FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT is
entered into as of the 30th day of September, 1997 between MAGNOLIA RETAIL
ASSOCIATES, L.L.C. ("Seller"), a Delaware limited liability company, and PREIT
ASSOCIATES, L.P. (the "Operating Partnership"), a Delaware limited
partnership.
RECITALS:
A. Seller and The Rubin Organization, Inc. ("TRO") entered
into that certain Purchase and Sale Agreement dated as of June 30, 1997 (the
"Contract") for the sale of certain property located in Florence, South
Carolina (the "Property").
B. TRO assigned its rights under the Contract to
Pennsylvania Real Estate Investment Trust (referred to in the Contract as
"REIT Assignee", but hereinafter referred to as the "Trust") and the Trust
assumed the obligations of TRO under the Contract, pursuant to that certain
Agreement Regarding Assignment of Purchase and Sale Agreements dated June 30,
1997 from TRO to the Trust.
C. At a Closing to be held on the Closing Date, as such
terms are defined in the Contract, the Trust will assign its rights in the
Contract to the Operating Partnership, and the Operating Partnership will
assume the obligations of the Trust under the Contract and designate a special
purpose subsidiary, PR Magnolia LLC (the "Title Holder"), as the entity to
take title to the Property. The Operating Partnership is the operating
partnership for the Trust and the Trust is its sole general partner.
D. Seller and the Operating Partnership desire to amend the
Contract as hereafter set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Seller agree as follows:
1. Effective Date. This Amendment shall become effective
upon the assignment by the Trust of the Contract to the Operating Partnership.
If such assignment is not made on or before the Closing Date, as such Closing
Date may be extended, this Amendment shall be null and void and of no force
and effect.
2. Defined Terms. All capitalized terms used, but not defined
herein, shall have the meanings ascribed to them in the Contract.
3. Class B Units. Section 2.C of the Contract is amended to
read as follows:
"C. Class B Units. Seller hereby agrees to contribute an
undivided interest in the Property to the Operating Partnership at
Closing for 213,038 Class B Units (the "Class B Units") (as such term
is defined in the Amended and Restated Agreement of Limited
Partnership substantially in the form attached hereto as Exhibit "B"
(the "Partnership Agreement") of PREIT Associates, L.P. (the
"Operating Partnership") with no changes having a material effect on
the holders of the Class B Units) in lieu of $5,000,000 of the
Purchase Price to be otherwise paid in cash. Seller hereby directs
the Operating Partnership to issue the Class B Units directly to the
entity listed on Exhibit "A" attached hereto and made a part hereof
(the "Beneficial Owner") which is a member of Seller.
"The Class B Units shall be redeemable as provided
in the Partnership Agreement into cash in the amount per Class B Unit
determined as provided in the Partnership Agreement, or at the
election of the Trust, into an equivalent number of unregistered
common shares of beneficial interest (the "Shares") in the Trust. The
Operating Partnership hereby designates PR Magnolia, LLC, a Delaware
limited liability company, to accept title to the Property (the
"Titleholder") in connection with Seller's contribution of the
Property to the Operating Partnership.
"(i) Omitted.
"(ii) Omitted.
"(iii) Between the date hereof and Closing, (A)
Seller shall provide Purchaser with such information as Purchaser may
reasonably request to determine whether the issuance of the Class B
Units would comply with federal and state securities laws and to
confirm that the Beneficial Owner is an "Accredited Investor" as such
term is defined in Regulation D promulgated by the Securities and
Exchange Commission and (B) the Operating Partnership shall provide
Seller with such additional information regarding the Trust, the
Operating Partnership, the Titleholder, the Class B Units and the
Shares which is readily available to the Operating Partnership as
Seller may reasonably request.
"(iv) Omitted.
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"(v) Seller's election to contribute a portion of
the Property for Class B Units shall be conditioned upon (x) Seller's
receipt at or prior to Closing of (1) confirmation that the issuance of
the Class B Units to the Beneficial Owner has been duly authorized by
the Operating Partnership and the Trust and that all necessary consents
to such issuance have been obtained; (2) confirmation that the Class B
Units will be redeemable at any time or times after Closing in
accordance with the Partnership Agreement; (3) confirmation that the
Shares relative to the Class B Units have been duly authorized and
reserved for issuance; (4) confirmation of such other legal issues as
are customarily and reasonably confirmed by sophisticated investors in
investments similar to the Class B Units (and the Operating Partnership
shall use reasonable efforts to cause such items to be delivered to
Seller); and (5) execution by the Trust of the Registration Rights
Agreement in the form attached hereto as Exhibit "C" and (y) there
being no material adverse change in the attributes of the Operating
Partnership, the Trust, the Class B Units or the Shares from those
disclosed to Seller prior to the execution hereof. If such conditions
are not satisfied, then Seller may either waive any unfulfilled
condition or elect that the Purchase Price shall be paid by the
Operating Partnership entirely in cash.
"(vi) There shall be no restrictions upon the
holders of the Class B Units with respect to (a) the purchase or
acquisition by such holders of additional Class B Units or the Shares
or (b) the time period during which the Class B Units can be redeemed
as described above, except that (x) such holders may not take any such
action which would cause the Trust to lose its status as a real estate
investment trust under any applicable law and (y) the Class B Units
acquired by any Beneficial Owner hereunder or otherwise shall be
subject to all of the terms and provisions of the Partnership
Agreement.
"(vii)(a) The Operating Partnership agrees that,
following the Closing, the Titleholder will not sell or otherwise
dispose of the Property in a transaction in which taxable gain is
recognized for a period of five (5) years after the Closing Date (such
five (5) year period following the Closing Date being referred to
herein as the "Tax Protection Period"), except that the Titleholder may
sell the Property in connection with a tax deferred exchange
transaction entered into pursuant to Section 1031 of the Code pursuant
to which no taxable gain is recognized by the Titleholder or the
Operating Partnership. In the event the Titleholder consummates any
such tax deferred exchange transaction during the Tax
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Protection Period, the provisions of this Section shall apply to the
property received by the Titleholder (or any other affiliate thereof)
in such transaction for the remainder of the Tax Protection Period.
"(b) The Property Debt (as hereinafter defined)
shall, at all times during the Tax Protection Period, equal or exceed
the Required Minimum Amount (as hereinafter defined). As used herein,
"Property Debt" shall mean the aggregate amount of debt which is
secured only by first priority liens on the Property and which
otherwise qualifies as "qualified nonrecourse financing" under Section
465(b)(6) of the Code. As used herein, "Required Minimum Amount" means
the principal balance of the Existing Loan on the Closing Date, at any
time reduced by the regularly scheduled payments of principal
amortization under the Existing Loan Documents, as they exist on the
date hereof.
"(c) Notwithstanding the foregoing, the Operating
Partnership may sell the Property during the Tax Protection Period if
the Operating Partnership has at the time of sale entered into a
program to sell substantially all of its (and its affiliates') retail
assets to an entity or entities not affiliated with the Operating
Partnership, and at least eighty percent (80%) of the retail properties
owned by the Operating Partnership have been sold or are under binding
contracts of sale with unaffiliated third parties and are scheduled to
close within six (6) months of the date of the closing of the sale of
the Property.
"(d) In order to account for the book-tax
disparity with respect to the assets contributed (or deemed
contributed) to the Operating Partnership by Seller, the Operating
Partnership will elect to use the "traditional method" in accordance
with Treasury Regulation Section 1.704-3(b) and shall not use the
traditional method with curative allocations or the remedial method.
The Operating Partnership shall elect to use the traditional method in
accounting for the book-tax disparity with respect to the assets
treated as contributed to the Operating Partnership by Seller upon
"termination" of the Operating Partnership under Section 708(b)(1) of
the Code."
4. Additional Representations by Seller. The following is
added at the end of Section 6.A of the Contract:
"(xv) Beneficial Owner. The Beneficial Owner is
an Illinois limited partnership which is presently a member of Seller
and has the power and
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authority to execute and deliver the Subscription Agreement and the
Registration Rights Agreement. The address set forth for the
Beneficial Owner on Exhibit "A" is the principal legal address of the
Beneficial Owner.
"(xvi) Authorization and Allocation. The
direction by Seller to deliver the Class B Units directly to the
Beneficial Owner has been duly and validly authorized by all requisite
action of Seller and the allocation to the Beneficial Owner (together
with cash, if any, which the Beneficial Owner will receive as a result
of the transactions contemplated by the Contract) is a correct
allocation of the portion of the Purchase Price to which such
Beneficial Owner is entitled under the organizational documents of
Seller or as the members of Seller have agreed.
"(xvii) Consents. To Seller's knowledge, no
consent, approval or other authorization or order of, and no filing
with or waiver of rights by, any governmental authority or any other
person is required in connection with the direction by Seller to
deliver the Class B Units directly to the Beneficial Owner.
"(xviii) No Conflict. The issuance of the Class B
Units directly to the Beneficial Owner does not (1) violate or conflict
with any provision of the Operating Agreement of Seller or (2) to
Seller's knowledge, result in a breach of, or constitute default under
(or with notice or lapse or time or both, result or a breach or
constitute a default under) any contract or other agreement or
instrument to which Seller or the Beneficial Owner is a party or by
which either of them are bound."
5. Additional Representations of the Operating Partnership.
The following is added to the end of Section 6.B of the Contract:
"(iii) Upon Closing, the Operating Partner- ship
shall deliver to the Beneficial Owner good and marketable title to the
Class B Units free and clear of all liens, claims, encumbrances and
restrictions, except (x) as contained in the Registration Rights
Agreement and the Partnership Agreement and (y) as imposed by federal
and state securities laws.
"(iv) At Closing, the Partnership Agreement shall
be substantially in the form attached to this Amendment as Exhibit "B",
with no changes having a material effect on the holders of the Class B
Units, and the Partnership Agreement shall be in full force and
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effect. There are no uncured defaults or breaches by the Trust or any
limited partner under the Partnership Agreement.
"(v) At Closing, the capitalization of the
Operating Partnership will be as set forth in the Partnership
Agreement. There are no restrictions on the transfer of the Class B
Units other than those contained in the Partnership Agreement and the
Registration Rights Agreement and those arising from federal and
applicable state securities laws. All Class B Units to be issued and
outstanding in accordance with the terms of this Agreement are or will
be duly authorized and validly issued in accordance with the terms of
the Partnership Agreement and in compliance with applicable laws and
are redeemable for cash or Shares as provided in the Partnership
Agreement. As of the date hereof, there are no outstanding
subscriptions, options, warrants, preemptive or other rights or other
arrangements or commitments obligating the Operating Partnership to
issue any Units in the Operating Partnership, except as described in
the Proxy Statement dated August 27, 1997 (the "Proxy"), a true and
complete copy of which has been delivered to Seller. If and when
issued, the Shares issuable upon exchange of the Class B Units will be
duly authorized, validly issued, fully paid and non-assessable. At the
Closing, the Beneficial Owner will be admitted as a limited partner of
the Operating Partnership. The issuance of the Class B Units at Closing
will not require any approval or consent of any person or entity,
except any such approval that shall have been obtained on or prior to
Closing.
"(vi) To the Operating Partnership's knowledge,
the Proxy taken as a whole does not, as of the date thereof, contain
any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which such
statements were made and there has been no material adverse effect on
the business, assets, financial condition or results of operation on
the Operating Partnership or the Trust since the dates thereof.
"(vii) The Trust is duly organized, validly
existing, in good standing and qualified and empowered to conduct its
business, and has full power and authority to take the actions
necessary for the Operating Partnership to fully perform under this
Agreement and to fully perform under the Registration Rights Agreement.
Neither the execution and delivery of the Registration Rights
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Agreement, nor the performance of the Trust's obligations thereunder,
will conflict with or result in the breach of any material contract,
agreement, law, rule or regulation to which the Trust is a party or
by which the Trust is bound.
"(viii) The Registration Rights Agreement, and
each instrument to be executed by the Trust in connection with this
Agreement or therewith, will, when executed and delivered, be valid and
enforceable against the Trust in accordance with its terms.
"(ix) At Closing, the Trust Agreement of the
Trust, a true, complete and correct copy of which has been delivered to
Seller, will be in full force and effect. There are no distribution,
termination or liquidation proceedings pending or contemplated with
respect to the Trust.
"(x) The Trust will elect to be taxed as a real
estate investment trust for its taxable year ending December 31, 1997
and the Trust is organized and will be operated in such a manner as to
qualify for taxation as a "real estate investment trust" as defined in
Section 856 of the Code for the taxable year ending December 31, 1997.
"(xi) There are no pending or threatened actions,
suits or proceedings against or affecting the Trust at law or in equity
or before or by any governmental entity which would prevent or impair
the transactions contemplated hereby."
6. Conditions Precedent. The following is added at the end
of Section 10 of the Contract, but shall be applicable only to the issuance of
the Class B Units at Closing. If any such condition is not fulfilled or
waived, the Operating Partnership shall not be entitled to issue, and Seller
and/or the Beneficial Owner shall not be required to accept, as the case may
be, the Class B Units at Closing, and in lieu thereof, the Operating
Partnership shall pay $5,000,000 in cash to Seller:
"H. TRO Transaction. The TRO transaction described in the
Proxy shall have closed and the Operating Partnership shall have been
capitalized substantially in the manner described in the Proxy.
"I. Subscription Agreement; Investor Status. The Beneficial
Owner shall have executed and delivered to the Operating Partnership a
Subscription Agreement in the form attached hereto as Exhibit "D" and
indicated on the
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signature page thereof the basis by which the Beneficial Owner
believes that it is an Accredited Investor.
"J. Deliveries. All deliveries required to be made hereunder
shall have been made."
7. Transfer of Class B Units. By its execution of this
Amendment as the General Partner of the Operating Partnership, the Trust
hereby agrees that the transfer of any or all of the Class B Units to any
affiliate(s) of the Beneficial Owner which are Accredited Investors shall be
permitted at any time and from time to time, and that any such transferee will
be admitted as a Limited Partner of the Operating Partnership without the
consent of the General Partner; provided, however, such transfer shall comply
with all of the other terms, requirements and conditions of Article XII of the
Partnership Agreement.
8. Closing Deliveries. The following is added at the end of
Section 4 of the Contract:
"F. Additional Deliveries. In addition to the documents
delivered at Closing under Section 4.B, the following additional
documents shall be delivered at Closing in connection with the issuance
of the Class B Units:
"(i) The Beneficial Owner shall execute and
deliver to the Operating Partnership a Subscription Agreement which has
been fully filled in.
"(ii) The Trust and the Beneficial Owner shall
execute and deliver the Registration Rights Agreement to each other.
"(iii) Upon the request of the Beneficial Owner,
the Trust will deliver a Certificate to the Beneficial Owner of the
Class B Units owned by it."
9. Capital Contributions. The Operating Partnership and
Seller hereby agree that the undivided interest in the Property being
contributed to the Operating Partnership by or on behalf of the Beneficial
Owner as and for the capital contribution of the Beneficial Owner and in
exchange for the Class B Units has a market value of $5,000,000, which shall
be allocated to the Beneficial Owner on the basis of $23.47 per Class B Unit
issued to the Beneficial Owner.
10. Notices. All notices required or permitted to be given
hereunder shall be in writing and sent by registered or certified mail, or by
hand delivery, overnight delivery service or facsimile transmission, in each
case addressed as follows:
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If to the Operating Partnership or the Trust:
Pennsylvania Real Estate Investment Trust
455 Pennsylvania Avenue, Suite 135
Fort Washington, Pennsylvania 19034
Attn: President
Fax No. 215-542-9179
With a copy to:
Howard A. Blum, Esquire
Clifford H. Swain, Esquire
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
Fax No. 215-988-2757
If to Seller:
Equity Group Investments, Inc.
2 North Riverside Plaza, Suite 600
Chicago, Illinois 60606
Attn: Cheryl Engel
Fax No. 312-454-0610
With a copy to:
Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Attn: John S. Santa Lucia, Esquire and Douglas
Lubelchek, Esquire
Fax No. 312-454-0335
or to such person or address as the party to be charged with such notice may
designate by notice given in the aforesaid manner. Notices shall be deemed to
have been given (a) if mailed, two Business Days following the date on which
such notice is deposited in the United States mail, or (b) if hand delivered
or sent by an overnight delivery service or by facsimile transmission, then if
and when delivered to and received by the respective parties, if received by
5:00 p.m. on a Business Day; otherwise on the next following Business Day.
11. Contract Affirmed. Except as amended and modified hereby
or inconsistent with the provisions hereof, the Contract is hereby ratified
and shall remain in full force and effect.
12. Counterpart Copies. This Agreement may be executed in one
or more counterpart copies which shall be taken together as one and the same
instrument.
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IN WITNESS WHEREOF, this First Amendment has been executed
and delivered as of the date first above written.
SELLER:
MAGNOLIA RETAIL ASSOCIATES, L.L.C.,
a Delaware limited liability
company
By Florence Mall Partners, an
Illinois limited partnership, a
member
By Samuel Zell Robert Lurie General
Partners, an Illinois general
partnership, its General Partner
By Zell General Partnership, Inc.,
its General Partner
By__________________________________________
Name:
Title:
PURCHASER:
PREIT ASSOCIATES, L.P.
By Pennsylvania Real Estate Investment Trust
By /s/ Jeffrey A. Linn
------------------------------------------
Name:
Title: Trustee
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MAGNOLIA RETAIL ASSOCIATES, L.L.C.,
a Delaware limited liability company
By: Florence Mall Partners, an
Illinois General Partnership,
its general partner
By: Samuel Zell Robert Lurie
General Partners, an Illinois
general partnership, its
general partner
By: Zell General Partnership,
Inc., its General Partner
By:/s/ Donald Liebentritt
-------------------------
Name:____________________
Title:___________________
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