Exhibit 2.8
SHAREHOLDER AGREEMENT
November 18, 2003
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
The Bellevue
200 S. Broad Street
Philadelphia, PA 19102
Re: Shareholder Agreement
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Ladies and Gentlemen:
Each of the undersigned (collectively, the "undersigned")
understands and acknowledges that Pennsylvania Real Estate Investment Trust, a
Pennsylvania business trust ("PREIT Trust"), PREIT Associates, L.P., a Delaware
limited partnership ("PREIT Partnership" and, together with PREIT Trust,
"PREIT"), Crown American Realty Trust, a Maryland real estate investment trust
("Crown"), and Crown American Properties, L.P., a Delaware limited partnership
("Crown Partnership"), entered into an Agreement and Plan of Merger, dated as of
May 13, 2003 (the "Merger Agreement"), pursuant to which, among other things,
(i) Crown will be merged with and into PREIT Trust (the "Merger"), with PREIT
Trust as the survivor of the Merger, and (ii) PREIT Partnership and Crown
Partnership will consummate certain transactions contemplated in connection with
the Merger, as described in the Merger Agreement, that will result in PREIT
Partnership acquiring substantially all of the assets of Crown Partnership in
exchange for limited partnership interests in PREIT Partnership.
In connection with the Merger Agreement and the closing of the
Merger, PREIT Partnership has made certain undertakings to the partners of Crown
Partnership, consisting of the undersigned, who will become, directly or
indirectly, limited partners in PREIT Partnership as a result of the Merger.
Among those undertakings is the requirement that PREIT Partnership enter into a
Tax Protection Agreement, dated as of the date hereof, with the undersigned (the
"Tax Protection Agreement"), pursuant to which PREIT Partnership will agree to
provide certain tax and debt protections to the undersigned, subject to certain
terms and conditions.
As a condition of, and a material inducement to, PREIT
providing tax and debt protection to the undersigned as and to the extent set
forth in the Tax Protection Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
each of the undersigned hereby agrees, intending to be legally bound hereby, as
follows:
1. Definitions. Capitalized terms used herein and not defined
are used as defined in the Merger Agreement. As used in this Shareholder
Agreement (the "Agreement"), the following capitalized terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person. The term "control" has the meaning ascribed to
such term in Rule 405 under the Securities Act.
"Beneficial Owner" shall mean any Person deemed to be a
"beneficial owner" of a security as defined in Rule 16a-1(a)(2) or Rule
13d-3(d)(1)(i) under the Securities Exchange Act of 1934, as amended. The term
"Beneficially Own" has a correlative meaning.
"Covered PREIT Common Shares" shall mean, with respect to any
Person, the PREIT Common Shares received by such Person pursuant to the Merger
or the other transactions contemplated by the Merger Agreement or pursuant to
the redemption of any Covered PREIT OP Units.
"Covered PREIT OP Units" shall mean, with respect to any
Person, the PREIT OP Units received or to be received by such Person pursuant to
the Merger or the other transactions contemplated by the Merger Agreement.
"Covered PREIT Securities" shall mean, with respect to any
Person, the Covered PREIT OP Units and the Covered PREIT Common Shares
Beneficially Owned by such Person; it being the intent of the parties that any
securities of PREIT Trust or PREIT Partnership acquired by any of the
undersigned other than pursuant to the Merger and the other transactions
contemplated by the Merger Agreement, including without limitation securities
acquired in the open market and pursuant to the exercise of options and dividend
reinvestment plans, shall not constitute Covered PREIT Securities subject to
this Agreement.
"Immediate Family" shall mean, with respect to any natural
person, such person's (natural, adoptive or by re-marriage) spouse, parents,
descendants, nephews, nieces, brothers, sisters and their respective spouses.
"Indemnification Agreement" shall mean that certain
Indemnification Agreement by and among PREIT Trust, PREIT Partnership, Crown
Investments Trust, Crown American Investment Company, Mark E. Pasquerilla and
Crown Delaware Holding Company, as guarantor, dated as of May 13, 2003.
"Initial Period" shall mean the period beginning immediately
upon the expiration of the Two Week Post-Closing Period and ending on the date
that is nine (9) months after the date hereof.
"Oak Ridge Net Proceeds of Sale" shall mean an amount equal to
the aggregate value of all consideration received (except, in the case of any
promissory note or other deferred consideration received, only the aggregate
value of all cash consideration received or to be received during the Initial
Period) by the undersigned in connection with the sale of the Oak Ridge Mall
(including a partial sale thereof) less (i) all direct costs and expenses
associated therewith, including, but not limited to, transfer taxes, brokerage
fees and transaction costs, (ii) any amounts paid by or on behalf of any of the
undersigned at the time of such sale in satisfaction of any debt secured by such
property and, (iii) in the case of a partial sale of the Oak Ridge Mall, any
portion of the consideration received by the undersigned in connection with such
sale which the undersigned reasonably expect to reinvest within one year from
the date of such sale in improvements or other expenditures reasonably necessary
to maintain and preserve the value of the remainder of the Oak Ridge Mall as a
result of such partial sale. For purposes of this definition, any non-monetary
consideration shall be valued at its fair market value on the date received.
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"Permitted Transferee" shall mean, with respect to any holder
of Covered PREIT Securities subject to this Agreement:
(a) charitable institutions and organizations within the
meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, that are the recipients of bona fide gifts by any of the
undersigned;
(b) if the holder is a natural person, (i) any member of the
holder's Immediate Family, (ii) any trust established solely for the
benefit of the holder and/or one or more members of the holder's
Immediate Family, (iii) any entity controlled by the holder and/or
members of the holder's Immediate Family, or (iv) any charitable
foundations established and maintained by or on behalf of the holder or
a member of the holder's Immediate Family;
(c) if the holder is a trust, the beneficiaries of such trust,
provided that the Covered PREIT Securities so Transferred shall be
subject to the restrictions on subsequent Transfers set forth in this
Agreement;
(d) if the holder is a partnership, limited liability company,
joint venture, corporation, real estate investment trust, business
trust or other business entity, its partners, members, stockholders,
shareholders or other owners who (i) owned interests in such entity on
the date the entity acquired the applicable Covered PREIT Securities
and (ii) continue to own interests in such entity at the time of the
proposed Transfer; and
(e) any lender to which any of the holder's Covered PREIT
Securities are pledged in accordance with Section 3(a) hereof, provided
that such lender shall no longer be considered a Permitted Transferee
with respect to any such pledged Covered PREIT Securities following the
foreclosure by such lender upon its security interest in such Covered
PREIT Securities;
provided, however, that, in each such case, any Transfer complies with Article
12 of the First Amended and Restated Agreement of Limited Partnership of PREIT
Partnership, dated as of September 30, 1997 and as amended through May 13, 2003
(as the same may be amended, restated or supplemented from time to time) and,
except for transferees specified in clause (e) above, the transferee with
respect to such Transfer agrees to be bound by the terms of this Agreement.
"Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
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"PREIT Common Shares" shall mean the common shares of
beneficial interest, par value $1.00 per share, of PREIT Trust.
"PREIT OP Units" shall mean the common units of PREIT
Partnership.
"Purchase Price" shall mean with respect to any Covered PREIT
Securities, the price at which such Covered PREIT Securities are sold.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of November 18, 2003 by and among PREIT
Trust and the undersigned.
"Subsequent Period" shall mean the period beginning
immediately upon the expiration of the Initial Period and ending sixty (60)
months thereafter and "Subsequent Annual Period" shall mean each consecutive
twelve (12) month period during the Subsequent Period commencing on the
expiration of the Initial Period.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Two Week Post-Closing Period" shall mean the period beginning
on the date hereof and ending on the date that is two (2) weeks after the date
hereof.
2. Transfer Restrictions.
(a) Except for Transfers (as defined below) made to Permitted
Transferees, each of the undersigned agrees that if:
(i) any of the undersigned, during the Two Week
Post-Closing Period, offers, sells, contracts to
sell, sells any option or contract to purchase,
purchases any option or contract to sell, grants any
option, right or warrant to purchase, pledges or
otherwise transfers or disposes of, directly or
indirectly, all or a portion of the economic
consequences associated with the ownership of any
Covered PREIT Securities Beneficially Owned by the
undersigned (any such transaction, a "Transfer");
(ii) the undersigned and their Permitted Transferees,
considered collectively as one Beneficial Owner,
during the Initial Period, Transfer any of the
Covered PREIT Securities Beneficially Owned by them
other than (A) pursuant to and in accordance with
Section 4 of the Registration Rights Agreement or (B)
in an amount that would not, after giving effect to
such Transfer and any other Transfers of Covered
PREIT Securities in the applicable period, exceed or
violate the volume limitations of Rule 144(e)(1)
under the Securities Act assuming the undersigned and
their Permitted Transferees, taken together, are a
single Affiliate of PREIT Trust;
(iii) the undersigned and their Permitted Transferees,
considered collectively as one Beneficial Owner,
during the Initial Period, Transfer in the aggregate
an amount of Covered PREIT Securities having an
aggregate Purchase Price of greater than $16 million
less the Oak Ridge Net Proceeds of Sale, if any;
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(iv) the undersigned and their Permitted Transferees,
considered collectively as one Beneficial Owner,
during any Subsequent Annual Period, Transfer in the
aggregate more than 20% of the Covered PREIT
Securities Beneficially Owned by them collectively
(immediately after giving effect to the Merger and
the other transactions contemplated by the Merger
Agreement (the "Initial Amount")); provided that if,
during any Subsequent Annual Period, the undersigned,
considered collectively as one Beneficial Owner,
Transfer less than 20% of the Initial Amount (the
amount by which the Initial Amount exceeds the amount
so transferred being referred to as the "Carryover
Amount"), then the undersigned, considered as one
Beneficial Owner, shall be permitted to Transfer
during any Subsequent Annual Period after such period
a number of Covered PREIT Securities equal to the
Initial Amount plus the Carryover Amount; or
(v) the undersigned and their Permitted Transferees,
considered collectively as one Beneficial Owner,
during the Subsequent Period, Transfer an amount of
the Covered PREIT Securities that would, after giving
effect to such Transfer and any other Transfers of
Covered PREIT Securities in the Subsequent Period,
exceed or violate the volume limitations of Rule
144(e)(1) under the Securities Act assuming the
undersigned and their Permitted Transferees, taken
together, are a single Affiliate of PREIT Trust;
then the undersigned shall forfeit all right and interest to, and PREIT
Partnership shall be released from and shall never be obligated to pay, the
first $25 million of (i) "Tax Cost" (as defined in the Tax Protection Agreement)
and/or (ii) "Interest Expense" (as defined in the Tax Protection Agreement)
and/or (iii) amounts payable pursuant to Section 2(c)(iii) of the Tax Protection
Agreement, which are otherwise payable by PREIT Partnership pursuant to Sections
2(c), 2(d)(iii) and/or 3(d) of the Tax Protection Agreement (and PREIT
Partnership also shall not be obligated to pay any "Gross-Up Amount" (as defined
in the Tax Protection Agreement) with respect to such first $25 million of
payments, but any "Gross-Up Amount" not required to be paid shall not be counted
against the $25 million exculpation from PREIT Partnership's liability under the
Tax Protection Agreement); provided, that if any such Transfer shall be by means
of foreclosure, deed in lieu of foreclosure or similar means with respect to
Covered PREIT Securities pledged in accordance with Section 3(a) of this
Agreement (such Transfer, a "Foreclosure"), then, at the election of Mark E.
Pasquerilla (but subject to the last sentence of this Section 2(a)), either (a)
the undersigned shall suffer the foregoing remedy, or (b) (i) PREIT Trust shall
no longer be required to perform its obligations under Section 1.6 of the Merger
Agreement and such obligations shall immediately cease, and (ii) if then a
trustee of PREIT Trust, Mark E. Pasquerilla shall promptly resign from the Board
of Trustees of PREIT Trust. Notification of the election by Mark E. Pasquerilla
contemplated by the proviso in the immediately preceding sentence shall be
delivered to PREIT pursuant to Section 7 below; provided, however, that if Mark
E. Pasquerilla fails to make such election within five (5) business days
following a Foreclosure, then PREIT may impose either of such penalties at the
sole election of PREIT.
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(b) In the event of any Transfer, the undersigned shall
promptly, and in any event no later than one (1) business day following such
Transfer, notify PREIT of such Transfer pursuant to Section 7 below.
(c) As used herein, a "Transfer" shall be deemed to occur on
the date that the undersigned or the undersigned's Permitted Transferee first
enters into a contract to sell or grants an option to purchase or otherwise
becomes obligated (subject to applicable conditions) to sell, transfer or
dispose of, directly or indirectly, the applicable Covered PREIT Securities, and
any subsequent sale, transfer or disposition pursuant to such contract, option
or other obligation shall not be deemed to be a separate Transfer. The transfer
of Covered PREIT Securities to the estate of the undersigned upon the
undersigned's death, or to the estate of a Permitted Transferee upon the death
of a Permitted Transferee, shall not be deemed to be a Transfer for purposes of
this Agreement, but any Covered PREIT Securities included in the undersigned's
estate will remain subject to the restrictions imposed hereunder. Any Transfer
by a Permitted Transferee of Covered PREIT Securities acquired from the
undersigned, directly or indirectly, shall be deemed to be a Transfer by the
undersigned.
(d) Any Permitted Transferee to whom any Covered PREIT
Securities are Transferred pursuant to this Agreement shall be subject to the
terms and conditions of this Agreement as if such Permitted Transferee were an
original party hereto (it being understood that all calculations made pursuant
to Section 2 of this Agreement shall be made on a collective basis taking into
account all Covered PREIT Securities held by the undersigned and by all
Permitted Transferees who hold any of the Covered PREIT Securities).
None of the provisions in this Agreement shall survive the
termination of this Agreement in accordance with its terms; provided, however,
that nothing contained herein shall release any of the undersigned from any
liability arising from any breach of any of the undersigned's obligations in
this Agreement.
3. Pledges; Redemption Permitted.
(a) Pledges. Notwithstanding any restrictions contained in
Section 2 hereof to the contrary, the undersigned (and the undersigned's
Permitted Transferees) shall be permitted at any time (including without
limitation during the Two Week Post-Closing Period and the Initial Period) to
pledge, encumber or otherwise grant a security interest in any Covered PREIT
Securities Beneficially Owned by the undersigned (or the undersigned's Permitted
Transferees) to any existing or future lender pursuant to a bona fide financing
incurred for investment or other purposes upon customary commercial terms;
provided, however, that immediately following a foreclosure by any such lender,
such lender shall cease to be a Permitted Transferee and such foreclosure shall
constitute a Transfer other than to a Permitted Transferee under Section 2(a) of
this Agreement.
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(b) Foreclosures and Other Remedies. Notwithstanding any
restrictions contained in this Agreement to the contrary, any lender or other
third party transferee who may acquire any of the undersigned's (and the
undersigned's Permitted Transferees') Covered PREIT Securities pledged in
accordance with Section 3(a) hereof, as a result of a foreclosure by the lenders
or the exercise of any other remedies available to such lenders with respect to
the pledge and the related obligations of the undersigned, shall not be bound by
the terms of this Agreement.
(c) Redemptions. Notwithstanding any restrictions contained in
Section 2 hereof to the contrary, the undersigned shall be permitted to exercise
its right to redeem any Covered PREIT OP Units owned by the undersigned subject
to any restrictions imposed on redemption pursuant to the PREIT Partnership
Agreement.
4. Permitted Exceptions. Notwithstanding any restrictions
contained in this Agreement to the contrary, any sale in accordance with Section
2.2(f) of the Indemnification Agreement shall not constitute a Transfer for
purposes of Sections 2(a)(i), (ii) and (iii) of this Agreement and any
transferee of such Covered PREIT Securities shall not be bound by the terms of
this Agreement.
5. Assignment; Binding on Successors and Assigns. This
Agreement and any of the rights, interests or obligations under this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by and
against, the parties hereto and their respective Permitted Transferees (except
for those identified in clause (e) of the definition of Permitted Transferee),
successors and assigns. Each Permitted Transferee (except for those identified
in clause (e) of the definition of Permitted Transferee) shall execute and
deliver a copy of this Agreement to PREIT and shall be bound by the terms and
conditions of this Agreement as if such Permitted Transferee were an original
party hereto.
6 Adjustment for Reorganization and Reclassification. For the
purposes of this Agreement, the minimum ownership amounts and value shall be
adjusted appropriately to reflect any subdivision or combination of Covered
PREIT Common Shares or Covered PREIT OP Units (including, without limitation,
securities convertible into or exercisable or exchangeable for Covered PREIT
Common Shares or Covered PREIT OP Units) and any adjustments arising as a result
of any reorganization, reclassification or similar events of PREIT Trust or
PREIT Partnership occurring after the date of the Merger Agreement.
7. Notices. All notices, requests, claims, demands and other
communication under this Agreement shall be in writing and shall be delivered
personally or 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):
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if to PREIT:
Pennsylvania Real Estate Investment Trust
The Bellevue
200 South Broad Street
Philadelphia, PA 19102
Attention: Bruce Goldman,
Executive Vice President and General Counsel
Facsimile: (215) 546-7311
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 13th Street, N.W.
Washington, D.C. 20004-1109
Attention: J. Warren Gorrell, Jr., Esq.
Stuart A. Barr, Esq.
Facsimile: (202) 637-5910
and
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
Attention: Howard A. Blum, Esq.
Facsimile: (215) 988-2757
if to any of the undersigned or any Permitted Transferee:
Crown American Properties, L.P.
Pasquerilla Plaza
Johnstown, PA 15901
Attention: Ronald J. Hamilton
Facsimile: (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, Esq.
Facsimile: (412) 288-3218
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and
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004-2498
Attention: Joseph C. Shenker, Esq.
Facsimile: (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).
8. Termination. This Agreement shall terminate at the end of
the last day of the Subsequent Period.
9. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. This
Agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives and Permitted Transferees
(except for those identified in clause (e) of the definition of Permitted
Transferee) of the undersigned. The undersigned has carefully read this
Agreement and discussed its requirements, to the extent the undersigned believed
necessary, with its counsel.
(signatures appear on the following page)
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EXECUTION COPY
IN WITNESS WHEREOF, each of the undersigned has duly executed
and delivered this Agreement, or caused this Agreement to be duly executed and
delivered on his or its behalf, as of the date first written above.
Very truly yours,
/s/ Mark E. Pasquerilla
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Mark E. Pasquerilla
Crown American Properties, L.P.,
a Delaware limited partnership
By: Crown American Realty Trust,
its general partner
By: /s/ Terry L. Stevens
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Name:
Title:
Crown Investments Trust,
a Delaware business trust
By: /s/ Ronald J. Hamilton
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Name: Ronald J. Hamilton
Title: Chief Financial Officer and Vice President
Crown American Investment Company,
a Delaware corporation
By: /s/ Ronald J. Hamilton
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Name: Ronald J. Hamilton
Title: Chief Financial Officer and Vice President
Crown Delaware Holding Company,
a Delaware Corporation
By: /s/ Ronald J. Hamilton
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Name: Ronald J. Hamilton
Title: Chief Financial Officer and Vice President
Acknowledged and Agreed:
Pennsylvania Real Estate Investment Trust
a Pennsylvania business trust
By: /s/ Bruce Goldman
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Name: Bruce Goldman
Title: Executive Vice President & General Counsel
PREIT Associates, L.P.
a Delaware limited partnership
By: Pennsylvania Real Estate Investment Trust,
its general partner
By:/s/ Bruce Goldman
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Name: Bruce Goldman
Title: Executive Vice President & General Counsel