CONTRIBUTION AGREEMENT
relating to
Hillview Shopping Center, Cherry Hill, New Jersey
Cherry Hill Partner, Inc.
Rubin Oxford Valley Associates, L.P.
Pennsylvania Real Estate Investment Trust
PREIT Associates, L.P.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................... 2
SECTION 2. CONTRIBUTIONS......................................... 2
SECTION 3. CONSIDERATION......................................... 2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTORS.......................................... 2
4.1 As to the Contributors................................ 2
4.2 As to the Project Partnership......................... 7
4.3 As to the Shopping Center............................. 15
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT........ 21
5.1 Organization.......................................... 21
5.2 Power and Authority................................... 21
5.3 No Conflicts.......................................... 22
5.4 Capitalization........................................ 23
5.5 PREIT Reports......................................... 23
5.6 Litigation............................................ 24
5.7 Material Adverse Change............................... 24
5.8 Brokers............................................... 24
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS...................... 24
6.1 Conduct of Business................................... 24
6.2 Reasonable Efforts.................................... 26
6.3 Notifications......................................... 26
6.4 Operation of Shopping Center.......................... 27
6.5 Preference Amount..................................... 27
6.6 Interest Rate Swap.................................... 27
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES....... 28
7.1 Time of Closing....................................... 28
7.2 Closing Conditions.................................... 28
7.3 Deliveries at the Closing............................. 33
SECTION 8. CLOSING ADJUSTMENTS................................... 34
8.1 Adjustment for Breaches by the Contributors........... 34
8.2 Casualty or Condemnation.............................. 34
SECTION 9. INDEMNIFICATION....................................... 35
9.1 Indemnification by Contributors....................... 35
9.2 Indemnification by PREIT.............................. 36
9.3 Limitations on Liability.............................. 36
9.4 Procedure For Indemnification - Third Party Claims.... 38
9.5 Procedure for Indemnification - Other Claims.......... 39
9.6 Distributions of Class A Units by Contributors........ 40
9.7 Right of Set-Off...................................... 40
9.8 Indemnification Payments.............................. 40
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SECTION 10. TERMINATION AND ABANDONMENT........................... 40
10.1 Termination........................................... 40
10.2 Procedure for Termination; Effect of
Termination........................................... 41
SECTION 11. GENERAL PROVISIONS.................................... 41
11.1 Survival of Representations and Warranties............ 41
11.2 Costs and Expenses.................................... 42
11.3 Notices............................................... 42
11.4 Access to Information; Confidentiality................ 43
11.5 Public Announcements.................................. 43
11.6 No Solicitation....................................... 44
11.7 Entire Agreement...................................... 44
11.8 Counterparts.......................................... 44
11.9 Governing Law......................................... 44
11.10 Section Headings, Captions and Defined Terms.......... 45
11.11 Amendments, Modifications and Waiver.................. 45
11.12 Severability.......................................... 45
11.13 Liability of Trustees, etc............................ 45
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CONTRIBUTION AGREEMENT
relating to
Hillview Shopping Center, Cherry Hill, New Jersey
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 30th
day of July, 1997, by and among CHERRY HILL PARTNER, INC., a New Jersey
corporation ("CHP,Inc."), RUBIN OXFORD VALLEY ASSOCIATES, L.P., a Pennsylvania
limited partnership ("RO,L.P." and, together with CHP,Inc., the "Contributors,"
and, each, a "Contributor"), PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, an
unincorporated association in business trust form created under Pennsylvania law
pursuant to a Trust Agreement dated December 27, 1960, as last amended and
restated on December 16, 1987 ("PREIT"), and PREIT ASSOCIATES, L.P., a Delaware
limited partnership (the "Partnership").
Background
The Contributors are affiliates of The Rubin Organization, Inc., a
Pennsylvania corporation ("TRO").
This Contribution Agreement is part of a larger transaction described
in the TRO Contribution Agreement of even date herewith (the "TRO Contribution
Agreement") among PREIT, TRO, The Rubin Organization-Illinois, Inc. and the
shareholders of TRO.
The Partnership has been formed by PREIT and PREIT Property Trust, a
Pennsylvania business trust ("PREIT Subsidiary"), pursuant to the terms of the
Agreement of Limited Partnership dated as of June 30, 1997 (the "Partnership
Agreement") of PREIT Associates, L.P. between PREIT, as general partner, and
PREIT Subsidiary, as limited partner.
Subject to the terms and conditions of this Agreement and the TRO
Contribution Agreement, the parties intend that the Contributors will contribute
their partnership interests (the "Interests") in Cherry Hill Associates, L.P., a
New Jersey limited partnership (the "Project Partnership"), which holds title to
the shopping center known as the Hillview Shopping Center, Cherry Hill, New
Jersey, as more fully described in Schedule B attached hereto and made a part
hereof (the "Shopping Center"), in exchange for Class A limited partner
interests in the Partnership ("Class A Units").
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall
have the same meanings as ascribed to such terms in the TRO Contribution
Agreement.
SECTION 2. CONTRIBUTIONS.
Subject to the terms and conditions of this Agreement, at the Closing
(as defined in Section 7.1), the Contributors shall contribute to the
Partnership, and the Partnership shall acquire from the Contributors, free and
clear of all Encumbrances (other than applicable securities law restrictions and
subject to the terms and conditions of the limited partnership agreement for the
Project Partnership), the Interests and all benefits and advantages to be
derived therefrom, including, without limitation, all right, title and interest
associated with the Interests in and to the capital accounts of the
Contributors, rights of the Contributors to distributions made after the Closing
and allocable shares of the Contributors with respect to profits and losses.
SECTION 3. CONSIDERATION.
In consideration for the contributions described in Section 2, subject
to the terms and conditions of this Agreement, at the Closing, the Partnership
shall issue to the Contributors that number of Class A Units as is set forth in
Schedule A hereto (which is incorporated by reference herein) as being issuable
at the Closing. Following Closing, the Partnership shall issue to the
Contributors at the times specified in Schedule A that number of Class A Units
as are issuable, in accordance with Schedule A, following Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS.
The Contributors hereby jointly and severally represent and warrant
to PREIT and the Partnership as follows:
4.1 As to the Contributors.
(a) Organization. Each Contributor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all corporate or partnership power to carry on its business
as presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. Each Contributor is
duly qualified to do business as a foreign corporation or foreign partnership
and is in good standing under the laws of each jurisdiction in which its
ownership or leasing of assets or properties or the nature of its
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activities requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the condition (financial
or otherwise), assets, results of operations or business of such Contributor (a
"Material Adverse Effect").
(b) Power and Authority. Each Contributor has all requisite
corporate or partnership power and authority to execute, deliver and perform its
obligations under this Agreement and under the other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Contributor Transaction Documents"). The execution, delivery and performance by
each Contributor of this Agreement and the other Contributor Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate or partnership action on the part of such Contributor. This Agreement
has been duly and validly executed and delivered by each Contributor and
constitutes a legal, valid and binding obligation of each Contributor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles. When executed and delivered as contemplated herein, each of the
other Contributor Transaction Documents to which a Contributor is a party shall,
assuming due authorization, execution and delivery thereof by the other parties
thereto, constitute a legal, valid and binding obligation of such Contributor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
(c) No Conflicts; etc. Except as described in Section 4.1(c)
of the disclosure letter delivered by the Contributors to PREIT on the date
hereof (the "Contributor Disclosure Letter"), the execution and delivery by the
Contributors of this Agreement do not, and the performance by the Contributors
of all of the Contributor Transaction Documents will not (with or without the
passage of time or the giving of notice), directly or indirectly:
(i) contravene, violate or conflict with (A) the
articles of incorporation, bylaws or partnership agreement (or other
organizational documents) of either Contributor or (B) any Law applicable to
either Contributor, or by or to which any assets or properties of either
Contributor is bound or subject;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit under, or give to
others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to, any Authorization or
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Contract to which either Contributor is a party or by which either Contributor
or any assets or properties thereof is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to either Contributor, the
Interests or any of their other assets or properties.
(d) Except as set forth in Section 4.1(d) of the Contributor
Disclosure Letter, the execution and delivery by the Contributors of this
Agreement do not, and the execution and delivery by the Contributors of the
other Contributor Transaction Documents, and the performance by the Contributors
of all of the Contributor Transaction Documents will not, require either
Contributor to obtain any authorization of, or to make any filing, registration
or declaration with or notification to, any court, government or governmental
agency or instrumentality (federal, state, local or foreign) or to obtain the
consent, waiver or approval of, or give any notice to, any other Person.
(e) Except as set forth in Section 4.1(e) of the Contributor
Disclosure Letter, there are no actions, proceedings or investigations pending
or, to the knowledge of the Contributors, threatened, that question any of the
transactions contemplated by this Agreement or which, if adversely determined,
would have a Material Adverse Effect or could materially and adversely affect
either Contributor's ability to enter into or perform its obligations under this
Agreement.
(f) Litigation; Orders.
(i) Except as set forth in Section 4.1(f) of the
Contributor Disclosure Letter, there are no, and since January 1, 1996 there
have not been any, claims, actions, suits, proceedings (arbitration or
otherwise) or, to the knowledge of the Contributors, investigations involving or
affecting either Contributor or any of their assets or properties or any of
their directors, officers, partners or shareholders in their capacities as such,
before or by any court, government or governmental agency or instrumentality
(federal, state, local or foreign), or before an arbitrator of any kind. To the
knowledge of the Contributors, no such claim, action, suit, proceeding or
investigation is presently threatened or contemplated. There are no unsatisfied
judgments, penalties or awards against or affecting either Contributor or any of
their assets or properties.
(ii) There is no material Order to which either
Contributor or any of their assets or properties is subject. No officer,
director, partner, shareholder or, to the knowledge of the Contributors,
employee of either Contributor is
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subject to any Order that prohibits such officer, director, partner, shareholder
or employee from engaging in or continuing any conduct, activity or practice
relating to its business. The Contributors have each complied in all respects
with the terms and conditions of each Order applicable to them.
(g) Undisclosed Liabilities. Except as set forth in Section
4.1 (g) of the Contribution Disclosure Letter, there are no liabilities or
obligations of the Contributors of any nature (whether absolute, accrued,
contingent, liquidated or unliquidated or otherwise) except the obligations
under the limited partnership agreement governing RO,L.P. and under the
Agreement of Limited Partnership dated as of November 1, 1996 (the "Project
Partnership Agreement") among RO,L.P., Cherry Hill Partner, Inc., and Goldenberg
CH Partners, L.P. ("Goldenberg CH"), the partnership agreement governing the
Project Partnership, and the obligations of RO,L.P. under the Amended and
Restated Limited Partnership Agreement of Oxford Valley Road Associates dated
June 27, 1996, among Rubin Oxford, Inc., RO,L.P., OVG General, Inc. ("OVG"),
Goldenberg Investors, L.P., Goldenberg Partners, L.P. and Milton S. Schneider,
and that certain Contribution Agreement relating to The Court at Oxford Valley
of even date herewith among Rubin Oxford, Inc., RO,L.P., PREIT and the
Partnership.
(h) The Interests.
(i) Section 4.1(h) of the Contributor Disclosure Letter
contains an accurate and complete description of the partnership interests in
the Project Partnership that have been issued of record, but the Contributors
make no representation or warranty that the partnership interests or equity
issued to Persons other than the Contributors have not been later assigned or
encumbered. Except as described therein, no Person has any partnership or other
interest in the Project Partnership or any right to receive any distributions
from the Project Partnership or be allocated any profits or losses of the
Project Partnership (provided, however, that with respect to the ownership of
the partner interests in the Project Partnership other than the Interests, this
representation is limited to the Contributors' knowledge). Each Contributor
owns, beneficially and of record, the portion of the Interests described in
Schedule A hereto, free and clear of all Encumbrances other than the Project
Partnership Agreement. The Persons listed in Section 4.1(h) of the Contributor
Disclosure Letter are the sole partners in the Project Partnership (provided,
however, that with respect to the ownership of the partner interests in the
Project Partnership other than the Interests, this representation is limited to
the Contributors' knowledge). The issued and outstanding partnership interests
in the Project Partnership have been issued by the Project Partnership in
compliance with the Project Partnership Agreement, and such interests were not
issued
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by the Project Partnership in violation of any federal or state securities laws.
(ii) Except for this Agreement and except as provided in
the Project Partnership Agreement or in leases with tenants (any such rights in
leases shall be customary in projects comparable to the Shopping Center and
shall not prejudice the value of the Shopping Center as calculated in Schedule A
hereto), there are no rights, subscriptions, warrants, options, rights of first
refusal, conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any partnership interests or other securities or
obligations of any kind convertible into any partnership interest or other
securities or any participation interests of any kind in the Shopping Center (or
any portion thereof) or the Project Partnership; (provided, however, that with
respect to the partner interests in the Project Partnership other than the
Interests, this representation is limited to the Contributors' knowledge).
(iii) Upon execution and delivery by the Contributors and
the Partnership of the assignment and assumption agreement contemplated by
Section 7.3, the Partnership will acquire good and valid title to the Interests,
free and clear of all Encumbrances (except for applicable securities law
restrictions and for the Project Partnership Agreement).
(iv) The Contributors have delivered to the Partnership
on the date hereof a true and complete copy of the Project Partnership
Agreement, as amended to date.
(i) Brokers. No Person acting on behalf of either Contributor
or any of their respective affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, from any of such parties in
connection with any of the contribution transactions contemplated by this
Agreement.
(j) Accurate Disclosure. All documents and other papers
delivered by or on behalf of either Contributor in connection with the
transactions contemplated by this Agreement are accurate and complete in all
material respects.
(k) Knowledge. For purposes of this Agreement, "to the
knowledge of the Contributors" and correlative terms means the actual knowledge
of Ronald Rubin, George Rubin, Edward Glickman and the officers and other senior
management of each Contributor (or in the case of RO,L.P., its partners), after
reasonable inquiry (with respect to Sections 4.1(h)(i) and 4.1(h)(ii),
reasonable inquiry shall be construed to mean that inquiry has been made to
Goldenberg CH or its affiliates (the "Goldenberg Group") by the Contributors).
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(l) Investment Representations.
(i) Each Contributor acknowledges that the Class A Units
to be issued pursuant to Section 3 and Schedule A hereto will not be registered
under the 1933 Act on the grounds that the issuance of such units is exempt from
registration pursuant to Section 4(2) of the 1933 Act and/or Regulation D
promulgated under the 1933 Act, and that the reliance of the Partnership on such
exemptions is predicated in part on the Contributors' representations,
warranties and acknowledgements set forth in this section.
(ii) The Class A Units issued in accordance with this
Agreement will be acquired by each Contributor for its own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the 1933 Act, and the rules and regulations thereunder, and neither
Contributor will distribute any of such units in violation of the 1933 Act.
(iii) Each Contributor (v) acknowledges that the Class A
Units, when issued, will not be registered under the 1933 Act and such units
will have to be held indefinitely by it unless they are subsequently registered
under the 1933 Act or an exemption from registration is available, (w) is aware
that any sales of such units made under Rule 144 of the Securities and Exchange
Commission under the 1933 Act may be made only in limited amounts and in
accordance with the terms and conditions for that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (x) is aware that Rule 144 may not be available for
use by either Contributor for resale of the units, (y) is aware that the
Partnership is under no obligation to register, and has no current intention of
registering any of such units under the 1933 Act and (z) acknowledges that such
Contributor has received and read a private placement memorandum relating to the
offer of Class A Units.
(iv) Each Contributor is well versed in financial
matters, has had dealings over the years in securities, including "restricted
securities," and is fully capable of understanding the type of investment being
made in the Class A Units and the risks involved in connection therewith.
4.2 As to the Project Partnership.
(a) Organization. The Project Partnership is a partnership
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has all partnership power to carry on its business as
presently conducted, to own and lease the assets and properties which it owns
and leases and to perform all its obligations under each agreement and
instrument to which it is a party or by which it is bound. The Project
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Partnership is duly qualified to do business as a foreign partnership and is in
good standing under the laws of each jurisdiction in which its ownership or
leasing of assets or properties or the nature of its activities requires such
qualification except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or otherwise), assets,
results of operations or business of the Project Partnership.
(b) No Conflicts. Except as described in Section 4.2(b) of
the Contributor Disclosure Letter, the execution and delivery by the
Contributors of this Agreement do not, and the execution and delivery by the
Contributors of the other Contributor Transaction Documents and the performance
by the Contributors of all of the Contributor Transaction Documents will not
(with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the Project
Partnership Agreement, or (B) any Law applicable to the Project Partnership or
to the Shopping Center;
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit under, or give to
others any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or Contract to which the Project Partnership is a party or by which the Project
Partnership or the Shopping Center is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any Encumbrance upon or with respect to the Project Partnership,
the Shopping Center or any other material assets or properties of the Project
Partnership.
(c) Except as set forth in Section 4.2(c) of the Contributor
Disclosure Letter, the execution and delivery by the Contributors of this
Agreement do not, and the performance by the Contributors of all of the
Contributor Transaction Documents will not, require the Project Partnership to
obtain any authorization of, or to make any filing, registration or declaration
with or notification to, any court, government or governmental agency or
instrumentality (federal, state, local or foreign) or to obtain the consent,
waiver or approval of, or give any notice to, any other Person.
(d) Compliance with Laws.
(i) Except as disclosed in Section 4.2(d) of the
Contributor Disclosure Letter, the Project Partnership is, and, to the knowledge
of the Contributors, at all times since its
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inception has been, in compliance in all material respects with all Laws that
are or were applicable to it or to the conduct or operation of its business or
the use of the Shopping Center. The Project Partnership has not received, and
there is no basis upon which the Project Partnership may expect to receive, any
notice, order or other communication from any government or governmental agency
or instrumentality (federal, state, local or foreign) of any alleged, actual or
potential material violation of or material failure to comply with any Law
applicable to the Project Partnership or the Shopping Center, and no event has
occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a material violation by the Project
Partnership, or a material failure by the Project Partnership, to comply with,
any Law applicable to the Project Partnership or the Shopping Center.
(ii) The Project Partnership is in possession of all
Authorizations required as of the date hereof to own, lease or operate its
assets and properties or to carry on its business. The Project Partnership shall
obtain as and when required by applicable law, all required Authorizations not
presently in its possession, recognizing that the Shopping Center is an ongoing
construction project as of the date of this Agreement. The Authorizations
currently in effect are in full force and effect without any default or
violation thereunder by the Project Partnership or, to the knowledge of the
Contributors, by any other party thereto. The Project Partnership is in
compliance with all existing Authorizations applicable to it or to the conduct
or operation of its business or the use of any of its assets or properties, and
no such Authorization shall be affected by the transactions contemplated hereby.
Neither the Project Partnership nor, to the best knowledge of the Contributors,
any partner therein has received any notice that any such Authorization
currently in effect may be revoked or may not in the ordinary course be renewed
upon its expiration or that by virtue of the transactions contemplated hereby
that any such Authorization may be revoked or may not be granted, renewed or
issued to the Project Partnership.
(e) Litigation; Orders.
(i) Except as set forth in Section 4.2(e) of the
Contributor Disclosure Letter, there are no, and since inception of the Project
Partnership there have not been any, claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of the Contributors,
investigations involving or affecting the Project Partnership or any of its
assets or properties or, to the knowledge of the Contributors, any of its
partners in their capacities as such, before or by any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
before an arbitrator of any kind (each, a "Claim") other than Claims customarily
arising in
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connection with the ownership and operation of shopping centers similar to the
Shopping Center that are covered by insurance or are within the limits of
current insurance deductibles. To the knowledge of the Contributors, no such
Claim is presently threatened or contemplated. There are no unsatisfied
judgments, penalties or awards against or affecting the Project Partnership or
any of its assets or properties.
(ii) Except as set forth in Section 4.2(e) of the
Contributor Disclosure Letter, there is no Order to which the Project
Partnership or any of its assets or properties is subject. No partner or
employee of the Project Partnership is subject to any Order that prohibits such
partner or employee from engaging in or continuing any conduct, activity or
practice relating to its business. The Project Partnership has complied in all
respects with the terms and conditions of each Order applicable to it.
(f) Cost Reports. Section 4.2(f) of the Contributor
Disclosure Letter includes the cost report reflecting the costs and liabilities
of constructing the Shopping Center as of the date of this Agreement (the "Cost
Report") incurred by the Project Partnership. As of the date hereof, no
financial statements have been prepared for the Project Partnership.
(g) Undisclosed Liabilities.
(i) As of the date hereof, there are no liabilities of
the Project Partnership of a nature required to be reflected in a balance sheet
prepared in accordance with GAAP except: (x) those described in Section 4.2(g)
of the Contributor Disclosure Letter; (y) those reflected or reserved against in
the Cost Report; or (z) current liabilities incurred in the ordinary course of
business consistent with past practice after the date of the Cost Report and
which are neither material in amount nor inconsistent with any of the
representations or warranties made herein.
(ii) As of the Closing, there shall be no liabilities of
the Project Partnership of any nature (whether absolute, accrued, contingent,
liquidated, unliquidated or otherwise) except the liabilities that are taken
into account in the calculation of Attributable Debt pursuant to Schedule A
hereto.
(h) Title to Property; Encumbrances. The Project Partnership
has either good and valid title to, or has a valid, subsisting and unchallenged
leasehold interest in or right to use, all personal property owned, used or
leased by it. The Project Partnership owns all of the personal property (whether
tangible or intangible) that is reflected as owned in its books and records,
free and clear of all Encumbrances other than liens
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for current taxes not yet due, the Encumbrances set forth in Section 4.2(h) of
the Contributor Disclosure Letter and Encumbrances arising after the date hereof
in the ordinary course of business or as the result of the Permitted
Refinancing.
(i) Taxes.
(i) All Taxes due from or required to be remitted by the
Project Partnership with respect to taxable periods ending on or prior to, and
the portion of any interim period up to, the Closing Date have been fully and
timely paid or, to the extent not yet due or payable, have been adequately
provided for on the Cost Report referred to in Section 4.2(f) of the Contributor
Disclosure Letter or on the books and records of the Project Partnership. There
are no levies, liens or other Encumbrances relating to Taxes existing or
pending, or to the best knowledge of the Contributors, threatened with respect
to any of the assets of the Project Partnership.
(ii) Except as disclosed in Section 4.2(i) of the
Contributor Disclosure Letter, all federal, state, local and foreign returns and
reports relating to Taxes, or extensions relating thereto, required to be filed
by or with respect to the Project Partnership have been timely and properly
filed, and all such returns and reports are correct and complete.
(iii) No issues have been raised with any representative
or employee of the Project Partnership (and are currently pending) by the IRS or
any other taxing authority in connection with any of the returns and reports
referred to in subsection (ii) above and no waivers of statutes of limitations
have been given or requested with respect to any such returns and reports or
with respect to any Taxes.
(iv) Section 4.2(i) of the Contributor Disclosure Letter
identifies all federal, state, local and foreign income, franchise and sales and
use tax returns of or with respect to the Project Partnership which have been
examined since its date of inception, or which are currently under examination,
by the IRS or by other taxing authorities, or with respect to which the
applicable statute of limitations (including all extensions and tolling periods)
has not yet run. Except as and to the extent shown therein, all deficiencies
asserted or assessments made as a result of such examinations have been fully
paid, and there are no other unpaid deficiencies asserted or assessments made by
any taxing authority against the Project Partnership.
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(j) Absence of Certain Changes and Events.
(i) The parties acknowledge that the Shopping Center is
not fully developed or constructed and the Shopping Center will not be
substantially completed until approximately November 1, 1997. Except as
described in Section 4.2(j) of the Contributor Disclosure Letter and except as
contemplated or disclosed herein, since its date of inception, the Project
Partnership has conducted its business and activities only in the usual and
ordinary course consistent with past practice and consistent with the
development and construction of a retail shopping center and there has not been
any:
(A) declaration or payment of any distribution or
payment in respect of any interest in the Project Partnership to the
extent that such payment or distribution relates to an obligation or
liability of the Project Partnership after Closing or any issuance,
repurchase or redemption of any such interest;
(B) amendment to the Project Partnership Agreement;
(C) damage, destruction or loss to any material
asset or property of the Project Partnership, whether or not covered by
insurance, that has not been fully repaired, restored or replaced;
(D) except for current trade debt incurred in the
ordinary course of business consistent with past practice and except
for the Permitted Refinancing, borrowing or incurring of any
indebtedness, obligation or liability, contingent or otherwise by the
Project Partnership;
(E) sale (other than sales of inventory in the
ordinary course of business), assignment, conveyance, lease (other than
to tenants for occupancy of space in the Shopping Center), or other
disposition of any asset or property of the Project Partnership other
than in the ordinary course of development and construction of the
Shopping Center;
(F) cancellation or waiver of any material claims or
rights of the Project Partnership; or
(G) agreement or commitment, whether or not in
writing, to do any of the foregoing.
(k) Books and Records. The books and records of the Project
Partnership, including financial records and books of
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account, are complete and accurate in all material respects and have been
maintained in accordance with sound business practices. To the extent such books
and records constitute financial records or books of account, they fairly
present revenues, expenses, assets and liabilities, all in a manner that will
allow the preparation of financial statements that comply with GAAP.
(l) FIRPTA. The Project Partnership is neither a "foreign
person" within the meaning of Section 1445(f) of the Code nor a "foreign
partner" within the meaning of Section 1446 of the Code.
(m) List of Properties, Contracts, etc. Section 4.2(m) of the
Contributor Disclosure Letter contains a complete and accurate list as of the
date hereof of each item described below, and the Contributors have delivered to
PREIT (or given PREIT access to) true and complete copies of each document (or
summaries of oral agreements) described below.
(i) Each of the following types of Contracts, whether
oral or written, to which the Project Partnership or, to the Contributors'
knowledge, any of its general partners (in their capacities as such) is a party
or by which it or any of its assets is bound:
(A) All Contracts that:
(I) involve performance of services or sale or
lease of goods, materials or space by the Project Partnership
or any of its general partners of an amount or value in excess
of $25,000 in any annual period or $100,000 in the aggregate;
(II) involve performance of services or sale or
lease of goods, materials or space to the Project Partnership
or any of its general partners of an amount or value in excess
of $25,000 in any annual period or $100,000 in the aggregate;
(III) are not in the ordinary course of business
and involve expenditures or receipts by the Project
Partnership or any of its general partners of more than
$25,000;
(IV) are not terminable by the Project
Partnership or any of its general partners without penalty or
premium upon less than 60 days' notice; or
(V) are otherwise material to the business,
operations, financial condition or prospects of the Project
Partnership or to the ownership, operation or management of
the Shopping Center.
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(B) All Authorizations held by the Project
Partnership that relate to any of the assets or properties owned, used
or leased by the Project Partnership;
(C) All outstanding loans and advances by the
Project Partnership to any partner, officer or employee of the Project
Partnership; and
(D) Other than trade debt incurred in the ordinary
course of business, all notes, debt instruments, other evidences of
indebtedness, letters of credit and guaranties (whether written or
oral) issued by or for the benefit of the Project Partnership and all
loan and other agreements relating thereto.
(n) Contracts.
(i) Except as described in Section 4.2(n) of the
Contributor Disclosure Letter and subject to the terms and conditions of Section
7.2(a)(ii) below, each Contract of a type required to be identified in Section
4.2(m)(i)(A) of the Contributor Disclosure Letter was made in the ordinary
course of business, is in full force and effect and is valid, binding and
enforceable against the parties thereto in accordance with its terms. Except as
described in Section 4.2(n) of the Contributor Disclosure Letter, the Project
Partnership and its general partners have each performed in all material
respects all obligations required to be performed by them under each such
Contract to which any of them is a party or by which any of them is bound, and,
to the knowledge of the Contributors, no condition exists or event has occurred
which with notice or lapse of time would constitute a default thereunder or a
basis for delay, non-performance, termination, modification or acceleration of
maturity or performance by any party thereto.
(ii) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Project Partnership or any of its general partners (in their
capacity as such) under any of the Contracts referred to in subparagraph (i)
above. All of such Contracts that relate to the provision of services or goods
by the Project Partnership or any of its general partners (in their capacity as
such) have been entered into in the ordinary course of business and have been
entered into without the commission of any act or any consideration having been
paid or promised that is or would be in violation of any Law.
(iii) Except as set forth in Section 4.2(n) of the
Contributor Disclosure Letter, without limiting the
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generality of the foregoing, the Project Partnership Agreement is in full force
and effect and each of the parties thereto has performed all obligations
required to be performed by it under such agreement.
(o) Preference Amount. As of the date hereof, TRO and an
affiliate of Ronald Rubin have the right to receive preferential distributions
from the Project Partnership pursuant to Sections 7.2.1.1, 7.2.1.2 and 7.2.1.3
of the Project Partnership Agreement. As of the date hereof, the sum of the
Unpaid Preference Amount and the Unpaid Cumulative Special Operating
Distributions (each as defined in the Project Partnership Agreement) equals
$1,540,000. Prior to the closing date under the TRO Contribution Agreement, TRO
and the affiliate of Ronald Rubin will assign all of their rights with respect
to such preferential distributions to TRO Liquidating LLC. If TRO Liquidating
LLC's rights with respect to such preferential distributions are assigned at
Closing as contemplated by Section 4(e) hereof, the assignee of such rights will
succeed to all rights to preferential distributions pursuant to Sections
7.2.1.1, 7.2.1.2 and 7.2.1.3 of the Project Partnership Agreement, and such
assignee shall be entitled to receive, subject to the terms of the Project
Partnership Agreement, preferential distributions from the Project Partnership
in an amount equal to the amount the Partnership is required to pay pursuant to
Section 4(e) of Schedule A hereto. Neither the Unpaid Preference Amount nor the
Unpaid Cumulative Special Operating Distributions are a part of the Equity Fund
(as defined in the TRO Contribution Agreement) and thus the payment of such
amounts pursuant to the Project Partnership Agreement will not reduce the
balance of the Equity Fund. As of the Closing, assuming a September 30 closing,
the sum of the Unpaid Preference Amount and the Unpaid Cumulative Special
Operating Distributions shall not exceed $1,600,000.
4.3 As to the Shopping Center.
(a) Title
(i) Based solely on Owner's Policy Nos. 206-103319 and
206-103324 issued by Commonwealth Land Title Insurance Company (the "Title
Policy"), as of the date hereof the Project Partnership owns fee simple title to
the Shopping Center, free and clear of all Encumbrances except as set forth in
the Title Policy and Section 4.3(a) of the Contributor Disclosure Letter (the
"Permitted Encumbrances"). To the knowledge of the Contributors, there have been
no changes in the state of such title as reflected in the Title Policy other
than the Title Policy Encumbrances and those encumbrances required to complete
the development and construction of the Shopping Center that are of a nature
customary for development projects similar to the Shopping Center.
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(ii) The Project Partnership is the owner of, or the
lessee under subsisting leases of, or otherwise has the right to use the
personal property used by the Project Partnership in the operation of the
Shopping Center. All of such property that is reflected on the Project
Partnership's records as owned by the Project Partnership is free and clear of
all Encumbrances, except for Permitted Encumbrances.
(iii) Except as set forth in Section 4.3(a) of the
Contributor Disclosure Letter, the Title Policy and except as provided in tenant
leases, there are no rights of first refusal on, or options to purchase, any
portion of the Shopping Center or any right to participation interests (whether
of profits, sale or refinancing proceeds, or calculated based on fair market
value) with respect to any portion of the Shopping Center in favor of any
tenant, lender or any other Person other than the Project Partnership. None of
the tenant leases provides for any such right or option except that one or more
of such leases may provide for a purchase option in favor of the tenant but only
in respect of the space leased to such tenant.
(iv) To the knowledge of the Contributors, no eminent
domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or threatened by an authority having the power of
eminent domain to condemn any part of the Shopping Center. To the Contributors'
knowledge, as of the date hereof, there are no pending or threatened
governmental rules, regulations, plans, studies, or court orders or decisions,
which do or could materially adversely affect the use or value of the Shopping
Center as a retail shopping center.
(b) Mortgage Obligations.
(i) As reflected in the Title Policy, the Shopping
Center is subject as of the date hereof to the mortgage(s) securing
obligation(s) in the amount(s) set forth in Section 4.3(b) of the Contributor
Disclosure Letter (such obligations and any other obligations incurred to
refinance such obligations, the "Loan Obligations") and is subject as of the
date hereof to no other mortgage. Section 4.3(b) of the Contributor Disclosure
Letter sets forth the original principal amount, approximate outstanding
principal amount, interest rate, term and other material economic provisions of
each of the Loan Obligations.
(ii) The documents identified in Section 4.3(b) of the
Contributor Disclosure Letter, true and correct copies of which have been
delivered to PREIT (or to which PREIT has been given access), constitute all of
the material documents evidencing, defining or securing the Loan Obligations
(the "Loan Documents").
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(iii) The Project Partnership has complied with the Loan
Documents, and there are no events of default thereunder now outstanding. To the
Contributors' knowledge, no event has occurred, which with the passage of time
or the giving of notice or both, could ripen into an event of default under the
terms of the Loan Documents.
(c) Leases.
(i) The Rent Roll attached to Section 4.3(c) of the
Contributor Disclosure Letter (the "Rent Roll") lists each of the leases in
existence as of the date hereof with respect to any portion of the Shopping
Center.
(ii) Except as set forth in Section 4.3(c) of the
Contributor Disclosure Letter, as of the date hereof, there are no leases,
licenses or other rights of occupancy in force which affect the Shopping Center
or any portion thereof other than the leases listed in the Rent Roll. The
Contributors have made available to PREIT copies of all of the leases (including
all amendments) listed on the Rent Roll. Except as set forth on the Rent Roll,
no uncured event of default of the Project Partnership or, to the knowledge of
the Contributors, any tenant has occurred and is continuing under any lease of
premises within the Shopping Center, no tenant has asserted a defense to or
offset or claim against its rent or the performance of its obligations under its
lease, and no tenant has asserted a default on the part of the Project
Partnership which would give it the right to terminate its lease or a setoff
against rent.
(iii) With respect to the leases involving the Shopping
Center, except as set forth in Section 4.3(c) of the Contributor Disclosure
Letter or in the leases, as of the date hereof:
(A) there are no proposed modifications to any such
lease that would reduce:
(I) the space leased to any tenant;
(II) the amount of any tenant's rent; or
(III) the term of any lease;
(B) no free rent or other concession is due any
tenant;
(C) the Project Partnership is not required to
provide tenant improvements or refurbishments with respect any such
lease other than tenant improvements
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that the Project Partnership may be required to construct if an
expansion option provided in a lease is exercised;
(D) no tenant has an option to terminate its lease
prior to its stated expiration date;
(E) except for (x) security deposits or (y) the
first full month's rent, whether or not the term of a lease has
commenced, no prepayments of rent more than thirty (30) days in advance
have been made under any such lease;
(F) no rent or security deposit under any such lease
has been assigned or encumbered, except as security for the Loan
Documents;
(G) there are no agreements or understandings,
written or oral, with any tenant other than as set forth in its lease
or on the Rent Roll; and
(H) all brokerage commissions and other compensation
or fees payable by reason of the leases have not been paid in full.
Attached to Section 4.3(c) of the Contributor Disclosure Letter is a
list of brokers commissions due with respect to the Shopping Center and
the status of such commissions.
(d) Zoning. The zoning classification for the Shopping Center
is I-R/B Shopping Center Overlay Zone, and the contemplated uses of the Shopping
Center are in compliance with the applicable zoning ordinances and regulations.
(e) Compliance with Laws and Recorded Declarations. The
Project Partnership has complied in all material respects with all Laws
(including, without limitation, the Americans with Disabilities Act of 1990) and
requirements of insurance bodies applicable to the ownership, leasing, use and
operation of the Shopping Center, including, without limitation, parking,
dimensional and building setback requirements, and has performed all work and
secured all required consents and approvals, or will do so in a timely fashion,
and obtained and fully paid, or will do so in a timely fashion, for all
Authorizations and any other items and documents required by applicable Law, by
contract, or as a condition of any approval granted by or agreement entered into
with any applicable municipal authority, required of the Project Partnership for
the completion, ownership, leasing, use and occupancy of the Shopping Center,
including, but not limited to, final certificates of occupancy for each of the
current tenancies in the Shopping Center other than where construction of tenant
improvements for new tenancies is not yet completed or timely applications
remain pending or where the tenants are required to obtain such consents,
approvals or authorizations
-18-
under the leases. All such existing Authorizations and other items and documents
are in full force and effect. The Project Partnership has not taken any action
that would (or failed to take any action, the omission of which might) result in
the revocation or suspension of any such Authorization or other item or
document, and the Project Partnership has not received any notice of any
violation from any federal, state or municipal entity or notice of an intention
by any such governmental entity to revoke any certificate of occupancy or other
Authorization issued by it in connection with the ownership, use and occupancy
of the Shopping Center that in each case has not been cured or otherwise
resolved to the satisfaction of such governmental entity. Except as set forth in
Section 4.3(e) of the Contributor Disclosure Letter, to the Contributors'
knowledge, (i) any and all charges and other assessments under declarations and
like agreements and special assessments to which the Shopping Center or the
Project Partnership is subject have been paid to date, and (ii) all consents and
approvals required to be obtained under such declarations and like agreements
with respect to the Shopping Center have been obtained or are in the process of
being obtained. Notwithstanding anything to the contrary contained herein, the
Contributors do not represent or warrant compliance by any of the tenants with
respect to Laws or that the Contributors are obtaining any Authorizations that
are required to be obtained by any tenants, but the Contributors shall enforce
the leases and obligations of tenants thereunder.
(f) Environmental Matters.
(i) Except as described in Section 4.3(f) of the
Contributor Disclosure Letter, the Contributors have no knowledge of any fact,
condition or circumstance that would suggest that the environmental reports
listed in Section 4.3(f) of the Contributor Disclosure Letter (which constitute
all environmental reports relating to the Shopping Center received by the
Contributors) contains any misstatement of material fact or omits to state any
material fact. To the knowledge of the Contributors, except for matters set
forth in Section 4.3(e) of the Contributor Disclosure Letter, there are no
conditions on, beneath or arising from, and there are no Hazardous Substances
migrating from, the Shopping Center which might under any Environmental Law (A)
give rise to liability or the imposition of a statutory lien upon the Project
Partnership or (B) require any Response, Removal or Remedial Action by the
Project Partnership.
(ii) To the knowledge of the Contributors, no wastes
generated by either Contributor or the Project Partnership have ever been
directly or indirectly sent, transferred, transported to, treated, stored or
disposed of at any site listed or formally proposed for listing on the National
Priority List promulgated pursuant to CERCLA or to any site listed in any state
list of sites requiring or recommended for investigation or clean-up.
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(g) Reassessments. The Shopping Center has not been fully
assessed and the Contributors have been informed that the Shopping Center will
be reassessed upon its completion. To the Contributors' knowledge, there are no
special assessments or other actions or proceedings that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against the Shopping Center.
(h) Property Improvements. PREIT acknowledges that the
Shopping Center is currently under construction and that the improvements to be
built thereon are not complete. Except as disclosed in any engineering studies
or reports obtained by or delivered by the Contributors to PREIT as set forth in
Section 4.3(h) of the Contributor Disclosure Letter, the Shopping Center is, to
the extent completed, in good condition and repair, ordinary wear and tear
excepted, consistent with a Shopping Center project that is still under
construction, and has not suffered any casualty or other material damage which
has not been repaired in all material respects. To the best of the Contributors'
knowledge, there is no material latent or patent structural, mechanical or other
significant defect, soil condition or deficiency in the improvements constructed
on the Shopping Center, or any other defects, soil conditions or deficiencies
which, in the aggregate, would materially adversely affect the value of the
Shopping Center as a whole.
(i) Employees and Service Contracts.
(i) Section 4.3(i) of the Contributor Disclosure Letter
sets forth a complete and correct list of all existing and proposed union or
collective bargaining agreements to which either Contributor or the Project
Partnership is a party with respect to or affecting the Shopping Center.
(ii) Section 4.3(i) of the Contributor Disclosure Letter
sets forth a complete and correct list of all persons who are employed by the
Project Partnership or its partners in connection with the management, operation
or maintenance of the Shopping Center, setting forth, with respect to each of
them, his or her name, position or duties, regular wages or salary, accrued
vacation pay and bonus and other benefits to which he or she is entitled. Each
of such persons is an employee-at-will and none of such persons is covered by a
written employment agreement.
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SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE
PARTNERSHIP.
PREIT hereby represents and warrants to the Contributors as follows:
5.1 Organization.
(a) PREIT is an unincorporated association in business trust
form duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania. PREIT has all necessary trust power to carry on its business as
presently conducted, to own and lease the assets and properties that it owns and
leases and to perform all its obligations under each agreement and instrument to
which it is a party or by which it is bound.
(b) The Partnership is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary partnership power to carry on its business as presently
conducted, to own and lease the assets and properties that it owns and leases
and to perform all its obligations under each agreement and instrument to which
it is a party or by which it is bound.
5.2 Power and Authority. Each of PREIT and the Partnership has all
requisite trust or partnership power to execute, deliver and perform its
obligations under this Agreement and under all other agreements and documents
required to be delivered by it prior to or at the Closing (collectively, the
"Buyer Transaction Documents"). The execution, delivery and performance by PREIT
and the Partnership of this Agreement and the other Buyer Transaction Documents
have been duly authorized by all necessary corporate or partnership action. This
Agreement has been duly and validly executed and delivered by PREIT and the
Partnership and constitutes the legal, valid and binding obligation of PREIT and
the Partnership enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Buyer Transaction Documents shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute the legal, valid and binding obligation of each of PREIT and the
Partnership that is a party thereto enforceable against it in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally
or by general equitable principles.
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5.3 No Conflicts.
(a) Except as described in Section 5.3 of the disclosure letter
delivered by PREIT to the Contributors on the date hereof (the "PREIT Disclosure
Letter"), the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not (in each case,
with or without the passage of time or the giving of notice), directly or
indirectly:
(i) contravene, violate or conflict with (A) the trust
or partnership agreement (or other organizational documents) of PREIT or the
Partnership or (B) any Law applicable to PREIT or the Partnership, or by or to
which any assets or properties of PREIT or the Partnership is bound or subject;
or
(ii) violate or conflict with, result in a breach of,
constitute a default or otherwise cause any loss of benefit or give to others
any rights (including rights of termination, amendment, foreclosure,
cancellation or acceleration) in or with respect to any material Authorization
or material Contract to which PREIT or the Partnership is a party or by which
either PREIT or the Partnership is bound or affected; or
(iii) result in, require or permit the creation or
imposition of any material Encumbrance upon or with respect to either PREIT or
the Partnership or any of their respective assets or properties.
(b) Except for filings with the Securities and Exchange
Commission and except as disclosed in Section 5.3(a) of the PREIT Disclosure
Letter, the execution and delivery by PREIT and the Partnership of this
Agreement do not, and the execution and delivery by PREIT and the Partnership of
the other Buyer Transaction Documents and the performance by PREIT and the
Partnership of all of the Buyer Transaction Documents will not, require PREIT or
the Partnership to obtain any material Authorization of or make any material
filing, registration or declaration with or notification to any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the material consent, waiver or approval of, or give any
material notice to, any Person.
(c) Except as disclosed in filings with the Securities and
Exchange Commission made by PREIT, there are no actions, proceedings or
investigations against or involving PREIT or the Partnership pending or, to the
best knowledge of PREIT, threatened, that question any of the transactions
contemplated by this Agreement or the validity of any of the Buyer Transaction
Documents or which, if adversely determined, could have a
-22-
material adverse effect on the consolidated financial condition, assets,
business or results of operations of PREIT or could materially and adversely
affect PREIT's or the Partnership's ability to enter into or perform its
obligations under the Buyer Transaction Documents.
5.4 Capitalization.
(a) On the date hereof, the outstanding beneficial interests in
PREIT consist of 8,679,598 PREIT Shares, and the outstanding partnership
interests in the Partnership are as described in Section 5.4(a) of the PREIT
Disclosure Letter. Except for 483,875 PREIT Shares reserved for issuance
pursuant to outstanding stock options and except as contemplated in the TRO
Contribution Agreement, in the Amended Partnership Agreement or in the
Employment Agreements referred to in the TRO Contribution Agreement, and except
as disclosed in Section 5.4(a) of the PREIT Disclosure Letter, as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character (including, without limitation,
voting agreements or arrangements known to PREIT) relating to the issuance of
beneficial interests in PREIT or partnership interests in the Partnership. As of
the Closing, the outstanding partner interests in the Partnership shall consist
of the interests outstanding on the date hereof, the Class A Units to be issued
as contemplated in the TRO Contribution Agreement, this Agreement and the EPD
Purchase Agreements.
(b) All Class A Units to be issued and delivered pursuant to
Section 3 hereof will be, at the time of issuance and delivery in accordance
with the terms of this Agreement, duly authorized and validly issued by the
Partnership. Assuming the accuracy of the representations and warranties of the
Contributors set forth herein, such issuance will be exempt from registration
under the 1933 Act as an offering described in Section 4(2) of such Act and/or
pursuant to Regulation D promulgated thereunder.
5.5 PREIT Reports. PREIT has delivered to the Contributors copies
of PREIT's (a) Proxy Statement dated November 15, 1996, (b) Annual Report on
Form 10-K for the fiscal year ending August 31, 1996, as amended by its Report
on 10-K/A-1 dated December 2, 1996, and (c) Quarterly Reports on Form 10-Q for
the quarters ended November 30, 1996, February 28, 1997 and May 31, 1997, all of
which have been filed by PREIT with the Securities and Exchange Commission (the
"PREIT Reports"). The audited consolidated financial statements and unaudited
interim financial statements of PREIT included in such reports have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
condition and results of operations of PREIT as at the dates thereof and for the
periods then ended,
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subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein. The PREIT
Reports do not contain any untrue statements of a material fact or omit to state
a material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
5.6 Litigation. Except as disclosed in filings with the Securities
and Exchange Commission, there are no claims, actions, suits, proceedings
(arbitration or otherwise) or, to the best knowledge of PREIT, investigations
involving or affecting PREIT or any of its subsidiaries or any of their assets
or properties or any of their trustees, directors, officers, partners or
shareholders in their capacities as such, before or by any court, government or
governmental agency or instrumentality (federal, state, local or foreign) or
before any arbitrator of any kind, in each case of a nature that is required to
be disclosed in PREIT's 1934 Act reports.
5.7 Material Adverse Change. Except as disclosed in filings with
the Securities and Exchange Commission, since May 31, 1997 and through the date
hereof, there has not been any material adverse change in the condition
(financial or otherwise), assets, results of operations or business of PREIT on
a consolidated basis.
5.8 Brokers. Except for Lehman Brothers, Inc., whose fees shall be
paid by PREIT, no Person acting on behalf of PREIT or the Partnership or any of
their affiliates or under the authority of any of the foregoing is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) Except as expressly provided herein, between the date
hereof and the Closing, except with the prior written consent of PREIT, each
Contributor shall, and the Contributors shall cause the Project Partnership to:
(i) carry on its business in, and only in, the usual,
regular and ordinary course, consistent with past practice and consistent with
the development and construction of a retail shopping center and the provisions
hereof and in compliance with all applicable Laws, Authorizations and Contracts;
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(ii) pay and discharge all of its debts, liabilities and
obligations as they become due and pay all debt service payments, real estate
taxes, payables and other liabilities arising from the construction or operation
of the Shopping Center that in the ordinary course of business would have been
paid prior to the Closing Date (with the exception of those liabilities and
obligations which the Contributors are contesting in good faith and for which
the Contributors have established adequate reserves on the Project Partnership's
books);
(iii) keep in full force and effect insurance comparable
in amount and scope of coverage to insurance now carried by it;
(iv) maintain its facilities and assets in the same state
of repair, order and condition as they were on the date hereof, reasonable wear
and tear excepted;
(v) maintain its books of account and records in the
usual, regular and ordinary manner and use diligent efforts to maintain in full
force and effect all of its Authorizations;
(vi) not take any action, fail to take any action or
permit to occur any event that would cause or constitute a material breach of or
inaccuracy in any representation or warranty set forth herein if made
immediately after such event or at the Closing or that would have been required
(or result in any situation that would be required) to be disclosed hereunder
had such action or inaction been taken or failed to have occurred or had such
event occurred prior to the date hereof;
(vii) except as described in Section 6.1(a) of the
Contributor Disclosure Letter and the TRO Contribution Agreement, not make any
change in its authorized or issued capital stock or partnership interests, grant
any stock option or other right to purchase its shares of capital stock,
partnership interests or other securities, issue or make any commitment to issue
any of its securities, including any securities convertible into capital stock
or partnership interests, grant any registration rights or purchase, redeem,
retire or make any other acquisition of any shares of its capital stock,
partnership interests or other securities;
(viii) not amend or grant any waivers under the Project
Partnership Agreement;
(ix) not enter into any agreement or understanding to do
or engage in any of the foregoing actions; and
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(x) construct and operate the Shopping Center in the
ordinary course in a manner consistent with past practice, maintaining the
Shopping Center in a reasonable state of repair, order and condition consistent
with a development project which is still under construction. Without limiting
the foregoing, the Project Partnership shall not defer any required maintenance
or repair unless such maintenance or repair would otherwise be deferred in the
ordinary course of business.
6.2 Reasonable Efforts. Upon the terms and subject to the condition
hereof, between the date hereof and the Closing Date, each of the parties hereto
shall use its reasonable efforts to take, or cause to be taken, all appropriate
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable Law to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) using its or
his reasonable efforts to make all required regulatory filings and applications
and to obtain all Authorizations and consents, approvals, amendments and waivers
from parties to Contracts as are necessary for the consummation of the
transactions contemplated by this Agreement and (ii) using its reasonable
efforts to cause the conditions to the consummation of the acquisition of the
Interests to be satisfied.
6.3 Notifications. Each party hereto shall give prompt notice to
the other parties upon becoming aware of: (i) any fact or condition that causes
or constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of or any
inaccuracy in any of its representations and warranties contained in this
Agreement had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure of
it or any of its officers, directors, employees or agents, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iv) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting either Contributor, the Project
Partnership or PREIT, as the case may be, or any of the transactions
contemplated by this Agreement.
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6.4 Operation of Shopping Center.
(a) The Contributors shall take all actions necessary so that
as of the Closing Date:
(i) Payments of rent or other monies due from Shopping
Center tenants (except reimbursements under leases for site improvements or
improvements to tenants' space) that fall due after the Closing Date and are
received prior to the Closing Date shall continue to be held in the Project
Partnership bank account or by the managing agent through the Closing Date;
(ii) All security deposits under leases and all interest
required to be paid thereon pursuant to the terms of such leases shall continue
to be held in the Project Partnership bank account, or by the managing agent as
the case may be, on the Closing Date; and
(iii) All debt service payments, real estate taxes and
payments due under service contracts and service providers in respect of the
operation of the Shopping Center that in the ordinary course of business would
have been paid prior to the Closing Date shall have been paid prior to the
Closing Date by or on behalf of the Project Partnership.
(b) No delinquent rent payments shall be apportioned on the
Closing Date. All rent receivables shall remain the property of the Project
Partnership.
(c) Notwithstanding anything to the contrary set forth in this
Agreement, the Contributors shall be entitled to cause the Project Partnership
to refinance its construction loan prior to Closing, provided that the new loan
expressly permits the transfer of the Interests contemplated herein and provides
that such transfer will not result in any acceleration of indebtedness or other
penalties and further provided that the Partnership approves the terms of the
refinancing, including, but not limited to, the amount of the refinancing, and
the loan documents evidencing and securing the refinancing, which approvals
shall not be unreasonably withheld (the "Permitted Refinancing").
6.5 Preference Amount. If rights to preferential distributions from
the Project Partnership are to be assigned at Closing as contemplated by Section
4(e) of Schedule A hereto, the Contributors shall deliver to PREIT at least five
business days prior to Closing a statement setting forth the sum of the Unpaid
Preference Amount and the Unpaid Cumulative Special Operating Distributions as
of the Closing.
6.6 Interest Rate Swap. The Contributors shall cause the Project
Partnership to liquidate or otherwise terminate prior to
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Closing the interest rate swap arrangements that are currently in effect in
connection with the Project Partnership's financing.
SECTION 7. CLOSING; CLOSING CONDITIONS; CLOSING DELIVERIES.
7.1 Time of Closing. The closing (the "Closing") of the acquisition
by the Partnership pursuant to this Agreement of the Interests shall take place
at the time and place specified in Schedule A hereto on the Closing Date (as
defined in Schedule A hereto).
7.2 Closing Conditions.
(a) Conditions Precedent to PREIT's and the Partnership's
Obligations. The obligation of PREIT and the Partnership to consummate the
acquisition of the Interests and to take the other actions required to be taken
by them at the Closing is subject to the fulfillment by or at the Closing of
each of the following conditions, any or all of which may be waived by PREIT in
its sole discretion:
(i) Condition of Title. The Project Partnership shall
own fee simple title to the Shopping Center and such title shall be good and
marketable and insured as such by First American Title Insurance Company,
Commonwealth Land Title Insurance Company, Lawyers Title Insurance Corporation
or Chicago Title Insurance Company, as selected by the Partnership (the "Title
Insurance Company"), free and clear of all Encumbrances other than Permitted
Encumbrances, the existing leases set forth on the Rent Roll or as such leases
may have changed in the ordinary course of the operation of the Shopping Center,
the mortgage securing the Permitted Refinancing and those encumbrances required
to complete the development and construction of the Shopping Center that are of
a nature customary for development projects similar to the Shopping Center
provided that such encumbrances do not constitute liens in liquidated amounts
and do not individually or in the aggregate materially or adversely affect the
value or use of the property as a Shopping Center. A vested owners title
insurance policy with "non-imputation" and fairways endorsements for the value
of the interest in the Project Partnership as determined in accordance with
Schedule "A" shall have been issued to the Partnership or a marked-up commitment
reflecting the effectiveness of such issuance shall have been delivered (unless
such insurance is not issued or effective solely due to the Partnership's
failure to pay the premiums therefor).
(ii) Tenant Estoppels. The Contributors shall have used
their reasonable efforts to cause the tenants in the Shopping Center to execute
and deliver to the Partnership estoppel certificates in form and substance
reasonably satisfactory to PREIT. The Contributors shall keep the
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Partnership reasonably apprised as to the status of receipt of the estoppel
certificates. The failure to obtain and deliver any or all of the estoppel
certificates shall not constitute a default by the Contributors hereunder or
allow PREIT or the Partnership to terminate this Agreement so long as the
Contributors have used reasonable efforts to obtain the estoppel certificates.
The Contributors' liability under the representations and warranties under
Sections 4.2(m)(i) and 4.3(c) as to a particular tenant shall terminate if the
Partnership subsequently receives an estoppel certificate for the applicable
tenant which confirms the Contributors' representations under Sections 4.2(l)(i)
and 4.3(c) above (provided, if the Partnership receives an estoppel certificate
which confirms some but not all of the matters which are the subject of the
representations and warranties under Sections 4.2(m)(i) and 4.3(c), then as to
such tenant, (x) if the estoppel certificate was received prior to Closing, the
representations and warranties set forth in Sections 4.2(m)(i) and 4.3(c) shall
be deemed to omit such matters stated on the estoppel certificate as to such
matters provided the certifications contained in such estoppel remain true and
correct until the Closing Date and (y) if received after Closing, the
representations and warranties under Sections 4.2(m)(i) and 4.3(c) shall cease
to survive as to such matters but shall continue to survive as to matters not
contained in such Estoppel Certificate.)
(iii) Survey, Etc. The Partnership shall have received, at
the Partnership's sole cost and expense, updated environmental and engineering
reports and surveys for the Shopping Center certified to the Partnership and the
Title Insurance Company, in form reasonably satisfactory to PREIT and the Title
Insurance Company, and such reports and surveys shall not disclose any material
adverse condition not disclosed in the original reports and surveys for the
Shopping Center delivered to PREIT or to which PREIT was given access prior to
the date of this Agreement.
(iv) No Mortgage Defaults. All payments of principal and
interest on all Loan Obligations shall be current and no Loan Obligation shall
be in default. The Contributors shall have used their reasonable efforts to
cause the holder of each Loan Obligation to issue to the Partnership a letter or
certification confirming the principal balance of such Loan Obligation, the date
of the last payment and that, to its knowledge, there are no events of default
thereunder. The failure to obtain or deliver such letter or certification shall
not constitute a default by the Contributors hereunder or allow PREIT or the
Partnership to terminate this Agreement provided that the Contributors have used
reasonable efforts to obtain such letter or certificate. In the event the letter
or certification from the holder of each Loan Obligation contains a
certification containing information which confirms the Contributors'
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representations under Section 4.3(b) above, the Contributors' liability for such
representation shall terminate upon delivery of the letter or certificate to the
Partnership provided the certifications contained in such estoppel remain true
and correct until the Closing Date.
(v) Representations and Warranties. Except as otherwise
expressly provided herein, each of the representations and warranties of the
Contributors set forth in this Agreement that is qualified by materiality shall
be true and correct, and each of the representations and warranties of the
Contributors set forth in this Agreement that is not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date; provided that the failure of one or more representations and warranties to
be true and correct as of the Closing Date shall not entitle PREIT to decline to
close if the Damages therefrom do not exceed 50% of the value referred to in
Section 7.2(a)(xiv) and if the other conditions in this Section 7.2(a) shall be
satisfied.
(vi) Performance of Covenants. All of the agreements,
covenants and obligations that either Contributor is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing shall have
been duly performed and complied with in all material respects. The Contributors
shall have delivered each of the documents required to be delivered by them
pursuant to Section 7.3(a) hereof.
(vii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person (other than by PREIT or the
Partnership) that questions the validity or legality of this Agreement or the
transactions contemplated hereby.
(viii) Consents and Approvals. Each consent, approval,
ratification, waiver or other authorization of any Person necessary, in the
reasonable opinion of PREIT, for the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect, and no such consent, approval, ratification, waiver or other
authorization: (x) shall have been conditioned upon the modification,
cancellation or termination of any Contract, right or Authorization of PREIT,
the Partnership or the Project Partnership or (y) shall impose on PREIT, the
Project Partnership or the Partnership any condition, provision or requirement
not presently imposed upon
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the Contributors or the Project Partnership or any condition that would be more
restrictive after the Closing on the Project Partnership or the Partnership than
the conditions presently imposed on the Contributors or the Project Partnership.
(ix) Opinion of Counsel. PREIT shall have received an
opinion of counsel for the Contributors, dated the Closing Date, in form and
substance reasonably satisfactory to PREIT and its counsel.
(x) TRO Closing. The TRO Closing shall have occurred.
(xi) Casualty or Condemnation. There shall not have
occurred any damage or destruction to, or condemnation of, any portion of the
Shopping Center that is reasonably likely to have a material adverse effect on
the operations or profitability of the Shopping Center.
(xii) Material Adverse Change. There shall not have been
since the date hereof any event, circumstance, condition or contingency that has
resulted in a material adverse effect on the business, assets, financial
condition or results of operations of the Project Partnership or that is
reasonably likely to result in such an change.
(xiii) Compliance Certificate. The Contributors shall have
obtained (to the extent such certifications or letters are made available in
such jurisdiction prior to substantial completion of the Shopping Center) a
certification or letter from the appropriate governmental officer having
jurisdiction to the effect that the Shopping Center and its use are in
compliance with applicable fire, health, safety and zoning ordinances, rules and
regulations.
(xiv) Adjustment for Breaches. The aggregate amount of
all Damages arising from breaches entitling PREIT and the Partnership to an
adjustment to the aggregate consideration as specified in Section 8.1 shall not
exceed 50% of the value of what the Contributors would receive pursuant to
Section 4 of Schedule A absent such adjustment. Neither the Contributors nor the
Project Partnership shall have violated any criminal or other material Law and
the consummation of the closing shall not violate or conflict with any material
Law.
(b) Conditions Precedent to the Contributors' Obligations. The
obligation of the Contributors to consummate the contribution of the Interests
contemplated by this Agreement and to take the other actions required to be
taken by them at the Closing is subject to the fulfillment by or at the Closing
of
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each of the following conditions, any or all of what may be waived by CHP,Inc.
in its sole discretion:
(i) Representations and Warranties. Each of the
representations and warranties of PREIT set forth in this Agreement that is
qualified by materiality shall be true and correct, and each of the
representations and warranties of PREIT set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(ii) Performance of Covenants. Each of the agreements,
covenants and obligations that PREIT or the Partnership is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been duly performed and complied with in all material respects. PREIT shall
have delivered each of the documents required to be delivered by it pursuant to
Section 7.3(b) hereof.
(iii) Legal Matters. The performance of the Buyer and
Contributor Transaction Documents and the consummation of the Closing shall not,
directly or indirectly (with or without notice or lapse of time), violate,
contravene, conflict with or result in a violation of any Law and shall not
violate any Order of any court or governmental body of competent jurisdiction,
and no suit, action, investigation or legal or administrative proceeding shall
have been brought or threatened by any Person that questions the validity or
legality of this Agreement or the transactions contemplated hereby.
(iv) TRO Closing. The TRO Closing shall have occurred.
(v) Opinion. The Contributors shall have received an
opinion of counsel for PREIT, dated the Closing Date, in form and substance
reasonably satisfactory to the Contributors and their counsel.
(vi) Adjustment for Breaches. The aggregate amount of all
Damages arising from breaches entitling PREIT and the Partnership to an
adjustment to the aggregate consideration as specified in Section 8.1 shall not
exceed 50% of the value of what the Contributors would receive pursuant to
Section 4 of Schedule A absent such adjustment; provided that if PREIT exercises
the PREIT Option (as defined below), this condition shall be deemed to have been
satisfied.
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7.3 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) The Contributors shall deliver or cause to be delivered to
the Partnership:
(i) each of the instruments, agreements or documents
listed on Schedule A-1 hereto, in each case in a form reasonably satisfactory to
the Contributors and the Partnership, duly executed by each of the signatories
thereto other than PREIT or the Partnership;
(ii) certificates, dated the Closing Date and executed by
the president of CHP,Inc. to the effect that the conditions set forth in
Sections 7.2(a)(v) and (vi) have been satisfied;
(iii) certificates of good standing of a recent date for
CHP,Inc. and RO,L.P. certified by the Secretary of State or corresponding
certifying authority of the state of incorporation or organization of CHP,Inc.
and RO,L.P. and of each state in which CHP,Inc. or RO,L.P. is qualified to do
business as a foreign corporation or foreign partnership;
(iv) copies of the resolutions of the board of directors
of CHP,Inc. and its shareholders authorizing the transactions contemplated under
this Agreement and the Contributor Transaction Documents to which CHP,Inc. or
RO,L.P. is a party;
(v) all consents and approvals under the Project
Partnership Agreement necessary or appropriate in connection with the
transactions contemplated herein; and
(vi) such other documents and instruments as the
Partnership or PREIT may reasonably request to effectuate or evidence the
transactions contemplated by this Agreement.
(b) The Partnership shall deliver or cause to be delivered to
the Contributors the following:
(i) the Class A Units to be delivered at Closing as
contemplated by Section 3 and Schedule A hereto;
(ii) copies of resolutions of the board of trustees of
PREIT authorizing the transactions contemplated hereunder and under the Buyer
Transaction Documents;
(iii) a certificate, dated the Closing Date, executed by
the chief executive officer and chief financial
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officer of PREIT, to the effect that the conditions set forth in Sections
7.2(b)(i) and (ii) have been satisfied; and
(iv) each of the instruments, agreements and documents
listed on Schedule A-1, in a form reasonably satisfactory to the Contributors
and the Partnership, duly executed by each of the Partnership or PREIT that is a
signatory thereto.
(c) Each party shall deliver or cause to be delivered, as the
case may be, to the other parties hereto such other documents, instruments,
certificates and opinions as may be required by this Agreement.
SECTION 8. CLOSING ADJUSTMENTS.
8.1 Adjustment for Breaches by the Contributors. It is the intent
of the parties that breaches of the representations and warranties of the
Contributors set forth in this Agreement (as brought down to the Closing Date in
the certificate referred to in Section 7.3(a)(ii), which for this purpose will
be deemed to state, inter alia, that the Contributors' representations and
warranties in this Agreement were true and correct as of the Closing Date as if
made on the Closing Date) that are discovered prior to Closing shall, in
addition to giving PREIT and the Partnership the right, under certain
circumstances described in Section 7.2, not to close hereunder, cause the
consideration otherwise deliverable pursuant to Section 4 of Schedule A to be
adjusted downward by the aggregate value of all Damages arising from such
breaches; provided, however, that if such downward adjustment would reduce by
more than 50% the value of the aggregate consideration the Contributors would
receive pursuant to Section 4 of Schedule A absent such adjustment, PREIT shall
have the right and option (but not the obligation) to notify the Contributors in
writing that the downward adjustment pursuant to this Section 8.1 shall be equal
to 50% of the value of such aggregate consideration (the "PREIT Option"). In
determining the value of any breaches, there shall be taken into account any
insurance recovery that may be available to PREIT or the Partnership, and any
insurance proceeds received by the Contributors prior to the Closing that are
assigned to the Partnership at Closing.
8.2 Casualty or Condemnation.
(a) If, prior to the Closing Date, there shall be any damage or
destruction to all or any portion of the Shopping Center by fire or other
casualty, the Contributors shall give prompt notice thereof to PREIT. Unless
such damage or destruction is reasonably likely to result in a material adverse
effect on the operations or profitability of the Shopping Center, such damage or
destruction shall not entitle PREIT or the
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Partnership to terminate this Agreement; provided, however, that the number of
Class A Units deliverable pursuant to Section 3 and Schedule A shall be reduced
by 50% of the value of all material damage or destruction to the extent that
such damage or destruction is not fully insured by insurance carried by the
Project Partnership or reimbursed by tenants.
(b) If prior to the Closing Date, condemnation or eminent
domain proceedings are commenced against the Shopping Center, the Contributors
shall give prompt notice thereof to PREIT. Unless the taking contemplated by
such condemnation or eminent domain proceeding is reasonably likely to result in
a material adverse effect on the operations or profitability of the Shopping
Center as a whole, such condemnation or eminent domain proceeding shall not
entitle PREIT or the Partnership to terminate this Agreement; provided, however,
that the number of Class A Units deliverable pursuant to Section 3 and Schedule
A hereto shall be reduced by the excess, if any, of the sum of Deemed Closing
Value, Non-Credit Tenant Value and the Post-Adjustment Value (each as defined in
Schedule A hereto) over 50% of the aggregate condemnation proceeds received or
to be received by the Project Partnership in respect of such condemnation. PREIT
shall have the right to participate in the negotiation of the award to be made
for such taking, and neither the Contributors nor the Project Partnership shall
agree to any proposed award or execute a deed in lieu of condemnation without
PREIT's prior written consent. The applicable percentage of any condemnation
award payable with respect to the taking of all or any portion the Shopping
Center shall be assigned to the Partnership.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by Contributors. The Contributors shall jointly and
severally indemnify, defend and hold harmless PREIT and the Partnership
(collectively, "Buyer Indemnified Persons") against and in respect of any and
all losses, costs, expenses (including, without limitation, costs of
investigation and reasonable defense and attorneys' fees), claims, damages,
obligations, liabilities or diminutions in value, whether or not involving a
third party claim (collectively, "Damages"), arising out of, based upon or
otherwise in respect of: (a) any inaccuracy in or breach of any representation
or warranty of either Contributor made in or pursuant to this Agreement
(including, without limitation, the certificate referred in Section 7.3(a)(ii),
which, for this purpose will be deemed to have stated, inter alia, that the
Contributors' representations and warranties in this Agreement were true and
correct as of the Closing Date as if made on the Closing Date); (b) any breach
or nonfulfillment of any covenant or obligation of either Contributor contained
in this Agreement or (c) any of the matters set forth on Schedule 9.1(c) hereto;
provided, however, that to
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the extent that Damages arising from breaches of representations and warranties
were taken into account in reducing the Deemed Closing Value, the Non-Credit
Tenant Value or the Post-Adjustment Value (as defined in Schedule A), such
Damages shall not be recoverable by Buyer Indemnified Persons pursuant to this
Agreement.
9.2 Indemnification by PREIT. PREIT shall indemnify, defend and
hold harmless each Contributor against and in respect of any and all Damages
arising out of, based upon or otherwise in respect of: (a) any inaccuracy in or
breach of any representation or warranty of PREIT made in or pursuant to this
Agreement; (b) any breach or nonfulfillment of any covenant or obligation of
PREIT or the Partnership contained in this Agreement; or (c) claims relating
solely to actions taken by the Partnership ( or its affiliates) as a partner in
the Project Partnership after Closing as the result of events and circumstances
first occurring after Closing.
9.3 Limitations on Liability.
(a) Neither Contributor shall have any obligation to indemnify
any Buyer Indemnified Person against Damages pursuant to Section 9.1(a) of this
Agreement arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to this Agreement unless and
until the aggregate of all such Damages suffered or incurred by the Buyer
Indemnified Persons exceeds $100,000; in which event the Buyer Indemnified
Persons shall be entitled to indemnification for the full amount of all Damages
suffered or incurred; provided, however, that the above limitation shall not be
applicable to any claim for Damages pursuant to Sections 9.1(b) or (c) or based
upon a breach of any representation or warranty made in or pursuant to Sections
4.1(a), 4.1(b), 4.1(c), 4.1(g), 4.1(h), 4.2(a), 4.2(b), 4.2(o), or 4.2(g) (in
the case of a breach of any of the representations and warranties set forth in
Section 4.2(g), other than due to the existence of liabilities of a nature not
required to be reflected in financial statements prepared in accordance with
GAAP of which the Contributors had no knowledge prior to Closing).
(b) Following Closing, (i) the Contributors shall not be
obligated to indemnify Buyer Indemnified Persons against Damages pursuant to
Section 9.1 to the extent that such indemnification payment (other than
indemnification payments in respect of fraud or intentional misrepresentation),
when aggregated with all prior indemnification payments (other than
indemnification payments in respect of fraud or intentional misrepresentation)
by or on behalf of the Contributors to Buyer Indemnified Persons or reasonably
paid by or on behalf of the Contributors to third parties for the benefit of
Buyer Indemnified Persons pursuant to this Agreement, would exceed the
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Aggregate Value (as hereafter defined) and (ii) each partner or shareholder of
either Contributor (collectively, "Applicable Beneficial Owners") other than
Ronald Rubin and George Rubin (or affiliates controlled by either of them or
members of their families) shall not be obligated to indemnify Buyer Indemnified
Persons against Damages pursuant to Section 9.1 to the extent that such
indemnification payment, when aggregated with all prior indemnification payments
by or on behalf of such Applicable Beneficial Owner to Buyer Indemnified Persons
or reasonably paid by or on behalf of such Applicable Beneficial Owner to third
parties for the benefit of Buyer Indemnified Persons pursuant to this Agreement,
would exceed the Proportionate Aggregate Value (as defined below) attributable
to such Applicable Beneficial Owner; provided, however, that the limitation of
this subclause (ii) shall not apply to the extent an indemnity claim is brought
with respect to a matter involving fraud or intentional misrepresentation by
such Applicable Beneficial Owner. The "Aggregate Value" means an amount equal to
the value of all Class A Units theretofore issued pursuant to Section 3 (it
being acknowledged that for this purpose units that would have been issued but
for an exercise of the set-off rights specified in Section 9.7 shall be deemed
to have been issued), such value to be calculated by multiplying the number of
units times the per share Value (as defined in the Amended Partnership
Agreement) of a PREIT Share as of the date of issuance of such units.
(c) Following Closing, the liability of each Applicable
Beneficial Owner for each indemnity claim pursuant to Section 9.1 shall be
limited to that fraction of the aggregate Damages incurred by Buyer Indemnified
Persons with respect to such claim that is equal to the quotient whose numerator
equals the portion of the Aggregate Value attributable to units (or proceeds of
units) theretofore distributed to such Applicable Beneficial Owner by a
Contributor (for this purpose units that would have been issued but for an
exercise of the set-off rights specified in Section 9.7 shall be deemed to have
been issued) (the "Proportionate Aggregate Value") and the denominator of which
equals the Aggregate Value; provided, however, that the foregoing shall not
limit the liability of Ronald Rubin or George Rubin (or affiliates controlled by
either of them or members of their families), each of whom shall be jointly and
severally liable for 100% of the aggregate Damages incurred (subject to the cap
on aggregate Damages set forth above in subclause (i) of Section 9.3(b)), and
provided further that the foregoing limitation shall not apply to the extent an
indemnity claim is brought with respect to a matter involving fraud or
intentional misrepresentation by such Applicable Beneficial Owner.
(d) No claim arising out of or based upon any inaccuracy in or
breach of any representation or warranty made in or pursuant to this Agreement
shall be made unless a claim arises and written notice is delivered to the
indemnifying party within
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the Basic Claims Period (as defined below); provided that any such claim arising
out of or based upon any inaccuracy in or breach of any representation or
warranty made in or pursuant to Sections 4.1(a), 4.1(b) or 4.1(h) may be made at
any time. For purposes hereof, "Basic Claims Period" means the period beginning
on the date hereof and ending on the date five months after the fiscal year end
for the first full fiscal year of PREIT after the Closing under this Agreement.
(e) Disclosures made after the date hereof and any knowledge
that is acquired about the accuracy or inaccuracy of or compliance with any
representation, warranty, covenant or obligation set forth herein shall not in
any manner affect rights to indemnification hereunder based on any such
representation, warranty, covenant or obligation or be deemed in any manner to
amend the Contributor Disclosure Letter. The waiver by PREIT of any condition
based on the accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification based on
such representations, warranties, covenants and obligations unless otherwise
expressly agreed in writing by PREIT. To the extent that any claim for
indemnification may be made under Section 9.1(a) and Section 9.1(c), then such
claim shall be deemed for all purposes to have arisen only under Section 9.1(c)
and not under Section 9.1(a).
(f) Each party's rights under this Section 9 shall be its sole
remedy against the other parties in respect of the subject matter hereof,
subject to a party's rights, if any, to seek and obtain specific performance.
9.4 Procedure For Indemnification - Third Party Claims.
(a) Within thirty days after receipt by an indemnified party
of notice of the commencement of any proceeding against it to which the
indemnification in this Section 9 relates, such indemnified party shall, if a
claim is to be made against an indemnifying party under Section 9, give notice
to the indemnifying party of the commencement of such proceeding, but the
failure to so notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
proceeding is materially prejudiced by the indemnified party's failure to give
such notice.
(b) If any proceeding referred to in paragraph (a) above is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
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indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under Section 9 for any fees of other counsel or
any other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (A) it will be
conclusively established for purposes of this Agreement that the claims made in
that proceeding are within the scope of and subject to indemnification; (B) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (1) there is no finding or
admission of any violation of Law by the indemnified party (or any affiliate
thereof) or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (2) the sole relief
provided is monetary damages that are paid in full by the indemnifying party.
The indemnified party will have no liability with respect to any compromise or
settlement of the claims underlying such proceeding effected without its
consent. If notice is given to an indemnifying party of the commencement of any
proceeding and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
be bound by any determination made in such proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, with respect to those issues, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent.
9.5 Procedure for Indemnification - Other Claims. A claim for any
matter not involving a third party claim may be asserted by notice to the party
from whom indemnification is sought.
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9.6 Distributions of Class A Units by Contributors. Neither Contributor
shall distribute or otherwise transfer to any of its partners or shareholders or
any other Person Class A Units issued pursuant to this Agreement (or proceeds
thereof other than distributions on such units) unless such partner, shareholder
or other Person first executes and delivers to PREIT an agreement, in form and
substance reasonably satisfactory to PREIT, by which such Person would join in
and become a party to this Agreement for purposes of the indemnification
provisions hereof.
9.7 Right of Set-Off. PREIT and the Partnership shall have the
right to set-off, against any Class A Units which may be owed by PREIT or the
Partnership to either Contributor, any amount owed by any Applicable Beneficial
Owner to any Buyer Indemnified Person pursuant to Section 10 of the TRO
Contribution Agreement. To the extent that a Contributor contests an
indemnification claim of PREIT or the Partnership that would be the basis for
the exercise of a right to set off against any Class A Units owed to such
Contributor, the Partnership shall issue such Class A Units and deposit them
with an escrow agent reasonably satisfactory to such Contributor until the
earlier to occur of (i) resolution of such dispute by a final nonappealable
order of a court of competent jurisdiction or (ii) the mutual agreement of such
Contributor and PREIT that such units should be released from escrow.
9.8 Indemnification Payments. The Contributors and the Applicable
Beneficial Owners shall be entitled to use cash or Class A Units to make
indemnification payments hereunder. In the event Class A Units are used, each
such unit shall be valued based on the per share Value (as defined in the
Amended Partnership Agreement) of a PREIT Share as of the date such unit is
tendered to PREIT as an indemnification payment hereunder.
SECTION 10. TERMINATION AND ABANDONMENT.
10.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(i) by PREIT or CHP,Inc., if the Closing has not occurred
(other than through the failure of the party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before February
15, 1999, or such later date as the parties may mutually agree upon in writing;
(ii) by mutual consent of PREIT and CHP,Inc.;
(iii) by the Contributors, on the one hand, or PREIT and the
Partnership, on the other hand, if a material breach (other than a breach of
representations and warranties
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that would not constitute a failure of the condition set forth in Section
7.2(a)(xiv)) of any provision of this Agreement has been committed by the other
and such breach has not been waived; or
(iv) by PREIT, if any of the conditions in Section 7.2(a) have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of PREIT or the
Partnership to comply with its obligations under this Agreement) and PREIT has
not waived all such unsatisfied conditions before termination pursuant to this
subparagraph (iv); or
(v) by CHP,Inc. if any of the conditions in Section 7.2(b)
have not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of either
Contributor to comply with its obligations hereunder) and CHP,Inc. has not
waived all such unsatisfied conditions before termination pursuant to this
subparagraph (v); or
(vi) by any party hereto if the TRO Contribution Agreement is
terminated prior to the consummation of the TRO Closing.
10.2 Procedure for Termination; Effect of Termination. A party
terminating this Agreement pursuant to this Section 10 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by any party and all further obligations of the parties under this Agreement
will terminate; provided, however, that if such termination is pursuant to
Section 10.1(iii), the terminating party's right to pursue all legal remedies
(including damages and/or specific performance) contemplated by Section 9 will
survive such termination unimpaired.
SECTION 11. GENERAL PROVISIONS.
11.1 Survival of Representations and Warranties.
(a) All representations and warranties made by the parties in
this Agreement and in the certificates, documents and other agreements delivered
pursuant hereto shall survive the Closing, subject to the terms and conditions
of Section 9 above. Anything in this Agreement to the contrary notwithstanding:
(i) the representations and warranties of the Contributors and the right of the
Buyer Indemnified Persons to indemnification for breach thereof, shall not be
affected by any investigation of the Contributors or the Project Partnership
made by PREIT or its agents or representatives; and (ii) the representations and
warranties of PREIT hereunder, and the right of the Contributors to
indemnification for breach thereof, shall not be affected by
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any investigation of PREIT or its affiliates made by the Contributors or its
agents or representatives.
(b) In the event of any inconsistency between the statements
made in the body of this Agreement and those contained in the Contributor
Disclosure Letter (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
11.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer taxes, recording and filing fees and all costs associated with
obtaining the title insurance or endorsements thereto contemplated herein in
connection with the transactions contemplated herein shall be borne by PREIT or
the Partnership. The parties contemplate that the transfer of the Interests in
accordance with the procedures and the time periods set forth in Schedule A will
not be subject to transfer tax. In the event either the Project Partnership or a
Contributor makes or causes a transfer of Interests not in accordance with the
procedures and time periods set forth herein and in the Partnership Agreement,
then the Project Partnership or such Contributor making or causing such transfer
shall be responsible for the payment of any transfer tax and all title insurance
premiums and title company charges and recording costs due as a result thereof.
11.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
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To PREIT or the Partnership:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, PA 19034
Attention: President and Special Committee
With a copy to:
Drinker Biddle & Reath LLP
1100 PNB Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
Telecopy (215) 988-2757
Attention: Howard A. Blum, Esquire
To the Contributors:
c/o The Rubin Organization, Inc.
200 South Broad Street
Philadelphia, PA 19102
Attention: Ronald Rubin
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Leonard M. Klehr, Esquire
11.4 Access to Information; Confidentiality. Between the date of
this Agreement and the Closing Date, PREIT, on the one hand, and the
Contributors, on the other hand, will give to the other party and its officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the assets,
records, facilities, properties and Contracts relating to its business as the
other party may reasonably request. Each party shall acquire and hold all
confidential information that has been made available by another party hereto
subject to the terms and conditions of Section IV of the Letter Agreement dated
as of April 16, 1997 (the "Letter Agreement") between TRO and PREIT, the terms
of which section are hereby incorporated by reference and which shall remain in
force through the Closing.
11.5 Public Announcements. Except as and to the extent required by
Law or by the rules of the American Stock Exchange, without the prior written
consent of the other party, the
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Contributors, on the one hand, and PREIT and the Partnership, on the other hand,
will not, and each will direct its representatives not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of any of the terms, conditions
or other aspects of the transactions contemplated hereby; provided, however,
that PREIT may issue a press release, in the form previously circulated by PREIT
to TRO, regarding, among other things, the execution of this Agreement; and
further provided that PREIT and TRO may each continue such communications with
principals, partners, lenders, trustees, attorneys, accountants, investment
bankers, consultants engaged by PREIT and TRO, including abstract companies,
title companies, engineers and architects, Claude de Botton and his affiliates,
Kenneth N. Goldenberg and his affiliates, EPD and its affiliates, and, if agreed
in each case by PREIT and TRO, others as may be legally required or necessary in
connection with the consummation of the transactions contemplated by this
Agreement.
11.6 No Solicitation. Each Contributor shall not, each Contributor
shall cause its officers, employees, partners, representatives and agents not
to, directly or indirectly, continue, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any nonpublic
information to, any Person (other than PREIT and the Partnership and their
respective representatives in connection with the transactions contemplated by
this Agreement) concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice) or shares of capital stock or
partnership interests of either Contributor or any merger, consolidation,
recapitalization, liquidation or similar transaction involving either
Contributor (collectively, an "Acquisition Transaction"). Each Contributor will
promptly communicate to PREIT the terms of any inquiry or proposal that it or he
may receive in respect of an Acquisition Transaction.
11.7 Entire Agreement. This Agreement, together with the Schedules,
Contributor Disclosure Letter, and certificates referred to herein or
delivered pursuant hereto, constitute the entire agreement between the parties
hereto with respect to its subject matter and supersede all prior and
contemporaneous agreements and understandings with respect to the subject
matter hereof.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
11.9 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of
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the Commonwealth of Pennsylvania (and United States federal law, to the extent
applicable), irrespective of the principal place of business, residence or
domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of laws.
11.10 Section Headings, Captions and Defined Terms. The section
headings and captions contained herein are for reference purposes only and shall
not in any way affect the meaning and interpretation of this Agreement. The
terms defined herein and in any agreement executed in connection herewith
include the plural as well as the singular, and the use of masculine pronouns
include the feminine and neuter. Except as otherwise indicated, all agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance herewith and therewith.
11.11 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing. The waiver by any party of any provision of this Agreement shall
not constitute or operate as a waiver of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision.
11.12 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
11.13 Liability of Trustees, etc. No recourse shall be had for any
obligation of PREIT hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of PREIT, whether by virtue of any statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by each other party hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement, all as of the date first written above.
CHERRY HILL PARTNER, INC.
By: /s/ George Rubin
-------------------------------------------
Name:
Title:
RUBIN OXFORD VALLEY ASSOCIATES, L.P.
By: Rubin Oxford, Inc., its
general partner
By: /s/ Ronald Rubin
---------------------------------------
Name:
Title
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: /s/ Jonathan B. Weller
---------------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
---------------------------------------
Name:
Title:
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate
Investment Trust, its general partner
By: /s/ Jonathan B. Weller
-----------------------------------
Name:
Title:
By: /s/ Jeffrey A. Linn
-----------------------------------
Name:
Title:
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