TRO CONTRIBUTION AGREEMENT
TABLE OF CONTENTS
SECTION 1. ACQUISITION OF PREFERRED SHARES AND
NON-VOTING COMMON SHARES.......................... 3
1.1 Sale and Contribution of Shares....................... 3
1.2 Issuance of Class A Units............................. 4
SECTION 2. CONTINGENT RIGHT TO ADDITIONAL UNITS............................ 4
2.1 Certain Definitions................................... 4
2.2 Earn-Out.............................................. 8
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANIES AND THE TRO SHAREHOLDERS............. 9
3.1 Organization.......................................... 9
3.2 Power and Authority................................... 10
3.3 No Conflicts.......................................... 11
3.4 Capitalization; Ownership of TRO Shares............... 12
3.5 Investments........................................... 13
3.6 Compliance with Laws.................................. 14
3.7 Litigation; Orders.................................... 15
3.8 Financial Statements.................................. 16
3.9 Undisclosed Liabilities............................... 16
3.10 Title to Property; Encumbrances....................... 18
3.11 Real Property......................................... 19
3.12 List of Properties, Contracts, etc.................... 19
3.13 Contracts............................................. 22
3.14 Intellectual Property................................. 22
3.15 Clients............................................... 23
3.16 Taxes................................................. 23
3.17 Employee Benefits..................................... 25
3.18 Labor Matters......................................... 27
3.19 Relationships With Related Persons.................... 29
3.20 Environmental Matters................................. 30
3.21 Absence of Certain Changes and Events................. 32
3.22 Books and Records..................................... 33
3.23 Insurance............................................. 34
3.24 Proxy Statement....................................... 34
3.25 Brokers............................................... 35
3.26 Accurate Disclosure................................... 35
3.27 Knowledge............................................. 35
3.28 Investment Representations............................ 35
3.29 First Refusal Rights Agreement........................ 36
3.30 One Meridian Plaza.................................... 36
3.31 Equity Fund........................................... 36
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING
PREIT AND THE PARTNERSHIP........................... 36
4.1 Organization.......................................... 37
4.2 Power and Authority................................... 37
4.3 No Conflicts.......................................... 38
4.4 Capitalization........................................ 39
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4.5 PREIT Reports......................................... 39
4.6 Information Included in Proxy Statement............... 40
4.7 Litigation............................................ 40
4.8 Material Adverse Change............................... 40
4.9 Brokers............................................... 40
SECTION 5. AGREEMENTS AND COVENANTS........................................ 41
5.1 Special Shareholders Meeting.......................... 41
5.2 Proxy Statement....................................... 41
5.3 Reasonable Efforts.................................... 41
5.4 Access to Information; Confidentiality................ 42
5.5 Public Announcements.................................. 42
5.6 No Solicitation....................................... 43
5.7 Notifications......................................... 43
5.8 Conduct of the Companies' Business.................... 43
5.9 Sale of Shares of TRO................................. 45
5.10 Financial Information................................. 45
5.11 Costs and Expenses.................................... 45
5.12 Confidentiality....................................... 46
5.13 Voting Agreements of Sylvan M. Cohen and Leonard
I. Korman............................................. 46
5.14 TRO Consolidation..................................... 46
5.15 TRO Recap............................................. 46
5.16 Predevelopment Properties; Concord Pike; Girard
Estate................................................ 47
5.17 Closing Loan; Purchase of Equity Fund................. 47
5.18 Acquisitions by TRO Affiliates........................ 48
5.19 Board of Trustees..................................... 48
5.20 Distributions Prior to Closing........................ 49
5.21 Employees............................................. 51
5.22 Employment Agreements................................. 51
5.23 PREIT Fiscal Year..................................... 51
5.24 Contribution of PREIT Assets.......................... 51
5.25 TRO Board Meetings.................................... 52
5.26 Receivables........................................... 52
5.27 Life Insurance........................................ 52
5.28 Liabilities........................................... 52
5.29 Accounts Receivable................................... 54
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO PREIT'S AND
THE PARTNERSHIP'S OBLIGATIONS....................... 55
6.1 Representations and Warranties........................ 55
6.2 Performance of Covenants.............................. 55
6.3 Legal Matters......................................... 55
6.4 Consents and Approvals................................ 56
6.5 Opinion of Counsel.................................... 56
6.6 (Intentionally Omitted)............................... 56
6.7 Material Adverse Change............................... 56
6.8 Predevelopment Partnership............................ 56
6.9 Existing Properties................................... 56
6.10 EPD Properties........................................ 57
6.11 TRO Consolidation..................................... 57
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6.12 TRO Recap............................................. 57
6.13 Rights of First Refusal............................... 57
6.14 Opinions of Financial Advisor......................... 57
6.15 Ronald Rubin.......................................... 57
6.16 Shareholder Approval.................................. 57
6.17 Registration Rights Agreement......................... 57
6.18 Lock-Up Letter Agreements............................. 58
6.19 Partnership Agreement................................. 58
6.20 Satisfaction of Section 5.28(a)....................... 58
6.21 Listing of PREIT Shares............................... 58
6.22 Goldenberg Estoppel Certificate....................... 58
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO THE TRO
SHAREHOLDERS' AND THE COMPANIES' OBLIGATIONS...... 58
7.1 Representations and Warranties........................ 58
7.2 Performance of Covenants.............................. 59
7.3 Legal Matters......................................... 59
7.4 Predevelopment Properties............................. 59
7.5 EPD Properties........................................ 59
7.6 Existing Properties................................... 59
7.7 Contribution of PREIT Assets.......................... 59
7.8 Opinion of Counsel.................................... 60
7.9 Registration Rights Agreement......................... 60
7.10 Partnership Agreement................................. 60
7.11 (Intentionally Omitted)............................... 60
7.12 Consents and Approvals................................ 60
7.13 Material Adverse Change............................... 60
SECTION 8. CLOSING......................................................... 60
8.1 Time and Place of the Closing......................... 60
8.2 Deliveries at the Closing............................. 60
SECTION 9. TERMINATION AND ABANDONMENT...................................... 62
9.1 Termination........................................... 62
9.2 Procedure for Termination; Effect of
Termination........................................... 63
SECTION 10. INDEMNIFICATION................................................. 64
10.1 Indemnification by TRO Shareholders................... 64
10.2 Indemnification by PREIT.............................. 64
10.3 Limitations on Liability.............................. 64
10.4 Procedure For Indemnification - Third Party
Claims................................................ 67
10.5 Procedure for Indemnification - Other Claims.......... 69
10.6 Acknowledgement....................................... 69
10.7 Right of Set-Off...................................... 69
10.8 Indemnification Payments.............................. 69
10.9 Transfer of Units..................................... 69
SECTION 11. MISCELLANEOUS................................................... 70
11.1 Survival of Representations and Warranties............ 70
11.2 Further Assurances.................................... 70
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11.3 Notices............................................... 70
11.4 Assignment and Benefit................................ 72
11.5 Amendment, Modification and Waiver.................... 72
11.6 Governing Law; Consent to Jurisdiction................ 72
11.7 Section Headings and Defined Terms.................... 73
11.8 Severability.......................................... 73
11.9 Counterparts.......................................... 73
11.10 Entire Agreement...................................... 73
11.11 Guaranty of Performance by TRO Predevelopment,
LLC................................................... 73
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TRO CONTRIBUTION AGREEMENT
THIS TRO CONTRIBUTION AGREEMENT (the "Agreement") is made as of the
30th day of July, 1997, by and among PENNSYLVANIA REAL ESTATE INVESTMENT
TRUST, an unincorporated association in business trust form created under
Pennsylvania law pursuant to a Trust Agreement dated December 27, 1960, as
last amended and restated on December 16, 1987 ("PREIT"), PREIT ASSOCIATES,
L.P., a Delaware limited partnership (the "Partnership"), THE RUBIN
ORGANIZATION, INC., a Pennsylvania corporation ("TRO"), THE RUBIN
ORGANIZATION-ILLINOIS, INC., an Illinois corporation ("TRO Illinois" and,
together with TRO, the "Companies" and each, a "Company"), the persons
identified on Schedule A hereto, constituting all of the shareholders of TRO
(collectively, the "Current TRO Shareholders"), and the entities identified on
Schedule B hereto (collectively, the "Former TRO Debtholders," and together
with the Current TRO Shareholders, the "TRO Shareholders"). An index of
defined terms is attached as an appendix hereto.
Background
PREIT has qualified as a real estate investment trust under Section
856(c) of the Internal Revenue Code of 1986, as amended (the "Code").
The Companies are engaged in the business of managing and developing,
and providing consulting, brokerage and related services with respect to, real
estate (the "Business").
PREIT is the sole general partner of the Partnership. PREIT Property
Trust, a Pennsylvania business trust, the beneficial interests in which are
held entirely by PREIT ("PREIT Subsidiary"), is currently the sole limited
partner of the Partnership.
The Current TRO Shareholders are the record and beneficial owners of
all of the outstanding capital stock of TRO.
Prior to the closing of the acquisition by the Partnership of TRO
capital stock contemplated herein: (i) TRO shall be recapitalized so that its
capital stock shall consist of Class A Voting Common Shares, par value $.01
per share (the "Voting Common Shares"), Class B Non-Voting Common Shares, par
value $.01 per share (the "Non-Voting Common Shares"), and Convertible
NonParticipating Preferred Shares, par value $.01 per share (the "Preferred
Shares"), each of which is convertible on a one-for-one basis into Non-Voting
Common Shares; (ii) in connection with such recapitalization, the Current TRO
Shareholders shall exchange all of the currently outstanding capital stock of
TRO for newly-issued Non-Voting Common Shares, and the Former TRO Debtholders
shall exchange approximately $6,000,000 of
indebtedness owed by TRO to such parties for newly-issued Preferred Shares;
(iii) TRO shall issue Voting Common Shares authorized as part of such
recapitalization to the PREIT-RUBIN, Inc. Employee Stock Ownership Trust (the
"Employee Stock Ownership Trust"), which shall thereupon own all of the
outstanding Voting Common Shares and hold all such shares pursuant to the
terms of the PREIT-RUBIN, Inc. Employee Stock Ownership Plan (the "Employee
Stock Ownership Plan"); and (iv) the outstanding capital stock of TRO Illinois
shall be transferred to TRO (the "TRO Consolidation").
As a result of the transactions described in subclauses (i) through
(iii) of the immediately preceding paragraph (collectively, the "TRO Recap"),
immediately prior to the closing of the acquisition of the Preferred Shares
and Non-Voting Common Shares by the Partnership as contemplated herein, all of
the outstanding Preferred Shares shall be owned by the Former TRO Debtholders,
all of the outstanding Voting Common Shares shall be owned by the Employee
Stock Ownership Trust and all of the outstanding Non-Voting Common Shares
shall be owned by the Current TRO Shareholders.
Immediately prior to or concurrent with the closing of the
acquisition of the Preferred Shares and Non-Voting Common Shares contemplated
herein, PREIT intends to contribute substantially all of its assets to the
Partnership in return for the issuance to PREIT Subsidiary of Class A limited
partner interests in the Partnership ("Class A Units") as contemplated by the
First Amended and Restated Agreement of Limited Partnership of PREIT
Associates, L.P. that is to be executed and delivered at such closing (the
"Amended Partnership Agreement").
The parties hereto desire to set forth, inter alia, the terms and
conditions by which the Partnership will acquire all of the outstanding
Preferred Shares from the Former TRO Debtholders and all of the outstanding
Non-Voting Common Shares from the Current TRO Shareholders in return for the
issuance of Class A Units.
The acquisition of the outstanding Preferred Shares and NonVoting
Common Shares contemplated herein is part of a larger transaction in which,
inter alia: (i) the Partnership will acquire from TRO or TRO Affiliates (as
hereinafter defined) all of the right, title and interest of TRO or the TRO
Affiliates in and to The Court at Oxford Valley, Hillview Shopping Center and
Northeast Tower Center (collectively, the "Existing Properties") pursuant to
the terms and conditions of the Contribution Agreement dated as of the date
hereof (the "Court at Oxford Valley Contribution Agreement") among the
Partnership, PREIT, Rubin Oxford, Inc. and Rubin Oxford Valley Associates,
L.P., the Contribution Agreement dated the date hereof (the "Hillview
Contribution Agreement") among the Partnership, PREIT, Cherry
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Hill Partner, Inc. and Rubin Oxford Valley Associates, L.P. and the
Contribution Agreement dated the date hereof (the "Northeast Contribution
Agreement") among PREIT, the Partnership, Roosevelt Blvd. Co., Inc. and
certain individuals; (ii) the Partnership will acquire all the right, title
and interest of (1) Magnolia Retail Associates, L.L.C. in and to Magnolia
Mall, Florence, South Carolina (the "Magnolia Mall") pursuant to an assignment
by PREIT to the Partnership of all of PREIT's rights and obligations under
that certain Purchase and Sale Agreement dated June 30, 1997 (the "Magnolia
Agreement") by and between TRO, as buyer, and Magnolia Retail Associates,
L.L.C., as seller, obtained by an assignment by TRO to PREIT pursuant to an
Agreement Regarding Assignment of Purchase and Sale Agreements dated June 30,
1997 (the "EPD Assignment Agreement") by and between TRO and PREIT; and (2)
Diversified Equity Corporation of Illinois, Inc. in and to North Dartmouth
Mall, Dartmouth, Massachusetts (the "North Dartmouth Mall" and, together with
Magnolia Mall, the "EPD Properties") pursuant to an assignment by TRO to PREIT
to be made, in accordance with the terms of the EPD Assignment Agreement, on
the Closing Date hereunder of all of TRO's rights and obligations under the
Purchase and Sale Agreement dated June 30, 1997 by and between TRO, as buyer,
and Diversified Equity Corporation of Illinois, Inc., as seller (the "North
Dartmouth Agreement") and a subsequent assignment to be made on the Closing
Date hereunder of all of PREIT's rights and obligations under the North
Dartmouth Agreement to the Partnership; and (iii) the Partnership will acquire
from TRO Predevelopment, LLC, a limited liability company controlled by
certain TRO Affiliates and TRO Shareholders, all of the right, title and
interest of such limited liability company (the "Predevelopment Partnership")
in and to the following predevelopment properties: the Blue Route Metroplex,
Christiana Strip Shopping Center, Red Rose Commons, certain properties in York
and Warrington, Pennsylvania and, under certain circumstances described in the
Predevelopment Properties Contribution Agreement, other properties
(collectively, the "Predevelopment Properties") pursuant to the terms and
conditions of the Predevelopment Properties Contribution Agreement dated as of
the date hereof (the "Predevelopment Properties Contribution Agreement") among
PREIT, the Partnership and TRO Predevelopment, LLC.
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
SECTION 1. ACQUISITION OF PREFERRED SHARES AND
NON-VOTING COMMON SHARES
1.1 Sale and Contribution of Shares. Subject to the terms and
conditions of this Agreement, at the Closing: (i) the
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Current TRO Shareholders shall sell, transfer, contribute and deliver to the
Partnership, free and clear of all Encumbrances (other than applicable
securities law restrictions), all of the issued and outstanding Non-Voting
Common Shares, (ii) the Former TRO Debtholders shall sell, transfer,
contribute and deliver to the Partnership, free and clear of all Encumbrances
(other than applicable securities law restrictions), all of the issued and
outstanding Preferred Shares (together with the shares referred to in
subclause (i), the "Contributed TRO Shares"), and (iii) in the event Howell
Shopping Center is not a Predevelopment Property as of the Closing as provided
in Section 5.20, the TRO Shareholders shall sell, contribute and deliver to
the Partnership (or its designee), free and clear of all Encumbrances, 50% of
the outstanding member interests in the Howell LLC. Immediately following the
Closing, the Partnership shall convert all of the Preferred Shares into
additional NonVoting Common Shares. The TRO Shareholders shall cause the
number of Contributed TRO Shares to be equal, as of the Closing, to 95% of the
sum of (x) the number of Contributed TRO Shares and (y) the number of Voting
Common Shares outstanding as of the Closing.
1.2 Issuance of Class A Units.
(a) In consideration for the sale, transfer,
contribution and delivery of the Contributed TRO Shares described in Section
1.1, subject to the terms and conditions of this Agreement, at the Closing,
the Partnership shall issue to the TRO Shareholders 200,000 Class A Units and
the contingent right to receive up to an aggregate of 800,000 (subject to
adjustment as specified in Section 2.2) additional Class A Units as described
in Section 2.2 hereof; provided, however, that in the event the record date
for a PREIT Recapitalization occurs prior to Closing, the number of Class A
Units issuable at Closing shall be proportionately adjusted as appropriate to
reflect such event.
(b) The Class A Units issued at Closing pursuant to
Section 1.2 and after Closing pursuant to Section 2.2 shall be allocated among
the TRO Shareholders in accordance with Schedule C hereto unless, at least
five business days prior to Closing, all of the TRO Shareholders and the TRO
Debtholders shall have signed and delivered to PREIT a new Schedule C which
shall replace Schedule C hereto.
SECTION 2. CONTINGENT RIGHT TO ADDITIONAL UNITS
2.1 Certain Definitions. For purposes of this Agreement, the
following capitalized terms shall have the following meanings:
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"Accumulated FFO Shortfall" as of a particular date
means the aggregate of any and all FFO Shortfalls as of such date in respect
of then-completed Earn-Out Periods.
"Adjusted FFO" means PREIT's consolidated net income
or loss before extraordinary items and the cumulative effect of any changes in
accounting principles, computed in accordance with United States generally
accepted accounting principles ("GAAP"), plus, to the extent deducted in
computing such consolidated net income or loss, (x)(i) depreciation expense
attributable to real property, (ii) amortization expense attributable to
capitalized leasing costs, tenant allowances and improvements and any
goodwill, management contracts and similar items arising from the allocation
of the purchase price under this Agreement, the Oxford Valley Contribution
Agreement, the Hillview Contribution Agreement, the Northeast Contribution
Agreement and the Predevelopment Properties Contribution Agreement among the
assets contributed pursuant to such agreements, (iii) expenses of the
transactions contemplated herein, (iv) losses on the sale of real estate
assets whether directly or indirectly owned, (v) material provisions for the
write-down or impairment of any real estate investments (including
predevelopment costs), (vi) material prepayment penalties, and (vii) rents
currently due under the terms of leases in excess of rental revenues reported
minus, to the extent included in computing such consolidated net income or
loss (y)(i) rental revenues reported in excess of amounts currently due under
the terms of leases, (ii) revenue relating to lease termination fees (which
excluded revenue shall be treated as revenue ratably over the balance of the
original lease term) and (iii) gains on the sale of directly or indirectly
owned real estate; provided, however, that (I) all fees that are described in
subclause (VIII) of Section 3.9(b) shall, notwithstanding their prepayment or
acceleration, be deemed to have been received at the times they would have
been payable assuming no acceleration or prepayment had occurred; (II)
$528,000 shall be deemed to have been received by TRO in respect of the South
Park rent roll at the following times: 50% of such amount in 1998 and 50% in
1999; (III) all Development Fees that are described in subclause (IV) of
Section 3.9(b) shall be deemed to have been received by TRO at the time such
fees were scheduled to have been received pursuant to Schedule 5.26; and (IV)
all Development Fees described in subclause (V) of Section 3.9(b) shall be
deemed to have been received by TRO either in the fourth calendar quarter of
1997 (if Closing occurs on or prior to September 30, 1997) or in 1998 (if
Closing occurs after September 30, 1997).
"Adjusted FFO Per Share with Carryforward" means a
quotient, the numerator of which equals the sum of (x) Adjusted FFO for an
Earn-Out Period and (y) any Carryforward FFO includable in such Earn-Out
Period and the denominator of which equals the Share Denominator for such
Earn-Out Period.
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"Annual Hurdle" means: (i) if the Closing occurs
after September 30, 1997, $2.40 for the First Earn-Out Period; $2.53 for the
Second Earn-Out Period; $2.65 for the Third Earn-Out Period; $2.83 for the
Fourth Earn-Out Period; and $2.92 for the Fifth Earn-Out Period; and (ii) if
the Closing occurs on or prior to September 30, 1997, $0.58 for the First
Earn-Out Period; $2.40 for the Second Earn-Out Period; $2.53 for the Third
Earn-Out Period; $2.65 for the Fourth Earn-Out Period; $2.83 for the Fifth
Earn-Out Period; and $2.19 for the Sixth Earn-Out Period; provided, however,
that in the event of a PREIT Recapitalization, the foregoing values shall be
proportionately adjusted as appropriate for all Post-Recapitalization Earn-Out
Periods with respect to such PREIT Recapitalization.
"Annual Target" means: (i) if the Closing occurs
after September 30, 1997, $2.66 for the First Earn-Out Period; $2.81 for the
Second Earn-Out Period; $2.94 for the Third Earn-Out Period; $3.14 for the
Fourth Earn-Out Period; and $3.24 for the Fifth Earn-Out Period; or (ii) if
the Closing occurs on or prior to September 30, 1997, $0.65 for the First
Earn-Out Period; $2.66 for the Second Earn-Out Period; $2.81 for the Third
Earn-Out Period; $2.94 for the Fourth Earn-Out Period; $3.14 for the Fifth
Earn-Out Period; and $2.43 for the Sixth Earn-Out Period; provided, however,
that in the event of a PREIT Recapitalization, the foregoing values shall be
proportionately adjusted as appropriate for all Post-Recapitalization Earn-Out
Periods with respect to such PREIT Recapitalization.
"Base Earn-Out Units" for an Earn-Out Period means
20,000 for the First Earn-Out Period and 57,500 for each other Earn-Out
Period; provided, however, that if the Closing occurs on or prior to September
30, 1997, Base Earn-Out Units for the First Earn-Out Period means 5,000 and
Base Earn-Out Units for the Sixth Earn-Out Period means 52,500 and provided
further that in the event of a PREIT Recapitalization, the foregoing numbers
shall be proportionately adjusted as appropriate for all Post-Recapitalization
Earn-Out Periods with respect to such PREIT Recapitalization.
"Carryforward FFO" includable in an Earn-Out Period
(the "Current Period") means the amount, if any, by which Adjusted FFO for the
Earn-Out Period immediately preceding the Current Period (the "Preceding
Period") exceeded the sum of (x) the Target FFO for such Preceding Period and
(y) the Accumulated FFO Shortfall immediately prior to the commencement of the
Preceding Period.
"Earn-Out Period" means the following periods:
(i) if the Closing occurs after September
30, 1997: (A) the First Earn-Out Period, the calendar year 1998; (B) the
Second Earn-Out Period, the calendar year 1999; (C) the
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Third Earn-Out Period, the calendar year 2000; (D) the Fourth Earn-Out Period,
the calendar year 2001; and (E) the Fifth Earn-Out Period, the calendar year
2002; or
(ii) if the Closing occurs on or prior to
September 30, 1997: (A) the First Earn-Out Period, the three month period
beginning October 1, 1997 and ending December 31, 1997; (B) the Second
Earn-Out Period, the calendar year 1998; (C) the Third Earn-Out Period, the
calendar year 1999; (D) the Fourth Earn-Out Period, the calendar year 2000;
(E) the Fifth Earn-Out Period, the calendar year 2001; and (F) the Sixth
Earn-Out Period, the nine months beginning January 1, 2002 and ending
September 30, 2002.
"Excess FFO" for an Earn-Out Period means the amount,
if any, by which Adjusted FFO for such Earn-Out Period exceeds the Target FFO
for such Earn-Out Period.
"FFO Per Share Spread" for an Earn-Out Period means
an amount equal to the Annual Target for such Earn-Out Period minus the Annual
Hurdle for such Earn-Out Period.
"FFO Shortfall" for an Earn-Out Period means the
amount, if any, by which Adjusted FFO for such Earn-Out Period is less than
the Target FFO for such Earn-Out Period minus the amount of Excess FFO that
has been carried back and credited to such Earn-Out Period from one or more
later Earn-Out Periods pursuant to Section 2.2(b)(ii).
"Gap Period" means the period beginning on the day
immediately following the end of an Earn-Out Period and ending on the date
immediately preceding the date on which the Current TRO Shareholders become
the record owners of additional Class A Units issued in respect of such
Earn-Out Period in accordance with Section 2.2(b) hereof.
"Maximum Earn-Out Units" for an Earn-Out Period means
130,000 for the First Earn-Out Period and 167,500 for each other Earn-Out
Period; provided, however, that if the Closing occurs on or prior to September
30, 1997, Maximum Earn-Out Units for the First Earn-Out Period means 32,500
and Maximum Earn-Out Units for the Sixth Earn-Out Period means 135,000 and
provided further that in the event of a PREIT Recapitalization, the foregoing
numbers shall be proportionately adjusted as appropriate for all
Post-Recapitalization Earn-Out Periods with respect to such PREIT
Recapitalization.
"Post-Recapitalization Earn-Out Periods" with respect
to a PREIT Recapitalization means all Earn-Out Periods other than those
Earn-Out Periods with respect to which additional Class A Units have been
issued prior to the record date for such PREIT Recapitalization.
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"PREIT Recapitalization" means that the issued and
outstanding PREIT Shares shall have been changed into a different number of or
class of shares as the result of a stock dividend, a stock split, a reverse
split, recapitalization, reclassification or any other similar change in
capitalization of PREIT without the receipt of any consideration by PREIT.
"PREIT Shares" means shares of beneficial interest in
PREIT, par value $1 per share.
"Share Denominator" for an Earn-Out Period means the
sum of: (x) the weighted average number of PREIT Shares outstanding during
such Earn-Out Period, (y) the aggregate number of PREIT Shares issuable as of
the end of such Earn-Out Period in order to redeem or otherwise retire the
weighted average number of the Class A Units, other securities of the
Partnership and, to the extent includable in the calculation of FFO per share
under the conventions currently followed by PREIT, other securities
outstanding during such Earn-Out Period and (z) the aggregate number of PREIT
Shares issuable as of the end of such Earn-Out Period in order to redeem all
of the Class A Units and other securities of the Partnership that are issuable
as of the end of such Earn-Out Period in respect of the Predevelopment
Properties that have been "completed" (as defined in the Predevelopment
Properties Contribution Agreement) or for which the Class A Units and other
securities of the Partnership issuable in consideration thereof have been
fixed as of the end of such Earn-Out Period.
"Target FFO" for an Earn-Out Period means the amount
of Adjusted FFO that is required to earn the Maximum Earn-Out Units for such
Earn-Out Period pursuant to Section 2.2(b)(i).
"Unit Spread" for an Earn-Out Period means an amount
equal to the Maximum Earn-Out Units for such Earn-Out Period
minus the Base Earn-Out Units for such Earn-Out Period.
2.2 Earn-Out.
(a) Promptly after the issuance of an audit
report with respect to PREIT's consolidated annual financial statements for
the fiscal year in which an Earn-Out Period ends, the Partnership shall issue
and deliver to the TRO Shareholders: (i) the number of additional Class A
Units that are to be issued in respect of such Earn-Out Period in accordance
with Section 2.2(b), if any, and (ii) an amount of cash equal to the
distributions to which the holder of such additional Class A Units would have
been entitled, if any, under the Partnership Agreement during the Gap Period
immediately following such Earn-Out Period if such additional Class A Units
had been issued to the TRO Shareholders on the first day of such Gap Period.
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(b) The number of additional Class A Units, if any, issuable
in respect of an Earn-Out Period shall be equal to the sum of "x" and "y"
where:
(i) "x" equals: (A) if Adjusted FFO Per Share with
Carryforward for such Earn-Out Period is less than the Annual Hurdle for such
period, zero; or (B) if Adjusted FFO Per Share with Carryforward for such
Earn-Out Period equals or exceeds the Annual Hurdle for such Earn-Out Period,
an amount equal to the sum of: (I) the Base Earn-Out Units for such Earn-Out
Period and (II) the product of the Unit Spread for such Earn-Out Period and a
fraction (not to exceed 1.0) the numerator of which equals the excess, if any,
of Adjusted FFO Per Share with Carryforward for such Earn-Out Period over the
Annual Hurdle for such period and the denominator of which equals the FFO Per
Share Spread for such Earn-Out Period; provided, however, that under no
circumstances shall the number of Class A Units issuable pursuant to this
subparagraph (b)(i) in respect of an Earn-Out Period exceed the Maximum
Earn-Out Units for such Earn-Out Period; and
(ii) "y" equals: (A) if there is no Excess FFO for
such Earn-Out Period, zero; and (B) if there is Excess FFO for such Earn-Out
Period, the number of additional Class A Units, if any, that results from the
following: Excess FFO for an Earn-Out Period shall be carried back and
credited to earlier Earn-Out Periods, if any, with existing FFO Shortfalls
(such excess being credited first to the earliest such deficit period, if
there is more than one such period, and being credited to any such period only
to the extent necessary to eliminate any FFO Shortfall for such period) and
the number of units deliverable pursuant to subparagraph (b)(i) above with
respect to any such earlier period to which such Excess FFO has been credited
shall be recalculated with carried back Excess FFO being added to the actual
Adjusted FFO for such prior period; the number of additional Class A Units
issuable as a result of such recalculations shall be aggregated.
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANIES AND THE TRO SHAREHOLDERS
Each TRO Shareholder hereby represents and warrants to PREIT and the
Partnership as follows (provided that to the extent a representation or
warranty set forth in Section 3 relates solely to the business, affairs or
status of a TRO Shareholder, such representation and warranty shall be deemed
to be made solely by the applicable TRO Shareholder to which such
representation and warranty relates):
3.1 Organization. Each Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has all corporate power to carry on its business as
presently conducted, to own and
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lease the assets and properties which it owns and leases and to perform all
its obligations under each agreement and instrument to which it is a party or
by which it is bound. Each Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction identified in Section 3.1 of the Disclosure Letter delivered by
the TRO Shareholders to PREIT and the Partnership on the date hereof (the "TRO
Disclosure Letter"), which includes each jurisdiction in which its ownership
or leasing of assets or properties or the nature of its activities requires
such qualification except where the failure to be so qualified would not have
a material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of such Company (a "Material Adverse
Effect").
3.2 Power and Authority.
(a) Each TRO Shareholder has full capacity, legal right,
power and authority to enter into and perform his or its obligations under
this Agreement and under the other agreements and documents required to be
delivered by him or it prior to or at the Closing (collectively, the
"Shareholder Transaction Documents"). This Agreement has been duly and validly
executed and delivered by each TRO Shareholder and constitutes the legal,
valid and binding obligation of each TRO Shareholder enforceable against him
or it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally or by general equitable principles. When executed
and delivered as contemplated herein, the other Shareholder Transaction
Documents shall, assuming due authorization, execution and delivery thereof by
the other parties thereto, constitute the legal, valid and binding obligation
of each TRO Shareholder that is a party thereto enforceable against him or it
in accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally or by general equitable principles.
(b) Each Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and all other Shareholder Transaction Documents to which such Company is a
party. The execution, delivery and performance by each Company of this
Agreement and the other Shareholder Transaction Documents to which it is a
party have been duly authorized by all necessary corporate action on the part
of such Company. This Agreement has been duly and validly executed and
delivered by each Company and constitutes the legal, valid and binding
obligation of each Company enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general
-10-
equitable principles. When executed and delivered as contemplated herein, each
of the other Shareholder Transaction Documents to which a Company is a party
shall, assuming due authorization, execution and delivery thereof by the other
parties thereto, constitute a legal, valid and binding obligation of such
Company enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
3.3 No Conflicts.
(a) Except as described in Section 3.3(a) of the TRO
Disclosure Letter, the execution and delivery by the Companies and the TRO
Shareholders of this Agreement do not, and the execution and delivery by the
Companies and the TRO Shareholders of the other Shareholder Transaction
Documents and the performance by the Companies and the TRO Shareholders of all
of the Shareholder Transaction Documents will not (in each case, with or
without the passage of time or the giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A) the
articles of incorporation, bylaws or partnership agreement (or other
organizational documents) of either Company or any TRO Shareholder or (B) any
Law applicable to any TRO Shareholder or either Company or by or to which any
assets or properties of any TRO Shareholder or either Company is bound or
subject;
(ii) violate or conflict with, result in a breach
of, constitute a default or otherwise cause any loss of benefit under, or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any Authorization or
Contract to which any TRO Shareholder or either Company is a party or by which
either Company or any TRO Shareholder or any assets or properties of either
Company is bound or affected including, without limitation, any existing
agreement among the TRO Shareholders or any thereof; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to either Company or any of
their respective assets or properties or the Class A Units issuable hereunder
to any TRO Shareholder.
(b) Except as described in Section 3.3(b) of the TRO
Disclosure Letter, the execution and delivery by the Companies and the TRO
Shareholders of this Agreement do not, and the execution and delivery by the
Companies and the TRO Shareholders of the other Shareholder Transaction
Documents and the performance by the Companies and the TRO Shareholders of all
of the Shareholder Transaction Documents will not, require any TRO
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Shareholder or either Company to obtain any authorization of, or to make any
filing, registration or declaration with or notification to, any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the consent, waiver or approval of, or give any notice
to, any natural person, company, corporation, partnership, estate, trust,
limited liability company, unincorporated association or entity of any kind or
governmental authority or instrumentality (each, a "Person").
(c) Except as described in Section 3.3(c) of the
TRO Disclosure Letter, there are no actions, proceedings or investigations
pending or, to the knowledge of the TRO Shareholders, threatened, that
question any of the transactions contemplated by this Agreement or the
validity of any of the Shareholder Transaction Documents or which, if
adversely determined, could have a Material Adverse Effect or could materially
and adversely affect any TRO Shareholder's or either Company's ability to
enter into or perform its or his obligations under any of the Shareholder
Transaction Documents.
3.4 Capitalization; Ownership of TRO Shares.
(a) Each Company's authorized, issued and outstanding
capital stock and its other securities as of the date hereof and, in the case
of TRO, as of immediately prior to Closing following the TRO Recap, are fully
and accurately described in Section 3.4(a) of the TRO Disclosure Letter.
Except as described in Section 3.4(a) of the TRO Disclosure Letter, no Person
has any preemptive or other similar rights with respect to any capital stock
or other securities of either Company, and there are no offers, options,
warrants, rights, agreements or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, registration, voting, sale or
transfer of any equity interests or other securities of either Company
(including, without limitation, the Contributed TRO Shares) or obligating
either Company or any other Person to purchase or redeem any such equity
interests or other securities. Immediately prior to the Closing, the Preferred
Shares, Non-Voting Common Shares and Voting Common Shares issued in the TRO
Recap shall constitute all of the issued and outstanding shares of capital
stock of TRO and each such share shall have been duly authorized, shall be
validly issued and outstanding, fully paid and non-assessable, and shall have
been issued in compliance with all applicable securities and other Laws. Upon
the conversion of the Preferred Shares into Non-Voting Common Shares as
contemplated by Section 1.1, all of such Non-Voting Common Shares shall be
validly issued and outstanding, fully paid and non-assessable and shall have
been issued in compliance with all applicable securities and other laws.
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(b) As of the date hereof, each Current TRO Shareholder
owns, beneficially and of record, the number of common shares, par value $0.10
per share, of TRO set forth in Section 3.4(b) of the TRO Disclosure Letter,
free and clear of all Encumbrances. Immediately prior to the Closing, the
Former TRO Debtholders shall own beneficially and of record all of the
then-outstanding Preferred Shares, the Employee Stock Ownership Trust shall
own of record all of the then-outstanding Voting Common Shares and the Current
TRO Shareholders shall own beneficially and of record all of the
then-outstanding Non-Voting Common Shares, in each case free and clear of all
Encumbrances other than the Employee Stock Ownership Trust, applicable
securities law restrictions and this Agreement. Except as described in Section
3.4(b) of the TRO Disclosure Letter, immediately prior to the consummation of
the TRO Recap, there will be no shareholder, partnership or other agreement
affecting the right of any Current TRO Shareholder to exchange the common
shares of TRO currently owned by him for Non-Voting Common Shares or the right
of any Former TRO Debtholder to exchange indebtedness of TRO owned by it for
Preferred Shares, and following the TRO Recap, there will be no such agreement
affecting the right of any of the TRO Shareholders to convey the Contributed
TRO Shares to the Partnership or any other right of any TRO Shareholder or
other Person with respect to any shares of capital stock of TRO. As of the
Closing, the TRO Shareholders shall have the absolute right, authority, power
and capacity to sell, assign, transfer, contribute and deliver all of the
Contributed TRO Shares to the Partnership, free and clear of all Encumbrances
(except for restrictions imposed generally by applicable securities laws), as
contemplated herein. Upon delivery to the Partnership of the certificates for
the Contributed TRO Shares at the Closing as contemplated herein, the
Partnership will acquire good and valid title to the Contributed TRO Shares,
free and clear of all Encumbrances (except for applicable securities laws
restrictions).
(c) No securities of either Company are or ever have been:
(i) registered or required to be registered under the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or equivalent laws of any state, local or foreign
jurisdiction; (ii) offered to the public; or (iii) listed for trading on any
stock exchange, market or system; and no registration statement or application
has been filed, nor agreement entered into, to so register or list any such
securities or to offer them to the public.
3.5 Investments. Except as disclosed in Section 3.5 of the TRO
Disclosure Letter, neither Company, directly or indirectly, beneficially or of
record, owns, controls or has (and since January 1, 1995 has not owned,
controlled or had) any investment, capital stock, membership or other interest
in any Person.
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Except for TRO Illinois, all of whose capital stock will be acquired by TRO as
a result of the TRO Consolidation, and except as disclosed in Section 3.5 of
the TRO Disclosure Letter, the Business is, and since January 1, 1994, has
been, conducted solely by and through TRO and through or by no other Person.
3.6 Compliance with Laws.
(a) Except as described in Section 3.6(a) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in compliance in
all material respects with all laws, statutes, regulations, permits, licenses,
certificates, judgments, orders, awards and other decisions of any arbitrator,
court, government or governmental agency or instrumentality (federal, state,
local or foreign) (collectively, "Laws") that are or were applicable to it or
to the conduct or operation of the Business or the use of any of its assets or
properties. Except as disclosed in Section 3.6(a) of the TRO Disclosure
Letter, neither Company has received any notice, order or other communication
from any government or governmental agency or instrumentality (federal, state,
local or foreign) of any alleged, actual or potential material violation of or
material failure to comply with any Law, and no event has occurred or
circumstance exists that may constitute or result in (with or without notice
or lapse of time) a material violation by either Company, or a material
failure by either Company to comply with, any Law.
(b) Except as described in Section 3.6(b) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in possession of
all federal, foreign, state, local and other governmental consents, licenses,
permits, variances, exemptions, franchises, grants and authorizations
(collectively, "Authorizations") necessary to own, lease or operate its assets
and properties or to carry on the Business. Such Authorizations currently in
effect are in full force and effect without any default or violation
thereunder by either Company or, to the knowledge of the TRO Shareholders, by
any other party thereto. Except as described in Section 3.6(b) of the TRO
Disclosure Letter, each Company is, and, to the knowledge of the TRO
Shareholders, at all times in the last three years has been, in compliance
with all Authorizations applicable to it or to the conduct or operation of the
Business or the use of any of its assets or properties, and no such
Authorization shall be affected by the TRO Consolidation, the TRO Recap, the
transfer, sale, contribution and transfer of the Contributed TRO Shares or any
other transaction contemplated herein. Neither Company has received any notice
that any such Authorization currently in effect may be revoked or may not in
the ordinary course be renewed upon its expiration or that by virtue of the
transactions
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contemplated hereby that any such Authorization may be revoked or may not be
granted, renewed or issued to such Company.
(c) Without limiting the generality of the foregoing,
Section 3.6(c) of the TRO Disclosure Letter sets forth a list of each state in
which either Company is currently licensed to render real estate brokerage or
other real estate activities. All of such licenses are in full force and
effect and are sufficient to permit the conduct of the real estate activities
conducted by the Companies.
3.7 Litigation; Orders.
(a) Except as described in Section 3.7(a) of the TRO
Disclosure Letter, there are no, and since January 1, 1996 there have not been
any, claims, actions, suits, proceedings (arbitration or otherwise) or, to the
knowledge of the TRO Shareholders, investigations involving or affecting any
TRO Shareholder in respect of the Business or other matters pertaining to TRO
or involving or affecting either Company or any of either Company's assets or
properties or any of either Company's directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign),
or before an arbitrator of any kind. Except as described in Section 3.7(a) of
the TRO Disclosure Letter, no such pending claim, action, suit, proceeding or
investigation, if determined adversely, would result in a liability that is
not covered by insurance in excess of $25,000 in the case of any single action
or $100,000 in the case of all such actions in the aggregate. To the knowledge
of the TRO Shareholders, except as described in Section 3.7(a) of the TRO
Disclosure Letter, no such claim, action, suit, proceeding or investigation is
presently threatened or contemplated. Except as disclosed in Section 3.7(a) of
the TRO Disclosure Letter, there are no unsatisfied judgments, penalties or
awards against or affecting either Company or any of their assets or
properties.
(b) Except as described in Section 3.7(b) of the TRO
Disclosure Letter, there is no material award, injunction, judgment, order,
ruling, subpoena or verdict or other decision entered, issued, made or
rendered by any court, arbitrator, government or governmental agency or
instrumentality, or agreement with any government or governmental agency or
instrumentality (federal, state, local or foreign) (collectively, "Orders") to
which either Company or any of their assets or properties is subject. To the
knowledge of the TRO Shareholders, no officer, director, partner, shareholder
or employee of either Company is subject to any Order that prohibits such
officer, director, partner, shareholder or employee from engaging in or
continuing any conduct, activity or practice relating to the Business. The
Companies have each complied in all respects with
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the terms and conditions of each Order applicable to either of them.
3.8 Financial Statements. Section 3.8 of the TRO Disclosure Letter
includes: (i) the consolidated balance sheet of TRO as at December 31, 1996
(including the notes thereto, the "Balance Sheet") and as at December 31 1995,
and the related statements of operations and shareholders' equity and cash
flow for each of the fiscal years then ended, including all notes thereto,
together with the unqualified report on the fiscal 1996 financial statements
of Arthur Andersen LLP, independent certified public accountants to TRO, and
(ii) a unaudited consolidated balance sheet of TRO as at March 31, 1997 (the
"Interim TRO Balance Sheet") and the related unaudited statements of
operations and cash flow for the period then ended. All such financial
statements, including the related notes, fairly present the consolidated
financial condition, results of operations and cash flow of TRO as at the
respective dates thereof and for the periods therein referred to, all in
accordance with GAAP consistently applied, subject, in the case of the interim
financial statements, to normal year-end adjustments and the absence of notes.
3.9 Undisclosed Liabilities.
(a) As of the date hereof, to the knowledge of the TRO
Shareholders, there are no liabilities or obligations of either Company of any
nature (whether absolute, accrued, contingent, liquidated, unliquidated or
otherwise) except: (i) those described in Section 3.9(a) of the TRO Disclosure
Letter; (ii) those reflected or reserved against in the Interim TRO Balance
Sheet or disclosed in the notes thereto; (iii) liabilities incurred in the
ordinary course of business consistent with past practice after May 31, 1997
and prior to the date hereof; or (iv) obligations to perform services under
Contracts entered into in the ordinary course of business, consistent with
past practice.
(b) As of the Closing, there shall be no liabilities,
contingencies or obligations of either Company of any nature (whether
absolute, accrued, contingent, liquidated, unliquidated or otherwise) except:
(i) obligations and liabilities to perform services after the Closing under
Contracts identified in Section 3.9(b) of the TRO Disclosure Letter; (ii)
threatened or asserted claims of third parties against or involving TRO that
are identified in Section 5.28(a)(iv) and (a)(vi) of the TRO Disclosure
Letter; (iii) the Closing Loan contemplated by Section 5.17; (iv) ordinary
course of business current liabilities consisting solely of accounts payable
for goods and services arising in the ordinary course of business, salaries,
commissions not required under Section 5.28 hereof to be satisfied prior to
Closing, and taxes payable; (v) liabilities of TRO under the deferred
compensation arrangements for the benefit of Joseph
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Straus, Jr. as described in the TRO Disclosure Letter (but in no event shall
such liability exceed $185,000); and (vi) all liabilities and obligations of
TRO to pay bonuses for 1997 described in Schedule 3.9(b) hereto. The
liabilities and obligations described in subclause (i) above shall not be
attributable, in whole or in part, to any breach or default under any Contract
by either Company occurring on or prior to Closing. As of Closing, the only
claims described in subclause (ii) above shall be those that TRO contests in
good faith. The aggregate amount of cash, cash equivalents and fully
collectible accounts receivable (other than rent roll receivables), such
accounts receivable being valued at their net realizable value in accordance
with GAAP (but with no reserve or other offset in respect of possible
uncollectibility) , owned by TRO as of the Closing shall not be less than the
sum of: (I) the aggregate amount of liabilities described in subclause (v)
above as of the Closing; (II) the aggregate amount of the bonuses for 1997
described in Schedule 3.9(b) hereto in respect to periods prior to Closing
(the amount for each yearly bonus to be prorated based upon the percentage of
1997 occurring prior to Closing); (III) $528,000 (in respect of prepayments of
the rent roll receivable for the South Park Shopping Center); (IV) the
aggregate amount of the Development Fees (other than the development fee in
respect of Hillview Shopping Center) that have been paid prior to Closing to
either Company, any TRO Affiliate or any of the TRO Shareholders other than
the portions of such fees that are scheduled, in accordance with Schedule 5.26
hereto, to be received by TRO prior to the Closing Date and that have been
earned by TRO prior to the Closing Date in accordance with the percentage of
completion method under GAAP; (V) the aggregate amount of the Development Fees
in respect of Hillview Shopping Center that has been paid prior to Closing to
either Company, any TRO Affiliate or any of the TRO Shareholders; (VI) the
aggregate amount of ordinary course of business current liabilities described
in subclause (iv) above as of the Closing; (VII) the amount of revenues in
respect of liabilities and obligations described in subclause (i) above that
have been paid to either Company on or prior to Closing (i.e., prepaid
revenues); (VIII) the amount of all leasing, management and other fees
(including, without limitation, rent roll proceeds other than the South Park
rent roll receivable) paid to either Company after May 31, 1997 and prior to
Closing to the extent such fees are paid by third parties prior to the date on
which such payments were originally due and payable and such original due date
is after the Closing Date (including, without limitation, any accelerated
payment of rent roll receivables other than the South Park rent roll
receivable); and (IX) 50% of all net proceeds, if any, received by TRO, any
TRO Shareholder or any TRO Affiliate prior to Closing in respect of any
Predevelopment Property. The amounts referred to in the foregoing subclauses
(I) through (IX) may be covered by any combination of cash, cash equivalents
or such accounts receivable of TRO except that the amount referred to in
subclause
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(III) shall be covered by cash. The Development Fees in respect of the
Hillview Shopping Center that TRO shall receive, net of all sums necessary to
satisfy obligations to Persons other than TRO that are entitled to a portion
of such fees or are entitled to receive any compensation in respect of
services compensated in whole or in part by such fees, shall equal or exceed
$1.3 million.
(c) The Balance Sheet and the Interim TRO Balance Sheet
reflect reserves or other appropriate provisions at least equal to reasonably
anticipated liabilities (including, without limitation, all losses and
expenses) of TRO and TRO Illinois as of the respective dates thereof,
including, without limitation, those with respect to bad debts, salaries,
vacation pay, and plans and programs (including medical and other benefits
programs) for the benefit of present and former employees.
3.10 Title to Property; Encumbrances.
(a) Each Company has either good and valid title to, or has
a valid, subsisting and unchallenged leasehold interest in or right to use,
all assets and properties owned, used or leased by it. Each Company owns all
of the assets and properties (whether tangible or intangible) that are
reflected as owned in its books and records (including, without limitation,
all assets reflected in the interim financial statements referred to in
Section 3.8 other than the assets listed in Section 3.12 of the TRO Disclosure
Letter as being held under capitalized leases), free and clear of all security
interests, liens, claims, pledges, charges, easements, equitable interests,
conditions, options, rights of first refusal, mortgages, deeds of trust,
restrictions of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership, or other
encumbrances of any nature whatsoever (each, an "Encumbrance" and
collectively, "Encumbrances") other than liens for current taxes not yet due
and, in the case of real property, the Encumbrances set forth in Section
3.10(a) of the TRO Disclosure Letter. All properties and assets owned or
leased by the Companies are in the possession or under the control of the
Companies and are suitable for the purposes for which they are being used, are
in good condition and repair, ordinary wear and tear excepted, and are of a
condition and nature sufficient for the conduct of the Business as it has been
conducted since January 1, 1997.
(b) Upon consummation of the TRO Consolidation contemplated
by Section 5.14, TRO will acquire good and valid title to all of the
outstanding shares of capital stock of TRO Illinois, free and clear of all
Encumbrances (other than applicable securities law restrictions).
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3.11 Real Property.
(a) Section 3.11(a) of the TRO Disclosure Letter sets forth
a true, correct, and complete list of each parcel of real property owned,
leased, occupied or otherwise used by either Company other than real property
in which the Companies have no equity or other interest except their interests
as providers of management, consulting or related services (such real
property, together with all buildings, structures, fixtures and improvements
located thereon or appurtenant thereto, are, collectively, the "Real
Property").
(b) Section 3.11(b) of the TRO Disclosure Letter sets forth
a complete list of all real property in which either Company, any TRO
Shareholder or any TRO Affiliate has or has the right to acquire, directly or
indirectly, any equity or other interest (including, without limitation, as a
provider of management, consulting or other related services in respect of
real estate or as a holder of development or other rights with respect to real
estate) other than (i) real property that constitutes a single-family
residence or (ii) in the case of all such Persons other than Ronald Rubin,
George Rubin, Joseph Strauss and their affiliates, real property in which such
Person's only interest is passive ownership. Such list accurately and fully
describes each parcel of such real property and the nature of each such
Person's interest therein. For purposes of this Agreement, "TRO Affiliate"
means: (i) any corporation of which one or more TRO Shareholders owns or
otherwise possesses the power to direct the vote, directly or indirectly, of
an amount of voting securities sufficient to elect a majority of the board of
directors of such corporation and (ii) any other Person controlled by,
controlling, or under common control with one or more TRO Shareholders. For
the purposes of this definition, "control" means the power to direct the
management or policies of a Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; provided that
any Person of which any one or more TRO Shareholders owns beneficially or of
record, either directly or through one or more intermediaries, more than 35%
of the ownership interests shall be conclusively presumed to be a TRO
Affiliate except that a Person that holds or that will hold title to a
Predevelopment Property or to an Existing Property, that is managed
exclusively by Ken Goldenberg or one of his affiliates and in which Ken
Goldenberg or one of his affiliates owns 50% or more of the outstanding equity
interests shall not constitute a TRO Affiliate hereunder.
3.12 List of Properties, Contracts, etc. Section 3.12 of the TRO
Disclosure Letter contains a complete and accurate list of each item described
below, and the Companies have delivered to PREIT true and complete copies of
each document (or summaries of oral agreements) described below.
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(a) Each of the following types of Contracts, whether oral
or written, to which either Company is a party or by which it or any of its
assets are bound:
(i) All Contracts which restrict or purport to
restrict any business activities or freedom of either Company (or, to the best
knowledge of the Companies, any of either Company's officers or employees) to
engage in any business or to compete with any Person;
(ii) All currently pending or outstanding Contracts
(whether written or oral) for capital expenditures;
(iii) All Contracts that:
(A) involve performance of services or sale
or lease of goods or materials by either Company of an
amount or value in excess of $25,000 in any annual period or
$100,000 in the aggregate;
(B) involve performance of services or sale
or lease of goods or materials to either Company of an
amount or value in excess of $25,000 in any annual period or
$100,000 in the aggregate;
(C) are not in the ordinary course of
business and involve expenditures or receipts by either
Company of more than $25,000;
(D) involve the performance by either
Company of management, consulting, development or related
services in respect of real property;
(E) are not terminable by the applicable
Company without penalty or premium upon less than 60 days'
notice; or
(F) are otherwise material to the business,
operations, financial condition or prospects of either
Company.
For purposes of this Agreement, "Contracts" means all
purchase orders, contracts, instruments, leases and other agreements and
commitments, whether oral or written, provided, however, that in the case of
Contracts to which either Company is a party or by which it or any of its
assets or properties is bound, the term "Contracts" shall not include any
purchase order, contract, instrument, lease or other agreement or commitment,
whether oral or written, entered into by such Company solely in its capacity
as agent for or on behalf of the owner (other than TRO, a TRO Shareholder or a
TRO Affiliate) of a property that such Company manages or is developing,
provided that neither
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Company has any liability thereunder or the applicable Company has full
recourse against the property owner with respect thereto.
(b) All forms of Contracts used by either Company as a
standard form in the ordinary course of business, including, without
limitation, all forms of waivers of rights to payment and waivers of
liability;
(c) All amendments, supplements and modifications (whether
oral or written) in respect of any of the Contracts required to be listed
pursuant to Section 3.12(a) or (b) hereof;
(d) All Authorizations held by either Company;
(e) All of the following: (i) fictitious business names,
tradenames, registered and unregistered trademarks, service marks and related
applications (collectively, "Marks"), (ii) patents, patent rights and patent
applications, if any (collectively, "Patents"), (iii) registered and
unregistered copyrights in published and material unpublished works
("Copyrights"), computer programs and software (other than commercially
available programs such as WordPerfect) ("Software"), (iv) proprietary
formulae, trade secrets, formulations, and inventions ("Trade Secrets"), and
(v) Contracts relating to any of the foregoing to which either Company is a
party or by which either Company is bound (other than standard shrink wrap
licenses accompanying commercially available computer programs and software),
and all Contracts (including secrecy and non-disclosure agreements) to which
either Company is a party or by which either Company is bound relating to:
know-how, confidential information, trade secrets, software (other than
standard shrink wrap licenses accompanying commercially available computer
programs and software), technical information, process technology, plans,
drawings and blue prints (the items referred to in clauses (i)-(iv) above and
following the preceding colon are collectively referred to herein as
"Intellectual Property"), in each case owned, leased, used, held by, granted
to or licensed by, as either licensor or licensee, either Company;
(f) All outstanding loans and advances by either Company to
any shareholder, director, trustee, officer or employee of either Company or
any TRO Affiliate;
(g) All notes, debt instruments, other evidences of
indebtedness, letters of credit and guaranties (whether written or oral)
issued by or for the benefit of either Company, and all loan and other
agreements relating thereto;
(h) All leases, rental and occupancy agreements, licenses,
installment and conditional sale agreements, and any other Contracts (in each
case, whether written or oral) affecting
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the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any asset (whether real or personal property) used, owned or
leased by either Company; and
(i) A list of all of the agreements and commitments made by
any TRO Shareholder, either Company or any TRO Affiliate to any third party
that involve, in whole or in part, any of the Predevelopment Properties, the
Existing Properties or the EPD Properties.
3.13 Contracts.
(a) Except as described in Section 3.13(a) of the TRO
Disclosure Letter, each Contract referred to in Section 3.12(a)(iii) was made
in the ordinary course of business, is in full force and effect and is valid,
binding and enforceable against the parties thereto in accordance with its
terms. Except as described in Section 3.13(a) of the TRO Disclosure Letter,
each Company has performed in all material respects all obligations required
to be performed by it under each such Contract to which it is a party or by
which it is bound, and, to the knowledge of the TRO Shareholders, no condition
exists or event has occurred which with notice or lapse of time would
constitute a default thereunder or a basis for delay, non-performance,
termination, modification or acceleration of maturity or performance by any
party thereto.
(b) Except as otherwise described in Section 3.13(b) of the
TRO Disclosure Letter, there are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to either Company under any current or completed Contracts.
3.14 Intellectual Property.
(a) Except as otherwise described in Section 3.14(a) of the
TRO Disclosure Letter: (i) each Company is the sole owner of or has the
exclusive perpetual right to use all Intellectual Property owned, leased, held
or used by it, free and clear of all Encumbrances; (ii) neither Company has
granted or licensed to any Person any rights with respect to any such
Intellectual Property and no other Person has any rights in or to any of such
Intellectual Property (including, without limitation, any rights to market or
distribute any of such Intellectual Property); (iii) the rights of each
Company in and to any of such Intellectual Property will not be limited or
otherwise affected by reason of any of the transactions contemplated hereby;
and (iv) such Intellectual Property is sufficient for the conduct of the
Business as such has been conducted since January 1, 1997.
(b) All of the Marks, Copyrights and Patents held, owned or
used by either Company are valid and enforceable and are
-22-
not subject to any maintenance fees or taxes or actions due within ninety days
after the Closing. To the knowledge of the TRO Shareholders, there is no
patent or patent application, or trademark or trademark application pending
which interferes or potentially interferes with any such Patent or Mark or any
rights of either Company therein. To the knowledge of the TRO Shareholders, no
such Mark, Copyright or Patent has been infringed or challenged in any way. No
such Mark or Patent has been or is involved in any interference, reissue,
re-examination, opposition, invalidation or cancellation proceeding and, to
the knowledge of the TRO Shareholders, no such proceeding is threatened. None
of such Marks, Patents or Copyrights nor any services provided by either
Company, nor any processes or other Intellectual Property infringe or, to the
knowledge of the TRO Shareholders, are alleged to infringe any trademark,
copyright, patent or other proprietary right of any Person. Each Company has
taken all reasonable precautions to preserve and document its Trade Secrets
and to protect the secrecy, confidentiality and value of its Trade Secrets.
All documentation relating to Trade Secrets and Software of either Company has
been maintained only at such Company's principal office.
3.15 Clients. Section 3.15 of the TRO Disclosure Letter lists the
names of the twenty (20) clients of TRO from whom TRO received the most
revenues during 1995 and 1996 and the aggregate revenues attributable to each
in each such year. Except as disclosed in Section 3.15 of the TRO Disclosure
Letter, no client that accounted for more than $50,000 of the revenues of
either Company during the last twelve months has terminated or materially
reduced, or has given notice that it intends to terminate or materially
reduce, the amount of business done with such Company. None of the TRO
Shareholders is aware of any intention on the part of any such client, whether
or not in connection with the transactions contemplated hereunder. Except as
described in Section 3.15 of the TRO Disclosure Letter, there are no and since
January 1, 1997 there have not been any disputes or controversies involving,
in the aggregate, more than $50,000 between either Company and any client
regarding the quality of, or involving a claim of breach of contract which has
not been fully resolved with respect to any service rendered by either
Company. To the knowledge of the TRO Shareholders, each Company enjoys good
working relationships under all arrangements and agreements with its clients.
3.16 Taxes.
(a) All federal, state, local and foreign income, profits,
franchise, sales, use, value added, payroll, premium, occupancy, property,
severance, excise, business privilege, withholding, customs, unemployment,
social security, transfer and other taxes, including interest, additions to
tax and penalties (collectively, "Taxes"), due from or required to be remitted
by
-23-
the Companies with respect to taxable periods ending on or prior to, and the
portion of any interim period up to, the Closing Date have been fully and
timely paid or, to the extent not yet due or payable, have been adequately
provided for on the balance sheets referred to in Section 3.8 or on the books
and records of either Company. There are no levies, liens or other
Encumbrances relating to Taxes existing or pending, or to the best knowledge
of the Companies, threatened with respect to any of the assets of either
Company.
(b) All federal, state, local and foreign returns and
reports relating to Taxes, or extensions relating thereto, required to be
filed by or with respect to either Company have been timely and properly
filed, and all such returns and reports are correct and complete.
(c) No issues have been raised with any representative or
employee of either Company (and are currently pending) by the Internal Revenue
Service ("IRS") or any other taxing authority in connection with any of the
returns and reports referred to in subsection (b) above and no waivers of
statutes of limitations have been given or requested with respect to any such
returns and reports or with respect to any Taxes.
(d) Section 3.16(d) of the TRO Disclosure Letter identifies
all federal, state, local and foreign income, franchise and sales and use tax
returns of or with respect to either Company which have been examined since
January 1, 1992, or which are currently under examination, by the IRS or by
other taxing authorities, or with respect to which the applicable statute of
limitations (including all extensions and tolling periods) has not yet run.
Except as and to the extent shown therein, all deficiencies asserted or
assessments made as a result of such examinations have been fully paid, and
there are no other unpaid deficiencies asserted or assessments made by any
taxing authority against either Company.
(e) Section 3.16(e) of the TRO Disclosure Letter lists all
elections by or with respect to either Company for federal or state income or
franchise tax purposes that are currently applicable. Neither Company has
filed any consent under section 341(f)(1) of the Code, or agreed to have the
provisions of Code section 341(f)(2) apply to any dispositions of "subsection
(f) assets" as such term is defined in Code section 341(f)(4). Neither Company
has agreed to or is required to make any adjustments under Code section 481(a)
by reason of a change in accounting method or otherwise. The books and records
of each Company are sufficient to prove the correctness of all tax returns for
open tax years and to determine and to prove the adjusted tax basis for
federal income tax purposes of each asset of such Company.
-24-
(f) Neither Company is a party to any tax sharing agreement
or tax indemnification agreement.
(g) Neither Company is obligated to make any payments that
would constitute an "excess parachute payment" as defined in Code Section
280G.
3.17 Employee Benefits.
(a) Section 3.17(a) of the TRO Disclosure Letter contains a
complete and correct list of all benefit plans, arrangements, commitments and
payroll practices (whether or not employee benefit plans ("Employee Benefit
Plans") as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), including, without limitation, sick leave,
vacation pay, severance pay, salary continuation for disability, consulting or
other compensation arrangements, retirement, deferred compensation, bonus,
incentive compensation, stock purchase, stock option, health including
hospitalization, medical and dental, and life insurance programs maintained
for the benefit of any present or former employees of either Company.
(b) With respect to each Employee Benefit Plan required to
be listed in Section 3.17(a) of the TRO Disclosure Letter: (i) each Employee
Benefit Plan has been administered in compliance in all material respects with
its terms, and is in compliance both in form and operation in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable Laws (including, without limitation funding, filing, termination,
reporting and disclosure); (ii) each Company and each ERISA Affiliate have
made or provided for all contributions required under the terms of such Plans
and any applicable Laws for all periods through Closing except to the extent
appropriately reflected on the Interim Balance Sheet of such Company; (iii) no
"Employee Pension Benefit Plan" (as defined in Section 3(2) of ERISA) has been
the subject of a "reportable event" (as defined in Section 4043 of ERISA) or
any event requiring disclosure under Section 4062(e) or 4063(a) of ERISA and
there have been no "prohibited transactions" (as described in Section 4975 of
the Code or in Part 4 of Subtitle B of Title I of ERISA) with respect to any
Employee Benefit Plan; (iv) except as described in Section 3.17(b) of the TRO
Disclosure Letter, there are, and during the past three years there have been,
no inquiries, proceedings, claims or suits pending or threatened by any
governmental agency or authority or by any participant or beneficiary against
any of the Employee Benefit Plans, the assets of any of the trusts under such
Plans or the Plan sponsor or the Plan administrator, or against any fiduciary
of any of such Employee Benefit Plans with respect to the design or operation
of the Employee Benefit Plans; (v) the actuarial present value of accumulated
benefits (both vested and unvested) of each of the Employee Pension Benefit
Plans which are defined benefit plans
-25-
are fully funded in accordance with the actuarial assumptions used by the
Pension Benefit Guaranty Corporation to determine the level of funding
required in the event of the termination of such Plan; (vi) no Employee
Pension Benefit Plan that is subject to the minimum funding requirements of
Part 3 of subtitle B of Title I of ERISA or subject to Section 412 of the Code
has incurred any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code and there has been no waived
funding deficiency within the meaning of Section 303 of ERISA or Section 412
of the Code; (vii) each Employee Pension Benefit Plan which is intended to be
"qualified," within the meaning of Section 401(a) of the Code has from its
inception received from the IRS favorable determination letters which are
currently applicable; (viii) any trust created pursuant to any such Employee
Pension Benefit Plan is exempt from federal income tax under Section 501(a) of
the Code and has not at any time had any "unrelated Business taxable income"
as that term is defined in Section 512 of the Code, nor has any such trust
been subject to tax thereon under Section 511 of the Code; (ix) neither
Company and no ERISA Affiliate is aware of any circumstance or event which
would jeopardize the tax-qualified status of any such Employee Pension Benefit
Plan or the tax-exempt status of any related trust; and (x) neither Company
and no ERISA Affiliate has incurred any liability under any provision of
ERISA, the Code or other applicable Law relating to any Employee Benefit Plan
other than funding and payment of benefits in accordance with the terms of
such Employee Benefit Plan. As used herein, "ERISA Affiliate" refers to any
trade or business, whether or not incorporated, under common control with
either Company within the meaning of Section 414(b), (c), (m) or (o) of the
Code.
(c) Neither Company and no ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a "Multiemployer Plan" (as
such term is defined by Section 4001(a)(3) of ERISA).
(d) Except as described in Section 3.17(d) of the TRO
Disclosure Letter, neither Company is bound by any collective bargaining
agreement or legally binding arrangement to maintain or contribute to any
Employee Benefit Plan and all such Plans may be amended, terminated or
otherwise discontinued except as specifically prohibited by federal law.
(e) All reports and information required to be filed with
the Department of Labor, Internal Revenue Service and Pension Benefit Guaranty
Corporation or with plan participants and their beneficiaries with respect to
each Employee Benefit Plan have been timely filed, and all annual reports
(including Form 5500 series) of such Plans were certified without
qualification by each Plan's accountants and actuaries to the extent, and in
the manner, required under ERISA. Any annual reports which are not yet due but
are required to be filed with
-26-
respect to a plan year which ends on or prior to the Closing Date shall be
filed by the appropriate Company on or before the date on which they are due.
(f) To the knowledge of the TRO Shareholders, there has been
no violation of the "continuation coverage requirements" of former Section
162(k) of the Code (as in effect for tax years beginning on or before December
31, 1988), of Section 4980B of the Code (as in effect for tax years beginning
on and after January 1, 1989) or of Part 6 of Subtitle B of Title I of ERISA
with respect to any Welfare Plan to which such continuation coverage
requirements apply.
(g) Except as described in Section 3.17(g) of the TRO
Disclosure Letter, neither Company and no ERISA Affiliate formerly maintained
or contributed to any Pension Plan which has been terminated ("Terminated
Pension Plan"). The representations and warranties set forth above are, if
applicable to such terminated plan, also true with respect to each Terminated
Pension Plan. With respect to each Terminated Pension Plan which was intended
to be a qualified plan within the meaning of Section 401 of the Code, the IRS
determined that the termination of the Plan did not adversely affect its
tax-qualified status. All of the liabilities of each Terminated Pension Plan
to participants and beneficiaries have been fully satisfied, and there are no
outstanding liabilities or potential liabilities with respect to such Plans.
(h) Except as set forth in Section 3.17(h) of the TRO
Disclosure Letter, neither Company and no ERISA Affiliate maintains any
retiree life and/or retiree health insurance plans that provide for continuing
benefits or coverage for any employee or any beneficiary of an employee after
such employee's termination of employment, other than as required by Section
601 et seq. of ERISA.
(i) Except as set forth in Section 3.17(i) of the TRO
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not, alone or together with any other event, (i) entitle any
person to severance pay, an excess parachute payment within the meaning of
Section 280G of the Code, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or (iii) result in any liability under
Title IV of ERISA or otherwise.
3.18 Labor Matters.
(a) Except as described in Section 3.18(a) of the TRO
Disclosure Letter: (i) neither Company is, and during the last three years has
not been, bound by any collective bargaining or other labor agreement,
contract or commitment; (ii) no
-27-
application or petition for certification of a collective bargaining agent is
pending or, to the knowledge of the TRO Shareholders, is threatened, and none
of the employees of either Company are, or during the last three years have
been, represented by any union or other bargaining representative; (iii) to
the knowledge of the TRO Shareholders, during the last three years, no union
and no other Person has attempted to organize any group of employees of either
Company, and no such group has sought to organize into a union or similar
organization for the purpose of collective bargaining, and, to the knowledge
of the TRO Shareholders, no such organizational activity is threatened or
contemplated by any Person; (iv) during the last three years there has not
been, there is not presently pending or existing and, to the knowledge of the
TRO Shareholders, there is not now threatened, any strike, slowdown,
picketing, work stoppage, grievance, labor arbitration, or proceeding in
respect of or arising from any labor dispute against or affecting either
Company, any of the Real Property or any real property that is managed by
either Company; (v) there is no lockout of any employees by either Company,
and no such action is contemplated by Company; and (vi) except as described in
Section 3.18(a) of the TRO Disclosure Letter, no agreement restricts either
Company from relocating, closing or terminating any of its operations or
facilities or any portion thereof.
(b) TRO has provided PREIT with the following information
for each current officer and employee of each Company and for each consultant
and independent contractor regularly retained by the Companies (including each
such person on leave or layoff status): employee name and job title, current
annual rate of compensation (identifying bonuses separately), any change in
compensation since December 31, 1996, vacation accrued and service credited
for purposes of vesting and eligibility to participate in applicable Employee
Benefit Plans, and any automobile leased or owned by either Company primarily
for use by any of the foregoing persons. Other than as described in Section
3.18(b) of the TRO Disclosure Letter, there exist no employment, severance,
change of control, consulting, commission, agency or representative Contracts
to which either Company is a party or is otherwise bound, including, without
limitation, any Contract relating to wages, hours, severance, retirement
benefits or annuities, or other terms or conditions of employment (other than
unwritten employment arrangements terminable at will without payment of any
contractual severance or other amount).
(c) Except as described in Section 3.18(c) of the TRO
Disclosure Letter: (i) neither Company has been cited for violations of the
Occupational Safety and Health Act of 1970, as amended ("OSHA"), any
regulation promulgated pursuant to OSHA, or any other statute, ordinance, rule
or regulation establishing standards of workplace safety, or paid any fines or
penalties with respect to any such citation; (ii) there have not been any
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inspections of any of the facilities of either Company by representatives of
the Occupational Safety and Health Administration or any other federal or
state government agency vested with authority to enforce any statute,
ordinance, rule or regulation establishing standards of workplace safety;
(iii) no representative of any such government agency has attempted to conduct
any such inspection or sought entry to any of such facilities for that
purpose; (iv) neither Company has been notified of any complaint or charge
filed by any employee or employee representative with any such government
agency which alleges that either Company has violated OSHA or any other
statute, ordinance, rule or regulation establishing standards of workplace
safety; (v) neither Company has been notified that any employee or employee
representative has requested that any such government agency conduct an
inspection of any facilities of either Company to determine whether violations
of OSHA or any other such statute, ordinance, rule or regulation may exist;
and (vi) neither Company maintains any condition, process, practice or
procedure at any of its facilities which violates OSHA or any other statute,
ordinance, regulation or rule establishing standards or workplace safety.
3.19 Relationships With Related Persons. Except as described in
Section 3.19 of the TRO Disclosure Letter: (i) no present officer, director,
or shareholder of either Company (collectively, "Current Affiliated Persons");
(ii) no member of the immediate family of any Current Affiliated Person; and
(iii) no Person controlled by, directly or indirectly, any of the foregoing
(all Persons referred to in subclauses (i), (ii) and (iii), collectively,
"Affiliated Persons") (A) in the case of Current Affiliated Persons has, or
has had since January 1, 1995, and (B) in the case of Affiliated Persons other
than Current Affiliated Persons, to the knowledge of the TRO Shareholders,
has, or has had since January 1, 1995, any interest (other than the interest
that derives solely by virtue of being a Shareholder of a Company) in any
property (whether real, personal or mixed and whether tangible or intangible)
used in or pertaining to the Business other than the assets or properties that
are to be distributed to the Current TRO Shareholders prior to Closing as
contemplated herein. Except as described in Section 3.19 of the TRO Disclosure
Letter, neither Ronald Rubin or George Rubin or, to the knowledge of Ronald
Rubin and George Rubin, any other Current Affiliated Person owns of record or
as a beneficial owner an equity interest or any other financial or profit
interest in any Person that has either had business dealings or a material
financial interest in any transaction with either Company, or engaged in
competition with either Company with respect to any services of either Company
(a "Competing Business") in any market presently served by either Company
except for interests in less than five percent (5%) of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market.
-29-
3.20 Environmental Matters.
(a) Except as described in Section 3.20 of the TRO
Disclosure Letter:
(i) each Company, including all of its business and
operations, is and at all times within the applicable statutes of limitations
has been in compliance in all material respects with all applicable
Environmental Laws;
(ii) To the knowledge of the TRO Shareholders,
there are no conditions on, beneath or arising from, and there are no
Hazardous Substances migrating from, any of the Real Property or any of the
properties for which either Company provides management services which might
under any Environmental Law (A) give rise to liability or the imposition of a
statutory lien upon either Company or (B) require any "Response," "Removal" or
"Remedial Action" (as those terms are defined below) by either Company, in
either case, with respect to properties managed by a Company, only to the
extent the applicable Company does not have a right to full recourse against
an unrelated third-party property owner in respect any liability or obligation
of such Company with respect thereto;
(iii) During the period of either Company's
ownership, lease or use of any real property which is no longer owned, used or
leased to or by either Company ("Former Real Property") there were, to the
knowledge of the TRO Shareholders, no conditions on, beneath or arising from,
and no Hazardous Substances migrated from any Former Real Property which might
under any Environmental Law (A) give rise to liability or the imposition of a
statutory lien upon TRO, PREIT or either Company or (B) require any
"Response," "Removal" or "Remedial Action" by either Company;
(iv) Neither Company has received any notification,
or is otherwise aware, of a Release or threat of a Release of a "Hazardous
Substance" at any Real Property or Former Real Property;
(v) To the knowledge of the TRO Shareholders, no
Hazardous Substances have been transported to or from, released, discharged or
disposed of in any material amount by either Company or any third party on or
beneath any Real Property or, during the ownership, use or lease of any Former
Real Property by a Company, any Former Real Property, in either case which
could give rise to liability upon either Company;
(vi) To the knowledge of the TRO Shareholders,
there are not now any above or underground storage tanks or transformers
containing or contaminated with PCBs on or beneath any Real Property;
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(vii) There is not:
(A) any material governmental claim, demand,
investigation, enforcement, Response, Removal,
Remedial Action, statutory lien or other
governmental or regulatory action instituted or,
to the knowledge of the TRO Shareholders,
threatened against either Company, any Real
Property or any Former Real Property pursuant to
any of the Environmental Laws;
(B) any material claim, demand, suit or action,
made or, to the knowledge of the TRO
Shareholders, threatened by any Person against
either Company, any Real Property or any Former
Real Property relating to (1) any form of damage,
loss or injury resulting from, or claimed to
result from, any Hazardous Substance on beneath
or arising from, or migrating from, any Real
Property or any Former Real Property or (2) any
alleged violation of the Environmental Laws by
either Company; or
(C) any communication to or from any governmental
or regulatory agency arising out of or in
connection with Hazardous Substances on beneath
or arising from, migrating from or generated at
any Real Property or any Former Real Property,
including, without limitation, any notice of
violation, citation, complaint, order, directive,
request for information or response thereto,
notice letter, demand letter or compliance
schedule; and
(viii) Neither Company has, or will have, any material
liability for any wastes generated by either Company which have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or to any site listed in
any state list of sites requiring or recommended for investigation or
clean-up.
(b) As used in this Agreement:
(i) The term "Environmental Laws" means any and all
Laws and Authorizations concerning or relating to the protection of health
and/or the environment, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., as amended ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., as amended, the Federal Water Pollution Control
Act, 33 Section 7401 et seq., as amended, the Toxic Substances Control Act, 15
-31-
U.S.C. Section 2601 et seq., as amended, the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., as amended,
or the Safe Drinking Water Act, 42 U.S.C. Section 300 et seq., as
amended, or regulations promulgated thereunder;
(ii) The terms "Release," "Response," "Removal" and
"Remedial Action" shall have the meanings ascribed to them in Sections
101(22)-101(25) of CERCLA.
(iii) The term "Hazardous Substances" or "Hazardous
Substance" shall mean any substance now regulated under any of the Environmental
Laws, including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material; (B) a "hazardous substance,"
"pollutant" or "contaminant" (as defined in Sections 101(14), and (33) of CERCLA
or the regulations designated pursuant to Section 102 of CERCLA), including any
element, compound, mixture, solution or substance that is designated pursuant to
Section 102 of CERCLA; (C) listed in the United States Department of
Transportation Hazardous Material Tables, 49 C.F.R. Section 172.101; (D)
defined, designated or listed as a "Hazardous Waste" pursuant to the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, ss.5903(5),
6921); (E) listed as a "Hazardous Air Pollutant" under Section 112 of the Clean
Air Act, as amended (42 U.S.C. Section 7412) or (F) does or may physically,
chemically, biologically or otherwise breakdown or transform into, or otherwise
produce, become, promote or result in the presence or an increase of any of the
above when released on, at, beneath or to the environment.
3.21 Absence of Certain Changes and Events.
(a) Except as described in Section 3.21 of the TRO
Disclosure Letter and except as contemplated herein (including, without
limitation, as necessary to effect the TRO Recap), since December 31, 1996,
each Company has conducted its business and activities only in the usual and
ordinary course consistent with past practice and there has not been any:
(i) declaration or payment of any distribution or
payment in respect of the ownership interest in either Company, or any
repurchase or redemption of any such interests;
(ii) amendment to the articles of incorporation,
bylaws or other organizational documents of either Company;
(iii) payment or increase by either Company of any
bonuses, salaries, or other compensation (except for payment of salary and
increases thereto in the ordinary course consistent with past practice) to any
shareholder, director, trustee, officer or employee or entry into (or
amendment of) any employment, severance or similar agreement with any
shareholder, director, trustee, officer or employee;
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(iv) adoption of, change in or increase in the
payments to or benefits under any Employee Benefit Plan or labor policy;
(v) damage, destruction or loss to any material
asset or property of either Company, whether or not covered by insurance;
(vi) entry into, amendment, termination or receipt
of notice of termination of, any Contract which is, is required to be, or
would have been required to be (if entered into prior to the date hereof)
disclosed in the TRO Disclosure Letter as the result of Section 3.12(a)(iii)
or which relates to any material transaction, whether or not in the ordinary
course of business;
(vii) borrowing or incurring of any indebtedness,
obligation or liability, contingent or otherwise, except current indebtedness
incurred in the ordinary course of business;
(viii) endorsement, assumption or guarantee of
payment or performance of any loan or obligation of any other Person;
(ix) loan or advance made to any Person except for
advances made in the ordinary course of business consistent with past
practice;
(x) sale, assignment, conveyance, lease, or other
disposition of any asset or property of either Company (other than the
disposition of office equipment and furniture in the ordinary course of
business consistent with past practice), or mortgage, pledge, or imposition of
any lien or other Encumbrance on any asset or property of either Company;
(xi) cancellation or waiver of any material claims
or rights of either Company;
(xii) change in the accounting methods, principles
or practices followed by either Company or any change in any of the
assumptions underlying, or methods of calculating, any bad debt, contingency
or other reserve; or
(xiii) agreement or commitment, whether or not in
writing, to do any of the foregoing.
(b) Since December 31, 1996, there has been no event,
circumstance, condition or contingency that has resulted in a Material Adverse
Effect or that is reasonably likely to result in a Material Adverse Effect.
3.22 Books and Records. The books and records of each Company,
including financial records and books of account, are complete and accurate in
all material respects and have been
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maintained in accordance with sound business practices. To the extent such
books and records constitute financial records or books of account, they
fairly present revenues, expenses, assets and liabilities, all in a manner
that will allow the preparation of financial statements that comply with GAAP.
3.23 Insurance.
(a) Section 3.23(a) of the TRO Disclosure Letter contains a
complete and accurate list of all policies and binders of insurance
(including, without limitation, property, casualty, liability, professional
liability, life, health, accident, workers' compensation and disability
insurance and bonding arrangements) owned by or maintained for the benefit of
either Company or to which either Company is a party or under which either
Company or any shareholder, director, trustee, officer or employee thereof is
covered and all self-insurance programs or arrangements. Such policies and
binders are issued by insurance companies reasonably believed by the TRO
Shareholders to be financially sound and reputable, are sufficient for
compliance with all requirements of Laws and all agreements to which either
Company is a party or by which it or its assets are bound, are valid and
enforceable policies, provide insurance coverage against all risks normally
insured against by a person or entity carrying on the same or similar business
as that conducted by the Companies and will not be affected by, terminate or
lapse by reason of the transactions contemplated by this Agreement.
(b) Each Company has paid all premiums due, and has
otherwise performed its obligations, under each policy listed or required to
be listed in Schedule 3.23(a) of the TRO Disclosure Letter.
(c) Except as described in Schedule 3.23(c) of the TRO
Disclosure Letter, neither Company has received: (i) any notice of
cancellation of any policy or binder of insurance required to be identified in
Schedule 3.23(a) of the TRO Disclosure Letter or refusal of coverage
thereunder; (ii) any notice that any issuer of such policy or binder has filed
for protection under applicable bankruptcy or insolvency laws or is otherwise
in the process of liquidating or has been liquidated; or (iii) any notice that
any such policy or binder may no longer be in full force or effect or that the
issuer of any such policy or binder may be unwilling or unable to perform its
obligations thereunder.
3.24 Proxy Statement. None of the information supplied or to be
supplied by any TRO Shareholder, any TRO Affiliate or either Company for
inclusion or incorporation by reference in the Proxy Statement shall, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the shareholders of PREIT, or at any time thereafter up to and
including the time of the PREIT Shareholders' Meeting, contain
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any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
3.25 Brokers. No Person acting on behalf of either Company or any TRO
Shareholder or any of their respective affiliates or under the authority of
any of the foregoing is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
3.26 Accurate Disclosure. All documents and other papers delivered by
or on behalf of any TRO Shareholder or either Company in connection with the
transactions contemplated by this Agreement are accurate and complete in all
material respects.
3.27 Knowledge. For purposes of this Agreement, "to the knowledge of
the TRO Shareholders" and correlative terms shall mean the actual knowledge of
any and all TRO Shareholders, after due inquiry except that, as applied in
Section 3.20 with respect to properties managed but not owned in whole or in
part by TRO, it shall mean such knowledge as a prudent manager would have as
to such properties.
3.28 Investment Representations.
(a) Each TRO Shareholder acknowledges that the Class A Units
to be issued pursuant to Sections 1.2 and 2.2 will not be registered under the
1933 Act on the grounds that the issuance of such units is exempt from
registration pursuant to Section 4(2) of the 1933 Act and/or Regulation D
promulgated under the 1933 Act, and that the reliance of the Partnership on
such exemptions is predicated in part on the TRO Shareholders'
representations, warranties and acknowledgements set forth in this section.
(b) The Class A Units issued in accordance with this
Agreement will be acquired by each TRO Shareholder for its own account, not as
a nominee or agent, and without a view to resale or other distribution within
the meaning of the 1933 Act, and the rules and regulations thereunder except
as contemplated hereunder, and no TRO Shareholder will distribute any of such
units in violation of the 1933 Act.
(c) Each TRO Shareholder (i) acknowledges that the Class A
Units, when issued, will not be registered under the 1933 Act and such units
will have to be held indefinitely by it or him unless they are subsequently
registered under the 1933 Act or an exemption from registration is available,
(ii) is aware that any sales of such units made under Rule 144 of the
Securities and Exchange Commission under the 1933 Act may be made only in
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limited amounts and in accordance with the terms and conditions for that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, (iii) is aware that Rule 144
may not be available for use by any TRO Shareholder for resale of the units,
(iv) is aware that the Partnership is under no obligation to register, and has
no current intention of registering any of such units under the 1933 Act, and
(v) acknowledges that he has received and read a private placement memorandum
relating to the offer of Class A Units.
(d) Each TRO Shareholder is well versed in financial
matters, has had dealings over the years in securities, including "restricted
securities," and is fully capable of understanding the type of investment
being made in the Class A Units and the risks involved in connection
therewith.
3.29 First Refusal Rights Agreement. The parties to the First Refusal
Rights Agreement referred to in Section 6.13 are the only TRO Shareholders and
TRO Affiliates with interests in the properties referred to therein.
3.30 One Meridian Plaza. Robert W. Hayes delivered under cover of
letter dated June 5, 1997 to Mark M. Wilcox copies of certain releases
relating to claims arising out of the fire at One Meridian Plaza,
Philadelphia, Pennsylvania on or about February 23-24, 1991. To the knowledge
of the TRO Shareholders, other than the Persons identified in such releases,
there are no Persons that may assert, or that have asserted, claims of any
nature arising directly or indirectly out of such fire. As a result, inter
alia, of such releases, neither Ronald Rubin nor either Company has any
uninsured liability or potential liability as a result of such fire.
3.31 Equity Fund. As of the time that TRO assigns, sells and
transfers the Equity Fund (as used in the Goldenberg Letter Agreement, the
"Equity Fund") to the Partnership, TRO shall own all of the rights with
respect to the Equity Fund, and the amount of the Equity Fund shall be as set
forth in the statement accompanying the Closing Loan Statement as contemplated
by Section 5.17. The assignment, sale and transfer of the Equity Fund
contemplated by Section 5.17 will not breach or otherwise conflict with the
Goldenberg Letter Agreement (the "Goldenberg Letter Agreement") dated March
26, 1996, and, as of the Closing, the Partnership shall be entitled to be paid
the amount of the Equity Fund and interest factor thereon pursuant to the
terms of the Goldenberg Letter Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING
PREIT AND THE PARTNERSHIP.
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PREIT hereby represents and warrants to the TRO Shareholders as
follows:
4.1 Organization.
(a) PREIT is an unincorporated association in business trust
form duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania. PREIT has all necessary trust power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform all its obligations under each agreement and instrument to
which it is a party or by which it is bound.
4.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). Subject to approval thereof by PREIT's
shareholders, the execution, delivery and performance by PREIT and the
Partnership of this Agreement and the other Buyer Transaction Documents have
been duly authorized by all necessary trust or partnership action. This
Agreement has been duly and validly executed and delivered by PREIT and the
Partnership and constitutes the legal, valid and binding obligation of PREIT
and the Partnership enforceable against each of them in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Buyer Transaction Documents shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally or by general equitable principles.
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4.3 No Conflicts.
(a) Except as described in Section 4.3(a) of the disclosure
letter delivered by PREIT to TRO on the date hereof ("PREIT Disclosure
Letter"), the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership
of the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not (in each case,
with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the
trust or partnership agreement (or other organizational documents) of PREIT or
the Partnership or (B) any Law applicable to PREIT or the Partnership, or by
or to which any assets or properties of PREIT or the Partnership is bound or
subject;
(ii) violate or conflict with, result in a breach
of, constitute a default or otherwise cause any loss of benefit under, or give
to others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any material
Authorization or material Contract to which PREIT or the Partnership is a
party or by which either PREIT or the Partnership or any assets or properties
of either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any material Encumbrance upon or with respect to either PREIT or
the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 4.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership
of the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT
or the Partnership to obtain any material Authorization of or make any
material filing, registration or declaration with or notification to, any
court, government or governmental agency or instrumentality (federal, state,
local or foreign) or to obtain the material consent, waiver or approval of, or
give any material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to
the best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this
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Agreement or the validity of any of the Buyer Transaction Documents or which,
if adversely determined, could have a material adverse effect on the
consolidated financial condition, assets, business or results of operations of
PREIT or could materially and adversely affect PREIT's or the Partnership's
ability to enter into or perform its obligations under the Buyer Transaction
Documents.
4.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests
in PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 4.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated herein, in
the Amended Partnership Agreement or in the Employment Agreements referred to
herein, and except as disclosed in Section 4.4(a) of the PREIT Disclosure
Letter as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character
(including, without limitation, voting agreements or arrangements known to
PREIT) relating to the issuance of beneficial interests in PREIT or
partnership interests in the Partnership. As of the Closing, the outstanding
partner interests in the Partnership shall consist of the interests
outstanding on the date hereof, the Class A Units contemplated by Section 1.2
hereof and by the Oxford Valley Contribution Agreement, and, if applicable,
the Class B Units contemplated by the EPD Purchase Agreements and an
additional number of units issued to PREIT Subsidiary in exchange for the
contribution contemplated by Section 5.24.
(b) All Class A Units to be issued and delivered pursuant to
Sections 1.2 and 2.2 hereof will be, at the time of issuance and delivery in
accordance with the terms of this Agreement, duly authorized and validly
issued by the Partnership. Assuming the accuracy of the representations and
warranties of the TRO Shareholders set forth herein, such issuance will be
exempt from registration under the 1933 Act as an offering described in
Section 4(2) of such Act and/or pursuant to Regulation D promulgated
thereunder.
4.5 PREIT Reports. PREIT has delivered to the Current TRO
Shareholders copies of PREIT's (a) Proxy Statement dated November 15, 1996,
(b) Annual Report on Form 10-K for the fiscal year ending August 31, 1996
containing audited financial statements for fiscal year 1996, as amended by
its Report on Form 10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports
on Form 10-Q for the quarters ended November 30, 1996, February 28, 1997 and
May 31, 1997, all of which have been filed by PREIT with the Securities and
Exchange Commission (the "PREIT Reports"). The audited consolidated financial
statements and unaudited interim
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financial statements of PREIT included in such reports have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present the consolidated financial condition and
results of operations of PREIT as at the dates thereof and for the periods
then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein. The PREIT Reports do not contain any untrue statements of a material
fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading.
4.6 Information Included in Proxy Statement. The information to be
included or incorporated in the Proxy Statement, other than information
provided by either Company or any TRO Shareholder for the express purpose of
including the same in the Proxy Statement, shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
shareholders of PREIT, or at any time thereafter up to and including the time
of the PREIT Shareholders' Meeting, be false or misleading with respect to any
material fact required to be stated therein, or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
shall comply in all material respects as to form and substance with the
requirements of the 1934 Act and the rules and regulations thereunder.
Notwithstanding the foregoing, PREIT makes no representation or warranty with
respect to any information about, or supplied or omitted by, either Company or
any TRO Shareholder which is contained in the Proxy Statement.
4.7 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government
or governmental agency or instrumentality (federal, state, local or foreign)
or before any arbitrator of any kind, in each case of a nature that is
required to be disclosed in PREIT's 1934 Act reports.
4.8 Material Adverse Change. Except as disclosed in filings with the
Securities and Exchange Commission, since May 31, 1997, there has not been any
material adverse change in the condition (financial or otherwise), assets,
results of operations or business of PREIT on a consolidated basis.
4.9 Brokers. Except for Lehman Brothers Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or
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the Partnership or any of their affiliates or under the authority of any of
the foregoing is or will be entitled to any brokers' or finders' fee or any
other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
SECTION 5. AGREEMENTS AND COVENANTS.
5.1 Special Shareholders Meeting. PREIT shall duly call, give notice
of, convene and hold a special shareholders meeting (the "PREIT Shareholders'
Meeting") to approve, among other things, the transactions contemplated by
this Agreement and PREIT's 1997 Stock Option Plan.
5.2 Proxy Statement. PREIT shall prepare as promptly as practicable,
with the cooperation of the Companies and the TRO Shareholders and the TRO
Affiliates, a proxy statement (the "Proxy Statement") in compliance with the
provisions of the 1934 Act, for purposes of soliciting the approval of the
shareholders of PREIT in respect of, among other things, the approval items
set forth in Section 5.1 above. The Companies and each TRO Shareholder shall,
and the TRO Shareholders shall cause each TRO Affiliate to, provide promptly
to PREIT for inclusion in the Proxy Statement, or any amendments or
supplements thereto, such information concerning its business and affairs and
its financial statements as, in the reasonable judgment of PREIT or its
counsel, may be required by applicable Law or the rules and regulations of the
Securities and Exchange Commission (including, without limitation, audited
financial statements of the Companies and the TRO Affiliates and unaudited
interim financial statements of the Companies and the TRO Affiliates) and to
cause its counsel, auditors and other representatives to cooperate with
PREIT's counsel, auditors and other representatives in the preparation of the
Proxy Statement. The Companies and the TRO Shareholders will promptly advise
PREIT in writing if at any time prior to the Closing either Company or any TRO
Shareholder shall obtain knowledge of any facts that might make it necessary
or appropriate to amend or supplement the Proxy Statement in order to correct
any misstatements of material fact or to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
Law.
5.3 Reasonable Efforts. Upon the terms and subject to the conditions
hereof, between the date hereof and the Closing Date, each of the parties
hereto shall use its reasonable efforts to take, or cause to be taken, all
appropriate action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in the preparation and filing of the Proxy Statement, (ii)
using its or his reasonable efforts to make all
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required regulatory filings and applications and to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to Contracts as are necessary for the
consummation of the transactions contemplated by this Agreement, and (iii)
using its or his reasonable efforts to cause the conditions to the
consummation of the acquisition of the Contributed TRO Shares to be satisfied.
5.4 Access to Information; Confidentiality. Between the date of this
Agreement and the Closing Date, PREIT, on the one hand, and the Companies and
the TRO Shareholders, on the other hand, will give to the other party and its
officers, employees, counsel, accountants and other representatives free and
full access to and the right to inspect, during normal business hours, all of
the assets, records, facilities, properties and Contracts relating to its
business as the other party may reasonably request. The TRO Shareholders shall
cause the TRO Affiliates that are parties to the transactions contemplated
herein to afford PREIT and its representatives comparable access to the
assets, records, facilities, properties and Contracts relating to the business
of the TRO Affiliates. Each party shall acquire and hold all confidential
information that has been made available by another party hereto subject to
the terms and conditions of Section IV of the Letter Agreement dated as of
April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the terms of
which section are hereby incorporated by reference and which shall remain in
force through the Closing.
5.5 Public Announcements. Except as and to the extent required by Law
or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the Companies and the TRO Shareholders, on the one
hand, and PREIT and the Partnership, on the other hand, will not, and each
will direct its representatives not to, directly or indirectly, make any
public comment, statement or communication with respect to, or otherwise
disclose or permit the disclosure of any of the terms, conditions or other
aspects of the transactions contemplated hereby; provided, however, that PREIT
may issue a press release, in the form previously circulated by PREIT to TRO,
regarding, among other things, the execution of this Agreement; and further
provided that PREIT and TRO may each continue such communications with
principals, partners, lenders, trustees, attorneys, accountants, investment
bankers, consultants engaged by PREIT and TRO, including abstract companies,
title companies, engineers and architects, Claude de Botton and his
affiliates, Albert Marta and his affiliates, Kenneth N. Goldenberg and his
affiliates, EPD and its affiliates, and, if agreed in each case by PREIT and
TRO, others as may be legally required or necessary in connection with the
consummation of the transactions contemplated by this Agreement.
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5.6 No Solicitation. Each Company and each TRO Shareholder shall not,
each Company shall cause its officers, employees, representatives and agents
not to, and the TRO Shareholders shall cause the TRO Affiliates not to,
directly or indirectly, continue, encourage, solicit, initiate or participate
in discussions or negotiations with, or provide any nonpublic information to,
any Person (other than PREIT and the Partnership and their respective
representatives in connection with the transactions contemplated by this
Agreement) concerning any sale of assets (other than in the ordinary course of
its business consistent with past practice) or shares of capital stock of
either Company or any TRO Affiliate that is a party to any of the transactions
contemplated herein or any merger, consolidation, recapitalization,
liquidation or similar transaction involving either Company or any such TRO
Affiliate (collectively, an "Acquisition Transaction"). Each Company and each
TRO Shareholder will promptly communicate to PREIT the terms of any inquiry or
proposal that it or he may receive in respect of an Acquisition Transaction.
5.7 Notifications. Each party hereto shall give prompt notice to the
other parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its or his representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a breach of
or any inaccuracy in any of its or his representations and warranties
contained in this Agreement had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition; (ii) any
material failure of it or him or any of its officers, directors, employees or
agents, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it or him hereunder; (iii) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and (iv) any
actions, suits, claims, investigations or proceedings commenced or, to the
best of its or his knowledge, threatened against, relating to or involving or
otherwise affecting either Company, any TRO Shareholder or PREIT, as the case
may be, or any of the transactions contemplated by this Agreement.
5.8 Conduct of the Companies' Business. Except as expressly provided
herein, between the date hereof and the Closing, except with the prior written
consent of PREIT, each Company shall (and the TRO Shareholders will cause each
Company to):
(a) carry on its business in, and only in, the usual,
regular and ordinary course, consistent with past practice and the provisions
hereof and in compliance with all applicable Laws,
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Authorizations and Contracts (including, without limitation, those required to
be identified in the TRO Disclosure Letter), preserve intact its present
business organization, maintain its corporate existence and use all reasonable
efforts to keep available the services of its present officers and employees
and to preserve its relationships with clients, contractors, and others having
business dealings with it to the end that its goodwill and business shall be
unimpaired at the Closing;
(b) pay and discharge all of its debts, liabilities and
obligations as they become due;
(c) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(d) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear
and tear excepted;
(e) maintain its books of account and records in the usual,
regular and ordinary manner and use best efforts to maintain in full force and
effect all of its Authorizations;
(f) maintain its S corporation status for federal and state
income tax purposes (it being expressly understood that the consummation of
the TRO Recap and the TRO Consolidation immediately prior to Closing will,
however, result in a termination of such status);
(g) not enter into, assume or amend any Contract of a type
described in Section 3.12(a)(iii);
(h) not take any action, fail to take any action or permit
to occur any event that would cause or constitute a breach of or inaccuracy in
any representation or warranty of the TRO Shareholders set forth herein if
made immediately after such event or at the Closing or that would have been
required (or result in any situation that would be required) to be disclosed
hereunder had such action or inaction been taken or failed to have occurred or
had such event occurred prior to the date hereof;
(i) not increase salaries or other compensation of its
officers or directors or any other employee other than normal year-end merit
increases for employees (other than employees with which employment agreements
are to be executed as contemplated herein) made in the ordinary course of such
Company's business consistent with past practice;
(j) not make any change in its authorized or issued capital
stock, grant any stock option or other right to purchase its shares of capital
stock or other securities, issue or make
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any commitment to issue any of its securities including any securities
convertible into capital stock, grant any registration rights or purchase,
redeem, retire or make any other acquisition of any shares of its capital
stock or other securities (except, in each case, as may be required in
connection with the TRO Recap and as described in Sections 3.4(a) and 3.21 of
the TRO Disclosure Letter);
(k) not amend its certificate or articles of incorporation
or bylaws (or equivalent governing documents) (except, in each case, as may be
required in connection with the TRO Recap and as described in Sections 3.4(a)
and 3.21 of the TRO Disclosure Letter);
(l) not enter any Contract with any TRO Shareholder or TRO
Affiliate; and
(m) not enter into any agreement or understanding to do or
engage in any of the foregoing actions.
5.9 Sale of Shares of TRO. Between the date hereof and the Closing,
except as expressly contemplated herein, except with the prior written consent
of PREIT, no TRO Shareholder shall sell, assign, transfer, or otherwise
encumber any of his shares of capital stock of TRO, or any rights of such
shareholder in such shares.
5.10 Financial Information. Until the Closing, each Company shall
provide PREIT, as soon as practicable and in any event no later than the 30th
day after the end of each month, with an unaudited balance sheet and income
statement of such Company as of and for the month then ended, prepared on the
same basis as the interim financial statements referred to in Section 3.8 and
certified as such by the chief executive officer and chief financial officer
of such Company.
5.11 Costs and Expenses. Except as otherwise provided herein, the
parties hereto shall each pay their own fees and expenses and those of their
respective agents and advisors incurred in connection with the transactions
contemplated by this Agreement (including, without limitation, all legal and
accounting fees (collectively, "Transaction Costs")). TRO shall provide, at
its cost and expense, all audited and unaudited financial statements relating
to The Court at Oxford Valley, TRO and TRO Illinois as of any date and for any
period ending prior to Closing that PREIT or its counsel reasonably requests
be furnished in order to prepare the Proxy Statement or to satisfy future
Securities and Exchange Commission filing requirements applicable to PREIT.
Except for the financial statements described in the preceding sentence, PREIT
shall bear all costs and expenses arising from the preparation of the Proxy
Statement and the financial statements required to be filed by PREIT with
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the Securities and Exchange Commission, and PREIT shall pay TRO, at the
Closing or promptly following termination of this Agreement, upon submission
to PREIT of reasonably detailed invoices with respect thereto, an amount equal
to the reasonable legal fees (the "Requested Legal Expenses") incurred by TRO
as the result of a written request of PREIT, or its counsel, to assist in the
preparation of the Proxy Statement or the compliance by PREIT with the
Securities and Exchange Commission or American Stock Exchange rules and
regulations; provided that if there is a Closing, such amount shall be
included in the Closing Loan provided for in Section 5.17 hereof and provided
further that if this Agreement is terminated following a breach of this
Agreement by either Company or by any TRO Shareholder, such payment to TRO by
PREIT shall not be required. Notwithstanding the foregoing, if this Agreement
is terminated pursuant to Section 9.2 hereof solely on account of the failure
to fulfill the condition set forth in Section 9.1(f) herein, then PREIT shall
pay up to a maximum of $1,000,000 in the aggregate of all reasonable
Transaction Costs incurred by the Companies and the TRO Shareholders upon
submission to PREIT of reasonably detailed invoices and such other information
related thereto as PREIT may reasonably request. TRO shall pay all of its
Transaction Costs, other than the Transaction Costs to be reimbursed by PREIT
as described above, prior to Closing.
5.12 Confidentiality. From and after the Closing Date, no TRO
Shareholder shall disclose directly or indirectly to any Person, other than in
the ordinary course of the employ of such TRO Shareholder by PREIT or any
affiliate thereof, without the prior written authorization of PREIT, any
client lists, pricing strategies, client and employee files and records, any
proprietary data or trade secrets of either Company, or any financial or other
information about either Company not in the public domain.
5.13 Voting Agreements of Sylvan M. Cohen and Leonard I. Korman.
Contemporaneously with the execution and delivery of this Agreement, Sylvan M.
Cohen and Leonard I. Korman shall each deliver to TRO a duly executed voting
agreement in the form attached hereto as Exhibit 5.13.
5.14 TRO Consolidation. Immediately prior to Closing, the TRO
Shareholders that own shares of capital stock of TRO Illinois will convey all
of such shares, free and clear of all Encumbrances and constituting all of the
outstanding shares of capital stock of TRO Illinois, to TRO.
5.15 TRO Recap. Prior to Closing, TRO shall take, and the TRO
Shareholders shall cause TRO to take, all actions necessary or appropriate to
effect the TRO Recap. In connection with the consummation of the TRO Recap,
the TRO Shareholders shall, inter alia. (i) cause TRO to amend and restate its
articles of
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incorporation and bylaws in the forms set forth in Exhibit 5.15-A hereto,
thereby changing its corporate name and effecting changes in its capital stock
necessary to effect the TRO Recap and (ii) cause TRO to adopt the Employee
Stock Ownership Trust in the form set forth in Exhibit 5.15-B hereto and to
create the Employee Stock Ownership Trust pursuant to the trust agreement set
forth in Exhibit 5.15-C hereto.
5.16 Predevelopment Properties; Concord Pike; Girard Estate. After
Closing, no TRO Shareholder or TRO Affiliate shall have any interest in the
development or ownership of any Predevelopment Property, the Girard Estate
project or the Concord Pike property other than as a result of the
participation of TRO, the Partnership or an affiliate thereof and other than
as provided in the Predevelopment Properties Contribution Agreement.
5.17 Closing Loan; Purchase of Equity Fund.
(a) On the date hereof, TRO has delivered to PREIT a
preliminary statement and no later than 5 business days prior to Closing TRO
shall deliver to PREIT a final statement (the "Closing Loan Statement")
setting forth in reasonable detail the nature and amount of: (i) all
reasonable out-of-pocket expenses (other than amounts advanced under the
Goldenberg Letter Agreement that are included in the Equity Fund) theretofore
paid or incurred but not yet paid by TRO, any TRO Shareholder or any TRO
Affiliate to third parties in connection with the acquisition and development
of the EPD Properties and those properties that constitute Predevelopment
Properties as of the Closing, in each case to the extent not theretofore
reimbursed out of proceeds arising from the Predevelopment Properties; (ii)
all reasonable start-up expenses theretofore incurred by TRO with respect to
the management of the EPD portfolio of properties up to a maximum of
$1,500,000; and (iii) the Requested Legal Expenses described in Section 5.11,
in each case together with detailed invoices and other documentation that
PREIT may reasonably request in order to verify the foregoing. At the Closing,
either PREIT or the Partnership shall loan (the "Closing Loan") to TRO an
amount equal to the aggregate amount of the expenses set forth on the Closing
Loan Statement. Promptly following the Closing, TRO shall use the proceeds of
the Closing Loan to retire all indebtedness of TRO to third parties with
respect to the expenses set forth on the Closing Loan Statement.
(b) The Closing Loan Statement shall be accompanied by a
statement of the outstanding principal amount of the Equity Fund and the
interest factor thereon then payable in accordance with the terms of the
Goldenberg Letter Agreement. Immediately prior to the Closing, TRO will sell,
assign and transfer to the Partnership all of TRO's right, title and interest
in the Equity Fund, and the Partnership will pay TRO an amount of cash equal
to the amount of the Equity Fund and interest factor. To the extent
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that TRO does not own the entirety of the Equity Fund and the interest factor
on the date hereof, it shall acquire rights thereto from the TRO Shareholders,
together with written representations and warranties in such form and
substance as PREIT shall reasonably request with respect to ownership and
right to assign.
(c) At the Closing, the Partnership shall assume all of the
liabilities and obligations of TRO and TRO Shareholders under the Goldenberg
Letter Agreement arising after Closing other than liabilities or obligations
arising from a breach of or default under such agreement prior to Closing.
5.18 Acquisitions by TRO Affiliates. Prior to Closing, the TRO
Shareholders shall cause the TRO Affiliates not to, without the prior written
consent of PREIT, acquire, directly or indirectly, any ownership or other
interest in any retail or residential real property that is not currently
listed in Section 3.11(b) of the TRO Disclosure Letter and that is of a type
that would have been includable in such list if such interest had been held
prior to the date hereof.
5.19 Board of Trustees.
(a) The Board of Trustees of PREIT (the "Board") shall take
all actions necessary or appropriate to appoint or elect Ronald Rubin, George
Rubin and Rosemarie Greco to be trustees of the Trust as of the Closing so
that, after such appointment or election, the Board of Trustees will consist
of six current members as of the date hereof and the three new members so
elected or appointed. In the event that any of the foregoing is unavailable to
serve as trustees as of the Closing, the Board shall elect or appoint one or
more substitutes therefor designated by TRO, provided, however, that if
Rosemarie Greco is unavailable, TRO shall designate a substitute that is
wholly independent of PREIT, the Companies, the TRO Shareholders and the TRO
Affiliates that is of recognized standing and is otherwise acceptable to the
Board.
(b) Immediately following the Closing, the Board shall cause
a special committee of the Board to be formed (the "Special Committee"). The
Special Committee shall consist of three independent trustees of PREIT, one of
whom shall initially be Rosemarie Greco (or her substitute). The
responsibilities of the Special Committee shall be to address and resolve
following Closing matters pertaining to the transactions contemplated herein.
If following Closing the holders of more than 33-1/3% of the then-outstanding
Class A Units issued to TRO Shareholders or TRO Affiliates or any trustee of
PREIT request from time to time that the Special Committee consider (x)
whether the contemplated incurrence by PREIT of non-project specific
indebtedness or the raising by PREIT of equity capital may have an unintended
and
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inequitable effect on PREIT or the holders of the Class A Units or (y) whether
the breach by PREIT of any of its representations and warranties set forth
herein has had any adverse effect upon PREIT's Adjusted FFO, the Special
Committee shall consider such request and may, but shall not be required to,
make any adjustments that the Special Committee deems appropriate in its sole
discretion, including, without limitation, any adjustment to the applicable
Annual Hurdles and Annual Targets (and the TRO Shareholders acknowledge that
the members of the Special Committee shall have no personal liability for
their decisions). If after Closing, there is a final judgment or settlement
with respect to litigation instituted prior to the date hereof by [the
Bermans] and as a result thereof PREIT or one of its affiliates is required to
pay an amount greater than the amount currently reserved therefor on PREIT's
financial statements, PREIT is required to write off revenues that were
recorded on PREIT's financial statements prior to the date hereof or the
percentage interest of PREIT in any property as it is currently accounted for
is reduced, such percentage of such holders shall have the right to cause the
Special Committee to consider the adverse effect of any such event upon the
earn-out set forth in Section 2.2. The Special Committee shall, in respect of
matters described in the immediately preceding sentence, be required to make
appropriate adjustments. In considering the appropriateness of any such
adjustment, the Special Committee shall consider adjustments as may be
appropriate to address any adverse effect on the earn-out specified in Section
2.2.
5.20 Distributions Prior to Closing; Howell Shopping Center.
(a) Notwithstanding anything to the contrary set forth
herein, prior to the Closing Date (and therefore prior to the consummation of
the TRO Recap and TRO Consolidation), TRO may, to the extent lawful, pay a
dividend to its shareholders consisting of: (i) all cash and cash equivalents
owned by TRO, including, without limitation, cash proceeds of the Closing Loan
(but excluding any cash and cash equivalents that are to be used in order to
satisfy the representation and warranty set forth in Section 3.9(b) hereof);
(ii) all accounts receivable other than rent roll receivables, tenant
deposits, funds held on behalf of others, and fully collectible accounts
receivable identified by TRO on a schedule delivered to the Partnership
pursuant to Section 5.29 that are to be retained by TRO in order to satisfy
the representation and warranty set forth in Section 3.9(b) hereof; and (iii)
all assets specifically listed on Schedule 5.20(a) hereto. No account
receivable shall be distributed to shareholders if treatment as a receivable
or the distribution would be a breach of Section 5.26 hereof.
(b) Notwithstanding anything to the contrary herein, prior
to the Closing, TRO shall cause all of TRO's right, title and interest in and
to predevelopment rights described on
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Schedule 5.20(b) hereto to be transferred to the Predevelopment Partnership.
(c) (i) Unless a contract approved in form and substance by
PREIT (such approval not to be unreasonably withheld) giving Home Depot the
right to purchase Howell Shopping Center is in effect as of Closing, Howell
Shopping Center shall constitute a Predevelopment Property. If such a contract
(the "Howell Purchase Agreement") is in effect as of Closing, Howell Shopping
Center shall not constitute a Predevelopment Property except under the
circumstances described below.
(ii) This subparagraph shall apply only if Howell
Shopping Center is not a Predevelopment Property as of Closing. Prior to the
Closing Date, TRO, the TRO Affiliates and the TRO Shareholders shall assign to
a newly-formed New Jersey limited liability company (the "Howell LLC") all of
their rights to the proceeds of the disposition of their interest in the
Howell Shopping Center. The TRO Shareholders shall cause the Howell LLC to
have no assets or liabilities (other than for payment of current services
rendered by third parties and any debt incurred by Howell LLC to acquire the
property constituting the Howell Shopping Center) except for its rights under
the Howell Purchase Agreement and all beneficial interests in the Howell
Shopping Center held by TRO, the TRO Shareholders or its TRO Affiliates prior
to Closing and the obligation to reimburse the TRO Shareholders and the TRO
Affiliates for the expenses and fees accrued as of the Closing (the expenses
and fees incurred as of the date hereof are set forth on Schedule 5.20(c)),
provided that such obligation shall be payable only out of the proceeds of the
disposition of the Howell Shopping Center that are received by the Howell LLC.
The Partnership and TRO Shareholders shall cause the Howell LLC, following its
receipt of the proceeds of a sale of Howell Shopping Center to Home Depot
pursuant to the Howell Purchase Agreement and the satisfaction of such
obligation and the other permitted liabilities referred to in the preceding
sentence, to distribute the net proceeds to its members. If the Howell
Purchase Agreement expires, terminates or is otherwise abandoned by Howell LLC
or Home Depot at any time, the Partnership shall have the right and option to
have Howell LLC assign all of its right, title and interest in and to Howell
Shopping Center to the Partnership (or its designee) in exchange for the
Partnerships's membership interest in Howell LLC, in which case Howell
Shopping Center shall from and after such date be treated as a Predevelopment
Property under the Predevelopment Properties Contribution Agreement, all
predevelopment costs and expenses with respect thereto will be paid by the
Partnership to Howell LLC which shall use the payment to satisfy the
obligations of Howell LLC and the TRO Shareholders shall cause Howell LLC to
become a party to the Predevelopment Properties Contribution Agreement. If the
Partnership does not exercise its option to take an assignment within 30 days
of written notice from the
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Howell LLC that such option has arisen as aforementioned, the Partnership
shall have no further rights or obligations in respect of the Howell Shopping
Center or the Howell LLC and Howell LLC shall have the right, subject to the
terms of the other agreements referred to herein, to develop, own or dispose
of such property.
5.21 Employees. No later than 15 days prior to Closing, TRO shall
deliver to PREIT a list of current employees whose employment shall be
terminated by TRO prior to Closing. TRO shall be solely responsible for any
severance pay, accrued salary, pension benefits, unemployment compensation,
vacation pay and any other obligations created or owing as a consequence of
such termination of employment, and the TRO Shareholders shall cause TRO to
take all actions necessary to discharge all of such liabilities and
obligations in full prior to Closing so that as of Closing TRO shall have no
further liabilities or obligations with respect thereto.
5.22 Employment Agreements. Contemporaneously with the execution and
delivery of this Agreement, TRO has executed and delivered Employment
Agreements with George Rubin, Joseph Coradino, Patricia Berns, Leonard Shore,
Alan Feldman, Doug Grayson and Eric Mallory and PREIT has executed and
delivered Employment Agreements with Ronald Rubin and Edward Glickman, in all
cases to be effective upon Closing. Prior to Closing, TRO and Joseph Straus,
Jr. may enter into an employment agreement satisfactory to PREIT. All
employment and other commission, compensation, equity participation or similar
agreements between any of the foregoing Persons and either Company shall be
terminated as of the Closing and neither Company shall have any further
obligation thereunder (other than to pay accrued and unpaid salary that is
included in the amount described in subclause (iv) of Section 3.9(b) and
accrued and unpaid bonuses that are included in subclause (v) of Section
3.9(b)).
5.23 PREIT Fiscal Year. After the Closing, PREIT shall take all
action necessary or appropriate to change its fiscal year for financial
reporting purposes to a calendar year basis effective no later than the fourth
calendar quarter of 1997.
5.24 Contribution of PREIT Assets. PREIT shall take all action that
may be necessary or appropriate, as of the Closing or promptly thereafter, to
effect the contribution of substantially all of PREIT's assets to the
Partnership substantially in accordance with the plan of contribution set
forth in Exhibit 5.24 hereto. In exchange for such contribution, the
Partnership shall issue to PREIT Subsidiary that number of additional Class A
Units that, when aggregated with the numbers of Class A Units issued to PREIT
Subsidiary as of the date hereof, equals the number of outstanding PREIT
Shares as of the Closing.
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5.25 TRO Board Meetings. After Closing, TRO shall give PREIT advance
written notice of all meetings of its board of directors and PREIT shall be
entitled to designate, from time to time, a representative who shall be
entitled to be present at all of such meetings but who shall not have any vote
in any such proceedings of the TRO board of directors.
5.26 Receivables. For the period from January 1, 1997 to the Closing
Date, neither Company shall recognize any revenues or related receivables from
management fees, leasing commissions, consulting fees, brokerage fees,
shopping center advertising agency fees and all other items of revenue other
than the Development Fees (which shall be handled in accordance with the last
sentence hereof) and the South Park rent roll receivable paid prior to Closing
unless both of the following conditions are met: (1) the applicable Company
does not have any substantive obligation for future performance relating to
the amounts recognized as revenues or receivables, whether imposed by written
contract or otherwise; and (2) collection of the amount recorded as a
receivable is reasonably assured and if amounts are due more than one-year
from the transaction date, any such amounts recorded shall be discounted to
their net present value using the prime rate of interest in effect at the time
as recorded in The Wall Street Journal. Any amounts received on account of any
item of revenue shall be reflected as a deposit liability on the applicable
Company's balance sheet until both of these conditions are met.
Notwithstanding the foregoing, the development fees listed on Schedule 5.26
hereto (the "Development Fees") shall be recognized as receivables of either
Company for purposes of Sections 3.9 or 5.20 or any other provision of this
Agreement only to the extent such fees remain unpaid as of the Closing, are
scheduled to be paid pursuant to Schedule 5.26 prior to Closing and have been
earned by either Company prior to Closing in accordance with the percentage of
completion method of accounting under GAAP.
5.27 Life Insurance. If requested by PREIT to do so, Ronald Rubin
will promptly take all action, including undergoing medical examinations,
required in order to secure the issuance of the life insurance policy
contemplated in Section 6.15.
5.28 Liabilities.
(a) The TRO Shareholders and PREIT acknowledge that their
original expectation was that, at Closing, the Companies would be free of all
liabilities and obligations except (x) obligations to perform future services
under Contracts disclosed pursuant to this Agreement; (y) contested claims by
third parties identified pursuant to this Agreement that PREIT agreed to
accept, and (z) ordinary course of business accounts and taxes payable. The
TRO Shareholders have advised PREIT that there are other liabilities and
obligations which may not be fully
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discharged prior to Closing. In order to induce PREIT to enter into this
Agreement and to accept the existence at Closing of certain liabilities and
obligations:
(i) Prior to the distribution of the Proxy Statement to the
shareholders of PREIT and, in any event, within 24 days
from the date hereof, the TRO Shareholders shall cause
TRO to be irrevocably and absolutely released by
writings reasonably satisfactory in form and substance
to PREIT from all guarantees, indemnities, obligations,
undertakings or liabilities of any nature whatsoever
(other than non-contractual obligations or liabilities
which might arise solely from TRO's status as a former
general partner in Twelfth Street Hotel Associates,
L.P. of which the TRO Shareholders are unaware) in
respect of the PSFS Building in Philadelphia,
Pennsylvania, including, without limitation,
contractual liabilities or obligations (whether
absolute, accrued, contingent, liquidated, unliquidated
or otherwise) arising by virtue of any interest that
TRO may have had, directly or indirectly, in such
property and those set forth in Section 5.28(i) of the
TRO Disclosure Letter, which the TRO Shareholders
represent and warrant are the only such guarantees,
indemnities, obligations, undertakings or liabilities
in connection with the PSFS Building that affect either
Company;
(ii) Prior to the distribution of the Proxy Statement to the
shareholders of PREIT and, in any event, within 24 days
from the date hereof, the TRO Shareholders shall cause
each beneficiary of the guarantee by TRO identified in
Section 5.28(ii) of the TRO Disclosure Letter to have
irrevocably and absolutely released TRO from all
obligations and liabilities in respect thereto by a
writing reasonably satisfactory in form and substance
to PREIT;
(iii) The TRO Shareholders shall cause the Companies as of Closing
to be free and clear of all liabilities and obligations of any
nature (whether absolute, accrued, contingent, liquidated,
unliquidated or otherwise) that (A) are due and payable or
performable at or prior to Closing and that are not otherwise
expressly identified and dealt with pursuant to this Section
5.28, including, without limitation, those liabilities and
obligations set forth in Section 5.28(iii) of the TRO
Disclosure Letter, and (B) that are due or payable or
performable at or after the Closing and that are not otherwise
expressly identified and dealt with pursuant to this Section
5.28;
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(iv) All Damages arising out of claims identified in Section
5.28(iv) of the TRO Disclosure Letter shall, to the
extent not satisfied in full prior to Closing, be
subject to indemnification pursuant to Section 10.1(b)
hereof by Ronald Rubin and George Rubin (who, for
purposes of this Section 5.28 and Section 10 hereof,
shall include all entities controlled by either or both
thereof which receive Class A Units issued on the
Closing Date);
(v) The TRO Shareholders shall cause the representations and
warranties set forth in Section 3.9(b) with respect to the
liabilities and obligations referred to in subclauses (i),
(iii), (iv), (v) and (vi) of the first sentence of Section
3.9(b) to be true and correct as of Closing; and
(vi) Ronald Rubin and George Rubin shall indemnify and hold
harmless PREIT and the Partnership pursuant to Section
10.1(b) against any Damages arising from any of the
liabilities or obligations listed in Section 5.28(vi) of the
TRO Disclosure Letter.
(b) At Closing, Ronald Rubin and George Rubin (and the
entities referred to in (iv) above) shall execute and deliver a pledge
agreement in form and substance reasonably satisfactory to PREIT by which they
shall pledge to the Partnership (in order to secure their indemnification
undertakings in Section 10.1(b) and 10.1(c)) such number of Class A Units
issued to them hereunder and under the Court at Oxford Valley Contribution
Agreement on the Closing Date as shall be equal in value to 150% of the
maximum amount of all liabilities and obligations referred to in subclauses
(i), (ii), (iii) and (vi) above (except as otherwise specifically provided
under Section 5.28(vi) of the TRO Disclosure Letter) which have not been fully
released or paid prior to Closing as security for their indemnities hereunder
with respect to such obligations and liabilities pursuant to Section 10.1(b)
and 10.1(c) hereof. For this purpose, each Class A Unit shall be deemed to
have a value of $_____. The requirement for a pledge to cover potential
Damages resulting from non-compliance with subclauses (i), (ii) and (iii) if
Closing occurs shall not affect any condition to Closing in favor of PREIT
with respect to such covenants or the obligations under 10.1(b) or 10.1(c) for
breaches of the covenants set forth in this Section 5.28.
5.29 Accounts Receivable. (a) The TRO Shareholders shall deliver to
PREIT at least 5 business days prior to Closing a schedule identifying any
accounts receivable that are to be retained by TRO in order for the TRO
Shareholders to satisfy their representations and warranties set forth in
Section 3.9(b). TRO shall provide PREIT with all information and documentation
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reasonably requested by PREIT in order for PREIT to confirm the nature and
status of such accounts receivable.
(b) The TRO Shareholders acknowledge that if any account
receivable is used to cover an amount referred to in subclause (I) through
(IX) of Section 3.9(b) and such account receivable is not paid as of the
earlier of (i) 90 days after it is due and payable or (ii) one year following
Closing, such account receivable shall be deemed not to have constituted a
"fully collectible" account receivable, and the TRO Shareholders shall be
responsible under Section 10.1(b) to pay TRO the amount of such account
receivable promptly after such date. Upon payment therefor by the TRO
Shareholders, TRO shall assign its right, title and interest in and to any
such account receivable to the Person designated by Ronald Rubin.
SECTION 6. CERTAIN CONDITIONS PRECEDENT TO PREIT'S AND
THE PARTNERSHIP'S OBLIGATIONS.
The obligation of PREIT and the Partnership to consummate the
acquisition of the Contributed TRO Shares and to take the other actions
required to be taken by them at the Closing is subject to the fulfillment by
or at the Closing of each of the following conditions, any or all of which may
be waived by PREIT in its sole discretion:
6.1 Representations and Warranties. Each of the representations and
warranties of the TRO Shareholders set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of the TRO Shareholders set forth in this
Agreement that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
6.2 Performance of Covenants. All of the agreements, covenants and
obligations that either Company or any TRO Shareholder is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been duly performed and complied with in all material respects. The TRO
Shareholders shall have delivered each of the documents required to be
delivered by them pursuant to Section 8.2(a) hereof.
6.3 Legal Matters. The performance of the Buyer and Shareholder
Transaction Documents and the consummation of the Closing shall not, directly
or indirectly (with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not violate any
Order of any court or governmental body of competent jurisdiction, and no
suit, action, investigation or legal or administrative proceeding shall have
been brought or threatened by any Person (other than
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by PREIT or the Partnership) that questions the validity or legality of this
Agreement or the transactions contemplated hereby.
6.4 Consents and Approvals. Each consent, approval, ratification,
waiver or other authorization of any Person necessary, in the reasonable
opinion of PREIT, for the consummation of the transactions contemplated
hereby, the continuation of the Business without interruption after the
Closing in the same manner in which the Business is presently conducted shall
have been obtained and shall be in full force and effect, and no such consent,
approval, ratification, waiver or other authorization: (i) shall have been
conditioned upon the modification, cancellation or termination of any
Contract, right or Authorization of TRO, PREIT or the Partnership or (ii)
shall impose on TRO, PREIT or the Partnership any condition, provision or
requirement not presently imposed upon the Companies or any condition that
would be more restrictive after the Closing on the Companies than the
conditions presently imposed on the Companies.
6.5 Opinion of Counsel. PREIT shall have received an opinion of
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, counsel for the Companies,
dated as of the Closing Date, substantially in the form set forth in Exhibit
6.5 hereto.
6.6 (Intentionally Omitted).
6.7 Material Adverse Change. There shall not have been since the date
hereof any event, circumstance condition or contingency that has resulted in a
Material Adverse Effect or that is reasonably likely to result in a Material
Adverse Effect.
6.8 Predevelopment Partnership. The transfer to the Predevelopment
Partnership of rights with respect to the Predevelopment Properties
contemplated by Section 5.20(b) hereof shall have occurred, all of the parties
to the Predevelopment Properties Contribution Agreement (other than the
Partnership and PREIT) shall be prepared and able to consummate simultaneously
with the Closing hereunder the initial closing under such agreement and to
satisfy their respective obligations with respect thereto, and all conditions
to the Partnership's and PREIT's obligation to proceed with the initial
closing thereunder shall have been satisfied or waived.
6.9 Existing Properties. All of the parties to the Court at Oxford
Valley Contribution Agreement (other than the Partnership) shall be prepared
and able to consummate immediately following the Closing hereunder the closing
under such agreement and to satisfy their respective obligations with respect
thereto and all conditions to the Partnership's and PREIT's obligation to
proceed with the closing thereunder shall have been satisfied or waived. The
conditions set forth in Section 7.2(a)(xiv) of the
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Hillview Contribution Agreement and Section 7.2(a)(xiv) of the Northeast
Contribution Agreement shall be satisfied as of the Closing Date as if the
Closing Date were the closing date under such agreements.
6.10 EPD Properties. All of the parties to the EPD Purchase
Agreements shall be prepared and able to consummate immediately following the
Closing hereunder the closings under such Purchase Agreements and the
assignments contemplated in the EPD Assignment Agreement and to satisfy their
respective obligations with respect thereto and all conditions to TRO's or
PREIT's obligation to proceed to close under such agreements shall have been
satisfied or waived.
6.11 TRO Consolidation. The TRO Consolidation shall have been
consummated in accordance with Section 5.14 hereof.
6.12 TRO Recap. The TRO Recap shall have been consummated in
accordance with Section 5.15 hereof.
6.13 Rights of First Refusal. All of the parties to the First Refusal
Rights Agreement other than PREIT and the Partnership shall have duly executed
and delivered the First Refusal Rights Agreement substantially in the form set
forth in Exhibit 6.13 hereto.
6.14 Opinions of Financial Advisor. PREIT shall have received the
written opinion of its financial advisor, Lehman Brothers Inc., dated the date
on which the Proxy Statement is first mailed to PREIT shareholders, stating
that the consideration paid by PREIT and the Partnership in connection
herewith is fair to PREIT from a financial point of view.
6.15 Ronald Rubin. PREIT shall be reasonably satisfied that Ronald
Rubin is in good health as of the Closing Date, and, if requested by PREIT and
at its sole cost and expense, PREIT shall have been designated the beneficiary
of a policy on the life of Ronald Rubin issued by an insurance carrier
selected by PREIT, which policy shall be issued at rates generally applicable
to persons of Mr. Rubin's age and gender and which policy shall contain no
exceptions other than those customary for a person of Mr. Rubin's age and
gender.
6.16 Shareholder Approval. The transactions contemplated hereby shall
have been approved by the affirmative vote of the shareholders of PREIT by the
requisite vote in accordance with PREIT's trust agreement, Pennsylvania law,
and the American Stock Exchange.
6.17 Registration Rights Agreement. All parties to the Registration
Rights Agreement other than PREIT shall have duly
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executed and delivered the Registration Rights Agreement substantially in the
form set forth in Exhibit 6.17 hereto.
6.18 Lock-Up Letter Agreements. Each of Ronald Rubin, George Rubin
and Edward Glickman shall have duly executed and delivered a Lock-Up Letter
Agreement substantially in the form set forth in Exhibit 6.18 hereto.
6.19 Partnership Agreement. Each TRO Shareholder and each of the
parties to the Court at Oxford Valley Contribution Agreement and the EPD
Purchase Agreements that has a right to receive limited partner interests in
the Partnership shall have executed and delivered the Amended Partnership
Agreement substantially in the form set forth in Exhibit 6.19 hereto.
6.20 Satisfaction of Section 5.28(a). Each of the agreements,
covenants and obligations that any of the TRO Shareholders is required to
perform or comply with pursuant to Section 5.28(a) at or prior to Closing
shall have been duly performed and complied with.
6.21 Listing of PREIT Shares. The PREIT Shares that may be used by
PREIT to redeem the Class A Units issuable as a result of the transactions
contemplated hereby shall have been approved for listing on the American Stock
Exchange upon official notice of issuance.
6.22 Goldenberg Estoppel Certificate. The Goldenberg Group shall have
executed and delivered to the Partnership an estoppel certificate providing
that as of the Closing Date neither TRO nor any TRO Affiliate or TRO
Shareholder has defaulted or breached any of its or his obligations under the
Goldenberg Letter Agreement (or any partnership agreement implementing the
Goldenberg Letter Agreement).
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO THE TRO
SHAREHOLDERS' AND THE COMPANIES' OBLIGATIONS.
The obligation of the TRO Shareholders and the Companies to
consummate the contribution of the Contributed TRO Shares contemplated by this
Agreement and to take the other actions required to be taken by them at the
Closing is subject to the fulfillment by or at the Closing of each of the
following conditions, any or all of which may be waived by TRO in its sole
discretion:
7.1 Representations and Warranties. Each of the representations and
warranties of PREIT set forth in this Agreement that is qualified by
materiality shall be true and correct, and each of the representations and
warranties of PREIT set forth in this Agreement that is not so qualified shall
be
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true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date.
7.2 Performance of Covenants. Each of the agreements, covenants and
obligations that PREIT or the Partnership is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing shall have been
duly performed and complied with in all material respects. PREIT shall have
delivered each of the documents required to be delivered by it pursuant to
Section 8.2(b) hereof.
7.3 Legal Matters. The performance of the Buyer and Shareholder
Transaction Documents and the consummation of the Closing shall not, directly
or indirectly (with or without notice or lapse of time), violate, contravene,
conflict with or result in a violation of any Law and shall not violate any
Order of any court or governmental body of competent jurisdiction, and no
suit, action, investigation or legal or administrative proceeding shall have
been brought or threatened by any Person that questions the validity or
legality of this Agreement or the transactions contemplated hereby.
7.4 Predevelopment Properties. The Partnership shall be prepared and
able to consummate simultaneously with the Closing hereunder the initial
closing under the Predevelopment Properties Contribution Agreement and to
satisfy its obligations with respect thereto and all of the conditions to the
obligation of the parties to such agreement other than the Partnership to
proceed with such closing shall have been satisfied or waived.
7.5 EPD Properties. The Partnership shall be prepared and able to
consummate immediately following the Closing hereunder the closings under the
EPD Purchase Agreements and to satisfy its obligations with respect thereto
and all of the conditions to the obligation of the parties to such agreements
other than TRO to proceed with such closings shall have been satisfied or
waived.
7.6 Existing Properties. The Partnership shall be prepared and able
to consummate simultaneously with Closing hereunder the closing under the
Court at Oxford Valley Contribution Agreement and to satisfy its obligations
with respect thereto and all of the conditions to the obligation of the
parties to such agreement other than the Partnership to proceed with such
closing shall have been satisfied or waived. The conditions set forth in
Section 7.2(b)(vi) of the Hillview Contribution Agreement and Section
7.2(b)(vi) of the Northeast Contribution Agreement shall be satisfied as of
the Closing Date as if the Closing Date were the closing date under such
agreements.
7.7 Contribution of PREIT Assets. PREIT shall be prepared and able to
satisfy its obligations pursuant to Section 5.24
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7.8 Opinion of Counsel. PREIT shall have received an opinion of
Drinker Biddle & Reath LLP, counsel for PREIT, dated as of the Closing Date,
substantially in the form set forth in Exhibit 7.8 hereto.
7.9 Registration Rights Agreement. PREIT shall have duly executed and
delivered the Registration Rights Agreement substantially in the form set
forth in Exhibit 6.17 hereto.
7.10 Partnership Agreement. PREIT and PREIT Subsidiary shall have
executed and delivered the Amended Partnership Agreement in the form set forth
in Exhibit 6.19 hereto.
7.11 (Intentionally Omitted).
7.12 Consents and Approvals. All consents, approvals, ratifications,
waivers or other authorizations of any Person necessary for the consummation
of the transactions contemplated hereby (other than consents, approvals,
ratifications, waivers or other authorizations the absence of which will not
have a material adverse effect upon PREIT's consolidated financial condition,
results of operations or Adjusted FFO) shall have been obtained and shall be
in full force and effect.
7.13 Material Adverse Change. There shall not have been since the
date hereof any event, circumstance, condition or contingency that has
resulted in a material adverse effect upon PREIT's consolidated financial
condition, results of operations, assets or business or that is reasonably
likely to result in such a material adverse effect.
SECTION 8. CLOSING.
8.1 Time and Place of the Closing. The closing of the acquisition by
the Partnership of the Contributed TRO Shares (the "Closing") pursuant to this
Agreement shall take place on the later to occur of (i) September 30, 1997 or
(ii) the fifth business day following the first date on which the conditions
set forth in Sections 6.4, 6.16 and 7.12 are satisfied (or waived in writing
by the applicable party), at the offices of Drinker Biddle & Reath LLP, 1100
PNB Building, 1345 Chestnut Street, Philadelphia, PA 19107, commencing at
10:00 A.M., local time, or at such other date, time or place as may be agreed
to by PREIT and TRO (the "Closing Date"). Subject to Section 9, failure to
consummate the Closing shall not result in the termination of this Agreement
or relieve any Person of any obligation hereunder.
8.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
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(a) The TRO Shareholders shall deliver or cause to be
delivered to the Partnership:
(i) stock certificates representing the Contributed
TRO Shares, duly endorsed for transfer or with stock powers affixed thereto
executed in blank in proper form for transfer;
(ii) certificates, dated the Closing Date and
executed by the chief executive officer and chief financial officer of TRO to
the effect that the conditions set forth in Sections 6.1, 6.2 and 6.7 have
been satisfied;
(iii) certificates of good standing of a recent
date for TRO certified by the Secretary of State or corresponding certifying
authority of the state of incorporation of TRO and of each state in which TRO
is qualified to do business as a foreign corporation;
(iv) copies of the resolutions of the board of
directors of TRO and its shareholders authorizing the transactions
contemplated under this Agreement and the Shareholder Transaction Documents to
which TRO is a party;
(v) evidence of the consummation of the TRO
Consolidation;
(vi) evidence of the amendment and restatement of
the articles of incorporation and bylaws of TRO contemplated by Section 5.15
hereof;
(vii) an assignment of the Equity Fund and interest
factor thereon contemplated by Section 5.17 (together with the representations
and warranties referred to in Section 5.17); and
(viii) such other documents and instruments as the
Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) PREIT and the Partnership shall deliver or cause to be
delivered to the TRO Shareholders or TRO, as the case may be, the following:
(i) to the TRO Shareholders, the Class A Units to
be delivered at Closing as contemplated by Section 1.2 hereof;
(ii) to the TRO Shareholders, the Registration
Rights Agreement, duly executed by PREIT;
(iii) to TRO, the Closing Loan and amounts due in
respect of the Equity Fund pursuant to Section 5.17 and an
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assumption agreement in a form reasonably satisfactory to TRO reflecting the
assumption set forth in Section 5.17(c);
(iv) to the TRO Shareholders, copies of resolutions
of the board of trustees of PREIT and its shareholders authorizing the
transactions contemplated hereunder and under the Buyer Transaction Documents;
and
(v) to the TRO Shareholders, a certificate, dated
the Closing Date, executed by the chief executive officer and chief financial
officer of PREIT, to the effect that the conditions set forth in Sections 7.1,
7.2 and 7.13 have been satisfied.
(c) Each party shall deliver or cause to be delivered, as
the case may be, to the other parties hereto such other documents,
instruments, certificates and opinions as may be required by this Agreement.
SECTION 9. TERMINATION AND ABANDONMENT.
9.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(a) by PREIT or TRO, if the Closing has not occurred (other
than through the failure of the party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1997, or such later date as the parties may mutually agree upon;
(b) by mutual consent of PREIT and TRO;
(c) by TRO and the TRO Shareholders, on the one hand, or
PREIT and the Partnership, on the other hand, if a material breach of any
provision of this Agreement has been committed by the other party and such
breach has not been waived;
(d) by PREIT, if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of PREIT or the
Partnership to comply with its obligations under this Agreement) and PREIT has
not waived all such unsatisfied conditions before termination pursuant to this
subparagraph (d); or
(e) by TRO, if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of either Company or
any TRO Shareholder to comply with its obligations under this Agreement) and
TRO has not waived all
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such unsatisfied conditions on or before termination pursuant to this
subparagraph (e);
(f) by PREIT or TRO, if the required approval of
shareholders of PREIT contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at the PREIT
Shareholders' Meeting or at any adjournment or postponement thereof; or
(g) by PREIT, if: (i) the Board shall have determined in
good faith that the consummation of the transactions contemplated herein would
preclude PREIT or its affiliates from consummating (A) a merger, consolidation
or similar transaction, (B) a purchase by PREIT or its affiliates of all or
any significant portion of the assets or equity securities of a third party,
or (C) a purchase by a third party of all or any significant portion of the
assets or equity securities of PREIT or its affiliates (any such transaction,
an "Alternative Transaction"); (ii) the Board shall have determined in good
faith that the Alternative Transaction is reasonably likely to be consummated;
and (iii) after consultation with its financial advisors, the Board shall have
determined in good faith that the Alternative Transaction would be more
favorable to PREIT's shareholders than the transactions contemplated by this
Agreement.
9.2 Procedure for Termination; Effect of Termination.
(a) A party terminating this Agreement pursuant to Section
9.1 shall give written notice thereof to each other party hereto, whereupon
this Agreement shall terminate and the transactions contemplated hereby shall
be abandoned without further action by any party and all further obligations
of the parties under this Agreement will terminate; provided, however, that if
such termination is pursuant to Section 9.1(c), the terminating party's right
to pursue all legal remedies (including damages and/or specific performance)
contemplated by Section 10 will survive such termination unimpaired except as
limited by Section 9.2(b) and provided further that if such termination is
pursuant to Section 9.1(g), PREIT shall promptly thereafter pay TRO the sum of
$2 million and provided further that if such termination is pursuant to
Section 9.1(f), the obligations of the parties pursuant to Section 5.11 shall
survive termination.
(b) Following a termination pursuant to Section 9.1(c), each
TRO Shareholder other than Ronald Rubin and George Rubin shall have no
liability for breaches of covenants, agreements, obligations, representations
or warranties set forth herein except to the extent that such TRO Shareholder
(i) breached a covenant, agreement or obligation set forth herein the
performance of which was within his power to control, (ii) made an intentional
misrepresentation or (iii) is the only TRO
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Shareholder that made the representation or warranty that was breached.
Following a termination pursuant to Section 9.1(c), neither Ronald Rubin,
George Rubin, the Companies, PREIT nor the Partnership shall have any
liability for breaches of covenants, agreements or obligations set forth
herein to the extent that such breaches arise from the actions of, or failure
to act by, Persons other than the parties hereto and the TRO Affiliates and
notwithstanding such party's best efforts to cause such Person to act in a
manner that would result in the satisfaction of such party's covenants,
agreements and obligations hereunder.
SECTION 10. INDEMNIFICATION.
10.1 Indemnification by TRO Shareholders. Subject to the limitations
set forth in Section 10.3, each TRO Shareholder shall indemnify, defend and
hold harmless PREIT, the Partnership and TRO (collectively, "Buyer Indemnified
Persons") against and in respect of any and all losses, costs, expenses
(including, without limitation, costs of investigation and reasonable defense
and attorneys' fees), claims, damages, obligations, liabilities or diminutions
in value, whether or not involving a third party claim (collectively,
"Damages"), arising out of, based upon or otherwise in respect of: (a) any
inaccuracy in or breach of any representation or warranty of such TRO
Shareholder made in or pursuant to this Agreement (including, without
limitation, the certificate referred to in Section 8.2(a)(ii) which, for this
purpose, will be deemed to have stated, inter alia, that the TRO Shareholders'
representations and warranties in this Agreement were true and correct as of
the Closing Date as if made on the Closing Date); (b) any breach or
nonfulfillment of any covenant or obligation of any TRO Shareholder contained
in this Agreement; or (c) any of the matters described in Schedule 10.1
hereto.
10.2 Indemnification by PREIT. PREIT shall indemnify, defend and hold
harmless the TRO Shareholders against and in respect of any and all Damages
arising out of, based upon or otherwise in respect of: (a) any inaccuracy in
or breach of any representation or warranty of PREIT made in or pursuant to
this Agreement (including, without limitation, the certificate referred to in
Section 8.2(b)(v) which, for this purpose, will be deemed to have stated,
inter alia, that PREIT's representations and warranties in this Agreement were
true and correct as of the Closing Date as if made on the Closing Date); or
(b) any breach or nonfulfillment of any covenant or obligation of PREIT or the
Partnership contained in this Agreement.
10.3 Limitations on Liability.
(a) No TRO Shareholder shall have any obligation to
indemnify any Buyer Indemnified Person against Damages pursuant to Section
10.1(a) of this Agreement arising out of or
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based upon any inaccuracy in or breach of any representation or warranty
(other than those set forth in Section 3.6) made in or pursuant to this
Agreement unless and until the aggregate of all such Damages suffered or
incurred by Buyer Indemnified Persons exceeds $350,000; in which event the
Buyer Indemnified Persons shall be entitled to indemnification for the full
amount of all Damages suffered or incurred; provided, however, that the above
limitation shall not be applicable to any claim for Damages pursuant to
Sections 10.1(b) (other than an indemnity claim based upon a breach of Section
5.28(a)(iii)(B), which shall be subject to such limitation to the same extent
as a claim for breach of Section 3.9 as described below) or 10.1(c) or based
upon a breach of any representation or warranty made in or pursuant to (x)
Sections 3.1, 3.2, 3.3, 3.4, 3.10(b), 3.28 or 3.31 or (y) Section 3.9, in the
case of a breach of any of the representations and warranties set forth in
Section 3.9 other than due to the existence of liabilities of a nature not
required to be reflected in financial statements prepared in accordance with
GAAP of which the TRO Shareholders had no knowledge prior to Closing.
(b) No TRO Shareholder shall have any obligation
to indemnify any Buyer Indemnified Person against Damages based upon any
inaccuracy in or breach of any representation or warranty set forth in Section
3.6 unless and until the aggregate of all such Damages suffered or incurred by
Buyer Indemnified Persons exceeds $50,000; in which event the Buyer
Indemnified Persons shall be entitled to indemnification for the full amount
of all such Damages suffered or incurred.
(c) Following Closing, (i) the TRO Shareholders
shall not be obligated to indemnify Buyer Indemnified Persons against Damages
pursuant to Section 10.1 to the extent that such indemnification payment
(other than indemnification payments in respect of fraud or intentional
misrepresentation), when aggregated with all prior indemnification payments
(other than indemnification payments in respect of fraud or intentional
misrepresentation) by or on behalf of the TRO Shareholders to Buyer
Indemnified Persons or reasonably paid by or on behalf of the TRO Shareholders
to third parties for the benefit of Buyer Indemnified Persons pursuant to this
Agreement, would exceed the Aggregate Value (as hereafter defined), and (ii)
each TRO Shareholder other than Ronald Rubin and George Rubin shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 10.1 to the extent that such indemnification payment, when aggregated
with all prior indemnification payments by or on behalf of such TRO
Shareholder to Buyer Indemnified Persons or reasonably paid by or on behalf of
such TRO Shareholder to third parties for the benefit of Buyer Indemnified
Persons pursuant to this Agreement, would exceed the Proportionate Aggregate
Value (as defined below) attributable to such TRO Shareholder, provided that
the limitation of this subclause (ii) shall not apply to the extent an
indemnity claim
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is brought with respect to a breach of a representation and warranty made
solely by such TRO Shareholder and not by such TRO Shareholder and other TRO
Shareholders or with respect to a matter involving fraud or intentional
misrepresentation by such TRO Shareholder. The "Aggregate Value" means an
amount equal to the value of all Class A Units theretofore issued pursuant to
Sections 1.2 and 2.2 (it being acknowledged that for this purpose units that
would have been issued but for an exercise of the set-off rights specified in
Section 10.7 shall be deemed to have been issued), such value to be calculated
by multiplying the number of units times the per share Value (as defined in
the Amended Partnership Agreement) of a PREIT Share as of the date of issuance
of such units.
(d) Following Closing, the liability of each TRO Shareholder
other than Ronald Rubin and George Rubin for each indemnity claim pursuant to
Section 10.1 shall be limited to that fraction of the aggregate Damages
incurred by Buyer Indemnified Persons with respect to such claim that is equal
to the quotient whose numerator equals the portion of the Aggregate Value
attributable to units theretofore issued to such TRO Shareholder (for this
purpose units that would have been issued but for an exercise of the set-off
rights specified in Section 10.7 shall be deemed to have been issued) (the
"Proportionate Aggregate Value") and the denominator of which equals the
Aggregate Value; provided, however, that the foregoing shall not limit the
liability of Ronald Rubin or George Rubin, each of whom shall be jointly and
severally liable for 100% of the aggregate Damages incurred (subject to the
cap on aggregate Damages set forth above in subclause (i) of Section 10.3(c)),
and provided further that the foregoing limitation shall not apply to the
extent that an indemnity claim is brought with respect to a breach of a
representation and warranty made solely by such TRO Shareholder and not by
such TRO Shareholder and other TRO Shareholders or with respect to a matter
involving fraud or intentional misrepresentation by such TRO Shareholder.
(e) No claim arising out of or based upon any inaccuracy in
or breach of any representation or warranty made in or pursuant to this
Agreement shall be made unless a claim arises and written notice is delivered
to the indemnifying party within the Basic Claims Period (as defined below);
provided that any such claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to (x) Sections
3.16, 3.17 or 3.20 may be made at any time before the expiration of the latest
to expire statute of limitations period applicable to an action brought by the
appropriate taxing or other regulatory agency with respect to the matters
forming the basis for such claim and (y) Sections 3.4, 3.25 or 3.28 may be
made at any time. For purposes hereof, "Basic Claims Period" means the period
beginning on the date hereof and ending on the
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date five months after the fiscal year end for first full fiscal year of PREIT
after Closing.
(f) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the TRO Disclosure Letter. The waiver by PREIT of any condition based on
the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT. To the extent that any claim for
indemnification may be made under Section 10.1(a) and Section 10.1(c), then
such claim shall be deemed for all purposes to have arisen only under Section
10.1(c) and not under Section 10.1(a).
(g) Each party's rights under this Section 10 shall be its
sole remedy against the other parties in respect of any matters arising under
this Agreement, subject to a party's rights, if any, to seek and obtain
specific performance with respect to covenants, agreements and obligations set
forth herein.
(h) No party may assert a claim for indemnification pursuant
to Section 10.1 unless the Closing has occurred or this Agreement has been
terminated pursuant to Section 9.
(i) The limitations of this Section 10.3 shall not be
applicable in respect of Damages arising from or relating to any breach of
representations or warranties with respect to the Equity Fund.
10.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 10 *relates, such indemnified party shall, if
a claim is to be made against an indemnifying party under Section 10, give
notice to the indemnifying party of the commencement of such proceeding, but
the failure to so notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such proceeding is materially prejudiced by the indemnified party's failure
to give such notice.
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(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under Section 11 for any fees of
other counsel or any other expenses with respect to the defense of such
proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a proceeding,
(A) it will be conclusively established for purposes of this Agreement that
the claims made in that proceeding are within the scope of and subject to
indemnification; (B) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (1) there is no finding or admission of any violation of Law by the
indemnified party (or any affiliate thereof) or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party, and (2) the sole relief provided is monetary damages that
are paid in full by the indemnifying party. The indemnified party will have no
liability with respect to any compromise or settlement of the claims
underlying such proceeding effected without its consent. If notice is given to
an indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice
to the indemnifying party, assume the exclusive right to defend, compromise,
or settle such proceeding, but the indemnifying party will not be bound by any
determination of a
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proceeding so defended or any compromise or settlement effected without its
consent.
10.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the
party from whom indemnification is sought.
10.6 Acknowledgement. Each TRO Shareholder hereby acknowledges that
the representations, warranties and covenants made by him herein are made in
his capacity as a shareholder of TRO and not as director, officer or employee
of either Company; accordingly, each TRO Shareholder acknowledges and confirms
that following the Closing he shall not have any claim for indemnification by
TRO, the Partnership, PREIT or any affiliate thereof as an officer, trustee,
director or employee thereof in respect of any Damages due or owing by such
TRO Shareholder pursuant to the terms of this Agreement.
10.7 Right of Set-Off. PREIT and the Partnership shall have the right
to set-off, against any Class A Units which may be owed by PREIT or the
Partnership to any TRO Shareholder, any amount owed by such TRO Shareholder to
any Buyer Indemnified Person pursuant to this Section 10. To the extent that a
TRO Shareholder contests an indemnification claim of PREIT or the Partnership
that would be the basis for the exercise of a right to set off against any
Class A Units owed to such TRO Shareholder, the Partnership shall issue such
Class A Units and deposit them with an escrow agent reasonably satisfactory to
such TRO Shareholder until the earlier to occur of (i) resolution of such
dispute by a final nonappealable order of a court of competent jurisdiction or
(ii) the mutual agreement of such TRO Shareholder and PREIT that such units
should be released from escrow.
10.8 Indemnification Payments. The TRO Shareholders shall be entitled
to use cash or Class A Units to make indemnification payments hereunder. In
the event Class A Units are used, each such unit shall be valued based on the
per share Value (as defined in the Amended Partnership Agreement) of a PREIT
Share as of the date such unit is tendered to PREIT as an indemnification
payment hereunder.
10.9 Transfer of Units. Ronald Rubin and George Rubin shall not, and
each shall cause their affiliates not to, transfer any Class A Units issued
pursuant to this Agreement to any of them (or any interest therein) for one
year following such issuance unless the transferee executes and delivers to
PREIT prior to such transfer an agreement, in form and substance reasonably
satisfactory to PREIT, by which such transferee shall agree that all such
transferred units (and proceeds thereof)
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shall be subject to and available to pay the indemnification undertakings of
the TRO Shareholders pursuant to Section 10.1.
SECTION 11. MISCELLANEOUS.
11.1 Survival of Representations and Warranties.
(a) The representations and warranties made by the parties
in this Agreement and in the certificates, documents and other agreements
delivered pursuant hereto shall survive the Closing. Anything in this
Agreement to the contrary notwithstanding: (i) the representations and
warranties of the TRO Shareholders hereunder, and the right of the Buyer
Indemnified Persons to indemnification for breach thereof, shall not be
affected by any investigation of the Companies, any TRO Shareholder or any TRO
Affiliate made by PREIT or its agents or representatives and (ii) the
representations and warranties of PREIT hereunder, and the right of the TRO
Shareholders to indemnification for breach thereof, shall not be affected by
any investigation of PREIT or the Partnership or its affiliates made by TRO or
its agents or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the TRO Disclosure
Letter (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
11.2 Further Assurances. Each party hereto shall use best efforts to
comply with all requirements imposed hereby on such party and to cause the
transactions contemplated hereby to be consummated as contemplated hereby and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other
actions as any other party hereto shall reasonably request in order to fulfill
its obligations under this Agreement and to effectuate the purposes of this
Agreement and the transactions contemplated herein. Each party shall promptly
notify the other parties of any event or circumstance known to such party that
could prevent or delay the consummation of the transactions contemplated
hereby or which would indicate a breach or non-compliance with any of the
terms, conditions, representations, warranties or agreements of any of the
parties to this Agreement.
11.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or
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addresses as shall be furnished in writing by any party hereto to the others.
Any such notice or communication shall be deemed to have been given as of the
date received, in the case of personal delivery, or on the date shown on the
receipt or confirmation therefor in all other cases.
To PREIT, the Partnership or (following the Closing)
TRO:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
(215) 542-9250
Telecopy (215) 542-9179
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the TRO Shareholders or (prior to Closing) the
Companies:
The Rubin Organization, Inc.
The Bellevue
200 South Broad Street
Philadelphia, PA 19102
(215) 875-0700
Telecopy (215) 546-7311
Attention: Ronald Rubin and George Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6060
Telecopy (215) 568-6603
Attention: Leonard M. Klehr, Esquire
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11.4 Assignment and Benefit.
(a) The parties hereto shall not assign this Agreement or
any rights hereunder, or delegate any obligations hereunder, without prior
written consent of the other party. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the benefit of,
and be binding upon, the parties hereto, and each of their respective
successors, heirs and assigns.
(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors, heirs
and assigns, any legal or equitable right, remedy or claim under or in respect
of this Agreement or any of the provisions herein contained, this Agreement
and all provisions and conditions hereof being intended to be, and being, for
the sole and exclusive benefit of such parties, and permitted successors,
heirs and assigns and for the benefit of no other person or entity.
11.5 Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect, and PREIT and TRO may: (a) extend the
time for the performance of any of the obligations of the other, (b) waive any
inaccuracies in representations and warranties by the other, (c) waive
compliance by the other with any of the obligations contained in this
Agreement, or (d) waive the fulfillment of any condition precedent to the
performance under this Agreement of the waiving party; provided, however, that
after the approval of the transactions contemplated by this Agreement by the
shareholders of PREIT, there shall be no material amendment or modification of
this Agreement unless the Board of Trustees of PREIT concludes that such
amendment or modification is in the best interests of the PREIT shareholders.
Any such amendment, or modification, extension or waiver shall be in writing.
The waiver by a party of any breach of any provision of this Agreement shall
not constitute or operate as a waiver of any other breach of such provision or
of any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
11.6 Governing Law; Consent to Jurisdiction. This Agreement is made
pursuant to, and shall be construed and enforced in accordance with, the laws
of the Commonwealth of Pennsylvania (and United States federal law, to the
extent applicable), irrespective of the principal place of business, residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Any legal action, suit or
proceeding arising out of or relating to this Agreement may be instituted in
any federal court or in any state court in the Commonwealth of Pennsylvania,
and each party waives any objection which such party may now or hereafter
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have to the laying of the venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court. Any and all service
of process and any other notice in any such action, suit or proceeding shall
be effective against any party if given as provided herein. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any jurisdiction other than
Pennsylvania. Nothing contained herein or in any Transaction Document shall
prevent or delay PREIT or the Partnership from seeking, in any court of
competent jurisdiction, specific performance or other equitable remedies in
the event of any breach or intended breach by any TRO Shareholder or either
Company of any of its or his obligations hereunder.
11.7 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way
affect the meaning and interpretation of this Agreement. The terms defined
herein and in any agreement executed in connection herewith include the plural
as well as the singular and the singular as well as the plural, and the use of
masculine pronouns shall include the feminine and neuter. Except as otherwise
indicated, all agreements defined herein refer to the same as from time to
time amended or supplemented or the terms thereof waived or modified in
accordance herewith and therewith.
11.8 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
11.10 Entire Agreement. This Agreement, together with the TRO
Disclosure Letter and the agreements, exhibits, and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, including without limitation, the Letter
Agreement (other than Section IV thereof).
11.11 Guaranty of Performance by TRO Predevelopment, LLC. Ronald
Rubin and George Rubin hereby guarantee that TRO Predevelopment, LLC will
perform its indemnification obligations
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set forth in Section 10 of the Predevelopment Properties Contribution
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
duly executed this Agreement, all as of the date first above
written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By:/s/ Jonathan B. Weller
----------------------------
Name:
Title:
By:/s/ Jeffrey A. Linn
----------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its
general partner
By:/s/ Jonathan B. Weller
----------------------------
Name:
Title:
By:/s/ Jeffrey A. Linn
----------------------------
Name:
Title:
THE RUBIN ORGANIZATION, INC.
By: /s/ Ronald Rubin
----------------------------
Name:
Title:
THE RUBIN ORGANIZATION-ILLINOIS, INC.
By: /s/ Ronald Rubin
----------------------------
Name:
Title:
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SCHEDULE A
to
TRO CONTRIBUTION AGREEMENT
Each Current TRO Shareholder, by executing this Schedule A,
evidences that such person has become a party to, and is bound by, the TRO
Contribution Agreement.
All signatures need not appear on the same copy of this
Schedule A.
/s/ Ronald Rubin /s/ Joseph Straus, Jr.
------------------------ ---------------------------
Ronald Rubin Joseph Straus, Jr.
/s/ George Rubin /s/ Alan Feldman
------------------------ ---------------------------
George Rubin Alan Feldman
/s/ Leonard Shore /s/ Doug Grayson
------------------------ ---------------------------
Leonard Shore Doug Grayson
/s/ Joseph Coradino /s/ Eric Mallory
------------------------ ---------------------------
Joseph Coradino Eric Mallory
/s/ Lewis Stone /s/ James Paterno
------------------------ ---------------------------
Lewis Stone James Paterno
/s/ Gerry Broker /s/ Judith Garfinkel
------------------------ ---------------------------
Gerry Broker Judith Garfinkel
/s/ Patricia Berns /s/ David Bryant
------------------------ ---------------------------
Patricia Berns David Bryant
/s/ Edward Glickman /s/ Susan Valentine
------------------------ ---------------------------
Edward Glickman Susan Valentine
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SCHEDULE B
to
TRO CONTRIBUTION AGREEMENT
Each Former TRO Debtholder, by executing this Schedule B,
evidences that it has become a party to, and is bound by, the TRO Contribution
Agreement.
All signatures need not appear on the same copy of this
Schedule B.
DELAWARE ASSOCIATES
/s/ Ronald Rubin
---------------------------
Ronald Rubin, General Partner
RICHARD I. RUBIN & CO., INC.
By: /s/ Ronald Rubin
---------------------------
Name:
Title:
RR LOANCO ASSOCIATES
By: Richard I Rubin & Co.,
Inc., its Managing Partner
By: /s/ George Rubin
---------------------------
Name:
Title:
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INDEX OF DEFINED TERMS
Defined Term Page
1933 Act ....................................................................13
1934 Act ....................................................................13
Affiliated Persons...........................................................29
Agreement ....................................................................1
Amended Partnership Agreement.................................................2
Authorizations ..............................................................14
Balance Sheet ...............................................................16
Board .......................................................................48
Business .....................................................................1
Buyer Indemnified Persons.........................................5, 30, 64, 66
Buyer Transaction Documents..................................................37
CERCLA ......................................................................31
Class A Units ................................................................2
Closing .....................................................................60
Closing Date ................................................................60
Closing Loan ................................................................47
Closing Loan Statement.......................................................47
Code .........................................................................1
Companies ....................................................................1
Company ......................................................................1
Company Acquisition Transaction..............................................43
Competing Business...........................................................29
Contracts ...................................................................20
Contributed TRO Shares........................................................4
Copyrights ..................................................................21
Court at Oxford Valley Contribution Agreement.................................2
Current Affiliated Persons...................................................29
Current Period ...............................................................6
Current TRO Shareholders......................................................1
Damages .....................................................................64
Employee Benefit Plans.......................................................25
Employee Stock Ownership Plan.................................................2
Employee Stock Ownership Trust................................................2
Encumbrance .................................................................18
Encumbrances ................................................................18
EPD Assignment Agreement......................................................3
EPD Properties ...............................................................3
Equity Fund .................................................................36
ERISA .......................................................................25
ERISA Affiliate .............................................................26
Existing Properties...........................................................2
Former TRO Debtholders........................................................1
GAAP .........................................................................5
Hazardous Substance..........................................................30
Hillview Contribution Agreement...............................................2
Howell Partnership...........................................................50
Intellectual Property........................................................21
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Interim Balance Sheet........................................................16
IRS..........................................................................24
Laws.........................................................................14
Letter Agreement.............................................................42
Magnolia Agreement............................................................3
Magnolia Mall.................................................................3
Marks........................................................................21
Material Adverse Effect......................................................10
Non-Voting Common Shares......................................................1
North Dartmouth Agreement.....................................................3
North Dartmouth Mall..........................................................3
Northeast Contribution Agreement..............................................3
Orders.......................................................................15
OSHA.........................................................................28
Partnership...................................................................1
Patents......................................................................21
Person.......................................................................12
Preceding Period..............................................................6
Predevelopment Partnership....................................................3
Predevelopment Properties.....................................................3
Predevelopment Properties Contribution Agreement..............................3
Preferred Shares..............................................................1
PREIT.........................................................................1
PREIT Disclosure Letter......................................................38
PREIT Reports................................................................39
PREIT Shareholders' Meeting..................................................41
PREIT Subsidiary..............................................................1
Proportionate Aggregate Value................................................66
Proxy Statement..............................................................41
Real Property................................................................19
Requested Legal Expenses.....................................................46
Shareholder Transaction Documents............................................10
Software.....................................................................21
Special Committee............................................................48
Taxes........................................................................23
Terminated Pension Plan......................................................27
Trade Secrets................................................................21
Transaction Costs............................................................45
TRO...........................................................................1
TRO Affiliate................................................................19
TRO Consolidation.............................................................2
TRO Disclosure Letter........................................................10
TRO Illinois..................................................................1
TRO Recap.....................................................................2
TRO Shareholders..............................................................1
Voting Common Shares..........................................................1
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