CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT ("this Agreement"), made as of the 28th
day of July, 1998, by and among THE WOODS ASSOCIATES, a Pennsylvania limited
partnership (the "Partnership"), PREIT ASSOCIATES, L.P., a Delaware limited
partnership ("OP"), and PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a
Pennsylvania business trust ("PREIT"), and each general, limited and special
limited partner of the Partnership executing a Joinder Agreement hereto and
Assignment in the form of Exhibit B (each a "Partner" and, collectively, the
"Partners.")
W I T N E S S E T H:
This Agreement is made with reference to the following facts and
objectives:
(a) The Partnership owns a 100% fee simple interest in a Pennsylvania
apartment property known as The Woods Apartments (the "Property").
(b) The Property comprises 320 dwelling units, a club house and
swimming pool and a single-family dwelling and is situated upon land owned in
fee simple by the Partnership.
(c) Upon the terms and conditions set forth in this Agreement, OP
desires to obtain 100% of the partnership interests in the Partnership (the
"Partnership Interests") in exchange for Class "A" limited partner interests
(the "OP Units") in OP and/or cash.
(d) The value of the OP Units and cash are to be allocated among the
Partners in accordance with Schedule 1 attached hereto.
(e) As used in this Agreement with initial capital letters, the
following terms, in each instance, shall have the meaning ascribed thereto:
"Code" shall mean and refer to the Internal Revenue Code of 1986, as
amended;
"Environmental Law" shall mean and refer to any Federal, state,
county or municipal environmental, health, chemical use, safety or sanitation
law, statute, ordinance or code relating to the protection of the environment,
and/or governing the use, storage, treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Materials, and
the rules, regulations and orders promulgated and/or issued thereunder;
"Existing Lender" shall mean and refer to Sun Life Assurance Company
of Canada;
"Existing Loan" shall mean the Mortgage Note in favor of the Existing
Lender, which had an original principal balance of $8,150,000.00 and which has
a principal balance as of July 24, 1998 of $7,356,069.20 and which is secured by
a mortgage or deed of trust on the Property;
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"General Partners" shall mean and refer to Glick Woods Corp. and
Morse Woods Corp. collectively (both being Pennsylvania corporations);
"Hazardous Materials" shall mean and refer to any hazardous
substances described or defined in (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; (ii) the
Hazardous Materials Transportation Act, as amended; (iii) the Resource
Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control
Act, as amended; and (v) any applicable Pennsylvania Environmental Laws, and
the regulations promulgated thereunder, in each case, as at the date of this
Agreement;
"PREIT" shall mean and refer to Pennsylvania Real Estate Investment
Trust, a Pennsylvania business trust (which operates as a self-administered
and self-managed equity real estate investment trust);
"PREIT Common Shares" shall mean and refer to the shares of
beneficial interest in PREIT, which are traded on the New York Stock Exchange;
"Capital Account Deficit" shall mean and refer to the negative
Capital Account amount of each Unit Partner (as hereinafter defined) for
Federal income tax purposes, as at the relevant date;
"OP" shall mean and refer to PREIT ASSOCIATES, L.P., a Delaware
limited partnership (in which PREIT is the sole general partner, and through
which PREIT conducts its operational, management and investing activities);
"Operating Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of PREIT Associates dated September 30, 1997,
as amended;
"OP Units" shall mean and refer to Class A Limited Partner Interests
in OP, which are, subject to restrictions and the terms and conditions of the
Operating Partnership Agreement, redeemable, at the election of the holder,
for cash or, at the election of PREIT, for PREIT Common Shares on a
one-for-one basis;
"Partner" shall mean each and every one of the partners of the
Partnership and "Partners" shall refer to all of the partners of the
Partnership;
"Partnership" shall mean and refer to THE WOODS ASSOCIATES, a
Pennsylvania limited partnership;
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"Property" shall mean and refer to the apartment project known as The
Woods Apartments, including: (i) the land occupied by such apartment project
(the "Land"), as more particularly described on Exhibit A attached hereto,
together with (a) all and singular the easements, rights-of-way, rights,
privileges, benefits, tenements, hereditaments and appurtenances thereunto
belonging or in anywise appertaining, and (b) all right, title and interest of
the Partnership in and to any land lying in the bed of any street, road,
avenue or alley, open or proposed, public or private, in front of, behind, or
otherwise adjoining the Land, or any part of the Land; and (ii) all buildings,
structures, fixtures, facilities, installations and other improvements of
every kind and description now or hereafter in, on, over and under the Land
(the "Improvements"), including, without limitation, any and all plumbing, air
conditioning, heating, ventilating, mechanical, electrical and other utility
systems, and fixtures, parking lots and facilities, landscaping, roadways,
fences, mail boxes, sidewalks, maintenance buildings, swimming pools and other
recreational facilities, security devices, signs and light fixtures; and
"Transferred Liabilities" shall mean the Existing Loan and such other
obligations and liabilities of the Partnership as are described on Schedule TL
attached hereto;
"Unit Partners" shall mean the Partners who are entitled to elect and
who, in fact, elect to receive OP Units in exchange for their Interests (and
their successors in interest with respect to such OP Units) and "Unit Partner"
shall mean each of the Unit Partners.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants, agreements and undertakings herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Partnership and OP agree as follows:
1. EXCHANGE.
(a) OP shall make an offer (the "Offer") to each of the Partners to
exchange the Partner's Interests in the Partnership for cash and/or OP Units
and/or a combination of cash and OP Units. The substance of the Offer shall be
that each Partner may exchange his, her or its Partnership Interest for a
share of the Adjusted Consideration as set forth in Section 2. The Partnership
shall use its reasonable efforts to solicit acceptance from the Partners of
the Offer, whether in exchange for cash or OP Units or a combination thereof.
Upon and subject to the terms and conditions set forth in this Agreement, OP
shall, on the Closing Date (as hereinafter defined), accept an assignment of
the Partnership Interests from the Partners who have accepted the Offer (the
"Accepting Partners") and will issue OP Units and/or pay cash to the Partners
as each Partner shall elect and as provided herein. Partners accepting the
Offer shall do so by executing a Joinder Agreement and Assignment in the form
of Exhibit B hereto.
(b) The General Partners shall accept the Offer with respect to all
of their Partnership Interests. The General Partners shall recommend to all of
the Limited Partners that they accept the Offer.
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(c) On the Closing Date, the Partnership shall possess all right,
title and interest in and to the following:
(1) all furniture, furnishings, equipment, machinery and other
tangible personal property and fixtures of every kind and
description owned by the Partnership, and used in connection
with the Property (in each instance, the "Personal
Property"), including, without limitation, all ranges,
refrigerators, disposals, dishwashers, water heaters,
furnaces, air conditioning units and equipment, carpeting,
traverse rods, drapes and other window treatments, exhaust
fans, range hoods, screens, model unit furniture, tools,
parts, motors, supplies, pool and other recreational
equipment, cabinets, mirrors, shelving, computers and other
office equipment, stationery and other office supplies,
maintenance vehicles and accessories, normal levels of
inventory, and all replacements of, and/or substitutions
for, any of the foregoing;
(2) all present and subsequent leases with tenants, and/or other
occupancy agreements, together with all pending applications
for tenancy (the "Leases");
(3) all service and maintenance contracts, and equipment leases,
used or useful in connection with the Property, other than
the management agreements which are to be terminated under
this Agreement (in each instance, the "Service Contracts"),
including, without limitation, natural gas purchase
contracts, vehicle, communication and other equipment leases
(the "Equipment Leases", and the vehicles and equipment
covered thereby being herein called the "Leased Equipment"),
coin-operated laundry concession leases, and pending
purchase orders, all of which are listed on Schedule 2
attached hereto;
(4) all trademarks, service marks, logos, trade, assumed or
business names and telephone numbers related to the use and
operation of the Property (in each instance, the "Trade
Names"), except that the Partnership makes no representation
or warranty of title or usage with respect to such Trade
Names;
(5) all contract rights, guaranties and warranties of any
nature, and all architect, engineer, surveyor or other real
estate professional plans, specifications, certifications,
contracts, reports, audits, data or other technical
descriptions;
(6) all governmental permits, licenses, certificates, and
approvals in connection with the ownership of the Property;
(7) all escrow accounts, deposits, instruments and documents of
title;
(8) all of Seller's rights, claims, and causes of action, if
any, to the extent they are assignable, under any warranties
and/or guarantees of manufacturers, contractors or
installers, rights against tenants and others relating to
the Premises or the operation or maintenance thereof,
including to the extent applicable, any warranties from any
previous owners of the Property, and
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(9) all other personal property owned by Seller and used in
connection with the ownership, operation and maintenance of
the Property and other property related to the Property.
2. CONSIDERATION.
(a) The aggregate consideration (the "Consideration") payable by OP
for 100% of the Interests shall be the difference between $21,150,000 and the
principal amount on the Closing Date of the Existing Loan, subject to
adjustments at Closing pursuant to Section 16 and the reductions described in
Paragraph (e) of Section 3 and Paragraph (c) of Section 18. The Consideration,
as so adjusted, is referred to herein as the "Adjusted Consideration."
(b) On the Closing Date, each of the Partners who has accepted the
Offer shall, pursuant to the Joinder Agreement and Assignment, assign his, her
or its Interests to OP in exchange for the Exchange Price. "Exchange Price"
for an Interest means the portion of the Adjusted Consideration allocable to
such Interest, as set forth on Schedule 1. At Closing, the General Partners
shall establish from Partnership funds otherwise distributable to the Partners
on or before the Closing Date a "Reserve Amount". "Reserve Amount" means the
sum of: (a) an amount equal to the current liabilities of the Partnership on
the Closing Date (other than the principal amount of the Existing Loan) which
would be accrued on a balance sheet of the Partnership as at the Closing Date
prepared in accordance with generally accepted accounting principles, together
with such other amounts as the General Partners may reasonably require (the
"Liabilities Reserve") and (b) $200,000 (the "Indemnity Reserve"). The Reserve
Amount shall be held and disbursed by the Disbursing Agent (as defined in
Paragraph (c) of this Section 2) as described in Paragraph (c) of this Section
2 and in Paragraphs (a) and (b) of Section 3. The Reserve Amount shall
initially be used to pay (xx) all amounts to satisfy the current liabilities
of the Partnership and other liabilities of the Partnership other than the
Transferred Liabilities ("Liabilities Claims") and (yy) any amounts paid or
subject to claims of OP by reason of a material breach or material
misrepresentation of any representations, warranties, covenants or agreements
of the Partnership which survive Closing (but only during the period of such
survival) ("Indemnity Claims"). In the event that any Partner shall not have
executed and delivered a Joinder Agreement and Assignment on or before the
Closing Date, OP shall have the right to terminate this Agreement on the
Closing Date and receive a return of the Earnest Money Deposit and no party
hereto shall thereafter have any liability hereunder.
(c) At Closing, the General Partners shall deliver in immediately
available funds from moneys otherwise distributable to the Partners (but not
from proceeds of Consideration) to Holt, Ney, Zatcoff & Wasserman, LLP (the
"Disbursing Agent") the Reserve Amount. The Reserve Amount shall be held and
disbursed pursuant to the terms of an escrow agreement that shall be in form
and substance substantially similar to that attached hereto as Exhibit H.
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(d) Partners who have elected to receive cash in exchange for all or
any portion of their Partnership Interests shall be paid so much of the
Exchange Price as they have elected to receive in cash at the Closing.
(e) Partners who are accredited under applicable securities laws and
who have elected to receive OP Units at least seven days prior to the Closing
Date in exchange for all or any portion of their Partnership Interests shall
be paid so much of the Exchange Price as they have elected to receive in OP
Units by the issuance of OP Units. The number of OP Units to be issued to each
Unit Partner shall be that portion of the Exchange Price as the such Unit
Partner has elected to receive in OP Units divided by the twenty (20) day
trailing average of the closing price of PREIT Common Shares on the New York
Stock Exchange for the twenty (20) business days preceding the third business
day prior to the Closing Date.
3. RELEASE OF RESERVES; CLOSING COSTS.
(a) Rules Applicable to Reserve Amount While Held by the Disbursing
Agent.
(i) If any claim (a "Claim") is made by OP for payment out of the
Reserve Amount held by the Disbursing Agent of an Indemnity Claim or a
Liability Claim, OP shall thereafter notify the General Partners and the
Disbursing Agent of such Claim. At such time as there is a Final Determination
(as hereinafter defined) with respect to any such Claim, OP and the General
Partners shall jointly instruct the Disbursing Agent to make disbursements out
of the Reserve Amount appropriate to reflect such Final Determination. A
"Final Determination" with respect to a Claim shall occur when: (x) OP and the
General Partners agree in writing to a payment from the Reserve Amount with
respect to a Claim; or (y) the arbitrator determining the disposition of a
Claim pursuant to Section (iv) below renders a final decision with respect to
a Claim determining that a payment is to be made from the Reserve Amount to
OP; or (z) provided that the General Partners (on behalf of all of the former
Partners of the Partnership) shall have been given an opportunity to
participate in the defense of such third-party claim throughout the course of
such third-party claim, the Claim is made on account of a judgment rendered by
a court of competent jurisdiction requiring, on a third-party's claim, a
specified payment on account of such Claim to the third-party claimant and
such judgment has become final and not subject to further appeal.
(ii) On December 31, 1998, and thereafter, at any time and from time
to time, within 10 days after the written request of the General Partners, OP
shall send a notice (the "Anniversary Notice") to the Disbursing Agent and to
the General Partners describing each then outstanding Claim with respect to
which a Final Determination has not theretofore been made and specifying what
OP believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
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(iii) If the General Partners and OP do not agree, the determination
of the Damage Amount with respect to any disputed Claim shall be immediately
submitted to prompt and binding arbitration before an arbitrator appointed by
the Philadelphia, Pennsylvania, office of the American Arbitration Association
in accordance with its rules, and acting in accordance with its rules. If any
such Disputed Amount relates to a third-party claim that is then in litigation
or is otherwise unresolved, the standard to be applied by the arbitrator in
determining the Damage Amount shall be the aggregate amount of damages that
have been or are likely thereafter to be incurred by OP, including OP'
attorneys' fees, court costs and other costs of defense, arising out of such
claim. The award of the arbitrator shall be communicated to the parties and
the Disbursing Agent and shall constitute a Final Determination, which shall
be final, binding and not subject to appeal, with respect to all the Claims
that are the subject of such award, notwithstanding that an underlying
third-party claim still remains unresolved or is subsequently resolved in a
manner inconsistent with the arbitrator's award.
(b) Rules Applicable to Amounts Disbursed to the General Partners.
(i) On December 31, 1998, the Disbursing Agent shall disburse to the
General Partners that portion of the Reserve Amount that has not been paid,
disbursed or is then subject to a pending and unresolved Liability or
Indemnity Claim. The General Partners may then elect (i) to continue to hold
such disbursed amounts in trust for the benefit of the Partners, as a fund
against which to pay unanticipated claims (the "Contingency Reserve"), and/or
(ii) to distribute some or all of such amounts to the Partners in accordance
with their interests.
(ii) At any time, and from time to time, after December 31, 1998,
that there is a Final Determination that any remaining portion, if any, of the
Reserve Amount is no longer subject to Liability or Indemnity Claims, OP and
the General Partners shall jointly instruct the Disbursing Agent to distribute
such remaining portion to the General Partners. The General Partners may then
elect (i) to continue to hold such disbursed amounts in trust for the benefit
of the Holders, as a fund against which to pay unanticipated claims (the
"Contingency Reserve"), and/or (ii) to distribute some or all of such amounts
to the Holders in accordance with their interests. Notwithstanding the above,
Dissenting Partners shall not be entitled to a distribution of any portion of
the Indemnity Reserve.
(iii) Subject to the following sentence, not later than January 15,
1999 (provided that there have been no unanticipated Claims asserted against
the Partnership), the General Partners shall distribute any balance remaining
in the Contingency Reserve to the Partners in accordance with their interests.
In the event that on January 15, 1999 there are unanticipated claims pending
or asserted, or the General Partners have reason to believe that such
unanticipated claims may be asserted, the General Partners may continue to
hold the Contingency Reserve until such time as the General Partners deem
prudent, after which any undisbursed amount remaining in the Contingency
Reserve shall be disbursed by the General Partners to the Holders in
accordance with their interests. In no event shall OP or PREIT have any
liability to any Partner in respect of any portion of the Reserve Amount or
the Contingency Reserve.
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(c) No Claim shall be valid unless a claim is made on or before
December 31, 1998 (or, with respect to any Claim of which notice has been
provided to the General Partners on or before December 31, 1998, such later
date as may be approved by the General Partners).
(d) OP shall pay all recording fees, its attorneys' fees, the costs
of obtaining a binder or commitment from a title insurance company, the
premium for its title insurance policy, the costs for updating any surveys,
the costs of any environmental surveys and studies, all (if any) Pennsylvania
state and local recordation and/or transfer taxes, the fee described in
section 20 payable to CB Richard Ellis and all other costs and expenses
incidental to or in connection with closing this transaction customarily paid
for by the purchaser of similar property. The Partnership shall pay its
attorneys' fees and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller of
similar property, including any costs required to clear title to the Property
in accordance with Section 13 hereof.
(e) The Consideration shall be reduced by the amount of the fee
described in section 20 payable to CB Richard Ellis and one-half of any
transfer taxes imposed on this transaction, if any.
(f) On, or at any time prior to, the Closing Date, the General
Partners shall have the right to spend on behalf of the Partnership and/or
distribute to the partners of the Partnership any and all cash and securities
held by the Partnership (other than amounts in its Security Deposit accounts,
unless otherwise provided pursuant to Subsection 16(d)), it being specifically
agreed and understood that OP is not purchasing the cash and securities of the
Partnership, and that a portion of the amounts so distributed shall be applied
to fund the Reserve Amount.
(g) Promptly following the Closing, (i) the Reserve Amount shall be
adjusted to reflect inaccuracies (if any) in the determination made at the
Closing of the current liabilities of the Partnership on the Closing Date, and
(ii) a payment shall be made to reflect inaccuracies (if any) in the
determination made at Closing of the Partnership's cash and securities.
4. OP UNITS.
(a) Distributions with respect to the OP Units shall be paid pursuant
to the provisions of the Partnership Agreement.
(b) The OP Units will be redeemable in accordance with the provisions
of the Operating Partnership Agreement.
(c) The OP Units will be transferable in accordance with the
provisions of the Operating Partnership Agreement.
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(d) Upon the terms and conditions of a Registration Rights Agreement,
in the form of Exhibit C attached hereto, to be dated the Closing Date, the
Unit Partners shall have registration rights with regard to any of PREIT
Common Shares which may be issued upon redemption of the OP Units (the
"Registration Rights"). The exercise of Registration Rights shall be without
cost to the Partners.
5. EXISTING LOAN. To the extent that there are any prepayment or
assumption fees (including any lender approval fees and fees and expenses of
the lender's lawyers and TPA fees and charges) in connection with the Existing
Loan or substituting OP as the general partner with respect to the Existing
Loan, OP shall be responsible for payment of those fees. OP and the
Partnership acknowledge and agree that it is most likely that either the
Existing Loan or a new mortgage ("New Mortgage") will need to be in place in
order to protect the tax deferred nature of the transaction for the Unit
Partners.
6. PERMITTED EXCEPTIONS. The Property at Closing shall be subject
only to the following (the "PERMITTED EXCEPTIONS"):
(a) the Existing Loan;
(b) the lien of real estate taxes not yet due and payable;
(c) the Leases;
(d) the Service Contracts;
(e) easements, rights-of-way, covenants, restrictions and
other matters of record set forth on Schedule 4; and
(f) such other agreements and matters as may be agreed to by
the General Partners and OP.
7. OBLIGATIONS AND COVENANTS OF THE PARTNERSHIP.
(a) From the date of this Agreement to the Closing Date, except as
specifically agreed otherwise by OP in writing in the particular instance the
Partnership shall:
(1) Maintain, manage and operate the Property in
substantially the same condition and manner as such Property
is now maintained, managed and operated by the Partnership,
and keep the Property, including, without limitation, the
Improvements and Personal Property, in substantially the
same good condition and repair as such Property is now
maintained, ordinary wear and tear excepted;
(2) Maintain the Existing Loan in full force and effect, timely
make all payments, and observe and perform all covenants to
be paid, observed or performed by the mortgagor thereunder,
and promptly deliver to OP notice of any receipt or delivery
of any notice (including any notice of default) thereunder;
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(3) Promptly provide OP with a copy of any notice, citation,
complaint or other directive from any person, entity or
governmental authority whereby compliance with any
Environmental Law is called into question;
(4) Maintain in full force and effect all of the existing
insurance policies regarding the Property;
(5) Promptly deliver notice to OP of, and, defend, at the
Partnership's expense, all actions, suits, claims and other
proceedings affecting the Property, or the use, possession
or occupancy thereof;
(6) Promptly deliver notice to OP of any actual or threatened
condemnation of the Property, or any portion thereof;
(7) Maintain all Licenses in full force and effect;
(8) Maintain all Service Contracts in full force and effect;
timely make all payments, and observe and perform all
obligations to be paid, observed or performed by the
Partnership thereunder; and promptly notify OP of any
receipt or delivery of any notice (including any notice of
default) thereunder;
(9) Provide in accordance with its ordinary practices all
services, repairs and other work required to be provided by
the landlord under the Leases;
(10) Reasonably cooperate with OP (but without obligation to
incur expenses in connection therewith with the exception of
the legal fees and expenses of its counsel) in connection
with (i) the consummation of the transaction contemplated by
this Agreement, and (ii) the preparation of the Closing
documents and apportionments hereunder;
(11) Promptly deliver to OP a copy of any notice of required work
from any company insuring the Property against casualty
loss;
(12) Terminate all management agreements pertaining to the
Property, effective as of the completion of the Closing on
the Closing Date;
(13) Promptly deliver to OP a copy of any notice of any violation
(or alleged violation) of any law, ordinance, order,
requirement or regulation of any Federal, state, county,
municipal or other governmental department, agency or
authority relating to the Property; and
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(14) Promptly give written notice to OP of the occurrence of any
condition or event which materially and adversely affects
the truth or accuracy of any representation or warranty made
(or to be made) by the Partnership under or pursuant to this
Agreement.
(b) From the date of this Agreement to the Closing Date, except as
specifically agreed otherwise by OP in writing in the particular instance the
Partnership shall not:
(1) Except with the consent or in conjunction with OP, modify,
amend, renew, extend, terminate or otherwise alter the
Existing Loan, or any document or documents relating thereto
or permit or consent to the placement of any new liens
encumbering the Property;
(2) Increase any wage or fringe benefit payable to any employee
at the Property, without the prior written consent of OP, in
each instance, which consent shall not be unreasonably
withheld, conditioned or delayed;
(3) Remove from the Property any article of Personal Property,
except as may be necessary for repairs, or the discarding of
worn out or useless items, provided, however, that any such
article removed for repairs shall be returned to the
Property promptly upon its repair, and shall remain a part
of the Personal Property, whether or not such article shall
be located on the Property at the time of the Closing, and
any such article so discarded shall be replaced with a new
or replacement article of similar quality and utility prior
to Closing;
(4) Modify, amend, renew, extend, terminate or otherwise alter
any of the Service Contracts, or enter into any new service
or maintenance contract, equipment lease or, except in the
ordinary course of business, any purchase order affecting
the Property, and extending beyond, or for any work or
improvement which will not be completed and paid for prior
to, the Closing Date, without the prior written consent of
OP, in each instance, which consent shall not be
unreasonably withheld, conditioned or delayed;
(5) Except in the ordinary course of business, terminate any
Lease. Ordinary course of business shall be deemed to
include, without limitation, non-renewals of problem
tenants, commencement of summary ejectment proceeding where
a tenant is more than ten (10) days delinquent in the
payment of rent, cases of any Lease where the tenant is more
than thirty (30) days delinquent in the payment of rent, or
in which there has been a material violation of the
obligations of tenant;
(6) Except in the ordinary course of business, enter into any
new Lease, or renew or extend any existing Lease, for a term
in excess of twelve months, or at a monthly rental less than
the relevant rental rate set forth in the rental schedule
for the Property approved by OP;
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(7) Except for modifications and amendments required to comply
with applicable law and of which notice is given to OP,
modify or amend the present form of lease in use by the
Partnership, without the prior written consent of OP;
(8) Enter into any new license, franchise, concession or
easement agreement affecting the Property, without the prior
written consent of OP, in each instance,
(9) Except in the ordinary course of business of the
Partnership, apply any Security Deposits against rent
delinquencies or other Lease defaults, other than in the
case of tenants who have vacated their apartments, or are
currently involved in litigation with the Partnership;
(10) Undertake or commence any renovations or alterations at the
Property, except those (a) made in the ordinary course of
business to prepare apartments for occupancy or (b)
necessary to comply with any of the provisions of this
Agreement, without the prior written consent of OP, in each
instance, which consent shall not be unreasonably withheld,
conditioned or delayed;
(11) Sell, mortgage, pledge, hypothecate or otherwise transfer or
dispose of all or any part of the Property, or the Personal
Property, or any interest therein, except in the case of the
sale or other disposition of items of Personal Property to
be replaced hereunder;
(12) Initiate, consent to, approve or otherwise take any action
with respect to the zoning, or any other governmental rule
or regulation, presently applicable to all or any part of
the Property; and
(13) Issue any press release or other media publicity of any kind
whatever with respect to this Agreement, or the transaction
contemplated hereby, without the prior written consent of
OP.
(14) Permit any transfers of Interests, or admit any substitute
Partners to the Partnership, after July 31, 1998, in each
case other than those transactions to be effected at the
Closing.
7.1 OBLIGATIONS AND COVENANTS OF OP AND PREIT. OP and PREIT covenant
and agree with the Partnership, both before and after Closing:
(a) Distributions with respect to the OP Units will be at least equal
in amount and identical in timing to the dividends on PREIT Common Shares,
except that the initial distribution payable with respect to the OP Units
issued to the Unit Partners shall be made on the date on which PREIT shall pay
the dividend to holders of PREIT Common Shares that relates to the earnings
for the calendar quarter in which the OP Units were issued to the Unit
Partners, and shall be prorated such that the Unit Partners will receive a
pro-rata distribution for the period from the date on which the OP Units were
issued to the Unit Partners to, and including, the last day of the calendar
quarter in which the OP Units were so issued.
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(b) The General Partners may retain copies of any and all books and
records pertaining to the Partnership and the operation of the Property so
that the General Partners may wind up the affairs of the previously conducted
business.
(c) At the Closing, OP shall deliver to each Unit Partner good and
marketable title to the OP Units allocated to such Unit Partner, free and
clear of all liens, charges, encumbrances and restrictions, except as
contained in the Operating Partnership Agreement, the Registration Rights
Agreement, and the Lock-Up Agreement, and shall, by execution of the
Amendment, admit each Unit Partner as a limited partner in OP.
(d) At all times during the Tax Protection Period (as defined in the
following sentence), OP shall (and following the Tax Protection Period OP
shall use reasonable efforts to) allocate to each Unit Partner, for Federal
income tax purposes, (i) pursuant to Section 752 of the Code, nonrecourse debt
of OP in an aggregate amount not less than the Basis Protection Amount
(calculated as provided in subsection (e)) of such Partner, as adjusted from
time to time, and (ii) sufficient qualified nonrecourse financing (within the
meaning of Section 465 of the Code) to prevent the application of Subsection
465(e) of the Code to such Partner. For purposes of this Agreement, the "Tax
Protection Period" means the period commencing on the Closing Date and
continuing thereafter for eight years.
(e) The initial Basis Protection Amount of each Unit Partner shall be
equal to the amount of such Unit Partners capital account deficit in the
Partnership as at (just prior to) the contribution of such Partner's Interest
in the Partnership to OP on the Closing Date (and without taking into account
the book-up adjustment to be made thereto in connection with such
contribution). For the Tax Protection Period, the Basis Protection Amount of
each Unit Partner shall be adjusted annually to reflect changes occasioned at
the level of OP, including, without limitation, distributions made by OP, to
the extent (and only to the extent) that such changes produce changes in the
tax basis of such Unit Partner for his interest in OP. OP agrees that the
methodology chosen under Section 704(c) of the Code in connection with the
Unit Partners' contributions of their Interests to OP hereunder shall be the
"traditional" method.
(f) For the Tax Protection Period, OP shall not sell, exchange,
transfer or otherwise dispose of the Property, or any replacement of the
Property (in any event, a "Property Transfer"), unless such Property Transfer
occurs in such manner as to be tax free to each Unit Partner or unless OP
reimburses each Unit Partner on an after-tax basis for any tax liability
resulting from such Property Transfer by reason of Section 704(c) of the Code.
Following the Tax Protection Period, OP shall use reasonable efforts to
utilize Section 1031 of the Code to prevent or minimize recognition of taxable
gain by the Unit Partners in connection with each disposition of the Property
or any replacement thereof.
13
(g) OP and PREIT shall cause the Existing Loan to be paid as and when
the same becomes payable.
(h) OP and PREIT shall take such action from time to time as may be
necessary to assure that, after the Closing, no Unit Partner has an obligation
to make a contribution to OP, except (i) to the extent expressly agreed upon
by such Unit Partner or (ii) as provided by applicable law or the Operating
Partnership Agreement.
(i) OP and PREIT shall take such action from time to time as may be
necessary to prevent any power of attorney granted by a Unit Partner pursuant
to the Operating Partnership Agreement from being employed to produce an
effect which, if produced by an amendment to the Operating Partnership
Agreement, would cause such amendment to be ineffective unless adopted with
the consent of such Partner.
7.2 CONSENTS AND SPECIAL AGREEMENTS OF THE PARTNERS. By execution of
a Joinder Agreement and Assignment in the form of Exhibit B hereto, each
Partner:
(a) Irrevocably consents to each of the transactions contemplated
hereby, including, without limitation (i) the transfer of all of the
Interests, including the Interests of the General Partner, to OP and/or its
permitted assigns; (ii) the admission and substitution of OP and its permitted
assigns as substitute general or limited partners of the Partnership and the
sole partners of the Partnership on and after the Closing Date; and (iii) the
termination of the Partnership under the Code by reason of the foregoing.
(b) Consents to an amendment to the Agreement of Limited Partnership
of the Partnership, effective on the date of this Agreement, deleting the
first two sentences of Section 6.4 thereof.
(c) If a Unit Partner, irrevocably consents to an amendment to the
Operating Partnership Agreement establishing a sixty (60) day redemption
period for OP Units issued on or after August 1, 1998 (including, without
limitation, the OP Units to be issued pursuant to the terms hereof).
8. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP.
(a) The Partnership and each Accepting Partner hereby, jointly and
severally, represents and warrants that each of the following numbered
sentences is true, complete and accurate as of the date of this Agreement and,
subject to any qualifications made on the Closing Date necessary to make such
representations and warranties continue to be true and correct on the Closing
Date by reason of changes in such matters covered thereby between the date
hereof and the Closing Date ("Closing Date Qualifications"). Pending the
Closing or termination hereof the Partnership shall use its best efforts to
maintain the accuracy (aside from inaccuracies which are not material or not
adverse to the interests of the Partnership or OP) of the following numbered
sentences. The truth, completeness and accuracy of the following numbered
sentences (aside from omissions and inaccuracies which are not material or not
adverse to the interests of the Partnership or OP), and without regard to the
Closing Date Qualifications, as of the Closing Date shall be a condition
precedent to OP's obligation to effect the Closing, but if OP proceeds to
effect the Closing only the following numbered sentences, subject to the
Closing Date Qualification, shall survive the Closing. For purposes of the
following numbered sentences, the Partnership will be considered to have
knowledge of a fact if and only if that fact is actually known to Michael I.
Glick, Lester S. Morse, Jr., or any full-time employee of the Partnership.
14
(1) The Partnership is the sole owner of, and has good,
marketable and insurable fee simple title to the Property,
free and clear of all liens, charges and encumbrances,
except the Permitted Exceptions.
(2) The Partnership owns legal and beneficial title to the
Personal Property, other than the Leased Equipment, free and
clear of all liens, charges and encumbrances, except the
Permitted Exceptions.
(3) There are no agreements with regard to the Leased Equipment
other than the Equipment Leases listed in Schedule 2
attached hereto, and true and complete copies of all
Equipment Leases have been or will be delivered to OP.
(4) To the best knowledge of the Partnership, each of the
Equipment Leases is in full force and effect; none of the
parties thereto is in default of any of its obligations
thereunder; and no event has occurred that, with the giving
of notice, or the passage of time, or both, would constitute
a default thereunder.
(5) To the best knowledge of the Partnership, the Existing Loan
is in full force and effect; there exists no default
thereunder; and no event has occurred that with the giving
of notice, or the passage of time, or both, would constitute
a default thereunder.
(6) To the best knowledge of the Partnership, true, complete and
accurate copies of the Existing Loan documents have been or
will be made available to OP.
(7) The Partnership is a limited partnership, duly organized,
validly existing, and in good standing under the laws of
Pennsylvania, and subject to consent of the Partners of the
Partnership and consent of Existing Lender, has full power
and authority to enter into, and to fully perform and comply
with the terms of this Agreement and to own, lease and
operate its properties and to carry on its business as it is
now being conducted.
(8) Subject to consent of the Existing Lender, the execution and
delivery of this Agreement, and its performance by the
Partnership and each Partner, will not conflict with, or
result in the breach of, any contract, agreement, law, rule
or regulation to which the Partnership is a party, or by
which the Partnership or any Partner is bound.
15
(9) Subject to consent of the Existing Lender, this Agreement is
valid and enforceable against the Partnership and each
Partner in accordance with its terms, and each instrument to
be executed by the Partnership pursuant to this Agreement,
or in connection herewith, will, when executed and
delivered, be valid and enforceable against the Partnership
in accordance with its terms, except as such enforcement may
be limited by bankruptcy and other laws affecting creditors'
rights generally.
(10) No written notice has been received by the Partnership from
any insurer, or from the Existing Lender, with respect to
any defect which affects the Property, or the use or
operation thereof, which remains uncured or uncorrected.
(11) To the best knowledge of the Partnership and except as set
forth on tax bills for the Property provided to OP before
the end of the Inspection Period, there are no special or
other assessments for public improvements or otherwise now
affecting the Property, nor does the Partnership know of (i)
any pending or threatened special assessments affecting the
Property, or (ii) any contemplated improvements affecting
the Property that may result in a special assessment against
the Property.
(12) To the best knowledge of the Partnership, the Partnership
has not received any notice from any party that the
Property, or the current use, occupation or condition
thereof, violate(s) any governmental statute, law,
ordinance, rule or regulation applicable (or allegedly
applicable) to the Property, or any order of any
governmental agency relating to the Property and/or the use
and/or legal occupancy thereof, or any applicable deed
restrictions or other covenant, easement or agreement
pertaining to the Property (including, without limitation,
any of the Permitted Exceptions), or any approval pertaining
to the Property, and to the best knowledge of the
Partnership, the Property, and the current use, occupation
and condition thereof, do not violate any such statute, law,
ordinance, rule, regulation, order, restriction, covenant,
easement, agreement or approval.
(13) To the best knowledge of the Partnership, all certificates
of occupancy, operating permits and licenses (the
"Licenses") required by any relevant governmental authority
for the lawful use, operation and occupancy of the Property
have been issued, and are in full force and effect.
(14) The Partnership has received no notice that the current use,
operation or occupancy of any part, or all, of the Property
violates any of the Licenses, and to the best knowledge of
the Partnership all of the Licenses can remain with the
Property after acquisition by Interests without charge by
any relevant governmental authority.
16
(15) There is no action, proceeding or investigation pending
against the Partnership or the Property, by or before any
court or governmental department, commission, board, agency
or instrumentality.
(16) To the best knowledge of the Partnership, all financial
information about the Property heretofore furnished by the
Partnership or the General Partners to OP is true, complete
and correct in all material respects as of the date therein
specified.
(17) To the best knowledge of the Partnership, there is no
Federal, state, county or municipal plan to restrict or
change access from any such highway or road to the Property,
or of any pending or threatened condemnation or eminent
domain proceedings relating to or affecting the Property.
(18) The Partnership has not (i) made a general assignment for
the benefit of its creditors; (ii) admitted in writing its
inability to pay its debts as they mature; (iii) had an
attachment, execution or other judicial seizure of any
property interest which remains in effect; or (iv) become
generally unable to meet its financial obligations as they
mature.
(19) To the best knowledge of the Partnership, there is not
pending any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or recomposition of the Partnership, or the
debts of the Partnership, under any law relating to
bankruptcy, insolvency, reorganization or the relief of
debtors, or seeking the appointment of a receiver, trustee,
custodian or other similar official for the Partnership or
the Property.
(20) To the best knowledge of the Partnership in reliance on (i)
that certain environmental assessment dated March 22, 1993
prepared by Criterion Laboratories, Inc. and (ii) that certain
environmental assessment dated July 24, 1998 prepared by
Tri-State Environmental Management Services Inc. (collectively
the "Environmental Reports"), and except for matters described
in the Environmental Reports and Hazardous Materials
customarily used, produced or transported in the operation and
management of residential rental communities (including but
not limited to liquid propane gas, heating oil and sewage),
there are no Hazardous Materials on, in or under the Property,
and the Property has never been used by the Partnership or any
other person, to generate, treat, store, dump, release, emit,
use, transport or in any manner deal with Hazardous Materials.
17
(21) To the best knowledge of the Partnership, except for matters
described in the Environmental Reports the present use and
occupation of the Property does not violate any
Environmental Law.
(22) To the best knowledge of the Partnership, the summaries of
Leases affecting the Property attached as Exhibit D to this
Agreement (the "Rent Roll") are, in all material ways true,
complete and accurate as at the date set forth therein.
(23) True and complete copies of all Leases have been made
available to OP at the Property.
(24) Except for the Existing Loan, the Partnership has not
assigned, mortgaged, pledged, hypothecated or otherwise
encumbered any of its rights or interests under any of the
Leases.
(25) To the best knowledge of the Partnership, the Rent Roll
attached as Exhibit D accurately includes each tenant's
name, a description of the dwelling unit leased by such
tenant, the amount of rent due monthly from such tenant, the
amount of the security deposit, if any, paid by such tenant
(collectively, the "Security Deposits"), and the expiration
date of the term of such Lease.
(26) To the best knowledge of the Partnership, except as
indicated on the Rent Roll, each Lease is in full force and
effect.
(27) To the best knowledge of the Partnership, except as
indicated on the Rent Roll, all rents are being paid and are
current (within 15 days of their due date).
(28) To the best knowledge of the Partnership, except as
indicated on the Rent Roll, no tenant has paid any rent for
more than one month in advance.
(29) To the best knowledge of the Partnership, except as
indicated on the Rent Roll, no tenant is entitled to any
free rent, abatement of rent or similar concession.
(30) To the best knowledge of the Partnership, as of the date of
this Agreement, the Security Deposits under the Leases are
as set forth in the Rent Roll.
(31) To the best knowledge of the Partnership, no brokerage
commission or other compensation is payable (or will, with
the passage of time, or occurrence of any event, or both, be
payable) with respect to any Lease.
(32) As of Closing the Partnership shall have complied with all
of the requirements of the relevant Pennsylvania laws
regarding the holding of tenant security deposits.
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(33) Except for the Service Contracts listed on Schedule 2
attached hereto, there are no service or maintenance
contracts, or pending purchase orders pertaining to the
Property which may not be terminated upon not more than
thirty (30) days' notice, without payment of any penalty or
termination fee.
(34) True and complete copies of the Service Contracts have been
made available to OP at the Property.
(35) To the best knowledge of the Partnership, each of the
Service Contracts is in full force and effect; none of the
parties thereto is in default of any of its obligations
thereunder; and no event has occurred that, with the giving
of notice, or the passage of time, or both, would constitute
a default thereunder.
(36) Schedule 1 hereto lists the current holders of all
outstanding Interests and the percentage interest in
distributions from the Partnership held by each Partner. In
the event that any Partner listed on Schedule 1 transfers
any Interests prior to the Closing Date, the Partnership
shall use good faith reasonable efforts to promptly provide
written notice to OP of such transfer, and such notice shall
include the names of the transferor and the transferee, the
address of the transferee and a description of the interests
transferred.
(37) Each Partner is the sole legal and beneficial owner of the
Interests owned by such Partner and owns such Interests free
and clear of all liens, claims, charges or encumbrances;
upon completion of the Closing, OP, together with any
assignee of any portion of the Interests which OP is
entitled to acquire hereunder, shall own all of the
Interests in the Partnership, free and clear of all liens,
charges and encumbrances except those arising by reason of
actions taken by OP or its assignee.
(38) To the best knowledge of the Partnership, except: (i) as
disclosed in Schedule 3 attached hereto; (ii) for the
Existing Loan, the Transferred Liabilities, and liabilities
and obligations incurred in the normal course of business of
the Partnership; and (iii) as otherwise disclosed in this
Agreement, the Partnership has no material liability or
obligation of any nature which materially affects or is
related to the Property or Personal Property whether now due
or to become due, absolute, contingent or otherwise,
including liabilities for taxes (or any interest or
penalties thereto).
(39) Except as previously disclosed to OP, all of the ranges and
refrigerators in the Property are the property of the
Partnership and not of the tenants.
19
(40) The Partnership has filed or will file when due all notices,
reports and returns of Taxes (as defined below) required to
be filed before the Closing Date and has paid or, if due
after the date hereof and prior to the Closing Date, will
pay, all Taxes and other charges for the periods shown to be
due on such notices, reports and returns or otherwise due
with respect to the periods covered by such notices, reports
or returns. "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation,
income, excise, property, sale, gross receipts, employment
and franchise taxes imposed by the United States, or any
state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business
of the Partnership, and including any interest, penalties or
additions attributable thereto.
(41) At least 90% of the Interests in the Partnership are owned
by more than thirty-six (36) Partners.
(b) All of the representations and warranties of the Partnership and
Partners set forth in this Agreement, subject to the Closing Date
Qualifications, including, without limitation, the following indemnity, shall
survive the Closing through December 31, 1998, and shall not be deemed to have
merged in any document delivered at the Closing. Any claim for any breach of
any such surviving representation or warranty of the Partnership shall be
brought, if at all, on or before December 31, 1998 or thereafter be forever
barred and the limitations of liability as set forth in Paragraph (c) below
shall apply to any such claim. The foregoing temporal limitation shall not
apply in the case of fraud or intentional material misrepresentation.
(c) The Partners shall indemnify OP, and hold harmless and defend OP,
from and against any and all losses, costs, claims, liabilities, damages and
expenses, including, without limitation, reasonable attorneys' fees, arising
as the result of a material breach of any of the representations and
warranties of the Partnership and Partners set forth in this Agreement which
survive the Closing. Notwithstanding anything to the contrary contained in
this Agreement, neither the General Partners nor any other Partner shall have
any personal liability, and no action of any kind shall be commenced or
maintained against any of them or their respective assets, with respect to
this Agreement and/or the transactions described in this Agreement, and OP,
its successors and assigns, shall look solely to (i) prior to the Closing
Date, the assets of the Partnership and (ii) from and after the Closing Date,
the cash or assets held by the Disbursing Agent pursuant to Paragraph (c) of
Section 2 above, for the payment of any Claim against or the performance of
any obligation of the Partnership. The foregoing limitation of liability shall
not apply in the case of fraud or intentional material misrepresentation.
(d) Except as expressly provided in this Agreement, neither the
Partnership nor Partner has made any representations and/or warranties
regarding the Property and the Partnership Interests, and, except as expressly
set forth in this Agreement, OP shall, at Closing, accept the Property and the
Interests in "AS IS" condition, with all faults, and without any other
representations or warranties of any kind, whether as to merchantability, or
fitness for a particular purpose, or otherwise.
20
9. REPRESENTATIONS AND WARRANTIES OF OP AND PREIT.
(a) OP and PREIT represent and warrant that each of the following is
true, complete and accurate as of the date of this Agreement, and will be
true, complete and accurate as of the Closing Date, and, as the context may
require, thereafter. For purposes of the following numbered sentences, OP and
PREIT will be considered to have knowledge of a fact if and only if that fact
is actually known to Jonathan B. Weller or Jeffrey A. Linn.
(1) OP and PREIT are duly organized, validly existing and in
good standing (under the laws of their respective states of
organization), and each has all the requisite power and
authority to enter into and carry out and perform this
Agreement, according to its terms, to own and/or lease the
assets owned and/or leased by it in connection with the
conduct of its business as it is now being conducted, and to
carry on such business.
(2) Neither the execution and delivery of this Agreement, nor
the performance of this Agreement by OP, nor the execution,
delivery and performance of the Registration Rights
Agreement by PREIT, nor the execution and delivery of the
Amendment (as hereinafter defined) by OP, nor the execution,
delivery and performance of all other agreements
contemplated by this Agreement, nor the issuance and
delivery of the OP Units by OP, will conflict with, or
result in any breach of, any contract, agreement, law, rule
or regulation to which either PREIT or OP is a party, or by
which either PREIT or OP is bound.
(3) This Agreement has been duly authorized, executed and
delivered, and constitutes a legal and binding obligation of
OP and PREIT, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy and
other laws affecting creditors rights generally.
(4) Each instrument to be executed and delivered by OP and/or
PREIT pursuant to this Agreement, or in connection herewith,
will, when executed and delivered, be valid and enforceable
against OP and/or PREIT in accordance with its terms, except
as such enforcement may be limited by bankruptcy and other
laws affecting creditors' rights generally and principles of
equity applicable to the availability of the remedy of
specific performance.
(5) To the best knowledge of OP, there is no litigation,
proceeding or investigation pending, or threatened, against
or affecting OP, or PREIT, that might affect the validity of
this Agreement, or any action taken, or to be taken, by OP,
or PREIT, pursuant to this Agreement, or that might have a
material adverse effect on the business of OP.
(6) At the Closing, OP shall deliver to each Unit Partner good
and marketable title to the OP Units allocated to such Unit
Partner, free and clear of all liens, charges, encumbrances
and restrictions, except as contained in the Operating
Partnership Agreement, the Registration Rights Agreement,
and the Subscription Agreement, and shall, by execution of
the Amendment, admit each Unit Partner as a limited partner
in OP.
21
(7) The Operating Partnership Agreement attached as Exhibit E,
to this Agreement is true, complete and accurate as at the
date of this Agreement, except for (i) amendments which
would not adversely affect the rights of the Partners if
they were holders of OP Units on the date of such amendment,
and (ii) the sixty (60) Day Amendment.
(8) All financial information heretofore or hereafter furnished
by PREIT or OP concerning such entities is, and shall be,
true, complete and correct in all material respects as of
the date therein specified. All of the information furnished
and statements made by PREIT or OP to the Partnership with
respect to this Agreement, and in the periodic filings (as
updated) by PREIT or OP with the Securities and Exchange
Commission, are true and correct in all material respects
and do not misstate or fail to state any material fact.
(9) PREIT or OP has not (i) made a general assignment for the
benefit of creditors; (ii) admitted in writing its inability
to pay its debts as they mature; (iii) had an attachment,
execution or other judicial seizure of any property interest
which remains in effect; or (iv) become generally unable to
meet its financial obligations as they mature.
(10) There is not pending any case, proceeding or other action
seeking reorganization, arrangement, adjustment,
liquidation, dissolution or recomposition of PREIT or OP, or
the debts of PREIT or OP, under any law relating to
bankruptcy, insolvency, reorganization or the relief of
debtors, or seeking the appointment of a receiver, trustee,
custodian or other similar official for PREIT or OP.
(11) PREIT and OP will be responsible for all activities,
operations, debts, liabilities of and claims against the
Partnership which arise and result from occurrences from and
after Closing.
(b) To the best knowledge of PREIT and OP, all of their
representations and warranties set forth in this Agreement shall be true and
correct in all material respects at the date of this Agreement, and shall be
deemed to be repeated at, and as of the Closing Date, and shall be true and
correct in all material respects as at the Closing Date.
(c) All of the representations and warranties of OP and PREIT, set
forth in this Agreement, including, without limitation, the following
indemnity, shall survive the Closing through December 31, 1998 and shall not
be deemed to have merged in any document delivered at the Closing. Any claim
for any breach of any representation or warranty of PREIT or OP shall be
brought, if at all, on or before December 31, 1998 or thereafter be forever
barred and the limitations of liability as set forth in Paragraph (d) below
shall apply to any such claim. The foregoing temporal limitation shall not
apply in the case of fraud or intentional material misrepresentation.
22
(d) OP and PREIT agree to indemnify the Partnership and each Partner,
and hold harmless and defend the Partnership and each Partner, from and
against any and all losses, costs, claims, liabilities, taxes (including taxes
on any indemnification amount), damages and expenses, including, without
limitation, reasonable attorneys' fees, arising as the result of a breach of
any of the obligations, covenants, representations and/or warranties of OP
and/or PREIT set forth in this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, neither the general partner nor any
other partners of OP or any shareholders, officers or directors of PREIT shall
have any personal liability, and no action of any kind shall be maintained
against any of them or their respective assets, with respect to this Agreement
and/or the transactions described in this Agreement, and the Partnership, its
successors and assigns, shall look solely to the assets of OP and PREIT for
the payment of any claim against or the performance of any obligation of OP
and PREIT. The foregoing limitation of liability shall not apply in the case
of fraud or intentional material misrepresentation.
10. CONDITIONS TO THE OBLIGATIONS OF OP AND PREIT.
(a) Without limiting any of the rights of OP and PREIT elsewhere set
forth in this Agreement, the obligations of OP on PREIT under this Agreement
shall be subject to the satisfaction of the conditions set forth following
("OP's Conditions"):
(1) All of the representations and warranties of the Partnership
set forth in this Agreement, subject to the Execution Date
Qualifications, shall be true, accurate and correct in all
material respects (aside from inaccuracies which are not
adverse to the interests of the Partnership or OP) as of the
Closing Date (as if made on the Closing Date).
(2) The Existing Lender shall have consented to all of the
transactions contemplated hereby without requiring
prepayment, in whole or in any part, or change in the terms
and conditions of the Existing Loan.
(3) On or before the Closing Date, all of the management
agreements pertaining to the Property shall have been
terminated (effective as at the completion of the Closing on
the Closing Date), without cost or expense to OP.
(4) As at the Closing Date, the Existing Loan shall be in full
force and effect, with no uncured default or
presently-exercisable right to accelerate thereunder.
(5) The Partnership and the Partners shall have delivered to OP
all of the documents and other items required to be
delivered by the Partnership to OP under the terms of this
Agreement.
23
(6) The General Partners shall have executed an agreement
whereby they agree that they will be responsible for making
all final distributions to the former Partners of the
Partnership from (i) any amounts remaining in the Reserve
Amount and/or Contingency Account (as the case may be) at
the time of expiration of such Accounts, and (ii) any other
Partnership funds that the General Partners hold, and shall
indemnify OP for all claims relating thereto.
(7) All of the Partners shall have agreed in writing to exchange
their Interests for cash and/or OP Units and assignments for
such Interests shall have been received by Closing, and
consents to the transfers hereunder of their Interests by
all of the Partners shall have been obtained.
(8) The Partnership possesses as of the date hereof and shall
continue to possess as of the Closing adequate written
financial and other information pertaining to the period of
the Partnership's ownership and operation of the Property
(including, without limitation, management representation
letters executed by the General Partners in the form of
Exhibit G hereto; that will, in OP's reasonable opinion,
enable OP and its Accountants to prepare, in a timely manner
and without undue expense, financial statements for the
Property that will comply with Rule 3-14 of Regulation S-X
promulgated by the Commission and all other applicable
Commission rules and regulations.
(9) The PREIT Common Shares issuable by the OP, at the election
of PREIT, upon redemption of the OP Units issuable by OP as
a result of the transactions contemplated herein, shall have
been approved for listing on the New York Stock Exchange
upon official notice of issuance.
(10) The fulfillment by the Partnership of such other conditions
to Closing as are set forth in this Agreement, including,
without limitation, the performance by the Partnership of
the obligations and covenants of the Partnership set forth
in this Agreement.
(11) Op and the Partnership shall have reached mutual agreement
on the amount of the Liabilities Reserve.
(b) Each of OP's Conditions is for the benefit of OP, and,
accordingly, any such condition may be waived by OP at any time.
11. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP AND THE
PARTNERS.
(a) Without limiting any of the rights of the Partnership elsewhere
set forth in this Agreement, it is agreed that the obligations of the
Partnership and the Partners under this Agreement shall be subject to the
satisfaction of the conditions set forth following (the "Partnership's
Conditions"):
24
(1) All of the representations and warranties of OP and PREIT
set forth in this Agreement shall be true, accurate and
correct as of the Closing Date (as if made on the Closing
Date).
(2) OP shall have delivered to the Partnership all of the
documents and other items required to be delivered by OP
under the terms of this Agreement.
(3) The fulfillment by OP of such other conditions to Closing as
are set forth in this Agreement.
(b) Each of the Partnership's Conditions is for the benefit of the
Partnership, and, accordingly, any such condition may be waived by the
Partnership at any time.
(c) If any of the Partnership's Conditions shall not have been
fulfilled by OP or otherwise satisfied on or before the dates specified above
or if no date is specified by the Closing Date, or waived by the Partnership,
the Partnership shall have the right to terminate this Agreement by written
notice to OP, in which event this Agreement shall, thereafter, be deemed to be
null, void and of no further force or effect, and neither party shall have any
further rights or obligations under this Agreement, but subject to the
provisions of Section 23 of this Agreement.
11A. CONDITION TO ALL PARTIES' OBLIGATIONS.
(a) The obligations of all of the parties under this Agreement shall
be subject to the satisfaction of the condition set forth following (the
"Mutual Condition"):
(1) The Existing Lender shall have approved the transfer of the
Existing Loan (and/or substitution of OP as general partner
of the Partnership) or OP shall have received a commitment
for substitute financing which can be closed within 45 days
after the execution of this Contribution Agreement.
(b) If the Mutual Condition shall not have been fulfilled or
otherwise satisfied or waived by both parties, either party shall have the
right to terminate this Agreement by written notice to the other party, in
which event the Earnest Money Deposit shall be returned to OP and this
Agreement shall, thereafter, be deemed null, void and of no further force or
effect, and neither party shall have any further rights or obligations under
this Agreement, but subject to the provisions of Section 23 of this Agreement.
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12. INSPECTION PERIOD. Subject to the rights of existing tenants at
the Property, OP shall have a period to and including the day following the
date of execution hereof (the "Due Diligence Period") within which to cause
one or more surveyors, attorneys, engineers, auditors, architects, and/or
other experts of its choice (i) to inspect any document related to any
Property, including, without limitation, all Leases and related documents,
documents pertaining to the Existing Loan, working drawings, plans and
specifications, surveys, appraisals, engineer's reports, environmental
reports, insurance policies, service contracts, real estate tax receipts and
annual and monthly operating statements, and (ii) to inspect, examine, survey,
appraise and obtain engineering inspection and environmental reports with
respect to the Property, documents pertaining to the Existing Loan, or all of
the Property, and otherwise to do all that, which, in the opinion of PREIT, is
necessary to determine the condition and value of the Property for the uses
intended by OP, provided, however, that OP shall not conduct any environmental
study beyond a Phase 1 level without the consent of the Partnership, which
consent shall not be unreasonably withheld. OP may declare the Due Diligence
Period ended at any earlier time. OP must be satisfied in all respects (in the
sole and absolute discretion of OP) with the results of all reviews,
inspections and investigations conducted by, or under, OP during the Due
Diligence Period. If OP shall not be so satisfied, OP may, within the Due
Diligence Period, terminate this Agreement, in which event OP shall have no
obligation or liability under this Agreement, or with regard to the
Partnership or the Property, and OP shall be entitled to the immediate return
of the Earnest Money Deposit, and this Agreement shall, thereafter, be null,
void and of no further force or effect, all, however, subject to Section 23.
If not so terminated by OP, this Agreement shall continue in full force and
effect according to its terms, and OP shall be considered to have waived any
and all unsatisfactory conditions as a result of which OP could have
terminated this Agreement pursuant to this Section 12, but this Agreement
shall remain subject to all other conditions to OP's obligation to complete
closing as set forth herein. OP shall be responsible for payment of all of the
costs of its due diligence activities, including, without limitation, all
engineering and environmental reports, and all financial and Lease audits. OP
and PREIT shall indemnify and hold the Partnership and the Partners harmless
from and against any and all loss, claims, damage and expense arising out of
entry by OP and its agents onto the Property and any testing performed
thereon; OP and PREIT shall repair any damage which it may cause as a result
of any such entry and testing; OP and PREIT shall cause their entry,
inspections and testing (if any) to be conducted in a manner so as to minimize
disruption to tenants at the Property. The indemnity and repair obligations of
OP and PREIT are collectively referred to herein as the "Inspection
Indemnity."
OP and PREIT shall give written notice to the Partnership as soon as
the Board has, pursuant to paragraphs (a)(3) and (a)(4) of Section 9 hereof,
acted upon a request for approval of this Agreement and the transactions
envisioned herein. In the event that the Board has failed to approve, or OP
shall fail to give the Partnership notice of approval, within the Due
Diligence Period, the Partnership shall have the right to terminate this
Agreement by giving written notice to OP, in which event the Earnest Money
Deposit shall be returned to OP and neither party shall have any further
obligation under this Agreement, subject to Section 23.
13. TITLE.
(a) At Closing, the Partnership will hold insurable fee simple title
to the Property, free and clear of all liens, charges and encumbrances, except
the Permitted Exceptions.
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(b) Within 5 days of the execution of this Contribution Agreement,
the Partnership will furnish and deliver to OP a copy of the most recent title
policy issued with respect to the Property and a copy of the most recent
survey of the Property.
(c) The obligation of OP to complete the transaction described in
this Agreement is conditioned upon the ability of OP to obtain title insurance
with respect to the Property insuring that, as of the Closing Date, title to
the Property is not subject to any liens, encumbrances or other than the
Permitted Exceptions.
(d) The Partnership agrees that, upon the request of OP, it will
provide an affidavit in such customary form as shall allow OP to obtain a
non-imputation endorsement to the title policy purchased by OP.
(e) If any title commitment, UCC search or survey discloses
exceptions to title other than the Permitted Exceptions, or any other matter
which does not conform to the requirements of this Agreement, OP shall so
notify the Partnership in writing, such notice to be furnished to the
Partnership, if at all, within fifteen (15) days following receipt by OP of
the title commitments, the UCC searches and surveys, but not later than the
last day of the Inspection Period. The Partnership shall have the right, but
not the obligation, within fifteen (15) days from the date of the receipt of
such notice by the Partnership (the "Correction Period"), to have each such
unpermitted exception to title removed, or to correct each such other matter,
in each case to the reasonable satisfaction of OP. OP shall have no obligation
to close within the Correction Period unless the Partnership shall have caused
each unpermitted exception to be removed or corrected to the reasonable
satisfaction of OP. If, within the Correction Period, the Partnership fails to
have each such unpermitted exception removed, or to correct each such other
matter as aforesaid, OP may, at its option, and as the sole and exclusive
remedy of OP, either (i) terminate this Agreement, in which event this
Agreement, without further action of the parties, shall become null and void
such that neither party shall have any further rights or obligations under
this Agreement (subject to Section 23), and OP shall be entitled to the
immediate return of the Earnest Money Deposit and any fees or costs incurred
by OP in reviewing the state of title to the Property or obtaining a survey of
the Property, or (ii) elect to take title to each Property as it then is. If
OP fails to make either such election within five (5) days following the
expiration of the Correction Period, OP shall be deemed to have elected option
(ii). Any exception to title (other than a Permitted Exception), or any other
matter which does not conform to the requirements of this Agreement, to which
the OP does not object, as aforesaid (and for this purpose if OP elects (or is
deemed to elect) option (ii) all such exceptions and other matters shall be
considered exceptions and other matters to which OP does not object), shall be
deemed approved by OP, and shall be deemed to be an additional Permitted
Exception. Notwithstanding anything to the contrary contained herein, the
Partnership shall be obligated to remove (or to cause the title company to
affirmatively insure over) at the expense of the Partnership (a) any mortgages
or deeds to secure debt regarding any financing obtained by any Partnership,
other than the Existing Loan; (b) any mechanic's or materialman's lien for
work done on any Property on behalf of the Partnership; and (c) any other
judgments or liens encumbering the Property.
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14. CLOSING DATE.
(a) If this Agreement shall not have been terminated by OP, or the
Partnership, pursuant to their respective rights to do so set forth elsewhere
herein, and within the time(s) herein limited, the closing of the transaction
contemplated by this Agreement (the "Closing") shall occur on the second
business day following the first business day on which all of the conditions
to Closing set forth in Sections 10, 11 and 11A have been satisfied or waived
in writing by the party or parties having a right to do so. OP and PREIT agree
to use commercially reasonable good faith efforts to expeditiously attempt to
obtain all necessary approvals of the Existing Lender. The Closing shall be
held at OP's office, or at such other place, and at such time, as may be
mutually agreed upon by the parties.
(b) If the Closing shall not have occurred and this Agreement shall
not otherwise have been terminated pursuant to a right to do so set forth
herein by September 30, 1998, then at any time thereafter (and before the
Closing or other termination of this Agreement) either party not in default of
its covenants and agreements hereunder may terminate this Agreement upon at
least five (5) days' notice to the other party, whereupon no party shall have
any further rights or duties hereunder except as provided in Section 23(c).
For purposes of the preceding sentence, OP and PREIT shall collectively be
considered a single party.
15. CLOSING DOCUMENTS.
(a) At or prior to the Closing, the Partnership shall deliver to OP
the following, each of which shall be in form and substance satisfactory to
OP:
(1) an estoppel certificate from the Existing Lender confirming
that to its knowledge there is no default under the Existing
Loan substantially in the form of Exhibit I;
(2) any and all affidavits (including, but not limited to, a
non-imputation affidavit), certificates or other documents
reasonably and customarily required by the title company in
order to cause it to issue the title policy regarding the
Property in the form and condition required by this
Agreement;
(3) an update of the Rent Roll pertaining to the Property
(including a listing of all delinquent and prepaid rents,
and all security deposits (including all interest due to
tenants pursuant to Pennsylvania or other applicable laws),
dated as of (or as close as reasonably practicable to) the
Closing Date, and represented and certified by the
Partnership to be true, accurate, complete and correct in
all material respects;
(4) to the extent in the possession of the Partnership, all of
the original Leases, Service Contracts and Equipment Leases
(in the case of the Equipment Leases or Service Contracts,
limited to those Equipment Leases or Service Contracts which
constitute Transferred Liabilities) (such materials if at
the rental office need not be brought to closing);
28
(5) all keys to the Property in the possession of the
Partnership, which shall remain at the rental office and
need not be brought to closing;
(6) duly executed certificates of title, and other transfer
documents, with regard to any vehicle owned by the
Partnership;
(7) a certified copy of the Certificate of Limited Partnership
of the Partnership, a good-standing certificate issued by
the Corporation Bureau of the Commonwealth of Pennsylvania
for the Partnership, certified resolutions and incumbency
certificates from the General Partners, and such other
evidence of the Partnership's power and authority as the
title company or OP may reasonably request;
(8) a letter to each of the tenants in the Property advising
them of the change of beneficial ownership of the Property,
and the transfer of the Security Deposits, and directing
that rentals or other payments thereafter be paid to a payee
designated by OP;
(9) such existing maintenance records possessed by the
Partnership in regard to the Property which OP may request
not later than five (5) days prior to the Closing Date
(which shall be delivered at the Property);
(10) the currently effective Licenses regarding the Property, or
other reasonably acceptable evidence of the right to use and
occupy the Property;
(11) signed notices to each utility service provider, advising of
the change in beneficial ownership of the
Property;
(12) A Joinder Agreement and Assignment in the form of Exhibit B
hereto, executed by each Partner.
(13) a counterpart signature page of the Operating partnership
Agreement on the Registration Rights Agreement in the form
of Exhibit J hereto, executed by each Unit Partner;
(14) A Subscription Agreement, including Exhibit A thereto, in
the form of Exhibit K hereto, completed and executed by each
Unit Partner;
(15) a signed counterpart of the Amendment to the Operating
Partnership Agreement admitting the Unit Partners as limited
partners of OP (the "Amendment");
29
(16) a statement of the aggregate amount of the Security Deposits
(with interest) as shown on the updated Rent Roll, which
amount shall be adjusted as more fully provided in Section
16 (d); and
(17) such additional documentation as OP, or the title company,
may reasonably deem necessary or desirable in order to
effectuate the transaction contemplated by this Agreement;
and
(18) a signed counterpart of the Escrow Agreement-Reserve Amount
in form substantially similar to Exhibit H.
(b) At the Closing, OP shall deliver to the Partnership the
following, each of which shall be in form and substance satisfactory to such
Partnership:
(1) proof of the issuance of the OP Units allocated to the Unit
Partners (by and through the execution and delivery of the
Amendment, which shall evidence and reflect the ownership of
the OP Units by such Partners);
(2) proof of the payment of cash allocated to the Partners who
have elected to receive cash in exchange for their
Interests;
(3) subject to Section 16(d), a receipt for the Security Deposits;
(4) a certificate of the Secretary of PREIT certifying that the
Board of Directors of PREIT have duly adopted resolutions
authorizing the transaction contemplated by this Agreement,
and the execution of all of the Closing documents to be
executed and delivered by OP pursuant to this Agreement;
(5) a sworn statement on behalf of PREIT certifying that the
person signing documents in connection with the transaction
contemplated by this Agreement on behalf of OP is authorized
to do so;
(6) a signed counterpart of the Registration Rights Agreement;
(7) counter-signed copies of the Subscription Agreement;
(8) a signed counterpart of the Amendment;
(9) signed counterparts of all other documents listed in Section
15(a) required to be signed by OP;
(10) a certified copy of the Operating Partnership Agreement;
(11) such additional documentation as the Partnership may
reasonably deem necessary to effectuate the transaction set
forth in this Agreement.
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16. ADJUSTMENTS.
(a) The following items shall be adjusted between the Partnership and
OP as of the Closing Date (it being understood that OP shall have the benefit
of moneys received and expenses incurred on the date of Closing) and shall be
paid in cash at Closing:
(1) interest on the Existing Loan;
(2) real estate and personal property taxes,
(3) rents under the Leases for the relevant month, as and when
collected;
(4) coin operated laundry income;
(5) charges for water, sewer, electricity, fuel, gas, telephone
and other utilities, which are not metered or otherwise
charged directly to tenants under the Leases; provided that
if the consumption of any such utilities is measured by
meters, at Closing the Partnership shall furnish a current
reading of each meter, and provided, further, that if there
is not a meter, or if the meter(s) cannot be read by the
relevant utility prior to the Closing, the charges therefor
shall be adjusted at the Closing on the basis of the charges
for the prior period for which bills were issued, and shall
be further adjusted when the bills for the period including
the Closing Date are issued;
(6) amounts paid or payable under the Service Contracts which
constitute Transferred Liabilities;
(7) fees paid for assignable current Licenses;
(8) insurance and tax escrows; prepaid real estate taxes;
prepaid mortgage insurance; replacement reserve escrows;
other expenses of operation; and
(9) any special assessment for public improvements or otherwise
which is or may become payable with respect to the Property
in annual installments; such other amounts as are
customarily adjusted between parties to similar transactions
in the local jurisdiction.
31
(b) Rents which are due and payable to the Partnership by any tenant
but uncollected as of the Closing Date shall not be adjusted at the Closing.
All rents collected by the Partnership after the Closing Date shall be applied
(i) first to any due but unpaid rentals accruing subsequent to the Closing
Date, then (ii) to any rents past due for the calendar month in which the
Closing Date occurs (subject to adjustment), and (iii) then to any rents due
and unpaid prior to the Closing Date (other than those described in clause
(i)). All rent collected after Closing for any period prior to the Closing
shall belong to the former Partners of the Partnership, and if paid to OP or
the Partnership, OP shall promptly send such rent to the General Partners for
distribution to the former Partners of the Partnership pursuant to the
agreement described in subparagraph (a)(6) of Section 10, less all reasonable
expenses incurred by OP or the Partnership, if any, in regard to the
collection thereof. At the Closing, the Partnership shall deliver to OP a
schedule of all such past due, but uncollected rents owed by tenants. All
rents collected by the Partnership prior to Closing, for rental period(s)
subsequent to the Closing shall be paid by the Partnership (and not
distributed pursuant to Subsection 3(f) of this Agreement) to OP at the
Closing or deducted as an adjustment at Closing. All rents collected by OP or
the Partnership for rental periods after the Closing shall belong to the
Partnership, and if paid to the former Partners of the Partnership, the former
Partners of the Partnership shall promptly send such rent to the Partnership.
(c) Any adjustment estimated at the Closing shall be finally adjusted
as soon as practicable after the Closing. Any error in the calculation of
apportionments shall be corrected subsequent to the Closing with appropriate
credits to be given based upon corrected adjustments; provided, however, that
all adjustments (except as to errors caused by misrepresentation) shall be
deemed final on December 31, 1998.
(d) At the option of either party, immediately prior to Closing the
Partnership shall be entitled to distribute to its Partners all amounts held
in its Security Deposit accounts, in which event there shall be an adjustment
at Closing of an amount equal to the aggregate amount of the Security Deposits
(with interest, if required to be paid on such deposits) shown on the updated
Rent Roll provided by the Partnership.
(e) The Partners shall be responsible for, and shall make
arrangements for payment of, all amounts due to the Closing Date for
employees, salaries, accrued vacation pay, withholding and payroll taxes, and
other benefits, and any management fee affecting the Property (the General
Partners may utilize one or more payroll periods after Closing to finalize
these payments); the Partnership shall be responsible for all such expenses
commencing upon the Closing Date.
(f) The General Partners and OP shall agree upon the amount of the
current liabilities of the Partnership (other than the Existing Loan) which is
to be included in the Liabilities Reserve.
17. POSSESSION. Upon completion of the Closing, the Partnership
shall retain full and complete possession of the Property, subject only to the
Permitted Exceptions and such other agreements and matters as may be agreed to
by the General Partners and OP.
18. CONDEMNATION AND DESTRUCTION.
(a) If, prior to the Closing Date, the Property, or any part of any
building included in the Property, is taken by eminent domain (or is the
subject of a pending or contemplated taking which has not been consummated),
the Partnership shall notify OP of such fact, and OP shall have the option
(which option shall be set forth in a notice from OP to the Partnership given
not later than fifteen (15) business days after receipt of the notice from the
Partnership):
32
(i) to terminate this Agreement, in which event, the Earnest
Money Deposit shall be returned to OP, and, thereafter, this
Agreement shall be deemed to be null, void and of no further
force or effect between the parties, subject to Section 23;
or
(ii) to accept the Interests of the Accepting Partners, without
abatement of the Consideration, in which event the
Partnership shall be entitled to receive and keep all
amounts awarded or to be awarded to the Partnership as the
result of the taking (and, without limiting the generality
of the foregoing, Subsection 3(f) shall not apply to such
amounts).
A failure by OP to make a timely election pursuant to the preceding sentence
shall be considered an election pursuant to clause (ii) thereof.
(b) If, prior to the Closing Date, all or any material part of any
Property is damaged or destroyed by fire or other casualty, the Partnership
shall notify OP of such fact, and OP shall have the option (which option shall
be set forth in a notice from OP to the Partnership given not later than
fifteen (15) business days after receipt of the notice from the Partnership):
(i) to terminate this Agreement, in which event, the Earnest
Money Deposit shall be returned to OP, and, thereafter, this
Agreement shall be deemed to be null, void and of no further
force or effect between the parties, subject to Section 23;
or
(ii) to accept the Interests of the Accepting Partners, in which
event the Partnership shall be entitled to receive and keep
the insurance proceeds awarded or to be awarded to the
Partnership as the result of such damage or destruction
(and, without limiting the generality of the foregoing,
Subsection 3(f) shall not apply to such proceeds), and the
Consideration shall be reduced by the amount of any
deductible under the applicable insurance policies of the
Partnership.
A failure by OP to make a timely election pursuant to the preceding sentence
shall be considered an election pursuant to clause (ii) thereof.
(c) In the event there is damage to or destruction of an immaterial
part of the Property by fire or other casualty, such damage or destruction
shall, subject to receipt of insurance proceeds, be repaired promptly by the
Partnership, and in the event such damage or destruction cannot be fully
repaired by the Closing Date, then the Closing shall be held as scheduled, and
OP shall accept the Interests of the Accepting Partners without abatement of
the Consideration, in which event the Partnership shall be entitled to receive
and keep the insurance proceeds awarded or to be awarded to the Partnership as
the result of such damage or destruction (and, without limiting the generality
of the foregoing, Subsection 3(f) shall not apply to such proceeds), and the
Consideration shall be reduced by the amount of any deductible under the
applicable insurance policies of the Partnership.
33
(d) An "Immaterial" part of the Property shall be deemed to have been
damaged or destroyed if the cost of repair or replacement thereof shall be
$250,000, or less, and a "Material" part thereof shall be deemed to have been
damaged or destroyed if the cost of repair or replacement thereof shall be
greater than $250,000.
19. [INTENTIONALLY OMITTED]
20. BROKER'S COMMISSION. The Partnership and OP each represent to the
other than the transaction described in this Agreement was not brought about
or assisted in any way by any broker, firm or salesman, or other person or
persons acting or functioning as, or in a role similar to a broker (any such
broker, firm or salesman, or other person, is herein referred to as a
"Broker"), except CB Richard Ellis, to whom OP shall pay a real estate
brokerage commission in the amount of $373,190 at the time of, and in
conjunction with the Closing of the transaction under this Agreement. The
amount of the brokerage commission paid by OP shall be a reduction of the
Consideration as provided in paragraph (e) of Section 3. OP and the
Partnership each agrees to indemnify the other from and against any claim and
expenses, including legal fees, if any other fees or commission is determined
to be due by reason of the employment of any other broker by the indemnifying
party, this indemnity and representation shall survive Closing.
21. EARNEST MONEY. Concurrently with the execution of this Agreement
by both OP and the Partnership, OP will deposit $250,000 by check (the
"Earnest Money Deposit") with the Disbursing Agent. The Earnest Money Deposit
shall be held pursuant to the terms of an Escrow Agreement in the form of
Exhibit F attached hereto and disbursed as provided in Section 23. As used
anywhere in this Agreement, the term "Earnest Money Deposit" includes all
earnings thereon, if any.
22. COOPERATION. At all times during the term and pendency of this
Agreement, the Partnership will cooperate fully with OP in all reasonable
manner in providing books, records and other documentation for review,
including, without limitation, all Leases and related documents, copies of
documentation relating to the Existing Loan, working drawings, plans and
specifications, surveys, appraisals, engineer's reports, environmental
reports, insurance policies, service contracts, real estate tax receipts,
copies of tax returns filed by the Partnership, and annual and monthly
operating statements relating to the Property, and in the possession of, or
reasonably available to the Partnership. Subject to existing tenant leases,
the Partnership will provide access to the Property for all physical
inspections required by OP. The Partnership will provide access by the
representatives of OP to all financial and other information relating to the
Property in the possession of or reasonably available to the Partnership as is
sufficient to enable such representatives to prepare audited financial
statements, at the expense of OP, in conformity with Regulation S-X of the
Securities and Exchange Commission (the "Commission"), and any registration
statement, report or disclosure statement required to be filed with the
Commission. OP shall conduct itself and its examinations in a manner to
minimize disruption to the staff and tenants of the Partnership and Property.
34
23. DEFAULTS AND REMEDIES.
(a) If the Partnership fails or refuses to perform in accordance with
the terms of this Agreement, including, without limitation, the failure or
refusal to perform any covenant or obligation to be performed by the
Partnership prior to the Closing, or if any of the representations and
warranties of the Partnership contained in this Agreement, shall not be true,
complete and correct at Closing (aside from inaccuracies and omissions which
are not material or not adverse to the interests of the Partnership or OP), OP
may, as its exclusive remedies, seek to specifically enforce any covenant or
obligation which the Partnership fails or refuses to perform or terminate this
Agreement, in which event (or if this Agreement is terminated by either party
pursuant to Subsection 14(b)) the Earnest Money Deposit shall be returned to
OP at which time this Agreement shall be deemed to be null, void and of no
further force or effect between the parties (subject to subsection (c)).
(b) If OP or PREIT fails or refuses to perform in accordance with the
terms of this Agreement, including, without limitation, the failure or refusal
to perform any covenant or obligation to be performed by OP or PREIT prior to
the Closing, or if any of the representations and warranties of OP or PREIT
contained in this Agreement shall not be true, complete and correct at
Closing, the Partnership may terminate this Agreement, in which event, the
Earnest Money Deposit shall be paid to the Partnership as liquidated damages
(which shall be the sole and exclusive remedy of the Partnership against OP or
PREIT), at which time this Agreement shall be deemed to be null, void and of
no further force or effect between the parties (subject to subsection (c)). In
that regard, the Partnership acknowledges and agrees that (i) the Earnest
Money Deposit is a reasonable estimate of, and bears a reasonable relationship
to, the damages suffered and costs incurred by the Partnership as a result of
having subjected the Interests to the terms of this Agreement; (ii) the actual
damages suffered and costs incurred by the Partnership as a result of such
failure of OP to close under this Agreement would be extremely difficult and
impractical to determine; (iii) OP seeks to limit its liability under this
Agreement to the amount of the Earnest Money Deposit in the event this
Agreement is terminated and the transaction contemplated by this Agreement
does not close due to a default of OP under this Agreement; and (iv) the
Earnest Money Deposit shall be and constitute valid liquidated damages. The
foregoing limitation shall apply only in the event that OP does not close the
transaction contemplated by this Agreement, and such limitation shall not
apply in the event that OP closes and thereafter OP or PREIT breaches one or
more of its obligations hereunder after Closing.
(c) The Inspection Indemnity and the provisions of Section 20 shall
survive Closing or other termination of this Agreement.
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24. OTHER PROHIBITED ACTIVITIES.
(a) From and after the end of the Due Diligence Period and provided
that this Agreement has not been terminated, the Partnership will cease to
market the Property, and, in that regard, the Partnership will refrain from
soliciting or accepting any offer from any third party, or, engaging in any
discussion with any third party concerning the sale, refinancing or
recapitalization of the Property.
(b) Both OP and the Partnership agree to keep this Agreement
confidential, and not to disclose its contents to anyone except their
respective lenders, legal counsel and accountants, and except to the Partners
in connection with the Offer and except that PREIT may make such public
announcements and may make such filings with the Securities and Exchange
Commission regarding the transaction contemplated by this Agreement, as may,
in its judgment, be required by, or appropriate under, applicable securities
laws.
25. RISK OF LOSS. Until the Closing, the risk of loss or damage to
all or any part of any Property, from fire or other casualty, or from
condemnation, shall be borne by the Partnership, subject to the terms of this
Agreement.
26. NOTICES.
(a) All notices, demands, or requests made and/or given pursuant to,
under, or by virtue of this Agreement must be in writing and sent to the party
to which the notice, demand or request is being made and/or given, by
nationally recognized courier service, or by personal delivery, to the
addressee at the address that shall most recently have been designated, by
effective notice hereunder from the addressee to the sender, as the
addressee's desired address for notices hereunder (or, prior to any such
notice, at the address for the addressee set forth below):
(i) if to the Partnership or the General Partners:
The Woods Associates
60 East 42nd Street
Room 2825
New York, New York 10165-0020
Attn: Michael I. Glick
with copies to:
the Woods Associates
60 East 42nd Street
Room 2446
New York, New York 10165-0020
Attn: Lester S. Morse, Jr.
and:
36
Holt, Ney, Zatcoff & Wasserman, LLP
One Galleria Parkway
Suite 600
Atlanta, GA 30339-5911
Attn: Sanford H. Zatcoff, Esq.
and
(ii) if to OP or PREIT:
PREIT Associates, L.P.
455 Pennsylvania Avenue
Fort Washington, Pennsylvania 19034
Attention: Jeffrey A. Linn, Senior Vice President
Telephone: 215/542-4183
Facsimile: 215-542-9179
with copies to:
PREIT-RUBIN, Inc.
The Bellevue - Third Floor
200 South Broad Street
Philadelphia, Pennsylvania 19107
Attention: Jeffrey A. Linn
Telephone: 215/875-0748
Facsimile: 215/546-0240
and:
John W. Fischer, Esq.
Drinker Biddle & Reath LLP
1000 Westlakes Drive, Suite 300
Berwyn, Pennsylvania 19312
Telephone: 610/993-2221
Facsimile: 610/993-8585
(b) Any such notice, demand or request shall be deemed to have been
rendered or given on the date of receipt or refusal to accept delivery.
27. ASSIGNMENT. Neither this Agreement nor any interest hereunder
shall be assigned or transferred by the Partnership or by OP without the prior
written consent of either party, such consent to be granted or withheld for
any reason or no reason; provided, however, that OP shall have the right to
designate and assign to an affiliate of the OP, without the prior consent of
the Partnership or the Partners, its right to receive the assignment of the
General Partners' Interests.
37
28. GOVERNING LAW. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed wholly within the
Commonwealth of Pennsylvania without giving effect to the conflicts-of-laws
principles thereof.
29. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the various
documents referred to herein contains, or incorporates, all of the terms
agreed upon between the parties with respect to the subject matter, and
supersedes any and all prior written or oral understandings. This Agreement
may not be modified or amended except in, and by, a written instrument
executed by the parties hereto.
30. WAIVER. No waiver by either party of any failure or refusal of
the other party to comply with any of the obligations of such party hereunder
shall be deemed a waiver of any other or subsequent failure or refusal so to
comply.
31. HEADINGS. The headings of the various sections and articles of
this Agreement have been inserted only for purposes of convenience, and are
not part of this Agreement, and shall not be deemed in any manner to modify,
explain, qualify or restrict any of the provisions of this Agreement.
32. CONDITION OF APARTMENTS. The Partnership will use commercially
reasonable efforts, in accordance with its existing business practices, to
ensure that at the time of the Closing the vast majority of apartment units
are in rentable condition. The parties recognize that tenants at the Property
move out at various times and that it may not be possible for all units to be
fully prepared at the time of Closing. Accordingly, the Partnership shall be
fully responsible for insuring that all units that have been vacated 10 or
more days prior to Closing shall be in full rentable condition. In the event
that any apartment unit vacant 10 or more days prior to Closing is not in
rentable condition, OP shall receive a closing credit equal to the amount
reasonably necessary to bring that unit to rentable condition based on a
standard typical for the Property. For units vacated within 10 days prior to
Closing, the Partnership will continue to use commercially reasonable efforts,
in accordance with its existing business practices, to prepare such units for
subsequent tenancy, however, if any such units are not in full rentable
condition at the time of Closing there shall be no credit given to OP.
33. MISCELLANEOUS.
(a) The Partnership acknowledges that audited financial statements
pertaining to the Property for a minimum of one, and a maximum of three, prior
calendar year(s) of operation, and the portion of the calendar year in which
the Closing occurs, up to the Closing Date, are required to be filed by OP
with the Securities and Exchange Commission after the Closing. Accordingly,
the General Partners shall provide OP, and its representatives, with access to
the books and records of the Partnership pertaining to the Property after the
Closing, upon reasonable advance notice, in order to conduct the required
audit, at the expense of OP.
38
(b) The parties hereto recognize that, at the Closing Date, the
Partnership will terminate for federal income tax purposes. The General
Partners hereby covenant to cause the tax returns to be prepared for the
Partnership for the period up to the Closing Date. Such tax returns shall be
prepared in a matter consistent with the Partnership's prior returns. The
General Partners will provide OP with a copy of the return at least twenty
days prior to the filing of the return. The General Partners shall make the
Section 754 election on the return. OP shall make available to the General
Partners (and their representatives) promptly upon request, all financial and
other information relating to the Partnership which is necessary to permit the
General Partners to file a tax return on behalf of the Partnership for its
taxable year ended on the Closing Date, and for such other purposes as may be
requested by the General Partners in order to wind up business affairs for the
entity and the Partners.
(c) Time is of the essence of this Agreement. In the computation of
any period of time provided for in this Agreement, or by law, the day of the
act or event from which the period of time runs shall be excluded, and the
last day of such period shall be included, unless it is a Saturday, Sunday, or
legal holiday, in which case the period shall be deemed to run until the end
of the next day which is not a Saturday, Sunday, or legal holiday.
(d) The General Partners shall cause tax returns for the Partnership
for the period up to the Closing Date to be completed within one hundred
twenty (120) days of the Closing Date. A copy of such final tax return shall
be submitted to OP twenty (20) days before its filing with the IRS.
(e) The date upon which this Agreement shall have been signed by both
the Partnership and OP shall be considered to be the date of this Agreement.
(f) The Partnership and the General Partners agree that they will not
trade in common stock of PREIT, or cause such stock to be traded on their
behalf, prior to the Closing Date.
(g) This Agreement may be executed in counterparts and by facsimile
signatures.
39
IN WITNESS WHEREOF, the Partnership, OP and PREIT have executed this
Agreement as at the day and year first above written.
THE WOODS ASSOCIATES,
a Pennsylvania limited partnership
By: Glick Woods Corp., its General Partner
By: /s/ Michael I. Glick
----------------------------------
Title: President
-------------------------------
Date: July 24, 1998
--------------------------------
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate Investment Trust,
its General Partner
By: /s/ Jeffrey A. Linn
---------------------------------
Title: Senior Vice President
------------------------------
Date: July 24, 1998
-------------------------------
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Jeffrey A. Linn
---------------------------------
Title: Senior Vice President
------------------------------
Date: July 24, 1998
-------------------------------
40
CONTRIBUTION AGREEMENT
(The Woods Associates/PREIT Associates, L.P.)
LIST
OF
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1 - Schedule of Partners
Schedule 2 - Schedule of Services Contracts and Equipment Leases
Schedule 3 - Schedule of Liabilities
Schedule 4 - Schedule of Permitted Title Exceptions
Schedule TL Schedule of Transferred Liabilities
EXHIBITS
Exhibit A - Description of the Land
Exhibit B - Joinder Agreement and Assignment
Exhibit C - Registration Rights Agreement
Exhibit D - Rent Roll
Exhibit E - Operating Partnership Agreement
Exhibit F - Escrow Agreement - Earnest Money Deposit
Exhibit G - Representation Letter
Exhibit H - Escrow Agreement - Reserve Amount
Exhibit I - [RESERVED]
Exhibit J Counterpart Signature to the Operating Partnership
Agreement and the Registration Rights Agreement
Exhibit K Subscription Agreement
PREIT/THE WOODS
AMENDMENT #1 TO
CONTRIBUTION AGREEMENT
This Amendment, by and among THE WOODS ASSOCIATES, a Pennsylvania
limited partnership (the "Partnership"), PREIT ASSOCIATES, L.P., a Delaware
limited partnership ("OP"), and PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a
Pennsylvania business trust ("PREIT"),
W I T N E S S E T H:
WHEREAS, the parties hereto are the parties to a certain Contribution
Agreement (the "Agreement"); and
WHEREAS, the parties desire to modify the Agreement as more
particularly provided hereinafter;
NOW, THEREFORE, the parties do hereby agree as follows.
A. AMENDMENTS.
1. Schedule 1 to the Agreement is hereby replaced with Schedule 1
attached hereto.
2. Paragraph 8(a)(40) of the Agreement is hereby amended to read as
follows.
(40) To the best knowledge of the Partnership, the footnotes to
Schedule 1 are accurate.
B. EFFECTIVE DATE. The Amendments made by division A hereof shall be
effective as of and from and after the effective date of the Agreement.
C. REAFFIRMATION. Except as hereby modified, the Agreement remains
and shall remain in full force and effect.
[This space intentionally left blank]
D. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which (consisting of one set of textual pages and one or
more signature pages, each signed by one or more parties and collectively
exhibiting the signatures of all parties) shall be deemed an original and all
of which shall constitute one agreement. The signature of any party on a
signature page intended by such party to be appended to a counterpart shall be
deemed to be a signature to, and may be appended to, any counterpart, and the
signature of any party to any counterpart shall be deemed to be a signature
to, and may be appended to, any other counterpart.
E. COPIES RELIABLE AND ADMISSIBLE. This Amendment shall be considered
to have been executed by a person if there exists a photocopy or facsimile
copy (or a photocopy of a facsimile copy) of an original hereof (or of a
counterpart hereof) which has been signed by such person. Any photocopy or
facsimile copy (or photocopy of a facsimile copy) of this Amendment or a
counterpart hereof shall be admissible into evidence in any proceeding as
though the same were an original.
WITNESS OUR HANDS on the dates indicated, but as of the effective
dates hereinbefore specified.
Date: August 7, 1998 THE WOODS ASSOCIATES
------------------
By: Glick Woods Corp., General partner
By: /s/ Michael Glick
--------------------------------
Date: August 7, 1998 PREIT ASSOCIATES, L.P.
------------------
By: Pennsylvania Real Estate Investment Trust
General Partner
By: /s/ George R. Rubin
--------------------------------
Date: August 7, 1998 PENNSYLVANIA REAL ESTATE INVESTMENT
----------------- TRUST
By: /s/ George R. Rubin
--------------------------------------------
CONTRIBUTION AGREEMENT
(The Woods Associates/PREIT Associates, L.P.)
Schedule 1
Schedule of Partners
(p. 1 of 3)
Robyn Teszler 0.26%
Susan T. Slader 0.26%
David J. Teszler 0.26%
Thomas Teszler 0.26%
Virginia A. Loeb 0.31%
David A. Loeb 0.31%
Oliver Mendell 0.34%
Marcia Nacht 0.34%
Stephen Berman-Trustee(1) 0.34%
James Morse 0.34%
David Jaffee 0.34%
Elise Jaffee 0.34%
Richard Jaffee 0.34%
Roger Strong 0.34%
L. Anthony Montag 0.34%
Jane F. Scovell 0.34%
Alan H. Scovell 0.34%
Pentastirp Partnership 0.34%
Joan Morse 0.34%
Steven Morse 0.34%
Frances Berkowitz 0.34%
Virginia B. Slaughter 0.41%
Morse Woods Corp. 0.50%
Glick Woods Corp. 0.50%
Claire Morse 0.51%
- --------
(1) Two equal remainder beneficiaries: James Lee Montag, Jr. (0.17%) and Emily
Montag Vaughn (0.17%).
CONTRIBUTION AGREEMENT
(The Woods Associates/PREIT Associates, L.P.)
Schedule 1
Schedule of Partners
(p. 2 of 3)
Richard Morse 0.51%
Lester Halpern 0.51%
Roberta Halpern 0.51%
Edward Herbst 0.68%
Julia B. Siegel Trust(2) 0.68%
Walter M. Grant Trustee - J. Montag(3) 0.68%
J. Andrew Abrams Trustee - A. Montag(4) 0.68%
A. Montag & Assoc. 0.68%
Michael Loeb 1.02%
David Auerbach 1.02%
Dr. Claude Bloch 1.02%
Richard Eisner 1.02%
Melvin Howard 1.02%
Estate of Richard Kaplan(5) 1.02%
Estate of Sylvia Kaplan(6) 1.02%
Melvin Scovell-Trustee(7) 1.02%
- --------
(2) Interest is held outright by Julia B. Siegal.
(3) Two equal remainder beneficiaries: James Lee Montag, Jr. (0.34%) and Emily
Montag Vaughn (0.34%).
(4) Four equal remainder beneficiaries: Helen Montag (0.17%), Alice Montag
Tisch (0.17%), Edward Montag (0.17%) and John Montag (0.17%).
(5) One residual beneficiary: Joan Kaplan (1.02%).
(6) Two equal residual beneficiaries: Rona Roob (0.51%) and Susan diamond
(0.51%).
(7) Five equal remainder beneficiaries: Julia Kaufman (0.204%), Alice Coleman
(0.204%), Helen Summers (0.204%), Edward Scovell (0.204%) and Claire La
Zebnik (0.204%).
CONTRIBUTION AGREEMENT
(The Woods Associates/PREIT Associates, L.P.)
Schedule 1
Schedule of Partners
(p. 3 of 3)
Robert Shasha 1.02%
Richard Towne, Jr. 1.02%
Robert Winthrop II 1.02%
Enid Morse 1.02%
Elliot Jaffee 1.02%
Barbara Barr 1.36%
Edward Bermas 1.36%
Molly Lazar 1.36%
Dorothy Rosen(8) 1.36%
Ronnie Glick 1.70%
Linda Blinken 2.05%
Margot Linton 2.05%
Hanina Shasha 2.05%
Peter Tishman 2.05%
Steven Tishman 2.05%
Anita Tishman 2.05%
Estate of Lawrence Fleischman(9) 2.73%
Stuart Paley 3.07%
Barbara Stanton 4.09%
Michael Glick 20.86%
Lester Morse 22.91%
- --------
(8) Interest held by Dorothy Rosen is held by her as nominee for herself
(0.68%), Kathleen Rosen (0.272%) and Gregory Panger (0.408%).
(9) One beneficiary: Barbara Fleischman.