investments in the aggregate; and
(B) his activities in respect to the Properties do
not interfere with, detract from or affect the performance of
Executive's duties for the Trust under this Agreement.
Notwithstanding the foregoing, it is understood that
Executive may, on a regular or occasional basis, perform services for one or
more entities in which the Trust has an investment.
SECTION 2. TERM OF EMPLOYMENT
2.1 Term. The initial term of Executive's employment hereunder
shall be two years commencing on the Effective Date and shall thereafter
automatically be renewed for additional two year periods unless and until either
party shall give notice of his or its election to terminate Executive's
employment at least six months prior to the end of the then-current term in each
case, unless earlier terminated as hereinafter provided.
-2-
<PAGE>
SECTION 3. COMPENSATION
3.1 Basic Compensation. As compensation for Executive's
services hereunder, the Trust shall pay to Executive a salary at the annual rate
of $230,000 (the "Base Salary"), payable in accordance with the Trust's regular
payroll practices in effect from time to time during the term of Executive's
employment.
3.2 Incentive Compensation. In addition to the Base Salary,
the Trust shall pay Executive additional compensation (the "Incentive
Compensation") for the services to be rendered by Executive pursuant to this
Agreement, with respect to each fiscal year during the term of this Agreement
commencing after December 31, 1997, such amount to be determined according to
an incentive compensation plan to be adopted prior to the Effective Date. In
approving the incentive plan, the Executive Compensation and Human Resources
Committee of the Board of Trustees of the Trust shall determine that, in its
judgment, the incentive compensation plan is reasonable for the Trust and fair
to Executive.
3.3 Executive Benefits. In addition to the compensation
provided for in Sections 3.1 and 3.2, Executive shall be entitled during the
term of his employment to participate in the Trust's benefit plan(s) listed on
Schedule 3.3 hereof at the Trust's cost, subject to such (i) co-payments and
deductibles as are provided for in such plans and (ii) modifications as shall be
generally applicable to senior executives of the Trust.
3.4 Vacation. Executive shall be entitled to no fewer than the
number of vacation days during each calendar year during the term of his
employment as is provided generally to other senior officers of the Trust,
during which time his compensation shall be paid in full.
3.5 Expense Reimbursement. During the term of his employment,
the Trust shall reimburse Executive for all reasonable expenses incurred by him
in connection with the performance of his duties hereunder in accordance with
its regular reimbursement policies as in effect from time to time and upon
receipt of itemized vouchers therefor and such other supporting information as
the Trust may reasonably require.
3.6 Options. Concurrently with the Effective Date, the Trust
shall grant Executive, pursuant to the Trust's 1997 Stock Option Plan adopted by
the Trust on July 8, 1997 (the "Option Plan"), non-qualified options to purchase
50,000 shares of beneficial interest of the Trust (the "Shares") at a cash price
per share as provided for under the Option Plan. Such incentive plan shall
provide a reasonable opportunity for Executive to earn Incentive Compensation
consistent with industry
-3-
<PAGE>
norms for senior executives of real estate investment trusts, the terms and
conditions of the Letter of Intent by and between the Trust and TRO dated as
of April 16, 1997 and the objectives of the Trust as determined in good faith
by the Board and the Compensation Committee of the Board. The shares shall be
exercisable as follows: the first 25% on or after January 1, 1999, the next
25% on or after January 1, 2000, the next 25% on or after January 1, 2001 and
the final 25% on or after January 1, 2002.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 Death of Executive. Executive's employment hereunder shall
immediately terminate upon his death, upon which the Trust shall not thereafter
be obligated to make any further payments hereunder other than amounts
(including salary, incentive compensation, expense reimbursement, etc.) accrued
as of the date of Executive's death in accordance with GAAP, as conclusively
determined in the absence of manifest error by the auditors of the Trust.
4.2 Disability of Executive. If Executive, in the reasonable
opinion of a physician selected by the Trust, is or has been unable, for any
reason due to his physical, mental or emotional illness or condition to perform
his duties hereunder for a period of 120 days within five consecutive months,
then the Trust shall have the right to terminate Executive's employment upon 30
days' prior written notice to Executive at any time during the continuation of
such inability, in which event the Trust shall not thereafter be obligated to
make any further payments hereunder other than amounts (including salary,
bonuses, expense reimbursement, etc.) accrued as of the date of such termination
in accordance with GAAP, as conclusively determined in the absence of manifest
error by the auditors of the Trust.
4.3 Termination for Cause. Executive's employment hereunder
shall terminate immediately upon notice that the Trust is terminating Executive
for "cause" (as defined herein), in which event the Trust shall not thereafter
be obligated to make any further payments hereunder other than amounts
(including salary, incentive compensation, expense reimbursement, etc.) accrued
under this Agreement as of the date of such termination, in accordance with
GAAP, as conclusively determined in the absence of manifest error by the
auditors of the Trust. As used herein, "cause" shall mean the following:
(i) fraud, theft or misappropriation or
embezzlement of the assets or funds of the Trust or an affiliate of the Trust;
-4-
<PAGE>
(ii) indictment for a crime involving moral
turpitude;
(iii) breach of Executive's obligations
under Sections 5, 6.2 and 6.3 of this Agreement;
(iv) failure of Executive to perform his
duties to the Trust, which persists for more than twenty (20) days after written
notice or which recurs; or
(v) repeated abuse of alcohol or abuse of
other drugs.
4.4 Termination without Cause; Change in Control.
(a) In the event that:
(i) Executive's employment is terminated for
any reason other than Cause or the death or disability of Executive, then,
unless (ii) below shall be applicable as a result of voluntary termination by
the Executive or by the Trust other than for disability or for Cause, the Trust
shall pay Executive, in a single lump sum, all of the consideration provided for
in Section 3.1 during the remainder of the then-current term (including any
automatic renewal term pursuant to Section 2.1 hereof) of Executive's employment
discounted to present value at the prime rate of interest in effect on the date
of such termination, as reported in The Wall Street Journal and any amounts due
under Section 3.2 for the period of his employment; or
(ii) in the event that Executive's
employment is terminated for any reason other than Cause or the death or
disability of Executive or Executive voluntarily terminates his employment for
Good Reason (as defined herein) following a Change in Control (as defined
herein), the Trust shall pay Executive up to two times the annual Base Salary
provided for in Section 3.1 and the targeted annual Incentive Compensation to be
provided for pursuant to Section 3.2, but in no event more than 2.99 times the
"base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), reduced by the present value of non-cash payments
determined under Section 280G(b)(2)(A)(ii) of the Code and the regulations
promulgated thereunder or successor provisions of similar import. The
determination by the auditors of the Trust as to any amounts due Executive
pursuant to this Section 4.4(a)(ii) shall be conclusive in the absence of
manifest error.
-5-
<PAGE>
Upon making the payments described in this Section 4.4(a),
Company shall have no further obligation to Executive hereunder.
(b) As used in this Section 4.4, the term "Good
Reason" shall mean a material breach of the Trust's obligations under this
Agreement, provided that the Trust has not remedied such breach after notice and
a reasonable opportunity to cure or the involuntary change of Executive's
principal office to a location more than 30 miles from its location immediately
prior to such change.
(c) As used in this Section 4.4, a "Change in
Control" means:
(i) the acquisition by any person, entity or
group required to file a Schedule 13D or Schedule 14D-1 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this
purpose, the Trust, its affiliates, any employee benefit plan (or related trust)
of the Trust or its affiliates which acquires beneficial ownership of voting
securities of the Trust) or any acquisition by any person entitled to file Form
13G under the Exchange Act with respect to such acquisition of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 51% or more of either the then outstanding shares of beneficial interest or
the combined voting power of the Trust's then outstanding voting securities
entitled to vote generally in the election of trustees (the "Outstanding
Shares"); or
(ii) the election or appointment to the
Board, or resignation of or removal from the Board by virtue of which the
Continuing Trustees (as defined below) no longer constitute at least a majority
of the Board of Trustees; or
(iii) approval by the shareholders of the
Trust of: (A) a reorganization, merger or consolidation, or (B) a liquidation or
dissolution of the Trust or the sale, transfer, lease or other disposition of
all or substantially all of the assets of the Trust, whether such assets are
held directly or indirectly, (the events referred to in this Section
4.4(b)(iii)(A) and (B) being referred to hereafter as a "Business Combination")
unless, following such Business Combination, (x) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Shares immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 51% of, respectively, the then outstanding shares of
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of trustees, as the case may be, of
the entity resulting from such Business Combination (including, without
limitation, an
-6-
<PAGE>
entity which as a result of such transactions owns the Trust or all or
substantially all of the Trust's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Shares, (y)
no person, excluding any employee benefit plan (or related trust) of the Trust
or such entity resulting from such Business Combination, beneficially owns,
directly or indirectly, 49% or more of, respectively, the then outstanding
shares of stock of the entity resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such entity
except to the extent that such ownership existed prior to the Business
Combination and (z) at least a majority of the members of the board of
trustees or directors of the entity resulting from such Business Combination
were Continuing Trustees at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) a change in control of the Trust that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, as in effect on the date
hereof, whether or not the Trust is then subject to such reporting requirements.
(d) In the event that the Trust elects not to renew
this Agreement pursuant to Section 2.1 hereof, in addition to its obligations to
Executive under Section 3 for the balance of the then-current term of
employment, the Trust shall pay Executive six months' Base Salary, and the Trust
shall not be obligated to make any further payments to Executive hereunder.
As used in this Section 4.4, the terms "person" and
"beneficial owner" have the same meanings as such terms under Section 13(d) of
the Securities Exchange Act of 1934 and the rules and regulations thereunder. As
used herein, "Continuing Trustees" means those trustees duly elected prior to
the time that any person, entity or group of associated persons acting in
concert has acquired beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of 50% or more of the then outstanding shares
of capital stock of the Trust entitled to vote for the election of trustees of
the Trust, and those trustees who were recommended to succeed Continuing
Trustees by a majority of Continuing Trustees including but not limited to the
trustees designated by TRO who are elected by the Continuing Trustees in
connection with the TRO Transactions.
-7-
<PAGE>
SECTION 5. RESTRICTIVE COVENANTS
5.1 Confidentiality. Executive acknowledges a duty of
confidentiality owed to the Trust and shall not, directly or indirectly, at any
time during or after his employment by the Trust, retain in writing, use,
divulge, furnish, or make accessible to anyone, without the express
authorization of the Board, any trade secret, private or confidential
information or knowledge of the Trust or any of its affiliates obtained or
acquired by him while so employed by the Trust or by TRO or any predecessors or
successors thereto. All computer software, books, records, and files and
know-how generated or acquired while an employee of the Trust or TRO, are
acknowledged to be the property of the Trust and shall not be duplicated,
removed from the Trust's possession or made use of other than in pursuit of the
Trust's or its affiliates' businesses and, upon termination of employment for
any reason, Executive shall deliver to the Trust, without further demand, all
copies thereof which are then in his possession or under his control. The
provisions of this Section 5.1 shall not apply to information which (i) is or
becomes generally available to the public other than as a result of disclosure
by Executive, (ii) was available to Executive on a non-confidential basis prior
to its disclosure to Executive, (iii) becomes available to Executive on a
non-confidential basis from a source other than the Trust or its affiliates, or
(iv) is required to be disclosed by law or by order of a court or governmental
authority.
5.2 Noncompetition. During the term of Executive's employment
and for six months after termination of Executive's employment for Cause,
Executive shall not directly or indirectly: (a) engage, anywhere within
twenty-five (25) miles of any property in which the Trust or an Affiliate of the
Trust has a direct or indirect ownership interest (the "Trust Properties") (i)
in the acquisition or development of any apartment properties or shopping
centers in competition with any apartment properties or shopping centers, which
at any time during the term of Executive's employment the Trust or an Affiliate
thereof has a direct or indirect ownership interest; or (ii) in the management
or leasing of any property in competition with the Trust Properties or (b) be or
become a stockholder, partner, owner, officer, director or employee or agent of,
or a consultant to or give financial or other assistance to, any person or
entity considering engaging in any such activities or so engaged; provided,
however, that nothing herein shall prohibit the Executive and his affiliates
from (i) owning, as passive investors, in the aggregate not more than 2% of the
outstanding publicly traded stock of any corporation so engaged; or (ii)
acquiring, developing, managing or leasing any properties not in competition
with the Trust or any affiliate thereof, subject to Sections 1.2(b) and (c)
hereof. The duration of the Executive's
-8-
<PAGE>
covenants set forth in this Section 5.2 shall be extended by a period of time
equal to the number of days, if any, during which the Executive is in
violation of the provisions hereof.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges that the covenants
contained in Sections 5 and 6.3 herein are fair and reasonable in light of the
consideration paid hereunder and to protect its investments under the
Contribution Agreement, and damages alone shall not be an adequate remedy for
any breach by Executive of his covenants contained herein and accordingly, in
addition to any other remedies which the Trust may have, the Trust shall be
entitled to injunctive relief in any court of competent jurisdiction for any
breach or threatened breach of any such covenants by Executive. Nothing
contained herein shall prevent or delay the Trust from seeking, in any court of
competent jurisdiction, specific performance or other equitable remedies in the
event of any breach or intended breach by Executive of any of its obligations
hereunder.
(b) In addition to such equitable relief with respect
to Sections 5 and 6.3, the Trust shall be entitled to monetary damages for any
breach in an amount deemed reasonable to cover all actual and consequential
losses, plus all monies received by Executive as a result of said breach and all
costs and attorneys' fees incurred by the Trust in enforcing this Agreement.
SECTION 6. MISCELLANEOUS
6.1 Arbitration.
(a) All disputes arising out of or relating to this
Agreement which cannot be settled by the parties shall be settled by arbitration
in Philadelphia, Pennsylvania, pursuant to the rules and regulations then
obtaining of the American Arbitration Association; provided that nothing herein
shall preclude the Trust from seeking, in any court of competent jurisdiction,
damages, specific performance or other equitable remedies in the case of any
breach or threatened breach by Executive of Sections 5 or 6.3 hereof. The
decision of the arbitrators shall be final and binding upon the parties, and
judgment upon such decision may be entered in any court of competent
jurisdiction.
(b) Discovery shall be allowed pursuant to the
intendment of the United States Federal Rules of Civil Procedure and as the
arbitrators determine appropriate under the circumstances.
-9-
<PAGE>
(c) The arbitration tribunal shall be formed of three
(3) arbitrators, one to be appointed by each party, and the third to be
appointed by the first two arbitrators. Such arbitrators shall be required to
apply the contractual provisions hereof in deciding any matter submitted to them
and shall not have any authority, by reason of this Agreement or otherwise, to
render a decision that is contrary to the mutual intent of the parties as set
forth in this Agreement.
6.2 Prior Employment. With the exception of the Employment
Agreement dated as of ___________, as amended (the "Prior Employment Agreement")
by and between Executive and PREIT-RUBIN under its former name, Executive
represents and warrants on the date hereof that he is not a party to any other
employment, non-competition, joint venture, partnership or other agreement or
restriction that could interfere with his employment with the Trust or his or
the Trust's rights and obligations hereunder; and that his acceptance of
employment with the Trust and the performance of his duties hereunder will not
breach the provisions of any contract, agreement, or understanding to which he
is party or any duty owed by him to any other person. Executive warrants and
covenants that he will not while an employee of the Trust hereafter become a
party to or be bound by any such conflicting agreement. The Prior Employment
Agreement is terminated as of the Effective Date, and Executive hereby releases
PREIT-RUBIN from any and all obligations, liabilities or claims under such
agreement as of such date.
6.3 Solicitation of Employees. During the term of Executive's
employment and for two years thereafter, Executive shall not directly or
indirectly solicit or contact any person who is employed by the Trust, the
Partnership or any Affiliate of either thereof with a view to the engagement or
employment of such person by any person or entity or otherwise interfere with
the employment relationship of any employee of the Trust or of any Affiliate of
either thereof.
6.4 Indemnification. During the term of this Agreement, the
Trust shall indemnify and defend Executive against all claims arising out of
Executive's activities as an officer or employee of the Trust to the fullest
extent permitted under the Trust's Trust Agreement, provided that the Trust
shall not indemnify Executive for any claims in connection with liabilities
arising under the Contribution Agreement or any document contemplated therein.
In addition to the foregoing, Executive shall, upon reasonable notice, furnish
such information and proper assistance to the Trust as may reasonably be
required by the Trust in connection with any litigation in which it or its
affiliates are, or may become, parties.
-10-
<PAGE>
6.5 Severability. The invalidity or unenforceability of any
particular provision or part of any provision of this Agreement shall not affect
the other provisions or parts hereof. If any provision hereof is determined to
be invalid or unenforceable by a court of competent jurisdiction by reason of
the duration or geographical scope of the covenants contained therein, such
duration or geographical scope, or both, shall be considered to be reduced to a
duration or geographical scope to the extent necessary to cure such invalidity.
6.6 Assignment. This Agreement shall not be assignable by
Executive, and shall be assignable by the Trust only to any person or entity
which may become a successor in interest (by purchase of assets or shares, or by
merger, or otherwise) to the Trust in the business or a portion of the business
presently operated by it or to an affiliate controlled by the Trust. Subject to
the foregoing, this Agreement and the rights and obligations set forth herein
shall inure to the benefit of, and be binding upon, the parties hereto and each
of their respective permitted successors, assigns, heirs, executors and
administrators.
6.7 Notices. All notices hereunder shall be in writing and
shall be sufficiently given if hand-delivered, sent by documented overnight
delivery service or registered or certified mail, postage prepaid, return
receipt requested or by telegram, fax or telecopy (confirmed by U.S. mail),
receipt acknowledged, addressed as set forth below or to such other person
and/or at such other address as may be furnished in writing by any party hereto
to the other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any action, suit or proceeding shall be effective against
any party if given as provided in this Agreement; provided that nothing herein
shall be deemed to affect the right of any party to serve process in any other
manner permitted by law.
(a) If to the Trust:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Tel: (215) 542-4180
Fax: (215) 542-9179
Attention: Special Committee of the Board of
Trustees
-11-
<PAGE>
With a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Tel: (215) 988-2794
Fax: (215) 988-2757
Attention: Howard A. Blum, Esq.
(b) If to Executive:
Edward Glickman
280 Melrose Avenue
Merion, PA 19066
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
Tel: (215) 569-6060
Fax: (215) 568-6603
Attn: Leonard H. Klehr, Esq.
6.8 Entire Agreement and Modification. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
matters contemplated herein and supersedes all prior agreements and
understandings with respect thereto, including but not limited to the Prior
Employment Agreement as of the Effective Date. Any amendment, modification, or
waiver of this Agreement shall not be effective unless in writing. Neither the
failure nor any delay on the part of any party to exercise any right, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power, or
privilege with respect to any occurrence or be construed as a waiver of any
right, remedy, power, or privilege with respect to any other occurrence.
6.9 Governing Law. This Agreement is made pursuant to, and
shall be construed and enforced in accordance with, the internal laws of the
Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), without giving effect to otherwise applicable principles of
conflicts of law.
6.10 Headings; Counterparts. The headings of paragraphs in
this Agreement are for convenience only and shall
-12-
<PAGE>
not affect its interpretation. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall be deemed to constitute but one and the same
Agreement.
6.11 Delegation. Any action hereunder that may be taken or
directed by the Board may be delegated by the Board to a Committee consisting
entirely or principally of trustees or officers or to an individual trustee or
officer and the determination of such Committee or individual shall have the
same effect hereunder as a determination of the Board.
6.12 Trust Assets. Executive acknowledges that no trustee,
officer or shareholder of the Trust is liable to Executive in respect of the
payments or other matters set forth herein and that Executive shall look only to
the income and assets of the Trust in respect hereof.
6.13 Effective Date. This Agreement shall take effect on the
Effective Date. If the Contribution Agreement shall be terminated prior to the
Effective Date, this Agreement shall have no force or effect and neither the
Trust nor Executive shall have any liability to the other by reason of the
provisions of this Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jonathan B. Weller
-----------------------------
Name:
Title:
/s/ Edward Glickman
-----------------------------
Edward Glickman
Accepted and Agreed as to Section 6.2:
PREIT-RUBIN, Inc.
By: /s/ George Rubin
-----------------------
Name:
Title:
-14-
<PAGE>
SECOND AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement made and entered as of
the 29th day of September, 1997 between Pennsylvania Real Estate Investment
Trust ("PREIT") and Sylvan M.
Cohen ("Employee").
Background of Agreement
PREIT has previously entered into an Employment Agreement with
Employee, which, as presently amended and restated, remains in effect until
December 31, 1997 (the amended and restated Employment Agreement is herein
called the "Employment Agreement"). PREIT and Employee wish to amend the
Employment Agreement to (i) provide for a contingency whereby the duties of
Employee would be modified, (ii) provide for an additional three years of
employment and (iii) reflect as Employee's basic compensation the current
amount thereof. The parties have determined that it would be advisable to
amend the Employment Agreement in the manner hereinafter provided.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby agree as hereinafter set forth.
1. Paragraph 1 of the Employment Agreement is hereby amended
in its entirety to read as follows:
"1. Duties.
Employee is presently employed as the
Chairman of the Board and Chief Executive Officer of
<PAGE>
PREIT. While serving in his present capacity, the duties and
authority of Employee shall be consistent with those
currently performed and exercised by Employee. Contingent
and effective upon the position of Chief Executive Officer
being assumed by another person as contemplated in the
August 27, 1997 Proxy Statement of PREIT, Employee shall
serve as the Chairman of the Board of Trustees of PREIT and
the Chairman of the Property Committee of the Board of
Trustees, but shall no longer serve as Chief Executive
Officer. While serving as Chairman of the Board of Trustees,
the duties and authority of Employee shall be (a) to preside
at the meetings of the Board of Trustees and the
Shareholders of PREIT, and (b) to serve as Chair of the
Property Committee of the Board of Trustees. Employee shall
have the authority to call special meetings of the Board of
Trustees and the Property Committee. Employee shall devote
such time, attention and energy to the business and
financial affairs of PREIT as shall be necessary to
discharge his duties hereunder. Employee shall be free to
engage in other business, personal and community pursuits
during the term hereof so long as the same do not prevent
Employee from discharging his duties hereunder."
2. Paragraph 2 of the Employment Agreement is hereby amended
in its entirety to read as follows:
"2. Term.
Regardless of Employee's position as determined by
Paragraph 1 above, the term of employment hereunder shall
continue for a period ending December 31, 2000. Upon the
expiration of such period, the term shall continue for
successive terms of one year each unless, not later than 180
days prior to the expiration of the then current term,
written notice is given by either party hereto of his or its
election to terminate the employment at the end of the then
current term. If such written notice is given, the
employment shall terminate at the end of the then current
term."
3. Paragraph 3 of the Employment Agreement is hereby amended
in its entirety to read as follows:
"3. Basic Compensation.
PREIT agrees to pay and Employee agrees to accept,
as the basic compensation for all services to be rendered by
Employee hereunder the sum of Three Hundred
<PAGE>
Forty-Five Thousand Dollars ($345,000.00) per annum, payable
in approximately equal monthly or bimonthly installments, as
PREIT and Employee shall agree. The Board of Trustees of
PREIT, in its sole discretion, may increase the basic
compensation payable hereunder at any time or times during
the term hereof. If such basic compensation is increased,
the increased amount shall become the basic compensation of
Employee hereunder from and after the date of such increase.
The basic compensation of Employee may not, at any time
during the term hereof, be decreased, except if Employee
agrees in writing to such reduction."
4. In all other respects, all other terms and conditions of
the Employment Agreement shall be unchanged and remain in full force and
effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the day and year first above written.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By:/s/ Robert Freedman
------------------------------------------------
Trustee
/s/ Jonathan B. Weller
------------------------------------------------
Trustee
EMPLOYEE
/s/ Sylvan M. Cohen
-----------------------------------------
Sylvan M. Cohen
Dated: September 30, 1997.
<PAGE>
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
INCENTIVE BONUS PLAN
(Effective as of January 1, 1998)
<PAGE>
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
INCENTIVE BONUS PLAN
(Effective as of January 1, 1998)
TABLE OF CONTENTS
Page
----
1. Purpose...................................................... 1
2. Definitions.................................................. 1
3. Participation................................................ 2
4. Annual Incentive Bonus Opportunity........................... 3
5. Calculation of Bonus Opportunity............................. 3
6. Plan Mechanics............................................... 3
7. Beneficiary Designation...................................... 3
8. Payment to Guardian.......................................... 4
9. Withholding; Payroll Taxes................................... 4
10. Source of Funds.............................................. 4
11. Administration............................................... 4
12. Nonalienation of Benefits.................................... 5
13. Amendment and Termination.................................... 6
14. No Contract of Employment.................................... 6
15. Applicable Law............................................... 6
16. Successors................................................... 6
-i-
<PAGE>
17. Headings............................................................ 6
18. Number and Gender................................................... 6
-ii-
<PAGE>
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
INCENTIVE BONUS PLAN
(Effective as of January 1, 1998)
PREAMBLE
WHEREAS, the Pennsylvania Real Estate Investment Trust (the
"Trust") desires to establish an incentive bonus plan for the benefit of
certain of the officers and other key employees of the Trust and of
PREIT-RUBIN, Inc.
("PREIT-RUBIN");
NOW, THEREFORE, effective as of January 1, 1998, the
Pennsylvania Real Estate Investment Trust Incentive Bonus Plan (the "Plan") is
hereby adopted under the following terms and conditions:
* * * * *
1. Purpose. The purpose of the Plan is to help motivate certain
officers and key employees of the Trust and PREIT-RUBIN to reach and exceed
challenging goals of profitability and growth within their companies. The
purpose of the Plan also is to help focus the attention of the eligible officers
and key employees on critical financial indicators that measure both the Trust
and PREIT-RUBIN's success.
2. Definitions
(a) "Bonus" means the amount of annual incentive compensation
a Participant will receive under the Plan.
(b) "Committee" means the Executive Compensation and Human
Resources Committee of the Board of Trustees, to whom responsibility for
administering the Plan is delegated under Section 11.
(c) "Disability" means total and permanent disability as
defined in the Employer's long-term disability plan which covers the Eligible
Employee.
(d) "Eligible Employee" means any officer or other key
employee of an Employer.
<PAGE>
(e) "Employer" means the Trust and PREIT-RUBIN.
(f) "FAD" means "funds available for distribution" which is
calculated as FFO minus expenses such as, but not limited to, capital
improvements and capital expenditures.
(g) "FFO" means "funds from operations" of the Trust, defined
as income before gains (losses) on investments and extraordinary items (computed
in accordance with generally accepted accounting principles) plus real estate
depreciation and similar adjustments for unconsolidated joint ventures after
adjustments for non-real estate depreciation and amortization of financing
costs.
(h) "Participant" means an Eligible Employee who has been
designated by the Committee under Section 3 as eligible to receive a Bonus under
the Plan.
(i) "Plan" means the Pennsylvania Real Estate Investment Trust
Incentive Bonus Plan, effective January 1, 1998, and as it may be amended from
time to time.
(j) "Plan Year" means the 12-month period beginning each
January 1 and ending each December 31.
(k) "PREIT-RUBIN" means PREIT-RUBIN, Inc.
(l) "Trust" means the Pennsylvania Real Estate Investment
Trust.
(m) "Trustees" means the members of the Board of Trustees of
the Trust.
3. Participation. The Committee shall designate as of the Effective
Date which Eligible Employees are eligible to receive Bonuses under the Plan,
and inform them in writing of their participation in the Plan within 30 days
after the Effective Date. Thereafter, the Committee shall review the
participation of any new Eligible Employees and inform those who will be new
Participants in subsequent Plan Years of their participation, in writing,
within 30 days after the beginning of the subsequent Plan Year.
Once an Eligible Employee is approved for participation in the Plan,
he will continue to be a Participant from Plan Year to Plan Year unless and
until he is informed in writing by the Committee that the Committee's approval
of his
-2-
<PAGE>
participation has been withdrawn effective as of the beginning of the
subsequent Plan Year. Thus, participation in one Plan Year shall not guarantee
participation in any subsequent Plan Year.
4. Annual Incentive Bonus Opportunity. For each Participant, the Trust
has established an "Annual Incentive Bonus Opportunity" which will be used to
determine each Participant's Bonus. The Annual Incentive Bonus Opportunity for
each Eligible Employee's position is set forth in Appendix A attached hereto.
5. Calculation of Bonus Opportunity. Each Participant's Annual
Incentive Bonus Opportunity shall be determined in accordance with a formula set
forth in Appendix A attached hereto. Appendix A also contains an example of how
a Participant's Bonus award(s) will be determined under the Plan.
6. Plan Mechanics. Bonuses shall be paid once a year in a single-sum
cash payment within a reasonable time after the Trust's fiscal year-end
financial statements are approved by the Trustees. Except as provided in a
Participant's employment agreement with an Employer, only a Participant employed
by an Employer as of December 31 of a Plan Year shall be eligible to receive a
Bonus for that Plan Year, unless the Participant was no longer an employee on
the applicable December 31 because (i) the Participant's position was eliminated
due to a reorganization, (ii) the Participant retired at or after age 65, (iii)
the Participant incurred a Disability, or (iv) the Participant died.
7. Beneficiary Designation
(a) Each Participant shall designate the person or persons
as his beneficiary or beneficiaries to whom his Bonus shall be paid in the
event of his death prior to the payment of his Bonus to him. Each beneficiary
designation shall be substantially in the form set forth in Appendix B
attached hereto and shall be effective only when filed with the Committee
during the Participant's lifetime.
(b) Any beneficiary designation may be changed by a
Participant without the consent of any previously designated beneficiary or
any other person by the filing of a new beneficiary designation with the
Committee. The filing of a new beneficiary designation shall cancel all
beneficiary designations previously filed.
(c) If any Participant fails to designate a beneficiary in
the manner provided above, or if the beneficiary designated by a Participant
predeceases the
-3-
<PAGE>
Participant, the Committee shall direct such Participant's Bonus to be
distributed as follows:
(i) to the Participant's surviving spouse; or
(ii) if the Participant has no surviving
spouse, then to the Participant's estate.
8. Payment to Guardian. If an amount is payable under this Plan to a
minor, a person declared incompetent, or a person incapable of handling the
disposition of property, the Committee may direct the payment of the amount to
the guardian, legal representative, or person having the care and custody of the
minor, incompetent, or incapable person. The Committee may require proof of
incompetency, minority, incapacity, or guardianship as the Committee may deem
appropriate prior to the payment. The payment shall completely discharge the
Committee, the Trustees, the Trust, and PREIT-RUBIN and its Board of Directors
from all liability with respect to the amount paid.
9. Withholding; Payroll Taxes. The Employer shall withhold from
payments made under the Plan any taxes required to be withheld from a
Participant's compensation for federal, state, or local income tax.
10. Source of Funds. This Plan shall be unfunded, and the payment of
Bonuses hereunder shall be made from the general assets of the Employer. Each
Participant and beneficiary shall be a general and unsecured creditor of the
Employer to the extent of the value of his Bonus determined hereunder, and he
shall have no right, title, or interest in any specific asset that the Employer
may set aside, earmark, or identify as for the payment of Bonuses under the
Plan. The employer's obligation under the Plan shall be merely that of an
unfunded and unsecured promise to pay money in the future.
11. Administration
(a) In General. This Plan shall be administered by the
Executive Compensation and Human Resources Committee of the Board of Trustees.
The Committee shall have the authority to:
(i) determine which Eligible Employees should be
approved for participation in the Plan;
-4-
<PAGE>
(ii) approve the extent to which a portion of the
Bonus referred to in Section 5 is awarded to a Participant;
(iii) interpret any disputed provision of the Plan;
and
(iv) determine all questions concerning Bonuses under
the Plan.
To the maximum extent permissible under law, the determinations of such
Committee on all such matters shall be final and binding upon all persons
involved.
(b) Records and Reports. The Committee (or its designee) shall
keep a record of the Committee's actions and shall maintain all books of
account, records, and other data as necessary for the proper administration of
the Plan. Such records shall contain all relevant data pertaining to individual
Participants and their rights under the Plan. The Committee shall have the duty
to carry into effect all rights or benefits provided hereunder to the extent
assets of the Employer are properly available therefor.
(c) Payment of Expenses. Each Employer shall pay its portion
of the expenses of administering the Plan. Such expenses shall include any
expenses incident to the functioning of the Committee in administering the Plan.
(d) Indemnification for Liability. Each Employer shall
indemnify the Committee against any and all claims, losses, damages, expenses,
and liabilities arising from its responsibilities in connection with the Plan,
unless the same is determined to be due to its gross negligence or willful
misconduct.
12. Nonalienation of Benefits. Except as hereinafter provided with
respect to marital disputes, none of the Bonuses or rights of a Participant or
any beneficiary of a Participant shall be subject to the claim of any creditor.
In particular, to the fullest extent permitted by law, all such Bonuses and
rights shall be free from attachment, garnishment, or any other legal or
equitable process available to any creditor of the Participant or his
beneficiary. Neither the Participant nor his beneficiary shall have the right to
alienate, anticipate, commute, pledge, encumber, or assign any of the payments
which he may expect to receive, contingently or otherwise, under this Plan,
except the right to designate a beneficiary to receive death benefits provided
hereunder. In cases of marital dispute, the Employer shall observe the terms of
the Plan unless and until ordered to do otherwise by a state or federal court.
As a condition of participation, a Participant agrees to hold the Employer
harmless from any harm that arises out of its obeying the final order of any
state or federal court, whether such order effects
-5-
<PAGE>
a judgment of such court or is issued to enforce a judgment or order of
another court.
13. Amendment and Termination
(a) The Chief Executive Officer ("CEO") of the Trust may
approve and execute changes of a technical nature to the Plan which do not
materially affect the substance thereof and which, in the opinion of the CEO,
are necessary and desirable. In addition, the Trustees reserve the right to
amend the Plan, by written resolution, at any time and from time to time in any
fashion, and to terminate it at will.
(b) No amendment or termination of the Plan shall decrease or
restrict any Bonus payable for the Plan Year in which the Plan is amended or
terminated, or for any preceding Plan Year.
14. No Contract of Employment. Nothing contained herein shall be
construed as conferring upon any person the right to be employed by the Employer
or to continue in the employ of the Employer.
15. Applicable Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the Commonwealth of Pennsylvania.
16. Successors. The provisions of this Plan shall bind and inure to the
benefit of the Trust and PREIT-RUBIN and their successors and assigns. The term
"successors" as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise, acquire
all or substantially all of the business and assets of the Trust or PREIT-RUBIN,
and successors of any such corporation or other business entity.
17. Headings. The headings of the Sections of the Plan are for
reference only. In the event of a conflict between a heading and the contents of
a Section, the contents of the Section shall control.
18. Number and Gender. Whenever any words used herein are in the
singular form or in the masculine form, they shall be construed as though they
were also used in the plural form or in the feminine or neuter form in all cases
where they would so apply.
-6-
<PAGE>
IN WITNESS WHEREOF, the Pennsylvania Real Estate Investment
Trust and PREIT-RUBIN, Inc. have caused these presents to be duly executed
this 30th day of September, 1997.
Attest: PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
/s/ Jeffrey A. Linn By:/s/ Jonathan B. Weller
- ---------------------------------- -------------------------------------
, Secretary Jonathan B. Weller, President
Attest: PREIT-RUBIN, INC.
/s/ Alan Fele By:/s/ Ronald Rubin
- ---------------------------------- -------------------------------------
, Secretary , President
-7-
<PAGE>
PREIT-RUBIN, INC.
STOCK BONUS PLAN
TRUST AGREEMENT
(Effective as of September 30, 1997)
<PAGE>
TABLE OF CONTENTS
Page
----
Article I - ESTABLISHMENT, AMENDMENT, AND TERMINATION OF THE
TRUST
1.1 Establishment of Trust..................................... 1
1.2 Exclusive Purpose of Trust................................. 1
1.3 Amendment of Trust......................................... 2
1.4 Amendment of Plan.......................................... 2
1.5 Termination of Agreement................................... 2
1.6 Removal or Resignation of Trustee.......................... 2
Article II - TRUSTEE RESPONSIBILITIES
2.1 Management of Plan and Trust............................... 2
2.2 Fiduciary Responsibility of Trustee........................ 2
2.3 Investment Responsibility of Trustee....................... 3
2.4 Division of the Trust Fund................................. 3
2.5 Investment of the Trust Fund............................... 3
2.6 Additional Powers of Trustee............................... 5
2.7 Benefit Payments........................................... 5
2.8 Authority for Trustee's Action............................. 5
2.9 Records.................................................... 5
2.10 Account................................................... 5
2.11 Voting and Tender of Company Stock........................ 6
Article III - TRUSTEE COMPENSATION
3.1 Trustee Compensation....................................... 7
3.2 Indemnification of the Trustee by the Company.............. 7
Article IV - PARTICIPATING EMPLOYERS
4.1 Affiliated Employers May Join in Trust Agreement........... 8
4.2 Company Appointed Agent of Participating Employer.......... 8
Article V - GENERAL
5.1 Plan Documents............................................. 8
5.2 Construction............................................... 8
5.3 Gender and Number.......................................... 8
-i-
<PAGE>
PREIT-RUBIN, INC.
STOCK BONUS PLAN
TRUST AGREEMENT
(Effective as of September 30, 1997)
THIS AGREEMENT and DECLARATION OF TRUST (the "Agreement") is
made effective September 30, 1997, by and between PREIT-RUBIN, INC., a
Pennsylvania corporation (the "Company"), and CoreStates Bank, N.A., (the
"Trustee");
W I T N E S E T H :
WHEREAS, effective September 30, 1997, the Company adopted the
PREIT-RUBIN, Inc. Stock Bonus Plan (the "Plan") for the benefit of its eligible
employees; and
WHEREAS, the Company desires to appoint CoreStates Bank, N.A.
as trustee of the trust established under the Plan;
NOW, THEREFORE, the Company and the Trustee agree that this
Agreement sets forth the PREIT-RUBIN, Inc. Stock Bonus Plan Trust Agreement, and
the parties hereto, intending to be legally bound hereby, further agree as
follows:
Article I
ESTABLISHMENT, AMENDMENT, AND TERMINATION OF THE TRUST
1.1 Establishment of Trust. The Company hereby establishes
with the Trustee a Trust to consist of all amounts contributed under the Plan on
and after September 30, 1997, and the earnings and appreciation thereon, less
payments made by the Trustee under the Plan and this Agreement. The assets of
the Trust (the "Trust Fund") shall be held, invested, reinvested, and
administered by the Trustee in accordance with this Agreement and the Plan. The
Company hereby names the Trustee as Trustee of the Trust, and the Trustee hereby
accepts its appointment as Trustee hereunder.
1.2 Exclusive Purpose of Trust. The Trustee shall hold the
assets of the Trust for the exclusive purpose of providing benefits to
"Participants" (as defined in the Plan) in the Plan and their beneficiaries
(except as provided in Section 4.3 of the Plan) and defraying reasonable
expenses of administering the Plan.
<PAGE>
1.3 Amendment of Trust. The Board of Directors of PREIT-RUBIN,
Inc. (the "Company") and the Trustee may amend this Agreement at any time by
written agreement between them; provided, that no such amendment shall cause any
part of the Fund to be used for or diverted to any purpose other than the
exclusive benefit of the Participants or their beneficiaries (except as provided
in Section 4.3 of the Plan), and no such amendment shall otherwise violate or
conflict with the terms of the Plan.
1.4 Amendment of Plan. The Trustee is not a party to the Plan
except insofar as the Trustee has assumed duties under the Plan as specifically
provided in this Agreement. The Board of Directors of the Company retains the
right to amend any provision of the Plan; provided, however, that no amendment
altering or modifying the responsibilities of the Trustee shall be effected
without its prior written consent.
1.5 Termination of Agreement. A termination of this Agreement
not involving a termination of the Plan may be accomplished by resignation or
removal of the Trustee as provided in Section 1.6. A termination of this
Agreement involving a termination of the Plan shall be accomplished in
accordance with the terms of the Plan and with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and other
applicable law.
1.6 Removal or Resignation of Trustee. The Board of Directors
of the Company may remove the Trustee at any time upon 60 days' notice in
writing to the Trustee (or upon any shorter notice consented to by the Trustee).
The Trustee may resign at any time upon 60 days' notice in writing to the Board
of Directors (or upon any shorter notice consented to by the Board of
Directors). Upon such removal or resignation of the Trustee, the Board of
Directors shall appoint a successor trustee. Upon acceptance of such appointment
by the successor trustee, the Trustee shall transfer and deliver the Fund to
such successor trustee.
Article II
TRUSTEE RESPONSIBILITIES
2.1 Management of Plan and Trust. The allocation of authority
and responsibility for management of the Plan and Trust is set forth in Articles
XII through XIV of the Plan, which are incorporated herein by reference.
2.2 Fiduciary Responsibility of Trustee. In holding the Fund,
following the directions of the "Committee" (as defined in the Plan), and
otherwise managing the Fund, the Trustee shall act solely in the interest of the
Participants and beneficiaries and --
-2-
<PAGE>
(a) for the exclusive purpose of providing benefits to
Participants and their beneficiaries and defraying reasonable expenses
of administering the Plan;
(b) with the care, skill, prudence, and diligence that a
prudent man acting in a like capacity and familiar with such matters
would use under the circumstances;
(c) by diversifying the investments of the Trust so as to
minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and
(d) in accordance with the terms of the Plan and the
Agreement and the provisions of ERISA.
For purposes of subsections (b) and (c), the prudence requirement (to the
extent that it requires diversification) and the diversification requirement
shall not be violated by the Trustee's acquisition or holding of "qualifying
employer securities" (as defined in section 407(d)(5) of ERISA).
2.3 Investment Responsibility of Trustee. Subject to the
directions of the Committee and to Section 5.2 of the Plan, the Trustee shall
have the exclusive responsibility and authority to hold, invest, reinvest, and
administer the Fund in accordance with the terms of the Plan and this Agreement.
The Trustee may invest and hold up to 100 percent of the Trust Fund in "Company
Stock" (as defined in the Plan), if so directed by the Committee. Except as
provided in Section 12.3 of the Plan, the Trustee shall not be liable for
following proper directions of the Committee which are in accordance with the
terms of the Plan and the Agreement and not contrary to law.
2.4 Division of the Trust Fund. The Trustee shall hold the
Fund in two separate Subfunds, to be designated (i) the "Company Stock Subfund"
and (ii) the "Other Investments Subfund." The Committee shall direct the Trustee
as to the manner in which the Trust Fund is to be allocated among the Subfunds.
Each Subfund shall be invested in accordance with the provisions of Section 2.5
in the kinds of property specified for the Subfund.
2.5 Investment of the Trust Fund. The Trustee shall invest and
reinvest the contributions allocated to each of the Subfunds named in Section
2.4, and all proceeds, interest, income, or other payments in respect of such
Subfund in the following manner:
(a) Company Stock Subfund. All amounts held, upon the
direction of the Committee, in the Company Stock Subfund shall be
invested and
-3-
<PAGE>
reinvested in Company Stock. Except upon written direction from the
Committee, or as necessary to make any distribution or payment from
the Trust, the Trustee shall have no power or duty to sell or
otherwise dispose of any Company Stock held in the Company Stock
Subfund.
(b) Other Investments Subfund. All amounts held, upon the
direction of the Committee, in the Other Investments Subfund shall be
invested and reinvested by the Trustee as directed by the Committee,
with the principal objective of maintaining the value of the
Participants' interest in the Sub-fund. The Trustee, with respect to
the Other Investments Subfund, as directed by the Committee and in
addition to those powers given by law, may --
(1) invest and reinvest the Subfund without
distinction between principal and income in any form of
property not prohibited by law, without restriction to
investments authorized by state law for fiduciaries;
(2) invest in any common or collective trust fund
operated by the Trustee or any of its affiliates, provided
the requirements of section 408(b)(8) of ERISA and any
regulations which may be issued thereunder are met with
respect to any such transactions, or in any pooled
investment fund of an insurance company qualified to do
business in a State; as long as this Trust has any
investments in a common trust which has been determined to
be qualified under section 401(a) of the Internal Revenue
Code of 1986, as amended, such common trust shall constitute
an integral part of this Trust and of the Plan;
(3) invest in deposits which bear a reasonable
interest rate in any bank or similar financial institution
supervised by the United States or any State, including its
own banking department, provided the requirements of section
408(b)(4) of ERISA and regulations issued thereunder are met
with respect to any such transaction with its own banking
department;
(4) provide any ancillary service for the Plan,
provided the requirements of section 408(b)(6) of ERISA and
regulations issued thereunder are met with respect to any
provision of such services;
(5) join in or oppose the reorganization,
recapitalization, consolidation, sale, or merger of
corporations or properties upon such terms as it deems wise;
-4-
<PAGE>
(6) dispose of property held by it for such prices
and on such terms as it deems best without liability on the
purchasers to see to application of the purchase money;
(7) hold investments in nominee or bearer form,
provided so holding such investments does not violate the
requirements of section 403(a) of ERISA and regulations
issued thereunder; and
(8) give proxies.
2.6 Additional Powers of Trustee. As directed by the
Committee, the Trustee shall have the authority and power to --
(a) enter into transactions for the purpose of acquiring or
selling Company Stock, including transactions with the Company or
with any shareholder of the Company; and
(b) exercise voting rights and any other rights of ownership
with respect to Company Stock as directed by the Committee or the
Participants in accordance with Section 2.11.
2.7 Benefit Payments. The Trustee shall, on the written
directions of the Committee, pay benefits from the Trust Fund to such persons,
in such manner, and in such amounts as may be specified in the Committee's
directions. The Trustee shall be entitled to rely in good faith on any such
direction which is proper on its face without making an independent inquiry or
investigation.
2.8 Authority for Trustee's Action. Whenever the Trustee must
or may act upon the direction or approval of the Committee, the Trustee may act
upon a written communication signed by any member of the Committee.
2.9 Records. The Trustee shall keep accurate and detailed
accounts of all investments, receipts, disbursements, and other transactions
involving the Trust. All accounts, books, and records relating to such
transactions shall be open to inspection and audit at all reasonable times by
persons designated by the Committee or the Company.
2.10 Account. Within 60 days after its receipt of the
independent appraiser's valuation report after the end of a "Plan Year" (as
defined in the Plan), and within 60 days after its removal or resignation, the
Trustee shall file with the Committee a written account of its administration of
the Trust, setting forth all investments, receipts, disbursements, and other
transactions effected by it since the end of the period covered by the preceding
account, and any other information required for compliance with the reporting
and disclosure provisions of ERISA.
-5-
<PAGE>
2.11 Voting and Tender of Company Stock. All voting rights of
Company Stock held in the Trust Fund shall be exercised by the Trustee as
directed by the Committee, except that each Participant shall be entitled to
direct the Trustee as to the manner in which voting rights under Company Stock
allocated to the "Company Stock Account" (as defined in the Plan) of the
Participant are to be exercised with respect to any corporate matter involving
the voting of such shares with respect to the approval or disapproval of any
corporate merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as prescribed by the Secretary of the
Treasury in regulations. With respect to any such matter, the Trustee shall vote
as directed by the Participant and shall vote all Company Stock held in the
Trust Fund but not yet allocated to the Company Stock Accounts of Participants
as directed by the Committee. Such directions shall be given in accordance with
the following provisions --
(a) At least 30 days before each annual or special
shareholders' meeting of the Company at which a corporate matter
requiring the votes of Participants is to be voted on, the Committee
through the Trustee shall furnish to each Participant a copy of any
proxy solicitation material, together with a form requesting
confidential instructions on how the Company Stock allocated to the
Participant's Company Stock Account (including fractional shares to
1/1000th of a share) is to be voted. Upon timely receipt of such
instructions, the Trustee shall vote the Company Stock as directed.
The instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be divulged or
released to any person, including officers or employees of the
Company or employees of any other company. The Trustee and the
Committee shall not make recommendations to Participants on whether
to vote or how to vote. If voting instructions for Company Stock
allocated to any Participant's Company Stock Account are not timely
received for a particular shareholders' meeting, the Trustee shall
vote such Company Stock as the Committee, in its sole discretion,
directs, after the Committee determines such action to be in the best
interests of Participants and their beneficiaries.
(b) The Trustee shall utilize its best efforts to distribute
or cause to be distributed to each Participant in a timely manner all
information distributed to shareholders of the Company in connection
with any tender or exchange offer. Each Participant shall have the
right with respect to the shares of Company Stock allocated to his
Company Stock Account to instruct the Trustee in writing as to the
manner in which to respond to any tender or exchange offer pending
for all shares of Company Stock or any portion thereof. A
Participant's instructions shall remain in force until superseded in
writing by the Participant. The Trustee shall tender or exchange such
shares of Company Stock as and to the extent so instructed by the
-6-
<PAGE>
Participant. If the Trustee does not receive instructions from a
Participant regarding any such tender or exchange offer for shares of
Company Stock allocated to his Company Stock Account, the Trustee
shall have no discretion in such matter and shall take no action in
response thereto. Unless and until shares of Company Stock are
tendered or exchanged, the individual instructions received by the
Trustee from Participants shall be held by the Trustee in strict
confidence and shall not be divulged or released to any person,
including officers or employees of the Company or employees of any
other company; provided, however, that the Trustee shall advise the
Board of Directors of the Company, at any time upon request, of the
total number of shares for which the Trustee has not received
instructions to tender or exchange.
(c) Except as otherwise provided in subsection (b), neither
the Committee nor the Trustee shall have the discretion or power to
sell, convey, or transfer any allocated or unallocated shares of
Company Stock held in the Trust Fund in response to a tender or
exchange offer unless the Board of Directors of the Company or a
court of competent jurisdiction determines that the Committee shall
have the discretion or power to instruct the Trustee to sell, convey,
or transfer any such shares of Company Stock in response to a tender
or exchange offer.
Article III
TRUSTEE COMPENSATION
3.1 Trustee Compensation. The Trustee shall be paid such
reasonable compensation as shall from time to time be agreed upon in writing by
the Board of Directors of the Company and the Trustee. In addition, the Trustee
shall be reimbursed for any reasonable and necessary expenses (including the
reasonable and necessary expenses of its legal counsel, financial adviser, and
other advisers) it incurs in the administration of the Trust which are not
payable out of the Trustee's compensation. The Trustee's compensation and the
expenses of the Trust shall be paid by the Company or, at the direction of the
Board of Directors, by the Trust. All taxes of any and all kinds whatsoever that
may be levied or assessed under existing or future laws upon, or in respect to,
the Trust or the income thereof shall be paid from the Trust.
3.2 Indemnification of the Trustee by the Company. The Company
hereby agrees to indemnify the Trustee for and to hold it harmless against any
and all liabilities, losses, costs, or expenses (including reasonable legal fees
and expenses and hourly charges for the time expended by the Trustee's
employees) of whatsoever kind and nature which may be imposed on, incurred by,
or asserted
-7-
<PAGE>
against the Trustee at any time by reason of the Trustee's service under this
Trust Agreement and the Plan, if the Trustee did not act dishonestly or in
willful or negligent violation of the law or regulation under which such
liability, loss, cost, or expense arose.
Article IV
PARTICIPATING EMPLOYERS
4.1 Affiliated Employers May Join in Trust Agreement. With the
consent of the Company and the Trustee, any "Affiliate" (as defined in the Plan)
may join in this Trust Agreement as a "Participating Employer." All references
in this Trust Agreement to employees of the Company shall be deemed to include
the employees of each Participating Employer. The contributions which may be
made by each Participating Employer, and the income therefrom, shall be held by
the Trustee as part of the Trust.
4.2 Company Appointed Agent of Participating Employer. Each
Participating Employer appoints the Company as its agent to exercise on its
behalf all of the powers and authority conferred upon the Company by this Trust
Agreement, including, without limitation, the power to amend this Trust
Agreement or to terminate this Trust.
Article V
GENERAL
5.1 Plan Documents. The Committee shall cause a copy of the
Plan and of any Plan amendment to be delivered to the Trustee.
5.2 Construction. Construction, validity, and administration
of this Agreement shall be governed by ERISA and other applicable federal law
and, to the extent not governed by Federal law, by Pennsylvania law.
5.3 Gender and Number. The masculine pronoun wherever used
shall include the feminine and the singular may include the plural, and vice
versa, as the context may require.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and attested to this 30th day of September, 1997.
Attest: PREIT-RUBIN, INC.
By /s/ Ronald Rubin
----------------------------
Attest: CORESTATES BANK, N.A.
/s/ Anthony Dello Russo, Jr. By/s/ Donald C. Cardamone
---------------------------- -----------------------------------
-9-
<PAGE>
PREIT-RUBIN, INC.
STOCK BONUS PLAN
(Effective as of September 30, 1997)
<PAGE>
TABLE OF CONTENTS
Page
Article I
DEFINITIONS........................................... 1
1.1 "Accrued Benefit".......................................... 1
1.2 "Affiliate"................................................ 1
1.3 "Board of Directors"....................................... 1
1.4 "Code" .................................................... 2
1.5 "Committee"................................................ 2
1.6 "Company".................................................. 2
1.7 "Company Stock"............................................ 2
1.8 "Company Stock Account".................................... 2
1.9 "Compensation"............................................. 2
1.10 "Effective Date".......................................... 2
1.11 "Eligible Employee"....................................... 2
1.12 "Employee"................................................ 2
1.13 "ERISA"................................................... 2
1.14 "Leased Employee"......................................... 2
1.15 "Normal Retirement Age"................................... 3
1.16 "Normal Retirement Date".................................. 3
1.17 "Other Investments Account"............................... 3
1.18 "Participant"............................................. 3
1.19 "Plan".................................................... 3
1.20 "Plan Year"............................................... 3
1.21 "Qualified Election Period"............................... 3
1.22 "Qualified Participant"................................... 3
1.23 "Trust"................................................... 3
1.24 "Trust Agreement"......................................... 3
1.25 "Trust Fund".............................................. 3
1.26 "Trustee"................................................. 4
1.27 "Valuation Date".......................................... 4
Article II
SERVICE................................................ 4
2.1 Hour of Service............................................ 4
2.2 Year of Service............................................ 6
2.3 One-Year Break in Service.................................. 6
2.4 Break in Service Rules..................................... 7
2.5 Military Service........................................... 7
Article III
PARTICIPATION.......................................... 7
3.1 Eligibility Requirements................................... 7
3.2 Commencement of Participation.............................. 7
<PAGE>
3.3 Participation After Separation from Service................ 7
Article IV
COMPANY CONTRIBUTIONS................................... 8
4.1 Company Contributions...................................... 8
4.2 Time of Payment............................................ 8
4.3 Contributions Irrevocable.................................. 8
Article V
PARTICIPANTS' ACCOUNTS AND INVESTMENT THEREOF........... 9
5.1 Accounts................................................... 9
5.2 Investment of Trust Fund................................... 9
5.3 Legal Limitation........................................... 9
Article VI
ALLOCATION OF CONTRIBUTIONS............................. 9
6.1 Participants Entitled to Allocation........................ 9
6.2 Allocation of Company Stock Contributions.................. 10
6.3 Allocation of Other Contributions.......................... 10
6.4 Allocation of Forfeitures.................................. 10
Article VII
VALUATION............................................... 10
7.1 Valuation.................................................. 10
7.2 Allocation of Gains and Losses............................. 11
7.3 Dividends on Company Stock................................. 11
Article VIII
BENEFITS AND DISTRIBUTIONS.............................. 11
8.1 Vesting.................................................... 11
8.2 Amount, Method of Benefit Payments......................... 12
8.3 Normal and Late Retirement................................. 12
8.4 Vested Deferred Benefits................................... 12
8.5 Disability Retirement...................................... 13
8.6 Death .................................................... 14
8.7 Designation of Beneficiary and Form of Payment of Death
Benefit; Spouse's Consent to Non-Spouse Beneficiary. 14
8.8 Requirements Concerning Distributions...................... 15
8.9 Participant's Consent to Payment of Benefits............... 17
8.10 Direct Rollovers........................................... 17
Article IX
LIMITATIONS ON CONTRIBUTIONS............................ 18
9.1 Definitions for Limitations on Contributions............... 18
9.2 Basic Limitation........................................... 20
-ii-
<PAGE>
9.3 Combined Limit with Defined Benefit Plans.................. 20
9.4 Combining and Aggregating Plans............................ 20
Article X
TOP-HEAVY PROVISIONS.................................... 20
10.1 Top-Heavy Preemption...................................... 20
10.2 Top-Heavy Definitions..................................... 21
10.3 Top-Heavy Rules........................................... 23
10.4 Impact on Maximum Benefits................................ 24
10.5 Change in Top-Heavy Status................................ 24
10.6 Duplication of Minimum Contributions Not Required......... 24
10.7 Repeal of Limitation...................................... 25
Article XI
NONALIENATION OF BENEFITS............................... 25
11.1 Nonalienation Rule........................................ 25
Article XII
ALLOCATION OF FIDUCIARY RESPONSIBILITY.................. 25
12.1 Allocation................................................ 25
12.2 Exclusive Responsibility.................................. 25
12.3 Co-Fiduciary Liability.................................... 26
12.4 Interest of Participants.................................. 26
12.5 Employment of Advisers.................................... 26
Article XIII
THE COMMITTEE........................................... 26
13.1 Appointment of Committee.................................. 26
13.2 Committee Officers, Procedures, Rules..................... 27
13.3 Investment Responsibilities............................... 27
13.4 Administrative Responsibilities, Powers................... 27
13.5 Standards of Committee Conduct............................ 28
13.6 Plan Records.............................................. 28
13.7 Claims Procedure.......................................... 29
13.8 Determination of Liquidity Needs.......................... 30
13.9 Voting Rights and Tender Offers........................... 30
13.10 Contracting for Services.................................. 31
13.11 Discretionary Authority................................... 31
Article XIV
THE TRUSTEE............................................. 32
14.1 The Trust................................................. 32
14.2 Standards of Trustee Conduct.............................. 32
14.3 Investment Responsibilities............................... 32
14.4 Payment of Benefits....................................... 32
-iii-
<PAGE>
14.5 Removal, Resignation of Trustee........................... 33
Article XV
PLAN AMENDMENT, MERGER OR CONSOLIDATION................. 33
15.1 Amendment................................................. 33
15.2 Merger or Consolidation................................... 33
Article XVI
PLAN TERMINATION........................................ 34
16.1 Discontinuance of Contributions or Termination............ 34
Article XVII
MISCELLANEOUS........................................... 34
17.1 Application of Plan....................................... 34
17.2 No Employment Rights Created.............................. 34
17.3 Incapacitated Participant or Beneficiary.................. 34
17.4 Payment of Plan Expenses.................................. 35
17.5 Unclaimed Benefits........................................ 35
17.6 Treatment of Leased Employees............................. 35
17.7 Construction.............................................. 35
17.8 Gender and Number......................................... 36
-iv-
<PAGE>
PREIT-RUBIN, INC.
STOCK BONUS PLAN
(Effective as of September 30, 1997)
WHEREAS, PREIT-RUBIN, Inc., a Pennsylvania corporation (the
"Company"), desires to establish the PREIT-RUBIN, Inc. Stock Bonus Plan (the
"Plan") to hold all of the voting common stock of the Company; and
WHEREAS, the Plan will be maintained for the exclusive
benefit of eligible employees of the Company and their beneficiaries (within
the meaning of section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code")), and is intended to qualify as a stock bonus plan under section
401(a) of the Code;
NOW, THEREFORE, effective as of September 30, 1997, except
as otherwise specifically provided herein, and subject to the approval of the
District Director of Internal Revenue, the Plan is hereby established under
the following terms:
Article I
DEFINITIONS
The following words and phrases, as used herein, shall have
the following meanings, unless the context clearly indicates otherwise:
1.1 "Accrued Benefit" shall mean the sum of the amounts
credited to a Participant's Company Stock Account and Other Investments
Account in the Trust Fund.
1.2 "Affiliate" shall mean any corporation which is a member
of a controlled group of corporations, as defined in section 414(b) of the
Code, of which the Company is a member; any other trade or business which is
under common control, as defined in section 414(c) of the Code, with the
Company; any trade or business which is a member of an affiliated service
group, as defined in section 414(m) of the Code, of which the Company is a
member; and any entity required to be aggregated with the Company pursuant to
section 414(o) of the Code. For purposes of applying section 414(b) and
section 414(c) of the Code to the limitations on contributions set forth in
Article IX, the phrase "more than 50 percent" shall be substituted for the
phrase "at least 80 percent" each place it appears in section 1563(a)(1) of
the Code.
1.3 "Board of Directors" shall mean the Board of Directors
of the Company, as such Board may be constituted from time to time.
<PAGE>
1.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 "Committee" shall mean the Stock Bonus Plan Committee
established under the provisions of Article XIII.
1.6 "Company" shall mean PREIT-RUBIN, Inc. or its successor.
1.7 "Company Stock" shall mean the voting common stock
issued by the Company.
1.8 "Company Stock Account" shall mean the account
established by the Committee for each Participant to which Company Stock
allocated to the Participant is credited.
1.9 "Compensation" shall mean an Eligible Employee's Form
W-2 wages for a Plan Year, as defined in section 3401(a) of the Code for
purposes of income tax withholding at the source, but determined without
regard to any rules that limit the remuneration included in wages based on the
nature or location of the employment or the services provided. The annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan shall not exceed $150,000, as adjusted by the
Commissioner of Internal Revenue for increases in the cost of living in
accordance with section 401(a)(17) of the Code. The cost-of-living adjustment
in effect for a calendar year shall apply to any period, not exceeding 12
months, beginning in such calendar year over which Compensation is determined
(the "determination period"). If a determination period consists of fewer than
12 months, the applicable limit (as adjusted) shall be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
1.10 "Effective Date" shall mean, except as otherwise
specifically provided, September 30, 1997.
1.11 "Eligible Employee" shall mean any Employee of the
Company. "Eligible Employee" shall not include any Leased Employee.
1.12 "Employee" shall mean any individual employed by the
Company or an Affiliate.
1.13 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.14 "Leased Employee" shall mean a leased employee of the
Company or an Affiliate within the meaning of section 414(n)(2) of the Code.
-2-
<PAGE>
Notwithstanding the foregoing, if all such leased employees constitute less
than 20 percent of the nonhighly compensated work force (within the meaning of
section 414(n)(5)(C)(ii) of the Code) of the Company and the Affiliates, the
term "Leased Employee" shall not include any leased employee covered by a plan
described in section 414(n)(5) of the Code.
1.15 "Normal Retirement Age" shall mean age 65.
1.16 "Normal Retirement Date" shall mean the first day of
the month coinciding with or next following the date a Participant attains
Normal Retirement Age.
1.17 "Other Investments Account" shall mean the account
established by the Committee for each Participant to which assets allocated to
the Participant other than Company Stock are credited.
1.18 "Participant" shall mean any Eligible Employee who
meets or who has met the eligibility requirements of Article III and who has
commenced to participate in the Plan pursuant to Section 3.3.
1.19 "Plan" shall mean the PREIT-RUBIN, Inc. Stock Bonus
Plan as set forth in this document and as it may be amended from time to time.
1.20 "Plan Year" shall mean a period of 12 consecutive
calendar months beginning on January 1 of each year.
1.21 "Qualified Election Period" shall mean the
six-Plan-Year period beginning with the first Plan Year in which the
Participant becomes a Qualified Participant.
1.22 "Qualified Participant" shall mean a Participant who
has attained age 55 and who has completed at least 10 years of participation
in the Plan.
1.23 "Trust" shall mean the PREIT-RUBIN, Inc. Stock Bonus
Plan Trust, created by the Trust Agreement.
1.24 "Trust Agreement" shall mean the agreement by and
between the Company and the Trustee, as it may be amended from time to time.
1.25 "Trust Fund" shall mean all cash and securities and all
other assets deposited with or acquired by the Trustee in its capacity as such
hereunder, together with accumulated income.
-3-
<PAGE>
1.26 "Trustee" shall mean CoreStates Bank, N.A., or its duly
appointed successor.
1.27 "Valuation Date" shall mean December 31 of each Plan
Year and any other date or dates during the Plan Year, as specified by the
Committee, upon which the assets of the Trust Fund are valued, as prescribed
by Section 7.1.
Article II
SERVICE
2.1 Hour of Service.
(a) (1) An "Hour of Service" is each hour for which
an Employee is paid, or entitled to payment, for the
performance of duties for the Company or an Affiliate.
(2) An "Hour of Service" is also each hour
for which an Employee is paid, or entitled to payment, by
the Company or an Affiliate on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of
absence. Notwithstanding the preceding sentence,
(A) No more than 501 Hours of Service
shall be credited under this subsection (a)(2) to an Employee
an account of any single continuous period during which the
Employee performs no duties;
(B) Hours of Service shall not be
credited under this subsection (a)(2) to an Employee for
payments made or due under a plan maintained solely for the
purpose of complying with any applicable workers'
compensation, unemployment compensation or disability
insurance laws;
(C) Hours of Service shall not be
credited under this subsection (a)(2) to an Employee for any
payment which solely reimburses him for medical or medically
related expenses he has incurred; and
(D) Hours of Service shall not be
credited under this subsection (a)(2) to an Employee for any
payments made or due
-4-
<PAGE>
him under this Plan or any other plan of deferred
compensation qualified under section 401 of the Code which
is maintained by the Company or an Affiliate.
(3) An "Hour of Service" is also each hour
for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Company or an
Affiliate.
(4) Solely for the purpose of determining
whether a Participant has incurred a One-Year Break in
Service, an "Hour of Service" is also --
(A) Each hour which is part of an
Employee's customary workweek during which he is on an unpaid
leave of absence authorized by the Company or an Affiliate
under its standard personnel practices, provided the Employee
resumes employment with the Company or an Affiliate upon the
expiration of such leave.
(B) With respect to any Employee who
is absent from work for maternity or paternity reasons, each
hour which would otherwise have been credited to such Employee
but for such absence, or, in any case in which such hours
cannot be determined, eight hours per day of such absence. An
absence from work for maternity or paternity reasons means a
continuous absence --
(I) by reason of the pregnancy of the
Employee;
(II) by reason of the birth of a child
of the Employee;
(III) by reason of the placement of a
child with the Employee in connection with the adoption of
such child by such Employee; or
(IV) for purposes of caring for such
child for a period beginning immediately following such birth
or placement.
The Hours of Service credited under this subsection (a)(4)(B) shall be credited
in the Plan Year in which the absence begins if the crediting is necessary to
prevent a One-Year Break in Service in that Plan Year, or, in all other cases,
in the following Plan Year.
(b) In the case of a payment which is made or due on
account of a period during which an Employee performs no duties, and which
-5-
<PAGE>
results in the crediting of Hours of Service under subsection (a)(2), or in
the case of an award or agreement for back pay, to the extent that such award
or agreement is made with respect to a period described in subsection (a)(2),
the number of Hours of Service to be credited shall be determined in
accordance with the applicable regulations prescribed by the Secretary of
Labor and set forth in 29 CFR ss. 2530.200b-2(b).
(c) Hours of Service described in subsection (a)(1),
subsection (a)(2) and subsection (a)(3) shall be credited to Plan Years in
accordance with the applicable regulations prescribed by the Secretary of Labor
and set forth in 29 CFR ss. 2530.200b-2(c).
(d) Hours of Service with an Affiliate shall be
credited to an Employee only to the extent that such Hours are completed during
the period that the Employee's employer is an Affiliate.
2.2 Year of Service
(a) Eligibility. An Employee shall complete a "Year
of Service" for purposes of eligibility in any successive 12-month period from
his date of hire during which he completes at least 1,000 Hours of Service. In
addition to Years of Service completed pursuant to the preceding sentence, an
Employee shall be credited with the number of Years of Service for purposes of
eligibility back to his date of hire by the Company, by an Affiliate, or by
Equities Properties Development LP, Strauss Greenberg, Inc., Richard I. Rubin,
Inc., or The Rubin Organization, Inc. (collectively, the "Predecessor
Companies"), equal to the number he would have been credited with had the Plan
been in existence throughout his pre-Effective Date service with the Company,
the Affiliate, or the Predecessor Company.
(b) Vesting. An Employee shall complete a "Year of
Service" for purposes of vesting in any Plan Year in which he completes 1,000 or
more Hours of Service, whether or not he is in the employ of the Company or an
Affiliate at the end of such Plan Year. In addition to Years of Service
completed pursuant to the preceding sentence, an Employee shall be credited with
the number of Years of Service for purposes of vesting back to his date of hire
by the Company, an Affiliate, or a Predecessor Company equal to the number he
would have been credited with had the Plan been in existence throughout his
pre-Effective Date service with the Company, the Affiliate, or the Predecessor
Company.
2.3 One-Year Break in Service. An Employee shall be
considered to have incurred a "One-Year Break in Service" in any Plan Year
beginning on or after January 1, 1998 in which he does not complete more than
500 Hours of Service.
-6-
<PAGE>
2.4 Break in Service Rules. For purposes of vesting, all of a
Participant's Years of Service shall be taken into account, except under the
following circumstances --
(a) In the case of a Participant who does not have
any vested Accrued Benefit, Years of Service before any One-Year Break in
Service shall not be taken into account if the number of consecutive One-Year
Breaks in Service equals or exceeds the greater of (i) the total number of Years
of Service preceding such Breaks or (ii) five. The total number of Years of
Service preceding such Breaks shall not include any Years of Service not taken
into account because of a prior application of this Section.
(b) In the case of Participant who has five
consecutive One-Year Breaks in Service, Years of Service after such Breaks
shall not be taken into account in determining the nonforfeitable (vested)
percentage of the Participant's Accrued Benefit which he accrued prior to such
Breaks and the nonvested portion of such Accrued Benefit shall be forfeited in
accordance with Section 8.4(d). If, as a result, the Participant has different
vesting percentages in his pre-Break and post-Break Accrued Benefit, the
Committee shall maintain within the Participant's Company Stock and Other
Investments Accounts separate sub-accounts for such pre-Break and post-Break
Accrued Benefit.
2.5 Military Service. Notwithstanding any provision of this
Plan to the contrary, contributions, benefits, and service credit with respect
to qualified military service shall be provided in accordance with section
414(u) of the Code.
Article III
PARTICIPATION
3.1 Eligibility Requirements. Any Eligible Employee shall be
eligible to participate in the Plan when he completes one Year of Service for
eligibility with the Company or an Affiliate.
3.2 Commencement of Participation. An Employee who meets the
requirements of Section 3.1 as of the Effective Date shall become a
Participant in the Plan on the Effective Date. An Employee who meets such
requirements after the Effective Date shall become a Participant in the Plan
on the first January 1 or July 1 following his attainment of eligibility,
provided he is an Eligible Employee on such date.
3.3 Participation After Separation from Service. If a
Participant separates from service and is thereafter reemployed by the Company
(whether or
-7-
<PAGE>
not he incurs a One-Year Break in Service), he shall resume participation in
the Plan immediately upon his return to the service of the Company.
Article IV
COMPANY CONTRIBUTIONS
4.1 Company Contributions. For each Plan Year, the Company
may make a contribution, in cash or in kind (including Company Stock), to the
Trust. The amount of such contribution for any year shall be determined by
appropriate action by the Board of Directors.
4.2 Time of Payment. The Company shall make payment of its
contribution to the Trust for each fiscal year for which it makes a
contribution within the time prescribed by law, including extensions of time,
for the filing of its Federal income tax return for such year.
4.3 Contributions Irrevocable
(a) General Rule. Except as provided in subsection
(b), all Company contributions to the Trust shall be irrevocable. Neither such
contributions nor any income therefrom shall be used for any purpose other than
the exclusive benefit of Participants or their beneficiaries under the Plan.
(b) Circumstances of Return of Company Contributions
(1) If the Internal Revenue Service
initially determines that the Plan does not meet the
requirements of a "qualified plan" under section 401(a) of
the Code, the assets of the Trust Fund attributable to
contributions made by the Company under the Plan shall be
returned to the Company within one year of the date of
denial of qualification of the Plan.
(2) In the case of a Company contribution
made by a mistake of fact, such contribution may be returned
to the Company within one year after the payment of the
contribution.
(3) Company contributions are conditioned
on their deductibility under section 404 of the Code, and,
to the extent a deduction is disallowed, the affected
contribution (to the extent disallowed) may be returned to
the Company within one year after the disallowance of the
deduction.
-8-
<PAGE>
Article V
PARTICIPANTS' ACCOUNTS AND INVESTMENT THEREOF
5.1 Accounts. A Participant's interest in the Trust Fund
shall be reflected in his Company Stock and Other Investments Accounts. The
Committee shall establish such record Accounts for each Participant.
Notwithstanding the foregoing, the Trust Fund shall be treated as a single
trust for purposes of investment and administration, and nothing contained
herein shall require a physical segregation of assets for any such Account.
5.2 Investment of Trust Fund. Up to 100 percent of the Trust
Fund may be invested in Company Stock. Among other investments, cash or cash
equivalents may be held in the Trust Fund for the purposes of, inter alia,
making distributions to Participants or acquiring shares of Company Stock from
shareholders of the Company or directly from the Company. Neither the Company
nor the Committee nor the Trustee shall have any responsibility or duty to
time any transaction involving Company Stock in order to anticipate market
conditions or changes in stock value, nor shall any such person have any
responsibility or duty to sell Company Stock held in the Trust Fund (or
otherwise to provide investment management for Company Stock held in the Trust
Fund) in order to maximize return or minimize loss.
5.3 Legal Limitation. The Committee shall not be required to
engage in any transaction, including, without limitation, directing the
purchase or sale of Company Stock, which it determines in its sole discretion
might tend to subject itself, its members, the Plan, the Company or any
Affiliate or any Participant to liability under Federal or state laws.
Article VI
ALLOCATION OF CONTRIBUTIONS
6.1 Participants Entitled to Allocation. Each contribution
to the Trust Fund for a Plan Year shall be allocated by the Committee to and
among each Participant (i) who in such Plan Year completed at least 1,000
Hours of Service for the Company, and (ii) who was an Eligible Employee on the
last day of such Plan Year. Notwithstanding the preceding clause (ii), a
Participant or his beneficiary, as the case may be, shall be entitled to an
allocation for the Plan Year in which the Participant's employment terminates
on or after his Normal Retirement Date, or because of death, or by reason of
total and permanent disability (as defined in Section 8.5(b)), regardless of
whether the Participant was an Eligible Employee on the last day of the Plan
Year.
-9-
<PAGE>
6.2 Allocation of Company Stock Contributions. The Committee
shall, as of December 31 of each Plan Year for which the Company makes a
Company Stock contribution, allocate such contribution (including fractional
shares to 1/1000th of a share) to the Company Stock Account of each
Participant entitled to an allocation for the Plan Year in the same proportion
that such Participant's Compensation for the calendar year ending with the
last day of the Plan Year bears to the total Compensation of all Participants
entitled to an allocation for the Plan Year.
6.3 Allocation of Other Contributions. The Committee shall,
as of December 31 of each Plan Year for which the Company makes a contribution
in a form other than Company Stock, allocate such contribution to the Other
Investments Account of each Participant entitled to an allocation for the Plan
Year in the same proportion that such Participant's Compensation for the
calendar year ending with the last day of the Plan Year bears to the total
Compensation of all Participants entitled to an allocation for the Plan Year.
6.4 Allocation of Forfeitures. All forfeitures occurring
pursuant to Section 8.4 shall be allocated in the manner described in Section
6.2 or Section 6.3 (as applicable) as of December 31 of the Plan Year in which
the last of the five consecutive One-Year Breaks in Service causing the
forfeiture occurs.
Article VII
VALUATION
7.1 Valuation. There shall be established within the Trust
Fund a "Company Stock Subfund" consisting of all of the Company Stock Accounts
of Participants and an "Other Investments Subfund" consisting of all of the
Other Investments Accounts of Participants. As of each Valuation Date, each
such Subfund shall be valued separately by the Trustee, and any net increase
or decrease in the fair market value of the applicable Subfund, including
earnings or losses realized or sustained during the Plan Year or part of the
Plan Year then ending, shall be computed. For the purpose of determining such
net increase or decrease, the value of the applicable Subfund on the
immediately preceding Valuation Date shall be reduced by amounts paid out or
due as benefits from such Subfund during the Plan Year or part of the Plan
Year then ending.
For purposes of the valuation described above, the fair
market value of shares of Company Stock which are not readily tradeable on an
established market and are held by the Trustee shall be determined as of the
Valuation Date coincident with the last day of the Plan Year, and as of such
other Valuation Dates as the Committee so directs, by a recognized independent
firm of security analysts
-10-
<PAGE>
or appraisers meeting requirements similar to those contained in regulations
(if any) issued under section 170(a)(1) of the Code.
7.2 Allocation of Gains and Losses. As of each Valuation
Date, the net increase or decrease in the market value of the Company Stock
Subfund and of the Other Investments Subfund, as calculated under Section 7.1,
shall be separately allocated (i) with respect to the Company Stock Subfund,
among the Company Stock Accounts of the Participants in the proportion that
each such Account bears to the total of all such Accounts immediately prior to
the valuation and before the allocations for the current Plan Year pursuant to
Article VI and (ii) with respect to the Other Investments Subfund, among the
Other Investments Accounts of the Participants in the proportion that each
such Account bears to the total of all such Accounts prior to the valuation
and before the allocations for the current Plan Year pursuant to Article VI.
7.3 Dividends on Company Stock
(a) Cash Dividends. With respect to any shares of
Company Stock allocated to the Company Stock Accounts of Participants, cash
dividends payable with respect to such shares shall be paid into the applicable
Participants' Other Investments Accounts.
(b) Stock Dividends. Stock dividends paid (and stock
received by the Trustee as a result of a stock split, stock conversion, or
reorganization or recapitalization of the Company) with respect to shares of
Company Stock held in the Trust Fund shall be credited to the Company Stock
Accounts to which such Company Stock was previously allocated.
Article VIII
BENEFITS AND DISTRIBUTIONS
8.1 Vesting. A Participant shall have a nonforfeitable
(vested) right to his Accrued Benefit when he attains age 55. Before age 55, a
Participant shall have a nonforfeitable (vested) right to the percentage of
his Accrued Benefit determined under the following table --
Completed Years Nonforfeitable
of Service Percentage
---------- ----------
fewer than 3................................ 0
3 or more ............................. 100
There shall be no divestment of a Participant's Accrued Benefit for cause.
-11-
<PAGE>
8.2 Amount, Method of Benefit Payments
(a) Amount and Form. The amount of any benefits
payable under this Article shall be determined from the amount of the
Participant's vested Accrued Benefit after the allocations pursuant to Article
VI for the Plan Year last ending before such benefits are paid, and based on the
Valuation Date last preceding such payment. Provided the corporate charter of
the Company restricts ownership of all or substantially all outstanding Company
Stock to Employees or to a plan or trust described in section 401(a) of the
Code, benefits held in a Participant's Company Stock Account shall be paid in
cash. Benefits held in a Participant's Other Investments Account shall be paid
in cash.
(b) Method. Except as otherwise required by Section
8.8, benefits shall be paid in the following methods --
(1) with respect to any Participant who
separates from service with the Company, and whose vested Accrued Benefit does
not exceed (and did not at the time of any prior distribution exceed) $3,500,
one single-sum payment paid as soon as practicable after the end of the Plan
Year in which the Participant separated from service (and in any event, not
later than one year after the end of such Plan Year);
(2) provided any consent required by Section
8.4(b) is given, with respect to any Participant whose vested Accrued Benefit
exceeds (or at the time of any prior distribution exceeded) $3,500, one
single-sum payment paid as soon as practicable after the end of the Plan Year in
which the Participant separated from service (and, in any event, not later than
one year after the end of such Plan Year).
8.3 Normal and Late Retirement
(a) A Participant may retire at any time on or after
his Normal Retirement Date.
(b) If a Participant continues in the service of the
Company after his Normal Retirement Date, he shall continue to participate in
the Plan until he actually retires. The benefits of a Participant who retires on
or after his Normal Retirement Date shall be paid in accordance with Section
8.2.
8.4 Vested Deferred Benefits
(a) If a Participant with a vested Accrued Benefit
separates from service before attaining Normal Retirement Age for any reason
other than
-12-
<PAGE>
death, benefits shall be paid in accordance with Section 8.2 but not later
than the time specified in Section 8.8.
(b) In the case of any Participant whose vested
Accrued Benefit exceeds (or at the time of any prior distribution exceeded)
$3,500, the Committee shall not direct that all or any part of such vested
Accrued Benefit be distributed, or commence to be distributed, before the
Participant attains Normal Retirement Age, unless the Participant consents in
writing to such distribution as provided in Section 8.9, or unless the benefit
becomes distributable under Section 8.6 upon the death of the Participant.
(c) If a Participant with a vested right to less than
100 percent of his Accrued Benefit separates from service, the nonvested portion
of his Accrued Benefit shall be transferred to a subaccount of the Company Stock
or Other Investments Account in which it is held, for disposition in accordance
with the provisions of subsection (d) or subsection (e).
(d) If the terminated Participant incurs five
consecutive One-Year Breaks in Service or dies before he returns to service,
any amount set aside in a subaccount pursuant to subsection (c) shall be
forfeited upon the fifth such consecutive One-Year Break in Service, or upon the
first payment to his designated beneficiary or beneficiaries in the event of his
death, if earlier.
(e) If the terminated Participant returns to service
with the Company prior to incurring five consecutive One-Year Breaks in Service,
any amount set aside in a subaccount pursuant to subsection (c) shall be
reallocated to the Participant's Company Stock and Other Investments Accounts as
of the last day of the month in which the terminated Participant returns to
service.
8.5 Disability Retirement
(a) If, before attaining Normal Retirement Age, a
Participant in the service of the Company suffers a total and permanent
disability (as defined in subsection (b)), such Participant shall then retire,
he shall become 100 percent vested in his Accrued Benefit, and his Accrued
Benefit shall be paid to him pursuant to Section 8.4(a).
(b) "Total and permanent disability" shall mean a
medically determinable physical or mental impairment which prevents the
Participant from engaging in any substantial gainful activity and which can be
expected to last at least 12 months, the existence of which disability shall be
established to the satisfaction of the Committee by the opinion of a physician
acceptable to the Committee.
-13-
<PAGE>
8.6 Death. If a Participant dies while in the service of the
Company, his Accrued Benefit shall be paid to his designated beneficiary or
beneficiaries in accordance with Section 8.7. If a Participant with a vested
Accrued Benefit dies after separating from service and before receiving all of
the benefit payments to which he was entitled, the remainder of his vested
Accrued Benefit shall be paid to his designated beneficiary(ies) in accordance
with Section 8.7.
8.7 Designation of Beneficiary and Form of Payment of Death
Benefit; Spouse's Consent to Non-Spouse Beneficiary
(a) Designation of Beneficiary and Form of Payment.
In the event a Participant has a surviving spouse at his death, such surviving
spouse shall be the Participant's beneficiary, unless the spouse has consented
in the manner described in subsection (b) to the payment of the Participant's
Accrued Benefit to a beneficiary other than the spouse. In the event the
Participant has no surviving spouse at his death, the beneficiary shall be the
beneficiary designated by the Participant. Any designation by the Participant
and/or consent by the Participant's spouse shall be made by a written form
delivered to the Committee. Except as otherwise provided with respect to a
surviving spouse, a Participant may, at any time prior to his death, change his
beneficiary designation by completing a new written form, but a beneficiary
designation shall remain in effect until such new form is received by the
Committee.
The death benefit shall be paid in one single-sum payment
paid as soon as practicable after the first Valuation Date after the
Participant's death. If a Participant dies without effectively designating a
surviving beneficiary and without a surviving spouse, the Committee shall
designate a beneficiary, but only from among the following and only in the
order set forth: the Participant's estate, surviving children, and surviving
parents.
(b) Requirements for Spouse's Consent. To be
effective, a consent by a spouse to a Participant's designation of a non-spouse
beneficiary must be filed in writing with the Committee, must be specific with
respect to the particular non-spouse beneficiary consented to, must be
irrevocable and must be witnessed by a Plan representative designated by the
Committee or by a notary public. In addition, any such spousal consent shall be
limited to the non-spouse beneficiary or beneficiaries specifically designated
by the Participant, which designation may not be changed without a further
spousal consent (unless the initial spousal consent expressly permits
designations by the Participant without any further consent by the spouse).
Notwithstanding the foregoing, if the Participant
establishes to the satisfaction of the Committee that such written consent may
not be obtained because there is no spouse or the spouse cannot be located,
the Participant's
-14-
<PAGE>
designation of a nonspouse beneficiary will be effective without the
requirement of the spouse's consent. Any consent required under this Section
shall be valid only with respect to the spouse who signs the consent, and any
establishment that the consent of a spouse may not be obtained shall be
effective only with respect to such spouse. Additionally, a revocation of a
prior beneficiary designation may be made by a Participant without the consent
of the spouse at any time. The number of revocations or consents shall not be
limited.
8.8 Requirements Concerning Distributions. All benefit
distributions under this Article shall be subject to the following requirements
(a) Before Death
(1) Last Date for Commencement of
Payments. The payment of benefits to a Participant under
this Plan shall commence not later than the 60th day after
the close of the Plan Year in which the latest of the
following events occurs --
(i) the Participant attains Normal
Retirement Age;
(ii) the tenth anniversary of the year
the Participant commenced participation in the
Plan; or
(iii) the termination of the Participant's
service with the Company.
Notwithstanding the above, if the amount of payment required
otherwise to commence on a date determined under this
Section or under any other Section of the Plan cannot be
ascertained by such date, or if the Committee is unable to
locate the Participant or beneficiary after making
reasonable efforts to do so, a payment retroactive to such
date may be made no later than 60 days after the later of
(i) the earliest date on which the amount of such payment
can be ascertained under the Plan or (ii) the earliest date
on which the Participant or beneficiary is located.
(2) Additional Rule for Commencement of
Benefit Payments. The distribution of benefits to a
Participant shall commence not later than April 1 of the
calendar year following the later of (i) the calendar year
in which the Participant attains age 70-1/2, or (ii) the
calendar year in which the Participant retires. However,
clause (ii) shall not apply if the Participant is a
"5-percent owner," as defined in section 416 of the Code,
with respect to the
-15-
<PAGE>
Plan Year ending in the calendar year in which the
Participant attains age 70-1/2.
(3) Duration of Benefit Payments. As of
the calendar year ending before the April 1 described in
paragraph (2), the distribution of benefit payments to each
Participant shall be made, in accordance with regulations
prescribed by the Secretary of the Treasury, over a period
not extending beyond the life expectancy of the Participant
or the joint life and last survivor expectancy of the
Participant and his designated beneficiary.
(4) Incidental Death Benefit Rule. If the
Participant's beneficiary is a person other than the
Participant's spouse, the value of the payments to be made
to the Participant shall be more than 50 percent of the
value of the total payments to be made to the Participant
and his beneficiary. This paragraph (4) shall be
administered so as to comply with the minimum distribution
incidental benefit requirements set forth in Prop. Treas.
Reg. ss. 1.401(a)(9)-2 or any successor thereto.
(b) After Death
(1) Distribution Already Begun. If a
Participant dies on or after the date described in
subsection (a)(2) and after distribution of his benefit has
commenced under a method of distribution in accordance with
subsection (a)(3), the remaining portion of such benefit
shall be distributed at least as rapidly as such benefit
would have been distributed under such method as of the date
of the Participant's death.
(2) Five-Year Rule for Other Cases. If a
Participant dies before the date described in subsection
(a)(2), the entire benefit of such Participant shall be
distributed by December 31 of the year containing the fifth
anniversary of the date of the Participant's death.
(c) Regulations Control. Distributions under this
Section shall be made in accordance with section 401(a)(9) of the Code and
regulations issued thereunder. This Section and section 401(a)(9) of the Code
shall take precedence over any distribution options in the Plan inconsistent
with this Section or section 401(a)(9) of the Code.
-16-
<PAGE>
8.9 Participant's Consent to Payment of Benefits
(a) Except as provided in subsection (b), the
Committee shall provide each Participant, not more than 90 days and (except as
provided in subsection (c)) not fewer than 30 days prior to the date the vested
portion of his Accrued Benefit is paid to him, written notice of his right to
defer receipt of the payment until on or after his Normal Retirement Date.
Payment shall not be made prior to the Participant's Normal Retirement Date
unless the Participant affirmatively elects the payment in writing, on a form
filed with the Committee.
(b) The written notice described in subsection (a)
shall not apply to the payment if (i) the Participant's vested Accrued Benefit
does not exceed (and did not at the time of any prior distribution exceed)
$3,500, or (ii) the payment is made on or after the Participant's Normal
Retirement Date.
(c) A payment may be made or may commence fewer than
30 days after the notice described in subsection (a) is given to the
Participant, provided --
(1) the Committee clearly informs the
Participant that he has a right to a period of at least 30 days after receiving
the notice to consider whether or not to elect the payment (and, if applicable,
a particular payment option); and
(2) the Participant, after receiving the
notice, affirmatively elects the payment.
8.10 Direct Rollovers
(a) General Rule. Notwithstanding any other provision
of the Plan to the contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and in the manner
prescribed by the Committee, to have a portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions. The following definitions shall
apply for purposes of this Section --
(i) "Eligible rollover distribution"
shall mean any distribution of all or any portion of the balance to
the credit of the distributee, except that an eligible rollover
distribution shall not include (i) any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
-17-
<PAGE>
the distributee and the distributee's designated beneficiary, or for
a specified period of 10 years or more, (ii) any distribution to the
extent such distribution is required under section 401(a)(9) of the
Code, and (iii) the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
(ii) "Eligible Retirement Plan" shall
mean an individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in section 408(b)
of the Code, an annuity plan described in section 403(a) of the Code,
or a qualified trust described in section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the surviving spouse,
an eligible retirement plan shall be an individual retirement account
or individual retirement annuity.
(iii) "Distributee" shall include an
Employee or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the Code
shall be Distributees with regard to the interest of the spouse or
former spouse.
(iv) "Direct rollover" shall mean a
payment by the Plan to the eligible retirement plan specified by the
distributee.
Article IX
LIMITATIONS ON CONTRIBUTIONS
9.1 Definitions for Limitations on Contributions
(a) "Annual additions" shall mean the sum of the
following amounts credited to a Participant's Company Stock and Other
Investments Accounts for the limitation year:
(1) Company contributions; and
(2) forfeitures.
(b) "Defined benefit fraction" shall mean a fraction,
the numerator of which is the Participant's projected annual benefit under any
defined benefit plans qualified under section 401(a) of the Code maintained by
the Company and its Affiliates, and the denominator of which is the lesser of
125
-18-
<PAGE>
percent of the dollar limitation in effect for the limitation year under
section 415(b)(1)(A) of the Code or 140 percent of the Participant's highest
average limitation compensation.
(c) "Defined contribution fraction" shall mean a
fraction, the numerator of which is the sum of the annual additions to the
Participant's Company Stock and Other Investments Accounts under the Plan and
all annual additions to any other defined contribution plans qualified under
section 401(a) of the Code maintained by the Company and its Affiliates for the
current and all prior limitation years, and the denominator of which is the sum
of the maximum amounts for the current and all prior years of employment with
the Company. The maximum amount in any limitation year is the lesser of 125
percent of the dollar limitation in effect under section 415(c)(1)(A) of the
Code or 35 percent of the Participant's limitation compensation for such year.
(d) "Highest average limitation compensation" shall
mean the Participant's average limitation compensation for the three consecutive
Years of Service that produce the highest average.
(e) "Limitation compensation" shall mean a
Participant's wages, salaries and fees for professional services and other
amounts received (without regard to whether or not the amount is paid in cash)
for personal services actually rendered in the service of the Company or any
Affiliate, to the extent that the amounts are includible in gross income, and
excluding contributions by the Company or any Affiliate to a plan of deferred
compensation which are not includible in the Participant's gross income for the
taxable year in which contributed, or any distributions from a plan of deferred
compensation (except any amounts received by a Participant pursuant to an
unfunded, nonqualified plan in the year such amounts are includible in his gross
income).
(f) "Limitation year" shall mean the calendar year.
(g) "Maximum permissible amount" shall mean the
lesser of --
(1) $30,000 (or, if greater, 1/4 of the
defined benefit dollar limitation set forth in section
415(b)(1)(A) of the Code as in effect for the limitation
year); or
(2) 25 percent of the Participant's
limitation compensation for the limitation year.
(h) "Projected annual benefit" shall mean the annual
retirement benefit (adjusted to an actuarially equivalent straight life annuity
if such
-19-
<PAGE>
benefit is expressed in a form other than a straight life annuity or qualified
joint and survivor annuity) to which the Participant is entitled under the
terms of any defined benefit plan qualified under section 401(a) of the Code
maintained by the Company and its Affiliates.
9.2 Basic Limitation. The amount of annual additions which
may be credited to the Participant's Company Stock and Other Investments
Accounts for any limitation year shall not exceed the lesser of the maximum
permissible amount or any other limitation contained in this Plan. If the
Company's contributions that would otherwise be contributed and allocated to
the Participant's Company Stock and Other Investments Accounts would cause the
annual additions for the limitation year to exceed the maximum permissible
amount, the amount contributed shall be reduced so that the annual additions
for the limitation year equal the maximum permissible amount.
9.3 Combined Limit with Defined Benefit Plans. For any
Participant who also has an accrued benefit under any defined benefit plan
qualified under section 401(a) of the Code maintained by the Company and its
Affiliates, the sum of the Participant's defined benefit fraction and defined
contribution fraction shall not exceed 1.0 in any limitation year. If the sum
of such fractions with respect to any Participant for any limitation year
would otherwise exceed 1.0, the amount contributed under this Plan shall be
reduced to the extent necessary to comply with such 1.0 limit.
9.4 Combining and Aggregating Plans. For purposes of
applying the limitations set forth in this Article --
(a) all qualified defined benefit plans ever
maintained by the Company or any Affiliate shall be treated as one defined
benefit plan; and
(b) all qualified defined contribution plans ever
maintained by the Company or any Affiliate shall be treated as one defined
contribution plan.
Article X
TOP-HEAVY PROVISIONS
10.1 Top-Heavy Preemption. Notwithstanding any other
provision of this Plan to the contrary, during any Plan Year in which this
Plan is top-heavy, as defined in Section 10.2 below, the Plan shall be
governed in accordance with this Article, which shall control over other
provisions hereof.
-20-
<PAGE>
10.2 Top-Heavy Definitions
(a) "Determination date" shall mean, with respect to
any Plan Year after the first Plan Year, the last day of the preceding Plan Year
and, with respect to the first Plan Year, the last day of such first Plan Year.
(b) "Determination period" shall mean, with respect
to any Plan Year, the Plan Year containing the determination date and the four
preceding Plan Years.
(c) "Key Employee" shall mean any Employee or former
Employee (and the beneficiaries of such Employee) who at any time during a Plan
Year included in the determination period was--
(1) an officer of the Company or any
Affiliate having an annual top-heavy compensation greater
than 50 percent of the dollar limitation applicable to
defined benefit plans under section 415(b)(1)(A) of the Code
for such Plan Year;
(2) one of the 10 Employees having an
annual top-heavy compensation from the Company and the
Affiliates greater than the amount in effect under section
415(c)(1)(A) of the Code and owning (or considered as owning
within the meaning of section 318 of the Code) both more
than a 1/2 percent interest and the largest interests in the
Company or any Affiliate;
(3) a five percent owner of the Company or
any Affiliate (within the meaning of section 416(i)(1)(B)(i)
of the Code); or
(4) a one percent owner of the Company or
any Affiliate (within the meaning of section
416(i)(1)(B)(ii) of the Code) having an annual top-heavy
compensation from the Company and the Affiliates of more
than $150,000.
For purposes of paragraph (1), no more than 50 employees (or if fewer, the
greater of three or 10 percent of the employees) shall be treated as officers.
The determination of who is a key Employee shall be made in accordance with
section 416(i) of the Code and regulations thereunder.
(d) "Limitation compensation" shall mean limitation
compensation as defined in Section 9.1(e).
(e) "Non-key Employee" shall mean any Employee who is
not a key Employee.
-21-
<PAGE>
(f) "Permissive aggregation group" shall mean, with
respect to any Plan Year, the required aggregation group plus any other defined
contribution plan or defined benefit plan which the Committee elects to include,
provided such permissive aggregation group meets the requirements of section
401(a)(4) and section 410 of the Code with such defined contribution plan or
defined benefit plan being taken into account.
(g) "Required aggregation group" shall mean, with
respect to any Plan Year:
(1) each defined contribution plan and
each defined benefit plan of the Company or any Affiliate in
which a key Employee is a participant or was a participant
at any time during the determination period (regardless of
whether the plan has been terminated); and
(2) each other defined contribution plan
and each other defined benefit plan of the Company or any
Affiliate which, during the determination period, enables
any defined benefit plan or defined contribution plan
described in paragraph (g)(1) to meet the requirements of
section 401(a)(4) or section 410 of the Code.
(h) "Top-heavy compensation" shall mean limitation
compensation plus elective or salary deferral contributions to a plan described
in section 125 or section 401(k) of the Code.
(i) "Top-heavy plan" shall mean this Plan if --
(1) this Plan is not part of a required or
permissive aggregation group, and the top-heavy ratio for
the Plan exceeds 60 percent;
(2) this Plan is part of a required
aggregation group and not part of a permissive aggregation
group, and the top-heavy ratio for the required aggregation
group exceeds 60 percent; or
(3) this Plan is part of a required
aggregation group and part of a permissive aggregation
group, and the top-heavy ratio for the permissive
aggregation group exceeds 60 percent.
(j) "Top-heavy ratio" shall mean a fraction. The
numerator of the fraction is the sum of the account balances of all key
Employees under the Plan, or, if the Plan is a member of a required or
permissive aggregation group, under all defined contribution plans in such
required or permissive aggregation
-22-
<PAGE>
group (hereinafter the "aggregation group"), plus the sum of the present
values of accrued benefits of all key Employees under all defined benefit
plans in the aggregation group, as of the determination date. The denominator
of the fraction is a similar sum determined for all Employees. For purposes of
determining the fraction, the numerator and denominator shall include any part
of any account balance or accrued benefit distributed in the determination
period. If any individual has not been credited with at least one Hour of
Service with the Company or any Affiliate at any time during the determination
period, any account balance or accrued benefit of, or distribution to, such
individual shall not be taken into account.
For purposes of the preceding paragraph, the sum of account
balances and the present values of accrued benefits shall be determined as of
the most recent valuation date that falls within the 12-month period ending on
the determination date. The calculation of the top-heavy ratio shall be made
in accordance with section 416 of the Code and the regulations thereunder.
Solely for the purpose of determining if the Plan, or any
other plan included in a required aggregation group of which this Plan is a
part, is top-heavy (within the meaning of section 416(g) of the Code) the
accrued benefit of a non-key Employee shall be determined under (i) the
method, if any, that uniformly applies for accrual purposes under all plans
maintained by the Company and the Affiliates, or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional accrual rate of section 411(b)(1)(C) of
the Code.
(k) "Valuation date" shall mean, with respect to this
Plan, the first day of the Plan Year.
10.3 Top-Heavy Rules. Notwithstanding any other provision of
the Plan, the following rules shall apply for any Plan Year in which the Plan is
determined to be a top-heavy plan --
(a) Minimum Benefit. The Company contributions and
forfeitures allocated on behalf of any Participant in this Plan who is a non-key
Employee for the Plan Year shall not be less than the lesser of (i) three
percent of such Participant's limitation compensation or (ii) the largest
percentage of the Company contributions and forfeitures allocated on behalf of
any key Employee under this Plan for such Plan Year as a percentage of the first
$150,000 (as adjusted by the Commissioner of Internal Revenue for increases in
the cost of living in accordance with section 401(a)(17)(B) of the Code) of the
key Employee's limitation compensation. This provision shall not apply to any
Participant who was not employed by the Company on the last day of the Plan
Year.
-23-
<PAGE>
The minimum benefit shall be provided without regard to any
Social Security contribution. The minimum benefit shall be provided even
though, under other Plan provisions, the Participant would not otherwise be
entitled to receive an allocation, or would have received a lesser allocation,
in the Plan Year because (i) of the Participant's failure to complete 1,000
Hours of Service, (ii) of the Participant's failure to make mandatory employee
contributions to the Plan or (iii) the Participant's limitation compensation
is less than a stated amount.
(b) Minimum Vesting. Notwithstanding the provisions
of Section 8.1, for any Plan Year in which this Plan is a top-heavy plan, the
following minimum vesting schedule shall apply to the Participant's Accrued
Benefit
ompleted Years Nonforfeitable
of Service Percentage
---------- ----------
fewer than 3 ...................................... 0
3 or more ......................................100
This subsection (b) does not apply to the Accrued Benefit of any Participant
who does not have an Hour of Service after the Plan has initially become a
top-heavy plan; such Participant's vested Accrued Benefit shall be determined
without regard to this subsection (b).
10.4 Impact on Maximum Benefits. For any Plan Year in which
the Plan is a top-heavy plan,Section 9.1 shall be read by substituting "100
percent" for "125 percent" wherever it appears therein, except that such
substitution shall not have the effect of reducing any benefit accrued under a
defined benefit plan prior to the first day of the Plan Year in which this
provision becomes applicable.
10.5 Change in Top-Heavy Status. If the Plan becomes a
top-heavy plan and subsequently ceases to be such, the vesting schedule in
Section 10.3(b) shall continue to apply in determining the nonforfeitable
percentage of any Participant who had at least three Years of Service as of
December 31 of the last Plan Year of top-heaviness. For other Participants,
such schedule shall apply only to the Participant's Accrued Benefit as of such
December 31.
10.6 Duplication of Minimum Contributions Not Required. The
Committee shall, to the maximum extent permitted by the Code and regulations
thereunder, apply the provisions of this Article by taking into account the
benefits payable and the contributions made under all other defined
contribution and defined benefit plans maintained by the Company or any
Affiliate which are qualified under section 401(a) of the Code to prevent
inappropriate omissions or duplication of minimum benefits or contributions.
-24-
<PAGE>
10.7 Repeal of Limitation. In the event that Congress should
provide by statute, or the Treasury Department should provide by regulation or
ruling, that the limitations provided in this Article are no longer necessary
for the Plan to meet the requirements of section 401 of the Code or other
applicable law then in effect, such limitations shall become void and shall no
longer apply, without the necessity of further amendment to the Plan.
Article XI
NONALIENATION OF BENEFITS
11.1 Nonalienation Rule. The right of any Participant or
beneficiary to any benefit payment shall not be subject to any voluntary or
involuntary alienation or assignment. The preceding sentence shall also apply
to the creation, assignment or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations order, unless
such order is determined to be a qualified domestic relations order (as
defined in section 414(p) of the Code) or a domestic relations order entered
before January 1, 1985.
Article XII
ALLOCATION OF FIDUCIARY RESPONSIBILITY
12.1 Allocation. Authority and responsibility for management
of the Plan and Trust shall be allocated among the following persons --
(a) The Board of Directors shall have sole
responsibility for the appointment, removal and replacement of the members of
the Committee described in Article XIII and the Trustee described in Article
XIV. To the extent that they are carrying out these responsibilities, the
members of the Board of Directors shall be "named fiduciaries" of the Plan for
purposes of section 402(a)(1) of ERISA.
(b) The Committee shall have sole responsibility for
the administration of the Plan, and shall have exclusive authority to direct the
Trustee with regard to the investment of the Trust Fund, as set forth in Article
V and Article XIII. The members of the Committee shall be "named fiduciaries"
with respect to the administration of the Plan.
(c) Subject to the direction of the Committee, the
Trustee shall have sole responsibility for the management and control of the
Trust Fund.
12.2 Exclusive Responsibility. It is the purpose of this Plan
and the Trust Agreement to allocate to each of the fiduciaries identified in
Section 12.1
-25-
<PAGE>
exclusive responsibility for prudent execution of the functions assigned to
him and no responsibility for execution of functions assigned to others.
Whenever one such fiduciary is required by the Plan and the Trust Agreement to
follow the directions of another such fiduciary, the two fiduciaries shall not
be deemed to have been assigned a shared responsibility, but the fiduciary
giving the directions shall have sole responsibility for the functions
assigned to him, including issuing such directions, and the fiduciary
receiving the directions shall have sole responsibility for the functions
assigned to him, including following such directions insofar as they are on
their face proper under this Plan and the Trust Agreement and under applicable
law.
12.3 Co-Fiduciary Liability. A fiduciary shall not be liable
for a breach of fiduciary responsibility by another fiduciary to whom other
fiduciary responsibilities have been assigned under the Plan except under the
following circumstances --
(a) if he participates knowingly in, or knowingly
undertakes to conceal, an act or omission of such other fiduciary, knowing such
act or omission is a breach;
(b) if, by his failure properly to discharge his own
fiduciary responsibilities, he has enabled such other fiduciary to commit a
breach; or
(c) if he has knowledge of a breach by such other
fiduciary, unless he makes reasonable efforts under the circumstances to remedy
the breach.
12.4 Interest of Participants. In carrying out the
responsibilities allocated to him under this Plan and the Trust Agreement,
each fiduciary shall act solely in the interest of the Participants and their
beneficiaries.
12.5 Employment of Advisers. A fiduciary identified in
Section 12.1 may employ one or more persons to render advice with regard to
such fiduciary's responsibilities under the Plan.
Article XIII
THE COMMITTEE
13.1 Appointment of Committee. The Board of Directors shall
appoint a Stock Bonus Committee consisting of at least three persons to
administer the Plan. Members of the Committee shall serve without compensation
at the pleasure of the Board of Directors. Vacancies on the Committee shall be
filled by the Board of Directors.
-26-
<PAGE>
The Board of Directors shall notify the Trustee of the
appointment of the Committee and of subsequent changes in its membership.
13.2 Committee Officers, Procedures, Rules. The Committee
shall elect a chairman and a secretary, who shall be members of the Committee.
The secretary shall keep a record of all meetings and actions taken by the
Committee.
A majority of the members of the Committee shall constitute
a quorum for the transaction of business. All resolutions or other actions
taken by the Committee at any meeting shall be by vote of the majority of the
Committee members present at such meeting. Resolutions may be adopted or other
action taken without a meeting upon written consent signed by all of the
members of the Committee. No member of the Committee shall act on any matter
which involves his personal interest or benefit under the Plan as
distinguished from the general interest of all Participants.
The Committee shall enact such rules and regulations
consistent with the Plan as it may consider desirable for the conduct of its
business.
13.3 Investment Responsibilities. The Committee shall have
sole responsibility for directing the Trustee with regard to the investment of
Trust assets in Company Stock. The Committee shall fulfill its responsibility
by issuing written instructions to the Trustee concerning the management,
acquisition, and disposition of Trust assets invested in Company Stock. No
investment of Trust assets in Company Stock shall be made without the written
approval of the Committee.
13.4 Administrative Responsibilities, Powers. The Committee
shall have sole responsibility for administration of the Plan, and shall
supervise and control the operation of the Plan in accordance with its terms.
The Committee shall have the responsibility, the power and the authority to do
all things necessary to accomplish that purpose, including, but not limited
to, the responsibility, power and authority to do the following --
(a) to construe and interpret the terms and
provisions of the Plan as provided in Section 13.11;
(b) to adopt such rules and regulations under the
Plan as it may consider desirable for the administration of the Plan;
(c) to determine all questions of eligibility for
participation under the Plan;
-27-
<PAGE>
(d) to determine all questions concerning the amount,
time and manner of payment of benefits under the Plan;
(e) to make or cause to be made valuations and
appraisals of Plan assets and to engage appropriate experts for such purpose;
(f) to prescribe procedures to be followed by
Employees, Participants and beneficiaries under the Plan;
(g) to prepare and distribute appropriate information
concerning the Plan;
(h) to issue directions to the Trustee concerning all
benefits which are to be paid from the Trust Fund pursuant to the Plan; and
(i) to keep such records, make such reports and do
such other acts as it deems appropriate in order to comply with ERISA and
government regulations thereunder.
13.5 Standards of Committee Conduct. The Committee shall act
solely in the interest of the Participants and beneficiaries and --
(a) for the exclusive purpose of providing benefits
to Participants and their beneficiaries and defraying reasonable expenses of
administering the Plan;
(b) with the care, skill, prudence and diligence that
a prudent man acting in a like capacity and familiar with such matters would use
under the circumstances;
(c) by diversifying the investments of the Trust so
as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and
(d) in accordance with the terms of the Plan and
Trust Agreement and the provisions of ERISA.
For purposes of subsection (b) and subsection (c), the prudence requirement
(to the extent that it requires diversification) and the diversification
requirement shall not be violated by the acquisition or holding of "qualifying
employer securities" (as defined in section 407(d)(5) of ERISA).
13.6 Plan Records. The Committee shall maintain records
containing all relevant data pertaining to Participants and their rights under
the Plan. Records
-28-
<PAGE>
pertaining solely to a particular Participant shall be made available to him
for examination during business hours upon request.
13.7 Claims Procedure. The Committee shall make all
determinations as to the right of any person to a benefit under the Plan. If
the Committee denies in whole or part any claim for a benefit under the Plan
by a Participant or a beneficiary, the Committee shall furnish the claimant
with notice of the decision not later than 90 days after receipt of the claim,
unless special circumstances require extension of time for processing the
claim. If such an extension of time for processing is required, written notice
of the extension shall be furnished to the claimant prior to the termination
of the initial 90-day period. In no event shall such extension exceed the
period of 90 days from the end of such initial period. The extension notice
shall indicate the special circumstances requiring an extension of time and
the date by which the Committee expects to render the final decision.
The written notice which the Committee shall provide to
every claimant who is denied a claim for benefits shall set forth in a manner
calculated to be understood by the claimant --
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions
on which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(d) appropriate information as to the steps to be
taken if the claimant wishes to submit his claim for review.
A claimant or his authorized representative may request a
review of the denied claim by the Committee. Such request shall be made in
writing and shall be presented to the Committee not more than 60 days after
receipt by the claimant of written notification of the denial of a claim. The
claimant shall have the right to review pertinent documents and to submit
issues and comments in writing. The Committee shall make its decision on
review not later than 60 days after receipt of the claimant's request for
review, unless special circumstances require an extension of time, in which
case a decision shall be rendered as soon as possible but not later than 120
days after receipt of the request for review. The decision on review shall be
in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, and specific references to
the pertinent Plan provisions on which the decision is based.
-29-
<PAGE>
It is intended that the claims procedure of this Plan be
administered in accordance with the claims procedure regulations of the
Department of Labor set forth in 29 CFR ss. 2560.503-1.
13.8 Determination of Liquidity Needs. The Committee shall,
at least annually, estimate the amount of the benefit payments which the Plan
will be required to make, taking into account anticipated Participant
retirements and terminations and all other relevant factors, and, on the basis
of such estimate, determine the Plan's need for liquidity. The Committee shall
consider each such determination in its formulation of investment policy for
the Trust.
13.9 Voting Rights and Tender Offers. All voting rights of
Company Stock held by the Trust Fund shall be exercised by the Trustee as
directed by the Committee, except for any vote regarding the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets
of a trade or business, or such similar transaction as may be prescribed in
Treasury regulations. With respect to any such matter, the Trustee shall vote
the Company Stock allocated to the Company Stock Account of each Participant
as directed by the Participant and shall vote all Company Stock held in the
Trust Fund but not yet allocated to the Company Stock Accounts of Participants
as directed by the Committee. Such directions shall be given in accordance
with the following provisions --
(a) At least 30 days before each annual or special
shareholders' meeting of the Company at which a corporate matter requiring the
votes of Participants is to be voted on, the Committee through the Trustee shall
furnish to each Participant a copy of any proxy solicitation material, together
with a form requesting confidential instructions on how the Company Stock
allocated to the Participant's Company Stock Account (including fractional
shares to 1/1000th of a share) is to be voted. Upon timely receipt of such
instructions, the Trustee shall vote the Company Stock as directed. The
instructions received by the Trustee from Participants shall be held by the
Trustee in strict confidence and shall not be divulged or released to any
person, including officers of the Company or Employees or employees of any other
company. The Trustee and the Committee shall not make recommendations to
Participants on whether to vote or how to vote. If voting instructions for
Company Stock allocated to any Participant's Company Stock Account are not
timely received for a particular shareholders' meeting, the Trustee shall vote
such Company Stock as the Committee, in its sole discretion, directs, after the
Committee determines such action to be in the best interests of Participants and
their beneficiaries.
(b) The Trustee shall utilize its best efforts to
distribute or cause to be distributed to each Participant in a timely manner all
information distributed to shareholders of the Company in connection with any
tender or
-30-
<PAGE>
exchange offer. Each Participant shall have the right from time to time with
respect to the shares of Company Stock allocated to his Company Stock Account
to instruct the Trustee in writing as to the manner in which to respond to any
such tender or exchange offer which shall be pending or which may be made in
the future for all shares of Company Stock or any portion thereof. A
Participant's instructions shall remain in force until superseded in writing
by the Participant. The Trustee shall tender or exchange such shares of
Company Stock as and to the extent so instructed. If the Trustee does not
receive instructions from a Participant regarding any such tender or exchange
offer, the Trustee shall have no discretion in such matter and shall take no
action in response thereto. Unless and until shares of Company Stock are
tendered or exchanged, the individual instructions received by the Trustee
from Participants shall be held by the Trustee in strict confidence and shall
not be divulged or released to any person, including officers of the Company
or Employees, or employees of any other company; provided, however, that the
Trustee shall advise the Board of Directors, at any time upon request, of the
total number of shares for which the Trustee has not received instructions to
tender or exchange.
(c) Except as otherwise provided in subsection (b),
neither the Committee nor the Trustee shall have the discretion or power to
sell, convey, or transfer any allocated or unallocated shares of Company Stock
held in the Trust Fund in response to a tender or exchange offer unless the
Board of Directors or a court of competent jurisdiction determines that the
Committee shall have the discretion or power to instruct the Trustee to sell,
convey, or transfer any such shares of Company Stock in response to a tender or
exchange offer.
13.10 Contracting for Services. The Committee may contract
for actuarial, legal, accounting, clerical and other services necessary to
carry out its responsibilities under the Plan. The costs of such services and
expenses of the Committee shall be paid pursuant to Section 17.4.
13.11 Discretionary Authority. The Committee shall have sole
discretion to carry out its responsibilities under this Article to construe
and interpret the provisions of the Plan and to determine all questions
concerning benefit entitlements, including the power to construe and determine
disputed or doubtful terms. To the maximum extent permissible under law, the
Committee's determinations on all such matters shall be final and binding upon
all persons involved.
-31-
<PAGE>
Article XIV
THE TRUSTEE
14.1 The Trust. The Trust which is a part of this Plan shall
consist of all amounts contributed under the Plan, and the earnings and
appreciation thereon, less payments made by the Trustee under the Plan and the
Trust Agreement entered into pursuant to the Plan.
14.2 Standards of Trustee Conduct. In holding the Trust
assets, following the directions of the Committee, and otherwise managing the
Trust assets, the Trustee shall act solely in the interest of the Participants
and beneficiaries and --
(a) for the exclusive purpose of providing benefits
to Participants and their beneficiaries and defraying reasonable expenses of
administering the Plan;
(b) with the care, skill, prudence and diligence that
a prudent man acting in a like capacity and familiar with such matters would use
under the circumstances;
(c) by diversifying the investments of the Trust so
as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and
(d) in accordance with the terms of the Plan and
Trust Agreement and the provisions of ERISA.
For purposes of subsection (b) and subsection (c), the prudence requirement
(to the extent that it requires diversification) and the diversification
requirement shall not be violated by the acquisition or holding of "qualifying
employer securities" (as defined in section 407(d)(5) of ERISA).
14.3 Investment Responsibilities. Subject to the directions
of the Committee pursuant to Section 13.3, and to Section 5.2, the Trustee
shall have the exclusive responsibility and authority to hold, invest,
reinvest and administer the Trust assets in accordance with the terms of the
Plan and the Trust Agreement. Except as provided in Section 12.3, the Trustee
shall not be liable for following proper directions of the Committee which are
in accordance with the terms of the Plan and Trust Agreement and not contrary
to law.
14.4 Payment of Benefits. The Trustee shall make all benefit
payments under the Plan from the Trust Fund upon the written instructions of
the Committee.
-32-
<PAGE>
14.5 Removal, Resignation of Trustee. The Board of Directors
may remove the Trustee at any time upon 60 days' notice in writing to the
Trustee (or upon any shorter notice consented to by the Trustee); and the
Trustee may resign at any time upon delivery of such notice to the Board of
Directors. Upon such removal or resignation of the Trustee, the Board of
Directors shall appoint a successor trustee and enter into a successor trust
agreement.
Article XV
PLAN AMENDMENT, MERGER OR CONSOLIDATION
15.1 Amendment. The Board of Directors shall have the right
to amend this Plan in writing at any time, subject to the following
limitations --
(a) No such amendment shall cause any part of the
Trust Fund to be used for or diverted to any purpose other than the exclusive
benefit of the Participants or their beneficiaries.
(b) No such amendment shall cause any reduction in
the amount of any Participant's Accrued Benefit. For purposes of this subsection
(b), an amendment which has the effect of (i) eliminating or reducing an early
retirement benefit or a retirement-type subsidy or (ii) eliminating an optional
form of benefit, with respect to benefits attributable to service before the
amendment, shall be treated as reducing accrued benefits as provided in section
411(d)(6) of the Code and the regulations thereunder.
(c) No such amendment shall change any vesting
schedule unless, in the case of an individual who is a Participant on (i) the
date the amendment is adopted, or (ii) the date the amendment is effective, if
later, the nonforfeitable percentage of such Participant's right to his Accrued
Benefit is not less than his percentage computed under the Plan without regard
to such amendment. Furthermore, no such amendment shall otherwise change any
vesting schedule unless each Participant having three or more Years of Service
is permitted to elect, in accordance with regulations under the Code, to have
the nonforfeitable percentage of his Accrued Benefit determined under the Plan
without regard to such amendment; provided that no election shall be given to
any Participant whose nonforfeitable percentage under the Plan as amended cannot
at any time be less than such percentage determined without regard to such
amendment.
15.2 Merger or Consolidation. This Plan and Trust shall not
be merged or consolidated with, nor shall any assets or liabilities be
transferred to, any other plan and trust, unless the benefits payable to each
Participant if the Plan were terminated immediately after such action would be
equal to or greater than
-33-
<PAGE>
the benefits which would have been payable to each Participant if the Plan had
been terminated immediately before such action.
Article XVI
PLAN TERMINATION
16.1 Discontinuance of Contributions or Termination. The
Board of Directors shall have the right to discontinue the Company's
contributions hereunder and to terminate or partially terminate this Plan by
delivery of written notice to the Trustee of such action.
Upon complete discontinuance of the Company's contributions,
or termination or partial termination of the Plan, the rights of all affected
Participants to benefits accrued to the date of such discontinuance or
termination shall become nonforfeitable except to the extent that law or
regulations may preclude such vesting in order to prevent discrimination in
favor of highly compensated Employees.
Upon final termination of the Plan, the Committee shall
direct the Trustee to distribute all assets remaining in the Trust, after
payment of any proper expenses, to the Participants in accordance with the
vested Accrued Benefits of such Participants as of the date of such
termination. Such payments shall be made in cash and at such time and in such
manner as the Committee shall in its discretion determine, subject to Section
8.8.
Article XVII
MISCELLANEOUS
17.1 Application of Plan. This Plan shall not apply to any
person who retired or otherwise separated from the service of the Company
before the Effective Date. The right of any such person to any retirement
benefit or otherwise shall be governed solely by the provisions of the Plan in
effect on the date of such retirement or other separation from service.
17.2 No Employment Rights Created. The Plan and Trust do not
confer upon any Participant or other Employee any right to be continued in the
employ of the Company or an Affiliate, and the Company expressly reserves the
right to terminate the employment of any Employee whether or not a
Participant, whenever the interest of the Company, in its sole judgment, may
so require.
17.3 Incapacitated Participant or Beneficiary. If the
Committee deems any person incapable of receiving any benefit to which he is
entitled by
-34-
<PAGE>
reason of minority, illness, infirmity or other incapacity, the Committee may
direct the Trustee to make payment to such person's legally appointed
guardian, or, if none has been appointed, to the holder of a legally valid
power of attorney from such person. Such payments shall, to the extent
thereof, discharge the liability of the Company, the Committee, the Trustee
and the Trust.
17.4 Payment of Plan Expenses. Except as otherwise provided
in the Trust Agreement, the Plan shall pay the expenses of administering the
Trust which is part of this Plan (to the extent such expenses are not paid by
the Company), including the compensation of the Trustee, which shall be as
mutually agreed by the Company and the Trustee.
17.5 Unclaimed Benefits. Any benefits payable to a
Participant or beneficiary not claimed for a period of five years from the
date of entitlement as determined by the Committee following a diligent effort
to locate such Participant or beneficiary and with the approval of the
Committee, shall be forfeited and applied in accordance with the terms of
Section 6.4; provided, however, that such forfeited benefits shall be
reinstated if a claim for them is made by the Participant or beneficiary.
17.6 Treatment of Leased Employees. Notwithstanding any
other provisions of the Plan, for purposes of the pension requirements of
section 414(n)(3) of the Code, Employees shall include Leased Employees.
17.7 Construction. Construction and administration of this
Plan and of the Trust Agreement shall be governed by ERISA and other
applicable Federal law and, to the extent not governed by Federal law, by
Pennsylvania law.
-35-
<PAGE>
17.8 Gender and Number. The masculine pronoun wherever used
shall include the feminine and the singular may include the plural, and vice
versa, as the context may require.
IN WITNESS WHEREOF, PREIT-RUBIN, INC. has caused these
presents to be duly executed as of this 30th day of September, 1997.
Attest: PREIT-RUBIN, INC.
/s/ Cynthia Wong By:/s/ Ronald Rubin
- --------------------------- --------------------------
-36-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1990 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
(As Amended and Restated Effective July 1, 1997)
<PAGE>
Table of Contents
Page
----
1. Purpose......................................................... 1
2. Administration.................................................. 2
3. Eligibility..................................................... 2
4. Stock........................................................... 2
5. Granting of Options............................................. 3
6. Annual Limit.................................................... 3
7. Terms and Conditions of Options................................. 4
8. Forfeiture...................................................... 9
9. Option Agreements -- Other Provisions........................... 9
10. Capital Adjustments............................................. 9
11. Certain Corporate Transactions.................................. 9
12. Exercise Upon Change in Control................................. 10
13. Amendment or Termination of the Plan............................ 11
14. Rights.......................................................... 12
15. Indemnification of Board and Committee.......................... 12
16. Application of Funds............................................ 12
17. Shareholder Approval............................................ 13
18. No Obligation to Exercise Option................................ 13
19. Termination of Plan............................................. 13
20. Governing Law................................................... 13
-i-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1990 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
(As Amended and Restated Effective July 1, 1997)
WHEREAS, the Pennsylvania Real Estate Investment Trust (the
"Trust") adopted the 1990 Incentive and Nonqualified Stock Option Plan (the
"Plan"), effective as of September 17, 1990, and has amended the Plan on one
occasion thereafter;
WHEREAS, Section 9 of the Plan provides that, subject to
certain inapplicable limitations, the Plan may be amended;
WHEREAS, the Trust wishes to amend and restate the Plan (i)
to reflect recent changes made to rules promulgated under Section 16(b) of the
Securities Exchange Act of 1934, (ii) to reflect changes made to the Internal
Revenue Code of 1986, as amended (particularly, the addition of Section 162(m)
to the Code), (iii) to provide Key Employees with additional methods of
exercising stock options to be granted in the future; and (iv) to make certain
other technical changes.
NOW THEREFORE, effective as of July 1, 1997, the Plan shall
be amended and restated as follows:
1. Purpose. This Pennsylvania Real Estate Investment Trust 1990
Incentive and Nonqualified Stock Option Plan (the "Plan") is intended to
provide a means whereby the Trust may, through the grant of incentive stock
options and nonqualified stock options (collectively, the "Options") to
purchase common shares of the Trust ("Common Stock") to officers and other key
employees of the Trust ("Key Employees"), attract and retain such Key
Employees and motivate them to exercise their best efforts on behalf of the
Trust and of any Related Corporation. For purposes of the Plan, a "Related
Corporation" shall mean either a "subsidiary corporation" of the Trust, as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), or the "parent corporation" of the Trust, as defined in Section
424(e) of the Code.
As used in the Plan, (i) the term "ISO" shall mean an option
which, at the time such option is granted, qualifies as an incentive stock
option within the meaning of Section 422 of the Code and is designated as an
ISO in the "Option Agreement" (as defined in Section 9 hereof); and (ii) the
term "NQSO" shall mean an option which, at the time such option is granted,
does not qualify as an ISO, and is designated as a nonqualified stock option
in the Option Agreement.
<PAGE>
2. Administration
(a) The Plan shall be administered by the Trust's Executive
Compensation and Human Resources Committee (the "Committee"), which shall
consist solely of not fewer than two non-employee trustees (directors) of the
Trust (within the meaning of Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor thereto) who
are also outside trustees (directors) (within the meaning of Treas. Reg.
ss.1.162-27(e)(3), or any successor thereto) of the Trust, and who shall be
appointed by, and shall serve at the pleasure of, the Trust's Board of
Trustees (the "Board"). Each member of the Committee, while serving as such,
shall be deemed to be acting in his capacity as a trustee of the Trust.
(b) The Committee shall have full authority, subject to the
terms of the Plan, to select the Key Employees to be granted Options under the
Plan, to grant Options on behalf of the Trust, and to set the date of grant
and the other terms of such Options. The Committee may correct any defect,
supply any omission, and reconcile any inconsistency in the Plan and in any
Option granted hereunder in the manner and to the extent it deems desirable.
The Committee may also, in its discretion but with the written consent of the
Key Employee, revise previously granted Options (including extending the
exercise date of any outstanding Option held by a Key Employee with at least
15 years of service who is retiring from the Trust), adjust the price of an
Option, or cancel an Option and grant a new Option to replace the cancelled
Option. The Committee also shall have the authority to establish such rules
and regulations, not inconsistent with the provisions of the Plan, for the
proper administration of the Plan, to amend, modify, or rescind any such rules
and regulations, and to make such determinations and interpretations under, or
in connection with, the Plan, as it deems necessary or advisable. All such
rules, regulations, determinations, and interpretations shall be binding and
conclusive upon the Trust, its shareholders, and all Key Employees, upon their
respective legal representatives, beneficiary, successors, and assigns, and
upon all other persons claiming under or through any of them.
No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted under it.
3. Eligibility. The class of employees who shall be eligible to
receive Options under the Plan shall be the Key Employees (including any
trustees who also are officers or key employees) of the Trust. More than one
Option may be granted to a Key Employee under the Plan. A Key Employee who has
been granted an Option under the Plan shall hereinafter be referred to as an
"Optionee."
4. Stock. Options may be granted under the Plan to purchase up to a
maximum of 400,000 shares of Common Stock, par value $1.00 per share;
provided, however, that no Key Employee shall receive Options for more than
50,000 shares of the Trust's Common Stock in any single calendar year.
However, both limits in the preceding sentence shall be subject to adjustment
as hereinafter provided. Shares issuable under the Plan may be
-2-
<PAGE>
authorized but unissued shares or reacquired shares, and the Trust may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.
If any Option granted under the Plan expires or otherwise
terminates for any reason whatsoever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares
subject to the unexercised portion of the Option shall continue to be
available for the granting of Options under the Plan as fully as if the shares
had never been subject to an Option. However, (i) if an Option is cancelled,
the shares of Common Stock covered by the cancelled Option shall be counted
against the maximum number of shares specified above for which Options may be
granted to a single Key Employee, and (ii) if the exercise price of an Option
is reduced after the date of grant, the transaction shall be treated as a
cancellation of the original Option and the grant of a new Option for purposes
of such maximum.
5. Granting of Options. From time to time until the expiration or
earlier suspension or discontinuance of the Plan, the Committee may, on behalf
of the Trust, grant to Key Employees under the Plan such Options as it
determines are warranted; provided, however, that grants of ISOs and NQSOs
shall be separate and not in tandem. In making any determination as to whether
a Key Employee shall be granted an Option, the type of Option to be granted,
the number of shares to be covered by the Option, and other terms of the
Option, the Committee shall take into account the duties of the Key Employee,
his present and potential contributions to the success of the Trust, the tax
implications to the Trust and the Key Employee of any Option granted, and such
other factors as the Committee shall deem relevant in accomplishing the
purposes of the Plan. Moreover, the Committee may provide in the Option that
said Option may be exercised only if certain conditions, as determined by the
Committee, are fulfilled.
6. Annual Limit
(a) ISOs. The aggregate fair market value (determined under
Section 7(b) hereof as of the date the ISO is granted) of the Common Stock
with respect to which ISOs are exercisable for the first time by a Key
Employee during any calendar year (counting ISOs under this Plan and incentive
stock options under any other stock option plan of the Trust or a Related
Corporation) shall not exceed $100,000. If an Option intended as an ISO is
granted to a Key Employee and the Option may not be treated in whole or in
part as an ISO pursuant to the $100,000 limitation, the Option shall be
treated as an ISO to the extent it may be so treated under the limitation and
as an NQSO as to the remainder. For purposes of determining whether an ISO
would cause the limitation to be exceeded, ISOs shall be taken into account in
the order granted.
(b) NQSOs. The annual limits set forth above for ISOs shall
not apply to NQSOs.
-3-
<PAGE>
7. Terms and Conditions of Options. Options granted pursuant to the
Plan shall include expressly or by reference the following terms and
conditions, as well as such other provisions not inconsistent with the
provisions of the Plan (and, for ISOs granted under the Plan, the provisions
of Section 422(b) of the Code), as the Committee shall deem desirable --
(a) Number of Shares. The Option shall state the number of
shares of Common Stock to which the Option pertains.
(b) Price. The Option shall state the Option price which
shall be determined and fixed by the Committee in its discretion but, in the
case of an ISO, shall not be less than the higher of 100 percent (110 percent
in the case of a more-than-10-percent shareholder, as provided in subsection
(j) below) of the fair market value of the optioned shares of Common Stock on
the date the ISO is granted, or the par value thereof, and, in the case of an
NQSO, shall not be less than the higher of 100 percent of the fair market
value of the optioned shares of Common Stock on the date the NQSO is granted,
or the par value thereof.
The fair market value of a share of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be --
(i) if there are sales of Common Stock on a
registered securities exchange or in an over-the-counter market on
the date of grant, then the mean between the highest and lowest
quoted selling price on the date of grant; or
(ii) if there are no such sales of Common Stock on
the date of grant but there are such sales on dates within a
reasonable period both before and after the date of grant, then the
weighted average of the means between the highest and lowest selling
price on the nearest date before and the nearest date after the date
of grant; or
(iii) if actual sales are not available during a
reasonable period beginning before and ending after the date of
grant, then the mean between the bid and asked price on the date of
grant as reported by the National Quotation Bureau; or
(iv) if (i) through (iii) are not applicable, such
other method of determining fair market value as shall be authorized
by the Code, or the rules or regulations thereunder, and adopted by
the Committee.
Where the fair market value of the optioned shares of Common Stock is
determined under (ii) above, the average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant shall be weighted inversely by the respective numbers of trading days
between the selling dates and the date of grant (i.e, the valuation date), in
accordance with Treas. Reg. ss. 20.2031-2(b)(1), or any successor thereto.
-4-
<PAGE>
(c) Term
(1) ISOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 9 hereof, the term of each
ISO shall be not more than 10 years (five years in the case of a
more-than-10-percent shareholder, as discussed in subsection (j) below) from the
date of grant.
(2) NQSOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 9 hereof, the term of each
NQSO shall be not more than 10 years from the date of grant.
(d) Exercise. Options shall be exercisable in such
installments and on such dates as the Committee may specify; provided that (i)
in the case of new Options granted to an Optionee to replace options (whether
granted under the Plan or otherwise) held by the Optionee or in the case of
Options repriced by the Committee, the new or repriced Options may be made
exercisable, if so determined by the Committee, in its discretion, at the
earliest date the original Options were exercisable, but not earlier than
three months from the date of grant of the new Options or the repricing of the
original Options; and (ii) the Committee may accelerate the exercise date
and/or extend the exercise period of any outstanding Options, in its
discretion, if it deems such acceleration or extension to be desirable.
Any exercisable Options may be exercised at any time up to
the expiration or termination of the Option. Exercisable Options may be
exercised, in whole or in part and from time to time, by giving written notice
of exercise to the Trust at its principal office, specifying the number of
shares to be purchased and accompanied by payment in full of the aggregate
Option exercise price for such shares. Only full shares shall be issued under
the Plan, and any fractional share which might otherwise be issuable upon
exercise of an Option granted hereunder shall be forfeited.
The Option price shall be payable in the case of an ISO, if
the Committee in its discretion causes the Option Agreement so to provide, and
in the case of an NQSO, if the Committee in its discretion so determines at or
prior to the time of exercise --
(1) in cash or its equivalent;
(2) in shares of Common Stock previously acquired by
the Optionee; provided that (i) if such shares of Common Stock were acquired
through the exercise of an ISO and are used to pay the Option price for ISOs,
such shares have been held by the Optionee for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, or (ii) if such shares of Common Stock were acquired through the
exercise of an NQSO and are used to pay the Option price of an ISO, or if such
shares of Common Stock were acquired through the exercise of an ISO or an NQSO
and are used to pay the Option price of an NQSO, such shares have been held by
the Optionee for a period of more than one year on the date of exercise;
-5-
<PAGE>
(3) by delivering a properly executed notice of
exercise of the Option to the Trust and a broker, with irrevocable instructions
to the broker promptly to deliver to the Trust the amount of sale or loan
proceeds necessary to pay the exercise price of the Option;
(4) if the Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or at
or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, (i) the Trust will loan the Optionee the money required
to pay the exercise price of the Option; (ii) any such loan to an Optionee shall
be made only at the time the Option is exercised; and (iii) the loan will be
made on the Optionee's personal, negotiable, demand promissory note, bearing
interest at the lowest rate which will avoid imputation of interest under
Section 7872 of the Code, and including such other terms as the Committee may
prescribe; or
(5) in any combination of paragraphs (1), (2), (3),
and (4) above.
In the event the Option price is paid, in whole or in part,
with shares of Common Stock, the portion of the Option price so paid shall be
equal to the aggregate fair market value (determined under subsection (b)
above, but as of the date of exercise of the Option, rather than the date of
grant) of the Common Stock so surrendered in payment of the Option price.
(e) Termination of Employment. If an Optionee's employment
by the Trust is terminated by either party prior to the expiration date fixed
for his Option for any reason other than retirement, death, disability, change
in control, cause, or employment with a competitor, such Option may be
exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date of such termination, or to any
greater extent permitted by the Committee, by the Optionee at any time prior
to the earlier of (i) the expiration date specified in such Option, or (ii) an
accelerated expiration date determined by the Committee, in its discretion,
and set forth in the Option Agreement; except that, subject to Section 9
hereof, such accelerated expiration date shall not be earlier than the date of
the Optionee's termination of employment, and in the case of ISOs, such
accelerated expiration date shall not be later than three months after such
termination of employment.
(f) Retirement or Disability. If an Optionee attains the age
which the Trust may from time to time establish as the retirement age for any
class of its employees or becomes disabled (within the meaning of Section
22(e)(3) of the Code) during his employment and, prior to the expiration date
fixed for his Option, his employment is terminated as a consequence of such
retirement or disability, such Option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, and set forth in the
Option Agreement; except that, subject to
-6-
<PAGE>
Section 9 hereof, such accelerated termination date shall not be earlier than
the date of the Optionee's termination of employment by reason of retirement
or disability, and in the case of ISOs, such accelerated termination date
shall not be later than three months after such termination of employment. In
the event of the Optionee's legal disability, such Option may be exercised by
the Optionee's legal representative.
(g) Death. If an Optionee dies during his employment, and
prior to the expiration date fixed for his Option, or if an Optionee whose
employment is terminated for any reason, dies following his termination of
employment but prior to the earliest of (i) the expiration date fixed for his
Option, (ii) the expiration of the period determined under subsections (e) and
(f) above, or (iii) in the case of an ISO, three months following termination
of employment, such Option may be exercised, to the extent of the number of
shares with respect to which the Optionee could have exercised it on the date
of his death, or to any greater extent permitted by the Committee, by the
Optionee's estate, personal representative, or beneficiary who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee. Such post-death exercise may occur at any time prior to
the earlier of (i) the expiration date specified in such Option or (ii) an
accelerated termination date determined by the Committee, in its discretion,
and set forth in the Option Agreement; except that, subject to Section 9
hereof, such accelerated termination date shall not be earlier than one year,
nor later than three years, after the date of death.
(h) Non-Transferability; Registration. No ISO and (except as
otherwise provided in any Option Agreement) no NQSO shall be assignable or
transferable by the Optionee other than by will or by the laws of descent and
distribution, and (subject to the preceding clause) during the lifetime of the
Optionee, shall be exercisable only by him or by his guardian or legal
representative. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or certificates
shall be registered in the name of the Optionee and the Optionee's spouse,
jointly, with right of survivorship.
(i) Rights as a Shareholder. An Optionee shall have no
rights as a shareholder with respect to any shares covered by his Option until
the issuance of a stock certificate to him for such shares.
(j) Ten Percent Shareholder. If the Optionee owns more than
10 percent of the total combined voting power of all shares of stock of the
Trust at the time an ISO is granted to him, the Option price for the ISO shall
be not less than 110 percent of the fair market value (as determined under
subsection (b) above) of the optioned shares of Common Stock on the date the
ISO is granted, and such ISO, by its terms, shall not be exercisable after the
expiration of five years from the date the ISO is granted. The conditions set
forth in this subsection shall not apply to NQSOs.
(k) Listing and Registration of Shares. Each Option shall be
subject to the requirement that, if at any time the Committee shall determine,
in its discretion, that the
-7-
<PAGE>
listing, registration, or qualification of the shares of Common Stock covered
thereby upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
Option or the purchase of shares of Common Stock thereunder, or that action by
the Trust or by the Optionee should be taken in order to obtain an exemption
from any such requirement, no such Option may be exercised, in whole or in
part, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Optionee or his legal representative or beneficiary may also
be required to give satisfactory assurance that shares purchased upon exercise
of an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.
(l) Withholding and Use of Shares to Satisfy Tax
Obligations. The obligation of the Trust to deliver shares of Common Stock
upon the exercise of any Option (or cash in lieu thereof) shall be subject to
applicable federal, state, and local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal tax law, the Committee, in its discretion,
may permit or require the Optionee to satisfy the federal withholding tax, in
whole or in part, by electing to have the Trust withhold shares of Common
Stock subject to the exercise (or by returning previously acquired shares of
Common Stock to the Trust). The Trust may not withhold shares in excess of the
number necessary to satisfy the minimum federal income tax withholding
requirements. Shares of Common Stock shall be valued, for purposes of this
subsection, at their fair market value under subsection (b) above, but as of
the date the amount attributable to the exercise of the Option is includable
in income by the Optionee under Section 83 of the Code (the "Determination
Date"). If shares of Common Stock acquired by the exercise of an ISO are used
to satisfy the withholding requirement described above, such shares of Common
Stock must have been held by the Optionee for a period of not less than the
holding period described in Section 422(a)(1) of the Code as of the
Determination Date.
The Committee shall adopt such withholding rules as it deems
necessary to carry out the provisions of this subsection.
(m) Loans. If an Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or
at or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, the Trust will loan the Optionee the money required to
satisfy any regular income tax obligations (as opposed to alternative minimum
tax obligations) resulting from the exercise of any Options. Any loan or loans
to an Optionee shall be made only at the time any such tax resulting from such
exercise is due. The Committee, in its discretion, may require an affidavit
from the Optionee specifying the amount of the tax required to be paid and the
date when such tax must be paid. The loan will be made on the Optionee's
personal, negotiable, demand promissory note, bearing
-8-
<PAGE>
interest at the lowest rate which will avoid imputation of interest under
Section 7872 of the Code, and including such other terms as the Committee may
prescribe.
8. Forfeiture. If the employment of an Optionee is terminated for
"Cause" (as defined below) or the Optionee terminates his employment and
commences working for a "Competitor" (as defined below), his right under any
then outstanding Option shall terminate at the time of such termination of
employment. As used in this Section, in the case of any Optionee not subject
to a written employment agreement, "Cause" shall mean any willful or
intentional act having the effect of injuring the reputation, business, or
business relationships of the Trust, or any repeated or continuous failure,
neglect, or refusal to perform in a satisfactory manner duties assigned to
such Optionee. In the case of an Optionee subject to a written employment
agreement, "Cause" shall mean any action giving the Trust the right to
terminate such person's employment agreement for Cause. "Competitor" shall
mean any person or entity other than the Trust engaged in a business
competitive (in the good faith judgment of the Committee) with that of the
Trust.
9. Option Agreements -- Other Provisions. Options granted under the
Plan shall be evidenced by written documents ("Option Agreements") in such
form as the Committee shall from time to time approve, and containing such
provisions not inconsistent with the provisions of the Plan (and, for ISOs
granted pursuant to the Plan, not inconsistent with Section 422(b) of the
Code), as the Committee shall deem advisable. The Option Agreements shall
specify whether the Option is an ISO or NQSO. Each Optionee shall enter into,
and be bound by, an Option Agreement as soon as practicable after the grant of
an Option.
10. Capital Adjustments. The number of shares which may be issued
under the Plan, and the maximum number of shares with respect to which Options
may be granted to any Key Employee under the Plan, both as stated in Section 4
hereof, and the number of shares issuable upon exercise of outstanding Options
under the Plan (as well as the Option price per share under such outstanding
Options) shall, subject to the provisions of Section 424(a) of the Code, be
adjusted, as may be deemed appropriate by the Committee, to reflect any stock
dividend, stock split, share combination, or similar change in the
capitalization of the Trust. In the event any such change in capitalization
cannot be reflected in a straight mathematical adjustment of the number of
shares issuable upon the exercise of outstanding Options (and a straight
mathematical adjustment of the exercise price thereof), the Committee shall
make such adjustments as are appropriate to reflect most nearly such straight
mathematical adjustment. Such adjustments shall be made only as necessary to
maintain the proportionate interest of Optionees, and preserve, without
exceeding, the value of Options.
11. Certain Corporate Transactions. In the event of a corporate
transaction (as that term is described in Section 424(a) of the Code and the
Treasury Regulations issued thereunder as, for example, a merger,
consolidation, acquisition of property or stock, separation, reorganization,
or liquidation), each outstanding Option shall be assumed by the surviving or
successor corporation; provided, however, that, in the event of a proposed
corporate transaction, the Committee may terminate all or a portion of the
outstanding
-9-
<PAGE>
Options if it determines that such termination is in the best interests of the
Trust. If the Committee decides to terminate outstanding Options, the
Committee shall give each Key Employee holding an Option to be terminated not
fewer than seven days' notice prior to any such termination, and any Option
which is to be so terminated may be exercised (if and only to the extent that
it is then exercisable) up to, and including the date immediately preceding
such termination. Further, as provided in Section 7(d) hereof, the Committee,
in its discretion, may accelerate, in whole or in part, the date on which any
or all Options become exercisable.
The Committee also may, in its discretion, change the terms
of any outstanding Option to reflect any such corporate transaction, provided
that, in the case of ISOs, such change would not constitute a "modification"
under Section 424(h) of the Code, unless the Optionee consents to the change.
12. Exercise Upon Change in Control
(a) Notwithstanding any other provision of this Plan, all
outstanding Options shall become fully vested and exercisable upon a Change in
Control.
(b) "Change in Control" shall mean:
(1) The acquisition by an individual, entity, or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30 percent or more of the combined voting
power of the then outstanding voting securities of the Trust entitled to vote
generally in the election of trustees (the "Outstanding Shares"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Trust, (ii) any acquisition by
the Trust, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Trust or any corporation controlled by the Trust,
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of paragraph (3) below, or (v) any acquisition
by any Person entitled to file Form 13G under the Exchange Act with respect to
such acquisition; or
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a trustee subsequent to the date hereof whose appointment, election, or
nomination for election by the Trust's shareholder, was approved by a vote of at
least a majority of the trustees then comprising the Incumbent Board (other than
an appointment, election, or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the trustees of the Trust, as such terms are
used in Rule 14a-1 promulgated under the Exchange Act) shall be, for purposes of
the Plan, considered as though such person were a Member of the Incumbent Board;
or
-10-
<PAGE>
(3) approval by the shareholders of the Trust of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Trust (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners of the
Outstanding Shares immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60 percent of, respectively, the then
outstanding shares of stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
trustees, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Trust or all or substantially all of the Trust's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Shares, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Trust or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 30 percent
or more of, respectively, the then outstanding shares of stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of trustees or directors
of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(4) approval by the shareholders of the Trust of a
complete liquidation or dissolution of the Trust.
13. Amendment or Termination of the Plan
(a) In General. The Board, pursuant to a written resolution,
from time to time may suspend or terminate the Plan or amend it, and the
Committee may amend any outstanding Options in any respect whatsoever; except
that, without the approval of the shareholders (given in the manner set forth
in subsection (b) below) --
(1) any amendment which would --
(A) change the class of employees eligible
to participate in the Plan with respect to ISOs;
(B) except as permitted under Section 9
hereof, increase the maximum number of shares of Common Stock with respect to
which ISOs may be granted under the Plan; or
(C) extend the duration of the Plan under
Section 19 hereof with respect to any ISOs granted hereunder.
-11-
<PAGE>
(2) No amendment requiring shareholder approval
pursuant to Treas. Reg. ss. 1.162-27(e)(4)(vi) or any successor thereto may be
made.
Notwithstanding the foregoing, no such suspension, discontinuance, or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) Manner of Shareholder Approval. The approval of
shareholders must be effected by a majority of the votes cast (including
abstentions, to the extent abstentions are counted as voting under applicable
state law), in a separate vote at a duly held shareholders' meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting on the Plan.
14. Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to be
granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option, and then his rights
shall be only such as are provided by the Option Agreement. Notwithstanding
any provisions of the Plan or the Option Agreement with a Key Employee, the
Trust shall have the right, in its discretion but subject to any employment
contract entered into with the Key Employee, to retire the Key Employee at any
time pursuant to its retirement rules or otherwise to terminate his employment
at any time for any reason whatsoever.
15. Indemnification of Board and Committee. Without limiting any
other rights of indemnification which they may have from the Trust, any
Related Corporation, or TRO, the members of the Board and the members of the
Committee shall be indemnified by the Trust against all costs and expenses
reasonably incurred by them in connection with any claim, action, suit, or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under, or in connection with, the Plan, or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Trust)
or paid by them in satisfaction of a judgment in any such action, suit, or
proceeding, except a judgment based upon a finding of willful misconduct or
recklessness on their part. Upon the making or institution of any such claim,
action, suit, or proceeding, the Board or Committee member shall notify the
Trust in writing, giving the Trust an opportunity, at its own expense, to
handle and defend the same before such Board or Committee member undertakes to
handle it on his own behalf. The provisions of this Section shall not give
members of the Board or the Committee greater rights than they would have
under the Trust's by-laws or Pennsylvania law.
16. Application of Funds. The proceeds received by the Trust from the
sale of Common Stock pursuant to Options granted under the Plan shall be used
for general corporate purposes. Any cash received in payment for shares upon
exercise of an Option shall be added to the general funds of the Trust and
shall be used for its corporate purposes.
-12-
<PAGE>
Any Common Stock received in payment for shares upon exercise of an Option
shall become treasury stock.
17. Shareholder Approval. This Plan was effective on September 17,
1990 (the date the Plan was adopted by the Board). The amendment and
restatement of the Plan shall become effective on July 1, 1997; provided,
however, that if the Plan is not approved by the shareholders, in the manner
described in Section 13(b) hereof, within 12 months before or after the date
the amended and restated Plan is adopted by the Board, all Options granted on
and after July 1, 1997 hereunder shall be null and void and no additional
Options shall be granted hereunder.
18. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon a Key Employee to exercise such Option.
19. Termination of Plan. Unless earlier terminated as provided in the
Plan, the Plan and all authority granted hereunder shall terminate absolutely
at 12:00 midnight on September 16, 2000, which date is within 10 years after
the date the Plan was adopted by the Board, and no Options hereunder shall be
granted thereafter. Nothing contained in this Section, however, shall
terminate or affect the continued existence of rights created under Options
issued hereunder, and outstanding on the date set forth in the preceding
sentence, which by their terms extend beyond such date.
20. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the
Commonwealth of Pennsylvania shall govern the operation of, and the rights of
Key Employees under, the Plan, and Options granted hereunder.
PHB 46319
071497
-13-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1997 STOCK OPTION PLAN
<PAGE>
Table of Contents
Page
----
1. Purpose....................................................... 2
2. Administration................................................ 2
3. Eligibility................................................... 3
4. Stock......................................................... 3
5. Granting of Awards............................................ 4
6. Annual Limit.................................................. 4
7. Terms and Conditions of Options............................... 5
8. Forfeiture.................................................... 10
9. Capital Adjustments........................................... 11
10. Certain Corporate Transactions................................ 11
11. Exercise Upon Change in Control............................... 12
12. Amendment or Termination of the Plan.......................... 13
13. Rights........................................................ 14
14. Indemnification of Board and Committee........................ 14
15. Application of Funds.......................................... 14
16. Shareholder Approval.......................................... 15
17. No Obligation Regarding Awards................................ 15
18. Termination of Plan........................................... 15
19. Governing Law................................................. 15
-1-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
1997 STOCK OPTION PLAN
WHEREAS, the Pennsylvania Real Estate Investment Trust (the
"Trust") desires to award incentive and nonqualified stock options to certain
of the officers and other key employees of the Trust and of PREIT-RUBIN, Inc.
("PREIT-RUBIN");
NOW, THEREFORE, the Pennsylvania Real Estate Investment
Trust 1997 Stock Option Plan (the "Plan") is hereby adopted under the
following terms and conditions:
1. Purpose. The Plan is intended to provide a means whereby the Trust
may grant incentive stock options and nonqualified stock options
(collectively, the "Options"), to purchase common shares of the Trust ("Common
Stock"), to officers and other key employees of the Trust and of PREIT-RUBIN
("Key Employees"), a corporation the majority of the equity (but not the
voting power) of which is indirectly owned by the Trust. Thereby, the Trust
expects to attract and retain such Key Employees and motivate them to exercise
their best efforts on behalf of the Trust, any Related Corporation, and
PREIT-RUBIN. For purposes of the Plan, a "Related Corporation" shall mean
either a "subsidiary corporation" of the Trust, as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code"), or the "parent
corporation" of the Trust, as defined in Section 424(e) of the Code. The term
"Related Corporation" shall not include PREIT-RUBIN.
As used in the Plan, (i) the term "ISO" shall mean an option
which, at the time such option is granted, qualifies as an incentive stock
option within the meaning of Section 422 of the Code and is designated as an
ISO in the "Option Agreement" (as defined in Section 7(n) hereof); and (ii)
the term "NQSO" shall mean an option which, at the time such option is
granted, does not qualify as an ISO, and is designated as a nonqualified stock
option in the Option Agreement.
2. Administration
(a) The Plan shall be administered by the Trust's Executive
Compensation and Human Resources Committee (the "Committee"), which shall
consist solely of not fewer than two non-employee trustees (directors) of the
Trust (within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any successor thereto) who are also
-2-
<PAGE>
outside trustees (directors) (within the meaning of Treas. Reg.
ss.1.162-27(e)(3), or any successor thereto) of the Trust, and who shall be
appointed by, and shall serve at the pleasure of, the Trust's Board of Trustees
(the "Board"). Each member of the Committee, while serving as such, shall be
deemed to be acting in his capacity as a director of the Trust.
(b) The Committee shall have full authority, subject to the
terms of the Plan, to select the Key Employees to be granted Options (also
referred to as "Awards") under the Plan, to grant Awards on behalf of the Trust,
and to set the date of grant and the other terms of such Awards. The Committee
may correct any defect, supply any omission, and reconcile any inconsistency in
the Plan and in any Award granted hereunder in the manner and to the extent it
deems desirable. The Committee may also, in its discretion but with the written
consent of the Key Employee, revise previously granted Options, adjust the price
of an Option, or cancel an Option and grant a new Option to replace the
cancelled Option. The Committee also shall have the authority to establish such
rules and regulations, not inconsistent with the provisions of the Plan, for the
proper administration of the Plan, to amend, modify, or rescind any such rules
and regulations, and to make such determinations and interpretations under, or
in connection with, the Plan, as it deems necessary or advisable. All such
rules, regulations, determinations, and interpretations shall be binding and
conclusive upon the Trust and PREIT-RUBIN, their shareholders, and all Key
Employees, upon their respective legal representatives, beneficiaries,
successors, and assigns, and upon all other persons claiming under or through
any of them.
No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted under it.
3. Eligibility. The class of employees who shall be eligible to receive
Awards under the Plan shall be the Key Employees (including any trustees who
also are officers or key employees). More than one Award may be granted to a Key
Employee under the Plan. A Key Employee who has been granted an Option under the
Plan shall be referred to as an "Optionee."
4. Stock. Options may be granted under the Plan to purchase up to
560,000 shares of Common Stock, par value $1.00 per share. However, no Key
Employee shall receive Options for more than 250,000 shares of the Trust's
Common Stock in any single calendar year, subject to adjustment as hereinafter
provided. Shares issuable under the Plan may be authorized but unissued shares
or reacquired shares, and the Trust may purchase shares required for this
purpose, from time to time, if it deems such purchase to be advisable.
-3-
<PAGE>
If any Option granted under the Plan expires or otherwise
terminates for any reason whatsoever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares
subject to the unexercised portion of the Option shall continue to be
available for the granting of Options under the Plan as fully as if the shares
had never been subject to an Option. However, (i) if an Option is cancelled,
the shares of Common Stock covered by the cancelled Option shall be counted
against the maximum number of shares specified above for which Options may be
granted to a single Key Employee, and (ii) if the exercise price of an Option
is reduced after the date of grant, the transaction shall be treated as a
cancellation of the original Option and the grant of a new Option for purposes
of such maximum.
5. Granting of Awards. From time to time until the expiration or
earlier suspension or discontinuance of the Plan, the Committee may, on behalf
of the Trust, grant to Key Employees under the Plan such Awards as it determines
are warranted; provided, however, that (i) ISOs shall not be granted to Key
Employees who are not employed by the Trust or a Related Corporation, and (ii)
grants of ISOs and NQSOs shall be separate and not in tandem. In making any
determination as to whether a Key Employee shall be granted an Award, the type
of Award to be granted, the number of shares to be covered by the Award, and
other terms of the Award, the Committee shall take into account the duties of
the Key Employee, his present and potential contributions to the success of the
Trust and/or of PREIT-RUBIN, the tax implications to the Trust and the Key
Employee of any Award granted, and such other factors as the Committee shall
deem relevant in accomplishing the purposes of the Plan.
6. Annual Limit
(a) ISOs. The aggregate fair market value (determined under
Section 7(b) hereof as of the date the ISO is granted) of the Common Stock with
respect to which ISOs are exercisable for the first time by a Key Employee
during any calendar year (counting ISOs under this Plan and incentive stock
options under any other stock option plan of the Trust or a Related Corporation)
shall not exceed $100,000. If an Option intended as an ISO is granted to a Key
Employee and the Option may not be treated in whole or in part as an ISO
pursuant to the $100,000 limitation, the Option shall be treated as an ISO to
the extent it may be so treated under the limitation and as an NQSO as to the
remainder. For purposes of determining whether an ISO would cause the limitation
to be exceeded, ISOs shall be taken into account in the order granted.
(b) NQSOs. The annual limits set forth above for ISOs shall
not apply to NQSOs.
-4-
<PAGE>
7. Terms and Conditions of Options. Options granted pursuant to the
Plan shall include expressly or by reference the following terms and conditions,
as well as such other provisions not inconsistent with the provisions of the
Plan (and, for ISOs granted under the Plan, the provisions of Section 422(b) of
the Code), as the Committee shall deem desirable --
(a) Number of Shares. The Option shall state the number of
shares of Common Stock to which the Option pertains.
(b) Price. The Option shall state the Option price which shall
be determined and fixed by the Committee in its discretion but, in the case of
an ISO, shall not be less than the higher of 100 percent (110 percent in the
case of a more-than-10-percent shareholder, as provided in subsection (j) below)
of the fair market value of the optioned shares of Common Stock on the date the
ISO is granted, or the par value thereof, and, in the case of an NQSO, shall not
be less than the higher of 100 percent of the fair market value of the optioned
shares of Common Stock on the date the NQSO is granted, or the par value
thereof.
The fair market value of a share of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be --
(i) if there are sales of Common Stock on a
registered securities exchange or in an over-the-counter market on
the date of grant, then the mean between the highest and lowest
quoted selling price on the date of grant; or
(ii) if there are no such sales of Common Stock on
the date of grant but there are such sales on dates within a
reasonable period both before and after the date of grant, then the
weighted average of the means between the highest and lowest selling
price on the nearest date before and the nearest date after the date
of grant; or
(iii) if actual sales are not available during a
reasonable period beginning before and ending after the date of
grant, then the mean between the bid and asked price on the date of
grant as reported by the National Quotation Bureau; or
(iv) if (i) through (iii) are not applicable, such
other method of determining fair market value as shall be authorized
by the Code, or the rules or regulations thereunder, and adopted by
the Committee.
Where the fair market value of the optioned shares of Common Stock is
determined under (ii) above, the average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant
-5-
<PAGE>
shall be weighted inversely by the respective numbers of trading days between
the selling dates and the date of grant (i.e, the valuation date), in accordance
with Treas. Reg. ss. 20.2031-2(b)(1), or any successor thereto.
(c) Term
(1) ISOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 8 hereof, the term of each
ISO shall be not more than 10 years (five years in the case of a
more-than-10-percent shareholder, as discussed in subsection (j) below) from the
date of grant.
(2) NQSOs. Subject to earlier termination as provided
in subsections (e), (f), and (g) below and in Section 8 hereof, the term of each
NQSO shall be not more than 10 years from the date of grant.
(d) Exercise. Options shall be exercisable in such
installments and on such dates as the Committee may specify; provided that (i)
in the case of new Options granted to an Optionee to replace options (whether
granted under the Plan or otherwise) held by the Optionee or in the case of
Options repriced by the Committee, the new or repriced Options may be made
exercisable, if so determined by the Committee, in its discretion, at the
earliest date the original Options were exercisable, but not earlier than three
months from the date of grant of the new Options or the repricing of the
original Options; and (ii) the Committee may accelerate the exercise date of any
outstanding Options, in its discretion, if it deems such acceleration to be
desirable.
Any exercisable Options may be exercised at any time up to
the expiration or termination of the Option. Exercisable Options may be
exercised, in whole or in part and from time to time, by giving written notice
of exercise to the Trust at its principal office, specifying the number of
shares to be purchased and accompanied by payment in full of the aggregate
Option exercise price for such shares. Only full shares shall be issued under
the Plan, and any fractional share which might otherwise be issuable upon
exercise of an Option granted hereunder shall be forfeited.
The Option price shall be payable in the case of an ISO, if
the Committee in its discretion causes the Option Agreement so to provide, and
in the case of an NQSO, if the Committee in its discretion so determines at or
prior to the time of exercise --
(1) in cash or its equivalent;
(2) in shares of Common Stock previously acquired by
the Optionee; provided that (i) if such shares of Common Stock were acquired
through
-6-
<PAGE>
the exercise of an ISO and are used to pay the Option price for ISOs, such
shares have been held by the Optionee for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, or (ii) if such shares of Common Stock were acquired through the
exercise of an NQSO and are used to pay the Option price of an ISO, or if such
shares of Common Stock were acquired through the exercise of an ISO or an NQSO
and are used to pay the Option price of an NQSO, such shares have been held by
the Optionee for a period of more than one year on the date of exercise;
(3) by delivering a properly executed notice of
exercise of the Option to the Trust and a broker, with irrevocable instructions
to the broker promptly to deliver to the Trust the amount of sale or loan
proceeds necessary to pay the exercise price of the Option;
(4) if the Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or at
or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, (i) the Trust will loan the Optionee the money required
to pay the exercise price of the Option; (ii) any such loan to an Optionee shall
be made only at the time the Option is exercised; and (iii) the loan will be
made on the Optionee's personal, negotiable, demand promissory note, bearing
interest at the lowest rate which will avoid imputation of interest under
Section 7872 of the Code, and including such other terms as the Committee may
prescribe; or
(5) in any combination of subsections (1), (2), (3),
and (4) above.
In the event the Option price is paid, in whole or in part,
with shares of Common Stock, the portion of the Option price so paid shall be
equal to the aggregate fair market value (determined under subsection (b)
above, but as of the date of exercise of the Option, rather than the date of
grant) of the Common Stock so surrendered in payment of the Option price.
(e) Termination of Employment. If an Optionee's employment by
the Trust or PREIT-RUBIN is terminated by either party prior to the expiration
date fixed for his Option for any reason other than retirement, death,
disability, change in control, cause, or employment with a competitor, such
Option may be exercised, to the extent of the number of shares with respect to
which the Optionee could have exercised it on the date of such termination, or
to any greater extent permitted by the Committee, by the Optionee at any time
prior to the earlier of (i) the expiration date specified in such Option, or
(ii) an accelerated expiration date determined by the Committee, in its
discretion, and set forth in the Option Agreement; except that, subject to
Section 8 hereof, such accelerated expiration date shall not be earlier than the
date of the Optionee's termination of
-7-
<PAGE>
employment, and in the case of ISOs, such accelerated expiration date shall
not be later than three months after such termination of employment.
(f) Retirement or Disability. If an Optionee attains the age
which the Trust or PREIT-RUBIN may from time to time establish as the retirement
age for any class of its employees or becomes disabled (within the meaning of
Section 22(e)(3) of the Code) during his employment and, prior to the expiration
date fixed for his Option, his employment is terminated as a consequence of such
retirement or disability, such Option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, and set forth in the Option
Agreement; except that, subject to Section 8 hereof, such accelerated
termination date shall not be earlier than the date of the Optionee's
termination of employment by reason of retirement or disability, and in the case
of ISOs, such accelerated termination date shall not be later than three months
after such termination of employment. In the event of the Optionee's legal
disability, such Option may be exercised by the Optionee's legal representative.
(g) Death. If an Optionee dies during his employment, and
prior to the expiration date fixed for his Option, or if an Optionee whose
employment is terminated for any reason, dies following his termination of
employment but prior to the earliest of (i) the expiration date fixed for his
Option, (ii) the expiration of the period determined under subsections (e) and
(f) above, or (iii) in the case of an ISO, three months following termination of
employment, such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date of his
death, or to any greater extent permitted by the Committee, by the Optionee's
estate, personal representative, or beneficiary who acquired the right to
exercise such Option by bequest or inheritance or by reason of the death of the
Optionee. Such post-death exercise may occur at any time prior to the earlier of
(i) the expiration date specified in such Option or (ii) an accelerated
termination date determined by the Committee, in its discretion, and set forth
in the Option Agreement; except that, subject to Section 8 hereof, such
accelerated termination date shall not be earlier than one year, nor later than
three years, after the date of death.
(h) Non-Transferability; Registration. No ISO and (except as
otherwise provided in any Option Agreement) no NQSO shall be assignable or
transferable by the Optionee other than by will or by the laws of descent and
distribution, and (subject to the preceding clause) during the lifetime of the
Optionee, shall be exercisable only by him or by his guardian or legal
representative. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or certificates
shall be
-8-
<PAGE>
registered in the name of the Optionee and the Optionee's spouse, jointly, with
right of survivorship.
(i) Rights as a Shareholder. An Optionee shall have no rights
as a shareholder with respect to any shares covered by his Option until the
issuance of a stock certificate to him for such shares.
(j) Ten Percent Shareholder. If the Optionee owns more than 10
percent of the total combined voting power of all shares of stock of the Trust
at the time an ISO is granted to him, the Option price for the ISO shall be not
less than 110 percent of the fair market value (as determined under subsection
(b) above) of the optioned shares of Common Stock on the date the ISO is
granted, and such ISO, by its terms, shall not be exercisable after the
expiration of five years from the date the ISO is granted. The conditions set
forth in this subsection shall not apply to NQSOs.
(k) Listing and Registration of Shares. Each Option shall be
subject to the requirement that, if at any time the Committee shall determine,
in its discretion, that the listing, registration, or qualification of the
shares of Common Stock covered thereby upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Option or the purchase of shares of Common Stock thereunder, or
that action by the Trust or by the Optionee should be taken in order to obtain
an exemption from any such requirement, no such Option may be exercised, in
whole or in part, unless and until such listing, registration, qualification,
consent, approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Optionee or his legal representative or beneficiary may also be
required to give satisfactory assurance that shares purchased upon exercise of
an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.
(l) Withholding and Use of Shares to Satisfy Tax Obligations.
The obligation of the Trust to deliver shares of Common Stock upon the exercise
of any Option (or cash in lieu thereof) shall be subject to applicable federal,
state, and local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal tax law, the Committee, in its discretion,
may permit or require the Optionee to satisfy the federal withholding tax, in
whole or in part, by electing to have the Trust withhold shares of Common Stock
subject to the exercise (or by returning previously acquired shares of Common
Stock to the Trust). The Trust may not withhold shares in excess of the number
necessary to
-9-
<PAGE>
satisfy the minimum federal income tax withholding requirements. Shares of
Common Stock shall be valued, for purposes of this subsection, at their fair
market value under subsection (b) above, but as of the date the amount
attributable to the exercise of the Option is includable in income by the
Optionee under Section 83 of the Code (the "Determination Date"). If shares of
Common Stock acquired by the exercise of an ISO are used to satisfy the
withholding requirement described above, such shares of Common Stock must have
been held by the Optionee for a period of not less than the holding period
described in Section 422(a)(1) of the Code as of the Determination Date.
The Committee shall adopt such withholding rules as it deems
necessary to carry out the provisions of this subsection.
(m) Loans. If an Optionee is designated as an "eligible
participant" by the Committee at the date of grant in the case of an ISO, or at
or after the date of grant in the case of an NQSO, and if the Optionee
thereafter so requests, the Trust will loan the Optionee the money required to
satisfy any regular income tax obligations (as opposed to alternative minimum
tax obligations) resulting from the exercise of any Options. Any loan or loans
to an Optionee shall be made only at the time any such tax resulting from such
exercise is due. The Committee, in its discretion, may require an affidavit from
the Optionee specifying the amount of the tax required to be paid and the date
when such tax must be paid. The loan will be made on the Optionee's personal,
negotiable, demand promissory note, bearing interest at the lowest rate which
will avoid imputation of interest under Section 7872 of the Code, and including
such other terms as the Committee may prescribe.
(n) Option Agreements -- Other Provisions. Options granted
under the Plan shall be evidenced by written documents ("Option Agreements") in
such form as the Committee shall from time to time approve, and containing such
provisions not inconsistent with the provisions of the Plan (and, for ISOs
granted pursuant to the Plan, not inconsistent with Section 422(b) of the Code),
as the Committee shall deem advisable. The Option Agreements shall specify
whether the Option is an ISO or NQSO. Each Optionee shall enter into, and be
bound by, an Option Agreement as soon as practicable after the grant of an
Option.
8. Forfeiture. If the employment of an Optionee is terminated for
"Cause" (as defined below) or the Optionee terminates his employment and
commences working for a "Competitor" (as defined below), his right under any
then outstanding Award shall terminate at the time of such termination of
employment. As used in this Section, in the case of any Optionee not subject
to a written employment agreement, "Cause" shall mean any willful or
intentional act having the effect of injuring the reputation, business, or
business relationships of
-10-
<PAGE>
the Trust or PREIT-RUBIN, or any repeated or continuous failure, neglect, or
refusal to perform in a satisfactory manner duties assigned to such Optionee.
In the case of an Optionee subject to a written employment agreement, "Cause"
shall mean any action giving the Trust or PREIT-RUBIN the right to terminate
such person's employment agreement for Cause. "Competitor" shall mean any
person or entity other than the Trust or PREIT-RUBIN engaged -- either before
the Optionee's employment is terminated or within the one-year period after
such termination -- in a business competitive (in the good faith judgment of
the Committee) with that of the Trust or PREIT-RUBIN.
9. Capital Adjustments. The number of shares which may be issued under
the Plan, and the maximum number of shares with respect to which Awards may be
granted to any Key Employee under the Plan, both as stated in Section 4 hereof,
and the number of shares issuable upon exercise or vesting of outstanding Awards
under the Plan (as well as the Option price per share under outstanding Options)
shall, subject to the provisions of Section 424(a) of the Code, be adjusted, as
may be deemed appropriate by the Committee, to reflect any stock dividend, stock
split, share combination, or similar change in the capitalization of the Trust.
In the event any such change in capitalization cannot be reflected in a straight
mathematical adjustment of the number of shares issuable upon the exercise of
outstanding Options (and a straight mathematical adjustment of the exercise
price thereof), the Committee shall make such adjustments as are appropriate to
reflect most nearly such straight mathematical adjustment. Such adjustments
shall be made only as necessary to maintain the proportionate interest of
Optionee, and preserve, without exceeding, the value of Awards.
10. Certain Corporate Transactions. In the event of a corporate
transaction (as that term is described in Section 424(a) of the Code and the
Treasury Regulations issued thereunder as, for example, a merger, consolidation,
acquisition of property or stock, separation, reorganization, or liquidation),
each outstanding Award shall be assumed by the surviving or successor
corporation; provided, however, that, in the event of a proposed corporate
transaction, the Committee may terminate all or a portion of any outstanding
Award if it determines that such termination is in the best interests of the
Trust. If the Committee decides to terminate outstanding Options, the Committee
shall give each Key Employee holding an Option to be terminated not fewer than
seven days' notice prior to any such termination, and any Option which is to be
so terminated may be exercised (if and only to the extent that it is then
exercisable) up to, and including the date immediately preceding such
termination. Further, as provided in Section 7(d) hereof, the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options become exercisable.
The Committee also may, in its discretion, change the terms of
any outstanding Award to reflect any such corporate transaction, provided that,
in the
-11-
<PAGE>
case of ISOs, such change would not constitute a "modification" under Section
424(h) of the Code, unless the Optionee consents to the change.
11. Exercise Upon Change in Control
(a) Notwithstanding any other provision of this Plan, all
outstanding Options shall become fully vested and exercisable upon a Change in
Control.
(b) "Change in Control" shall mean:
(1) The acquisition by an individual, entity, or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30 percent or more of the combined voting
power of the then outstanding voting securities of the Trust entitled to vote
generally in the election of trustees (the "Outstanding Shares"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Trust, (ii) any acquisition by
the Trust, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Trust or any corporation controlled by the Trust,
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of paragraph (3) below, or (v) any acquisition
by any Person entitled to file Form 13G under the Exchange Act with respect to
such acquisition; or
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a trustee subsequent to the date hereof whose appointment, election, or
nomination for election by the Trust's shareholders, was approved by a vote of
at least a majority of the trustees then comprising the Incumbent Board (other
than an appointment, election, or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the trustees of the Trust, as such terms are
used in Rule 14a-1 promulgated under the Exchange Act) shall be, for purposes of
this Plan, considered as though such person were a Member of the Incumbent
Board; or
(3) approval by the shareholders of the Trust of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Trust (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners of the
Outstanding Shares immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60 percent of, respectively, the then
outstanding shares of stock and the combined voting power of the then
outstanding voting securities
-12-
<PAGE>
entitled to vote generally in the election of trustees, as the case may be, of
the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Trust
or all or substantially all of the Trust's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Shares, (ii)
no Person (excluding any employee benefit plan (or related trust) of the Trust
or such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 30 percent or more of, respectively, the then
outstanding shares of stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the members
of the board of trustees or directors of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(4) approval by the shareholders of the Trust of a
complete liquidation or dissolution of the Trust.
12. Amendment or Termination of the Plan
(a) In General. The Board, pursuant to a written resolution,
from time to time may suspend or terminate the Plan or amend it, and the
Committee may amend any outstanding Awards in any respect whatsoever; except
that, without the approval of the shareholders (given in the manner set forth in
subsection (b) below) --
(1) any amendment which would --
(A) change the class of employees eligible
to participate in the Plan with respect to ISOs;
(B) except as permitted under Section 10
hereof, increase the maximum number of shares of Common Stock with respect to
which ISOs may be granted under the Plan; or
(C) extend the duration of the Plan under
Section 18 hereof with respect to any ISOs granted hereunder.
(2) No amendment requiring shareholder
approval pursuant to Treas. Reg. ss. 1.162-27(e)(4)(vi) or any successor thereto
may be made.
-13-
<PAGE>
Notwithstanding the foregoing, no such suspension, discontinuance, or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) Manner of Shareholder Approval. The approval of
shareholders must be effected by a majority of the votes cast (including
abstentions, to the extent abstentions are counted as voting under applicable
state law), in a separate vote at a duly held shareholders' meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting on the Plan.
13. Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to be
granted an Award, or any other right hereunder, unless and until the Committee
shall have granted such individual an Award, and then his rights shall be only
such as are provided by the Option Agreement. Notwithstanding any provisions
of the Plan or the Option Agreement with a Key Employee, the Trust or
PREIT-RUBIN (as applicable) shall have the right, in its discretion but
subject to any employment contract entered into with the Key Employee, to
retire the Key Employee at any time pursuant to its retirement rules or
otherwise to terminate his employment at any time for any reason whatsoever.
14. Indemnification of Board and Committee. Without limiting any
other rights of indemnification which they may have from the Trust, any
Related Corporation, or PREIT-RUBIN, the members of the Board and the members
of the Committee shall be indemnified by the Trust against all costs and
expenses reasonably incurred by them in connection with any claim, action,
suit, or proceeding to which they or any of them may be a party by reason of
any action taken or failure to act under, or in connection with, the Plan, or
any Award granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by legal counsel
selected by the Trust) or paid by them in satisfaction of a judgment in any
such action, suit, or proceeding, except a judgment based upon a finding of
willful misconduct or recklessness on their part. Upon the making or
institution of any such claim, action, suit, or proceeding, the Board or
Committee member shall notify the Trust in writing, giving the Trust an
opportunity, at its own expense, to handle and defend the same before such
Board or Committee member undertakes to handle it on his own behalf. The
provisions of this Section shall not give members of the Board or the
Committee greater rights than they would have under the Trust's by-laws or
Pennsylvania law.
15. Application of Funds. The proceeds received by the Trust from the
sale of Common Stock pursuant to Awards granted under the Plan shall be used for
general corporate purposes. Any cash received in payment for shares upon
exercise of an Option shall be added to the general funds of the Trust and shall
be
-14-
<PAGE>
used for its corporate purposes. Any Common Stock received in payment for
additional Common Stock upon exercise of an Option shall become treasury
stock.
16. Shareholder Approval. This Plan shall become effective on July 8,
1997 (the date the Plan was adopted by the Board); provided, however, that if
the Plan is not approved by the shareholders, in the manner described in Section
12(b) hereof, within 12 months before or after the date the Plan is adopted by
the Board, all ISOs granted hereunder shall be null and void and no additional
ISOs shall be granted hereunder.
17. No Obligation Regarding Awards. The granting of an Award shall
impose no obligation upon a Key Employee to exercise or meet the conditions of
such Award.
18. Termination of Plan. Unless earlier terminated as provided in the
Plan, the Plan and all authority granted hereunder shall terminate absolutely at
12:00 midnight on July 7, 2007 which date is within 10 years after the date the
Plan was adopted by the Board, and no Awards hereunder shall be granted
thereafter. Nothing contained in this Section, however, shall terminate or
affect the continued existence of rights created under Awards issued hereunder,
and outstanding on the date set forth in the preceding sentence, which by their
terms extend beyond such date.
19. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the
Commonwealth of Pennsylvania shall govern the operation of, and the rights of
Key Employees under, the Plan, and Awards granted hereunder.
-15-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 16, 1997 on the statement of revenue and
certain expenses of Magnolia Mall included in the Trust's previously filed
Proxy Statement dated August 27, 1997 and incorporated by reference in this
Current Report on Form 8-K, into the Trust's previously filed Registration
Statements on Form S-3 (File No. 33-61115) and S-8 (File Nos. 33-59771,
33-59773 and 33-59767). It should be noted that we have not audited any
financial statements of Magnolia Mall subsequent to December 31, 1996 or
performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
October 10, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 20, 1997 on the statement of revenue and
certain expenses of North Dartmouth Mall included in the Trust's previously
filed Proxy Statement dated August 27, 1997 and incorporated by reference in
this Current Report on Form 8-K, into the Trust's previously filed
Registration Statements on Form S-3 (File No. 33-61115) and S-8 (File Nos.
33-59771, 33-59773 and 33-59767). It should be noted that we have not audited
any financial statements of North Dartmouth Mall subsequent to December 31,
1996 or performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
October 10, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 23, 1997 on the financial statements of The
Rubin Organization, Inc. and Subsidiary included in the Trust's previously filed
Proxy Statement dated August 27, 1997 and incorporated by reference in this
Current Report on Form 8-K, into the Trust's previously filed Registration
Statements on Form S-3 (File No. 33-61115) and S-8 (File Nos. 33-59771, 33-59773
and 33-59767). It should be noted that we have not audited any financial
statements of The Rubin Organization, Inc. and Subsidiary subsequent to December
31, 1996 or performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
October 10, 1997
<PAGE>
CONSENT AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As independent certified public accountants, we hereby consent to the
incorporation by reference of our report dated June 30, 1997, relating to the
financial statements of OXFORD VALLEY ROAD ASSOCIATES, which appear on Exhibit G
to the definitive Proxy Statement of the Pennsylvania Real Estate Investment
Trust (the "Trust") dated August 27, 1997 and incorporated by reference in this
Current Report on Form 8-K, into the Trust's previously filed Registration
Statements on Form S-3 (File No. 33-61115) and S-8 (File Nos. 33-59771, 33-59773
and 33-59767).
/s/ Zelenkofske Axelrod and Co., Ltd.
------------------------------------------
Jenkintown, Pennsylvania
October 13, 1997
