Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST,
PREIT ASSOCIATES, L.P.,
CROWN AMERICAN REALTY TRUST,
and
CROWN AMERICAN PROPERTIES, L.P.
Dated as of May 13, 2003
TABLE OF CONTENTS
Page
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ARTICLE 1 THE MERGER...........................................................................................4
1.1 Pre-Merger Transactions...........................................................................4
1.2 The Merger........................................................................................5
1.3 Post-Merger Contribution Transactions.............................................................6
1.4 Closing...........................................................................................6
1.5 Effect of Merger on Trust Agreement and Bylaws....................................................6
1.6 Trustees of PREIT.................................................................................6
1.7 Effect on Shares..................................................................................8
1.8 Merger Consideration..............................................................................8
1.9 Partner Approval..................................................................................9
1.10 Appraisal or Dissenters Rights...................................................................10
1.11 Exchange of Certificates; Pre-Closing Dividends; Fractional Shares...............................10
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF CROWN AND CROWN PARTNERSHIP.......................................14
2.1 Organization, Standing and Power.................................................................14
2.2 Crown Subsidiaries...............................................................................15
2.3 Capital Structure................................................................................16
2.4 Other Interests..................................................................................18
2.5 Authority; Noncontravention; Consents............................................................19
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities.....................................21
2.7 Absence of Certain Changes or Events.............................................................22
2.8 Litigation.......................................................................................23
2.9 Properties.......................................................................................23
2.10 Environmental Matters............................................................................27
2.11 Related Party Transactions.......................................................................29
2.12 Employee Benefits................................................................................29
2.13 Employee Plans and Employees.....................................................................32
2.14 Taxes............................................................................................33
2.15 No Payments to Employees, Officers or Trustees...................................................36
2.16 Broker; Schedule of Fees and Expenses............................................................37
2.17 Compliance with Laws.............................................................................37
2.18 Contracts; Debt Instruments......................................................................37
2.19 Opinions of Financial Advisor....................................................................40
2.20 State Takeover Statutes..........................................................................40
2.21 Rights Agreement.................................................................................40
2.22 Investment Company Act of 1940...................................................................41
2.23 Definition of Knowledge of Crown.................................................................41
2.24 Required Shareholder Approvals and Partner Approvals.............................................41
2.25 Intellectual Property............................................................................41
2.26 Documents........................................................................................41
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PREIT AND PREIT PARTNERSHIP.......................................42
3.1 Organization, Standing and Power.................................................................42
3.2 PREIT Subsidiaries...............................................................................42
3.3 Capital Structure................................................................................43
3.4 Other Interests..................................................................................45
3.5 Authority; Noncontravention; Consents............................................................46
3.6 SEC Documents; Financial Statements; Undisclosed Liabilities.....................................48
3.7 Absence of Certain Changes or Events.............................................................48
3.8 Litigation.......................................................................................49
3.9 Properties.......................................................................................50
3.10 Environmental Matters............................................................................53
3.11 Related Party Transactions.......................................................................54
3.12 Employee Benefits................................................................................55
3.13 Employee Plans and Employees.....................................................................57
3.14 Taxes............................................................................................58
3.15 No Payments to Employees, Officers or Trustees...................................................60
3.16 Brokers; Schedule of Fees and Expenses...........................................................60
3.17 Compliance with Laws.............................................................................61
3.18 Contracts; Debt Instruments......................................................................61
3.19 Opinion of Financial Advisor.....................................................................63
3.20 State Takeover Statutes..........................................................................63
3.21 Intentionally omitted............................................................................63
3.22 Investment Company Act of 1940..................................................................63
3.23 Definition of Knowledge of PREIT.................................................................63
3.24 Required Shareholder Approvals and Partner Approvals.............................................63
3.25 Intellectual Property............................................................................63
3.26 Documents........................................................................................64
ARTICLE 4 COVENANTS...........................................................................................64
4.1 Conduct of Crown's and Crown Partnership's Business Pending Merger...............................64
4.2 Conduct of PREIT's and PREIT Partnership's Business Pending Merger...............................70
4.3 No Solicitation..................................................................................74
4.4 Affiliates.......................................................................................77
4.5 Other Actions....................................................................................78
ARTICLE 5 ADDITIONAL COVENANTS................................................................................78
5.1 Preparation of the Form S-4 and the Proxy Statement; Crown Shareholders Meeting,
Crown Unitholders Consent Solicitation, PREIT Shareholders Meeting and PREIT
Unitholders Consent Solicitation.................................................................78
5.2 Access to Information; Confidentiality...........................................................82
5.3 Commercially Reasonable Efforts; Notification....................................................82
5.4 Tax Matters......................................................................................83
5.5 Public Announcements.............................................................................83
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5.6 Listing..........................................................................................84
5.7 Transfer and Gains Taxes.........................................................................84
5.8 Benefit Plans and Other Employee Arrangements....................................................84
5.9 Indemnification..................................................................................90
5.10 Declaration of Dividends and Distributions.......................................................94
5.11 Resignations.....................................................................................95
5.12 Registration Rights Agreements and Exchange Agreements...........................................95
5.13 Merger Documents.................................................................................95
5.14 Performance of Pre-Merger Transactions...........................................................96
5.15 Performance of Post-Merger Transactions..........................................................96
5.16 Estoppel Certificates............................................................................96
5.17 Performance of Agreements........................................................................97
5.18 No Amendment or Modification.....................................................................97
ARTICLE 6 CONDITIONS..........................................................................................97
6.1 Conditions to Each Party's Obligation to Effect the Pre-Merger Transactions and
the Merger.......................................................................................97
6.2 Conditions to Obligations of PREIT and PREIT Partnership to Effect the Pre-Merger
Transactions and the Merger......................................................................98
6.3 Conditions to Obligations of Crown and Crown Partnership to Effect the Pre-Merger
Transactions and the Merger.....................................................................100
6.4 Conditions of Each Party's Obligation to Effect the Closing Date Transactions...................102
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER..................................................................102
7.1 Termination.....................................................................................102
7.2 Termination After the Pre-Merger Transfer Date..................................................107
7.3 Certain Fees and Expenses.......................................................................107
7.4 Effect of Termination...........................................................................111
7.5 Amendment.......................................................................................111
7.6 Extension; Waiver...............................................................................111
ARTICLE 8 GENERAL PROVISIONS.................................................................................112
8.1 Nonsurvival of Representations and Warranties...................................................112
8.2 Notices.........................................................................................112
8.3 Interpretation..................................................................................114
8.4 Counterparts....................................................................................114
8.5 Entire Agreement; No Third-Party Beneficiaries..................................................114
8.6 Governing Law...................................................................................114
8.7 Assignment......................................................................................114
8.8 Enforcement.....................................................................................115
8.9 Severability....................................................................................115
8.10 Exculpation.....................................................................................115
8.11 Joint and Several Obligations...................................................................115
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EXHIBITS
Exhibit A -- Form of Pennsylvania Articles of Merger
Exhibit B -- Form of Maryland Articles of Merger
Exhibit C-1 -- Form of Amendment to CFLP Limited Partnership Agreement
Exhibit C-2 -- Form of Amendment to WCLP Limited Partnership Agreement
Exhibit D -- Form of Crown Partnership Amendment and Restatement
Exhibit E -- Form of PREIT Trust Amendment
Exhibit F-1 -- Form of Assumed Registration Rights Agreement
Exhibit F-2 -- Form of Assumed Exchange Agreement
Exhibit G -- Form of Shareholder Agreement
Exhibit H -- Form of Non-Competition Agreement
Exhibit I -- Form of Pasquerilla Registration Rights Agreement
Exhibit J -- Form of Standstill Agreement
Exhibit K -- Form of Pasquerilla Tax Protection Agreement
Exhibit L -- Form of Crown Estoppel Certificate
Exhibit M -- Form of PREIT Estoppel Certificate
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List of Schedules
Schedule 1.6(a)
Schedule 2.2(a)
Schedule 2.2(b)
Schedule 2.2(l)
Schedule 2.3(b)
Schedule 2.3(e)
Schedule 2.3(f)
Schedule 2.3(g)
Schedule 2.4
Schedule 2.5(c)(1)
Schedule 2.5(c)(2)
Schedule 2.6(a)
Schedule 2.6(b)
Schedule 2.7
Schedule 2.8
Schedule 2.9(a)
Schedule 2.9(b)
Schedule 2.9(c)
Schedule 2.9(d)
Schedule 2.9(f)
Schedule 2.9(h)
Schedule 2.9(i)
Schedule 2.10(b)(iv)
Schedule 2.10(b)(v)
Schedule 2.11
Schedule 2.12
Schedule 2.12(a)
Schedule 2.13
Schedule 2.13(b)(1)
Schedule 2.13(b)(2)
Schedule 2.14(a)
Schedule 2.15
Schedule 2.18(a)
Schedule 2.18(b)
Schedule 2.18(c)
Schedule 2.18(d)
Schedule 2.18(e)
Schedule 2.18(f)
Schedule 2.18(g)
Schedule 2.18(h)
Schedule 2.18(i)
Schedule 2.18(j)
Schedule 2.23
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Schedule 2.25
Schedule 3.2(a)
Schedule 3.2(b)
Schedule 3.3(b)
Schedule 3.3(e)
Schedule 3.3(f)
Schedule 3.3(g)
Schedule 3.4
Schedule 3.5(c)(1)
Schedule 3.5(c)(2)
Schedule 3.6(a)
Schedule 3.6(b)
Schedule 3.6(c)
Schedule 3.7
Schedule 3.7(f)
Schedule 3.8
Schedule 3.9(a)
Schedule 3.9(b)
Schedule 3.9(c)
Schedule 3.9(d)
Schedule 3.9(f)
Schedule 3.9(h)
Schedule 3.10(b)(v)
Schedule 3.11
Schedule 3.13
Schedule 3.13(b)
Schedule 3.15
Schedule 3.18(b)
Schedule 3.18(c)
Schedule 3.18(d)
Schedule 3.18(e)(1)
Schedule 3.18(e)(2)
Schedule 3.18(h)
Schedule 3.18(i)
Schedule 3.18(j)
Schedule 3.23
Schedule 3.25
Schedule 4.1(j)
Schedule 4.1(dd)
Schedule 4.2(j)
Schedule 4.2(o)
Schedule 5.3(a)(ii)
Schedule 5.12
Schedule 5.16(a)
Schedule 5.16(b)
Schedule 6.1(g)(i)
Schedule 6.1(g)(ii)
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Index of Defined Terms
3rd Amendment to CFSA...............................................Recital P
4th Amendment to CFSA...............................................Recital P
7th Amendment to Crown Partnership Agreement........................Recital P
8th Amendment to Crown Partnership Agreement........................Recital P
1940 Act.................................................................2.22
Acquiring Person.........................................................2.21
Acquisition Proposal................................................4.3(a)(i)
Affiliate................................................................2.11
Agreement............................................................Preamble
AICPA Statement........................................................5.1(b)
Alternative Proposal...................................................7.1(j)
Anchor Tenants.........................................................2.9(e)
Assumed Employee Plans.................................................5.8(c)
Assumed Exchange Agreement...............................................5.12
Assumed Registration Rights Agreement....................................5.12
Base Expense Amount....................................................7.3(e)
Base Fee Amount........................................................7.3(d)
Board Right Termination Date...........................................1.6(a)
Break-Up Expenses......................................................7.3(e)
Break-Up Expenses Recipient............................................7.3(e)
Break-Up Expenses Tax Opinion..........................................7.3(e)
Break-Up Fee...........................................................7.3(d)
Break-Up Fee Recipient.................................................7.3(c)
Break-Up Fee Tax Opinion...............................................7.3(d)
Capital Expenditure Budget.............................................4.1(j)
CAIC................................................................Recital M
CASC..................................................................2.13(b)
CDHC................................................................Recital O
CERCLA................................................................2.10(a)
Certificate............................................................1.8(c)
CFLP................................................................Recital P
CIT.................................................................Recital G
Claims.................................................................5.9(a)
Class B Designee..........................................................1.6
Closing Date..............................................................1.4
Closing...................................................................1.4
COBRA.................................................................2.12(a)
Code................................................................Recital E
Commitment.............................................................4.1(j)
Confidentiality Agreement..............................................4.3(b)
Corresponding PREIT Dividends and Distributions...................1.11(d)(ii)
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Crown................................................................Preamble
Crown Acquisition Agreement............................................7.3(a)
Crown Bylaws..............................................................2.1
Crown Common Share.....................................................1.8(a)
Crown Controlled Group Member............................................2.12
Crown Declaration of Trust................................................2.1
Crown Disclosure Letter................................................Art. 2
Crown Employee Plan......................................................2.12
Crown Estoppel Certificates...........................................5.16(a)
Crown Financial Statement Date............................................2.7
Crown Ground Lease.....................................................2.9(a)
Crown Insured Parties..................................................5.9(c)
Crown Material Adverse Effect.............................................2.1
Crown OP Units......................................................Recital M
Crown Options..........................................................2.3(b)
Crown Other Interests.....................................................2.4
Crown Partner Approvals...................................................1.9
Crown Partnership....................................................Preamble
Crown Partnership Agreement...............................................1.9
Crown Partnership Amendment and Restatement...............................1.3
Crown Partnership Contribution Agreement............................Recital K
Crown Partnership Distribution Agreement............................Recital H
Crown Partnership Option...............................................2.3(b)
Crown Permitted Title Exceptions.......................................2.9(a)
Crown Pre-Merger Conditions Certificate................................6.2(j)
Crown Properties.......................................................2.9(a)
Crown Reciprocal Operating Agreements..................................2.9(f)
Crown Rent Roll........................................................2.9(e)
Crown Representative...............................................4.3(a)(ii)
Crown Rights.............................................................2.21
Crown Rights Agreement...................................................2.21
Crown SEC Documents.......................................................2.6
Crown Senior Preferred OP Units.....................................Recital J
Crown Senior Preferred Share...........................................1.8(b)
Crown Share Rights.....................................................2.3(b)
Crown Shareholder Approval.............................................2.5(a)
Crown Shareholders Meeting.............................................5.1(d)
Crown Space Lease......................................................2.9(e)
Crown Subsidiaries.....................................................2.2(a)
Crown Tax Protection Agreement........................................2.18(j)
Crown Trustee Option...................................................2.3(b)
Crown Voting Agreements.............................................Recital M
Department.............................................................1.2(b)
Distribution Date........................................................2.21
DRIP...................................................................2.7(c)
Effective Time.........................................................1.2(b)
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Employee Plan..........................................................5.8(c)
Enabling Trust Agreement Amendment........................................1.7
Encumbrances...........................................................2.9(a)
Environmental Law.....................................................2.10(a)
Environmental Mitigation...............................................2.9(d)
Environmental Permits.............................................2.10(b)(iv)
ERISA....................................................................2.12
Exchange Act..............................................................2.6
Exchange Agent........................................................1.11(a)
Exchange Agreement..................................................Recital G
Exchange Fund.........................................................1.11(b)
Final Crown Dividend...............................................1.11(d)(i)
Final Crown Partnership Distribution...............................1.11(d)(i)
Flip-Over Entity.........................................................2.21
Form S-4...............................................................5.1(a)
Former Crown Properties...........................................2.10(b)(ii)
Former PREIT Properties...........................................3.10(b)(ii)
GAAP......................................................................2.6
Governmental Entity....................................................2.5(c)
Hazardous Materials...................................................2.10(a)
Hired Employees........................................................5.8(a)
HSR Act................................................................2.5(c)
Indebtedness..........................................................2.18(b)
Indemnification Agreement...........................................Recital O
Indemnification Parties................................................5.9(b)
Indemnified Parties....................................................5.9(a)
Indemnifying Parties...................................................5.9(a)
IRS..............................................................2.12(b)(iii)
Joint Proxy Statement..................................................5.1(a)
Knowledge of Crown.......................................................2.23
Knowledge of PREIT.......................................................3.23
Laws...................................................................2.5(c)
Liens..................................................................2.2(b)
Maryland Articles of Merger ........................................Recital D
Merger..............................................................Recital A
Merger Consideration......................................................1.8
Merger Documents.........................................................5.13
Minimum Acquisition Proposal Percentage.............................4.3(a)(i)
MSDAT..................................................................1.2(b)
Non-Competition Agreement.............................................5.13(b)
NYSE......................................................................5.6
Operating Budget.......................................................4.1(j)
Option Date............................................................5.8(g)
Other Tenants..........................................................2.9(e)
Partner Approvals.........................................................1.9
Pasquerilla Group......................................................1.6(a)
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Pasquerilla Registration Rights Agreement.............................5.13(c)
Pasquerilla Tax Protection Agreement..................................5.13(e)
Payor..................................................................7.3(c)
Pennsylvania Articles of Merger.....................................Recital C
Pennsylvania Code......................................................1.2(a)
Pension Plan.............................................................2.12
Person.................................................................2.2(a)
Post-Merger Contribution Transactions.....................................1.3
PREIT................................................................Preamble
PREIT Bylaws..............................................................1.5
PREIT Class A Units.................................................Recital J
PREIT Class B Units.................................................Recital K
PREIT Common Shares....................................................1.8(a)
PREIT Contribution Agreement........................................Recital J
PREIT Controlled Group Member.........................................3.12(a)
PREIT Counter Proposal.................................................4.3(c)
PREIT Disclosure Letter.............................................Article 3
PREIT Employee Plan...................................................3.12(a)
PREIT Estoppel Certificates...........................................5.16(b)
PREIT Financial Statement Date............................................3.7
PREIT Ground Lease.....................................................3.9(a)
PREIT Material Adverse Effect.............................................3.1
PREIT OP Units....................................................1.11(d)(ii)
PREIT Options..........................................................3.3(b)
PREIT Other Interests.....................................................3.4
PREIT Partner Approvals...................................................1.9
PREIT Partnership....................................................Preamble
PREIT Partnership Agreement...............................................1.9
PREIT Partnership Amendment...............................................1.9
PREIT Permitted Title Exceptions.......................................3.9(a)
PREIT Pre-Merger Conditions Certificate................................6.3(i)
PREIT Properties.......................................................3.9(a)
PREIT Reciprocal Operating Agreements..................................3.9(f)
PREIT Rent Roll........................................................3.9(e)
PREIT Rights...........................................................1.8(a)
PREIT Rights Agreement.................................................1.8(a)
PREIT SEC Documents.......................................................3.6
PREIT Senior Preferred OP Units.....................................Recital J
PREIT Senior Preferred Share...........................................1.8(b)
PREIT Shareholder Approval.............................................3.5(a)
PREIT Shareholders Meeting.............................................5.1(c)
PREIT Space Lease......................................................3.9(c)
PREIT Subsidiaries.....................................................3.2(a)
PREIT Tax Protection Agreement........................................3.18(j)
PREIT Trust Agreement.....................................................1.5
PREIT Trust Amendment.....................................................1.7
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PREIT Voting Agreements.............................................Recital N
Pre-Merger Transactions...................................................1.1
Pre-Merger Transfer Date..................................................6.1
Property Restrictions..................................................2.9(a)
Qualified Crown Acquisition............................................7.3(a)
Qualifying Income......................................................7.3(d)
REIT..................................................................2.14(b)
REIT Requirements......................................................7.3(d)
Release...............................................................2.10(a)
Reserved PREIT OP Units.............................................Recital K
Retained LP Interests...............................................Recital K
SEC....................................................................2.5(c)
Securities Act.........................................................2.3(g)
Share Acquisition Date...................................................2.21
Shareholder Agreement.................................................5.13(a)
Shareholder Approvals..................................................3.5(a)
Solicited Employees....................................................5.8(a)
Standstill Agreement..................................................5.13(d)
Subsidiary.............................................................2.2(a)
Substituted Partnership Option.........................................5.8(g)
Substituted Trustee Option.............................................5.8(f)
Successor Employer.....................................................5.8(a)
Superior Acquisition Proposal..........................................4.3(d)
Surviving Trust........................................................1.2(a)
Takeover Statute.........................................................2.20
Taxes.................................................................2.14(a)
Third Party Provisions....................................................8.5
Title 3................................................................1.2(a)
Title 8................................................................1.2(a)
Top-Hat Plans..........................................................5.8(e)
Transfer............................................................4.3(a)(i)
Transfer and Gains Taxes..................................................5.7
WARN Act...........................................................2.13(b)(1)
WCLP................................................................Recital K
Welfare Plan.............................................................2.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of May 13, 2003, is entered into by and among PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST, a Pennsylvania business trust ("PREIT"), PREIT ASSOCIATES,
L.P., a Delaware limited partnership ("PREIT Partnership"), CROWN AMERICAN
REALTY TRUST, a Maryland real estate investment trust ("Crown"), and CROWN
AMERICAN PROPERTIES, L.P., a Delaware limited partnership ("Crown Partnership").
R E C I T A L S:
A. The Board of Trustees of PREIT and the Board of Trustees of
Crown deem it advisable and, among other appropriate considerations, in the best
interests of each of PREIT and Crown, respectively, and their respective
shareholders, upon the terms and subject to the conditions contained herein,
that Crown shall merge with and into PREIT (the "Merger").
B. PREIT, as the sole general partner of PREIT Partnership,
and Crown, as the sole general partner of Crown Partnership, deem it advisable
and, among other appropriate considerations, in the best interests of each of
PREIT Partnership and Crown Partnership, respectively, and their respective
limited partners, subject to the conditions and other provisions contained
herein, that PREIT Partnership and Crown Partnership shall consummate certain
transactions contemplated in connection with the Merger and further described
herein.
C. Upon the terms and subject to the conditions set forth
herein, immediately prior to the Merger, PREIT and Crown shall execute Articles
of Merger (the "Pennsylvania Articles of Merger") in substantially the form
attached hereto as Exhibit A and shall file such Pennsylvania Articles of Merger
in accordance with Pennsylvania law to effectuate the Merger.
D. Upon the terms and subject to the conditions set forth
herein, immediately prior to the Merger, PREIT and Crown shall execute Articles
of Merger (the "Maryland Articles of Merger") in substantially the form attached
hereto as Exhibit B and shall file such Maryland Articles of Merger in
accordance with Maryland law to effectuate the Merger.
E. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a plan of reorganization under Section 368(a) of the Code.
F. No later than the fourth business day following the date on
which the Form S-4 to be filed in connection with the Merger is declared
effective by the SEC, Crown and PREIT will prepare and mail to their respective
shareholders of record the Joint Proxy Statement contained in the Form S-4.
G. Concurrently with the execution of this Agreement, Crown
Investments Trust ("CIT"), on the one hand, and Crown Partnership, on the other
hand, have entered into an agreement (the "Exchange Agreement") pursuant to
which, among other things, Crown Partnership has agreed to convey to CIT the
property known as Pasquerilla Plaza in exchange for the conveyance by CIT of
certain out-parcels to Crown Partnership.
H. On the day immediately preceding the Closing Date, Crown
Partnership will distribute to Crown, in complete liquidation of all of Crown's
partnership interests in Crown Partnership, Crown's proportionate interest in
any and all of Crown Partnership's assets, subject to Crown's proportionate
share of substantially all of the liabilities of Crown Partnership, and admit a
new general partner designated by the other partners of Crown Partnership, all
as provided in the Distribution Agreement of even date herewith by and between
Crown and Crown Partnership (the "Crown Partnership Distribution Agreement").
I. On the Closing Date, Crown will merge with and into PREIT,
with PREIT surviving as a Pennsylvania business trust.
J. Immediately following the Merger, PREIT will contribute to
PREIT Partnership substantially all of the assets transferred from Crown
Partnership to Crown pursuant to the Crown Partnership Distribution Agreement in
exchange for (i) a number of Class A Limited Partner Interest Units of PREIT
Partnership ("PREIT Class A Units") equal to the number of PREIT Common Shares
issued to the former Crown shareholders in the Merger and a number of preferred
units of partnership interest in PREIT Partnership (the "PREIT Senior Preferred
OP Units") equal to the number of preferred units of partnership interest in
Crown Partnership (the "Crown Senior Preferred OP Units") outstanding
immediately prior to consummation of the transactions contemplated by the Crown
Partnership Distribution Agreement, the right, preference, privilege and voting
power of which PREIT Senior Preferred OP Units will be identical in all material
respects to that of the Crown Senior Preferred OP Units, and (ii) the assumption
by PREIT Partnership of the liabilities assumed by Crown pursuant to the Crown
Partnership Distribution Agreement, all as provided in a contribution agreement
of even date herewith between PREIT and PREIT Partnership (the "PREIT
Contribution Agreement").
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K. Concurrently with the transactions contemplated by the
PREIT Contribution Agreement, (i) Crown Partnership will contribute to PREIT
Partnership 100% of its assets other than an 11% interest in the capital and a
1% interest in the profits of each of CFLP and Washington Crown Center
Associates L.P. ("WCLP"), a Pennsylvania limited partnership and a direct and
indirect wholly-owned subsidiary of Crown Partnership (the "Retained LP
Interests"), in exchange for (a) 2,044,511 Class B Limited Partner Interest
Units of PREIT Partnership (the "PREIT Class B Units") (subject to reduction and
adjustment as set forth in the Crown Partnership Contribution Agreement) minus
341,297 PREIT Class B Units (subject to reduction and adjustment as set forth in
the Crown Partnership Contribution Agreement) (the "Reserved PREIT OP Units")
and (b) the assumption by PREIT Partnership of substantially all of the
remaining liabilities of Crown Partnership, all as provided in the Contribution
Agreement of even date herewith between Crown Partnership and PREIT Partnership
(the "Crown Partnership Contribution Agreement"), and (ii) also as provided in
the Crown Partnership Contribution Agreement, Crown Partnership will grant to
PREIT Partnership an option to acquire at any time after the end of the 36th
month following the Effective Time the Retained LP Interests in exchange for the
Reserved PREIT OP Units, subject to a potential cash adjustment, and PREIT
Partnership will grant to Crown Partnership an option exercisable at any time
after the end of the 40th month following the Effective Time to contribute the
Retained LP Interests to PREIT Partnership in exchange for the Reserved PREIT OP
Units, subject to a potential cash adjustment; provided, that, during such time
as Crown Partnership holds the Retained LP Interests, Crown Partnership shall
receive a quarterly preferred return from CFLP and WCLP, all as set forth in
amendments to the CFLP and WCLP limited partnership agreements, substantially in
the forms attached hereto as Exhibit C-1 and Exhibit C-2, which shall each be
subject to the receipt of any consents or approvals required to adopt and
approve such amendments.
L. PREIT, PREIT Partnership, Crown and Crown Partnership
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger and the other transactions contemplated hereunder.
M. Concurrently with the execution and delivery of this
Agreement and as an inducement to PREIT and PREIT Partnership to enter into this
Agreement, Xxxx X. Xxxxxxxxxxx, CIT and Crown American Investment Company
("CAIC") and the executive officers and trustees of Crown and Crown Partnership
have entered into voting agreements (the "Crown Voting Agreements"), pursuant to
which they have agreed, among other things, to vote their Crown Common Shares
and common units of Crown Partnership (the "Crown OP Units") to approve this
Agreement, the Merger and any other matter which requires their vote in
connection with the transactions contemplated by this Agreement.
N. Concurrently with the execution and delivery of this
Agreement and as an inducement to Crown and Crown Partnership to enter into this
Agreement, Xxxxxx Xxxxx and all other executive officers and trustees of PREIT
and PREIT Partnership have entered into voting agreements (the "PREIT Voting
Agreements"), pursuant to which they have agreed, among other things, to vote
their PREIT Common Shares to approve this Agreement, the Merger and any other
matter which requires their vote in connection with the transactions
contemplated by this Agreement.
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O. Concurrently with the execution and delivery of this
Agreement and as an inducement to PREIT to enter into this Agreement, PREIT,
PREIT Partnership, Xxxx X. Xxxxxxxxxxx, CAIC and CIT, and Crown Delaware Holding
Company ("CDHC"), as guarantor, have entered into an Indemnification Agreement
of even date herewith with and for the benefit of PREIT and its Affiliates (the
"Indemnification Agreement").
P. On March 31, 2003, (i) CIT, on the one hand, and Crown
Partnership, on the other hand, entered into the Third Amendment to the Amended
and Restated Cash Flow Support Agreement (the "3rd Amendment to CFSA") and (ii)
Crown, CIT and CAIC entered into the Seventh Amendment to Amended and Restated
Agreement of Limited Partnership of Crown Partnership (the "7th Amendment to
Crown Partnership Agreement"). Concurrently with the execution and delivery of
this Agreement, (x) CIT, on the one hand, and Crown Partnership and Crown
American Financing Partnership, L.P., a Delaware Limited Partnership ("CFLP"),
on the other hand, will enter into the Fourth Amendment to Amended and Restated
Cash Flow Support Agreement (the "4th Amendment to CFSA") and (y) Crown, CIT and
CAIC will enter into the Eighth Amendment to Amended and Restated Agreement of
Limited Partnership of Crown Partnership (the "8th Amendment to Crown
Partnership Agreement").
Q. On March 31, 2003, CIT and Crown Partnership entered into
an agreement, pursuant to which CIT purchased from Crown Partnership the
property known as Oak Ridge Mall.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 Pre-Merger Transactions. Upon the terms and subject to the
conditions set forth in this Agreement and the other agreements contemplated
hereby:
(a) On the first business day following the
satisfaction of the conditions in Sections 6.1, 6.2 and 6.3 hereof (provided
that the next calendar day is a business day), the transactions contemplated by
the Exchange Agreement shall be performed; and
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(b) Immediately following the consummation of the
transactions contemplated by the Exchange Agreement, (i) Crown and Crown
Partnership shall consummate the transactions contemplated by the Crown
Partnership Distribution Agreement and (ii) Crown shall cease to be a partner in
Crown Partnership and CIT and CAIC shall cause a new general partner to be
admitted as the general partner of Crown Partnership.
All of such transactions described in this Section 1.1 are
referred to collectively herein as the "Pre-Merger Transactions."
1.2 The Merger.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Chapter 95 of the Pennsylvania
Associations Code (the "Pennsylvania Code"), Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended ("Title 3"),
and Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended ("Title 8"), Crown shall be merged with and into PREIT,
with PREIT surviving as a Pennsylvania business trust (the "Surviving Trust").
(b) As soon as practicable on the Closing Date, PREIT
and Crown shall execute and file the Pennsylvania Articles of Merger, executed
in accordance with Chapter 95 of the Pennsylvania Code, with the Department of
State of Pennsylvania (the "Department"), and shall execute and file the
Maryland Articles of Merger, executed in accordance with Title 3 and Title 8,
with the State Department of Assessments and Taxation of Maryland (the "MSDAT"),
and shall make all other filings and recordings required under the Pennsylvania
Code, Title 3 and Title 8. The Merger shall become effective (the "Effective
Time") upon the later of (i) the filing of the Pennsylvania Articles of Merger
with the Department or (ii) the filing of the Maryland Articles of Merger with
the MSDAT.
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1.3 Post-Merger Contribution Transactions.
Immediately following the Effective Time and concurrently with
each other, (i) PREIT and PREIT Partnership shall consummate the transactions
contemplated by the PREIT Contribution Agreement, (ii) Crown Partnership and
PREIT Partnership shall consummate the transactions contemplated by the Crown
Partnership Contribution Agreement, and (iii) the new general partner of Crown
Partnership shall amend and restate the Crown Partnership Agreement (the "Crown
Partnership Amendment and Restatement") in the form attached hereto as
Exhibit D.
All of such transactions described in this Section 1.3 are
referred to collectively herein as the "Post-Merger Contribution Transactions."
1.4 Closing. The closing of the Merger (the "Closing") shall
take place commencing at 9:00 a.m., local time, on the date to be specified by
the parties, which (subject to satisfaction or waiver of the conditions set
forth in Section 6.4) shall be no later than the third business day after
satisfaction or waiver of the conditions set forth in Section 6.4 (the "Closing
Date"), at the offices of Xxxxx & Xxxxxxx L.L.P., 000 00xx Xxxxxx, XX,
Xxxxxxxxxx, XX 00000, unless another date or place is agreed to in writing by
the parties.
1.5 Effect of Merger on Trust Agreement and Bylaws. The Trust
Agreement, as amended and restated on December 16, 1997, of PREIT (the "PREIT
Trust Agreement"), and as further amended pursuant to Section 1.7 hereof and as
in effect as of the Effective Time, and the Bylaws, as amended, of PREIT (the
"PREIT Bylaws"), as in effect as of the Effective Time, shall continue in full
force and effect after the Merger and shall be the trust agreement and bylaws of
PREIT, as the survivor of the Merger, until further amended in accordance with
applicable Pennsylvania law and the terms thereof.
1.6 Trustees of PREIT.
(a) Effective at the Effective Time, the members of the PREIT
Board of Trustees immediately prior to the Effective Time shall continue as
members of the PREIT Board of Trustees, and the PREIT Board of Trustees shall be
expanded by one Class A member and, except as otherwise set forth in the last
sentence of this Section 1.6(a), one Class B member, and (i) Xxxx X. Xxxxxxxxxxx
shall be appointed to fill the vacant Class A board seat until the next annual
or special meeting of PREIT shareholders following the Effective Time and until
his successor is elected and qualified and, (ii) except as otherwise set forth
in the last sentence of this Section 1.6(a), a person selected by PREIT in its
sole and absolute discretion from among those current members of the board of
trustees of Crown who will not be employed by PREIT following the Merger (other
than Xxxx X. Xxxxxxxxxxx or any person set forth on Schedule 1.6(a) to the Crown
Disclosure Letter) (a "Class B Designee") shall be appointed to fill the vacant
Class B board seat until the next annual or special meeting of PREIT
shareholders following the Effective Time and until his successor is elected and
qualified. PREIT then shall include and recommend (x) Xxxx X. Xxxxxxxxxxx in the
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management slate of nominees for election at the next annual or special meeting
to fill a Class A board seat for a term ending at the annual meeting in 2005 and
(y) the Class B Designee in the management slate of nominees for election at the
next annual or special meeting to fill a Class B board seat for a term ending at
the annual meeting in 2006. Thereafter, except as set forth in this Section
1.6(a) or Section 1.6(b), PREIT shall include Xxxx X. Xxxxxxxxxxx in the
management slate of nominees for Class A trustees and recommend Xxxx X.
Xxxxxxxxxxx in the management slate of nominees for Class A trustee until the
earlier to occur of (A) the date on which Xxxx X. Xxxxxxxxxxx, including any
trusts of which he is a trustee or beneficiary, CAIC, CIT, CDHC and any of their
Affiliates, other than PREIT (the "Pasquerilla Group") beneficially owns (as
defined by Rule 13-d(3) of the Exchange Act) in the aggregate less than 70% of
the aggregate number, as equitably adjusted for any share splits, dividends,
reclassifications, recapitalizations or other similar transactions, of PREIT
Common Shares and PREIT Class B Units issued to the members of the Pasquerilla
Group pursuant to the Merger and the other transactions contemplated by this
Agreement or (B) the date, after the eighth anniversary of the Merger, on which
the Pasquerilla Group beneficially owns (as defined by Rule 13-d(3) of the
Exchange Act) in the aggregate less than 7.5% of the total outstanding PREIT
Common Shares (on a fully diluted basis, giving effect to the redemption of any
PREIT Class B Units and the issuance of PREIT Common Shares therefor) (the
"Board Right Termination Date"). Unless requested by PREIT to remain as a
trustee, Xxxx X. Xxxxxxxxxxx shall resign from the PREIT Board of Trustees on
the Board Right Termination Date. Management shall not be obligated to
re-nominate the Class B Designee, if any, for re-election as a trustee upon the
expiration of his term at the annual meeting in 2006. Notwithstanding anything
contained in this Section 1.6(a) to the contrary, (x) in the event that the
person initially selected by PREIT to serve as the Class B Designee pursuant to
Section 1.6(a)(ii) above shall decline such appointment or nomination, PREIT
shall select one other person from those current members of the board of
trustees of Crown who will not be employed by PREIT following the Merger (other
than Xxxx X. Xxxxxxxxxxx or any person set forth on Schedule 1.6(a) to the Crown
Disclosure Letter) to serve as the Class B Designee pursuant to Section
1.6(a)(ii) above and, (y) in the event that such other person so selected shall
also decline such appointment or nomination to serve as the Class B Designee
pursuant to Section 1.6(a)(ii) above, any obligations of PREIT related to the
Class B Designee or to otherwise create or fill a Class B board seat pursuant to
this Section 1.6 shall terminate.
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(b) Notwithstanding the provisions of Section 1.6(a), PREIT is
not required at any time to nominate for election as a trustee of PREIT or
recommend Xxxx X. Xxxxxxxxxxx or any other person in the management slate of
nominees if, at any time, such person is subject to (i) a criminal proceeding
(other than a traffic violation or other minor offense) resulting in an
indictment or a conviction, (ii) any order, judgment or decree that permanently
or temporarily enjoins or otherwise limits such person's participation or right
to engage in, continue any conduct or practice in connection with, or be
associated with any person who engages, in securities or commodities activities,
(iii) a finding by a court of competent jurisdiction, the SEC or the Commodity
Futures Trading Commission of a federal or state securities or commodities law
violation, which finding has not been subsequently reversed, suspended or
vacated, or (iv) a finding of liability by a court of competent jurisdiction for
breach of fiduciary duty as a trustee of PREIT.
1.7 Effect on Shares. The effect of the Merger on the shares
of beneficial interest of Crown shall be as provided in the Articles of Merger
and in Section 1.8. The Merger shall not change the shares of beneficial
interest of PREIT outstanding immediately prior to the Merger. Prior to or as of
the Effective Time, the PREIT Trust Agreement shall be amended, in accordance
with Chapter 95 of the Pennsylvania Code and the terms of the PREIT Trust
Agreement, by the adoption by the PREIT Board of Trustees of the amendment to
the PREIT Trust Agreement ("PREIT Trust Amendment") in substantially the form
attached hereto as Exhibit E to provide for the authorization of the PREIT
Senior Preferred Shares. At any time prior to the PREIT Trust Amendment becoming
effective, the PREIT Trust Agreement may be amended by the PREIT Board of
Trustees in accordance with its terms as they determine to be necessary or
appropriate in order to permit the proposed terms and provisions of the PREIT
Trust Amendment to have effect under the PREIT Trust Agreement (the "Enabling
Trust Agreement Amendment").
1.8 Merger Consideration. The consideration to be paid to
holders of shares of beneficial interest of Crown in the Merger (collectively,
the "Merger Consideration") is as follows:
(a) Each common share of beneficial interest, par
value $.01 per share, of Crown ("Crown Common Share") issued and outstanding
immediately prior to the Effective Time, together with the associated Crown
Right, shall be converted into the right to receive 0.3589 validly issued, fully
paid and non-assessable common shares of beneficial interest, par value $1.00
per share, of PREIT ("PREIT Common Shares"), together with the associated rights
(the "PREIT Rights") issued pursuant to the terms of that certain Rights
Agreement, dated as of April 30, 1999, between PREIT and American Stock Transfer
& Trust Company, as rights agent (the "PREIT Rights Agreement");
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(b) Each 11.00% Non-Convertible, Senior Preferred
Share of Beneficial Interest (par value $.01 per share), liquidation preference
$50.00 per share, of Crown ("Crown Senior Preferred Share") issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive one 11.00% non-convertible, senior preferred share of
beneficial interest (par value $.01 per share), liquidation preference $50.00
per share, of PREIT, the terms of which shall be identical in all material
respects to the Crown Senior Preferred Shares and shall include the right to
receive all accrued but unpaid dividends on each issued and outstanding Crown
Senior Preferred Share through the Effective Time ("PREIT Senior Preferred
Share");
(c) All Crown Common Shares, together with the
associated Crown Rights, when so converted as provided in Section 1.8(a), and
all Crown Senior Preferred Shares, when so converted as provided in Section
1.8(b), shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate (a
"Certificate") theretofore representing any such shares shall cease to have any
rights with respect thereto, except the right to receive as applicable, (A)
certificates representing the PREIT Common Shares into which such Crown Common
Shares are converted pursuant to Section 1.8(a), (B) certificates representing
the PREIT Senior Preferred Shares into which the Crown Senior Preferred Shares
are converted pursuant to Section 1.8(b), (C) any cash payable in lieu of any
fractional PREIT Common Shares pursuant to Section 1.11(g), and (D) any accrued
and unpaid dividends on the PREIT Senior Preferred Shares. Notwithstanding any
failure by holders of a Certificate to surrender such Certificate for a
certificate representing PREIT Common Shares or PREIT Senior Preferred Shares,
as applicable, from and after the Effective Time each such holder shall become a
holder of PREIT Common Shares or PREIT Senior Preferred Shares, as applicable,
upon conversion, as provided in this Section 1.8, and shall be accorded the same
rights as any other holder of PREIT Common Shares or PREIT Senior Preferred
Shares, as applicable, and such Certificate shall thereafter represent only the
right to receive the consideration provided for in this Section 1.8(c).
1.9 Partner Approval. Crown shall seek the requisite approval
of the partners of Crown Partnership of this Agreement, the Merger, any
transactions or agreements contemplated by this Agreement that require approval
of such parties, and the withdrawal of Crown as general partner to the extent
required by the Amended and Restated Agreement of Limited Partnership, dated as
of August 17, 1993, of Crown Partnership, as amended (the "Crown Partnership
Agreement"), or by applicable law to effectuate the transactions contemplated by
this Agreement (collectively, the "Crown Partner Approvals"). PREIT shall seek
the requisite vote of the partners of PREIT Partnership of the Merger and the
approval of the partners of PREIT Partnership of any transactions or agreements
contemplated by this Agreement that require approval of such parties and the
amendment (the "PREIT Partnership Amendment") to the First Amended and Restated
Agreement of Limited Partnership, dated as of September 30, 1997, of PREIT
Partnership, as amended (the "PREIT Partnership Agreement"), to the extent
required by the PREIT Partnership Agreement or by applicable law to effectuate
the transactions contemplated by this Agreement (collectively, the "PREIT
Partner Approvals," and together with the Crown Partner Approvals, the "Partner
Approvals").
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1.10 Appraisal or Dissenters Rights. The holders of Crown
Common Shares, Crown Senior Preferred Shares and PREIT Common Shares are not
entitled under applicable law to appraisal, dissenters or similar rights as a
result of the Merger.
1.11 Exchange of Certificates; Pre-Closing Dividends;
Fractional Shares.
(a) Exchange Agent. Prior to the Effective Time,
PREIT shall appoint American Stock Transfer & Trust Company, or another bank or
trust company reasonably acceptable to Crown, to act as exchange agent (the
"Exchange Agent") for the exchange of the Merger Consideration upon surrender of
Certificates representing issued and outstanding Crown Common Shares and Crown
Senior Preferred Shares.
(b) PREIT to Provide Merger Consideration; Crown to
Provide Funds for Any Final Crown Dividend. PREIT shall provide to the Exchange
Agent on or before the Effective Time, for the benefit of the holders of Crown
Common Shares and Crown Senior Preferred Shares, the Merger Consideration
issuable in exchange for the issued and outstanding Crown Common Shares and
Crown Senior Preferred Shares pursuant to Section 1.8, together with any cash
required to make payments in lieu of any fractional shares pursuant to Section
1.11(g) (the "Exchange Fund"). The Exchange Agent (or other depository acting
for the benefit of the Exchange Agent, selected by PREIT and reasonably
satisfactory to Crown) shall invest any cash included in the Exchange Fund as
directed by PREIT, on a daily basis. Any interest or other income resulting from
such investments shall be paid to PREIT. If the Merger is terminated in
accordance with the terms of this Agreement, such cash and any interest or other
income earned on such investment thereof shall be paid to PREIT. Crown shall
provide to the Exchange Agent not later than three business days prior to the
Effective Time, for the benefit of the holders of Crown Common Shares and Crown
Senior Preferred Shares, cash payable in respect of any dividends required
pursuant to Section 1.11(d)(i). Such cash shall be invested in accordance with
written directions delivered by Crown to the Exchange Agent (or any such other
depository) not later than three business days prior to the Effective Time, with
any interest or other income earned on such investments to be paid to PREIT as
the successor to Crown in the Merger. If the Merger is terminated in accordance
with the terms of this Agreement, such cash and any interest or other income
earned on such investment thereof shall be paid to Crown.
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(c) Exchange Procedure. PREIT and PREIT Partnership
shall use commercially reasonable efforts to cause the Exchange Agent, no later
than the fifth (5th) business day after the Closing Date, to mail to each holder
of record of a Certificate or Certificates which immediately prior to the
Effective Time represented outstanding Crown Common Shares or Crown Senior
Preferred Shares whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.8, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as PREIT may
reasonably specify), and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, (x) the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration into which the
Crown Common Shares or Crown Senior Preferred Shares, as applicable, theretofore
represented by such Certificate shall have been converted pursuant to Section
1.8, including any cash payable in lieu of fractional shares pursuant to Section
1.11(g), (y) PREIT and PREIT Partnership shall use commercially reasonable
efforts to cause the Exchange Agent to mail (or make available for collection by
hand if so elected by the surrendering holder) such amount to such holder within
five business days after receipt thereof, and (z) the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Crown
Common Shares or Crown Senior Preferred Shares which is not registered in the
transfer records of Crown, payment may be made to a Person other than the Person
in whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a Person other than the
registered holder of such Certificate or establish to the satisfaction of Crown
that such tax or taxes have been paid or are not applicable. Until surrendered
as contemplated by this Section 1.11, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without interest, into which the Crown
Common Shares or Crown Senior Preferred Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.8, including any
cash payable in lieu of fractional shares pursuant to Section 1.11(g). No
interest will be paid or will accrue to the benefit of the shareholders on the
Merger Consideration or on any cash payable pursuant to Section 1.11(g). PREIT
or the Exchange Agent, as applicable, shall be entitled, in its sole and
absolute discretion, to deduct and withhold from the cash, PREIT Common Shares
or PREIT Senior Preferred Shares, or any combination thereof, that otherwise is
payable pursuant to this Agreement to any holder of Crown Common Shares or Crown
Senior Preferred Shares such amounts as PREIT or the Exchange Agent is required
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to deduct and withhold with respect to the making of such payment under the Code
or under any provision of state, local or foreign tax law. For this purpose, any
PREIT Common Shares or PREIT Senior Preferred Shares deducted and withheld by
PREIT shall be valued at the last trading price of the PREIT Common Shares or
the PREIT Senior Preferred Shares, as applicable, on the New York Stock Exchange
on the Effective Date of the Merger (or in the event that the PREIT Senior
Preferred Shares do not yet trade on the New York Stock Exchange, at the
liquidation preference (excluding unpaid dividends) per PREIT Senior Preferred
Share). To the extent that amounts are so withheld by PREIT or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Crown Common Shares or Crown Senior
Preferred Shares, as applicable, in respect of which such deduction and
withholding was made by PREIT or the Exchange Agent.
(d) Provisions Relating to Record Dates for Final
Dividends.
(i) If and to the extent necessary for Crown
to satisfy the requirements of Section 857(a)(1) of the Code for the taxable
year of Crown ending at the Effective Time and, if applicable, the preceding
taxable year (and to avoid the payment of any tax with respect to undistributed
income or gain), Crown shall declare a dividend (the "Final Crown Dividend") to
holders of Crown Common Shares and Crown Senior Preferred Shares, the record
date for which shall be not later than the close of business on the sixth
business day preceding the Closing Date, in an amount equal to the minimum
dividend sufficient to permit Crown to satisfy such requirements. Any dividends
payable hereunder to holders of Crown Common Shares and Crown Senior Preferred
Shares shall be paid on the third business day immediately preceding the Closing
Date. In the event that Crown is required to declare a Final Crown Dividend with
respect to the Crown Common Shares, Crown Partnership shall simultaneously
declare a distribution (the "Final Crown Partnership Distribution") to holders
of Crown OP Units in an amount per unit equal to the Final Crown Dividend
payable per Crown Common Share, together with any distributions required to be
paid to holders of Crown Senior Preferred OP Units by reason of the payment of
either the Final Crown Dividend or the Final Crown Partnership Distribution with
respect to Crown OP Units, the record date for which shall be the close of
business on the sixth business day preceding the Closing Date. The distribution
payable hereunder to holders of Crown OP Units and, if applicable, Crown Senior
Preferred OP Units, shall be paid on the third business day immediately
preceding the Closing Date.
(ii) If Crown determines that it will be
necessary to declare the Final Crown Dividend, Crown shall notify PREIT at least
20 days prior to the date for the Crown Shareholders Meeting, and PREIT shall be
entitled to declare a dividend per share payable to holders of shares of PREIT
Common Shares (in which event PREIT Partnership shall declare a distribution per
unit payable to holders of common units of PREIT Partnership (the "PREIT OP
Units") if a distribution has been declared on the PREIT Common Shares), the
record dates for which shall be the close of business on the fifth business day
preceding the Closing Date, in an amount per PREIT Common Share (and PREIT OP
Unit) equal to the quotient obtained by dividing (x) the Final Crown Dividend
paid by Crown with respect to each Crown Common Share by (y) 0.3589 (the
"Corresponding PREIT Dividends and Distributions"). The Corresponding PREIT
Dividends and Distributions shall be in addition to any additional Corresponding
PREIT Dividends and Distributions payable pursuant to Section 5.10. Any
dividends payable hereunder to holders of PREIT Common Shares (and PREIT OP
Units) shall be paid on the second business day preceding the Closing Date.
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(e) No Further Ownership Rights in Crown Common
Shares and Crown Senior Preferred Shares. All Merger Consideration paid in
accordance with the terms of this Section 1.11 (including any cash paid pursuant
to Section 1.11(g)) shall be deemed to have been paid in full satisfaction of
all rights pertaining to the Crown Common Shares and Crown Senior Preferred
Shares, as applicable, theretofore represented by such Certificates; provided,
however, that from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of Crown of the Crown
Common Shares or Crown Senior Preferred Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to PREIT for any reason, they shall be canceled and
exchanged as provided in this Section 1.11.
(f) No Liability. None of Crown, PREIT or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration or dividends delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any portion of the
Exchange Fund delivered to the Exchange Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time shall be redelivered by
the Exchange Agent to PREIT, upon demand, and any holders of Certificates who
have not theretofore complied with Section 1.11(c) shall thereafter look only to
PREIT for delivery of the Merger Consideration, including any cash payable in
lieu of fractional shares pursuant to Section 1.11(g) and any unpaid dividends,
subject to applicable escheat and other similar laws.
(g) No Fractional Shares.
(i) No certificates or scrip representing
fractional Crown Common Shares shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the owner
thereof to vote, to receive dividends or to any other rights of a shareholder of
Crown.
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(ii) No fractional PREIT Common Shares shall
be issued pursuant to this Agreement. In lieu of the issuance of any fractional
PREIT Common Shares pursuant to this Agreement, each holder of Crown Common
Shares shall be paid an amount in cash (without interest), rounded to the
nearest cent (with .5 of a cent rounded up), determined by multiplying (i) the
average closing price of one PREIT Common Share on the New York Stock Exchange
on the five trading days immediately preceding the Closing Date by (ii) the
fraction of a PREIT Common Share which such holder would otherwise be entitled
to receive under this Section 1.11.
(h) Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by PREIT or the Exchange Agent, the posting by such Person of a bond in
such reasonable amount as PREIT or the Exchange Agent reasonably may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the PREIT Common Shares or PREIT Senior Preferred Shares
to which the holders thereof are entitled pursuant to Section 1.8 and any cash
payable pursuant to Section 1.11(g) to which the holders thereof are entitled
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 1.11(d).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CROWN AND CROWN PARTNERSHIP
Except as specifically set forth in the letter of even date
herewith delivered to PREIT prior to the execution hereof and signed by each of
the Chief Executive Officer and Chief Financial Officer, in such capacity, of
Crown as the disclosure letter to this Agreement (the "Crown Disclosure
Letter"), Crown and Crown Partnership jointly and severally represent and
warrant to PREIT and PREIT Partnership as follows as of the date hereof:
2.1 Organization, Standing and Power. Crown is a real estate
investment trust duly organized, validly existing and in good standing under the
laws of Maryland. Crown has all requisite power and authority to own, operate,
lease and encumber its properties and carry on its business as now being
conducted. The Second Amended and Restated Declaration of Trust of Crown (the
"Crown Declaration of Trust") is in effect, and no dissolution, revocation or
forfeiture proceedings regarding Crown have been commenced. Crown is duly
qualified or licensed to do business as a foreign entity and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not reasonably be expected to have a
Crown Material Adverse Effect. As used in this Agreement, a "Crown Material
Adverse Effect" means any circumstance, event, occurrence, change or effect that
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is materially adverse to the business, properties, assets (tangible or
intangible), financial condition or results of operations of Crown, Crown
Partnership and the Crown Subsidiaries, taken as a whole, except, in each case,
as a result of (i) changes in general economic conditions nationally or
regionally, (ii) changes affecting the real estate industry generally which do
not affect Crown or Crown Partnership, as the case may be, materially
disproportionately relative to other participants in the real estate industry
similarly situated, or (iii) in and of itself and without the occurrence of any
other Crown Material Adverse Effect, changes in the trading prices of Crown
Common Shares or Crown Senior Preferred Shares. Crown has delivered to PREIT
complete and correct copies of each of the Crown Declaration of Trust and the
Bylaws of Crown (the "Crown Bylaws"), in each case as amended or supplemented to
the date of this Agreement.
2.2 Crown Subsidiaries.
(a) Schedule 2.2(a) to the Crown Disclosure Letter
sets forth (i) each Subsidiary of Crown (the "Crown Subsidiaries"), (ii) the
ownership interest therein of Crown, (iii) if not directly or indirectly wholly
owned by Crown, the identity and ownership interest of each of the other owners
of such Crown Subsidiary, (iv) each property owned by such Crown Subsidiary, and
(v) if not wholly owned by such Crown Subsidiary, the identity and ownership
interest of each of the other owners of such property. As used in this
Agreement, "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture, trust or other legal entity of which
such Person owns (either directly or through or together with another Subsidiary
of such Person) either (i) a general partner, managing member or other similar
interest, or (ii)(A) 10% or more of the voting power of the voting capital stock
or other voting equity interests, or (B) 10% or more of the outstanding voting
capital stock or other voting equity interests of such corporation, partnership,
limited liability company, joint venture or other legal entity. As used herein,
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
(b) Except as set forth in Schedule 2.2(b) to the
Crown Disclosure Letter, (i) all of the outstanding shares of capital stock in
each Crown Subsidiary that is a corporation which are owned by Crown, a Crown
Subsidiary or by Crown and a Crown Subsidiary have been duly authorized, validly
issued and are (A) fully paid and nonassessable and not subject to preemptive or
similar rights and (B) owned free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each Crown Subsidiary
that is a partnership, joint venture, limited liability company or trust which
are owned by Crown, a Crown Subsidiary or by Crown and a Crown Subsidiary are
owned free and clear of all Liens other than pledges, if any, contained in
organizational documents of such Crown Subsidiary and given to secure
performance thereunder. Each Crown Subsidiary that is a corporation is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted, and each Crown Subsidiary that is a
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partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Schedule 2.2(b)
to the Crown Disclosure Letter lists, for each Crown Subsidiary, all
jurisdictions in which the nature of its business or the ownership or leasing of
its properties requires that it be duly qualified or licensed to do business,
and other than as set forth on Schedule 2.2(b) to the Crown Disclosure Letter,
each Crown Subsidiary is in good standing in each such jurisdiction. Complete
and correct copies of the articles of incorporation, bylaws, organization
documents and partnership, joint venture and operating agreements of each Crown
Subsidiary, as amended to the date of this Agreement, have been previously
delivered or made available to PREIT.
(c) There are no attachments, executions or general
assignments for the benefit of creditors, or voluntary or involuntary proceeding
in bankruptcy, or under any debtor relief laws, contemplated by or pending or,
to the Knowledge of Crown, threatened against Crown or a Crown Subsidiary.
2.3 Capital Structure.
(a) The authorized shares of beneficial interest of
Crown consist of 250,000,000 shares (par value $.01 per share), 120,000,000 of
which are classified as Crown Common Shares, 2,875,000 of which are classified
as Crown Senior Preferred Shares, and 125,000,000 of which are classified as
excess shares. 32,077,961 Crown Common Shares and 2,475,000 Crown Senior
Preferred Shares are issued and outstanding as of May 9, 2003. 1,750,000 Crown
Series A Junior Participating Preferred Shares (par value $.01 per share) have
been reserved for issuance pursuant to the Crown Rights Agreement and none are
outstanding.
(b) Set forth in Schedule 2.3(b) to the Crown
Disclosure Letter is a true and complete list of the following: (i) each
qualified or nonqualified option to purchase Crown Common Shares or Crown OP
Units issued and outstanding under Crown's Amended and Restated 1993 Crown
Partnership Option Plan (the "Crown Partnership Option"), Crown's 1993 Crown
Trustee's Plan (the "Crown Trustee Option"), or any other formal or informal
arrangement (collectively, the "Crown Options"); and (ii) except for the Crown
Rights and the Crown OP Units, all other warrants or other rights to acquire
Crown's shares of beneficial interest, all stock appreciation rights, phantom
shares, restricted stock, dividend equivalents, deferred compensation accounts,
performance awards and other awards which are outstanding on the date of this
Agreement and payable in Crown Common Shares or Crown OP Units ("Crown Share
Rights"). Schedule 2.3(b) to the Crown Disclosure Letter sets forth for each
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Crown Option and Crown Share Right (other than Crown Rights and Crown OP Units),
the name of the grantee, the date and type of each grant, the status of each
Crown Option as qualified or nonqualified under Section 422 of the Code, the
number of Crown Common Shares subject to each Crown Option, the number and type
of Crown Common Shares subject to Crown Options that are currently exercisable,
the exercise price per share, and the number and type of such shares subject to
stock appreciation rights. On the date of this Agreement, except as set forth in
this Section 2.3 or excepted therefrom or as set forth in Schedule 2.3(b) to the
Crown Disclosure Letter, no Crown Common Shares were outstanding or reserved for
issuance.
(c) All outstanding shares of beneficial interest of
Crown are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights under law or the Crown Declaration of
Trust or Crown Bylaws, or any contract or instrument to which Crown is a party
or by which it is bound. There are no bonds, debentures, notes or other
indebtedness of Crown having the right to vote (or convertible into, or
exchangeable or exercisable for, securities having the right to vote) on any
matters on which shareholders of Crown may vote.
(d) Other than as set forth in this Section 2.3 or in
Schedule 2.3(b) to the Crown Disclosure Letter, as of the date of this
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Crown or any Crown Subsidiary is a party or by which such entity is bound,
obligating Crown or any Crown Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of beneficial interest, voting
securities or other ownership interests of Crown or any Crown Subsidiary or
obligating Crown or any Crown Subsidiary to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking (other than to Crown or a Crown Subsidiary).
(e) As of May 9, 2003 (i) 42,034,359 Crown OP Units,
of which 8,169,939 Crown OP Units are held by CIT, 1,786,459 Crown OP Units are
held by CAIC and 32,077,961 Crown OP Units are held by Crown, are validly issued
and outstanding, fully paid and nonassessable and not subject to preemptive or
similar rights under law or the Crown Partnership Agreement, or any contract or
instrument to which Crown or Crown Partnership is a party or by which either is
bound and (ii) 2,475,000 Crown Senior Preferred OP Units are validly issued and
outstanding, fully paid and nonassessable and not subject to preemptive or
similar rights. Schedule 2.3(e) to the Crown Disclosure Letter sets forth the
name of each holder of Crown OP Units and Crown Senior Preferred OP Units and
the number of Crown OP Units and Crown Senior Preferred OP Units owned by each
such holder as of May 9, 2003. Except as provided in the Crown Partnership
Agreement or as contemplated by this Agreement, the Crown OP Units and Crown
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Senior Preferred OP Units are not subject to any restrictions imposed by Crown
Partnership on the transfer, assignment, pledge, distribution, encumbrance or
other disposition thereof (either voluntarily or involuntarily and with or
without consideration) or on the exercise of the voting rights thereof provided
in the Crown Partnership Agreement. Except as provided in the Crown Partnership
Agreement, Crown Partnership has not issued or granted and is not a party to any
outstanding commitments of any kind relating to, or any presently effective
agreements or understandings with respect to, the issuance or sale of interests
in Crown Partnership, whether issued or unissued, or securities convertible into
or exchangeable or exercisable for interests in Crown Partnership.
(f) Except as set forth in Schedule 2.3(f) to the
Crown Disclosure Letter, all dividends on Crown Common Shares and Crown Senior
Preferred Shares and all distributions on Crown OP Units and Crown Senior
Preferred OP Units, which have been declared prior to the date of this
Agreement, have been paid in full.
(g) Set forth on Schedule 2.3(g) to the Crown
Disclosure Letter is a list of each registration rights agreement or other
agreement between Crown, a Crown Subsidiary, on the one hand, and one or more
other parties, including one or more members of the Pasquerilla Group, on the
other hand, which grants any such other party or parties the right to cause the
registration of any securities of Crown and/or a Crown Subsidiary pursuant to
the Securities Act of 1933, as amended (the "Securities Act").
2.4 Other Interests. Except for interests in the Crown
Subsidiaries and certain other entities as set forth in Schedule 2.4 to the
Crown Disclosure Letter (the "Crown Other Interests"), none of Crown, Crown
Partnership or any Crown Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business trust, limited liability company or other entity (other than
investments in short-term investment securities). With respect to the Crown
Other Interests, Crown and/or any Crown Subsidiary, as the case may be, is a
partner, member or shareholder in good standing, and owns such interests free
and clear of all Liens. None of Crown, Crown Partnership or any Crown Subsidiary
is in material breach of any agreement, document or contract which is of a
material nature governing its rights in or to the Crown Other Interests, all of
which agreements, documents and contracts are (a) listed in Schedule 2.4 to the
Crown Disclosure Letter, (b) unmodified except as described therein and (c) to
the Knowledge of Crown, in full force and effect. To the Knowledge of Crown and
except as set forth in Schedule 2.4 to the Crown Disclosure Letter, the other
parties to any such agreement, document or contract which is of a material
nature are not in material breach of any of their respective obligations under
such agreements, documents or contracts.
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2.5 Authority; Noncontravention; Consents.
(a) Crown has the requisite power and authority to
enter into this Agreement and, subject only to the requisite Crown shareholder
approval of the Merger (the "Crown Shareholder Approval") and the Crown Partner
Approvals, to consummate the transactions contemplated by this Agreement to
which Crown is a party, including, without limitation, the Pre-Merger
Transactions. The execution and delivery of this Agreement by Crown and the
consummation by Crown of the transactions contemplated by this Agreement to
which Crown is a party have been duly authorized by all necessary action on the
part of Crown, except for and subject to the Crown Shareholder Approval and the
Crown Partner Approvals. This Agreement has been duly executed and delivered by
Crown and constitutes a valid and binding obligation of Crown, enforceable
against Crown in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
(b) Crown Partnership has the requisite partnership
power and authority to enter into this Agreement and, subject only to the
requisite Crown Shareholder Approval and Crown Partner Approvals, to consummate
the transactions contemplated by this Agreement to which Crown Partnership is a
party, including, without limitation, the Pre-Merger Transactions and the
Post-Merger Contribution Transactions. The execution and delivery of this
Agreement by Crown Partnership and the consummation by Crown Partnership of the
transactions contemplated by this Agreement to which Crown Partnership is a
party have been duly authorized by all necessary action on the part of Crown
Partnership, except for and subject to the Crown Shareholder Approval and the
Crown Partner Approvals. This Agreement has been duly executed and delivered by
Crown Partnership and constitutes a valid and binding obligation of Crown
Partnership, enforceable against Crown Partnership in accordance with and
subject to its terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
(c) Except as set forth in Schedule 2.5(c)(1) to the
Crown Disclosure Letter and subject to receipt of the Crown Shareholder Approval
and the Crown Partner Approvals, the execution and delivery of this Agreement by
Crown do not, and the consummation of the transactions contemplated by this
Agreement to which Crown and Crown Partnership is a party and compliance by
Crown and Crown Partnership with the provisions of this Agreement will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of Crown
or any Crown Subsidiary under, (i) the Crown Declaration of Trust or Crown
Bylaws or the comparable charter or organizational documents or partnership,
operating or similar agreement (as the case may be) of any Crown Subsidiary,
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each as amended or supplemented, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, merger or other acquisition agreement, reciprocal easement
agreement, lease, management agreement or other agreement, instrument, permit,
concession, franchise or license applicable to Crown or any Crown Subsidiary or
their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation (collectively,
"Laws") applicable to Crown or any Crown Subsidiary, or their respective
properties or assets, other than, in the case of clause (iii), any such
conflicts, violations, defaults, rights, loss or Liens that individually or in
the aggregate would not reasonably be expected to (x) have a Crown Material
Adverse Effect or (y) prevent or materially impair the ability of Crown to
perform any of its obligations hereunder or prevent or materially threaten or
impede the consummation of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
Crown or any Crown Subsidiary in connection with the execution and delivery of
this Agreement by Crown and Crown Partnership or the consummation by Crown or
any Crown Subsidiary of any of the transactions contemplated by this Agreement,
except for (i) the filing with the Securities and Exchange Commission (the
"SEC") of the Form S-4 and such reports and filings under the Securities Act and
Section 13(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (ii) the filing
and acceptance for record of the Articles of Merger by the Department, (iii) the
filing of the Maryland Articles of Merger with the MSDAT, (iv) such filings as
may be required in connection with the payment of any transfer and gains taxes
and (v) such other material consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule
2.5(c)(2) to the Crown Disclosure Letter or (B) as may be required under (w) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (x) federal, state or local environmental laws, (y) the "blue sky" laws
of various states, to the extent applicable or (z) rules and regulations of the
NYSE.
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2.6 SEC Documents; Financial Statements; Undisclosed
Liabilities. Crown Partnership is not required by any Law to file any reports,
schedules, forms, statements or other documents with the SEC and has made no
such filings. Crown has timely filed all reports, schedules, forms, statements,
certifications and other documents required to be filed in accordance with the
rules and requirements of the SEC since December 31, 1996 through the date
hereof (collectively, including all exhibits thereto and any registration
statement filed since such date, the "Crown SEC Documents"). All of the Crown
SEC Documents (other than preliminary material), as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in each case, the rules and regulations promulgated
thereunder applicable to such Crown SEC Documents. None of the Crown SEC
Documents at the time of filing contained, nor will any report, schedule, form,
statement or other document filed by Crown after the date hereof and prior to
the Effective Time contain, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of Crown
included in the Crown SEC Documents complied, or will comply, as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been or will be
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, or will fairly present, in all material respects in accordance with
the applicable requirements of GAAP and the applicable rules and regulations of
the SEC, the consolidated financial position of Crown and its Subsidiaries taken
as a whole, as of the dates thereof and the consolidated results of operations
and cash flows for the periods then ended (except, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act). Except as set
forth in Schedule 2.6(a) to the Crown Disclosure Letter, Crown has no
Subsidiaries which are not consolidated for accounting purposes. Except for
liabilities and obligations set forth in the Crown SEC Documents or in Schedule
2.6(b) to the Crown Disclosure Letter, neither Crown nor any Crown Subsidiary
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Crown or in the notes thereto and which, individually or in the
aggregate, would reasonably be expected to have a Crown Material Adverse Effect.
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2.7 Absence of Certain Changes or Events. Except as disclosed
in the Crown SEC Documents or in Schedule 2.7 to the Crown Disclosure Letter or
as provided herein, since December 31, 2002 (the "Crown Financial Statement
Date"), Crown and the Crown Subsidiaries have conducted their business only in
the ordinary course (taking into account prior practices, including the
acquisition and disposition of properties and issuance of securities) and there
has not been:
(a) any circumstance, event, occurrence, change or
effect that has had a Crown Material Adverse Effect, nor has there been any
circumstance, event, occurrence, change or effect that with the passage of time
would reasonably be expected to result in a Crown Material Adverse Effect,
(b) any authorization, declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the Crown Common Shares, the Crown OP Units, the Crown
Senior Preferred Shares or the Crown Senior Preferred OP Units, except for
regular quarterly distributions not in excess of (i) $.2150 per Crown Common
Share or Crown OP Unit (subject to any Final Crown Dividend payable pursuant to
Section 1.11(d)(i)), (ii) $1.375 per Crown Senior Preferred Share or Crown
Senior Preferred OP Unit, or (iii) in each case, with respect to the period
commencing on the date hereof and ending on the Closing Date, distributions as
necessary to maintain REIT status, in each case with customary record and
payment dates,
(c) any split, combination or reclassification of the
Crown Common Shares, the Crown OP Units, the Crown Senior Preferred Shares, or
the Crown Senior Preferred OP Units or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for, or giving the right to acquire by exchange or exercise, shares of stock of
Crown or partnership interests in Crown Partnership or any issuance of an
ownership interest in, any Crown Subsidiary, except for issuances of Crown
Common Shares with respect to Crown's Dividend Reinvestment Plan (hereinafter
referred to as a "DRIP"),
(d) any damage, destruction or loss, whether or not
covered by insurance, that has or would reasonably be expected to have a Crown
Material Adverse Effect,
(e) any change in accounting methods, principles or
practices by Crown or any of its Subsidiaries or Crown Partnership or any of its
Subsidiaries materially affecting its assets, liabilities or business, except
insofar as may have been disclosed in Crown SEC Documents or required by a
change in GAAP, or
(f) any amendment in any material respect of any
employment, consulting, severance, retention or any other agreement between
Crown and any officer or trustee of Crown or any Affiliate or immediate family
member thereof or any new such agreement with any of the foregoing.
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2.8 Litigation. Except as disclosed in Schedule 2.8 to the
Crown Disclosure Letter or in the Crown SEC Documents filed with the SEC after
December 31, 2002, and other than personal injury and other routine tort
litigation arising from the ordinary course of operations of Crown or the Crown
Subsidiaries (a) for which insurance coverage has been acknowledged by the
applicable insurer, subject to a reasonable deductible or retention limit or (b)
for which all material costs and liabilities arising therefrom are reimbursable
pursuant to common area maintenance or similar agreements, there is no suit,
action or proceeding pending (in which service of process has been received by
an employee of Crown or a Crown Subsidiary) or, to the Knowledge of Crown,
threatened against or affecting Crown or any Crown Subsidiary that, individually
or in the aggregate, would reasonably be expected to (i) have a Crown Material
Adverse Effect or (ii) prevent or materially impair the ability of Crown to
perform any of its obligations hereunder or prevent or materially threaten or
impair the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
court or Governmental Entity or arbitrator outstanding against Crown or any
Crown Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Notwithstanding the foregoing, (y) Schedule
2.8 to the Crown Disclosure Letter sets forth each and every material uninsured
claim, equal employment opportunity claim and claim relating to sexual
harassment and/or discrimination pending or, to the Knowledge of Crown,
threatened as of the date hereof, in each case with a brief summary of such
claim or threatened claim, and (z) no claim has been made under any trustees',
directors' and officers' liability insurance policy maintained at any time by
Crown or any of the Crown Subsidiaries except for those claims that have been
fully and finally adjudicated and any judgment owing on which have been fully
paid and claims for which all defendant parties have been fully and
unconditionally released and all payments under any settlement or release
agreement in connection therewith have been paid in full.
2.9 Properties.
(a) Title; Encumbrances; Property Restrictions.
Except as provided in Schedule 2.2(a) or Schedule 2.9(a) to the Crown Disclosure
Letter, Crown or the Crown Subsidiary set forth on Schedule 2.2(a) to the Crown
Disclosure Letter owns fee simple title to or holds a leasehold interest in each
of the real properties identified in Schedule 2.2(a) to the Crown Disclosure
Letter (the "Crown Properties"), which are all of the real estate properties
owned or leased by them, in each case (except for the Crown Permitted Title
Exceptions) free and clear of liens, mortgages or deeds of trust, claims against
title, charges which are liens, security interests or other encumbrances on
title ("Encumbrances"). Schedule 2.2(a) to the Crown Disclosure Letter further
identifies which of the Crown Properties are owned in fee simple by Crown or the
Crown Subsidiary and which of the Crown Properties are subject to a ground lease
(the "Crown Ground Lease"). Except as set forth in Schedule 2.2(a) to the Crown
Disclosure Letter, no other Person has any ownership interest in, and any such
ownership interest so scheduled does not materially interfere with the present
use of, any of the Crown Properties subject thereto or affected thereby. Except
as set forth in Schedule 2.9(a) to the Crown Disclosure Letter, none of the
Crown Properties is subject to any restriction on the sale or other disposition
thereof or on the financing or release of financing thereon. The Crown
Properties are not subject to any rights of way, restrictive covenants,
agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions") or Encumbrances, except for the following (collectively, the
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"Crown Permitted Title Exceptions"): (i) Property Restrictions and Encumbrances
set forth in Schedule 2.9(a) to the Crown Disclosure Letter, (ii) Property
Restrictions imposed or promulgated by law or any governmental body or authority
with respect to real property, including zoning regulations, which do not
materially adversely affect the current use of any Crown Property, (iii)
Property Restrictions and Encumbrances that are matters of public record, which
Property Restrictions and Encumbrances, in any event, do not materially
interfere with the present use of any of the Crown Properties subject thereto or
affected thereby and (iv) liens for real estate taxes not yet due and payable,
mechanics', carriers', workmen's, repairmen's liens and other Encumbrances and
Property Restrictions, if any, which, individually or in the aggregate, do not
materially detract from the value of or materially interfere with the present
use of any of the Crown Properties subject thereto or affected thereby. Schedule
2.9(a) to the Crown Disclosure Letter also lists each of the Crown Properties
which are under development as of the date of this Agreement and describes the
status of such development as of the date hereof.
(b) Title Insurance. Except as provided in Schedule
2.9(b) to the Crown Disclosure Letter, valid policies of title insurance (or
fully paid and enforceable commitments therefor) have been issued insuring the
applicable Crown Subsidiary's (as the case may be) fee simple title or leasehold
estate, as the case may be, to the Crown Properties owned by it in amounts
approximately equal to the purchase price therefor paid by such Crown
Subsidiary, subject only to the Crown Permitted Title Exceptions and the matters
disclosed in Schedule 2.9(a) to the Crown Disclosure Letter. Such policies are,
at the date hereof, in full force and effect. No material claim has been made
against any such policy.
(c) Permit; Violation; Condition. Except as provided
in Schedule 2.9(c) to the Crown Disclosure Letter, Crown has no Knowledge (i)
that, any certificate, permit or license from any Governmental Entity having
jurisdiction over any of the Crown Properties or any agreement, easement or
other right which is necessary to permit the ownership, lawful use, operation
and licensing of the management of the buildings and improvements on any of the
Crown Properties or which is necessary to permit the lawful use and operation of
all driveways, roads, utilities and other means of egress and ingress to and
from any of the Crown Properties has not been obtained and is not in full force
and effect, or of any pending threat of modification or cancellation of any of
the same, the absence of which would reasonably be expected to have a material
adverse effect on such Crown Property, (ii) of any written notice of any
violation of any federal, state or municipal law, ordinance, order, regulation
or requirement affecting any of the Crown Properties issued by any Governmental
Entity which would reasonably be expected to have a material adverse effect on
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such Crown Property, (iii) of any structural defects relating to any Crown
Property which would reasonably be expected to have a material adverse effect on
such Crown Property, (iv) of any Crown Property whose building systems are not
in working order so as to have a material adverse effect on such Crown Property,
(v) of any physical damage to any Crown Property in excess of $500,000 for which
there is not insurance in effect covering the cost of the restoration and the
loss of revenue (subject to a reasonable deduction or retention limit) or any
such physical damage that could reasonably give rise to a tenant's right to
terminate the Crown Space Lease applicable to such Crown Property, or (vi) of
current renovation or restoration to any Crown Properties that is underway or is
being completed, the cost of which exceeds $250,000.
(d) Condemnation; Zoning; Work. Except as set forth
in Schedule 2.9(d) to the Crown Disclosure Letter, neither of Crown nor any
Crown Subsidiary has received any written or published notice to the effect that
(i) any condemnation or involuntary rezoning proceedings are pending or
threatened with respect to any of the Crown Properties or (ii) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the Crown Properties or by the continued
maintenance, operation or use of the parking areas which would reasonably be
expected, with respect to both (i) and (ii), to have a material adverse effect
on such Crown Property. Except as set forth in Schedule 2.9(d) to the Crown
Disclosure Letter, (i) all work required to be performed, payments required to
be made and actions required to be taken prior to the date hereof pursuant to
any agreement entered into with a governmental body or authority in connection
with a site approval, zoning reclassification or other similar action relating
to any Crown Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) have been performed, paid or taken, as the
case may be, and (ii) Crown has no Knowledge of any planned or proposed work,
payments or actions that may be required after the date hereof pursuant to such
agreements, in each of case (i) and (ii) except as set forth in development or
operating budgets for such Crown Properties delivered to PREIT and PREIT
Partnership prior to the date hereof and other than those which would not
reasonably be expected to have a Crown Material Adverse Effect. As used in this
Agreement, "Environmental Mitigation" means investigation, clean-up, removal
action, remedial action, restoration, repair, response action, corrective
action, monitoring, sampling and analysis, installation, reclamation, closure or
post-closure in response to any actual or suspected environmental condition or
Hazardous Materials.
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(e) Rent Rolls. The rent rolls, dated as of May 2,
2003 and previously provided by Crown to PREIT, with respect to anchor tenants
(the "Anchor Tenants"), as identified therein, and all other tenants (the "Other
Tenants") identified therein (together, the "Crown Rent Roll") lists each Crown
Space Lease in effect as of the respective dates indicated in the Crown Rent
Roll and, except for omissions or discrepancies that, individually and in the
aggregate, would not reasonably be expected to have a Crown Material Adverse
Effect, all information set forth in the Crown Rent Roll is true, correct and
complete as of the date thereof. "Crown Space Lease" means each lease or other
right of occupancy affecting or relating to a property in which Crown (or an
entity in which it directly or indirectly has an interest) is the landlord,
either pursuant to the terms of the lease agreement or as successor to any prior
landlord, but excluding any Crown Ground Lease and agreements for space with a
non-renewable term of less than one year. Crown has made available to PREIT
true, correct and complete copies of all Crown Space Leases, including all
amendments, modifications, supplements, renewals, extensions and guarantees
related thereto, as of the date hereof. Except as set forth in a delinquency
report, dated as of May 2, 2003 and previously provided by Crown to PREIT,
neither Crown or any Crown Subsidiary, on the one hand, nor, to the Knowledge of
Crown or Crown Partnership, any other party, on the other hand, is in default
under any Crown Space Lease, except for such defaults that would not reasonably
be expected to have a Crown Material Adverse Effect.
(f) Reciprocal Operating Agreements. Schedule 2.9(f)
to the Crown Disclosure Letter sets forth a true and complete list of all
reciprocal operating or easement agreements (the "Crown Reciprocal Operating
Agreements") encumbering and or benefiting any Crown Properties in effect as of
the dates set forth therein. Crown has made available to PREIT true, correct and
complete copies of all Crown Reciprocal Operating Agreements, including all
amendments, modifications, supplements, renewals, extensions and guarantees
related thereto, as of the date hereof. Neither Crown or any Crown Subsidiary,
on the one hand, nor, to the Knowledge of Crown or Crown Partnership, any other
party, on the other hand, is in default under any Crown Reciprocal Operating
Agreement, except for such defaults that would not reasonably be expected to
have a Crown Material Adverse Effect.
(g) Ground Lease. None of Crown, Crown Partnership or
any Crown Subsidiary, as applicable, on the one hand, or, to the Knowledge of
Crown or Crown Partnership, another party, on the other hand, is in default
under any Crown Ground Lease, except for such defaults that would not reasonably
be expected to have a Crown Material Adverse Effect.
(h) Insurance. Schedule 2.9(h) to the Crown
Disclosure letter contains a true and complete list as of May 2, 2003, by type
of insurance, carrier, coverages (including limits) and term, of all material
policies of casualty, liability and other types of insurance (except title
insurance) carried by Crown or any Crown Subsidiary. All such policies are in
full force and effect and neither Crown nor any Crown Subsidiary has received
from any insurance company notice of any material defects or deficiencies
affecting the insurability of Crown or any Crown Subsidiary or any of their
respective assets thereunder.
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(i) Leasing Commissions, Fees and Tenant Improvement
Allowances. All leasing commissions, fees, tenant improvement allowances and
other tenant inducement costs (including the obligation on the part of the
landlord to install tenant improvements) due with respect to the current
unexpired term of each Crown Space Lease have been paid in full as of May 2,
2003 except as set forth on Schedule 2.9(i) to the Crown Disclosure Letter.
Schedule 2.9(i) to the Crown Disclosure Letter contains a true and complete list
as of May 2, 2003 of all leasing commissions, fees and tenant improvement
allowances that may be due under any Crown Space Lease upon a renewal,
extension, expansion or early termination of such Crown Space Lease.
2.10 Environmental Matters.
(a) "Environmental Law" shall mean all applicable
Laws, including any plans, other criteria, or guidelines promulgated pursuant to
such Laws, relating to noise control, or the protection of human health, safety
and natural resources, animal health or welfare or the environment, including,
without limitation, Laws relating to the use, manufacturing, production,
generation, installation, recycling, reuse, sale, storage, handling, transport,
treatment, release, threatened release or disposal of any Hazardous Materials
(including the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, 42 U.S.C. xx.xx. 9601 et seq. ("CERCLA")). "Hazardous
Materials" shall mean substances, wastes, radiation or materials (whether
solids, liquids or gases) (i) which are hazardous, toxic, infectious, explosive,
radioactive, carcinogenic, or mutagenic, (ii) which are listed, regulated or
defined under any Environmental Law, and shall include "hazardous wastes,"
"hazardous substances," "hazardous materials," "pollutants," "contaminants,"
"toxic substances," "radioactive materials" or "solid wastes," (iii) the
presence of which on property cause or threaten to cause a nuisance pursuant to
applicable statutory or common law upon the property or to adjacent properties,
(iv) which contain without limitation polychlorinated biphenyls (PCBs), asbestos
or asbestos-containing materials, lead-based paints, urea-formaldehyde foam
insulation, or petroleum or petroleum products (including, without limitation,
crude oil or any fraction thereof) or (v) which pose a hazard to human health,
safety, natural resources, industrial hygiene, or the environment, or an
impediment to working conditions. "Release" shall have the meaning set forth in
Section 101 of CERCLA, without regard to the exclusions set forth therein.
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(b) Except as disclosed in the Crown SEC Documents,
(i) neither Crown nor any of the Crown
Subsidiaries or, to Crown's Knowledge, any other Person has caused or permitted
the presence of any Hazardous Materials at, on or under any of the Crown
Properties, and neither Crown nor any of the Crown Subsidiaries has any
Knowledge of the presence of any Hazardous Materials at, on or under any of the
Crown Properties, in each of the foregoing cases, such that the presence of such
Hazardous Materials (including the presence of asbestos in any buildings or
improvements at the Crown Properties) would, individually or in the aggregate,
reasonably be expected to have a Crown Material Adverse Effect;
(ii) except in accordance with the
Environmental Permits, there have been no Releases of Hazardous Materials at,
on, under or from (A) the Crown Properties or (B) any real property previously
owned, operated or leased by Crown or the Crown Subsidiaries (the "Former Crown
Properties") during the period of such ownership, operation or tenancy in
violation of any applicable Environmental Law and which have not been remediated
in accordance with applicable Environmental Laws and Environmental Permits,
which Releases would, individually or in the aggregate, reasonably be expected
to have a Crown Material Adverse Effect;
(iii) (y) Crown and the Crown Subsidiaries
have not failed to comply with any Environmental Laws, and (z) neither Crown nor
any of the Crown Subsidiaries has any liability under the Environmental Laws,
except in each of cases (y) and (z) to the extent that any such failure to
comply or any such liability, individually or in the aggregate, would not
reasonably be expected to have a Crown Material Adverse Effect;
(iv) Crown and the Crown Subsidiaries have
been duly issued, and currently have and will maintain through the Closing Date,
all permits, licenses, certificates and approvals required under any
Environmental Law (collectively, the "Environmental Permits") necessary to
operate their businesses as currently operated except where the failure to
obtain and maintain such Environmental Permit would not, individually or in the
aggregate, reasonably be expected to have a Crown Material Adverse Effect. Crown
and the Crown Subsidiaries have filed applications for all Environmental Permits
necessary to operate their business as currently operated. Except as set forth
on Schedule 2.10(b)(iv) to the Crown Disclosure Letter, all of the Environmental
Permits are transferable and none require consent, notification or other action
to remain in full force and effect following consummation of the transactions
contemplated hereby; and
(v) except as set forth on Schedule 2.10(b)(v)
to the Crown Disclosure Letter, to the Knowledge of Crown, no mining of coal or
"other minerals", or "surface coal mining operations" or similar activities with
respect to "other minerals", as those terms are defined by the Federal Surface
Mining Control and Reclamation Act of 1977, as amended, 30 U.S.C. Section 1201
et seq., have occurred or are occurring at any of the Crown Properties.
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(c) Crown has previously delivered or made available
to PREIT complete copies of all material documents and reports, including,
without limitation, environmental investigations and testing or analysis that
are in the possession or control of any of Crown and the Crown Subsidiaries and
which relate to compliance with Environmental Laws by any of them or to the past
or current environmental condition of the Crown Properties.
2.11 Related Party Transactions. Set forth in Schedule 2.11 to
the Crown Disclosure Letter or in the Crown SEC Documents is a list of all
arrangements, agreements and contracts of Crown and any Crown Subsidiary or any
relative of any of the foregoing or any entity of which any of the foregoing is
an Affiliate entered into or modified since December 31, 1996 through the date
hereof that are required to be described in Item 404 of Regulation S-K under the
Securities Act. As used in this Agreement, the term "Affiliate" shall have the
same meaning as such term is defined in Rule 405 promulgated under the
Securities Act
2.12 Employee Benefits. As used herein, the term "Crown
Employee Plan" includes any pension, retirement, savings, disability, medical,
dental, health, life, death benefit, group insurance, profit sharing, deferred
compensation, stock option, equity compensation, bonus, incentive, vacation pay,
tuition reimbursement, severance pay, employment continuation, change of
control, fringe benefit or other employee benefit plan, trust, agreement,
contract, policy or commitment (including, without limitation, any employee
pension benefit plan, as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") ("Pension Plan"), and any employee welfare
benefit plan as defined in Section 3(1) of ERISA ("Welfare Plan")), whether any
of the foregoing is funded, insured or self-funded, written or oral, (i)
sponsored or maintained by Crown or any Crown Subsidiary (each, a "Crown
Controlled Group Member") and covering any Crown Controlled Group Member's
active or former employees (or their beneficiaries), (ii) to which any Crown
Controlled Group Member is a party or by which any Crown Controlled Group Member
(or any of the rights, properties or assets thereof) is bound or (iii) with
respect to which any Crown Controlled Group Member may otherwise have any
liability (whether or not such Crown Controlled Group Member still maintains
such Crown Employee Plan). Each Crown Employee Plan is listed on Schedule 2.12
to the Crown Disclosure Letter. Except as disclosed in Schedule 2.12 to the
Crown Disclosure Letter, with respect to the Crown Employee Plans:
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(a) No Crown Controlled Group Member has any
continuing liability, including any post-retirement medical, dental, life
insurance or other benefits, under any Welfare Plan which provides for
continuing benefits or coverage for any participant or any dependent or
beneficiary of a participant after such participant's termination of employment,
except as may be required by Section 4980B of the Code or Section 601 (et seq.)
of ERISA ("COBRA"), or under any applicable state law, the cost of which is
fully paid by the participant or the dependent or beneficiary of the
participant. Schedule 2.12(a) to the Crown Disclosure Letter sets forth a true,
correct and complete list of (i) each former employee of Crown Partnership who
is entitled to benefits under COBRA as of the date of this Agreement and (ii)
the Welfare Plan under which such benefits are to be provided.
(b) Each Crown Employee Plan complies in all material
respects with the applicable requirements of ERISA, the Code, the Securities
Act, the Exchange Act and any other applicable laws governing such Crown
Employee Plan, and each Crown Employee Plan has at all times been properly
administered in all material respects in accordance with all such requirements
of the law and all regulations issued thereunder, and in accordance with its
terms and the terms of any applicable collective bargaining agreement to the
extent consistent with all such requirements of law. Each Pension Plan is
qualified under Section 401(a) of the Code, and each trust established by each
Pension Plan is exempt from federal income tax under Section 501(a) of the Code.
Each Pension Plan is, and from its establishment has been, the subject of a
favorable determination letter from the IRS stating that such Pension Plan meets
the requirements of Section 401(a) of the Code and that the trust associated
with such Pension Plan is tax-exempt under Section 501(a) of the Code. No event
has occurred since the date of each Pension Plan's last determination letter
that would jeopardize the qualified status of any such plan or the tax exempt
status of any such trust under Sections 401(a) and 501(a) of the Code,
respectively. No lawsuits, claims (other than routine claims for benefits) or
complaints to, or by, any Person, governmental entity, regulatory body or
arbiter have been filed, are pending or are threatened with respect to any Crown
Employee Plan and there is no fact or contemplated event that would give rise to
any such lawsuit, claim (other than routine claims for benefits) or complaint
with respect to any Crown Employee Plan. Without limiting the foregoing, the
following are true with respect to each Crown Employee Plan:
(i) all Crown Controlled Group Members have complied in
all material respects with the reporting and
disclosure requirements of both ERISA and the Code
with respect to each Crown Employee Plan and no Crown
Controlled Group Member has incurred any liability in
connection with such reporting or disclosure
requirements or has knowledge of any facts or
contemplated events that would be expected to give
rise to any liability in connection with such
reporting or disclosure requirements;
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(ii) all contributions and payments with respect to the
Crown Employee Plans that are required to be made by
a Crown Controlled Group Member with respect to
periods ending on or before the Closing Date have
been, or will be, made or accrued before the Closing
Date in accordance with the appropriate plan
document, actuarial report, collective bargaining
agreements, insurance contracts or arrangements, or
as otherwise required by either ERISA or the Code and
no Crown Controlled Group Member shall take any
actions relating to the Crown Employee Plans that
will increase PREIT's or PREIT Partnership's
obligations under the Crown Employee Plans after the
Closing Date;
(iii) with respect to each Crown Employee Plan, to the
extent applicable, Crown has delivered to or has made
available to PREIT true and complete copies of (A)
all plan documents, or any and all other documents
that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all
amendments thereto, (B) the most recent determination
letter, if any, received from the Internal Revenue
Service (the "IRS"), (C) the three most recent IRS
Form 5500 Annual Return/Reports (and all schedules
and reports relating thereto) and actuarial reports,
(D) all related trust agreements, insurance contracts
or other funding agreements maintained in connection
with each such Crown Employee Plan, (E) all
Department of Labor opinions on any Crown Employee
Plan and all correspondence relating to the request
for and receipt of any such opinions, (F) all IRS
rulings, opinions or technical advice relating to any
Crown Employee Plan and all correspondence relating
to any request for and receipt of any such rulings,
opinions, or technical advice, and (G) any other
correspondence with or other submissions filed with
any governmental or regulatory entity; and
(iv) all statements made by or on the behalf of a Crown
Controlled Group Member to the IRS, the Department of
Labor or any other governmental or regulatory entity
with respect to each Crown Employee Plan were true
and correct when made and continue to be true and
correct.
(c) With respect to each Crown Employee Plan, there
has not occurred, and no Person is contractually bound to enter into, any
"prohibited transaction" within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of
the Code or Section 408 of ERISA.
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(d) No Crown Employee Plan is a Defined Benefit Plan
as defined in Section 3(35) of ERISA and no Crown Controlled Group Member has
ever maintained or been obligated to contribute to any Defined Benefit Plan.
(e) No Crown Employee Plan is a Multiemployer Plan as
such term is defined in Section 3(37) of ERISA.
(f) No Crown Employee Plan is an Employee Stock
Ownership Plan as such term is defined in Section 4975(e)(7) of the Code.
(g) No Crown Employee Plan is a Qualified Foreign
Plan as such term is defined in Section 404A of the Code and no Crown Employee
Plan is subject to the laws or regulations of any other jurisdiction other than
the United States of America or one of its political subdivisions.
(h) No Pension Plan has been terminated in the past
five years.
(i) No Welfare Plan is a Voluntary Employees'
Beneficiary Association as such term is defined in Section 501(c)(9) of the
Code.
(j) All Welfare Plans and their related trusts comply
with and have been administered in material compliance with (i) Section 4980B of
the Code and Sections 601 through 609 of ERISA and all Department of Treasury
and Department of Labor regulations issued thereunder, respectively, and (ii)
the Health Insurance Portability and Accountability Act of 1996 and all
Department of Labor regulations issued thereunder.
(k) With respect to each Crown Employee Plan
maintained by any Crown Controlled Group Member, each such Crown Employee Plan
provides the Plan Sponsor the authority to amend or terminate the Crown Employee
Plan at any time, subject to the applicable requirements of ERISA and the Code.
(l) Except as set forth on Schedule 2.12(l) to the
Crown Disclosure Letter, no Crown Controlled Group Member has any pending unfair
labor practice charges, contract grievances under any collective bargaining
agreement or other administrative charges, claims, grievances or lawsuits before
any court, governmental agency, regulatory body or arbiter.
2.13 Crown Employee Plans and Employees.
(a) The employee handbooks of Crown and the Crown
Subsidiaries currently in effect have been delivered to PREIT and fairly and
accurately summarize in all material respects all generally applicable employee
policies, vacation policies and payroll policies. Schedule 2.13 to the Crown
Disclosure Letter contains a true and accurate list of all employees to whom
Crown, Crown Partnership or any Crown Subsidiary is paying compensation,
including bonuses and incentives, at an annual rate in excess of Fifty Thousand
Dollars ($50,000) for services rendered or otherwise and the current annual rate
of compensation for such employees. Except as set forth on Schedule 2.13 to the
Crown Disclosure Letter, no employee or independent contractor of Crown, Crown
Partnership or any Crown Subsidiary will be paid any amount that is not
deductible under Section 162(a) of the Code or that is an "excess parachute
payment" under Section 280G of the Code.
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(b)(1) Neither Crown nor any of the Crown
Subsidiaries other than Crown Partnership or Crown American Services Corporation
("CASC") employs, or in the last three years has employed, any Person as an
employee. Schedule 2.13(b)(1) to the Crown Disclosure Letter sets forth a true,
correct and complete list of each employee terminated or laid off by Crown
Partnership or CASC, or whose regularly scheduled working hours have been
reduced by more than 50%, from February 11, 2003 through May 2, 2003, and the
following information for each such employee: (i) name; (ii) date of such
termination, layoff or reduction in hours; (iii) reason for such termination,
layoff or reduction in hours; and (iv) location to which the employee was
assigned. Crown, Crown Partnership and CASC are in compliance with the Worker
Adjustment and Retraining Notification Act (the "WARN Act"), and all similar
state or local Laws, and to their Knowledge, have not violated any such Laws
within the last two years.
(2) Schedule 2.13(b)(2) to the Crown Disclosure
Letter sets forth a true, correct and complete list of each employee of Crown
Partnership and CASC as of May 2, 2003, including employees on approved leaves
of absence, and the following information for each such employee: (i) name; (ii)
position/title; (iii) Social Security number; (iv) years of service with Crown
Partnership and/or CASC and any predecessors thereto; (v) last rate of base
compensation; and (vi) location to which the employee was assigned.
2.14 Taxes.
(a) Except as set forth on Schedule 2.14(a) to the
Crown Disclosure Letter: (i) Each of Crown and the Crown Subsidiaries (A) has
filed all Tax returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so), and all such returns and reports are accurate and complete
in all respects, (B) has paid (or Crown has paid on its behalf) all Taxes owed
by it (whether or not shown on such returns and reports), and (C) has complied
in all respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes (including, without limitation, withholding of
Taxes pursuant to Sections 1441, 1442, 1445, 1446, 3121, and 3402 of the Code)
and has, within the time period prescribed by law, withheld and paid over to the
proper Governmental Entities all amounts required to be so withheld and paid
over under applicable laws and regulations, except, with respect to all of the
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foregoing, where the failure to file such tax returns or reports or failure to
pay such Taxes or failure to comply with such withholding requirements would not
reasonably be expected to have a Crown Material Adverse Effect; (ii) to the
Knowledge of Crown, no claim has ever been made by a Governmental Entity in a
jurisdiction where Crown or the Crown Subsidiaries do not file a Tax return that
Crown or any Crown Subsidiary may be the subject of Taxation in that
jurisdiction; (iii) the most recent audited financial statements contained in
the Crown SEC Documents reflect an adequate reserve for all material Taxes
payable by Crown and the Crown Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements; (iv) since the Crown
Financial Statement Date, Crown has incurred no liability for Taxes under
Sections 857(b), 860(c) or 4981 of the Code, including without limitation any
Tax arising from a prohibited transaction described in Section 857(b)(6) of the
Code or any Tax arising or resulting from redetermined rents, redetermined
deductions or excess interest described in Section 857(b)(7) of the Code, and
neither Crown nor any Crown Subsidiary has incurred any liability for Taxes
other than in the ordinary course of business; (v) no event has occurred, and no
condition or circumstance exists, which presents a material risk that any
material Tax described in the preceding sentences will be imposed upon Crown or
any Crown Subsidiary; (vi) neither Crown nor any Crown Subsidiary is the subject
of any audit, examination, or other proceeding in respect of federal income
Taxes, and to Crown's Knowledge, no audit, examination or other proceeding in
respect of federal income Taxes involving any of Crown or any Crown Subsidiary
is being considered by any Tax authority and, except for audits completed prior
to December 31, 1997, no audit, examination, or other proceeding in respect of
federal income taxes involving Crown or any Crown Subsidiary has occurred; and
(vii) to the Knowledge of Crown, there are no pending deficiencies for any Taxes
that have been proposed, asserted or assessed against Crown or any Crown
Subsidiary, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending.
As used in this Agreement, "Taxes" shall include all
taxes, charges, fees, levies and other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding
(including, without limitation, dividend withholding and withholding required
pursuant to Sections 1445 and 1446 of the Code), social security, occupation,
use, service, license, payroll, franchise, transfer and recording taxes, fees
and charges, including estimated taxes, imposed by the United States or any
taxing authority (domestic or foreign), whether computed on a separate,
consolidated, unitary, combined or any other basis, and any interest, fines,
penalties or additional amounts attributable to, or imposed upon, or with
respect to any such taxes, charges, fees, levies or other assessments.
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(b) Crown (i) for all taxable years for which the IRS
could assert a Tax liability, has been subject to taxation as a real estate
investment trust (a "REIT") within the meaning of Section 856 of the Code and
has qualified as a REIT for all such years, (ii) has operated since December 31,
2002 to the date of this representation, and intends to continue to operate, in
such a manner as to qualify as a REIT for the taxable year ending on the earlier
of December 31, 2003 or the Effective Time and, if later, for the taxable year
ending on the Effective Time, and (iii) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its status
as a REIT and, to Crown's Knowledge, no such challenge is pending or threatened.
Each Crown Subsidiary that is a partnership, business, trust, joint venture or
limited liability company either (A) (i) has been treated since its formation
and continues to be treated for federal income tax purposes either as a
partnership or as an entity that is disregarded for federal income tax purposes
and not as a corporation or as an association taxable as a corporation and (ii)
has not since the later of its formation or the acquisition by Crown of a direct
or indirect interest therein, owned any assets (including, without limitation,
securities) that would cause Crown to violate Section 856(c)(4) of the Code or
(B) has been treated since its formation and continues to be treated for federal
income tax purposes as a corporation that qualifies as (x) a REIT within the
meaning of Section 856 of the Code, (y) a qualified REIT subsidiary under
Section 856(i) of the Code, or (z) a taxable REIT subsidiary under Section
856(l) of the Code. Crown Partnership is not a publicly traded partnership
within the meaning of Section 7704(b) of the Code that is taxable as a
corporation pursuant to Section 7704(a) of the Code. For all tax years in which
the IRS could assert a tax liability, each such corporation and each other
issuer in which Crown holds or has held securities (within the meaning of
Section 856(c) of the Code but excluding "straight debt" of issuers described in
Section 856(c)(7)) having a value of more than 10% of the total value of the
outstanding securities of such issuer has qualified at all times as either a
REIT within the meaning of Section 856 of the Code, a qualified REIT subsidiary
under Section 856(i) of the Code, or a taxable REIT subsidiary under Section
856(l) of the Code. Neither Crown nor any Crown Subsidiary holds any asset (x)
the disposition of which would be subject to rules similar to Section 1374 of
the Code as a result of IRS Notice 88-19, Temporary Treas. Regs. ss.1.337(d)-5T,
ss.1.337(d)-6T or ss.1.337(d)-7T, or (y) which is subject to a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder.
(c) To Crown's Knowledge, as of the date hereof,
Crown is a "domestically-controlled" REIT within the meaning of Section
897(h)(4)(B) of the Code.
(d) There are no liens for Taxes upon the assets of
Crown or the Crown Subsidiaries, other than liens for Taxes not yet due and
payable.
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(e) Neither Crown nor any Crown Subsidiary is party
to any Tax allocation or sharing agreement.
(f) Crown does not have any liability for the Taxes
of any person other than Crown and the Crown Subsidiaries, and the Crown
Subsidiaries do not have any liability for the Taxes of any person other than
Crown and the Crown Subsidiaries (A) under Treas. Reg.ss.1.1502-6 (or any
similar provision of state, local or foreign law), (B) as transferee or
successor, (C) by contract, or (D) otherwise.
(g) Crown and the Crown Subsidiaries have not taken
any positions on any of their federal income Tax returns which could reasonably
be expected to give rise to a substantial underpayment of Tax under Section 6662
of the Code.
(h) Neither Crown nor any of the Crown Subsidiaries
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Effective Time as a result of any: (A) change in method of
accounting for taxable period ending on or prior to the Effective Time under
Code Section 481(c) (or any corresponding or similar provision of state, local
or foreign income Tax law); (B) "closing agreement" as described in Code Section
7121 (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Effective Time; (C) installment sale
or open transaction disposition made on or prior to the Effective Time; or (D)
prepaid amount received on or prior to the Effective Time.
(i) Neither Crown Partnership nor any Crown
Subsidiary that is a partnership for federal income tax purposes has made, with
regard to any taxable year since its formation (including, without limitation,
its taxable year ended December 31, 2002 and any short taxable year ending at
the Effective Time), an election under Section 754 of the Code.
2.15 No Payments to Employees, Officers or Trustees. Schedule
2.15 to the Crown Disclosure Letter contains a true and complete list of all
arrangements, agreements or plans pursuant to which cash and non-cash payments
are or will become payable to each employee, officer, director or trustee of
Crown or any Crown Subsidiary as a result of the Merger, the other transactions
contemplated by this Agreement, or a termination of service subsequent to the
consummation of the Merger. Except as described in Schedule 2.15 to the Crown
Disclosure Letter, or as otherwise provided for in this Agreement, there is no
employment or severance contract, or other agreement requiring payments,
cancellation of indebtedness or other obligation to be made on a change of
control or otherwise as a result of the consummation of any of the transactions
contemplated by this Agreement or as a result of a termination of service
subsequent to the consummation of any of the transactions contemplated by this
Agreement, with respect to any employee, officer, director or trustee of Crown
or any Crown Subsidiary. Except as described in Schedule 2.15 to the Crown
Disclosure Letter, there is no agreement or arrangement with any employee,
officer or other service provider under which Crown or any Crown Subsidiary has
agreed to pay any tax that might be owed under Section 4999 of the Code with
respect to payments to such individuals.
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2.16 Broker; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other Person, other than Wachovia
Securities, the fees and expenses of which are described in that certain
engagement letter dated February 13, 2002 between Wachovia Securities and Crown,
as amended on March 17, 2003, true, correct and complete copies of which have
previously been given to PREIT, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Crown or any
Crown Subsidiary.
2.17 Compliance with Laws. Neither Crown nor any Crown
Subsidiary has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity or award
to any arbitration applicable to its business, properties or operations, except
in each case to the extent that such violation or failure would not reasonably
be expected to have a Crown Material Adverse Effect.
2.18 Contracts; Debt Instruments.
(a) Default. Except as set forth on Schedule 2.18(a)
to the Crown Disclosure Letter, neither Crown nor any Crown Subsidiary (i) has
received a written notice in 2002 or 2003 that it is in violation of or in
default under any lease to which it is a party or by which it or any of its
properties or assets is bound or (ii) has received a written notice that it is
in violation of or in default under (or that there exists any condition which
upon the passage of time or the giving of notice or both would reasonably be
expected to cause such a violation of or default under) any (A) loan or credit
agreement, note, bond, mortgage, debenture, indenture, or (B) material permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, and no such violation or default exists.
(b) Indebtedness. Schedule 2.18(b) to the Crown
Disclosure Letter sets forth a list of each loan or credit agreement, note,
bond, mortgage, indenture and any other agreement or instrument pursuant to
which any Indebtedness of Crown or any of the Crown Subsidiaries, is outstanding
or may be incurred. "Indebtedness" shall mean: (i) obligations in respect of
money borrowed; (ii) obligations (other than trade debt incurred in the ordinary
course of business), whether or not for money borrowed (A) represented by notes
payable, or drafts accepted, in each case representing extensions of credit, (B)
evidenced by bonds, debentures, notes or similar instruments, or (C)
constituting purchase money indebtedness, conditional sales contracts, title
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retention debt instruments or other similar instruments, upon which interest
charges are customarily paid or that are issued or assumed as full or partial
payment for property; (iii) all capitalized lease obligations; (iv) all
reimbursement obligations under any letters of credit or acceptances that have
been presented for payment; (v) all obligations under interest rate cap, swap,
collar or similar transaction or currency hedging transactions (valued at the
termination value thereof); (vi) all Indebtedness of other Persons which (A)
such Person has guaranteed (other than guarantees which are solely guarantees of
performance and not of payment and other guarantees of such Person for
liabilities arising from reasonable and customary exceptions to nonrecourse
indebtedness, such as for fraud, willful misrepresentation, misapplication of
funds (including misappropriation of security deposits and failure to apply
rents to operating expenses or debt service), indemnities relating to
environmental matters and waste of property constituting security for such
nonrecourse indebtedness and other similar exceptions to recourse liability) or
is otherwise recourse to such Person or (B) is secured by a Lien on any property
of such Person; provided, that such Indebtedness shall be limited to the value
of such property so encumbered; and (vii) the recourse share of all Indebtedness
of any partnership of which such Person is a general partner. For purposes of
the foregoing, preferred equity of a Person shall not be considered to be
Indebtedness.
(c) Interest Rate Agreements. To the extent not set
forth in response to the requirements of Section 2.18(b), Schedule 2.18(c) to
the Crown Disclosure Letter sets forth each interest rate cap, interest rate
collar, interest rate swap, currency hedging transaction, and any other
agreement relating to a similar transaction to which Crown or any Crown
Subsidiary is a party or an obligor with respect thereto.
(d) Prepayment Restrictions. Except as set forth in
Schedule 2.18(d) to the Crown Disclosure Letter, neither Crown nor any Crown
Subsidiary is a party to any agreement which would restrict any of them from
prepaying any of their Indebtedness without penalty or premium at any time or
which requires any of them to maintain any amount of Indebtedness with respect
to any of the Crown Properties.
(e) Management Agreements. Neither Crown nor any
Crown Subsidiary is a party to any agreement relating to the management of any
Crown Property by any Person other than Crown or a Crown Subsidiary. Neither
Crown nor any Crown Subsidiary is a party to any agreement pursuant to which
Crown or any Crown Subsidiary manages or provides services with respect to any
real properties other than Crown Properties, except for the agreements listed in
Schedule 2.18(e) to the Crown Disclosure Letter.
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(f) Property Related Agreements. Except as set forth
in Schedule 2.18(f) to the Crown Disclosure Letter or as otherwise disclosed in
Section 2.5 and this Section 2.18, neither Crown nor any Crown Subsidiary has
entered into any service, operating, listing, brokerages, supply and maintenance
agreement, equipment lease, or other agreements with a third-party relating to
operations at the Crown Properties, other than those that involve total payment
by Crown or Crown Subsidiary of no more than $100,000 per annum and are
terminable by Crown or a Crown Subsidiary without penalty upon (i) one (1) year
prior written notice or less or (ii) ninety (90) days' prior written notice upon
sale of the Crown Property. Neither Crown or any Crown Subsidiary, on the one
hand, nor, to the Knowledge of Crown or Crown Partnership, any other party, on
the other hand, is in default under any of the agreements set forth in Schedule
2.18(f) to the Crown Disclosure Letter.
(g) Budget. Crown has delivered to PREIT prior to the
date of this Agreement a true and complete capital budget for the year 2003
relating to budgeted capital improvements and development. Schedule 2.18(g) to
the Crown Disclosure Letter lists all material agreements entered into by Crown
and Crown Subsidiaries relating to the development or construction of, or
additions or expansions to, any Crown Real Properties (or any properties with
respect to which Crown has executed as of the date of this Agreement a purchase
agreement or other similar agreement) which are currently in effect and under
which Crown or any of the Crown Subsidiaries currently has, or expects to incur,
an obligation in excess of $250,000 in the aggregate in the future. True,
correct and complete copies of such agreements have previously been delivered or
made available to PREIT.
(h) Purchase and Sale Agreements. Schedule 2.18(h) to
the Crown Disclosure Letter lists all agreements entered into by Crown or any
Crown Subsidiary providing for the sale of, or option to sell, any Crown
Properties or the purchase of, or option to purchase, by Crown or any Crown
Subsidiary, any real estate not yet consummated as of the date hereof.
(i) Contractual Liability. Except as set forth in
Schedule 2.18(i) to the Crown Disclosure Letter, neither Crown nor any Crown
Subsidiary has any material continuing contractual liability (A) for
indemnification or otherwise under any agreement relating to the sale of real
estate previously owned, whether directly or indirectly, by Crown or any Crown
Subsidiary or (B) to pay any additional purchase price for any of the Crown
Properties.
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(j) Tax Protection Agreements. Except as set forth in
Schedule 2.18(j) to the Crown Disclosure Letter, neither Crown nor any Crown
Subsidiary has entered into or is subject, directly or indirectly, to any Crown
Tax Protection Agreements. As used herein, a "Crown Tax Protection Agreement" is
an agreement, oral or written, (A) that has as one of its purposes to permit a
Person to take the position that such Person could defer federal taxable income
that otherwise might have been recognized upon a transfer of property to the
Crown Partnership or any other Crown Subsidiary that is treated as a partnership
for federal income tax purposes, and that (i) prohibits or restricts in any
manner the disposition of any assets of Crown or any Crown Subsidiary, (ii)
requires that Crown or any Crown Subsidiary maintain, put in place, or replace,
indebtedness, whether or not secured by one or more of the Crown Properties, or
(iii) requires that Crown or any Crown Subsidiary offer to any Person at any
time the opportunity to guarantee or otherwise assume, directly or indirectly
(including, without limitation, through a "deficit restoration obligation,"
guarantee (including, without limitation, a "bottom" guarantee), indemnification
agreement or other similar arrangement), the risk of loss for federal income tax
purposes for indebtedness or other liabilities of Crown or any Crown Subsidiary,
(B) that specifies or relates to a method of taking into account book-tax
disparities under Section 704(c) of the Code with respect to one or more assets
of Crown or a Crown Subsidiary, or (C) that requires a particular method for
allocating one or more liabilities of Crown or any Crown Subsidiary under
Section 752 of the Code. Neither Crown nor any Crown Subsidiary is in violation
of or in default under any Crown Tax Protection Agreement.
2.19 Opinions of Financial Advisor. Crown has received the
written opinion of Wachovia Securities, Crown's financial advisor, to the effect
that the consideration to be received by the holders of Crown Common Shares
pursuant to the Merger is fair to such holders from a financial point of view.
2.20 State Takeover Statutes. Crown has taken all action
necessary to exempt the transactions contemplated by this Agreement between
PREIT and Crown and its Affiliates from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute enacted under the laws of the state or federal laws of the
United States or similar statute or regulation (a "Takeover Statute").
2.21 Rights Agreement. The Board of Trustees of Crown has
resolved, and Crown has taken all action necessary, to render the rights (the
"Crown Rights") issued pursuant to the terms of that certain Rights Agreement,
dated as of January 20, 2000, between Crown and American Stock Transfers and
Trust Company, as rights agent (the "Crown Rights Agreement"), inapplicable to
(i) the execution of this Agreement and the Merger Documents (ii) the Merger and
(iii) the transactions contemplated by this Agreement and the Merger Documents.
The Crown Rights Agreement has been amended so that (a) PREIT and each of its
Subsidiaries is exempt from the definition of "Acquiring Person" (as defined in
the Crown Rights Agreement), (b) no "Share Acquisition Date," "Distribution
Date," or "Flip-Over Entity" (as such terms are defined in the Crown Rights
Agreement) will occur as a result of the execution and delivery of this
Agreement or the consummation of the Merger pursuant to this Agreement and (c)
the Crown Rights Agreement will expire immediately prior to the Effective Time.
The Crown Rights Agreement, as amended in accordance with the preceding
sentence, has not been further amended or modified. Copies of all existing
amendments to the Crown Rights Agreement have been previously provided to PREIT.
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2.22 Investment Company Act of 1940. Neither Crown nor any of
the Crown Subsidiaries is, or at the Effective Time will be, required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
2.23 Definition of "Knowledge of Crown". As used in this
Agreement, the phrase "Knowledge of Crown" (or words of similar import) means
the actual knowledge of those individuals identified in Schedule 2.23 to the
Crown Disclosure Letter.
2.24 Required Shareholder Approvals and Partner Approvals. The
affirmative vote of the holders of at least a majority of the Crown Common
Shares outstanding and entitled to vote and voting together as a single class
are the only votes of the holders of any class or series of Crown capital shares
necessary or required under this Agreement or under applicable law to approve
the Merger and this Agreement. The approval of Crown, the affirmative vote of at
least a majority of Crown limited partner interests, and the affirmative vote of
Xxxx X. Xxxxxxxxxxx (acting as the designated representative of CIT and CAIC),
voting in accordance with the Crown Partnership Agreement, are the only votes of
the holders of any class or series of Crown Partnership's partnership interests
necessary or required under this Agreement or under applicable law to approve
the execution, delivery and performance of this Agreement, the Merger, or the
withdrawal of Crown as general partner.
2.25 Intellectual Property. Except as set forth in Schedule
2.25 to the Crown Disclosure Letter, to the Knowledge of Crown, neither Crown
nor any Crown Subsidiary is infringing upon any intellectual property rights of
any other Person nor, to the Knowledge of Crown, is any other Person infringing
on any of Crown or Crown Subsidiaries' rights in respect of the intellectual
property owned and used by any of such entities.
2.26 Documents. Crown and Crown Partnership have made
available to PREIT true, correct and complete copies of all documents referenced
in any schedules attached hereto.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PREIT AND PREIT PARTNERSHIP
Except as specifically set forth in the letter of even date
herewith delivered to Crown prior to the execution hereof and signed by each of
the Chief Executive Officer and Chief Financial Officer, in such capacity, of
PREIT as the disclosure letter to this Agreement (the "PREIT Disclosure
Letter"), PREIT and PREIT Partnership jointly and severally represent and
warrant to Crown and Crown Partnership as follows as of the date hereof:
3.1 Organization, Standing and Power. PREIT is a business
trust duly organized, validly existing and in good standing under the laws of
Pennsylvania. PREIT has all requisite power and authority to own, operate, lease
and encumber its properties and carry on its business as now being conducted.
The PREIT Trust Agreement is in effect, and no dissolution, revocation or
forfeiture proceedings regarding PREIT have been commenced. PREIT is duly
qualified or licensed to do business as a foreign entity and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not reasonably be expected to have a
PREIT Material Adverse Effect. As used in this Agreement, a "PREIT Material
Adverse Effect" means any circumstance, event, occurrence, change or effect that
is materially adverse to the business, properties, assets (tangible or
intangible), financial condition or results of operations of PREIT, PREIT
Partnership and the PREIT Subsidiaries, taken as a whole, except, in each case,
as a result of (i) changes in general economic conditions nationally or
regionally, (ii) changes affecting the real estate industry generally which do
not affect PREIT or PREIT Partnership, as the case may be, materially
disproportionately relative to other participants in the real estate industry
similarly situated, or (iii) in and of itself and without the occurrence of any
other PREIT Material Adverse Effect, changes in the trading prices of PREIT
Common Shares. PREIT has delivered to Crown complete and correct copies of each
of the PREIT Trust Agreement and the PREIT Bylaws, in each case as amended or
supplemented to the date of this Agreement.
3.2 PREIT Subsidiaries.
(a) Schedule 3.2(a) to the PREIT Disclosure Letter
sets forth (i) each Subsidiary of PREIT (the "PREIT Subsidiaries"), (ii) the
ownership interest therein of PREIT, (iii) if not directly or indirectly wholly
owned by PREIT, the identity and ownership interest of each of the other owners
of such PREIT Subsidiary, (iv) each property owned by such PREIT Subsidiary, and
(v) if not wholly owned by such PREIT Subsidiary, the identity and ownership
interest of each of the other owners of such property.
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(b) Except as set forth in Schedule 3.2(b) to the
PREIT Disclosure Letter, (i) all of the outstanding shares of capital stock in
each PREIT Subsidiary that is a corporation which are owned by PREIT, a PREIT
Subsidiary or by PREIT and a PREIT Subsidiary have been duly authorized, validly
issued and are (A) fully paid and nonassessable and not subject to preemptive or
similar rights and (B) owned free and clear of all Liens and (ii) all equity
interests in each PREIT Subsidiary that is a partnership, joint venture, limited
liability company or trust which are owned by PREIT, a PREIT Subsidiary or by
PREIT and a PREIT Subsidiary are owned free and clear of all Liens other than
pledges, if any, contained in organizational documents of such PREIT Subsidiary
and given to secure performance thereunder. Each PREIT Subsidiary that is a
corporation is duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to own, operate, lease and encumber its properties and carry
on its business as now being conducted, and each PREIT Subsidiary that is a
partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Each PREIT
Subsidiary is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary.
Complete and correct copies of the articles of incorporation, bylaws,
organization documents and partnership, joint venture and operating agreements
of each PREIT Subsidiary, as amended to the date of this Agreement, have been
previously delivered or made available to Crown.
(c) There are no attachments, executions or general
assignments for the benefit of creditors, or voluntary or involuntary proceeding
in bankruptcy, or under any debtor relief laws, contemplated by or pending or,
to the Knowledge of PREIT, threatened against PREIT or a PREIT Subsidiary.
3.3 Capital Structure.
(a) The authorized shares of beneficial interest of
PREIT consist of 100,000,000 PREIT Common Shares (par value $1 per share),
16,754,458 of which were issued and outstanding as of May 9, 2003, and
25,000,000 undesignated preferred shares of beneficial interest, none of which
were issued and outstanding as of the date of this Agreement.
(b) Set forth in Schedule 3.3(b) to the PREIT
Disclosure Letter is a true and complete list of the following: (i) each
qualified or nonqualified option to purchase PREIT Common Shares issued and
outstanding under any PREIT employee or non-employee trustee stock option plan
or any other formal or informal arrangement (collectively, the "PREIT Options");
and (ii) except for the PREIT Rights and the PREIT OP Units, all other warrants
or other rights to acquire PREIT's shares of beneficial interest, all stock
appreciation rights, phantom shares, restricted stock, dividend equivalents,
deferred compensation accounts, performance awards and other awards which are
outstanding on the date of this Agreement. Schedule 3.3(b) to the PREIT
Disclosure Letter sets forth for each PREIT Option, the name of the grantee, the
date and type of each grant, the status of each PREIT Option as qualified or
nonqualified under Section 422 of the Code, the number of PREIT Common Shares
subject to each PREIT Option, the number and type of PREIT Common Shares subject
to PREIT Options that are currently exercisable, the exercise price per share,
and the number and type of such shares subject to stock appreciation rights. On
the date of this Agreement, except as set forth in this Section 3.3 or excepted
therefrom or as set forth in Schedule 3.3(b) to the PREIT Disclosure Letter, no
PREIT Common Shares were outstanding or reserved for issuance.
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(c) All outstanding shares of beneficial interest of
PREIT are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights under law or the PREIT Trust Agreement
or PREIT Bylaws, or any contract or instrument to which Crown is a party or by
which it is bound. There are no bonds, debentures, notes or other indebtedness
of PREIT having the right to vote (or convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any matters on which
shareholders of PREIT may vote.
(d) Other than as provided in the PREIT Partnership
Agreement or as set forth in this Section 3.3 or in Schedule 3.3(b) to the PREIT
Disclosure Letter, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which PREIT or any PREIT Subsidiary
is a party or by which such entity is bound, obligating PREIT or any PREIT
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of beneficial interest, voting securities or other ownership
interests of PREIT or any PREIT Subsidiary or obligating PREIT or any PREIT
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking (other
than to PREIT or a PREIT Subsidiary).
(e) As of May 9, 2003, 18,701,007.60 PREIT OP Units,
of which 93,313.84 are general partnership units, 17,940,833.76 are PREIT Class
A Units and 666,860 are PREIT Class B Units, are validly issued and outstanding,
fully paid and nonassessable and not subject to preemptive or similar rights
under law or the PREIT Partnership Agreement, or any contract or instrument to
which PREIT or PREIT Partnership is a party or by which either is bound.
Schedule 3.3(e) to the PREIT Disclosure Letter sets forth the name of each
holder of PREIT OP Units and the number of PREIT OP Units owned by each such
holder as of the date of this Agreement. Except as provided in the PREIT
Partnership Agreement or as contemplated by this Agreement, the PREIT OP Units
are not subject to any restrictions imposed by PREIT Partnership on the
transfer, assignment, pledge, distribution, encumbrance or other disposition
thereof (either voluntarily or involuntarily and with or without consideration)
or on the exercise of the voting rights thereof provided in the PREIT
Partnership Agreement. Except as provided in the PREIT Partnership Agreement,
PREIT Partnership has not issued or granted and is not a party to any
outstanding commitments of any kind relating to, or any presently effective
agreements or understandings with respect to, the issuance or sale of interests
in PREIT Partnership, whether issued or unissued, or securities convertible into
or exchangeable or exercisable for interests in PREIT Partnership.
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(f) Except as set forth in Schedule 3.3(f) to the
PREIT Disclosure Letter, all dividends on PREIT Common Shares and all
distributions on PREIT OP Units, which have been declared prior to the date of
this Agreement, have been paid in full.
(g) Set forth on Schedule 3.3(g) to the PREIT
Disclosure Letter is a list of each registration rights agreement or other
agreement between PREIT, a PREIT Subsidiary, on the one hand, and one or more
other parties, on the other hand, which grants any such other party or parties
the right to cause the registration of any securities of PREIT and/or a PREIT
Subsidiary pursuant to the Securities Act.
(h) The PREIT Common Shares and PREIT Senior
Preferred Shares to be issued by PREIT, and the PREIT Class A Units and PREIT
Class B Units to be issued by PREIT Partnership, pursuant to this Agreement and
the transactions contemplated hereby have been duly authorized for issuance, and
upon issuance will be duly and validly issued, fully paid and nonassessable.
3.4 Other Interests. Except for interests in the PREIT
Subsidiaries and certain other entities as set forth in Schedule 3.4 to the
PREIT Disclosure Letter (the "PREIT Other Interests"), none of PREIT, PREIT
Partnership or any PREIT Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business trust, limited liability company or other entity (other than
investments in short-term investment securities). With respect to the PREIT
Other Interests, PREIT and/or any PREIT Subsidiary, as the case may be, is a
partner, member or shareholder in good standing, and owns such interests free
and clear of all Liens. None of PREIT, PREIT Partnership or any PREIT Subsidiary
is in material breach of any agreement, document or contract which is of a
material nature governing its rights in or to the PREIT Other Interests, all of
which agreements, documents and contracts are (a) listed in Schedule 3.4 to the
PREIT Disclosure Letter, (b) unmodified except as described therein and (c) to
the Knowledge of PREIT, in full force and effect. To the Knowledge of PREIT and
except as set forth in Schedule 3.4 to the PREIT Disclosure Letter, the other
parties to any such agreement, document or contract which is of a material
nature are not in material breach of any of their respective obligations under
such agreements, documents or contracts.
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3.5 Authority; Noncontravention; Consents.
(a) PREIT has the requisite business trust power and
authority to enter into this Agreement and, subject only to the requisite PREIT
shareholder approval of the Merger and the proposed PREIT Trust Amendment (the
"PREIT Shareholder Approval" and, together with the Crown Shareholder Approval,
the "Shareholder Approvals") and the PREIT Partner Approvals, to consummate the
transactions contemplated by this Agreement to which PREIT is a party,
including, without limitation, the Post-Merger Contribution Transactions. The
execution and delivery of this Agreement by PREIT and the consummation by PREIT
of the transactions contemplated by this Agreement to which PREIT is a party
have been duly authorized by all necessary action on the part of PREIT, except
for and subject to the PREIT Shareholder Approval and the PREIT Partner
Approvals. This Agreement has been duly executed and delivered by PREIT and
constitutes a valid and binding obligation of PREIT, enforceable against PREIT
in accordance with and subject to its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
(b) PREIT Partnership has the requisite partnership
power and authority to enter into this Agreement and, subject only to the
requisite PREIT Shareholder Approval and PREIT Partner Approvals, to consummate
the transactions contemplated by this Agreement to which PREIT Partnership is a
party, including, without limitation, the Post-Merger Contribution Transactions.
The execution and delivery of this Agreement by PREIT Partnership and the
consummation by PREIT Partnership of the transactions contemplated by this
Agreement to which PREIT Partnership is a party have been duly authorized by all
necessary action on the part of PREIT Partnership, except for and subject to the
PREIT Shareholder Approval and the PREIT Partner Approvals. This Agreement has
been duly executed and delivered by PREIT Partnership and constitutes a valid
and binding obligation of PREIT Partnership, enforceable against PREIT
Partnership in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
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(c) Except as set forth in Schedule 3.5(c)(1) to the
PREIT Disclosure Letter and subject to receipt of the PREIT Shareholder Approval
and the PREIT Partner Approvals, the execution and delivery of this Agreement by
PREIT and PREIT Partnership do not, and the consummation of the transactions
contemplated by this Agreement to which PREIT and PREIT Partnership is a party
and compliance by PREIT or PREIT Partnership with the provisions of this
Agreement will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of PREIT or any PREIT Subsidiary under, (i) the PREIT Trust
Agreement or PREIT Bylaws or the comparable charter or organizational documents
or partnership, operating or similar agreement (as the case may be) of any PREIT
Subsidiary, each as amended or supplemented, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, merger or other acquisition agreement,
reciprocal easement agreement, lease, management agreement or other agreement,
instrument, permit, concession, franchise or license applicable to PREIT or any
PREIT Subsidiary or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any Laws applicable to PREIT or any PREIT Subsidiary or their
respective properties or assets, other than, in the case of clause (iii), any
such conflicts, violations, defaults, rights, loss or Liens that individually or
in the aggregate would not reasonably be expected to (x) have a PREIT Material
Adverse Effect or (y) prevent or materially impair the ability of PREIT to
perform any of its obligations hereunder or prevent or materially threaten or
impede the consummation of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to PREIT or
any PREIT Subsidiary in connection with the execution and delivery of this
Agreement by PREIT and PREIT Partnership or the consummation by PREIT or any
PREIT Subsidiary of any of the transactions contemplated by this Agreement,
except for (i) the filing with the SEC of the Form S-4 and such reports and
filings under the Securities Act and under Sections 13(a) and 13(d) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (ii) the filing and acceptance for
record of the Articles of Merger by the Department, (iii) the filing of the
Maryland Articles of Merger with the MSDAT, (iv) such filings as may be required
in connection with the payment of any transfer and gains taxes and (v) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as are set forth in Schedule 3.5(c)(2) to the PREIT Disclosure
Letter or (B) as may be required under (w) the HSR Act, (x) federal, state or
local environmental laws, (y) the "blue sky" laws of various states, to the
extent applicable, or (z) rules and regulations of the NYSE.
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3.6 SEC Documents; Financial Statements; Undisclosed
Liabilities. PREIT Partnership is not required by any Law to file any reports,
schedules, forms, statements or other documents with the SEC and has made no
such filings. Except as set forth in Schedule 3.6(a) to the PREIT Disclosure
Letter, PREIT has timely filed all reports, schedules, forms, statements,
certifications and other documents required to be filed in accordance with the
rules and requirements of the SEC since December 31, 1996 through the date
hereof (collectively, including all exhibits thereto and any registration
statement filed since such date, the "PREIT SEC Documents"). All of the PREIT
SEC Documents (other than preliminary material), as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and regulations
promulgated thereunder applicable to such PREIT SEC Documents. None of the PREIT
SEC Documents at the time of filing contained, nor will any report, schedule,
form, statement or other document filed by PREIT after the date hereof and prior
to the Effective Time contain, any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of PREIT
included in the PREIT SEC Documents complied, or will comply, as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been or will be
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented, or will fairly present, in all material
respects in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of PREIT and its Subsidiaries taken as a whole, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(except, in the case of unaudited statements, as permitted by Form 10-Q under
the Exchange Act). Except as set forth in Schedule 3.6(b) to the PREIT
Disclosure Letter, PREIT has no Subsidiaries which are not consolidated for
accounting purposes. Except for liabilities and obligations set forth in the
PREIT SEC Documents or in Schedule 3.6(c) to the PREIT Disclosure Letter,
neither PREIT nor any PREIT Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a consolidated balance sheet of PREIT or in the notes thereto
and which, individually or in the aggregate, would reasonably be expected to
have a PREIT Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Except as disclosed
in the PREIT SEC Documents or in Schedule 3.7 to the PREIT Disclosure Letter or
as provided herein, since December 31, 2002 (the "PREIT Financial Statement
Date"), PREIT and the PREIT Subsidiaries have conducted their business only in
the ordinary course (taking into account prior practices, including the
acquisition and disposition of properties and issuance of securities) and there
has not been:
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(a) any circumstance, event, occurrence, change or
effect that has had a PREIT Material Adverse Effect, nor has there been any
circumstance, event, occurrence, change or effect that with the passage of time
would reasonably be expected to result in a PREIT Material Adverse Effect,
(b) any authorization, declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the PREIT Common Shares or PREIT OP Units, except for
regular quarterly distributions not in excess of (i) $.54 per PREIT Common Share
or PREIT OP Unit (subject to any Corresponding PREIT Dividends paid pursuant to
Section 1.11(d)(ii)), or (ii) with respect to the period commencing on the date
hereof and ending on the Closing Date, distributions as necessary to maintain
REIT status, in each case with customary record and payment dates,
(c) any split, combination or reclassification of the
PREIT Common Shares or the PREIT OP Units or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for, or giving the right to acquire by exchange or exercise, shares
of stock of PREIT or partnership interests in PREIT Partnership or any issuance
of an ownership interest in, any PREIT Partnership, except for issuances of
PREIT Common Shares with respect to PREIT's DRIP and PREIT's Employee Share
Purchase Plans,
(d) any damage, destruction or loss, whether or not
covered by insurance, that has or would reasonably be expected to have a PREIT
Material Adverse Effect,
(e) any change in accounting methods, principles or
practices by PREIT or any of its Subsidiaries materially affecting its assets,
liabilities or business, except insofar as may have been disclosed in the PREIT
SEC Documents or required by a change in GAAP, or
(f) except as set forth in Schedule 3.7(f) to the
PREIT Disclosure Letter, any amendment in any material respect of any
employment, consulting, severance, retention or any other agreement between
PREIT and any officer or trustee of PREIT or any Affiliate or immediate family
member thereof or any new such agreement with any of the foregoing.
3.8 Litigation. Except as disclosed in Schedule 3.8 to the
PREIT Disclosure Letter or in the PREIT SEC Documents filed with the SEC after
December 31, 2002, and other than personal injury and other routine tort
litigation arising from the ordinary course of operations of PREIT or the PREIT
Subsidiaries (a) for which insurance coverage has been acknowledged by the
applicable insurer, subject to a reasonable deductible or retention limit or (b)
for which all material costs and liabilities arising therefrom are reimbursable
pursuant to common area maintenance or similar agreements, there is no suit,
action or proceeding pending (in which service of process has been received by
an employee of PREIT or a PREIT Subsidiary) or, to the Knowledge of PREIT,
threatened against or affecting PREIT or any PREIT Subsidiary that, individually
or in the aggregate, would reasonably be expected to (i) have a PREIT Material
Adverse Effect or (ii) prevent or materially impair the ability of PREIT to
perform any of its obligations hereunder or prevent or materially threaten or
impair the consummation of any of the transactions contemplated by this
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Agreement, nor is there any judgment, decree, injunction, rule or order of any
court or Governmental Entity or arbitrator outstanding against PREIT or any
PREIT Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Notwithstanding the foregoing, (y) Schedule
3.8 to the PREIT Disclosure Letter sets forth each and every material uninsured
claim, equal employment opportunity claim and claim relating to sexual
harassment and/or discrimination pending or, to the Knowledge of PREIT,
threatened as of the date hereof, in each case with a brief summary of such
claim or threatened claim, and (z) no claim has been made under any trustees',
directors' and officers' liability insurance policy maintained at any time by
PREIT or any of the PREIT Subsidiaries except for those claims that have been
fully and finally adjudicated and any judgment owing on which have been fully
paid and claims for which all defendant parties have been fully and
unconditionally released and all payments under any settlement or release
agreement in connection therewith have been paid in full.
3.9 Properties.
(a) Title; Encumbrances; Property Restrictions.
Except as provided in Schedule 3.2(a) or Schedule 3.9(a) to the PREIT Disclosure
Letter, PREIT or the PREIT Subsidiary set forth on Schedule 3.2(a) to the PREIT
Disclosure Letter owns fee simple title to or holds a leasehold interest in each
of the real properties identified in Schedule 3.2(a) to the PREIT Disclosure
Letter (the "PREIT Properties"), which are all of the real estate properties
owned or leased by them, in each case (except for the PREIT Permitted Title
Exceptions) free and clear of Encumbrances. Schedule 3.2(a) to the PREIT
Disclosure Letter further identifies which of the PREIT Properties are owned in
fee simple by PREIT or the PREIT Subsidiary and which of the PREIT Properties
are subject to a ground lease (the "PREIT Ground Lease"). Except as set forth in
Schedule 3.2(a) to the PREIT Disclosure Letter, no other Person has any
ownership interest in, and any such ownership interest so scheduled does not
materially interfere with the present use of, any of the PREIT Properties
subject thereto or affected thereby. Except as set forth in Schedule 3.9(a) to
the PREIT Disclosure Letter, none of the PREIT Properties is subject to any
restriction on the sale or other disposition thereof or on the financing or
release of financing thereon. The PREIT Properties are not subject to any
Property Restrictions or Encumbrances, except for the following (collectively,
the "PREIT Permitted Title Exceptions"): (i) Property Restrictions and
Encumbrances set forth in Schedule 3.9(a) to the PREIT Disclosure Letter, (ii)
Property Restrictions imposed or promulgated by law or any governmental body or
authority with respect to real property, including zoning regulations, which do
not materially adversely affect the current use of any PREIT Property, (iii)
Property Restrictions and Encumbrances that are matters of public record, which
Property Restrictions and Encumbrances, in any event, do not materially
interfere with the present use of any of the PREIT Properties subject thereto or
affected thereby and (iv) liens for real estate taxes not yet due and payable,
mechanics', carriers', workmen's, repairmen's liens and other Encumbrances and
Property Restrictions, if any, which, individually or in the aggregate, do not
materially detract from the value of or materially interfere with the present
use of any of the PREIT Properties subject thereto or affected thereby. Schedule
3.9(a) to the PREIT Disclosure Letter also lists each of the PREIT Properties
which are under development as of the date of this Agreement and describes the
status of such development as of the date hereof.
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(b) Title Insurance. Except as provided in Schedule
3.9(b) to the PREIT Disclosure Letter, valid policies of title insurance (or
fully paid and enforceable commitments therefor) have been issued insuring the
applicable PREIT Subsidiary's (as the case may be) fee simple title or leasehold
estate, as the case may be, to the PREIT Properties owned by it in amounts
approximately equal to the purchase price therefor paid by such PREIT
Subsidiary, subject only to the PREIT Permitted Title Exceptions and the matters
disclosed in Schedule 3.9(a) to the PREIT Disclosure Letter. Such policies are,
at the date hereof, in full force and effect. No material claim has been made
against any such policy.
(c) Permit; Violation; Condition. Except as provided
in Schedule 3.9(c) to the PREIT Disclosure Letter, PREIT has no Knowledge (i)
that, any certificate, permit or license from any Governmental Entity having
jurisdiction over any of the PREIT Properties or any agreement, easement or
other right which is necessary to permit the ownership, lawful use, operation
and licensing of the management of the buildings and improvements on any of the
PREIT Properties or which is necessary to permit the lawful use and operation of
all driveways, roads, utilities and other means of egress and ingress to and
from any of the PREIT Properties has not been obtained and is not in full force
and effect, or of any pending threat of modification or cancellation of any of
the same, the absence of which would reasonably be expected to have a material
adverse effect on such PREIT Property, (ii) of any written notice of any
violation of any federal, state or municipal law, ordinance, order, regulation
or requirement affecting any of the PREIT Properties issued by any Governmental
Entity which would reasonably be expected to have a material adverse effect on
such PREIT Property, (iii) of any structural defects relating to any PREIT
Property which would reasonably be expected to have a material adverse effect on
such PREIT Property, (iv) of any PREIT Property whose building systems are not
in working order so as to have a material adverse effect on such PREIT Property,
(v) of any physical damage to any PREIT Property in excess of $500,000 for which
there is not insurance in effect covering the cost of the restoration and the
loss of revenue (subject to a reasonable deduction or retention limit) or any
such physical damage that could reasonably give rise to a tenant's right to
terminate the PREIT Space Lease applicable to such PREIT Property, or (vi) of
current renovation or restoration to any PREIT Properties that is underway or is
being completed, the cost of which exceeds $250,000.
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(d) Condemnation; Zoning; Work. Except as set forth
in Schedule 3.9(d) to the PREIT Disclosure Letter, neither of PREIT nor any
PREIT Subsidiary has received any written or published notice to the effect that
(i) any condemnation or involuntary rezoning proceedings are pending or
threatened with respect to any of the PREIT Properties or (ii) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the PREIT Properties or by the continued
maintenance, operation or use of the parking areas which would reasonably be
expected, with respect to both (i) and (ii), to have a material adverse effect
on such PREIT Property. Except as set forth in Schedule 3.9(d) to the PREIT
Disclosure Letter, (i) all work required to be performed, payments required to
be made and actions required to be taken prior to the date hereof pursuant to
any agreement entered into with a governmental body or authority in connection
with a site approval, zoning reclassification or other similar action relating
to any PREIT Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) have been performed, paid or taken, as the
case may be, and (ii) PREIT has no Knowledge of any planned or proposed work,
payments or actions that may be required after the date hereof pursuant to such
agreements, in each of case (i) and (ii) other than those which would not
reasonably be expected to have a PREIT Material Adverse Effect.
(e) Rent Rolls. The rent rolls, dated as of May 2,
2003 and previously provided by PREIT to Crown, with respect to the Anchor
Tenants, and the Other Tenants identified therein (together, the "PREIT Rent
Roll") lists each PREIT Space Lease in effect as of the respective dates
indicated in the PREIT Rent Roll and, except for omissions or discrepancies
that, individually and in the aggregate, would not reasonably be expected to
have a PREIT Material Adverse Effect, all information set forth in the PREIT
Rent Roll is true, correct and complete as of the date thereof. "PREIT Space
Lease" means each lease or other right of occupancy affecting or relating to a
property in which PREIT (or an entity in which it directly or indirectly has an
interest) is the landlord, either pursuant to the terms of the lease agreement
or as successor to any prior landlord, but excluding any PREIT Ground Lease and
agreements for space with a non-renewable term of less than one year. PREIT has
made available to Crown true, correct and complete copies of all PREIT Space
Leases, including all amendments, modifications, supplements, renewals,
extensions and guarantees related thereto, as of the date hereof. Except as set
forth in a delinquency report, dated as of May 2, 2003 and previously provided
by PREIT to Crown, neither PREIT or any PREIT Subsidiary, on the one hand, nor,
to the Knowledge of PREIT or PREIT Partnership, any other party, on the other
hand, is in default under any PREIT Space Lease, except for such defaults that
would not reasonably be expected to have a PREIT Material Adverse Effect.
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(f) Reciprocal Operating Agreements. Schedule 3.9(f)
to the PREIT Disclosure Letter sets forth a true and complete list of all
reciprocal operating or easement agreements (the "PREIT Reciprocal Operating
Agreements") encumbering and or benefiting any PREIT Properties in effect as of
the dates set forth therein. PREIT has made available to Crown true, correct and
complete copies of all PREIT Reciprocal Operating Agreements, including all
amendments, modifications, supplements, renewals, extensions and guarantees
related thereto, as of the date hereof. Neither PREIT or any PREIT Subsidiary,
on the one hand, nor, to the Knowledge of PREIT or PREIT Partnership, any other
party, on the other hand, is in default under any PREIT Reciprocal Operating
Agreement, except for such defaults that would not reasonably be expected to
have a PREIT Material Adverse Effect.
(g) Ground Lease. None of PREIT, PREIT Partnership or
any PREIT Subsidiary, as applicable, on the one hand, or, to the Knowledge of
PREIT or PREIT Partnership, another party, on the other hand, is in default
under any PREIT Ground Lease, except for such defaults that would not reasonably
be expected to have a PREIT Material Adverse Effect.
(h) Insurance. Schedule 3.9(h) to the PREIT
Disclosure letter contains a true and complete list as of the date hereof, by
type of insurance, carrier, coverages (including limits) and term, of all
material policies of casualty, liability and other types of insurance (except
title insurance) carried by PREIT or any PREIT Subsidiary. All such policies are
in full force and effect and neither PREIT nor any PREIT Subsidiary has received
from any insurance company notice of any material defects or deficiencies
affecting the insurability of PREIT or any PREIT Subsidiary or any of their
respective assets thereunder.
3.10 Environmental Matters.
(a) Except as disclosed in the PREIT SEC Documents,
(i) neither PREIT nor any of the PREIT
Subsidiaries or, to PREIT's Knowledge, any other Person has caused or permitted
the presence of any Hazardous Materials at, on or under any of the PREIT
Properties, and neither PREIT nor any of the PREIT Subsidiaries has any
Knowledge of the presence of any Hazardous Materials at, on or under any of the
PREIT Properties, in each of the foregoing cases, such that the presence of such
Hazardous Materials (including the presence of asbestos in any buildings or
improvements at the PREIT Properties) would, individually or in the aggregate,
reasonably be expected to have a PREIT Material Adverse Effect;
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(ii) except in accordance with the
Environmental Permits, there have been no Releases of Hazardous Materials at,
on, under or from (A) the PREIT Properties or (B) any real property previously
owned, operated or leased by PREIT or the PREIT Subsidiaries (the "Former PREIT
Properties") during the period of such ownership, operation or tenancy in
violation of any applicable Environmental Law and which have not been remediated
in accordance with applicable Environmental Laws and Environmental Permits,
which Releases would, individually or in the aggregate, reasonably be expected
to have a PREIT Material Adverse Effect;
(iii) (y) PREIT and the PREIT Subsidiaries
have not failed to comply in any material respect with any Environmental Laws,
and (z) neither PREIT nor any of the PREIT Subsidiaries has any liability under
the Environmental Laws, except in each of cases (y) and (z) to the extent that
any such failure to comply or any such liability, individually or in the
aggregate, would not reasonably be expected to have a PREIT Material Adverse
Effect;
(iv) PREIT and the PREIT Subsidiaries have
been duly issued, and currently have and will maintain through the Closing Date,
all Environmental Permits except where the failure to obtain and maintain such
Environmental Permits would not, individually or in the aggregate, reasonably be
expected to have a PREIT Material Adverse Effect. PREIT and the PREIT
Subsidiaries have filed applications for all Environmental Permits necessary to
operate their businesses as currently operated; and
(v) except as set forth on Schedule 3.10(b)(v)
to the PREIT Disclosure Letter, to the Knowledge of PREIT, no mining of coal or
"other minerals", or "surface coal mining operations" or similar activities with
respect to "other minerals", as those terms are defined by the Federal Surface
Mining Control and Reclamation Act of 1977, as amended, 30 U.S.C. Section 1201
et seq., have occurred or are occurring at any of the PREIT Properties.
(b) PREIT has previously delivered or made available
to Crown complete copies of all material documents and reports, including,
without limitation, environmental investigations and testing or analysis that
are in the possession or control of any of PREIT and the PREIT Subsidiaries and
which relate to compliance with Environmental Laws by any of them or to the past
or current environmental condition of the PREIT Properties.
3.11 Related Party Transactions. Set forth in Schedule 3.11 to
the PREIT Disclosure Letter or in the PREIT SEC Documents is a list of all
arrangements, agreements and contracts of PREIT and any PREIT Subsidiary or any
relative of any of the foregoing or any entity of which any of the foregoing is
an Affiliate entered into or modified since December 31, 1996 through the date
hereof that are required to be described in Item 404 of Regulation S-K under the
Securities Act.
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3.12 Employee Benefits.
(a) As used herein, the term "PREIT Employee Plan"
includes any pension, retirement, savings, disability, medical, dental, health,
life, death benefit, group insurance, profit sharing, deferred compensation,
stock option, equity compensation, bonus, incentive, vacation pay, tuition
reimbursement, severance pay, employment continuation, change of control, fringe
benefit or other employee benefit plan, trust, agreement, contract, policy or
commitment (including, without limitation, any Pension Plan), and any Welfare
Plan), whether any of the foregoing is funded, insured or self-funded, written
or oral, sponsored or maintained by PREIT or any PREIT Subsidiary (each, a
"PREIT Controlled Group Member" for purposes of this Section 3.12). Each PREIT
Employee Plan complies in all material respects with the applicable requirements
of ERISA, the Code, the Securities Act, the Exchange Act and any other
applicable laws governing such PREIT Employee Plan, and each PREIT Employee Plan
has at all times been properly administered in all material respects in
accordance with all such requirements of the law and all regulations issued
thereunder, and in accordance with its terms and the terms of any applicable
collective bargaining agreement to the extent consistent with all such
requirements of law. Each Pension Plan sponsored or maintained by PREIT or any
PREIT Controlled Group member is qualified under Section 401(a) of the Code, and
each trust established by each Pension Plan is exempt from federal income tax
under Section 501(a) of the Code. Each Pension Plan is, and from its
establishment has been, the subject of a favorable determination letter from the
IRS stating that such Pension Plan meets the requirements of Section 401(a) of
the Code and that the trust associated with such Pension Plan is tax-exempt
under Section 501(a) of the Code. No event has occurred since the date of each
Pension Plan's last determination letter that would jeopardize the qualified
status of any such plan or the tax exempt status of any such trust under
Sections 401(a) and 501(a) of the Code, respectively. No lawsuits, claims (other
than routine claims for benefits) or complaints to, or by, any Person,
governmental entity, regulatory body or arbiter have been filed, are pending or
are threatened with respect to any PREIT Employee Plan and there is no fact or
contemplated event that would give rise to any such lawsuit, claim (other than
routine claims for benefits) or complaint with respect to any PREIT Employee
Plan. Without limiting the foregoing, the following are true with respect to
each PREIT Employee Plan:
(i) all PREIT Controlled Group Members have complied in all
material respects with the reporting and disclosure
requirements of both ERISA and the Code with respect to each
PREIT Employee Plan and no PREIT Controlled Group Member has
incurred any liability in connection with such reporting or
disclosure requirements or has knowledge of any facts or
contemplated events that would be expected to give rise to any
liability in connection with such reporting or disclosure
requirements;
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(ii) all contributions and payments with respect to the PREIT
Employee Plans that are required to be made by a PREIT
Controlled Group Member with respect to periods ending on or
before the Closing Date (including periods from the first day
of the current plan or policy year to the Closing Date) have
been, or will be, made or accrued before the Closing Date in
accordance with the appropriate plan document, actuarial
report, collective bargaining agreements, insurance contracts
or arrangements, or as otherwise required by either ERISA or
the Code;
(iii) with respect to each PREIT Employee Plan, to the extent
applicable, PREIT has delivered to or has made available to
Crown true and complete copies of (A) all plan documents, or
any and all other documents that establish the existence of
the plan, trust, arrangement, contract, policy or commitment
and all amendments thereto, (B) the most recent determination
letter, if any, received from the IRS, (C) the three most
recent IRS Form 5500 Annual Return/Reports (and all schedules
and reports relating thereto) and actuarial reports, (D) all
related trust agreements, insurance contracts or other funding
agreements maintained in connection with each such PREIT
Employee Plan, (E) all Department of Labor opinions on any
PREIT Employee Plan and all correspondence relating to the
request for and receipt of any such opinions, (F) all IRS
rulings, opinions or technical advice relating to any PREIT
Employee Plan and all correspondence relating to any request
for and receipt of any such rulings, opinions, or technical
advice, and (G) any other correspondence with or other
submissions filed with any governmental or regulatory entity;
and
(iv) all statements made by or on the behalf of a PREIT
Controlled Group Member to the IRS, the Department of Labor or
any other governmental or regulatory entity with respect to
each PREIT Employee Plan were true and correct when made and
continue to be true and correct.
(b) With respect to each PREIT Employee Plan, there
has not occurred, and no Person is contractually bound to enter into, any
"prohibited transaction" within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of
the Code or Section 408 of ERISA.
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(c) No PREIT Employee Plan is a Defined Benefit Plan
as defined in Section 3(35) of ERISA and no PREIT Controlled Group Member has
ever maintained or been obligated to contribute to any Defined Benefit Plan.
(d) No PREIT Employee Plan is a Multiemployer Plan as
such term is defined in Section 3(37) of ERISA.
(e) No PREIT Employee Plan is an Employee Stock
Ownership Plan as such term is defined in Section 4975(e)(7) of the Code.
(f) No PREIT Employee Plan is a Qualified Foreign
Plan as such term is defined in Section 404A of the Code and no PREIT Employee
Plan is subject to the laws or regulations of any other jurisdiction other than
the United States of America or one of its political subdivisions.
(g) No Welfare Plan is a Voluntary Employees'
Beneficiary Association as such term is defined in Section 501(c)(9) of the
Code.
(h) All Welfare Plans and their related trusts comply
with and have been administered in material compliance with (i) Section 4980B of
the Code and Sections 601 through 609 of ERISA and all Department of Treasury
and Department of Labor regulations issued thereunder, respectively, and (ii)
the Health Insurance Portability and Accountability Act of 1996 and all
Department of Labor regulations issued thereunder.
(i) No PREIT Controlled Group Member has any pending
unfair labor practice charges, contract grievances under any collective
bargaining agreement or other administrative charges, claims, grievances or
lawsuits before any court, governmental agency, regulatory body or arbiter which
would have a PREIT Material Adverse Effect.
3.13 PREIT Employee Plans and Employees. The employee
handbooks of PREIT and the PREIT Subsidiaries currently in effect have been
delivered to Crown. Schedule 3.13 to the PREIT Disclosure Letter contains a true
and accurate list of all employees to whom PREIT, PREIT Partnership or any PREIT
Subsidiary is paying compensation, including bonuses and incentives, at an
annual rate in excess of Fifty Thousand Dollars ($50,000) for services rendered
or otherwise and the current annual rate of compensation for such employees.
Except as set forth on Schedule 3.13 to the PREIT Disclosure Letter, no employee
or independent contractor of PREIT, PREIT Partnership or any PREIT Subsidiary
will be paid any amount that is not deductible under Section 162(a) of the Code
or that is an "excess parachute payment" under Section 280G of the Code.
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3.14 Taxes.
(a) Each of PREIT and the PREIT Subsidiaries (A) has
filed all Tax returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so), and all such returns and reports are accurate and complete
in all respects, (B) has paid (or PREIT has paid on its behalf) all Taxes owed
by it (whether or not shown on such returns and reports), and (C) has complied
in all respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes (including, without limitation, withholding of
Taxes pursuant to Sections 1441, 1442, 1445, 1446, 3121, and 3402 of the Code)
and has, within the time period prescribed by law, withheld and paid over to the
proper Governmental Entities all amounts required to be so withheld and paid
over under applicable laws and regulations, except, with respect to all of the
foregoing, where the failure to file such tax returns or reports or failure to
pay such Taxes or failure to comply with such withholding requirements would not
reasonably be expected to have a PREIT Material Adverse Effect. To the Knowledge
of PREIT, no claim has ever been made by a Governmental Entity in a jurisdiction
where PREIT or the PREIT Subsidiaries do not file a Tax return that PREIT or any
PREIT Subsidiary may be the subject of Taxation in that jurisdiction. The most
recent audited financial statements contained in the PREIT SEC Documents reflect
an adequate reserve for all material Taxes payable by PREIT and the PREIT
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements. Since the PREIT Financial Statement Date, PREIT has
incurred no liability for Taxes under Sections 857(b), 860(c) or 4981 of the
Code, including without limitation any Tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code or any Tax arising or resulting from
redetermined rents, redetermined deductions or excess interest described in
Section 857(b)(7) of the Code, and neither PREIT nor any PREIT Subsidiary has
incurred any liability for Taxes other than in the ordinary course of business.
No event has occurred, and no condition or circumstance exists, which presents a
material risk that any material Tax described in the preceding sentences will be
imposed upon PREIT or any PREIT Subsidiary. Neither PREIT nor any PREIT
Subsidiary is the subject of any audit, examination, or other proceeding in
respect of federal income Taxes, and to PREIT's Knowledge, no audit, examination
or other proceeding in respect of federal income Taxes involving any of PREIT or
any PREIT Subsidiary is being considered by any Tax authority and, except for
audits completed prior to December 31, 1997, no audit, examination, or other
proceeding in respect of federal income taxes involving PREIT or any PREIT
Subsidiary has occurred. To the Knowledge of PREIT, there are no pending
deficiencies for any Taxes have been proposed, asserted or assessed against
PREIT or any PREIT Subsidiary, and no requests for waivers of the time to assess
any such Taxes have been granted or are pending.
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(b) PREIT (i) for all taxable years for which the IRS
could assert a Tax liability, has been subject to taxation as a REIT within the
meaning of Section 856 of the Code and has qualified as a REIT for all such
years, (ii) has operated since December 31, 2002 to the date of this
representation, and intends to continue to operate, in such a manner as to
qualify as a REIT for the taxable year ending on the earlier of December 31,
2003 and, if later, for the taxable year that includes the Effective Time, and
(iii) has not taken or omitted to take any action which would reasonably be
expected to result in a challenge to its status as a REIT and, to PREIT's
Knowledge, no such challenge is pending or threatened. Each PREIT Subsidiary
that is a partnership, business trust, joint venture or limited liability
company either (A)(i) has been treated since its formation and continues to be
treated for federal income tax purposes either as a partnership or as an entity
that is disregarded for federal income tax purposes and not as a corporation or
as an association taxable as a corporation and (ii) has not since the later of
its formation or the acquisition by PREIT of a direct or indirect interest
therein, owned any assets (including, without limitation, securities) that would
cause PREIT to violate Section 856(c)(4) of the Code or (B) has been treated for
federal income tax purposes as a corporation that qualifies as (x) a REIT within
the meaning of Section 856 of the Code, (y) a qualified REIT subsidiary under
Section 856(i) of the Code, or (z) a taxable REIT subsidiary under Section
856(l) of the Code. PREIT Partnership is not a publicly traded partnership
within the meaning of Section 7704(b) of the Code that is taxable as a
corporation pursuant to Section 7704(a) of the Code. For all tax years in which
the IRS could assert a tax liability, each PREIT Subsidiary which is a
corporation and each other issuer in which PREIT holds or has held securities
(within the meaning of Section 856(c)(4) of the Code but excluding "straight
debt" of issuers described in Section 856(c)(7)) having a value of more than 10%
of the total value of the outstanding securities of such issuer has qualified at
all times as either a REIT within the meaning of Section 856 of the Code, a
qualified REIT subsidiary under Section 856(i) of the Code, or a taxable REIT
subsidiary under Section 856(l) of the Code. Except as set forth in Schedule
3.14(b) to the PREIT Disclosure Letter, neither PREIT nor any PREIT Subsidiary
holds any asset (x) the disposition of which would be subject to rules similar
to Section 1374 of the Code as a result of IRS Notice 88-19, Temporary Treas.
Regs. ss.1.337(d)-5T, ss.1.337(d)-6T or ss.1.337(d)-7T, or (y) which is subject
to a consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder.
(c) To PREIT's Knowledge, as of the date hereof,
PREIT is a "domestically-controlled" REIT within the meaning of Section
897(h)(4)(B) of the Code.
(d) There are no liens for Taxes upon the assets of
PREIT or the PREIT Subsidiaries, other than liens for Taxes not yet due and
payable.
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(e) Neither PREIT nor any PREIT Subsidiary is party
to any Tax allocation or sharing agreement.
(f) PREIT does not have any liability for the Taxes
of any person other than PREIT and the PREIT Subsidiaries, and the PREIT
Subsidiaries do not have any liability for the Taxes of any person other than
PREIT and the PREIT Subsidiaries (A) under Treas. Reg.ss.1.1502-6 (or any
similar provision of state, local or foreign law), (B) as transferee or
successor, (C) by contract, or (D) otherwise.
(g) PREIT and the PREIT Subsidiaries have not taken
any positions on any of their federal income Tax returns which could reasonably
be expected to give rise to a substantial underpayment of Tax under Section 6662
of the Code.
(h) Neither PREIT nor any of the PREIT Subsidiaries
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Effective Time as a result of any: (A) change in method of
accounting for taxable period ending on or prior to the Effective Time under
Code Section 481(c) (or any corresponding or similar provision of state, local
or foreign income Tax law); (B) "closing agreement" as described in Code Section
7121 (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Effective Time; (C) installment sale
or open transaction disposition made on or prior to the Effective Time; or (D)
prepaid amount received on or prior to the Effective Time.
3.15 No Payments to Employees, Officers or Trustees. Except as
described in Schedule 3.15 to the PREIT Disclosure Letter, or as otherwise
provided for in this Agreement, there is no employment or severance contract, or
other agreement requiring payments, cancellation of indebtedness or other
obligation to be made on a change of control or otherwise as a result of the
consummation of any of the transactions contemplated by this Agreement or as a
result of a termination of service subsequent to the consummation of any of the
transactions contemplated by this Agreement, with respect to any employee,
officer, director or trustee of PREIT or any PREIT Subsidiary. Except as
described in Schedule 3.15 to the PREIT Disclosure Letter, there is no agreement
or arrangement with any employee, officer or other service provider under which
PREIT or any PREIT Subsidiary has agreed to pay any tax that might be owed under
Section 4999 of the Code with respect to payments to such individuals.
3.16 Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other Person, other than Xxxxxx Brothers
Inc. and Xxxxxxx Xxxxx Barney Inc., the fees and expenses of which will be paid
by PREIT and are described in the engagement letters dated April 1, 2002 and
March 5, 2003 between Xxxxxx Brothers Inc. and PREIT and Xxxxxxx Xxxxx Barney
Inc. and PREIT, respectively, true, correct and complete copies of which have
previously been given to Crown, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of PREIT or any
PREIT Subsidiary.
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3.17 Compliance with Laws. Neither PREIT nor any PREIT
Subsidiary has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity or award
to any arbitration applicable to its business, properties or operations, except
in each case to the extent that such violation or failure would not reasonably
be expected to have a PREIT Material Adverse Effect.
3.18 Contracts; Debt Instruments.
(a) Default. Neither PREIT nor any PREIT Subsidiary
(i) has received a written notice in 2002 or 2003 that it is in violation of or
in default under any lease to which it is a party or by which it or any of its
properties or assets is bound or (ii) has received a written notice that it is
in violation of or in default under (or that there exists any condition which
upon the passage of time or the giving of notice or both would reasonably be
expected to cause such a violation of or default under) any (A) loan or credit
agreement, note, bond, mortgage, debenture, indenture, or (B) material permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, and no such violation or default exists.
(b) Indebtedness. Schedule 3.18(b) to the PREIT
Disclosure Letter sets forth a list of each loan or credit agreement, note,
bond, mortgage, indenture and any other agreement or instrument pursuant to
which any Indebtedness of PREIT or any of the PREIT Subsidiaries, is outstanding
or may be incurred.
(c) Interest Rate Agreements. To the extent not set
forth in response to the requirements of Section 3.18(b), Schedule 3.18(c) to
the PREIT Disclosure Letter sets forth each interest rate cap, interest rate
collar, interest rate swap, currency hedging transaction, and any other
agreement relating to a similar transaction to which PREIT or any PREIT
Subsidiary is a party or an obligor with respect thereto.
(d) Prepayment Restrictions. Except as set forth in
Schedule 3.18(d) to the PREIT Disclosure Letter, neither PREIT nor any PREIT
Subsidiary is a party to any agreement which would restrict any of them from
prepaying any of their Indebtedness without penalty or premium at any time or
which requires any of them to maintain any amount of Indebtedness with respect
to any of the PREIT Properties.
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(e) Management Agreements. Except as set forth in
Schedule 3.18(e)(1) to the PREIT Disclosure Letter, neither PREIT nor any PREIT
Subsidiary is a party to any agreement relating to the management of any PREIT
Property by any Person other than PREIT or a PREIT Subsidiary. Neither PREIT nor
any PREIT Subsidiary is a party to any agreement pursuant to which PREIT or any
PREIT Subsidiary manages or provides services with respect to any real
properties other than PREIT Properties, except for the agreements listed in
Schedule 3.18(e)(2) to the PREIT Disclosure Letter.
(f) [Intentionally omitted]
(g) [Intentionally omitted]
(h) Purchase and Sale Agreements. Schedule 3.18(h) to
the PREIT Disclosure Letter lists all agreements entered into by PREIT or any
PREIT Subsidiary providing for the sale of, or option to sell, any PREIT
Properties or the purchase of, or option to purchase, by PREIT or any PREIT
Subsidiary, any real estate not yet consummated as of the date hereof.
(i) Contractual Liability. Except as set forth in
Schedule 3.18(i) to the PREIT Disclosure Letter, neither PREIT nor any PREIT
Subsidiary has any material continuing contractual liability (A) for
indemnification or otherwise under any agreement relating to the sale of real
estate previously owned, whether directly or indirectly, by PREIT or any PREIT
Subsidiary or (B) to pay any additional purchase price for any of the PREIT
Properties.
(j) Tax Protection Agreements. Except as set forth in
Schedule 3.18(j) to the PREIT Disclosure Letter, neither PREIT nor any PREIT
Subsidiary has entered into or is subject, directly or indirectly, to any PREIT
Tax Protection Agreements. As used herein, a "PREIT Tax Protection Agreement" is
an agreement, oral or written, (A) that has as one of its purposes to permit a
Person to take the position that such Person could defer federal taxable income
that otherwise might have been recognized upon a transfer of property to the
PREIT Partnership or any other PREIT Subsidiary that is treated as a partnership
for federal income tax purposes, and that (i) prohibits or restricts in any
manner the disposition of any assets of PREIT or any PREIT Subsidiary, (ii)
requires that PREIT or any PREIT Subsidiary maintain, put in place, or replace,
indebtedness, whether or not secured by one or more of the PREIT Properties, or
(iii) requires that PREIT or any PREIT Subsidiary offer to any Person at any
time the opportunity to guarantee or otherwise assume, directly or indirectly
(including, without limitation, through a "deficit restoration obligation,"
guarantee (including, without limitation, a "bottom" guarantee), indemnification
agreement or other similar arrangement), the risk of loss for federal income tax
purposes for indebtedness or other liabilities of PREIT or any PREIT Subsidiary,
(B) that specifies or relates to a method of taking into account book-tax
disparities under Section 704(c) of the Code with respect to one or more assets
of PREIT or a PREIT Subsidiary, or (C) that requires a particular method for
allocating one or more liabilities of PREIT or any PREIT Subsidiary under
Section 752 of the Code. Neither PREIT nor any PREIT Subsidiary is in violation
of or in default under any PREIT Tax Protection Agreement.
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3.19 Opinion of Financial Advisor. PREIT has received the
written opinion of Xxxxxx Brothers Inc., PREIT's financial advisor, to the
effect that the consideration to be paid by PREIT and PREIT Partnership in
connection with the Merger, including the transactions contemplated by the Crown
Partnership Contribution Agreement, is fair, from a financial point of view, to
PREIT.
3.20 State Takeover Statutes. No action need be taken by PREIT
to exempt transactions between PREIT and Crown and its Affiliates from the
operation of any Pennsylvania Takeover Statutes.
3.21 [Intentionally omitted]
3.22 Investment Company Act of 1940. Neither PREIT nor any of
the PREIT Subsidiaries is, or at the Effective Time will be, required to be
registered under the 0000 Xxx.
3.23 Definition of "Knowledge of PREIT". As used in this
Agreement, the phrase "Knowledge of PREIT" (or words of similar import) means
the actual knowledge of those individuals identified in Schedule 3.23 to the
PREIT Disclosure Letter.
3.24 Required Shareholder Approvals and Partner Approvals. The
affirmative vote of at least the majority of the votes cast by holders of PREIT
Common Shares outstanding and entitled to vote and voting together as a single
class are the only votes of the holders of any class or series of PREIT capital
shares necessary or required under this Agreement or under applicable law to
approve the Merger, this Agreement and the proposed PREIT Trust Amendment. The
approval of PREIT is the only votes of the holders of any class or series of
PREIT Partnership's partnership interests necessary or required under this
Agreement or under applicable law to approve the execution, delivery and
performance of this Agreement, the Merger or the PREIT Partnership Amendment.
3.25 Intellectual Property. Except as set forth in Schedule
3.25 to the PREIT Disclosure Letter, to the Knowledge of PREIT, neither PREIT
nor any PREIT Subsidiary is infringing upon any intellectual property rights of
any other Person nor, to the Knowledge of PREIT, is any other Person infringing
on any of PREIT or PREIT Subsidiaries' rights in respect of the intellectual
property owned and used by any of such entities.
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3.26 Documents. PREIT and PREIT Partnership have made
available to Crown true, correct and complete copies of all documents referenced
in any schedules attached hereto.
ARTICLE 4
COVENANTS
4.1 Conduct of Crown's and Crown Partnership's Business
Pending Merger. During the period from the date of this Agreement to the
Effective Time, except either (i) as consented to in writing (including by
e-mail or other electronic transmission) by PREIT in response to a written or
oral request therefor from Crown, which response shall not be unreasonably
delayed, or (ii) as otherwise permitted by or required to meet its obligations
under this Agreement or any other agreement entered into in connection with this
Agreement, Crown and Crown Partnership shall, and shall cause (or, in the case
of Crown Subsidiaries that Crown or Crown Partnership do not control, shall use
commercially reasonable efforts to cause) each of the Crown Subsidiaries to:
(a) conduct its business and operate the Crown
Properties only in the ordinary course and in substantially the same manner as
heretofore conducted;
(b) use commercially reasonable efforts to preserve
intact its business organizations and goodwill and, provided it does not require
additional compensation, keep available the services of its officers and
employees;
(c) include one or more representatives of PREIT at
weekly Crown management meetings (at which Crown shall report on all operational
matters of materiality), and, subject to Section 4.3, confer with one or more
representatives of PREIT on any proposals to engage in material transactions or
transactions in excess of 10% of the operating and capital expenditure budgets
of the Crown Property to which any such proposal relates;
(d) notify (which may be by e-mail or other
electronic transmission) PREIT as soon as practicable of the occurrence or
existence of any circumstance, event, development, change or effect that has had
or would reasonably be expected to have a Crown Material Adverse Effect or a
material adverse effect on any of the Crown Properties;
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(e) deliver to PREIT as soon as practicable true and
correct copies of any report, statement, schedule or other document filed with
the SEC subsequent to the date of this Agreement;
(f) maintain its books and records in accordance with
GAAP consistently applied and not change in any material manner any of its
methods, principles or practices of accounting in effect at the Crown Financial
Statement Date, except as may be required by the SEC, applicable law or GAAP,
and in such case, Crown shall notify PREIT of any such proposed change;
(g) duly and timely file all tax returns required to
be filed with federal authorities and all reports required to be filed with the
SEC, and duly file all other material reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
in each case to extensions permitted by law, provided such extensions do not
adversely affect Crown's qualification as a REIT under the Code;
(h) maintain in full force and effect insurance
coverage substantially similar to insurance coverage maintained on the date
hereof with the same insurance companies that provide their current coverage or
with other insurance companies which have equivalent or better financial
ratings;
(i) unless required by law or necessary (1) to
preserve Crown's status as a REIT, or (2) to qualify or preserve the status of
any Crown Subsidiary as a partnership for federal income tax purposes, as a
qualified REIT subsidiary under Section 856(i) of the Code, or as a taxable REIT
subsidiary under Section 856(l) of the Code, as the case may be (in which event
Crown or the applicable Crown Subsidiary shall not fail to make such election in
a timely manner), neither (A) make or rescind any express or deemed election
relative to Taxes, nor (B) change any of its methods of reporting income or
deductions for federal income Tax purposes from those employed in the
preparation of its income Tax returns that have been filed for prior taxable
years;
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(j) not (i) acquire, enter into any option to
acquire, or exercise an option or other right or election or enter into any
other commitment or contractual obligation (each, a "Commitment") for the
acquisition, whether by merger consolidation, asset acquisition, like-kind
exchange or otherwise, of any real property (other than the conveyance of
certain outparcels in exchange for Pasquerilla Plaza as contemplated by the
Exchange Agreement), (ii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation, partnership,
joint venture, association, or other business organization or division thereof,
(iii) encumber any assets or commence construction of, or enter into any
Commitment to develop or construct other real estate projects, except in the
ordinary course of its business, (iv) incur or enter into any Commitment to
incur additional Indebtedness (secured or unsecured) except for working capital
under the revolving line of credit listed on Schedule 4.1(j) to the Crown
Disclosure Letter and Commitments for indebtedness for the purposes and not in
excess of the amounts described on Schedule 4.1(j) to the Crown Disclosure
Letter, or (v) modify, amend or terminate, or enter into any Commitment to
modify, amend or terminate, any Indebtedness (secured or unsecured) in existence
as of the date hereof; except, in the case of clauses (i), (iii) and (iv) above,
if (A) such Commitment is included in the operating budget attached hereto as
Schedule 4.1(j) to the Crown Disclosure Letter (the "Operating Budget"), or (B)
the amount of such Commitment does not exceed 10% of the aggregate capital
expenditures in the capital expenditure budget attached hereto as Schedule
4.1(j) to the Crown Disclosure Letter (the "Capital Expenditure Budget");
(k) other than as necessary to comply with any
applicable laws, rules or regulations or NYSE rules or regulations after giving
notice to PREIT of any such proposed amendment, not amend the Crown Declaration
of Trust or the Crown Bylaws, or the articles or certificate of incorporation,
bylaws, code of regulations, partnership agreement, operating agreement or joint
venture agreement or comparable charter or organization document of any Crown
Subsidiary;
(l) not classify or re-classify any unissued shares;
not issue, sell, pledge, dispose of, grant, transfer, encumber or authorize the
foregoing or make any change in the number (including by reclassification,
combination, split, subdivision or redemption) of shares of beneficial interest,
membership interests or units of limited partnership interest issued and
outstanding, other than pursuant to (i) the exercise of options disclosed in
Schedule 2.3(b) to the Crown Disclosure Letter, or (ii) the redemption of Crown
OP Units under the Crown Partnership Agreement solely for Crown Common Shares;
(m) except as required by the Crown Trustee Option,
grant no options or other right or commitment relating to its shares of
beneficial interest, membership interests or units of limited partnership
interest or any security convertible into its shares of capital stock,
membership interests or units of limited partnership interest, or any security
the value of which is measured by shares of beneficial interest, or any security
subordinated to the claim of its general creditors and not amend or waive any
rights under any of the Crown Options or Crown Share Rights;
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(n) except as provided in Section 5.10 and Section
1.11(d), not (i) authorize, declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Crown Common Share, Crown
Senior Preferred Share, Crown OP Unit or Crown Senior Preferred OP Unit or (ii)
directly or indirectly redeem, purchase or otherwise acquire any shares,
membership interests or units of partnership interest or any option, warrant or
right to acquire, or security convertible into, shares of beneficial interest,
membership interests or units of partnership interest of Crown and Crown
Partnership, except for (A) deemed transfers of Crown excess shares required
under Article VI of the Crown Declaration of Trust in order to preserve the
status of Crown as a REIT under the Code, and (B) redemptions of Crown OP Units,
whether or not outstanding on the date of this Agreement, under the Crown
Partnership Agreement in which solely Crown Common Shares are utilized;
(o) not (i) sell, mortgage, voluntarily subject to
Lien or otherwise dispose of any of the Crown Properties, except as disclosed in
Schedule 4.1(j) to the Crown Disclosure Letter, (ii) enter into, modify, amend,
supplement, renew or extend the terms of a lease or other right to use or occupy
space, including without limitation any Crown Space Lease and any Crown Ground
Lease, at any of the Crown Properties (A) having a term of one year or more
(giving effect to any automatic renewals and assuming the exercise of any tenant
renewal options) or (B) regarding 5,000 square feet or more, provided that,
Crown shall not be prohibited from taking any such action under this Section
4.1(o)(ii) if (x) PREIT shall have failed to object to any request for consent
thereto (including, but not limited to, any request made by Crown at its weekly
management meetings) within five business days after receipt of such request
(accompanied by such information as is reasonably necessary for PREIT to
consider such request, which information shall not include the actual form of
proposed lease agreement) from Crown, (y) PREIT shall have failed to provide
Crown with its objections to a consent request (including, but not limited to,
any request made by Crown at its weekly management meetings) with reasonable
specificity within such five business day period described above, or (z) PREIT
shall have withheld its consent unreasonably); or (iii) suffer an involuntary
Lien (other than a mechanics', carriers', workmen's, repairmen's or other
similar Lien created or arising other than as a result of any failure or
purported failure of Crown, Crown Partnership or any of the Crown Subsidiaries
to perform any of their respective obligations to a third party) and fail to
have such Lien removed within sixty (60) days following the creation thereof
(except to the extent that the claim to which such Lien relates is being
contested in good faith);
(p) not sell, lease, mortgage, subject to Lien or
otherwise dispose of any of its personal property or intangible property, except
with respect to the Pasquerilla Plaza or in the ordinary course of business and
not material, individually or in the aggregate;
(q) not make, arrange or materially modify any
personal loans in violation of Section 402 of the Xxxxxxxx-Xxxxx Act of 2002,
and not make any other loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to Crown Subsidiaries in existence on the date hereof and ordinary
course expense advances to employees and except in connection with a transaction
permitted by Section 4.1(j);
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(r) not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
accordance with their terms, of claims, liabilities or obligations reflected in,
reserved against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) furnished to PREIT;
(s) not (i) guarantee the indebtedness of another
Person, other than the indebtedness of the Crown Subsidiaries if either (A) the
obligation being guaranteed is for an activity permitted under this Agreement or
(B) such obligation is outstanding as of the date of this Agreement and is in
respect of any debt that was issued by or is recourse to Crown Partnership as of
the date of this Agreement, (ii) enter into any "keep well" or other agreement
to maintain any financial condition of another Person or (iii) enter into any
arrangement having the economic effect of any of the foregoing;
(t) not enter into any Commitment with any officer,
director, trustee or Affiliate of Crown or any of the Crown Subsidiaries or any
Commitment with any consultant;
(u) other than (i) annual merit compensation
increases for non-executive employees consistent with past practice and (ii)
payments for compensation to employees located outside of Crown's principal
executive office not to exceed, in the aggregate, $50,000, not increase any
compensation or enter into or amend any employment agreement, severance
agreement, employment continuation agreement or other arrangement with any of
its officers, directors, trustees or employees, other than as expressly required
by any contract or Plan;
(v) not adopt any new employee benefit plan or amend
any existing plans or rights or grant any new, or modify any existing severance
or term arrangement;
(w) not settle any stockholder derivative or class
action claims arising out of or in connection with any of the transactions
contemplated by this Agreement or any other litigation except solely for cash
payments (i) paid by any insurer or Person other than Crown and any Crown
Subsidiary, plus (ii) an amount paid by Crown or any Crown Subsidiary not
exceeding $250,000 in the aggregate;
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(x) not change the ownership of any Crown
Subsidiaries, except changes which arise as a result of the acquisition by Crown
of Crown OP Units in exchange for Crown Common Shares pursuant to Section 11.1
of the Crown Partnership Agreement;
(y) not accept a promissory note in payment of the
exercise price payable under any option to purchase Crown Common Shares;
(z) not enter into any Crown Tax Protection
Agreement;
(aa) not settle or compromise any material federal,
state, local or foreign tax
liability;
(bb) pay all real estate taxes when due in the
ordinary course of business consistent with past practices;
(cc) pay all debts and discharge all liabilities when
due in the ordinary course of business consistent with past practices;
(dd) except as set forth in Schedule 4.1(dd) to the
Crown Disclosure Letter, not modify, amend or supplement any agreement
evidencing Indebtedness or cause or allow an event of default to occur with
respect to any Indebtedness;
(ee) not enter into, modify, amend or supplement any
management agreement or other contracts providing, in each case, for payments
thereunder of $100,000 or more;
(ff) not publicly recommend, propose or announce an
intention to do any of the foregoing prohibited actions, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing
prohibited actions; and
(gg) not make, with regard to any taxable year since
its formation (including, without limitation, its taxable year ended December
31, 2002 and any subsequent taxable year), an election under Section 754 of the
Code.
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4.2 Conduct of PREIT's and PREIT Partnership's Business
Pending Merger. During the period from the date of this Agreement to the
Effective Time, except either (i) as consented to in writing by Crown (including
by e-mail or other electronic transmission) in response to a request therefor
from PREIT, which response shall not be unreasonably delayed, or (ii) as
otherwise permitted or required to meet its obligations under this Agreement or
any other agreement entered into in connection with this Agreement, PREIT and
PREIT Partnership shall, and shall cause (or, in the case of PREIT Subsidiaries
that PREIT or PREIT Partnership do not control, shall use commercially
reasonable efforts to cause) each of the PREIT Subsidiaries to:
(a) conduct its business and operate the PREIT
properties only in the ordinary course and in substantially the same manner as
heretofore conducted;
(b) use commercially reasonable efforts to preserve
intact its business organizations and goodwill and, provided it does not require
additional compensation, keep available the services of its officers and
employees;
(c) confer at least weekly with one or more
representatives of Crown to report operational matters of materiality and any
proposals to engage in material transactions;
(d) notify (which may be by e-mail or other
electronic transmission) Crown as soon as practicable of the occurrence or
existence of any circumstance, event, occurrence, change or effect that has had
or would reasonably be expected to have a PREIT Material Adverse Effect or a
material adverse effect on any of the PREIT Properties;
(e) deliver to Crown as soon as practicable true and
correct copies of any report, statement, schedule or other document filed with
the SEC subsequent to the date of this Agreement;
(f) maintain its books and records in accordance with
GAAP consistently applied and not change in any material manner any of its
methods, principles or practices of accounting in effect at the PREIT Financial
Statement Date, except as may be required by the SEC, applicable law or GAAP,
and, in such case, PREIT shall notify Crown of any such proposed change;
(g) duly and timely file all tax returns required to
be filed with federal authorities and all reports required to be filed with the
SEC, and duly file all other material reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
in each case to extensions permitted by law, provided such extensions do not
adversely affect PREIT's qualification as a REIT under the Code;
(h) maintain in full force and effect insurance
coverage substantially similar to insurance coverage maintained on the date
hereof with the same insurance companies that provide their current coverage or
with other insurance companies which have equivalent or better financial
ratings;
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(i) unless required by law or necessary (1) to
preserve PREIT's status as a REIT, or (2) to qualify or preserve the status of
any PREIT Subsidiary as a partnership for federal income tax purposes, as a
qualified REIT subsidiary under Section 856(i) of the Code, or as a taxable REIT
subsidiary under Section 856(l) of the Code, as the case may be (in which event
PREIT or the applicable PREIT Subsidiary shall not fail to make such election in
a timely manner), neither (A) make or rescind any express or deemed election
relative to Taxes, nor (B) change any of its methods of reporting income or
deductions for federal income Tax purposes from those employed in the
preparation of its income Tax returns that have been filed for prior taxable
years;
(j) not (i) acquire, enter into any option to
acquire, or exercise an option or other right or election or enter into any
Commitment for the acquisition, whether by merger, consolidation, asset
acquisition, like-kind exchange or otherwise, of any real property (other than
(a) Commitments described in Schedule 4.2(j) to the PREIT Disclosure Letter or
(b) Commitments that do not, in the aggregate (taking into account the
activities permitted by this Section 4.2(j)), exceed $100 million in total
consideration payable by PREIT, PREIT Partnership or any other PREIT Subsidiary
and, in the case of (b), so long as any such Commitment would not, in the
judgment of PREIT, after consultation with Crown, require PREIT or Crown to
recirculate to their respective shareholders the Joint Proxy Statement that
forms a part of the S-4 after the initial mailing thereof ), (ii) enter into or
agree to effect any merger, acquisition, exchange offer or other business
combination with a third party in which PREIT is the surviving entity; provided,
however, that in the case of (i) or (ii) above, the value of the equity
securities that PREIT or PREIT Partnership may issue shall not in the aggregate
exceed $100 Million on the date any such transaction is entered into or agreed
to, or (iii) incur or enter into any contractual obligation to incur additional
Indebtedness (secured or unsecured) that, if incurred, would cause PREIT, PREIT
Partnership or any other PREIT Subsidiary to violate a covenant or result in an
event of default under any Indebtedness of PREIT, PREIT Partnership or any other
PREIT Subsidiary;
(k) other than as necessary to comply with any
applicable laws, rules or regulations or NYSE rules or regulations after giving
notice to Crown of any such proposed amendment, not amend the PREIT Trust
Agreement or the PREIT Bylaws, or the articles or certificate of incorporation,
bylaws, code of regulations, partnership agreement, operating agreement or joint
venture agreement or comparable charter or organization document of any PREIT
Subsidiary;
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(l) except as permitted by Section 4.2(m) below or in
connection with actions permitted by Section 4.2(j) of this Agreement, not (i)
classify or re-classify any unissued shares, nor (ii) issue, sell, pledge,
dispose of, grant, transfer or encumber any PREIT Common Shares or securities
convertible prior to the Merger into PREIT Common Shares or authorize the
foregoing or make any change in the number (including by reclassification,
combination, split, subdivision or redemption) of PREIT Common Shares,
membership interests or units of limited partnership interest issued and
outstanding, other than, in the case of (i) or (ii) above, pursuant to (A) the
exercise of options disclosed in Schedule 3.3(b) to the PREIT Disclosure Letter,
(B) the redemption of PREIT OP Units under the PREIT Partnership Agreement
solely for PREIT Common Shares, (C) the issuance, sale, pledge, grant, transfer,
encumbrance or other disposition, after consultation with Crown, of any PREIT or
PREIT Partnership equity security, whether in a private or public transaction,
resulting in PREIT receiving as consideration therefor net cash proceeds of up
to an aggregate of $100 million, (D) PREIT's DRIP or Employee Share Purchase
Plans or (E) the issuance to PREIT of PREIT Partnership equity securities (or
securities convertible into PREIT Partnership equity securities);
(m) other than options, rights or commitments granted
to PREIT employees or trustees in the ordinary course of business, consistent
with past practice, grant no options or other right or commitment relating to
its shares of beneficial interest, membership interests or units of limited
partnership interest, or any security convertible into its shares of capital
stock, membership interests or units of limited partnership interest, or any
security the value of which is measured by shares of beneficial interest, or any
security subordinated to the claim of its general creditors and not amend or
waive any rights under any of the PREIT Options;
(n) except as provided in Section 5.10 and Section
1.11(d), not (i) authorize, declare, set aside or pay any dividend or make any
other distribution or payment with respect to any PREIT Common Share or PREIT OP
Unit or (ii) directly or indirectly redeem, purchase or otherwise acquire any
shares, membership interests or units of partnership interest or any option,
warrant or right to acquire, or security convertible into, shares of beneficial
interest, membership interests or units of partnership interest of PREIT and
PREIT Partnership, except for (A) deemed transfers of PREIT excess shares
required under the PREIT Trust Agreement in order to preserve the status of
PREIT as a REIT under the Code, and (B) redemptions of PREIT OP Units, whether
or not outstanding on the date of this Agreement, under the PREIT Partnership
Agreement in which solely PREIT Common Shares are utilized;
(o) other than with respect to the transactions set
forth in Schedule 3.18(h) or Schedule 4.2(o) to the PREIT Disclosure Letter, not
sell, mortgage, voluntarily subject to Lien or otherwise dispose of any of the
material PREIT Properties, individually or in the aggregate outside the ordinary
course of business;
(p) [Intentionally omitted];
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(q) not make, arrange or materially modify any
personal loans in violation of Section 402 of the Xxxxxxxx-Xxxxx Act of 2002,
and not make any other loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to PREIT Subsidiaries in existence on the date hereof and ordinary
course expense advances to employees and except in connection with a transaction
permitted by Section 4.2(j);
(r) [Intentionally omitted];
(s) not (i) guarantee the indebtedness of another
Person, other than the indebtedness of the PREIT Subsidiaries if either (A) the
obligation being guaranteed is for an activity permitted under this Agreement or
(B) such obligation is outstanding as of the date of this Agreement and is in
respect of any debt that was issued by or is recourse to PREIT Partnership as of
the date of this Agreement, (ii) enter into any "keep well" or other agreement
to maintain any financial condition of another Person or (iii) enter into any
arrangement having the economic effect of any of the foregoing;
(t) not enter into any Commitment with any officer,
director, trustee or Affiliate of PREIT or any of the PREIT Subsidiaries, not
increase any compensation or enter into or amend any employment agreement,
severance agreement, employment continuation agreement or other arrangement with
any of its officers, directors, trustees or employees, other than (i) as
expressly required by any contract or Plan or (ii) any action which, consistent
with past practice, is (A) consistent with recommendations made by one or more
third-party consultants to PREIT and (B) approved by the Compensation Committee
of the Board of Trustees of PREIT;
(u) [Intentionally omitted];
(v) [Intentionally omitted];
(w) not settle any stockholder derivative or class
action claims arising out of or in connection with any of the transactions
contemplated by this Agreement except for solely cash payments (i) paid by any
insurer or Person other than PREIT and any PREIT Subsidiary, plus (ii) an amount
paid by PREIT or any PREIT Subsidiary not exceeding $250,000 in the aggregate;
(x) [Intentionally omitted];
(y) not accept a promissory note in payment of the
exercise price payable under any option to purchase PREIT Common Shares;
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(z) not enter into any PREIT Tax Protection Agreement
other than in connection with any Commitment permitted by Section 4.2 hereof;
(aa) [Intentionally omitted];
(bb) pay all real estate taxes when due in the
ordinary course of business consistent with past practices;
(cc) pay all debts and discharge all liabilities when
due in the ordinary course of business consistent with past practices;
(dd) cause or allow an event of default to occur with
respect to any Indebtedness;
(ee) [Intentionally omitted];
(ff) not publicly recommend, propose or announce an
intention to do any of the foregoing prohibited actions, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing
prohibited actions; and
(gg) [Intentionally omitted].
4.3 No Solicitation.
(a) On and after the date hereof and prior to the
Effective Time, Crown agrees, for itself and in its capacity as the sole general
partner of the Crown Partnership, that, other than as contemplated by this
Agreement:
(i) none of it, Crown Partnership or any Crown
Subsidiary shall invite, initiate, solicit or encourage, directly or indirectly,
any inquiries, proposals, discussions or negotiations or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to any direct or indirect
(A) merger, consolidation, business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction, (B) sale,
acquisition, tender offer, exchange offer (or the filing of a registration
statement under the Securities Act in connection with such an exchange offer),
share exchange or other transaction or series of related transactions that, if
consummated, would result in the issuance of securities representing, or the
sale, exchange or transfer of, 25% (the "Minimum Acquisition Proposal
Percentage") or more of the outstanding voting equity securities of Crown or
outstanding partnership interests of Crown Partnership (including, without
limitation, partnership interests and units), or (C) sale, lease, exchange,
mortgage, pledge, transfer or other disposition ("Transfer") of any assets of
Crown or Crown Partnership in one or a series of related transactions that, if
consummated, would result in the Transfer of more than the Minimum Acquisition
Proposal Percentage of the assets of Crown or Crown Partnership, other than the
Merger (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"), or engage in any discussions or negotiations with or
provide any confidential or non-public information or data to, or afford access
to properties, books or records to, any Person relating to, or that may
reasonably be expected to lead to, an Acquisition Proposal, or enter into any
letter of intent, agreement in principle or agreement relating to an Acquisition
Proposal, or propose publicly to agree to do any of the foregoing, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by amending or granting any waiver under, the
Crown Rights Agreement);
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(ii) Crown, Crown Partnership and each Crown
Subsidiary will use commercially reasonable efforts to cause any officer,
director, trustee, employee, affiliate, agent, investment banker, financial
advisor, attorney, accountant, broker, finder, consultant or other agent or
representative of Crown, Crown Partnership or any Crown Subsidiary (each, a
"Crown Representative") not to engage in any of the activities described in
Section 4.3(a)(i);
(iii) (A) it, Crown Partnership and the Crown
Subsidiaries will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing (including, without limitation, any
Acquisition Proposal) and will take commercially reasonable actions to inform
each Crown Representative, and each of the Persons referred to in Section
4.3(b), of the obligations undertaken in this Section 4.3 and to cause each
Crown Representative to comply with such obligations, and (B) it shall promptly
request each Person, if any, that has executed a confidentiality agreement
within the twenty-four month period prior to the date hereof in connection with
its consideration of any Acquisition Proposal to return or destroy all
confidential information heretofore furnished to such Person by or on behalf of
it, Crown Partnership and the Crown Subsidiaries; and
(iv) it will (A) notify PREIT promptly (but in
any event within 24 hours), orally and in writing, if it, Crown Partnership, any
Crown Subsidiary or any Crown Representative receives (1) an Acquisition
Proposal or any amendment or change in any previously received Acquisition
Proposal (2) any request for confidential or nonpublic information or data
relating to, or for access to the properties, books or records of, it, Crown
Partnership or any Crown Subsidiary by any Person that has made, or to such
party's knowledge may be considering making, an Acquisition Proposal, or (3) any
oral or written expression that any such activities, discussions or negotiations
are sought to be initiated or continued with it, and, as applicable, include in
such notice the identity of the Person making such Acquisition Proposal,
indication or request, the material terms of such Acquisition Proposal,
indication or request and, if in writing, shall promptly deliver to PREIT copies
of any proposals, indications of interest, indication or request along with all
other related documentation and correspondence; and (B) will keep PREIT informed
of the status and material terms of (including all changes to the status or
material terms of) any such Acquisition Proposal, indication or request.
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(b) Notwithstanding Section 4.3(a), the Board of
Trustees of Crown (including with respect to Crown's capacity as the sole
general partner of Crown Partnership) shall not be prohibited from furnishing
information to or entering into discussions or negotiations with, any Person
that makes a bona fide written Acquisition Proposal to the Board of Trustees of
Crown after the date hereof which was not invited, initiated, solicited or
encouraged, directly or indirectly, by Crown, Crown Partnership, any Crown
Subsidiary or any Crown Representative on or after the date hereof, if, and only
to the extent that (i) a majority of the Board of Trustees of Crown determines
in good faith, after consultation with its financial advisors of nationally
recognized reputation and after receiving advice from its outside legal counsel,
that such Acquisition Proposal is reasonably likely to result in a Superior
Acquisition Proposal, (ii) each of Crown and Crown Partnership complies fully
with Section 4.3, (iii) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person, Crown provides written
notice to PREIT to the effect that it is furnishing information to, or entering
into discussions with such Person and (iv) Crown receives from such Person an
executed confidentiality agreement the material terms of which are (without
regard to the terms of such Acquisition Proposal) in all material respects no
less favorable to Crown, and no less restrictive to the Person making such
Acquisition Proposal, than those contained in the Confidentiality Agreements,
each dated July 2, 2002, as amended on February 4, 2003, between Crown and PREIT
(the "Confidentiality Agreement").
(c) Notwithstanding anything to the contrary set
forth in Section 4.3(a) or 4.3(b), in the event that an Acquisition Proposal
constitutes a Superior Acquisition Proposal, nothing contained in this Section
4.3 shall prohibit the Board of Trustees of Crown from withdrawing, modifying,
amending or qualifying its recommendation of this Agreement and the Merger as
required under Section 5.1(d) hereof and recommending such Superior Acquisition
Proposal to its shareholders: (i) if but only if, Crown: (A) complies fully with
this Section 4.3 and (B) provides PREIT with at least five business days' prior
written notice of its intent to withdraw, modify, amend or qualify its
recommendation of this Agreement or the Merger, (ii) if, in the event that
during such five business days PREIT makes a counter proposal to such Superior
Acquisition Proposal (any such counter proposal being referred to in this
Agreement as the "PREIT Counter Proposal"), Crown's Board of Trustees in good
faith, taking into account the advice of its outside financial advisors of
nationally recognized reputation, determines (A) that the PREIT Counter Proposal
is not at least as favorable to Crown's shareholders as the Superior Acquisition
Proposal, from a financial point of view, and (B) the PREIT Counter Proposal is
not at least as favorable generally to Crown's shareholders (taking into account
all financial and strategic considerations and other relevant factors, including
relevant legal, financial, regulatory and other aspects of such proposals, and
the conditions, prospects and time required for completion of such proposal),
and (iii) Crown shall have terminated this Agreement in accordance with Section
7.1(h).
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(d) For all purposes of this Agreement, "Superior
Acquisition Proposal" means a bona fide written proposal made by a third party
to acquire, directly or indirectly, Crown, Crown Partnership and CFLP pursuant
to a tender or exchange offer, merger, share exchange, consolidation or sale of
all or substantially all of the assets of Crown, Crown Partnership, and the
Crown Subsidiaries or otherwise (i) on terms which a majority of the Board of
Trustees of Crown determines in good faith, (A) after consultation with Crown's
financial advisors of nationally recognized reputation, are superior, from a
financial point of view, to Crown's shareholders to those provided for in the
Merger and the transactions contemplated by this Agreement and (B) to be more
favorable generally to Crown's shareholders (taking into account all financial
and strategic considerations and other relevant factors, including relevant
legal, financial, regulatory and other aspects of such proposals, and the
conditions, prospects and time required for completion of such proposal), (ii)
for which financing, to the extent required, in the reasonable judgment of the
Board of Trustees is capable of being obtained and (iii) which the Board of
Trustees of Crown determines in good faith is reasonably capable of being
consummated.
(e) Any disclosure that the Board of Trustees of
Crown may be compelled to make with respect to the receipt of an Acquisition
Proposal in order to comply with its duties to shareholders imposed by
applicable law or Rule 14d-9 or 14e-2 of the Exchange Act will not constitute a
violation of this Section 4.3.
(f) Nothing in this Section 4.3 shall (i) permit
Crown or PREIT to terminate this Agreement (except as expressly provided in
Article 7) or (ii) affect any other obligations of Crown or PREIT under this
Agreement.
4.4 Affiliates. Prior to the Effective Time, Crown shall cause
to be prepared and delivered to PREIT a list (reasonably satisfactory to counsel
for PREIT) identifying all Persons who, at the time of the Crown Shareholders
Meeting and the PREIT Shareholders Meeting, may be deemed to be "affiliates" of
Crown or Crown Partnership as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act.
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4.5 Other Actions. Each of Crown and Crown Partnership, on the
one hand, and PREIT and PREIT Partnership, on the other hand, shall not take,
and shall use commercially reasonable efforts to cause their respective
Subsidiaries not to take, any action that would result in (i) any of the
representations and warranties of such party (without giving effect to any
"knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue in any material respect or (iii) except as expressly
required by Section 4.3, any of the conditions to the Merger set forth in
Article 6 not being satisfied.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Form S-4 and the Proxy Statement; Crown
Shareholders Meeting, Crown Unitholders Consent Solicitation, PREIT Shareholders
Meeting and PREIT Unitholders Consent Solicitation.
(a) As promptly as practicable after execution of
this Agreement, (i) Crown and PREIT shall prepare and file with the SEC (with
appropriate requests for confidential treatment, unless the parties hereto
otherwise agree) under the Exchange Act, one or more joint proxy
statements/prospectuses, forms of proxies and information statements (such joint
proxy statement(s)/prospectus(es) and information statements together with any
amendments to supplements thereto, the "Joint Proxy Statement") relating to the
shareholder meeting of Crown and the shareholder meeting of PREIT, the vote of
the shareholders of Crown and the shareholders of PREIT with respect to the
Merger, and the consent, if any, of partners of Crown Partnership and PREIT
Partnership in connection with any required Partner Approvals and (ii) in
connection with the clearance by the SEC of the Joint Proxy Statement, PREIT and
Crown, if applicable, shall prepare and file with the SEC under the Securities
Act one or more registration statements on Form S-4 (such registration
statements, together with any amendments or supplements thereto, the "Form
S-4"), in which the Joint Proxy Statement will be included, as one or more
prospectuses in connection with the registration under the Securities Act of the
PREIT Common Shares and PREIT Senior Preferred Shares to be distributed to the
holders of Crown Common Shares and Crown Senior Preferred Shares in the Merger.
The respective parties will cause the Proxy Statement and the Form S-4 to comply
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. Each
of Crown, Crown Partnership, PREIT and PREIT Partnership shall furnish all
information about itself and its business and operations and all necessary
financial information to the other as the other may reasonably request in
connection with the preparation of the Joint Proxy Statement and the Form S-4.
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Each of PREIT and Crown, if applicable, shall use commercially reasonable
efforts, and Crown will cooperate with PREIT, to have the Form S-4 declared
effective by the SEC as promptly as practicable (including clearing the Proxy
Statement with the SEC). Each of Crown and Crown Partnership, on the one hand,
and PREIT and PREIT Partnership, on the other hand, agree promptly to correct
any information provided by it for use in the Joint Proxy Statement and the Form
S-4 if and to the extent that such information shall have become false or
misleading in any material respect, and each of the parties hereto further
agrees to take all steps necessary to amend or supplement the Joint Proxy
Statement and the Form S-4 and to cause the Joint Proxy Statement and the Form
S-4 as amended or supplemented to be filed with the SEC and to be disseminated
to their respective shareholders and partners, in each case as and to the extent
required by applicable federal and state securities laws. Each of Crown, Crown
Partnership, PREIT and PREIT Partnership agrees that the information provided by
it for inclusion in the Joint Proxy Statement or the Form S-4 and each amendment
or supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of shareholders of Crown and PREIT and at the time of the
respective taking of consents, if any, of partners of Crown Partnership and
PREIT Partnership, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. PREIT will advise and deliver copies (if any) to Crown,
forthwith after it receives notice thereof, of any request by the SEC for
amendment of the Joint Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information (regardless
of whether such requests relate to PREIT or PREIT Partnership, on the one hand,
and Crown or Crown Partnership, on the other hand), and PREIT shall forthwith
notify Crown, and Crown shall promptly notify PREIT, if applicable, of (i) the
time when the Form S-4 has become effective, (ii) the filing of any supplement
or amendment thereto, (iii) the issuance of any stop order, and (iv) the
suspension of the qualification and registration of the PREIT Common Shares and
PREIT Senior Preferred Shares issuable in connection with the Merger.
(b) Each of Crown, Crown Partnership, PREIT and PREIT
Partnership shall use commercially reasonable efforts to timely mail the Joint
Proxy Statement contained in the Form S-4 to its respective shareholders. It
shall be a condition to the mailing of the Joint Proxy Statement that, and the
respective parties shall undertake commercially reasonable efforts to cause, (i)
PREIT and PREIT Partnership shall have received a "comfort" letter from Ernst &
Young LLP, independent public accountants for Crown and Crown Partnership, of
the kind contemplated by the Statement of Auditing Standards with respect to
Letters to Underwriters promulgated by the American Institute of Certified
Public Accountants (the "AICPA Statement"), dated as of the date on which the
Form S-4 shall become effective and as of the Effective Time, addressed to PREIT
and PREIT Partnership, in form and substance reasonably satisfactory to PREIT
and PREIT Partnership, concerning the procedures undertaken by Ernst & Young
with respect to the financial statements and information of Crown, Crown
Partnership and their subsidiaries contained in the Form S-4 and the other
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matters contemplated by the AICPA Statement and otherwise customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions such as those contemplated by this Agreement and (ii) Crown
and Crown Partnership shall have received a "comfort" letter from KPMG LLP,
independent public accountants for PREIT and PREIT Partnership, of the kind
contemplated by the AICPA Statement, dated as of the date on which the Form S-4
shall become effective and as of the Effective Time, addressed to Crown and
Crown Partnership, in form and substance reasonably satisfactory to Crown,
concerning the procedures undertaken by KPMG LLP with respect to the financial
statements and information of PREIT, PREIT Partnership and their subsidiaries
contained in the Form S-4 and the other matters contemplated by the AICPA
Statement and otherwise customary in scope and substance for letters delivered
by independent public accountants in connection with transactions such as those
contemplated by this Agreement. Each of Crown and Crown Partnership also shall
use commercially reasonable efforts to cause Xxxx Xxxxx LLP or other counsel
reasonably satisfactory to PREIT to have delivered an opinion, which opinion
shall be filed as an exhibit to the Form S-4, as to the federal income tax
matters described in clause (i) of Section 6.2(d) and Section 6.3(e) and such
other federal income tax matters as are required to be addressed in the Form S-4
and the Joint Proxy Statement under the applicable rules of the SEC. Each of
PREIT and PREIT Partnership shall use commercially reasonable efforts to cause
(a) Drinker Xxxxxx & Xxxxx LLP or other counsel reasonably satisfactory to Crown
to have delivered an opinion, which opinion shall be filed with the SEC and as
exhibit to the Form S-4, as to the federal income tax matters described in
clause (ii) of Section 6.2(d), Section 6.3(d) and such other federal income tax
matters as are required to be addressed in the Form S-4 and the Joint Proxy
Statement under the applicable rules of the SEC and (b) Xxxxx & Xxxxxxx L.L.P.
or other counsel reasonably satisfactory to Crown to have delivered an opinion,
which opinion shall be filed with the SEC as an exhibit to the Form S-4, as to
the federal income tax matters described in Section 6.2(e) and such other
federal income tax matters as are required to be addressed in the Form S-4 and
the Joint Proxy Statement under the applicable rules of the SEC. Such opinions
shall contain customary exceptions, assumptions and qualifications and be based
upon customary representations.
(c) PREIT will duly call and give notice of and, as
soon as practicable following the date of this Agreement (but in no event sooner
than 20 business days following the date the Joint Proxy Statement is mailed to
the shareholders of PREIT), convene and hold a meeting of its shareholders (the
"PREIT Shareholders Meeting") for the purpose of obtaining the PREIT Shareholder
Approval. PREIT shall, through its Board of Trustees, recommend to its
shareholders approval of this Agreement, the Merger and the transactions
contemplated by this Agreement.
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(d) Crown will duly call and give notice of and, as
soon as practicable following the date of this Agreement (but in no event sooner
than 20 business days following the date the Joint Proxy Statement is mailed to
the stockholders of Crown), convene and hold a meeting of its shareholders (the
"Crown Shareholders Meeting") for the purpose of obtaining the Crown Shareholder
Approval. Crown shall, through its Board of Trustees, recommend to its
shareholders approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement and include such recommendation in the Proxy
Statement; provided, however, that prior to the Crown Shareholders Meeting, such
recommendation may be withdrawn, modified, amended or qualified if and only to
the extent permitted by Section 4.3(c) hereof.
(e) PREIT and Crown shall use their commercially
reasonable efforts to convene their respective shareholder meetings on the same
day, which day, subject to the provisions of Sections 5.1(c), 5.1(d) and 5.3,
shall be a day not later than 60 days after the date the Joint Proxy Statement
is mailed.
(f) If on the date for the PREIT Shareholders Meeting
and Crown Shareholders Meeting established pursuant to Section 5.1(e) of this
Agreement, either PREIT or Crown has not received duly executed proxies for a
sufficient number of votes to approve the Merger, then both parties shall
recommend the adjournment of their respective shareholders meetings until one or
more dates not later than the date 10 days after the originally scheduled date
of the shareholders meetings, with such rescheduled meetings to be held on the
same mutually agreed upon date.
(g) Crown shall request written consents for approval
by the limited partners of Crown Partnership of each of the matters described in
the definition of Crown Partner Approvals. Crown shall vote in favor of or
consent to, as applicable, each of the matters described in the definition of
Crown Partner Approvals, to the extent approval thereof is required by the Crown
Partnership Agreement. Crown shall recommend to the limited partners of Crown
Partnership that they approve such matters. Crown shall execute its written
consent to each of the matters described in the definition of Crown Partner
Approvals, by the 20th business day after mailing of the Joint Proxy Statement,
and immediately thereafter, Crown Partnership shall mail to each holder of a
Crown OP Unit a notice of the approval. PREIT shall vote in favor of or consent
to, as applicable, each of the matters described in the definition of PREIT
Partner Approvals, to the extent approval thereof is required by the PREIT
Partnership Agreement. PREIT shall execute its written consent to each of the
matters described in the definition of PREIT Partner Approvals, by the 20th
business day after mailing of the Joint Proxy Statement, and immediately
thereafter, PREIT Partnership shall mail to each holder of a PREIT OP Unit a
notice of the approval.
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(h) Crown shall not exercise any dissenters or other
similar rights, if any, with respect to any of its Crown OP Units (or Crown
Senior Preferred OP Units).
5.2 Access to Information; Confidentiality. Subject to the
requirements of confidentiality agreements with third parties in existence on
the date hereof, each of the parties shall, and shall cause each of its
Subsidiaries to, afford to the other parties and to the officers, employees,
accountants, counsel, financial advisors and other representatives of such other
parties, upon reasonable prior notice, during mutually agreeable times during
normal business hours prior to the Effective Time reasonable access to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of the parties shall, and shall cause each of its
Subsidiaries to, furnish promptly to the other parties (a) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. Each of the parties shall, and shall
cause its Subsidiaries to, use commercially reasonable efforts to cause its
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to, hold any nonpublic information in confidence
in accordance with the Confidentiality Agreement, which shall remain in full
force and effect pursuant to the terms thereof, notwithstanding the execution
and delivery of this Agreement or the termination hereof.
5.3 Commercially Reasonable Efforts; Notification.
(a) Subject to the terms and conditions herein
provided, each of the parties shall: (i) use commercially reasonable efforts to
cooperate with one another in (A) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions and any third parties in connection with the execution
and delivery of this Agreement, and the consummation of the transactions
contemplated hereby, including, without limitation, any filing under the HSR
Act, and (B) timely making all such filings and timely seeking all such
consents, approvals, permits and authorizations; (ii) use commercially
reasonable efforts (other than the payment of money which is not contractually
required to be paid) to obtain in writing any consents required from third
parties to effectuate the Merger, such consents to be in form reasonably
satisfactory to each of the parties (including, without limitation, taking the
actions contemplated under Schedule 5.3(a)(ii)); and (iii) use commercially
reasonable efforts to take, or cause to be taken, all other action and do, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement,
including the Pre-Merger Transactions, the Merger and the Post-Merger
Contribution Transactions. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purpose of this Agreement,
each party shall take all such necessary action.
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(b) Crown and Crown Partnership shall use
commercially reasonable efforts to obtain from Ernst & Young LLP access to all
work papers relating to audits of Crown and Crown Partnership performed by Ernst
& Young LLP, and the continued cooperation of Ernst & Young LLP with regard to
the preparation of consolidated financial statements for the Surviving Trust.
(c) Crown and Crown Partnership shall give prompt
notice to PREIT and PREIT Partnership, and PREIT and PREIT Partnership shall
give prompt notice to Crown and Crown Partnership, (i) if any representation or
warranty made by it contained in this Agreement that is not qualified as to
materiality becomes untrue or inaccurate in any respect or any such
representation or warranty that is so qualified becomes untrue or inaccurate in
any material respect or (ii) of the failure by it to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.4 Tax Matters. Each of PREIT and Crown shall use
commercially reasonable efforts to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code and to obtain
the opinions of counsel referred to in Sections 6.2(e) and 6.3(e).
5.5 Public Announcements. The initial press release to be
issued with respect to the transactions contemplated by this Agreement will be
in the form agreed to by the parties prior to the execution of this Agreement.
Each party will consult with the other party before issuing, and provide such
other party the opportunity to review and comment upon, any material press
release or other written public statement, including, without limitation, any
press release or other written public statement which addresses in any manner
the transactions contemplated by this Agreement, and shall not issue any such
press release or make any such written public statement prior to such
consultation, except as may be required by applicable law, rule or regulation,
court process or by obligations pursuant to any listing agreement with any
national securities exchange.
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5.6 Listing. PREIT shall use commercially reasonable efforts
to cause the PREIT Common Shares and PREIT Senior Preferred Shares to be issued
in the Merger and the PREIT Common Shares underlying the PREIT Class B Units to
be issued pursuant to the Crown Partnership Contribution Agreement to be
approved for listing on the New York Stock Exchange (the "NYSE"), subject to
official notice of issuance, prior to the Effective Time, including timely
submitting all required applications and filings, and making payment of all
required fees and expenses.
5.7 Transfer and Gains Taxes. Each party shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
affidavits, applications or other documents regarding any real property transfer
or gains, sales, use, transfer, mortgage, value added stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the transactions contemplated by
this Agreement (together with any related interests, penalties or additions to
tax, "Transfer and Gains Taxes"). From and after the Effective Time, except as
expressly provided for in Section 9 of the Pasquerilla Tax Protection Agreement
(as defined in Section 5.13(e)), PREIT shall pay or cause PREIT Partnership, as
appropriate, to pay or cause to be paid all Transfer and Gains Taxes (which term
shall not in any event be construed to include for these purposes any Tax
imposed under the Code or state or local income tax laws).
5.8 Benefit Plans and Other Employee Arrangements.
(a) Access to Employees. Neither PREIT nor any PREIT
Subsidiary shall be obligated to hire any employee of Crown Partnership or CASC
following the Merger, but may interview some or all such employees with a view
to possible employment. From and after the date hereof, Crown, Crown Partnership
and CASC shall provide reasonable access to the facilities and personnel records
consisting of performance appraisals and disciplinary actions of Crown, Crown
Partnership and CASC for the purpose of preparing for and conducting employment
interviews and shall permit any employee of Crown Partnership or CASC to
interview with PREIT or any PREIT Subsidiary, and PREIT or any PREIT Subsidiary
will conduct such interviews as expeditiously as possible prior to the Closing
Date. Within 90 days of the date hereof, PREIT shall provide Crown a list of all
those employees of Crown Partnership and CASC to whom PREIT or a PREIT
Subsidiary (the "Successor Employer") intends to make an offer of employment to
be effective on the Closing Date ("Solicited Employees"), and, within 30 days of
delivering such list of Solicited Employees, the Successor Employer shall notify
Crown, Crown Partnership and CASC of each Solicited Employee who has accepted an
offer of employment to be effective on the Closing Date (the "Hired Employees").
The Successor Employer shall include in any offer of employment a provision to
the effect that acceptance of such offer shall constitute a resignation of
employment with Crown Partnership or CASC, as the case may be, effective
immediately before the Closing Date. If the Successor Employer expresses an
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intention to extend offers of employment as set forth in this Section 5.8(a),
any such expression shall not constitute a commitment, contract or understanding
(expressed or implied) or any obligation on the part of the Successor Employer
with respect to a post-Closing employment relationship of any fixed term or
duration or upon any terms or conditions other than those that the Successor
Employer may establish pursuant to individual offers of employment. Nothing in
this Agreement shall create any obligation on the part of the Successor Employer
or any of its Affiliates to continue the employment of any Hired Employees for
any period or to continue to pay any salaries comparable to those previously
paid or provided by Crown, Crown Partnership or CASC or, except as otherwise
expressly provided in this Section 5.8, to continue to provide any benefits of
employment. Furthermore, nothing in this Agreement shall prevent or restrict in
any way the right of the Successor Employer to reassign, promote or demote any
of the Hired Employees after the Closing, or to change adversely or favorably
the title, powers, duties, responsibilities, functions, locations, or terms or
conditions of employment of such employees. In addition, no Person shall be
deemed a third party-beneficiary of this Section 5.8 entitled to enforce its
provisions.
(b) Termination of Crown Partnership Employees. Other
than in the ordinary course of business and consistent with past practices,
without the written consent of PREIT, Crown, Crown Partnership and CASC shall
not terminate any employees except as provided in the next sentence. Effective
immediately before the Closing, Crown Partnership and CASC shall terminate the
employment of all of their employees, other than the Hired Employees. Crown
Partnership and CASC, to the extent practicable, shall comply with the WARN Act
and any similar state or local Law in connection with the termination of their
employees and Crown Partnership and CASC shall provide PREIT with a reasonable
opportunity to review and comment on any notices to be delivered in connection
with such terminations prior to delivery thereof. In any event, Crown
Partnership and CASC shall give at least two weeks notice to any employee who is
to be terminated. At Closing, PREIT or a PREIT Subsidiary shall deposit with a
third-party escrow agent identified by Crown and reasonably acceptable to PREIT
an amount mutually agreed upon by Crown and PREIT equal to a reasonable estimate
of the aggregate severance payments that are required to be made to employees of
Crown, Crown Partnership and CASC pursuant to the Crown Employee Plans as a
result of the resignations and terminations of employment contemplated by
Sections 5.8(a) and 5.8(b) hereof. Within 10 business days of the Closing Date,
PREIT or a PREIT Subsidiary shall cause to be paid from such escrow deposit any
such severance payments required to be made pursuant to the Crown Employee
Plans, less any required withholding. Any balance remaining from such escrow
deposit after such payments shall be paid to PREIT, or, if additional funds are
required to be paid, such amounts shall be paid by PREIT. In furtherance of the
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foregoing, PREIT agrees that, for purposes of the Crown Partnership Special
Severance Plan and the employees covered thereby, any resignation of employment
by employees pursuant to Section 5.8(a) shall be deemed to constitute a
voluntary termination by the employee to accept a position with an acquiror of
Crown or Crown Partnership in connection with or anticipation of a "Change of
Control" within the meaning of such plan; any termination of employment of
employees pursuant to Section 5.8(b) shall be deemed to constitute a termination
of employment by employer action other than for "cause" in connection with or
anticipation of a "Change of Control" within the meaning of such plan; and
employees who resign or are terminated pursuant to Section 5.8(a) or (b) shall
be entitled to a "Severance Allowance", which lump sum amount, less any required
withholding, shall be paid by PREIT or a PREIT Subsidiary within 10 business
days of the Closing Date in the manner provided above. For purposes of Crown
Partnership's Employment Continuation agreements, PREIT agrees that signing this
Agreement shall constitute a "Potential Change of Control" as defined therein,
consummation of the transactions contemplated herein shall constitute a "Change
of Control" under such agreements, termination of employment of those employees
covered by such agreements by Crown Partnership shall be a termination by Crown
Partnership other than for "Cause", resignation of employment by those employees
covered by such agreements shall be a termination with "Good Reason", and those
employees shall be entitled to a "Severance Amount" and continuation of benefits
as provided for in such agreements, which lump sum Severance Amount, less any
required withholding, shall be paid by PREIT or a PREIT Subsidiary within 10
business days of the Closing Date in the manner provided above and which
employee benefits will be continued by PREIT or a PREIT Subsidiary for those
employees for the time period specified in such agreements. Furthermore, PREIT
or a PREIT Subsidiary shall assume the Employment Continuation Agreements
entered into as of February 25, 2002 by Crown Partnership and Messrs.
Pasquerilla, Stephenson, Griffith, Zucco, Antonazzo, Rusinak, Xxxxxx and Xxxxxxx
and Xx. Xxxxxx-Xxxxxxxx, respectively. Notwithstanding anything in this
Agreement to the contrary, but except as provided in the preceding sentence,
neither PREIT nor any PREIT Subsidiary shall assume any other Employee Plan of
Crown Partnership that provides for severance or similar benefits in the nature
of severance.
(c) Benefit Plans. As of the Effective Time, and
except as set forth in Section 5.8(e) hereof, the Successor Employer expressly
assumes and agrees to perform the obligations of Crown, Crown Partnership and
CASC under each Crown Employee Plan, including those set forth on Schedule 2.12
to the Crown Disclosure Letter, but excluding those stock option plans and
agreements which are covered by Sections 5.8(f) and 5.8(g) and severance pay
plans, arrangements and agreements which are covered by Section 5.8(b), and all
of the liabilities and obligations of Crown and Crown Partnership associated
therewith (the "Assumed Employee Plans"), in each case to the same extent as
Crown, Crown Partnership or CASC, as the case may be, would be required to
perform (and with the same ability to amend, suspend, or terminate each such
Crown Employee Plan as Crown, Crown Partnership and CASC, as the case may be,
would have had) if no transactions contemplated by this Agreement had taken
place. Without limiting the generality of the foregoing, the Successor Employer
shall assume and make available group health coverage and perform all COBRA
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obligations for the applicable COBRA period with respect to all Crown, Crown
Partnership and CASC employees and former employees, including (i) employees of
Crown, Crown Partnership and CASC who resign or who are terminated as provided
in Sections 5.8(a) and 5.8(b) hereof, (ii) employees of Crown, Crown Partnership
and CASC who are terminated between the date hereof and the Closing Date, and
(iii) former employees of Crown, Crown Partnership and CASC, including those
disclosed on Schedule 2.12(a) to the Crown Disclosure Letter who have elected or
who are eligible to elect COBRA coverage. All Hired Employees shall be eligible
to either (i) participate in any pension, retirement, savings, disability,
medical, dental, health, life, death benefit, group insurance, profit sharing,
deferred compensation, stock option, equity compensation, bonus, incentive,
vacation pay, tuition reimbursement, severance pay, employment continuation,
change of control, fringe benefit or other employee benefit plan, trust,
agreement, contract, policy or commitment (including, without limitation, any
Pension Plan and any Welfare Plan) (each, an "Employee Plan") sponsored or
maintained by the Successor Employer after the Effective Time on the same terms
and conditions as similarly situated employees of the Successor Employer,
subject to the terms and conditions of such plans, or (ii) continue
participation in any Assumed Employee Plan, until such time, if ever, as such
Hired Employees become participants in the Employee Plans maintained by the
Successor Employer as provided in (i), subject to the terms and conditions
thereof. The particular clause (i) or (ii) of the preceding sentence under which
Hired Employees are eligible shall be determined by the Successor Employer in
its discretion. With respect to each such Employee Plan or Assumed Employee
Plan, service with Crown or any Crown Subsidiary (as applicable) and the
predecessor of any of them by any Hired Employee shall be included for purposes
of determining eligibility to participate, vesting (if applicable) and
determination of the level of entitlement to, benefits under such Employee Plan;
provided, however, that such service shall not be included for purposes of
benefit accrual under any Pension Plan. PREIT shall, or shall cause the
Successor Employer to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to all Hired Employees under any Welfare Plan that such
employees may be eligible to participate in after the Effective Time, other than
limitations or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under any
Welfare Plan maintained for such employees immediately prior to the Effective
Time, and (ii) provide each Hired Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any Welfare Plans that such
employees are eligible to participate in after the Effective Time.
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(d) Crown Section 401(k) Plan. Prior to the Closing
Date, Crown Partnership shall file a proposal with the IRS through the IRS's
Employee Plans Compliance Resolution System as to how to correct the failure to
amend properly the Crown Retirement Savings Plan to eliminate all benefit
options other than lump sums. Crown shall obtain PREIT's prior written approval
to the proposal, which approval shall not be unreasonably withheld. For Hired
Employees, due to the Successor Employer's assumption of the Crown Retirement
Savings Plan ("401(k) Plan"), a termination of employment pursuant to Section
5.8(b) or resignation under Section 5.8(a) shall not be deemed to be a
termination of employment for purposes of distributions under such 401(k) Plan
and neither the Successor Employer nor Crown shall offer a distribution to such
Hired Employees as a result of the transactions described herein. The Successor
Employer acknowledges that its assumption of the 401(k) Plan includes assumption
of all liabilities under such 401(k) Plan, including liabilities relating to
employees and former employees who are not Hired Employees.
(e) Stock Option, Restricted Stock and Top-Hat Plans.
The stock option plans or programs of Crown and the restricted stock plans or
programs of Crown shall be discontinued as of the Closing Date. The
non-qualified deferred compensation plans or programs of Crown, including
without limitation the Amended and Restated Key Executive Capital Incentive Plan
and Savings Restoration Plan of Crown Partnership (the "Top-Hat Plans"), and the
rabbi trusts maintained pursuant to the terms of such plans or programs (i)
shall be assumed by the Successor Employer as of the Effective Time, (ii) all
contributions to such plans or programs shall cease as of the Effective Time,
and (iii) no new employees shall be eligible to enter such plans or programs on
or after the Effective Time.
(f) Crown Trustee Options. As of the Effective Time,
each Crown Trustee Option outstanding immediately prior to the Effective Time,
determined without regard to the termination or resignation of service by any
optionee, shall be automatically converted into an option (a "Substituted
Trustee Option") to purchase a number of PREIT Common Shares equal to the number
of Crown Common Shares that could have been purchased (assuming full vesting)
under such Crown Trustee Option multiplied by 0.3589 (rounded down to the
nearest whole number of shares) at an exercise price per PREIT Common Share
equal to the per-share option exercise price specified in the Crown Trustee
Option divided by 0.3589 (rounded up to the nearest whole cent). Such
Substituted Trustee Option shall otherwise be subject to the same terms and
conditions as such Crown Trustee Option; provided, however, that such
Substituted Trustee Option shall be fully vested as of the Effective Time and
shall, notwithstanding its terms, be and remain exercisable until the earlier of
(i) six months from the Effective Time or (ii) the expiration date of such stock
option as in effect immediately prior to the Effective Time and without regard
to the optionee's resignation or other termination of service. For purposes of
expiration and otherwise, the deemed date of grant of the Substituted Trustee
Option shall be the date on which the corresponding Crown Trustee Option was
granted, and, except as provided in the preceding sentence, any termination or
resignation of service shall be given the same effect as would have applied
without regard to the Merger. In respect of each Crown Trustee Option converted
into a Substituted Trustee Option, and the PREIT Common Shares underlying such
Substituted Trustee Option, PREIT shall, immediately following the date of
conversion, file or shall have filed, and shall keep current a Registration
Statement on Form S-8 or other appropriate registration statement for as long as
Substituted Trustee Options remain outstanding.
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(g) Crown Partnership Options. As of the Effective
Time, each Crown Partnership Option outstanding immediately prior to the
Effective Time, determined without regard to the termination or resignation of
service by any optionee, shall be automatically converted into an option (a
"Substituted Partnership Option") to purchase a number of PREIT Common Shares
equal to the number of Crown Partnership Units that could have been purchased
(assuming full vesting) under such Crown Partnership Option multiplied by 0.3589
(rounded down to the nearest whole number of shares) at an exercise price per
PREIT Common Share equal to the per-share option exercise price specified in the
Crown Partnership Option divided by 0.3589 (rounded up to the nearest whole
cent). Such Substituted Partnership Option shall otherwise be subject to the
same terms and conditions as such Crown Partnership Option; provided, however,
that (i) each Substituted Partnership Option held by a Hired Employee shall
become fully vested on (A) the later of March 31, 2004 or the last day of the
first full calendar quarter that begins on or after the Closing Date (as the
case may be, the "Option Date"), provided, in either case, that such Hired
Employee remains an employee of PREIT or a PREIT Subsidiary on the Option Date,
or (B) if earlier than the Option Date, the date of such employee's termination
of employment by the Successor Employer for any reason other than for "Cause" as
defined in Crown Partnership's Employment Continuation agreements, (ii) each
Substituted Partnership Option held by a person who was an employee of Crown,
Crown Partnership or CASC immediately prior to the Closing Date but who either
is not a Solicited Employee or is a Solicited Employee but whose offer of
employment by the Successor Employer is conditioned upon such Solicited Employee
relocating on or before the Option Date to a work location more than 25 miles
from such Solicited Employee's current work location and/or is conditioned upon
a material reduction in compensation as compared with such Solicited Employee's
compensation with Crown Partnership or CASC immediately prior to the Effective
Time, and who does not accept such offer of employment, shall become fully
vested at the Effective Time, (iii) each Substituted Partnership Option
specified in the foregoing clause (i) that vests upon the date of such Hired
Employee's termination of employment by the Successor Employer shall,
notwithstanding its terms, be and remain exercisable until the earlier of (A)
six months from the date of such employee's termination of employment by the
Successor Employer or (B) the expiration date of such stock option as in effect
immediately prior to the Effective Time and without regard to the optionee's
termination of employment, and (iv) each Substituted Partnership Option
specified in the foregoing clause (ii) shall, notwithstanding its terms, be and
remain exercisable until the earlier of (A) six months from the Effective Time
or (B) the expiration date of such stock option as in effect immediately prior
to the Effective Time and without regard to the optionee's termination or
resignation of employment. For purposes of expiration and otherwise, the deemed
date of grant of the Substituted Partnership Option shall be the date on which
the corresponding Crown Partnership Option was granted, and, except as provided
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in the preceding sentence, (x) each Substituted Partnership Option held by a
Hired Employee shall be treated as if such Hired Employee had never been
terminated by Crown Partnership and (y) each other Substituted Partnership
Option shall be treated according to the terms of such Substituted Partnership
Option taking into account the termination or resignation of the holder thereof.
In respect of each Crown Partnership Option converted into a Substituted
Partnership Option, and the PREIT Common Shares underlying such Substituted
Partnership Option, PREIT shall, immediately following the date of conversion,
file or shall have filed, and shall keep current a Registration Statement on
Form S-8 or other appropriate registration statement for as long as Substituted
Partnership Options remain outstanding.
(h) Withholding. To the extent required by applicable
law, Crown shall require each employee and trustee who exercises a Crown Option,
Crown Partnership Option or who receives Crown Common Shares pursuant to any
existing commitment to pay to Crown in cash or Crown Common Shares an amount
sufficient to satisfy in full Crown's obligation to withhold Taxes incurred by
reason of such exercise or issuance (unless and to the extent such withholding
is satisfied pursuant to the provision regarding withholding in Section
1.11(c)).
5.9 Indemnification.
(a) From and after the Effective Time, PREIT and
PREIT Partnership (collectively, the "Indemnifying Parties") shall provide
exculpation and indemnification for each individual who is now or has been at
any time prior to the date hereof or who becomes prior to the Effective Time, an
officer, director or trustee of Crown or any Crown Subsidiary (the "Indemnified
Parties") which is the same as the exculpation and indemnification (including
any applicable provisions for payment) provided to the Indemnified Parties by
Crown and the Crown Subsidiaries immediately prior to the Effective Time in its
charter, Bylaws or in its partnership, operating or similar agreement, as in
effect on the date hereof; provided, that no such exculpation or indemnification
(including any applicable provisions for payment) shall be provided by PREIT or
PREIT Partnership to Xxxx X. Xxxxxxxxxxx for any threatened or actual "Claims"
(as defined in the Indemnification Agreement) that are described in Section
2.1(a) of the Indemnification Agreement (whether or not PREIT or PREIT
Partnership is actually entitled to or receives indemnification).
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(b) In addition to the rights provided in Section
5.9(a) above, in the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any action by or on behalf of any or all security
holders of Crown or PREIT, or any Crown Subsidiary or PREIT Subsidiary, or by or
in the right of Crown or PREIT, or any Crown Subsidiary or PREIT Subsidiary, or
any claim, action, suit, proceeding or investigation in which any individual who
is now, or has been, at any time prior to the date hereof, or who becomes prior
to the Effective Time, an officer, employee, director or trustee of Crown or any
Crown Subsidiary (the "Indemnification Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was an officer, employee,
director or trustee of Crown or any of the Crown Subsidiaries or any action or
omission by such individual in his capacity as a trustee, or (ii) this Agreement
or the transactions contemplated by this Agreement, whether in any case asserted
or arising before or after the Effective Time, the Indemnifying Parties shall,
from and after the Effective Time, indemnify and hold harmless, as and to the
full extent permitted by applicable law, each Indemnification Party against any
losses, claims, liabilities, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in accordance
herewith in connection with any such threatened or actual claim, action, suit,
proceeding or investigation. Any Indemnification Party proposing to assert the
right to be indemnified under this Section 5.9(b) shall, promptly after receipt
of notice of commencement of any action against such Indemnification Party in
respect of which a claim is to be made under this Section 5.9(b) against the
Indemnifying Parties, notify the Indemnifying Parties of the commencement of
such action, enclosing a copy of all papers served; provided, however, that the
failure to provide such notice shall not affect the obligations of the
Indemnifying Parties except to the extent such failure to notify materially
prejudices the Indemnifying Parties' ability to defend such claim, action, suit,
proceeding or investigation; and provided further, however, that, in the case of
any claim, action, suit, proceeding or investigation pending, to the Knowledge
of Crown, at the Effective Time, Crown shall notify PREIT pursuant to this
Section 5.9(b) prior to such Effective Time. If any such action is brought
against any of the Indemnification Parties and such Indemnification Parties
notify the Indemnifying Parties of its commencement, the Indemnifying Parties
will be entitled to participate in and, to the extent that they elect by
delivering written notice to such Indemnification Parties promptly after
receiving notice of the commencement of the action from the Indemnification
Parties, to assume the defense of the action and after notice from the
Indemnifying Parties to the Indemnification Parties of their election to assume
the defense, the Indemnifying Parties will not be liable to the Indemnification
Parties for any legal or other expenses except as provided below. If the
Indemnifying Parties assume the defense, the Indemnifying Parties shall have the
right to settle such action without the consent of the Indemnification Parties;
provided, however, that the Indemnifying Parties shall be required to obtain
such consent if the settlement includes any admission of wrongdoing on the part
of the Indemnification Parties or any decree or restriction on the
Indemnification Parties; provided further, however, that no Indemnifying
Parties, in the defense of any such action shall, except with the consent of the
Indemnification Parties, consent to entry of any judgment or enter into any
settlement that (i) does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnification Parties of a release from
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all liability with respect to such action, or (ii) contains obligations other
than with respect to the payment of money. The Indemnification Parties will have
the right to employ their own counsel in any such action, but the fees, expenses
and other charges of such counsel will be at the expense of such Indemnification
Parties unless (i) the employment of counsel by the Indemnification Parties has
been authorized in writing by the Indemnifying Parties, (ii) the Indemnification
Parties have reasonably concluded (based on written advice of counsel to the
Indemnification Parties) that there may be legal defenses available to them that
are different from or in addition to and inconsistent with those available to
the Indemnifying Parties, (iii) a conflict or potential conflict exists (based
on written advice of counsel to the Indemnification Parties) between the
Indemnification Parties and the Indemnifying Parties (in which case the
Indemnifying Parties will not have the right to direct the defense of such
action on behalf of the Indemnification Parties) or (iv) the Indemnifying
Parties have not in fact employed counsel to assume the defense of such action
within a reasonable time (not to exceed 10 days) after receiving notice of the
commencement of the action from the Indemnification Parties, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the Indemnifying Parties and shall promptly be paid by each
Indemnifying Party as they become due and payable in advance of the final
disposition of the claim, action, suit, proceeding or investigation to the
fullest extent and in the manner permitted by law; provided, however, that in no
event shall any contingent fee arrangement be considered reasonable.
Notwithstanding the foregoing, the Indemnifying Parties shall not be obligated
to advance any expenses or costs prior to receipt of an undertaking by or on
behalf of the Indemnification Party to repay any expenses advanced if it shall
ultimately be determined that the Indemnification Party is not entitled to be
indemnified against such expense pursuant to the last sentence of this Section
5.9(b). It is understood that the Indemnifying Parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any one time for all
such Indemnification Parties unless (a) the employment of more than one counsel
has been authorized in writing by the Indemnifying Parties, (b) any of the
Indemnification Parties have reasonably concluded (based on written advice of
counsel to the Indemnification Parties) that there may be legal defenses
available to them that are different from or in addition to and inconsistent
with those available to other Indemnification Parties or (c) a conflict or
potential conflict exists (based on written advice of counsel to the
Indemnification Parties) between any of the Indemnification Parties and the
other Indemnification Parties, in each case of which the Indemnifying Parties
shall be obligated to pay the reasonable fees and expenses of such additional
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counsel or counsels on the same basis as provided in the immediately preceding
sentence. Notwithstanding anything to the contrary set forth in this Agreement,
the Indemnifying Parties (i) shall not be liable for any settlement effected
without their prior written consent and (ii) shall not have any obligation
hereunder to any Indemnification Party to the extent that a court of competent
jurisdiction shall determine in a final and non-appealable order that such
indemnification is prohibited by applicable law. In the event of a final and
non-appealable determination by a court that any payment of expenses is
prohibited by applicable law, the Indemnification Parties shall promptly refund
to the Indemnifying Parties the amount of all such expenses theretofore advanced
pursuant hereto.
(c) At or prior to the Effective Time, PREIT shall
purchase trustees', directors' and officers' liability insurance covering acts
or omissions occurring prior to the Effective Time for a period of six years
with respect to those individuals who are currently covered by Crown's
trustees', directors' and officers' liability insurance policy (the "Crown
Insured Parties") on terms with respect to such coverage and amount no less
favorable to Crown's trustees and officers currently covered by such insurance
than those of such policy in effect on the date hereof; provided, however, that
if the premium of such insurance policy exceeds 200% of the premium of such
policy in effect on the date hereof, PREIT shall be required only to purchase
such comparable coverage as available for an amount not to exceed 200% of the
premium of such policy in effect on the date hereof; and provided further,
however, that during such six year period, in no event shall PREIT provide
insurance coverage that is less favorable to the Crown Insured Parties than is
maintained by PREIT for its trustees and officers.
(d) This Section 5.9 is intended for the irrevocable
benefit of, and to grant third-party rights to, the Indemnified Parties, the
Indemnification Parties and their successors, assigns and heirs and shall be
binding on all successors and assigns of PREIT and PREIT Operating Partnership.
Each of the Indemnified Parties and the Indemnification Parties shall be
entitled to enforce the covenants contained in this Section 5.9 and PREIT and
PREIT Partnership acknowledge and agree that each Indemnified Party and
Indemnification Party would suffer irreparable harm and that no adequate remedy
at law exists for a breach of such covenants and such Indemnified Party or such
Indemnification Party shall be entitled to injunctive relief and specific
performance in the event of any breach of any provision in this Section 5.9.
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(e) If PREIT or PREIT Partnership or any of its
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.9, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director, trustee and officer
covered hereby.
5.10 Declaration of Dividends and Distributions. From and
after the date of this Agreement, except as provided for in Section 1.11(d),
neither Crown nor PREIT shall make any dividend or distribution to its
respective shareholders without the prior written consent of the other party;
provided, however, the written consent of the other party shall not be required
for the authorization and payment of (a) distributions at their respective
stated dividend or distribution rates with respect to Crown Senior Preferred
Shares, (b) quarterly distributions with respect to the Crown Common Shares of
$.2125 per share for the quarter ended March 31, 2003 and $.2150 per share for
the quarter ending June 30, 2003 and for each quarter thereafter and (c)
quarterly distributions with respect to the PREIT Common Shares of up to $.54
per share; provided, however, the record and payment dates for each distribution
with respect to the Crown Common Shares shall be the same dates as the record
and payment dates, respectively, for the quarterly distribution for the PREIT
Common Shares, such record and payment dates to be mutually and reasonably
agreed to by Crown and PREIT. From and after the date of this Agreement, except
as provided in Section 1.11(d), Crown Partnership shall not make any
distribution to the holders of Crown OP Units except a distribution per Crown OP
Unit in the same amount as a dividend per Crown Common Share or Crown Preferred
Share permitted pursuant to this Section 5.10, with the same record and payment
dates as such dividend on the Crown Common Share or the Crown Preferred Share,
as applicable. From and after the date of this Agreement, except as provided in
Section 1.11(d) and except as contemplated in the Crown Partnership Distribution
Agreement, PREIT Partnership shall not make any distribution to the holders of
PREIT OP Units except a distribution per PREIT OP Unit in the same amount as a
dividend per PREIT Common Share permitted pursuant to this Section 5.10, with
the same record and payment dates as such dividend on the PREIT Common Share, as
applicable. The foregoing restrictions shall not apply, however, (i) to PREIT to
the extent a distribution (or an increase in a distribution) by PREIT is
necessary for PREIT to maintain REIT status, avoid the incurrence of any taxes
under Section 857 of the Code, avoid the imposition of any excise taxes under
Section 4981 of the Code, or avoid the need to make one or more extraordinary or
disproportionately larger distributions to meet any of the three preceding
objectives (or to any corresponding distributions or increases in distributions
paid by PREIT Partnership), (ii) to PREIT and PREIT Partnership with respect to
any Corresponding PREIT Dividends and Distributions (as provided for in Section
1.11(d)), (iii) to Crown and Crown Partnership with respect to any Final Crown
Dividends and Final Crown Partnership Distributions (as provided for in Section
1.11(d)), or (iv) to the distributions to be made by Crown Partnership to Crown
under the Crown Partnership Distribution Agreement.
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5.11 Resignations. On the Closing Date, Crown shall cause the
trustees, directors and officers of Crown and of each of the Crown Subsidiaries
other than Crown Partnership to submit their resignations from such positions,
effective as of the Effective Time; provided, however, that in no event shall
any such person be deemed to have resigned his or her position as an employee,
for purposes of any severance, stock option, or other Employee Benefit Plan,
contract, entitlement or arrangement.
5.12 Registration Rights Agreements and Exchange Agreements.
At the Closing, PREIT and PREIT Partnership, as applicable, shall enter into (i)
a registration rights agreement, in substantially the form attached hereto as
Exhibit F-1 (an "Assumed Registration Rights Agreement"), and (ii) an exchange
agreement, in substantially the form attached hereto as Exhibit F-2 (an "Assumed
Exchange Agreement"), with each of the parties listed on Schedule 5.12 to the
Crown Disclosure Letter. Crown and Crown Partnership shall use commercially
reasonable efforts to cause each of the parties listed on Schedule 5.12 to the
Crown Disclosure Letter to execute and deliver an Assumed Registration Right
Agreement and an Assumed Exchange Agreement at the Closing.
5.13 Merger Documents. On or prior to the Pre-Merger Transfer
Date, Crown and PREIT shall and shall cause its Affiliates and Subsidiaries to
execute and deliver the following agreements to which it or they are a party
(together the "Merger Documents"):
(a) a shareholder agreement, substantially in the
form attached hereto as Exhibit G (the "Shareholder Agreement");
(b) a non-competition agreement, substantially in the
form attached hereto as Exhibit H (the "Non-Competition Agreement");
(c) a registration rights agreement, substantially in
the form attached hereto as Exhibit I (the "Pasquerilla Registration Rights
Agreement");
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(d) a standstill agreement, substantially in the form
attached hereto as Exhibit J (the "Standstill Agreement"); and
(e) a tax protection agreement, substantially in the
form attached hereto as Exhibit K (the "Pasquerilla Tax Protection Agreement").
5.14 Performance of Pre-Merger Transactions. Crown and Crown
Partnership, shall, and shall cause their Affiliates and Subsidiaries, as
applicable, to perform their respective obligations with respect to the
Pre-Merger Transactions. PREIT and PREIT Partnership shall, and shall cause
their Affiliates and Subsidiaries, as applicable, to perform their respective
obligations, if any, with respect to the Pre-Merger Transactions.
5.15 Performance of Post-Merger Transactions. Crown
Partnership, shall, and shall cause its Affiliates and Subsidiaries, as
applicable, to perform their respective obligations with respect to the
Post-Merger Contribution Transactions. PREIT and PREIT Partnership shall, and
shall cause their Affiliates and Subsidiaries, as applicable, to perform their
respective obligations with respect to the Post-Merger Contribution
Transactions. The parties acknowledge that the transactions contemplated under
Section 1.3 shall be consummated immediately after the Effective Time.
5.16 Estoppel Certificates.
(a) Crown and Crown Partnership shall prepare and
deliver an estoppel certificate to each of the tenants set forth in Schedule
5.16(a) to the Crown Disclosure Letter. Crown shall request that such estoppel
certificates be in the form attached hereto as Exhibit L; provided, that the
form of any such estoppel certificate may be modified so that it conforms to the
requirements, if any, of each tenant's lease (the "Crown Estoppel
Certificates"). Crown and Crown Partnership shall use commercially reasonable
efforts to have all of the Crown Estoppel Certificates executed in a timely
fashion by the tenants identified on Schedule 5.16(a) to the Crown Disclosure
Letter.
(b) PREIT and PREIT Partnership shall prepare and
deliver an estoppel certificate to each of the tenants set forth in Schedule
5.16(b) to the PREIT Disclosure Letter. PREIT shall request that such estoppel
certificates be in the form attached hereto as Exhibit M; provided that the form
of any such estoppel certificate may be modified so that it conforms to the
requirements, if any, of each tenant's lease (the "PREIT Estoppel
Certificates"). PREIT and PREIT Partnership shall use commercially reasonable
efforts to have all of the PREIT Estoppel Certificates executed in a timely
fashion by the tenants identified on Schedule 5.16(b) to the PREIT Disclosure
Letter.
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5.17 Performance of Agreements. Crown and Crown Partnership
shall, and shall cause its Affiliates and Subsidiaries, to perform their
respective obligations under (i) the Crown Partnership Contribution Agreement
and the Crown Partnership Distribution Agreement and (ii) the 4th Amendment to
CFSA and the Exchange Agreement. PREIT and PREIT Partnership shall, and shall
cause their Affiliates and Subsidiaries, to perform their respective obligations
under the PREIT Contribution Agreement.
5.18 No Amendment or Modification. None of Crown, Crown
Partnership or any Crown Subsidiary shall amend or otherwise modify the Crown
Rights Agreement, except as provided pursuant to this Agreement, or the Crown
Partnership Distribution Agreement. Until such time as all of the transactions
contemplated by this Agreement are consummated, none of PREIT, PREIT Partnership
or any PREIT Subsidiary shall amend or otherwise modify the PREIT Contribution
Agreement.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the
Pre-Merger Transactions and the Merger. The obligations of each party to
consummate the transactions contemplated by this Agreement to occur on the date
of the Pre-Merger Transactions (the "Pre-Merger Transfer Date") and the Merger
shall be subject to the fulfillment at or prior to the Pre-Merger Transfer Date
of the following conditions:
(a) Shareholder and Partner Approvals. Each of the
Crown Shareholder Approval, the PREIT Shareholder Approval and the Partner
Approvals shall have been obtained.
(b) HSR Act. Passage of any waiting period (and any
extension thereof) applicable to the Merger or any of the other transactions
contemplated hereby under the HSR Act, if applicable to such transactions.
(c) Listing of Shares. The NYSE shall have approved
for listing the PREIT Common Shares, PREIT Senior Preferred Shares and the PREIT
Common Shares underlying the PREIT Class A Units and the PREIT Class B Units to
be issued in the Merger and the other transactions contemplated hereby, on the
NYSE, subject to official notice of issuance, prior to the Effective Time.
(d) Form S-4. The Form S-4 filed with the SEC under
the Securities Act shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings by the SEC seeking a
stop order.
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(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated hereby shall be in effect.
(f) Blue Sky Laws. PREIT and PREIT Partnership shall
have received all state securities or "blue sky" permits and other
authorizations necessary to issue the PREIT Common Shares, PREIT Class A Units
and PREIT Class B Units issuable in the Merger and the other transactions
contemplated hereby.
(g) Third-Party Consents. (i)Crown and Crown
Partnership shall have obtained and delivered to PREIT all consents and waivers
listed in Schedule 6.1(g)(i) to the Crown Disclosure Letter, and (ii) PREIT and
PREIT Partnership shall have obtained and delivered to Crown all consents and
waivers listed in Schedule 6.1(g)(ii) to the PREIT Disclosure Letter.
6.2 Conditions to Obligations of PREIT and PREIT Partnership
to Effect the Pre-Merger Transactions and the Merger. The obligations of PREIT
and PREIT Partnership to consummate the transactions contemplated to occur on
the Pre-Merger Transfer Date and the date of the Merger are further subject to
the fulfillment at or prior to the Pre-Merger Transfer Date of the following
conditions, any one or more of which may be waived by PREIT:
(a) Representations and Warranties. Each of the
representations and warranties of Crown and Crown Partnership set forth in this
Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality or Crown Material Adverse Effect, shall be true and
correct as of the date of this Agreement and as of the Pre-Merger Transfer Date
as though made on and as of the Pre-Merger Transfer Date (except to the extent
that such representations and warranties are as of a specified date, in which
case such representations and warranties shall be true and correct as of such
other date and not as of the Pre-Merger Transfer Date), except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a Crown
Material Adverse Effect; and PREIT shall have received a certificate (which
certificate may be qualified by "knowledge" to the same extent as the
representations and warranties of Crown and Crown Partnership contained herein
are so qualified) signed on behalf of Crown by the chief executive officer or
the chief financial officer of Crown, in such capacity, certifying to such
effect.
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(b) Performance of Obligations of Crown and Crown
Partnership. Crown and Crown Partnership shall have performed all obligations
required to be performed by them under this Agreement at or prior to the
Pre-Merger Transfer Date (except where the failure to so perform would not
permit PREIT to terminate this Agreement pursuant to Section 7.1(b)(i)), and
PREIT shall have received a certificate signed on behalf of Crown by the chief
executive officer or the chief financial officer of Crown, in such capacity,
certifying to such effect.
(c) Material Adverse Effect. Since the date of this
Agreement, there shall have been no Crown Material Adverse Effect, and PREIT
shall have received a certificate of the chief executive officer or chief
financial officer of Crown, in such capacity, certifying to such effect.
(d) Tax Opinions Relating to REIT Status and
Partnership Status. PREIT shall have received (i) (A) an opinion of Xxxx Xxxxx
LLP or other counsel reasonably satisfactory to PREIT, dated as of the date of
this Agreement, to the effect that, commencing with its taxable year ended
December 31, 1993, (I) Crown has been organized and has operated in conformity
with the requirements for qualification as a REIT under the Code, and (II) Crown
Partnership has been since its formation, and continues to be, treated for
federal income tax purposes as a partnership and not as a corporation or
association taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations), and (B) an opinion of
Xxxx Xxxxx LLP or other counsel reasonably satisfactory to PREIT, dated as of
the Pre-Merger Transfer Date, reaffirming as of the Pre-Merger Transfer Date the
opinion delivered pursuant to clause (i)(A) above; and (ii) (X) an opinion of
Drinker Xxxxxx & Xxxxx LLP or other counsel reasonably satisfactory to PREIT,
dated as of the date of this Agreement, to the effect that, for all taxable
years ended on or after December 31, 1997, PREIT has been organized and has
operated in conformity with the requirements for qualification as a REIT under
the Code and that, after giving effect to the Merger, PREIT's proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code (with customary exceptions, assumptions
and qualifications and based upon customary representations and based upon and
subject to the opinion of counsel to Crown described in clause (i)(A) above),
and (Y) an opinion of Drinker Xxxxxx & Xxxxx LLP or other counsel reasonably
satisfactory to PREIT, dated as of the Pre-Merger Transfer Date, reaffirming as
of the Pre-Merger Transfer Date the opinion delivered pursuant to clause (ii)(X)
above.
(e) Tax Opinion Relating to the Merger. PREIT shall
have received (i) an opinion from Xxxxx & Xxxxxxx L.L.P. or other counsel
reasonably satisfactory to PREIT, dated as of the date of this Agreement, based
upon customary certificates and letters, which letters and certificates are to
be in a form to be agreed upon by the parties and dated the date of this
Agreement, to the effect that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Code, and (ii) an opinion of Xxxxx &
Xxxxxxx L.L.P. or other counsel reasonably satisfactory to PREIT, dated as of
the Pre-Merger Transfer Date, reaffirming as of the Pre-Merger Transfer Date the
opinion delivered pursuant to clause (i) above.
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(f) "Comfort" Letter. PREIT and PREIT Partnership
shall have received a "comfort" letter from Ernst & Young LLP, as described in
Section 5.1(b).
(g) Merger Documents. PREIT and PREIT Partnership
shall have received executed copies of each of the Merger Documents.
(h) Estoppel Certificates. Crown and Crown
Partnership shall have obtained and delivered to PREIT the Crown Estoppel
Certificates.
(i) Consummation of Agreements. The transactions
contemplated under the 4th Amendment to CFSA and the Exchange Agreement shall
have been consummated.
(j) Certificate. The chief executive officer or the
chief financial officer of Crown, in such capacity, shall have executed a
certificate, dated as of the Pre-Merger Transfer Date (the "Crown Pre-Merger
Conditions Certificate"), certifying to the effect that all of the conditions
listed in Sections 6.1 and 6.2 have been fulfilled.
6.3 Conditions to Obligations of Crown and Crown Partnership
to Effect the Pre-Merger Transactions and the Merger. The obligations of Crown
and Crown Partnership to consummate the transactions contemplated to occur on
the Pre-Merger Transfer Date and the date of the Merger are further subject to
the fulfillment at or prior to the Pre-Merger Transfer Date of the following
conditions, any one or more of which may be waived by Crown:
(a) Representations and Warranties. Each of the
representations and warranties of PREIT and PREIT Partnership set forth in this
Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality or PREIT Material Adverse Effect, shall be true and
correct as of the date of this Agreement and as of the Pre-Merger Transfer Date
as though made on and as of the Pre-Merger Transfer Date (except to the extent
that such representations and warranties are as of a specified date, in which
case such representations and warranties shall be true and correct as of such
other date and not as of the Pre-Merger Transfer Date), except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a PREIT
Material Adverse Effect; and Crown shall have received a certificate (which
certificate may be qualified by "knowledge" to the same extent as the
representations and warranties of PREIT and PREIT Partnership contained herein
are so qualified) signed on behalf of PREIT by the chief executive officer or
the chief financial officer of PREIT, in such capacity, certifying to such
effect.
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(b) Performance of Obligations of PREIT and PREIT
Partnership. PREIT and PREIT Partnership shall have performed all obligations
required to be performed by them under this Agreement at or prior to the
Pre-Merger Transfer Date (except where the failure to so perform would not
permit Crown to terminate this Agreement pursuant to Section 7.1(c)(i)), and
Crown shall have received a certificate signed on behalf of PREIT by the chief
executive officer or the chief financial officer of PREIT, in such capacity,
certifying to such effect.
(c) Material Adverse Effect. Since the date of this
Agreement, there shall have been no PREIT Material Adverse Effect, and Crown
shall have received a certificate of the chief executive officer or the chief
financial officer of PREIT, in such capacity, certifying to such effect.
(d) Tax Opinions Relating to REIT Status and
Partnership Status. Crown shall have received (i) an opinion of Drinker Xxxxxx &
Xxxxx LLP or other counsel reasonably satisfactory to PREIT, dated as of the
date of this Agreement, to the effect that, commencing with its taxable year
ended December 31, 1997, (A) PREIT was organized and has operated in conformity
with the requirements for qualification as a REIT under the Code and that, after
giving effect to the Merger and the other transactions contemplated by this
Agreement, PREIT's proposed method of operation will enable it to continue to
meet the requirements for qualification and taxation as a REIT under the Code
(with customary exceptions, assumptions and qualifications and based upon
customary representations and based upon and subject to the opinions of counsel
to Crown described in Section 6.2(d) of this Agreement), and (B) PREIT
Partnership has been during and since 1997, and continues to be, treated for
federal income tax purposes as a partnership and not as a corporation or
association taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations), and (ii) an opinion of
Drinker Xxxxxx & Xxxxx LLP or other counsel reasonably satisfactory to PREIT,
dated as of the Pre-Merger Transfer Date, reaffirming as of the Pre-Merger
Transfer Date the opinion delivered pursuant to clause (i) above.
(e) Tax Opinion Relating to the Merger. Crown shall
have received (i) an opinion of Xxxx Xxxxx LLP or other counsel reasonably
satisfactory to Crown, dated as of the date of this Agreement, that, based upon
customary certificates and letters, which letters and certificates are to be in
a form to be agreed upon by the parties and dated the date of this Agreement, to
the effect that the Merger will qualify as a reorganization under the provisions
of Section 368(a) of the Code, and (ii) an opinion of Xxxx Xxxxx LLP or other
counsel reasonably satisfactory to Crown, dated as of the Pre-Merger Transfer
Date, reaffirming as of the Pre-Merger Transfer Date the opinion delivered
pursuant to clause (i) above.
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(f) "Comfort" Letter. Crown and Crown Partnership
shall have received a "comfort" letter from KPMG LLP, as described in Section
5.1(b).
(g) Merger Documents. Crown and Crown Partnership
shall have received executed copies of each of the Merger Documents.
(h) Estoppel Certificates. PREIT and PREIT
Partnership shall have obtained and delivered to Crown the PREIT Estoppel
Certificates.
(i) Certificate. The chief executive officer or the
chief financial officer of PREIT, in such capacity, shall have executed a
certificate, dated as of the Pre-Merger Transfer Date (the "PREIT Pre-Merger
Conditions Certificate"), certifying to the effect that all of the conditions
listed in Sections 6.1 and 6.3 have been fulfilled.
(j) PREIT shall have delivered evidence that it has
obtained the trustees', directors' and officers' liability insurance required to
be purchased by PREIT pursuant to Section 5.9(c) hereof.
6.4 Conditions of Each Party's Obligation to Effect the
Closing Date Transactions. The obligations of each party to effect the Merger
and the other transactions contemplated by this Agreement to occur on the
Closing Date shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Injunction or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated hereby shall be in effect.
(b) Pre-Merger Transactions. The Pre-Merger
Transactions shall have been consummated at least one business day prior to the
Closing Date.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Pre-Merger Transfer Date, whether such action occurs before or
after any of the Crown Shareholder Approval, the PREIT Shareholder Approval or
either of the Partner Approvals are obtained, only:
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(a) by mutual written consent duly authorized by the
Board of Trustees of PREIT and the Board of Trustees of Crown;
(b) by PREIT, (i) (A) upon a material breach of or
material failure to perform any covenant, obligation or agreement on the part of
Crown or Crown Partnership set forth in Sections 4.1(a), (b), (c), (d), (e),
(g), (h), (p), (ee) (provided that, in the case of Section 4.1(ee) only, in
order to be material, such breach or breaches of Section 4.1(ee) must relate to
contracts having an aggregate value equal to $750,000 or more) or (ff), (B) upon
a breach of or failure to perform any covenant, obligation or agreement on the
part of Crown or Crown Partnership set forth in Sections 4.1(bb) or (cc), if
such breach has had or would reasonably be expected to have either a Crown
Material Adverse Effect or a material adverse effect on any Crown Property, or
(C) upon a breach of or failure to perform in any material respect any other
covenant, obligation or agreement on the part of Crown or Crown Partnership set
forth in this Agreement; provided, however, that, in the case of Section 4.1(f),
the failure of Crown to provide any notice required by Section 4.1(f) shall not
provide PREIT with the right to terminate this Agreement pursuant to this
Section 7.1(b); and provided, further that, in the case of (A), (B) or (C), if
such breach or failure is curable on or before February 20, 2004 without Crown
or Crown Partnership breaching or failing to perform any covenant, obligation or
agreement under this Agreement, then only upon the failure of Crown or Crown
Partnership to cure such breach or failure within ten business days after Crown
or Crown Partnership has received written notice from PREIT requesting cure of
such breach or failure (or as extended by mutual written agreement, or, if such
breach or failure could not reasonably be expected to be cured within such ten
business days and Crown and Crown Partnership promptly commence such cure after
receipt of notice from PREIT and diligently prosecute such cure to completion,
then as promptly as practicable but in no event later than February 20, 2004),
or (ii) upon a breach of or in the event that any representation or warranty of
Crown or Crown Partnership is or shall have become untrue (x) as of the date of
this Agreement or (y) as of any subsequent date prior to or on the Pre-Merger
Transfer Date, as a result of (A) any action or inaction by Crown or Crown
Partnership or any event, circumstance or occurrence that was in the control of
Crown or Crown Partnership or (B) any event, circumstance or occurrence that was
not in the control of Crown or Crown Partnership, such that, in the case of (x)
or (y), the condition set forth in Section 6.2(a) would be incapable of being
satisfied by February 27, 2004; provided, however, if a breach described in this
Section 7.1(b)(ii) is curable on or before February 20, 2004 without Crown or
Crown Partnership breaching or failing to perform any covenant, obligation or
agreement under this Agreement, then only upon the failure of Crown or Crown
Partnership to cure such breach or failure within ten business days after Crown
or Crown Partnership has received written notice from PREIT requesting cure of
such breach or failure (or as extended by mutual written agreement, or, if such
breach or failure could not reasonably be expected to be cured within such ten
business days and Crown and Crown Partnership promptly commence such cure after
receipt of notice from PREIT and diligently prosecute such cure to completion as
promptly as practicable but in no event later than February 20, 2004);
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(c) by Crown, (i) (A) upon a material breach of or
material failure to perform any covenant, obligation or agreement on the part of
PREIT or PREIT Partnership set forth in Sections 4.2(a), (b), (c), (d), (e),
(g), (h), (m), (o) or (ff), (B) upon a breach of or failure to perform any
covenant, obligation or agreement on the part of PREIT or PREIT Partnership set
forth in Sections 4.2(bb) or (cc), if such breach has had or would reasonably be
expected to have either a PREIT Material Adverse Effect or a material adverse
effect on any PREIT Property, or (C) upon a breach of or failure to perform in
any material respect any other covenant, obligation or agreement on the part of
PREIT or PREIT Partnership set forth in this Agreement; provided, however, that,
in the case of Section 4.2(f), the failure of PREIT to provide any notice
required by Section 4.2(f) shall not provide Crown with the right to terminate
this Agreement pursuant to this Section 7.1(c); and provided, further that, in
the case of (A), (B) or (C), if such breach or failure is curable on or before
February 20, 2004 without PREIT or PREIT Partnership breaching or failing to
perform any covenant, obligation or agreement under this Agreement, then only
upon the failure of PREIT or PREIT Partnership to cure such breach or failure
within ten business days after PREIT or PREIT Partnership has received written
notice from Crown requesting cure of such breach or failure (or as extended by
mutual written agreement, or, if such breach or failure could not reasonably be
expected to be cured within such ten business days and PREIT and PREIT
Partnership promptly commence such cure after receipt of notice from Crown and
diligently prosecute such cure to completion, then as promptly as practicable
but in no event later than February 20, 2004), or (ii) upon a breach of or in
the event that any representation or warranty of PREIT or PREIT Partnership is
or shall have become untrue (x) as of the date of this Agreement or (y) as of
any subsequent date prior to or on the Pre-Merger Transfer Date, as a result of
(A) any action or inaction by PREIT or PREIT Partnership or any event,
circumstance or occurrence that was in the control of PREIT or PREIT Partnership
or (B) any event, circumstance or occurrence that was not in the control of
PREIT or PREIT Partnership, such that, in the case of (x) or (y), the condition
set forth in Section 6.3(a) would be incapable of being satisfied by February
27, 2004; provided, however, if a breach described in this Section 7.1(c)(ii) is
curable on or before February 20, 2004 without PREIT or PREIT Partnership
breaching or failing to perform any covenant, obligation or agreement under this
Agreement, then only upon the failure of PREIT or PREIT Partnership to cure such
breach or failure within ten business days after PREIT or PREIT Partnership has
received written notice from Crown requesting cure of such breach or failure (or
as extended by mutual written agreement, or, if such breach or failure could not
reasonably be expected to be cured within such ten business days and PREIT and
PREIT Partnership promptly commence such cure after receipt of notice from Crown
and diligently prosecute such cure to completion as promptly as practicable but
in no event later than February 20, 2004;
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(d) (i) by PREIT, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of the Pre-Merger Transactions, the Merger or the Post-Merger
Contribution Transactions shall have become final and non-appealable;
(ii) by Crown, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Pre-Merger Transactions, the Merger or the
Post-Merger Contribution Transactions shall have become final and
non-appealable;
(e) by either PREIT or Crown, if the Merger shall not
have been consummated on or before February 27, 2004;
(f) by either PREIT or, provided Crown shall have
given PREIT at least five business days prior written notice of Crown's intent
to terminate this Agreement pursuant to this Section 7.1(f), Crown (unless Crown
or Crown Partnership is in breach in any material respect of its obligations
under Section 5.1) (i) if, upon a vote at a duly held Crown Shareholders Meeting
or any adjournment thereof, the Crown Shareholder Approval shall not have been
obtained as contemplated by Section 5.1 or (ii) if the Crown Partner Approvals
have not been obtained as contemplated by Section 5.1;
(g) by either Crown or, provided PREIT shall have
given Crown at least five business days prior written notice of PREIT's intent
to terminate this Agreement pursuant to this Section 7.1(g), PREIT (unless PREIT
or PREIT Partnership is in breach in any material respect of its obligations
under Section 5.1) if, upon a vote at a duly held PREIT Shareholders Meeting or
any adjournment thereof, the PREIT Shareholder Approval shall not have been
obtained as contemplated by Section 5.1;
(h) by Crown (i) if the Board of Trustees of Crown
shall have withdrawn, modified, amended or qualified, or proposed publicly not
to recommend or to withdraw, modify, amend or qualify, in any manner adverse to
PREIT (other than following the valid exercise by Crown or Crown Partnership of
its termination right pursuant to another subsection of Section 7.1, in which
case such termination shall be effective pursuant to such other subsection of
Section 7.1), its approval or recommendation of either of the Merger or this
Agreement in connection with any Superior Acquisition Proposal, or (ii) in order
to enter into a binding written agreement with respect to a Superior Acquisition
Proposal, provided that, in each case, Crown shall have complied with the terms
of Section 4.3 and, prior to terminating pursuant to this Section 7.1(h), Crown
or Crown Partnership has paid to PREIT the Break-Up Fee as provided by Section
7.3 hereof;
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(i) by PREIT or PREIT Partnership, if (1) the Board
of Trustees of Crown shall have failed to recommend or withdrawn, modified,
amended or qualified, or proposed publicly not to recommend or to withdraw,
modify, amend or qualify, in any manner adverse to PREIT (other than following
the valid exercise by Crown or Crown Partnership of its termination right
pursuant to another subsection of Section 7.1), its approval or recommendation
of the Merger or this Agreement in connection with any Superior Acquisition
Proposal, (2) following the announcement or receipt of an Acquisition Proposal,
Crown shall have failed to call the Crown Shareholders Meeting in accordance
with Section 5.1(a) or failed to prepare and mail to its shareholders the Joint
Proxy Statement in accordance with Section 5.1(a) or 5.1(b), or (3) the Board of
Trustees of Crown or any committee thereof shall have resolved to do any of the
foregoing;
(j) by PREIT or PREIT Partnership, or by Crown or
Crown Partnership, if the PREIT Board of Trustees approves or recommends (other
than following the valid exercise by PREIT or PREIT Partnership of its
termination right pursuant to another subsection of Section 7.1, in which case
such termination shall be effective pursuant to such other subsection of Section
7.1) any direct or indirect (A) merger, consolidation, business combination,
reorganization, recapitalization, liquidation, dissolution or similar
transaction, (B) sale, acquisition, tender offer, exchange offer (or the filing
of a registration statement under the Securities Act in connection with such an
exchange offer), share exchange or other transaction or series of related
transactions that, if consummated, would result in the issuance of securities,
or the sale, exchange or transfer of, any voting equity securities of PREIT or
outstanding partnership interests of PREIT Partnership (including, without
limitation, partnership interests and units), or (C) Transfer of any assets of
PREIT or PREIT Partnership in one or a series of related transactions that
prohibits the consummation of the Merger and the other transactions contemplated
under this Agreement (any such proposal or offer being hereinafter referred to
as an "Alternative Proposal"), provided that, in any case, prior to terminating
pursuant to this Section 7.1(j), PREIT or PREIT Partnership has paid Crown the
Break-Up Fee as provided by Section 7.3 hereof;
(k) [Intentionally omitted];
(l) by Crown or Crown Partnership, if PREIT announces
a reduction in the dividend on the PREIT Common Shares or takes any action to
authorize, approve, recommend or effect such a reduction and such reduction is
not the result of a PREIT Material Adverse Effect or a Crown Material Adverse
Effect;
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(m) by Crown or Crown Partnership, if PREIT announces
a reduction in the dividend on the PREIT Common Shares or takes an action to
authorize, approve, recommend or effect such a reduction and such reduction is
the result of a PREIT Material Adverse Effect or a Crown Material Adverse
Effect;
(n) by Crown or Crown Partnership, if Crown
determines after consultation with PREIT that there is a PREIT Material Adverse
Effect; or
(o) by PREIT or PREIT Partnership, if PREIT
determines after consultation with Crown that there is a Crown Material Adverse
Effect.
7.2 Termination After the Pre-Merger Transfer Date. This
Agreement may be terminated at any time after the Pre-Merger Transfer Date and
prior to the Effective Time only by:
(a) either PREIT or Crown, if any judgment,
injunction, order, decree or action by any Governmental Entity of competent
authority preventing the consummation of the Merger shall have become final and
non-appealable;
(b) PREIT or PREIT Partnership, if, subject to
Section 1.4 of this Agreement, any of Crown, Crown Partnership or the
Pasquerilla Group has failed to perform in any material respect any covenant,
obligation or agreement on the part of Crown or Crown Partnership required to be
performed on the Closing Date (unless Crown or Crown Partnership has the right
to terminate pursuant to Section 7.2(c)); or
(c) Crown or Crown Partnership, if, subject to
Section 1.4 of this Agreement, PREIT or PREIT Partnership shall have failed to
perform in any material respect any covenant, obligation or agreement on the
part of PREIT or PREIT Partnership required to be performed on the Closing Date
(unless PREIT or PREIT Partnership has the right to terminate pursuant to
Section 7.2(b)).
7.3 Certain Fees and Expenses. (a) If this Agreement shall be
terminated (i) pursuant to Sections 7.1(h) or 7.1(i), then Crown and Crown
Partnership shall pay to PREIT Partnership a fee equal to the Break-Up Fee, or
(ii) pursuant to Section 7.1(b) (other than Section 7.1(b)(ii)(y)(B)) or Section
7.1(f) (provided that with respect to Section 7.1(f) the PREIT Shareholder
Approval shall have been obtained), then Crown and Crown Partnership shall pay
to PREIT Partnership (provided that Crown was not entitled to terminate this
Agreement pursuant to Section 7.1(c) at the time of such termination) an amount
equal to the Break-Up Expenses. If this Agreement shall be terminated (i)
pursuant to Section 7.1(d) and such judgment, injunction, order, decree or
action is primarily the result of any action or inaction by Crown or Crown
Partnership in breach of this Agreement or the result of Crown or Crown
Partnership seeking or assisting a third-party in seeking such judgment,
injunction, order, decree or action, or (ii) by Crown or Crown Partnership
pursuant to Section 7.1(e), and prior to the time of such termination, in either
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case, an Acquisition Proposal (in the case of this Section 7.3 only, the
definition of Acquisition Proposal shall be modified as follows: the term
"Minimum Acquisition Proposal Percentage" included within such definition shall
mean "50%") has been received by Crown or Crown Partnership, and either prior to
the termination of this Agreement or, within twelve (12) months thereafter,
Crown or Crown Partnership enters into any written agreement to consummate a
Qualified Crown Acquisition (each, a "Crown Acquisition Agreement"), which is
subsequently consummated (whether or not any Crown Acquisition Agreement relates
to the same Acquisition Proposal which had been received at the time of the
termination of this Agreement), then Crown and Crown Partnership shall pay the
Break-Up Fee to PREIT Partnership. For purposes of this Agreement, a "Qualified
Crown Acquisition" shall mean any direct or indirect (i) (A) merger,
consolidation, business combination, reorganization, recapitalization,
liquidation, dissolution or similar transaction, (B) sale, acquisition, tender
offer, exchange offer, or share exchange, (C) Transfer of any assets of Crown or
Crown Partnership, or (D) any other transaction that, (ii) in one or a series of
related transactions, will result in (A) the issuance of securities
representing, or the sale, exchange or transfer of, 50% or more of the
outstanding voting equity securities of Crown or outstanding partnership
interests of Crown Partnership (including, without limitation, partnership
interests and units) or (B) the Transfer of 50% or more of the assets of Crown
or Crown Partnership.
(b) If this Agreement shall be terminated (i)
pursuant to Section 7.1(j), then PREIT and PREIT Partnership shall pay to Crown
Partnership a fee equal to the Break-Up Fee, or (ii) pursuant to Section 7.1(c)
(other than Section 7.1(c)(ii)(y)(B)), Section 7.1(g) (provided that with
respect to Section 7.1(g) the Crown Shareholder Approval shall have been
obtained) or Section 7.1(l), then PREIT and PREIT Partnership shall pay to Crown
Partnership (provided that PREIT was not entitled to terminate this Agreement
pursuant to Section 7.1(b) at the time of such termination) an amount equal to
the Break-Up Expenses.
(c) Except as set forth in Section 7.4, the payment
of the Break-Up Fee shall be the sole and exclusive compensation for the loss
suffered by PREIT and PREIT Partnership or Crown and Crown Partnership, as the
case may be (the "Break-Up Fee Recipient") (the remaining parties, the "Payor"),
as a result of the failure of the Merger to be consummated (including, without
limitation, opportunity costs and out-of-pocket costs and expenses) and to avoid
the difficulty of determining damages under the circumstances. The Break-Up Fee
shall be paid to the Break-Up Fee Recipient in immediately available funds
within two (2) business days after the date the event giving rise to the
obligation to make such payment occurred, except as otherwise provided in
Sections 7.1(h) and 7.1(j). The Parties hereto acknowledge that the agreements
contained in this Section 7.3 are integral parts of this Agreement; accordingly,
if any party fails to promptly pay to the other party the Break-Up Fee or
Break-Up Expenses, as the case may be, due pursuant to this Section 7.3 and, in
order to obtain payment, the other party commences a suit which results in a
judgment against the non-paying party for any amounts owed pursuant to this
Section 7.3, the non-paying party shall pay to the other party its costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amount owed at the rate on six-month
U.S. Treasury obligations in effect on the date such payment was required to be
made plus 300 basis points.
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(d) As used in this Agreement, "Break-Up Fee" shall
be an amount equal to the lesser of (i) $20,000,000 less Break-Up Expenses paid
or payable under this Section 7.3 (the "Base Fee Amount") and (ii) the sum of
(A) the maximum amount that can be paid to Break-Up Fee Recipient, without
causing the Break-Up Fee Recipient to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such amount did
not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by independent
accountants to the Break-Up Fee Recipient, and (B) in the event the Break-Up Fee
Recipient, receives a letter from outside counsel (the "Break-Up Fee Tax
Opinion") indicating that it has received a ruling from the IRS holding that the
Break-Up Fee Recipient's receipt of the Base Fee Amount would either constitute
Qualifying Income or would be excluded from gross income of the Break-Up Fee
Recipient within the meaning of Sections 856(c)(2) and (3) of the Code (the
"REIT Requirements") or that the receipt by the Break-Up Fee Recipient of the
remaining balance of the Base Fee Amount following the receipt of and pursuant
to such ruling would not be deemed constructively received prior thereto, the
Base Fee Amount less the amount payable under clause (A) above. The Payor's
obligation to pay any unpaid portion of the Break-Up Fee shall terminate three
years from the date of this Agreement. In the event that Break-Up Fee Recipient
is not able to receive the full Base Fee Amount, the Payor shall place the
unpaid amount in escrow and shall not release any portion thereof to the
Break-Up Fee Recipient unless and until the Break-Up Fee Recipient receives one
or both of the following: (i) a letter from Break-Up Fee Recipient's independent
accountants indicating the maximum amount that can be paid at that time to
Break-Up Fee Recipient without causing it to fail to meet the REIT Requirements
or (ii) a Break-Up Fee Tax Opinion, in either of which events Payor shall pay to
Break-Up Fee Recipient the unpaid Base Fee Amount or, if less and either there
is no Break-up Fee Tax Opinion or the ruling described in the Break-Up Fee Tax
Opinion does not hold that the Base Fee Amount either would constitute
Qualifying Income or would be excluded from gross income for purposes of the
REIT Requirements, the maximum amount stated in the letter referred to in (i)
above. Subject to satisfaction of the conditions set forth in the immediately
preceding sentence, there is no limitation on the number of distributions that
can be made from the escrow prior to the third anniversary of the date of this
Agreement.
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(e) The "Break-Up Expenses" payable to PREIT
Partnership or Crown Partnership, as the case may be (the "Break-Up Expenses
Recipient"), shall be an amount equal to the lesser of (i) $7,000,000 (to
compensate the Break-Up Expenses Recipient for its costs and expenses,
including, without limitation, transfer taxes paid and reasonable attorneys',
accountants', investment bankers', appraisers' and lenders' fees and expenses,
incurred in connection with this Agreement and the transactions contemplated
hereby) (the "Base Expense Amount"), provided, however, that in the case of any
Break-Up Expenses payable to PREIT Partnership as a result of a termination
pursuant to Section 7.1(f) hereof or to Crown Partnership as a result of a
termination pursuant to Section 7.1(g) hereof, the Base Expense Amount shall be
reduced to $3,500,000, and (ii) the sum of (A) the maximum amount that can be
paid to Break-Up Expenses Recipient, without causing the Break-Up Expenses
Recipient to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the Break-Up Expenses
Recipient, and (B) in the event the Break-Up Expenses Recipient, receives a
letter from outside counsel (the "Break-Up Expenses Tax Opinion") indicating
that it has received a ruling from the IRS holding that the Break-Up Expenses
Recipient's receipt of the Base Expense Amount would either constitute
Qualifying Income or would be excluded from gross income of the Break-Up
Expenses Recipient within the meaning of the REIT Requirements or that the
receipt by the Break-Up Expenses Recipient of the remaining balance of the Base
Expense Amount following the receipt of and pursuant to such ruling would not be
deemed constructively received prior thereto, the Base Expense Amount less the
amount payable under clause (A) above. The Payor's obligation to pay any unpaid
portion of the Break-Up Expense shall terminate three years from the date of
this Agreement. In the event that Break-Up Expenses Recipient is not able to
receive the full Base Expense Amount, the Payor shall place the unpaid amount in
escrow and shall not release any portion thereof to the Break-Up Expenses
Recipient unless and until the Break-Up Expenses Recipient receives one or both
of the following: (i) a letter from Salt Break-Up Expenses Recipient's
independent accountants indicating the maximum amount that can be paid at that
time to Break-Up Expenses Recipient without causing it to fail to meet the REIT
Requirements or (ii) a Break-Up Expense Tax Opinion, in either of which events
Payor shall pay to Break-Up Expenses Recipient the unpaid Base Expense Amount
or, if less and either there is no Break-up Expense Tax Opinion or the ruling
described in the Break-Up Expense Tax Opinion does not hold that the Base
Expense Amount either would constitute Qualifying Income or would be excluded
from gross income for purposes of the REIT Requirements, the maximum amount
stated in the letter referred to in (i) above. Subject to satisfaction of the
conditions set forth in the immediately preceding sentence, there is no
limitation on the number of distributions that can be made from the escrow prior
to the third anniversary of the date of this Agreement.
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(f) The payment of Break-Up Expenses as a result of
termination of this Agreement pursuant to either Section 7.1(b) or 7.1(c) shall
not in any way limit a party's liability for any breach by such party of its
representations, warranties, covenants or agreements set forth in this
Agreement.
7.4 Effect of Termination. In the event of termination of this
Agreement by either Crown or PREIT pursuant to the provisions of Section 7.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of PREIT, PREIT Partnership, Crown or Crown
Partnership, other than the last sentence of Section 5.2, Section 7.3, this
Section 7.4 and Article 8, and except if this Agreement is terminated pursuant
to either Section 7.1(b) or 7.1(c), in which case nothing in this Agreement
shall in any way limit a party's liability for any breach by such party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
7.5 Amendment. This Agreement may be amended by the parties in
writing by action of the respective Board of Trustees of PREIT and Crown at any
time before or after any Shareholder Approvals are obtained and prior to the
filing of the Pennsylvania Articles of Merger with the Department or the
Maryland Articles of Merger with the MSDAT; provided, however, that, after the
Shareholder Approvals and Partner Approvals are obtained, no such amendment,
modification or supplement shall be made which by law requires the further
approval of shareholders or partners without obtaining such further approval.
The parties agree to amend this Agreement in the manner provided in the
immediately preceding sentence to the extent required to (a) continue the status
of each party as a REIT or (b) preserve the Merger as a reorganization under
Section 368(a) of the Code.
7.6 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.5, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
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ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant, including but not limited to the covenants contained in Article V, or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and, except as set forth
in Sections 4.1 and 4.2 hereof, shall be delivered personally, sent by overnight
courier (providing proof of delivery) to the parties or sent by telecopy
(providing confirmation of transmission) at the following addresses or telecopy
numbers (or at such other address or telecopy number for a party as shall be
specified by like notice) from such party:
(a) if to PREIT or PREIT Partnership, to:
Pennsylvania Real Estate Investment
Trust 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Executive Vice President and
General Counsel
Fax No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: J. Xxxxxx Xxxxxxx, Xx.
Xxxxxx X. Xxxx
Fax No.: (000) 000-0000
and
Drinker Xxxxxx & Xxxxx LLP
One Xxxxx Square
00xx & Xxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx
Fax No.: (000) 000-0000
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(b) if to Crown, to:
Crown American Realty Trust
Xxxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Fax No.: (000) 000-0000
with a copy (which shall not constitute
notice) to:
Xxxxxxx & Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: M. Xxxxx Xxxxxxx, Xx.
Fax No.: (000) 000-0000
and
Xxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. XxXxxxx
Fax No.: (000) 000-0000
and
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Xxxx Israel
Fax No.: (000) 000-0000
(c) if to Crown Partnership, to: Crown
American Properties, X.X. Xxxxxxxxxxx
Xxxxx Xxxxxxxxx, XX 00000 Attention:
Xxxxxx X. Xxxxxxxx
Fax No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. XxXxxxx
Fax No.: (000) 000-0000
and
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Xxxx Israel
Fax No.: (000) 000-0000
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All notices shall be deemed given when delivered personally, one day after being
delivered to a nationally recognized overnight courier or when telecopied (with
a confirmatory copy sent by such overnight courier).
8.3 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
8.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.
8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Crown Disclosure Letter, the PREIT Disclosure Letter, the
Confidentiality Agreement, the Voting Agreement, and the other agreements
entered into in connection with the Merger (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral
between the parties with respect to the subject matter of this Agreement and (b)
except as provided in Section 5.9 ("Third Party Provisions"), are not intended
to confer upon any Person other than the parties hereto any rights or remedies.
8.6 Governing Law. THE MERGER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICT OF LAWS THEREOF.
8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
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8.8 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that, subject to Section 7.4, the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
federal court located in Pennsylvania or in any state court located in
Pennsylvania this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself (without making such submission exclusive) to the
personal jurisdiction of any federal court located in Pennsylvania or any state
court located in Pennsylvania in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
8.9 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
8.10 Exculpation. This Agreement shall not impose any personal
liability on any shareholder, trustee, trust manager, officer, employee or agent
of PREIT, PREIT Partnership, Crown, Crown Partnership, any Crown Subsidiary or
any partner of Crown or Crown Partnership, or any PREIT Subsidiary or any
partner of PREIT or PREIT Partnership, and all Persons shall look solely to the
property of PREIT, PREIT Partnership, Crown or Crown Partnership for the payment
of any claim hereunder or for the performance of this Agreement. Except as
specified pursuant to the Crown Partnership Contribution Agreement or the PREIT
Contribution Agreement, as applicable, none of PREIT, PREIT Partnership or any
of their Subsidiaries shall be responsible for any obligations of Crown
Partnership arising from and after the Effective Time. Except as specified
pursuant to the Crown Partnership Contribution Agreement or the PREIT
Contribution Agreement, as applicable, upon the Effective Time Crown Partnership
shall no longer be responsible for any obligations of Crown, Crown Partnership
or any of their Subsidiaries arising prior to the Effective Time.
8.11 Joint and Several Obligations. Prior to the Effective
Time, in each case where both Crown and Crown Partnership, on the one hand, or
PREIT and PREIT Partnership, on the other hand, are obligated to perform the
same obligation hereunder, such obligation shall be joint and several.
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IN WITNESS WHEREOF, PREIT, PREIT Partnership, Crown and Crown
Partnership have caused this Agreement to be signed by their respective officers
(or general partners) thereunto duly authorized all as of the date first written
above.
PENNSYLVANIA REAL ESTATE
NVESTMENT TRUST
By: Xxxxx Xxxxxxx
---------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
and General Counsel
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate Investment
Trust, as general partner
By: Xxxxx Xxxxxxx
-------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
and General Counsel
CROWN AMERICAN REALTY TRUST
By: Xxxx X. Xxxxxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
CROWN AMERICAN PROPERTIES, L.P.
By: Crown American Realty Trust, as
general partner
By: Xxxx X. Xxxxxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
