Exhibit 2.4
CROWN PARTNERSHIP CONTRIBUTION AGREEMENT
----------------------------------------
This CROWN PARTNERSHIP CONTRIBUTION AGREEMENT (this "Contribution
Agreement") is made as of May 13, 2003, by and between CROWN AMERICAN
PROPERTIES, L.P., a Delaware limited partnership ("Crown Partnership"), and
PREIT ASSOCIATES L.P., a Delaware limited partnership ("PREIT Partnership").
RECITALS
--------
A. Pennsylvania Real Estate Investment Trust, a Pennsylvania business
trust ("PREIT"), PREIT Partnership, Crown American Realty Trust, a Maryland real
estate investment trust ("Crown"), and Crown Partnership entered into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement")
pursuant to which, among other things, Crown will merge with and into PREIT (the
"Merger"), and PREIT Partnership and Crown Partnership shall consummate certain
transactions contemplated in connection with the Merger.
B. Contemporaneously with the execution and delivery of the Merger
Agreement and this Contribution Agreement, Crown and Crown Partnership entered
into a distribution agreement (the "Crown Partnership Distribution Agreement").
C. Pursuant to the Crown Partnership Distribution Agreement, one
business day prior to the Merger, Crown Partnership will distribute to Crown, in
complete liquidation of all of Crown's partnership interest in Crown
Partnership, Crown's Proportionate Interest (as hereinafter defined) in the
Crown Partnership Assets (as hereinafter defined), subject to Crown's
Proportionate Interest in the Crown Partnership Liabilities (as hereinafter
defined).
D. On the first business day following consummation of the transactions
contemplated by the Crown Partnership Distribution Agreement, the Merger will be
consummated.
E. Immediately following the Merger, pursuant to a contribution
agreement between PREIT and PREIT Partnership (the "PREIT Contribution
Agreement"), PREIT (as successor to Crown pursuant to the Merger) will
contribute all of its right, title and interest in the Crown Partnership Assets
to PREIT Partnership in exchange for (i) a number of units of Class A limited
partnership interest of PREIT Partnership ("PREIT Class A Units") corresponding
to the number of PREIT common shares issued to the former Crown common
shareholders in the Merger, (ii) a number of preferred units of partnership
interests in PREIT Partnership ("PREIT Preferred Units") corresponding to the
number of PREIT preferred shares issued to the former Crown preferred
shareholders in the Merger, the rights, preferences, privileges and voting power
of which shall be identical in all material respects to the existing Crown
Senior Preferred OP Units, and (iii) the assumption by PREIT Partnership of the
obligations of PREIT (as successor to Crown pursuant to the Merger) with respect
to the Crown Partnership Liabilities and the obligations of PREIT (as successor
to Crown) under the Crown Partnership Distribution Agreement.
F. Concurrently with the transactions contemplated by the PREIT
Contribution Agreement, (i) Crown Partnership will contribute all of its
remaining right, title and interest in the Crown Partnership Assets, other than
the Excluded Interest (as hereinafter defined) (the "Remaining Interest in the
Crown Partnership Assets") to PREIT Partnership in exchange for (A) units of
Class B limited partnership interest of PREIT Partnership ("PREIT Class B
Units"), (B) the assumption by PREIT Partnership of all remaining obligations of
Crown Partnership with respect to the Crown Partnership Liabilities (the
"Assumed Crown Partnership Liabilities"), and (C) PREIT Partnership's agreement
to indemnify and hold harmless Crown Partnership and certain related parties as
provided herein, and (ii) Crown Partnership and PREIT Partnership have agreed to
an arrangement for the future contribution by Crown Partnership of the Excluded
Interest to PREIT Partnership in exchange for additional PREIT Class B Units,
subject to a potential cash adjustment.
G. The parties desire to set forth the terms of the transactions
described in Recital F above.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. Definitions.
-----------
The terms used herein have the definition specified or referred to in
this Contribution Agreement. Unless the context otherwise provides, terms
defined in the Merger Agreement, when used herein, shall have the same meanings
as set forth in that agreement.
"Closing Unit Amount" shall equal (i) the sum of (A) the product of (x)
the number of Crown OP Units held by Crown American Investment Company as of the
date hereof (which is 1,786,459) that remain outstanding on the Crown
Partnership Contribution Closing Date multiplied by (y) 0.12589713, plus (B) the
product of (x) the number of Crown OP Units held by Crown Investments Trust as
of the date hereof (which is 8,169,939) that remain outstanding on the Crown
Partnership Contribution Closing Date multiplied by (y) 0.22271905, minus (ii)
341,297; provided, however, that in the event that the foregoing calculation
would result in an amount less than zero, then the Closing Unit Amount shall
equal zero and the amount by which the result of the foregoing calculation would
have been less than zero shall be referred to herein as the "Closing Shortfall
Amount."
"Crown Adjustment Amount" shall equal the excess, if any, of (x) the
aggregate cumulative amount of cash distributions received by Crown Partnership
from CFLP and WCLP with respect to the Excluded Interest during the period from
the Crown Partnership Contribution Closing Date through the Put/Call
Contribution Date (the "Interim Period"), over (y) the aggregate cumulative
amount of cash distributions that would have been paid during the Interim Period
by PREIT Partnership with respect to the number of Additional Units issuable
pursuant to Section 4.1 or 4.2 if such Additional Units had been issued on the
Crown Partnership Contribution Closing Date.
-2-
"Crown Partnership Assets" shall mean all assets, properties, goodwill
and rights, wherever located, whether real, personal or mixed, tangible or
intangible, of Crown Partnership, including, without limitation, Crown
Partnership's interests in the properties identified on Schedule 2.2(a) included
in the Crown Disclosure Letter delivered pursuant to the Merger Agreement as
being owned directly by Crown Partnership, Crown Partnership's partnership
interests in the Limited Partnerships, Crown Partnership's ownership interests
in the General Partners, Crown Partnership's limited liability company interests
in the Limited Liability Companies, Crown Partnership's general partnership
interest in the Palmer Park Mall Venture, and Crown Partnership's stock in the
TRSs.
"Crown Partnership Liabilities" shall mean all liabilities and
obligations of Crown Partnership, including any liability or obligation of any
kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, other than
the Excluded Liabilities.
"Crown's Proportionate Interest" shall mean the percentage of the
economic value of Crown Partnership held by Crown as of the Crown Partnership
Distribution Closing Date (as defined in the Crown Partnership Distribution
Agreement), after giving effect to the 4th Amendment to CFSA and the 8th
Amendment to Crown Partnership Agreement, which percentage shall equal a
fraction (i) the numerator of which is the aggregate market value (as determined
in accordance with the following sentence) of the common and preferred units in
Crown Partnership held by Crown immediately prior to the consummation of the
transactions contemplated by the Crown Partnership Distribution Agreement, and
(ii) the denominator of which is the aggregate market value (as determined in
accordance with the following sentence) of all the outstanding common and
preferred units of Crown Partnership immediately prior to the consummation of
the transactions contemplated by the Crown Partnership Distribution Agreement.
The market value of the common and preferred units of Crown Partnership shall be
determined based upon the average trading price of Crown common shares and
preferred shares, respectively, over the five trading day period ending on the
day immediately prior to the Crown Partnership Distribution Closing Date, and
shall take into account, in the case of the Crown Partnership common units, the
"Partner Adjustment Factor," as defined in the Crown Partnership Agreement, as
amended by the Eighth Amendment thereto.
"Excluded Interest" shall mean an 11% interest in the capital and a 1%
interest in the profits of each of Crown American Financing Partnership, L.P., a
Delaware limited partnership ("CFLP"), and Washington Crown Center Associates,
L.P., a Pennsylvania limited partnership ("WCLP").
"Excluded Liabilities" shall mean (i) liabilities for "Claims" (as
defined in the Indemnification Agreement) that are the subject of the
Indemnification Agreement (whether or not PREIT or PREIT Partnership actually
receives indemnification thereunder) or for which the Indemnification Agreement
requires the Indemnifying Parties (as defined therein) to indemnify PREIT or
PREIT Partnership; (ii) liabilities owed by Crown Partnership to the limited
partners of Crown Partnership in their capacities as such; (iii) liabilities of
Crown Partnership for any breach of or failure by Crown Partnership to perform
any of its obligations pursuant to the Merger Agreement or any other agreements
contemplated thereby; and (iv) liabilities of Crown Partnership which accrue or
arise during the period following the Crown Partnership Contribution Closing
Date and which relate to such period, including for purposes of this clause (iv)
any increased costs of doing business for Crown Partnership from and after the
Crown Partnership Contribution Closing Date, whether or not attributable to the
transactions contemplated by the Merger Agreement and the other agreements
referenced therein.
-3-
"General Partners" shall mean the single purpose entities wholly owned
by Crown or Crown Partnership and identified on Schedule 2.2(a) included in the
Crown Disclosure Letter delivered pursuant to the Merger Agreement as the
general partners of the Limited Partnerships.
"Limited Liability Companies" shall mean the limited liability
companies identified on Schedule 2.2(a) included in the Crown Disclosure Letter
delivered pursuant to the Merger Agreement, in which Crown Partnership owns all
the issued and outstanding limited liability company ownership interests.
"Limited Partnerships" shall mean the limited partnerships identified
on Schedule 2.2(a) included in the Crown Disclosure Letter delivered pursuant to
the Merger Agreement, in which Crown Partnership owns a 99.5% limited
partnership interest and a General Partner owns a 0.5% general partnership
interest.
"Palmer Park Mall Venture" shall mean the Palmer Park Mall Joint
Venture identified on Schedule 2.2(a) included in the Crown Disclosure Letter
delivered pursuant to the Merger Agreement, in which, as of the closing of the
transactions under the Crown Partnership Distribution Agreement, Crown
Partnership will own a 49.9% general partnership interest and PR Palmer Park
Limited Partnership, a Pennsylvania limited partnership and an affiliate of
PREIT Partnership, will own a 50.1% general partnership interest.
"PREIT Adjustment Amount" shall equal (i) the excess, if any, of (x)
the aggregate cumulative amount of cash distributions that would have been paid
during the Interim Period by PREIT Partnership with respect to the number of
Additional Units issuable pursuant to Section 4.1 or 4.2 if such Additional
Units had been issued on the Crown Partnership Contribution Closing Date, over
(y) the aggregate cumulative amount of cash distributions received by Crown
Partnership from CFLP and WCLP with respect to the Excluded Interest during the
Interim Period, plus (ii) a pro rata portion (based on the ratio of (A) the
number of Additional Units to (B) the aggregate number of PREIT Class A Units
and PREIT Class B Units outstanding at the time of the distribution, including
for purpose of clause (B) the Additional Units) of any distributions paid by
PREIT Partnership during the Interim Period in consideration other than cash or,
in the event that such non-cash consideration cannot be paid on the Put/Call
Contribution Date, a cash amount equal to the fair market value (calculated as
of the date of the distribution) of such pro rata portion of that non-cash
consideration.
"Put/Call Unit Amount" shall equal (i) 341,297 minus (ii) the Closing
Shortfall Amount.
-4-
"TRSs" shall mean Crown American GC, Inc., a Maryland corporation, and
Crown American Services Corporation, a Pennsylvania corporation, in which Crown
Partnership owns 100% of the issued and outstanding stock, each of which has
elected to be treated as a "taxable REIT subsidiary."
SECTION 2. Contribution; Assumption.
------------------------
On the Crown Partnership Contribution Closing Date (as
hereinafter defined), Crown Partnership shall contribute to PREIT Partnership,
and PREIT Partnership shall acquire from Crown Partnership, the Remaining
Interest in the Crown Partnership Assets and all benefits and advantages to be
derived therefrom, and PREIT Partnership shall assume the Assumed Crown
Partnership Liabilities and indemnify and hold harmless Crown Partnership and
the other parties as set forth in Section 9 hereof.
SECTION 3. Consideration.
-------------
On the Crown Partnership Contribution Closing Date, in
consideration for the contribution described in Section 2 above, Crown
Partnership shall receive from PREIT Partnership a number of PREIT Class B Units
(the "Initial Units") equal to the Closing Unit Amount.
SECTION 4. Put/Call Agreement.
------------------
4.1 Crown Partnership hereby grants to PREIT Partnership an option to
require Crown Partnership to contribute, at any time after the end of the 36th
month following the Crown Partnership Contribution Closing Date, all (but not
less than all) of the Excluded Interest plus cash equal to the Crown Adjustment
Amount, if any, in exchange for a number of PREIT Class B Units (subject to
adjustment in connection with stock splits, reverse stock splits, stock
dividends or distributions, combinations or similar recapitalizations, the
"Additional Units") equal to the Put/Call Unit Amount, plus cash (and, if
applicable, non-cash consideration) equal to the PREIT Adjustment Amount, if
any. The Initial Units and the Additional Units shall be referred to herein
collectively as the "Units."
4.2 PREIT Partnership hereby grants to Crown Partnership the right to
contribute, at any time after the end of the 40th month following the Crown
Partnership Contribution Closing Date, all (but not less than all) of the
Excluded Interest plus cash equal to the Crown Adjustment Amount, if any, to
PREIT Partnership in exchange for the Additional Units plus cash (and, if
applicable, non-cash consideration) equal to the PREIT Adjustment Amount, if
any.
4.3 Other than as contemplated by Section 4.1 or 4.2 hereof, Crown
Partnership shall not sell or otherwise dispose of or transfer the Excluded
Interest and shall hold it subject to Sections 4.1 and 4.2 hereof.
Notwithstanding the foregoing, Crown Partnership shall be permitted to pledge,
encumber and otherwise grant a security interest in the Excluded Interest to any
existing or future lender (a "Bona Fide Lender") pursuant to a bona fide
financing incurred for investment or other purposes upon customary commercial
terms; provided that, at the time of such pledge, encumbrance or grant and as a
condition thereto, (i) Crown Partnership discloses the terms of this Agreement
to the Bona Fide Lender, (ii) Crown Partnership notifies PREIT Partnership in
-5-
writing of the name and address of the Bona Fide Lender, and (iii) the Bona Fide
Lender (A) acknowledges in writing to PREIT Partnership that the Excluded
Interest remains subject to the terms of this Section 4 (including, without
limitation, Section 4.1) notwithstanding such pledge, encumbrance or grant and
(B) acknowledges in writing to PREIT Partnership that the Bona Fide Lender and
any third party assignee of such Bona Fide Lender will be bound by all of the
provisions of this Section 4 in the event that the Bona Fide Lender or such
third party acquires the Excluded Interest as a result of a foreclosure by the
Bona Fide Lender or exercise of any other remedies available to the Bona Fide
Lender, in which event the Bona Fide Lender and any such third party shall be
entitled to exercise the rights granted under Section 4.2 at any time (including
prior to the 40th month following the Crown Partnership Contribution Closing
Date) pursuant to the procedures set forth in Section 4.4 (and, in the event of
such an acquisition of the Excluded Interest by the Bona Fide Lender or such a
third party, all references in this Section 4 to Crown Partnership shall refer
instead to such Bona Fide Lender or such third party). Notwithstanding the
foregoing, if a Bona Fide Lender exercises its rights pursuant to Section 2 of
the Assumed Exchange Agreement to acquire common shares of PREIT in exchange for
the Excluded Interest, such Bona Fide Lender shall have no continuing rights
with respect to the portion of the Excluded Interest exchanged for the PREIT
common shares.
4.4 Any party (the "Exercising Party") desiring to exercise the rights
granted to it in Section 4.1 or 4.2 shall provide written notice (the "Notice of
Exercise") to the other party (the "Receiving Party"), which shall state that
the Exercising Party is exercising the rights set forth in Section 4.1 or 4.2
hereof, as applicable. The Notice of Exercise shall constitute an irrevocable
exercise by the Exercising Party of the rights granted in the applicable
Section, and the Receiving Party shall be deemed to have accepted such exercise
upon receipt. The closing (the "Put/Call Closing") of the contribution
contemplated by Section 4.1 or 4.2 (as applicable) shall take place at the
offices of PREIT Partnership at 10:00 a.m. local time (or such other place and
time as the parties shall mutually agree) on the date (the "Put/Call
Contribution Date") specified in the Exercise Notice (which date shall not be
less than five nor more than ten days after the date of delivery of the Exercise
Notice). At the Put/Call Closing, Crown Partnership shall deliver to PREIT
Partnership, the Excluded Interest, free and clear of liens or encumbrances, and
the Crown Adjustment Amount, if any (which shall be paid in immediately
available funds to an account designated by PREIT Partnership), against delivery
by PREIT Partnership of the Additional Units and the PREIT Adjustment Amount, if
any (the cash portion, if any, of which shall be paid in immediately available
funds to an account designated by Crown Partnership). In addition, on the
Put/Call Contribution Date, PREIT Partnership shall cause CFLP and WCLP to amend
their respective partnership agreements to reflect the contribution of the
Excluded Interest, if necessary.
4.5 Crown Partnership and PREIT Partnership agree that the transfer of
the Excluded Interest by Crown Partnership to PREIT Partnership pursuant to
Section 4.1 or 4.2 (as applicable) will constitute a contribution under Section
721 of the Internal Revenue Code, and Crown Partnership and PREIT Partnership
will file all applicable tax returns in accordance therewith.
4.6 On or before the Crown Partnership Contribution Closing Date,
subject to obtaining the necessary third party consents therefor, Crown
Partnership shall cause the CFLP and WCLP limited partnership agreements to be
amended as and to the extent reasonably necessary to effectuate the transactions
contemplated by this Contribution Agreement, the Merger Agreement, the Crown
Partnership Distribution Agreement, and the other agreements contemplated herein
and therein (including, without limitation, the amendments to the CFLP and WCLP
limited partnership agreements the forms of which are attached as exhibits to
the Merger Agreement).
-6-
SECTION 5. Representations and Warranties by Crown Partnership.
---------------------------------------------------
5.1 Crown Partnership hereby represents and warrants to PREIT
Partnership that, except as disclosed in the Merger Agreement or the Crown
Disclosure Letter:
(a) Organization. Crown Partnership is a Delaware limited
partnership duly existing and in good standing under the laws
of the State of Delaware;
(b) Due Authorization. The execution, delivery and performance of
this Contribution Agreement and all other documents and
agreements to be executed by Crown Partnership in connection
with the transactions contemplated by this Contribution
Agreement have been duly and validly authorized by all
necessary action of Crown Partnership. This Contribution
Agreement constitutes a valid and binding obligation of Crown
Partnership, enforceable against Crown Partnership in
accordance with its terms;
(c) Accredited Investor. Crown Partnership is an "accredited
investor" as defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "1933 Act"), and is
knowledgeable and experienced in finance, securities and
investments and has had sufficient experience so as to be
capable of evaluating the merits and risks of an investment in
the Units;
(d) Access to SEC Filings and Partnership Agreement. Crown
Partnership has received and reviewed to the extent deemed
necessary or desirable PREIT's Proxy Statement and Annual
Report delivered to shareholders for its 2003 Annual Meeting
and Annual Report on Form 10-K for the year ended December 31,
2002 (together, the "SEC Filings") and the Amended and
Restated Agreement of Limited Partnership of PREIT
Partnership, as amended (the "Partnership Agreement") and has
consulted such of Crown Partnership's own attorney,
accountant, tax adviser and investment counselor as determined
to be necessary or desirable;
(e) Opportunity to Make Inquiries. Crown Partnership has been
given an adequate opportunity to ask questions of and receive
answers from officers of PREIT with respect to PREIT, PREIT
Partnership, the Units, the SEC Filings and the Partnership
Agreement;
(f) Investment Intent. The Units are being acquired for Crown
Partnership's own account, not on behalf of or as nominee of
any other person, solely for investment purposes and not with
a view to resale or distribution thereof;
-7-
(g) Reliance. In considering subscribing for the Units, Crown
Partnership has not relied upon any representations made by,
or other information (whether oral or written) furnished by or
on behalf of, PREIT or PREIT Partnership other than as set
forth in this Agreement, the Merger Agreement, the SEC Filings
and the Partnership Agreement;
(h) Restrictions on Transfer. Crown Partnership acknowledges that
the Partnership Agreement restricts the assignment, sale or
transfer of the Units, and that it may continue to bear the
economic risk of the investment in the Units for an indefinite
period;
(i) Units Not Registered. Crown Partnership acknowledges that the
Units and any shares of beneficial interest in PREIT that may
be issued, at the option of the PREIT, upon redemption of the
Units, will not be registered under the 1933 Act on the
grounds that the issuance thereof is exempt from registration
under the 1933 Act pursuant to Section 4(2) of the 1933 Act
and/or Regulation D promulgated thereunder and that the
reliance of PREIT and PREIT Partnership on such exemptions is
predicated in part on Crown Partnership's representations,
warranties and covenants set forth in this Contribution
Agreement; and
(j) Taxation. Crown Partnership acknowledges that the redemption
of any of the Units may cause Crown Partnership to incur
taxable income or gain.
5.2 Survival of Representations and Warranties. All representations and
warranties made in this Contribution Agreement by Crown Partnership shall
survive the execution of this Contribution Agreement and closing of the
transactions contemplated by this Contribution Agreement (the "Crown Partnership
Contribution Closing").
SECTION 6. Representations and Warranties by PREIT Partnership.
---------------------------------------------------
6.1 PREIT Partnership hereby represents and warrants to Crown
Partnership that, except as disclosed in the Merger Agreement or the PREIT
Disclosure Letter:
(a) Organization. PREIT Partnership is a Delaware partnership duly
existing and in good standing under the laws of the State of
Delaware.
(b) Due Authorization. The execution, delivery and performance of
this Contribution Agreement and all other documents and
agreements to be executed by PREIT Partnership in connection
with the transactions contemplated by this Contribution
Agreement have been duly and validly authorized by all
necessary action of PREIT Partnership. This Contribution
Agreement constitutes a valid and binding obligation of PREIT
Partnership, enforceable against PREIT Partnership in
accordance with its terms.
(c) Units. The Units will be, at the time of issuance and delivery
in accordance with the terms of this Contribution Agreement,
duly authorized and validly issued by PREIT Partnership.
-8-
6.2 Survival of Representations and Warranties. All representations and
warranties made in this Contribution Agreement by PREIT Partnership shall
survive the execution of this Contribution Agreement and the Crown Partnership
Contribution Closing.
SECTION 7. Closing; Closing Deliveries; Transfer Deliveries.
------------------------------------------------
7.1 Time of Closing. The Crown Partnership Contribution Closing shall
take place immediately following the Effective Time of the Merger (the "Crown
Partnership Contribution Closing Date") at the offices of Hogan & Hartson
L.L.P., 555 13th Street, N.W., Washington, D.C.
7.2 Responsibility for Documents and Instruments. Crown Partnership
shall obtain or cause to be obtained all documents and instruments required to
be delivered by parties other than Crown Partnership or PREIT Partnership in
order to consummate the transactions contemplated by this Contribution
Agreement, including, without limitation, the consents required under the debt
facilities and organizational documents of CFLP and/or WCLP as may be necessary
to effect the amendments to the CFLP and WCLP limited partnership agreements
contemplated in Section 4.6 above. Crown Partnership shall prepare, or cause to
be prepared, all documents and instruments necessary to transfer title to the
Remaining Crown Partnership Assets to PREIT Partnership. PREIT Partnership shall
prepare, or cause to be prepared, all documents and instruments necessary to
issue the Initial Units to PREIT.
7.3 Representations and Warranties True as of Closing Date. The
representations and warranties of each of the parties contained in this
Contribution Agreement shall be true at and as of the Crown Partnership
Contribution Closing Date in all material respects, with the same effect as
though such representations and warranties were made as of such date.
7.4 Closing Certificates. Crown Partnership and PREIT Partnership shall
each have executed and delivered to the other a certificate dated as of the
Crown Partnership Contribution Closing Date (the "Closing Certificate") and
signed by an authorized officer, as the case may be, certifying that its
representations and warranties set forth in this Contribution Agreement remain
true and correct in all material respects.
7.5 Other Closing Documents. In addition to the certificates and other
documents referred to in this Section 7 of this Contribution Agreement, the
parties shall also execute and deliver, or cause to be executed and delivered
all agreements, documents and instruments necessary or appropriate to effect the
transactions contemplated by this Contribution Agreement, which agreements,
documents and instruments may include, but shall not be limited to, one or more
lease assignments, assignment and assumption agreements, deeds, certificates of
title, bills of sale, FIRPTA and other affidavits, or other documents or
instruments.
7.6 Conditions of Closing. In addition to the other matters set forth
in this Section 7 of this Contribution Agreement, consummation of the
transactions contemplated by this Contribution Agreement shall be conditioned
upon the closing of the Merger.
-9-
SECTION 8. Additional Covenants.
--------------------
8.1 Amendment of Crown Partnership Agreement. On the Crown Partnership
Contribution Closing Date, Crown Partnership shall amend and restate its
partnership agreement, in the form attached to the Merger Agreement, to remove
all provisions related to its status as an operating partnership of a real
estate investment trust, including, without limitation, the ability to redeem
its partnership interests for shares of beneficial interest in Crown or its
successors.
8.2 Transfer Expenses. Except as set forth in the Pasquerilla Tax
Protection Agreement, transfer taxes, if any, as well as the cost of title
insurance and other expenses of the transfer shall be paid by PREIT Partnership.
PREIT Partnership shall be responsible for all title insurance premiums and
title company charges and recording costs payable in connection with this
Contribution Agreement or the transaction contemplated hereby. Otherwise, each
party shall be responsible for all expenses incurred by it in connection with
this Contribution Agreement and the transactions contemplated hereby, including,
without limitation, the fees and expenses of such party's accountants, attorneys
and other advisors, except as otherwise provided in the Merger Agreement.
SECTION 9. Indemnification.
---------------
9.1 Indemnification of Crown Partnership by PREIT Partnership. From and
after the Crown Partnership Contribution Closing Date, PREIT Partnership and its
successors (collectively, the "Indemnifying Parties") shall indemnify and hold
harmless Crown Partnership and its partners, officers, employees and agents
(collectively, the "Indemnified Parties") against any losses, claims,
liabilities, expenses (including reasonable attorneys' fees and expenses),
judgments, fines and amounts paid in settlement in accordance herewith
(collectively, "Losses") incurred by any Indemnified Party arising, directly or
indirectly, from or in connection with (i) the Assumed Crown Partnership
Liabilities; (ii) all obligations under the WARN Act with respect to current or
former employees of Crown, Crown Partnership or CASC, including all Solicited
Employees, (iii) any unemployment tax statute or regulation arising from or
related to the termination or resignation of employment by employees of Crown,
Crown Partnership and CASC pursuant to Sections 5.8(a) or 5.8(b) of the Merger
Agreement, excluding, however, any Losses relating to unfavorable experience
ratings resulting from such terminations or resignations, (iv) all obligations
under COBRA with respect to any employees, including former employees, of Crown,
Crown Partnership or CASC, and (v) any failure by PREIT and/or any PREIT
Subsidiary (including without limitation the entity acting as the Successor
Employer) to perform any of its obligations under Section 5.8 of the Merger
Agreement. Notwithstanding the foregoing, in no event shall any Indemnified
Party shall be entitled to indemnification hereunder for any Losses to the
extent that such Indemnified Party has received indemnification under the Crown
Partnership Distribution Agreement for such Losses.
9.2 Procedures Relating to Third Party Claims. Any Indemnified Party
proposing to assert the right to be indemnified under this Contribution
Agreement shall, promptly after receipt of notice of commencement of any action
by a third party against such Indemnified Party in respect of which a claim for
indemnification is to be made under this Contribution Agreement by an
Indemnified Party against the Indemnifying Parties (a "Third Party Claim"),
notify the Indemnifying Parties of the commencement of such Third Party Claim
-10-
through written notice describing it with reasonable specificity and enclosing a
copy of all papers served; provided, however, that the failure so to notify the
Indemnifying Parties shall not relieve the Indemnifying Parties from any
liability which they may have under this Contribution Agreement (except to the
extent such failure to notify materially prejudices the Indemnifying Parties'
ability to defend such Third Party Claim) or from any liability which the
Indemnifying Parties may otherwise have. If any such Third Party Claim is
brought against any of the Indemnified Parties and such Indemnified Parties
notify the Indemnifying Parties of its commencement in accordance herewith, the
Indemnifying Parties shall be entitled to participate in and, to the extent that
the Indemnifying Parties elect by delivering written notice to such Indemnified
Parties promptly after receiving notice of the commencement of the action from
the Indemnified Parties, to assume the defense of the action and after notice
from the Indemnifying Parties to the Indemnified Parties of their election to
assume the defense of any Third Party Claim, the Indemnifying Parties will not
be liable to the Indemnified Parties for any legal or other expenses except as
provided below. If the Indemnifying Parties assume the defense, the Indemnifying
Parties shall have the right to settle such action without the consent of the
Indemnified Parties; provided, however, that the Indemnifying Parties shall be
required to obtain such consent if the settlement includes (i) any admission of
wrongdoing on the part of the Indemnified Parties, (ii) any decree or
restriction on the Indemnified Parties or (iii) an obligation of the Indemnified
Parties to pay any money that is not otherwise indemnified by the Indemnifying
Parties; provided further, however, that none of the Indemnifying Parties, in
the defense of any such action shall, except with the consent of the Indemnified
Parties, consent to entry of any judgment or enter into any settlement that (i)
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Parties of a release from all liability with
respect to such action, or (ii) contains obligations other than with respect to
the payment of money. The Indemnified Parties shall have the right to employ
their own counsel in any such action, but the fees, expenses and other charges
of such counsel shall be at the expense of such Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) the Indemnified Parties have
reasonably concluded (based on written advice of counsel to the Indemnified
Parties) that there may be legal defenses available to them that are different
from or in addition to and inconsistent with those available to the Indemnifying
Parties, (iii) a conflict or potential conflict exists (based on written advice
of counsel to the Indemnified Parties) between the Indemnified Parties and the
Indemnifying Parties (in which case the Indemnifying Parties will not have the
right to direct the defense of such action on behalf of the Indemnified Parties)
or (iv) the Indemnifying Parties have not in fact employed counsel to assume the
defense of such action within a reasonable time (not to exceed 10 days) after
receiving notice of the commencement of the action from the Indemnified Parties
in accordance herewith, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
Indemnifying Parties and shall promptly be paid by each of the Indemnifying
Parties as they become due and payable in advance of the final disposition of
the Third Party Claim to the fullest extent and in the manner permitted by law;
provided, however, that in no event shall any contingent fee arrangement be
considered reasonable. Notwithstanding the foregoing, the Indemnifying Parties
shall not be obligated to advance any expenses or costs prior to receipt of an
undertaking by or on behalf of the Indemnified Parties to repay any expenses
advanced if it shall ultimately be determined that the Indemnified Parties are
not entitled to be indemnified against such expense pursuant to the last
sentence of this Section 9.2. It is understood that the Indemnifying Parties
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
-11-
of more than one separate counsel admitted to practice in such jurisdiction at
any one time for all such Indemnified Parties unless (a) the employment of more
than one counsel has been authorized in writing by the Indemnifying Parties, (b)
any of the Indemnified Parties have reasonably concluded (based on written
advice of counsel to the Indemnified Parties) that there may be legal defenses
available to them that are different from or in addition to and inconsistent
with those available to other Indemnified Parties, or (c) a conflict or
potential conflict exists (based on written advice of counsel to the Indemnified
Parties) between any of the Indemnified Parties and the other Indemnified
Parties, in case of each of which the Indemnifying Parties shall be obligated to
pay the reasonable fees and expenses of such additional counsel or counsels on
the same basis as provided in the immediately preceding sentence.
Notwithstanding anything to the contrary set forth in this Contribution
Agreement, the Indemnifying Parties (i) shall not be liable for any settlement
effected without their prior written consent and (ii) shall not have any
obligation hereunder to any of the Indemnified Parties to the extent that a
court of competent jurisdiction shall determine in a final and non-appealable
order that such indemnification is prohibited by applicable law. In the event of
a final and non-appealable determination by a court that any payment of expenses
is prohibited by applicable law, the Indemnified Parties shall promptly refund
to the Indemnifying Parties the amount of all such expenses theretofore advanced
pursuant hereto.
9.3 Procedures Relating to Inter-Party Claims. In the event that any
Indemnified Party desires to seek indemnification from the Indemnifying Parties
pursuant to Section 9.1 (other than in connection with a Third Party Claim),
Crown Partnership shall, on behalf of such Indemnified Party, notify the
Indemnifying Parties from which such indemnification is sought, which
indemnification notices shall be provided not more frequently than monthly,
specifying the basis of such indemnification claim and providing reasonable
back-up information and documentation therefor. The Indemnified Party shall
thereupon give the Indemnifying Parties reasonable access to the books and
records of the Indemnified Party which evidence or support such claim or the
act, omission or occurrence giving rise to such claim and the right, upon prior
notice during normal business hours, to interview any appropriate personnel of
the Indemnified Party related thereto. Within 30 days of the Indemnifying
Parties' receipt of any notice seeking indemnification under this subsection
(c), the Indemnifying Parties shall either pay the amount of such claim or
notify Crown Partnership in writing of the basis for any objection to such
claim. Any undisputed portion of such a claim shall be paid within such 30 day
period.
9.4 Exclusive Remedy; Survival. The remedies provided in this Section 9
will be exclusive of any other remedies that may be available to the Indemnified
Parties with respect to Losses covered by this Section 9, other than Losses for
which equitable relief is sought. This Section 9 and the indemnification
provided for hereunder shall survive indefinitely and shall be binding upon
Crown and, after the Effective Time of the Merger, PREIT and their successors
and assigns.
SECTION 10. General Provisions.
------------------
10.1 Notices. All notices, requests, claims, demands and other
communications under this Contribution Agreement shall be in writing and shall
be delivered personally, sent by overnight courier (providing proof of delivery)
to the parties or sent by telecopy (providing confirmation of transmission) at
the following addresses or telecopy numbers (or at such other address or
telecopy number for a party as shall be specified by like notice) from such
party:
-12-
(a) if to PREIT or PREIT Partnership, to:
Pennsylvania Real Estate Investment Trust
200 South Broad Street
Philadelphia, PA 19102
Attention: Bruce Goldman
General Counsel
Fax No.: (215) 546-7311
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: J. Warren Gorrell, Jr.
Stuart A. Barr
Fax No.: (202) 637-5910
and
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
Attention: Howard A. Blum
Fax No.: (215) 988-2757
(b) if to Crown or Crown Partnership, to:
Crown American Realty Trust
Pasquerilla Plaza
Johnstown, PA 15901
Attention: Ronald J. Hamilton
Fax No.: (814) 536-9525
with a copy (which shall not constitute notice) to:
Spitzer & Feldman
405 Park Avenue
New York, NY 10022
Attention: M. James Spitzer, Jr.
Fax No.: (212) 838-7472
and
-13-
Reed Smith LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Attention: David L. DeNinno
Fax No.: (412) 288-3218
and
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004-2498
Attention: Joseph C. Shenker
Gary Israel
Fax No.: (212) 558-3588
All notices shall be deemed given when delivered personally, one day after being
delivered to a nationally recognized overnight courier or when telecopied (with
a confirmatory copy sent by such overnight courier). Prior to the PREIT
Contribution Closing Date, any notice under this Contribution Agreement shall
also be given to Crown and Crown Partnership in accordance with the notice
provisions in the Merger Agreement.
10.3 Entire Agreement. This Contribution Agreement and the Merger
Agreement, to the extent its terms are incorporated herein, constitute the
entire agreement between the parties hereto with respect to subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings with respect to the subject matter hereof.
10.4 Counterparts. This Contribution Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original copy of
this Contribution Agreement, and all of which, when taken together, shall be
deemed to constitute but one and the same agreement.
10.5 Governing Law. This Contribution 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. Nothing contained herein or in any
other document contemplated hereunder shall prevent or delay any party 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 party of
any of their respective obligations hereunder.
10.6 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 Contribution 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.
-14-
10.7 Amendments, Modifications and Waiver. The parties may amend or
modify this Contribution Agreement in any respect, provided that any such
amendment or modification shall be in writing signed by each of the parties
hereto; provided, that, prior to the Merger, no amendment, modification or
waiver shall be made without the express written consent of Crown. The waiver by
any party of any provision of this Contribution 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.
10.8 Severability. The invalidity or unenforceability of any particular
provision, or part of any provision, of this Contribution Agreement shall not
affect the other provisions or parts hereof, and this Contribution Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions or parts were omitted.
10.9 Termination. This Contribution Agreement shall terminate and be of
no further force and effect automatically upon termination of the Merger
Agreement; provided, that nothing contained herein shall limit or affect the
rights of the parties to the Merger Agreement in connection with termination
thereof.
10.10 Intended Third Party Beneficiary. It is expressly acknowledged
and agreed that, until the Crown Partnership Distribution Closing Date, Crown is
an intended third party beneficiary under this Contribution Agreement.
-15-
IN WITNESS WHEREOF, each of the parties hereto has executed this
Contribution Agreement, all as of the date first written above.
CROWN AMERICAN PROPERTIES, L.P.
By: Crown American Realty Trust, as general partner
By: Mark E. Pasquerilla
---------------------------------------
Name: Mark E. Pasquerilla
Title: Chief Executive Officer
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate Investment Trust, as
general partner
By: Bruce Goldman
---------------------------------------
Name: Bruce Goldman
Title: Executive Vice President
and General Counsel