-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J26Vo12PkixXf7nUzFOW4LAKwo7TeI0WzSXqYpv3H0yYCGwqZRpu5OKPl8OGGY6/ uJcNxlswAXm6eCXaaRN9jw== 0000950131-98-003545.txt : 19980527 0000950131-98-003545.hdr.sgml : 19980527 ACCESSION NUMBER: 0000950131-98-003545 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980508 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980526 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL GROWTH PROPERTIES INC CENTRAL INDEX KEY: 0000895648 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 421283895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11656 FILM NUMBER: 98631716 BUSINESS ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 BUSINESS PHONE: 3125515000 MAIL ADDRESS: STREET 1: 55 WEST MONROE ST STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60603 8-K 1 CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 Date of Report (Date of Earliest Event Reported) May 8, 1998 ------------- General Growth Properties, Inc. (Exact name of registrant as specified in its charter) Delaware 1-11656 42-1283895 (State or other (Commission File (I.R.S. Employer jurisdiction of Number) Identification incorporation) Number) 110 N. Wacker Drive, Chicago, Illinois 60606 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 960-5000 55 West Monroe Street, Chicago, Illinois 60603 (Former name or former address, if changed since last report.) Item 2. Acquisition or Disposition of Assets. ------------------------------------- On May 8, 1998, two Delaware limited liability companies, the sole members of which are GGP Limited Partnership, a Delaware limited partnership (the "Partnership"), and a wholly-owned subsidiary of the registrant, General Growth Properties, Inc., a Delaware corporation (the "Company"), which is the general partner of and owner of an approximately 65.2% interest in the Partnership, acquired from Grosvenor International (Westcoast Estates) Limited, a California corporation, and P.I.C. Investments, a Nevada corporation, in a negotiated arms-length transaction 100% of the partnership interests in the partnership which owns Northbrook Court, an enclosed mall shopping center located in Northbrook (Chicago), Illinois. The purchase price for the partnership interests was paid in cash from borrowings under the Company's line of credit. Northbrook Court opened in 1976 and was renovated and expanded in 1995 and 1996. It is a two-level mall of approximately one million square feet. The center is anchored by Neiman Marcus, Lord & Taylor, Marshall Field's and a 14- screen, state-of-the-art General Cinema theater. The center has an additional 362,000 square feet of mall shop space, is currently 88% occupied and produces sales of approximately $333 per square foot. On April 3, 1998, two Delaware limited liability companies, the sole members of which are the Partnership and the Company, acquired from Southwest Properties Venture, a Colorado joint venture, in a negotiated arms-length transaction 100% of Southwest Plaza, an enclosed mall shopping center located in Denver, Colorado. The purchase price consisted of cash from borrowings under the Company's line of credit, redeemable units of limited partnership interest in the Partnership and the assumption of certain indebtedness. Southwest Plaza opened in 1983 and was renovated in 1994 and 1995. It is a two-level mall of approximately 1.3 million square feet located on a 102- acre tract. The center is anchored by Joslin's, Foley's, Sears, JC Penney and Montgomery Ward. The mall has an additional 438,000 square feet of mall shop space, a 100,000 square foot freestanding Target store and two office buildings totaling approximately 92,000 square feet. The center is currently 83% occupied and produces sales of approximately $265 per square foot. The aggregate purchase price paid for Northbrook Court and Southwest Plaza was approximately $261 million. The acquisition of Northbrook Court, when taken together with the unrelated acquisition of Southwest Plaza, is deemed to constitute the acquisition of a significant amount of assets under rules and regulations promulgated by the Securities and Exchange Commission and therefore is required to be reported on this Current Report on Form 8-K. -2- Item 5. Other Events. ------------- On April 17, 1998, the Company entered into a definitive agreement to acquire the U.S. retail property portfolio of MEPC plc (the "MEPC Portfolio"), a United Kingdom based real estate company ("MEPC"). Through the purchase of the stock of the three U.S. subsidiaries of MEPC that directly or indirectly own the MEPC Portfolio (the "MEPC U.S. Subsidiaries"), the Company will acquire for approximately $871 million in cash (less certain adjustments) 100% of eight enclosed mall shopping centers comprising approximately 7.7 million square fee of GLA and located throughout the United States. The stock of the MEPC U.S. Subsidiaries will be acquired by a newly formed corporate subsidiary of the Company that will elect to be taxed as a REIT. This transaction is expected to close during the second quarter of 1998. On May 14, 1998, the Company entered into a definitive merger agreement to acquire U.S. Prime Property, Inc. (""USPPI"), a private REIT, which owns (or as of closing will own) 100% of six enclosed mall shopping centers (and office buildings adjacent to one of the malls) (the "USPPI Portfolio"). The Company has agreed to acquire USPPI through the merger of a subsidiary owned by the Company with and into USPPI, for an aggregate purchase price of approximately $625 million (less certain adjustments), which purchase price includes approximately $65 million of mortgage indebtedness being assumed. The Company expects to complete the acquisition of the USPPI Portfolio together with an approximately 50% joint venture partner. This transaction is expected to close during the second quarter of 1998. Item 7. Financial Statements and Exhibits. ---------------------------------- (a), (b) The requisite financial information will be filed under cover of Form 8-K/A as soon as practicable, and in any event not later than 60 days after the date by which this Form 8-K is required to be filed. (c) See Exhibit Index attached hereto and incorporated herein by reference. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL GROWTH PROPERTIES, INC. By: /s/ Bernard Freibaum --------------------------------- Bernard Freibaum Executive Vice President and Chief Financial Officer Date: May 26, 1998 -4- EXHIBIT INDEX ------------- Exhibit Name* Page Number ----- Number - ------- ------ 2.1 Purchase and Sale Agreement, dated May 8, 1998, among Grosvenor International Limited, P.I.C. Investments, Northbrook Court I L.L.C. and Northbrook Court II L.L.C. 2.2 Stock Purchase Agreement, dated as of April 17, 1998, among MEPC plc, MEPC North American Properties Limited, U.K.- American Holdings Limited and GGP Limited Partnership. 2.3 Merger Agreement, dated May 14, 1998, among GGP Limited Partnership, GGP Acquisition L.L.C. and U.S. Prime Property, Inc. 2.4 Sale and Contribution Agreement, dated April 2, 1998, between Southwest Properties Venture and GGP Limited Partnership.** 4 Redemption Rights Agreement, dated April 2, 1998, among GGP Limited Partnership, General Growth Properties, Inc. and Southwest Properties Venture. - --------------------- * In accordance with Rule 601(b)(2) of Regulation S-K, the exhibits to these agreements and the related disclosure schedules have not been filed. The Company agrees to furnish supplementally a copy of any such omitted exhibit or disclosure schedule to the Securities and Exchange Commission upon request. ** To be filed by amendment. -5- EX-2.1 2 PURCHASE AND SALE AGREEMENT EXHIBIT 2.1 ----------------------------------- PURCHASE AND SALE AGREEMENT PURCHASE AND SALE OF GENERAL PARTNERSHIP INTEREST IN WESTCOAST ESTATES, A CALIFORNIA GENERAL PARTNERSHIP ----------------------------------- Partners: Grosvenor International (Westcoast Estates) Limited, a California corporation and P.I.C. Investments, a Nevada corporation and Buyer: Northbrook Court I L.L.C., a Delaware limited liability company and Northbrook Court II L.L.C., a Delaware limited liability company May 8, 1998 ----------------------------------- PURCHASE AND SALE AGREEMENT PURCHASE AND SALE OF GENERAL PARTNERSHIP INTERESTS IN WESTCOAST ESTATES, A CALIFORNIA GENERAL PARTNERSHIP ----------------------------------- TABLE OF CONTENTS -----------------
Page ---- Recital of Fact......................................................... 1 1. PURCHASE OF THE PARTNERSHIP INTERESTS.............................. 4 2. ESCROW AND CLOSING................................................. 7 3. CONDITIONS AND INSPECTION.......................................... 20 4. CONDITIONS TO CLOSING.............................................. 24 5. ADDITIONAL OBLIGATIONS OF PARTIES.................................. 25 6. OPERATION OF PROPERTY.............................................. 26 7. TITLE AND WARRANTIES............................................... 27 8. ASSIGNMENT......................................................... 34 9. BROKERAGE COMMISSIONS.............................................. 35 10. NOTICES............................................................ 35 11. CONDEMNATION AND DESTRUCTION....................................... 36 12. DEFINED TERMS...................................................... 37 13. MISCELLANEOUS...................................................... 41
i TABLE OF EXHIBITS -----------------
Page First Mentioned --------- Exhibit A - Partnership Agreement...................... 1 Exhibit B - Real Property.............................. 2 Exhibit C - Reciprocal Operating Agreement and Proposed Fifth Amendment to REA ("REA")........... 2 Exhibit D - Rent Schedule and Security Deposits........ 3 Exhibit E - Personal Property.......................... 3 Exhibit F - Service Contracts and Third Party Contracts 3 Exhibit G - PIC Partnership Assignment................. 8 Exhibit H - Grosvenor Partnership Assignment........... 8 Exhibit I - Form of Tenant Estoppel Certificate........ 8 Exhibit J - Partners' Estoppel Certificate............. 8 Exhibit K - Form of Anchor Estoppel Certificate........ 8 Exhibit L - FIRPTA CERTIFICATE......................... 9 Exhibit M - Opinion of Partners' Counsel............... 9 Exhibit N - Opinion of Buyer's Counsel................. 10 Exhibit O - Mechanics Lien Claims...................... 11 Exhibit P - Title Commitment........................... 11 Exhibit Q - Pending Leases............................. 19 Exhibit R - Management Agreement....................... 19 Exhibit S - Termination of Management Agreement........ 19 Exhibit T - 1998 Capital Expenditures Statement........ 20 Exhibit U - Schedule of Reports and Studies............ 28 Exhibit V - Schedules of Regulatory Compliance......... 28 Exhibit W - Environmental Disclaimer................... 29 Exhibit X - Asbestos Reports........................... 29 Exhibit Y - Pending Litigation......................... 30
ii PURCHASE AND SALE AGREEMENT PURCHASE AND SALE OF GENERAL PARTNERSHIP INTERESTS IN WESTCOAST ESTATES, A CALIFORNIA GENERAL PARTNERSHIP -------------------------------- THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made by and among GROSVENOR INTERNATIONAL (WESTCOAST ESTATES) LIMITED, a California corporation ("Grosvenor"), and P.I.C. INVESTMENTS, a Nevada corporation ("PIC"), and Northbrook Court I L.L.C., a Delaware limited liability company ("NCI"), and Northbrook Court II L.L.C., a Delaware limited liability company ("NCII") (NCI and NCII are hereinafter jointly referred to as "Buyer"). Recital of Fact I. The Partnership P.I.C. Investments, a Nevada corporation, is the successor in interest to W.E. Investments Limited, N.V., a Netherlands Antilles corporation, as the owner of an eighty percent (80%) general partnership interest in Westcoast Estates, a California general partnership (hereinafter referred to as the "Partnership"). Grosvenor International (Westcoast Estates) Limited, a California corporation, is the successor-in-interest to Grosvenor International California, Ltd., a California corporation, as the owner of a twenty percent (20%) general partnership interest in the Partnership. PIC and Grosvenor are hereinafter sometimes referred to individually as a "Partner" and, jointly, as "the Partners". PIC's eighty percent (80%) general partnership interest in the Partnership and Grosvenor's twenty percent (20%) general partnership interest in the Partnership are sometimes hereinafter individually referred to as "a Partnership Interest" and, jointly, as "the Partnership Interest". The Partnership was formed pursuant to those certain Articles of General Partnership of Westcoast Estates dated February 15, 1980 among Grosvenor International, California, Ltd. (predecessor to Grosvenor) and W.E. Investments Limited, N.V., a Netherlands Antilles corporation (predecessor to PIC) (the "Partnership Agreement"). The Partnership Agreement was amended by that certain Amendment No. 1 to California General Partnership Agreement dated June 26, 1985, by that certain Amendment No. 2 to California Partnership Agreement dated December 17, 1986, by that certain Amendment No. 3 to California Partnership Agreement dated June 10, 1987 and by that certain Amendment No. 4 to Agreement and Articles of General Partnership dated June 1, 1996. A true, complete and correct copy of the Partnership Agreement, as amended, is attached hereto as Exhibit "A". II. The Mall -------- Northbrook Court Shopping Center (the "Mall") is a fully-enclosed, two- level regional shopping center and two improved out parcels (the "Out Parcels") containing a total of approximately 995,500 square feet of improvements. The Mall has four anchor retail operations (jointly, the "Anchors" and individually, an "Anchor") who are "Lord & Taylor", "Marshall Fields", "Neiman Marcus", and "General Cinema". The Mall is located on approximately 103.50 acres of land and is located in Northbrook, Illinois. A portion of the Mall and the real property on which it is located are owned by Marshall Field's and Neiman Marcus, who severally own a total of approximately 410,000 square feet of gross leasable area of the Mall and various parking lots on approximately 24.58 acres. The Partnership is the owner of the remaining portion of the Mall commonly known as the Mall Stores, the Out Parcels, the Lord & Taylor Store and the General Cinema (as hereinafter defined, the "Improvements") composed of approximately 585,000 square feet of gross leasable area and a parking lot area, which collectively are located on approximately 78.92 acres of land, which is more particularly described on Exhibit "B" attached hereto and incorporated herein by reference (such real property together with all easements, rights, licenses, privileges rights-of-way, mineral rights and royalties, hereditaments and any other real property rights and interests appurtenant thereto, are hereinafter collectively referred to as the "Real Property"). III. Reciprocal Easement Agreement ----------------------------- The Mall and the parking areas owned by the Anchors and the Partnership are governed by that certain Construction, Operation and Reciprocal Easement Agreement for the Mall dated June 17, 1975, amended on February 16, 1976 by that certain First Amendment to Reciprocal Easement Agreement, on August 30, 1978 by that certain Second Amendment to Reciprocal Easement Agreement, on November 2, 1983 by that certain Third Amendment to Reciprocal Easement Agreement and on October 6, 1995 by that certain Fourth Amendment to Operating Agreement (the Construction, Operation and Reciprocal Easement Agreement, as amended, is hereinafter referred to as the "REA"). As of the date hereof, a Fifth Amendment to REA ("Fifth Amendment") has been approved and is being circulated for execution by the Partnership, Neiman Marcus Group (as successor to Carter Hawley Hale), Dayton Hudson (successor by merger to Marshall Field, which is the successor to J.C. Penney) and May Department Stores; the Fifth Amendment to REA when executed and recorded will be included in the term "REA". A description of the REA is attached hereto as Exhibit "C". 2 IV. Property Owned by the Partnership --------------------------------- The property owned by the Partnership includes all of the Partnership's right, title and interest in: A. The Real Property B. All buildings, structures, fixtures, facilities, installations, machinery, equipment and other improvements situated on the Real Property (the "Improvements") and all easements, rights, titles and interests appurtenant thereto; C. All retail leases, license agreements and possession agreements affecting the Real Property and Improvements together with any additions, modifications or amendments thereof entered into in accordance with the provisions of this Agreement (the "Leases"), which Leases are more particularly described on Exhibit "D" attached hereto and incorporated herein by reference (the "Rent Schedule"); D. The promissory note from Neiman Marcus in the original principal amount of $3,000,000 and all equipment, furniture and fixtures and other personal property used in conjunction with the operation of the Real Property and Improvements (other than equipment, furniture and fixtures owned by Tenants under the Leases, the Anchors or the property manager,) including the items described on Exhibit "E" attached hereto and incorporated herein by reference (the "Personal Property"), subject to depletions, replacements or additions thereto in the ordinary course of business of the Real Property and Improvements and any lease interest therein; E. The third party contracts or agreements pertaining to the Real Property or Improvements, such as service or utility contracts, which are more particularly described on Exhibit "F" attached hereto and incorporated herein by reference (the "Service Contracts"). F. The interest of the Partnership in all intangible personal property owned by the Partnership and used in the operation of the Real Property and the Improvements, including (i) warranties, guaranties, indemnities and claims, (ii) licenses, permits, or similar documents, (iii) telephone exchanges, trade names, marks and other identifying material, including without limitation all right, title and interest (if any) of the Partnership in and to the name "Northbrook Court Shopping Center", (iv) plans, drawings, specifications, surveys, engineering reports, and other technical descriptions, (v) all records, books of account and papers of the Partnership relating to the construction, ownership and operation of the Property, including without limitation, architect's drawings, blue prints and as-built plans, maintenance logs, copies of warranties and 3 guaranties, licenses and permits, instruction books, employee manuals, records and correspondence relating to insurance claims, financial statements, operating budgets, paper and electronic media copies of data and other information relating to the Property available from personal computers, structural, mechanical, geotechnical or other engineering studies, soil test reports, environmental reports, underground storage tank reports, feasibility studies, appraisals, ADA surveys or reports, OSHA asbestos surveys, marketing studies, mall documents and compilations, lease summaries and originals and/or copies of Leases, the REA and the Contracts and correspondence related thereto (collectively the "Books and Records"), all of which together are sometimes hereinafter referred to as the "Intangible Assets". G. All right, title and interest of the Partnership under the REA (the Partnership's "REA Interest"). The Partnership's right, title and interest in the Real Property, the Improvements, the Leases, the Personal Property, the Service Contracts, the Intangible Assets and the Partnership's REA Interest are hereinafter collectively referred to as the "Property". The effective date of this Agreement (the "Effective Date") shall be the date the second of Buyer or the Partners executes this Agreement and delivers the fully-executed Agreement to the other party. PIC desires to sell and transfer its Partnership Interest to NCI and NCI desires to purchase and acquire the Partnership Interest of PIC on the terms and conditions herein set forth. Grosvenor desires to sell and transfer its Partnership Interest to NCII and NCII desires to purchase and acquire the Partnership Interest of Grosvenor on the terms and conditions hereinafter set forth. NOW, THEREFORE, the Partners and Buyer hereby agree as follows: 1. PURCHASE OF THE PARTNERSHIP INTERESTS. ------------------------------------- 1.1 The Partnership Interests. PIC shall sell the PIC Partnership ------------------------- Interest to NCI and NCI shall acquire and accept the PIC Partnership Interest from PIC upon the terms and conditions hereinafter set forth. Grosvenor shall sell the Grosvenor Partnership Interest to NCII and NCII shall acquire and accept the Grosvenor Partnership Interest from Grosvenor upon the terms and conditions hereinafter set forth. 1.2 Purchase Price. The total purchase price for the Partnership -------------- Interests ("Purchase Price") shall be One Hundred Forty-Eight Million Dollars ($148,000,000), as adjusted by the following: 4 (a) The subtraction of the sum of Three Million Five Hundred Thousand Dollars ($3,500,000) pursuant to the I. Magnin/GCC Adjustment, as provided in Section 2.3(h). (b) The addition of the aggregate amount of the book value of cash and cash equivalents and prepaid expenses of the Partnership as of the date of closing. Accounts receivable will be distributed from the Partnership to the Partners prior to the Close of Escrow. (c) The subtraction of the aggregate amount of all accounts payable, accrued employee bonuses, payroll taxes withheld and accrued, deposits by tenants, of the Partnership as of the date of closing. As of the Close of Escrow, Notes payable to Partners will be canceled and treated as a contribution to equity. (d) The proration (as provided herein) of all real and personal property taxes, assessments, rents (including percentage rentals) and interest, and charges for water, electricity, steam, gas and telephone and telegraph equipment rental, as applicable. (e) For the purposes of calculations for the Close of Escrow, the adjustments provided in subparagraphs (a), (b) and (c) above shall be initially calculated as of the Close of Escrow based on the Partners' good faith estimate thereof, subject to a final adjustment to be made as of 12:00 midnight, May 8, 1998. The parties shall attempt to fix the day of Close of Escrow to correspond with the end of an accounting month or other convenient accounting date to facilitate ease of such accounting adjustments. Such final adjustment shall be determined from a Closing Balance Sheet prepared as provided below which Closing Balance Sheet shall be approved by Buyers, which approval shall not be unreasonably withheld. It is intended that the final adjustments to the Purchase Price based on the adjustments provided in this subparagraph (d) shall be made within sixty (60) days after the date of the Close of Escrow or as soon as such adjustments can reasonably be calculated. (f) As soon as practicable after the Close of Escrow, the Partners shall without charge prepare an audited Closing Balance Sheet of the Partnership. Such Closing Balance Sheet for the Partnership shall be prepared in accordance with the prior practices and standards utilized by the Partnership's accountants in the preparation of audited statements for the Partnership. The final adjustments pursuant to this paragraph will be based on the Closing Balance Sheets and, when delivered by the Partners, will be true and correct in all substantial and material respects and will be certified by the Partners to be true and correct to the best of their knowledge. 5 (g) Prorations, as provided herein, which are not calculated and paid until the time periods set forth below, shall be paid in accordance with the provisions set forth herein. 1.3 Payment of Purchase Price. The Purchase Price as set forth in ------------------------- Section 1.2 shall be paid as follows: (a) On the Effective Date, Buyer shall deliver an initial deposit to Near North National Title Corporation ("Escrow Holder"), 222 N. LaSalle Street, Chicago, Illinois, 60601, Attn: Cindy O'Donohue in escrow (as hereinafter defined, the "Escrow") in the sum of Two Million Nine Hundred Sixty Thousand Dollars ($2,960,000). After satisfaction or waiver of the conditions to Buyer's obligations listed in Section 3.1, Buyer shall deliver to Escrow Holder an additional deposit of One Million Four Hundred Eighty Thousand Dollars ($1,480,000). The initial deposit, the additional deposit and all interest accrued thereon are hereinafter referred to as the "Deposit". The Deposit shall be paid into an interest-bearing account, which interest shall accrue for the benefit of Buyer up to and including the close of escrow (as hereinafter defined, the "Close of Escrow") and on the Close of Escrow, the Deposit plus interest accrued thereon shall be credited against the Purchase Price. If this Agreement is terminated by Buyer in accordance with its terms, Buyer shall be entitled to the return of the Deposit plus interest accrued thereon. IF BUYER DEFAULTS FOR ANY REASON WHATSOEVER IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND SUCH DEFAULT IS NOT CURED WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF FROM THE PARTNERS TO BUYER, AND THE PARTNERS ARE NOT IN DEFAULT, THE PARTNERS SHALL HAVE THE RIGHT TO RETAIN THE DEPOSIT PLUS ANY INTEREST EARNED THEREON AS THE PARTNERS' DAMAGES FOR BUYER'S DEFAULT. BUYER AND THE PARTNERS AGREE THAT THEY HAVE MADE GOOD FAITH REASONABLE EFFORTS TO DETERMINE WHAT THE PARTNERS' DAMAGES WOULD BE IN THE EVENT OF A DEFAULT BY BUYER. THE PARTNERS AND BUYER HAVE BEEN UNABLE TO ARRIVE AT ANY MEANINGFUL FORMULA OR MEASURE OF DAMAGES FOR BUYER'S DEFAULT AND HAVE THEREFORE AGREED THAT SUCH DAMAGES WOULD BE EXTREMELY DIFFICULT AND IMPRACTICAL TO DETERMINE IN THE EVENT OF BUYER'S DEFAULT. THE DEPOSIT SHALL BE LIQUIDATED DAMAGES AND SHALL BE THE PARTNERS' SOLE RIGHT TO DAMAGES AND THE PARTNERS WAIVE ALL RIGHT TO SPECIFIC PERFORMANCE, CONSEQUENTIAL DAMAGES, PUNITIVE DAMAGES OR ANY OTHER REMEDY. BY INITIALING OR SIGNING WHERE INDICATED BELOW, THE PARTIES SPECIFICALLY APPROVE THIS LIQUIDATED DAMAGES PROVISION. PARTNERS: _______________ BUYER: _______________ 6 If the Partners default for any reason whatsoever in the performance of their respective obligations under this Agreement and such default is not cured within ten (10) days after written notice thereof from Buyer to the Partners, and Buyer is not in default, then at Buyer's sole and exclusive option either (i) upon notice to Escrow Holder the Deposit shall be immediately returned to Buyer and thereupon this Agreement shall terminate and this Agreement shall be of no further force or effect, or (ii) Buyer shall have the right to pursue an action for specific performance of the terms of this Agreement. (b) The balance of the Purchase Price, plus or minus prorations, shall be deposited together with Buyer's portion of the closing costs and reimbursements required hereunder, in immediately available funds to a bank account designated by Escrow Holder on or before the Close of Escrow and shall be paid toward the Purchase Price at the Close of Escrow. 2. ESCROW AND CLOSING. ------------------ 2.1 Escrow. The closing of the purchase and sale of the Property ------ shall take place at the offices of Buyer's counsel, Neal Gerber & Eisenberg, Two North LaSalle Street, 21st Floor, Chicago, Illinois, 60602, Attn: Reuben C. Warshawsky. 2.2 Closing. The closing of the Escrow (the "Closing" or the "Close ------- of Escrow") shall occur on May 8, 1998 (the "Closing Date") or such other date as the parties shall mutually agree. 2.3 The Close of Escrow shall be in accordance with the following terms, conditions and restrictions: (a) Escrow Authorization and Commitment of Parties. A fully- ---------------------------------------------- executed copy of this Agreement shall be deposited with Escrow Holder as escrow instructions within ten (10) days of the date hereof. Amended and/or additional instructions ("Additional Escrow Instructions") not inconsistent with the terms and conditions of this Agreement may be received into Escrow from Buyer and the Partners. Escrow Holder is hereby authorized and instructed to deliver the documents and moneys to be deposited into Escrow as hereinafter provided, with the terms and conditions contained herein to apply to the Escrow. The Partners and Buyer shall, prior to Close of Escrow, execute any and all documents and perform any and all acts reasonably necessary or appropriate to close the transactions pursuant to the terms of this Agreement. (b) Documents to be Deposited with Escrow Holder by the Partners. ------------------------------------------------------------ On or before the Close of Escrow, the Partners shall deposit into Escrow for delivery to Buyer upon the close hereof (the "Partners' Closing Documents"): 7 (i) An instrument of assignment (the "Assignment of PIC's Partnership Interests") in the form attached hereto as Exhibit "G" assigning to NCI all of PIC's Partnership interest in the Partnership; (ii) An instrument of assignment (the "Assignment of Grosvenor's Partnership Interest") in the form attached hereto as Exhibit "H" assigning to NCII all of Grosvenor's Partnership interest in the Partnership; (iii) As a condition to closing an estoppel certificate ("Tenant Estoppel Certificate"), in the form attached hereto as Exhibit "I", dated on or after March 1, 1998 executed by each tenant of space within the Property (excluding Anchors). The form of estoppel certificate shall be modified to complete the relevant information for the respective lease and may be modified by or for the respective tenants to delete or modify provisions which such tenants reasonably assert are not required by the estoppel certificate under their respective leases (such deletions or modifications to be subject to Buyer's approval), but such estoppel certificate shall contain no statement or information which is materially inconsistent with the provisions of such tenant's lease as delivered to Buyer. If the Partners are unable to obtain such estoppel certificates from all of the tenants of the Property (excluding Anchors) but if the Partners obtain a Tenant Estoppel Certificate from tenants whose total aggregate gross leasable area is not less than seventy percent (70%) of the total aggregate gross leasable occupied area (excluding, however, Anchors and short term kiosk license agreements or other short term specialty leases or licenses with a term of one (1) year or less), then in satisfaction of the condition of providing Tenant Estoppel Certificates the Partners shall execute and deliver a Partners' estoppel ("Partners' Estoppel Certificate") as a condition to closing in the form of Exhibit "J" attached hereto with respect to space for which Tenant Estoppel Certificates were not received from tenants. The certifications contained in the Partners' Estoppel Certificate shall survive the Closing; provided, however, any Tenant Estoppel Certificate received by Buyer after the Close of Escrow shall enable the Partners to remove their certification with respect to the Tenant for which the Tenant Estoppel Certificate is received to the extent that such Tenant Estoppel Certificate confirms the information set forth in Partners' Estoppel Certificate. Buyer shall use Buyer's best efforts to assist the Partners in obtaining the Tenant Estoppel Certificates. (iv) Estoppel certificates (the "Anchor Estoppel Certificates"), in the form attached hereto as Exhibit "K", from Lord & Taylor, Marshall Fields (Dayton Hudson) and Neiman Marcus, and from the ground lessees, General Cinema and Lord and Taylor in the form attached as Exhibit "I", in each case dated on or after March 1, 1998. The Partners and Buyer shall 8 use their best efforts to obtain such estoppel certificates. The delivery of the Anchor Estoppel Certificates shall be a condition precedent to Closing. (v) A FIRPTA Certificate, in the form attached hereto as Exhibit "L", duly executed and acknowledged by each Partner. (vi) Closing Statements duly executed by the Partners. (vii) An updated, revised litigation schedule. (viii) Evidence of authority of each Partner to execute, and perform under the terms of this Agreement. (ix) A written certificate executed by the Partners and addressed to Buyer to the effect that all of the representations and warranties of the Partners herein contained in Section 7.1 are true and correct in all material respects as of the Closing Date with the same force and effect as though remade and repeated in full on and as of the Closing Date or stating the specific respects, if any, in which any of the representations and warranties is untrue. (x) Certificate issued by the Secretary of State of the state of incorporation of each Partner, dated not more than ten (10) days prior to the Closing Date, certifying the good standing of each Partner. (xi) Copies of the Articles of Organization of each Partner and any amendments thereto, certified by the Secretary of State of their respective states of incorporation, as of a date not more than ten (10) days prior to the Closing Date, together with a certificate of an officer of such Partner to the effect that the Articles of Organization thereof, as certified by the Secretary of State aforesaid, have not been further amended, revised, restated, canceled or rescinded up to and including the Closing Date. (xii) An opinion or opinions of counsel for each Partner dated as of the Closing Date, in the form of Exhibit "M" attached hereto and otherwise in form and substance reasonably acceptable to Buyer. (xiii) An updated Rent Schedule showing amounts payable as of the Closing Date or a date not more than five (5) days prior thereto. 9 (xiv) The instruments, documents or certificates as are customarily required by the Title Company to be executed or provided by the Partners as a condition to the issuance of the Title Policy at the Closing pursuant to the Title Commitment, including, without limitation, owner's affidavits, mechanics' lien affidavits, personal undertakings and ALTA Statements. (xv) All additional documents, instruments, amendments or supplements as in the reasonable opinion of Buyer's and the Partners' counsels and their respective representatives are necessary for the proper consummation of the transactions contemplated by this Agreement. The original Leases, or copies, if originals are unavailable, of all Licenses and Permits, the plans and specifications for the Improvements, to the extent available, the Books and Records and all keys and entrance cards in the Partners' possession to all locks on the Property, tagged for identification, shall remain at the Property in the offices of the Property staff. (c) Documents to be Deposited with Escrow Holder by Buyer. On ----------------------------------------------------- or before the Close of Escrow, Buyer shall deposit the following into Escrow. (i) Evidence of the authority of Buyer to execute and perform this Agreement. (ii) A Closing Statement duly executed by Buyer. (iii) An opinion or opinions of counsel for Buyer dated as of the Closing Date, in the form of Exhibit "N" attached hereto and otherwise in form and substance reasonably acceptable to the Partners. (iv) All additional documents, instruments, amendments or supplements as in the reasonable opinion of the Partners' and Buyer's counsel and their respective representatives are necessary for the proper completion of the transactions contemplated by this Agreement. (d) Sums to be Deposited with Escrow Holder by Buyer. On or ------------------------------------------------ before the Close of Escrow, Buyer shall deposit with Escrow Holder the sums as provided in Section 1.3, together with all additional documents, instruments, amendments or supplements as in the reasonable opinion of Buyer's and the Partners' counsels and their respective representatives are necessary for the proper consummation of the transactions contemplated by this Agreement. 10 (e) Title Insurance. Ticor Title Insurance Company ("Title Company") --------------- shall furnish to Buyer an American Land Title Association owners policy of title insurance (together with reinsurance and direct access agreements reasonably acceptable to Buyer) (the "Title Policy") in the amount of the Purchase Price from the Title Company, insuring fee title to the Property vested in Buyer as of the Close of Escrow, subject only to the matters approved by Buyer as provided herein (the "Permitted Exceptions") with extended coverage endorsement over the standard printed exceptions and containing the following endorsements: Zoning 3.1 with parking, a location endorsement insuring accuracy of the Survey (as hereinafter defined), an access endorsement, a contiguity endorsement, a tax parcel endorsement, a non-imputation endorsement and an endorsement insuring that there are no violations of covenants or restrictions of record, if available. The cost of the base Title Commitment, Title Policy and all search charges shall be borne equally by Buyer and the Partners. The Property is subject to various mechanics liens relating to tenant improvement work contracted for by tenants which liens are more specifically listed on Exhibit "O" attached hereto (the "Mechanics Liens"). The Partners will credit the Buyers for the sums which the Partnership is obligated to expend for the mechanics liens listed as items 42, 43, 44, and 55 (the "Credit"). Buyers will use appropriate and customary measures to compel the tenants responsible for the mechanics liens to discharge such liens. If Buyers are unsuccessful in resolving such liens after application of the Credit and other security held by Buyers for discharge of such liens, if any, then the Partners shall pay Buyers such unreimbursed lien claims in conjunction with the Final Closing adjustment (as provided herein). In order to facilitate Buyer's financing at Closing the Partners will enter into an indemnity agreement with the Title Company with respect to the Mechanics Liens. The cost of the endorsements shall be borne solely by Buyer. Attached hereto as Exhibit "P" is the Title Commitment issued by the Title Company showing the state of title of the Property. Buyer shall have no obligation to accept or approve any exceptions on the Title Commitment except to the extent mentioned above. Buyer will notify the Partners within five (5) days of Buyer's objections to any of the exceptions to title. Buyer and the Partners will act in good faith to resolve any unacceptable title exceptions. If the Partners do not agree to remove any title exceptions which are unacceptable to Buyer, then Buyer's sole right is to accept such item without discount or credit and close this transection or terminate this agreement for failure of condition precedent, in which case Buyer shall be entitled to a full refund of Buyer's Deposit. If after Buyer's approval of the Title Commitment any additional items except the Permitted Exceptions are shown in the Title Policy to be provided to Buyer hereunder and the Partners fail to remove the same or cause the Title Company to insure over such item by endorsement 11 approved by Buyer prior to the Close of Escrow, Buyer shall have the right to either (x) complete the transactions hereunder and accept the effect of the additional items; provided, however, that Buyer shall thereupon have the right to deduct from the Purchase Price the amount of any such additional item which is a monetary lien of a fixed and ascertainable amount not in excess of Five Hundred Thousand Dollars ($500,000); or (y) terminate the Escrow as Buyer's sole and exclusive remedy prior to the Close of Escrow and the Deposit and all interest earned thereon shall be returned to Buyer in full. The Partners shall remove or insure over any monetary liens which show as an exception to the Title Commitment and not approved above. The Partners shall execute and deliver such affidavits as may reasonably be required by the Title Company, including an affidavit to enable the Title Company to limit any exception in policies for "rights of Tenants or rights of parties in possession" to the "occupancy rights of Tenants as Tenants only under the space leases with no right or option to purchase the Property or any portion thereof" listed in the current schedule to be delivered by the Partners to Buyer at the Close of Escrow as provided herein. At least ten (10) business days prior to the date of the Close of Escrow, the Title Company shall furnish Buyer with a pro forma of each Title Policy --- ----- (including all of the co-insurance, reinsurance and direct access agreements which constitute part thereof) substantially as the Title Company is prepared (subject to events occurring after the date and time of such pro forma and prior --- ----- to Close of Escrow) to bind itself to issue as the Title Policy. (f) Survey. The Partnership has delivered to Buyer an ALTA Survey of ------ the Mall prepared by Gremley & Biedermann dated March 27, 1998 (the "Survey"). (g) Duties of Escrow Holder. On the Close of Escrow, Escrow Holder ----------------------- shall (1) deliver to Buyer the Assignment of PIC's Partnership Interest, the Assignment of Grosvenor's Partnership Interest, and the Title Policy, (2) deliver to the Partners the cash proceeds in accordance with the Closing Statement, and (3) forward to Buyer and the Partners, in duplicate, an accounting of all funds received and disbursed and copies of all executed documents deposited into Escrow. (h) Prorations - General. All rentals, revenues and other income of -------------------- the Property, if any, and all utilities, real estate taxes, maintenance charges and other regular operating expenses of the Property, if any, shall be paid or shall be prorated between the Partners and Buyer in accordance with the provisions set forth in Sections 2.3(h) through (q) inclusive. Buyer and Partners acknowledge that some or all of the tenants under Leases and the Anchors may claim or be entitled to adjustments of past or future CAM (common area maintenance) obligations and real property tax and assessment reimbursement obligations based upon the termination of the I. Magnin lease 12 (the area currently leased by General Cinema) and the General Cinema lease. The parties have adjusted the purchase price (the "I. Magnin/GCC Adjustment") due to current claims and potential future claims for repayment of past CAM charges and reduction of future CAM obligations and past real property tax and assessment reimbursement charges and reduction of future real property tax and assessment reimbursement obligations. In consideration of the I. Magnin/GCC Adjustment, Buyer releases Partners for any such claims or liabilities relating to CAM and real property tax reimbursement charges and adjustments for tenants or Anchors relating to the I. Magnin termination and the General Cinema leasing and no proration, credit or adjustment shall be made in regard to claims, losses, costs, damages, refunds or liabilities incurred by Buyer in regard thereto. For purposes of the prorations and adjustments to be made, Buyer shall be deemed to own the Property and therefore shall be entitled to any revenues and responsible for any expenses for the entire day upon which the Closing occurs. Any apportionments and prorations which are not expressly provided for below shall be made in accordance with the customary practice in the metropolitan Chicago, Illinois area. The Partners and Buyer shall cause their accountants to prepare the schedules of adjustments (the "Closing Statement") prior to the Proration Date. Any net adjustment in favor of Buyer shall be paid in the form of a credit to the Purchase Price. Any net adjustment in favor of the Partners shall be paid in cash or cash equivalent by Buyer to the Partners at Closing. A copy of the Closing Statement agreed upon by the Partners and Buyer shall be executed by both the Partners and Buyer and delivered to the Title Company at the Closing. All Rentals received by the Partners or any of its affiliates or its general partners related to any period after the Proration Date shall be immediately paid to Buyer. The parties shall make an interim closing adjustment (the "Interim Closing Adjustment") on July 31, 1998 and a final closing adjustment (the "Final Closing Adjustment") on October 1, 1999. The Interim Closing Adjustment and the Final Closing Adjustment are jointly referred to as the "Closing Adjustments". (i) Prorations - Rentals. Rentals shall be prorated upon the -------------------- Closing in accordance with the following provisions. (i) Minimum Rent. Subject to Subsection 2.3(g)(iv) below ------------ with respect to Delinquent Rentals, Minimum Rent shall be prorated between the Partners and Buyer as of the Proration Date on an accrual basis based on the actual number of days in the month during which the Closing occurs. The Partners shall be entitled to all Minimum Rent which accrues up to and including the Proration Date and Buyer shall be entitled to all Minimum Rent which accrues after the Proration Date. 13 (ii) Additional Rental. Subject to Subsection 2.3(i)(iv) below with ----------------- respect to Delinquent Rentals, and Section 2.3(m) with respect to the Closing Adjustments, estimated monthly or quarterly payments made by Tenants of the Property, or parties to the REA, in advance based upon projected Additional Rentals shall be prorated between the Partners and Buyer as of the Proration Date on an accrual basis based on the actual number of days in the month during which the Closing occurs. The Partners shall be entitled to all Additional Rent which accrues up to and including the Proration Date and Buyer shall be entitled to all Additional Rent which accrues after the Proration Date. (iii) Percentage Rent. Percentage Rent (if any) payable by a Tenant --------------- under each Lease shall be separately prorated as of the Proration Date between the Partners and Buyer in the manner provided in this Subsection 2.3(g)(iii). Such proration shall be made on a Lease-by-Lease basis and shall be based upon the fiscal year set forth in each Lease for the determination of Percentage Rent. The actual fiscal year for Percentage Rent during which the Closing occurs is hereinafter referred to as the "Applicable Percentage Rent Fiscal Year". To the extent a Tenant makes monthly or quarterly interim payments on account of Percentage Rent, the Partners shall initially retain all such interim payments of Percentage Rent received by the Partners up to and including the Proration Date until a Closing Adjustment occurs and Buyer shall initially retain all such interim payments of Percentage Rent received by Buyer after the Proration Date until a Closing Adjustment occurs. At each Closing Adjustment, the Partners and Buyer shall prorate the total annual Percentage Rent due from a Tenant for such Tenant's Applicable Percentage Rent Fiscal Year as follows: (a) the Partners shall be entitled to the portion of the Percentage Rent payable by each Tenant equal to the product obtained by multiplying the total annual Percentage Rent paid by each such Tenant by a fraction, the numerator of which is the number of days in the Applicable Percentage Rent Fiscal Year up to and including the Proration Date and the denominator of which is the number of days in the Applicable Percentage Rent Fiscal Year; and (b) Buyer shall be entitled to the portion of the Percentage Rent payable by each Tenant equal to the product obtained by multiplying the total annual Percentage Rent paid by each such Tenant by a fraction, the numerator of which is the number of days in the Applicable Percentage Rent Fiscal Year after the Proration Date and the denominator of which is the number of days in the Applicable Percentage Rent Fiscal Year. (iv) Delinquent Rental. As used herein, "Delinquent Rentals" means ----------------- Rentals which are due and payable by a Tenant on or prior to the Proration Date but which have not been paid by the Proration Date. Delinquent Rentals shall be prorated between the Partners and Buyer as of the Proration Date, but not 14 until they are actually collected by Buyer. Buyer shall have the right after the Closing to collect Delinquent Rentals relating to the period prior to the Proration Date, but shall not be obligated to do so. Upon the Final Closing Adjustment, any Delinquent Rentals which have not as yet been paid shall be assigned to the Partners. After the Closing and continuing through and after the Final Closing Adjustment, without the express written consent of Buyer, the Partners shall not take, nor cause Buyer to take, any action against a Tenant owing Delinquent Rentals which would affect such Tenant's right to occupy its leased premises. Rentals collected by Buyer after the Closing, shall be applied in the following order of priority: (a) first, to the particular rental obligation, if any, for which the Tenant designates the payment has been made (e.g., by a notation on the Tenant's check or in an accompanying cover letter or - ----- if the payment is made in response to an invoice submitted to the Tenant); and (b) secondly, against the Tenant's Rental obligations in reverse chronological order in which they accrue. All Delinquent Rentals received by Buyer or any of its affiliates after the Proration Date shall be immediately applied in accordance with the above and any amount owing to the Partners shall be immediately paid upon application, less the amount of any management fee or compensation paid or due with respect to such Delinquent Rentals; however, in no event later than thirty (30) days after collection. (A) The Partners shall have the right to commence litigation against the Tenants owing Delinquent Rents (the "Delinquent Tenants") to collect the Delinquent Rentals, which pursuant to the above, the Partners are entitled to as and when collected. The Partnership shall assign to the Partners the necessary rights under the subject leases to commence such litigation. The Partners may proceed with counsel of their own choosing, and at its own expense, to collect any such Delinquent Rentals due by the Delinquent Tenants which are allocable to the Partners, provided that the Partners shall not seek (i) termination of any Lease; (ii) eviction of any Delinquent Tenant; nor (iii) to levy against the Delinquent Tenant's interests in the Lease, all without the prior written consent of Buyer. (B) If a Delinquent Tenant owes Delinquent Rental which is properly allocable to both the Partners and Buyer, the Partners and Buyer shall cooperate in collecting such Delinquent Rental. If the Partners desire to commence litigation as to Delinquent Rentals properly allocable to it, but Buyer does not so desire to commence litigation, then the Partners may commence litigation as set forth in (A) above. If both parties desire to commence litigation, Buyer shall 15 institute such litigation on the Partnership's behalf and the Partners' share of any recovery of the Delinquent Rentals from such litigation, after the payment of all expenses in connection therewith, shall be apportioned between Buyer and the Partners in accordance with this Subsection 2.3(i)(iv). (j) Proration - Taxes and Assessments. All non-delinquent real estate --------------------------------- and personal property taxes on the Property not otherwise reimbursed by Tenants under their Leases or by a party to the REA shall be prorated between the Partners and Buyer on an accrual basis, based upon the actual current tax bill for the tax year in which the Closing occurs. If the most recent tax bill received by the Partners as of the Proration Date is not the actual current tax bill, then the Partners and Buyer shall re-prorate the real estate and personal property taxes at the Final Closing Adjustment if the actual current tax bill is then available. All amounts payable for real estate and personal property taxes accruing up to and including the Proration Date shall be the obligation of the Partners and all amounts payable for real estate and personal property taxes accruing after the Proration Date shall be the obligation of Buyer. If, after the Proration Date, any additional or supplemental real estate and personal property taxes are assessed against the Property by reason of back assessments, corrections to previous tax bills or other events occurring up to and including the Proration Date, the Partners and Buyer shall re-prorate the real estate and personal property taxes at the Final Closing Adjustment to provide the appropriate credit. All amounts receivable pursuant to pending appeals for real estate and personal property tax for the period up to and including the Proration Date shall be the property of the Partners and all amounts recovered for tax appeals for real estate and personal property taxes accruing after the Proration Date shall be property of Buyer. If any of the sums recovered by the Partners pursuant to the real property tax appeal are payable to or owed as a credit to tenants of the Property, such sums shall be paid to Buyer who shall make the appropriate adjustments with the tenants. Any delinquent real estate and personal property taxes on the Property shall be paid by the Partners at the Closing. (k) Proration - Operating Expenses and Insurance Premiums. All costs, ----------------------------------------------------- expenses, charges and fees for sewer, water, electricity, heat and air- conditioning service and other utilities, common area maintenance charges, insurance premiums, rental and privilege taxes, business occupation taxes, promotional expenses, periodic charges payable under Service Contracts which are assigned to Buyer, periodic fees payable under transferable Licenses and Permits for the operation (as opposed to the construction) of the Property, periodic charges under the REA, any payroll, employee benefits, employee related taxes or other labor costs paid by the Partners (if assumed by 16 Buyer directly or indirectly) and any other costs incurred in the ordinary course of business for the management and operation of the Property, and insurance premiums shall be prorated between the Partners and Buyer on an accrual basis, based on the actual number of days in the month during which the Closing occurs. The Partners shall be responsible for all such expenses that are attributable to the period up to and including the Proration Date and Buyer shall be responsible for all such expenses which are attributable to the period after the Proration Date. To the extent commercially reasonably and practicable, the Partners shall obtain billings and meter readings as of the day up to and including the Proration Date to aid in such prorations. If billings or meter readings as of the day up to and including the Proration Date are obtained, adjustments of any costs, expenses, charges or fees shown thereon shall be made in accordance with such billings or meter readings. (l) Proration - Security Deposits and Other Tenant Credits. At the ------------------------------------------------------ Closing, Buyer shall be credited with and the Partners shall be charged with an amount equal to the sum of (i) the Security Deposits (and any interest due to Tenants thereon, if any) being held by the Partners or any other person under the Leases as designated on the Rent Schedule, plus (ii) the amount of any other credits due Tenants. Upon the Closing, the Partners shall be entitled to retain the Security Deposits or other such credits due Tenants, for which Buyer has been credited and the Partners have been charged pursuant to this Subsection 2.3(l). (m) Adjustment Dates. On July 31, 1998, the Partners and Buyer shall ---------------- make the Interim Closing Adjustment and no later than October 1, 1999, the Partners and Buyer shall make the Final Closing Adjustment to the prorations, each pursuant to this Subsection 2.3(m). The Interim Closing Adjustment and the Final Closing Adjustment shall be made as set forth below in this Subsection 2.3(m). (i) General. Payment of Delinquent Rentals collected by Buyer after ------- the Proration Date which have not been adjusted at the Interim Closing Adjustment and which are attributable to the period up to and including the Proration Date, shall be made by Buyer to the Partners when and as collected and as soon as practicable following receipt. All other adjustments or prorations which could not be determined at the Closing or the Interim Closing Adjustment due to the lack of actual statements, bills or invoices for the current period, the year-end adjustment of Additional Rentals, the unavailability of final sales figures or amounts for Percentage Rent or for any other reason shall be made at the Final Closing Adjustment. Any net adjustment determined at each respective Adjustment Date in favor of Buyer shall be paid in cash or cash equivalent by the Partners to Buyer no later than twenty (20) days after the 17 respective Adjustment Date. Any net adjustment in favor of the Partners shall be paid in cash or cash equivalent by Buyer to the Partners no later than twenty (20) days after the respective Adjustment Date. Any reduction or credit paid to or benefiting any tenant or Anchor occasioned by the I. Magnin/GCC Adjustment shall be treated as if such reduction had not been given or such credit had not been paid for the purpose of adjustments required by this Agreement. (ii) Additional Rental Adjustment. The actual amount of Additional ---------------------------- Rentals paid by each Tenant of the Property for the annual period in which the Proration Date occurs (as distinguished from the estimated amounts prorated as of the Proration Date pursuant to Subsection 2.3(i)(ii) above) shall be separately prorated between the Partners and Buyer as of the Proration Date based on the actual number of days in the annual period during which the Proration Date occurs. Buyer shall pay to the Partners an amount (if any) equal to the excess of (1) the product obtained by multiplying (A) the total amount of Additional Rentals paid by the Tenant to the Partners and Buyer for the annual period during which the Proration Date occurs, by (B) a fraction, the numerator of which is the number of days in the annual period up to and including the Proration Date and the denominator of which is the total number of days in the annual period over (2) the sum of (X) the total amount of the monthly or quarterly payments of estimated Additional Rentals actually collected by the Partners or the Partnership prior to the Close of Escrow from the Tenant for the months or quarters preceding the month or quarter during which the Proration Date occurs, (Y) a pro-rated portion of the monthly or quarterly estimated Additional Rentals paid by the Tenant for the month or quarter during which the Proration Date occurs (i.e., the amount of the adjustment pursuant to Section ---- 2.3(i)(ii) above) and (Z) the entire amount of the monthly or quarterly estimated Additional Rentals which constitutes Delinquent Rentals and which is collected by Buyer or the Partnership from the Tenant after the Proration Date and paid over to the Partners by Buyer pursuant to Subsection 2.3(i)(iv) above. If, for any Tenant, the Additional Rent received by the Partners, up to and including the Proration Date, exceeds the product obtained above, the Partners shall pay the excess to Buyer. If the total sum of all advance payments of projected Additional Rentals exceeds the Additional Rentals actually due from the Tenant for the annual period in which the Proration Date occurs, Buyer shall remit or credit the Tenant with such excess. (iii) Percentage Rent Adjustment. To the extent the sum of all interim payments on account of Percentage Rent collected by the Partners from each Tenant for the Applicable Percentage Rent Fiscal Year exceeds the amount of Percentage Rent to which the Partners are entitled with respect to such Tenant pursuant to Subsection 2.3(i)(iii), the Partners 18 shall pay such excess to Buyer. To the extent the sum of all interim payments on the account of Percentage Rent collected by Buyer from each Tenant for the Applicable Percentage Rent Fiscal Year exceeds the amount of Percentage Rent to which Buyer is entitled with respect to such Tenant, then Buyer shall pay such excess to the Partners. Any such adjustment of interim payments received and actual Percentage Rent payable shall be made on a Lease-by-Lease basis (as opposed to aggregating all interim payments received by the Partners from all Tenants and offsetting the same against the entire amount of Percentage Rent payable by all Tenants). If the total sum of the interim payments on account of Percentage Rent collected by the Partners plus the interim payments on account of Percentage Rent collected by Buyer exceeds the Percentage Rent actually due from the Tenant, Buyer shall remit or credit Tenant with such excess and the Partners and Buyer shall make any necessary adjustment between them in accordance with the preceding provisions of this Subsection 2.3(m)(iii). (iv) No Further Adjustments. On the Final Adjustment Date, final ---------------------- prorations shall be made and, to the extent necessary, Buyer and the Partners shall estimate items for which final sums are not available. Except for: (a) additional or supplemental real estate taxes, real estate tax credits or rebates, or other adjustments to real estate taxes due to back assessments, corrections to previous tax bills or real estate tax appeals or contests, and (b) any Additional Rentals or any Percentage Rent which may be contested by Tenants or cannot be computed by the Final Adjustment Date, the Final Closing Adjustment shall be conclusive and binding upon the Partners and Buyer. (n) Leasing Commissions and Tenant Improvements. Any and all leasing ------------------------------------------- commissions due and tenant improvements with respect to Leases in existence on the date hereof including the Pending Leases (as hereinafter defined in Exhibit "Q") shall be paid in full and discharged by the Partners or the Partnership or credited to Buyer at closing prior to the Close of Escrow. The Partners have entered into that certain Management Agreement with Wilder & Co. a true copy of which is attached hereto as Exhibit "R" (the "Management Agreement"). The Partnership will terminate the Management Agreement as of the Close of Escrow. Buyer shall pay to Wilder & Company a leasing commission earned by Wilder & Company pursuant to the Termination of Management Agreement attached hereto as Exhibit "S". Any and all leasing commissions and tenant improvements with respect to Leases executed after the date of this Agreement in accordance with the consent provisions described below, except for the Pending Leases shall be paid in full and discharged by Buyer. 19 (o) Reimbursement of 1998 Capital Costs. Buyer shall pay to the ----------------------------------- Partners at Closing the sums expended by the Partnership during the calendar year 1998 in connection with the 1998 Capital Expenditures Statement as is more specifically described on Exhibit "T" (the "1998 Capital Expenditures Statement"). The 1998 Capital Expenditures Statement shows the sums budgeted and the sums expended to date. Such statement shall be updated as of the Close of Escrow based upon actual sums paid by the Partnership. The remaining sums due under contracts included with the Service Agreements shall be assumed and paid by Buyer. The Partners will credit Buyer with the unpaid capital improvement costs which are the Partners' obligation as more specifically set forth on Exhibit "T". (p) Payment of Expenses. Except as otherwise specifically provided in ------------------- this Agreement, the Partners and Buyer shall each pay all of their own expenses incurred in connection with this Agreement and the transactions contemplated hereby, including all related accounting, legal and appraisal fees. (q) Continuing Effect. Notwithstanding any provisions of this ----------------- Agreement to the contrary, the agreements made by the Partners and Buyer pursuant to Subsections 2.3(h) through (p) (inclusive) shall survive the Closing. (r) Recordation; Escrow Fees. The cost of the municipal transfer ------------------------ taxes, if any, state and county transfer taxes required to be affixed to the deeds required herein, recording fees and escrow fees of Escrow Holder shall be divided and paid equally by Buyer and the Partners. 2.4 Escrow Holder Authorized to Complete. If necessary, Escrow ------------------------------------ Holder is hereby authorized to insert the date of the Close of Escrow as the execution date of the deeds and is further authorized to insert the date of the Close of Escrow and to fill in blank spaces in any and all documents and instructions delivered to it so long as it is done in conformance with this Agreement. 3. CONDITIONS AND INSPECTION. ------------------------- 3.1 Conditions to Buyer's Obligations. Buyer commenced Buyer's due --------------------------------- diligence on or about March 1, 1998 and completed Buyer's due diligence on or about April 15, 1998 (the "Approval Time") to review and approve the "due diligence" matters set forth in Subsections 3.1(a)-(e) inclusive. Buyer acknowledges Buyer's approval of the due diligence matters. If any of the conditions set forth in Subsections 3.1(e), (f), (g) and (h) are not satisfied by the respective dates set forth therein (each such date being called an "End Date"), then Buyer may elect to terminate this Agreement and receive the return of the Deposit and all interest earned thereon. Buyer's election to 20 terminate this Agreement pursuant to this Section 3.1 shall be effective if, on or before the End Date, Buyer has delivered to the Partners and Escrow Holder Buyer's notice of termination. Upon receipt by Escrow Holder of Buyer's notice of termination pursuant to Section 3.1, Escrow Holder shall immediately return the Deposit and all interest earned thereon to Buyer and this Agreement shall be deemed terminated. If Buyer fails to notify the Partners of its election to terminate this Agreement in accordance with this Section 3.1, then this Agreement shall remain in full force and effect. (a) The Partners (i) have made available to Buyer, at the Property or in the Partners' Washington, D.C. office and at Wilder & Co. offices in Boston, Massachusetts, all plans and specifications for the Property in the Partners' possession or under the Partners' control, together with all soils, geological and environmental reports and governmental reports in the Partners' possession or under the Partners' control in connection with the construction of improvements on the Property, and (ii) have permitted Buyer to examine the conditions of the Property, including but not limited to its soils and any environmental, structural, electrical, mechanical, roof, HVAC and other elements relating to the Real Property and the Improvements. Buyer provided the Partners with copies of all reports prepared by parties other than Buyer in connection with Buyer's examination of the Property. Buyer shall give the Partners, or the Partnership's manager or agent, designated by the Partnership for this purpose, at least twenty-four (24) hours' notice in advance of any intended inspection or entry. Buyer shall comply with all laws and governmental regulations applicable to such inspection or entry. Buyer shall indemnify, defend with counsel reasonably acceptable to the Partnership, and hold Partnership, its directors, officers, employees, agents, representatives, attorneys and consultants harmless from and against any and all losses, costs, damages, liabilities and expenses (including reasonable attorneys' fees and costs of suit), arising out of acts or activities of Buyer or Buyer's agents or consultants on or about the Property; provided Buyer shall only be responsible for actual, out-of-pocket losses, costs, damages, liabilities and expenses. Buyer shall not remove flooring, make excavations or test borings, disturb any plants, trees or shrubs, or engage in any other activities destructive of the Property without the Partnership's consent, which consent shall not be unreasonably withheld or delayed. Any damage to the Property made by Buyer or any persons acting for or on behalf of Buyer shall be repaired promptly, replacing or restoring any vegetation that is damaged and generally putting the Property and all points of entry by the inspectors in substantially the same condition as before the inspection or entry. 21 (b) The Partnership has delivered or made available to Buyer copies of all Leases and all amendments thereto or any subleases in the Partnership's or the Partners' possession, and any pending leases. (c) Buyer (or its authorized employees and agents) shall have the right to examine all of the Partnership's books and records at the Property and at the Partnership's Washington, D.C. office and at Wilder & Co. offices in Boston, Massachusetts pertaining to the Property including without limitation the following documents: (i) Copies of all certificates of occupancy, licenses, permits, authorizations, and approvals required by law and issued by all governmental authorities having jurisdiction and copies of all certificates issued by the local board of fire underwriters (or other body exercising similar functions); (ii) Copies of all certificates of existing insurance policies in force affecting the Property or any portion thereof and a synopsis of the existing policies (Buyer shall have the right to review the existing policies at the Partnership's office); (iii) The original of each bill for current real estate and personal property taxes and for the two most recent prior years, a current statement of assessed valuation, water charges and other utilities, together with proof of payment thereof; (iv) All records and files relating to the Property including those records and files relating to the ownership, management, operation and maintenance of the Property; (v) The current operating budget for the Property with applicable documentary support and operating statements for the years 1995, 1996 and 1997; (vi) The financial records of tenant sales and tenant sales reports for 1995, 1996, 1997 and year to date 1998; (vii) Tenant expense recapture calculation worksheets and resulting billing for 1996, 1997 and projected 1998; (viii) Audited financial statements for the Partnership as of December 31, 1997 and current unaudited financing statements for the period ending March 31, 1998; and (ix) Pro-forma financial statements for the Partnership as at the Close of Escrow. 22 (d) Buyer shall have the right to approve the Survey described in Section 2.3(f). On or before ten (10) days prior to the Approval Date, Buyer shall notify the Partners, in writing, of any disapproved survey matters ("Disapproved Matters"). All other matters shown by the Survey shall constitute additional "Permitted Encumbrances". As a condition to the Closing, the Partners shall use their best efforts to remove, or cause to be removed, all Disapproved Matters. No less than five (5) days after receiving notice from Buyer of the Disapproved Matters, the Partners shall notify Buyer in writing of any Disapproved Matters which the Partners are unable to cause to be removed or corrected and Buyer shall then, within five (5) days of receipt of such notice, elect, by giving written notice to the Partners (i) to terminate this Agreement, or (ii) to waive its disapproval of such survey matters (such survey matters shall then be deemed to be "Permitted Encumbrances"). Buyer's failure to give such written notice shall be deemed an election to terminate this Agreement. (e) The Partnership has provided to Buyer a Phase I Environmental Site Assessment regarding the Property prepared by Boelter Engineering dated March 10, 1998. Any further environmental testing or investigation will be at Buyer's expense. (f) The Partners shall perform, observe and comply with all the covenants, agreements, and conditions required by this Agreement to be performed, and observed, and complied with by, prior to or as of Close of Escrow. (g) As of the Close of Escrow, neither the Partners nor the Partnership shall have made a general assignment for the benefit of creditors, nor have admitted in writing its inability to pay its debts as they become due, nor have filed a petition in bankruptcy or been adjudicated a bankrupt or insolvent or have filed a petition seeking any reorganization, arrangement, composition, readjustment liquidation, dissolution or similar relief under any present or future statute, law or regulation, nor have filed any answer admitting or failing to reasonably contest the material allegations of a petition filed against it in any such proceeding or seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator. 3.2 Conditions to the Partners' Obligations. The Partners' --------------------------------------- obligations to close Escrow and complete the transaction contemplated herein is subject to Buyer's performance, observance and compliance with all the covenants, agreements, and conditions required by this Agreement to be performed, and observed, and complied with by, prior to or as of Close of Escrow. 23 3.3 Upon termination of this Agreement pursuant to Section 3.1 hereof, Buyer shall return any and all documents, studies and other items received from the Partnership in Buyer's possession, under control of, or reasonably available without additional cost to, Buyer and the Partners shall thereafter maintain the confidentiality of all such information relating to the Property and the Partners as provided in Section 14.12 hereof. 4. CONDITIONS TO CLOSING. --------------------- 4.1 Conditions to Closing. In addition to the conditions set forth --------------------- in Section 3.1 above, the Closing and Buyer's obligation to pay the Purchase Price and complete the transaction contemplated by this Agreement are subject to satisfaction of the following conditions, no later than the respective dates specified below in this Section 4.1, and the obligations of the parties with respect to such conditions are as follows: (a) Moratorium. At the Closing Date, there shall be no statute, law, ---------- judicial or administrative decision, proceeding, ordinance or regulation pending, or proposed and known to the Partners, to be imposed by the Authorities or any public or private utility having jurisdiction over the Property which would prevent or materially and adversely impair the operation or use of the Property in the manner it is currently operated or used. (b) Representations, Warranties and Covenants of the Partners. The --------------------------------------------------------- Partners shall have materially performed each and every agreement to be performed by the Partners hereunder and Buyer shall have approved, pursuant to the Partners' Certificate (hereinafter defined), any material changes in the truth and accuracy of the Partners' warranties and representations. (c) No Material Changes. As of the Closing, there shall have been no ------------------- material adverse changes in the physical or financial condition of the Property and no material adverse change in the financial condition of the Partnership. For purposes of this Subsection 4.1(c), a "material adverse change in the physical or financial condition of the Property" shall mean (i) the closing of operations by an Anchor of more than twenty-five percent of its store in the Mall or (ii) a change in the physical condition of the Property other than by condemnation or casualty which will result in $2,500,000 of loss of value to the Property or (iii) $250,000 of loss of annualized income of the Property. (d) The Partners' Deliveries. On or before the Closing Date, the ------------------------ Partners shall have delivered or caused to be delivered the items described herein to be delivered by the 24 Partners including, without limitation, the Tenant Estoppel Certificates required under Section 2.3(b)(iii) and the Anchor Estoppel Certificates required under Section 2.3(b)(iv). (e) Title and Title Insurance. At the Closing Date, the ------------------------- Title Company shall have issued or shall have unconditionally committed to issue the Title Policy to Buyer as provided herein. 4.2 Conditions Precedent to the Partners' Obligations. The Closing ------------------------------------------------- and the Partners' obligation to transfer the Property to Buyer and consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions, no later than the respective dates specified below in this Section 4.2, and the obligations of the parties with respect to such conditions are as follows: (a) Buyer's Deliveries. On or before the Closing Date, ------------------ Buyer shall have delivered the items described herein to be delivered by Buyer. (b) Purchase Price. On or before the Closing Date, Buyer -------------- shall have deposited into Escrow, for disbursement as provided herein, the Purchase Price in accordance with Section 1.3 of this Agreement. (c) Representations, Warranties and Covenants of Buyer. -------------------------------------------------- Buyer shall have materially performed each and every agreement to be performed by Buyer hereunder and each and every one of Buyer's representations, warranties and covenants set forth in this Agreement shall be true and correct in all material respects as of the Closing Date. 5. ADDITIONAL OBLIGATIONS OF PARTIES. --------------------------------- 5.1 Security Deposits. Subject to the provisions of Section 2.3(l), ----------------- the Partners shall, at the Close of Escrow, prorate and turn over to Buyer a current list of all tenants and Security Deposits, as well as all security deposited by any tenant where not prohibited by terms of the tenant's Lease and all of the original Leases under the Partners' or the Partnership's possession or control; and in connection with the receipt thereof, Buyer will hold and apply the Security Deposits for the purposes set out in such tenant's Lease and indemnify the Partners against any liability in connection therewith. 5.2 Notices to Tenants, Parties to REA and Service Contractors. ---------------------------------------------------------- Immediately after the Close of Escrow, the Partners and Buyer shall give written notices (i) to the Parties to the REA advising them of the change of ownership of the Partnership and directing them to pay all charges under the REA as directed by Buyer; (ii) to the Tenants advising them of the change of 25 ownership of the Partnership and directing them to pay Rent and other charges under their respective Leases as directed by Buyer. 5.3 Foreign Investors. If the Partners fail to deliver the FIRPTA ----------------- Certificate (as provided in Section 2.3(b)(ix)), to Buyer prior to or at the Close of Escrow, then the transaction shall be completed at the Close of Escrow, but Buyer shall withhold ten percent (10%) of the "amount realized" (as set forth in the Regulations) by the Partners and transmit to the appropriate Internal Revenue Service Center, all in accordance with said Section 1445 and the Regulations pursuant thereto. If the Partners provide Buyer with such executed certificate or notice prior to or at the Close of Escrow, then no such withholding shall occur. 6. OPERATION OF PROPERTY. --------------------- 6.1 Access to and Information Concerning the Property and Consulting. ---------------------------------------------------------------- The Partners shall, between the date hereof and the Close of Escrow, allow Buyer, its agents and attorneys access to the Property for purposes of inspecting the same or any part thereof at any time as they shall reasonably request, and furnish to Buyer, its agents and attorneys any and all information in the Partners' or the Partnership's control regarding the Property and its operation that Buyer, its agents and attorneys shall reasonably request from time to time. 6.2 Leasing of the Property. Prior to the Close of Escrow, the ----------------------- Partnership and the Partners shall not terminate, amend or extend existing Leases, except with respect to the pending leases (the "Pending Leases") a schedule of which is attached hereto as Exhibit "Q" or with respect to agreements approved by Buyer, or enter into new leases or lease extensions without the approval of Buyer. License and storage agreements which are terminable by the Landlord do not require prior approval of Buyer. Approval or disapproval shall be given within five (5) business days of Buyer's receipt of a proposal from the Partnership. A failure of Buyer to respond within such five (5) Business Day period shall be deemed approval. To the extent approved by Buyer, the Partners agree to promptly deliver to Buyer true and complete copies of any lease amendments, lease extensions, lease termination agreements and new leases when fully executed. The Partners shall, at the Partners' sole expense, satisfy in full all lease commissions, tenant allowances or monetary concessions and complete all alterations or other work required to be performed by the Partners under the Leases (as shown on the Rent Schedule) or the Pending Leases. 6.3 Possession. Buyer shall have the non-exclusive right to ---------- possession of the Partnership Interest as of the Close of Escrow. 26 6.4 Conduct of Business Pending Closing. From the date hereof until ----------------------------------- the Closing, the Partners shall (a) use reasonable best efforts to maintain, for the benefit of Buyer following the Closing, the goodwill of Tenants, prospective tenants, vendors and other parties having business relations with the Partnership; (b) pay their debts and the debts of the Partnership (or in good faith contest the same) and perform their obligations and the obligations of the Partnership as they become due; (c) maintain the Property in the same manner and condition that exists on the date hereof, as such condition shall be altered by reason of casualty, taking and/or normal wear and tear; (d) without the express written consent of Buyer, not (i) enter into a new reciprocal easement or similar agreement or amend or modify, consent to the assignment of or waive any material right under the REA (except for the execution and recording of the Fifth Amendment), (ii) make any alterations to the Property or enter into any new contracts or extend or renew or cancel any Service Contract relating to capital expenditures, (iii) enter into any other new contracts or extend, renew or cancel, consent to the assignment of or waive any material right under any other Service Contract, except for contracts executed in the ordinary and usual course and business and in accordance with past practices and policies which can be terminated without penalty or payment upon not more than thirty (30) days prior notice, (iv) sell, transfer, exchange, further encumber or grant interests (including easements) in the Property or in the Partnership or any part thereof or engage in negotiations or discussions with, or otherwise solicit or assist, any third party relating to the acquisition by such third party of the Property or the equity interests in the Partnership or the Partners, and (v) otherwise take any action which could or would render inaccurate any of the representations or warranties made by the Partners in this Agreement; and (e) otherwise operate the Property in the ordinary course consistent with current practice. 6.5 Assistance Following Closing. From and after the Closing, the ---------------------------- Partners shall provide reasonable assistance to Buyer in connection with the preparation of financial statements and bills and the adjustment of losses and claims and the enforcement or settlement of any such claims. Without limiting the foregoing, the Partners shall, upon the request of Buyer from time to time, provide signed representation letters with respect to revenues and expenses of the Partnership if required under generally accepted accounting practices to enable Buyer's accountants to render an opinion on Buyer's financial statements. 7. TITLE AND WARRANTIES. -------------------- 7.1 The Partners' Representations and Warranties. The Partners -------------------------------------------- hereby represent, warrant and covenant to Buyer as follows: 27 (a) The Partners have full power and authority to enter into and perform this Agreement in accordance with its terms; the Partnership is a general partnership duly organized, validly existing and in good standing under the laws of the State of California, and to the best of the Partners' knowledge, it has made all filings and recordings necessary to exist, operate and do business under all presently applicable Governmental Regulations and has the full and unrestricted power and authority, to own, operate and lease its properties, to carry on its business as currently conducted and to execute and deliver this Agreement and any other instruments to be delivered pursuant hereto, and to perform all of its obligations under this Agreement and any other instruments to be delivered pursuant hereto. (b) Except as otherwise disclosed on the Schedule of Reports and Studies attached hereto as Exhibit "U", the Partners have no knowledge of any notice, order or directive of any Authorities that any work of repair, maintenance, or improvement be performed on the Property. (c) Except as otherwise disclosed on the Schedules of Regulatory Compliance attached hereto as Exhibit "V" ("Regulatory Compliance") or on Exhibit "U", neither the Partners nor the Partnership has received no notice from any Authorities, any board of fire underwriters, improvement association, or architectural committee relating to defects in the improvements on the Property, relating to noncompliance with any applicable building code, laws, regulations or restrictions applicable to the Property that has not been corrected, or relating to any threat of impending condemnation. (d) Neither the Partnership nor the Partners have received any notice from any Authorities of any pending or contemplated condemnation or change of zoning affecting the Property. (e) To the best of the Partners' knowledge, the Rent Schedule provided is a complete and correct list of all leases, tenancies, and other rights of occupancy or use for any portion of the Property in effect on the date of this Agreement and all of the tenant leases are the result of bona fide arm's-length negotiations between the parties. To the best of the Partners' knowledge, the Partners have delivered or made available true and complete copies of all Leases and amendments thereto and Service Contracts affecting the Property that would be binding on Buyer, the Partnership or the Property following the Closing. Except for rents not delinquent for more than thirty (30) days and claims related to the I. Magnin/GCC Adjustment and matters listed on the Partners' Certificate of Reaffirmation of Representations delivered at the Close of 28 Escrow, the Partners are not aware of any default by any of the tenants of the Property. (f) Except for the completion of tenant improvements under Leases which the Partnership is obligated to complete and for budgeted repair and maintenance for the Property, from and after the Effective Date, the Partners and the Partnership will not authorize Wilder & Co. to, (i) perform any grading or excavation, construction, or removal of any improvements, or make any other change or improvement upon or about the Property; (ii) create or incur, or suffer to exist, any mortgage, lien, pledge, or other encumbrances in any way affecting the Property without Buyer's written approval; and (iii) commit any waste or nuisance upon the Property. The Partners and the Partnership will, maintain and keep the Property in neat condition and will observe all laws, ordinances, regulations, and restrictions affecting the Property and its use, until the Close of Escrow. (g) Except as otherwise disclosed on the Environmental Disclosures attached hereto as Exhibit "W", the Phase I report referenced in Section 3.1(e) and the Asbestos Surveys and Reports a listing of which is attached hereto as Exhibit "X", neither the Partnership nor the Partners have received any written notice that the Partnership is not in compliance with the Federal Resources Conservation and Recovery Act ("RCRA"), the Federal Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. (S)136 et. seq.; the -- --- Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.); the Toxic -- --- Substance Control Act ("TSCA"), 15 U.S.C. (S)2601 et. seq.; the Atomic Energy -- --- Act, 42 U.S.C. (S)2011 et. seq.; the Clean Water Act (the "Clean Water Act"), 33 -- --- U.S.C. (S)1251 et. seq.; and the Clean Air Act (the "Clean Air Act"), 42 U.S.C. -- --- (S)7401 et seq. and all comparable federal and/or state laws, implementing -- --- federal and/or state regulations and local ordinances (hereafter "Applicable Environmental Laws"). The Partners hereby disclose and Buyer acknowledges that some components of the Improvements contain asbestos material and may contain lead in paint products used prior to 1978. Neither the Partners nor the Partnership have received any written notice from any governmental unit or other person that (i) the Partnership or the Property is not in compliance with any Applicable Environmental Laws, (ii) there are administrative, regulatory or judicial proceedings pending or alleging any violation of any Applicable Environmental Laws, or (iii) there is liability or claims under any applicable Environmental Laws. Except as set forth on Exhibit "W", the Partnership has not installed any underground or above ground storage tanks on, under or about the Property and, to the 29 Partners' knowledge, no such tanks are located on, under or about the Property. (h) Except as disclosed on the schedule of pending litigation attached hereto as Exhibit "Y" ("Pending Litigation"), neither the Partners nor the Partnership have received any written notice of any threatened litigation and to the best of the Partners' knowledge, there is no litigation pending not covered by public liability insurance that might adversely affect the Partnership, the Partnership Interests, the value or the use or operation of the Property for its intended purpose or the ability of the Partners to perform their obligations under this Agreement. The Partners shall notify Buyer promptly of any such litigation of which the Partners become aware. (i) The Partners are not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. (j) Neither the Partners nor the Partnership have filed or been the subject of any filing of a petition under the Federal Bankruptcy Law or any federal or state insolvency laws or laws for composition of indebtedness or for the reorganization of debtors. (k) The execution, delivery and performance of this Agreement by the Partners has been duly and validly authorized. This Agreement has been, and the Partners' Closing Documents will be, duly executed and delivered by the Partners. This Agreement constitutes, and when so executed and delivered the Partners' Closing Documents will constitute, the legal, valid and binding obligations of the Partners, enforceable against the Partners in accordance with their respective terms. (l) None of the execution, delivery or performance of this Agreement by the Partners does or will, with or without the giving of notice, lapse of time or both, violate, conflict with, constitute a default, result in a loss of rights, acceleration of payments due or creation of any Lien upon the Property or require the approval or waiver of or filing with any person or entity (including without limitation any Authorities) under (i) the organizational documents of the Partnership or the Partners or, any agreement, instrument or other document to which the Partnership or the Partners is a party or by which it is bound or (ii) any judgment, decree, order, statute, injunction, rule, regulation or the like of any Authorities applicable to the Partnership or the Partners. (m) Except for easement agreements listed on the Title Commitment, the REA constitutes the only reciprocal easement agreements or operating agreements encumbering the Property. A true and complete copy of the REA has heretofore 30 been furnished to Buyer, together with each written modification thereof and supplement thereto. The Partners have not made any oral promises or agreements amending or modifying the REA with any REA Party. (i) The REA is valid and in full force and effect. As of the Closing Date, no interest in the REA will be assigned to any party other than Buyer, or otherwise pledged or encumbered in any way. (ii) Except for a $590.30 dispute with Marshall, Fields regarding 1995 REA expenses and the matters relating to the I. Magnin/GCC Adjustment, none of the parties to the REA has made any written claim which has been received by the Partners or the Partnership (A) that the Partnership has defaulted in performing any of its obligations under the REA which has not heretofore been cured, (B) that any condition exists which with the passage of time or giving of notice, or both, would constitute any such default, (C) that such REA party is entitled to any reduction in, refund of, or counterclaim or offset against, or is otherwise disputing, any Additional Rent or other charges paid, payable or to become payable by such REA party, (D) that such REA party is entitled to cancel its REA or to be relieved of its operating covenants thereunder, or (E) that there is a violation of any of the covenants, conditions or restrictions contained in such REA. As of the date hereof, Marshall, Fields has reserved the right to audit REA expenses for 1996 and 1997 and Lord & Taylor will commence its audit of REA expenses for 1995 and 1996 on April 13, 1998. (n) To the best of the Partners' knowledge, Exhibit "F" is a true and complete list of all Service Contracts, including all modifications thereof. There has been no material default (without giving effect to any notice and cure rights) by the Partnership under any Service Contract or any written claim received by the Partners or the Partnership of any such default by any party thereto, which has not heretofore been cured except as set forth on Exhibit "F". A true and complete copy of each Service Contract, together with any amendments or supplements thereto, has been delivered or made available to Buyer by Wilder & Company. (o) Neither the Partnership nor the Partners have received any written notice of violation of any permit or license maintained by the Partnership from any Authorities that has not been cured or otherwise resolved to the satisfaction of such Authority. (p) The Partnership has subsidized the marketing and promotional fund for the Property; however, the Partnership (as Landlord) is not under any obligation to make contributions or otherwise provide assistance to any promotional association or 31 promotional fund. The promotional and marketing fund established with respect to the Property (the "Promotional Fund") is collected from the Tenants by the Partnership and is held by the Partnership. (q) Copies of current real estate tax bills with respect to the Property, other than tax bills sent to Tenants who have the obligation to pay such taxes to the collecting authority, have been delivered or made available to Buyer. Tax refund proceedings relating to the Property are currently pending through retainer agreements with Crane & Norcross. (r) No approval, consent, waiver, filing, registration or qualification with any third party, including but not limited to, any governmental bodies, agencies or instrumentalities is required to be made, obtained or given for the execution, delivery and performance of this Agreement or any of the Partners' Closing Documents by the Partners. (s) To the Partners' knowledge, there are no lease brokerage agreements, leasing commission agreements or other agreements providing for payments of any amounts for leasing activities or procuring tenants with respect to the Property other than as disclosed in the Leases, the Contracts or in Exhibit "W". (t) The Partners have delivered to Buyer true and complete copies of the balance sheet and profit and loss statement of the Partnership for the period ended December 31, 1997, which are true and complete, and were prepared in accordance with generally accepted accounting principles consistently followed throughout the periods indicated. Except as and to the extent reflected or reserved against on such balance sheet, the Partnership as of such date had no liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, and whether due or to become due. (u) The Partnership shall pay all federal and state income taxes payable with respect to their share of the income of the Partnership accrued through May 8, 1998. (v) Exhibit "A" is a true, correct and complete copy of the Partnership Agreement and all amendments thereto. (w) Title to Partnership Interest; Liens and Encumbrances. The ----------------------------------------------------- Partners each are the legal and beneficial owner of their respective Partnership Interest free and clear of all mortgages, liens, options, claims, encumbrances and other security arrangements and restrictions of any kind. Neither of the Partners have granted any outstanding rights to purchase its respective Partnership Interest and neither of the Partners is a party to any agreement, arrangement or understanding restricting 32 or otherwise relating to the transfer or voting of its respective Partnership Interests. (x) The term "knowledge", when used in this Agreement, shall mean only such information as has actually been communicated to, or learned by, the employees or officers of the Partners (without imputing to those employees or officers, or to that entity, the knowledge of any other person or entity). In furtherance to the sale of the Property, the Partners obtained and are familiar with the due diligence materials, including the studies and reports referenced therein, described in Exhibits "W" and "X". (y) The representations and warranties set forth in this Article shall be continuing and shall be true and correct on and as of the date of Close of Escrow with the same force and effect as if made at that time, and all such representations and warranties shall survive the Close of Escrow for one (1) year. If, prior to the Closing, the Partners become aware of any fact or circumstance that would materially change a representation or warranty of the Partners in this Agreement, then the Partners shall promptly give written notice of such changed fact or circumstance to Buyer. If, prior to Closing, upon the Partners' notice or otherwise, Buyer becomes aware of: any material failure of any condition to the obligations of Buyer to close the transactions contemplated in this Agreement; the untruth or inaccuracy of, or facts or circumstances which would change materially, any representation or warranty of the Partners in this Agreement; or the failure of the Partners to comply with any provision of this Agreement; then Buyer shall have the sole option of: (i) waiving such condition, breach of warranty, or breach, and proceeding to Close the transactions contemplated in this Agreement; (ii) subject to the Partners' agreement and concurrence agreeing with the Partners to adjust the terms of this Agreement to compensate Buyer for such change; or (iii) terminating this Agreement and receiving the return of the Deposit as Buyer's sole remedy prior to Closing. 7.2 Buyer's Warranties. Buyer hereby represents, warrants and ------------------ covenants as follows: (a) NCI and NCII are each limited liability companies duly organized, validly existing and in good standing under the law of the State of Delaware, and to the best of Buyer's knowledge, have made all filings and recordings necessary to exist, operate and do business under all presently applicable Governmental Regulations and have the full and unrestricted power and authority, corporate or otherwise, to own, operate and lease their respective properties, to carry on their business as currently conducted and to execute and deliver this Agreement and any other instruments to be delivered pursuant hereto, and to 33 perform all of its obligations under this Agreement and any other instruments to be delivered pursuant hereto. (b) The execution, delivery and performance by Buyer of this Agreement and all other instruments required to be delivered pursuant hereto, the fulfillment of and compliance with the respective terms and provisions hereof and thereof, and the due consummation of the transaction contemplated hereby, have been duly and validly authorized, and do not: (1) require any consent or approval of any partner, lender, shareholder, creditor, investor, judicial or administrative body, Authority or other party which has not already been obtained; or (2) conflict with, or result in any breach of, or constitute a default under, any presently applicable Governmental Regulation, bond, note, or other evidence of indebtedness, or under any contract, indenture, mortgage, deed of trust, loan, lease, partnership agreement, operating agreement, articles of incorporation, bylaws, shareholder agreement or any other agreement or instrument to which Buyer is a party or by which Buyer or any of Buyer's properties may be bound or affected. (c) Buyer's representations and warranties contained herein are and will be true and correct as of the Close of Escrow. (d) Buyer represents that an affiliate of Buyer acquired an interest in substantially all of the regional mall assets of the original developer and former manager of the Property, Homart Development Co. ("Homart"), in 1995. Buyer further acknowledges that some of the Homart employees who were involved with the management of the Property in 1995 are currently employees of affiliates of a member of Buyer and, as of the termination date of Homart's management of the Property, had some knowledge and experience with the Property and its operation prior to Buyer undertaking its due diligence of the Property. 8. ASSIGNMENT. ---------- 8.1 No Other Assignment. Neither Buyer nor the Partners shall assign ------------------- all or any part of this Agreement or any of their rights or obligations hereunder, or any interest herein, whether by operation of law or otherwise, without the prior written consent of the Partners or Buyer, as applicable, and any such assignment contrary to the terms hereof shall be null and void and of no force or effect. Except as the other party may otherwise agree in writing, in no event shall any assignment by Buyer or the Partners of all or any part of this Agreement or any of their rights or obligations under this Agreement, whether before or after the Closing, release Buyer or the Partners, as the case may be, from any of their respective liabilities or obligations hereunder. 34 9. BROKERAGE COMMISSIONS. --------------------- 9.1 Mutual Representations. Each party represents to the other that ---------------------- no brokers except Morgan Stanley Realty have been involved in this transaction. The Partners shall pay any commissions owed to Morgan Stanley Realty on or before the Close of Escrow. It is agreed that if any claims for brokerage commissions or finder's fees or like payment arise out of or in connection with the transaction provided herein, and in the event any claim is made, all such claims shall be handled and paid by the party whose actions or alleged commitment form the basis of such claim. It is further agreed that each party whose actions or alleged commitment form the basis of a claim agrees to indemnify and hold harmless the other party from and against any and all claims or demands with respect to the brokerage fees or agent's commissions or other compensation asserted by any person, firm, or corporation in connection with this Agreement or the transactions contemplated hereby. 10. NOTICES. ------- Any notices given under this Agreement shall be in writing and shall be served either personally or delivered by first class or express U.S. mail with postage prepaid, return receipt requested pursuant to registered or certified mail, or by nationally recognized overnight commercial courier service with charges prepaid. Notices may also effectively be given by transmittal over electronic transmitting devices if the party to whom the notice is being sent has a receiving device in its office, and provided a complete copy of the notice shall also be served either personally or in the same manner as required for a mailed notice. Notices shall be deemed received at the earlier of actual receipt or one (1) day following deposit in U.S. mail with postage prepaid or with a nationally recognized overnight commercial courier service with charges prepaid. Notices shall be directed as follows: If to the Partners: Grosvenor International (Westcoast Estates) Limited 1701 Pennsylvania Avenue, N.W. Suite 1050 Washington, D.C. 20006 Attention: John R. Flavin Fax No: (202) 785-2632 Telephone No: (202) 293-1235 35 Copy to P.I.C. Greene Radovsky Maloney & Share LLP Investments: Four Embarcadero Center, Suite 4000 San Francisco, CA 94111 Attention: Graham Maloney Fax No: (415) 777-4961 Telephone No: (415) 981-1400 If to Buyer: c/o General Growth Properties, Inc. 55 West Monroe, Suite 3100 Chicago, IL 60603-5060 Attention: Joel Bayer Fax No: (312) 551-5475 Telephone No.: (312) 551-5015 Copy to: Reuben C. Warshawsky Neal Gerber & Eisenberg Two North LaSalle Street Chicago, IL 60602 Fax No: (312) 269-1747 Telephone No.: (312) 269-8000 If to Escrow Near North National Title Insurance Holder: Corporation 222 N. LaSalle Street Chicago, IL 60601 Attention: Cindy O'Donohue Fax No.: (312) 419-0569 Telephone No: (312) 419-3900 11. CONDEMNATION AND DESTRUCTION. ---------------------------- 11.1 Eminent Domain or Taking. If, prior to the Close of Escrow, any ------------------------ material portion of the Property (as defined in Section 11.2 below) is taken or if the access to the Project is reduced or restricted, by eminent domain or otherwise (or is the subject of a pending, threatened or contemplated taking which has not been consummated), Buyer shall have the option, in Buyer's sole and absolute discretion, to terminate this Agreement upon written notice to the Partners given not later than ten (10) business days after Buyer is notified of such taking (and if necessary, the Closing Date shall be extended by the number of days necessary to provide Buyer such ten (10) Business Day period). If Buyer elects to terminate this Agreement, neither party shall have any further rights or obligations hereunder, except the payment of title and escrow cancellation costs, which shall be borne equally by the Partners and Buyer. If Buyer does not elect to terminate this Agreement, all awards for the taking by eminent domain which accrue to the Partners shall be paid to Buyer and the parties shall proceed to the Closing pursuant to the terms hereof, without modification of the terms or Purchase Price of this Agreement, provided that Buyer shall accept the Property "AS IS" and "WITH ALL FAULTS" insofar only as such 36 condemnation is concerned, and all of the Partners' covenants, representations and warranties hereunder shall be deemed modified accordingly. Unless or until this Agreement is terminated, the Partners shall not take any action with respect to any eminent domain proceeding without the prior written consent of Buyer which consent shall not be unreasonably withheld or delayed. 11.2 Fire or Casualty. Prior to the Closing, and notwithstanding the ---------------- pendency of this Agreement, the entire risk of loss or damage by fire or other casualty shall be borne as set forth in this Section 11.2. If, prior to the Closing, any part of the Property is damaged or destroyed by earthquake, flood, landslide, fire or other casualty, the Partners shall immediately notify Buyer of such fact. If such damage or destruction is "material", either Buyer or the Partners shall have the option to terminate this Agreement upon written notice to the other party given not later than thirty (30) days after receipt of the Partners' notice of such damage or destruction (and, if necessary, the Closing Date shall be extended by the number of days necessary to provide Buyer such thirty (30) day period). For purposes hereof, "material" shall be deemed to be any uninsured damage or destruction to the Property in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), and any insured damage or destruction to the Property where the cost of repair or replacement is estimated to be Five Hundred Thousand Dollars ($500,000.00) or more. If either Buyer or the Partners elects to terminate this Agreement, neither party shall have any further rights or obligations hereunder except the payment of title and escrow cancellation charges which shall be borne equally by Buyer and the Partners. If neither Buyer nor the Partners elects to terminate this Agreement, or if the damage or destruction is not material, this Agreement shall not terminate but the Partners shall be entitled to the proceeds of any insurance maintained by or on behalf of the Partners and the Partners shall repair or restore the damage or destruction to the same condition as existed prior to the casualty as soon as reasonably practical but in no event more than 60 days after the casualty, and upon the completion of such repair or restoration the parties shall proceed to the Closing pursuant to the terms hereof without any adjustment of the Purchase Price. 12. DEFINED TERMS. ------------- 12.1 Definitions. The following terms shall have the respective ----------- meanings assigned to them: (a) Additional Rental - means such sums and charges payable by the ----------------- Tenant's pursuant to the Leases (other than Minimum Rent and Percentage Rent) including without limitation, expense reimbursement; operating cost pass- throughs; utility charges; common area maintenance charges; charges payable 37 under the REA; administrative charges, real estate and privilege taxes; Roof Repair Fund and insurance cost reimbursements. (b) Affiliate - means with respect to any specific entity or natural --------- person, any firm, corporation, partnership, association, trust or other entity which is controlled by, under the common control of or subject to the control of such specific entity or natural person. For purposes hereof, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such entity, or the power to veto major policy decisions of any such entity, whether through the ownership of voting securities, by contract or otherwise. (c) Authorities - means all federal, state, county and local ----------- governmental and quasi-governmental bodies, boards, commissions, agencies and courts having jurisdiction over the Property including, without limitation, the Village of Northbrook, the County of Cook, and the State of Illinois. (d) Business Day - means the days (other than Saturday or Sunday) on ------------ which federally insured national banking associations are required to be open for business in Cook County, Illinois. (e) Improvements - mean, in addition to its definition in the Recital ------------ of Facts, all buildings, fixtures, structures, streets, roadways, sidewalks, walkways, parking areas, storm drainage facilities, utility systems (including sanitary sewer, natural gas, domestic and fire protection water, electrical, telephone and cable television systems) and any other facilities or improvements situated on the Real Property or constructed as part of the Improvements. The term "Improvements" also means all rights, titles and interests appurtenant to the Real Property, including rights and obligations under any REA and rights to all streets, alleys, easements and rights of way, in, on, across, in front of and abutting or adjoining the Real Property. (f) Leases - means all leases, licenses, guaranty agreements, rental ------ agreements or occupancy agreements and all amendments, modifications and supplements thereto, executed by either (i) unilaterally by the Partners; or (ii) the Partners and Tenant; or (iii) a third party guarantor of a Lease, relative to occupying space within the Improvements (together with all rents, issues and profits thereunder). (g) Minimum Rent - means all base rent, minimum rent or basic rent ------------ payable in fixed installments for stated periods by Tenants under the Leases. 38 (h) Official Records - means the Real Property Records of Cook ---------------- County, Illinois. (i) Percentage Rent - means rentals which are expressed as a fixed --------------- percentage or percentages of the gross receipts or gross sales in excess of the stated "break point" of the Tenants under the Leases. (j) Permitted Encumbrances - means and shall include matters affecting ---------------------- the Property set forth in the Title Commitment and approved, or deemed approved, by Buyer pursuant to Section 2.3(f). (k) Personal Property - means, in addition to its definitions in the ----------------- Recitals of Fact, all fixtures, food court furniture and fixtures, equipment, appliances, carpet, drapes, maintenance equipment and tools, all other machinery, landscaping, planting and foliage and furniture and personal property of every kind or character owned by the Partnership and located in or on or used in connection with the Real Property or the Improvements or operations thereon, including the personal property described on the Personal Property Inventory. The term "Personal Property" shall be deemed to exclude all property owned by the Tenants and by the Anchors. (l) Personal Property Inventory - means the list attached as Exhibit --------------------------- "E". (m) Proration Date - means 11:59 p.m. on May 8, 1998. -------------- (n) Real Property - means, in addition to the definition in the ------------- Recital of Facts, the real property described in Exhibit "B" together with all and singular the rights pertaining to such real property, including, without limitation, any right, title and interest of the Partners, if any, in and to all adjacent streets, roads, alleys, underground tunnels, easements, licenses, and rights-of-way, whether such property is owned or claimed by deed, limitations, or otherwise, and whether such real property is located inside or outside the metes and bounds description contained in Exhibit "B", located within the Survey. (o) Rentals - means, collectively, all Minimum Rent, Additional ------- Rentals, Percentage Rent and other sums and charges payable by the Tenants under the Lease. Rentals shall not include Security Deposits unless and until such Security Deposits are forfeited. (p) Security Deposits - means all security deposits, Rentals prepaid ----------------- for a period which is more than thirty (30) days in advance, access card or key deposits, cleaning fees 39 and other deposits (plus any interest accrued thereon) paid by Tenants to the Partners pursuant to the Leases. (q) Title Company: ------------- Ticor Title Insurance Company c/o Near North National Title Corporation 222 N. LaSalle Street Chicago, IL 60601 (r) Title Underwriters - cumulatively the following title insurance ------------------ underwriters with their indicated amounts of title insurance coverages:
UNDERWRITER AMOUNT OF COVERAGE ----------- ------------------ Ticor Title Insurance Company $60,000,000 (primary liability) Chicago Title Insurance $60,000,000 (reinsurance) Company Security Union Title Insurance $26,000,000 (reinsurance) Company
12.2 Use of Defined Terms. The definitions set forth in Section 12.1 -------------------- are intended to supplement and be consistent with the defined terms set forth in the Recitals of Fact and in the other Sections hereof, but in the event of any conflict between defined terms in the Recitals of Fact or the other Sections and the definitions in Section 12.1, the definitions in Section 12.1 shall prevail. Any defined terms used in the plural shall refer to all members of the relevant class and any defined terms used in the singular shall refer to any number of members of the relevant class. Any reference to this Agreement or any Exhibits hereto and any other instruments, documents and agreements shall include this Agreement, Exhibits and other instruments, documents and agreements as originally executed or existing and as the same may from time to time be supplemented, modified or amended. 12.3 Accounting Terms. All accounting terms not specifically defined ---------------- in this Agreement shall be construed in conformity with, and all financial data required by this Agreement to be submitted shall, unless otherwise expressly stated, be prepared in conformity with generally accepted accounting principles, applied on a consistent basis. 40 13. MISCELLANEOUS. ------------- 13.1 Additional Actions and Documents. Each of the parties hereto -------------------------------- hereby covenants to take or cause to be taken such further actions, to execute, deliver, and file or cause to be executed, delivered, and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably required in order to effectuate fully the purposes, terms, and conditions of this Agreement, whether before, at, or after the Closing. 13.2 Limitations on Benefits. It is the explicit intention of the ----------------------- parties hereto that no person or entity other than the parties hereto and their permitted successors and assigns is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns as permitted hereunder. 13.3 Cumulative Remedies. Prior to or following the Closing, each ------------------- and every one of the rights, benefits and remedies provided to Buyer by this Agreement, or any instrument or documents executed pursuant to this Agreement, are cumulative, and shall not be exclusive of any other of said rights, remedies and benefits allowed by law or equity to Buyer including the right to bring an action for specific performance. From and after the Closing, each and every of the rights, benefits and remedies provided to the Partners by this Agreement, or any other documents or agreements delivered at, or in connection with, the Closing shall be cumulative and shall not be exclusive of any other of said rights, remedies and benefits allowed under this Agreement or such other documents or agreements; provided, however, it being expressly agreed that the Partners' sole remedy in the event of a breach of this Agreement by Buyer shall be to receive the Deposit as liquidated damages and not as a penalty. 13.4 Pronouns; Time. All pronouns and any variations thereof shall -------------- be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require. If any period or time set forth in this Agreement ends or occurs on a day which is not a Business Day, then such period or time shall instead end on the next immediately following Business Day. 13.5 Exhibits. The Exhibits and Schedules enumerated herein are -------- attached hereto. When attached to this Agreement, the Exhibits and Schedules are hereby made a part of this Agreement as fully as if set forth in the text hereof. 41 13.6 Headings. The title and headings of the various Sections hereof -------- are intended solely for means of reference and are not intended for any purpose whatsoever to modify, explain or place any construction on any of the provisions of this Agreement. 13.7 Invalidity. If any of the provisions of this Agreement or the ---------- application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement by the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable shall not be effected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 13.8 Attorneys' Fees. In the event of any litigation between the --------------- parties hereto to enforce any of the provisions of this Agreement or any right of either party hereto, the unsuccessful party to such litigation agrees to pay the successful party all costs and expenses, including reasonable attorneys' fees, incurred hereby by the successful party, all of which may be included in and as part of the judgment rendered in such litigations. 13.9 Entire Agreement. The terms of this Agreement are intended by ---------------- the parties as a final expression of their agreement with respect to such terms as are included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement constitutes the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial proceedings, if any, involving this Agreement. No provision of this Agreement may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. 13.10 Successors. All the terms, covenants and conditions hereof ---------- shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. 13.11 Counterparts. This Agreement may be executed in several ------------ counterparts each of which shall be an original, but all of such counterparts shall constitute one such Agreement. 13.12 Confidentiality. Until Closing, Buyer and its partners, --------------- attorneys, agents, employees and consultants will treat the information disclosed to it by the Partners and marked as confidential information, giving it the same care as Buyer's own 42 confidential information, and make no use of any such confidential information not independently known to Buyer except in connection with the transactions contemplated hereby. In the event of any termination of this Agreement in accordance with its terms, Buyer shall promptly return copies of all such confidential information to the Partners. In addition, the parties shall agree to any press release to be issued regarding this transaction, and except as required by applicable law, neither party shall issue any such release or make any statement to the media without the other party's consent, which shall not be unreasonably withheld. 13.13 Force Majeure. The time for performance of either Buyer's or ------------- the Partners' obligations hereunder shall be extended for a period equal to any delays in the performance of that party's obligations caused by acts of God, labor disputes, strikes, weather conditions, riots, storms, delays or unavailability of supplies, breach by the Partners' contractor or subcontractors, or any other causes beyond Buyer's or the Partners' reasonable control, as the case may be (collectively, "Force Majeure Events"); provided, however, lack of funds or willful acts of a party shall not constitute a Force Majeure Event hereunder. Further, it shall be a condition to any extension of the time for a party's performance hereunder that such party notify the other party within five (5) Business Days following the occurrence of the Force Majeure Event. In the event any such delays shall cause or are reasonably likely to cause the Closing Date to extend six (6) months beyond October 31, 1998, then either party shall have the right to terminate this Agreement. 13.14 Time of the Essence. Time is of the essence in this Agreement. ------------------- 13.15 Indemnification by the Partners. From and after the Closing, ------------------------------- the Partners shall indemnify, defend and hold harmless Buyer and its respective Affiliates, members, partners, employees, representatives and agents, and their respective successors and assigns (collectively, the "Indemnified Buyer Persons") from and against any and all claims, actions, suits, demands, losses, damages, liabilities, obligations, judgments, settlements, awards, penalties, costs or expenses, including, without limitation, reasonable attorneys' fees and expenses ("Losses") incurred or suffered by any Indemnified Buyer Person that results from, relates to or arises out of (a) claims (excluding, however, claims that are actually known to Buyer prior to the Close of Escrow) made by any Tenant or Anchor under the Leases, any Party to the REA under the REA, or by any Party under those Service Contracts assigned to Buyer, that relate to any actions or events first occurring, or obligations first accruing, prior to the Closing Date, (b) any event, occurrence or accident at any time prior to the Closing Date relating to the 43 Property or the Partnership excluding events, occurrences or accidents not covered by insurance and actually known to Buyer, or (c) the Pending Claims as are more particularly described on Exhibit "X" attached hereto. This Section 13.15 shall survive the Close of Escrow. Claims against the Partnership or the Property arising from CAM charges, Rentals, any construction contract or service agreement or operations expenses shall be borne by the Partners regardless of any knowledge of Buyer. 13.16 Breach of Contract. Notwithstanding anything to the contrary ------------------ contained in this Agreement, in the event of any breach or inaccuracy of any representation or warranty made by the Partners in this Agreement or in the Partners' Closing Documents, or in the event of any breach or non-fulfillment by the Partners of any of the covenants or agreements of the Partners contained in this Agreement or the Partners' Closing Documents, Buyer shall have the right, in addition to any other rights or remedies provided in this Agreement, to bring an action for breach of contract and for damages against the Partners. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date set forth below and is effective as of the latter. THE PARTNERS: ------------ GROSVENOR INTERNATIONAL (WESTCOAST ESTATES) LIMITED, a California corporation By: ______________________________ Its: ______________________________ By: ______________________________ Its: ______________________________ P.I.C. INVESTMENTS, a Nevada corporation By: ______________________________ Its: ______________________________ By: ______________________________ Its: ______________________________ 44 BUYER: ----- NORTHBROOK COURT I L.L.C., a Delaware limited liability company By: NORTHBROOK COURT, INC., a Delaware corporation, a member By: _____________________________ Joel Bayer, Vice President By: GGP LIMITED PARTNERSHIP, a Delaware limited partnership, a member By: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation, its general partner By: ___________________________ Joel Bayer Vice President-Acquisitions NORTHBROOK COURT II L.L.C., a Delaware limited liability company By: NORTHBROOK COURT, INC., a Delaware corporation, a member By: _____________________________ Joel Bayer, Vice President By: GGP LIMITED PARTNERSHIP, a Delaware limited partnership, a member By: GENERAL GROWTH PROPERTIES, INC., a Delaware corporation, its general partner By: ___________________________ Joel Bayer Vice President-Acquisitions 45 PARTNERSHIP AGREEMENT --------------------- EXHIBIT "A" REAL PROPERTY ------------- EXHIBIT "B" LEGAL DESCRIPTION OF OPERATING AGREEMENT ---------------------------------------- NORTHBROOK COURT ---------------- The Operating Agreement by and among Carter Hawley Hale Stores, Inc. ("Neiman"), Sears, Roebuck and Co. ("Sears"), Adcor Realty Corporation ("Lord & Taylor") and Homart, was recorded June 24, 1975 as Document No. 23,126,333, re-recorded September 12, 1975 as Document No. 23,219,179, re-recorded January 9, 1976 as Document No. 23,349,231 and filed November 18, 1975 as Document No. LR-2,841,284 and was amended by "First Amendment to Operating Agreement" recorded March 4, 1976 as Document No. 23,406,570 and filed April 2, 1976 as Document No. LR- 2,882,028 which amendment was corrected by an instrument entitled "Correction to First Amendment to Operating Agreement" recorded May 7, 1976 as Document No. 23,477,882 and re-recorded May 20, 1976 as Document No. 23,492,076 and filed May 20, 1976 as Document No. LR-2,870,558 and was further amended by "Second Amendment to Operating Agreement" recorded August 30, 1978 as Document No. 24,607,414 and filed August 30, 1978 as Document No. LR-3,043,161, by and among Neiman, Sears, Lord & Taylor, Federated Department Stores, Inc. (I. Magnin) and Developer and was supplemented by the "Supplement to Second Amendment" recorded August 30, 1978 as Document No. 24,607,415 and filed August 30, 1978 as Document No. LR-3,043,162 and was further amended by "Third Amendment to Operating Agreement" recorded January 26, 1984 as Document No. 26,945,586 and filed January 25, 1984 as Document No. LR-3,352,289, by and among Neiman, J. C. Penney Properties, Inc. ("Penney"), I. Magnin, Lord & Taylor and Homart and as further amended by a letter agreement dated June 6, 1988, and by a letter agreement dated May 2, 1991 regarding Magnin Properties lease termination; and as amended by "Fourth Amendment to Operating Agreement" dated as of February 1, 1994, and recorded October 6, 1995 as document 95681401 by and among Neiman, Lord & Taylor, Field and Developer. EXHIBIT "C" RENT SCHEDULE ------------- EXHIBIT "D" INVENTORY OF PERSONAL PROPERTY ------------------------------ EXHIBIT "E" SERVICE CONTRACTS ----------------- 1. Wilder Company Management Agreement 2. Contracts relating to 1998 Capital Expenditures Contracts: a. b. c. d. 3. Norcress & Crane Retainer Agreements EXHIBIT "F" PIC PARTNERSHIP ASSIGNMENT -------------------------- EXHIBIT "G" GROSVENOR PARTNERSHIP ASSIGNMENT -------------------------------- EXHIBIT "H" FORM OF TENANT ESTOPPEL CERTIFICATE ----------------------------------- TO: Westcoast Estates ("Landlord") c/o Grosvenor International (Atlantic) Limited 1701 Pennsylvania Avenue, N.W. Suite 1050 Washington, D.C. 20006 Attn: John R. Flavin and Northbrook Court I L.L.C. Northbrook Court II L.L.C. (jointly "Purchaser") c/o General Growth Properties, Inc. 55 West Monroe, Suite 3100 Chicago, IL 60603-5060 Attn: Joel Bayer Re: ______________________________________ (Tenant) d/b/a ____________________ Northbrook, Illinois ("Real Property") Gentlemen: The undersigned tenant ("Tenant") certifies to Landlord and Purchaser that Tenant and Landlord entered into a written Lease dated ________________ (the "Lease") in which Landlord leased to Tenant and Tenant leased from Landlord premises located in the Northbrook Court Shopping center commonly known as __________________________ (the "Premises"): 1. A true and complete copy of the Lease and all amendments thereto is attached hereto as Exhibit "A". The Lease has not been supplemented, amended, modified, extended, renewed, assigned or superseded since its original execution except as follows:. ___________________________________________________ ___________________________________________________ ___________________________________________________ 2. The Lease is a valid lease, duly authorized and executed by Tenant and is in full force and effect. Tenant is in full and complete possession of the Premises and has commenced occupancy and use of the Premises, and Tenant's obligation to pay rent has commenced and that Tenant is paying monthly installments of Annual Fixed Minimum Rent of $_____________. EXHIBIT "I" 3. To the best of Tenant's knowledge, there are no defaults on the part of Landlord under the Lease and there are no breaches of the Lease by Landlord which if not cured by the Landlord in a timely manner will constitute a default by Landlord. 4. There are no provisions for, and Tenant has no rights with respect to, renewal or extension of the initial term of the Lease, terminating the term, leasing additional space, reducing existing space or purchasing any portion of the Real Property, except as expressly set forth in the Lease attached hereto. 5. No litigation or arbitration or other proceeding presently exists between Landlord and Tenant, over the Lease or the performance of the terms thereto, except as follows: ___________________________________________________ ___________________________________________________ ___________________________________________________ 6. Landlord has completed all tenant improvement obligations and conditions under the Lease to be satisfied and performed to date by Landlord and Landlord has complied with and completed all construction and provided all parking required by the Lease. Landlord has no current obligations to pay for any tenant improvements or to provide any other inducements for the benefit of Tenant, except as follows: ___________________________________________________ ___________________________________________________ ___________________________________________________ 7. No rental or other payment has been made in connection with the Lease more than 30 days in advance, except rental for the current month there is no "free rent" or other concession under the remaining term of the Lease including, without limitation, payment by Landlord for tenant improvements or moving costs, and the rent has been paid to and including ________________, 1998. 8. A security deposit is being held by Landlord in the amount of $___________. 9. Tenant has received no notice of a prior sale, transfer, assignment, hypothecation or pledge of the Lease. 10. To the best of Tenant's knowledge, Tenant does not use, nor has Tenant disposed of, hazardous materials in violation of environmental laws on the Real Property or the Premises. 11. There are no bankruptcy actions pending against Tenant. 2 12. Landlord has not rebated, reduced or waived any amounts due from Tenant under the Lease relating to the period from and after the date hereof. Landlord has not provided financing for or made loans or advances to Tenant except for ________________. 13. Tenant has not received any notice from any governmental authority of any present violation of any federal, state, county or municipal laws, regulations, ordinances, orders or directives relating to the Real Property or the Premises. 14. This certification is made with the understanding that Purchaser, Landlord and a lender (the "Lender") making a loan to Purchaser secured by the Real Property are relying upon the representations herein made in its determination to purchase the Real Property or make the Loan, as the case may be, and that the undersigned and the person(s) executing this certification on behalf of the undersigned have the power and authority to render this certification. IN WITNESS WHEREOF, Tenant has duly executed this Estoppel Certificate this ____ day of _______________, 1998. [TENANT NAME] By:_____________________________ Name:______________________ Title:_____________________ 3 FORM OF THE PARTNERS' ESTOPPEL CERTIFICATE ------------------------------------------ ______________________________ ("Purchaser") ______________________________ ______________________________ ______________________________ Re: Lease Between ____________________________, as landlord ("Landlord"), and ____________________________ as tenant ("Tenant") dated _______________________. Gentlemen: Grosvenor International (Westcoast Estates) Limited and P.I.C. Investments (jointly, the "Partners") hereby certificate as follows to and for the benefit of the above-named Purchaser, its successors and assigns, and any lender providing financing to Buyer which is secured by a lien on the Property of which the Premises are a part. 1. A true and complete copy of the Lease and all amendments thereto is attached hereto as Exhibit "A". The Lease has not been supplemented, amended, modified, extended, renewed, assigned or superseded since its original execution, and there do not exist any other agreements concerning the space rented under the Lease, whether oral or written, between Landlord and Tenant, except as follows: ____________________________________________________ ____________________________________________________ ____________________________________________________ 2. The Lease is duly authorized and executed by Landlord and is in full force and effect. Tenant is in possession of the Premises and has commenced occupancy and use of the Premises, and Tenant's obligation to pay rent has commenced and that Tenant is paying monthly installments of Annual Fixed Minimum Rent of $____________________. 3. Tenant has not notified Landlord that Landlord is in default under the Lease and to the best of Landlord's knowledge there are no events that have occurred that, with the giving of notice or passage of time or both, would result in a default by Landlord thereunder. Tenant has not notified Landlord of any claim against Landlord under the Lease that could be set off against accruing rentals or could be a defense against enforcement of the Lease by Landlord. EXHIBIT "J" 4. No litigation or arbitration presently exists between Landlord and Tenant, over the Lease or the performance of the terms thereto, except as follows: ____________________________________________________ ____________________________________________________ ____________________________________________________ 5. To the best of the Partners' knowledge, all work required to be performed by the Landlord under any of the Lease Documents has been completed in accordance with the terms of the applicable Lease Documents, all allowances and payments owing by the Landlord to the Tenant for any tenant improvement work or for any other concessions or inducements payable by Landlord to Tenant in respect of the Lease have been paid to or as directed by the Tenant, and the Landlord has no further obligations under the Lease to make any alterations or improvements to the Premises except ____________________________. (If none, write "none".) All brokerage and finders fees and leasing commissions payable by Landlord for or with respect to the Lease have been paid in full. 6. No rental or other payment has been made in connection with the Lease more than 30 days in advance, except rental for the current month, and there is no "free rent" except as follows: ____________________ ________________________________________________________________. 7. A security deposit is being held by Landlord in the sum of $______________. 8. Landlord has not sold, transferred, assigned, hypothecated or pledged the Lease or the rents to be paid under the terms of the Lease. 9. To the best of Landlord's knowledge, Tenant does not use, nor has Tenant disposed of, hazardous materials in violation of environmental laws on the Real Property or the Premises. 10. Landlord has received no notice that there are actions, voluntary or involuntary, pending against Tenant under the bankruptcy laws of the United States or any state thereof. 11. Landlord has not rebated, reduced or waived any amounts due from Tenant under the Lease relating to the period from and after the date hereof. 12. Landlord has not received any notice from any governmental authority of any present violation of any federal, state, county or municipal laws, regulations, ordinances, orders or directives relating to the Premises. 2 13. This certification is made with the understanding that both Purchaser and Lender are relying upon the representations herein made in its determination to purchase the Real Property or make the Loan, as the case may be, and that the undersigned and the person(s) executing this certification on behalf of the undersigned have the power and authority to render this certification. 14. Notwithstanding anything to the contrary set forth in this Certificate, all obligations and liabilities of the undersigned to any person or entity arising under or by virtue of this Certificate shall terminate without further action of the undersigned, Purchaser or any lender, or any successor or assign of Purchaser or such lender, upon the delivery to Purchaser of an estoppel certificate duly executed by the Tenant substantially in the form of Exhibit "I" to that certain Agreement and Contract of Sale and Escrow Instruction, dated _____________________, 1998 (the "Agreement"), between the undersigned and Buyer, which meets the requirements of Section 2.3(b)(vii) of the Agreement with respect to the content of such estoppel certificate; and following such delivery, no claim shall be made against the 3 undersigned on account of any certificates or other matters set forth in this Certificate. This Certificate is executed on ________________, 1998. GROSVENOR INTERNATIONAL (WESTCOAST ESTATES) LIMITED, A CALIFORNIA CORPORATION By: _____________________________ Its: _____________________________ By: _____________________________ Its: _____________________________ P.I.C. INVESTMENTS, a Nevada corporation By: _____________________________ Its: _____________________________ By: _____________________________ Its: _____________________________ 4 FORM OF ANCHOR ESTOPPEL CERTIFICATE (for Marshall Fields (Dayton Hudson), Lord & Taylor (May Department Stores), and Neiman Marcus), _______________, 199__ [GGP ENTITY] c/o GGP Management, Inc. 55 W. Monroe Suite 3100 Chicago, Illinois 60603 Attn: Joel Bayer Ladies and Gentlemen: The undersigned [Insert name of Anchor], a corporation organized and --------------------- existing under the laws of the State of ____________________, is a party to a certain Reciprocal Easement Agreement which is more particularly described on Exhibit "A" (the "REA"). The undersigned has been advised that [GGP ENTITY] or its affiliate (collectively "Purchaser" may acquire the Westcoast Estates interest in Northbrook Court Shopping Center (as such term is defined in the REA) located in Northbrook, Illinois (the "Property"). The undersigned does hereby state and disclose for the benefit of Purchaser and any prospective lender(s) financing such acquisition by Purchaser: 1. The REA contains the entire agreement between the parties thereto with respect to the matters set forth therein and no side or separate agreements not referred to above exist between such parties with respect to the Property or the REA. 2. The REA is in full force and effect and has not been modified, amended, supplemented or changed, except as described on Exhibit "A". 3. To the best knowledge of the undersigned, there are no defaults by any party in the performance of any covenant, agreement, term or condition contained in the REA, and no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a default under the REA or give rise to a right on the part of the undersigned to reduce its obligations thereunder. The undersigned has neither given nor received any notice of any such default or occurrence. EXHIBIT "K" 4. The undersigned has claims no set-off or counterclaim against Westcoast Estates under the REA. 5. The undersigned's department store on the Property opened for business on ________________, 19__ and is open for business as of the date of this Estoppel Certificate. 6. No petition in bankruptcy or petition or answer seeking an assignment for the benefit of creditors, the appointment of a receiver, trustee, or liquidator with respect to the undersigned or a substantial portion of the undersigned's property, or any reorganization, arrangement, liquidation, dissolution, or similar relief under the Federal Bankruptcy Code or any state law has been filed by or against the undersigned. 7. The undersigned has no right to receive and Westcoast Estates under the REA has no obligation to pay or deliver, which has not yet been paid or delivered, any inducement to construct, occupy or operate its building on the Property or to perform its obligations under the REA. 8. The undersigned acknowledges that it has been advised that Purchaser may acquire Westcoast Estates' interest in the Property and, in such event, that Purchaser would reasonably rely upon the statements contained herein in making such acquisition. 9. Consent of the undersigned to the transfer of Westcoast Estates' interest in the Property and the assignment of the REA to Purchaser either is not required or has been given and such transactions will not presently or with the passage of time or giving of notice, or both, constitute a default under the REA. IN WITNESS WHEREOF, this Estoppel Certificate has been duly executed as of the date first above written. [Insert name of Undersigned Anchor] By: _____________________________ Name:________________________ Title:_______________________ 2 FIRPTA CERTIFICATE ------------------ EXHIBIT "L" OPINION OF PARTNERS' COUNSEL ---------------------------- EXHIBIT "M" OPINION OF BUYER'S COUNSEL -------------------------- EXHIBIT "N" MECHANICS LIEN CLAIMS ---------------------- EXHIBIT "O" TITLE COMMITMENT ---------------- EXHIBIT "P" PENDING LEASES -------------- EXHIBIT "Q" MANAGEMENT AGREEMENT -------------------- EXHIBIT "R" LEASING COMMISSION OBLIGATION ----------------------------- EXHIBIT "S" 1998 CAPITAL EXPENDITURES STATEMENT ----------------------------------- EXHIBIT "T" SCHEDULE OF REPORTS AND STUDIES ------------------------------- EXHIBIT "U" SCHEDULE OF REGULATORY COMPLIANCE --------------------------------- EXHIBIT "V" ENVIRONMENTAL DISCLAIMER ------------------------ None EXHIBIT "W" ASBESTOS REPORTS ---------------- EXHIBIT "X" PENDING LITIGATION ------------------ EXHIBIT "Y" EX-2.2 3 STOCK PURCHASE AGREEMENT EXHIBIT 2.2 STOCK PURCHASE AGREEMENT dated as of April 17, 1998 among MEPC PLC, MEPC NORTH AMERICAN PROPERTIES LIMITED, U.K.-AMERICAN HOLDINGS LIMITED, Sellers and GGP LIMITED PARTNERSHIP Buyer relating to the purchase and sale of 100% OF THE COMMON STOCK of MEPC AMERICAN HOLDINGS INC., CALEDONIAN HOLDING COMPANY, INC., and U.K.-AMERICAN PROPERTIES, INC. TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS AND INTERPRETATION ---------------------------------------- Section 1.01. Definitions 1 - Section 1.02. Interpretation 8 - ARTICLE 2 Purchase and Sale --------------------------- Section 2.01. Purchase and Sale 9 - Section 2.02. Base Balance Sheet 9 - Section 2.03. Closing 9 - Section 2.04. Closing Balance Sheet 10 -- Section 2.05. Adjustment to Preliminary Purchase Price 12 -- Section 2.06. Deposit 13 -- Section 2.07. Cost to Completion Adjustments 14 -- ARTICLE 3 Representations and Warranties of the Sellers ------------------------------------------------------- Section 3.01. Corporate Existence and Power 16 -- Section 3.02. Corporate Authorization 17 -- Section 3.03. Governmental Authorization 17 -- Section 3.04. Noncontravention 17 -- Section 3.05. Capitalization 17 -- Section 3.06. Subsidiaries 18 -- Section 3.07. Financial Statements 19 -- Section 3.08. Absence of Certain Changes 20 -- Section 3.09. Intercompany Accounts 21 -- Section 3.10. Properties 21 -- Section 3.11. Other Material Contracts 24 -- Section 3.12. Litigation 27 -- Section 3.13. Insurance Coverage 27 -- Section 3.14. Brokers and Finders 27 -- Section 3.15. Employees 27 -- Section 3.16. Employee Benefit Plans 27 -- Section 3.17. Environmental Matters 29 -- Section 3.18. Compliance with Laws and Court Orders 30 -- Section 3.19. Rent Roll 30 -- Section 3.20. Disclosure Schedules 30 -- ARTICLE 4 Representations and Warranties of Buyer ------------------------------------------------- Section 4.01. Existence and Power 31 -- Section 4.02. Authorization 31 -- Section 4.03. Governmental Authorization 31 -- Section 4.04. Noncontravention 31 -- Section 4.05. Financing 31 -- Section 4.06. Purchase for Investment 32 -- Section 4.07. Litigation 32 -- Section 4.08. Brokers and Finders 32 -- Section 4.09. Inspections; No Other Representations 32 -- ARTICLE 5 Covenants of the Sellers ---------------------------------- Section 5.01. Conduct of the Company Group 33 -- Section 5.02. Tenant Leases 35 -- Section 5.03. Access to Properties and Information; Confidentiality 35 -- Section 5.04. Notices of Certain Events 36 -- Section 5.05. Restructuring 37 -- Section 5.06. Resignations 37 -- Section 5.07. Estoppel Certificates 37 -- Section 5.08. Title Insurance and Surveys 37 -- Section 5.09. Certain Accounts and Agreements 38 -- ARTICLE 6 Covenants of Buyer ---------------------------- Section 6.01. Confidentiality 38 -- Section 6.02. Access 39 -- Section 6.03. Trademarks; Tradenames 39 -- ARTICLE 7 Covenants of Buyer and Seller --------------------------------------- Section 7.01. Commercially Reasonable Efforts; Further Assurances 39 -- Section 7.02. Certain Filings 40 -- Section 7.03. Public Announcements 40 -- Section 7.04. Brokers 40 -- ARTICLE 8 Tax Matters --------------------- Section 8.01. Tax Definitions 41 -- Section 8.02. Tax Representations 42 -- Section 8.03. Tax Covenants 43 -- Section 8.04. Termination of Existing Tax Sharing Agreements 44 -- Section 8.05. Tax Returns and Cooperation on Tax Matters 44 -- Section 8.06. Indemnification by Seller 45 -- Section 8.07. Survival 48 -- Section 8.08. Withholding 48 -- ARTICLE 9 Employee Benefits --------------------------- Section 9.01. Employment of Company Group Employees; Service Recognition 48 -- Section 9.02. Stay Sell Agreement 49 -- Section 9.03. Annual Bonuses 49 -- Section 9.04. No Third-Party Beneficiaries 49 -- ARTICLE 10 Conditions to Closing -------------------------------- Section 10.01. Conditions to Obligations of Buyer and Sellers 50 -- Section 10.02. Conditions to Obligation of Buyer 50 -- Section 10.03. Conditions to Obligation of the Sellers 52 -- ARTICLE 11 Survival; Indemnification ------------------------------------ Section 11.01. Survival 53 -- Section 11.02. Indemnification 53 -- Section 11.03. Procedures 54 -- Section 11.04. Calculation of Damages 55 -- Section 11.05. Assignment of Claims 56 -- Section 11.06. Exclusivity 56 -- ARTICLE 12 Termination ---------------------- Section 12.01. Grounds for Termination 57 -- Section 12.02. Effect of Termination 57 -- ARTICLE 13 Miscellaneous ------------------------ Section 13.01. Notices 58 -- Section 13.02. Amendments and Waivers 60 -- Section 13.03. Expenses 60 -- Section 13.04. Successors and Assigns 60 -- Section 13.05. Third-Party Beneficiaries 60 -- Section 13.06. Governing Law 60 -- Section 13.07. Jurisdiction 61 -- Section 13.08. WAIVER OF JURY TRIAL 61 -- Section 13.09. Attorneys' Fees 61 -- Section 13.10. No Recording 61 -- Section 13.11. Entire Agreement 61 -- Section 13.12. Invalid Provisions 61 -- Section 13.13. Counterparts 62 -- Section 13.14. Binding Effect 62 -- Section 13.15. Specific Performance 62 -- Section 13.16. Joint and Several Liability 62 -- Exhibit A Restructuring Transactions Exhibit B Accounting Procedures Exhibit C Form of Escrow Agreement Exhibit D Industrial Properties Exhibit E Office Properties Exhibit F Retail Properties STOCK PURCHASE AGREEMENT AGREEMENT dated as of April 17, 1998 among MEPC PLC, an English company ("PARENT"), MEPC NORTH AMERICAN PROPERTIES LIMITED, an English company ("NORTH AMERICAN PROPERTIES"), U.K.-AMERICAN HOLDINGS LIMITED, a company organized under the laws of Jersey ("UK-AMERICAN" and, together with Parent and North American Properties, the "SELLERS"), and GGP Limited Partnership, a Delaware limited partnership ("BUYER"). WITNESSETH: WHEREAS, MEPC American Holdings Inc., a Delaware corporation ("MEPC HOLDINGS"), Caledonian Holding Company, Inc., a Delaware corporation ("CALEDONIAN HOLDING") and U.K.-American Properties, Inc., a Delaware corporation ("UK-AMERICAN PROPERTIES" and, together with MEPC Holdings and Caledonian Holding, the "COMPANIES"), either directly or through their direct and indirect Subsidiaries (as defined below), are the owners of the Properties (as defined below); WHEREAS, the Sellers are the record and beneficial owners of the Shares (as defined below) and desire to sell the Shares to Buyer, and Buyer desires to purchase the Shares from the Sellers, upon the terms and subject to the conditions and provisions hereinafter set forth; WHEREAS, certain Restructuring (as defined below) will be consummated on or prior to the Closing; The parties hereto agree as follows: ARTICLE 1 Definitions and Interpretation Section 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that none of the Companies nor any of their Subsidiaries (after giving effect to the Restructuring) shall be considered an Affiliate of the Sellers. "BALANCE SHEET" means the audited combined balance sheet of the Companies and their Subsidiaries as of September 30, 1997. "BALANCE SHEET DATE" means September 30, 1997. "BENEFIT ARRANGEMENT" means any employment, severance or similar contract or arrangement (whether or not written) or any plan, policy, fund, program or contract or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock options, or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, workers' compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that (i) is not an Employee Plan, (ii) is entered into, maintained, administered or contributed to, as the case may be, by the Sellers, any of their Affiliates or any member of the Company Group and (iii) covers any employee or former employee of any member of the Company Group employed in the United States. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended on or prior to the date hereof, and any rules or regulations promulgated thereunder. "CLOSING DATE" means the date of the Closing. "COMPANY GROUP" means the Companies and all of their direct or indirect Subsidiaries, after giving effect to the Restructuring. "COMPANY SUBSIDIARIES" means the Subsidiaries of each of the Companies. "EMPLOYEE PLAN" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or contributed to by any Seller, any of its Affiliates or any member of the Company Group and (iii) covers any employee or former employee of any member of the Company Group. "ENVIRONMENTAL LAWS" means any and all statutes, laws, regulations and rules, in each case as in effect on the date hereof, that have as their principal purpose the protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder. "ERISA AFFILIATE" of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code. "EXCLUDED ASSETS" means assets and properties, including common stock and other equity interests, that are or have been disposed of or transferred prior to Closing by any member of the Company Group to the Sellers or other Persons that are not members of the Company Group. "EXCLUDED LIABILITIES" means (i) all liabilities or obligations of the Company Group that are or have been satisfied or assumed prior to Closing by the Sellers or other Persons that are not members of the Company Group or that primarily relate to the Excluded Assets and (ii) all liabilities or obligations of the Company Group relating to employees, Employee Plans or Benefit Arrangements that accrued or arose, or are based on acts or events occurring, prior to the Closing or that arise as the result of the consummation of the transactions contemplated hereby (including, without limitation, any liabilities with respect to the Worker Adjustment and Retraining Notification Act), except as otherwise expressly provided in Article 9. - "FINANCE NOTES" means the notes of one or more members of the Company Group payable to MEPC Finance evidencing the Finance Receivables. "FINANCE RECEIVABLES" means the combined obligations of the Company Group owed to MEPC Finance, including principal and accrued interest, as of the Closing Date after giving effect to the Restructuring. "GRAYBAR AGREEMENT" means the Sale and Purchase Agreement, dated as of March 11, 1998 between Caledonian Holding and Graybar Builders LLC. "GRAYBAR PROPERTY" means the property that is subject to the Graybar Agreement. "HAZARDOUS SUBSTANCES" means any pollutant, contaminant or any toxic, radioactive or otherwise hazardous substance, as such terms are defined in, or identified pursuant to, any Environmental Law. "INDEBTEDNESS" means any indebtedness for borrowed money or any obligations in connection with any sale-leaseback transaction or similar, off-balance sheet financing; provided that Indebtedness shall not include (i) accounts payable (or similar items) arising in the ordinary course of business consistent with past practices or (ii) the current portion of any item which constitutes Indebtedness. "INDUSTRIAL PROPERTIES" means the Properties described in Exhibit D. "KNOWLEDGE OF THE SELLERS", "SELLERS' KNOWLEDGE" or any other similar knowledge qualification in this Agreement means to the actual knowledge of James Tuckey, James Dundas, Stephen East, David Gruber, Donn Fuller, Peter Johnson, Howard Garfield, Ab Atkins, Jim Fant or Paul Ledbetter. "LIEN" means, with respect to any property or asset, any mortgage, deed of trust, deed to secure debt, lien, pledge, charge or encumbrance of any kind thereon; the interest of a vendor or lessor under conditional sale agreement, capital lease or other title retention agreement affecting the title thereto; any covenant, condition, restriction, reservation, easement, right of way or other right, instrument or document affecting the title thereto; or any other exception to or defect in the title thereto. "MEPC FINANCE" means MEPC Finance Inc., a Delaware corporation, and its Subsidiaries. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, assets or results of operations of the Company Group, taken as a whole, except any such effect resulting from or arising in connection with (i) this Agreement or the transactions contemplated hereby, (ii) changes or conditions affecting generally the retail real estate markets in the United States or in any jurisdiction or market where any Property is located, or (iii) changes in economic, regulatory or political conditions generally. "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 3(37) of ERISA. "NOTES" means the Parent Notes together with the Finance Note. "OFFICE AND INDUSTRIAL CONTRACT" means the Sale and Purchase Agreement providing for the sale of the Industrial Properties and the Office Properties. "OFFICE PROPERTIES" means the Properties described in Exhibit E. "PBGC" means the Pension Benefit Guaranty Corporation. "PARENT NOTES" means the notes of one or more members of the Company Group payable to Parent, evidencing the Parent Receivables. "PARENT RECEIVABLES" means the combined obligations of the Company Group owed to Parent, including principal and accrued interest, as of the Closing Date after giving effect to the Restructuring. "PERSON" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "RELATED AGREEMENTS" means (i) the Graybar Agreement; (ii) any agreement or agreements relating to the sale (either through the sale of assets or the sale of stock) of certain land located in Broward County and Orlando County, Florida; (iii) any agreement relating to the sale of the Company Group's equity interests in R.A. Greiner Realty and Greiner Pacaud Management Associates; and (iv) the Office and Industrial Contract. "RESTRUCTURING" means the transactions set forth in Exhibit A hereto. "RETAIL PROPERTIES" means the Properties described in Exhibit F. "SHARES" means all of the issued and outstanding shares of common stock of MEPC Holdings, Caledonian Holding and UK-American Properties. "STAY SELL AGREEMENT" means that certain Stay and Sell Pay and Performance Bonus Agreement dated October 9, 1997, among Parent, MEPC Holdings, UK-American Properties, Caledonian Holding and their affiliates (as defined therein), as amended. "SUBSIDIARY" means, as to any Person, any corporation, partnership or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "TENANT ALLOWANCE" means all tenant improvement costs required to be paid by the Company Group under the terms of leases or other agreements and all cash allowances for tenant improvements required to be made by the Company Group under such leases or agreements. "TITLE IV PLAN" means an employee benefit plan subject to Title IV of ERISA other than any Multiemployer Plan. "TRANSACTION EXPENSES" means all costs and expenses incurred by the parties hereto in connection with this Agreement or the transactions contemplated hereby. (b) Each of the following terms is defined in the Section set forth opposite such term:
TERM SECTION Arthur Andersen 2.04(c) ------- Base Balance Sheet 2.02 ---- Base Balance Sheet Date 2.02 ---- Base Receivables Amount 2.05(a)(iv) ------------ Base Stockholders' Equity Amount 2.05(a) ------- Basket 8.01 ---- Brokerage Agreement 3.10(a)(v) ----------- Buyer Breach Conditions 2.06 ----- Buyer Designated Person 2.07(c)(iii) ------------ Buyer Recitals Caledonian Holding Recitals Claim 11.03(a) -------- Closing 2.03 ----
Closing Balance Sheet 2.04(a) ------- Closing Permitted Liens 10.02(d) -------- Code 8.01 ----- Companies Recitals Company Financial Statements 3.07(a) ------- Company Group Subsidiary 3.06(a) ------- Company Securities 3.05(b)(ii) ------------ Confidential Information 6.01 ----- Construction Agreement 3.10(a)(X) ---------- Construction Completion Amount 2.07(a)(ii) ------------ COREA 3.10(a)(vii) ------------ Damages 11.02(a) -------- Deposit 2.06 ---- Deposit Amount 2.06 ---- Designated Committee 2.07(c)(iii) ------------ Designated Person 2.07(c) ------- Development Plans 2.07(a)(ii) ------------ E&P Report 8.06(i) ------- Effective Date 12.01(b) -------- Employees 9.01(a) ------- Encumbrances 3.05(b) ------- Escrow Agent 2.06 ---- Escrow Agreement 2.06 ---- Estimated Construction Completion Amount 2.07(c)(iii) ------------ Existing Survey 3.10(a)(iv) ------------ Existing Title Report 3.10(a)(iii) ------------ Expiration Date 11.01 ----- Federal Tax 8.01 ---- Final Determination 8.01 ---- Final Receivables Amount 2.04(c)(iii)(b) --------------- Final Stockholders' Equity Amount 2.04(c)(iii) ------------ GGPI 8.06(i) ------- Ground Lease 3.10(a)(vi) ------------ Group Subsidiary Securities 3.06(b)(ii) ------------ Indemnified Party 11.03(a) -------- Indemnifying Party 11.03(a) -------- Loss 8.06(a)(ii) ------------ Management Agreement 3.10(a)(viii) ------------- MEPC Holdings Recitals MEPC Holdings Class A Common Stock 3.05(a)(i) ---------- MEPC Holdings Common Stock 3.05(a)(i) ---------- Net Partnership Asset Amount Exhibit B North American Properties Recitals Note Election 2.01(b)(i) ---------- Owner 3.10(a)(ii) ------------ Parent Recitals Parent Designated Person 2.07(c)(iii) ------------ Payment Election 2.01(b)(ii) ------------ Permitted Liens 3.10(b)(vii) ------------ Post-Closing Tax Period 8.01 ---- Potential Contributor 11.05 -----
Pre-Closing Tax Period 8.01 ----- Preliminary Purchase Price 2.03(a) ------------ Property 3.10(a) ------------ Purchase Price 2.05(a)(viii) ------------ Rate 2.05(b) ------------ Receivables Amount 2.04(a) ------------ Retained Employee 9.02(a) ------------ Returns 8.02(a)(i) ------------ Seller Group 8.01 ----- Sellers Recitals Service Agreement 3.10(a)(ix) ------------ Stockholders' Equity Amount 2.04(a) ------------ Straddle Period 8.06(b) ------------ Surveyors 5.08 ----- Tax 8.01 ----- Tax Asset 8.01 ----- Tax Period 8.01 ----- Tax Sharing Agreement 8.01 ----- Taxing Authority 8.01 ----- Tenant Lease 3.11(a)(ii) ------------ Third Designated Person 2.07(c)(iii) ------------ Third Party Claim 11.03(b) ------------ Title Companies 5.08 ----- Title Policy 10.02(d) ------------ UK-American Recitals UK-American Properties Recitals
Section 1.02. Interpretation. In this Agreement, unless otherwise specified; (i) singular words include the plural and plural words include the singular; (ii) words importing any gender include the other genders; (iii) references to any person include its successors and assigns; (iv) the word "successors", when it refers to an individual, includes the heirs, devisees, legatees, executors, administrators and personal representatives of such individual; (v) references to any statute or other law include all rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to; (vi) references to any agreement or other document include all subsequent amendments or other modifications thereof entered into in accordance with the provisions thereof; (vii) the words "approve", "consent" or "agree", and any derivations thereof or words of similar import, mean the prior written approval, consent or agreement of the person holding the right to approve, consent or agree; (viii) the words "include" and "including", and words of similar import, shall be deemed to be followed by the words "without limitation"; (ix) the words "hereto", "herein", "hereof" and "hereunder", and words of similar import, refer to this Agreement in its entirety; (x) the Schedules and Exhibits hereto are part of this Agreement and are incorporated herein by reference; (xi) the words "Section", "Schedule" or "Exhibit" refer to the sections, schedules and exhibits of and to this Agreement; (xii) headings of Sections, Schedules and Exhibits are inserted as a matter of convenience and shall not affect the construction of this Agreement; and (xiii) this Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted. ARTICLE 2 Purchase and Sale Section 2.01. Purchase and Sale. (a) Upon the terms and subject to the conditions of this Agreement, the Sellers agree, jointly and severally, to sell to Buyer, and Buyer agrees to purchase from the Sellers, the Shares at the Closing. (b) Upon the terms and subject to the conditions of this Agreement, Buyer agrees to either (i) purchase from Parent the Parent Notes and purchase from MEPC Finance the Finance Notes (a "NOTE ELECTION") or (ii) provide the Company Group with sufficient cash and cause the Company Group, at the Closing, to pay to Parent the amount of the Parent Receivables and to pay to MEPC Finance the amount of the Finance Receivables (a "PAYMENT ELECTION"). In the event Buyer makes a Note Election, Parent agrees to sell (or, as appropriate, to cause MEPC Finance to sell) to Buyer the Notes. Buyer shall give notice to Parent of a Note Election or a Payment Election no less than five business days prior to the Closing Date. Section 2.02. Base Balance Sheet. At least five business days prior to the Closing, Parent shall deliver to Buyer (i) a combined balance sheet (the "BASE BALANCE SHEET") of the Company Group as of the end of the most recent month which precedes the Closing Date (the "BASE BALANCE SHEET DATE"), which Base Balance Sheet will include all adjustments necessary to give effect to each transaction included in the Restructuring as of the date of consummation of such transaction, if such transaction is consummated prior to such month end, or otherwise all pro forma adjustments necessary to give effect to such transactions as of the Base Balance Sheet Date; (ii) a statement setting out in reasonable detail the calculation of the amount of Parent Receivables and the amount of Finance Receivables based upon the latest available financial information as of the date of the Base Balance Sheet and, (iii) reasonable supporting documentation for each pro forma Restructuring adjustment. The Base Balance Sheet shall be prepared by the Sellers in good faith in accordance with the procedures set forth in Exhibit B hereto. Section 2.03. Closing. The closing (the "CLOSING") of the purchase and sale of the Shares and, in the event of a Note Election, the Notes hereunder shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, at 10:00 AM (New York time) on May 31, 1998, or at such other time as Buyer and Parent may agree. At the Closing: (a) Buyer shall deliver to Parent (or, as appropriate, MEPC Finance) an amount (the "PRELIMINARY PURCHASE PRICE") equal to: (i) $871,000,000, as adjusted pursuant to Section 2.07; plus or minus (ii) stockholders' equity, ---- as set forth on the Base Balance Sheet; plus (iii) in the event of a Note Election, the sum of the amount of the Parent Receivables and the amount of the Finance Receivables, in each case as set forth in Parent's statement delivered pursuant to Section 2.02; minus (iv) the Deposit Amount (as ---- defined below). The Preliminary Purchase Price shall be paid in United States dollars, in immediately available funds by wire transfer to an account of Parent with a bank in New York City designated by Parent, by notice to Buyer, not later than two business days prior to the Closing Date (or if not so designated, then by certified check of Buyer certified by, or by an official bank check of a bank which is a member of the New York Clearing House Association payable in immediately available funds directly to the order of Parent in such amount). The Preliminary Purchase Price will be subject to certain adjustments as described below. (b) Parent shall cause the Sellers (or, as appropriate, MEPC Finance) to deliver to Buyer (i) certificates for the Shares duly endorsed or accompanied by stock powers duly endorsed in blank, with any required transfer stamps affixed thereto and (ii) in the event of a Note Election, the Notes, duly endorsed to Buyer. (c) In the event of a Payment Election, Buyer shall transfer as a capital contribution or loan to the Company Group at Closing cash, payable in immediately available funds, in an amount sufficient to enable the Company Group to pay and Buyer and the Sellers will cause the Company Group to pay at Closing (i) to Parent the amount of the Parent Receivables and (ii) to MEPC Finance, the amount of the Finance Receivables, in each case as set forth in Parent's statement delivered pursuant to Section 2.02. ---- (d) The Preliminary Purchase Price shall be allocated first to the Notes (in the event of a Note Election), in an amount equal to the amount thereof, and then to the Shares, as set forth in a Schedule to be agreed upon by Buyer and Parent and delivered at the Closing. Any difference between the Preliminary Purchase Price and the Purchase Price shall be allocated to the Notes (in the event of a Note Election) and to the Shares as set forth in a schedule to be agreed upon by Buyer and Parent at the time the Purchase Price is determined. Section 2.04. Closing Balance Sheet. (a) As promptly as practicable, but no later than 90 days, after the Closing Date, Buyer will cause to be prepared and delivered to Parent a combined balance sheet of the Company Group as of the close of business on the Closing Date (the "CLOSING BALANCE SHEET"), together with a report of Coopers & Lybrand or Ernst & Young thereon, and a certificate based on such Closing Balance Sheet setting forth Buyer's calculation of stockholders' equity (the "STOCKHOLDERS' EQUITY AMOUNT"), the amount of the Parent Receivables, the amount of the Finance Receivables (together with the amount of the Parent Receivables, the "RECEIVABLES AMOUNT"), in each case before giving effect to any payment thereof pursuant to Section 2.03. The Closing Balance Sheet shall be ---- prepared by Buyer in good faith in accordance with the procedures set forth in Exhibit B hereto. (b) If Parent disagrees with Buyer's calculation of the Stockholders' Equity Amount or Buyer's calculation of the Receivables Amount, in each case delivered pursuant to Section 2.04(a), Parent may, within 20 days ------- after delivery of the documents referred to in Section 2.04(a), deliver a ------- notice to Buyer disagreeing with such calculation and setting forth Parent's calculation of such amounts. Any such notice of disagreement shall specify those items or amounts as to which Parent disagrees, and Parent shall be deemed to have agreed with all other items and amounts contained in the Closing Balance Sheet and the Buyer's calculation of the Stockholders' Equity Amount and the Receivables Amount, in each case delivered pursuant to Section 2.04(a). ------- (c) If a notice of disagreement shall be duly delivered pursuant to Section 2.04(b), Buyer and Parent shall, during the 30 days following such ------- delivery, use their best efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the Final Stockholders' Equity Amount (as defined below) and the Final Receivables Amount (as defined below) which amounts shall not be less than the amounts thereof shown in Buyer's calculations delivered pursuant to Section 2.04(a) ------- nor more than the amounts thereof shown in Parent's calculation delivered pursuant to Section 2.04(b). If, during such period, Buyer and Parent are ------- unable to reach such agreement, they shall promptly thereafter cause Arthur Andersen LLP ("ARTHUR ANDERSEN") to promptly to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Stockholders' Equity Amount and the Final Receivables Amount. In making such calculation, Arthur Andersen shall consider only those items or amounts in the Closing Balance Sheet or Buyer's calculation of the Stockholders' Equity Amount and/or Buyer's calculation of the Receivables Amount as to which Parent has disagreed. Arthur Andersen shall deliver to Buyer and Parent, as promptly as practicable, a report setting forth such calculations. Such report shall be final and binding upon Buyer and Parent. The cost of such review and report shall be borne (i) by Buyer if the difference between the Final Stockholders' Equity Amount plus the Final Receivables Amount and Buyer's calculation of the Stockholders' Equity Amount plus Buyer's calculation of the Receivables Amount delivered pursuant to Section 2.04(a) is more than the difference ------- between the Final Stockholders' Equity Amount plus the Final Receivables Amount and Parent's calculation of the Stockholders' Equity Amount plus Parent's calculation of the Receivables Amount delivered pursuant to Section 2.04(b), (ii) by Parent if the first such difference is less than ------- the second such difference and (iii) otherwise equally by Buyer and Parent. "FINAL STOCKHOLDERS' EQUITY AMOUNT" means the Stockholders Equity Amount as shown in Buyer's calculation delivered pursuant to Section 2.04(a), if no notice of disagreement with respect thereto is duly ------- delivered pursuant to Section 2.04(b); or if such a notice of disagreement ------- is delivered, (a) as agreed by Buyer and Parent pursuant to Section 2.04(c) ------- or (b) in the absence of such agreement, as shown in Arthur Andersen's calculation delivered pursuant to Section 2.04(c); provided that in no ------- event shall the Final Stockholders' Equity Amount be less than Buyer's calculation of the Stockholders' Equity Amount delivered pursuant to Section 2.04(a) nor more than Parent's calculation of the Stockholders' ------- Equity Amount delivered pursuant to Section 2.04(b). ------- "FINAL RECEIVABLES AMOUNT" means the Receivables Amount as shown in Buyer's calculation delivered pursuant to Section 2.04(a), if no notice of ------- disagreement with respect thereto is duly delivered pursuant to Section 2.04(b); or if such a notice of disagreement is delivered, as agreed by ------- Buyer and Parent pursuant to Section 2.04(c) or, in the absence of such ------- agreement, as shown in Arthur Andersen's calculation delivered pursuant to Section 2.04(c); provided that in no event shall the Final Receivables ------- Amount be less than Buyer's calculation of the Receivables Amount delivered pursuant to Section 2.04(a) nor more than Parent's calculation of the ------- Receivables Amount delivered pursuant to Section 2.04(b). ------- (d) Buyer and the Sellers agree that they will, and agree to cause their respective independent accountants and each member of the Company Group to, cooperate and assist in the preparation of the Closing Balance Sheet, the calculation of the Final Stockholders' Equity Amount and the Final Receivables Amount and in the conduct of the reviews referred to in this Section, including without limitation, the making available to the extent necessary of books, records, work papers and personnel. Section 2.05. Adjustment to Preliminary Purchase Price. (a) The Preliminary Purchase Price will be adjusted as follows: if the sum of (i) the Final Stockholders' Equity Amount plus (ii) the Final Receivables Amount exceeds the sum of (iii) the stockholders equity as set forth on the Base Balance Sheet (the "BASE STOCKHOLDERS' EQUITY AMOUNT") plus (iv) the Receivables Amount set forth on the Base Balance Sheet (the "BASE RECEIVABLES AMOUNT"), Buyer shall pay to Parent, as an adjustment to the Preliminary Purchase Price, in the manner and with interest as provided in Section 2.05(b), the amount of such excess. If the sum of (v) the Base ------- Stockholders' Equity Amount plus (vi) the Base Receivables Amount exceeds the sum of (vii) the Final Stockholders' Equity Amount plus (viii) the Final Receivables Amount, Parent shall pay to Buyer, as an adjustment to the Preliminary Purchase Price, in the manner and with interest as provided in Section 2.05(b), the amount of such excess. The Preliminary Purchase ------- Price as so adjusted is referred to herein as the "PURCHASE PRICE". (b) Any payment pursuant to Section 2.05(a) shall be made at a ------- mutually convenient time and place within 10 days after the Final Stockholders' Equity Amount has been determined by delivery by Buyer or Parent, as the case may be, of a certified or official bank check payable in immediately available funds to the other party or by causing such payments to be credited to such account of such other party as may be designated by such other party. The amount of any payment to be made pursuant to Section 2.05(a) shall bear interest from and including the ------- Closing Date to but excluding the date of payment at a rate per annum equal to the rate of interest announced by Morgan Guaranty Trust Company of New York (the "RATE") from time to time as its Base Rate in New York City in effect from time to time during the period from the Closing Date to the date of payment. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed. Section 2.06. Deposit. If this Agreement is not terminated by Buyer pursuant to Section 12.01(b), on the business day immediately following the -------- Effective Date, Buyer shall deposit with Chase Manhattan Bank (the "ESCROW AGENT") $20,000,000 (the "DEPOSIT") by a certified check of Buyer certified by, or by an official bank check of, a bank which is a member of the New York Clearing House Association payable in immediately available funds or by wire transfer of immediately available funds to such account as the Escrow Agent may specify. The Deposit Amount (as defined below) shall be held, invested and disbursed by the Escrow Agent in accordance with the terms set forth in the agreement attached hereto as Exhibit C (the "ESCROW AGREEMENT"). The Deposit (and any interest earned thereon) (the "DEPOSIT AMOUNT") shall be credited against the Preliminary Purchase Price at the Closing as provided in Section 2.03. If this Agreement is terminated by ---- Parent pursuant to Section 12.01(c) and any of the conditions set forth in -------- Section 12.02 that would, in accordance with Section 12.02, give rise to ----- ----- liability on the part of Buyer (the "BUYER BREACH CONDITIONS") have occurred, the Sellers shall have the right to retain the Deposit; provided that, prior to terminating this Agreement, the Sellers will give written notice to Buyer of such condition and will give Buyer 10 days from the date of such notice to cure such condition (and if such condition is cured within such 10-day period, the Sellers may not terminate this Agreement on account thereof); provided further that retention of the Deposit Amount shall not affect the availability of any other remedies that may be available to the Sellers under this Agreement or applicable law. If this Agreement is terminated pursuant to any other paragraph of Section 12.01 or ----- pursuant to Section 12.01(c) under circumstances where no Buyer Breach -------- Condition is satisfied, the Deposit Amount shall be returned to Buyer and, subject to Section 12.02, the Sellers shall not have any liability to ----- Buyer. Section 2.07. Cost to Completion Adjustments. (a) The Preliminary Purchase Price will be reduced by (i) the amount of all tenant improvement costs and allowances and brokerage commissions which have been agreed to be paid by landlord with respect to space leases in effect for the Properties on the date of this Agreement and which have not been paid by any member of the Company Group as of the Closing Date and (ii) the amount estimated as of Closing that will be required, following the Closing Date, to complete (not including any tenant improvement costs or allowances or any leasing commissions) the planned development program with respect to Northridge Fashion Center and Regency Square Mall in accordance with plans and specifications for each such Property delivered to Buyer not later than 15 days prior to the Closing Date (the "DEVELOPMENT PLANS"), which plans and specifications shall not be materially different from those made available to Buyer prior to the date hereof (together, the "CONSTRUCTION COMPLETION AMOUNT"), the calculation of which shall be without regard to any actions taken by Buyer or any developments arising after the Closing Date. The amount calculated pursuant to Section 2.07(a)(ii) shall include the cost of ----------- paving, grading and other offsite and onsite work; barricades, security, directional signs and other general conditions; roof, structural and other shell work; mall and common area finish work; parking, lighting, landscaping, exterior signage and other developer work; permits and licenses; architectural, engineering and general contractor's fees and legal fees, in each case, only to the extent required to complete the development program set forth under the Development Plans. Notwithstanding anything to the contrary contained in this Section 2.07(a), for purposes of ------- this Section 2.07(a), the parties agree that the ------- tenant improvement costs and allowances and brokerage commissions for the theatre lease at Valley Plaza Mall shall be deemed to be $5,200,000. The Sellers shall cause the site work for the proposed theatre tenant at Valley Plaza Mall to be completed prior to Closing (or, to the extent not completed, Buyer shall be entitled to a credit at Closing for the unpaid cost thereof). (b) From and after the date hereof and until Closing, the Sellers shall cause the members of the Company Group to (i) take, at their own expense, all actions reasonably necessary to continue the construction, renovation, development or redevelopment of Northridge Fashion Center and Regency Square Mall, in each case, substantially in accordance with the plans and specifications therefor made available to Buyer prior to the date hereof and to keep a designated representative of Buyer informed with respect to the progress and implementation of such plans, (ii) use all reasonable efforts to continue negotiating leases in respect of leasable space in each of such Properties, including the Valley Plaza Mall theatre lease, (iii) use all reasonable efforts to obtain the consent of the anchor tenants to the proposed amendments to the Northridge Fashion Center REA (it being understood that such consents are not required to be obtained prior to Closing). (c) Not later than 15 days prior to the Closing Date, Parent shall deliver to Buyer in writing its good faith calculation of the Construction Completion Amount. If Buyer agrees with the Construction Completion Amount as calculated by Parent, such calculation shall be binding upon Parent and Buyer and will constitute the Construction Completion Amount for purposes of calculating the Preliminary Purchase Price. If Buyer disagrees with the calculation made by Parent, Buyer shall deliver to Parent, within 5 days of receipt of Parent's calculation, a written notice specifying the basis for its disagreement and setting forth its calculation of the Construction Completion Amount. Failure to deliver a notice of disagreement within any such 5-day period shall be deemed to constitute agreement to such calculation. If a notice of disagreement is delivered within such 5-day period, Buyer and Parent shall negotiate in good faith to resolve the disagreements. If no agreement is reached as to the Construction Completion Amount, Buyer and Parent shall refer the disputed issues for resolution to an appropriate Person of recognized national standing who has been agreed upon by Parent and Buyer (a "DESIGNATED PERSON"). The Designated Person shall resolve such issues and determine the Construction Completion Amount. The fees and expenses of the Designated Person shall be borne (i) by Buyer if the difference between Buyer's calculation of the Construction Completion Amount and the Construction Completion Amount determined by the Designated Person is greater than the difference between Parent's calculation of the Construction Completion Amount and the Construction Completion Amount determined by the Designated Person, (ii) by Parent if the first such difference is less than the second such difference and (iii) otherwise equally by Buyer and Parent. If Parent and Buyer are unable to agree on a Designated Person, each of Parent and Buyer will select a Designated Person (the "PARENT DESIGNATED PERSON" and the "BUYER DESIGNATED PERSON", respectively). The Parent Designated Person and the Buyer Designated Person will select a third, independent Designated Person (the "THIRD DESIGNATED PERSON"). The Parent Designated Person, the Buyer Designated Person and the Third Designated Person (collectively, the "DESIGNATED COMMITTEE") will resolve the issues and will determine, by a majority vote of the three, the Construction Completion Amount. The determination of the Construction Completion Amount shall be binding upon Parent and Buyer; provided that the Construction Completion Amount so determined shall not exceed the higher of the Construction Completion Amount or be less than the lower of the Construction Completion Amount calculated by Parent and Buyer. The Parent and Buyer will pay the fees and expenses of its own Designated Person, and if a Third Designated Person is engaged, the fees and expenses of the Third Designated Person will be paid one-half by Parent and one-half by Buyer. If Parent and Buyer are unable to agree on the Construction Completion Amount or if the Designated Person(s) has (have) not made a determination as to the Construction Completion Amount, in each case by the Closing Date, the Construction Completion Amount for purposes of calculating the Preliminary Purchase Price shall be the calculation originally delivered by Parent (the "ESTIMATED CONSTRUCTION COMPLETION AMOUNT"). In such event, if the Estimated Construction Completion Amount is less than the Construction Completion Amount, determined in accordance with the procedures of this Section 2.07, Parent shall pay to Buyer the difference between the two ---- amounts. Such payment shall be made within 10 days after the Construction Completion Amount has been determined pursuant to this Section 2.07 and ---- shall be made in immediately available funds by wire transfer to an account of Buyer designated by Buyer, by notice to Parent, (or if not so designated, then by certified check of Parent certified by, or by an official bank check of a bank which is a member of the New York Clearing House Association payable in immediately available funds directly to the order of Buyer in such amount). The amount of any payment to be made pursuant to Section 2.07(a) shall bear interest from and including the ------- Closing Date to but excluding the date of payment at the Rate in effect from time to time during the period from the Closing Date to the date of payment. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed. ARTICLE 3 Representations and Warranties of the Sellers The Sellers represent and warrant to Buyer as of the date hereof and as of the Closing Date, except as any of the following may be affected by the Restructuring, that: Section 3.01. Corporate Existence and Power. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not have a Material Adverse Effect. Section 3.02. Corporate Authorization. The execution, delivery and performance by each Seller of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby are within such Seller's corporate powers and have been duly authorized by all necessary corporate action on the part of such Seller. This Agreement has been and the Escrow Agreement, upon the execution thereof, will be, duly executed and delivered by the Sellers. This Agreement constitutes and the Escrow Agreement, upon the execution and delivery thereof by the parties thereto, will constitute, a valid and binding agreement of each Seller, enforceable against it in accordance with its terms. Section 3.03. Governmental Authorization. The execution, delivery and performance by each Seller of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with, any governmental body, agency or official other than any such action or filing where the failure to make or obtain such action or filing would not have a Material Adverse Effect. Section 3.04. Noncontravention. The execution, delivery and performance by each Seller of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the certificate of incorporation, bylaws, partnership agreement or other organizational documents of any Seller or any member of the Company Group, (ii) assuming compliance with the matters referred to in Section 3.03, violate any applicable law, rule, regulation, ---- judgment, injunction, order or decree, except for any such violations which would not have a Material Adverse Effect, (iii) except as disclosed in Schedule 3.04 or as to matters which would not have a Material Adverse ---- Effect, require any consent or other action by any person under, constitute a default (or would, with the passage of time or giving of notice or both, constitute a default) under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of any Seller or any member of the Company Group or to a loss of any benefit to which any Seller or any member of the Company Group is entitled under any provision of any agreement or other instrument binding upon such Seller or such member of the Company Group or (iv) result in the creation or imposition of any Lien on the Shares or any asset of any member of the Company Group, except for any Permitted Liens. Section 3.05. Capitalization. (a) (i) The authorized capital stock of MEPC Holdings consists of 1,000 shares of $1.00 par value common stock (the "MEPC HOLDINGS COMMON STOCK") and 1,000 shares of $1.00 par value Class A Common Stock (the "MEPC HOLDINGS CLASS A COMMON STOCK"), of which only 105 shares of the MEPC Holdings Common Stock and 496 shares of the MEPC Holdings Class A Common Stock are issued and outstanding and owned beneficially and of record by Parent; (ii) the authorized capital stock of Caledonian Holding consists of 1,000 shares of $.10 par value common stock, of which only 1,000 shares are issued and outstanding and owned beneficially and of record by North American Properties; and (iii) the authorized capital stock of UK-American Properties consists of 1,500 shares of $.10 par value common stock, of which only 1,440.038 shares are issued and outstanding and owned beneficially and of record by UK-American. (b) The Shares have been duly authorized and validly issued and are fully paid and non-assessable and the Shares are owned directly by the Sellers, free and clear of any lien, encumbrance, security interest, pledge or option or other right to acquire or vote the same or any interest therein ("ENCUMBRANCES"). The Sellers will transfer and deliver to Buyer at the Closing valid title to the Shares free and clear of any Encumbrance other than any Encumbrance arising as a result of actions of Buyer. There are no outstanding (i) securities of any Company convertible into or exchangeable for shares of capital stock, voting securities or other equity interests of that Company or (ii) options or other rights to acquire from any Company, or other obligations of any Company to issue, any capital stock, voting securities or other equity interests in that Company or securities convertible into or exchangeable for capital stock, voting securities or other equity interests of that Company (the items in Sections 3.05(b)(i) and 3.05(b)(ii) being referred to collectively as the "COMPANY ---------- ----------- SECURITIES"). There are no outstanding obligations of any member of the Company Group to repurchase, redeem or otherwise acquire any Company Securities. (c) Each of the Parent Notes and the Finance Notes are duly authorized and validly issued and constitute a valid and binding obligation of each of the Persons issuing such Note. The Parent Notes are owned by Parent free and clear of any Encumbrance and, in the event of a Note Election, Parent will transfer and deliver to Buyer at the Closing valid title to the Parent Notes free and clear of any Encumbrance other than any Encumbrance arising as a result of actions of Buyer. The Finance Notes are owned by MEPC Finance free and clear of any Encumbrance and, in the event of a Note Election, Parent will cause MEPC Finance to transfer and deliver to Buyer at the Closing valid title to the Finance Notes free and clear of any Encumbrance other than any Encumbrance arising as a result of actions of Buyer. Section 3.06. Subsidiaries. (a) Each member of the Company Group is a corporation or partnership duly organized or formed, validly existing and (to the extent applicable) in good standing under the laws of its jurisdiction of incorporation or formation and has all powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, consents and approvals the absence of which would not have a Material Adverse Effect. Each corporate member of the Company Group is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Schedule 3.06(a)(i) sets forth, with respect to each Company, after giving ------- effect to the Restructuring, a correct and complete list of each material direct or indirect Subsidiary thereof (each a "COMPANY GROUP SUBSIDIARY"), and the jurisdiction of organization of such Company Group Subsidiary. The Companies and the Company Group Subsidiaries, after giving effect to the Restructuring, own no general partnership interest in any Person other than the Company Group Subsidiaries and there are no material capital contribution obligations or other material obligations with respect to any equity interest that is held by any member of the Company Group and not disclosed on Schedule 3.06(a)(i). ------- (b) All of the issued and outstanding shares of capital stock of or other equity interests in each Company Group Subsidiary have been duly authorized and validly issued, and are fully paid and non-assessable. All of the outstanding capital stock or other equity interests in each Company Group Subsidiary is owned by the respective Company or Company Group Subsidiary as designated in 3.06(a)(i), directly or indirectly, free and ------- clear of any Encumbrance. Except as set forth in Schedule 3.06(b)(ii), ----------- there are no outstanding (i) securities of any Company Group Subsidiary convertible into or exchangeable for shares of capital stock, voting securities or other equity interests in that Company Group Subsidiary or (ii) options or other rights to acquire from any Company Group Subsidiary, or other obligation of such Company Group Subsidiary to issue, any capital stock, voting securities or other equity interests in that Company Group Subsidiary or securities convertible into or exchangeable for capital stock, voting securities or other equity interests of that Company Subsidiary (collectively the "GROUP SUBSIDIARY SECURITIES"). There are no outstanding obligations of any of the Companies or any of the Company Group Subsidiaries to repurchase, redeem or otherwise acquire any Group Subsidiary Securities. Section 3.07. Financial Statements. (a) The audited combined balance sheet as of September 30, 1997 and the related audited combined statements of income and cash flows for the year ended September 30, 1997 and the unaudited interim combined balance sheet as of January 31, 1998 and the related unaudited interim combined statement of income for the four months ended January 31, 1998 of the Companies and the Company Group Subsidiaries (together, the "COMPANY FINANCIAL STATEMENTS") fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the combined financial position of the Company Group as of the dates thereof and their combined results of operations for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). (b) None of the Companies nor any of the Company Group Subsidiaries had at January 31, 1998, or has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except liabilities, obligations or contingencies that (i) are accrued or reserved against in the Company Financial Statements or reflected in the notes thereto, (ii) are not required under U.S. generally accepted accounting principles to be shown in the Company Financial Statements or reflected in the notes thereto, (iii) were incurred in the ordinary course of business and consistent with past practices, (iv) have been discharged or paid in full prior to the Closing Date or (v) are not, individually or in the aggregate, material to the Company and the Company Group Subsidiaries, taken as a whole. Section 3.08. Absence of Certain Changes. Except as set forth in Schedule 3.08 and except in connection with the Restructuring, since the ---- Balance Sheet Date, the business of the Company Group has been conducted in the ordinary course consistent with past practices and there has not been: (a) any event, occurrence or development which has had or would reasonably be expected to have a Material Adverse Effect; (b) except for dividends contemplated by the Restructuring, any dividends paid by any member of the Company Group or any repurchase, redemption or other acquisition by any member of the Company Group of any outstanding shares of capital stock of any of the Companies; (c) any amendment of any material term of any outstanding security issued by any member of the Company Group; (d) any incurrence, assumption or guarantee by any member of the Company Group of any Indebtedness, other than Indebtedness (i) between or among members of the Company Group or (ii) between or among a member of the Company Group, on the one hand, and Parent or any of its Affiliates (other than members of the Company Group), on the other hand. (e) any making by any member of the Company Group of any loan, advance or capital contribution to, or investment in, any Person, other than a Company Group Subsidiary and other than Tenant Allowances and loans, advances or capital contributions or investments of the type made in the ordinary course of business consistent with past practices; (f) any transaction or commitment made, or any contract or agreement entered into, by any member of the Company Group relating to its assets or business, in either case, material to the Company Group, taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (g) any material change in any method of accounting by any member of the Company Group except for any such change required by reason of a concurrent change in generally accepted accounting principles, and except as set forth in the Company Financial Statements; or (h) other than in connection with the Stay Sell Agreement and except as set forth on Schedule 3.08(h), any (i) employment, deferred ------- compensation, severance, retirement or other similar agreement entered into with any director, officer or employee of any member of the Company Group (or any amendment to any such existing agreement), (ii) grant of any severance or termination pay to any director, officer or employee of any member of the Company Group, or (iii) change in compensation or other benefits payable to any director, officer or employee of any member of the Company Group, in each case other than in the ordinary course of business consistent with past practices. Section 3.09. Intercompany Accounts. Schedule 3.09 reflects all ---- intercompany balances (including those evidenced by the Notes) as of the Balance Sheet Date between Parent and its Affiliates (other than members of the Company Group), after giving effect to the Restructuring, on the one hand, and members of the Company Group as of such date, on the other hand. Since the Balance Sheet Date there has not been any accrual of liability of the Company Group to Parent or any of its Affiliates (other than members of the Company Group), or other material transaction between the Company Group and Parent and any of its Affiliates (other than members of the Company Group), except (i) in connection with the Restructuring, (ii) changes in the outstanding principal balance of the Receivables occurring in the ordinary course of business of the Company Group consistent with past practices or (iii) as provided in Schedule 3.09. ---- Section 3.10. Properties. (a) Schedule 3.10(a) lists all the real ------- properties owned by or held, as lessee, by, any member of the Company Group (each a "PROPERTY") and, with respect to each Property: (i) whether the Property is owned or leased; (ii) the Person that owns the Property (each an "OWNER"); (iii) the most recent title commitment/s, certificate/s or other report/s held by any member of the Company Group with respect to such Property (collectively with respect to each Property an "EXISTING TITLE REPORT"); (iv) the most recent surveys held by any member of the Company Group with respect to such Property (collectively with respect to each Property an "EXISTING SURVEY"); (v) any leasing or other real estate brokerage agreements binding upon any member of the Company Group with respect to such Property, including any material modifications thereof or supplements thereto (each a "BROKERAGE AGREEMENT"); (vi) any ground or similar lease under which any member of the Company Group holds such Property or leases such property to another Person, including any material modifications thereof or supplements thereto (each a "GROUND LEASE"); (vii) any construction, operation and reciprocal easement agreements relating to such Property, including any material modifications thereof or supplements thereto (each a "COREA"); (viii) any third-party management agreements relating to such Property, including any material modifications thereof or supplements thereto (each a "MANAGEMENT AGREEMENT"); (ix) any consulting or other material service agreement binding upon any member of the Company Group with respect to such Property, including any material modifications thereof or supplements thereto (each a "SERVICE AGREEMENT"); and (x) any material construction, redesign or architectural agreements binding upon any member of the Company Group with respect to such Property, including any material modification thereof or supplements thereto (each a "CONSTRUCTION AGREEMENT"). (b) Each member of the Company Group has good title to each Property owned by it and a valid leasehold interest in each Property held by it as lessee, except for any Property sold, leased or otherwise disposed of in connection with the Restructuring. None of the Properties is subject to any Lien, except: (i) any and all Ground Leases, Tenant Leases (as defined below), COREAs, Management Agreements, Brokerage Agreements, Construction Agreements and Service Agreements relating to such Property; (ii) Liens relating to such Property disclosed or reflected in or on the relevant Existing Title Reports or the relevant Existing Surveys (other than Tenant Leases that have expired or been terminated, Liens for taxes, assessments and similar charges and Liens that relate to Indebtedness that has been satisfied) and any additional state of facts which would be disclosed by a survey of such Property since the date of the relevant Existing Surveys or would be disclosed by a physical inspection of such Property, so long as such additional state of facts would not, taken in the aggregate, reasonably be expected to have a Material Adverse Effect; (iii) Liens with respect to such Property disclosed or reflected on the Balance Sheet, the Closing Balance Sheet or notes to either or securing liabilities reflected on the Balance Sheet or notes to either and not satisfied, released or otherwise terminated subsequent to the date of the Balance Sheet; (iv) Liens with respect to such Property for taxes, assessments and similar charges that are not yet due or are being contested in good faith; (v) mechanic's, materialman's, carrier's, repairer's and other similar Liens with respect to such Property arising or incurred in the ordinary course of business or that are not yet due and payable or are being contested in good faith or that are the obligation of any party (other than a member of the Company Group) under any COREA, any tenant under any Tenant Lease or any manager or other party (other than a member of the Company Group) under any Management Agreement, Service Agreement, Construction Contract or other contract or agreement to pay, bond or remove; (vi) Liens with respect to such Property incurred since the Balance Sheet Date and described on Schedule 3.10(b); ------- (vii) other Liens with respect to such Property which, individually or in the aggregate, do not have and would not reasonably be expected to have a Material Adverse Effect (the Liens with respect to each Property referred to in Sections 3.10(b)(i) through ---------- 3.10(b)(viii) are, collectively, the "PERMITTED LIENS" with respect to ------------- such Property); or (viii) Liens with respect to such Property that are between members of the Company Group. (c) Each Ground Lease, COREA, Brokerage Agreement, Management Agreement, Construction Agreement and Service Agreement disclosed pursuant to this Section is a valid and binding agreement of the relevant member of the Company Group, constitutes the complete agreement of the parties thereto with respect to the subject matter thereof and is in full force and effect, and neither the relevant member of the Company Group nor, to Sellers' knowledge, the other party thereto is in default or breach in any material respect thereunder or would, with the passage of time or giving of notice or both, be in default or breach thereunder; nor, to Sellers' knowledge, has any member of the Company Group received any written notice from any other party thereto of any such defaults, breaches or conditions thereunder; in each case except for any such defaults set forth in Schedule 3.10(c), and except for any such defaults, breaches or conditions which do ------- not have and would not reasonably be expected to have a Material Adverse Effect. True, correct and complete copies of the Ground Leases, COREAs, Brokerage Agreements, Management Agreements and Service Agreements have been made available to Buyer. (d) Upon execution and delivery of any COREA, Management Agreement, Service Agreement or Construction Agreement described in Schedule 3.10(d) ------- as pending by any member of the Company Group and the other party or parties thereto upon the terms contained therein, such COREA, Management Agreement, Service Agreement or Construction Agreement shall constitute a COREA, Management Agreement, Service Agreement or Construction Agreement, as the case may be, and shall be deemed to be disclosed and scheduled pursuant to this Section. Section 3.11. Other Material Contracts. (a) Except for the contracts set forth in Schedule 3.10(a), Schedule 3.11 or Schedule 3.19 and except ------- ---- ---- for contracts entered into in connection with the Restructuring, no member of the Company Group is a party to or bound by: (i) any lease of personal property providing for annual rentals of $50,000 or more that cannot be terminated on not more than 60 days' notice without payment by the relevant member of the Company Group of any material penalty; (ii) any lease of real property under which a member of the Company Group is lessor (or sublessor) that cannot be terminated by such member of the Company Group on not more than 60 days notice without payment by such member of the Company Group of any material penalty (each, a "TENANT LEASE"); provided that, upon execution and delivery by a member of the Company Group and the other party or parties thereto of any lease described in Schedule 3.11(a)(ii) as ----------- pending or anticipated leases upon substantially the terms described therein and of the standard retail lease form of the Companies (except with regard to the Borders Books lease at Northridge Fashion Center), such lease shall constitute a Tenant Lease and shall be deemed to be disclosed and scheduled pursuant to this Section. (iii) any agreement for the purchase of materials, supplies, goods, services, equipment or other assets providing for either (A) annual payments by any member of the Company Group of $50,000 or more or (B) aggregate payments by any member of the Company Group of $250,000 or more, in each case that cannot be terminated on not more than 60 days' notice without payment by that member of the Company Group of any material penalty; (iv) any material third-party partnership, joint venture or other similar agreement or arrangement; (v) any agreement (including without limitation option agreements) relating to the acquisition or disposition of any material asset (whether by merger, sale of stock, sale of assets or otherwise); (vi) any agreement relating to Indebtedness (other than leases for personal property) or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) or the issuance of performance bonds or letters of credit and any guarantees or other financial accommodations, except any such agreement entered into subsequent to the date of this Agreement as permitted by Section 3.08(d); ------- (vii) any agreement between a member of the Company Group and any of its officers, directors or employees which agreement cannot be terminated currently by such member of the Company Group without a material penalty; (viii) any material agreement that limits the freedom of any member of the Company Group to compete in any line of business or with any person or in any area; or (ix) any collective bargaining agreement. (x) any lease of real property under which a member of the Company Group is lessee (or sublessee) that cannot be terminated currently by such member of the Company Group without a material penalty; (xi) any notes, contracts or agreements between any members of the Company Group, on the one hand, and any of the Sellers or their Affiliates (other than members of the Company Group), on the other hand, except as set forth in Schedule 3.09; or ---- (xii) any material undertakings or commitments to any governmental or regulatory authority; or (xiii) any other material contract, agreement, arrangement or commitment not made in the ordinary course of business consistent with past practice. (b) Each agreement, contract, plan, lease, arrangement or commitment disclosed pursuant to Sections 3.11(a)(i) through 3.11(a)(xiii) is a valid ---------- ------------- and binding agreement of the relevant member of the Company Group, and is in full force and effect, and no member of the Company Group nor, to the Sellers' knowledge, any other party thereto is in default (or, with the passage of time or giving of notice or both, would be in default) under the terms of any such agreement, contract, plan, lease, Tenant Lease, arrangement or commitment, except as are set forth in Schedule 3.11(b), and ------- except for any such defaults which do not have or would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Sellers, no member of the Company Group has received any written notice from any other party to any of the agreements, contracts, plans, leases, arrangements or commitments disclosed pursuant to Sections 3.11(a)(i) ---------- through 3.11(a)(xiii) asserting that such member of the Company is in ------------- default or breach thereunder. True, correct and complete copies of the documents disclosed pursuant to Sections 3.11(a)(i) through 3.11(a)(xiii) ---------- ------------- have been made available to Buyer. Each of the agreements, contracts, plans, leases, arrangements or commitments set forth in Schedule 3.11 ---- constitutes the complete agreement of the parties thereto with respect to the subject matter thereof. Section 3.12. Litigation. Except as set forth in Schedule 3.12, ---- there is no action, suit, investigation or proceeding (including condemnation proceedings) pending against or, to the knowledge of the Sellers, threatened against or affecting, the Sellers, any member of the Company Group or any of the Properties before any court or arbitrator or any governmental body, agency or official which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement. None of the Sellers nor any other member of the Company Group is a party to or is bound by or in default or, with the passing of time or giving of notice or both, would be in default with respect to any outstanding order, writ, injunction, judgment or decree of any court or governmental entity which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. Section 3.13. Insurance Coverage. Schedule 3.13 sets forth a list of ---- all insurance policies and fidelity bonds relating to the assets, business, operations, employees, officers or directors of the Company Group. Except as set forth on Schedule 3.13, there are no material claims by any member ---- of the Company Group pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. Such policies and bonds are in full force and effect and all premiums have been paid through the date hereof. To the knowledge of the Sellers, no Seller or any other member of the Company Group has received notice or has knowledge of (a) any material violation with respect to any of such insurance policies or bonds or (b) any material request or demand by the underwriters of any such insurance policies and bonds that any work or alteration be performed or made with respect to any of the Properties. Section 3.14. Brokers and Finders. Except for Goldman, Sachs & Co., whose fees will be paid by the Sellers, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Sellers or any member of the Company Group who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement. Section 3.15. Employees. Schedule 3.15 sets forth a true and ---- complete list of the names, titles, annual salaries and other compensation of all officers of the Company Group and all other employees of the Company Group whose annual base salary exceeds $75,000. Section 3.16. Employee Benefit Plans. (a) Schedule 3.16 identifies each ---- Employee Plan. Seller has made available to Buyer copies of the Employee Plans (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and the most recent actuarial valuation report prepared in connection with any Employee Plan. (b) No Company nor any ERISA Affiliate of any Company has (i) engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii) incurred, or reasonably expects to incur prior to the Closing Date, (A) any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in either case could become a liability of that Company or any Company Group Subsidiary or Buyer or any of its ERISA Affiliates after the Closing Date. No Employee Plan is a Multiemployer Plan or a Title IV Plan. (c) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified and, to the knowledge of the Sellers, there has been no event since the date of such determination which would adversely affect such qualification; each trust created under any such Plan has been determined by the Internal Revenue Service to be exempt from tax under Section 501(a) of the Code and, to the knowledge of the Sellers, there has been no event since the date of such exemption which would adversely affect such exemption. The Sellers have provided Buyer with the most recent determination letter of the Internal Revenue Service relating to each such Employee Plan. Each Employee Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code. (d) Schedule 3.16 identifies each Benefit Arrangement. The Sellers ---- have made available to Buyer copies or descriptions of each Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof. Each Benefit Arrangement has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations and has been maintained in good standing with applicable regulatory authorities. (e) No member of the Company Group has any current or projected liability in respect of post-employment or post-retirement health or medical or life insurance benefits for retired, former or current employees of the Company Group, except as required to avoid excise tax under Section 4980B of the Code. (f) Except as would not reasonably be expected to have a Material Adverse Effect, all contributions, premiums or payments required to be made with respect to any Employee Plan have been made on or before their due date or accrued on the unaudited interim combined balance sheet as of January 31, 1998 of the Companies and the Company Group Subsidiaries and as a result, there are no underfunded amounts thereunder that have not been paid or accrued with respect to such Employee Plans. No Employee Plan is currently subject to an audit or other investigation by the Internal Revenue Service, the Department of Labor, the PBGC or any other governmental or regulatory authority. Except as would not reasonably be expected to have a Material Adverse Effect, no lawsuits, claims (other than routine claims for benefits) or complaints to, or by, any person or governmental entity have been filed or are pending and there are no facts or contemplated events which could be expected to give rise to any such lawsuit, claim or complaint with respect to any Employee Plan. Section 3.17. Environmental Matters. Except as disclosed on Schedule 3.17 and except as to matters that would not reasonably be expected to have ---- a Material Adverse Effect: (a) there has been no written environmental audit of any Property conducted within the past two years by the Sellers, or any member of the Company Group, which has not been made available to Buyer prior to the date hereof; (b) no written notice, request for information, order, complaint or penalty has been received, and there are no judicial, administrative or other actions, suits, investigations or proceedings pending or threatened which allege a violation of any Environmental Law, in each case relating to any member of the Company Group arising out of any Environmental Law; (c) each member of the Company Group has all environmental permits necessary for the operations of that member of the Company Group to comply with all applicable Environmental Laws and are in compliance with the terms of such permits and with all other applicable Environmental Laws; and (d) no member of the Company Group has discharged, disposed of or released any Hazardous Substances on or at any of the Properties, other than the discharge, disposal or release of Hazardous Substances commonly present at or used in the operation and maintenance of shopping centers in quantities commonly present at shopping centers and in compliance with Environmental Laws; and (e) no member of the Company Group owns or leases any property in New Jersey or Connecticut. Section 3.18. Compliance with Laws and Court Orders. Except as disclosed in Schedule 3.18, no member of the Company Group is in violation ---- of any applicable law, rule, regulation, judgment, injunction, order or decree, except for violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Section 3.19. Rent Roll. The rent roll attached hereto as Schedule 3.19 identifying with respect to each tenant: the lease expiration date, ---- percentage and breakpoint amount, current monthly rent, operating escalations, current past due amount, amount of security deposits is true, correct and accurate as of the date of such rent roll, except for any such inaccuracies which, individually or in the aggregate, would not be material with respect to the relevant Property. Section 3.20. Disclosure Schedules. (a) At Closing, the Sellers may revise the Schedules and Exhibit A to this Agreement by delivering revised Schedules or a revised Exhibit A to Buyer to reflect any matter hereafter arising or discovered which, if existing or known at the date hereof, would have been required to be set forth herein or described thereon (but no such revision shall relieve the Sellers of liability hereunder for breach of a representation or warranty except as provided in Section 11.04(c) or modify -------- the representations and warranties for purposes of determining whether any condition to closing is satisfied). Buyer shall be reasonably satisfied with any changes to Exhibit A that are inconsistent with the representations, warranties and covenants contained herein and that would materially adversely affect Buyer. Any proposed revision to Exhibit A shall be provided to Buyer no later than five business days prior to Closing. (b) The parties acknowledge and agree that (i) the Schedules to this Agreement may include certain items and information solely for informational purposes for the convenience of Buyer; (ii) the disclosure by the Sellers of any matter in the Schedules shall not be deemed to constitute an acknowledgment by the Sellers that the matter is required to be disclosed by the terms of this Agreement or that the matter is material; and (iii) if any Schedule hereto discloses information that is or may be properly disclosed on another Schedule or Schedules, the matter shall be deemed to have been disclosed in such other Schedule or Schedules. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Sellers as of the date hereof and as of the Closing Date that: Section 4.01. Existence and Power. Buyer is a limited partnership duly formed, validly existing and in good standing under the laws of the state of Delaware and has all powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Section 4.02. Authorization. The execution, delivery and performance by Buyer of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby are within the powers of Buyer and have been duly authorized by all necessary action on the part of Buyer. This Agreement has been and the Escrow Agreement, upon the execution thereof, will be, duly executed and delivered by the Buyer. This Agreement constitutes and the Escrow Agreement, upon execution and delivery thereof by the parties thereto, will constitute, a valid and binding agreement of Buyer, enforceable against it in accordance with its terms. Section 4.03. Governmental Authorization. The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any governmental body, agency or official. Section 4.04. Noncontravention. The execution, delivery and performance by Buyer of this Agreement and the Escrow Agreement and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the organizational documents of Buyer, (ii) assuming compliance with the matters referred to in Section 4.03, violate any ---- applicable law, rule, regulation, judgment, injunction, order or decree, (iii) require any consent or other action by any person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or to a loss of any benefit to which Buyer is entitled under any provision of any agreement or other instrument binding upon Buyer or (iv) result in the creation or imposition of any material Lien on any asset of Buyer. Section 4.05. Financing. Buyer has, or will have prior to the Closing, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make timely payment of the Preliminary Purchase Price and any other amounts to be paid by it hereunder. Section 4.06. Purchase for Investment. Buyer is purchasing the Shares and the Notes, in the event of a Note Election, for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. Buyer (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares and the Notes, in the event of a Note Election, and is capable of bearing the economic risks of such investment. Section 4.07. Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer threatened against or affecting, Buyer before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement. Section 4.08. Brokers and Finders. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission upon consummation of the transactions contemplated by this Agreement. Section 4.09. Inspections; No Other Representations. Buyer is an informed and sophisticated purchaser, and has engaged expert advisors, experienced in the evaluation and purchase of companies such as the Company Group as contemplated hereunder. Buyer has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed and intelligent decision with respect to the execution, delivery and performance of this Agreement and the Escrow Agreement. Buyer acknowledges that the Sellers have given Buyer complete and open access to the key employees, documents and Properties of the Company Group. Buyer agrees to accept the Shares and the Properties in the condition they are in on the Closing Date based upon its own inspection, examination and determination with respect thereto as to all matters, and without reliance upon any express or implied representations or warranties of any nature made by or on behalf of or imputed to the Sellers, except as expressly set forth in this Agreement. BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE SELLERS MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY OF THE ASSETS OF THE COMPANY GROUP OR OF THE PROPERTIES. Without limiting the generality of the foregoing, Buyer agrees by acquiring the Shares, that it is accepting the Properties in their financial, physical and environmental condition existing on the Closing Date. Further, without limiting the generality of the foregoing, Buyer acknowledges that the Sellers are not bound by and have no responsibility for any expressed or implied warranties, statements or representations made or furnished by any investment banker, broker, agent, employee or other person representing or purporting to represent the Sellers, unless such warranties, statements or representations are expressly set forth herein. Further, without limiting the generality of the foregoing, Buyer acknowledges that, except as expressly set forth in this Agreement, the Sellers make no representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to Buyer of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of any member of the Company Group or the future business and operations of any member of the Company Group, (ii) any information or documents made available to Buyer or its advisors concerning the financial, physical or environmental condition of the Properties, the use to which the Properties may be put, the expenses of operation or maintenance of the Properties, the rental income or prospective rental income of the Properties, or anything else related to the Properties, or (iii) any other information or documents made available to Buyer or its counsel, accountants or advisors with respect to any member of the Company Group or their respective businesses or operations, except as expressly set forth in this Agreement. Nothing contained in this Section shall be deemed to limit the representations, warranties and covenants expressly contained in this Agreement. ARTICLE 5 COVENANTS OF THE SELLERS The Sellers agree that: Section 5.01. Conduct of the Company Group. (a) Except in connection with the Restructuring, from the date hereof until the Closing Date, the Sellers shall cause each member of the Company Group to conduct its businesses in the ordinary course consistent with past practices and to use commercially reasonable efforts to preserve intact its business organizations and relationships with third parties and to keep available the services of its present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, except as disclosed on Schedule 5.01 and except in connection with the ---- Restructuring, the Sellers will not permit any member of the Company Group to: (i) adopt or propose any change in its certificate of incorporation, bylaws or other organizational documents; (ii) merge or consolidate with any other Person or acquire the business or operations of any other Person; (iii) sell or otherwise dispose of the Properties or any material portion thereof; (iv) sell or otherwise dispose of any material assets or property (other than the Properties) except (A) pursuant to existing contracts or commitments that are listed on the Schedules hereto or (B) otherwise in the ordinary course consistent with past practices; or (v) make any material alterations to the Properties other than in connection with and in accordance with the development or improvement programs described on Schedule 5.01(a)(v) hereto; or ---------- (vi) agree or commit to do any of the foregoing. Except for actions taken in connection with the Restructuring and except for the transactions contemplated hereby, the Sellers will not take, and will not permit any member of the Company Group to take, any action that would make any representation or warranty of the Sellers hereunder inaccurate in any material respect at the Closing Date. (b) Notwithstanding anything to the contrary contained herein, or in any budget with respect to any Property, subject to the requirements of Section 2.07, none of the Sellers nor any member of the Company Group will ---- be required to make any repairs, replacements or improvements for existing conditions at any Property disclosed in any engineering report or in any of other written information made available to Buyer on or prior to the date hereof during the period from the date hereof to the Closing Date. If any such repairs, replacements or improvements are made by any member of the Company Group because such repairs, replacements or improvements (i) are required under legally binding agreements, (ii) are necessary to preserve the value of, or prevent further deterioration to, the relevant Property or (iii) have been requested to be made by Buyer, then Buyer shall reimburse the Sellers at Closing for the actual cost of such repairs, replacements or improvements. Section 5.02. Tenant Leases. Notwithstanding anything to the contrary contained herein and except for actions taken in connection with the Restructuring and pursuant to Section 2.07, the Sellers agree that from ---- the date hereof until the Closing Date: (a) Without Buyer's consent, Sellers will not, and will not permit any member of the Company Group to, terminate any Tenant Lease, except by reason of a material default by the tenant thereunder or as required thereunder or by applicable law. Buyer agrees that its consent under this paragraph shall not be unreasonably withheld, delayed or conditioned, and shall be deemed given if Buyer does not, within five business days after Buyer's receipt of a request for such consent, give notice to the Sellers stating that such consent is denied, the reasons for such denial and the conditions (if any) that would need to be complied with for such consent to be given (and if such conditions are complied with such consent shall be deemed given). Any Tenant Lease terminated by the Sellers or the Company Group pursuant to this paragraph shall be deemed deleted from the applicable Schedule 3.10; and ---- (b) Except for entering into the pending Tenant Leases disclosed in Schedule 3.10 on the terms described therein, without Buyer's consent, the ---- Sellers will not, and will not permit any member of the Company Group to, enter into any new Tenant Lease, for any Property. Buyer's consent under this paragraph shall not be unreasonably withheld, delayed or conditioned and shall be deemed given if Buyer does not, within five business days after Buyer's receipt of a request for such consent (which request shall include the identity of the proposed tenant, a summary of the proposed lease terms, including term, options to renew, options to cancel, rents, rent concessions, improvement allowances, improvement costs, etc., in reasonable detail and a statement of the amount of any brokerage commission payable with respect thereto) give notice to the Sellers stating that such consent is denied, the reasons for such denial and the conditions (if any) that would need to be complied with for such consent to be given (and if such conditions are complied with, such consent shall be deemed given). Any new lease made by the Sellers or the Company Group pursuant to this paragraph and any related real estate brokerage agreement shall be deemed added to the applicable Schedule 3.10. ---- Section 5.03. Access to Properties and Information; Confidentiality. (a) From the date hereof until the Closing Date, the Sellers will (i) give, and will cause each member of the Company Group to give, Buyer, its counsel, financial advisors, auditors and other authorized representatives reasonable access to the Properties, offices, books and records of (and accounting work papers relating to) the Company Group and to the books and records of the Sellers relating to the Company Group, (ii) furnish, and will cause each member of the Company Group to furnish, to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to any member of the Company Group as such persons may reasonably request and (iii) instruct the employees, counsel and financial advisors of the Sellers and any member of the Company Group to cooperate with Buyer in its investigation of any member of the Company Group, except, in each case, where compliance by the Sellers with these provisions would result in the violation of a confidentiality restriction with a third-party or would jeopardize the availability of the attorney-client privilege to any member of the Company Group. Any investigation pursuant to this Section 5.03 ---- shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Sellers or the Company Group and shall be limited to matters relating to this Agreement or the transactions contemplated hereby. Notwithstanding the foregoing, Buyer shall not conduct any invasive tests or inspections or any tests for the presence of Hazardous Substances without the consent of the Sellers. Also, notwithstanding the foregoing, Buyer shall not have access to personnel records of the Company Group relating to individual performance or evaluation records, medical histories or other information which in the Sellers' good faith opinion is sensitive or the disclosure of which could subject the Company Group to risk of liability. (b) On and after the Closing Date, the Sellers will afford promptly to Buyer and its agents reasonable access to their books of account, financial and other records (including, without limitation, accountant's work papers), information, employees and auditors to the extent necessary or useful for Buyer in connection with the performance of any of its obligations hereunder or in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to any member of the Company Group; provided that any such access by Buyer shall not unreasonably interfere with the conduct of the business of the Sellers. Buyer shall bear all of the out-of-pocket costs and expenses (including, without limitation, attorneys' fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing. Section 5.04. Notices of Certain Events. The Sellers shall promptly notify Buyer of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (c) any actions, suits, claims, investigations or proceedings commenced relating to the Seller or any member of the Company Group that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.12. ---- Section 5.05. Restructuring. The Sellers shall consummate the Restructuring at or prior to the Closing Date. Section 5.06. Resignations. The Sellers will deliver to Buyer at the Closing the resignations of all officers and directors of the members of the Company Group. Section 5.07. Estoppel Certificates. As soon as practicable after the date of this Agreement, the Sellers shall, or shall cause the members of the Company Group to, distribute to anchor tenants, any party to a COREA, any ground lessor, any other major contractors for Northridge Fashion Center and Regency Square Mall and each other individual tenant which under its lease occupies 5,000 or more square feet of floor area at the Properties under Tenant Leases to which any member of the Company Group is a party estoppel certificates, in Sellers' customary form, which shall be reasonably satisfactory to Buyer, and shall ask such parties to execute and return such estoppel certificates to the appropriate member of the Company Group prior to the Closing. The Sellers shall have no further obligation to obtain any such estoppel certificates, and the receipt of such estoppel certificates shall not be considered a condition to the closing of the transactions contemplated by this Agreement. If, prior to Closing, the Sellers receive any such estoppel certificates, the Sellers shall promptly deliver a copy of such estoppel certificates to Buyer. If the facts set forth in any estoppel certificate differ from those set forth in the Sellers' representations and warranties as set forth in this Agreement, then, after the Closing, the Sellers' representations and warranties shall be deemed amended to conform to the facts stated in such estoppel certificate. Section 5.08. Title Insurance and Surveys. Upon the written request of Buyer, the Sellers shall cooperate (including, without limitation, through the delivery by Sellers of customary documents to the Title Companies (as defined below)) with Buyer to cause the title insurance company that issued the Title Reports: Chicago Title Insurance Company, National Business Unit, Dollar, TX (or any other nationally recognized title company selected by Buyer and reasonably acceptable to Sellers) (the "TITLE COMPANIES") and the surveyors that issued the surveys (or other surveyors selected by Buyer) (the "SURVEYORS") to issue current title insurance policies as described in Section 10.02 and/or current surveys ----- certified to Buyer. All costs for such current surveys, and all premiums for and costs related to title insurance obtained by Buyer shall be paid by Buyer. Section 5.09. Certain Accounts and Agreements. The Sellers shall cause all intercompany balances (other than the Receivables Amount) between Parent or its Affiliates (other than members of the Company Group), on the one hand, and members of the Company Group, on the other hand, to be paid in full on or prior to the Closing. The Sellers shall cause all contracts or agreements between any members of the Company Group, on the one hand, and any of the Sellers or their Affiliates (other than members of the Company Group), on the other hand, to be terminated on or prior to the Closing. ARTICLE 6 COVENANTS OF BUYER Buyer agrees that: Section 6.01. Confidentiality. Prior to the Closing Date and after any termination of this Agreement, Buyer and its Affiliates will hold, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, lenders, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning any of the Sellers, the Companies or the Company Subsidiaries furnished to Buyer or its Affiliates in connection with the transactions contemplated by this Agreement (the "CONFIDENTIAL INFORMATION"), except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources other than the Sellers, the Companies or the Company Subsidiaries; provided that Buyer may disclose such Confidential Information to its officers, directors, employees, accountants, counsel, lenders, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. Buyer shall be responsible for any failure to treat the Confidential Information confidentially by such persons. The obligation of Buyer and its Affiliates to hold Confidential Information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, Buyer and its Affiliates will, and will use their best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Sellers, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or its Affiliates or on their behalf from the Sellers, the Companies or the Company Subsidiaries in connection with this Agreement that are subject to such confidence. Section 6.02. Access. Buyer will cause each member of the Company Group, on and after the Closing Date, to afford promptly to the Sellers and its agents reasonable access to (a) their properties, books, records (and accounting work papers relating to), employees and auditors to the extent necessary to permit the Sellers to determine any matter relating to its rights and obligations hereunder or to any period ending on or before the Closing Date or to the obligations of the Sellers pursuant to Section 2.07; ---- provided that any such access by the Sellers shall not unreasonably interfere with the conduct of the business of Buyer and (b) the Properties subject to the provisions of Section 2.07 for the purposes of performing ---- the obligations of the Sellers pursuant to Section 2.07. The Sellers will ---- hold, and will direct their officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning any member of the Company Group provided to it pursuant to this Section. Sellers shall be responsible for any failure to treat such documents and information confidentially by such persons. The obligation of Sellers and their respective Affiliates to hold such documents and information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. Section 6.03. Trademarks; Tradenames. After the Closing, Buyer shall not permit any member of the Company Group to use any of the marks or names set forth on Schedule 6.03. ---- ARTICLE 7 COVENANTS OF BUYER AND SELLER Buyer and the Sellers agree that: Section 7.01. Commercially Reasonable Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, the Sellers and Buyer will use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. The Sellers and Buyer agree, and the Sellers, prior to the Closing, and Buyer, after the Closing, agree to cause each member of the Company Group, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement. Section 7.02. Certain Filings. The Sellers and Buyer shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. The Sellers and Buyer shall provide to the other copies of any filings made pursuant to this Section 7.02 with respect to this Agreement or the transactions contemplated ---- hereby. Section 7.03. Public Announcements. To the extent practicable, the parties agree to consult with each other, before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. Section 7.04. Brokers. The Sellers shall pay the fees of any investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of any of them or any member of the Company Group who is entitled to any fee or commission in connection with the transactions contemplated by this Agreement. The Buyer shall pay the fees of any investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of it or its Affiliates who is entitled to any fee or commission in connection with the transactions contemplated by this Agreement. ARTICLE 8 TAX MATTERS Section 8.01. Tax Definitions. The following terms, as used herein, have the following meanings: "BASKET" means the amount at any time equal to (a) $100,000 plus the liabilities for Taxes, if any, provided for on the Closing Balance Sheet, minus (b) any reductions (in the aggregate) made pursuant to Section 8.06 ---- hereof. "CODE" means the United States Internal Revenue Code of 1986, as amended. "FEDERAL TAX" means any Tax imposed under Subtitle A of the Code. "FINAL DETERMINATION" shall mean (i) with respect to Federal Taxes, a "determination" as defined in Section 1313(a) of the Code or execution of an Internal Revenue Service Form 870AD and, with respect to Taxes other than Federal Taxes, any final determination of liability in respect of a Tax that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise (including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns or appeals from adverse determinations) or (ii) with respect to any Tax attributable to an item disallowed or adjusted by a Taxing Authority, the payment of such Tax by the person responsible therefore under applicable law; provided that such responsible party determines that no action should be taken to recoup such payment and the other party agrees. "POST-CLOSING TAX PERIOD" means any Tax Period beginning after the close of business on the Closing Date and that portion of any Straddle Period (as defined below) beginning after the close of business on the Closing Date. "PRE-CLOSING TAX PERIOD" means any Tax Period ending on or before the close of business on the Closing Date and that portion of any Straddle Period ending on or before the close of business on the Closing Date. "SELLER GROUP" means, with respect to Federal Taxes, the affiliated groups of corporations (as defined in Section 1504(a) of the Code) of which any of the Companies or the Company Subsidiaries is a member and, with respect to state income or franchise Taxes, any of the consolidated, combined or unitary groups of which the Companies or the Company Subsidiaries is a member. "TAX" means any tax or similar charge, together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax (a "TAXING AUTHORITY"). "TAX ASSET" means any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction or any other credit or tax attribute which could reduce Taxes (including, without limitation, deductions and credits related to alternative minimum Taxes). "TAX PERIOD" means, in respect of a particular Tax, the taxable year or other period for which Tax is imposed. "TAX SHARING AGREEMENT" means the tax sharing agreement between the members of the Company Group currently in effect. Section 8.02. Tax Representations. The Sellers represent and warrant to Buyer as of the date hereof and as of the Closing Date that, except as set forth in the Base Balance Sheet (including the notes thereto) or on Schedule 8.02, (i) all material Tax returns, statements, reports and forms ---- required to be filed with any Taxing Authority (collectively, the "RETURNS") on or before the Closing Date (taking into account any extension of time to file) by, or on behalf of, any Company or any Company Subsidiary have been filed or will be filed in accordance with all applicable laws; (ii) all such Returns are true, complete and correct in all material respects; (iii) all Taxes shown as due and payable on such Returns have been or will be paid prior to the Closing Date; (iv) there are no outstanding waivers extending the statutory period of limitations applicable to any Return required to be filed by any Company or any Company Subsidiary; (v) the charges, accruals and liabilities for Taxes with respect to the Companies and the Company Subsidiaries reflected on the Base Balance Sheet are adequate to cover the Tax liabilities accruing through the date thereof; (vi) there is no action, suit, proceeding, audit or claim by any Taxing Authority now pending (or to the Sellers' knowledge proposed) against or with respect to the Company or any Company Subsidiary; (vii) no deficiency for any Taxes has been assessed with respect to any Company or any Company Subsidiary that has not been abated, paid in full or contested; (viii) no consent has been filed relating to any member or prior member of the Seller Group pursuant to Section 341(f) of the Code; (ix) none of the Companies nor the Company Subsidiaries was a member of an affiliated group (as defined in Section 1504(a) of the Code) except for the affiliated group of which it is now a member; (x) with respect to state income or franchise taxes, no Company or Company Subsidiary has been a member of a consolidated, combined or unitary group other than the group comprising the group of which it is now a member (no member of which is not a member of the Seller Group); (xi) prior to the Closing, the Sellers shall have caused to be eliminated (a) any excess loss account which a member of the Company Group has in the stock of a Company Subsidiary and (b) any item of a member of the Company Group which arose as a result of an intercompany transaction or deferred intercompany transaction in a Pre-Closing Tax Period; and (xii) the combined earnings and profits of the Companies accumulated for all Tax Periods through and including the Tax Period ending at the close of business on the Closing Date (disregarding any Company having net negative accumulated earnings and profits) will be not more than $5,000,000 (reduced by any earnings and profits of a Company Subsidiary attributable to a Taxable Period in which such Company Subsidiary was not a member of the Company Group, whether or not such Company Subsidiary is a subsidiary of a Company having negative earnings and profits). Section 8.03. Tax Covenants. (a) Buyer covenants that it will not cause or permit any Company, any Company Subsidiary or any Affiliate of Buyer (i) to take any action on the Closing Date other than in the ordinary course of business, including but not limited to the distribution of any dividend or the effectuation of any redemption that could give rise to any tax liability of the Seller Group or any loss of the Sellers or the Seller Group under this Agreement (other than as provided in Section 2.03(c)), ------- (ii) to make any election or deemed election under Section 338 of the Code (or any comparable election under state, local or foreign law), or (iii) to make or change any tax election, amend any Return or take any position on any Return, take any action, omit to take any action or enter into any transaction that results in any increased Tax liability or reduction of any Tax Asset of the Seller Group in respect of any Pre-Closing Tax Period; provided that the Sellers acknowledge that Buyer or its assignee's election to be taxed as a REIT pursuant to Subchapter M of the Code, and the Companies and the Company Subsidiaries' treatment as Qualified REIT Subsidiaries, shall not be such an action, or omission to act, which results in an increased Tax liability or reduction of any Tax Asset of a Pre-Closing Period. Buyer agrees that the Sellers will have no liability for any Tax resulting from any action, referred to in the preceding sentence, of any Company, Company Subsidiary, Buyer or any Affiliate of Buyer on the Closing Date, and agrees to indemnify and hold harmless the Sellers and their Affiliates against any such liability or reduction. The Sellers agree to give prompt notice to Buyer of the assertion of any claim, or the commencement of any action or proceeding, in respect of which indemnity may be sought under this Section 8.03(a). Buyer may participate ------- in and assume the defense of any such suit, action or proceeding at its own expense. If Buyer assumes such defense, the Sellers shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at their own expense, separate from the counsel employed by Buyer. Whether or not the Sellers choose to defend or prosecute any claim, the parties hereto shall cooperate in the defense or prosecution thereof. (b) Buyer shall promptly pay or cause to be paid to the Sellers all refunds of Taxes and interest thereon (to the extent in excess of the amount recorded in the Final Stockholders' Equity Amount) received by Buyer, any Affiliate of Buyer, any Company, or any Company Subsidiary attributable to Taxes imposed on the Sellers, any Company or any Company Subsidiary (or any predecessor or Affiliate of the Sellers) with respect to any Pre-Closing Tax Period. The Sellers shall be subrogated to any rights of Buyer, any Company or any Company Subsidiary against third parties with respect to Taxes paid by any Seller or for which the Sellers otherwise are responsible under this Article 8. - (c) All transfer, documentary, sales, use, stamp, registration and similar taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne and paid by the Sellers and the Sellers will, at their own expense, file all necessary Returns and other documentation with respect to all such taxes and fees, and, if required by applicable law, Buyer will, and will cause its Affiliates to, join in the execution of any such Returns and other documentation. Section 8.04. Termination of Existing Tax Sharing Agreements. Any and all existing Tax sharing agreements between any Company and any member of the Seller Group (including, without limitation, the Tax Sharing Agreement) shall be terminated as of the close of business on the Closing Date. After such date none of the Companies, the Company Subsidiaries, the Sellers nor any Affiliate of the Sellers shall have any further rights or liabilities thereunder. This Agreement shall be the sole Tax sharing agreement relating to any Company or any Company Subsidiary for all Pre- Closing Tax Periods. Section 8.05. Tax Returns and Cooperation on Tax Matters. (a) Buyer and the Sellers agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information (including access to books and records) and assistance (including making its employees available on a mutually convenient basis) relating to the Companies and the Company Subsidiaries as is reasonably necessary for any determination with respect to Taxes, including the filing of any Return, the preparation for any audit, and the prosecution or defense of any claim, suit or proceeding relating to Taxes. Buyer and the Sellers agree to retain or cause to be retained all books and records pertinent to the Companies and the Company Subsidiaries until the applicable period for assessment under applicable law (giving effect to any and all extensions or waivers) has expired, and to abide by or cause the abidance with all record retention agreements entered into with any Taxing Authority. Buyer agrees to give the Sellers reasonable notice prior to discarding or destroying any such books and records relating to Tax matters and, if the Sellers so request, Buyer shall allow the Sellers to take possession of such books and records. Buyer and the Sellers shall cooperate with each other in the conduct of any audit or other proceedings involving the Seller Group for any Tax purposes and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this subsection. Any information obtained pursuant to Section 8.05 shall be kept confidential, except as may ---- be otherwise necessary in connection with the filing of Returns or claims for refund or in conducting an audit or other proceeding. (b) Buyer shall prepare and timely file or cause the Companies and the Company Subsidiaries to prepare and timely file all Returns relating to the Companies and any of the Company Subsidiaries that are due (taking into account any applicable extension period) after the Closing Date. Returns required to be filed by Buyer in respect of a Pre-Closing Period shall be prepared on a basis consistent with those prepared for prior tax years unless a different treatment of any item is required by an intervening change in law. Buyer shall furnish the Sellers (and their representatives) with a copy of any Return prepared by it for a Pre-Closing Period at least 20 business days before the anticipated filing date thereof and, in preparing such Return, shall accept any comments made by the Sellers with respect to any issue or item which could give rise to a claim for indemnification; provided that this sentence shall not apply in respect of any comments for which the Sellers do not provide Buyer, if so requested in writing to do so, with an opinion of counsel to the effect that there is a reasonable basis for the Sellers' comments. Section 8.06. Indemnification by Seller. (a) The Sellers hereby indemnify Buyer against and agree to hold it harmless from any (i) Tax imposed on any Company or any Company Subsidiary and (ii) out-of-pocket costs and expenses (including, without limitation, reasonable expenses of investigation and attorneys' fees and expenses), arising out of or incident to the imposition, assessment or assertion of any Tax indemnified under Section 8.06(a)(i), in each case with respect to any Pre-Closing Tax Period ---------- and in each case incurred or suffered by Buyer, any of its Affiliates or, effective for any Post-Closing Tax Period, any Company, or any Company Subsidiary (the sum of 8.06(a)(i) and 8.06(a)(ii) being referred to as a ---------- ----------- "LOSS"); provided that the Sellers shall have no liability for the payment of any Loss attributable to or resulting from (i) any action described in Section 8.03(a) hereof relating to any breach by Buyer, or its Affiliates ------- of an obligation under this Agreement, (ii) any transaction occurring after the close of business on the Closing Date or (iii) a reduction in any Tax Asset of any member of the Seller Group which would otherwise be available to the Buyer for a Post-Closing Tax Period; provided further, that the Sellers shall have no obligation to make any payment to Buyer pursuant to this Section 8.06(a) until the amount of all claims arising pursuant hereto ---- in the aggregate exceeds the Basket, in which case Buyer shall be entitled to indemnity for the full amount of all claims in excess of the Basket. (b) Any Taxes for a Tax Period beginning before the Closing Date and ending after the Closing Date (a "STRADDLE PERIOD") shall be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax Period on the basis of the actual operation of the Companies and the Company Subsidiaries. Each such Pre-Closing Tax Period and Post-Closing Tax Period shall be deemed to be a Tax Period subject to the provisions of Article 8. - (c) If as a result of an adjustment the Sellers make a payment to any Taxing Authority in respect of a Tax of any member of the Seller Group with respect to any Pre-Closing Tax Period, then Buyer shall promptly pay to the Sellers an amount equal to such payment made by the Sellers, provided, that any such payment by Buyer shall not exceed an amount equal to the positive balance, if any, in the Basket. (d) The Basket shall be reduced by (i) the amount of any claim of Buyer under Section 8.06(a) hereof that is not paid in whole or part by the ------- Sellers solely by reason of there being a positive balance in the Basket, and (ii) the amount of any payment of Buyer to the Sellers under Section 8.06(c) hereof. ------- (e) Any payment by the Sellers pursuant to this Section 8.06 shall be ---- made not later than 30 business days after receipt by the Sellers of written notice from Buyer stating that any Loss has been paid by Buyer, any of its Affiliates or, effective upon the Closing, any Company or any Company Subsidiary and the amount thereof and of the indemnity payment requested; provided that the Sellers shall not be required to make any payment hereunder earlier than five days before it is due to the appropriate Taxing Authority. In the case of a Tax that is contested in accordance with the provisions of Section 8.06(f), payment of such Tax to ------- the appropriate Taxing Authority shall not be considered due earlier than the date of Final Determination with respect to such Tax. (f) If any claim or demand for Taxes in respect of which indemnity may be sought pursuant to this Section 8.06 is asserted in writing against ---- Buyer, any of its Affiliates or, effective upon the Closing, any Company or Company Subsidiary, Buyer shall notify the Sellers of such claim or demand within 10 business days of receipt thereof, or such earlier time that would allow the Sellers to timely respond to such claim or demand (but no failure to so notify Sellers shall preclude indemnification hereunder except to the extent Sellers were prejudiced by such failure), and shall give the Sellers such information with respect thereto as the Sellers may reasonably request. The Sellers may discharge, at any time, their indemnification obligation under this Section 8.06 by paying to Buyer the amount of the ---- applicable Loss, calculated on the date of such payment. The Sellers may, at their own expense, participate in and, upon notice to Buyer, assume and control the defense of any such claim, suit, action, litigation or other proceeding (including any Tax audit, other than a claim under Section 8.06(i), in which event Sellers may, at their own expense, participate in the defense of such claim). Buyer shall empower by appropriate powers of attorney such persons as may be designated by the Sellers from time to time as its representatives in any such proceeding. If the Sellers assume such defense, Buyer shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Sellers. Whether or not the Sellers choose to defend or prosecute any claim, Buyer shall use reasonable efforts to mitigate any Loss and all of the parties hereto shall cooperate in the defense or prosecution thereof. (g) The Sellers shall not be liable under this Section 8.06 for (i) ---- any settlements effected, without the Sellers' prior written consent; provided that the Sellers have not affirmatively abandoned the contest of any such Tax or (ii) or resulting from any claim, suit, action, litigation or proceeding in which the Sellers were not permitted an opportunity to participate. (h) Any amount paid to or by the Sellers in respect of warranties or indemnities under this Agreement or the Related Agreements shall be treated as an adjustment to the Purchase Price. (i) Prior to the Closing, the Sellers shall cause KPMG Peat Marwick to prepare a report (which shall be reasonably acceptable to Buyer) setting forth the current and accumulated earnings and profits, if any, of the Company Group (the "E&P REPORT"). The cost of preparing the E&P Report shall be borne by the Sellers. As part of the Restructuring, the Sellers shall take such actions as are reasonably necessary to ensure that the combined earnings and profits of the Companies accumulated for all Tax Periods through and including the Tax Period ending at the close of business on the Closing Date (disregarding any Company having net negative accumulated earnings and profits) will be not more than $5,000,000 (reduced by any earnings and profits of a Company Subsidiary attributable to a Tax Period in which such Company Subsidiary was not a member of the Company Group, whether or not such Company Subsidiary is a subsidiary of a Company having negative earnings and profits). The Sellers hereby indemnify Buyer and General Growth Properties, Inc. ("GGPI"), which shall be a third party hereof notwithstanding Section 13.05, against any Taxes imposed on Buyer, ----- GGPI, any Affiliates of GGPI or any Company or Company Subsidiary as a result of the combined earnings and profits of the Companies accumulated for all Tax Periods through and including the Tax Period ending at the close of business on the Closing Date (disregarding any Company having net negative accumulated earnings and profits) exceeding $5,000,000 (reduced by any earnings and profits of a Company Subsidiary attributable to a Tax Period in which such Company Subsidiary was not a member of the Company Group, whether or not such Company Subsidiary is a subsidiary of a Company having negative earnings and profits). In no event, however, shall the Sellers' liability under this Section 8.06(i) and Section 8.02(xii) exceed ------- $25,000,000. (j) This Article 8 shall be the sole provision governing Tax matters - and indemnities therefor under this Agreement, except as and to the extent provided in Section 11.06. ----- Section 8.07. Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of this Article shall survive for thirty days following the full period of all statutes of limitations (giving effect to any waiver, mitigation or extension thereof). Section 8.08. Withholding. On or prior to Closing, the Sellers shall submit an application for a withholding tax certificate and shall provide Buyer with notice thereof, as provided for in Treasury regulation (S)1.1445-1(c)(2)(i)(b). Buyer shall withhold 10% of the Purchase Price allocated to the Shares hereunder, as paid from time to time, pursuant to Section 1445 of the Code and deposit such amount in an interest-bearing escrow account to be established by the Sellers and Buyer with a financial institution designated by the Sellers. On the 20th day following receipt of a final determination by the Internal Revenue Service with respect to the Seller's application for the withholding tax certificate, the amount of such escrow account shall be distributed as follows: (i) to the Internal Revenue Service, an amount equal to the amount set forth in such final determination; and (ii) to the Sellers, an amount equal to the balance of the escrow account (including any accrued interest) after the distribution provided for in (i) above. ARTICLE 9 Employee Benefits Section 9.01. Employment of Company Group Employees; Service Recognition. (a) Buyer or its Affiliates may, but shall not be obligated to, offer to employ any or all employees of the Company Group ("EMPLOYEES") on such terms as it deems advisable. The Sellers shall cause all Employees of the Company Group to be terminated immediately prior to the Closing Date. (b) Buyer and its Affiliates shall, with respect to Employees who are employed by Buyer or its Affiliates following Closing, recognize service with the Sellers, the Company Group and their Affiliates as service for all purposes under any benefit plan maintained by Buyer or its Affiliates in which such Employees are otherwise eligible to participate, except for purposes of benefit accrual under any defined benefit pension plan. Buyer and its Affiliates shall credit the dollar amount of all expenses incurred by such Employees and their respective eligible dependents during the applicable plan year in which occurs the Closing Date, to the extent relevant, for purposes of satisfying such plan year's deductible and co- payment limitations under any applicable plan in which such Employees participate after the Closing Date. (c) Notwithstanding the foregoing, this Section 9.01 shall not apply ---- to any Employee included in a unit of employees covered by a collective bargaining agreement. Section 9.02. Stay Sell Agreement. (a) Notwithstanding any termination of an Employee pursuant to Section 9.01, Buyer shall assume, ---- and shall hold the Sellers and their Affiliates harmless from, all liability for "Severance Pay", within the meaning of the Stay Sell Agreements or any other severance plan or policy of any Company, with respect to any Employee who is employed by Buyer or its Affiliates in any capacity at any time during the period commencing on the 30th day after the Closing Date and ending on the second anniversary of the Closing Date (a "RETAINED EMPLOYEE"). On or prior to the 30th day after the Closing Date, Buyer shall provide Parent with a written list of those Employees covered by the Stay Sell Agreements who Buyer does not intend to treat as a Retained Employee. (b) Except as provided in paragraph 9.02(a) of this Section, Parent ------- or its Affiliate shall retain or assume, and shall hold Buyer and its Affiliates harmless from, all liabilities arising under the Stay Sell Agreements or any other severance plan or policy of any Company or any other member of the Company Group. Section 9.03. Annual Bonuses. The pro rata portion of each Retained Employee's annual bonus and vacation pay, if any, earned through the Closing Date for the calendar year in which the Closing Date occurs shall be calculated by the Sellers as soon as practicable after the Closing Date, and reflected as a liability on the Closing Balance Sheet. Section 9.04. No Third-Party Beneficiaries. The provisions of this Article shall not create any rights in any Employee or any other person who is not a party to this Agreement, and no such person shall have any rights as a third party beneficiary hereof. ARTICLE 10 Conditions to Closing Section 10.01. Conditions to Obligations of Buyer and Sellers. The obligations of Buyer and the Sellers to consummate the Closing are subject to the satisfaction of the following conditions: (a) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Closing. (b) All actions by or in respect of or filings with any governmental body, agency, official or authority required to permit the consummation of the Closing shall have been taken, made or obtained, except for any such actions or filings the failure to take, make or obtain would not reasonably be expected to have a Material Adverse Effect. (c) No termination of this Agreement by the Sellers or Buyer shall have occurred pursuant to any other provision hereof. Section 10.02. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction of the following further conditions: (a) (i) The Sellers shall have performed in all material respects all of their obligations hereunder required to be performed by them on or prior to the Closing Date, (ii) the representations and warranties of the Sellers contained in this Agreement (without regard to any materiality or Material Adverse Effect qualifications contained therein) shall be true at and as of the Closing Date, as if made at and as of such date, with only such exceptions as are related to or contemplated by the Restructuring or would not in the aggregate have a Material Adverse Effect and (iii) Buyer shall have received a certificate signed by a senior officer of each of the Sellers to the foregoing effect. (b) The Sellers shall have received all consents, authorizations or approvals from the governmental agencies referred to in Section 3.03, in ---- each case in form and substance reasonably satisfactory to Buyer, and no such consent, authorization or approval shall have been revoked. (c) The Restructuring shall have been consummated on or prior to the Closing. (d) The Title Companies shall be willing to issue to Buyer (or, at Buyer's option, the appropriate member of the Company Group), on and effective as of the Closing Date, a title insurance policy or policies (each a "TITLE POLICY") on the 1992 ALTA form owner's policy insuring Buyer (or, at Buyer's option, the appropriate member of the Company Group) as to title to each of the Properties as described in the Existing Title Reports and as to valid easement rights to any property covered by a party to a COREA (i) subject to no exclusions or exceptions other than Closing Permitted Liens, (ii) limiting the "rights of parties in possession" exception to "rights of tenants as tenants only" without options to purchase, and (iii) including comprehensive, zoning 3.1 (with parking), non-imputation, tax parcel, survey, contiguity, creditor's rights, access, fairway (Boulevard Mall only), and utility facility endorsements, to the extent available and appropriate. The aggregate amount of the Title Policies shall be equal to the Preliminary Purchase Price. For purposes hereof, "CLOSING PERMITTED LIENS" means: (i) any and all Ground Leases, Tenant Leases, COREAs, Management Agreements, Brokerage Agreements, Construction Agreements and Service Agreements relating to such Property; (ii) Liens relating to such Property disclosed or reflected in or on the relevant Existing Title Reports or the relevant Existing Surveys (other than Tenant Leases that have expired or been terminated, Liens for taxes, assessments and similar charges and Liens that relate to Indebtedness that has been satisfied); (iii) Liens with respect to such Property disclosed or reflected on the Balance Sheet, the Closing Balance Sheet or notes to either or securing liabilities reflected on the Balance Sheet or notes to either and not satisfied, released or otherwise terminated subsequent to the date of the Balance Sheet; (iv) Liens with respect to such Property for taxes, assessments and similar charges that are not yet due or are being contested in good faith; (v) mechanic's, materialman's, carrier's, repairer's and other similar third-party Liens with respect to such Property arising or incurred in the ordinary course of business or that are not yet due and payable or are being contested in good faith or that are the obligation of any party (other than a member of the Company Group) under any COREA, any tenant under any Tenant Lease or any manager or other party (other than a member of the Company Group) under any Management Agreement, Service Agreement, Construction Contract or other contract or agreement to pay, bond or remove; (vi) third party Liens with respect to such Property incurred since the Balance Sheet Date and described on Schedule 3.10(b); or ------- (vii) other Liens with respect to such Property which, individually or in the aggregate, would not reasonably be expected to materially restrict the current use of such Property or materially impair the value of such Property. (e) Buyer shall have received all documents it may reasonably request relating to the existence of the Sellers, the members of the Company Group and the authority of the Sellers for this Agreement, all in form and substance reasonably satisfactory to Buyer. (f) Buyer shall have received an opinion of counsel to the Sellers in form reasonably acceptable to Buyer. Section 10.03. Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the Closing is subject to the satisfaction of the following further conditions: (a) (i) Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement shall be true in all material respects at and as of the Closing Date, as if made at and as of such date and (iii) the Sellers shall have received a certificate signed by a senior officer of Buyer to the foregoing effect. (b) Buyer shall have received all consents, authorizations or approvals, including those from governmental agencies referred to in Section 4.03, in each case in form and substance reasonably satisfactory to ---- the Sellers, and no such consent, authorization or approval shall have been revoked. (c) The Sellers shall have received all documents it may reasonably request relating to the existence of Buyer and the authority of Buyer for this Agreement, all in form and substance reasonably satisfactory to the Sellers. (d) The Buyer shall have deposited with the Escrow Agent the Deposit. (e) The Sellers shall have received an opinion of counsel to the Buyer in form reasonably acceptable to Sellers. ARTICLE 11 Survival; Indemnification Section 11.01. Survival. Unless otherwise provided herein, the covenants, agreements, representations and warranties of the parties hereto contained in this Agreement shall survive the Closing until June 1, 1999 (the "EXPIRATION DATE"); provided that the covenants, agreements, representations and warranties contained in (i) Section 2.07 and Article 8 ---- - shall survive for the periods set forth therein and; (ii) Sections 2.04, ---- 2.05, 3.01 - 3.06, 4.01 - 4.04, 4.09, 5.03(b), 5.05, 5.09, 6.02, 6.03, ---- ---- ---- ---- ---- ---- ------- ---- ---- ---- ---- 7.01, 7.03, 7.04, 9.02, 9.03, 9.04, and Articles 11 and 13 shall survive ---- ---- ---- ---- ---- ---- -- -- indefinitely. Notwithstanding the preceding sentence, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. Section 11.02. Indemnification. (a) From and after Closing, the Sellers hereby indemnify Buyer and its Affiliates against and agree to hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) ("DAMAGES") incurred or suffered by Buyer, the members of the Company Group or any of their Affiliates (i) arising out of any misrepresentation or breach of representation or warranty, in each case made by any of the Sellers pursuant to this Agreement (without regard to any materiality or Material Adverse Effect qualifications contained in any representation or warranty other than Section 3.07) and which survives the ---- Closing (other than Article 8), (ii) arising out of any breach of any - covenant or agreement made or to be performed by any of the Sellers pursuant to this Agreement and which survives the Closing (other than Article 8), (iii) arising out of any Excluded Asset or Excluded Liability, - (iv) arising out of any mechanic's, materialman's, carrier's, repairer's and other similar Liens with respect to any Property to the extent such Liens result from landlord's acts (or the acts of those acting by, through or under landlord) taken prior to Closing or relating to acts of tenants (or those acting by, through or under them), which tenants, are not in possession of the leased premises to which the Lien relates or have filed for bankruptcy, in each case as of the Closing Date, or (v) arising out of any obligation of a member of the Company Group under the Related Agreements; provided that the Sellers shall not be liable under 11.02(a)(i) ----------- unless the aggregate amount of Damages with respect to all matters referred to in Section 11.02(a)(i) exceeds $8,000,000 and then only to the extent of ----------- such excess and the Sellers' maximum aggregate liability under Section 11.02(a)(i) shall not exceed $50,000,000. Parent ----------- shall be entitled to receive and retain any amount, and Buyer shall pay to Parent any amount it shall receive which is payable to Parent or to any member of the Company Group under any of the Related Agreements. (b) From and after Closing, the Sellers hereby indemnify Buyer and its Affiliates against and agree to hold each of them harmless from any and all Damages, in excess of the reserve established therefor on the Closing Balance Sheet, incurred or suffered by Buyer, the members of the Company Group or any of their Affiliates arising out any of the litigation matters scheduled on Schedule 11.02(b) hereof. The parties agree that (i) the -------- reserve to be established on the Closing Balance Sheet in respect of such litigation matters shall be $40,000 and (ii) Buyer and its Affiliates shall undertake the defense of the same. Buyer and its Affiliates may not make any compromise or settlement, or consent to the entry of judgment, in any such litigation matter without the prior written consent of Parent, which shall not be unreasonably withheld. (c) From and after Closing, Buyer hereby indemnifies the Sellers and their Affiliates against and agrees to hold each of them harmless from any and all Damages incurred or suffered by the Sellers or any of their Affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement and which survives the Closing (other than pursuant to Article 8); provided that (i) Buyer shall not be liable under this Section 11.02(c) - -------- unless the aggregate amount of Damages with respect to all matters referred to in this Section 11.02(c) exceeds $8,000,000 and then only to the extent -------- of such excess and (ii) Buyer's maximum aggregate liability under this Section 11.02(c) shall not exceed $50,000,000. -------- Section 11.03. Procedures. (a) The party seeking indemnification under Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice ----- to the party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the assertion of any claim, or the commencement of any suit, action or proceeding ("CLAIM") in respect of which indemnity may be sought under such Section and will provide the Indemnifying Party such information with respect thereto that the Indemnifying Party may reasonably request. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have adversely prejudiced the Indemnifying Party. (b) The Indemnifying Party shall be entitled to participate in the defense of any Claim asserted by any third party ("THIRD PARTY CLAIM") and, subject to the limitations set forth in this Section, shall be entitled to control and appoint lead counsel (who shall be reasonably acceptable to the Indemnified Party) for such defense, in each case at its expense. (c) If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section, (i) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld) before entering into any settlement of such Third Party Claim or consenting to entry of any judgment and (ii) the Indemnified Party shall be entitled to participate in the defense of such Third Party Claim and to employ separate counsel of its choice for such purpose. The fees and expenses of such separate counsel shall be paid by the Indemnified Party, except that if the Indemnifying Party has a conflict of interest with respect to any Third Party Claim, the Indemnifying Party shall pay the fees and expenses of such separate counsel for the Indemnified Party. (d) If the Indemnifying Party shall fail to timely undertake the defense of any Third Party Claim in accordance with the provisions of this Section and notify the Indemnified Party thereof, the Indemnified Party may, but shall not be obligated to, undertake the defense of the same and make any compromise or settlement thereof and recover the entire cost thereof from the Indemnifying Party, including without limitation reasonable attorneys' and expert's fees (but the Indemnified Party shall not have the right to make any compromise or settlement of, or consent to the entry of judgment in, any such Third Party Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld). (e) Each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith. Section 11.04. Calculation of Damages. (a) The amount of any Damages payable under Section 11.02 by the Indemnifying Party shall be net of any ----- amounts recovered or recoverable by the Indemnified Party under applicable insurance policies. (b) The Indemnifying Party shall not be liable under Section 11.02 ----- for any (i) Damages relating to any matter to the extent that (A) there is included in the Closing Balance Sheet a specific liability or reserve relating to such matter or (B) the Indemnified Party had otherwise been compensated for such matter pursuant to the Purchase Price adjustment under Section 2.05 or (ii) consequential or punitive Damages. Any calculation of ---- lost profits shall not include a capitalization rate or other earnings multiplier. (c) Notwithstanding any other provision of this Agreement to the contrary, if on the Closing Date the Indemnified Party has actual knowledge of any information that would cause one or more of the representations and warranties made by the Indemnifying Party to be inaccurate as of the date made (other than those contained in Section 8.02(viii) and (xi), the ---- Indemnified Party shall have no right or remedy after the Closing with respect to such inaccuracy to the extent of the Indemnified Party's actual knowledge thereof and shall be deemed to have waived its rights to indemnification in respect thereof. Section 11.05. Assignment of Claims. If the Indemnified Party receives any payment from an Indemnifying Party in respect of any Damages pursuant to Section 11.02 and the Indemnified Party could have recovered ----- all or a part of such Damages from a third party (a "POTENTIAL CONTRIBUTOR") based on the underlying Claim asserted against the Indemnifying Party, the Indemnified Party shall assign such of its rights to proceed against the Potential Contributor as are necessary to permit the Indemnifying Party to recover from the Potential Contributor the amount of such payment; provided that the Indemnified Party shall not be required to assign any right to proceed against a Potential Contributor if the Indemnified Party determines in its reasonable discretion that such assignment would be materially detrimental to its reputation or future business prospects. Section 11.06. Exclusivity. Except as specifically set forth in this Agreement, Buyer waives any rights and claims Buyer may have against the Sellers, whether in law or in equity, relating to any of the Companies or the Shares or the transactions contemplated hereby (other than claims for fraud). The rights and claims waived by Buyer include, without limitation, claims for contribution or other rights of recovery arising out of or relating to any Environmental Law, claims for breach of contract, breach of representation or warranty, negligent misrepresentation and all other claims for breach of duty (other than claims for breach of this Agreement or representations or warranties expressly set forth in this Agreement). After the Closing, Sections 8.06 and 11.02 will provide the exclusive ---- ----- remedy (other than equitable remedies and other than a claim at law for breach of representation, warranty, or covenant contained in Section 8.02(viii), 8.02(xi), 8.03, 8.04, 8.05 or 8.08) for any misrepresentation, ---- ---- ---- ---- ---- ---- breach of warranty, covenant or other agreement (other than those contained in Sections 2.05 and 2.07) or other ---- ---- claim arising out of this Agreement or the transactions contemplated hereby. ARTICLE 12 Termination Section 12.01. Grounds for Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual written agreement of the Sellers and Buyer; (b) by Buyer, if on or before 5:00 p.m. New York City time on April 20, 1998 (the "EFFECTIVE DATE") Buyer is not reasonably satisfied with the disclosure schedules and Exhibit A attached hereto. (c) by either the Sellers or Buyer if the Closing shall not have been consummated on or before June 30, 1998; or (d) by either the Sellers or Buyer if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any court or governmental body having competent jurisdiction. The party desiring to terminate this Agreement pursuant to Sections 12.01(b), 12.01(c) or 12.01(d) shall give notice of such termination to the -------- -------- -------- other party. Section 12.02. Effect of Termination. If this Agreement is terminated as permitted by Section 12.01; such termination shall be without ----- liability of either party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party to this Agreement; provided that if such termination shall result from the willful (i) failure of either party to fulfill a condition to the performance of the obligations of the other party, (ii) failure to perform a material covenant of this Agreement or (iii) breach by either party hereto of any representation or warranty or material agreement contained herein, such party shall be fully liable for any and all Damages incurred or suffered by the other party as a result of such failure or breach. The provisions of Sections 2.06, 6.01, 7.03, 7.04, 9.04, 13.03, 13.06, 13.07, ---- ---- ---- ---- ---- ----- ----- ----- 13.08, 13.09, 13.15 and 13.16 shall survive any termination hereof pursuant ----- ----- ----- ----- to Section 12.01. ----- ARTICLE 13 Miscellaneous Section 13.01. Notices. All notices, requests, responses and other communications required or permitted hereunder shall be in writing (including facsimile transmission), signed by the party giving the same or by its attorneys, and shall be given: (a) if to the Sellers: MEPC plc Nations House 103 Wigmore Street London, W1H 9AB England Attention: James Dundas Finance Director Fax number: 011-44-171-499-0643 MEPC North American Properties Limited Nations House 103 Wigmore Street London, W1H 9AB England Attention: James Dundas Fax number: 011-44-171-499-0643 U.K.American Holdings Limited c/o MEPC plc Nations House 103 Wigmore Street London, W1H 9AB England Attention: James Dundas Fax number: 011-44-171-499-0643 with copies to: MEPC Management Inc. 15303 Dallas Parkway Suite 400, LB5 Dallas, TX 75248 Attention: David L. Gruber President Fax number: 972-980-5092 Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attention: David J. Strupp, Esq. Fax number: 212-450-4800 (b) if to Buyer: General Growth Properties, Inc. 110 North Wacker Drive Chicago IL 60606 Attention: Matthew Bucksbaum Fax Number: 312-551-5475 with copy to: Neal, Gerber & Eisenberg Two North LaSalle Street, Suite 2200 Chicago, IL 60602 Attention: Marshall E. Eisenberg Fax Number: 312-269-1747 or at such other address or copy address as may be designated by a notice of change of address given in accordance herewith. Each notice, request, response or other communication shall be deemed to have been given and to be effective upon being (i) personally delivered with receipt for delivery, (ii) deposited with a nationally recognized overnight express delivery service for next business day delivery with receipt for delivery, (iii) sent by facsimile transmission with confirmation of delivery, or (iv) deposited in the United States mail, postage prepaid, registered or certified with return receipt requested, to the addressee at its address set forth above or in a change of address notice given in accordance herewith. The time period in which a response to any such notice, request or other communication must be given shall commence on the date of receipt thereof or deemed receipt thereof as provided below. Personal delivery to a party or any officer, partner or employee of such party at its address set forth above or in a change of address notice given in accordance herewith shall be deemed given and received at the time delivered. Rejection or other refusal shall also be deemed receipt. Section 13.02. Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 13.03. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement or the transactions contemplated hereby, other than accounting fees and expenses payable under Section 2.04(c) and costs of obtaining additional title ------- insurance policies and surveys payable under Section 5.08, shall be paid by ---- the party incurring such cost or expense. Section 13.04. Successors and Assigns. Subject to Section 2.04 the ---- provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Buyer may assign its rights hereunder to any wholly- owned subsidiary of Buyer without the consent of Sellers, in which case Buyer will not be relieved of any of its obligations hereunder. Section 13.05. Third-Party Beneficiaries. The provisions of this Agreement are for the sole benefit of the parties hereto and their successors and permitted assigns; and none of the provisions of this Agreement is intended to or shall be construed as conferring any rights upon any person other than the parties hereto and their successors and permitted assigns. Section 13.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such State which might cause the laws of any other jurisdiction to govern this Agreement. Section 13.07. Jurisdiction. Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any other New York State court sitting in New York City, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 13.01 shall be ----- deemed effective service of process on such party. Section 13.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 13.09. Attorneys' Fees. In the event of any suit, action or proceeding relating to this Agreement, the prevailing party or parties shall be entitled to recover reasonable attorneys' fees and disbursements as a part of its judgment. Any amounts owing hereunder which are not paid when due shall bear interest at the Rate. Section 13.10. No Recording. Neither this Agreement nor any memorandum or other document referring to this Agreement shall be recorded. Any such recording shall be void and of no force or effect. Section 13.11. Entire Agreement. This Agreement and the Closing Documents constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements, understandings, representations and statements of any kind whatsoever, both oral and written, between the parties or their representatives with respect to the subject matter of this Agreement. Section 13.12. Invalid Provisions. If any provision of this Agreement or the application of any provision of this Agreement to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Agreement or the application of such provision to any other persons or circumstances shall not be affected thereby, and this Agreement and each of the provisions hereof shall be valid and enforceable to the fullest extent permitted by law. Section 13.13. Counterparts. This Agreement may be signed in any number of counterparts; the signatures on each counterpart shall be deemed to be on the same instrument; each of such counterparts shall be deemed to be an original; all of such counterparts shall be deemed to be a single instrument; and signatures on any counterpart delivered by facsimile transmission shall have the same effect as the original signatures. Section 13.14. Binding Effect. This Agreement shall not be a binding obligation of the Sellers until it has been fully executed by Buyer and the Sellers, the Sellers have delivered a fully executed counterpart hereof to Buyer, and the Sellers have received the proceeds of the Deposit. Section 13.15. Specific Performance. The Sellers acknowledge that a failure by the Sellers to close the transactions contemplated by this Agreement in violation of this Agreement will irreparably harm Buyer and that money damages may not be adequate and, accordingly, that Buyer shall, in addition to other available remedies, be entitled to specific performance in the event of the failure of the Sellers to close the transactions contemplated by this Agreement in violation of this Agreement. Section 13.16. Joint and Several Liability. Each of the Sellers shall be jointly and severally liable for the obligations, representations, warranties and covenants of one or more of the Sellers hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. SELLERS: MEPC PLC By: /s/ James Dundas -------------------------------- Name: James Dundas Title: Director By: /s/ David S. Gruber -------------------------------- Name: David S. Gruber Title: Director MEPC NORTH AMERICAN PROPERTIES LIMITED By: /s/ James Dundas -------------------------------- Name: James Dundas Title: Director By: /s/ David S. Gruber -------------------------------- Name: David S. Gruber Title: Director U.K.-AMERICAN HOLDINGS LIMITED By: /s/ James Dundas -------------------------------- Name: James Dundas Title: Director By: /s/ David S. Gruber -------------------------------- Name: David S. Gruber Title: Director BUYER: GGP LIMITED PARTNERSHIP By: General Growth Properties, Inc., its General Partner By: /s/ Matthew Bucksbaum -------------------------------- Name: Matthew Bucksbaum Title: Chairman of the Board of Directors EX-2.3 4 MERGER AGREEMENT Exhibit 2.3 MERGER AGREEMENT Among GGP Limited Partnership, GGP Acquisition L.L.C. And U.S. Prime Property Inc. May 14, 1998 TABLE OF CONTENTS 1. Definitions............................................................................. 1 2. Basic Transaction.......................................................................11 (a) The Merger.........................................................................11 (b) The Closing........................................................................11 (c) Actions at the Closing.............................................................11 (d) Effect of Merger...................................................................12 (e) Procedure for Payment..............................................................14 (f) Closing of Transfer Records........................................................16 (g) Dissenters' Rights.................................................................16 (h) Escrow of Deposit..................................................................16 (i) Escrow For Post-Closing Claims and Adjustments.....................................17 (j) Withholding Matters................................................................17 (k) Net Quick Asset Adjustment.........................................................19 (l) Further Assurances.................................................................22 3. Representations and Warranties of the Company...........................................22 (a) Organization, Qualification and Corporate Power....................................22 (b) Capitalization.....................................................................23 (c) PCI; the Venture; the Trust........................................................23 (d) Subsidiaries; Other Equity Interests...............................................23 (e) Authorization of Transaction.......................................................24 (f) Noncontravention...................................................................24 (g) Financial Statements...............................................................25 (h) Events Subsequent to Most Recent Fiscal Period End.................................26 (i) Tax Returns and Liabilities........................................................27 (j) Litigation.........................................................................29 (k) Real and Personal Property.........................................................29 (l) Shopping Centers - Service Contracts; Leases; REAs; and Brokerage Commissions; Other Material Contracts..............................................29 (m) Shopping Centers - Representations Pertaining to the Premises and Legal Matters............................................................................32 (n) Debt Instruments...................................................................34 (o) ERE Yarmouth Agreement.............................................................34 (p) Hart-Scott-Rodino Act..............................................................34 (q) Employees..........................................................................35 (r) Brokers' Fees......................................................................35 (s) Promotional Funds..................................................................35 (t) Violations.........................................................................35 (u) Licenses and Permits...............................................................36
i (v) Tenant Bankruptcy........................................................36 (w) Intellectual Property....................................................36 (x) Tax Assessments..........................................................36 (y) Bank Accounts and Powers of Attorney.....................................37 (z) Records..................................................................37 4. Representations and Warranties of the Buyer and the Transitory Subsidiary.....37 (a) Organization.............................................................37 (b) Financial Ability to Perform.............................................37 (c) Authorization of Transaction.............................................37 (d) Noncontravention.........................................................38 (e) Litigation...............................................................38 (f) The Transitory Subsidiary................................................38 (g) Brokers' Fees............................................................38 5. Survival of Representations and Warranties....................................39 6. Claims Against the Escrow Fund................................................39 7. Covenants.....................................................................39 (a) General..................................................................39 (b) Notices and Consents.....................................................39 (c) Regulatory Matters; Stockholder Approval.................................40 (d) Conduct of Business by the Company.......................................40 (e) Full Access..............................................................42 (f) Notice of Developments...................................................42 (g) Indemnification; Directors' and Officers' Insurance......................43 (h) Contracts, Transfers and Encumbrances....................................46 (i) Tenant Leases and REAs...................................................46 (j) Notice...................................................................47 (k) Estoppel Letters; Rent Roll..............................................47 (l) Taxes; Notices; Lease Negotiations; and Insurance........................48 (m) Other Obligations........................................................48 (n) Contest..................................................................49 (o) Transfer Taxes...........................................................49 (p) Exclusivity..............................................................49 (q) Governmental Entities....................................................50 (r) Employees................................................................50 8. Delivery of Title Commitments and Surveys.....................................50 9. Conditions to Obligation to Close.............................................52 (a) Conditions to Obligations of the Buyer and the Transitory Subsidiary.....52 (b) Conditions to Obligation of the Company..................................55
ii 10. Termination..............................................................56 (a) Termination of Agreement and Remedies...............................56 (b) Effect of Termination...............................................57 (c) Remedies............................................................57 11. Miscellaneous............................................................57 (a) Press Releases and Public Announcements.............................57 (b) No Third-Party Beneficiaries........................................58 (c) Entire Agreement....................................................58 (d) Succession and Assignment...........................................58 (e) Counterparts........................................................58 (f) Headings............................................................58 (g) Notices.............................................................58 (h) Governing Law.......................................................60 (i) Amendments and Waivers..............................................60 (j) Severability........................................................60 (k) Construction........................................................60 (l) Consent of the Buyer................................................61 (m) Expenses............................................................61 (n) Enforcement of Agreement............................................61 (o) Waiver of Jury Trial................................................61 (p) Incorporation of Exhibits and Schedules.............................61
Exhibit A--List of Properties Exhibit B--Form of Certificate of Merger Exhibit C--Certificate of Incorporation Exhibit D--Bylaws Exhibit E--Form of Letter of Transmittal Exhibit F--Intentionally Omitted Exhibit G--Form of Deposit Escrow Agreement Exhibit H--Form of Post-Closing Escrow Agreement Exhibit I--Form of Non-Foreign Person Certificate Exhibit J--Form of Notice of Submission of Application for Withholding Certificate Exhibit K--Certain Liabilities on Net Quick Assets Schedules Exhibit L--Forms of Estoppel Exhibit M--Intentionally Omitted Schedule I--Stockholders to be Parties to Post-Closing Escrow Agreement Schedule II--List of Knowledge Persons Schedule III--Approved Committed Capital Expenditures and Tenant Improvements and Certain Due Diligence Items, Commissions and Other Matters Disclosure Schedule--Exceptions to Representations and Warranties and other Provisions iii MERGER AGREEMENT Merger Agreement, entered into on May 14, 1998, by and among GGP Limited Partnership, a Delaware limited partnership (the "Buyer"), GGP Acquisition, L.L.C., a Delaware limited liability company wholly-owned by the Buyer (the "Transitory Subsidiary"), and U.S. Prime Property Inc., a Delaware corporation (the "Company"). The Buyer, the Transitory Subsidiary and the Company are each sometimes referred to herein as a "Party" and collectively as the "Parties". This Agreement contemplates a transaction in which the Buyer will acquire the Company for cash through a reverse subsidiary merger of the Transitory Subsidiary with and into the Company. It is intended that, immediately prior to the Effective Time (as hereinafter defined), P City, Inc. ("PCI"), a Delaware corporation which is the owner of a fifty percent interest in the partnership which owns the entire beneficial interest in Park City Center, located in Lancaster, Pennsylvania, will transfer such interest (the "PCI Venture Interest") to the Company (or, if requested by the Buyer, to a newly-formed wholly-owned subsidiary of the Company ("Company Sub")) so that, upon the Merger, the Buyer will indirectly acquire the entire beneficial interest in Park City Center. Such transaction will be effected pursuant to the terms of an agreement, dated as of the date hereof (the "P City Agreement"), among the Company, the Schedule I Stockholders (as defined below) and PCI. As an inducement to the Buyer to enter into this Agreement, certain stockholders of the Company holding a majority of the outstanding Company Shares (as defined below) are concurrently herewith entering into an agreement with the Buyer and the Transitory Subsidiary providing that such stockholders shall vote their Company Shares for approval of the Merger and the transactions contemplated hereby (the "Stockholder Voting Agreement"). Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Parties agree as follows. 1. Definitions. "Adjustment" has the meaning set forth in (S)2(k)(iii). "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended. "Auditor" has the meaning set forth in (S)2(k)(v). "Business Day" means any day, other than a Saturday, Sunday, legal holiday under the Federal laws of the United States of America or a day on which banks are closed in Chicago, Illinois or New York, New York. "Buyer" has the meaning set forth in the preface above. "CBA" has the meaning set forth in (S)7(r)(ii). "Certificate" means any certificate which immediately prior to the Effective Time represented Company Shares. "Certificate of Merger" has the meaning set forth in (S) 2(c)(iv). "Chargeable Violation" means any violation of any law, ordinance, order, requirement or regulation of any governmental authority (i) which is not caused by the Buyer or the result of any of its decisions under this Agreement, (ii) which no one other than the Company, any of its Subsidiaries, or the Venture is solely responsible for complying with, (iii) which the Company, any of its Subsidiaries, or the Venture has received written notice of from the appropriate governmental authority on or prior to the Closing Date, (iv) which is not listed in the Disclosure Schedule or otherwise known to the Buyer on the date hereof, (v) which will cost at least $5,000 to cure, and (vi) for which the cost of curing cannot be passed through to tenants or other occupants as common area maintenance charges pursuant to Leases or REAs. "Closing" has the meaning set forth in (S) 2(b). "Closing Date" has the meaning set forth in (S) 2(b). "Closing Expense Fund" means the amount set forth in a written notice from the Company to the Buyer at least three (3) Business Days prior to the Closing Date, to be paid to the Representative, as agent for the Company Stockholders and PCI, at the Closing pursuant to (S) 2(c), to cover certain transaction expenses of the Company, the Company Stockholders and PCI, as set forth in such notice, including, without limitation, all unpaid title and survey costs to be borne by the Company Stockholders as set forth in (S) 8(a) of this Agreement, fees, expenses and other amounts payable to ERE Yarmouth Inc. or its Affiliates (including any disposition fees, termination fees and asset management fees payable in respect of any period prior to or following the Closing), any unpaid legal or accounting fees or expenses relating to the transactions contemplated by this Agreement, the P City Agreement and the other agreements contemplated hereby, all Transfer Taxes other than Pennsylvania Commonwealth Transfer Taxes and any fees and expenses of the Representative, which notice shall also separately identify which expenses are expenses attributable to the Company, the Company Stockholders and PCI, respectively. The amounts and allocations so set forth shall be subject to the review and approval of the Buyer, which approval shall not be unreasonably withheld based on the expenses which can reasonably be expected to be incurred by the Company, the Company Stockholders and PCI in connection with the transactions contemplated hereby and which remain unpaid at Closing. The Representative shall pay all such transaction expenses on behalf of the Company Stockholders and PCI out of and to the extent of the Closing Expense Fund, and the Surviving Corporation shall have no liability therefor. The Buyer and the Surviving Corporation shall be indemnified pursuant to the Post-Closing Escrow Agreement against any expenses which should have been paid out of the Closing Expense Fund, but which were not so paid. "Closing Net Quick Assets Schedules" has the meaning set forth in (S) 2(k) -2- "Code" means the Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the preface above. "Company Common Share" means any share of Common Stock, par value $.01 per share, of the Company. "Company Share" means any Company Common Share and any share of Class A Stock, par value $.01 per share, of the Company. "Company Stockholder" means any Person who or which holds any Company Shares. "Company Sub" has the meaning set forth in the preface above. "Confidential Information" means any information concerning the business or affairs of the Company, any of its Subsidiaries or the Venture other than information which (i) at or prior to the time of disclosure by the Company or any of its Affiliates or representatives, is generally available to and known by the public other than as a result of a disclosure directly or indirectly by the Buyer or its partners, directors, officers, employees, agents or advisors, (ii) was or becomes available to the Buyer on a non-confidential basis from a source other than the Company, or anyone acting on behalf of the Company, provided that such source is not and was not known by the Buyer to be bound by a confidentiality agreement with or other obligation of secrecy to the Company or (iii) is independently developed by the Buyer or its partners, directors, officers, employees, agents or advisors without violation of any confidentiality obligation set forth herein or in the Confidentiality Agreement. To the extent the foregoing definition conflicts with the definition of Evaluation Material in the Confidentiality Agreement, the definition of Confidential Information herein shall control for purposes hereof and of the Confidentiality Agreement. "Confidentiality Agreement" means the Confidentiality Agreement between General Growth Properties, Inc. and the Representative (formerly known as The Yarmouth Group, Inc.), dated December 18, l997, as amended. "Delaware General Corporation Law" means the General Corporation Law of the State of Delaware, as amended. "Deposit" has the meaning set forth in (S) 2(h)(i). "Deposit Escrow Agent" means Commonwealth Land Title Insurance Company. "Deposit Escrow Agreement" has the meaning set forth in (S) 2(h)(i). "Disclosure Schedule" has the meaning set forth in (S) 3. -3- "Dissenting Share" means any Company Share which any Company Stockholder who or which has exercised his or its appraisal rights in accordance with the Delaware General Corporation Law holds of record and Dissenting Stockholder means any such Company Stockholder. "Effective Time" has the meaning set forth in (S) 2(d)(i). "Employee" has the meaning set forth in (S) 3(q). "Environmental Laws" means all federal, state and local statutes, ordinances, codes, rules, regulations, guidelines, orders and decrees regulating, relating to or imposing liability or standards concerning or in connection with Hazardous Materials, underground storage tanks or the protection of human health or the environment, as any of the same may be amended from time to time, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et. seq., as amended by the Superfund Amendments and Reauthorization Act, or any equivalent state or local laws or ordinances; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et. seq., as amended by the Hazardous and Solid Waste Amendments of 1984, or any equivalent state or local laws or ordinances; the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. (S) 136 et. seq. or any equivalent state or local laws or ordinances; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et. seq.; the Emergency Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. (S) 11001 et. seq., or any equivalent state or local laws or ordinances; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. (S) 2601 et. seq,. or any equivalent state or local laws or ordinances; the Atomic Energy Act, 42 U.S.C. (S) 2011 et. seq., or any equivalent state or local laws or ordinances; the Clean Water Act (the "Clean Water Act"), 33 U.S.C. (S) 1251 et. seq., or any equivalent state or local laws or ordinances; the Clean Air Act (the "Clean Air Act") 42 U.S.C. (S) 7401 et. seq., or any equivalent state or local laws or ordinances; and the Occupational Safety and Health Act, 29 U.S.C. (S) 65101 et. seq., or any equivalent state or local laws or ordinances. "ERE-Yarmouth" means ERE-Yarmouth, Inc., a Delaware corporation. "Escrow Withholding Amount" has the meaning set forth in (S) 2(j)(ii). "Financial Statements" has the meaning set forth in (S) 3(g). "GAAP" means United States generally accepted accounting principles, and, with respect to the Financial Statements and the Venture Financial Statements, such principles in effect on the date of the relevant Financial Statement or Venture Financial Statement, as the case may be. "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Hazardous Materials" has the meaning set forth in (S) 3(m)(iv). -4- "Indemnified Party" has the meaning set forth in (S) 7(g). "Indemnifying Party" has the meaning set forth in (S) 7(g). "Knowledge of the Company" means the actual knowledge, after due inquiry, of the persons identified on Schedule II to this Agreement. "Licenses and Permits" has the meaning set forth in (S) 3(u). "Liens" means liens, charges, claims, pledges, security interests, mortgages or encumbrances of any nature whatsoever. "Mandatory Cure Items" has the meaning set forth in (S) 8(b). "Material Adverse Effect" means a material adverse effect on the business, properties, liabilities, financial condition or results of operations of the Company and its Subsidiaries (including, for this purpose the Venture), taken as a whole, or on the ability of the Parties to consummate the transactions contemplated by this Agreement or perform their obligations under this Agreement. Effects attributable to either (i) actions required by the terms of this Agreement or (ii) changes in general economic conditions, including, without limitation, changes in prevailing real estate values and interest rates, shall not be considered to constitute a Material Adverse Effect. "Mayfair" means Mayfair Property, Inc., a Delaware corporation. "Meadows Mall Loan" means the loan evidenced by Promissory Note dated November 30, 1993 of the Company, as Maker, and Connecticut General Life Insurance Company, as Payee, in the principal amount of $67 million, as modified by the Modification of Note, Deed of Trust and Other Loan Documents dated August 5, 1994. "Meadows Mall Mortgage" means the Deed of Trust and Security Agreement with Assignment of Rents and Fixture Filing, dated November 30, 1993, as modified by the Modification of Note, Deed of Trust and Other Loan Documents dated August 5, 1994. "Merger" has the meaning set forth in (S) 2(a). "Merger Consideration" means $625,000,000 less the sum of (i) the outstanding unpaid principal balance together with accrued and unpaid interest thereon in respect of the Meadows Mall Loan, (ii) $15,230,940 in respect of committed capital expenditures and tenant improvements and certain due diligence items, commissions and other matters identified in Schedule III, (iii) the Park City Proceeds, (iv) the Revolving Credit Proceeds and (v) the Closing Expense Fund, as adjusted in accordance with the terms of this Agreement. -5- "Most Recent Fiscal Period End" has the meaning set forth in (S) 3(g). "Net Quick Assets" has the meaning set forth in (S) 2(k) "Notice of Denial" has the meaning set forth in (S) 2(j). "Other Material Contract" means any agreement (including all modifications, amendments and supplements thereto), other than a Service Contract, Lease or REA, (i) that limits or purports to limit, directly or indirectly, the ability of the Company, any of its Subsidiaries or the Venture to compete with any Person in any geographic area during any period; (ii) relating to the acquisition or disposition of any real property, whether by merger, sale of stock, sale of assets or otherwise; (iii) under which the Company, any of its Subsidiaries or the Venture is obligated to pay in excess of $25,000 over the remaining term thereof; (iv) constituting an option agreement for real property or (v) which is between or among any of the Company, any of its Subsidiaries, PCI, Park City and the Venture, including without limitation, any notes representing indebtedness among any such entities. "Ordinary Course of Business" means the ordinary course of business of the Company, its Subsidiaries, P City and the Venture, consistent with past custom and practice. "Park City" means Park City, Inc., a Delaware corporation. "Park City Proceeds" means the aggregate amount, in U.S. Dollars, required to be paid by the Company in order to satisfy in full the mortgage indebtedness of the Company secured by the Park City Center located in Lancaster, Pennsylvania and to obtain the release of all Liens related thereto on the Closing Date and all other obligations of the Company and its Affiliates in respect thereof, including the payment of all fees and expenses related thereto. "Party" has the meaning set forth in the preface above. "Paying Agent" has the meaning set forth in (S) 2(e)(i)(A). "Payment Fund" has the meaning set forth in (S) 2(e)(i)(A). "PCI" has the meaning set forth in the preface above. "P City Agreement" has the meaning set forth in the preface above. "PCI Allocable Portion" means that portion of the Merger Consideration allocable to PCI in accordance with the P City Agreement in consideration of the transfer by PCI to the Company (or Company Sub) of the PCI Venture Interest immediately prior to the Effective Time. The Company shall give written notice of the PCI Allocable Portion to the Buyer at least three (3) Business Days prior to the Closing Date, which notice shall specify the amount of the Merger Consideration which constitutes the PCI Allocable Portion (i) to be delivered to PCI at -6- the Closing and (ii) to be paid to the Escrow Agent in accordance with the terms of this Agreement and the Post-Closing Escrow Agreement at the Closing as part of the Escrow Amount. "PCI Venture Interest" has the meaning set forth in the preface above. "Permitted Exceptions" means matters identified as Permitted Exceptions in the Disclosure Schedule. The listing of an item as a Permitted Exception shall not be deemed to qualify any representation, warranty, covenant, closing condition (other than the condition relating to the delivery of the Title Policies), indemnity or other agreement contained herein or in the agreements contemplated hereby, except as expressly set forth herein or therein. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or any other entity, including a governmental entity (or any department, agency or political subdivision thereof). "Post-Closing Escrow Agent" means Commonwealth Land Title Insurance Company. "Post-Closing Escrow Agreement" has the meaning set forth in (S) 2(i). "Post-Closing Escrow Amount" has the meaning set forth in (S) 2 (i). "Post-Closing Escrow Fund" has the meaning set forth in (S) 2(i). "Preliminary Net Quick Assets Schedules" has the meaning set forth in (S) 2(k)(i). "Quick Assets" has the meaning set forth in (S) 2(k)(i). "Quick Liabilities" has the meaning set forth in (S) 2(k)(i). "REA" means the reciprocal easement agreements set forth in the Disclosure Statement. "REA Party" means any party to an REA other than the Company, any of its Subsidiaries, or the Venture. "Representative" means ERE Yarmouth, Inc., acting solely in its capacity as representative of the Schedule I Stockholders and PCI. "Requisite Stockholder Approval" means the affirmative vote of the holders of a majority of the Company Shares voting as a single class in favor of this Agreement and the Merger. "Revolving Credit Agreements" means (i) the Credit Agreements, each dated as of November 17, 1994, (x) among the Company, the banks parties thereto and Westpac Banking -7- Corporation, as agent and as issuing bank, (y) between the Company and Lend Lease Corporation Limited ("Lendlease") and (z) between the Company and MLC Life Limited ("MLC") and (ii) the Commercial Paper Agreement dated as of November 17, l994 among the Company, Lendlease, MLC, ABN AMRO Australia Limited and ABN AMRO Bank N.V. and all amendments to the foregoing (in each case, together with all documents and instruments referred to therein making up the commercial paper credit facility as referred to in such agreements). "Revolving Credit Proceeds" means the aggregate amount, in U.S. Dollars, required to be paid by the Company under the Revolving Credit Agreements in order to satisfy in full all of the Company's obligations thereunder and obtain the release all Liens related thereto on the Closing Date, including the payment of all fees and expenses related thereto. "Schedule I Stockholders" has the meaning set forth in (S) 2(d)(vi). "Service Contract" has the meaning set forth in (S)3(l)(i). "Settlement Date" has the meaning set forth in (S)2(k)(iii). "Shopping Centers" means the properties listed on Exhibit A hereto. "Special Meeting" has the meaning set forth in (S) 7(c). "Stockholder Allocable Portion" means the difference between the Merger Consideration and the PCI Allocable Portion. "Stockholder's Portion" means, with respect to any Company Stockholder, that portion of the Merger Consideration included in the Stockholder Allocable Portion equal to the product of the Stockholder's Percentage of such Company Stockholder multiplied by the Stockholder Allocable Portion. "Stockholder's Percentage" means, with respect to any Company Stockholder, the percentage (computed to the fourth decimal place) determined by dividing the number of Company Shares held by such Company Stockholder immediately prior to the Effective Time by the aggregate number of Company Shares issued and outstanding immediately prior to the Effective Time. "Stockholder Voting Agreement" has the meaning set forth in the preamble above. "Subsidiary" means any corporation, partnership, limited liability company or other entity with respect to which the Company (or a Subsidiary thereof), directly or indirectly, owns a majority of the voting securities or equivalent interests or has the power to vote or direct the voting of sufficient securities or equivalent interests to elect a majority of the directors or those Persons performing similar functions or otherwise to direct the management and policies thereof. -8- "Survey" means: ------ with respect to Landmark Mall, that certain survey dated April 1, 1998, revised May 6, 1998, prepared by Holland Engineering (the "Landmark Survey"); with respect to Northgate Mall, that certain survey dated April 10, 1998, revised May 6, 1998, prepared by David Barnes Realty Development Co. (the "Northgate Survey"); with respect to Oglethorpe Mall, (a) that certain survey dated September 20, 1982, as updated on April 14, 1998, revised April 25, 1998, prepared by Hussey, Gay, Bell & DeYoung and (b) with respect to the outparcels, (i) those certain surveys dated April 26, 1990, as visually reinspected and updated on April 25, 1998, prepared by Hussey, Gay, Bell & De Young and (ii) those certain surveys dated March 30, 1990, as visually reinspected and updated on April 25, 1998, prepared by Hussey, Gay, Bell & De Young (collectively, the "Oglethorpe Survey"); with respect to Park City Center, that certain survey dated March 30, 1998, revised May 11, 1998, prepared by Acer Engineers & Consultants, Inc. (the "Park City Survey"); with respect to Mayfair Mall and the Mayfair office buildings, that certain survey dated April 10, 1998 prepared by National Survey & Engineering (the "Mayfair Survey"); and with respect to Meadows Mall that certain survey dated April 10, 1998, revised May 6, 1998, prepared by VTN Nevada Consulting Engineers, Planners & Surveyors (the "Meadows Survey"). "Surveyor" means: -------- with respect to the Landmark Survey, Holland Engineering; with respect to the Northgate Survey, David Barnes Realty Development Co.; with respect to the Oglethorpe Survey, Hussey, Gay, Bell & DeYoung; with respect to the Park City Survey, Acer Engineers & Consultants, Inc.; with respect to the Mayfair Survey, National Survey & Engineering; and with respect to the Meadows Survey, VTN Nevada Consulting Engineers, Planners & Surveyors. "Survival Termination Date" has the meaning set forth in (S) 5. ------------------------- "Surviving Corporation" has the meaning set forth in (S) 2(a). --------------------- "Tax" means any federal, state, local, foreign or other tax (including withholding taxes), assessment, deficiency, fee, levy, social security obligation or other governmental charge, from time to time imposed by or required to be paid to any governmental authority (including -9- penalties and additions to tax thereon, penalties for failure to file a return or report and interest on any of the foregoing). "Tax Returns and Reports" means any federal, state, local or foreign Tax returns, statements, reports, forms and notices required to be filed with any Taxing authority. "Title Company" means Commonwealth Land Title Insurance Company. ------------- "Title Commitments" means: ----------------- with respect to Landmark Mall, the pro forma Title Insurance Policy No. AX 984054AA dated May 12, 1998 issued by the Title Company; with respect to Northgate Mall, the pro forma Title Insurance Policy No. 97-027 dated May 12, 1998 issued by the Title Company; with respect to Oglethorpe Mall, the pro forma Title Insurance Policy No. 98-1022-5 dated May 12, 1998 issued by the Title Company; with respect to Park City Center, the pro forma Title Insurance Policy No. D201714LA dated May 12, 1998 issued by the Title Company; with respect to Mayfair Mall and the Mayfair office buildings, the pro forma Title Insurance Policies No. 85-00-861416 and No. 85-00-861152 dated May 12, 1998 issued by Lawyers Title Insurance Corporaton; and with respect to Meadows Mall, the pro forma Title Insurance Policy No. 9711347 dated May 12, 1998 issued by Lawyers Title of Nevada. "Title Policy" means an ALTA Form B-1970 Owner's Policy of Title Insurance issued by the Title Company with respect to each Shopping Center, (other than with respect to Northgate Mall as to which the policy shall be an ALTA 1975 Leasehold Owner's Policy) in the applicable amount set forth on the corresponding Title Commitment, and dated the date and time of Closing, insuring the Company as owner of good, marketable and indefeasible fee title (other than Northgate Mall as to which the title insured shall be leasehold title) to each Shopping Center except for Mayfair Mall and the Mayfair office buildings as to which Mayfair Property Inc. shall be insured as the owner of good, marketable and indefeasible fee title, and except for Park City Center as to which the Trust shall be insured as the owner of good, marketable and indefeasible title, subject in each case only to the Permitted Exceptions, and containing such affirmative insurance and endorsements as are specified in the respective Title Commitment. "Transfer Taxes" has the meaning set forth in (S) 7(o). -------------- "Transitory Subsidiary" has the meaning set forth in the preface above. --------------------- -10- "Trust" means the Lancaster Trust, an Illinois trust established by that certain Indenture of Trust dated as of July 31, 1979 between the Venture and Ernest Greenberger and M. James Spitzer, Jr., as trustees, as amended, which is the legal owner of Park City Center, located in Lancaster, Pennsylvania. "Venture" means PARCIT-IIP Lancaster Venture, an Illinois partnership which owns the entire beneficial interest in Park City Center, located in Lancaster, Pennsylvania. "Venture Agreement" has the meaning set forth in (S) 3(c). ----------------- "Venture Financial Statements" has the meaning set forth in (S) 3(g). ---------------------------- "Withholding Amount" has the meaning set forth in (S) 2(j). ------------------ "Withholding Certificate" has the meaning set forth in (S) 2(j). ----------------------- 2. Basic Transaction. ----------------- (a) The Merger. On and subject to the terms and conditions of this Agreement, the Transitory Subsidiary will merge with and into the Company (the "Merger") at the Effective Time in accordance with the Delaware General Corporation Law. The Company shall be the corporation surviving the Merger (the "Surviving Corporation"). (b) The Closing. Subject to (S) 10(a) hereof, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Coudert Brothers, 1114 Avenue of the Americas, New York, New York 10036 (or such other location as the Parties may agree upon), commencing at 9:00 a.m. local time on the second Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Parties may mutually determine (the "Closing Date"). (c) Actions at the Closing. At the Closing, (i) the Company will deliver to the Buyer and the Transitory Subsidiary the various certificates, instruments and documents referred to in (S) 9(a) below; (ii) the Buyer and the Transitory Subsidiary will deliver to the Company the various certificates, instruments and documents referred to in (S) 9(b) below; (iii) the Buyer will deliver or cause to be delivered, in each case in accordance with wire transfer instructions delivered in writing at least three (3) Business Days prior to the Closing, (A) the Revolving Credit Proceeds to Citibank N.A. as depository with respect to the commercial paper program of the Company supported by the Revolving Credit Agreements in order to discharge all indebtedness represented by the foregoing; (B) the Park City Proceeds to Union Bank of Switzerland, New York Branch in order to discharge the Park City Center mortgage indebtedness; (C) the Closing Expense Fund to the Representative; (D) the Post-Closing Escrow Amount and the aggregate Escrow Withholding Amounts to the Post-Closing Escrow Agent, (E) -11- the PCI Allocable Portion (net of the portion thereof delivered as part of the Post-Closing Escrow Amount) to PCI in satisfaction of the Company's obligations in respect of the transfer to the Company (or Company Sub) by PCI of the PCI Venture Interest and (F) the Payment Fund to the Paying Agent in the manner provided below in this (S) 2 (and the Company hereby authorizes the Buyer to make or cause to be made all payments referred to in this clause (iii)); (iv) the Company and the Transitory Subsidiary will file with the Secretary of State of the State of Delaware a Certificate of Merger in the form attached hereto as Exhibit B (the "Certificate of Merger") and (v) the Deposit Escrow Agent will deliver the Deposit, together with interest earned thereon, to the Paying Agent. (d) Effect of Merger. ---------------- (i) General. The Merger shall become effective at the time (the "Effective Time") the Company and the Transitory Subsidiary file the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with (S) 264 of the Delaware General Corporation Law. The Merger shall have the effect set forth in the Delaware General Corporation Law. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either the Company or the Transitory Subsidiary in order to carry out and effectuate the transactions contemplated by this Agreement. (ii) Certificate of Incorporation. The Certificate of Incorporation of the Surviving Corporation shall, by virtue of the Merger and without any further action on the part of the Surviving Corporation be amended and restated to read in its entirety as set forth in Exhibit C hereto, and such Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Certificate of Incorporation. (iii) Bylaws. The Bylaws of the Surviving Corporation shall, by virtue of the Merger and without any further action on the part of the Surviving Corporation be amended and restated to read in their entirety as set forth in Exhibit D hereto, and such Bylaws shall be the Bylaws of the Surviving Corporation, until thereafter amended as provided by law, the Surviving Corporation's Certificate of Incorporation and such Bylaws. (iv) Directors and Officers. The Board of Directors of the Surviving Corporation shall be comprised of Matthew Bucksbaum, John Bucksbaum and Robert A. Michaels and the officers of the Surviving Corporation shall be Matthew Bucksbaum as President, Joel Bayer, John Bucksbaum, Robert A. Michaels and Bernard Freibaum, each as a Vice President, Bernard Freibaum as Treasurer and Marshall Eisenberg as Secretary, in each case to serve until their successors have been duly elected and qualified or until their earlier, death, resignation or removal -12- (v) Cancellation of Treasury Stock. As of the Effective Time, any Company Shares that are owned beneficially or of record by the Company or any of its Subsidiaries shall automatically be cancelled and retired and all rights with respect thereto shall cease to exist, and no consideration shall be delivered in exchange therefor. (vi) Conversion of Company Shares. At and as of the Effective Time, (A) all of the Company Shares (other than any Company Shares to be cancelled in accordance with (S) 2(d)(v) and Dissenting Shares) shall, by virtue of the Merger and without any action on the part of the holders thereof, automatically be cancelled, converted and reclassified into and represent the right, in the case of each Company Stockholder, to receive such Stockholder's Portion of the Stockholder Allocable Portion of the Merger Consideration upon surrender of the Certificate or Certificates representing the Company Shares held by the Company Stockholder and (B) each Dissenting Share shall be converted into the right to receive payment from the Surviving Corporation with respect thereto in accordance with the provisions of the Delaware General Corporation Law; provided, however, that, notwithstanding the foregoing, the Stockholder's Portion of the Stockholder Allocable Portion of the Merger Consideration otherwise receivable by each of the Company Stockholders listed on Schedule I hereto (the "Schedule I Stockholders") shall be reduced by the amount of such Schedule I Stockholder's proportionate interest in the Post-Closing Escrow Fund as set forth on Schedule I and any applicable Escrow Withholding Amount, which amounts shall be payable to the Post-Closing Escrow Agent as part of the Post-Closing Escrow Amount and the Tax Escrow Fund (as defined in the Post-Closing Escrow Agreement), respectively, to be held and distributed in accordance with (S) 2(j) and the terms of the Post-Closing Escrow Agreement, and by any amounts required to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j). The Stockholder's Portion for all other Company Stockholders shall be reduced by amounts required to be withheld pursuant to (S) 2(j). No Company Share shall be deemed to be outstanding or to have any rights other than those set forth above in this (S) 2(d)(vi) after the Effective Time. (vii) Conversion of Capital Stock of the Transitory Subsidiary. At and as of the Effective Time, all of the outstanding membership interests in the Transitory Subsidiary (all of which are owned by the Buyer) shall, by virtue of the Merger and without any action on the part of the Transitory Subsidiary, automatically be converted into 100 validly issued, fully paid and nonassessable shares of Common Stock, no par value per share, and 120 validly issued, fully paid and non-assessable shares of non- voting preferred stock, par value $1.00 per share, of the Surviving Corporation, and the Surviving Corporation shall issue certificates representing such shares. (viii) Company's Obligations, Properties, Assets. At the Effective Time, the identity, existence, rights, privileges, powers, franchises, liabilities, obligations, properties and assets of the Company, as the Surviving Corporation in the Merger, shall continue unaffected and unimpaired, except as specifically provided herein; and the identity and separate existence of the Transitory Subsidiary shall cease and all of the -13- rights, privileges, powers, franchises, liabilities, obligations, properties and assets of the Transitory Subsidiary shall be vested in the Surviving Corporation, all in accordance with the provisions of this Agreement and the Delaware General Corporation Law. (ix) No Further Rights. From and after the Effective Time, holders of certificates theretofore evidencing Company Shares shall cease to have any rights as stockholders of the Surviving Corporation, except as provided herein or by law. No dividends or other distributions declared or made after the Effective Time with respect to Company Shares with a record date after the Effective Date shall be paid to any holder of Certificates until the holder of any such Certificate shall properly surrender such Certificate to the Paying Agent. (e) Procedure for Payment. --------------------- (i) At the Effective Time, (A) the Buyer will, or will cause the Surviving Corporation to, furnish to the paying agent engaged for purposes of this Agreement (the "Paying Agent") a corpus consisting of cash which, together with the amount to be delivered by the Deposit Escrow Agent pursuant to (S) 2(h)(ii)(a), is sufficient in the aggregate for the Paying Agent to make full payment of the Stockholder Allocable Portion of the Merger Consideration to the holders of all of the outstanding Company Shares (other than any Dissenting Shares and less the applicable Post- Closing Escrow Amount to be paid to the Post-Closing Escrow Agent and less amounts to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j), or deposited with the Post-Closing Escrow Agent pursuant to (S)2(j)) (the "Payment Fund"), and (B) the Buyer will cause the Paying Agent to mail a letter of transmittal (with instruction for its use), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of such Certificates to the Paying Agent, in the form attached hereto as Exhibit E to each record holder of outstanding Company Shares for the holder to use in surrendering the Certificates which represented such holder's Company Shares against payment of such holder's Stockholder's Portion of the Merger Consideration (less, in the case of each Schedule I Stockholder, the amounts thereof to be paid to the Post-Closing Escrow Agent as part of the Post-Closing Escrow Amount and any applicable Escrow Withholding Amount, and less any amounts to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j) and, in the case of other Company Stockholders, amounts to be withheld pursuant to (S) 2(j)). Each holder of Certificates theretofore evidencing Company Shares, upon proper surrender thereof to the Paying Agent together with and in accordance with such transmittal form and any other documents required thereby, shall, subject to (S) 2(j), be entitled to receive in exchange therefore such holder's Stockholder's Portion of the Merger Consideration deliverable in respect of the Company Shares theretofore evidenced by the Certificates so surrendered (less, in the case of each Schedule I Stockholder, the amounts thereof to be paid to the Escrow Agent as part of the Post-Closing Escrow Amount and any applicable Escrow Withholding Amount, and less any amounts to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j) and, in the case of other Company -14- Stockholders, amounts to be withheld pursuant to (S) 2(j)). Upon such proper surrender, the Paying Agent shall, subject to (S) 2(j), promptly deliver such holder's Stockholder's Portion of the Merger Consideration to the relevant Company Stockholder (less, in the case of each Schedule I Stockholder, the amounts thereof to be paid to the Post-Closing Escrow Agent as part of the Post-Closing Escrow Amount and any applicable Escrow Withholding Amount, and less any amounts to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j) and, in the case of other Company Stockholders, amounts to be withheld pursuant to (S) 2(j)). Until properly surrendered, Certificates formerly evidencing Company Shares shall be deemed for all purposes to evidence only the right to receive the applicable portion of the Merger Consideration as herein provided and subject to (S)(S) 2(i) and (j). No interest shall accrue or be paid on any cash payment upon surrender of Certificates which immediately prior to the Effective Time represented Company Shares. In the event of a permitted transfer of ownership of Company Shares, which is not registered in the transfer records of the Company, the applicable Stockholder's Portion of the Merger Consideration or portion thereof (less the applicable portion of the Post-Closing Escrow Amount and any applicable Escrow Withholding Amount, and less any amounts to be withheld and paid to the Internal Revenue Service pursuant to (S)2(j), in the case of Schedule I Stockholders and, in the case of the other Company Stockholders, amounts to be withheld pursuant to (S) 2(j)) may be paid to a transferee of a Certificate if such Certificate is presented to the Paying Agent accompanied by all documents required to evidence and effect such transfer and any evidence that any applicable stock transfer Taxes have been paid. Notwithstanding the foregoing, the Buyer will, if and to the extent requested by the Company or any Company Stockholder not less than three (3) Business Days prior to the Closing Date, make appropriate arrangements, subject to (S) 2(j), with the Paying Agent to enable the Stockholder's Portion of the Merger Consideration payable to any Company Stockholder (less, in the case of each Schedule I Stockholder, the amount thereof to be paid to the Post-Closing Escrow Agent as part of the Post-Closing Escrow Amount and any applicable Escrow Withholding Amount, and less any amounts to be withheld and paid to the Internal Revenue Service pursuant to (S) 2(j) and, in the case of the other Company Stockholders, amounts to be withheld pursuant to (S) 2(j)), to be paid on the Effective Date (including payment by wire transfer of immediately available funds), upon surrender of the Certificates evidencing such Company Stockholder's Company Shares and such other documents as may be required by the Paying Agent. (ii) The Buyer may cause the Paying Agent to invest the cash included in the Payment Fund, to the extent such cash is not disbursed on the Effective Date, in certificates of deposit or money market funds; provided, however, that the terms and conditions of the investments shall be such as to permit the Paying Agent to make, subject to (S)(S) 2(i) and (j), prompt payment of the applicable portion of the Stockholder Allocable Portion of the Merger Consideration included in the Payment Fund as necessary. The Buyer may cause the Paying Agent to pay over to the Surviving Corporation any net earnings with respect to the investments, and the Buyer will cause -15- the Surviving Corporation to replace promptly any portion of the Payment Fund which the Paying Agent loses through investments. (iii) The Buyer may cause the Paying Agent to pay over to the Surviving Corporation any portion of the Payment Fund (including any earnings thereon) remaining 180 days after the Effective Time, and thereafter all former Company Stockholders shall only be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) as general creditors thereof with respect to the Merger Consideration payable upon surrender of their Certificates. The Buyer and the Surviving Corporation shall not be liable to any holder of Certificates for any cash payable in respect thereof delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (iv) The Buyer shall cause the Surviving Corporation to pay all charges and expenses of the Paying Agent. (f) Closing of Transfer Records. From and after the Effective Time, the stock transfer books of the Company shall be closed and no transfers of Company Shares outstanding prior to the Effective Time shall be made on the stock transfer books of the Surviving Corporation. (g) Dissenters' Rights. No Dissenting Stockholder shall be entitled to such Dissenting Stockholder's Stockholder's Portion of the Merger Consideration unless and until such Dissenting Stockholder shall have failed to perfect or shall have effectively withdrawn or lost such holder's right to dissent from the Merger under the Delaware General Corporation Law, and any Dissenting Stockholder shall be entitled to receive only the payment provided by Section 262 of the Delaware General Corporation Law with respect to Company Shares owned by such Dissenting Stockholder. If any Person who otherwise would be deemed a Dissenting Stockholder shall have failed to properly perfect or shall have effectively withdrawn or lost the right to dissent with respect to any Company Shares, such Company Shares shall, subject to (S) 2(j), thereupon be treated as though such Company Shares had been converted into the applicable portion of the Merger Consideration pursuant to (S) 2(d)(vi) hereof. The Company shall give the Buyer (i) prompt notice of any written demands for appraisal, attempted withdrawals of such demands and any other instruments served pursuant to applicable law received by the Company relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demand for appraisal under the Delaware General Corporation Law. The Company shall not, except with the prior written consent of the Buyer, voluntarily make any payment with respect to any demands for appraisals of Dissenting Shares, offer to settle or settle any such demands or approve any withdrawal of any such demands. (h) Escrow of Deposit. ----------------- -16- (i) On the date hereof, the Buyer has deposited with the Deposit Escrow Agent the amount of $18,750,000 (the "Deposit") to be held in escrow pursuant to the provisions of an escrow agreement among the parties hereto and the Deposit Escrow Agent in the form attached hereto as Exhibit G (the "Deposit Escrow Agreement"). The Deposit Escrow Agent has separately acknowledged its receipt of the Deposit and agreed to hold it pursuant to the provisions of the Deposit Escrow Agreement. (ii) In accordance with and subject to the terms of the Deposit Escrow Agreement: (a) If the Closing occurs, at the Closing, the Deposit Escrow Agent shall deliver the Deposit, together with all interest earned thereon, if any, to the Paying Agent. (b) If this Agreement terminates in accordance with its terms by reason of the Buyer's or the Transitory Subsidiary's default and a notice of termination has been delivered to the Buyer, the Deposit Escrow Agent shall deliver the Deposit, together with all interest earned thereon, if any, to the Company as liquidated damages as provided in (S) 10(c), subject to the terms of the Deposit Escrow Agreement. (c) If this Agreement terminates in accordance with its terms for any other reason and a notice of termination has been delivered to the Company, the Deposit, together with all interest earned thereon, if any, shall forthwith be paid to the Buyer, subject to the terms of the Deposit Escrow Agreement. (i) Escrow For Post-Closing Claims and Adjustments. At the Closing, the Buyer shall deposit with the Post-Closing Escrow Agent, as escrow agent for the Buyer, the Schedule I Stockholders and PCI pursuant to the terms of the escrow agreement attached hereto as Exhibit H and incorporated herein by this reference (the "Post-Closing Escrow Agreement") and (S)2(c)(D), funds in an amount equal to Twenty Million Dollars ($20,000,000), as increased to the extent required by (S) 2(k) (the "Post Closing Escrow Amount"), which shall be maintained by the Post-Closing Escrow Agent pursuant to the Post-Closing Escrow Agreement (such funds, together with any net earnings from the investment thereof, being hereinafter referred to as the "Post-Closing Escrow Fund") in connection with the disposition of Post-Closing Claims and any Adjustments pursuant to the terms of this Agreement and the Post-Closing Escrow Agreement. The funds in the Post- Closing Escrow Fund shall be held for disbursement as provided in the Post- Closing Escrow Agreement. (j) Withholding Matters. ------------------- (i) The Buyer will, subject to (S)2(j)(ii) hereof, withhold and promptly pay over to the Internal Revenue Service an amount equal to ten percent (10%) of the sum of (x) the aggregate Stockholder's Portions of the Merger Consideration allocable to the Company Stockholders who or which are foreign persons for purposes of Section 1445 of the Code, and -17- (y) the aggregate portions of the Closing Expense Fund allocable to such Company Stockholders (such aggregate ten percent (10%) withheld amount being referred to as the "Withholding Amount"), together with the applicable Internal Revenue Service forms (as duly prepared and executed by the Buyer), which shall specify the portion of the Withholding Amount allocable to each Company Stockholder with respect to whom or which the Buyer has withheld under this (S)2(j). If the Buyer is required pursuant to (S)2(k) to pay the Adjustment to the Representative, on behalf of the Company Stockholders, the Buyer will, subject to (S)2(j)(ii) hereof, at the time when the Buyer is required to so pay the Adjustment, withhold and promptly pay over to the Internal Revenue Service ten percent (10%) of the aggregate portions of the Adjustment allocable to the Company Stockholders who or which are foreign persons for purposes of Section 1445 of the Code (such aggregate ten percent (10%) withheld amount being referred to as the "Adjustment Withholding Amount"), together with the applicable Internal Revenue Service forms (as duly prepared and executed by the Buyer), which shall specify the portion of the Adjustment Withholding Amount allocable to each such Company Stockholder with respect to whom or which the Buyer has withheld under this (S)2(j). Promptly after filing with the Internal Revenue Service, the Buyer will deliver to the Representative a copy of all Internal Revenue Service forms filed by the Buyer in accordance with this (S)2(j). The Buyer will not withhold under this (S)2(j) any portion of a Stockholder's Portion of the Merger Consideration, any portion of the Closing Expense Fund, or any portion of the Adjustment, allocable to any Company Stockholder who or which furnishes to the Buyer on or before the Closing a certificate in the form attached hereto as Exhibit I certifying that such Company Stockholder is not a "foreign person" within the meaning of Section 1445 of the Code. If a Company Stockholder does not furnish such certificate to the Buyer, it shall be assumed that such Company Stockholder is a "foreign person". (ii) If a Schedule I Stockholder who or which is a "foreign person" for purposes of Section 1445 of the Code applies for a withholding certificate from the Internal Revenue Service to authorize reduced withholding (including zero withholding) under Section 1445 of the Code (a "Withholding Certificate") on or before the Closing, such Schedule I Stockholder shall submit to the Buyer on or before the Closing a notice under Treasury Regulations Section 1.1445- 1(c)(2) substantially in the form of Exhibit J attached hereto. In this event, the Buyer shall deposit with the Post-Closing Escrow Agent an amount equal to ten percent (10%) of the sum of (x) such Schedule I Stockholder's Stockholder's Portion of the Merger Consideration, and (y) the portion of the Closing Expense Fund allocable to such Company Stockholder (such ten percent (10%) deposited amount being referred to as the "Escrow Withholding Amount"), in accordance with this (S)2(j). The Post-Closing Escrow Agent shall hold the Escrow Withholding Amount with respect to such Schedule I Stockholder until the earlier to occur of (x) receipt by the Post-Closing Escrow Agent of a copy of a Withholding Certificate or notice of denial ("Notice of Denial") from the Internal Revenue Service with respect to such Schedule I Stockholder (which copy shall be delivered to the Post-Closing Escrow Agent by the Buyer, promptly upon receipt of such copy by the Buyer from the Internal Revenue Service, and may be delivered to the Post-Closing Escrow Agent by such Schedule I Stockholder), or (y) the date (the "Expiration Date") which is twelve (12) months following the Closing Date. The Post-Closing Escrow Agent shall pay the Escrow Withholding Amount with respect to such Schedule -18- I Stockholder (or a portion thereof) within twenty (20) days following the mailing by the Internal Revenue Service of a Withholding Certificate or Notice of Denial (or copy thereof) with respect to such Schedule I Stockholder (but not less than five (5) days from receipt of such Withholding Certificate or Notice of Denial or copy thereof), as follows. In the event the Internal Revenue Service issues a Withholding Certificate eliminating the withholding tax under Section 1445 of the Code with respect to such Schedule I Stockholder, the Post- Closing Escrow Agent (v) shall pay such Escrow Withholding Amount, together with all interest earned thereon, directly to such Schedule I Stockholder, and (w) shall send to the Buyer a copy of the check payable to the order of such Schedule I Stockholder in the amount of such Escrow Withholding Amount. In the event the Internal Revenue Service denies the Schedule I Stockholder's application for a Withholding Certificate, or issues a Withholding Certificate with respect to such Schedule I Stockholder providing for an amount of withholding that is less than such Escrow Withholding Amount, upon receipt of any executed applicable Internal Revenue Service forms from the Buyer, the Post- Closing Escrow Agent promptly (x) shall pay to the Internal Revenue Service such Escrow Withholding Amount, or portion thereof, plus interest thereon (if any), as set forth in the Notice of Denial or Withholding Certificate with respect to such Schedule I Stockholder, together with the applicable Internal Revenue Service forms received from the Buyer (which Internal Revenue Service forms the Buyer agrees to promptly prepare, execute and deliver), (y) shall pay to such Schedule I Stockholder the balance of such Escrow Withholding Amount (if any) plus interest (if any), and (z) shall send to the Buyer a copy of the check payable to the order of the Internal Revenue Service in the amount set forth in the Notice of Denial or Withholding Certificate with respect to such Schedule I Stockholder. If the Expiration Date occurs prior to the issuance of a Withholding Certificate or a Notice of Denial with respect to such Schedule I Stockholder, the Post-Closing Escrow Agent shall pay the Escrow Withholding Amount to the Internal Revenue Service for the account of such Schedule I Stockholder, together with the applicable Internal Revenue Service forms received from the Buyer (which Internal Revenue Service forms the Buyer agrees to promptly prepare, execute and deliver). If the Buyer is required pursuant to (S)2(k) hereof to pay the Adjustment to the Representative, on behalf of the Company Stockholders, the following provisions shall apply with respect to each Schedule I Stockholder who has submitted to the Buyer on or before the Closing a notice under Treasury Regulations Section 1.1445-1(c)(2) substantially in the form of Exhibit J. In this event, at the time when the Buyer is required to pay the Adjustment to the Representative, on behalf of the Company Stockholders, the Buyer shall deposit with the Post-Closing Escrow Agent an amount equal to ten percent (10%) of the Adjustment allocable to each such Schedule I Stockholder (the "Adjustment Escrow Amount"). Thereafter, the Adjustment Escrow Amount with respect to each such Schedule I Stockholder shall be subject to the provisions of this (S)2(j)(ii) applicable to the Escrow Withholding Amount with respect to such Schedule I Stockholder. (k) Net Quick Asset Adjustment. -------------------------- (i) No later than five (5) days prior to the Closing, the Company shall prepare and deliver to the Buyer a preliminary pro forma consolidated statement of Net Quick Assets (as defined below) of (a) the Company and its Subsidiaries (excluding the Venture) and (b) the Venture, in each case, as of the Closing Date, assuming the consummation of the transactions -19- contemplated hereby and by the P City Agreement, prepared in accordance with the terms of this (S) 2(k) (the "Preliminary Net Quick Asset Schedules"). No later than ninety (90) days after the Closing Date, the Buyer shall cause to be prepared and delivered to the Representative an unaudited consolidated statement of Net Quick Assets of (x) the Company and its Subsidiaries (excluding the Venture) and (y) the Venture as of the Closing Date and following the consummation of the transactions contemplated hereby and by the P City Agreement, prepared in accordance with the terms of this (S) 2(k) (the "Closing Net Quick Asset Schedules"). The Preliminary Net Quick Asset Schedules and the Closing Net Quick Asset Schedules shall reflect only the following categories of assets, which categories are referred to in the Financial Statements for the year ended December 31, 1997: "Cash and Cash Equivalents", "Accounts Receivable", and "Prepaid expenses and other assets," in the case of the Company and its Subsidiaries (excluding the Venture) and "Cash and Cash Equivalents", "Accounts Receivable" and "Prepaid expenses, in the case of the Venture (collectively, the "Quick Assets") and shall reflect only the following categories of liabilities, which categories are referred to in the Financial Statements for the year ended December 31, 1997, "Accounts payable and accrued expenses", "Accrued real estate taxes" and "Tenant liabilities", in the case of the Company and its Subsidiaries (excluding the Venture), and "Accounts payable and accrued expenses" and "Tenant liabilities", in the case of the Venture (collectively, the "Quick Liabilities"), provided that, as described above, the Quick Assets and Quick Liabilities shall be calculated assuming consummation of the transactions contemplated hereby and by the P City Agreement (except that the Venture shall not be treated as consolidated with the Company). With respect to each Preliminary Net Quick Asset Schedule and each Closing Net Quick Asset Schedule, the amount (positive or negative) equal to Quick Assets less Quick Liabilities is referred to as "Net Quick Assets." The Preliminary Net Quick Asset Schedules and the Closing Net Quick Asset Schedules shall be prepared in accordance with GAAP applied in a manner consistent with that utilized in the preparation of the Financial Statements, except as provided above. To the extent that, during the period January 1, 1998 through the Closing Date, (i) any sale by the Company, any of its Subsidiaries or the Venture of any real property, or any item of personal property with a sale price exceeding $25,000, occurs or has occurred or (ii) any proceeds are or have been received by the Company, any of its Subsidiaries or the Venture as a result of any condemnation, casualty or any similar event, the proceeds from any such sale or other event shall, regardless of the form in which received, be deducted in the determination of Net Quick Assets and not be deemed to be Quick Assets and any corresponding liability shall not be deemed to constitute Quick Liabilities for the purposes of such determination. In addition, the matters identified in Schedule III to this Agreement shall not be deemed to consitute Quick Liabilities for the purpose of such determination. (ii) If, as set forth on the Preliminary Net Quick Assets Schedules, the combined Quick Liabilities exceed the combined Quick Assets by an amount in excess of $1,000,000, the Post-Closing Escrow Amount shall be increased by the amount of such shortfall. (iii) If, based on the Closing Net Quick Assets Schedules, the combined Net Quick Assets exceed zero, the Buyer will, no later than the later of (A) thirty (30) days following the delivery of the Closing Net Quick Assets Schedules or (B) 5 Business Days -20- following the resolution of a dispute with respect to any items on the Closing Net Quick Assets Schedules as set forth in subsection (iv) hereof (the "Settlement Date"), pay to the Representative, on behalf of the Company Stockholders and PCI, the amount of such excess, together with interest thereon calculated as described below, by wire transfer of immediately available funds to an account designated by the Representative, subject to (S)2(j) hereof. If the combined Closing Net Quick Assets are less than zero, the Representative will cause the Post-Closing Escrow Agent to pay to the Buyer, no later than the Settlement Date, the amount of such shortfall, together with interest thereon calculated as described below, by wire transfer of immediately available funds to an account designated by the Buyer. The amount, if any, payable pursuant to this clause (iii), together with interest thereon at the rate of interest paid from time to time on the Post-Closing Escrow Fund from the Closing Date up to and including the date of payment is hereafter referred to as the "Adjustment." (iv) If the Representative in good faith disagrees with any items on the Closing Net Quick Assets Schedules, the Representative shall notify the Buyer and the Post-Closing Escrow Agent in writing of such disagreement within twenty-nine (29) days after the Representative's receipt of the Closing Net Quick Assets Schedules. Such notice shall set forth the basis for such disagreement in reasonable detail. During such twenty-nine (29) day period, the Buyer shall afford the Representative access to all of the Surviving Corporation's books and records and cause the Buyer's accountants to afford the Representative access to all of the work papers of the Buyer's accountants during regular business hours as required by the Representative to review the Closing Net Quick Assets Schedules, in each case, solely for the purposes of resolving such disagreement. The Buyer and the Representative shall thereafter negotiate in good faith to resolve any such disagreements, provided that the Representative shall promptly cause the Escrow Agent to pay to the Buyer, or the Buyer shall promptly pay to the Representative on behalf of the Company Stockholders and PCI, as the case may be, the portion of the Adjustment that is not subject to dispute. (v) If the Buyer and the Representative are unable to resolve any such disagreements within twenty (20) days after the expiration of the twenty- nine-day period referred to in clause (iv), the Buyer and the Representative shall use their reasonable best efforts to cause the Chicago office of Arthur Andersen LLP, acting as an independent arbitrator, (the "Auditor") to resolve all disagreements on the disputed items as soon as practicable, provided that the Auditor shall be bound by the provisions of this (S) 2(k) and may not assign a value to any item greater than the greatest value for such item claimed by either the Buyer or the Representative or less than the smallest value for such item claimed by either the Buyer or the Representative. Each of the Buyer and the Representative shall permit the Auditor to have full access to its books, records, key employees and independent accountants, in each case solely in order to resolve any such disagreements. The resolution of such disagreements by the Auditor shall be final and binding on the Buyer, the Company Stockholders, PCI and the Representative. The fees and expenses of the Auditor shall be paid by the party whose position is most at variance with the decision of the Auditor, as determined by the Auditor which, if required to be paid by the Representative on behalf of the Company Stockholders and PCI, shall be paid out of the Escrow Fund in accordance with the terms of the Post-Closing Escrow Agreement. Any -21- payment by the Buyer to the Representative shall be net of amounts to be withheld pursuant to (S) 2(j). (l) Further Assurances. Each Party hereto and the Representative, in its capacity as representative of PCI and the Schedule I Stockholders, will, either prior to or after the Effective Time, execute such further documents, instruments, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be requested by one or more of the others to consummate the transactions contemplated hereby, to vest the Surviving Corporation with full title to all assets, properties, privileges, rights, approvals, immunities and franchises of the Company and to effect the other purposes of this Agreement. (m) Chargeable Violations. Notwithstanding that Chargeable Violations are Permitted Exceptions, if on the Closing Date Chargeable Violations exist which have not been cured, then the Buyer shall be entitled as its sole and exclusive remedy to a credit against the Merger Consideration in an amount equal to the cost of curing said Chargeable Violations, as reasonably determined by Buyer and the Company, it being understood and agreed that no credits either individually or in the aggregate under this (S) 2(m) shall exceed $3,000,000. In furtherance of the foregoing, and notwithstanding anything in this Agreement to the contrary, the Buyer acknowledges and agrees that it shall have no right to terminate this Agreement by reason of the existence of any violations of laws, ordinances, orders, requirements, or regulations of any governmental authority relating to the Shopping Centers, including Chargeable Violations and Seller shall have no obligation to cure or remove any violations of laws, ordinances, orders, requirements or regulations of any governmental authority including Chargeable Violations. 3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer and the Transitory Subsidiary that the statements contained in this (S) 3 are correct and complete as of the date of this Agreement, except as set forth in the disclosure schedule accompanying this Agreement and initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this (S) 3 (and the other provisions of this Agreement to which it relates). (a) Organization, Qualification and Corporate Power. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, as set forth in the Disclosure Schedule. Each of the Company and its Subsidiaries is duly authorized to conduct business and is in good standing under the laws of those jurisdictions set forth in the Disclosure Schedule, which are the only jurisdictions where such qualification is required, except where the lack of such qualification, individually or in the aggregate and together with any other absent qualifications referred to in (S) 3(c), would not have a Material Adverse Effect. Each of the Company and its Subsidiaries has full corporate power and authority to carry on the business in which it is engaged and to own or lease the properties owned or leased by it. The Company has delivered to the Buyer complete and correct copies of its Restated Certificate of Incorporation and By- laws, as amended. -22- (b) Capitalization. The entire authorized capital stock of the Company consists of 940,000 Company Common Shares, of which 798,160.466 shares are issued and outstanding and 13,712.569 shares are held in treasury, 70,000 Class A Shares, of which 59,311.758 shares are issued and outstanding and no shares are held in treasury, and 100,000 Preferred Shares, none of which are issued or outstanding or held in treasury. All of the issued and outstanding Company Shares have been duly authorized and are validly issued, fully paid and nonassessable. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights or other contracts or commitments that could require the Company to issue, sell or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company, and there are no agreements or arrangements to which the Company is a party or by which it is bound for the redemption or repurchase of any Company Shares. There are no agreements or arrangements governing the rights and/or duties of any Company Stockholders nor any voting trusts, stockholder or similar agreements, proxies or other agreements in effect with respect to the voting or transfer of any equity or other interests in the Company to which the Company is a party or by which it is bound. (c) PCI; the Venture; the Trust. PCI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly authorized to conduct business and is in good standing under the laws of those jurisdictions set forth in the Disclosure Schedule, which are the only jurisdictions where such qualification is required, except where the lack of such qualification would not, together with any other such absent qualifications referred to in (S) 3(a), have a Material Adverse Effect. Immediately prior to the Effective Time, the Company will own a 50% interest in the Venture directly (or indirectly through Company Sub) and the remaining 50% interest in the Venture indirectly through Parcity Inc., in each case, free and clear of any Liens other than in respect of payment of the PCI Allocable Portion. The Venture is a partnership duly organized and validly existing under the laws of the State of Illinois, the sole partners of which are Parcity, Inc., a wholly-owned Subsidiary of the Company, and PCI, each of which owns a 50% interest in the Venture. Each of PCI and the Venture has full power and authority (corporate or otherwise) to carry on the business in which it is engaged and to own or lease the properties owned or leased by it. Since its formation, the Venture has conducted no business other than its ownership of 100% of the beneficial interest in Park City Center and activities related thereto. The Company has delivered to the Buyer complete and correct copies of the Certificate of Incorporation and Bylaws of PCI and a complete and correct copy of the Amended and Restated Partnership Agreement of the Venture (the "Venture Agreement"), in each case as amended. The Trust is duly established under the laws of the State of Illinois. The Company has delivered to the Buyer a complete and correct copy of the Indenture of Trust pursuant to which the Trust was established, as amended. (d) Subsidiaries; Other Equity Interests. Each Subsidiary of the Company and each other Person, including the Venture, in which the Company or any of its Subsidiaries has an equity or other interest (of record or beneficially) is listed in the Disclosure Schedule. The authorized, issued and outstanding shares of the capital stock of each Subsidiary and the record -23- and beneficial ownership of the outstanding shares thereof are as set forth in the Disclosure Schedule; all outstanding shares of each Subsidiary have been duly and validly issued, are fully paid and nonassessable and are owned free and clear of all Liens. There are no agreements or arrangements to which any Subsidiary or the Venture is a party or by which it is bound for the redemption, repurchase or issuance of such Subsidiary's or the Venture's equity or other interests. There are no outstanding or authorized options, warrants, puts, calls, purchase rights, subscription rights, preemptive rights, conversion rights or exchange rights or other contracts or commitments that could require any Subsidiary or the Venture to issue, sell or otherwise cause to become outstanding any equity or other interests, except as contemplated by this Agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to any Subsidiary or the Venture. There are no agreements or arrangements governing the rights and/or duties of any stockholders of any Subsidiary nor any voting trusts, stockholder or similar agreements, proxies or other agreements or arrangements in effect with respect to the voting or transfer of any equity or other interests in any Subsidiary or the Venture. The Company has delivered to the Buyer complete and correct copies of the Certificate of Incorporation and Bylaws of each of its Subsidiaries, as amended. (e) Authorization of Transaction. Each of the Company, PCI and Park City, to the extent it is a party thereto, has full power and authority (including full corporate power and authority) to execute and deliver this Agreement, the P City Agreement, the Post-Closing Escrow Agreement and the Deposit Escrow Agreement and the other agreements contemplated hereby and to perform its obligations hereunder and thereunder, and all necessary corporate action has been taken by the Company, PCI and Park City (except as described below) to approve the execution, delivery and performance hereof and thereof by the Company, PCI and Park City, except that the Company cannot consummate the Merger unless and until it receives the Requisite Stockholder Approval and the transactions contemplated by the P City Agreement must be approved by the stockholders of Park City. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the other Parties and subject to the receipt of the Requisite Stockholder Approval, which is the only vote required in respect of the Company (including its stockholders) in order to approve the Merger and the other transactions contemplated hereby, constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms. The P City Agreement and the Deposit Escrow Agreement have been, and the other agreements contemplated hereby will, prior to the Closing be, duly executed and delivered by the Company, PCI and/or Park City, as the case may be, and constitute, or will constitute, as the case may be, the valid and legally binding obligations of the Company, PCI and/or Park City, as the case may be, enforceable in accordance with their respective terms. (f) Noncontravention. Neither the execution and the delivery of this Agreement, the P City Agreement, the Deposit Escrow Agreement, the Post-Closing Escrow Agreement or any other agreement contemplated hereby nor the consummation of the transactions contemplated hereby and thereby will (i) violate any statute, regulation, rule, injunction, judgment, order or decree of any government, governmental agency or court to which any of the Company, its -24- Subsidiaries, PCI or the Venture is subject or by which it or its assets may be bound, or (ii) result in a breach or default under any provision of the charter, bylaws or other organizational documents of any of the Company, its Subsidiaries or PCI or of the Venture Agreement or the Indenture of Trust for the Trust or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel or require any notice under any agreement, note, bond, mortgage, contract, lease, license, permit or instrument to which any of the Company, its Subsidiaries, PCI or the Venture is a party or by which it is bound or to which any of its assets is subject or any Service Contract (or result in the imposition of any Lien upon any of its assets), except where, in the cases of clauses (i) and (iii), any such violations, conflicts, breaches, defaults, accelerations, terminations, modifications, cancellations, failures to give notice or Liens would not, individually or in the aggregate, have a Material Adverse Effect. Other than as required by the Delaware General Corporation Law, none of the Company and its Subsidiaries, PCI or the Venture needs to give any notice to, make any filing with or obtain any authorization, consent or approval of any government or governmental agency or other Person in order for the Parties to execute and deliver this Agreement, the P City Agreement and the other agreements contemplated hereby or consummate the transactions contemplated hereby and thereby, except where the failure to give notice, to file or to obtain any authorization, consent or approval would not, individually or in the aggregate, have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the P City Agreement and the other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby will not permit any stockholder, partner, joint venturer or other holder of an interest in the Company, any Subsidiary, PCI or the Venture to exercise or invoke any buy-sell, right of first refusal or first offer, purchase option or other purchase or option right. (g) Financial Statements. The Company has previously provided the Buyer with an audited consolidated balance sheet and consolidated statement of operations, and related consolidated statements of shareholders equity and cash flows, as at and for the fiscal year ended December 31, 1997 (the "Most Recent Fiscal Period End") and audited consolidated balance sheets and consolidated statements of operations, and related consolidated statements of shareholders equity and cash flows, as at and for each of the fiscal years ended December 31, 1994, 1995 and 1996 (collectively, the "Financial Statements"). The Financial Statements (including the related notes and schedules) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes thereto) and present fairly the consolidated financial condition of the Company and its Subsidiaries as of the indicated dates and the consolidated results of operations of the Company and its Subsidiaries for the indicated periods. With respect to the Venture, the Company has also previously provided the Buyer with an audited balance sheet and statement of operations and related statement of the venturers' deficit and cash flows as at and for the Most Recent Fiscal Period End and audited balance sheets and statements of operations and related statement of venturers' deficit and cash flows as at and for each of the fiscal years ended December 31, 1994, 1995 and 1996 (collectively, the "Venture Financial Statements"). The Venture Financial Statements (including, the related notes and schedules) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be -25- indicated in the notes thereto) and present fairly the financial condition of the Venture as of the indicated dates and the results of operations of the Venture for the indicated periods. Except as set forth in the Financial Statements or the Venture Financial Statements (including in each case, the related notes), except for liabilities and obligations incurred since the Most Recent Fiscal Period End in the Ordinary Course of Business and except for liabilities under contracts and Leases which are disclosed in the Disclosure Schedule, neither the Company nor any of its Subsidiaries or the Venture has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, are material to the Company, the Subsidiaries, and the Venture taken as a whole. (h) Events Subsequent to Most Recent Fiscal Period End. Since the Most Recent Fiscal Period End, there has not been any: (i) Material Adverse Effect; (ii) change in the accounting methods, principles or practices (including, without limitation, any change in depreciation or amortization policies or rates) of the Company or any of its Subsidiaries or of the Venture, except insofar as required by a change in GAAP (which changes are described in the Disclosure Schedule); (iii) sale or transfer of any assets of the Company or any of its Subsidiaries or the Venture, except in the Ordinary Course of Business and involving less than $25,000 for each item individually; (iv) any loan made by the Company or any of its Subsidiaries or the Venture to any Person or guaranty by the Company or any of its Subsidiaries or the Venture of any loan, in an amount exceeding $10,000, in each case, except for inter-company loans (which inter-company loans shall be paid off or otherwise satisfied prior to the Closing); (v) cancellation made by the Company or any of its Subsidiaries or the Venture, without full payment, of any note, loan or other obligation owing to the Company or any of its Subsidiaries or the Venture in an amount exceeding $25,000; (vi) mortgage, pledge or other encumbrance of any assets of the Company, any of its Subsidiaries or the Venture or the PCI Venture Interest, except for Liens for Taxes not yet due and payable and for which appropriate accruals have been reflected in the books and records of the Company or the Venture; (vii) waiver or release of any claim of the Company or any of its Subsidiaries or the Venture with a value in excess of $25,000 for each item individually, except in the Ordinary Course of Business; (viii) capital expenditure, including the incurrence of any liability therefor, by the Company, any of its Subsidiaries or the Venture other than in accordance with the -26- Company's capital expenditures budget, a copy of which has previously been delivered to the Buyer, and tenant improvements contemplated by Leases disclosed in (S) 3(l) of the Disclosure Schedule. (ix) execution of any real estate lease as tenant or personal property lease as lessee, including the incurrence of any liability therefor, by the Company, any of its Subsidiaries or the Venture involving in excess of $25,000 per year, provided that any leases described on the Disclosure Schedule in relation to this clause (ix) were entered into in the Ordinary Course of Business and on an arm's length basis; (x) failure to repay any indebtedness for borrowed money of the Company, any of its Subsidiaries or the Venture; (xi) physical damage, destruction or loss (whether or not covered by insurance) affecting the properties of the Company or any of its Subsidiaries or of the Venture, which physical damage, destruction or loss, individually or in the aggregate, had or could reasonably be expected to have a Material Adverse Effect; (xii) indebtedness for borrowed money incurred by the Company or any of its Subsidiaries or by the Venture, or any commitment to incur indebtedness for borrowed money entered into by the Company or any of its Subsidiaries or the Venture, other than with respect to the Revolving Credit Agreements and inter-company loans which shall be paid off or otherwise satisfied prior to Closing. (xiii) payment, discharge or satisfaction of any liabilities of the Company, any of its Subsidiaries or the Venture other than in the Ordinary Course of Business and consistent with past practice and in respect of inter-company loans which shall be paid off or otherwise satisfied prior to Closing; (xiv) declaration or payment of any dividend or other distribution in respect of the capital stock or other interests of the Company, any of its Subsidiaries or the Venture (it being acknowledged that after the date hereof and prior to the Closing, such entities may pay cash dividends, subject to the last sentence of (S) 7(d)); or (xv) agreement, commitment or obligation of the Company or any of its Subsidiaries or the Venture or PCI to do, or undertaking which may cause, any of the matters described in the preceding clauses (i) through (xiv) to occur. (i) Tax Returns and Liabilities. (i) (A) Each of the Company, its Subsidiaries and the Venture has filed all Tax Returns and Reports which it is required to file (taking into account any applicable filing extensions), (B) all such Tax Returns and Reports are correct and complete in all material respects, (C) each of the Company, its Subsidiaries and the Venture has paid (or -27- the Company has paid on its behalf) all Taxes shown on such Tax Returns and Reports as required to be paid by it, and (D) the Financial Statements and the Venture Financial Statements reflect adequate accruals, for all material Taxes payable by the Company, its Subsidiaries and the Venture for all taxable periods and portions thereof through the Most Recent Fiscal Period End and the general ledgers, which have been prepared in a manner consistent with prior practices, of the Company, its Subsidiaries and the Venture reflect adequate accruals for all material Taxes that have accrued thereafter. True, correct and complete copies of the federal tax returns for the Company and the Venture for the taxable years 1994, 1995 and 1996 have been delivered or made available to representatives of the Buyer, and no deficiencies for any Taxes have, to the Knowledge of the Company, been proposed, asserted or assessed against the Company, any of its Subsidiaries or the Venture, and no requests for waivers of the time to assess any such Taxes are pending. (ii) The Company (A) for all taxable years commencing with the taxable year ended December 31, 1989 through December 31, 1997 has been organized in conformity with the requirements for qualification as a real estate investment trust (a "REIT") (within the meaning of the Code) under the Code, has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT for such years, (B) has operated, and intends to continue to operate, in such a manner as to qualify as a REIT for the taxable period through and including the Closing Date and (C) 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 no such challenge is pending or, to the Knowledge of the Company, threatened. Each Person which is a partnership, joint venture or limited liability company and in which the Company, any of its Subsidiaries or the Venture owns (either directly or together with any of the Company's Subsidiaries) 5% or more of the equity interests has been since its formation and continues to be for federal income tax purposes a partnership and not a corporation or an association taxable as a corporation. Each Subsidiary with respect to which all of the outstanding capital stock is owned solely by the Company (or solely by any of its Subsidiaries that is a corporation wholly owned by the Company) is a "qualified REIT subsidiary," as defined in Section 856(i) of the Code. Neither the Company nor any of its Subsidiaries holds any asset that is subject to a consent filed pursuant to Section 341(f) of the Code and the regulations thereunder. None of the Company, any of its Subsidiaries or the Venture owns 5% or more of the stock of any corporation which is not a "qualified REIT subsidiary" as defined in Section 856(i) of the Code. (iii) The Venture has been since its formation and continues to be for federal income tax purposes a partnership and not a corporation or an association taxable as a corporation. (iv) None of the Company or its Subsidiaries has been at any time a member of a consolidated, combined or unitary group for federal, state, local or foreign tax purposes. -28- (v) None of the Company, its Subsidiaries or the Venture is bound by any private letter ruling or closing agreement with the Internal Revenue Service or any other taxing authority, and no applications or requests for such rulings or closing agreements are outstanding. (j) Litigation. There is no suit, action, proceeding (including arbitration), governmental investigation, CAM or environmental audit or labor dispute pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or the Venture or any of their respective properties or assets (including the Shopping Centers), nor is there any judgment, decree, injunction, writ or order of any court, government, governmental agency or arbitrator outstanding against the Company or any of its Subsidiaries or the Venture or any of their respective properties or assets. (k) Real and Personal Property. The Company has previously delivered to the Buyer a complete list and brief description of all real and personal property (or where indicated, the leasehold estate therein) having a value of over $5,000 per item owned or leased by the Company or by any of its Subsidiaries or the Venture, in each case indicating the entity or entities owning or leasing such property. All real property reflected in the most recent Financial Statements and Venture Financial Statements is listed on the Disclosure Schedule and is the only real property owned or leased by the Company, any Subsidiary or the Venture. With respect to all such real property, the Company, the Subsidiary or the Venture (through the Trust) (as applicable) owning such property has good title in fee simple (or where indicated, the leasehold estate) thereto, including all improvements thereon, free and clear of all Liens, except for the Permitted Exceptions. The Company, each Subsidiary and the Venture (as applicable) owns its personal property (including capital stock and other interests in entities) free and clear of any Liens, except for Permitted Exceptions. All leases referred to in this clause (k) are in full force and effect and none of the Company, any Subsidiary, the Venture or, to the Knowledge of the Company, any other party thereto is in default thereunder. (l) Shopping Centers - Service Contracts; Leases; REAs; and Brokerage Commissions; Other Material Contracts. (i) Service Contracts. All service, maintenance, supply and management contracts affecting each Shopping Center or entered into by the Company, any of its Subsidiaries or the Venture which are not terminable without payment of premium or penalty or which cannot be terminated without more than thirty (30) days notice ("Service Contracts") and any modifications thereto are set forth in the Disclosure Schedule, and the information set forth therein is accurate as of the date hereof. Each of the Service Contracts is valid and subsisting and none of the Company, any of its Subsidiaries or the Venture or, to the Knowledge of the Company, any other party thereto is in breach or default thereunder. None of the Company, its Subsidiaries or the Venture has received or given any written notice from or to any party to any such Service Contract claiming the existence of any default or breach thereunder. -29- (ii) Leases. (A) A list of all leases, occupancy agreements, concessions, and licenses (and any modifications, supplements, amendments and guarantees relating thereto) affecting each Shopping Center on the date hereof (the "Leases"), showing the name of each tenant, the space demised (including square footage), the lease commencement and expiration date, the base monthly rent (including sales break point and percentage rent rate), any percentage or additional rent, any outstanding rent abatements, tenant improvement allowances and other tenant concessions and applicable security deposits (the "Rent Roll"), is accurately set forth in the Disclosure Schedule. True and complete copies of all Leases (including all amendments, modifications, supplements and guaranties relating thereto) have previously been delivered or made available to the Buyer. Except as otherwise set forth in the Leases, the Disclosure Schedule or Estoppel Certificates, as applicable, each of the Leases is valid and enforceable and is in full force and effect and neither the Company, any of its Subsidiaries or the Venture nor, to the Knowledge of the Company, any of the tenants thereunder is in default of any of its obligations under any of the Leases. No tenant has paid any base rent more than 30 days in advance. (B) Each Lease, together with any modifications, amendments and supplements thereto, constitutes the entire agreement between the Company, any of its Subsidiaries or the Venture and each other party thereto, and neither the Company, any of its Subsidiaries nor the Venture has made any oral promises or agreements amending or modifying the same; (i) There are no leases executed by or on behalf of the Company, any of its Subsidiaries or the Venture or other rights of occupancy or use granted by or on behalf of the Company, any of its Subsidiaries or the Venture for any portion of the Shopping Centers other than (A) the Leases, (B) subleases or subtenancies granted by tenants, or (C) occupancy agreements for the operation of any cart or kiosk. As of the Closing, except for any collateral assignment of leases and rents pursuant to any financing which will continue after the Closing, no rents due under, or any other interest of the Company, any of its Subsidiaries or the Venture in, any of the Leases will be held by any party other than the Company, any of its Subsidiaries or the Venture or otherwise pledged or encumbered or subject to any other Lien in any way. (ii) (1) No tenant has made any written claim which has been received by the Company, any of its Subsidiaries or the Venture (A) that the Company, any of its Subsidiaries or the Venture has defaulted in performing any of its obligations under any of the Leases which has not heretofore been cured, (B) that the Company, any of its Subsidiaries or the Venture is or will be in default under any Lease as a result of any condition claimed therein to exist which with the passage of time or notice, or both, would constitute such a default, (C) that such tenant is entitled to any reduction in, refund of or counterclaim or offset against, or is otherwise disputing, any rents or other charges (including CAM) paid, payable -30- or to become payable by such tenant or (D) that such tenant is entitled to cancel its Lease or to be relieved of its operating covenants, if any, therein; and (2) to the Knowledge of the Company, (x) no "event of default" or "default" (as defined in the respective Lease) by a tenant exists under any Lease and (y) no condition exists that with the passage of time or notice, or both, reasonably forms a basis for which any Lease may be terminated by the tenant thereunder. (iii) (1) There are no rent abatements or other tenant concessions or inducements, including, without limitation, lease assumptions or buy-outs, applicable to any of the Leases; (2) neither the Company, any of its Subsidiaries nor the Venture has granted any rights, options or rights of first refusal of any kind to any tenant, which are in effect, to purchase or otherwise acquire the Shopping Centers or any part thereof; and (3) all of the improvements to be constructed by the landlord under each of the Leases have been fully completed and paid for. (C) The REAs constitute the entire agreement between the Company, any of its Subsidiaries or the Venture and each REA Party thereto, and neither the Company, any of its Subsidiaries nor the Venture has made any oral or written promises or agreements amending or modifying the same; (i) The REAs are valid and in full force and effect. As of the Closing (except for any collateral assignments of leases and rents pursuant to any financing which will continue after the Closing), no amounts due under, or any other interest of the Company, any of its Subsidiaries or the Venture in, the REAs will be held by any party other than the Company, any of its Subsidiaries or the Venture or otherwise pledged or encumbered or subject to any other Lien in any way. (ii) (1) None of the REA Parties has made any written claim which has been received by the Company, any of its Subsidiaries or the Venture (A) that the Company, any of its Subsidiaries or the Venture has defaulted in performing any of its obligations under any of the REAs which has not heretofore been cured, (B) that the Company, any of its Subsidiaries or the Venture is or will be in default under any REA as a result of any condition claimed therein to exist which with the passage of time or notice, or both, would constitute such a default, (C) that such REA Party is entitled to any reduction in, refund of or counterclaim or offset against, or is otherwise disputing, any amounts or other charges paid, payable or to become payable by such REA Party or (D) that such REA Party is entitled to cancel its REA or to be relieved of its operating covenants, if any, therein; (2) to the Knowledge of the Company, (x) no "event of default" or "default" (as defined in the respective REA) by a party to an REA exists under any REA and (y) no condition exists that with the passage of time or notice, or -31- both, reasonably forms a basis for which any REA may be terminated by any party thereto; and (3) each REA is in full force and effect. (iii) (A) None of the Company, any of its Subsidiaries or the Venture has granted any rights, options or rights of first refusal of any kind to any of the REA Parties, which are in effect, to purchase or to otherwise acquire the Shopping Centers or any part thereof, (B) all of the improvements to be constructed by the Company, any of its Subsidiaries or the Venture under any REA have been fully completed and paid for and (C) there are no abatements or other concessions or inducements applicable to any REA. (iv) None of the Company, any of its Subsidiaries or the Venture has entered into any reciprocal easement agreements other than the REAs. (D) Brokerage Commissions. There are no brokerage commissions or finder's fees payable by the Company, any of its Subsidiaries or the Venture with respect to the current or any renewal term of any of the Leases or the negotiation of any new lease, and none of the Company, any of its Subsidiaries or the Venture has any agreement with any broker with respect to any renewal term of any Lease. (E) Other Material Contracts. The Company has made available to Buyer for review correct and complete copies of all Other Material Contracts. All Other Material Contracts entered into by or on behalf of the Company, any of its Subsidiaries or the Venture or by which any of them or their assets may be bound and any modifications, supplements or amendments thereto are set forth in the Disclosure Schedule, and the information set forth therein is accurate. Each of the Other Material Contracts is valid and subsisting and none of the Company, any of its Subsidiaries or the Venture or, to the Knowledge of the Company, any other party thereto is in breach or default thereunder. None of the Company, any of its Subsidiaries or the Venture has received from, or given any written notice to, any party to any Other Material Contract claiming the existence of any default or breach thereunder. (m) Shopping Centers - Representations Pertaining to the Premises and Legal Matters. (i) Insurance. The Disclosure Schedule lists all insurance policies (the "Insurance Policies") affording coverage with respect to each Shopping Center, and the information contained therein is accurate. The Company has delivered or caused to be delivered to the Buyer a certificate or certificates of insurance with respect to each blanket insurance policy for the Shopping Centers. Each insurance policy set forth on the Disclosure Schedule is, and as of the Closing Date will be, in full force and effect, without any material amendments or modifications having been made thereto and with all premiums having been paid. None of the Company, any of its Subsidiaries or the Venture has received any notification of cancellation or non-renewal or notice of violation in connection with any insurance policy. -32- (ii) Laws and Ordinances. None of the Company, any of its Subsidiaries or the Venture has received written notice that any of the Shopping Centers or the present use and condition thereof violate any applicable deed restrictions, zoning or subdivision regulations or urban redevelopment plans applicable to such Shopping Center, as modified by any duly issued variances. No action or proceeding relating to the foregoing is pending or, to the Knowledge of the Company, threatened with respect to the Shopping Centers. No written notices of violations of law, ordinances, regulations or orders relating to the Shopping Centers have been received by the Company, any of its Subsidiaries or the Venture which have not been cured or complied with. No written notice from any insurance company, insurance rating organization or Board of Fire Underwriters requiring any alterations, improvements or changes at the Shopping Centers, or any portion thereof, which has not heretofore been complied with has been received by the Company, any of its Subsidiaries or the Venture. (iii) Condemnation. There is no pending or, to the Knowledge of the Company, threatened condemnation, expropriation, eminent domain or similar proceeding affecting all or any portion of any of the Shopping Centers, and none of the Company, any of its Subsidiaries or the Venture has received any written or, to the Knowledge of the Company, oral notice of any of the same. (iv) Environmental. To the Knowledge of the Company, none of the Shopping Centers is in material violation of any Environmental Law. During the time in which the Company, any of its Subsidiaries or the Venture has owned the Shopping Centers, neither the Company, any of its Subsidiaries nor the Venture nor, to the Knowledge of the Company, any third party has used, generated, manufactured, stored, released or disposed of on, under or about the Shopping Centers or transported to or from the Shopping Centers any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials ("Hazardous Materials"), except for the storage and use of substances commonly present at or used in the operation and maintenance of shopping centers and in compliance with all applicable laws. Hazardous Materials shall include, but not be limited to, substances defined as "hazardous substances", "hazardous materials" or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq; the Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801, et seq; the Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901, et seq; and those substances defined as "hazardous wastes" in relevant state laws and in the regulations adopted and publications promulgated pursuant to said laws. Neither the Company, any of its Subsidiaries, PCI nor the Venture has received any written notice from any governmental authority having jurisdiction or other Person that (i) it, any other occupant of the Shopping Centers or the Shopping Centers are not in compliance with any Environmental Law or that it has any liability with respect thereto or (ii) there are administrative, regulatory or judicial proceedings pending with respect to the Shopping Centers pursuant to, or alleging any violation of or liability under, any Environmental Law. Neither the Company, any of its Subsidiaries, PCI nor the Venture has installed or maintained any -33- underground or above ground storage tanks on, under or about the Shopping Centers. Neither the Company, any of its Subsidiaries, PCI nor the Venture has received written notice that there is a facility located on or at the Shopping Centers that is subject to the reporting requirements of Section 312 of the Federal Emergency Planning and Community Right to Know Act of 1986 and the federal regulations promulgated thereunder (42 U.S.C. (S)11022). None of the Company, any of its Subsidiaries, PCI or the Venture has received any written notice of pending or threatened claims, liabilities or proceedings, nor, to the Knowledge of the Company have there been any violations of or failures to comply with Environmental Laws or any releases of Hazardous Materials (except for releases of materials commonly present at or used in the operation and maintenance of shopping centers and in compliance with all applicable laws), in each case, with respect to any properties formerly owned or leased (in whole or in part) by any of such entities or any predecessors of such entities during the period such properties were so-owned or so-leased by the Company, any of the Subsidiaries or the Venture (or their predecessors) or prior thereto. (n) Debt Instruments. Set forth in the Disclosure Schedule is a list of all loan or credit agreements, notes, bonds, mortgages, indentures or other agreements or instruments pursuant to which any indebtedness of the Company or any of its Subsidiaries or the Venture for money borrowed is outstanding or may be incurred and any agreements relating to the deferred purchase price of property and the respective principal amounts outstanding thereunder on March 31, 1998. Neither the Company nor any of its Subsidiaries or the Venture is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice, or both, would cause such a violation of or default under) any such loan or credit agreement, note, bond, mortgage, indenture or other agreement or instrument, except for violations that are not, individually or in the aggregate, material to the Company, its Subsidiaries and the Venture, taken as a whole, and which will not prevent, materially hinder or delay consummation of the transactions contemplated hereby. The Disclosure Schedule lists all letters of credit and performance bonds to which the Company, any of its Subsidiaries or the Venture is a party or under which any of them is obligated or which otherwise relate to properties or assets of the Company, any Subsidiary or the Venture. (o) ERE Yarmouth Agreement. Set forth in the Disclosure Schedule is a list of all arrangements, agreements or contracts (written or oral) entered into by the Company or any of its Subsidiaries or by PCI or the Venture with ERE Yarmouth or any of its Affiliates, complete and correct copies of which have been previously delivered or made available to the Buyer. All fees (and expenses) payable to ERE Yarmouth or any of its Affiliates under such agreements or in connection with the execution, delivery and performance of this Agreement and the agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby shall be paid by the Company Stockholders and PCI or from the Closing Expense Fund, in each case prior to or concurrently with the Closing. (p) Hart-Scott-Rodino Act. For purposes of determining compliance with the Hart-Scott-Rodino Act, the Company confirms that the conduct of its business consists solely of -34- investing in, owning and operating shopping centers and office buildings for the benefit of its stockholders. (q) Employees. Except as set forth in (S) 3(q) of the Disclosure Schedule, to the Knowledge of the Company, (a) no employee of ERE Yarmouth or its Affiliates who is employed at the Shopping Centers (an "Employee") is a member of a collective bargaining unit, (b) there are no threatened or contemplated attempts to organize for collective bargaining purposes any of the Employees, (c) no unfair labor practice charge or complaint or sex, age, disability, gender, race or religious discrimination claim is pending against the Company, any Subsidiary or the Venture before the National Labor Relations Board or any other federal state or local governmental authority, (d) there is no work stoppage, strike or other concerted action by Employees, (e) the Company, the Subsidiaries and the Venture and their employee benefit plans are in compliance in all material respects with all applicable laws, rules, regulations, ordinances, orders, judgments and decrees relating to the employment of labor and benefit plans, (f) ERE Yarmouth and its Affiliates have paid in full to all Employees all wages, salaries, commissions, bonuses, benefits and other compensation due or to become due on behalf of such Employees, and (g) all contributions and/or premiums to or on behalf of all benefit plans which are due and owing have been paid, (h) no notice of intent to terminate any pension plan has been filed and no amendment to treat such plan as terminated has been adopted, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate any pension plan, and no other event or condition has occurred which might constitute grounds under Sections 4041 or 4042 of the Employee Retirement Income Security Act of 1974, as amended, for the termination of, or the appointment of a trustee to administer any pension plan, and (i) each benefit plan which is qualified under Section 401(a) of the Code has received a determination letter from the IRS that it is so qualified in form, and no fact or event has occurred since the date of such determination letter that could adversely affect the qualified status of such benefit plan in operation or form. (r) Brokers' Fees. Except as described in (S) 3(o), none of the Company, any of its Subsidiaries or the Venture has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement or the P City Agreement. (s) Promotional Funds. None of the Company, any of its Subsidiaries or the Venture is under any obligation to make contributions or otherwise provide assistance to any promotional association or promotional fund. (t) Violations. None of the Company, any of its Subsidiaries, PCI or the Venture has received any written notice that there exists any violation of any restriction, condition or agreement contained in any easement, restrictive covenant or any similar instrument or agreement recorded against the Shopping Centers or any portion thereof and, to the Knowledge of the Company, there is no such violation. To the Knowledge of the Company, without having made any governmental investigation or inquiry, the Company, its Subsidiaries and the Venture are in compliance with all applicable laws, statutes, ordinances and regulations, whether federal, state or local, relating to such entities or their businesses, properties, assets or operations, other -35- than those as to which failure to comply would not, individually or in the aggregate, have a Material Adverse Effect, or prevent, materially hinder or delay consummation of the transactions contemplated hereby. (u) Licenses and Permits. The Disclosure Statement contains a list of all licenses and permits (collectively, the "Licenses and Permits") currently maintained with respect to the Shopping Centers. None of the Company, any of its Subsidiaries, PCI or the Venture has received any written notice of violation of any such Licenses and Permits from any federal, state or municipal entity that has not been cured or otherwise resolved to the satisfaction of such governmental entity, and to the Knowledge of the Company, there is no such uncured violation. To the Knowledge of the Company, without having done any governmental investigation or inquiry, the Company has all material Licenses and Permits necessary for the Company, each of its Subsidiaries and the Venture to conduct their businesses as presently conducted and to own their properties and assets. (v) Tenant Bankruptcy. Neither the Company, any of its Subsidiaries, PCI nor the Venture has received any written notice that any tenant or REA Party is the subject of any bankruptcy, reorganization, insolvency or similar proceedings or has ceased or reduced or intends to cease or reduce operations at the Shopping Centers (other than temporarily due to casualty, remodeling, renovation or similar cause) and, to the Knowledge of the Company, no tenant or REA Party is the subject of any such proceedings or has so ceased or reduced or intends to so cease or reduce operations at the Shopping Centers. (w) Intellectual Property. Neither the Company, any of its Subsidiaries, PCI nor the Venture has received any written notice that the conduct of the Company's, any of its Subsidiaries' or the Venture's business infringes upon the patents, trademarks, copyrights or other intellectual property rights of any third party, and neither the Company, any of its Subsidiaries nor the Venture has given any written notice to any third party that such third party is infringing upon the patents, copyrights, trademarks or other intellectual property rights of the Company, any of its Subsidiaries or the Venture, and, to the Knowledge of the Company, there is no such infringement. The Company, its Subsidiaries, and the Venture have all right, title and interest in, or licenses to use, all intellectual property necessary to conduct their business as presently conducted. (x) Tax Assessments. Copies of current real estate tax bills with respect to each of the Shopping Centers, other than tax bills sent to tenants or REA Parties who have the obligation to pay such Taxes to the collecting authority, have been delivered or made available to the Buyer. No application or proceeding is pending with respect to a reduction of or an increase in any such Taxes. None of the Company, any of its Subsidiaries, PCI or the Venture has received any written notice of or, to the Knowledge of the Company, otherwise been made aware of (i) any special tax or assessment to be levied or proposed to be levied against any of the Shopping Centers or (ii) any change or proposed change in the tax assessment of any of the Shopping Centers. -36- (y) Bank Accounts and Powers of Attorney. The Disclosure Schedule identifies all bank accounts (or other accounts with financial institutions) and safe deposit boxes of the Company, the Subsidiaries and the Venture, together with account numbers and all current signatories thereon and persons with access thereto, and the names of all persons holding powers of attorney or similar grants of authority from the Company, any of its Subsidiaries or the Venture which are not otherwise disclosed in agreements or other instruments identified in the Disclosure Schedule. Copies of all said powers of attorney and similar authorizations have been delivered to the Buyer. (z) Records. The minute books and records of the Company, each Subsidiary, and the Venture in the possession of the Representative have been provided or made available to Buyer. The minute books, stock ledgers and stock records of the Company, each Subsidiary, and the Venture are or will, as of the Closing Date, be true, correct and complete. Complete and accurate copies of the foregoing have been or will, prior to the Closing, be provided or made available to the Buyer. 4. Representations and Warranties of the Buyer and the Transitory Subsidiary. The Buyer and the Transitory Subsidiary jointly and severally represent and warrant to the Company, for the benefit of the Company and the Company Stockholders, that the statements contained in this (S) 4 are correct and complete as of the date of this Agreement. (a) Organization. The Buyer is a limited partnership, and the Transitory Subsidiary is a limited liability company, in each case, duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Buyer and the Transitory Subsidiary has full limited partnership or limited liability company, as the case may be, power and authority to carry on the business in which it is engaged and to own or lease the properties owned or leased by it. (b) Financial Ability to Perform. The Buyer has or, at the Closing Date, will have currently available cash funds sufficient to consummate the transactions contemplated by this Agreement. (c) Authorization of Transaction. Each of the Buyer and the Transitory Subsidiary has full power and authority to execute and deliver this Agreement and the agreements contemplated hereby to which it is a party and to perform its obligations hereunder and thereunder, and all necessary corporate or limited liability company action has been taken by the Buyer and the Transitory Subsidiary to approve the execution, delivery and performance hereof and thereof by the Buyer and the Transitory Subsidiary, respectively. This Agreement has been duly executed and delivered by the Buyer and the Transitory Subsidiary under applicable Delaware law and in accordance with its partnership agreement or operating agreement, as the case may be, and, assuming the due authorization, execution and delivery hereof by the other Parties, constitutes the valid and legally binding obligation of each of the Buyer and the Transitory Subsidiary, enforceable in accordance with its terms. The Deposit Escrow Agreement has been, and the other agreements contemplated hereby to which the Buyer or the -37- Transitory Subsidiary will be parties, will prior to the Closing be duly executed and delivered by the Buyer and/or the Transitory Subsidiary, as the case may be, and constitute or will constitute, as the case may be, the valid and legally binding obligations of the Buyer and/or the Transitory Subsidiary, as the case may be, enforceable in accordance with their respective terms. (d) Noncontravention. Neither the execution and the delivery of this Agreement and the agreements contemplated hereby nor the consummation of the transactions contemplated hereby and thereby will (i) violate any statute, regulation, rule, injunction, judgment, order or decree of any government, governmental agency or court to which the Buyer or the Transitory Subsidiary is subject or by which it or its assets may be bound or any provision of the limited partnership agreement or operating agreement of the Buyer and the Transitory Subsidiary, respectively, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, note, bond, mortgage, contract, lease, license, permit or instrument to which the Buyer or the Transitory Subsidiary is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any of its assets), except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice or Lien would not have a material adverse effect on the ability of the Buyer or the Transitory Subsidiary to consummate the transactions contemplated by or perform its obligations under this Agreement. Except for the filing of the Certificate of Merger in Delaware, neither the Buyer nor the Transitory Subsidiary needs to give any notice to, make any filing with or obtain any authorization, consent or approval of any government or governmental agency or other Person in order for such Parties to execute and deliver this Agreement and the other agreements contemplated hereby to which they are parties or to consummate the transactions contemplated hereby and thereby. (e) Litigation. There is no suit, action or proceeding pending or, to the knowledge of the Buyer or the Transitory Subsidiary, threatened against or affecting the Buyer or the Transitory Subsidiary that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the ability of the Buyer or the Transitory Subsidiary to consummate the transactions contemplated by or perform its obligations under this Agreement, nor is there any judgment, decree, injunction, writ rule or order of any court, government, governmental agency or arbitrator outstanding against the Buyer or the Transitory Subsidiary or any of their respective properties or assets having, or which would reasonably be expected to have, any such effect. (f) The Transitory Subsidiary. The Transitory Subsidiary was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other than in connection with such transactions. (g) Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement. -38- 5. Survival of Representations and Warranties. No representations and warranties of the Company or the Buyer and the Transitory Subsidiary set forth in this Agreement or in any instrument or document delivered or to be delivered pursuant to this Agreement shall survive the Closing, other than the representations and warranties of the Company set forth in (S) 3(a), (b), (c), (d), (e), (f), (g), (h) (only with respect to clauses (ii), (iv), (v), (vii), (x), (xii), (xiii), (xiv) and clause (xv) but only insofar as clause (xv) relates to the foregoing clauses of subsection (h)), (i), (o), (p), (q), (r), (y) and (z), those of the Buyer and the Transitory Subsidiary set forth in (S) 4(a), (c), (d) and (g) and those set forth in any certificate delivered on behalf of the Company pursuant to (S) 9(a)(v) or on behalf of the Buyer pursuant to (S) 9(b)(iv), but only to the extent that such representations and warranties in such certificates relate to the foregoing sections and subsections of this Agreement, which shall survive the Closing until the first anniversary of the Closing Date ("Survival Termination Date"). Any representation or warranty which expires at the Closing shall, notwithstanding anything to the contrary herein, not be deemed to limit in any respect any representation, warranty or other provision of this Agreement or the agreements contemplated hereby which does not so expire. No Party hereto may assert any claim with respect to any breach of any representation or warranty after the date on which such representation or warranty ceases to survive pursuant to this Section 5. All covenants, to the extent relating to periods following the Closing, and indemnities of the Parties shall survive the Closing. 6. Claims Against the Escrow Fund. (a) The Parties hereby acknowledge and agree that none of the Buyer, the Transitory Subsidiary or the Surviving Corporation is permitted to assert against any Schedule I Stockholder or PCI or Park City any claim with respect to representations, warranties, indemnities or covenants contained herein or in the P City Agreement or in any instrument or document delivered or to be delivered pursuant to this Agreement except in accordance with the Post-Closing Escrow Agreement and their sole remedy with respect to such matters shall be pursuant to the Post-Closing Escrow Agreement. 7. Covenants. The Parties agree as follows with respect to the period from and after the execution of this Agreement and to the Effective Time or earlier termination of this Agreement: (a) General. Except as otherwise provided herein, each of the Parties will use its reasonable best efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in (S) 9 below). (b) Notices and Consents. The Company will give any notices (and will cause each of its Subsidiaries, PCI, the Venture and ERE Yarmouth and its Affiliates to give any notices) to third parties and will use its reasonable best efforts to obtain (and will cause each of its Subsidiaries, PCI, the Venture and ERE Yarmouth and its Affiliates to use its reasonable best efforts to obtain) any third party consents that are required as disclosed in the Disclosure Schedule in connection with the matters referred to in (S) 3(f) above. -39- (c) Regulatory Matters; Stockholder Approval. Each of the Parties will (and will cause each of its Subsidiaries and, in the case of the Company, PCI and the Venture to) give any notices to, make any filings with and use its reasonable best efforts to obtain any authorizations, consents and approvals of governments and governmental agencies in connection with the matters referred to in (S) 3(f) or (S) 4(d) above, as the case may be. In addition, the Company will call a special meeting of its stockholders (the "Special Meeting") in accordance with its Bylaws and the Delaware General Corporation Law as soon as practicable in order that Company Stockholders may consider and vote upon the adoption of this Agreement and the approval of the Merger in accordance with the Delaware General Corporation Law. The notice of such meeting shall contain the recommendation of the Board of Directors of the Company that the Company Stockholders adopt this Agreement and approve the transactions contemplated hereby. (d) Conduct of Business by the Company. The Company will not (and will not cause or permit any of its Subsidiaries, PCI or the Venture to) engage in any practice, take any action or enter into any transaction outside the Ordinary Course of Business except with the written consent of the Buyer, which consent shall be given or withheld by the Buyer acting in accordance with its business judgment, exercised in good faith after giving due consideration to the Company's recommendations. Without limiting the generality of the foregoing: (i) none of the Company or its Subsidiaries will authorize or effect any change in its charter or by-laws and none of the Company, Parcity, Inc. or PCI will authorize or effect any change in the Venture Agreement or cause the termination of the Venture; (ii) none of the Company or its Subsidiaries will grant any options, warrants or other rights to purchase or obtain any of its capital stock, securities convertible into or exchangeable therefor or other equity interests or issue, sell or otherwise dispose of any of its capital stock, securities convertible into or exchangeable therefor or other equity interests; (iii) none of the Company, its Subsidiaries or the Venture will declare, set aside or pay any non-cash dividend or non-cash distribution with respect to its capital stock or other equity interests, except to the extent required in order for the Company or Park City to maintain its status as a "real estate investment trust" under the Code, or redeem, repurchase or otherwise acquire any of its capital stock or other equity interests; (iv) except as expressly contemplated by this Agreement, none of the Company, its Subsidiaries or PCI will merge or consolidate with or into any Person; (v) none of the Company, its Subsidiaries or the Venture will issue any note, bond or other debt security, create, incur, assume or guarantee any indebtedness for borrowed money or capitalized lease obligations or enter into any sale-leaseback or similar off-balance sheet financing , in each case which will continue to be outstanding or otherwise remain in effect following the Closing. -40- (vi) none of the Company, its Subsidiaries or the Venture will impose any Lien or permit to exist any new Lien upon any of its assets outside the Ordinary Course of Business (other than new Liens which do not exceed $25,000, individually or $50,000, in the aggregate); (vii) none of the Company, its Subsidiaries or the Venture will make any capital investment in, make any loan to or acquire the securities or assets of any other Person outside the Ordinary Course of Business except as contemplated by the current capital expenditure budgets of the Company and its Subsidiaries or of the Venture, as previously approved by the Board of Directors of the Company or the Venturers, as the case may be, and provided to the Buyer; (viii) none of the Company, its Subsidiaries or the Venture will settle pending or threatened litigation in an amount exceeding $25,000 individually, or $50,000 in the aggregate (excluding amounts covered by insurance); (ix) none of the Company, its Subsidiaries or the Venture will sell, assign or transfer any of its assets that has a fair market value in excess of $25,000 individually, or $100,000 in the aggregate, whether or not in the Ordinary Course of Business and; (x) none of the Company, its Subsidiaries or the Venture will cancel any indebtedness for borrowed money owed to it, other than in return for full payment thereof, whether or not in the Ordinary Course of Business; (xi) none of the Company, its Subsidiaries or the Venture will engage in any new transaction outside of the Ordinary Course of Business or not on an arm's-length basis or enter into any new line of business; (xii) the Company will not waive any rights under, or enter into any amendment or modification of, the P City Agreement; and (xiii) none of the Company, the Subsidiaries or the Venture will hire any employees; and (xiv) none of the Company, its Subsidiaries or the Venture will commit to any of the foregoing. The Company shall, and shall cause each of its Subsidiaries and the Venture to, use its reasonable best efforts to preserve its business organization and reputation intact, to maintain its assets and properties in good working order and condition, ordinary wear and tear excepted, to preserve its relationships with tenants and other occupiers of properties, customers, suppliers, lenders, partners and others having significant business dealings with such entity. The Company shall prepare and file prior to the Closing Date all federal, state, local or foreign Tax Returns and Reports relating to the Company, any Subsidiary or the Venture for the period ending -41- December 31, 1997 and pay all Tax due in connection therewith prior to the Closing Date. Such Tax Returns and Reports shall be prepared on a basis consistent with those prepared for prior tax years unless a different treatment of any item is required by an intervening change in law. Notwithstanding the foregoing, with respect to each year in which Parcity Inc. or PCI owned an interest in the Venture, the Company shall cause Parcity Inc. and PCI, or, if applicable, their respective parents, prior to Closing to file corporate Tax Returns with the Pennsylvania Department of Revenue and to pay the corporate capital stock/franchise Taxes and corporate net income Taxes shown to be due on such Tax Returns. The Taxes shown to be due on such corporate Tax Returns (i) shall be calculated on the basis that the Venture was the legal and beneficial owner of the Park City Center located in Lancaster, Pennsylvania for each applicable year, and (ii) shall include interest and all penalties except those waived in writing by the Pennsylvania Department of Revenue. In addition, prior to Closing, the Company shall cause the Venture to file a Pennsylvania partnership information return with the Pennsylvania Department of Revenue for each year in which the Venture was in existence. The Company shall furnish the Buyer with a copy of any such Tax Returns and Reports at least 5 Business Days prior to the Closing. The Company will enforce its rights under the P City Agreement and will use its reasonable best efforts to cause Net Quick Assets as of the Closing not to be less than zero. (e) Full Access. The Company will (and will cause each of its Subsidiaries and the Venture to) permit representatives and agents of the Buyer to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company, its Subsidiaries or the Venture, to all premises, properties, personnel, officers, accountants, agents, books, records (including tax records), contracts and documents of or pertaining to the Company, its Subsidiaries and the Venture and to make photocopies of any such books, records, contracts and documents at no cost to the Company or the Schedule I Stockholders and PCI. The Buyer will treat and hold any Confidential Information it receives from the Company or any of its Subsidiaries or the Venture in the course of the reviews contemplated by this (S) 7(e), in accordance with the terms of the Confidentiality Agreement. The Company shall deliver or cause to be delivered promptly to the Buyer each report, statement, schedule and other document filed with any governmental agency or authority by the Company, any Subsidiary or the Venture. (f) Notice of Developments. Each Party will give prompt written notice to the others of any information which comes to its attention indicating a breach of any of its own or any other Party's representations and warranties in (S) 3 or (S) 4 above or covenants herein or that is necessary to correct or complete any information in any representation or warranty contained in (S) 3 or (S) 4. No disclosure by any Party pursuant to this (S) 7(f), however, shall be deemed to amend or supplement the Disclosure Schedule or to qualify any representation, warranty, covenant, indemnity or other agreement contained herein or in the agreements contemplated hereby or any condition to the obligations of the Parties hereto. In addition, it is acknowledged and agreed that: -42- (i) The Company shall deliver or cause to be delivered to the Buyer, promptly upon receipt thereof by the Company, any of its Subsidiaries, PCI or the Venture, copies of any notices received or given by the Company, any of its Subsidiaries, PCI or the Venture from or to any Person alleging or relating to any violation of applicable law or any default, or the occurrence of any event which could result in a default, under any of the Leases, the REAs or the Service Contracts. (ii) The Company shall advise the Buyer promptly in writing of the receipt, by the Company, any of its Subsidiaries, PCI or the Venture, of notice of the institution of any litigation or judicial, quasi-judicial or administrative inquiry or proceeding with respect to any of the Shopping Centers or the Company, any of its Subsidiaries, PCI or the Venture, including any legal proceedings or condemnation proceedings, any notice of a violation issued by any governmental authority with respect to any of the Shopping Centers, any actual or proposed special assessment or change in the assessed value of any of the Shopping Centers or any portion thereof, any notice from any insurance company or fire rating bureau of any material defects or inadequacies in any of the Shopping Centers or any part thereof or any notice of the unavailability of any licenses or permits hereafter required in connection with the ownership or operation of any of the Shopping Centers. Without the written consent of the Buyer, which shall be given or withheld by the Buyer acting in accordance with its business judgment, exercised in good faith after giving due consideration to the Company's recommendations, neither the Company, any of its Subsidiaries, PCI nor the Venture will withdraw, settle or otherwise compromise any protest or reduction proceeding affecting real estate taxes or the charges assessed against any of the Shopping Centers. (g) Indemnification; Directors' and Officers' Insurance (i) For a period of six (6) years from and after the Effective Time, the Buyer and the Surviving Corporation (collectively, the "Indemnifying Parties") shall indemnify, defend and hold harmless each person who is now or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, an officer or director of the Company, any of its Subsidiaries or the Venture or a trustee of the Trust (the "Indemnified Parties") against all losses, claims, damages, liabilities, judgments, amounts that are paid or to be paid in settlement with the approval of the Indemnifying Party (which approval shall not be unreasonably withheld or delayed), costs or expenses (including reasonable attorneys' fees and expenses), or assessments that are incurred or otherwise suffered by any Indemnified Party in connection with any threatened or actual claim, action, suit, proceeding or investigation based on or arising out of the fact that such Person is or was an officer or director of the Company or any of its Subsidiaries at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time, which arises out of any action occurring at or prior to the Effective Time ("Indemnified Liabilities"), including all Indemnified Liabilities based on, or arising out of, or pertaining to this Agreement or the transactions contemplated by this Agreement, in each case to the full extent a corporation is permitted under the Delaware General -43- Corporation Law to indemnify its own directors or officers. The Indemnifying Party shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the full extent permitted by law, provided that the Person to whom expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such Person is not entitled to indemnification. Any Indemnified Parties proposing to assert the right to be indemnified under this (S) 7(g) shall, promptly after receipt of notice of commencement of any action against such Indemnified Parties in respect of which a claim is to be made under this (S) 7(g) against the Buyer or the Surviving Corporation, notify the Indemnifying Parties of the commencement of such action, enclosing a copy of all papers served. The failure to so notify the applicable Indemnifying Party shall not relieve such Indemnifying Party from any liability which it may have under this Section, except to the extent such failure prejudices such Indemnifying Party. If any such action is brought against any of the Indemnified Parties and such Indemnified 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 Indemnified Parties promptly after receiving notice of the commencement of the action from the Indemnified Parties, to assume the defense of the action, and, after notice from the Indemnifying Parties to the Indemnified Parties of their election to assume the defense, the Indemnifying Parties will not be liable to the Indemnified Parties for any legal expenses with respect to such action 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 Indemnified Parties; provided, however, that the Indemnifying Parties shall be required to obtain such consent (which consent shall not be unreasonably withheld or delayed) if the settlement includes any admission of wrongdoing on the part of the Indemnified Parties or any decree or restriction on the Indemnified Parties; provided, further, that no Indemnifying Parties in the defense of any such action shall, except with the consent of the Indemnified Parties (which consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Parties of a release from all liability with respect to such action. The Indemnified Parties will have the right to employ their own counsel in any such action, and the fees, expenses and other charges of such counsel will be at the expense of the Indemnified Parties unless (i) the employment of counsel by the Indemnified Parties has been authorized in writing by the Indemnifying Parties, (ii) the Indemnified Parties have reasonably concluded (based on advice of counsel) that there may be legal defenses available to them that are different from or in addition to those available to the Indemnifying Parties, (iii) a conflict or potential conflict exists (based on advice of counsel to the Indemnified Parties) between the Indemnified 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 Indemnified Parties) or (iv) the Indemnifying Parties have not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the Indemnifying Parties. It is understood that the Indemnifying -44- 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 from all such Indemnified Parties unless (a) the employment of more than one counsel has been authorized in writing by the Indemnifying Parties or (b) there is, under applicable standards of professional conduct (based on advice of counsel), a conflict on any significant issue between the positions of any two or more Indemnified Parties, in each of which cases the Indemnifying Parties shall be obligated to pay the reasonable and appropriate fees and expenses of one additional counsel. The Indemnifying Parties will not be liable for any settlement of any action or claim effected without their written consent (which consent shall not be unreasonably withheld or delayed). (ii) The provisions of this (S) 7(g) are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and his or her personal representatives and shall be binding on all successors and assigns of the Buyer and the Surviving Corporation. (iii) The Buyer shall either (A) cause the Surviving Corporation to extend the Company's existing directors and officers liability insurance policy as of the date hereof (or a policy providing coverage on comparable terms and conditions) for acts or omissions occurring prior to the Effective Time by Persons who are covered as of the date of this Agreement by such insurance policy maintained by the Company for a period of six (6) years following the Effective Time, or (B) add such Persons to the existing directors and officers liability insurance policy of the Buyer or an Affiliate; provided, however, that, for purposes of this clause (B), such insurance shall provide officers and directors of the Company the same coverage as similarly situated officers and directors of the Buyer and such insurance shall be maintained by the Buyer for a period of six years following the Effective Time. Notwithstanding the preceding sentence, in no event shall the Buyer or the Surviving Corporation be required to expend on average over such six year period in excess of 125% of the annual premium currently paid by the Company for such coverage and, if the premium for such coverage on average over such six year period exceeds such amount, the Buyer or the Surviving Company shall purchase a policy with the greatest coverage available for such 125% of the annual premium. (iv) In the event that the Buyer or any of its successors or assigns 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 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, as a condition precedent to such consolidation, merger or transfer, assume the obligations set forth in this (S) 7(g), which obligations are expressly intended to be for the irreversible benefit of, and shall be enforceable by, each officer and director covered hereby. -45- (h) Contracts, Transfers and Encumbrances. The Company will not (and will cause each of its Subsidiaries and the Venture not to), without the prior written consent of the Buyer, which consent shall be given or withheld by the Buyer acting in accordance with its business judgment, exercised in good faith after giving due consideration to the Company's recommendations: (i) extend, renew, terminate, replace, amend, supplement or modify any Service Contract (other than as may be required pursuant to its existing terms), or enter into any new Service Contract with respect to any of the Shopping Centers which will survive the Closing or otherwise affect the use, operation or enjoyment of the Shopping Centers after the Closing or increase the obligations of the Company, any Subsidiary or the Venture thereunder; (ii) waive any material rights of the Company, any of its Subsidiaries or the Venture under any Service Contracts; (iii) sell, transfer, convey or encumber, or cause or permit to be sold, transferred, conveyed or encumbered, any of the Shopping Centers, or any part thereof or interest therein, or agree to or support any adoption of, amendment to or revocation of any environmental, zoning, subdivision, land use, building or similar law affecting the Shopping Centers or enter into any easements or restrictive covenants which burden any of the Shopping Centers; or (iv) perform or permit any act which shall diminish, encumber or adversely affect the Company's, any of its Subsidiaries' or the Venture's rights in and to the Shopping Centers or prevent the Company from performing its obligations hereunder. (i) Tenant Leases and REAs. The Company, each of its Subsidiaries and the Venture shall fully and faithfully perform all of the landlord's covenants, agreements and obligations under the Leases and the REAs to which it is a party, consistent with past practice. Neither the Company or any of its Subsidiaries nor the Venture will, without the prior written consent of the Buyer, which consent shall be given or withheld by the Buyer acting in accordance with its business judgment, exercised in good faith after giving due consideration to the Company's recommendations: (i) Enter, or commit to enter, into any new reciprocal easement agreement or lease or sublease for space in any of the Shopping Centers which is in excess of 1,000 square feet. (ii) Agree to any alteration, amendment, supplement, extension, termination, cancellation or revision of any REA or Lease involving any space in any of the Shopping Centers which is in excess of 1,000 square feet and for a term of more than 90 days heretofore entered into or which may hereafter be entered into as provided in this (S) 7(i). -46- (iii) Accept any rent more than one month in advance or any security deposit not reflected in a Lease. (iv) Release any of the material obligations of the tenants under the Leases or the REA Parties under the REAs. (v) Consent to any assignment or sublease of any Lease except to the extent required by the terms of the Lease. (j) Notice. In connection with any action set forth in (S) 7(h) or (i) above that requires the Buyer's consent, the Company shall deliver to the Buyer a written notice of each proposed action hereunder stating, if applicable, whether the Company is willing to consent to such action and setting forth the relevant information relating thereto and, if applicable, the number of days within which the Company must respond to the proposed action under the terms of the applicable Lease, REA or Service Contract, together with any other material information supplied to the Company as to the proposed action. The Buyer shall, except as provided in the last sentence of this (S) 7(j), have ten (10) days after delivery to it of such notice and information to determine whether or not to approve such action. If the Buyer shall not give notice of its disapproval within such ten (10) day period, the Buyer shall be deemed to have approved such action and the Company may proceed to take such action in its discretion. If any Lease, REA or Service Contract provides the Company, by its express terms, with fewer than ten (10) days within which to grant any such approval or disapproval, such ten (10) day period provided for above shall be reduced to one (1) Business Day less than the number of days provided for in such Lease, REA or Service Contract and the written notice to the Buyer shall specifically state the time period for the Buyer's approval. (k) Estoppel Letters; Rent Roll. (i) The Company agrees to request estoppel certificates from all tenants, REA parties, the ground lessor at Northgate Mall and from Connecticut General Life Insurance Company as lender at Meadows Mall. (ii) On or before the date that is five (5) Business Days prior to the Closing Date, the Company shall furnish to the Buyer, an estoppel certificate completed by each anchor tenant (as identified on Exhibit L-1 hereto) who is required to deliver an estoppel certificate pursuant to its Lease, each REA Party who is required to deliver an estoppel certificate pursuant to its REA, not less than seventy five percent (75%) of the tenants, other than the anchors, who are required to deliver an estoppel certificate pursuant to their Lease, the ground lessor at the Northgate Mall and Connecticut General, as lender with respect to Meadows Mall. The estoppels shall be either (x) on the form specified in the Lease, REA, or mortgage, as the case may be, or (y) on the form attached hereto and incorporated herein as Exhibit L-2 for tenants (a "Tenant Estoppel"), or the form attached hereto and incorporated herein as Exhibit L-3 for each REA Party (an "REA Estoppel"), or the form attached hereto and incorporated herein as Exhibit L-4 for the ground lessor (the foregoing are hereinafter collectively referred to as the "Estoppels"). The Company shall use its reasonable best efforts to obtain and deliver the Estoppels specified in this clause (ii) it being understood and agreed, however, that if an estoppel certificate is received -47- which is in a form different from the form specified in the Lease, REA or mortgage, as the case may be, or different from the form specified herein, said estoppel certificate shall nevertheless be deemed duly received for purposes of this Agreement and the Company's obligations hereunder provided the Estoppel does not contain information which is materially different from that previously disclosed in writing to the Buyer. (iii) Prior to the Closing an updated version of the Rent Roll shall be delivered by the Company to the Buyer which shall be dated as of a date no more than five (5) Business Days prior to the Closing. (l) Taxes; Notices; Lease Negotiations; and Insurance. The Company shall, at all times: (i) pay or cause to be paid when due all real estate taxes, special assessments, sales taxes and other Taxes, brokerage commissions and other charges required to be paid by the Company, any of its Subsidiaries or the Venture, except for any real estate taxes, special assessments, sales taxes or other Taxes, brokerage commissions or other charges that are being contested in good faith, and for which appropriate accruals on the Company's financial statements and general ledgers have been established and which are disclosed in writing to the Buyer; (ii) advise the Buyer from time to time, at the request of the Buyer, of the status of any negotiations with prospective tenants of the Shopping Centers or with other parties with whom contracts or agreements are being negotiated; and (iii) file all returns and reports required by any governmental authority with respect to the Shopping Centers or the ownership, use or occupancy thereof and provide copies thereof to the Buyer. (m) Other Obligations. The Company shall, and shall cause its Subsidiaries, PCI and the Venture to, perform all obligations required by the terms of this Agreement, the P City Agreement and the other agreements contemplated hereby to be performed by them, shall perform or cause to be performed when due all of the Company's, its Subsidiaries' and the Venture's obligations under, and shall comply and cause its Subsidiaries and the Venture to comply with all applicable provisions of, the Service Contracts, the insurance policies, governmental approvals and all Licenses and Permits and other agreements, encumbrances and restrictions relating to the Shopping Centers and shall comply with all applicable laws, including, without limitation, the requirements of any governmental authority with respect to any tax abatement or exemption benefitting the Shopping Centers. The Company shall not cause or permit any Hazardous Materials to be stored, released or disposed of on, under or at the Shopping Centers or any part thereof and shall promptly notify the Buyer in writing if any Hazardous Materials are discovered at the Shopping Centers. -48- (n) Contest. If any proceedings are filed seeking to enjoin or otherwise prevent or declare unlawful the occupancy, maintenance or operation of any of the Shopping Centers or any portion thereof, the Company shall (i) notify the Buyer of such proceedings, (ii) cause such proceedings to be vigorously contested in good faith and (iii) in the event of an adverse ruling or decision, prosecute all allowable appeals therefrom. (o) Transfer Taxes. The Buyer and the Company shall cooperate in the preparation, execution and filing of all returns, reports or other documents regarding any real property transfer or gains, sales, use, transfer, 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 and the P City Agreement ("Transfer Taxes") and the Schedule I Stockholders and PCI shall be responsible for the payment thereof, other than any Pennsylvania Commonwealth Transfer Tax, which shall be the responsibility of the Buyer. In particular, the Company shall use its reasonable best efforts to obtain prior to Closing a final settlement regarding any applicable Pennsylvania local real estate Transfer Taxes on the transactions contemplated by this Agreement and the P City Agreement. Such settlement shall document the names of the relevant Affiliates and shall be binding on the City of Lancaster, the School District of Lancaster, and any other subdivision of the Commonwealth of Pennsylvania in which the Park City Center is located. The Company shall keep the Buyer informed of its discussions and written filings with the local taxing authorities and shall reasonably consult in good faith with the Buyer before making or accepting any settlement offer or submitting any written filings. The Closing Expense Fund shall reflect the amount of any local real estate Transfer Tax which is agreed to be due with the local taxing authorities or, in the absence of such an agreement, such amount as the Company shall in good faith estimate to be due upon a determination or settlement plus actual and estimated legal and accounting fees and expenses relating thereto; provided that the Buyer Indemnified Parties (as defined in the Post-Closing Escrow Agreement) shall be indemnified pursuant to Section 4.1(c) of the Post-Closing Escrow Agreement in respect of any amount which becomes due in excess of such estimates. (p) Exclusivity. The Company shall notify the Buyer promptly if any proposal or offer, or any inquiry or other contact with any Person with respect to the acquisition of any of the capital stock (or other interests) or any material assets of any of the Company, any Subsidiary, PCI or the Venture (including any acquisition structured as a merger, consolidation or share exchange), is made and shall, in any such notice to the Buyer, indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Company shall immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons other than with the Buyer and its Affiliates and representatives with respect to the foregoing. The Company will not (and will not cause or permit any of its Subsidiaries or the Venture or any of their officers, directors, employees, financial advisors or other representatives) to provide Confidential Information to any third party (other than representatives of Buyer and its Affiliates). The Company agrees not to, and to cause each Subsidiary, PCI and the Venture not to, without the prior written consent of the -49- Buyer, release any Person from, or waive any provision of, any confidentiality or standstill agreement to which the Company, any Subsidiary or the Venture is a party. (q) Governmental Entities. Without the prior written consent of the Company, such consent not to be unreasonably withheld or delayed, prior to the Closing, the Buyer shall not contact any governmental entity having jurisdiction over the Shopping Centers or any part thereof with respect to any matter relating to the condition or operation of the Shopping Centers; provided, that, in the event the Company so consents to such contact, the Buyer shall indemnify and hold harmless the Company, its Subsidiaries, PCI and the Venture from any costs, losses and claims arising from any note or notice of violation from such governmental authority related to such contact. The foregoing indemnity shall not cover any such contact made by the Title Company that is not directed by the Buyer. (r) Employees. (i) As of the Closing Date, the Representative shall terminate or cause the termination of the employment of all of its and its Affiliates' employees who are employed in the conduct of the business of the Company, its Subsidiaries and the Venture, except for the employees of the General Maintenance Group at the Mayfair Shopping Center (the "Represented Employees"), and any and all obligations of the Representative with respect to such terminated employees shall end as of the date on which the employment of such employees is terminated by the Representative or its Affiliates. The Buyer may offer employment thereafter to such terminated employees as it shall determine in its sole discretion and shall be solely responsible for any and all obligations arising out its employment of any such terminated employees. (ii) As of the Closing Date, the Buyer or an Affiliate thereof shall (a) assume the obligations of Mayfair and ERE Yarmouth under the Agreement between Mayfair and the Local 150, Service Employees International Union AFL-CIO, CLC (the "CBA"), (b) adopt the Froedtert-Mayfair, Inc. Retirement Income Plan for Employees Represented by Local #125 for the benefit of the Represented Employees and (c) continue the employment of the Represented Employees pursuant to the CBA. 8. Delivery of Title Commitments and Surveys. (a) Prior to the date hereof, the Company has caused the Title Company to deliver the Title Commitments and the Surveyors to deliver the Surveys to the Buyer. The cost of the title examinations related to the Title Commitments and the Surveys and the premiums for basic coverage in respect of the Title Policies shall be borne by the Schedule I Stockholders. The cost of coverage in excess of basic coverage under the Title Policies shall be borne by the Buyer. (b) If any update of the Title Commitments or the Surveys delivered to the Buyer after the date hereof disclose any matters other than the Permitted Exceptions, the Buyer shall notify the Company in writing (a "Disapproval Notice") within fifteen (15) days after the Buyer's receipt of such update. The Disapproval Notice shall specify the title objections. The Buyer's failure to give such notice shall be deemed an election by the Buyer to waive such title -50- objections without compensation or offset or abatement to or of the Merger Consideration and without warranty by or recourse against the Company, any of its Subsidiaries or the Venture of any nature whatsoever with respect thereto, and the Buyer shall thereupon take and accept title to the Shopping Centers "as is". The Company (A) shall cause all Mandatory Cure Items (as hereinafter defined) to be removed or, in the case of clause (2)(I)(y) or (z) of the definition of Mandatory Cure Item, bonded or insured over by the Title Company, at or prior to the Closing and the Company shall deposit with the Buyer or the Title Company releases, bonds or other appropriate instruments, in recordable form (where appropriate), sufficient to cause the removal of such Liens from the respective Shopping Center or to cause the Title Company to insure over said Liens or omit them as exceptions to coverage under the Title Policy and (B) shall notify the Buyer in writing within fifteen (15)Business Days after receipt of the Disapproval Notice whether the Company will cause all or any of the matters other than Mandatory Cure Items to be removed, bonded insured over or cured at or prior to Closing. The term "Mandatory Cure Items" shall mean (1) mortgages or deeds of trust granted by the Company, any of its Subsidiaries or the Venture, or (2) monetary liens that (I) are (x) affirmatively placed on the Shopping Centers by the Company, any of its Subsidiaries or the Venture, (y) judgment liens against the Company, any of its Subsidiaries or the Venture that would require the expenditure by the Company any of its Subsidiaries or the Venture of an aggregate amount of not more than $1,000,000 for each Shopping Center to remove such judgment liens from title, or (z) mechanics' liens that result from labor or materials contracted for or required to be paid (whether by allowances, credit reimbursement, payment or otherwise) by the Company, any of its Subsidiaries or the Venture, (II) are of a fixed and ascertainable amount and (III) may be removed solely by the payment of money (other than any such matters that are the responsibility of any tenant under a Lease, any REA Party under an REA or any other Person other than the Company, any of its Subsidiaries or the Venture). The Company shall be deemed to have elected to remove, bond or cure any matters other than Mandatory Cure Items if the Company does not affirmatively notify the Buyer to the contrary as aforesaid. If the Company elects not to remove, bond or cure all such matters which are not Mandatory Cure Items, the Buyer may elect, in its sole discretion, (m) subject to satisfaction of the other conditions to Closing, to close the transactions contemplated by this Agreement without adjustment of the Merger Consideration and take title subject to any such matters which are not Mandatory Cure Items that the Company elects not to remove, bond or cure, or (n) to terminate this Agreement. The Company shall have until the Closing or such later date as may be needed to remove, bond or cure any matter that it has elected or is required to remove, bond or cure. The Closing Date may be extended by the Company as necessary to permit the Company to fulfill its obligations pursuant to this (S) 8(b) but not beyond ninety (90) days. With respect to title objections which are not Mandatory Cure Items, the Company agrees to cooperate in good faith with the Buyer in order to cure said title objections. Except with respect to Mandatory Cure Items, nothing contained in this Agreement shall require the Company to bring or defend any action or proceeding, or to incur any expense, or to make any payment or to do any acts or things of any nature whatsoever in order to cure any alleged title objection, regardless of the manner in which the same arose. Notwithstanding anything in this Agreement to the contrary, any action by the Company resulting in the issuance of -51- affirmative coverage or the omission of any alleged title objection from the Title Policy, whether or not the same are removed of record, shall be deemed a "cure" for purposes of this Agreement. (c) If any matter that is not a Mandatory Cure Item that the Company has elected, or is required, to remove or cure has not been removed or cured on or prior to Closing (as the same may be extended pursuant to clause (b) above), or provision for their removal or cure to the Buyer's reasonable satisfaction has not been made at or prior to Closing, the Buyer may elect (no later than the Closing Date as the same may be adjourned pursuant to clause (b) above), in its sole discretion and as its exclusive remedy: (x) subject to satisfaction of the other conditions to Closing, to close the transactions contemplated hereby without adjustment to the Merger Consideration and take title subject to any matters that have not been cured or removed at or before Closing other than in respect of Mandatory Cure Items as to which the Buyer shall be allowed a credit against the Merger Consideration for all costs incurred or reasonably estimated to cure such Mandatory Cure Item or (y) to terminate this Agreement. 9. Conditions to Obligation to Close. (a) Conditions to Obligations of the Buyer and the Transitory Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction, at or prior to the Closing, of the following conditions: (i) this Agreement and the Merger shall have received the Requisite Stockholder Approval; (ii) the representations and warranties set forth in (S) 3 above (except for (S) 3(h)(xiv) insofar as it relates to cash dividends or cash distributions made after the date hereof) which are not qualified by materiality shall be true and correct in all material respects and the representations and warranties set forth in (S) 3 above which are so qualified shall be true and correct, in each case, at and as of the date hereof and the Closing Date; (iii) the Company shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iv) there shall not be any judgment, order, decree, legislation, stipulation or injunction pending, threatened or in effect which would prevent or hinder consummation of any of the transactions contemplated by this Agreement, the P City Agreement and the other agreements contemplated hereby; (v) the Company shall have delivered to the Buyer and the Transitory Subsidiary a certificate to the effect that each of the conditions specified above in -52- (S) 9(a)(i)-(iii) is satisfied, signed by the President or a Vice President and the chief financial officer of the Company; (vi) the Parties shall have received all authorizations, consents and approvals of governments and governmental agencies referred to in (S)3(f) and (S) 4(d) above and those non-governmental authorizations, consents or approvals, including those consents to transfers of Service Contracts in the name of the Representative relating to or used primarily in the operation or maintenance of the Shopping Centers, identified on the Disclosure Schedule under (S) 9(a)(vi); (vii) the Buyer and the Transitory Subsidiary shall have received from counsel to the Company, PCI and the Schedule I Stockholders opinions in form and substance reasonably acceptable to them relating to the transactions described herein, in the P City Agreement, and in the agreements contemplated hereby and thereby, and the status of the Company as a REIT under the Code, addressed to the Buyer and the Transitory Subsidiary and dated as of the Closing Date; (viii) Estoppels shall have been obtained in accordance with (S) 7(k)(ii); (ix) (a) all management and advisory or other agreements between ERE Yarmouth, and/or its Affiliates, on the one hand, and the Company, any Subsidiary and/or the Venture, on the other hand, shall have been terminated, with the Company, the Subsidiaries and the Venture having no further obligations thereunder and the managers and advisors thereunder shall have returned all books and records to General Growth Management, Inc. and (b) ERE Yarmouth and its Affiliates shall have duly assigned, transferred and conveyed to General Growth Management, Inc. all service contracts and personal property relating to or used primarily in the operation or maintenance of the Shopping Centers which are assignable without consent of a third party or for which consent to assignment has been obtained. (x) all intercompany agreements and arrangements between or among any of the Company, the Subsidiaries, and/or the Venture, or between or among any of such entities on the one hand, and PCI, Park City or any Affiliates of any of the entities described in this clause (x), on the other hand, shall have been terminated; (xi) the PCI Venture Interest shall have been transferred to the Company (or Company Sub) in accordance with the P City Agreement, free and clear of any Liens other than the right of PCI to receive the PCI Allocable Portion from the Company pursuant to the terms of the P City Agreement; (xii) the Revolving Credit Proceeds and the Park City Proceeds shall have been applied to discharge the Company's obligations under the Revolving Credit Agreements and the Park City Center mortgage indebtedness and to release all Liens created thereby, and all other indebtedness (including intercompany indebtedness, interest rate swap and -53- cap agreements and other hedging agreements, but excluding the Meadows Mall Loan and the Meadows Mall Mortgage) shall have been discharged or terminated and all Liens created thereby shall have been released; (xiii) the parties to the Post-Closing Escrow Agreement, other than the Company, shall have delivered duly executed counterparts thereof; (xiv) the aggregate amount of Dissenting Shares shall represent less than 10% of the Company Stock outstanding at the Effective Time; (xv) all persons who are directors or officers of any of the Subsidiaries or trustees of the Trust shall have resigned such directorships, trusteeships or such offices and new trustees of the Trust designated by the Buyer shall have been appointed as of the Effective Time; (xvi) all agreements between the Company and any of the Company Stockholders shall have been terminated to Buyer's reasonable satisfaction, and the Company shall have been released from all obligations thereunder; (xvii) PCI and each Company Stockholder who or which is not a "foreign person" for purposes of Section 1445 of the Code shall have delivered to the Buyer a certificate in the form attached hereto as Exhibit I certifying that PCI or such Company Stockholder, as the case may be, is not a "foreign person" within the meaning of Section 1445 of the Code. (xviii) the Title Company shall have issued, or be irrevocably committed to issue a Title Policy with respect to each Shopping Center; (xix) since the date hereof no event or events shall have occurred, other than any event or events directly resulting from actions or omissions of the Buyer in the exercise of its rights to give or withhold consents pursuant to Article 7, which individually or in the aggregate has had a Material Adverse Effect; (xx) ERE Yarmouth and its Affiliates shall have assigned all confidentiality agreements and standstill agreements relating to the Company, any Subsidiaries or the Venture to the Buyer; (xxi) the Company shall have prepared and delivered to the Buyer, at the Company's cost and expense, a report (which shall be reasonably acceptable to the Buyer) which demonstrates that Froedtert-Mayfair Inc. did not have any current or accumulated earnings and profits as of September 30, 1991 (provided that, if the cost and expense of such report exceeds $25,000, the Buyer shall bear the cost and expense of such report in excess of $25,000), or such other supporting material reasonably satisfactory to the Buyer demonstrating that, as of the end of the Company's taxable year -54- ended December 31, 1991, the Company had no earnings and profits accumulated in any non-REIT year, within the meaning of Section 857(a)(3) of the Internal Revenue Code of 1986, as amended and as in effect for the Company's taxable year ended December 31, 1991; (xxii) the Company shall have satisfied, or made arrangements to satisfy, any realty Transfer Tax obligations in Pennsylvania (other than Pennsylvania Commonwealth Transfer Taxes) and any capital stock/franchise Tax and corporate net income Tax obligations in Pennsylvania (as described in the last paragraph of (S) 7(d)); and (xxiii) all actions to be taken by the Company, its Subsidiaries, PCI and the Venture in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required or deemed reasonably required by the Buyer or its counsel to effect the transactions contemplated hereby shall, in all reasonable respects, be satisfactory in form and substance to the Buyer. The Buyer and the Transitory Subsidiary may waive, in their sole and absolute discretion, any condition specified in this (S) 9(a) if they execute a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Company. The obligation of the Company to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in (S)4 above which are not qualified by materiality shall be true and correct in all material respects and the representations and warranties set forth in (S) 4 above which are so qualified shall be true and correct, in each case, at and as of the date hereof and the Closing Date; (ii) each of the Buyer and the Transitory Subsidiary shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any judgment, order, decree, legislation, stipulation or injunction pending, threatened or in effect which would prevent or materially hinder consummation of any of the transactions contemplated by this Agreement, the P City Agreement and the other agreements contemplated hereby; (iv) the Buyer and the Transitory Subsidiary shall have delivered to the Company a certificate to the effect that each of the conditions specified above in (S) 9(b)(i)-(iii) is satisfied, signed by the President or a Vice President and the chief financial officer of the general partner of the Buyer on behalf of the Buyer and the Transitory Subsidiary; -55- (v) this Agreement and the Merger shall have received the Requisite Stockholder Approval; (vi) the Parties shall have received all authorizations, consents, and approvals of governments and governmental agencies referred to in (S) 3(f) and (S) 4(d) above; (vii) the Company, PCI and the Schedule I Stockholders shall have received from counsel to the Buyer and the Transitory Subsidiary an opinion in form and substance reasonably acceptable to them relating to the transactions described herein and in the agreements contemplated hereby, addressed to the Company, PCI and the Schedule I Stockholders, and dated as of the Closing Date; (viii) the Revolving Credit Proceeds and the Park City Proceeds shall have been applied to discharge the Company's obligations under the Revolving Credit Agreements and the Park City Center mortgage indebtedness; (ix) new trustees of the Trust designated by the Buyer shall have been appointed as of the Effective Time; and (x) all actions to be taken by the Buyer and the Transitory Subsidiary in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will, in all reasonable respects, be satisfactory in form and substance to the Company. The Company may waive, in its sole and absolute discretion, any condition specified in this (S) 9(b) if it executes a writing so stating at or prior to the Closing. 10. Termination. (a) Termination of Agreement and Remedies. Any of the Parties may terminate this Agreement (whether before or after stockholder approval) as provided below: (i) the Parties may terminate this Agreement by mutual written consent at any time prior to the Effective Time; (ii) the Buyer and the Transitory Subsidiary may terminate this Agreement by giving written notice to the Company at any time prior to the Effective Time (A) in the event the Company has breached any representation, warranty or covenant contained in this Agreement, the P City Agreement or the other agreements contemplated hereby in any material respect, the Buyer or the Transitory Subsidiary has notified the Company of the breach and the breach has continued without cure for a period of 20 days after the notice of breach, or as otherwise provided herein, (B) if the Closing shall not have occurred on or before August 31, 1998 by reason of the failure of any condition -56- precedent under (S) 9(a) hereof (unless the failure results primarily from the Buyer or the Transitory Subsidiary breaching any representation, warranty or covenant contained in this Agreement) or (C) if the P City Agreement has terminated; (iii) the Company may terminate this Agreement by giving written notice to the Buyer and the Transitory Subsidiary at any time prior to the Effective Time (A) in the event the Buyer or the Transitory Subsidiary has breached any representation, warranty or covenant contained in this Agreement in any material respect, the Company has notified the Buyer and the Transitory Subsidiary of the breach and the breach has continued without cure for a period of 20 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 31, 1998, by reason of the failure of any condition precedent under (S) 9(b) hereof (unless the failure results primarily from the Company breaching any representation, warranty, or covenant contained in this Agreement); or (iv) any Party may terminate this Agreement by giving written notice to the other Parties at any time after the Special Meeting in the event this Agreement and the Merger fail to receive the Requisite Stockholder Approval. (b) Effect of Termination. If any Party terminates this Agreement pursuant to (S) 10(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (subject to (S) 2(h) and 10(c) hereof and except for any liability of any Party then in breach for actual but not consequential damages); provided, however, that the confidentiality provisions contained in (S) 7(e) above and the provisions of (S)(S) 3(r), 4(g), 11(a) and this (S) 10(b) shall survive any such termination. (c) Remedies. Notwithstanding anything to the contrary set forth herein, the Company shall be entitled to retain the Deposit as the Company's liquidated damages (and not as a penalty) and as the Company's exclusive remedy for the Buyer's default in the event of termination of this Agreement pursuant to Section 10(a)(iii)(A), it being agreed by the parties that it would be impracticable and extremely difficult to ascertain the actual damages suffered by the Company as a result of the Buyer's failure to complete the transactions contemplated by this Agreement and that, under the circumstances existing as of the date hereof, the liquidated damages provided for herein represent a reasonable estimate of the damages which the Company would incur as a result of such failure. 11. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement nor permit any of its Affiliates, representatives or agents to do the same without the prior written approval of the other Parties which shall not be unreasonably withheld; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any -57- listing agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Party prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns; provided, however, that (i) the provisions in (S)(S) 2, 4, 5 and 6 above are intended for the benefit of the Company Stockholders and PCI and (ii) the provisions in (S) 7(g) above concerning insurance and indemnification are intended for the benefit of the individuals specified therein and their respective legal representatives. (c) Entire Agreement. This Agreement (including the documents referred to herein) and the Confidentiality Agreement constitute the entire agreement among the Parties concerning the subject matter hereof and supersede any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties; provided, however, that the Buyer or the Transitory Subsidiary may assign its respective rights and obligations to any wholly-owned direct or indirect subsidiary of the Buyer, but no such assignment shall relieve the Buyer of its obligations hereunder. (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices and other communications hereunder shall be deemed to have been duly given and made if in writing and (i) served by personal delivery upon the party for whom it was intended or (ii) delivered by courier service or telecopier, return receipt received, to the relevant party at the following addresses (or at such other address for a party as shall be specified by like notice): -58- If to the Company: ----------------- U.S. Prime Property Inc. c/o ERE Yarmouth, Inc. 787 Seventh Avenue 46th Floor New York, New York 10019 Attn.: Ms. Susan Lloyd-Hurwitz Fax No.: (212) 554-1667 Copy to: ------- Coudert Brothers 1114 Avenue of the Americas New York, New York 10036 Attn: Andrew S. Hedden, Esq. Fax No.: (212) 626-4120 If to the Buyer: --------------- GGP Limited Partnership 110 North Wacker Drive Chicago, Illinois 60606 Attn: Mr. Matthew Bucksbaum Fax No.: (312) 960-5475 Copy to: ------- Neal, Gerber & Eisenberg Two North LaSalle Street Chicago, Illinois 60602 Attn.: Marshall E. Eisenberg, Esq. Fax No.: (312) 269-1747 If to the Transitory Subsidiary: ------------------------------- GGP Acquisition, L.L.C. 110 North Wacker Drive Chicago, Illinois 60606 Attn: Mr. Matthew Bucksbaum Fax No.: (312) 960-5475 Copy to: ------- -59- Neal, Gerber & Eisenberg Two North LaSalle Street Chicago, Illinois 60602 Attn.: Marshall E. Eisenberg, Esq. Fax No.: (312) 269-1747 Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (i) Amendments and Waivers. The Parties may mutually amend any provision of this Agreement at any time prior to the Effective Time with the prior authorization of the Board of Directors, in the case of the Company and the general partner of the Buyer in the case of the Buyer and the Transitory Subsidiary; provided, however, that any amendment effected subsequent to stockholder approval will be subject to the restrictions contained in the Delaware General Corporation Law. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. The Closing shall not be deemed to constitute a waiver by the Buyer of any of its rights hereunder except as otherwise expressly provided in this Agreement. Whenever this Agreement requires or permits consent by or on behalf of any Party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance set forth in this (S)11(i). The Transitory Subsidiary hereby agrees that any consent or waiver of compliance given by the Buyer hereunder shall be conclusively binding upon it, whether given expressly on its behalf or not. (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local or foreign statute or law shall be deemed to refer to such statute or law as amended and also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires. The word "including" shall mean including without limitation. -60- (l) Consent of the Buyer. The Buyer, as the sole member of the Transitory Subsidiary, by executing this Agreement, consents to the execution, delivery and performance of this Agreement by the Transitory Subsidiary, and such consent shall be treated for all purposes as a vote duly adopted at a meeting of the members of the Transitory Subsidiary held for such purpose. (m) Expenses. Except as otherwise provided herein, each Party shall be liable for its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the agreements contemplated hereby, whether or not the transactions contemplated hereby are consummated. (n) Enforcement of Agreement. The Company agrees that irreparable damage would occur in the event that any of the provisions of this Agreement binding upon it were not performed in accordance with their specified terms or were otherwise breached. It is accordingly agreed that the Buyer and the Transitory Subsidiary shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. (o) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, FOR ITSELF AND FOR THE THIRD PARTY BENEFICIARIES HEREUNDER, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (p) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. ***** -61- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. GGP LIMITED PARTNERSHIP By: GENERAL GROWTH PROPERTIES, INC., General Partner By: ------------------------------- Name: Title: GGP ACQUISITION, L.L.C. By: GGP LIMITED PARTNERSHIP, Member By: GENERAL GROWTH PROPERTIES, INC., General Partner By: ------------------------------- Name: ----------------------------- Title: ---------------------------- U.S. PRIME PROPERTY INC. By: ------------------------------- Name: ----------------------------- Title: ---------------------------- -62- EXHIBIT A --------- 1. That certain property known as the Landmark Mall located in Alexandria, Virginia, together with the buildings and improvements thereon. 2. Those certain properties known as Mayfair Mall, North Tower Office Building, Bank Tower Office Building, Atrium Building and the Professional Building Garden Suites East located in Wauwatosa, Wisconsin, together with the buildings and improvements thereon. 3. That certain property known as Meadows Mall located in Las Vegas, Nevada, together with the buildings and improvements thereon. 4. That certain property known as the Northgate Mall located in Chattanooga, Tennessee, together with buildings and improvements thereon. 5. That certain property known as Oglethorpe Mall located in Savannah, Georgia, together with the buildings and improvements thereon. 6. That certain property known as the Park City Center located in Lancaster, Pennsylvania, together with the buildings and improvements thereon. EX-4 5 REDEMPTION RIGHTS AGREEMENT Exhibit 4 REDEMPTION RIGHTS AGREEMENT Redemption Rights Agreement, dated April 2, 1998, among GGP Limited Partnership, a Delaware limited partnership (the "Partnership"), General Growth Properties, Inc., a Delaware corporation (the "General Partner"), and Southwest Properties Venture, a Colorado general partnership ("Contributing Partner"). R E C I T A L S --------------- WHEREAS, concurrently herewith, Contributing Partner is being admitted as a limited partner of the Partnership, the general partner of which is the General Partner; WHEREAS, shares of common stock, $.10 par value per share, of the General Partner (the "Common Stock") are listed on the New York Stock Exchange; and WHEREAS, the parties desire to set forth herein the terms and conditions upon which the Contributing Partner may cause the Partnership to redeem its limited partnership units in the Partnership. NOW, THEREFORE, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Acts" shall mean the Securities Act and the Exchange Act, collectively. "Affiliates" shall mean "affiliates" as defined pursuant to the Securities Act and the regulations promulgated thereunder. "Business Day" shall mean any day upon which commercial banks are open for business in Chicago, Illinois. "Cash Purchase Price" shall mean, with respect to any redeemed or purchased Units, an amount of cash equal to the value of the Share Purchase Price (computed as of the Computation Date and equal to the Current Per Share Market Price on such Computation Date multiplied by the number of Shares) that would be payable with respect to such Units assuming the Share Purchase Price were paid in full satisfaction of the Purchase Price of such Units. In the event that the Share Purchase Price includes securities other than Shares, then the value of such other securities shall be determined by the General Partner acting in good faith on the basis of the closing prices of securities if listed on a nationally recognized exchange and otherwise on the basis of such quotations and other information as the General Partner considers, in its reasonable judgment, appropriate. "Certificate of Incorporation" shall mean the Certificate of Incorporation of the General Partner, as the same may be amended from time to time. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor code. "Common Stock" shall have the meaning set forth in the recitals. "Computation Date" shall mean the date on which the applicable Notice is received by the Partnership or, if such date is not a Business Day, the first Business Day thereafter. "Conversion Factor" shall mean 100%, provided that such factor shall be adjusted in accordance with Section 6(a). "Contribution Agreement" shall mean that certain Sale and Contribution Agreement dated January ___, 1998, among the Partnership, the General Partner and Contributing Partner, as the same has been and may hereafter be amended from time to time, pursuant to which this Agreement is being executed. "Current Per Share Market Price" shall have the meaning set forth in the Partnership Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor statute. "Exchange Act Reporting Company" shall mean any corporation or other entity which is subject to the reporting requirements of the Exchange Act. "Expiration Date" shall mean the earlier of (a) April 16, 2023 and (b) the date upon which all Units have been redeemed or purchased in accordance with the terms hereof. "Liens" shall have the meaning set forth in the Contribution Agreement. 2 "Major Transaction Event" shall mean, with respect to the General Partner, (a) a reclassification, capital reorganization or other similar change regarding or affecting outstanding Shares (other than a change addressed in Section 6(a)); (b) a merger or consolidation of the General Partner with one or more other corporations or entities, other than a merger pursuant to which the General Partner is the surviving corporation and the outstanding Shares are not affected, (c) a sale, lease or exchange of all or substantially all of the General Partner's assets or (d) the liquidation, dissolution or winding up of the General Partner. "Notice" shall have the meaning set forth in Section 3.2. "Partnership Agreement" shall mean that certain Amended and Restated Agreement of Limited Partnership of the Partnership, dated July 27, 1993, as amended by that certain First Amendment thereto dated May 23, 1995, that certain Second Amendment thereto dated June 13, 1995, that certain Third Amendment thereto dated May 21, 1996, that certain Fourth Amendment thereto dated August 30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that certain Sixth Amendment thereto dated as of November 27, 1996, that certain Seventh Amendment thereto dated December 6, 1996, that certain Eighth Amendment thereto dated June 19, 1997, that certain Ninth Amendment thereto dated as of August 8, 1997, that certain Tenth Amendment thereto dated as of September 8, 1997, that certain Eleventh Amendment thereto dated as of September 11, 1997, that certain Twelfth Amendment thereto dated October 15, 1997, that certain Thirteenth Amendment thereto dated October 24, 1997 and that certain Fourteenth Amendment thereto dated October 29, 1997 and as the same may be further amended. "Person" shall mean any natural person, corporation, partnership, association, limited liability company, trust or other entity. "Purchase Price" shall mean the Cash Purchase Price or the Share Purchase Price, or a combination thereof. "Redemption Rights" shall have the meaning set forth in Section 2. "REIT" shall mean real estate investment trust as such term is defined under the Code. 3 "REIT Requirements" shall have the meaning set forth in the Partnership Agreement, as the same may change from time to time. "Registration Expenses" shall mean all expenses incident to the General Partner's performance of or compliance with the registration requirements set forth in this Agreement, including without limitation (a) the fees, disbursements and expenses of the General Partner's counsel and accountants in connection with the registration of Shares issuable upon the exercise of the Redemption Rights; (b) all expenses in connection with the preparation and printing of the registration statement or statements, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto; (c) the cost of printing or producing any blue sky or legal investment memoranda or other documents in connection with the offering, sale or delivery of such Shares; (d) all expenses in connection with the qualification of such Shares under state securities laws; (e) the fees and expenses incurred in connection with the listing of such Shares on each securities exchange on which securities of the same class are then listed and (f) all SEC, stock exchange and National Association of Securities Dealers, Inc. registration and filing fees. Notwithstanding the foregoing, Registration Expenses shall not include (and the General Partner will pay) any costs incurred by the Partnership or the General Partner in preparing any document that is incorporated by reference in a registration statement, or any professional fee or other expenses, that would have been incurred apart from the obligation of the General Partner hereunder to file a Registration Statement. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor statute. "Share Purchase Price" shall mean, with respect to the exercise of any Redemption Rights and subject to the provisions of Section 6(c), a number of Shares equal to the product of (a) the number of Units being redeemed or purchased multiplied by (b) the Conversion Factor; provided, however, that, in the event the General Partner, after the date of this Agreement, issues to all holders of Shares rights, options, warrants or convertible or exchangeable securities entitling the stockholders to subscribe for or purchase Shares (other than rights referred to in Section 6(b)) or any other securities or property, then the Share Purchase Price also shall include such rights, options, 4 warrants or convertible or exchangeable securities that a holder of that number of Shares would have been entitled to receive. "Shares" shall mean shares of the Common Stock. "Units" shall mean the limited partnership units in the Partnership issued to Contributing Partner pursuant to the Contribution Agreement. "Unitholder" shall mean the Person who at the time in question holds one or more Units in accordance with the Partnership Agreement, as the same may be amended from time to time. 2. Grant of Redemption Rights. (a) Upon the terms and subject to the conditions contained herein, the Partnership does hereby grant to Contributing Partner, and Contributing Partner does hereby accept, the right, but without obligation on the part of Contributing Partner, to require the Partnership to redeem from time to time part or all of the Units of Contributing Partner for the Cash Purchase Price ("Redemption Rights"). (b) Notwithstanding the provisions of Section 2(a), the General Partner may, in its sole and absolute discretion, assume the obligation of the Partnership with respect to and satisfy Contributing Partner's exercise of a Redemption Right by paying to Contributing Partner, at the General Partner's election (which may be exercised in the General Partner's sole discretion), either the Cash Purchase Price or the Share Purchase Price (or a combination thereof) with respect to the Units for which Contributing Partner exercised its Redemption Rights. If the General Partner assumes such obligations with respect to the exercise by Contributing Partner of a Redemption Right as to certain Units and makes the required payment, then the Partnership shall have no obligation to pay any amount to Contributing Partner with respect to the exercise of a Redemption Right for such Units, and any Units purchased shall be owned by the General Partner for all purposes. (c) If the General Partner shall assume the obligations of the Partnership with respect to and satisfy a Redemption Right, the Partnership, the Contributing Partner and the General Partner each shall treat the transaction between the General Partner and Contributing Partner as a sale of Contributing 5 Partner's Units (or a portion thereof) to the General Partner for federal income tax purposes. (d) Upon the redemption or purchase of part or all of Contributing Partner's Units and the payment of the Purchase Price with respect thereto, such Person shall be deemed withdrawn as a Partner in the Partnership to the extent of the Units redeemed or purchased and shall have no further rights or obligations under this Agreement with respect to such redeemed or purchased Units; provided, however, that Contributing Partner's rights under this Agreement with regard to any other Units will continue in full force and effect. (e) No fractional Shares shall be issued hereunder. In lieu of fractional Shares, the General Partner shall pay cash based on the Current Per Share Market Price on the relevant Computation Date. 3. Exercise of Redemption Rights. 3.1 Time for Exercise of Redemption Rights. Contributing Partner may exercise its Redemption Rights in whole or in part and at any time and from time to time on or after the first anniversary of the date hereof but prior to the Expiration Date; provided, however, that the Redemption Rights may not be exercised at any one time by Contributing Partner with respect to less than 1,000 Units (or all the Units then owned by Contributing Partner if Contributing Partner owns less than 1,000 Units) or in the event that such exercise of Redemption Rights (or the assignment of Units or delivery of either the Cash Purchase Price or the Share Purchase Price with respect thereto) violates the terms of the Partnership Agreement or applicable law. Once given, a Notice shall be irrevocable subject to the payment of the Purchase Price for the Units specified therein in accordance with the terms hereof. 3.2 Method of Exercise. The Redemption Rights shall be exercised by written notice (the "Notice") to the Partnership in the form of Exhibit A specifying the number of Units to be redeemed and the name or names (with address) in which any Shares issuable upon such exercise shall be registered if different than the Contributing Partner. 3.3 Closing. The closing of the redemption or purchase and sale pursuant to an exercise of the Redemption Rights shall occur within 30 days following the giving of the Notice. Contributing Partner shall execute such documents as the General 6 Partner may reasonably require in connection with the closing of such redemption or purchase and sale. 3.4 Payment of Cash or Issuance of Shares. At the closing of the redemption or purchase and sale of Units pursuant to an exercise of Redemption Rights, the Partnership shall deliver to Contributing Partner the Cash Purchase Price by check or, in the event that the General Partner has assumed the obligations of the Partnership with respect to such exercise of Redemption Rights, the General Partner shall deliver to the Partnership, at the election of the General Partner, which may be exercised in the General Partner's sole discretion, either (a) the Cash Purchase Price by check or (b) certificates representing the Shares and any other securities constituting the Share Purchase Price, together with cash in lieu of the issuance of any fraction of a Share as provided in Section 2(e), or a combination thereof. 4. Matters Relating to Shares. 4.1 Registration. (a) The General Partner shall (i) prepare, file and use reasonable efforts to cause to become effective on or before the ninetieth day following the first anniversary of the date hereof a registration statement, which may be on Form S- 3, under the Securities Act relating to the Shares to be issued upon exercise of the Redemption Rights assuming full satisfaction of the Redemption Rights by delivery of Shares and (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act. (b) The General Partner shall pay all Registration Expenses incurred prior to the sixth anniversary of the date hereof with respect to filing and keeping effective the registration statement through such date, and the Unitholders shall reimburse the General Partner for Registration Expenses (or a pro rata portion of the Registration Expenses based on the number of Shares issuable to such Unitholders upon full exercise of the Redemption Rights of such Unitholders relative to the total number of Shares issuable pursuant to such registration statement) which are incurred after the sixth anniversary of the date hereof in respect of maintaining effective (but not the initial filing and causing to become effective of) such 7 registration statement; provided, however, that Contributing Partner shall not be required to reimburse any costs (i) of preparing any documents filed with the SEC that are incorporated by reference in the Registration Statement or (ii) that become necessary because the General Partner is unable to use Form S-3 (or any equivalent short form that relies on incorporation by reference) for the reason that the General Partner has failed to comply on a timely basis with any requirement of the Acts or Form S-3. The reimbursement of such expenses by the Unitholders shall be paid upon demand. (c) Notwithstanding anything to the contrary contained herein, the General Partner shall have no obligation to keep any registration statement filed pursuant to this Section 4.1 effective after the Expiration Date or if the status of the General Partner (or its successor) as an Exchange Act Reporting Company is terminated or all of the Unitholders notify the General Partner in writing that the General Partner no longer need keep such registration statement effective. 4.2 Reservation of Shares. At all times while the Redemption Rights are outstanding, the General Partner shall reserve for issuance such number of Shares as may be necessary to enable the General Partner to issue Shares in full satisfaction of all Redemption Rights which are from time to time outstanding (assuming no limitations as to the ownership of such Shares under the Certificate of Incorporation which relate to compliance with the REIT Requirements and that the General Partner elected to pay the Share Purchase Price with respect to all such Redemption Rights). 4.3 Fully Paid and Non-Assessable. All Shares which may be issued upon exercise of the Redemption Rights shall be duly and validly issued and fully paid and non-assessable. 5. Transfer and Other Taxes. In the event that any state or local property transfer or other tax is payable as the result of or in connection with any exercise of the Redemption Rights by Contributing Partner, Contributor Partner shall pay such tax, and no Shares shall be issued pursuant hereto until such Contributor Partner has paid to the General Partner or the Partnership, as the case may be, the amount of such tax or has provided evidence, in form reasonably satisfactory to the General Partner or the Partnership, as the case may be, as to the payment thereof. 8 6. Anti-Dilution and Adjustment Provisions. (a) The Conversion Factor shall be adjusted in the event that the General Partner (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) subdivides its outstanding Shares, or (iii) combines its outstanding Shares into a smaller number of Shares. The Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (b) If at any time the General Partner grants to its stockholders any right to subscribe pro rata for additional securities of the General Partner, whether Common Stock or other classifications, or for any other securities or interests that Contributing Partner would have been entitled to subscribe for if, immediately prior to such grant, Contributing Partner had exercised its Redemption Rights and received the Share Purchase Price in payment thereof, in lieu of any adjustment under any other subsection of this Section 6 or other provision of this Agreement, then the General Partner also shall grant to Contributing Partner the same subscription rights that Contributing Partner would be entitled to if Contributing Partner had exercised its Redemption Rights in full and received the Share Purchase Price in satisfaction thereof prior to such grant. (c) Upon the occurrence of a Major Transaction Event where at least one- half of the value (as determined in good faith by the General Partner) of the consideration received by the stockholders of the General Partner in connection with such Major Transaction Event is in the form of securities in a successor entity, the General Partner shall cause effective provision to be made so that, upon exercise of the Redemption Rights and payment of the Purchase Price at any time following such Major Transaction Event by means of the Share Purchase Price, Unitholders shall have the right to acquire, in lieu of 9 the Shares which otherwise would have been issued to Contributing Partner, the kind and amount of shares of stock and other securities and property (and the provisions contained in Section 4.1 shall apply anew to the extent that such securities are of a class of securities of the General Partner or its successor that are registered under the Exchange Act) and interests as would be issued or payable with respect to or in exchange for the number of Shares constituting the Share Purchase Price as if such Redemption Rights had been exercised and the General Partner had satisfied the Redemption Rights by delivery of the Share Purchase Price immediately before such Major Transaction Event. (d) In the event of any other Major Transaction Event, each Unitholder shall be entitled to exercise the Redemption Rights in full prior to the consummation of such Major Transaction Event, and, with respect to any Shares acquired upon exercise thereof, shall be entitled to all of the rights of the other holders of Shares with respect to any distribution by the General Partner (or the other party to such Major Transaction Event) in connection with such Major Transaction Event. If not exercised within forty-five days after written notice from the General Partner of such Major Transaction Event or such shorter period between the date of such notice and the effective date of such Major Transaction Event, the Redemption Rights shall terminate at the expiration of such period, but the Redemption Rights shall be revived if such Major Transaction Event is not consummated. (e) The Partnership shall give written notice of any Major Transaction Event promptly after such Major Transaction is announced to the public. (f) The provisions of this Section 6 shall apply to successive events that may occur from time to time but only shall apply to a particular event if it occurs prior to the exercise in full of the Redemption Rights or the liquidation of the Partnership. Nothing contained herein shall prevent or otherwise limit the liquidation of the Partnership pursuant to the Partnership Agreement, as amended from time to time. (g) Whenever the Conversion Factor is adjusted as herein provided, the General Partner shall compute the adjusted Conversion Factor in accordance with this Section 6 and shall prepare a certificate signed by the chief financial officer of the General Partner setting forth the adjusted Conversion Factor and showing in reasonable detail the facts upon which such 10 adjustment is based, and such certificate shall forthwith be filed at the offices of the General Partner. 7. Miscellaneous Provisions. 7.1 Notices. All notices or other communications given pursuant to this Agreement, including without limitation any Notice, shall be sent to the party to whom or to which such notice is being sent, by certified or registered mail, return receipt requested, commercial overnight delivery service, facsimile or delivered by hand with receipt acknowledged in writing and otherwise as set forth in this Section 8.1. All notices (a) shall be deemed given when received or, if mailed as described above, after 5 Business Days or, if sent by facsimile, upon receipt of confirmed answerback and (b) may be given either by a party or by such party's attorneys. For purposes of this Section 8.1, the addresses of the parties shall be, in the case of the Partnership and the General Partner, 55 West Monroe Street, Suite 3100, Chicago, Illinois 60603, facsimile number (312) 551-5475, Attention: Matthew Bucksbaum and Bernard Freibaum (with a copy to Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite 2200, Chicago, Illinois 60602, Attn: Marshall E. Eisenberg), and, in the case of Contributing Partner, as set forth on the records of the Partnership. The address of any party may be changed by a notice in writing given in accordance with the provisions hereof. 7.2 Assignment. The rights of Contributing Partner hereunder (including the Redemption Rights) shall automatically devolve upon any Person to the extent that such Person holds Units, and becomes a substituted partner with respect to such Units, in accordance with the Partnership Agreement, as amended from time to time, and delivers to the Partnership a written instrument, in form reasonably satisfactory to the Partnership, pursuant to which such Person agrees to be bound by the terms hereof (but the rights of Contributing Partner hereunder are not otherwise assignable). Subject to the provisions of Section 6, the General Partner may assign this Agreement without the consent of Contributing Partner, provided that no such assignment shall relieve the General Partner of its obligations under this Agreement. 7.3 Binding Effect. Except as otherwise set forth herein, this Agreement shall be binding upon, and inure to the benefit of, the parties and their successors and permitted assigns. 11 7.4 Governing Law. This Agreement shall be governed by the laws of the State of Delaware (without regard to its conflicts of law principles). 7.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one document. 7.6 Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any prior written or oral understandings and/or agreements among them with respect thereto. 7.7 Pronouns; Headings; Etc. As used herein, all pronouns shall include the masculine, feminine and neuter, and all terms shall include the singular and plural thereof wherever the context and facts require such construction. The headings herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Any references in this Agreement to a "Section" or "Exhibit" shall refer to a Section or Exhibit of this Agreement unless otherwise specified. 7.8 Survival. The representations, warranties and covenants contained herein or made pursuant hereto shall survive the execution and delivery of this Agreement and the issuance of Shares pursuant hereto. 7.9 Further Assurances. Each of the parties shall hereafter execute and deliver such other instruments and documents and do such further acts and things as may be required or useful to carry out the purposes of this Agreement. 12 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. CONTRIBUTING PARTNER: SOUTHWEST PROPERTIES VENTURE, a Colorado joint venture By: P&P SOUTHWEST PARTNERSHIP, a Colorado general partnership, which is a joint venturer of Southwest Properties Venture By: /s/ Jordon Perlmutter ------------------------------------ Jordon Perlmutter Managing General Partner By: /s/ Samuel Primack ------------------------------------ Samuel Primack Managing General Partner By: WADSWORTH PARTNERSHIP, a Colorado limited partnership, which is a joint venturer of Southwest Properties Venture By: The Wadsworth Holding Partnership, a Colorado general partnership, which is the sole general partner of The Wadsworth Partnership By: Cooper Investments, a Colorado general partnership, which is a general partner of The Wadsworth Holding Partnership By: /s/ Michael Cooper ------------------------------------ Michael Cooper General Partner 13 PARTNERSHIP: GGP LIMITED PARTNERSHIP, a Delaware limited partnership By: General Growth Properties, Inc. a Delaware corporation By: /s/ Joel Bayer ------------------------------------ Its Senior Vice President --------------------------------- GENERAL PARTNER: General Growth Properties, Inc. a Delaware corporation By: /s/ Joel Bayer ------------------------------------ Its: Senior Vice President ------------------------------- 14 EXHIBIT A Notice of Redemption The undersigned hereby irrevocably (i) exercises its Redemption Rights as to ___________ units of limited partnership interest (the "Units") in GGP Limited Partnership (the "Partnership") in accordance with the terms of that certain Redemption Rights Agreement, dated _______________, 1998 (the "Agreement"), among the Partnership, General Growth Properties, Inc. (the "General Partner"), and the other parties thereto, (ii) transfers and surrenders such Units and all right, title and interest of the undersigned therein to the party, which shall be either the Partnership or the General Partner, that shall purchase or redeem such Units pursuant to the Agreement, and (iii) directs that the Cash Purchase Price or Share Purchase Price payable upon exercise of the Redemption Right be delivered to the address specified below and, if the Share Purchase Price is to be delivered, the Shares shall be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, certifies and agrees (i) that the undersigned has unencumbered title to the Units, free and clear of all Liens, (ii) that the undersigned has the full right, power and authority to transfer and surrender the Units as provided herein and such transfer and surrender has been authorized by all necessary action, and (iii) that the undersigned has obtained the consent or approval of all persons or entities, if any, having the right to consent to or approve such transfer and surrender. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. Dated: ____________________ Name: ________________________ _____________________________ (Signature of Limited Partner) _____________________________ (Street Address) _____________________________ City (State) (Zip Code) Signature Guaranteed by ______________________________ If Shares are to be issued, issue to: Please insert social security or identifying number: -----END PRIVACY-ENHANCED MESSAGE-----