Exhibit 2.6
INDEMNIFICATION AGREEMENT
by and among
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST,
PREIT ASSOCIATES, L.P.,
CROWN INVESTMENTS TRUST,
CROWN AMERICAN INVESTMENT COMPANY,
MARK E. PASQUERILLA,
and
CROWN DELAWARE HOLDING COMPANY, as Guarantor
Dated as of May 13, 2003
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of May 13,
2003, and effective as of the Effective Time (as defined in the Merger
Agreement), is entered into by and among PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, a Pennsylvania business trust ("PREIT"), PREIT ASSOCIATES, L.P., a
Delaware limited partnership ("PREIT Partnership"), CROWN INVESTMENTS TRUST, a
Delaware business trust ("CIT"), and CROWN AMERICAN INVESTMENT COMPANY, a
Delaware corporation ("CAIC") (CIT and CAIC are hereafter referred to
collectively as the "Indemnifying Group"), MARK E. PASQUERILLA, an individual
and resident of Pennsylvania ("Shareholder"), and CROWN DELAWARE HOLDING
COMPANY, A Delaware corporation ("CDHC") ("Guarantor").
R E C I T A L S:
A. Pursuant to the Agreement and Plan of Merger dated as of
the date hereof (the "Merger Agreement") by and among PREIT, PREIT Partnership,
Crown American Realty Trust ("Crown") and Crown American Properties, L.P.
("Crown Partnership"), the parties to the Merger Agreement have agreed, among
other things, that Crown shall merge with and into PREIT (the "Merger").
B. Shareholder is the chief executive officer of Crown, and
owns, directly or indirectly 100% of the outstanding ownership interests in CIT,
CAIC and Guarantor.
C. Shareholder and the Indemnifying Group collectively own,
directly or indirectly, (a) approximately 16% of the outstanding common shares
of Crown; (b) approximately 0.5% of the outstanding 11% Senior Preferred Shares
of Crown; and (c) approximately 24% of the outstanding common units of Crown
Partnership.
D. On March 31, 2003, CIT, on the one hand, and Crown American
Financing Partnership, L.P. ("CAFP") and Crown Partnership, on the other hand,
entered into the Third Amendment to the Amended and Restated Cash Flow Support
Agreement (the "3rd Amendment to CFSA"). On the date hereof, CIT, on the one
hand, and Crown Partnership and CAFP, on the other hand, entered into the Fourth
Amendment to the Amended and Restated Cash Flow Support Agreement (the "4th
Amendment to CFSA").
E. On March 31, 2003, CIT and Crown Partnership entered into
an agreement (the "Oak Ridge Agreement"), pursuant to which CIT purchased from
Crown Partnership the property known as Oak Ridge Mall.
F. Concurrently with the execution of this Agreement, CIT and
Crown Partnership have entered into an agreement (the "Exchange Agreement"),
pursuant to which CIT has agreed to convey certain out-parcels to Crown
Partnership in exchange for the conveyance of the property known as Pasquerilla
Plaza by Crown Partnership to CIT.
G. As an inducement to PREIT and PREIT Partnership to
consummate the Merger, Shareholder, the Indemnifying Group and Guarantor have
agreed to enter into this Indemnification Agreement.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINED TERMS
Any capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Merger Agreement.
ARTICLE 2
INDEMNIFICATION
2.1 Agreement of Indemnifying Group to Indemnify.
(a) Subject to the conditions and provisions of this Article
2, each member of the Indemnifying Group, during the Indemnity Period (as
defined below) hereby agrees, jointly and severally, to indemnify, defend and
hold harmless PREIT, PREIT Partnership and each of their respective Affiliates,
employees, representatives, agents, officers and directors (collectively, the
"PREIT Indemnified Persons") from, against and in respect of the following, in
each case to the extent arising from or relating to the period between January
1, 2000 and the Closing Date of the Merger (but not including the Merger or the
other transactions contemplated by the Merger Agreement other than to the extent
expressly provided below):
(i) any Claims sustained or suffered by any PREIT
Indemnified Person to the extent arising, directly or indirectly, in whole or in
part, from or as a consequence of the 3rd Amendment to CFSA or the 4th Amendment
to CFSA;
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(ii) any Claims sustained or suffered by any PREIT
Indemnified Person to the extent arising, directly or indirectly, in whole or in
part, from or as a consequence of the Oak Ridge Agreement;
(iii) any Claims sustained or suffered by any PREIT
Indemnified Person to the extent arising, directly or indirectly, in whole or in
part, from or as a consequence of the Exchange Agreement; and
(iv) any Claims sustained or suffered by any PREIT
Indemnified Person to the extent arising, directly or indirectly, in whole or in
part, from or as a consequence of any relationship or related transaction or
series of related transactions entered into or modified since January 1, 2000,
involving Crown or any Crown Subsidiary, on the one hand, and Shareholder or any
member of the Indemnifying Group, on the other hand, which fall within the
matters described in Item 404 of Regulation S-K under the Securities Act, as in
effect on the date hereof.
For purposes of this Agreement, "Indemnity Period" means the
period beginning from the Closing Date of the Merger and ending on the Indemnity
Notice Date (as hereafter defined). For purposes of this Agreement, "Claims"
means all demands, claims, actions or causes of action, assessments, suits,
proceedings (including litigation and arbitration proceedings), demands,
judgments, losses, obligations, damages, liabilities, interest, penalties, and
reasonable costs and expenses, including without limitation, reasonable
attorneys', accountants' and other professional fees and disbursements.
(b) Shareholder and each of the members of the Indemnifying
Group hereby irrevocably waive any and all right to recourse against PREIT,
PREIT Partnership and each of their respective Affiliates, employees,
representatives, agents, officers and directors with respect to any Claim for
which indemnification is required under or pursuant to this Agreement.
Shareholder and the Indemnifying Group shall not be entitled to contribution
from, subrogation to, or recovery against PREIT, PREIT Partnership or any of
their respective Affiliates, employees, representatives, agents, officers and
directors with respect to any Claim for which indemnification is required under
or pursuant to this Agreement.
2.2 Conditions of Indemnification.
The obligations and liabilities of the Indemnifying Group
hereunder with respect to their joint and several indemnities pursuant to this
Article 2, resulting from any Claim shall be subject to the following terms and
conditions:
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(a) Notwithstanding anything in this Agreement to the
contrary, unless this Agreement is terminated pursuant to Article 6 hereof, the
obligations of the Indemnifying Group under this Article 2 shall terminate and
be extinguished forever on the second anniversary of the Closing Date of the
Merger (the "Indemnity Notice Date"), unless and to the extent written notice of
a Claim that arose on or prior to such date has been asserted on or prior to
such date, which notice shall describe such Claim with reasonable specificity.
If such timely written notice of a Claim has been made, the indemnity
obligations of the Indemnifying Group shall continue beyond the Indemnity Notice
Date, but only with respect to such Claim and only until the earlier of (i) the
date such Claim is satisfied or otherwise finally resolved, (ii) if final legal
action is taken with respect to such Claim during the Indemnity Period, the date
on which such Claim is satisfied or otherwise finally resolved, or (iii) with
respect to a Claim for which no legal action has been taken during the Indemnity
Period, twelve (12) months after the date on which the last settlement or other
substantive discussions have taken place with respect to such Claim, but in no
event more than thirty-six (36) months after the end of the Indemnity Period.
(b) The cumulative aggregate obligation of the Indemnifying
Group under this Article 2 shall not exceed Six Million Dollars ($6,000,000.00)
(the "Indemnification Cap").
(c) Any of the PREIT Indemnified Persons proposing to assert
the right to be indemnified under this Agreement shall, promptly after receipt
of notice of commencement of any action against such PREIT Indemnified Persons
in respect of which a Claim is to be made under this Agreement against the
Indemnifying Group, notify the Indemnifying Group of the commencement of such
action, enclosing a copy of all papers served; provided, however, that the
failure so to notify an Indemnifying Group prior to the end of the Indemnity
Period shall not relieve the Indemnifying Group from any liability which it or
he may have under this Agreement (except to the extent such failure to notify
materially prejudices the Indemnifying Group's ability to defend such Claim) or
from any liability which the Indemnifying Group may otherwise have. If any such
action is brought against any of the PREIT Indemnified Persons and such PREIT
Indemnified Persons notify the Indemnifying Group of its commencement in
accordance with and subject to the terms of Section 2.2(a) hereof, the
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Indemnifying Group shall be entitled to participate in and, to the extent that
the members of the Indemnifying Group elect by delivering written notice to such
PREIT Indemnified Persons promptly after receiving notice of the commencement of
the action from the PREIT Indemnified Persons, to assume the defense of the
action and after notice from the Indemnifying Group to the PREIT Indemnified
Persons of their election to assume the defense, the Indemnifying Group will not
be liable to the PREIT Indemnified Persons for any legal or other expenses
except as provided below. If the Indemnifying Group assumes the defense, the
Indemnifying Group shall have the right to settle such action without the
consent of the PREIT Indemnified Persons; provided, however, that the
Indemnifying Group shall be required to obtain such consent if the settlement
includes (i) any admission of wrongdoing on the part of the PREIT Indemnified
Persons, (ii) any decree or restriction on the PREIT Indemnified Persons, or
(iii) an obligation of the PREIT Indemnified Persons to pay any money that is
not otherwise indemnified by the Indemnifying Group; provided further, however,
that no member of the Indemnifying Group, in the defense of any such action
shall, except with the consent of the PREIT Indemnified Persons, 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
PREIT Indemnified Persons 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 PREIT Indemnified Persons 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 PREIT Indemnified Persons unless (i) the
employment of counsel by the PREIT Indemnified Persons has been authorized in
writing by the Indemnifying Group, (ii) the PREIT Indemnified Persons have
reasonably concluded (based on written advice of counsel to the PREIT
Indemnified Persons) 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 Group, (iii) a conflict or potential conflict exists (based on
written advice of counsel to the PREIT Indemnified Persons) between the PREIT
Indemnified Persons and the Indemnifying Group (in which case the Indemnifying
Group will not have the right to direct the defense of such action on behalf of
the PREIT Indemnified Persons) or (iv) the Indemnifying Group 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
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from the PREIT Indemnified Persons, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
Indemnifying Group and shall promptly be paid by each member of the Indemnifying
Group as they become due and payable in advance of the final disposition of the
claim, action, suit, proceeding or investigation 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 Group shall not be obligated to advance any expenses
or costs prior to receipt of an undertaking by or on behalf of the PREIT
Indemnified Persons to repay any expenses advanced if it shall ultimately be
determined that the PREIT Indemnified Persons are not entitled to be indemnified
against such expense pursuant to the last sentence of this Section 2.2(c). It is
understood that the Indemnifying Group shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all such PREIT
Indemnified Persons unless (a) the employment of more than one counsel has been
authorized in writing by the Indemnifying Group, (b) any of the PREIT
Indemnified Persons have reasonably concluded (based on written advice of
counsel to the PREIT Indemnified Persons) that there may be legal defenses
available to them that are different from or in addition to and inconsistent
with those available to other PREIT Indemnified Persons, or (c) a conflict or
potential conflict exists (based on written advice of counsel to the PREIT
Indemnified Persons) between any of the PREIT Indemnified Persons and the other
PREIT Indemnified Persons, in each case of which the Indemnifying Group 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 Agreement, the
Indemnifying Group (i) shall not be liable for any settlement effected without
their prior written consent and (ii) shall not have any obligation hereunder to
any PREIT Indemnified Persons 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 PREIT Indemnified Persons shall promptly
refund to the Indemnifying Group the amount of all such expenses theretofore
advanced pursuant hereto.
(d) To the extent an indemnification payment pursuant to this
Article 2 shall be reduced by withholding Taxes or causes any Taxes to be
payable by a PREIT Indemnified Person with respect to such payment without such
PREIT Indemnified Person having received a corresponding reduction in Taxes with
respect to the Claim for which the indemnification payment was made, the
Indemnifying Group shall increase the gross amount of such payment by a
sufficient amount so that the net balance held by the PREIT Indemnified Person,
after imposition of such withholding Taxes or Taxes payable with respect to such
payment, equals the amount of the indemnity payment to which the PREIT
Indemnified Person is entitled pursuant to this Article 2.
(e) No member of the Indemnifying Group shall be liable under
this Agreement to make any payment of amounts otherwise indemnifiable hereunder
if and to the extent that the PREIT Indemnified Person has otherwise actually
and properly received payment of such amounts under any insurance policy.
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(f) The parties hereto agree that to the extent the
Indemnifying Group collectively shall not have sufficient funds available when
required to make an indemnification payment pursuant to this Article 2, other
than through a sale of PREIT or PREIT Partnership securities that would
otherwise violate the terms of the shareholder agreement to be entered into by
and among Mark E. Pasquerilla, Crown Partnership, CIT, CAIC, CDHC, PREIT and
PREIT Partnership in connection with the Merger (the "Shareholder Agreement"),
the Indemnifying Group shall be permitted to sell the minimum number of PREIT or
PREIT Partnership securities necessary, when taken together with all other funds
available to the members of the Indemnifying Group, to make such indemnification
payment.
2.3 Reimbursement and Insurance; Release.
(a) The PREIT Indemnified Persons hereby expressly acknowledge
that it is the intent of the parties that this Agreement will in no way affect
Shareholder's right to coverage under (i) PREIT's trustees', directors' and
officers' liability insurance coverage in his capacity as a trustee of PREIT,
(ii) the trustees', directors' and officers' insurance coverage provided by
PREIT for the trustees and officers of Crown pursuant to Section 5.9 of the
Merger Agreement, or (iii) the trustee's, directors' and officers' insurance
coverage available to Crown and the Indemnifying Group.
(b) The PREIT Indemnified Persons hereby expressly covenant
and agree to use commercially reasonable efforts to seek coverage of any matters
indemnifiable hereunder from any insurance policies of the PREIT Indemnified
Persons in effect on the date of such Claim and agree to cooperate with the
Indemnifying Group in any and all of its efforts to seek coverage of any matters
indemnifiable hereunder from such insurance policies available to the
Indemnifying Group, in each case including coverage under any trustees',
directors' and officer's liability policies. Notwithstanding the foregoing, the
PREIT Indemnified Persons shall not be required to file any action, suit or
proceeding against any applicable insurance carriers to pursue coverage unless
and until the Indemnifying Group expressly agrees in writing to pay all fees and
expenses of counsel employed in connection therewith. The obligations of the
PREIT Indemnified Persons pursuant to this Section 2.3(b) shall terminate
effective at the end of the Indemnity Period, unless, and to the extent there is
an insurance claim outstanding that has been filed under such insurance policies
no later than 90 days after the Indemnity Notice Date.
2.4 No Indemnification. Neither Shareholder nor any member of
the Indemnifying Group shall seek any indemnification or exculpation from PREIT
or PREIT Partnership or any of their Affiliates for any threatened or actual
claim, action, suit, proceeding or investigation to the extent that any member
of the Indemnifying Group must indemnify PREIT or PREIT Partnership pursuant to
this Agreement.
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2.5 Release of Indemnifying Group and Shareholder. Effective
at the end of the Indemnity Period, the Indemnified Parties shall release and
forever discharge the Indemnifying Group, Shareholder and their respective
Affiliates from any and all Claims relating to or arising from the matters
covered by Section 2.1(a); provided, however, that such release and discharge
shall not apply with respect to any Claims for which notice has been provided
pursuant to Section 2.2 prior to the Indemnity Notice Date.
2.6 Guarantee of Indemnification Obligations. If any payment
required to be made by the Indemnifying Group pursuant to this Agreement is not
made by the Indemnifying Group within thirty (30) days after such payment is
required to be made to the PREIT Indemnified Persons hereunder, then the
Guarantor shall assume all obligations of the Indemnifying Group under Article 2
hereof, including without limitation to make any such outstanding payments
hereunder.
ARTICLE 3
PAYMENT UPON RESALE OF OAK RIDGE
3.1 Payment Obligation. In the event that, during the period
beginning on the date hereof and ending on the sixth anniversary of the
consummation of the Merger, unless this Agreement has terminated pursuant to
Article 6 hereof, CIT shall consummate a Sale of Oak Ridge (as hereafter
defined), CIT hereby agrees to pay in cash to PREIT an amount equal to ninety
percent (90%) of the Oak Ridge Net Proceeds of Sale (as hereafter defined) in
excess of the Oak Ridge Investment (as hereafter defined). Any payment required
to be made by CIT pursuant to the preceding sentence shall be made by wire
transfer in immediately available funds to PREIT upon the effective date of the
relevant Sale of Oak Ridge; provided, that if all or a portion of the proceeds
from a Sale of Oak Ridge are paid to CIT on a deferred or contingent basis, then
CIT agrees to pay to PREIT ninety percent (90%) of the Oak Ridge Net Proceeds of
Sale in excess of the Oak Ridge Investment actually received as and when such
proceeds are received.
3.2 Sale of Oak Ridge. For purposes of Section 3.1, a "Sale of
Oak Ridge" shall be deemed to occur upon the sale, transfer or alienation of all
or substantially all of the shares, business or assets acquired by CIT pursuant
to the Oak Ridge Agreement (collectively, the "Oak Ridge Assets"), in one or
more transactions, to one or more parties, whether by merger, purchase of stock
or assets, tender offer, exchange offer or otherwise, or any combination of the
foregoing. Notwithstanding the foregoing, a Sale of Oak Ridge shall not include
a sale or transfer to an entity that is an Affiliate of CIT, so long as such
transferee assumes CIT's obligations under this Article 3.
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3.3 Oak Ridge Net Proceeds of Sale. For purposes of Section
3.1, the "Oak Ridge Net Proceeds of Sale" of any Sale of Oak Ridge shall be
equal to the aggregate value of all consideration received by CIT in connection
with each transaction pursuant to which the Sale of Oak Ridge occurs, less all
direct costs and expenses associated therewith, including but not limited to
transfer taxes, brokerage fees and transaction costs. For purposes of this
Section 3.3, any non-monetary consideration shall be valued at its fair market
value, as agreed by CIT and PREIT, or failing such agreement, as determined by
an appraiser jointly designated by CIT, on the one hand, and PREIT, on the other
hand.
3.4 Oak Ridge Investment. For purposes of Section 3.1, the
"Oak Ridge Investment" shall be equal to (x) $11,412,372.96, plus (y) the
aggregate amount of all additional investments in the Oak Ridge Mall with
respect to capital improvements or which are reasonably necessary for the
operation of the Oak Ridge Mall, plus (z) an eight percent (8%) per annum
return, compounded annually, on the amounts set forth in (x) and (y) above;
provided, however, that upon the request of PREIT at the time of a Sale of Oak
Ridge, CIT shall provide to PREIT written notice of each additional investment
in the Oak Ridge Mall describing such investment with reasonable specificity.
ARTICLE 4
PAYMENT UPON RESALE OF PASQUERILLA PLAZA
4.1 Payment Obligation. In the event that, during the period
beginning on the date hereof and ending on the third anniversary of the
consummation of the Merger, unless this Agreement has terminated pursuant to
Article 6 hereof, CIT consummates a Sale of Pasquerilla Plaza (as hereafter
defined), CIT hereby agrees to pay in cash to PREIT an amount equal to fifty
percent (50%) of the Pasquerilla Plaza Net Proceeds of Sale (as hereafter
defined) in excess of the Pasquerilla Plaza Investment (as hereafter defined).
Any payment required to be made by CIT pursuant to the preceding sentence shall
be made by wire transfer in immediately available funds to PREIT upon the
effective date of the relevant Sale of Pasquerilla Plaza; provided, that if all
or a portion of the proceeds from a Sale of Pasquerilla Plaza are paid to CIT on
a deferred or contingent basis, then CIT agrees to pay to PREIT fifty percent
(50%) of the Pasquerilla Plaza Net Proceeds of Sale in excess of the Pasquerilla
Plaza Investment actually received as and when such proceeds are received.
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4.2 Sale of Pasquerilla Plaza. For purposes of Section 4.1, a
"Sale of Pasquerilla Plaza" shall be deemed to occur upon the sale, transfer or
alienation of all or substantially all of the shares, business or assets
acquired by CIT pursuant to the Exchange Agreement (collectively, the
"Pasquerilla Plaza Assets"), in one or more transactions, to one or more
parties, whether by merger, purchase of stock or assets, tender offer, exchange
offer or otherwise, or any combination of the foregoing. Notwithstanding the
foregoing, a Sale of Pasquerilla Plaza shall not include a sale or transfer to
an entity that is an Affiliate of CIT, so long as such transferee assumes CIT's
obligations under this Article 4.
4.3 Pasquerilla Plaza Net Proceeds of Sale. For purposes of
Section 4.1, the "Pasquerilla Plaza Net Proceeds of Sale" shall mean the
aggregate value of all consideration received by CIT in connection with any Sale
of Pasquerilla Plaza, less all direct costs and expenses associated therewith,
including but not limited to, transfer taxes, brokerage fees and transaction
costs. For purposes of this Section 4.3, any non-monetary consideration received
in connection with any Sale of Pasquerilla Plaza shall be valued at its fair
market value, as agreed by CIT and PREIT, or failing such agreement, as
determined by an appraiser jointly designated by CIT and PREIT.
4.4 Pasquerilla Plaza Investment. For purposes of Section 4.1,
the "Pasquerilla Plaza Investment" shall be equal to (x) the appraised value of
Pasquerilla Plaza set forth in the Exchange Agreement, plus (y) the aggregate
amount of all additional investments in the Pasquerilla Plaza with respect to
capital improvements or which are reasonably necessary for the operation of the
Pasquerilla Plaza, plus (z) an eight percent (8%) per annum return, compounded
annually, on the amounts set forth in (x) and (y) above; provided, however, that
upon the request of PREIT at the time of a Sale of Pasquerilla Plaza, CIT shall
provide to PREIT written notice of each additional investment in Pasquerilla
Plaza describing such investment with reasonable specificity.
ARTICLE 5
COVENANTS
5.1 Net Assets.
(a) Shareholder and each member of the Indemnifying
Group hereby agrees and covenants that during the Indemnity Period and
thereafter for so long as a Claim for which notice has been given prior to the
Indemnity Notice Date shall remain unresolved, no member of the Indemnifying
Group shall, and Shareholder shall not cause any member of the Indemnifying
Group to, transfer any assets, incur any liabilities or take any other actions
that would cause the Net Assets of the Indemnifying Group on a consolidated
basis at any time to be less than two hundred percent (200%) of the
Indemnification Cap less any payments previously made by the Indemnifying Group
to the PREIT Indemnified Persons pursuant to this Agreement.
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(b) "Net Assets" shall mean, as of any date of
determination thereof, with respect to the Indemnifying Group, determined on a
consolidated basis, the remainder of (i) the fair market value of its assets
less (ii) all liabilities of the Indemnifying Group that are reflected on its
balance sheet.
5.2 Reporting.
(a) Quarterly Financial Statements. The members of
the Indemnifying Group shall furnish to PREIT, as soon as available, but in any
event within thirty (30) days after the close of each of the fiscal quarters of
such members of the Indemnifying Group, the consolidated balance sheet of such
members of the Indemnifying Group and their subsidiaries as at the end of such
period and the related consolidated statements of income of such members of the
Indemnifying Group and their subsidiaries for such period, and setting forth in
each case in comparative form the figures for the corresponding periods of the
previous fiscal year, all of which shall be certified by the controller or
principal financial officer of the Indemnifying Group, in his or her opinion, to
present fairly, in accordance with generally accepted accounting principles and
in all material respects, the consolidated financial position of such members of
the Indemnifying Group and their subsidiaries as at the date thereof and the
results of operations for such period (subject to normal year-end audit
adjustments).
(b) Compliance Certificate. At the time the financial
statements are furnished pursuant to the immediately preceding subsection (a),
the members of the Indemnifying Group shall furnish to PREIT a certificate by
the controller or principal financial officer of the Indemnifying Group on
behalf of the Indemnifying Group stating the combined Net Assets of the members
of the Indemnifying Group on a consolidated basis at such time.
ARTICLE 6
TERMINATION
6.1 Termination. This Agreement shall become effective as of
the Effective Date and shall be terminated automatically and without further
action by any of the parties if and at such time as the Merger Agreement is
terminated in accordance with Section 7.1 thereof.
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6.2. Effect of Termination. In the event of termination of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith become
null and void and have no effect, without any liability or obligation on the
part of the parties hereto; provided, however, that nothing contained herein
shall affect the rights and obligations of Crown and PREIT under the Merger
Agreement.
ARTICLE 7
GENERAL PROVISIONS
7.1 Notices. All notices, requests, claims, demands and other
communications under this 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):
(a) if to PREIT or PREIT Partnership, to:
Pennsylvania Real Estate Investment Trust
200 South Broad Street
Philadelphia, PA 19102
Attention: Bruce Goldman, Executive Vice
President and 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
Facsimile: (215) 988-2757
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(b) if to CIT, CAIC, CDHC or Shareholder, to:
Crown American Properties, L.P.
Pasquerilla Plaza
Johnstown, PA 15901
Attention: Chief Financial Officer
Fax No.: (814) 536-9525
with a copy (which shall not constitute notice) to:
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
Facsimile: (212) 558-3588
All notices shall be deemed given only when actually received.
7.2 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
7.3 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.
7.4 Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives.
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7.5 Integration; Amendment. This Agreement and the Merger
Agreement constitute the entire agreement between the parties hereto with
respect to the matters set forth herein and supersede and render of no force and
effect all prior oral or written agreements, commitments and understandings
among the parties with respect to the matters set forth herein. Except as
otherwise expressly provided in this Agreement, no amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by each of the parties hereto.
7.6 Governing Law. This Agreement, the rights and obligations
of the parties hereunder, and any claims or disputes thereto, shall be governed
by and construed in accordance with the internal laws of the State of New York.
7.7 Assignment. None of the parties hereto may assign, in
whole or in part, by operation of law or otherwise, any of his or its rights
under this Agreement or attempt to have any other person or entity assume any of
his or its obligations hereunder, except that PREIT and PREIT Partnership may
assign any of their rights, interests and obligations under this Agreement to
any Affiliate or to any successor person or entity to PREIT or PREIT Partnership
in connection with a merger, consolidation, reorganization, business
combination, sale of all or substantially all of PREIT's or PREIT Partnership's
assets, or other similar corporate transaction to which PREIT and/or PREIT
Partnership is a party.
7.8 Enforcement. Shareholder and each member of the
Indemnifying Group acknowledge that certain of the obligations undertaken
pursuant to this Agreement are unique, and that PREIT and PREIT Partnership will
have no adequate remedy at law if Shareholder or any member of the Indemnifying
Group fails to perform any of his or its obligations hereunder. Shareholder and
each member of the Indemnifying Group therefore confirm that the right of PREIT
and PREIT Partnership to specific performance of the terms of this Agreement is
essential to protect the rights and interests of PREIT and PREIT Partnership.
Accordingly, in addition to any other remedies that PREIT or PREIT Partnership
may have at law or in equity, PREIT and PREIT Partnership shall have the right
to have all obligations, covenants, agreements and other provisions of this
Agreement specifically performed by Shareholder and each member of the
Indemnifying Group, and each of PREIT and PREIT Partnership shall have the right
to obtain preliminary and permanent injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement by
Shareholder or any of the members of the Indemnifying Group.
-14-
7.9 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
-15-
IN WITNESS WHEREOF, PREIT, PREIT Partnership, CIT, CAIC, CDHC,
and Shareholder have signed this Agreement or caused this Agreement to be signed
by their respective officers (or general partners) thereunto duly authorized all
as of the date first written above.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: Bruce Goldman
------------------------------
Name: Bruce Goldman
Title: Executive Vice President
and General Counsel
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general partner
By: Bruce Goldman
------------------------------
Name: Bruce Goldman
Title: Executive Vice President
and General Counsel
CROWN INVESTMENTS TRUST
By: Mark E. Pasquerilla
------------------------------
Name: Mark E. Pasquerilla
Title: President
CROWN AMERICAN INVESTMENT COMPANY
By: Mark E. Pasquerilla
------------------------------
Name: Mark E. Pasquerilla
Title: Chief Executive Officer
Mark E. Pasquerilla
-----------------------
MARK E. PASQUERILLA
CROWN DELAWARE HOLDING COMPANY,
as Guarantor
By: Mark E. Pasquerilla
-----------------------------------
Name: Mark E. Pasquerilla
Title: Chief Executive Officer