Exhibit 10.11

CONTRIBUTION AGREEMENT

By and among

Bala Cynwyd Associates, L.P.

City Line Associates

Ronald Rubin

George Rubin

Joseph Coradino

Leonard Shore

Lewis Stone

Pennsylvania Real Estate Investment Trust

PREIT Associates, L.P.

PR Cherry Hill Office GP, LLC

Dated as of January 22, 2008

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

SECTION 1.

  

CERTAIN DEFINITIONS

   2

1.1

  

Certain Definitions

   2

SECTION 2.

  

CONCURRENT TRANSACTIONS

   3

2.1

  

Contributions by PREIT

   3

2.2

  

Financing of Cherry Hill Property

   3

2.3

  

Pay off of Mortgage on Bala Property

   3

2.4

  

Closing

   3

SECTION 3.

  

PUT AND CALL

   3

3.1

  

First Call Right

   3

3.2

  

First Put Right

   4

3.3

  

Second Call Option

   4

3.4

  

Adjustment

   5

3.5

  

Accredited Investor Status

   5

3.6

  

Recapitalization

   6

SECTION 4.

  

REPRESENTATIONS AND WARRANTIES OF CLA AND THE INDIVIDUALS

   6

4.1

  

As to CLA

   6

4.2

  

As to BCA

   9

SECTION 5.

  

REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE UPREIT

   12

5.1

  

Organization

   12

5.2

  

Power and Authority

   12

5.3

  

No Conflicts

   12

5.4

  

Capitalization

   13

5.5

  

PREIT Reports

   14

5.6

  

Litigation

   14

5.7

  

Material Adverse Change

   14

5.8

  

Brokers

   14

SECTION 6.

  

CERTAIN COVENANTS AND AGREEMENTS

   14

6.1

  

Conduct of Business

   14

6.2

  

Reasonable Efforts

   15

6.3

  

Notifications

   15

 

- i -

--------------------------------------------------------------------------------

6.4

  

Notifications regarding Exchange Agreement.

   16

6.5

  

Transfer of Interests

   16

6.6

  

PREIT and UPREIT Responsibilities

   16

6.7

  

Special Covenant Regarding the Cherry Hill Property

   16

SECTION 7.

  

CLOSING CONDITIONS; CLOSING DELIVERIES

   17

7.1

  

Closing Conditions

   17

7.2

  

Deliveries at the First Closing

   18

7.3

  

Deliveries at the Second Closing

   19

7.4

  

Deliveries at the Third Closing

   20

SECTION 8.

  

PRE-CLOSING DISTRIBUTIONS; CLOSING COSTS; NET DISTRIBUTION AMOUNT

   20

8.1

  

Costs

   20

8.2

  

Cash

   21

8.3

  

AXA Payment

   21

8.4

  

Statement

   21

8.5

  

Post-Closing Adjustments

   21

8.6

  

Transfer Taxes on Call or Put

   21

8.7

  

Survival

   21

SECTION 9.

  

INDEMNIFICATION

   21

9.1

  

Indemnification by CLA and the Individuals

   21

9.2

  

Indemnification by PREIT

   22

9.3

  

Limitation

   22

9.4

  

Procedure For Indemnification – Third-Party Claims

   22

9.5

  

Procedure for Indemnification - Other Claims

   23

9.6

  

Right of Set-Off

   23

9.7

  

Indemnification Payments

   23

9.8

  

Representative

   23

9.9

  

Survival

   23

SECTION 10.

  

TERMINATION AND ABANDONMENT

   23

10.1

  

Termination

   23

10.2

  

Procedure for Termination; Effect of Termination

   24

SECTION 11.

  

GENERAL PROVISIONS

   24

11.1

  

Survival of Representations and Warranties

   24

 

- ii -

--------------------------------------------------------------------------------

11.2

  

Costs and Expenses

   24

11.3

  

Notices

   24

11.4

  

Access to Information

   25

11.5

  

Confidentiality and Disclosures

   25

11.6

  

Public Announcements

   26

11.7

  

Entire Agreement

   26

11.8

  

Counterparts

   26

11.9

  

Governing Law

   26

11.10

  

Section Headings, Captions and Defined Terms

   26

11.11

  

Amendments, Modifications and Waiver

   26

11.12

  

Severability

   27

11.13

  

Liability of Trustees, etc

   27

11.14

  

No Third-Party Beneficiary

   27

11.15

  

Binding Effect

   27

 

- iii -

--------------------------------------------------------------------------------

CONTRIBUTION AGREEMENT (this “Agreement”) dated as of the 22nd day of January,
2008, by and among Bala Cynwyd Associates, L.P. a Pennsylvania limited
partnership, formerly known as Bala Cynwyd Associates (“BCA”), City Line
Associates, a Pennsylvania limited partnership (“CLA”), Ronald Rubin, George
Rubin, (collectively with Ronald Rubin, the “Rubins”), Joseph Coradino
(“Coradino”), Leonard Shore (“Shore”) and Lewis Stone (“Stone”) (the Rubins,
together with Coradino, Shore and Stone, are sometimes collectively referred to
herein as the “Individuals”), Pennsylvania Real Estate Investment Trust, an
unincorporated association in business trust form created under Pennsylvania law
pursuant to a Trust Agreement dated December 27, 1960, as last amended and
restated on December 16, 1997 (“PREIT”); PREIT Associates, L.P., a Delaware
limited partnership (the “UPREIT”) and PR Cherry Hill Office GP, LLC, a Delaware
limited liability company (“PR GP”).

Background

CLA and CBS Broadcasting Inc., formerly known as CBS Inc. (“CBS”) are the sole
partners in BCA. Each of CLA and CBS own equal interests in BCA/CH LLC, a
Delaware limited liability company that is the sole general partner of BCA (“BCA
GP”). BCA owns an office building known as 40 Monument Road, Bala Cynwyd,
Pennsylvania (the “Bala Property”). The Individuals constitute all of the
partners in CLA.

BCA has entered into an Exchange Agreement dated as of August 17, 2007, as
amended (the “Exchange Agreement”) with One Cherry Hill Corp., a New Jersey
corporation (“CH Corp.”) pursuant to which BCA has agreed to convey the Bala
Property to CH Corp. in exchange for the conveyance by CH Corp. to BCA of an
office building known as One Cherry Hill Plaza, Cherry Hill, New Jersey (the
“Cherry Hill Property”) plus cash and/or a note equal to the difference in the
agreed values between the Bala Property and the Cherry Hill Property (such
transaction, the “Exchange”). The Exchange Agreement values the Bala Property at
$19,500,000, subject to adjustment if a lease with AXA Equitable Life Assurance
Society (“AXA”) is not renewed upon terms specified in the Exchange Agreement,
and values the Cherry Hill Property at $15,300,000. The Exchange Agreement
requires that each of the Bala Property and the Cherry Hill Property be
exchanged free and clear of all debt and monetary encumbrances.

The Cherry Hill Property is physically located within the boundaries of the
Cherry Hill Mall, a first class regional mall owned indirectly by PREIT in
Cherry Hill, New Jersey (the “Mall”). PREIT is in the process of a substantial
renovation, upgrade and expansion of the Mall and believes that it is in PREIT’s
best interest to control the Cherry Hill Property in connection with its
redevelopment of the Mall.

BCA has entered into an agreement with CBS (the “Redemption Agreement”),
contingent upon closing occurring under the Exchange Agreement, to redeem CBS’s
interest in BCA, including CBS’s interest in BCA GP, at the First Closing, such
redemption to be for a consideration paid in cash and/or by assignment of a note
from CH Corp. The redemption of CBS’s interest in BCA will be a condition of the
UPREIT’s obligation to close under this Agreement.

The UPREIT and the PR GP have agreed to make capital contributions to BCA in
exchange for interests in BCA, the Rubins, Coradino and Shore have agreed to
contribute their

--------------------------------------------------------------------------------

partnership interests in BCA to the UPREIT in exchange for Class A Units of
partnership interest (the “Class A Units”) in the UPREIT and Stone has agreed to
assign his partnership interests in BCA to the UPREIT for cash, all upon the
terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:

SECTION 1. CERTAIN DEFINITIONS

1.1 Certain Definitions. The terms set forth below shall have the meanings set
forth below.

(a) Affiliate. “Affiliate” means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.

(b) Authorizations. “Authorizations” means all licenses, permits, approvals,
consents and authorizations required by any governmental or quasi-governmental
agency, body, department, commission, board, bureau, instrumentality, officer,
or other Person or entity with respect to the business, assets or affairs of a
party.

(c) Contracts. “Contracts” means any contractual obligations, commitments,
undertaking or arrangements to which a party is bound, whether oral or in
writing, other than occupancy leases of the Cherry Hill Property, including
without limitation (1) Contracts with service providers relating to the assets
of Cherry Hill, and (2) Contracts with municipal or governmental authorities.

(d) Disclosure Exhibit. “Disclosure Exhibit” means Schedule 1.1 (d) hereto,
which sets forth certain qualifications and exceptions to the representations,
warranties and other information provided by the Individuals in this Agreement.

(e) Laws. “Laws” means any applicable governmental laws, statutes, ordinances,
resolutions, rules, codes, regulations, orders or determinations of any federal,
state, county, municipal or other government or governmental or
quasi-governmental agency, department, commission, board, bureau, officer or
instrumentality, relating to a party, its partners, assets, rights and
obligations.

(f) Net Equity Value of BCA. “Net Equity Value of BCA” means the result, without
duplication and calculated on the First Closing Date, of: (i) $19,500,000, the
agreed value of the Bala Property under the Exchange Agreement, minus (ii) any
adjustment required by Section 7(a)(viii) of the Exchange Agreement, as amended,
minus (iii) all sums required to payoff and satisfy the mortgage on the Bala
Property on the First Closing Date, minus (iv) all costs incurred or payable by
BCA under or pursuant to the Exchange Agreement (including, without limitation,
due diligence costs, attorneys fees and closing costs, minus (v) the
participation payment to AXA, minus (vi) all brokerage costs payable by BCA as a
result of the Exchange, excluding, however, the brokerage fees agreed to be paid
by the UPREIT on behalf of BCA as provided in Section 8.1 hereof, minus
(vii) all accrued and unpaid liabilities of BCA on the First Closing Date, and
plus (viii) all cash or cash equivalents held by or for the benefit of BCA on
the First Closing Date.

 

- 2 -

--------------------------------------------------------------------------------

(g) Person. “Person” means any individual, partnership, limited partnership,
trust, estate, incorporated or unincorporated association, limited liability
company, limited liability partnership, or other entity.

(h) Taxes. “Taxes” means any income, franchise, sales, use, social security,
unemployment compensation or other taxes, imposts or impositions payable by an
entity to any federal, state or local collecting authority, other than ad
valorem real estate taxes.

SECTION 2. CONCURRENT TRANSACTIONS

2.1 Contributions by PREIT. Concurrently with the closing of the Exchange,
(a) PR GP shall make a cash capital contribution to BCA in an amount equal to
0.1% of the Net Equity Value of BCA in exchange for a 0.1% general partnership
interest in BCA, (b) the UPREIT shall make a cash capital contribution to BCA in
an amount equal to 49.8% of the Net Equity Value of BCA in exchange for a 49.8%
limited partnership interest in BCA, (c) PR GP will execute and file an Amended
and Restated Certificate of Limited Partnership in the Commonwealth of
Pennsylvania, and (d) the Agreement of Limited Partnership of BCA shall be
amended and restated in its entirety in the form attached hereto as Schedule 2.1
(the “Amended Partnership Agreement”). The general partnership interest in BCA
held by the BCA GP immediately prior to the closing shall be converted to a
limited partnership interest and shall be fully owned by CLA.

2.2 Financing of Cherry Hill Property. Concurrently with the closing of the
Exchange, BCA shall enter into a first mortgage loan secured by a first lien on
the Cherry Hill Property in such amount and upon such terms and conditions as
the PR GP shall approve.

2.3 Pay off of Mortgage on Bala Property. Concurrently with the closing of the
Exchange, BCA shall pay off and satisfy the mortgage on the Bala Property.

2.4 Closing. Closing (the “First Closing”) with respect to the transactions
described in Sections 2.1 through 2.4 above shall be held concurrently with the
closing under the Exchange Agreement (such date, the “First Closing Date”).

SECTION 3. PUT AND CALL

3.1 First Call Right. The UPREIT will have a right to call (the “First Call”)
49.9% of the limited partnership interests in BCA held by CLA in the thirty
(30) day period the (“First Call Period”) beginning one (1) year and (1) day
following the First Closing Date by giving CLA not less than ten (10) days prior
written notice thereof. Closing (the “Second Closing”) with respect to the First
Call will take place at 10:00 a.m. at the offices of Drinker Biddle & Reath LLP,
One Logan Square, 18th and Cherry Streets, 20th Floor, Philadelphia, PA 19103 on
the tenth (10th) day following the giving of such notice. At the Second Closing:
(a) CLA will distribute 49.9% of the limited partnership interests in BCA,
consisting of the entire interest held by BCA GP and a portion of the limited
partnership interest in BCA held by CLA, to the Individuals pro-rata in
proportion to their respective ownership interests in CLA, (b) Coradino will
assign the entire limited partnership interest in BCA then held in his name
(constituting a 1.5757921% limited partnership interest in BCA) to the UPREIT
free and clear of all liens, pledges and encumbrances of every type or nature in
exchange for Class A Units in the UPREIT with a value, calculated at the Average
Closing Price (hereinafter defined) on the date of the First Closing, equal to
1.5757921% of the Net Equity Value of BCA, (c) Shore will assign the entire

 

- 3 -

--------------------------------------------------------------------------------

limited partnership interest in BCA then held in his name (constituting a
5.2526237% limited partnership interest in BCA) to the UPREIT free and clear of
all liens, pledges and encumbrances of every type or nature in exchange for
Class A Units in the UPREIT with a value, calculated at the Average Closing
Price on the date of the First Closing, equal to 5.2526237% of the Net Equity
Value of BCA, (d) Stone will assign the entire limited partnership interest in
BCA then held in his name (constituting a 2.6263368% limited partnership
interest in BCA) to the UPREIT free and clear of all liens, pledges and
encumbrances of every type or nature in exchange for cash in an amount equal to
2.6263368% of the Net Equity Value of BCA, (e) Ronald Rubin will contribute the
entire limited partnership interest in BCA then held in his name (constituting a
20.2226237% limited partnership interest in BCA) to the UPREIT free and clear of
all liens, pledges and encumbrances of every type or nature in exchange for
Class A Units in the UPREIT with a value, calculated at the Average Closing
Price on the date of the First Closing, equal to 20.2226237% of the Net Equity
Value of BCA, and (f) George Rubin will contribute the entire limited
partnership interest in BCA then held in his name (constituting a 20.2226237%
limited partnership interest in BCA) to the UPREIT free and clear of all liens,
pledges and encumbrances of every type or nature in exchange for Class A Units
in the UPREIT with a value, calculated at the Average Closing Price on the date
of the First Closing, equal to 20.2226237% of the Net Equity Value of BCA. As
used herein, the “Average Closing Price” shall mean the average closing price of
a share of the publicly traded beneficial interest of PREIT during the ten
(10) day trading period immediately preceding the First Closing; provided that
the number of Class A Units so derived shall be rounded to the nearest integer
(0.5 rounded down). Notwithstanding the foregoing, the consideration payable to
the Individuals for the assignment or transfer of their limited partnership
interests in BCA as set forth above, or as set forth in Section 3.2 below, shall
be subject to the further adjustment specified in Section 3.4 below.

3.2 First Put Right. If the UPREIT does not give notice of the First Call during
the First Call Period, CLA will have a right to put 49.9% of the limited
partnership interests in BCA to the UPREIT by giving the UPREIT not less than
ten (10) days prior written notice to the UPREIT at any time in the thirty
(30) day period following the expiration of the First Call Period, in which case
the Second Closing will take place at the offices of Drinker Biddle & Reath, One
Logan Square, 18th & Cherry Streets, 20th Floor, Philadelphia, PA 19103, on the
tenth (10th) day after the giving of such notice. At the Second Closing, the
distributions, assignments, payments and exchanges will be as set forth in
Section 3.1 above. The date of the Second Closing is referred to as the “Second
Closing Date.”

3.3 Second Call Option. The UPREIT will have the right to call (the “Second
Call”) the remaining 0.2% limited partnership interests in BCA held by CLA in
the thirty (30) day period beginning one (1) year and one (1) day following the
Second Closing Date by giving CLA not less than ten (10) days prior written
notice thereof. Closing (the “Third Closing”) will take place on the tenth
(10th) day following the giving of such notice (the “Third Closing Date”). At
the Third Closing, (a) CLA will distribute the remaining 0.2% limited
partnership interests in BCA held by CLA to the Individuals pro-rata in
proportion to their respective ownership interests in CLA, (b) Coradino will
assign the entire limited partnership interest in BCA then held in his name
(constituting a 0.0063158% limited partnership interest in BCA) to the UPREIT
free and clear of all liens, pledges and encumbrances of every type or nature in
exchange for Class A Units in the UPREIT with a value, calculated at the Average
Closing Price on the First Closing Date, equal to 0.0063158% of the Net Equity
Value of BCA, (c) Shore will assign the entire limited partnership interest in
BCA then held in his name (constituting a 0.0210526%

 

- 4 -

--------------------------------------------------------------------------------

limited partnership interest in BCA) to the UPREIT free and clear of all liens,
pledges and encumbrances of every type or nature in exchange for Class A Units
in the UPREIT with a value, calculated at the Average Closing Price on the First
Closing Date, equal to 0.0210526% of the Net Equity Value of BCA, (d) Stone will
assign the entire limited partnership interest in BCA then held in his name
(constituting a 0.0105264% limited partnership interest in BCA) to the UPREIT
free and clear of all liens, pledges and encumbrances of every type and nature
in exchange for cash in an amount equal to 0.0105264% of the Net Equity Value of
BCA, (e) Ronald Rubin will contribute the entire limited partnership interest in
BCA then held in his name (constituting a 0.0810526% limited partnership
interest in BCA) to the UPREIT free and clear of all liens, pledges and
encumbrances of every type or nature in exchange for Class A Units in the UPREIT
with a value, calculated at the Average Closing Price on the First Closing Date,
equal to 0.0810526% of the Net Equity Value of BCA, and (f) George Rubin will
contribute the entire limited partnership interest in BCA then held in his name
(constituting a 0.0810526% limited partnership interest in BCA) to the UPREIT
free and clear of all liens, pledges and encumbrances of every type or nature in
exchange for Class A Units in the UPREIT with a value, calculated at the Average
Closing Price on the date of the First Closing, equal to 0.0810526% of the Net
Equity Value of BCA an the First Closing Date.

3.4 Adjustment. At the time of the Second Closing, the consideration to be
furnished to the Individuals for the assignment or contribution of their limited
partnership interests, as set forth in Sections 3.1 and 3.2 above, shall be
subject to the following further adjustments:

(a) As used herein, the term “Equivalent Class A Units” means, with respect to
an Individual, the number of Class A Units in the UPREIT which, if valued in
accordance with the formulations of Section 3.1 above, would be given to such
Individual pursuant to said Section 3.1 or which would be given to such
Individual if he elected to receive equivalent value in Units instead of cash.

(b) If the distributions made to an Individual under the Amended Partnership
Agreement, for period from the First Closing Date until the Second Closing Date,
are less than the distributions accrued for the same period for the Equivalent
Class A Units, then the consideration to be given to the Individual pursuant to
Section 3.1 or 3.2 above for his assignment or contribution of limited
partnership interests shall be increased by such difference; and if such
distributions under the Amended Partnership Agreement are more than the
distribution accrued for the same period for the Equivalent Class A Units, then
the consideration to be given to an Individual pursuant to Section 3.1 or 3.2
above for his assignment or contribution of limited partnership interests shall
be decreased by such difference.

(c) If between the First Closing Date and the Second Closing Date, there have
been any distributions to an Individual under the Amended Partnership Agreement
of net capital proceeds from a capital event, then the consideration to be given
to an Individual pursuant to Section 3.1 or 3.2 above for his assignment or
contribution of limited partnership interests shall be reduced by the aggregate
amount of such distribution.

(d) Any adjustment pursuant to this Section 3.4 shall be made in cash, as to the
Individual who is to receive cash for the assignment of his partnership
interests, and shall be made in cash or in Units, as the UPREIT may determine,
for the remaining Individuals.

3.5 Accredited Investor Status. Notwithstanding anything to the contrary set
forth herein, the UPREIT shall have the right and option to deliver to any
Individual who is not an

 

- 5 -

--------------------------------------------------------------------------------

“accredited investor,” as such term is defined under Regulation D promulgated
pursuant to the Securities Act of 1933, as amended (the “1933 Act”), or to the
estate of any Individual who dies following the execution hereof, whether or not
such estate is an “accredited investor,” in lieu of any Class A Units which
would otherwise be issuable to such Individual pursuant to Section 3.1 through
Section 3.4 of this Agreement, an amount of cash equal to the product of (i) the
number of Class A Units otherwise issuable to such Individual pursuant to
Section 3.1 through 3.4 of this Agreement and (ii) the Average Closing Price.

3.6 Recapitalization. If, after the date hereof, there shall occur any
recapitalization, unit division, reverse division, unit re-issuance or any other
transaction involving the UPREIT or PREIT whereby a Class A Unit of the UPREIT
(as it exists on the date hereof) shall be reconstituted as a different number
of Class A Units, and/or as a specified number of units having a different class
or designation (in each case subject to the necessary requirements specified in
the UPREIT Partnership Agreement), or if there shall occur any merger,
consolidation or other transaction involving the UPREIT and/or PREIT whereby
specified interests or units are substituted for a Class A Unit (or for the
reconstituted Units determined as aforesaid), then for purposes of computing the
number of Units to be issued under this Agreement, such reconstituted or
substituted number of Class A Units and/or specified other Units or interests
shall be substituted for each Class A Unit otherwise applicable hereunder. Any
such substitution shall be accomplished in a manner that neither increases nor
decreases the value of the Units to be received by the Individuals as compared
to other holders of Class A Units under the UPREIT Partnership Agreement .

SECTION 4. REPRESENTATIONS AND WARRANTIES OF CLA AND THE INDIVIDUALS.

4.1 As to CLA. Except for the representations and warranties by the Individuals
set forth in clauses (c), (d), (e), (f), (h) and (j) below, which are made
severally by each Individual as to himself, and the representations set forth in
clause (i) below, which are made severally by the Rubins only, CLA hereby
represents and warrants to PREIT and the UPREIT as follows:

(a) Organization. CLA is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all power to
carry on its business as presently conducted, to own its interest in BCA and to
exercise all rights attributable to such interest. It is duly qualified to do
business as a foreign entity and is in good standing under the laws of each
jurisdiction in which its ownership of or other interest in assets or properties
or the nature of its activities requires such qualification except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), assets, results of operations or business of
CLA (a “Material Adverse Effect”).

(b) Power and Authority. CLA has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and under the other
agreements and documents required to be delivered by it prior to or at each
Closing (collectively, and together with all documents and agreements required
to be delivered by all Individuals at the Closings, the “Transaction
Documents”). The execution, delivery and performance by CLA of this Agreement
and the other Transaction Documents to which it is a party have been duly
authorized by all necessary action on the part of CLA. This Agreement has been
duly and validly executed and delivered by CLA and constitutes a legal, valid
and binding obligation of

 

- 6 -

--------------------------------------------------------------------------------

CLA enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally or by general equitable
principles. When executed and delivered as contemplated herein, each of the
other Transaction Documents to which CLA is a party shall, assuming due
authorization, execution and delivery thereof by the other parties thereto,
constitute a legal, valid and binding obligation of CLA enforceable against it
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally or by general equitable principles.

(c) No Conflicts. The execution and delivery by CLA and each Individual of this
Agreement does not, and the performance by CLA and such Individual of all of
their respective obligations under the Transaction Documents will not (with or
without the passage of time or the giving of notice), directly or indirectly:

(i) contravene, violate or conflict with (A) the partnership agreement of CLA,
or (B) any Law applicable to CLA or any Individual, or by or to which any assets
or properties of CLA or any such Individual are bound or subject;

(ii) violate or conflict with, result in a breach of, constitute a default or
otherwise cause any loss of benefit under, or give to others any rights
(including rights of termination, amendment, foreclosure, cancellation or
acceleration) in or with respect to, any Authorization or Contract to which CLA
or any Individual is a party or by which CLA or any such Individual or any
assets or properties CLA or any such Individual are bound or affected; or

(iii) result in, require or permit the creation or imposition of any lien or
encumbrance upon or with respect to CLA or any such Individual, or any assets or
properties of CLA or any such Individual.

(d) Authorizations. The execution and delivery by CLA or any such Individual of
this Agreement does not, and the execution and delivery by CLA and such
Individuals of the other Transaction Documents, and the performance by such CLA
and any such Individual of this Agreement and all of the Transaction Documents
will not, require CLA or any such Individual to obtain any authorization of, or
to make any filing, registration or declaration with or notification to, any
court, government or governmental agency or instrumentality (federal, state,
local or foreign) or to obtain the consent, waiver or approval of, or give any
notice to, any other Person.

(e) Proceedings. There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of CLA or any Individual, threatened
or contemplated, involving or affecting CLA or any Individual or any of their
respective assets or properties, that question any of the transactions
contemplated by this Agreement or other Transaction Documents, or which, if
adversely determined, would have a Material Adverse Effect or could materially
and adversely affect the ability of CLA or any Individual to enter into or
perform their respective obligations under this Agreement.

 

- 7 -

--------------------------------------------------------------------------------

(f) Interests in CLA.

(i) No person or entity other than the Individuals has any partnership or other
interest in CLA or any right to receive any distributions from CLA or be
allocated any profits or losses of CLA. Each Individual owns, beneficially and
of record, his interest in CLA free and clear of all liens, pledges and
encumbrances of any type or nature.

(ii) No person has any rights, subscriptions, warrants, options, rights of first
refusal, conversion rights or agreements of any kind outstanding to purchase or
to otherwise acquire any partnership interest or other securities or obligations
of any kind convertible into any partnership interest or other securities or any
participation interests of any kind in CLA.

(g) Brokers. No Person acting on behalf of BCA, CLA or any Individual or under
the authority of any of BCA, CLA or any Individual is or will be entitled to any
brokers’ or finders’ fee or any other commission or similar fee, directly or
indirectly, from any of such parties in connection with any of the transactions
contemplated by this Agreement except for such commissions as are payable with
respect to the Exchange, which commissions will be fully paid by CLA and/or CH
Corp. at the First Closing.

(h) Accurate Disclosure. All documents and other papers delivered by or on
behalf of CLA or each Individual in connection with the transactions
contemplated by this Agreement are accurate and complete in all material
respects.

(i) Investment Representations.

(i) Coradino, the Rubins and Shore (hereinafter collectively referred to as the
“Share Recipients”) acknowledge that the Class A Units to be issued pursuant to
Section 3 hereof will not be registered under the 1933 Act on the grounds that
the issuance of such units is exempt from registration pursuant to Section 4(2)
of the 1933 Act and/or Regulation D promulgated under the 1933 Act, and that the
reliance of the UPREIT on such exemptions is predicated in part on the
representations, warranties and acknowledgements of the Share Recipients set
forth in this section.

(ii) The Share Recipients are accredited investors as defined in Regulation D
promulgated under the 1933 Act. The Class A Units issued in accordance with this
Agreement will be acquired by each of the Share Recipients hereunder for his own
account, not as a nominee or agent for any other Person, solely for investment
purposes, and without a view to resale or other distribution within the meaning
of the 1933 Act, and the rules and regulations thereunder, and the Share
Recipients will not distribute any of such units in violation of the 1933 Act or
any applicable state securities law.

(iii) Each of the Share Recipients: (v) acknowledges that the Class A Units,
when issued, will not be registered under the 1933 Act and such Class A Units
will have to be held indefinitely by him unless they are subsequently registered
under the 1933 Act or an exemption from registration is available, (w) is aware
that any sales of such Class A Units made under Rule 144 of the Securities and
Exchange Commission under the 1933 Act may be made only in limited amounts and
in accordance with the terms and conditions for that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (x) is aware that Rule 144 may not be available for
use by him for resale of the Units, and (y) is aware that the UPREIT is under no
obligation to register, and has no current intention of registering, any of such
units under the 1933 Act.

 

- 8 -

--------------------------------------------------------------------------------

(iv) Each of the Share Recipients is well versed in financial matters, has had
dealings over the years in securities, including “restricted securities,” and
has had sufficient experience so as to be fully capable of understanding the
type of investment being made in the Class A Units and the risks involved in
connection therewith.

(v) Each of the Share Recipients has examined the UPREIT Partnership Agreement,
and is prepared to accept and abide by the terms thereof. Each of the Share
Recipients acknowledges that the UPREIT Partnership Agreement restricts the
assignment, sale or transfer of the Class A Units, and that he must continue to
bear the economic risks of the investment in the Class A Units for an indefinite
period.

(vi) Each of the Share Recipients has received and reviewed to the extent deemed
necessary or desirable all PREIT Reports (as defined in Section 5.5 hereof), and
has consulted such of his own attorney, accountant, tax adviser and investment
counselor as he has determined to be necessary or desirable.

(vii) Each of the Share Recipients has been given an adequate opportunity to ask
questions of and receive answers from officers of PREIT and the UPREIT with
respect to PREIT, the UPREIT, the Class A Units, the UPREIT Partnership
Agreement and the PREIT Reports. However, in considering whether to enter into
this Agreement, consummate the transactions contemplated hereby and acquire the
Class A Units, none of the Share Recipients has relied upon any representations
made by, or other information (whether oral or written) furnished by or on
behalf of, PREIT or the UPREIT other than as set forth in this Agreement, the
UPREIT Partnership Agreement, and the PREIT Reports.

(viii) Each of the Share Recipients acknowledges that the redemption of any of
the Class A Units may cause such him to incur taxable income or gain.

(j) FIRPTA. Neither CLA nor any Individual is a “foreign person” within the
meaning of Section 1445(f) of the Internal Revenue Code (“Code”) or a “foreign
partner” within the meaning of Section 1446 of the Code.

4.2 As to BCA. CLA hereby represents and warrants to PREIT and the UPREIT as
follows:

(a) Organization. BCA is a general partnership duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
all partnership power to carry on its business as presently conducted, to own
and lease the assets and properties which it owns and leases and to perform all
its obligations under each agreement and instrument to which it is a party or by
which it is bound. BCA is duly qualified to do business as a foreign partnership
and is in good standing under the laws of each jurisdiction in which its
ownership or leasing of assets or properties or the nature of their activities
requires such qualification except where the failure to be so qualified would
not have a Material Adverse Effect on the condition (financial or otherwise),
assets, results of operations or business of BCA. Prior to the First Closing,
CLA and CBS will form the BCA GP and BCA will be reconstituted as a Pennsylvania
limited partnership with BCA GP as its general partner and will be qualified to
do business in the State of New Jersey.

(b) Power and Authority. BCA has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and under the
Transaction Documents to which it is a party. The execution, delivery and
performance by BCA of this

 

- 9 -

--------------------------------------------------------------------------------

Agreement and the Transaction Documents to which it is a party have been duly
authorized by all necessary action on the part of BCA. This Agreement has been
duly and validly executed and delivered by BCA and constitutes a legal, valid
and binding obligation of BCA enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the other Transaction Documents to which BCA is a party shall,
assuming due authorization, execution and delivery thereof by the other parties
thereto, constitute a legal, valid and binding obligation of BCA enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally or by general equitable principles.

(c) No Conflicts. The execution and delivery by BCA of this Agreement does not,
and the performance by it of all of the Transaction Documents to which it is a
party will not (with or without the passage of time or the giving of notice),
directly or indirectly:

(i) contravene, violate or conflict with (A) its partnership agreement (as it
now exists or as it may be amended prior to the First Closing), or (B) any Law
applicable to BCA, or by or to which any assets or properties of BCA is bound or
subject;

(ii) violate or conflict with, result in a breach of, constitute a default or
otherwise cause any loss of benefit under, or give to others any rights
(including rights of termination, amendment, foreclosure, cancellation or
acceleration) in or with respect to, any Authorization or Contract to which BCA
is a party or by which BCA or any assets or properties thereof is bound or
affected; or

(iii) result in, require or permit the creation or imposition of any lien or
encumbrance upon or with respect to BCA or any partnership interest in BCA, or
any of BCA’s assets or properties.

(d) Authorizations. The execution and delivery by BCA of this Agreement does
not, and the execution and delivery by BCA of the Transaction Documents to which
it is a party, and the performance by BCA of this Agreement and all of the
Transaction Documents to which it is a party will not, require BCA to obtain any
authorization of, or to make any filing, registration or declaration with or
notification to, any court, government or governmental agency or instrumentality
(federal, state, local or foreign) or to obtain the consent, waiver or approval
of, or give any notice to, any other Person.

(e) Proceedings. There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of any Individual, threatened or
contemplated, involving or affecting BCA or any of its assets or properties or
to the knowledge of any Individual any of its partners that question any of the
transactions contemplated by this Agreement or the Transaction Documents to
which it is a party, or which, if adversely determined, would have a Material
Adverse Effect or could materially and adversely affect BCA’s ability to enter
into or perform its obligations under this Agreement.

(f) Interests in BCA.

(i) No person or entity has any partnership or other interest in BCA or any
right to receive any distributions from BCA or be allocated any profits or
losses of BCA other than CLA except for AXA (which is a participation right
under its lease) and CBS, both of

 

- 10 -

--------------------------------------------------------------------------------

which will be fully paid (in the case of AXA) or redeemed (in the case of CBS)
at the First Closing. Except for the interests in BCA owned by CBS, which
interests will be redeemed at the First Closing, CLA owns and will own at the
First Closing, directly or indirectly, all of the partnership interests in BCA,
free and clear of all liens, pledges and encumbrances of any type or nature.

(ii) Except for the rights of the UPREIT under this Agreement, no Person has any
rights, subscriptions, warrants, options, rights of first refusal, conversion
rights or agreements of any kind outstanding to purchase or to otherwise acquire
any partnership interest or other securities or obligations of any kind
convertible into any partnership interest or other securities or any
participation interests of any kind in BCA or, to CLA’s knowledge, the Cherry
Hill Property.

(g) Accurate Disclosure. All documents and other papers delivered by or on
behalf of BCA in connection with the transactions contemplated by this Agreement
are accurate and complete in all material respects.

(h) Financial Statements. Except as set forth in the Disclosure Exhibit, the
financial statements for BCA for the years 2004, 2005 and 2006 attached hereto
as Schedule 4.2(h) are correct and complete in all material respects and present
accurately the results of the operations of BCA for the periods indicated. Since
the date of the last financial statement included on said Schedule, no material
adverse change in the financial condition of BCA has occurred.

(i) Undisclosed Liabilities.

(i) As of the First Closing Date, there shall be no liabilities of BCA of any
nature (whether absolute, accrued, contingent, liquidated, unliquidated or
otherwise) except liabilities with respect to the Cherry Hill Property to be
assumed or taken subject to by BCA pursuant to the Exchange Agreement (provided
that any such liabilities shall not be in contravention of any of the warranties
and representations of the Individuals under this Agreement, and shall be
subject to the indemnification obligations of the Individuals under this
Agreement to the extent applicable).

(j) Taxes.

(i) All Taxes due from or required to be remitted by BCA with respect to taxable
periods ending on or prior to, and the portion of any interim period up to, the
First Closing Date have been fully and timely paid or, to the extent not yet due
or payable, shall be adequately provided for by an actual cash reserve which
shall be available at Closing as an asset of BCA which shall not be taken into
account in calculating the Net Equity Value of BCA.

(ii) Except as disclosed in the Disclosure Exhibit, all federal, state, local
and foreign returns and reports relating to Taxes, or extensions relating
thereto, required to be filed by or with respect to BCA have been timely and
properly filed, and all such returns and reports are correct and complete.

(iii) Except as set forth in the Disclosure Exhibit, no issues have been raised
with BCA (and are currently pending) by the Internal Revenue Service, the
Pennsylvania Department of Revenue or any other taxing authority in connection
with any of the returns and reports referred to in subsection (ii) above and no
waivers of statutes of limitations have been given or requested with respect to
any such returns and reports or with respect to any Taxes.

 

- 11 -

--------------------------------------------------------------------------------

Except as set forth in the Disclosure Exhibit, all deficiencies asserted or
assessments made as a result of any previous examinations with respect to Taxes
have been fully paid, and there are no other unpaid deficiencies asserted or
assessments made by any taxing authority against BCA or the Cherry Hill
Property.

(k) Books and Records. The books and records of BCA, including financial records
and books of account, are complete and accurate in all material respects and
have been maintained in accordance with sound business practices.

SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING PREIT AND THE UPREIT.

PREIT and the UPREIT hereby represent and warrant to the Individuals as follows;
provided that each of PREIT and the UPREIT make these representations solely as
to its separate business, affairs or status and shall not extend to matters
relating to the business, affairs or status of the other:

5.1 Organization.

(a) PREIT is an unincorporated association in business trust form duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania. PREIT
has all necessary trust power to carry on its business as presently conducted,
to own and lease the assets and properties that it owns and leases and to
perform all its obligations under each agreement and instrument to which it is a
party or by which it is bound.

(b) The UPREIT is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
partnership power to carry on its business as presently conducted, to own and
lease the assets and properties that it owns and leases and to perform all its
obligations under each agreement and instrument to which it is a party or by
which it is bound.

5.2 Power and Authority. Each of PREIT and the UPREIT has all requisite trust or
partnership power to execute, deliver and perform its obligations under this
Agreement and under all Transaction Documents to be delivered by it prior to or
at any Closing. The execution, delivery and performance by PREIT and the UPREIT
of this Agreement and the Transaction Documents to which either of them are a
party have been duly authorized by all necessary corporate or partnership
action. This Agreement has been duly and validly executed and delivered by PREIT
and the UPREIT and constitutes the legal, valid and binding obligation of PREIT
and the UPREIT enforceable against each of them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights generally or by
general equitable principles. When executed and delivered as contemplated
herein, each of the Transaction Documents to which either of them are a party
shall, assuming due authorization, execution and delivery thereof by the other
parties thereto, constitute the legal, valid and binding obligation of each of
PREIT and the UPREIT that is a party thereto enforceable against it in
accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors
rights generally or by general equitable principles.

5.3 No Conflicts.

 

- 12 -

--------------------------------------------------------------------------------

(a) The execution and delivery by PREIT and the UPREIT of this Agreement do not,
and the execution and delivery by PREIT and the UPREIT of the Transaction
Documents to which either of them are a party and the performance by PREIT and
the UPREIT of all of the Transaction Documents to which either of them are a
party will not (in each case, with or without the passage of time or the giving
of notice), directly or indirectly:

(i) contravene, violate or conflict with (A) the trust or partnership agreement
(or other organizational documents) of PREIT or the UPREIT or (B) any Law
applicable to PREIT or the UPREIT, or by or to which any assets or properties of
PREIT or the UPREIT is bound or subject; or

(ii) violate or conflict with, result in a breach of, constitute a default or
otherwise cause any loss of benefit or give to others any rights (including
rights of termination, amendment, foreclosure, cancellation or acceleration) in
or with respect to any material Authorization or material Contract to which
PREIT or the UPREIT is a party or by which either PREIT or the UPREIT is bound
or affected; or

(iii) result in, require or permit the creation or imposition of any material
encumbrance upon or with respect to either PREIT or the UPREIT or any of their
respective assets or properties.

(b) Except for filings with the Securities and Exchange Commission, the
execution and delivery by PREIT and the UPREIT of this Agreement do not, and the
execution and delivery by PREIT and the UPREIT of the Transaction Documents to
which either of them are a party and the performance by PREIT and the UPREIT of
all of the Transaction Documents to which either of them are a party will not,
require PREIT or the UPREIT to obtain any material Authorization of or make any
material filing, registration or declaration with or notification to any court,
government or governmental agency or instrumentality (federal, state, local or
foreign) or to obtain the material consent, waiver or approval of, or give any
material notice to, any Person.

(c) Except as disclosed in filings with the Securities and Exchange Commission
made by PREIT, there are no actions, proceedings or investigations against or
involving PREIT or the UPREIT pending or, to the best knowledge of PREIT,
threatened, that question any of the transactions contemplated by this Agreement
or the validity of any of the Transaction Documents to which either of them are
a party or which, if adversely determined, could have a material adverse effect
on the consolidated financial condition, assets, business or results of
Operations of PREIT or could materially and adversely affect PREIT’s or the
UPREIT’s ability to enter into or perform its obligations under the Transaction
Documents to which either of them are a party.

5.4 Capitalization.

(a) As of September 30, 2007, the outstanding beneficial interests in PREIT
consist of 38,664,061 common shares.

(b) All Class A Units to be issued and delivered to the Share Recipients
pursuant to this Agreement will be, at the time of issuance and delivery in
accordance with the terms of this Agreement, duly authorized and validly issued
by the UPREIT. Assuming the accuracy of the representations and warranties of
the Share Recipients set forth herein, such

 

- 13 -

--------------------------------------------------------------------------------

issuance will be exempt from registration under the 1933 Act as an offering
described in Section 4(2) of such Act and/or pursuant to Regulation D
promulgated thereunder.

5.5 PREIT Reports. PREIT has delivered to the Share Recipients copies of PREIT’s
(a) Proxy Statement for its 2007 Annual Meeting, (b) Annual Report on Form 10-K
for the fiscal year ending December 31, 2006, (c) Quarterly Reports on Form 10-Q
for the quarters ended March 31 and June 30, 2007, and (d) Current Reports on
Form 8-K filed since December 31, 2006, all of which have been filed by PREIT
with the Securities and Exchange Commission (the “PREIT Reports”). The Share
Recipients acknowledge that delivery of the foregoing is effective by reason of
the filing of the aforesaid materials with the publicly-accessible EDGAR
database of the Securities and Exchange Commission. To the knowledge of PREIT
and the UPREIT, in all material respects, the audited consolidated financial
statements and unaudited interim financial statements of PREIT included in such
reports have been prepared in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto) and fairly present the consolidated
financial condition and results of operations of PREIT as at the dates thereof
and for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein. To the knowledge of PREIT and the UPREIT, the PREIT Reports
do not contain any untrue statements of a material fact or omit to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading at the time the
filing was made.

5.6 Litigation. Except as disclosed in filings with the Securities and Exchange
Commission, there are no claims, actions, suits, proceedings (arbitration or
otherwise) or, to the best knowledge of PREIT, investigations involving or
affecting PREIT or any of its subsidiaries or any of their assets or properties
or any of their trustees, directors, officers, partners or shareholders in their
capacities as such, before or by any court, government or governmental agency or
instrumentality (federal, state, local or foreign) or before any arbitrator of
any kind, in each case of a nature that is required to be disclosed in the PREIT
Reports.

5.7 Material Adverse Change. Except as disclosed in filings with the Securities
and Exchange Commission, since December 31, 2006 and through the date of this
Agreement, there has not been any material adverse change in the condition
(financial or otherwise), assets, results of operations or business of PREIT on
a consolidated basis.

5.8 Brokers. No Person acting on behalf of PREIT or the UPREIT is or will be
entitled to any brokers’ or finders’ fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with the issuance
of Class A Units contemplated by this Agreement.

SECTION 6. CERTAIN COVENANTS AND AGREEMENTS

6.1 Conduct of Business.

Except as expressly provided herein, until the date of the First Closing, except
with the prior written consent of PREIT and the UPREIT, which consent shall not
be unreasonably withheld or delayed, CLA shall endeavor to cause BCA to:

(a) Comply in all material respects with the terms, conditions and provisions of
the Exchange Agreement and endeavor to fulfill all requirements necessary to
close

 

- 14 -

--------------------------------------------------------------------------------

thereunder; provided, however, BCA shall have the right to terminate the
Exchange Agreement in accordance with its terms.

(b) pay and discharge in the ordinary course of business all payments due under
BCA’s loan documents and all of its other debts, liabilities and obligations as
they become due and pay all debt service payments, real estate taxes, payables
and other liabilities arising from the operation of the Bala Property prior to
the Closing Date, subject to apportionments to be made under the Exchange
Agreement;

(c) keep in full force and effect insurance comparable in amount and scope of
coverage to insurance now carried by it;

(d) maintain its books of account and records in the usual, regular and ordinary
manner and use diligent efforts to maintain in full force and effect all of its
Authorizations;

(e) not take any action, fail to take any action or permit to occur any event
that would cause or constitute a material breach of or inaccuracy in any
representation or warranty set forth herein;

(f) not amend or grant any waivers under the Exchange Agreement except to the
extent any such amendment or waiver does not materially adversely affect the
UPREIT’s investment in BCA; and

(g) not enter into any agreement or understanding to do or engage in any of the
foregoing actions.

6.2 Reasonable Efforts. Upon the terms and subject to the condition hereof,
between the date hereof and the Closing Date, each of the parties hereto shall
use its reasonable efforts to take, or cause to be taken, all appropriate action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Law to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) using its reasonable efforts
to make all required regulatory filings and applications and to obtain all
Authorizations and consents, approvals, amendments and waivers from parties to
Contracts as are necessary for the consummation of the transactions contemplated
by this Agreement, (ii) using its reasonable efforts to cause the conditions to
the consummation of the transaction contemplated by this Agreement to be
satisfied, and (iii) using its reasonable efforts to take any action within its
control to allow closing to occur under the Exchange Agreement.

6.3 Notifications. Each party hereto shall give prompt notice to the other
parties upon becoming aware of: (i) any fact or condition that causes or
constitutes (or that reasonably could be expected to cause or constitute) a
breach of its representations and warranties set forth herein, or the
occurrence, or failure to occur, of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of or any
inaccuracy in any of its representations and warranties contained in this
Agreement had such representation or warranty. been made as of the time of
occurrence or discovery of such fact or condition; (ii) any material failure of
it or any of its officers, directors, employees or agents, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iv) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened against,

 

- 15 -

--------------------------------------------------------------------------------

relating to or involving or otherwise affecting any Individual, BCA, the UPREIT
or PREIT, as the case may be, or any of the transactions contemplated by this
Agreement.

6.4 Notifications regarding Exchange Agreement.

(a) Without limiting the provisions of Section 6.3 above, each party hereto
shall give prompt notice to the other parties upon becoming aware of: (i) any
fact or condition that causes or constitutes (or that reasonably could be
expected to cause or constitute) a breach of any of the representations,
warranties, covenants or agreements set forth in the Exchange Agreement, or the
occurrence, or failure to occur, of any fact or condition that would cause or
constitute a breach of or any inaccuracy in any of the representations,
warranties, covenants or agreements contained in the Exchange Agreement or could
reasonably be anticipated to result in the non-satisfaction of any condition to
closing hereunder; (ii) any failure of any party or any of such party’s
officers, directors, employees or agents, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
the Exchange Agreement; (iii) the assertion by any party to the Exchange
Agreement of any of the matters set forth in subsections (i) or (ii) immediately
preceding regardless of the accuracy thereof; (iv) any notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by the Exchange Agreement; and
(v) any actions, suits, claims, investigations or proceedings commenced or, to
the best of its knowledge, threatened against, relating to or involving or
otherwise affecting any party to the Exchange Agreement or the transactions
contemplated thereunder.

(b) BCA shall promptly deliver to the UPREIT copies of all reports, studies,
materials, leases, rent rolls, estoppel certificates, mortgagee statements, data
and other relevant information obtained from any source (including without
limitation CH Corp. or independent contractors) with regard to the Cherry Hill
Property, as well as all relevant correspondence and communications relating
thereto (and to the extent any such information is not in written form, BCA
shall endeavor to advise the UPREIT thereof with reasonable promptness).

6.5 Transfer of Interests. Between the date hereof and the date of the Third
Closing, except as provided herein or with the prior written consent of PREIT
and the UPREIT which consent may be withheld in their sole discretion or as
otherwise contemplated by this Agreement, no Individual shall sell, assign,
transfer or otherwise encumber all or any portion of his interest in CLA, and
CLA shall not sell, assign, transfer or otherwise encumber all or any portion of
its interest in BCA, whether voluntarily, by operation of law or otherwise,
including without limitation a transfer by reason of any merger, division or
consolidation, and any such sale, assignment, transfer or encumbrance shall be
void.

6.6 PREIT and UPREIT Responsibilities. PREIT and the UPREIT acknowledge that
they have conducted or shall conduct their own due diligence review of the
Cherry Hill Property. PREIT and the UPREIT shall bear full responsibility for
such due diligence review. No condition at the Cherry Hill Property or liability
under the Exchange Agreement, other than any liability created or assumed in
contravention of the express covenants and provisions of this Agreement, or the
Exchange Agreements, shall in any way impose liability on CLA or the Individuals
or diminish the consideration to be received by the Individuals hereunder,
except as may be set forth in Section 9 hereof.

6.7 Special Covenant Regarding the Cherry Hill Property.

 

- 16 -

--------------------------------------------------------------------------------

The UPREIT and PREIT, as the general partner thereof, covenant and agree that,
if the First Closing occurs hereunder, then the UPREIT shall not permit the
Cherry Hill Property or the interests in BCA which are acquired from the Share
Recipients pursuant to this Agreement to be disposed of for a period of eight
(8) years following First Closing Date in such manner as to cause the Share
Recipients to recognize taxable income and that any such disposition within such
time period must be pursuant to a tax-free exchange under Section 1031 of the
Code or other tax-free disposition; except that such disposition shall be
permitted in a taxable transaction if: (i) such disposition occurs on or before
the fifth (5th) anniversary of the First Closing Date and the Share Recipients
are paid an amount sufficient to reimburse them for any income tax liability
resulting from such disposition by reason of Section 704(c) of the Code (the
“Tax Liability Amount”), together with all income taxes payable on such Tax
Liability Amount; or (ii) such disposition occurs during the period following
the fifth (5th) anniversary of the First Closing Date until the eighth
(8th) anniversary of the First Closing Date and the Share Recipients are paid an
amount sufficient to reimburse them only for the Tax Liability Amount. The
covenants of this Section 6.7 shall survive all Closings hereunder.

SECTION 7. CLOSING CONDITIONS; CLOSING DELIVERIES.

7.1 Closing Conditions.

(a) Conditions Precedent to PREIT’s and the UPREIT’s Obligations. The obligation
of PREIT and the UPREIT to consummate the transactions contemplated herein and
to take the other actions required to be taken by them at each Closing is
subject to the fulfillment by or at the First Closing of each of the following
conditions, any or all of which may be waived (but only by a duly executed
writing) by both PREIT and the UPREIT in their sole discretion:

(i) Exchange Agreement.

(A) All conditions to closing under the Exchange Agreement shall have been
satisfied in the manner required under the Exchange Agreement or as otherwise
reasonably approved by PREIT and the UPREIT, it being understood, however, that
PREIT and the UPREIT shall have no interest in or approval rights related to the
Bala Property. Such conditions shall include, without limitation, the accuracy
of all representations and warranties of CH Corp. under the Exchange Agreement,
the condition, title and status of the Cherry Hill Property, and the status of
all tenant estoppel certificates, mortgagee certificates, surveys, title
information and all other deliverables relating to the Cherry Hill Property;

(B) Without limiting the foregoing, BCA shall have conveyed the Bala Property to
CH Corp. or its designee, and shall have the unqualified right to obtain (a) fee
title to the Cherry Hill Property pursuant to the Exchange Agreement (subject to
no liens or encumbrances except as contemplated by the terms of the Exchange
Agreement), without the requirement for any further payment or performance
except for such payment and/or performance as is specified in the Exchange
Agreement and as is contemplated to occur in due course without violation of any
of the terms, warranties or representations of this Agreement or of the Exchange
Agreement and (b) the payment by CH Corp. of cash or one or more secured notes
in the amount equal to the difference in the agreed values between the Bala
Property and the Cherry Hill Property as provided in the Exchange Agreement.

 

- 17 -

--------------------------------------------------------------------------------

(C) BCA shall have obtained an unconditional commitment, from the title
insurance company insuring title to the Cherry Hill Property, to issue its title
insurance policy to BCA with a “non-imputation” endorsement which shall
effectively waive any defense of said title insurance company based upon any
knowledge or action of any of the Individuals, CLA or CBS obtained or occurring
prior to the First Closing Date.

(ii) Redemption of CBS’s Interest in BCA. Prior to the First Closing, BCA and
CBS shall have entered into the Redemption Agreement for the redemption of CBS’s
interest in BCA, including CBS’s interest in BCA GP, at the First Closing and
closing under the Redemption Agreement shall occur concurrently with the
Exchange and the other transactions contemplated herein to occur at the First
Closing.

(iii) Representations and Warranties. The representations and warranties of CLA
and the Individuals set forth in this Agreement shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
First Closing Date as though made on and as of the First Closing Date.

(iv) Performance of Covenants. All of the agreements, covenants and obligations
that CLA or any Individual is required to perform or to comply with pursuant to
this Agreement at or prior to the First Closing shall have been duly performed
and complied with in all material respects.

(b) Conditions Precedent to BCA’s Obligations. The obligation of BCA to
consummate the transactions contemplated by this Agreement and to take the other
actions required to be taken by it at the First Closing is subject to the
fulfillment by or at the First Closing of each of the following conditions, any
or all of what may be waived by BCA in its reasonable discretion:

(i) Representations and Warranties. Each of the representations and warranties
of PREIT and the UPREIT set forth in this Agreement shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the First Closing Date as though made on and as of the First Closing Date.

(ii) Performance of Covenants. Each of the agreements, covenants and obligations
that PREIT or the UPREIT is required to perform or to comply with pursuant to
this Agreement at or prior to the First Closing shall have been duly performed
and complied with in all material respects.

7.2 Deliveries at the First Closing. At the First Closing, in addition to the
other actions contemplated elsewhere herein:

(a) CLA shall deliver or cause to be delivered to the UPREIT:

(i) the Amended Partnership Agreement wherein the UPREIT or its designee shall
be the sole general partner. In such connection, it is agreed that for purposes
of allocating taxable income and losses between the portion of BCA’s taxable
year up to and including the date of Closing and the portion of BCA’s taxable
year after the date of Closing to take into account the varying interests of the
partners of BCA as a result of the acquisition by PR GP and the UPREIT of
interests in BCA by way of their respective capital contributions, there shall
be an interim closing of the books of BCA as of the close of the date of Closing
as permitted by Treasury Regulations under Section 706 of the Code.

 

- 18 -

--------------------------------------------------------------------------------

(ii) an Amendment to the Certificates of Limited Partnership of BCA, reflecting
the admission of PR GP as a general partner and the withdrawal of BCA GP as a
general partner;

(iii) a termination of the existing management agreement for the Cherry Hill
Property, which shall be replaced by a new management contract for the Cherry
Hill Property with an affiliate of PREIT for a fee of approximately 3% of gross
rental receipts in the form of that attached as Schedule 7.2(a)(iii).

(iv) A Uniform Commercial Code financing statement search from the Secretary of
State of Pennsylvania, disclosing no grant of a security interest in the BCA
interests owned by CLA;

(v) a payoff letter with respect to the Bala Property reflecting all sums
required by BCA to pay off and satisfy the mortgage on the Bala Property; and

(vi) such other documents and instruments as the UPREIT or PREIT may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.

(b) The UPREIT shall deliver or cause to be delivered to BCA the following:

(i) The capital contribution of PR GP and the UPREIT to BCA; and

(ii) each of the documents referred to in Section 7.2(a)(i) through (iii) above,
duly executed by the UPREIT or its designee;

(c) BCA shall close on a first mortgage on the Cherry Hill Property in such
amount as is at least sufficient, together with the capital contributions of PR
GP and the UPREIT and funds otherwise available to BCA, to pay off the mortgage
on the Bala Property and close under the Exchange Agreement.

(d) BCA shall pay off the mortgage on the Bala Property, including all accrued
interest and prepayment premium, if any.

(e) The UPREIT and the Individuals will cooperate in good faith in executing
such documentation (such as limited guarantees of indebtedness by the
Individuals, if so desired by the Individuals at each Individual’s option, and
not as their obligation) to avoid recognition of income or gain to the
Individuals by reason of a constructive distribution to them under Section 752
of the Code relating to relief from liabilities.

(f) Each party shall deliver or cause to be delivered, as the case may be, to
the other parties hereto such other documents, instruments, certificates and
opinions as may be required by this Agreement.

7.3 Deliveries at the Second Closing. At the Second Closing:

(a) CLA and the Individuals shall deliver or cause to be delivered to the
UPREIT:

(i) evidence of the distribution by CLA of the 0.2% limited partnership interest
in BCA consisting of the entire limited partnership interest held by BCA GP and
a portion of the limited partnership interest in BCA held by CLA, to the
Individuals, prorata in proportion to their respective ownership interests in
CLA;

 

- 19 -

--------------------------------------------------------------------------------

(ii) each Individual will assign pursuant to an Assignment of Partnership
Interest (an “Assignment”) the entire limited partnership interest in BCA then
held in his name;

(iii) the Share Recipients will execute a counterpart copy of a Registration
Rights Agreement in the form attached hereto as Schedule 7.3(a)(iii) (the
“Registration Rights Agreement”); and

(iv) Uniform Commercial Code financing statement searches from the Secretaries
of State of Pennsylvania and of any other state in which the principal residence
of an Individual is located disclosing no grant of a security interest in the
BCA interests owned by CLA or any Individual.

(b) The UPREIT shall deliver or cause to be delivered to the Individuals:

(i) the purchase price for the limited partnership interests in BCA being
acquired by the UPREIT from the Individuals for cash;

(ii) the Class A Units which are to be delivered to the Share Recipients at the
Second Closing; and

(iii) a counterpart of the Registration Rights Agreement executed by PREIT.

7.4 Deliveries at the Third Closing. At the Third Closing:

(a) CLA and the Individuals shall deliver or cause to be delivered to the
UPREIT:

(i) evidence of the distribution by CLA of the remaining 0.2% limited
partnership interests in BCA held by CLA to the Individuals, prorata in
proportion to their respective ownerships interests in CLA; and

(ii) each Individual will assign pursuant to an Assignment the entire limited
partnership interest in BCA held in his name; and

(iii) Uniform Commercial Code financing statement searches from the Secretaries
of State of Pennsylvania and of any other state in which the principal residence
of an Individual is located disclosing no grant of a Security Interest in the
BCA interests owned by CLA or any Individual.

SECTION 8. PRE-CLOSING DISTRIBUTIONS; CLOSING COSTS; NET DISTRIBUTION AMOUNT

8.1 Costs. BCA shall bear and be responsible for all costs in connection with
the Exchange Agreement, including without limitation, due diligence costs,
attorneys fees and expenses, brokerage fees, transfer taxes, title insurance
premiums, the payoff of the Mortgage on the Bala Property and the participation
payment to AXA. All of such costs shall be taken into account in determining the
Net Equity Value of BCA. BCA shall bear no responsibility for PREIT or the
UPREIT’s costs in connection with the negotiation of, or due diligence with
respect to, the Exchange Agreement, and no adjustment to the Net Equity Value of
BCA will result therefrom. Notwithstanding the foregoing, the UPREIT shall pay,
or shall reimburse BCA for the payment of, a commission payable by BCA to
Meridian Capital Group/J. Investments

 

- 20 -

--------------------------------------------------------------------------------

LLC in the amount of $120,000 and a commission payable by BCA to Madison Realty
in the amount of $50,000.

8.2 Cash. At or prior to the First Closing, BCA shall apply cash and cash
equivalents, to closing-related expenses under this Agreement and the Exchange
Agreement and distribute any remaining cash to CLA and CBS in such amounts as
CLA deems appropriate and it is not intended that the UPREIT will acquire any
interest therein except to the extent such cash is included in the Net Equity
Value of BCA.

8.3 AXA Payment. At the First Closing, BCA shall make the participation payment
to AXA as is required by the AXA lease in the Bala Property.

8.4 Statement. At the First Closing, the parties hereto shall execute and
deliver to one another a statement detailing the Net Equity Value of BCA and all
relevant components and calculations thereof.

8.5 Post-Closing Adjustments. In the event there are any post-closing
adjustments under the Exchange Agreement and/or the amount of the Net Equity
Value of BCA is not capable of exact calculation at the First Closing, the
parties shall made adjustments and calculations on the basis of the best
available information, and subsequent adjustments will be made between the
parties as appropriate.

8.6 Transfer Taxes on Call or Put. Any realty transfer taxes which may be due by
reason of the exercise of the Call or the Put or by reason of the transfers by
the Individuals to the UPREIT of interests in BCA or by reason of transfers of
the Class A Units from the UPREIT to the Share Recipients shall be the sole
responsibility of CLA.

8.7 Survival. The provisions of this Section 8 shall survive all Closings.

SECTION 9. INDEMNIFICATION

9.1 Indemnification by CLA and the Individuals. CLA and the Individuals, on a
several basis, to the extent Damages (as defined below) are caused by a
misrepresentation by an Individual or to the extent taxes are payable by an
Individual, shall and do hereby indemnify, defend and hold harmless PREIT and
the UPREIT (collectively, “PREIT Indemnitees”) against and in respect of any and
all losses, costs, expenses (including, without limitation reasonable attorneys’
fees), claims, actions, damages, obligations, liabilities or diminutions in
value (collectively, “Damages”), arising out of, based upon or otherwise in
respect of: (a) any inaccuracy in or breach of any representation or warranty of
the Individuals made in or pursuant to this Agreement or failure of CLA or any
Individual to perform any other obligation or undertaking hereunder; and (b) any
indemnification obligations, undertakings, agreements, warranties and/or
representations of BCA in favor of CH Corp., its designees or successors, under
or with respect to the Exchange Agreement, and (c) any act or omission of BCA or
any of its partners, employees, agents or representatives in connection with the
ownership or operation of the Bala Property occurring at any time prior to the
Closing or any liability or obligation incurred by BCA at any time prior to the
First Closing, and (d) any transfer taxes to the Commonwealth of Pennsylvania or
any governmental entity related to the Bala Property, and (e) any transfer taxes
imposed by the State of New Jersey related to the change in control in BCA by
reason of the transactions described herein, and (f) any federal, state or local
taxes imposed on or allocated to BCA, PREIT or the UPREIT as a result of the
Exchange or the business or operations of BCA prior to or at the First Closing.

 

- 21 -

--------------------------------------------------------------------------------

9.2 Indemnification by PREIT. The UPREIT and PREIT shall indemnify, defend and
hold harmless CLA and each Individual against and in respect of any and all
Damages arising out of, based upon or otherwise in respect of: (a) any
inaccuracy in or breach of any representation or warranty of PREIT or the UPREIT
made in or pursuant to this Agreement; and (b) any breach or nonfulfillment of
any covenant or obligation of PREIT or the UPREIT contained in this Agreement.

9.3 Limitation. No party may assert a claim for indemnification pursuant to this
Section 9 unless the First Closing has occurred under this Agreement.

9.4 Procedure For Indemnification – Third-Party Claims.

(a) Within thirty (30) days after receipt by an indemnified party of notice of
the commencement of any proceeding against it to which the indemnification in
this Section 9 relates, such indemnified party shall, if a claim is to be made
against an indemnifying party under Section 9, give notice to the indemnifying
party of the commencement of such proceeding, but the failure to so notify the
indemnifying party will not relieve the indemnifying party of any liability that
it may have to any indemnified party, except to the extent that the indemnifying
party, demonstrates that the defense of such proceeding is materially prejudiced
by the indemnified party’s failure to give such notice.

(b) If any proceeding referred to in paragraph (a) above is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such proceeding, the indemnifying party will be entitled to
participate in such proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such proceeding and
provide indemnification with respect to such proceeding), to assume the defense
of such proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under Section 9 for any fees of other counsel or any other
expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (A) it will be
conclusively established for purposes of this Agreement that the claims made in
that proceeding are within the scope of and subject to indemnification; (B) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party’s consent unless (l) there is no finding or
admission of any violation of Law by the indemnified party (or any affiliate
thereof) or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (2) the sole relief
provided is monetary damages that are paid in full by the indemnifying party.
The indemnified party will have no liability with respect to any compromise or
settlement of the claims underlying such proceeding effected without its
consent. If notice is given to an indemnifying party of the commencement of any
proceeding and the indemnifying party does not, within ten days after the
indemnified party’s notice is given, give notice to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
be bound by any determination made in such proceeding or any compromise or
settlement effected by the indemnified party.

 

- 22 -

--------------------------------------------------------------------------------

(c) Notwithstanding the foregoing, if an indemnified party determines in good
faith that there is a reasonable probability that a proceeding may adversely
affect it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the indemnified
party may, with respect to those issues, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such proceeding, but
the indemnifying party will not be bound by any determination of a proceeding so
defended or any compromise or settlement effected without its consent.

9.5 Procedure for Indemnification—Other Claims. A claim for any matter not
involving a third party claim may be asserted by notice to the party from whom
indemnification is sought.

9.6 Right of Set-Off. PREIT and the UPREIT shall have the right to set-off,
against any payments to be made by the UPREIT or any Class A Units to be issued
by the UPREIT at the Second Closing or the Third Closing, any amount owed to any
PREIT Indemnitee provided, however, such set off shall be as to the Individuals
severally, with respect to Damages chargeable to such Individual. To the extent
that an Individual contests an indemnification claim of PREIT or the UPREIT that
would be the basis for the exercise of a right to set off against any payments
or Class A Units owed to an Individual, the UPREIT shall pay such amount or
issue such Class A Units and deposit them with an escrow agent reasonably
satisfactory to the UPREIT and the Individuals until the earlier to occur of
(i) resolution of such dispute by a final nonappealable order of a court of
competent jurisdiction or (ii) the mutual agreement of the Individuals and the
UPREIT that such units should be released from escrow.

9.7 Indemnification Payments. The Individuals shall be entitled to use cash or
Class A Units to make indemnification payments hereunder. In the event Class A
Units are used, each such Unit shall be valued based on the per share Value (as
defined in the UPREIT Partnership Agreement) of a PREIT Share as of the date
such Unit is tendered to PREIT as an indemnification payment hereunder.

9.8 Representative. The Individuals hereby appoint George Rubin as their agent
and attorney-in-fact to represent each Individual in connection with any claim
made hereunder. Said attorney-in-fact shall have full power and authority to
compromise claims and give releases on behalf of each Individual.

9.9 Survival. The rights and obligations of the parties set forth in this
Section 9 shall survive all Closings.

SECTION 10. TERMINATION AND ABANDONMENT.

10.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the First Closing:

(i) by any party hereto, if the First Closing has not occurred on or before
June 30, 2008, or such later date as the parties may mutually agree upon in
writing;

(ii) by mutual consent of the UPREIT, PREIT, CLA and the Individuals;

(iii) by PREIT and the UPREIT, if any of the conditions in Section 7.1(a) have
not been satisfied as of the First Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of PREIT or
the UPREIT to comply with

 

- 23 -

--------------------------------------------------------------------------------

its obligations under this Agreement) and PREIT and the UPREIT have not waived
all such unsatisfied conditions before termination pursuant to this subparagraph
(iii);

(iv) by CLA or any Individual if any of the conditions in Section 7.1(b) have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible and CLA and the Individuals have not waived all such
unsatisfied conditions before termination pursuant to this subparagraph (iv); or

(v) by PREIT pursuant to the provisions of Section 6.6 of this Agreement.

10.2 Procedure for Termination; Effect of Termination. A party terminating this
Agreement pursuant to this Section 10 shall give written notice thereof to each
other party hereto, whereupon this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
any party and all further obligations of the parties under this Agreement will
terminate; provided, however, that if the reason for such termination is
attributable to the willful failure of a party to perform its obligations
hereunder, or a willful misrepresentation or breach of warranty, then such party
shall reimburse to the other party its reasonable costs and expenses (including
reasonable legal fees) in connection with this Agreement and the efforts to
proceed to closing hereunder.

SECTION 11. GENERAL PROVISIONS.

11.1 Survival of Representations and Warranties.

(a) All representations and warranties made by the parties in this Agreement and
in the certificates, documents and other agreements delivered pursuant hereto
shall survive the Closing. Anything in this Agreement to the contrary
notwithstanding: (i) the representations and warranties of the Individuals and
the right of the PREIT Indemnitees to indemnification for breach thereof, shall
not be affected by any investigation of the Individuals, BCA, CLA or the Cherry
Hill Property made by PREIT, the UPREIT or their agents or representatives; and
(ii) the representations and warranties of PREIT hereunder, and the right of the
Individuals to indemnification for breach thereof, shall not be affected by any
investigation of PREIT, the UPREIT or its affiliates made by CLA or the
Individuals or their agents or representatives.

11.2 Costs and Expenses. Except as otherwise expressly provided herein, each
party shall bear its own expenses in connection herewith.

11.3 Notices. All notices or other communications permitted or required under
this Agreement shall be in writing and shall be sufficiently given if and when
hand delivered to the persons set forth below or if sent by documented overnight
delivery service or registered or certified mail, postage prepaid, return
receipt requested, or by telegram, telex or telecopy, receipt acknowledged,
addressed as set forth below or to such other person or persons and/or at such
other address or addresses as shall be furnished in writing by any party hereto
to the others. Any such notice or communication shall be deemed to have been
given as of the date received, in the case of personal delivery, or on the date
shown on the receipt or confirmation therefor in all other cases.

 

- 24 -

--------------------------------------------------------------------------------

To PREIT or the UPREIT:

c/o PREIT-Rubin, Inc.

200 South Broad Street – 3rd Floor

Philadelphia, PA 19102

Attn: Jeffrey Linn

With a copy to:

c/o PREIT-Rubin, Inc.

200 South Broad Street – 3rd Floor

Philadelphia, PA 19102

Attn: Bruce Goldman

To the Individuals and CLA:

c/o City Line Associates

200 South Broad Street, 3rd Floor

Philadelphia, PA 19102

Attention: George Rubin

With copies to:

Blank Rome LLP

One Logan Square

Philadelphia, PA 19103

Attn: Michael Pollack

11.4 Access to Information. Between the date of this Agreement and the First
Closing Date, PREIT and the UPREIT, on the one hand, and CLA, on the other hand,
will give to the other party and its officers, employees, counsel, accountants
and other representatives free and full access to and the right to inspect,
during normal business hours, all of the assets, records, facilities, properties
and Contracts relating to its business as the other party may reasonably
request.

11.5 Confidentiality and Disclosures. Except as hereinafter provided, from and
after the execution of this Agreement, PREIT, the UPREIT, CLA, BCA and the
Individuals shall keep the terms, conditions and provisions of this Agreement
confidential and neither shall make any public announcements hereof unless the
other first approves of same in writing, nor shall either disclose the terms,
conditions and provisions hereof, except to persons who “need to know”, such as
their respective officers, directors, employees, attorneys, accountants,
engineers, surveyors, consultants, financiers, partners, investors and bankers,
and such other third parties whose assistance is required in connection with the
consummation of this transaction or as required by law or order of court of
competent jurisdiction. Notwithstanding the foregoing, it is acknowledged that
PREIT and their affiliates shall have the absolute and unbridled right to
disclose any information regarding the transaction contemplated by this
Agreement required by

 

- 25 -

--------------------------------------------------------------------------------

law or as determined to be necessary or appropriate by attorneys for each such
entity to satisfy disclosure and reporting obligations of each such entity. If
PREIT files this Agreement with the Securities Exchange Commission and, in any
event, after Closing, any party shall be free to disclose previously
confidential information in their discretion.

11.6 Public Announcements. Except as and to the extent required by Law or by the
rules of the New York Stock Exchange, without the prior written consent of the
other party, the Individuals and CBS, on the one hand, and PREIT and the UPREIT,
on the other hand, will not, and each will direct its representatives not to,
directly or indirectly, make any public comment, statement or communication with
respect to, or otherwise disclose or permit the disclosure of any of the terms,
conditions or other aspects of the transactions contemplated hereby; provided,
however, that PREIT may issue a press release, after discussion of the contents
thereof with the Individuals, regarding the transactions contemplated by this
Agreement and the Exchange Agreement; and further provided that PREIT and the
UPREIT may each maintain and continue such communications with principals,
partners, lenders, trustees, attorneys, accountants, investment bankers,
consultants engaged by PREIT and UPREIT, as may be legally required or necessary
or appropriate in connection with the consummation of the transactions
contemplated by this Agreement.

11.7 Entire Agreement. This Agreement, together with the Schedules hereto and
the Disclosure Exhibit, and any supplementary agreements of the Individuals
regarding the confidentiality of the transactions contemplated hereunder,
constitutes the entire agreement between the parties hereto with respect to its
subject matter and supersede all prior agreements and understandings with
respect to the subject matter hereof.

11.8 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original copy of this Agreement, and all
of which, when taken together, shall be deemed to constitute but one and the
same Agreement.

11.9 Governing Law. This Agreement is made pursuant to, and shall be construed
and enforced in accordance with, the laws of the Commonwealth of Pennsylvania
(and United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of laws.

11.10 Section Headings, Captions and Defined Terms. The section headings and
captions contained herein are for reference purposes only and shall not in any
way affect the meaning and interpretation of this Agreement. The terms defined
herein and in any agreement executed in connection herewith include the plural
as well as the singular, and the use of any pronouns includes the masculine,
feminine and neuter. Except as otherwise indicated, all agreements defined
herein refer to the same as from time to time amended or supplemented or the
terms thereof waived or modified in accordance herewith and therewith.

11.11 Amendments, Modifications and Waiver. The parties may amend or modify this
Agreement in any respect. Any such amendment or modification shall be in
writing. The waiver by any party of any provision of this Agreement shall not
constitute or operate as a waiver of any other provision hereof, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision.

 

- 26 -

--------------------------------------------------------------------------------

11.12 Severability. The invalidity or unenforceability of any particular
provision, or part of any provision, of this Agreement shall not affect the
other provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.

11.13 Liability of Trustees, etc. No recourse shall be had for any obligation of
PREIT hereunder, or for any claim based thereon or otherwise in respect thereof,
against any past, present or future trustee, shareholder, officer or employee of
PREIT, whether by virtue of any statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being expressly
waived and released by each other party hereto.

11.14 No Third-Party Beneficiary. No party other than the parties to this
Agreement and their respective successors and permitted assigns shall be a
beneficiary of this Agreement; and without limiting the foregoing, neither AXA
nor CH Corp. shall be a beneficiary of this Agreement.

11.15 Binding Effect. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that no
assignment by an Individual shall be binding or effective unless approved by
PREIT and the UPREIT.

11.16 No Liability of CBS. Notwithstanding anything herein to the contrary, CBS
shall have no liability under this Agreement for any misrepresentations,
damages, indemnification or other liabilities of BCA or CLA or any of the
Individuals, it being the intention that CBS is executing this Agreement in
order to furnish its written consent to the provisions hereof, to the extent
such consent is required under the partnership agreement of BCA or under the
operating agreement of BCA GP. Obligations, if any, of CBS with respect to such
matters shall be pursuant to the partnership agreement of BCA, the Exchange
Agreement and/or the Redemption Agreement.

[The balance of this page is intentionally blank]

 

- 27 -

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, all
as of the date first written above.

 

BALA CYNWYD ASSOCIATES, L.P., formerly known as Bala Cynwyd Associates By:  

BCA/CH LLC, its General Partner

By:   City Line Associates, Member By:  

/s/ George Rubin

Name:   George Rubin Title:   Authorized General Partner By:   CBS Broadcasting,
Inc., Member By:  

/s/ Martin P. Messinger

Name:   Martin P. Messinger Title:   Vice President CITY LINE ASSOCIATES By:  

/s/ George Rubin

Name:   George Rubin Title:   Authorized General Partner

/s/ Ronald Rubin

Ronald Rubin

 

/s/ George Rubin

George Rubin

 

/s/ Joseph Coradino

Joseph Coradino

 

/s/ Leonard Shore

Leonard Shore

 

/s/ Lewis Stone

Lewis Stone

[Signatures continued on next page]

 

- 28 -

--------------------------------------------------------------------------------

[Continuation of signatures]

 

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST By:  

/s/ Jeffrey A. Linn

Name:   Jeffrey A. Linn Title:   Executive Vice President PREIT ASSOCIATES, L.P.
By:   Pennsylvania Real Estate Investment Trust, its General Partner By:  

/s/ Jeffrey A. Linn

Name:   Jeffrey A. Linn Title:   Executive Vice President PR CHERRY HILL OFFICE
GP, LLC By:   PREIT Associates, L.P., its sole member By:   Pennsylvania Real
Estate Investment Trust, its General Partner By:  

/s/ Jeffrey A. Linn

Name:   Jeffrey A. Linn Title:   Executive Vice President

 

- 29 -

--------------------------------------------------------------------------------

Schedule 1.1(d)

Contributor Disclosure Exhibit

None

--------------------------------------------------------------------------------

Schedule 2.1

Amended and Restated Agreement of Limited Partnership

of Bala Cynwyd Associates, L.P.

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES, L.P.

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

This amended and restated limited partnership agreement of Bala Cynwyd
Associates, L.P., a Pennsylvania limited partnership, is entered into effective
as of the          day of January, 2008, by and among PR Cherry Hill Office GP,
LLC, a Delaware limited liability company, as the General Partner, and the
parties whose names are set forth as Limited Partners on Exhibit “A” attached
hereto. Capitalized terms used herein are defined in Section 1.01 below.

B A C K G R O U N D:

The Partnership has been operated as a general partnership in accordance with
the Partnership Agreement dated as of January 21, 1988 as amended by that
certain Agreement of Limited Partnership of Bala Cynwyd Associates, L.P. and
Conversion of General Partnership to a Limited Partnership dated as of
January 8, 2008 pursuant to which the Partnership was converted from a general
to a limited partnership (collectively, the “Former Partnership Agreement”). As
of the date hereof, (1) the Partnership has acquired the Limited Partnership
Interest of former Partner CBS in and to the Partnership; (2) the ownership
interest of CBS in and to Partner BCA GP has been redeemed; (3) PR GP, an
affiliate of UPREIT, is hereby being admitted as the sole General Partner and
the Interest of BCA GP as a General Partner is hereby being converted to an
Interest as a Limited Partner; (4) PR GP and UPREIT have made capital
contributions to the Partnership and the Percentage Interests are hereby being
adjusted to reflect the foregoing.

The parties hereto now desire to enter into this amended and restated limited
partnership agreement to replace the Former Partnership Agreement and to set
forth their respective rights, duties and obligations with respect to the
Partnership.

NOW, THEREFORE, in consideration of the mutual promises of the parties hereto
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:

ARTICLE 1

DEFINED TERMS; OPERATION OF PARTNERSHIP

Section 1.01 Definitions. Within the context of this Agreement, the following
terms shall have the following meanings:

“Act” means the Pennsylvania Revised Uniform Limited Partnership Act.

“Adjusted Capital Account” means a Partner’s Capital Account, adjusted as
follows: (a) any deficit balance in a Partner’s Capital Account shall be reduced
by any amount that the Partner is obligated to restore to the Partnership, or
any amount the Partner is treated as obligated to restore to the Partnership
under Regulation §§ 1.704-1(b)(2)(ii)(c), Regulation §§ 1.704-2(g) and
Regulation §§ 1.704-2(i)(5); and (b) a Partner’s Capital Account shall be
adjusted for items specified in subsections (4), (5), and (6) of Regulation §§
1.704-1 (b) (2) (ii) (d).

--------------------------------------------------------------------------------

“Affiliate” means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by, or under common control with such Person,
and (ii) any officer, director, general partner, or manager of any Person
described in clause (i) of this sentence. For purposes of this definition,
“controlling,” “controlled by,” or “under common control with” shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.

“Agreement” means this amended and restated limited partnership agreement, as
the same may be amended from time to time.

“Bankruptcy” means, with respect to any Person, (i) the filing of any petition
or answer by such Person seeking to adjudicate it a bankrupt or insolvent, or
seeking for itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or such Person’s
debts under any law relating to bankruptcy, insolvency, or reorganization or
relief of debtors, or seeking, consenting to, or acquiescing in the entry of an
order for relief or the appointment of a receiver, trustee, custodian, or other
similar official for such Person for any substantial part of its property, or
(ii) without the consent or acquiescence of such Person, the entering of an
order for relief or approving a petition for relief or reorganization or any
other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or other similar relief under any
bankruptcy, liquidation, dissolution, or other similar statute, law, or
regulation, or the filing of any such petition against such Person which
petition shall not be dismissed within ninety (90) days, or, without the consent
or acquiescence of such Person, the entering of an order appointing a trustee,
custodian, receiver, or liquidator of such Person or of all or any substantial
part of the property of such Person which order shall not be dismissed within
sixty (60) days.

“BCA GP” means BCA/CH LLC, a Delaware limited liability company.

“Book Value” means the adjusted basis of the Partnership’s property for federal
income tax purposes, with the adjustments provided in accordance with
Section 2.04(d) of this Agreement.

“Capital Account” means the account established and maintained for each Partner
in accordance with Section 2.04 of this Agreement.

“Capital Contribution” means the amount of money and the Book Value of any
property contributed to the Partnership by a Partner (net of any liabilities to
which such property is subject or that are assumed by the Partnership in
connection with such contribution).

“Capital Event” means any disposition of all or any part of Partnership property
not in the ordinary course of business including, without limitation, a sale,
exchange, condemnation, casualty, or grant of a long-term leasehold, or the
borrowing of money by the Partnership not in the ordinary course of business, or
the receipt of title insurance proceeds by the Partnership.

“CBS” means CBS Broadcasting Inc. formerly known as CBS Inc.

 

2

--------------------------------------------------------------------------------

“Certificate” means the certificate of limited partnership for the Partnership,
and any amendments thereto.

“CLA” means City Line Associates, a Pennsylvania limited partnership.

“Contribution Agreement” means the contribution agreement dated January     ,
2008 by and among the Partners, certain former Partners, certain other Persons
and Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust,
pursuant to which UPREIT has acquired an Interest.

“Code” means the Internal Revenue Code of 1986, as amended.

“Depreciation” means the amount determined for each year or other period as an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to any Partnership property for such year or other
period, except that, if the Book Value of any property differs from its adjusted
tax basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning Book Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the adjusted tax basis
of a property at the beginning of a year is zero, Depreciation shall be
determined for such property with reference to Book Value using any reasonable
method selected by the General Partner; and provided, further, that Depreciation
with respect to any property for which the Partnership uses the “remedial
allocation method” (as defined in Regulation §1.704-3(d)) shall be determined in
accordance with Regulation §1.704-3(d)(2).

“General Partner” means the Person designated as general partner on Exhibit “A”
attached to this Agreement, and any Person subsequently admitted as a general
partner in accordance with the terms of this Agreement.

“Incapacity” means (a) with respect to a natural Person, the Bankruptcy, death
or determination of incompetency or insanity of such Person and (b) with respect
to any other Person, the Bankruptcy, liquidation or dissolution of such Person.

“Indemnified Party” means the General Partner and any officer, director,
shareholder, partner, member, manager or agent of the General Partner.

“Interest” means an ownership interest in the Partnership, including all of the
rights and obligations in connection therewith under this Agreement and the Act.

“Limited Partners” means the Persons designated as limited partners on Exhibit
“A” attached to this Agreement, and any Person subsequently admitted as a
limited partner in accordance with the terms of this Agreement.

“Net Capital Proceeds” means gross cash or property received by the Partnership
from all Capital Events, increased by reductions in Reserves that reduced Net
Capital Proceeds for prior periods, and reduced by the portion used (i) to pay
Partnership expenses incurred in

 

3

--------------------------------------------------------------------------------

connection with such Capital Event and repay any debts of the Partnership then
due, (ii) to make investments and capital expenditures, and (iii) to fund
Reserves.

“Net Equity Value” means, with respect to each Partner, the amount determined by
multiplying (a) the sum of the Net Equity Value of BCA as defined in Section 1.1
of the Contribution Agreement by (b) such Partner’s Percentage Interest, which
amount is stated for each Partner on Exhibit A hereto.

“Net Ordinary Proceeds” means gross cash or property received by the Partnership
from all sources other than Capital Contributions or Capital Events, increased
by reductions in Reserves that reduced Net Ordinary Proceeds for prior periods,
and reduced by the portion used (i) to pay Partnership expenses, including debt
service, (ii) to make investments and capital expenditures, and (ii) to fund
Reserves.

“Nonrecourse Deductions” has the meaning set forth in Regulation §
1.704-2(b)(1).

“Partner Nonrecourse Debt” has the meaning set forth in Regulation §
1.704-2(b)(4).

“Partner Nonrecourse Debt Minimum Gain” has the meaning set forth in Regulation
§ 1.704-2(i)(3).

“Partner Nonrecourse Deductions” has the meaning set forth in Regulation §
1.704-2(i)(2).

“Partners” means the General Partner and the Limited Partners, and any Person
subsequently admitted as a partner in accordance with the terms of this
Agreement.

“Partnership” means the limited partnership formed and operated pursuant to the
terms of this Agreement.

“Partnership Minimum Gain” has the meaning set forth in Regulation §
1.704-2(b)(2) and 1.704-2(d).

“Percentage Interest” means the percentage determined in accordance with
Section 2.03 of this Agreement.

“Person” means any individual or any partnership, corporation, estate, trust,
limited liability company or other legal entity.

“PR GP” means PR Cherry Hill Office GP, LLC, a Delaware limited liability
company.

“PR GP Special Capital Contribution” means the Capital Contribution made to the
Partnership by PR GP pursuant to Section 2.02 of this Agreement.

 

4

--------------------------------------------------------------------------------

“Profits” and “Losses” mean, for each year or other period, an amount equal to
the Partnership’s taxable income or loss for such year or period, determined in
accordance with § 703(a) of the Code (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to §
703(a)(1) of the Code shall be included in taxable income or loss), with the
following adjustments:

(a) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits and Losses shall be added to
such taxable income or loss.

(b) Any expenditures of the Partnership described in § 705(a)(2)(B) of the Code
or treated as § 705(a)(2)(B) expenditures pursuant to Regulation §
1.704-1(b)(2)(iv)(1), and not otherwise taken into account in computing Profits
and Losses shall be subtracted from such taxable income or loss.

(c) If the Book Value of any Partnership property is adjusted pursuant to
Section 2.04(d)(ii) of this Agreement, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such property for
purposes of computing Profits or Losses.

(d) Gain or loss resulting from any disposition of Partnership property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Book Value of the asset disposed of,
notwithstanding that the adjusted tax basis of such asset differs from its Book
Value.

(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such year or other period as
determined in accordance with this Agreement.

(f) To the extent adjustment to the adjusted tax basis of any Partnership asset
pursuant to § 734(b) or § 743(b) of the Code is required, pursuant to
Regulations § 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Regulations.

(g) Items of income, gain, loss or deduction allocated pursuant to Section 4.02
shall be excluded from Profits and Losses.

“Property” means the real property to be acquired by the Partnership which is
described on Exhibit “B” attached hereto, together with all related personal
property and fixtures.

“Regulations” means the income tax regulations promulgated under the Code, as
such regulations may be amended from time to time.

 

5

--------------------------------------------------------------------------------

“Reserves” means amounts set aside to pay future costs or expenses that are
anticipated to exceed cash available to pay such costs or expenses when due, as
determined in the sole discretion of the General Partner.

“Transfer” means to sell, exchange, assign, pledge, encumber, or dispose of in
any manner other than by bequest or inheritance on the death of a Partner.

“UPREIT” means PREIT Associates, L.P., a Delaware limited partnership.

“UPREIT Special Capital Contribution” means the Capital Contribution made to the
Partnership by UPREIT pursuant to Section 2.02 of this Agreement.

Section 1.02 Continuation of Partnership; Name. From and after the date hereof,
the Partners agree to continue to operate the Partnership as a limited
partnership under the terms of this Agreement and the Act. Whenever the terms of
this Agreement conflict with the Act, the terms of this Agreement shall control,
except with respect to any matters contained in the Act that cannot be modified
or waived by a limited partnership agreement. The Partnership shall be operated
under the name “Bala Cynwyd Associates.” The General Partner shall file such
other certificates and documents as are necessary to qualify the Partnership to
conduct business in any jurisdiction in which the Partnership conducts business.
A copy of the Certificate shall be provided to any Partner on request.

Section 1.03 Registered Agent and Office; Principal Office. The registered agent
and office of the Partnership required under the Act shall be as designated in
the Certificate, and may be changed by the General Partner in accordance with
the Act. The principal business office of the Partnership shall be located at
The Bellevue, 200 S. Broad Street, 3rd Floor, Philadelphia, Pennsylvania 19102,
or such other address as shall be designated by the General Partner with written
notice to the Limited Partners.

Section 1.04 The purpose and business of the Partnership is to acquire, hold,
operate, manage, lease, improve, renovate, maintain, finance, refinance and sell
all and any portions of the Property and any replacement or other property
acquired in accordance with the provisions of this Agreement. The Partnership is
authorized to engage in any business or activity that may be engaged in by a
limited partnership under the Act, and do any and all acts and things necessary,
appropriate, incidental to, or convenient for the furtherance and accomplishment
of its purposes.

Section 1.05 Term. The term of the Partnership as a limited partnership shall
commence on the date of filing of the Certificate, and the Partnership shall
continue until the Partnership is terminated in accordance with this Agreement.

Section 1.06 Title to Property. All real and personal property owned by the
Partnership shall be owned by the Partnership as an entity and no Partner shall
have any ownership interest in such property in the Partner’s individual name or
right, and each Partner’s Interest shall be personal property for all purposes.
The Partnership shall hold all of its real and personal property in the name of
the Partnership and not in the name of any Partner.

 

6

--------------------------------------------------------------------------------

Section 1.07 Waiver of Partition. No Partner shall either directly or indirectly
take any action to require partition or appraisement of the Partnership or of
any of its assets or properties or cause the sale of any Partnership property,
and notwithstanding any provisions of applicable law to the contrary, each
Partner hereby irrevocably waives any and all right to maintain any action for
partition or to compel any sale with respect to such Partner’s Interest, or with
respect to any assets or properties of the Partnership, except as expressly
provided in this Agreement.

ARTICLE 2

CAPITAL CONTRIBUTIONS; INTERESTS; CAPITAL ACCOUNTS; NEW ADMISSIONS

AND CONVERSION OF INTERESTS

Section 2.01 Capital Contributions. The Partners have previously made all of
their Capital Contributions to the Partnership that were required prior to the
date hereof. Except as provided in Section 2.02, no Partner shall be obligated
to make any additional Capital Contributions to the Partnership.

Section 2.02 Special Capital Contributions.

(a) In connection with its admission to the Partnership as a Limited Partner,
UPREIT shall make a Capital Contribution in the amount of $3,713,725.00 (the
“UPREIT Special Capital Contribution”).

(b) In connection with its admission to the Partnership as a General Partner, PR
GP shall make a Capital Contribution in the amount of $7,457.00 (the “PR GP
Special Capital Contribution”).

Section 2.03 Percentage Interests. Each Partner shall have the Percentage
Interest in the Partnership set forth next to such Partner’s name on Exhibit “A”
attached hereto.

Section 2.04 Capital Accounts. A Capital Account shall be maintained and
adjusted for each Partner in accordance with the following provisions:

(a) Additions to Capital Accounts. To each Partner’s Capital Account there shall
be added the Partner’s Capital Contributions and the Partner’s distributive
share of Profits and any items of income or gain which are allocated separately
from Profits under Section 4.02.

(b) Subtractions from Capital Accounts. From each Partner’s Capital Account
there shall be subtracted the amount of money and the Book Value of any
Partnership property distributed to the Partner (net of any liabilities to which
the property is subject or that are assumed by the Partner in connection with
the distribution), and the Partner’s distributive share of Losses and any items
of expenses or losses which are allocated separately from Losses under
Section 4.02.

 

7

--------------------------------------------------------------------------------

(c) Transfers. If any Interest is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.

(d) Book Values. For purposes of determining a Partner’s Capital Contributions
and Capital Account, property held by the Partnership shall be taken into
account in accordance with the following provisions:

 

  (i) The Book Value of any property contributed by a Partner to the Partnership
initially shall be the gross fair market value of the property.

 

  (ii) The Book Value of all Partnership property shall be adjusted to equal the
respective gross fair market values of the property as of the following times,
unless the General Partner determines that such adjustment is not necessary to
reflect the economic arrangement among the Partners: (A) the acquisition of an
additional Interest by any new or existing Partner in exchange for services or
more than a de minimis Capital Contribution; (B) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for an Interest; or (C) the liquidation of the
Partnership within the meaning of Regulation § 1.704-1(b)(2)(ii)(g). If any
property is distributed to a Partner, the Book Value of such property shall be
adjusted to equal the gross fair market value of such property immediately
before such distribution. In connection with the admission of UPREIT and PR GP
as Partners and the contributions by UPREIT and PR GP of the UPREIT Special
Capital Contribution and the PR GP Special Capital Contribution, respectively,
the Capital Accounts of the Partners shall be adjusted so each Partner’s Capital
Account is equal to such Partner’s Net Equity Value.

 

  (iii) The Book Values of Partnership property shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such property
pursuant to § 734(b) or § 743(b) of the Code, but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation § 1.704-1(b)(2)(iv)(m).

 

  (iv) The Book Value of Partnership property shall be adjusted by the
Depreciation taken into account with respect to such property.

 

8

--------------------------------------------------------------------------------

(e) Compliance with Regulations. The foregoing provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with §
704(b) of the Code and the Regulations issued thereunder, and shall be
interpreted and applied in a manner consistent with such Regulations. If the
General Partner determines that it is appropriate to modify the manner in which
the Capital Accounts are computed in order to comply with such Regulations, the
General Partner may make such modification, provided that such modification
shall not have a material effect on the amounts distributable to any Partner.

Section 2.05 No Interest. No interest shall be paid on any Capital Contributions
or Capital Account balance of any Partner.

Section 2.06 No Deficit Make-Up. No Partner shall be obligated to the
Partnership, or any other Partner solely because of a deficit balance in such
Partner’s Capital Account.

Section 2.07 New Admissions and Conversion of Interests. PR GP is hereby
admitted as the sole General Partner. The Interest held by BCA GP is hereby
converted from an Interest as a General Partner to an Interest as a Limited
Partner and in connection therewith, BCA GP hereby withdraws as a General
Partner and is hereby admitted as a Limited Partner with the Percentage Interest
set forth on Exhibit “A” attached hereto. UPREIT is hereby admitted as a Limited
Partner with the Percentage Interest set forth on Exhibit “A” attached hereto.
The General Partner shall cause to be prepared and duly filed an amended
Certificate to evidence such changes effective as of the date hereof.

ARTICLE 3

DISTRIBUTIONS

Section 3.01 Distributions of Net Ordinary Proceeds. Within thirty (30) days
after the last day of February, May, August, and November, Net Ordinary Proceeds
shall be distributed to the Partners. Net Ordinary Proceeds shall be distributed
among all of the Partners in proportion to their relative Percentage Interests.

Section 3.02 Distributions of Net Capital Proceeds. Within thirty (30) days
after receipt by the Partnership, Net Capital Proceeds shall be distributed to
all of the Partners in proportion to their relative Percentage Interests.

Section 3.03 Amounts Withheld. The Partnership is authorized to withhold from
distributions or with respect to allocations and pay over to any federal, state,
local or foreign government any amounts required to be withheld with respect to
any Partner pursuant to any provisions of federal, state, local or foreign law.
All amounts so withheld shall be treated as amounts distributed to the Partners
pursuant to Section 3.01 or Section 3.02 of this Agreement, depending upon the
item that gives rise to the withholding obligation. To the extent any amount
withheld with respect to a Partner pursuant to this Section 3.03 for any year
exceeds the amount distributable to such Partner for such year, such Partner
shall repay such excess to the Partnership within ten (10) days after such
Partner receives written notice from the Partnership of the amount of such
excess.

 

9

--------------------------------------------------------------------------------

Section 3.04 Property Distributions. The General Partner may authorize the
distribution to the Partners of property other than cash. All such distributions
shall be included in Net Ordinary Proceeds or Net Capital Proceeds, as the case
may be, based upon the fair market value of such property at the time of
distribution.

Section 3.05 Distribution of Certain Excess Refinancing Proceeds.
Notwithstanding anything to the contrary contained herein, in the event that
UPREIT shall provide credit support for Partnership borrowing to refinance the
Partnership’s existing indebtedness, any excess refinancing proceeds from such
borrowing shall be distributed to UPREIT. Any amount distributed to UPREIT
pursuant to this Section 3.05 shall be treated as an advance of, and credited
against, amounts otherwise distributable in subsequent distributions to UPREIT
pursuant to the other provisions of this Agreement, and shall not affect
UPREIT’s Percentage Interest or other rights under this Agreement. If upon
liquidation of the Partnership, the partners other than UPREIT have not received
(and do not receive in liquidation) extra distributions in an amount providing
them with aggregate distributions equal to the amount which they would have
received in the absence of the special additional distributions paid to UPREIT
of excess refinancing proceeds pursuant to the preceding provisions of this
Section 3.05, then UPREIT shall recontribute to the Partnership an amount
adequate to make up such shortfall to such other partners and such amount shall
be distributed to such other partners.

ARTICLE 4

PROFITS AND LOSSES

Section 4.01 General Allocation of Profits and Losses. After taking into account
any special allocations pursuant to Section 4.02 and subject to any limitations
contained therein, Profits and Losses for any year or portion thereof shall be
allocated among the Partners in accordance with this Section 4.01.

 

  (a) Profits. Profits shall be allocated among the Partners as follows:

 

  (i) First, among the Partners who have previously been allocated Losses
pursuant to Section 4.01(b)(ii) in the same proportion as such Losses have been
allocated, until the cumulative Profits allocated to each Partner pursuant to
this Section 4.01(a)(i) equal the cumulative Losses allocated to each Partner
pursuant to Section 4.01(b)(ii);

 

  (ii) Then, among all of the Partners in accordance with their Percentage
Interests.

 

  (b) Losses. Losses shall be allocated among the Partners as follows:

 

  (i)

First, among the Partners who have previously been allocated Profits pursuant to
Section 4.01(a)(ii) in the same proportion as such Profits have been allocated,
until the cumulative Losses allocated to each Partner pursuant to this
Section 4.01(b)(i) equal the cumulative Profits allocated to

 

10

--------------------------------------------------------------------------------

 

each Partner pursuant to Section 4.01(a)(ii);

 

  (ii) Then, among all of the Partners in accordance with their Percentage
Interests.

(c) The Partners intend that the allocations of Profits and Losses in
Section 4.01(a) and Section 4.01(b) result in a Capital Account balance for each
Partner on liquidation of the Partnership that is equal to the amount that would
be distributed to such Partner if liquidating distributions were made in
accordance with Article 3 of this Agreement. In the year of liquidation of the
Partnership, if the allocations set forth in Section 4.01(a) and Section 4.01(b)
would result in Capital Account balances that are not as described in the
preceding sentence, Profits and Losses and, if necessary, items of gross income
and deduction shall be specially allocated among the Partners to the extent
necessary to cause each Partner’s Capital Account balance to be equal to the
amount that would be distributed to such Partner if liquidating distributions
were made in accordance with Article 3 of this Agreement.

Section 4.02 Special Allocations.

(a) Limitation on Allocation of Items of Loss or Deduction. No Partnership items
of loss or deduction may be allocated to any Partner to the extent such
allocation would result in an Adjusted Capital Account deficit balance for such
Partner. Any items of loss or deduction that are prohibited to be allocated to a
Partner under the preceding sentence shall be reallocated among the other
Partners to whom such limitation does not apply in accordance with their
relative Percentage Interests. If, at the end of a year, any Partner has an
Adjusted Capital Account deficit balance that exceeds the amounts described in
subsection (a) of the definition of “Adjusted Capital Account,” such Partner
shall be allocated items of gross income and gain to the extent necessary to
eliminate such excess.

(b) Nonrecourse Deductions and Partnership Minimum Gain Chargeback. Nonrecourse
Deductions shall be allocated among the Partners in accordance with their
Percentage Interests. If there is a net decrease in Partnership Minimum Gain for
any year, each Partner shall be allocated the next available items of income and
gain for such year (and for subsequent years if necessary) equal to such
Partner’s share of the net decrease in Partnership Minimum Gain as determined in
accordance with Regulation § 1.704-2(g) and the “minimum gain chargeback”
requirement of Regulation § 1.704-2(f).

(c) Partner Nonrecourse Deductions and Chargeback. Partner Nonrecourse
Deductions for any year shall be allocated to the Partner who bears the economic
risk of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable as determined under Regulation §
1.704-2(i). If there is a net decrease in Partner Nonrecourse Debt Minimum Gain
in any year, each Partner shall be allocated items of income and gain for such
year (and for subsequent years if necessary) equal to such Partner’s share of
the net decrease in Partner Nonrecourse Debt Minimum Gain in accordance with
Regulation § 1.704-2(i)(4).

 

11

--------------------------------------------------------------------------------

(d) Qualified Income Offset. Any Partner who unexpectedly receives, with respect
to the Partnership, an adjustment, allocation, or distribution of any item
described in subsections (4), (5), or (6) of Regulation § 1.704-1(b)(2)(ii)
(d) shall be allocated items of income and gain in an amount sufficient to
eliminate such Partner’s Adjusted Capital Account deficit balance arising
thereby as quickly as possible, in accordance with the “qualified income offset”
rule of Regulation § 1.704-1(b) (2) (ii) (d) (3) .

(e) Curative Allocations. The special allocations set forth in this Section 4.02
are intended to comply with the requirements of the Regulations under § 704(b)
of the Code. It is the intent of the Partners that all such special allocations
shall be offset with other special allocations. Accordingly, to the extent
consistent with the Regulations, to the extent that any such special allocations
are made to a Partner, subsequent offsetting special allocations shall be made
to such Partner such that the net amount of all items of income, gain, loss and
deduction allocated to each Partner is the same that would have been allocated
to each Partner if no special allocations had been made to any Partner, taking
into account future special allocations that, although not yet made, are likely
to offset previous special allocations.

Section 4.03 Allocation During Year. For purposes of determining Profits,
Losses, or any other items allocable to any period ending on a date other than
the last day-of the Partnership’s year, Profits, Losses, and any such other
items shall be allocated among such periods using such method permitted by § 706
of the Code and the Regulations thereunder as shall be chosen by the General
Partner.

Section 4.04 Tax Allocations.

(a) General Allocation. Except as otherwise provided in this Section 4.04, items
of income, gain, loss and deduction as determined for federal income tax
purposes shall be allocated in the same manner as the related items of Profits,
Losses, or specially allocated items. Tax credits shall be allocated in
accordance with Regulation § 1.704-1(b)(4)(ii).

(b) Contributed Property. In accordance with § 704(c) of the Code and the
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and its Book Value.

(c) Revaluations. If the Book Value of any Partnership property is adjusted
pursuant to Section 2.04(d)(ii) of this Agreement, income, gain, loss and
deduction with respect to such property shall be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
for federal income tax purposes and its Book Value in the same manner as under §
704(c) of the Code and the Regulations thereunder.

(d) No Effect on Capital Accounts. Allocations pursuant to this Section 4.04 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Partner’s Capital Account or
share of Profits, Losses, or other items or distributions pursuant to any
provision of this Agreement.

 

12

--------------------------------------------------------------------------------

(e) Allocation Method. The method for making allocations pursuant to
Section 4.04(b) and Section 4.04(c) shall be such method permitted by Regulation
§ 1.704-3 as shall be selected by the General Partner.

ARTICLE 5

MANAGEMENT OF PARTNERSHIP

Section 5.01 General Provisions Concerning Management. Subject only to the
express limitations contained in the other provisions of this Agreement, the
General Partner shall have the exclusive right and responsibility to manage the
business of the Partnership and is hereby authorized to take any action of any
kind and to do anything and everything the General Partner deems necessary in
connection therewith, including authorizing confession of judgment against the
Partnership. The General Partner shall have all of the rights and powers of a
general partner under the Act. The Limited Partners shall not have any right or
power to take part in the management or control of the Partnership or its
business and affairs or to act for or bind the Partnership in any way.

Section 5.02 Actions Requiring Limited Partner Consent. Notwithstanding any
other provision of this Agreement, for a period of fourteen (14) months and one
(1) day following the date hereof, the General Partner shall not cause the
Partnership to do any of the following without the consent of the Limited
Partners who hold more than fifty percent (50%) of the Percentage Interests held
by the Limited Partners:

(a) sell, exchange, or otherwise dispose of all or any portion of the Property
other than in a transaction in which no gain is recognized by the Partnership as
a result of such disposition; or

(b) incur or assume any indebtedness secured by the Property that is recourse to
any Partner within the meaning of Regulation §1.752-2 or prepay any such
indebtedness with any Capital Contribution from a Partner.

Nothing set forth in this Section 5.02 shall be deemed to limit the restrictions
upon the sale of the Property set forth in Section 6.7 of the Contribution
Agreement. In the event of any inconsistency between the terms of this
Section 5.02 and the terms of Section 6.7 of the Contribution Agreement, the
terms of Section 6.7 of the Contribution Agreement shall prevail.

Section 5.03 Contracts with Affiliates. The Partners authorize the General
Partner to execute, deliver and perform on behalf of the Partnership the Leasing
and Management Agreement in the form attached hereto as Exhibit “C.” The General
Partner, on behalf of the Partnership, may enter into other contracts and
agreements for property or services in the ordinary course of business with any
Partner or any Affiliate of a Partner, provided such contracts and agreements
are on terms and conditions no less favorable to the Partnership than the terms
and conditions that could be obtained by the Partnership in the same type of
transaction with an independent third party.

 

13

--------------------------------------------------------------------------------

Section 5.04 Partnership Expenses. All expenses of the Partnership shall be
billed directly to and be paid by the Partnership. The General Partner shall be
reimbursed for all expenses incurred by it for or on behalf of the Partnership.

ARTICLE 6

BOOKS AND RECORDS; TAX AND FINANCIAL MATTERS

Section 6.01 Books and Records. Proper and complete records and books of account
of the Partnership shall be maintained at the principal place of business of the
Partnership. The Partnership books shall be closed and balanced at the end of
each fiscal year. Each Partner or duly authorized representative of a Partner
shall have access and the right to inspect such books and records during normal
business hours, provided any information obtained thereby may be used solely for
purposes reasonably related to the Partner’s Interest or the business of the
Partnership.

Section 6.02 Fiscal Year. The fiscal year of the Partnership shall end on the
last day of the month of December each year.

Section 6.03 Reports and Tax Returns. Within one hundred twenty (120) days after
the end of each fiscal year (subject to reasonable delays in the event of
difficulty in obtaining or compiling financial information), the Partnership
shall deliver to each Person who was a Partner at any time during the fiscal
year a financial statement of the Partnership, including a balance sheet and
statements of income, Partner’s equity, and cash flows for such fiscal year,
which shall be prepared in accordance with generally accepted accounting
principles consistently applied and shall be audited by a firm of independent
certified public accountants selected by the General Partner. Within ninety
(90) days after the end of each fiscal year (subject to reasonable delays in the
event of difficulty in obtaining or compiling of tax information), the
Partnership shall transmit to each Person who was a Partner at any time during
the fiscal year the Schedule K-1 (IRS Form 1065) for the Partner for such year.
The General Partner shall cause to be prepared and filed all tax returns for the
Partnership, and all tax elections concerning the Partnership shall be made at
the direction of the General Partner. Each Partner agrees that it shall not take
on any of its original or amended income tax returns or claims for refund any
position with respect to any Partnership item of income, gain, loss, deduction,
or credit that is inconsistent with the treatment of such item by the
Partnership on the Schedule K-1.

Section 6.04 Tax Matters Partner. The General Partner shall be the “tax matters
partner” under § 6231(a)(7) of the Code.

Section 6.05 Banking. All funds of the Partnership shall be deposited in the
name of the Partnership in such checking account or accounts as shall be
designated by the General Partner. All withdrawals therefrom are to be made upon
checks signed by a Person or Persons authorized by the General Partner.

 

14

--------------------------------------------------------------------------------

ARTICLE 7

TRANSFERS, ADMISSIONS, AND WITHDRAWALS

Section 7.01 Transfers. Except as provided in this Agreement, no Partner shall
Transfer all or any portion of the Partner’s Interest without the written
consent of the General Partner, which consent may be withheld in the sole
discretion of the General Partner. In connection with any permitted Transfer, if
required by the General Partner the transferee shall provide the Partnership
with a written opinion from legal counsel acceptable to the General Partner that
such transfer will not violate any state or federal securities law, and will not
cause a termination of the Partnership under Section 708(b)(1)(B) of the Code.
The transferee shall pay all costs and expenses incurred by the Partnership in
connection with such Transfer. With respect to any Interest held by an entity
other than UPREIT, each such entity agrees that it will not permit any of its
direct or indirect owners to Transfer all or any part of their direct or
indirect ownership interests in such entity except in accordance with this
Section 7.01. Any purported Transfer in violation of this Agreement shall be
null and void. The Partners acknowledge that the restrictions on Transfers
contained herein are reasonable and necessary to protect the interests of the
Partners with respect to the Partnership. If in connection with a permitted
Transfer of an Interest the transferor requests that the Partnership make an
election under Section 754 of the Code and provides the Partnership with the
information required by Regulation § 1.743-1(k), the General Partner shall cause
the Partnership to make the election under Section 754 of the Code provided such
election does not result in a negative adjustment to the tax basis of the
Partnership’s assets with respect to any other Partner.

Section 7.02 Admissions. Except as provided in this Agreement, no transferee of
an Interest shall be admitted as a Partner of the Partnership without the
written consent of the General Partner, and only if the transferee agrees to be
legally bound by this Agreement as a Partner and executes and delivers to the
Partnership such documents and instruments as are necessary or appropriate in
connection with the transferee becoming a Partner. The transferee shall pay all
costs and expenses incurred by the Partnership in connection with such
admission. Any transferee of an Interest who is not admitted as a Partner shall
have the rights of an assignee with respect to distributions and Profits,
Losses, and other allocations attributable to the transferred Interest, but
shall have no rights as a Partner under this Agreement or the Act.
Notwithstanding the foregoing, the Interest of the assignee shall be subject to
the restrictions contained in this Agreement applicable to Interests held by a
Limited Partner.

Section 7.03 No Withdrawal. The Limited Partners shall have no right to withdraw
from the Partnership prior to the dissolution and winding up of the Partnership.
The General Partner agrees that it shall not withdraw from the Partnership prior
to the dissolution and winding up of the Partnership.

Section 7.04 Incapacity of Limited Partner. The Incapacity of a Limited Partner
shall not dissolve or terminate the Partnership. In the event of such
Incapacity, the executor, administrator, guardian, trustee or other personal
representative of the Limited Partner affected by such Incapacity shall be
deemed to be the assignee of such Limited Partner’s Interest and may, subject to
Section 7.02, become a substituted Limited Partner.

 

15

--------------------------------------------------------------------------------

ARTICLE 8

TERMINATION AND DISSOLUTION

Section 8.01 Dissolution Events. The Partnership shall be terminated and
dissolved upon the earliest to occur of the following events:

(a) Dissolution Date. December 31, 2080.

(b) Dissolution Event with Respect to a General Partner. Any event with respect
to a General Partner that would result in a dissolution of the Partnership
pursuant to the Act, provided, however, that the Partnership shall not be
dissolved if (a) there is at least one remaining General Partner and the
business of the Partnership is carried on by the remaining General Partner(s)
either alone or together with a new General Partner, or, (b) within one hundred
eighty (180) days of such event the holders of a majority of the Percentage
Interests of the Limited Partners elect a new General Partner to continue the
business of the Partnership; or

(c) Election of the Partners. The election of the General Partner, with the
consent of the holders of a majority of the Percentage Interests of the Limited
Partners, to dissolve the Partnership.

Section 8.02 Liquidation.

(a) Winding Up. Upon the dissolution of the Partnership, the Partnership’s
business shall be liquidated in an orderly manner. The General Partner or, if
there is no General Partner at the time of liquidation, a Person selected by the
holders of a majority of the Percentage Interests of the Limited Partners (the
“Liquidator”), shall determine which Partnership property shall be distributed
in-kind and which Partnership property shall be liquidated. The liquidation of
Partnership property shall be carried out as promptly as is consistent with
obtaining the fair value thereof.

(b) Payments and Distributions. Partnership property or the proceeds therefrom,
to the extent sufficient therefor, shall be applied and distributed in the
following order of priority, with no distribution being made in any category set
forth below until each preceding category has been satisfied in full:

 

  (i) To the payment and discharge of all of the Partnership’s debts and
liabilities, including any debts and liabilities owed to any Partner, and to the
expenses of liquidation;

 

  (ii) To the establishment of Reserves (which Reserves, to the extent
determined by the General Partner or the Liquidator to be no longer needed by
the Partnership, shall be distributed in accordance with the order of priority
set forth in Section (c) hereof);

 

  (iii)

To and among the Partners in accordance with their positive Capital Account
balances after adjusting such

 

16

--------------------------------------------------------------------------------

 

Capital Account balances for allocations of Profits and Losses and items of
income, gain, loss and deduction for the year of liquidation.

ARTICLE 9

EXCULPATION AND INDEMNIFICATION

Section 9.01 Exculpation. No Indemnified Party shall be liable, responsible or
accountable in damages or otherwise to the Partnership or the Limited Partners
for any act or omission of the Indemnified Party on behalf of the Partnership,
provided that the act or omission is not determined by a court to be due to such
Indemnified Party’s willful misconduct or recklessness or material breach of
this Agreement.

Section 9.02 Indemnification. The Partnership shall indemnify and hold harmless
each Indemnified Party against any loss or damage (including attorneys’ and
other professional fees) incurred by the Indemnified Party on behalf of the
Partnership or in furtherance of the Partnership’s interests, without relieving
the Indemnified Party of liability for willful misconduct or recklessness or
material breach of this Agreement. The satisfaction of any indemnification shall
be from and limited to Partnership’s assets and no Partner shall have any
liability on account thereof. The right to indemnification shall include the
right to be paid or reimbursed by the Partnership the reasonable expenses
incurred by the Indemnified Party in advance of the final disposition of any
proceeding; provided, however, that the advance payment of such expenses shall
be made only upon delivery to the Partnership of a written affirmation by such
Indemnified Party of such Indemnified Party’s good faith belief that the
Indemnified Party has met the standard of conduct necessary for indemnification
under this Agreement and a written undertaking, by or on behalf of such
Indemnified Party, to repay all amounts so advanced if it shall ultimately be
determined that such Indemnified Party is not entitled to be indemnified under
this Agreement or otherwise.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

Section 10.01 General. As of the date hereof, each of the Partners makes each of
the representations and warranties applicable to such Partner as set forth in
this Section 10.01, and such representations and warranties shall survive the
execution of this Agreement.

(a) Due Incorporation or Formation; Authorization of Agreement. If such Partner
is a corporation, partnership, trust, limited liability company, or other legal
entity, it is duly organized or formed, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation or formation and has the
power and authority to own property and carry on its business as owned and
carried on at the date hereof and as contemplated hereby. Such Partner is duly
licensed or qualified to do business and in good standing in each of the
jurisdictions in which the failure to be so licensed or qualified would have a
material adverse effect on its ability to perform its obligations hereunder, and
the execution, delivery, and performance of this Agreement has been duly
authorized by all necessary corporate or

 

17

--------------------------------------------------------------------------------

partnership or company action. This Agreement constitutes the legal, valid, and
binding obligation of each Partner.

(b) No Conflict or Default. The execution, delivery, and performance of this
Agreement and the consummation by such Partner of the transactions contemplated
hereby (i) will not conflict with, violate, or result in a breach of any of the
terms, conditions, or provisions of any law, regulation, order, writ,
injunction, decree, determination, or award of any court, any governmental
department, board, agency, or instrumentality, or any arbitrator, applicable to
such Partner, and (ii) will not conflict with, violate, result in a breach of,
or constitute a default under any of the terms, conditions, or provisions of the
articles of incorporation, bylaws, partnership agreement, operating agreement,
or other organizational documents of such Partner, or of any material agreement
or instrument to which such Partner is a party or by which such Partner is or
may be bound or to which any of its material properties or assets are or may be
subject.

(c) Governmental Authorizations. Any registration, declaration or filing with or
consent, approval, license, permit or other authorization or order by, any
governmental or regulatory authority that is required in connection with the
valid execution, delivery, acceptance, and performance by such Partner under
this Agreement or the consummation by such Partner of any transaction
contemplated hereby has been completed, made, or obtained on or before the
effective date of this Agreement.

(d) Litigation. There are no actions, suits, proceedings, or investigations
pending or, to the knowledge of such Partner, threatened against or affecting
such Partner or any of such Partner’s properties, assets, or businesses in any
court or before or by any governmental department, board, agency,
instrumentality, or arbitrator which, if adversely determined, could (or in the
case of an investigation could lead to any action, suit, or proceeding which, if
adversely determined, could) reasonably be expected to materially impair such
Partner’s ability to perform its obligations under this Agreement.

Section 10.02 Investment Representations. Each Limited Partner represents and
warrants that it has acquired its Interest for its own account as part of a
transaction exempt from registration under the Securities Act of 1933, as
amended, and applicable state law for investment purposes and not with a view to
the resale or distribution thereof, and that it has had access to any and all
information necessary to arrive at its decision to acquire its Interest. In
addition to the restrictions on transfer of Interests otherwise set forth in
this Agreement, no Interest may be sold, transferred, assigned or otherwise
disposed of by any Partner in the absence of registration under the Securities
Act of 1933, as amended, and applicable state law, or an opinion of counsel
experienced in securities matters and satisfactory to the General Partner that
such assignment or other disposition will not be in violation of said Act or
state laws. No Limited Partner shall have any right to require registration of
its Interest under said Securities Act or applicable state law and, in view of
the nature of the Partnership and its business, such registration is neither
contemplated nor likely. Each Limited Partner further acknowledges that it
understands that the effect of the foregoing representation and warranty and
restriction on assignment or other disposition is generally to require that such
Interest be held indefinitely unless it is registered or an exemption from
registration is available.

 

18

--------------------------------------------------------------------------------

ARTICLE 11

MISCELLANEOUS

Section 11.01 Notices. All notices, approvals, consents, requests, instructions,
and other communications (collectively “Communications”) required to be given in
writing pursuant to this Agreement shall be validly given, made or served only
when delivered personally or by registered or certified mail, return receipt
requested, postage prepaid, or by a reputable overnight or same day courier,
addressed to the Partnership or the Partner at the address that is on record at
the principal office of the Partnership, or by facsimile to the number that is
on record at the principal office of the Partnership. Any such Communication
shall be treated as given under this Agreement when the Communication is
delivered to such address or received at such facsimile number. The designation
of the Person to receive such Communication on behalf of a Partner or the
address of any such Person for the purposes of such Communication may be changed
from time to time by written notice given to the Partnership pursuant to this
Section.

Section 11.02 Parties Bound; No Third Party Beneficiaries. This Agreement shall
inure to the benefit of and shall be binding upon all of the parties and their
respective heirs, successors and assigns. No provision of this Agreement is
intended to or shall be construed to grant or confer any right to enforce this
Agreement or any remedy for breach of this Agreement to or upon any Person other
than the parties hereto.

Section 11.03 Applicable Law. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the Commonwealth
of Pennsylvania.

Section 11.04 Amendment. No change or modification to this Agreement shall be
valid unless the same is in writing and signed by the General Partner and the
Limited Partners who hold more than 50% of the Percentage Interests held by the
Limited Partners. Notwithstanding the foregoing, no amendment to this Agreement
shall cause a Limited Partner to be treated as a general partner under the Act,
without the consent of the affected Limited Partner.

Section 11.05 Entire Agreement. This Agreement contains the entire understanding
among the parties and supersedes any prior understandings and agreements between
them respecting the subject matter hereof. There are no representations,
agreements, arrangements, or understandings, oral or written, between or among
the parties hereto relating to the subject matter of this Agreement which are
not fully expressed herein.

Section 11.06 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected thereby but rather shall be enforced to the greatest extent permitted
by law.

 

19

--------------------------------------------------------------------------------

Section 11.07 Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if all of the Partners had signed the same
document. All counterparts shall be construed together and shall constitute one
and the same instrument.

Section 11.08 Construction. When from the context it appears appropriate, each
term stated either in the singular or the plural shall include the singular and
the plural and pronouns stated either in the masculine, the feminine or the
neuter shall include the masculine, the feminine and the neuter.

Section 11.09 Headings and Captions. The headings and captions contained in this
Agreement are inserted only as a matter of convenience and in no way define,
limit or extend the scope or intent of this Agreement or any provisions hereof.

Section 11.10 No Waiver. The failure of any Partner to insist upon strict
performance of a covenant hereunder or of any obligation hereunder or to
exercise any right or remedy hereunder, regardless of how long such failure
shall continue, shall not be a waiver of such Partner’s right to demand strict
compliance therewith in the future unless such waiver is in writing and signed
by the Partner giving the same.

Section 11.11 Other Business and Investment Ventures. Except as otherwise
provided in this Agreement or any other agreement to which a Partner is a party,
each Partner may engage in other business or investment ventures, including
business or investment ventures in competition with the Partnership, and neither
the Partnership nor the other Partners shall have any rights in such business or
investment ventures.

Section 11.12 Additional Instruments. Each Partner agrees to execute and deliver
such additional agreements, certificates, and other documents as may be
necessary or appropriate to carry out the intent and purposes of this Agreement.

Section 11.13 Power of Attorney. Each Limited Partner, by the execution of this
Agreement, irrevocably constitutes and appoints the General Partner as its true
and lawful attorney-in- fact, with full power and authority in its name, place
and stead to execute, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or appropriate to
carry out the provisions of this Agreement. The appointment by each Limited
Partner of the General Partner as attorney-in-fact shall be deemed to be a power
coupled with an interest, in recognition of the fact that each of the Partners
under this Agreement will be relying upon the powers of the General Partner to
act as contemplated by this Agreement, and any filing or any other action on
behalf of the Partnership shall survive the Bankruptcy or death of a Limited
Partner.

Section 11.14 Call and Put Option. The Partners acknowledge that the Interests
held by CLA and BCA GP are subject to the call and put option provisions of the
Contribution Agreement (the “Option”). The restrictions on Transfers contained
in Article 7 of this Agreement shall not apply to any Transfer of an Interest
pursuant to the Option.

 

20

--------------------------------------------------------------------------------

[The balance of this page is intentionally blank.]

 

21

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

GENERAL PARTNER:

PR Cherry Hill Office GP, LLC, a Delaware limited liability company   By:  
PREIT ASSOCIATES, L.P.,     a Delaware limited partnership, its sole member  
By:   Pennsylvania Real Estate Investment Trust,     a Pennsylvania business
trust,     its general partner     By:  

 

    Name:       Title:   LIMITED PARTNERS: CITY LINE ASSOCIATES, a Pennsylvania
limited partnership By:  

 

Name:   Title:   General Partner PREIT ASSOCIATES, L.P., a Delaware limited
partnership By: Pennsylvania Real Estate Investment Trust, a Pennsylvania
business trust, its general partner   By:  

 

  Name:       Title:    

[signatures continued on following page]

 

22

--------------------------------------------------------------------------------

[continuation of signatures]

 

BCA/CH LLC, a Delaware limited liability company  

By:

  City Line Associates, member     By:  

 

    Name:       Title:  

 

23

--------------------------------------------------------------------------------

Bala Cynwyd Associates, L.P.

Amended and Restated Agreement of Limited Partnership

Exhibit “A”

PARTNERS’ PERCENTAGE INTERESTS AND NET EQUITY VALUES

 

Partner

   Percentage Interest     Net Equity Value

General Partner:

    

PR Cherry Hill Office GP, LLC,

a Delaware limited liability company

   0.1 %    $ 7,457

Limited Partners:

    

City Line Associates,

a Pennsylvania limited partnership

   50.05 %    $ 3,786,991

PREIT Associates, L.P. a Delaware limited partnership

   49.8 %    $ 3,713,725

BCA/CH LLC

a Delaware limited liability company

   0.05 %    $ 3,783             

TOTAL

   100.0 %    $ 7,551,956

--------------------------------------------------------------------------------

Bala Cynwyd Associates, L.P.

Amended and Restated Agreement of Limited Partnership

Exhibit “B”

DESCRIPTION OF PROPERTY

[attached]

--------------------------------------------------------------------------------

LEGAL DESCRIPTION

The property consists of the land and all the buildings and structures on the
land in the Township of Cherry Hill, County of Camden and State of New Jersey.
The legal description is:

Beginning at an intersection point of the easterly curb line with the northerly
curb line of Cherry Hill One being the following courses and distances from the
intersection of the extension of the easterly right-of-way line of Haddonfield
Road (49.75 feet wide) with the extension of the southerly right-of-way line of
Church Road (49.50 feet wide) a/k/a Camden County Route 616):

 

a) Along said southerly right-of-way line of Church Road, a distance of 1002.55
feet to the division line of Lots 2 and 2C, and extending thence

 

b) Along a line common with Lots 2 and 2C, South 33 degrees 23 minutes 05
seconds West, a distance of 93.69 feet to a point and extending thence

 

c) Along a line common with Lots 2 and 2C, South 02 degrees 38 minutes 20
seconds West, a distance of 641.58 feet to a corner point common with Lots 2, 2C
and 4, and extending thence

 

d) Along a line common with Lots 2C and 4, North 87 degrees 21 minutes 40
seconds West, a distance of 43.83 feet to the intersection point with the
extension of the easterly curb line of Cherry Hill One, and extending thence

 

e) Along said extension of the easterly curb line of Cherry Hill One, South 02
degrees 38 minutes 20 seconds East, a distance of 185.01 feet to the
intersection point of the easterly curb line with the northerly curb line of
Cherry Hill One, and extending thence

 

1) Along the said northerly curb line of Cherry Hill One, North 87 degrees 21
minutes 40 seconds West, a distance of 209.50 feet to a point, and extending
thence

 

2) Along a common line with the pillars on the westerly side of Cherry Hill One,
South 02 degrees 38 minutes 20 seconds West, a distance of 162.50 feet to a
point on the southerly curb line of Cherry Hill One, and extending thence

 

3) Along said southerly curb line of Cherry Hill One, South 87 degrees 21
minutes 40 seconds East, a distance of 209.50 feet to a point on the easterly
curb line of Cherry Hill One, and extending thence

 

4) Along said easterly curb line of Cherry Hill One, North 02 degrees 38 minutes
20 seconds East, a distance of 162.50 feet to a point on the northerly curb line
of Cherry Hill One and being the point and place of Beginning.

The above description is in accordance with a survey prepared by Walter H.
MacNamara Assoc., dated January 20, 1993 and revised February 3, 1993.

FOR INFORMATIONAL PURPOSES ONLY: Also known as Lot 5 in Block 285.02 on the
Township of Cherry Hill Tax Map.

BEING the same premises which Cherry Hill Towers, Inc., a New Jersey
Corporation, by Deed dated 2/9/1993 and recorded 2/17/1993 in the Office of the
Clerk of Camden County in Deed Book 4606 page 94 etc., granted and conveyed unto
One Cherry Hill Corp., a New Jersey Corporation, in fee.

 

B - 1

--------------------------------------------------------------------------------

TOGETHER WITH those beneficial rights, easements and restrictions as contained
in that certain Common Facilities and Common Utility Easement Agreement between
J.C. Penney Properties, Inc., Connecticut General Life Insurance Company,
Strawbridge & Clothier, The Equitable Life Assurance Society Of The United
States, R.H. Macy & Co., Inc. and Cherry Hill Properties Corp. in Deed Book 3482
Page 293.

ALSO TOGETHER WITH those beneficial rights, easements and restrictions as
contained in that certain Declaration and Reciprocal Easement Agreement by and
between Cherry Hill Center, Inc. a Maryland Corporation Connecticut General Life
Insurance Company a Connecticut Corporation, and Cherry Hill Towers, Inc. a New
Jersey Corporation recorded in Deed Book 4360 page 145.

 

B- 2 -

--------------------------------------------------------------------------------

Bala Cynwyd Associates

Amended and Restated Agreement of Limited Partnership

Exhibit “C”

LEASING AND MANAGEMENT AGREEMENT

REAL ESTATE MANAGEMENT AND LEASING AGREEMENT

Premises:

REAL ESTATE MANAGEMENT AND LEASING AGREEMENT made as of the          day of
                    , 2008, between PREIT-RUBIN, INC., a Pennsylvania
Corporation having an address at The Bellevue, Suite 300, 200 South Broad
Street, Philadelphia, Pennsylvania 19102 (hereinafter referred to as the
“Agent”), and BALA CYNWYD ASSOCIATES, L.P., a Delaware limited partnership,
having an address at c/o PREIT Associates, L.P., The Bellevue, Suite 300, 200
South Broad Street, Philadelphia, Pennsylvania 19102 (hereinafter referred to as
the (“Owner”).

W I T N E S S E T H :

In consideration of the covenants herein contained, the parties hereto,
intending to be legally bound, covenant and agree as follows:

ARTICLE I

APPOINTMENT AND AUTHORITY OF THE AGENT

1.1 The Owner hereby appoints the Agent as the exclusive managing and leasing
agent for the above described property (the “Premises”), and hereby authorizes
the Agent to exercise such powers with respect to the Premises as may be
necessary for the performance of the Agent’s obligations under Article II, and
the Agent accepts such appointment on the terms and conditions hereinafter set
forth for a term as provided in Article VII. Agent shall have no right or
authority, expressed or implied, to commit or otherwise obligate Owner in any
manner whatsoever except to the extent specifically provided in this Agreement.
Not later than forty-five (45) days prior to the effective date of this
Agreement, Owner shall deliver to Agent such information, documents and
certificates regarding the Premises as Agent shall reasonably request,
including, but not limited to the following:

 

  (a) A current and complete rent roll.

 

  (b) The current operating budget and capital budget for the past and current
calendar year.

 

  (c) Income cash flow report and variances from budget for prior and current
calendar year.

 

  (d) A current list of all employees, titles, salaries/wages employed on site
at the Premises.

 

1

--------------------------------------------------------------------------------

  (e) A current list of brokers actively engaged in leasing the Premises.

 

  (f) Copies of all existing lease documents.

 

  (g) All leases currently in dispute or litigation.

 

  (h) All files on any litigation and/or disputes regarding any and all matters,
including, but not limited to: parts, equipment, furnishings, real property,
easements, taxes, third party contracts, employer-employee relations, and the
like.

 

  (i) Legal descriptions of the Premises. .

 

  (j) Mortgagees’ names and addresses; lien holders, and the like.

 

  (k) Site plans and specs.

 

  (l) An inventory of Owner’s personal property on Premises, all tools,
equipment and supplies.

 

  (m) List of vendors.

 

  (n) All pertinent books and records relating to the management, operation and
leasing of the Premises.

 

  (o) Third party contracts in force.

 

  (p) List of security deposits held, on a tenant by tenant basis.

Not later than the effective date of this agreement, Owner shall wire transfer
to the Bank Account (hereafter defined) sufficient working capital to enable
Agent to operate and maintain the Premises during the first thirty (30) days.
Within thirty (30) days after the effective date of this Agreement, Owner shall
deliver to Agent original executed copies of all existing leases and operating
agreements in effect with respect to the Premises. If requested by Agent, Owner
shall arrange for the present property manager to meet with Agent’s employees at
the Premises or Agent’s home office to review all of the above and to assist
Agent in connection with the transition of the management of the Premises.

ARTICLE II

THE AGENT’S AGREEMENTS

--------------------------------------------------------------------------------

2.1 The Agent, on behalf of the Owner, shall implement or cause to be
implemented the decisions of the Owner relating to the Premises and within the
scope of Agent’s obligations as specified in this Agreement and shall conduct
the ordinary and usual business affairs of the Owner with respect to the
Premises solely as provided in this Agreement. The Agent agrees to use
reasonable efforts to:

 

  (a) contract, for periods limited to the Owner’s possession of the Premises,
but not in excess of one year, (without Owners prior consent), in the name and
at the expense of the Owner, for gas, electricity, water, and such other
services as are being currently furnished to the Premises. Service contracts
shall be written to include a thirty (30) day notice of cancellation by the
Owner wherever possible.

 

  (b) at the expense of the Owner, select, employ, pay, supervise, direct and
discharge an on-site manager, accountant and staff as well as all other
employees necessary for the operation and maintenance of the Premises, in number
and at initial wages not in excess of those shown on Exhibit A attached hereto
or those required under any union contract then in effect, plus Agent’s standard
fringe benefit package, including bonus, to carry Workers’ Compensation
Insurance (and, when required by law, compulsory Non-Occupational Disability
Insurance) covering such employees, and to use reasonable care in the selection
and supervision of such employees. The Agent shall be responsible for complying
with all laws and regulations and collective bargaining agreements affecting
such employment, and Agent shall negotiate with labor unions lawfully entitled
to represent employees at the premises. The Agent will be and will continue
throughout the term of this Agreement to be an Equal Opportunity Employer. All
persons employed in connection with the operation and maintenance of the
Premises shall be employees of the Agent, Agent’s affiliates or Agent’s
contractors, and not of Owner. The Agent shall be reimbursed by the Owner in
amounts not exceeding those which are in accordance with the approved budget for
all expenses properly incurred by it for compensation of all employees necessary
for the operation and maintenance of the Premises, including, without
limitation, direct payroll, fringe benefits, including bonus, employer’s payroll
taxes such as the employer’s contribution to FICA, unemployment compensation,
employer’s contribution to any pension plan which is identified by the Agent to
the Owner (including, without limitation, any withdrawal liability imposed on
the Agent as a result of this Agreement pursuant to the Multi-Employer Pension
Plan Amendments Act of 1980), the cost of employee benefits required by law,
workers compensation premiums, and any sums required to be paid to such
employees under collective bargaining agreements made pursuant to the National
Labor Relations Act.

 

  (c)

make all ordinary repairs and replacements (except those excluded by this
Agreement), do all decorating and landscaping, and purchase all supplies

--------------------------------------------------------------------------------

 

necessary for the proper operation of the Premises and the fulfillment of the
Owner’s obligations under the leases affecting the Premises and compliance with
all governmental and insurance requirements; provided that the Agent shall not
make any purchase or do any work, the cost of which shall exceed the amount set
forth in Exhibit B without obtaining, in each instance, the prior consent of the
Owner, except (i) in circumstances which the Agent shall deem to constitute an
emergency requiring immediate action for the protection of the Premises or of
tenants or other persons or to avoid the suspension of necessary services or
(ii) where the expense is authorized by the approved budget. The Agent shall
notify the Owner of the necessity for, the nature of, and the cost of any such
emergency repairs or compliance. If Owner shall require, Agent shall submit, for
Owner’s prior written approval, a list of contractors and subcontractors
performing tenant work, repairs, alterations or services at the Premises, under
Agent’s direction.

It is understood that if the Agent is requested by Owner to undertake the making
or supervision of extensive repairs (such as re-roofing the Premises or a major
portion thereof), alterations, renovations or reconstruction of the Premises or
any part thereof that Owner shall pay Agent therefor pursuant to § 4.3 hereof
and that such work is otherwise not required to be contracted for by Agent. The
Owner shall receive the benefit of all discounts and rebates obtained by the
Agent in its operation of the Premises.

If the Agent desires to contract for repair, construction, or any other service
described in this subsection (c) with a party with respect to which any partner
or shareholder of the Agent holds a beneficial interest, such interest shall be
disclosed to and approved by the Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates notwithstanding
that tenants of the Premises may be required to pay such costs. The Agent shall
not employ any corporation or other entity in which the Agent (or any
subsidiary, affiliate, or related corporation) shall have a financial interest
for the purpose of making repairs and alterations or performing other services
to the Premises, unless such work is done at a tenant’s request and at tenant’s
sole expense (such work being hereinafter referred to as “Tenant Work”). The
Agent, or general contractor working under the supervision of the Agent, is
authorized to make and install such Tenant Work, and Agent may collect from such
tenant or such general contractor, for its sole account, its charge for
supervisory overhead on all such Tenant Work. The Agent shall hold the Owner
harmless from any and all claims which may be advanced by any such tenant in
connection with Tenant Work performed by the Agent or under the Agent’s
supervision. The Agent, however, shall not require any tenant to use the Agent,
its subsidiaries, affiliates or related corporations or its general contractor
to perform such Tenant Work.

 

  (d) handle promptly complaints and requests from tenants, notify the Owner
promptly (together with copies of supporting documentation) of any notice of
violation of any governmental requirements, any material defect in the Premises
and any fire or other damage to the Premises.

 

  (e)

notify the Owner’s general liability insurance carrier and the Owner

--------------------------------------------------------------------------------

 

promptly of any bodily or personal injury or property damage occurring to or
claimed by any tenant or third party on or with respect to the Premises and to
forward promptly to the carrier any summons, subpoena, or other like legal
document served upon the Agent relating to actual or alleged potential liability
of the Owner, the Agent or the Premises.

 

  (f) request from tenants any certificates of insurance and renewals thereof
required to be furnished by the terms of leases, copies of which will be
provided to the Owner upon request.

 

  (g) receive and collect rent and all other monies payable to the Owner by all
tenants and licensees in the Premises and to deposit the same promptly in the
bank (the “Bank”) named in Exhibit B in a bank account (the “Bank Account”) in
the name of Agent, as Agent for the Owner, which Bank Account shall be used
exclusively for such funds. In the event state law requires tenant security
deposits be held in a separate account, such account shall be established by the
Agent as approved by the Owner.

The Owner or the Owner’s designated representative will be a signatory on the
Bank Account, but need not co-sign each check.

 

  (h)

collect such rent and other charges from tenants in a timely manner and to
pursue Owner’s legal remedies for non-payment of same, including the termination
of leases for tenants in default by the institution of legal action. Agent shall
refer all such matters requiring legal services to Agent’s approved attorneys
listed on Exhibit B hereto or, at Agent’s option, have such legal work performed
by Agent’s in-house attorneys or paralegals. The fees for all such legal
services shall be paid for by Owner, including (i) negotiation of leases,
including department store leases and reciprocal easement agreements;
(ii) preparation and negotiations of construction contracts for renovations of
the Premises; (iii) suits to enforce leases; (iv) bankruptcy claims involving
tenants; (v) negotiations with labor unions; (vi) environmental matters and
(vii) any other legal action approved by Owner. With respect to lease
preparation and negotiation performed by Agent’s in-house attorneys or
paralegals, Owner shall reimburse Agent for the salary, fringe benefits,
allocable share of rent and other office overhead, in an amount equal to Fifteen
Hundred ($1,500.00) Dollars for each lease so prepared and negotiated, or such
reasonable higher charge as is justified because of the complexity of the lease
in question. For lease assignments, lease amendments and lease surrenders, the
reimbursement shall be Five Hundred ($500.00) Dollars; and for all other legal
work performed by Agent’s in-house attorneys or paralegals, the amount of the
reimbursement shall be Two Hundred ($200.00) Dollars per hour for Agent’s
in-house attorneys and Seventy-Five ($75.00) Dollars per hour for all work
performed by Agent’s in-house paralegals. Such attorneys and paralegals shall
keep time records substantiating the hours charged and on request such records
may be inspected by Owner. Agent

--------------------------------------------------------------------------------

 

may deduct the amount to be reimbursed from the Bank Account. With respect to
any litigation involving sums due from tenants, Agent is authorized to
compromise such litigation without Owner’s consent so long as such compromise
does not involve a forgiveness of sums due by such tenant in excess of Fifteen
Thousand ($15,000.00) Dollars.

 

  (i) bond the Agent and all of the Agent’s employees who may handle or be
responsible for monies or property of the Owner with a “fidelity” bond, in the
amount of Two Hundred Thousand ($200,000.00) Dollars.

 

  (j) notify the Owner immediately of any fire, accident or other casualty,
condemnation proceedings, rezoning or other governmental order, or lawsuit or
threat thereof involving the Premises; and violations relative to the leasing,
use, repair and maintenance of the Premises under governmental laws, rules,
regulations, ordinances or like provisions. The Agent will not bear
responsibility for non-compliance unless such non-compliance is due to the
negligence of the Agent or its employees.

 

  (k) check tax assessments and promptly furnish Owner with copies of all
assessment notices and receipted tax bills and, if requested by Owner, Agent
agrees to retain an expert to bring an appeal at Owner’s expense before any
taxing authority relative to the Premises.

 

  (l) subject to Owner’s making funds available to do so, cause the Premises to
comply with all present and future laws, ordinances, orders, rules, regulations
and requirements of all federal, state and local governments, courts,
departments, commissions, boards and offices, any national or local Board of
Fire Underwriters or Insurance Services offices having jurisdiction, or any
other body exercising functions similar to those of any of the foregoing which
may be applicable to the Premises or any part thereof or to the leasing, use,
repair, operation or management thereof. Such compliance shall be undertaken in
the name of Owner, and be at Owner’s expense. Agent shall give prompt written
notice to Owner of any violation or notice of alleged violation of such laws and
Agent shall not bear responsibility for failure of the Premises or the operation
thereof to comply with such laws unless Agent has committed gross negligence or
a willful act or omission in the performance of its obligations under this
Agreement.

2.2 The Agent agrees that on or before the twentieth (20th) day of each month to
render to Owner monthly cash basis reports itemized in reasonable detail
relating to the management and operation of the Premises for the preceding
calendar month. The names and address of the persons who shall receive said
reports are set forth in Exhibit B. Subject to the terms and provisions of this
Agreement, the Agent is authorized to pay all bills for the operation of the
Premises from the rentals and other income of the Premises, including the
Agent’s fee and reimbursable items set forth in this Agreement, and the Agent
shall remit to the Owner the net receipts after such payments with such monthly
report. Prior to Owner’s default or the

--------------------------------------------------------------------------------

termination of this Agreement the Owner shall, at any time, have the right to
require the transfer to the Owner of any funds in the Bank Account considered by
the Owner and Agent to be in excess of an amount reasonably required by the
Agent for disbursement purposes in connection with the Premises. In the event
Agent determines that there is not sufficient funds in the Bank Account to pay
when due all expenses of the Premises and reimbursements due Agent, Owner shall,
within five (5) days of request, deposit into such account additional funds in
the amount requested by Agent. The Agent agrees to keep full and detailed
records with respect to the management and operation of the Premises and to
retain those records for periods specified by the Owner, not to exceed three
(3) years after the year in question. The Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement, and at times mutually agreeable to Owner
and Agent.

2.3 The Agent shall exercise reasonable diligence to exert such control over
accounting and financial transactions as is reasonably required to protect the
Owner’s assets from loss or diminution due to error, negligence or willful
misconduct or wanton acts on the part of the Agent, its employees, agents or
contractors. Losses caused by failure to exercise reasonable diligence shall be
borne by Agent.

2.4 The Agent shall prepare and submit to the Owner a proposed operating and
capital budget for the promotion, operation, repair and maintenance of the
Premises for each calendar year. Preliminary and final budgets will be due
ninety (90) and sixty (60) days, respectively, prior to the end of each calendar
year. Such budgets shall be prepared on a cash basis showing a month by month
projection of income and expense and capital expenditures and shall be
accompanied by proposed leasing guidelines for the next ensuing calendar year
which shall contain a brief narrative description of the anticipated market, a
projection of cash flow for such year, listing expiring leases for the next
following year as well as project ranges of rental rates and terms for new or
renewal leases, estimates of concessions to tenants and of cost estimates of
alterations for space to be leased. The annual budget shall be deemed approved
unless Agent receives written notification of disapproval within thirty
(30) days after the date such budget was tendered to Owner for approval; Owner
shall have the right to disapprove line items in such budget or the entire
budget. In the event of a line item disapproval, all portions of the budget not
disapproved shall automatically be deemed approved. In the event of such
disapproval of the budget or any specific line items thereof, the parties will
promptly meet and resolve such differences and Agent will promptly thereafter
resubmit a revised budget to Owner who shall have an additional ten (10) days to
approve or disapprove the same and such procedure shall continue until the
budget has been approved. If Owner shall fail to disapprove the revised budget
within ten (10) days of receipt, the same shall be deemed approved. Agent is
authorized for the account of Owner to make any expenditures or to incur any
obligations or implement any items which are included in the approved annual
budget without further approval from owner being required. Such budgets and all
other financial reporting to be prepared by Agent shall be prepared using
Agent’s then standard format and software. Agent shall not be obligated to use
any other financial format or software unless same is satisfactory to Agent,
Owner purchases same for Agent and Owner pays all of the training expenses for
Agent’s employees relating to such software.

After approval of each such budget by the Owner, the Agent agrees to use
diligence and to employ all reasonable efforts so that the actual costs of
operating the Premises shall not

--------------------------------------------------------------------------------

exceed said approved budget by more than ten (10%) percent per year without the
Owner’s approval. The Agent shall promptly notify the Owner if the Agent
reasonably anticipates any such line item exceeding one hundred ten
(110%) percent of the amount therefor in the approved budget.

2.5 Agent agrees, for itself and all persons retained or employed by Agent in
performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent including, but not limited to, any data,
information, plans, programs, processes, costs, operations or tenants which may
come within the knowledge of Agent in the performance of or as a result of its
services, except where Owner specifically authorizes Agent to disclose any of
the foregoing to others or such disclosure reasonably results from the
performance of Agent’s duties hereunder or is required to be disclosed pursuant
to litigation.

2.6 The Agent agrees to use its best efforts to have the Premises rented to
desirable tenants, satisfactory to the Owner considering the nature of the
Premises, and in connection therewith to negotiate business terms for relocation
and/or expansions, new leases and renewals of leases at appropriate times, it
being understood that all inquiries to the Owner with respect to leasing any
portion of the Premises shall be referred to the Agent. At least once per year
Owner and Agent shall meet and mutually develop a “leasing game plan” for the
ensuing calendar year which game plan shall specify projected vacancies,
projected rentals and other pertinent terms of new leases or lease renewals,
costs to be incurred in obtaining tenants and other relevant matters. Owner
hereby authorizes Agent to implement the approved leasing game plan and to
negotiate and execute leases in accordance therewith and confirms that any
leases so executed shall be deemed approved by Owner and Owner shall pay Agent
the leasing commission set forth in this Agreement with respect to each lease
executed by a tenant consistent with the leasing game plan. Agent is hereby
given the exclusive right to lease the Premises on behalf of Owner and Owner
shall pay to Agent the leasing commission set forth in Exhibit B regardless of
who may negotiate the same, including Owner. All leases and renewals shall be
prepared by the Agent on the Agent’s form lease, and such leases shall either be
executed by Agent on behalf of Owner or, at Agent’s option shall be executed by
the Owner. The Agent agrees it will observe the specific leasing guidelines, if
any, set forth in the approved budget or otherwise made known to the Agent in
writing by the Owner. In the event the Agent shall have a prospective tenant
reference from another property in the local market area where the Premises are
located in which the Agent has a beneficial interest or which the Agent manages,
the Agent shall declare its potential conflict of interest to the Owner, and the
Owner shall determine if negotiations shall be undertaken by the Agent, the
Owner, or a third party appointed by the Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated by the
Agent.

2.7 Anything in the Agreement to the contrary notwithstanding:

 

  (a) Nothing in this Agreement shall require Agent to take any action (and
Agent will not be in default for failure to take any action) to the extent and
wherever there is provided a limitation on Agent’s ability to expend funds or
incur obligations with respect to the Premises.

 

  (b)

Unless expressly provided, Agent shall not be responsible or obligated to

--------------------------------------------------------------------------------

 

advance its own funds for any purpose in the performance of Agent’s duties under
this Agreement.

 

  (c) Agent shall not be obligated to pay or perform any liability or obligation
or take any action under this Agreement which is to be done at the expense of
Owner or for which Agent is entitled to reimbursement from Owner unless funds
for such purpose are available in the Bank Account or have otherwise been made
available to Agent by Owner.

 

  (d) Wherever Agent is obligated to use its “best efforts or reasonable
efforts” under this Agreement such term is intended to signify and shall mean
that Agent shall exercise its professional skill and expertise with diligence
and in a commercially reasonable manner and consistent with high quality
practice for the management of similar buildings located in the geographic area
in which the Premises are situate. However, such a standard shall not impose
additional duties or obligations on Agent not set forth in this Agreement, such
as, by way of example, an obligation to advance Agent’s funds or to commence
litigation against third parties, or to take extraordinary actions or to perform
services not customarily provided by managers of comparable buildings in the
local geographic area. Nothing in this Agreement shall require Agent to perform
the obligations of others or exercise any efforts (other than reasonable
efforts) to cause them to perform such obligations.

 

  (e) Everything done by Agent in the performance of its obligations under this
Agreement and all expenses incurred pursuant hereto shall be for and on behalf
of Owner and for its account and at its expense. Except as otherwise expressly
provided herein, all debts and liabilities incurred to third parties in
accordance with the annual budget and in the ordinary course of business of
managing the Premises are and shall be obligations of Owner, and Agent shall not
be liable for any such obligations by reason of its management, supervision or
operation of the Premises for Owner.

ARTICLE III

THE OWNER’S AGREEMENTS

3.1 The Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments, in which event Owner
shall notify Agent of such.

3.2 The Owner shall carry (or cause to be carried) insurance upon the Premises
and shall look solely to such insurance for indemnity against any loss or damage
to the Premises except when caused by the willful act or omission or gross
negligence of the Agent or its employees, agents, contractors or subcontractors.
However, Agent shall not be liable to Owner for any loss or damage to the
Premises even if caused by the willful act or omission or gross negligence of
Agent or its employees, agents, contractors or subcontractors to the extent any

--------------------------------------------------------------------------------

such loss or damage is covered or should have been covered by Owner’s insurance.
To the extent any loss or damage to the Premises is covered or should have been
covered by Owner’s insurance, Agent is released from liability therefor and
Owner waives its right of subrogation against Agent. The Owner shall purchase,
or have Agent purchase for Owner and at Owner’s expense, and maintain policies
of commercial general liability insurance, including personal injury liability
and contractual liability, in an amount determined by Agent but, in any event
not less than $5,000,000.00 combined single limit for bodily injury and property
damage. Said policies shall name the Agent as an additional insured thereunder
and will be primary to any other available insurance. The Owner shall advise the
Agent as to the name and address of any insurance carriers for insurance placed
by Owner directly. If Owner desires Agent to purchase property damage or
liability insurance for the Premises, Owner shall pay Agent an annual fee
representing a pro rata share of the fee Agent pays to participate in its group
insurance coverage pool.

3.3 Owner agrees (a) to indemnify, hold and save Agent free and harmless from
any claim for damages or injuries to persons or property resulting from:
(1) Agent carrying out the provisions of this Agreement or acting under
direction of Owner, (2) Owner’s failure or refusal to comply with or abide by
any rule, order, determination, ordinance or law of any federal, state or
municipal authority, (3) Owner’s failure or refusal to comply with or abide by
or perform its obligations set forth in this Agreement, (4) any latent building
defects or other defect or dangerous condition which a visual inspection would
fail to disclose or any unsafe or dangerous condition or characteristic of the
Premises resulting from the design or initial construction of the Premises
(including, but not limited to, security systems, door locks, location of trash
receptacles, ingress & egress routes and recreational structures), (5) any
defects, conditions or situations with respect to the Premises which Agent has
disclosed to Owner and requested Owner’s permission to correct or rectify,
(6) the willful misconduct or criminal activity of any third person or agency,
except as to Agent and its employees, agents and representatives with respect to
the Premises or (7) the negligent or willful acts of Owner or Owner’s
representatives, officers, employees and agents; and (b) to defend promptly and
diligently at Owner’s expense, any claim, action or proceeding against Agent
and/or Agent and Owner, jointly or severally, arising out of or connected with
any of the foregoing, and to hold harmless and fully indemnify Agent from any
judgment, loss or settlement on account thereof. The undertaking of Owner as set
forth above shall survive the expiration or earlier termination of this
Agreement as to all liabilities accruing during the term hereof.

3.4 If Owner requests Agent to perform certain designated additional management
services and the parties agree to the exact nature, scope and time frame for the
performance thereof, then Owner shall pay the Agent the agreed upon fee for
Agent’s performance of such services, such payment to be made within twenty
(20) days after receipt of a bill therefor. Such payment shall be made in
addition to the fees and reasonable expenses otherwise stated herein. In
performing any specialized management services for Owner, Agent shall not be
liable to Owner for errors, accuracies, mistakes or the consequences thereof,
relating to the performance of such services provided Agent has performed the
services in good faith. Owner hereby waives, releases and discharges Agent from
all errors, inaccuracies, mistakes and the consequences thereof relating to the
performance of such services, except to the extent Agent has not performed such
services in good faith.

--------------------------------------------------------------------------------

3.5 The Owner hereby irrevocably appoints Agent as the sole and exclusive broker
for any sale and/or re-financing of the Premises and agrees to pay Agent a fee
of                      (    %) percent of the principal amount of any
refinancing and a sales commission of                      (    %) percent of
the gross sales price for the Premises, each such fee to be paid at the closing
involved. Such fee shall include Agent’s fee for any due diligence work required
to accomplish such refinancing and/or sale.

3.6 Owner agrees to make available to Agent, free of charge, an on-site office
to be utilized in connection with Agent’s leasing of the Premises. In addition,
Owner shall reimburse Agent monthly for all travel expenses, leasing and
marketing materials, demographic and marketing studies signage and advertising
incurred by Agent during the performance of its obligations under this
Agreement. Agent shall have the right to install signage on the Premises in
furtherance of its obligation to lease the Premises. Owner shall cause the
Premises to participate in Agent’s wide area network data transmission system
and shall lease or purchase for the Premises any wiring, phone, computers,
routers or software upgrades that Agent deems necessary to access the system.

3.7 Agent has afforded Owner the benefit of Agent’s blanket policy of workmen’s
compensation insurance. Such policy provides that Agent is required to pay in
full, in advance, the annual premium for such policy. Owner shall reimburse
Agent, on demand, its share of such premium, such share being determined by the
actual payroll and rate classifications statutorily mandated in the state where
the Premises is located. Owner acknowledges that should this contract be
terminated during the policy year, there shall be no proration of Owner’s
premium payment as between Owner and Agent unless or until Agent receives a
refund for the unused portion of such premium from the insurance carrier.

ARTICLE IV

MANAGEMENT AND OTHER FEES

4.1 As the management fee for the services performed pursuant to Article II, the
Owner agrees to pay the Agent at the rate specified in Exhibit B and Exhibit C.
Said fee shall be payable monthly, in arrears, on the first (1st) day of each
calendar month. Agent shall withdraw said fee and all of its reimbursable
expenses from the Bank Account for the Premises and shall account for same as
provided for in Section 2.2 hereof.

4.2 With respect to any space occupied by the Owner, the Agent shall be entitled
to no leasing commissions but shall be entitled to a management fee as though
the Owner were paying rent at the average square foot rental rate being paid for
comparable space in the Premises.

4.3 If Owner requests Agent to perform supervisory or administrative services
with respect to any renovation, expansion, tenant fit-out work or other repair
or construction project at the Premises which would involve “hard” costs in
excess of One Hundred Thousand ($100,000.00) Dollars, Owner shall pay Agent a
construction management fee equal to five (5%) percent of the “hard” costs of
such work, such fee to be paid in three equal installments, one-third upon the
commencement of such work, the second third upon fifty (50%) percent

--------------------------------------------------------------------------------

completion and a final payment upon substantial completion of the project. In
addition, and whether or not Agent is paid the above specified supervisory fee,
Owner shall reimburse Agent for the reasonable fees and disbursements of any
architect, engineer, on-site manager and/or on-site job accountant engaged to
monitor or perform any portion of such work.

4.4 Owner shall pay Agent Five Hundred ($500.00) Dollars to review the plans and
specifications prepared by each tenant doing alterations or renovations to its
space, to verify that such plans are acceptable to landlord and consistent with
any landlord design criteria applicable to the Premises. In the event Agent
utilizes Agent’s own in-house architect or engineer in lieu of retaining the
services of an independent architect or engineer, the amount of such
reimbursement shall be based upon the approximate hourly wage and other benefits
paid by Agent to such architect or engineer.

4.5 Owner authorizes Agent to institute a satellite communication marketing
program for the Premises and if such program is successful, Owner shall pay
Agent twenty (20%) percent of the income generated therefrom during the term of
each such contract, payable in full upon the date Owner receives its first
payments for each such contract executed.

ARTICLE V

LEASING COMMISSION

5.1 As leasing commissions for (a) all leases, expansions and renewals executed
and (b) with respect to a person or entity procured by Agent that is ready,
willing and able to lease upon the terms set forth in the leasing game plan,
during the term of this Agreement, which, for purposes of calculating Owner’s
obligation for leasing commissions will include the six (6) month period set
forth below , the Owner agrees to pay the Agent at the rate specified in Exhibit
B. Commissions will be based on base rents including CPI inflators payable to
Owner, percentage rent and all additional rental payable by the tenant. When
leases are negotiated by third party broker, the Agent shall cooperate with such
brokers. The Owner shall pay the commission due any such third party broker so
long as the Owner has approved in advance the use of such broker and the
commission to be paid such broker and such payment shall not reduce the fees
provided herein payable to Agent. The leasing commission will be paid to Agent
if within a period of six (6) months after the expiration of the term of this
Agreement Owner leases all or any portion of the Premises, irrespective of the
terms of such lease, to any prospect introduced to the Premises by Agent prior
to the expiration of the term, provided that Agent shall have informed Owner in
writing of the name of the prospect within thirty (30) days after the expiration
of the term hereof. With respect to all such pending leases, Agent is authorized
by Owner to continue negotiations and documentation on all such deals. In
addition, in the event Owner sells the Premises, at the time of such sale Owner
shall pay Agent the leasing commission due for any lease approved by Owner and
submitted to the tenant even if such lease is then unsigned.

ARTICLE VI

AGENT’S EXPENSES

--------------------------------------------------------------------------------

6.1 Except to the extent approved in the annual budget or otherwise provided
herein, the following expenses or costs incurred by or on behalf of the Agent in
connection with the management of the Premises shall be the sole cost and
expense of the Agent and shall not be reimbursable by the Owner:

 

  (a) Cost of gross salary and wages, payroll taxes, insurance, worker’s
compensation, pension benefits, and any other benefits of the Agent’s home
office or regional home office personnel, except for those costs specifically
identified in Exhibit C.

 

  (b) General agency bookkeeping accounting and reporting services as such
services are considered to be within the reasonable scope of the Agent’s
responsibility to the Owner, except for those costs specifically identified in
Exhibit C.

 

  (c) Cost of forms, stationery, ledgers, and other supplies and equipment used
in the Agent’s home office or regional home office.

 

  (d) Cost of all incentive compensation, profit sharing or any pay advances by
the Agent to the Agent’s employees.

 

  (e) Cost of automobile purchase and/or rental, except if furnished by the
Owner.

 

  (f) Cost attributable to losses arising from criminal acts or fraud on the
part of the Agent’s associates or employees.

 

  (g) Cost of comprehensive crime insurance purchased by the Agent for its own
account.

ARTICLE VII

DURATION, TERMINATION, DEFAULT

7.1 This Agreement shall become effective on the date specified in Exhibit B and
shall be for the term therein specified and shall continue thereafter from month
to month until terminated by at least thirty (30) days prior written notice.

7.2 In the event a party hereto (the “Defaulting Party”) (a) materially defaults
in the performance of its obligations under this Agreement and such default
remains uncured for more than twenty (20) days’ after such party’s receipt of
written notice from the other party hereto, except for defaults not susceptible
to cure within twenty (20) days, provided as to such defaults the Defaulting
Party commences to cure within such twenty (20) day period and diligently
prosecutes each cure; or (b) makes an assignment for the benefit of creditors;
or (c) has appointed a receiver, liquidator or trustee of its property; or
(d) is adjudicated to be a bankrupt or insolvent; or (e) has filed by or against
it any petition for the bankruptcy, reorganization or arrangement of the
Defaulting Party or, if such appointment, adjudication or petition be
involuntary and not consented to by the Defaulting Party and fails to proceed
diligently to have

--------------------------------------------------------------------------------

the same discharged or dismissed, then the other party hereto may forthwith
terminate this Agreement upon giving ten (10) days’ written notice to the
Defaulting Party.

7.3 This Agreement shall terminate at the election of the Owner upon thirty
(30) days’ written notice to the Agent if the Premises are sold by the Owner to
a non-affiliated third party purchaser or automatically if the Premises were
acquired by the owner on foreclosure of a mortgage and are subsequently
redeemed. In the event the Premises are sold by the Owner to a non-affiliated
third party purchaser and this Agreement is not thereby terminated by the Owner,
the Agent shall have the right to terminate this Agreement upon sixty (60) days
prior written notice. The Term “non-affiliate” as used herein shall mean any
entity which is not an “affiliate” as such term is defined in Section 8.1
hereof. Upon termination of this Agreement for any reason, the Agent shall
deliver the following to the Owner or the Owner’s duly appointed agent on or
before thirty (30) days following the termination date:

 

  (a) A final accounting, reflecting the balance of income and expense for the
Premises as of the date of termination;

 

  (b) Any balance or monies due to the Owner or tenant security deposits, or
both, held by the Agent with respect to the Premises except for reasonable
amounts to pay for services already provided; and

 

  (c) All records, contracts, drawings, leases, correspondence, receipts for
deposits, unpaid bills, summary of all leases in existence at the time of
termination, and all other papers or documents which pertain to the Premises.
Such data and information and all such documents shall, at all times, be the
property of the Owner.

7.4 Notwithstanding termination of this Agreement by the Owner, the Owner shall
reimburse the Agent within thirty (30) days after receipt of documents from the
Agent supporting such expenses, for all sums as may be necessary to satisfy
known obligations which the Agent has incurred for the Owner’s accounts as
authorized under this Agreement, including all severance payments relating to
employees at the Premises who are not retained by Owner. In addition, after any
termination by the Owner, the Owner and the Agent will as promptly as possible
settle any outstanding balances with each other and render final accounts as to
any items overlooked or treated incorrectly in any previous settlement,
accounting or remittance. Upon any termination of this Agreement, Agent shall
assign to Owner or Owner’s nominee all service, supply and other contracts and
agreements pertaining to the Premises entered into by Agent in accordance with
this Agreement and thereupon Owner shall be fully responsible and liable for the
performance of all obligations of Agent under all such contracts and agreements
occurring after the date of such assignment and Agent shall have no further
responsibility or liability with respect thereto. Owner shall indemnify and hold
Agent harmless with respect to all such contracts. Any termination permitted
hereunder shall not prejudice Agent’s right to receive amounts to which Agent is
entitled hereunder on account of services rendered by Agent prior to said
termination.

7.5 The parties agree that it is not within the intention of the Agreement that
the Agent be required to advance its own funds to assist with the maintenance or
operation of the

--------------------------------------------------------------------------------

Premises or, except as provided in Paragraph 6.1 hereof, to compensate personnel
employed by the Agent hereunder. Nevertheless, if the Agent does in good faith
advance its own funds for purposes authorized herein or for emergency repairs,
the Owner shall promptly reimburse the Agent without interest upon receipt of
proper documentation.

7.6 In the event Owner sells the Premises to a nonaffiliated third party and
simultaneously elects to cancel this Agreement in accordance with Section 7.3
hereof, together with such notice of termination the Owner shall pay to Agent
the following sums as and for a cancellation fee:

 

  (a) In the event such termination is effective during the first twenty-four
(24) months of the term of this Agreement, Owner shall pay Agent the sum of
[    ];

 

  (b) In the event such termination is effective after the twenty-fourth
(24th) month in the term of this Agreement, Owner shall pay the Agent the sum of
[    ].

ARTICLE VIII

ASSIGNMENT

8.1 This Agreement shall be unassignable by Agent (except that without Owner’s
consent Agent may assign this Agreement to a parent, successor by merger,
subsidiary or affiliate of Agent) and can be changed only by a writing signed by
both parties. As used herein, the terms “subsidiary” or “affiliate” shall mean a
corporation which directly or indirectly controls or is controlled by Agent. For
this purpose “control” shall mean the possession, directly or indirectly, of the
power to direct the management policies of such corporation, whether through the
ownership of voting rights or by contract or otherwise.

ARTICLE IX

MISCELLANEOUS

9.1 The Owner’s Representative (“Owner’s Representative”) whose name and address
are set forth on Exhibit B shall be the duly authorized representative of the
Owner for the purpose of this Agreement. Any statement, notice, recommendation,
request, demand, consent or approval under this Agreement shall be in writing
and shall be deemed given (a) by the Owner when made by the Owner’s
Representative and delivered personally to the Agent, if an individual, or to an
officer of the Agent, if a corporation, or when mailed, addressed to the Agent,
at the address set forth above, and (b) by the Agent when delivered personally
to or when mailed addressed to the Owner’s Representative at the address set
forth in Exhibit B. Either party may, by written notice, designate a different
address.

9.2 The Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses, directly in its name or through affiliation with other
licensed persons or entities, as may be required for the performance by the
Agent of its services.

--------------------------------------------------------------------------------

9.3 Each provision of this Agreement is intended to be severable. If any term or
provision hereof shall be determined by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such provision shall be severed
from this Agreement and shall not affect the validity of the remainder of this
Agreement.

9.4 In the event one of the parties hereto shall institute an action or
proceeding against the other party relating to this Agreement, the unsuccessful
party in such action or proceeding shall reimburse the successful party for its
disbursements incurred in connection therewith and for its reasonable attorney’s
fees.

9.5 No consent or waiver, expressed or implied, by either party hereto of any
breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligation of such party hereunder. Failure on the part of either party to
complain of any act or failure to act of the other party or to declare the other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder. The granting of any
consent or approval in any one instance by or on behalf of Owner shall not be
construed to waive or limit the need for such consent in any subsequent
instance.

9.6 The venue of any action or proceeding brought by either party against the
other arising out of this Agreement shall, to the extent legally permissible, be
in a court of competent jurisdiction in the Commonwealth of Pennsylvania.

9.7 This Agreement shall be construed and interpreted under and pursuant to the
laws of the Commonwealth of Pennsylvania.

9.8 Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or the
basic management fee set forth in § 4.1 herein that the Agent perform any
services with respect to the following: re-zoning of the Premises, site
acquisition of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, financing or
construction relating to any proposed or implemented expansion of the Premises
or work generally classified as “development” work in connection with the same;
any due diligence work and/or preparation of estoppel certificates; removal of
asbestos or other hazardous material or above or underground storage tanks from
the Premises or supervising such work unless same have been installed by Agent
or its employees or contractors; preparation of Owner’s tax returns or audited
financial statements or preparation of multi-year financial projections;
bringing or assisting in any real estate tax appeals or abatement proceedings.

9.9 This Agreement shall not be construed as creating a partnership or joint
venture between the parties. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
permitted assigns.

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

OWNER:

BALA CYNWYD ASSOCIATES, L.P. BY:   PR Cherry Hill Office GP, LLC BY:   PREIT
Associates, L.P., its Sole Member BY:   Pennsylvania Real Estate Investment
Trust, its General Partner BY:  

 

Name:   Title:   BY:  

 

  Partner AGENT: PREIT-RUBIN, INC. BY:  

 

Name:   Title:  

--------------------------------------------------------------------------------

EXHIBIT A to Management and Leasing Agreement

Premises:

SCHEDULE

(By Job Category and Wages)

 

     Number of
Employees    Maximum
Wage/wk*    Fringe
Benefits    List of Number
Hrs./Wk

Job Title

           

As specified in the current years’ approved budget.

 

* The wages listed will be in effect for the current year, after which the Agent
may grant increases consistent with Agent’s standard wage review policy.

--------------------------------------------------------------------------------

EXHIBIT B to Management and Leasing Agreement

Premises:

 

1. Term:              years, plus for purposes of determining Owner’s obligation
for leasing commissions, the Term will include the six (6) month period set
forth in § 5.1.

Effective date:

 

2. Name and Address of Owner’s Representative:

 

             

 

             

 

             

 

 

3. Limit of amount authorized for non-emergency purchases and repairs:

$ 5,000.00

 

4. Name of Bank:

 

             

 

             

 

             

 

 

5. Description of Bank Account:

PREIT-RUBIN, Inc., Agent for Owner

 

6. Management Fee:

5.25% of gross cash income and receipts during the applicable period received by
Owner from the ownership and operation of the Premises including, without
limitation, all payments of rent of any kind including minimum rent, percentage
rent, utility income, expense reimbursement, license or concession payments,
miscellaneous income and any payments under any other revenue producing
contracts for the use, occupation or other utilization of space in the Premises
and insurance proceeds received by Owner in lieu of any or all of the foregoing,
excluding security deposits, unless and until applied as rent.

 

7. Rate of leasing commissions, if any

Owner shall pay to Agent a leasing commission for each existing and new tenant
lease, expansion, renewal lease and license and concession in the Premises. In
the case of existing leases, license and concession, the commission shall be
                     (    %) percent of the gross cash income and receipts
referred to in § 6 above received by Owner from each existing tenant, license
and concession. With respect to each new lease,

--------------------------------------------------------------------------------

license or concession, or lease amendment effecting a relocation, the amount of
the leasing commission shall be the greater of: (a) three percent (3%) of the
gross cash income and receipts referred to in § 6 above, received by Owner from
each tenant during each year, or (b) a lump sum payment of five percent (5%) of
the rent and escalations received for the 1st year of such lease, plus four
percent (4%) of such items for the second year of such lease, plus three percent
(3%) of such items for the 3rd year of such lease, plus two percent (2%) of such
items for the fourth year of such lease plus one percent (1%) of such items for
each remaining year, plus one and one-half percent (1.5%) of such items for each
year of any renewal term or (b) $             for each square foot of floor area
demised by such document. For the purpose of the above calculations, Owner will
be deemed to have received any free rent which by such lease is abated. The
commission referred to in (a) shall be paid monthly and that specified in
(b) shall be paid seventy five percent (75%) upon lease execution (or, if such
lease is not executed by Owner, upon Agent’s procuring a person or entity ready,
willing and able to lease the space in question on terms set forth in the
approved leasing game plan) and twenty five percent (25%) upon occupancy except
that the portion relating to lease extensions (whether subsequently negotiated
or pursuant to an option contained in the lease) shall be paid on the
commencement of each extension period. In the event a tenant subsequently
expands its space, a similar leasing commission shall be paid by the Owner to
Agent for the expansion area. In the event that an outside broker obtains a new
tenant, Owner shall be solely responsible for the commission due such outside
broker and Agent shall nevertheless receive its leasing commission with respect
to such lease if such is calculated pursuant to (a) above, or, if paid pursuant
to (b) above, Agent shall receive one-half of the amount paid to such outside
broker.

 

8. Owner’s Approved Counsel:

--------------------------------------------------------------------------------

EXHIBIT C to Management and Leasing Agreement

Agent shall charge and Owner shall pay monthly, in arrears, the following in
addition to the management fee as described in Article IV:

 

  1. Payroll Administration – Agent shall charge Owner a portion of its cost of
payroll administration expenses, including salary, employer share of payroll
taxes, employer cost of fringe benefit programs, approved employee expenses, as
well as data processing costs and administration of benefit plans. The total
costs of Agent will be allocated to Owner based on a ratio the numerator of
which shall be the number of employees of Agent directly involved with Owner’s
property divided by total number of home office employees of Agent.

 

  2. Risk Management – Agent shall charge Owner, in addition to premiums
allocated to Owner’s property for specific insurance coverage and a
proportionate share of Agent’s fees to third party insurance brokers or
consultants who provide the overall insurance package to Agent the reasonable
cost of managing the insurance program of the Premises, including a
proportionate share of the salary, employer share of payroll taxes, employer
cost of fringe benefit programs and employee expenses of Agent’s risk management
department.

 

  3. Group and Regional Property Manager – Agent shall charge Owner for its
reasonable share of the salary bonus, employer share of payroll taxes, employer
cost of fringe benefits paid to Agent’s Group and/or Regional Property Manager
and approved employee expenses, it being understood that such property manager
has responsibility to supervise and direct the operation of the on-site Property
Manager.

 

  4. ICSC Convention and Periodic Property Management Meetings – Agent shall
represent Owner and the Premises at all ICSC functions attended by Agent for
other similar properties and Owner shall reimburse Agent for Owner’s reasonable
allocation of the expenses of participating in such functions, including travel,
meals, brochures and other like expenses. In addition, Owner shall reimburse
Agent for the cost involved in having the on-site property management staff
participate in Agent’s periodic management meetings.

--------------------------------------------------------------------------------

Schedule 4.2(h)

BCA Financial Statements

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

BALA CYNWYD ASSOCIATES

DECEMBER 31, 2006 AND 2005

 

 

 

 

 

 

 

VOYNOW BAYARD AND COMPANY

CERTIFIED PUBLIC ACCOUNTANTS

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

DECEMBER 31, 2006 AND 2005

 

CONTENTS       PAGE

INDEPENDENT AUDITORS’ REPORT

   1

FINANCIAL STATEMENTS

  

Balance Sheets

   2

Statements of Changes in Partners’ Deficit

   3

Statements of Income

   4

Statements of Cash Flows

   5-6

Notes to Financial Statements

   7-11

SUPPLEMENTARY INFORMATION

  

Schedules of Operating and Maintenance Expenses

   12

--------------------------------------------------------------------------------

Voynow, Bayard and Company

Certified Public Accountants

Northbrook Corporate Center

1210 Northbrook Dr. Suite 140, Trevose, Pa 19053

Tel: 215-355-8000 • Fax: 215-396-2000

www.voynowbayard.com

 

PARTNERS:

  

ROBERT H. BAYARD, CPA

  

KENNETH MANN, CPA

  

HUGH WHYTE, CPA

  

RANDALL E. FRANZEN, CPA

  

DAVID A. KAPLAN, CPA

  

CHARLES L. KLOSS, CPA

  

STEVEN W. WHITE, CPA

   PAUL VOYNOW, CM

INDEPENDENT AUDITORS’ REPORT

To the Partners of

Bala Cynwyd Associates

Wynnewood, Pennsylvania 19096

We have audited the balance sheets of Bala Cynwyd Associates (a partnership) as
of December 31, 2006 and 2005, and the related statements of income, changes in
partners’ deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bala Cynwyd Associates as of
December 31, 2006 and 2005 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary schedules of operating
and maintenance expenses on page 13 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has not been subjected to the auditing procedures applied in the
audits of the basic financial statements, and, accordingly, we express no
opinion on it.

VOYNOW, BAYARD AND COMPANY

Certified Public Accountants

March 1, 2007

 

 

MEMBER • AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

MEMBER • PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

 

      2006     2005   ASSETS     

REAL ESTATE

    

Land

   $ 1,226,219      $ 1,226,219   

Site Improvements

     1,065,725        1,065,725   

Building and improvements

     5,777,565        5,772,765   

Tenant improvements

     3,192,512        3,192,512                          11,262,021       
11,257,221   

Less accumulated depreciation

     6,163,491        5,866,751                          5,098,530       
5,390,468                    

OTHER ASSETS

    

Cash and cash equivalents

     610,896        182,110   

Restricted cash

     109,440        113,387   

Accounts receivable, tenants (net of allowance for bad debts of $5,888 in 2006)

     111,168        65,872   

Prepaid expenses

     141,776        120,030   

Deferred charges, net

     398,986        537,725   

Security deposits escrowed

     60,341        60,220   

Construction deposit

     7,500        7,500                          1,440,107        1,086,844   
                

TOTAL ASSETS

   $ 6,538,637      $ 6,477,312                     LIABILITIES AND PARTNERS’
DEFICIT     

DEBT

    

Mortgage payable

   $ 10,717,646      $ 10,892,419   

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     197,893        215,401                    

TOTAL LIABILITIES

     10,915,539        11,107,820   

PARTNERS’ DEFICIT

     (4,376,902 )      (4,630,508 )                  

TOTAL LIABILITIES AND PARTNERS’ DEFICIT

   $ 6,538,637      $ 6,477,312                    

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

2

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT

YEARS ENDED DECEMBER 31, 2006 AND 2005

 

      CITY LINE
ASSOCIATES     VIACOM
REALTY
CORPORATION     TOTAL  

BALANCE, JANUARY 1, 2005

   $ (2,250,285 )    $ (2,250,285 )    $ (4,500,570 ) 

NET INCOME, 2005

     185,031        185,031        370,062   

DISTRIBUTIONS, 2005

     (250,000 )      (250,000 )      (500,000 )                          

BALANCE, DECEMBER 31, 2005

     (2,315,254 )      (2,315,254 )      (4,630,508 ) 

NET INCOME, 2006

     226,803        226,803        453,606   

DISTRIBUTIONS, 2006

     (100,000 )      (100,000 )      (200,000 )                          

BALANCE, DECEMBER 31, 2006

   $ (2,188,451 )    $ (2,188,451 )    $ (4,376,902 )                          

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

3

--------------------------------------------------------------------------------

BALA CYNWD ASSOCIATES

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2006 AND 2005

 

      2006     2005

REVENUES

    

Rental income

   $ 2,293,121      $ 2,308,164

Interest and other income

     120        120                     2,293,241        2,308,284             
 

EXPENSES

    

Operating and maintenance expenses

     797,533        777,534

Less reimbursements from tenants

     355,625        250,055                     441,908        527,479

Real estate taxes (net of $33,740 and $17,763 in tenant reimbursements in 2006
and 2005, respectively)

     242,404        243,336

Commissions and leasing expenses

     15,659        7,301

Bad debt expense (recovery)

     (5,381 )      3,775                     694,590        781,891             
 

OPERATING INCOME

     1,598,651        1,526,393               

OTHER EXPENSES

    

Interest expense

     810,992        823,678

Depreciation

     296,738        295,337

Amortization

     37,315        37,316                     1,145,045        1,156,331       
       

NET INCOME

   $ 453,606      $ 370,062               

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

4

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2006 AND 2005

 

      2006     2005  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Cash received from tenants

   $ 2,738,492      $ 2,590,293   

Interest received

     120        —     

Interest paid

     (812,085 )      (824,690 ) 

Cash paid for payroll, taxes and benefits

     (162,480 )      (144,536 ) 

Cash paid for other operating and maintenance expenses

     (673,215 )      (636,932 ) 

Cash paid for commissions and leasing expenses

     (10,278 )      (7,301 ) 

Cash paid for real estate taxes

     (276,144 )      (259,602 )            

Net Cash Provided By

Operating Activities

     804,401        717,232   

CASH FLOWS FROM INVESTING ACTIVITIES

    

Expenditures for tenant and site improvements

     (4,800 )      (5,445 ) 

Refund of construction deposit

     —          6,800   

Decrease to escrow cash accounts

     3,949        688                    

Net Cash Provided By (Used In) Investing Activities

     (851 )      2,043   

CASH FLOWS FROM FINANCING ACTIVITIES

     (174,772 )      (162,165 ) 

Mortgage principal payments

     (200,000 )      (500,000 )                  

Distributions to partners

    

Net Cash Used In Financing Activities

     (374,772 )      (662,165 )                  

INCREASE IN CASH AND CASH EQUIVALENTS

     428,787        57,110   

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

     182,109        124,999                    

CASH AND CASH EQUIVALENTS AT END OF YEAR

   $ 610,896      $ 182,109                    

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

5

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2006 AND 2005

 

 

RECONCILIATION OF NET INCOME TO NET

CASH PROVIDED BY OPERATING ACTIVITIES:

 

     2006      2005  

NET INCOME

   $ 453,606       $ 370,062                     

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

     

Depreciation and amortization

     334,053         332,653   

Changes in assets and liabilities:

     

Increase in accounts receivable

     (45,297 )       (55,233 ) 

Increase in prepaid expenses

     (21,746 )       (6,037 ) 

Increase in security deposits escrowed

     (121 )       (40 ) 

Decrease in deferred charges

     101,423         101,492   

Decrease in accounts payable and accrued expenses

     (17,508 )       (25,597 )                   350,804         347,170        
            

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 804,410       $ 717,232                     

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

6

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

 

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  A. Operations

Bala Cynwyd Associates (The Partnership) was formed as a Pennsylvania
partnership organized to acquire, develop, lease, operate and maintain an office
building located in Bala Cynwyd, Pennsylvania, a suburb of Philadelphia. The
office building has approximately 80,000 square feet with four tenants.

 

  B. Real Estate

Real estate acquired by The Partnership has been stated at cost. Depreciation of
building and site improvements is computed by the straight-line method over the
assets’ estimated useful lives, ranging from five to forty years. Amortization
of tenant improvements is calculated over the terms of related leases on a
straight-line basis and is included in depreciation expense.

 

  C. Income Taxes

Income taxes are not recorded by The Partnership because the individual partners
are responsible for income taxes based on their respective interests in net
income or loss.

 

  D. Deferred Charges

Deferred financing costs are expenditures related to mortgage debt acquisition
and are being amortized over the term of the debt agreement on a straight-line
basis.

Deferred leasing costs are expenditures paid to real estate brokers for services
rendered in obtaining tenants. These costs are being amortized over the terms of
the related tenant leases on a straight-line basis.

Deferred rent credits are reductions in the rent (“free rent”) charged tenants
at the beginning of the lease term to induce such tenants to lease space in the
building. These credits are being amortized over the terms of the related tenant
leases as a charge against rental income.

Deferred rental adjustments arise from the averaging and spreading of scheduled
rental increases over the entire term of a tenant’s lease in order to recognize
rental income evenly (“straight-lining”) from those applicable tenants.

 

  E. Statements of Cash Flows

For purposes of these statements, cash and cash equivalents are defined as all
unrestricted demand deposits and time deposits which mature within three months.

 

  F. Allowance for Doubtful Accounts

It is the policy of the management to review the outstanding accounts receivable
at year-end, as well as the actual bad debts experienced in the past, to
establish an allowance for doubtful accounts for uncollectible amounts.

 

  G. Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and to disclose contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

 

7

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

 

 

 

  H. Restricted Cash

The Partnership maintains escrow cash accounts with the mortgage lender to fund
future cash commitments for real estate taxes and with the management company
for self-insurance claims.

 

  I. Advertising Costs

The Partnership conducts non-direct response advertising. The costs are expensed
as incurred. Advertising costs for the years ended December 31, 2006 and 2005
were $3,200 and $3,100, respectively, included in commissions and leasing
expenses.

 

2. DEFERRED CHARGES

Deferred charges consisted of the following:

 

     2006    2005

Deferred finance costs (net of accumulated amortization of $142,399 in 2006 and
$123,413 in 2005)

   $ 47,467    $ 66,453

Deferred leasing costs (net of accumulated amortization of $166,850 in 2006 and
$152,579 in 2005)

     36,099      50,369

Deferred rent credits (net of accumulated amortization of $160,166 in 2006 and
$156,107 in 2005)

     9,135      13,194

Straight-line rental adjustments (reduced by allowance for unrealized rental
collections of $34,032 in 2006 and $45,301 in 2005).

     306,285      407,709                  $ 398,986    $ 537,725              

 

3. MORTGAGE PAYABLE

The current mortgage financing was obtained on July 1, 1999 with Lend Lease
Mortgage Service, L.P. in the amount of $11,750,000 and has a ten-year term. The
interest rate is 7.51%. The note provides for monthly payments of $82,238,
including principal and interest based on a thirty-year amortization schedule,
with a balloon payment of approximately $10,200,000. Prepayment is permitted
subject to penalty. The book value of the collateralized real property as of
December 31, 2006 and 2005 was $5,098,530 and $5,390,468, respectively.

Future principal payments required under the mortgage debt obligation are as
follows:

 

YEAR ENDING

DECEMBER 31,

    

2007

   $ 188,358

2008

     203,001

2009

     10,326,296           $ 10,717,655       

 

8

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

 

 

 

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

 

     2006      2005

Accounts payable and accrued expenses

   $ 32,475      $ 74,064

Accrued interest

     67,075        69,168

Accounts payable, related parties

     40,343        14,169

Tenant security deposits

     58,000        58,000                    $ 197,893      $ 215,401       
        

 

5. RENTALS UNDER OPERATING LEASES

Operating leases for office space range in terms from one year to ten years.
Leases provide for minimum rentals plus a proportional reimbursement of certain
defined operating and maintenance expenses. Minimum future rents to be received
under noncancellable operating leases as of December 31, 2006 are as follows:

 

YEAR ENDING

DECEMBER 31,

    

2007

   $  2,414,398

2008

     2,440,139

2009

     1,202,176       

Total Minimum

Future Rentals

   $ 6,056,713       

 

6. RELATED PARTY TRANSACTIONS

The Partnership signed a management and leasing agreement with an affiliate,
PREIT-RUBIN, Inc., to obtain tenants and to manage the operations of the
building. The agreement, which expired on May 31, 1998, is currently running on
a year-to-year basis.

Under the management agreement, the manager receives a fee, payable monthly, of
2.5% of all minimum rents and reimbursements for operating costs and real estate
taxes actually received from tenants. In addition, the manager is reimbursed for
payroll and related coats incurred on the partnership’s behalf.

Under the leasing agreement, if the manager is the sole broker, the leasing
commissions paid are 75% upon tenant occupancy and the remaining 25% on the
first anniversary based upon the amount of a tenant’s percentage of annual
minimum rentals as follows:

 

1st Year

   5%

2nd Year

   4%

3rd Year

   3%

4th Year

   2%

5th through 10th Year

   1%

 

9

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

 

 

For an existing tenant renewal or expansion, the commission in its entirety is
paid at execution at the rate of 1% of the total tenant rentals due under the
lease.

Fees, commissions and reimbursed costs were as follows:

 

     2006      2005

Management fees

   $ 67,606      $ 65,492

Reimbursed payroll and benefit costs

   $ 160,580      $ 141,607

Insurance premiums

   $ 67,968      $ 42,058

 

10

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 AND 2005

 

 

 

7. INSURANCE AND CONTINGENCY

The Partnership is self-insured under its general liability insurance policy for
the first $50,000 of losses from damage claims made against it. Coverage is
maintained for each individual incident. The Partnership has transferred to the
management company funds set aside for the payment of these potential losses.
Deficits of $1,500 and $14,169 at December 31, 2006 and 2005, respectively, in
this account are reflected in accounts payable and accrued expenses.

 

8. MAJOR TENANT

Lend Lease Mortgage Service, L.P., currently the mortgage holder (see Note 3),
is also the largest tenant, occupying 57,304 square feet (approximately 72%) of
the building and is currently committed to a ten-year lease expiring on July 31,
2009. The amount of rent billed by The Partnership to Lend Lease was $1,776,424
for each 2006 and 2005.

 

9. RECONCILIATION OF PARTNERS’ DEFICIT REPORTED IN THE FINANCIAL STATEMENTS TO
THE RELATED AMOUNTS REPORTED IN THE FEDERAL INCOME TAX RETURN

 

     City Line
Associates     Viacom Realty
Corporation     Total  

Partners’ Deficit, December 31, 2006, per financial statement

   $ (2,188,451 )    $ (2,188,451 )    $ (4,376,902 ) 

Excess of amortization expense for tax purposes over financial reporting
purposes

     (13,141 )      (13,141 )      (26,282 ) 

Net basis reduction in property from cancellation of indebtness income for tax
purposes

     (1,352,979 )      —          (1,352,979 ) 

Excess of depreciation expense for financial reporting purposes over tax
purposes

     287,463        287,463        574,926   

Timing difference for financial straight-line rental income adjustment

     (153,144 )      (153,141 )      (306,285 ) 

Reversal of estimated insurance liability

     750        750        1,500                            

Partners’ Deficit, December 31, 2006, per tax return

   $ (3,419,502 )    $ (2,066,520 )    $ (5,486,022 )                          

 

11

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

SUPPLEMENTARY SCHEDULES OF OPERATING AND MAINTENANCE

YEARS ENDED DECEMBER 31, 2006 AND 2005

 

 

 

     2006    2005           PER SQUARE
FOOT OF
GROSS
LEASABLE
AREA*         PER SQUARE
FOOT OF
GROSS
LEASABLE
AREA*

Payroll

   $ 123,981    1.55    $ 108,947    1.36

Payroll taxes and benefits

     36,599    .46      32,660    .41

Cleaning service

     94,638    1.18      90,285    1.13

Electric

     182,140    2.28      168,342    2.10

Electric supplies

     3,279    .04      2,231    .03

Elevator maintenance

     19,082    .24      9,095    .11

General building expense

     148,384    1.85      115,254    1.44

Heating, ventilation and air conditioning

     7,644    .10      9,847    .12

Insurance

     11,425    .14      75,303    .94

Landscaping

     16,501    .21      11,393    .14

Management fees

     67,606    .84      65,492    .82

Office expense

     14,066    .18      13,464    .17

Other taxes

     4,530    .06      3,831    .04

Professional fees

     13,500    .17      13,602    .17

Security

     17,388    .22      11,096    .14

Snow removal

     24,640    .31      36,028    .45

Water and sewer

     12,130    .15      10,664    .13                            $ 797,533   
9.96    $ 777,534    9.70                        

 

*Based on 80,053 square feet.

See disclaimer paragraph contained in independent auditors’ report.

 

12

--------------------------------------------------------------------------------

 

 

 

 

 

 

BALA CYNWYD ASSOCIATES

DECEMBER 31, 2005 AND 2004

 

 

 

 

 

 

 

VOYNOW BAYARD AND COMPANY

CERTIFIED PUBLIC ACCOUNTANTS

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

DECEMBER 31, 2005 AND 2004

CONTENTS

 

   PAGE

INDEPENDENT AUDITORS’ REPORT

   1

FINANCIAL STATEMENTS

  

Balance Sheets

   2

Statements of Changes in Partners’ Deficit

   3

Statements of Income

   4

Statements of Cash Flows

   5-6

Notes to Financial Statements

   7-10

SUPPLEMENTARY INFORMATION

  

Schedules of Operating and Maintenance Expenses

   11

--------------------------------------------------------------------------------

Voynow, Bayard and Company

Certified Public Accountants

Northbrook Corporate Center

1210 Northbrook Dr. Suite 140, Trevose, Pa 19053

Tel: 215-355-8000 • Fax: 215-396-2000

www.voynowbayard.com

 

PARTNERS:

  

ROBERT H. BAYARD, CPA

  

KENNETH MANN, CPA

  

HUGH WHYTE, CPA

  

RANDALL E. FRANZEN, CPA

  

DAVID A. KAPLAN, CPA

  

CHARLES L. KLOSS, CPA

  

STEVEN W. WHITE, CPA

   PAUL VOYNOW, CM

INDEPENDENT AUDITORS’ REPORT

To the Partners of

Bala Cynwyd Associates

Wynnewood, Pennsylvania 19096

We have audited the balance sheets of Bala Cynwyd Associates (a partnership) as
of December 31, 2005 and 2004, and the related statements of income, changes in
partners’ deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bala Cynwyd Associates as of
December 31, 2005 and 2004 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary schedules of operating
and maintenance expenses on page 13 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has not been subjected to the auditing procedures applied in the
audits of the basic financial statements, and, accordingly, we express no
opinion on it.

VOYNOW, BAYARD AND COMPANY

Certified Public Accountants

February 21, 2006

 

 

MEMBER • AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

MEMBER • PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

BALANCE SHEETS

DECEMBER 31, 2005 AND 2004

 

      2005     2004   ASSETS     

REAL ESTATE

    

Land

   $ 1,226,219      $ 1,226,219   

Site improvements

     1,065,725        1,061,178   

Building and improvements

     5,772,765        5,772,765   

Tenant improvements

     3,192,512        3,191,614                          11,257,221       
11,251,776   

Less accumulated depreciation

     5,866,753        5,571,416                          5,390,468       
5,680,360                    

OTHER ASSETS

    

Cash and cash equivalents

     182,110        124,999   

Restricted cash

     113,387        114,075   

Accounts receivable, tenants (net of allowance for bad debts of $280 in 2004)

     65,872        10,610   

Prepaid expenses

     120,030        113,995   

Deferred charges, net

     537,725        676,464   

Security deposits escrowed

     60,220        60,180   

Construction deposit

     7,500        14,300                          1,086,844        1,114,623   
                

TOTAL ASSETS

   $ 6,477,312      $ 6,794,983                     LIABILITIES AND PARTNER’S
DEFICIT     

DEBT

    

Mortgage payable

   $ 10,892,419      $ 11,054,583   

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     215,401        240,970                    

TOTAL LIABILITIES

     11,107,820        11,295,553   

PARTNERS’ DEFICIT

     (4,630,508 )      (4,500,570 )                  

TOTAL LIABILITIES AND PARTNERS’ DEFICIT

   $ 6,477,312      $ 6,794,983                    

 

 

 

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

2

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT

YEARS ENDED DECEMBER 31, 2005 AND 2004

 

      CITY LINE
ASSOCIATES     VIACOM REALTY
CORPORATION     TOTAL  

BALANCE, JANUARY 1, 2004

   $ (2,356,291 )    $ (2,356,292 )    $ (4,712,583 ) 

NET INCOME, 2004

     181,006        181,007        362,013   

DISTRIBUTIONS, 2004

     (75,000 )      (75,000 )      (150,000 )                          

BALANCE, DECEMBER 31, 2004

     (2,250,285 )      (2,250,285 )      (4,500,570 ) 

NET INCOME, 2005

     185,031        185,031        370,062   

DISTRIBUTIONS, 2005

     (250,000 )      (250,000 )      (500,000 )                          

BALANCE, DECEMBER 31, 2005

   $ (2,315,254 )    $ (2,315,254 )    $ (4,630,508 )                          

 

 

 

 

The independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

3

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2005 AND 2004

 

      2005    2004  

REVENUES

     

Rental income

   $ 2,308,164    $ 2,179,566   

Telecommunication fees

     —        6,557   

Interest and other income

     120      291                         2,308,284      2,186,414             
     

EXPENSES

     

Operating and maintenance expenses

     777,534      601,630   

Less reimbursements from tenants

     250,055      196,083                         527,479      405,547   

Real estate taxes (net of $17,763 and $16,267 in tenant reimbursements in 2005
and 2004, respectively)

     243,336      233,009   

Commissions and leasing expenses

     7,301      8,331   

Bad debt expense (recovery)

     3,775      (280 )                       781,891      646,607               
   

OPERATING INCOME

     1,526,393      1,539,807                   

OTHER EXPENSES

     

Interest expense

     823,678      835,449   

Depreciation

     295,337      287,371   

Amortization

     37,316      54,974                         1,156,331      1,177,794        
          

NET INCOME

   $ 370,062    $ 362,013                   

 

 

 

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

4

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CASH FLOW

YEARS ENDED DECEMBER 31, 2005 AND 2004

 

      2005     2004  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Cash received from tenants

   $ 2,590,293      $ 2,365,703   

Interest received

     —          275   

Interest paid

     (824,690 )      (836,390 ) 

Cash paid for payroll, taxes and benefits

     (144,536 )      (106,971 ) 

Cash paid for other operating and maintenance expenses

     (636,932 )      (519,570 ) 

Cash paid for commissions and leasing expenses

     (7,301 )      (8,332 ) 

Cash paid for real estate taxes

     (259,602 )      (249,276 )                  

Net Cash Provided By Operating Activities

     717,232        645,433                    

CASH FLOWS FROM INVESTING ACTIVITIES

    

Expenditures for leasing costs

     —          (6,586 ) 

Expenditures for tenant and site improvements

     (5,445 )      (371,076 ) 

Refund of construction deposit

     6,800        59,535   

Decrease (increase) to escrow cash accounts

     688        (1,156 )                  

Net Cash Provided By (Used In) Investing Activities

     2,043        (319,283 )                  

CASH FLOWS FROM FINANCING ACTIVITIES

    

Mortgage principal payments

     (162,165 )      (150,468 ) 

Distributions to partners

     (500,000 )      (150,000 )                  

Net Cash Used In Financing Activities

     (662,165 )      (300,468 )                  

INCREASE IN CASH AND CASH EQUIVALENTS

     57,110        25,682   

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

     124,999        99,317                    

CASH AND CASH EQUIVALENTS AT END OF YEAR

     182,109      $ 124,999                    

 

 

 

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

5

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

STATEMENTS OF CASH FLOW

YEARS ENDED DECEMBER 31, 2005 AND 2004

 

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

                      2005     2004  

NET INCOME

   $ 370,062      $ 362,013                    

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

    

Depreciation and amortization

     332,653        342,345   

Changes in assets and liabilities:

    

Increase in accounts receivable

     (55,233 )      (8,248 ) 

Increase in prepaid expenses

     (6,037 )      (2,854 ) 

Increase decrease in security deposits escrowed

     (40 )      (79 ) 

Decrease (Increase) in deferred charges

     101,424        (33,958 ) 

Decrease in accounts payable and accrued expenses

     (25,597 )      (13,786 )                        347,170        283,420   
                

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 717,232      $ 645,433                    

 

 

 

 

See independent auditors’ report.

The accompanying notes are an integral part of the financial statements.

 

6

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

 

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  A. Operations

Bala Cynwyd Associates (The Partnership) was formed as a Pennsylvania
partnership organized to acquire, develop, lease, operate and maintain an office
building located in Bala Cynwyd, Pennsylvania, a suburb of Philadelphia. The
office building has approximately 80,000 square feet with four tenants.

 

  B. Real Estate

Real estate acquired by The Partnership has been stated at cost. Depreciation of
building and site improvements is computed by the straight-line method over the
assets’ estimated useful lives, ranging from five to forty years. Amortization
of tenant improvements is calculated over the terms of related leases on a
straight-line basis and is included in depreciation expense.

 

  C. Income Taxes

Income taxes are not recorded by The Partnership because the individual partners
are responsible for income taxes based on their respective interests in net
income or loss.

 

  D. Deferred Charges

Deferred financing costs are expenditures related to mortgage debt acquisition
and are being amortized over the term of the debt agreement on a straight-line
basis.

Deferred leasing costs are expenditures paid to real estate brokers for services
rendered in obtaining tenants. These costs are being amortized over the terms of
the related tenant leases on a straight-line basis.

Deferred rent credits are reductions in the rent (“free rent”) charged tenants
at the beginning of the lease term to induce such tenants to lease space in the
building. These credits are being amortized over the terms of the related tenant
leases as a charge against rental income.

Deferred rental adjustments arise from the averaging and spreading of scheduled
rental increases over the entire term of a tenant’s lease in order to recognize
rental income evenly (“straight-lining”) from those applicable tenants.

 

  E. Statements of Cash Flows

For purposes of these statements, cash and cash equivalents are defined as all
unrestricted demand deposits and time deposits which mature within, three
months.

 

  F. Allowance for Doubtful Accounts

It is the policy of the management to review the outstanding accounts receivable
at year-end, as well as the actual bad debts experienced in the past, to
establish an allowance for doubtful accounts for uncollectible amounts.

 

  G. Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and to disclose contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

 

  H. Restricted Cash

The Partnership maintains escrow cash accounts with the mortgage lender to fund
future cash commitments for real estate taxes and cash with the management
company for self-insurance claims.

 

7

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

 

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

  I. Advertising Costs

The Partnership conducts non-direct response advertising. The costs are expensed
as incurred. Advertising costs for the years ended December 31, 2005 and 2004
were $3,100 and $3,049, respectively.

 

2. DEFERRED CHARGES

Deferred charges consisted of the following:

 

     2005    2004

Deferred finance costs (net of accumulated amortization of $123,413 in 2005 and
$104,426 in 2004)

   $ 66,453    $ 85,440

Deferred leasing costs (net of accumulated amortization of $152,579 in 2005 and
$138,310 in 2004)

     50,369      64,638

Deferred rent credits (net of accumulated amortization of $156,107 in 2005 and
$152,047 in 2004)

     13,194      17,253

Straight-line rental adjustments (reduced by allowance for unrealized rental
collections of $45,301 in 2005 and $56,570 in 2004)

     407,709      509,133                  $ 537,725    $ 676,464              

 

3. MORTGAGE PAYABLE

The current mortgage financing was obtained on July 1, 1999 with Lend Lease
Mortgage Service, L.P. in the amount of $11,750,000 and has a ten-year term. The
interest rate is 7.51%. The note provides for Monthly payments of $82,238,
including principal and interest based on a thirty-year amortization schedule,
with a balloon payment of approximately $10,200,000. Prepayment was prohibited
for the first five years of the loan, but, thereafter, is permitted subject to
penalty. The book value of the collateralized real property as of December 31,
2005 and 2004 was $5,390,468 and $5,680,360, respectively.

Future principal payments required under the mortgage debt obligation are as
follows:

 

YEAR ENDING
DECEMBER 31,

    

2006

   $ 174,772

2007

     188,359

2008

     203,002

2009

     10,326,286           $ 10,892,419       

 

4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

 

     2005    2004

Accounts payable and accrued expenses

   $ 74,064      79,404

Accrued interest

     69,168      69,183

Accounts payable, related parties

     14,169      —  

Tenant security deposits

     58,000      60,100

Due to tenants and prepaid income

     —        32,283                  $ 215,401    $ 240,970              

 

8

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

 

 

 

5. RENTALS UNDER OPERATING LEASES

Operating leases for office space range in terms from one year to ten years.
Leases provide for minimum rentals plus a proportional reimbursement of certain
defined operating and maintenance expenses. Minimum future rents to be received
under noncancellable operating leases as of December 31, 2005 are as follows:

 

YEAR ENDING
DECEMBER 31,

    

2006

   $  2,405,813

2007

     2,414,395

2008

     2,440,136

2009

     1,202,176       

Total Minimum

Future Rentals

   $ 8,462,520       

 

6. RELATED PARTY TRANSACTIONS

The Partnership signed a management and leasing agreement with an affiliate,
PREIT-RUBIN, Inc., to obtain tenants and to manage the operations of the
building. The agreement, which expired on May 31, 1998, is currently running on
a year-to-year basis.

Under the management agreement, the manager receives a fee, payable monthly, of
2.5% of all minimum rents and reimbursements for operating costs and real estate
taxes actually received from tenants. In addition, the manager is reimbursed for
payroll and related costs incurred on the partnership’s behalf.

Under the leasing agreement, if the manager is the sole broker, the leasing
commissions paid are 75% upon tenant occupancy and the remaining 25% on the
first anniversary based upon the amount of a tenant’s percentage of annual
minimum rentals as follows:

 

1st Year

   5%

2nd Year

   4%

3rd Year

   3%

4th Year

   2%

5th through 10th Year

   1%

For an existing tenant renewal or expansion, the commission in its entirety is
paid at execution at the rate of 1% of the total tenant rentals due under the
lease.

Fees, commissions and reimbursed costs were as follows:

 

     2005    2004

Management fees

   $ 65,492    $ 59,142

Reimbursed payroll and benefit costs

   $ 141,607    $ 117,315

Insurance premiums

   $ 42,058    $ 38,826

 

7. INSURANCE AND CONTINGENCY

The Partnership is self-insured under its general liability insurance policy for
the first $50,000 of losses from damage claims made against it. Coverage is
maintained for each individual incident. The Partnership has transferred to the
management company funds set aside for the payment of these potential losses.
The amount held in this account at December 31, 2004 was $18,291. A deficit of
$14,169 at December 31, 2005 in this account is reflected in accounts payable
and accrued expenses.

 

9

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

 

 

 

8. MAJOR TENANT

Lend Lease Mortgage Service, L.P., currently the mortgage holder (see Note 3),
is also the largest tenant, occupying 57,304 square feet (approximately 72%) of
the building and is currently committed to a ten-year lease expiring on July 31,
2009. The amount of rent billed by The Partnership to Lend Lease was $1,776,424
for 2005 and $1,626,001 for 2004.

 

9. RECONCILIATION OF PARTNERS’ DEFICIT REPORTED IN THE FINANCIAL STATEMENTS TO
THE RELATED AMOUNTS REPORTED IN THE FEDERAL INCOME TAX RETURN

 

     City Line
Associates     Viacom Realty
Corporation     Total  

Partners’ Deficit, December 31, 2005, per financial statement

   $ (2,315,254 )    $ (2,315,254 )    $ (4,630,508 ) 

Excess of amortization expense for tax purposes over financial reporting
purposes

     (13,141 )      (13,141 )      (26,282 ) 

Net basis reduction in property from cancellation of indebtness income for tax
purposes

     (1,451,362 )      —          (1,451,362 ) 

Excess of depreciation expense for financial reporting purposes over tax
purposes

     288,149        288,150        576,299   

Timing difference for financial straight-line rental income adjustment

     (203,858 )      (203,851 )      (407,709 ) 

Reversal of estimated insurance liability

     15,000        15,000        30,000                            

Partners’ Deficit, December 31, 2005, per tax return

   $ (3,680,466 )    $ (2,229,096 )    $ (5,909,562 )                          

 

10

--------------------------------------------------------------------------------

BALA CYNWYD ASSOCIATES

SUPPLMENTARY SCHEDULES OF OPERATING AND MAINTENANCE EXPENSES

YEARS ENDED DECEMBER 31, 2005 AND 2004

 

      2005    2004           PER SQUARE
FOOT OF
GROSS
LEASABLE
AREA*         PER SQUARE
FOOT OF
GROSS
LEASABLE
AREA*

Payroll

   $ 108,947    1.36    $ 94,502    1.18

Payroll taxes and benefits

     32,660    .41      22,813    .28

Cleaning service

     90,285    1.13      85,695    1.07

Electric

     168,342    2.10      155,974    1.95

Electric supplies

     2,231    .03      3,978    .05

Elevator maintenance

     9,095    .11      11,658    .15

General building expense

     115,254    1.44      15,119    .19

Heating, ventilation and air conditioning

     9,847    .12      18,709    .23

Insurance

     75,303    .94      47,102    .59

Landscaping

     11,393    .14      7,745    .10

Management fees

     65,492    .82      59,142    .74

Office expense

     13,464    .17      13,535    .17

Other taxes

     3,831    .04      3,133    .04

Professional fees

     13,602    .17      13,500    .17

Security

     11,096    .14      13,419    .17

Snow removal

     36,028    .45      23,853    .30

Water and sewer

     10,664    .13      11,753    .15                            $ 777,534   
9.70    $ 601,630    7.52                        

 

 

 

 

*Based on 80,053 square feet.

See disclaimer paragraph contained in independent auditors’ report.

 

11

--------------------------------------------------------------------------------

Schedule 7.2

FORM OF PROPERTY MANAGEMENT AGREEMENT

TABLE OF CONTENTS

 

         Page

ARTICLE 1

  APPOINTMENT    1

ARTICLE 2

  INITIAL TERM; RENEWAL TERMS    2

ARTICLE 3

  OPERATIONAL DUTIES AND AUTHORITY OF MANAGER    2

Section 3.01.

  Employees; Independent Contractors    3

Section 3.02.

  Annual Plan    4

Section 3.03.

  Supplies and Equipment    6

Section 3.04.

  Service Contracts    6

Section 3.05.

  Collection of Receivables    6

Section 3.06.

  Compliance with Lease Obligations    7

Section 3.07.

  Repairs, Decorations, Alterations    7

Section 3.08.

  Taxes    7

Section 3.09.

  Mortgages    8

Section 3.10.

  Leasing    8

Section 3.11.

  Compliance with Laws    8

Section 3.12.

  Legal Proceedings    9

Section 3.13.

  General    10

ARTICLE 4

  INSURANCE    10

Section 4.01.

  Owner’s Insurance    10

Section 4.02.

  Manager’s Insurance    11

Section 4.03.

  Contractors and Subcontractor’s Insurance    12

Section 4.04.

  Certificates    12

Section 4.05.

  Brokers    12

ARTICLE 5

  FINANCIAL REPORTING AND RECORDKEEPING    13

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(continued)

 

         Page

Section 5.01.

  Books of Accounts    13

Section 5.02.

  Financial Reports    13

Section 5.03.

  Administrative Services; Partnership Reports    14

Section 5.04.

  Supporting Documentation    14

Section 5.05.

  Accounting Principles    14

ARTICLE 6

  BANK ACCOUNTS    14

Section 6.01.

  Operating Account    14

Section 6.02.

  Remittance of Funds to Owner    15

Section 6.03.

  Access to Account    15

ARTICLE 7

  PAYMENT OF EXPENSES    15

Section 7.01.

  Expenses Paid from Operating Account    15

Section 7.02.

  Expenses Reimbursed to Manager from Operating Account    16

ARTICLE 8

  INSUFFICIENT GROSS INCOME    16

ARTICLE 9

  COMPENSATION    17

Section 9.01.

  Compensation for Managing the Project    17

Section 9.02.

  Leasing Commissions    18

ARTICLE 10

  TERMINATION    18

Section 10.01.

  Termination    18

Section 10.02.

  Final Accounting    19

Section 10.03.

  Owner’s Assumption of Liability    19

Section 10.04.

  No Prejudice    20

ARTICLE 11

  MANAGER’S LIABILITY    20

Section 11.01.

  Services for Account of Owner    20

Section 11.02.

  Limitation of Liability; Manager’s Indemnity    20

Section 11.03.

  Owner’s Indemnity    21

ARTICLE 12

  NOTICES    21

ARTICLE 13

  MISCELLANEOUS PROVISIONS    21

Section 13.01.

  Status of Property Manager    21

 

- 2 -

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(continued)

 

         Page

Section 13.02.

  No Assignment or Delegation    21

Section 13.03.

  Entire Agreement    21

Section 13.04.

  Modification    22

Section 13.05.

  Waivers    22

Section 13.06.

  Severability    22

Section 13.07.

  Governing Law    22

Section 13.08.

  Counterparts    22

Section 13.09.

  Successors and Assigns    22

Schedule A - Description of Project Site

  

Schedule B - Content of Annual Plan

  

Schedule C - Form of Financial Report

  

Schedule D - Leasing Commission

  

 

- 3 -

--------------------------------------------------------------------------------

PROPERTY MANAGEMENT AGREEMENT

THIS AGREEMENT, dated as of January     , 2008, between BALA CYNWYD ASSOCIATES,
L.P. a Pennsylvania limited partnership having an office at c/o PREIT
Associates, L.P., The Bellevue, Suite 300, 200 South Broad Street, Philadelphia,
Pennsylvania 19102 (“Owner”), and PREIT-RUBIN, INC., having its principal office
at The Bellevue, Suite 300, 200 South Broad Street, Philadelphia, Pennsylvania
19102 (“Manager”),

W I T N E S S E T H :

WHEREAS, Owner exists pursuant to the terms of that certain Amended and Restated
Limited Partnership Agreement dated of even date herewith (the “Partnership
Agreement”) and, unless otherwise defined herein, capitalized terms shall have
the meanings set forth in the Partnership Agreement; and

WHEREAS, Owner wishes to employ Manager as the sole and exclusive managing agent
of the office building to be acquired by Owner on a site located in Camden
County, New Jersey and more particularly described in Schedule A (which land,
building and other improvements are referred to in the Partnership Agreement as
the “Project”), and Manager is willing to accept such employment.

NOW, THEREFORE, for valuable consideration, the parties agree as follows (with
the terms defined in the Partnership Agreement being used herein with their
respective defined meanings).

ARTICLE 1

APPOINTMENT

Upon the terms and conditions hereinafter set forth Owner hereby employs Manager
to manage, operate, maintain and lease the Project on behalf of Owner and to
provide

 

- 1 -

--------------------------------------------------------------------------------

the services required of Manager hereunder (collectively, the “Management
Services”), and Manager hereby accepts such employment and undertakes to provide
or cause to be provided the Management Services.

ARTICLE 2

INITIAL TERM; RENEWAL TERMS

This Agreement shall be for a term (the “Initial Term”) commencing on the date
hereof (the “Commencement Date”) and ending, unless earlier terminated pursuant
to Article 10, on the second (2nd) anniversary of the last day of the month in
which the Commencement Date occurs. Thereafter, this Agreement shall be renewed
automatically and shall continue (unless terminated in accordance with Article
10) for successive one-year periods (each, a “Renewal Term”) commencing on the
day following the last day of the Initial Term or the preceding Renewal Term, as
the case may be, unless any Partner shall, at least ninety (90) days prior to
the end of the Initial Term or Renewal Term, as the case may be, notify Manager
and the other Partners that the notifying Partner elects to require that this
Agreement not be renewed for the next renewal period in question. Manager may
also elect to terminate this Agreement at the end of the Initial Term or a
Renewal Term, as the case may be, by notifying Owner of such election at least
ninety (90) days prior to the end of the Initial Term or Renewal Term, as the
case may be.

ARTICLE 3

OPERATIONAL DUTIES AND AUTHORITY OF MANAGER

During the Initial Term, and any applicable Renewal Terms, Manager shall
undertake and perform or cause to be performed the Management Services in a
diligent and efficient manner consistent with the terms of this Agreement,
including without limitation, the Annual Plan (as hereinafter defined) and the
standard for property management in first-class

 

- 2 -

--------------------------------------------------------------------------------

office buildings in the vicinity of the Project (the “Management Standard”), and
subject always to the direction of the General Partner of Owner. In case third
party contractors or any tenants perform any Management Services, then with
regard to such Management Services, the role of Manager shall be supervisory. If
possible without unreasonable accounting or record keeping complexities, Manager
will use reasonable efforts to make available to Owner the benefits of the
economies of scale and other efficiencies obtainable as a result of discounts
Manager may receive in connection with combined purchases for other buildings
managed by Manager.

Section 3.01. Employees; Independent Contractors. Subject to the Annual Plan,
Manager shall for the account of Owner, in Manager’s reasonable discretion and
as part of its authority hereunder, select, employ, pay, supervise, direct and
discharge all such employees and independent contractors as Manager deems
reasonably necessary to perform the Management Services; provided, however, that
Owner’s approval shall be required in the case of any contract which (a) has a
term in excess of one year (or such longer period as Owner may designate) or
provides for annual payments in excess of $10,000 (or such higher amount as
Owner may designate), (b) is a renewal or extension of a contract which had a
term of one year (or such longer period as the Owner may designate) or less or
provided for annual payments of $10,000 (or such higher amount as the Owner may
designate) or less, or (c) is entered into with any Affiliate of Manager;
provided, further, however, that the senior staff assigned by Manager to the
Project shall be subject to Owner’s approval (not to be unreasonably withheld or
delayed). Manager shall (i) use reasonable care in the selection of such
employees or independent contractors, (ii) execute and file punctually when due
all forms, reports and returns required by law relating to such employee and
(iii) carry, or cause to be carried by independent contractors, such workmen’s
compensation insurance and employer’s liability and disability insurance as

 

- 3 -

--------------------------------------------------------------------------------

may be worker’s by law or Owner. All persons employed by Manager or by any
independent contractor employed by Manager in connection with the performance of
the Management Services shall be employees of Manager or such independent
contractor or contractors, as the case may be. Manager shall use reasonable
diligence to meet the requirements of any labor contract now or hereafter
applicable to Manager and/or the Project.

Section 3.02. Annual Plan. (a) At least sixty (60) days prior to the
Commencement Date, and thereafter no later than November 1 of each succeeding
year, Manager shall prepare and submit to Owner an “Annual Plan” setting forth
all items of the character specified in Schedule B, including but not limited to
the costs and revenues anticipated in connection with the activities of the
Project during the succeeding calendar year, which Annual Plan shall be
consistent with the Management Standard and shall, to the extent possible,
project the calendar months in which major costs are projected to become
payable. If any portion of an Annual Plan is unacceptable to Owner, Owner shall
so notify Manager within thirty (30) days after the receipt of the Annual Plan,
and the parties shall thereupon make a good faith effort to negotiate an Annual
Plan which is mutually acceptable to them. If the parties are unable to agree
upon an Annual Plan, the Annual Plan proposed by Owner shall be the approved
Annual Plan. An Annual Plan shall be deemed accepted by Owner as submitted by
Manager unless Owner notifies Manager to the contrary within thirty (30) days
after Owner’s receipt of such Annual Plan. In no event shall there be any
requirement (whether pursuant to this Agreement, an Annual Plan or otherwise)
for the hiring or use of “on site” supervisory personnel without Owner’s written
approval of such requirement. Except as set forth in subparagraph (b) below,
Manager shall take no action in connection with the operation of the Project
which deviates in any material respect from an Annual Plan approved by Owner.
Manager shall make its

 

- 4 -

--------------------------------------------------------------------------------

management representatives available at least once a month (and more frequently
in the event of an emergency or a major matter) for meetings with
representatives of Owner to discuss the activities of the Project and to receive
the directions of Owner with respect thereto. Owner may call such a meeting, by
at least fifteen (15) days’ advance notice to Manager (or, in the case of
emergencies or major matters, upon such shorter notice as Owner may reasonably
deem appropriate), to be held at Manager’s office in Philadelphia, Pennsylvania,
or such other place as the parties may agree.

(b) In incurring costs relating to the management, operation and maintenance of
the Project, Manager shall be guided by the Annual Plan approved by Owner as
then in effect for such period and shall use diligence and employ reasonable
efforts towards achieving the result that the actual costs of such management,
operation and maintenance do not exceed the amount approved in the then
applicable Annual Plan. Manager may not incur any costs which result in a
material deviation from such costs set forth in the Annual Plan without the
prior written consent of Owner (which consent shall not be unreasonably withheld
or delayed); provided, however, that Manager may incur costs and expenses
(including, without limitation, capital costs) in reasonable amounts which
exceed those set forth in the Annual Plan without prior approval of Owner if, in
the reasonable judgment of Manager, an emergency exists and it is in the best
interests of Owner that such costs and expenses be incurred. Manager shall
notify Owner of any emergency expenditure within forty-eight (48) hours after
the incurrence thereof.

(c) Manager shall promptly inform Owner of any actual or projected material
increase in costs and expenses necessary to manage, operate and maintain the
Project that were not foreseen during the Annual Plan preparation period and not
reflected in the Annual Plan, and shall submit to Owner a revised Annual Plan
based upon such unforeseen costs

 

- 5 -

--------------------------------------------------------------------------------

and expenses. No such revision to the Annual Plan shall become effective except
with the prior written approval of Owner (which approval shall not be
unreasonably withheld or delayed). If disapproved, Manager shall promptly meet
with Owner to agree on the revised Annual Plan. During any period when an Annual
Plan shall not be in effect, Manager, shall use its reasonable judgment in
incurring costs and expenses in the name of Owner and shall be guided by the
most recent approved Annual Plan.

Section 3.03. Supplies and Equipment. Subject to Section 3.02, Manager shall
purchase for the account of Owner all supplies, materials, tools and equipment
which are necessary or appropriate to operate and maintain the Project in
accordance with the Management Standard.

Section 3.04. Service Contracts. Manager may negotiate and enter into for the
account of Owner any and all contracts and agreements with third parties for all
services, supplies or other matters relating to the management, operation or
maintenance of the Project contemplated by the Annual Plan containing such terms
as Manager shall in its reasonable opinion deem appropriate. With respect to any
contract or agreement not contemplated by the Annual Plan, Manager may not
(except in the case of any contract expressly permitted under Section 3.01
hereof) negotiate and enter into the same without Owner’s approval (which
approval shall not be unreasonably withheld or delayed). Each contract and
agreement entered into by Manager pursuant to Manager’s rights and obligations
under this Agreement shall be for the account of Owner and shall be in Owner’s
name or assignable, at Owner’s option, to Owner or Owner’s nominee.

Section 3.05. Collection of Receivables. Manager shall determine all amounts of
all fixed rent, percentage rent, additional rent and other sums payable by all
tenants in the Project

 

- 6 -

--------------------------------------------------------------------------------

and shall send invoices and bills to the tenants therefor. Manager shall use
diligent efforts to collect all rents (including, without limitation, billings
for tenant participation in operating and fixed expenses, taxes and common area
maintenance charges) which may become due to Owner at any time from any tenant
or from others for Project services and shall collect and identify any income
due to Owner from miscellaneous services provided to tenants of the Project or
to the public. If approved by Owner, Manager shall, at Owner’s expense, retain
legal counsel and collection agencies to enforce any right or remedy against any
tenant that is in default of its lease obligations.

Section 3.06. Compliance with Lease Obligations. Manager shall generally
administer and perform on behalf of Owner all of Owner’s lease obligations under
any leases of space in the Project.

Section 3.07. Repairs, Decorations, Alterations. Manager shall institute and
supervise all ordinary and extraordinary repairs, decorations and alterations,
including the administration of a preventive maintenance program, for all
mechanical, electrical and plumbing systems and equipment of the Project and may
retain any consultants, construction manager, contractors, architects or similar
parties who are reasonably necessary in order to perform such work; provided,
however, that (subject to the rights of Manager in the event of an emergency as
provided in Section 3.02) Manager shall not, without the consent of Owner (which
consent shall not be unreasonably withheld or delayed) incur any material
expense not included in the approved Annual Plan. Manager shall promptly report
to Owner any fire or other material damage to the Project.

Section 3.08. Taxes. If requested by Owner to do so, Manager shall obtain and
verify bills for real estate and personal property taxes (if any), improvement
assessments and

 

- 7 -

--------------------------------------------------------------------------------

similar assessments which are or may become liens against the Project. Manager
shall promptly forward such bills to Owner for payment, or, if such amounts are
included in the Annual Plan, Manager shall pay all such items.

Section 3.09. Mortgages. If requested by Owner to do so by including such
amounts in the Annual Plan or otherwise, Manager shall make payments on accounts
of any mortgages, loans or credit obligations of the Project.

Section 3.10. Leasing. Manager shall be responsible for (a) the development and
execution of a marketing program for the leasing of the Project (which program
shall include, to the extent approved by Owner, the use of independent third
party brokers to be paid commissions by Owner in accordance with rates approved
by Owner) and (b) the negotiation of all tenant leases. Any such marketing
program and lease negotiation process shall be conducted by Manager in strict
accordance with leasing guidelines approved by Owner. Manager shall use
reasonable diligence to obtain desirable tenants for the Project, including the
procurement and investigation of references of prospective tenants; provided,
however, no lease shall be executed without Owner’s prior approval. On or before
November 1 of each calendar year if appropriate by reason of anticipated
vacancies, Manager shall submit a marketing program for the following calendar
year (including advertising plans and promotional materials and the estimated
costs thereof) to Owner for approval. Manager shall not be entitled to any
separate fee for any leasing or reletting of space in the Project except as
expressly set forth in this Agreement.

Section 3.11. Compliance with Laws. Unless otherwise provided herein, Manager
shall (prior to the imposition of any interest or penalty on Owner) use
reasonable diligence to comply (or cause others to comply) with federal, state
and municipal laws, ordinances, regulations, rules and orders applicable to the
management, operation and

 

- 8 -

--------------------------------------------------------------------------------

maintenance of the Project and with the rules and regulations of the local Board
of Fire Underwriters or other similar body. Manager shall promptly remedy any
known violation of any such law, ordinance, rule, regulation or order to the
extent (i) such remedy is within the control of Manager and (ii) sufficient
funds are available in the Operating Account (as defined in Section 6.01) to pay
for such remedy; provided, however, that if, in Manager’s reasonable opinion,
compliance with any such law, ordinance, rule, regulation or order is not in the
best interests of Owner, then Manager shall promptly notify Owner thereof and
thereafter shall take only such action to comply therewith as may be necessary
to protect the interests of Manager or as may be directed by Owner and, if the
action so directed by Owner involves legal proceedings, Manager may, at the
expense of Owner, retain counsel approved by Owner in connection therewith.
Manager shall promptly notify Owner of known violations which are unable to be
remedied by Manager in accordance herewith. In complying with such laws and
remedying any violations, Manager may retain such consultants, construction
managers, contractors, architects or similar parties who are reasonably
necessary in order to perform any required work hereunder; provided, however,
that (subject to the rights of Manager in the event of an emergency as provided
in Section 3.2) Manager shall not, without the consent of Owner, incur any
material expense not included in the approved Annual Plan.

Section 3.12. Legal Proceedings. If Manager shall have knowledge of any suit or
other proceeding instituted or threatened against Owner, or of any circumstance
which may entitle Owner to assert a claim or seek a remedy of any kind on
account of any matter concerning the Project, Manager shall give Owner all
information in Manager’s possession in respect thereof, and shall at all times
assist and cooperate with Owner in the defense of any such suit or other
proceeding and, to the extent directed by Owner, shall for Owner’s account, and
at

 

- 9 -

--------------------------------------------------------------------------------

Owner’s expense, retain counsel approved by Owner and prosecute any such claim
or remedy to which Owner may be entitled.

Section 3.13. General. Manager shall generally do all things reasonably deemed
necessary or desirable by Owner, for Owner’s account and at Owner’s expense, for
the proper management, operation and maintenance of the Project, as a
first-class office building development. Manager shall furnish Owner with
complete information with respect to its management activities, and Owner shall
have the right to participate in all such activities. At the request of Owner or
the General Partner of Owner, Manager shall provide assistance to Owner and the
General Partner in the implementation of any decision made by the partners of
Owner.

ARTICLE 4

INSURANCE

Section 4.01. Owner’s Insurance. Owner or, if requested by Owner, Manager shall
(to the extent reasonably available), at Owner’s expense and direction, obtain
and maintain, or cause to be obtained and maintained, insurance against all risk
of loss or physical damage (including rental income and boiler and machinery
coverage) and against liability for loss, damage or injury to property or
persons which might arise out of the occupancy, management, operation or
maintenance of the Project. Manager shall be covered as an Additional Named
Insured in all liability insurance maintained with respect to the Project.
Manager shall ensure that all insurance coverages required to be maintained by
Owner under any mortgage, loan or credit facility applicable to the Project are
obtained and maintained. In the event of any inconsistency between the insurance
requirements set forth in this Agreement and the insurance requirements required
by Owner’s lenders, the requirements of Owner’s lenders shall prevail.

 

- 10 -

--------------------------------------------------------------------------------

Section 4.02. Manager’s Insurance. At all times during the term of this
Agreement, Manager shall maintain in force and effect the following insurance
coverage in reasonable amounts not less than the stated amounts to the extent
generally available:

(a) Comprehensive General Liability Insurance including, blanket Contractual
Liability, Independent Contractors and Personal Injury, with limits of no less
than $5,000,000 per person for bodily injuries (including death), $5,000,000 for
bodily injuries (including death) arising out of one occurrence and $1,000,000
for property damages;

(b) Comprehensive Automobile Liability Insurance covering all of Manager’s owned
or rented vehicles used in connection with this Agreement, with policy limits of
no less than $1,000,000 for bodily injuries (including death) to one person,
$1,000,000 for bodily injuries (including death) arising out of one accident and
$1,000,000 for property damages;

(c) Workers’ Compensation Insurance as required by statute including Employers’
Liability with limits not less than $500,000 per occurrence, for all of
Manager’s employees having any connection with the work performed in connection
with this Agreement; and

(d) Blanket fidelity bond or bonds in connection with all the business and
affairs arising rest of, or in connection with, the Project and the assets of
the Partnership in the aggregate amount of $1,000,000.

Except for Worker’s Compensation Insurance, each policy of insurance maintained
by Manager pursuant to this Section 4.02 shall name Owner and Owner’s lender(s)
as

 

- 11 -

--------------------------------------------------------------------------------

Additional Named Insureds and state thereon that such policy shall not be
cancelable or terminable or subject to change without thirty (30) days’ prior
written notice to Owner.

Section 4.03. Contractors and Subcontractor’s Insurance. Manager shall require
that any contractors and/or subcontractors retained for the Project maintain at
least the following insurance coverages, at such contractors’ and/or
subcontractor’s expense, or in such amounts as Owner may reasonably specify from
time to time:

(a) Worker’s Compensation - Statutory Amount;

(b) Employer’s Liability - $100,000; and

(c) Comprehensive General Liability Insurance, combined single limit (bodily
injury and property damage).

(d) Comprehensive Automobile Liability, including all owned, non-owned and hired
vehicles.

Except for Worker’s Compensation Insurance, all of such policies maintained
pursuant to this Section 4.3, shall name Owner, Manager and Owner’s lender(s) as
Additional Named Insureds and state thereon that such policy shall not be
cancelable or terminable or subject to change without thirty (30) days’ prior
written notice to Owner.

Section 4.04. Certificates. Upon Owner’s request, Manager shall deliver to Owner
a copy of each policy or certificate of insurance effected by Manager pursuant
to this Article 4.

Section 4.05. Brokers. All insurance required by Sections 4.01 shall be placed
through brokers or agents as Owner shall approve.

 

- 12 -

--------------------------------------------------------------------------------

ARTICLE 5

FINANCIAL REPORTING AND RECORDKEEPING

Section 5.01. Books of Accounts. Manager shall maintain account books and
financial records for the Project, along with documentation sufficient to
ascertain that all entries thereto are properly and accurately recorded. Such
books and records shall be maintained at Manager’s principal office in
accordance with generally accepted accounting principles (consistently applied)
and the same shall be open to inspection, examination, audit and copying by
Owner and its designees at all reasonable times. Manager shall use reasonable
efforts to the end that such books and records shall be kept confidential. All
books of record and accounts maintained by Manager with respect to the Project
shall be the property of and subject to disposition by Owner.

Section 5.02. Financial Reports. (a) Within thirty (30) days after the last day
of each month, Manager shall furnish to Owner an itemized report of revenues and
expenses during said month resulting from the operation of the Project. Such
reports shall conform substantially to Schedule C and shall compare actual
monthly and year-to-date revenues and expenses with the revenues and expenses
projected in the current Annual Plan.

(b) Within sixty (60) days after the end of each calendar year, Manager shall
submit to Owner an itemized annual statement of such receipts and disbursements
and other information customarily furnished in such an annual statement prepared
in accordance with generally accepted accounting principles; and with reasonable
promptness after a request therefor, render to Owner such other statements,
reports, tax returns, analyses and forecasts with respect to the Project and the
activities of the Project (including, without limitation, the rent and

 

- 13 -

--------------------------------------------------------------------------------

other sums collected by Manager and payments made by Manager) as may be
reasonably requested by Owner in writing.

Section 5.03. Administrative Services; Partnership Reports. Manager shall
perform all other the administrative services necessary or desirable for the
operation of the Project in accordance with the Management Standard and shall
prepare and deliver to Owner all financial reports and other information
requested by Owner.

Section 5.04. Supporting Documentation. Manager shall provide to Owner on
request copies of the following:

(a) Bank statements, bank deposit slips and bank reconciliations;

(b) Detailed cash revenue and expense records;

(c) Detailed receivables reports;

(d) Paid invoices; and

(e) Supporting documentation for payroll, payroll taxes and benefits.

Section 5.05. Accounting Principles. All monthly financial statements and
reports required to be submitted by Manager hereunder shall be prepared in
accordance with generally accepted accounting principles, consistently applied.

ARTICLE 6

BANK ACCOUNTS

Section 6.01. Operating Account. Manager shall deposit all rent and other funds
collected from the operation of the Project in a special bank account or
accounts (collectively, the “Operating Account”) established for such purpose in
such bank or financial institution

 

- 14 -

--------------------------------------------------------------------------------

directed by Owner from time to time. At all times the funds deposited in the
Operating Account shall be the property of Owner and no other funds of Owner or
Manager shall be commingled therewith.

Section 6.02. Remittance of Funds to Owner. Within thirty (30) days after the
last day of each quarter of each calendar year, Manager shall remit to Owner the
amount of funds in the Operating Account as of the last day of said quarter,
except for a reserve in such amount as reasonably determined by Manager and as
Owner may from time to time approve as sufficient for reasonably anticipated
needs.

Section 6.03. Access to Account. Through the use of signature cards, an
authorized representative of Owner shall be permitted access to any and all
funds in the Operating Account; provided, however, that Owner or Owner’s
representatives may not draw against the Operating Account without reasonable
prior notice to Manager.

ARTICLE 7

PAYMENT OF EXPENSES

Section 7.01. Expenses Paid from Operating Account. To the extent of available
funds, the following costs shall be paid by Manager from the Operating Account
substantially in accordance with the Annual Plan:

(a) all costs of Owner under or on account of any mortgage, loan or credit
obligation of the Project, insurance premiums, real estate taxes, assessments
and charges and other taxes of any kind payable on account of the Project;

(b) all other costs arising out of or in connection with the management,
operation and maintenance of the Project which, under this Agreement, Manager is
authorized to incur for the account or on behalf of Owner;

 

- 15 -

--------------------------------------------------------------------------------

(c) amounts due and payable by Owner to Manager pursuant to Article 9 hereof;
and

(d) any other charge, item or cost or expense regarding the Project that Owner
directs to be paid.

Section 7.02. Expenses Reimbursed to Manager from Operating Account. Subject to
the limitations set forth in this Agreement, all costs incurred by Manager in
the proper performance of its duties shall be paid directly or reimbursed to
Manager by Owner, and Manager is hereby authorized to draw against the Operating
Account for such payment and reimbursement. Such costs include, without
limitation, the following: costs of the gross salaries, wages, bonuses and
benefits, including, without limitation, payroll taxes, insurance (including the
premiums on the insurance policies maintained by Manager pursuant to
Section 4.02) and workmen’s compensation, of Manager’s on-site personnel
involved in the management, operation and maintenance of the Project. Unless
otherwise agreed by Owner, in no event shall Owner be obligated to reimburse
Manager for any “off-site” property management costs which are incurred by
Manager in the performance of its duties under this Agreement other than
telephone, tolls, travel expenses, entertainment, office supplies, costs of
lease preparation and administration and similar costs directly related to the
Project and not part of the general, home office or overhead expenses of the
Manager.

ARTICLE 8

INSUFFICIENT GROSS INCOME

Section 8.01. Manager shall notify Owner whenever the Operating Account contains
inadequate funds to meet current expenses of the Project and reasonable reserves
therefor. In any such event Manager shall pay such expenses (including fees and

 

- 16 -

--------------------------------------------------------------------------------

reimbursements to Manager), in such order as Manager determines to be prudent
(or as otherwise directed by Owner), to the extent of available funds in the
Operating Account, and promptly submit to Owner a statement of all remaining
unpaid items. It is agreed that Manager shall be paid in the same manner as
other third party creditors. Owner shall immediately pay or provide sufficient
monies for Manager to pay all such unpaid items and items requiring payment
within the subsequent one (1) month period.

ARTICLE 9

COMPENSATION

Section 9.01. Compensation for Managing the Project. As compensation for the
performance of the Management Services, Manager shall be entitled to receive a
fee (the “Management Fee”) equal to three percent (3%) of the sum of the amounts
collected from the tenants under each space lease from time to time on account
of (i) fixed rent, (ii) additional rent, including, without limitation, payments
for operating costs, real estate taxes and utilities, (iii) payments under any
other revenue producing contracts for the use, occupation or other utilization
of space in the Project and (iv) payments on account of, or in lieu of, rent set
forth in clauses (i), (ii) and (iii). In no event shall amounts paid by tenants
to Owner in connection with repairs or restoration (other than those included in
Owner’s operating costs) be included in the calculation of the Management Fee.
Manager is hereby authorized to draw upon the Operating Account for the purpose
of collecting all payments on account of Management Fees as and when such
payments are made by tenants of the Project. The Management Fee set forth above
shall be calculated only on amounts actually received from the tenants and any
rent insurance which Owner may receive in lieu of such rents.

 

- 17 -

--------------------------------------------------------------------------------

Section 9.02. Leasing Commissions. Manager shall be entitled to a brokerage
commission in accordance with Schedule D annexed hereto in the event it is the
sole procuring broker with respect to any space lease in the Project. In the
event any other broker is involved with such space lease, Manager, or any of its
affiliates, shall not be entitled to any brokerage commission.

ARTICLE 10

TERMINATION

Section 10.01. Termination. (a) In case Manager shall default in the observance
or performance of any covenant or agreement on its part to be observed or
performed under this Agreement, and if such default shall continue and shall not
be cured by Manager within thirty (30) days after Owner shall have given Manager
a notice specifying the same, or, in the case of such a default which for causes
beyond Manager’s reasonable control cannot with due diligence be cured within
such period of thirty (30) days, if Manager (i) shall not, promptly upon the
giving of such notice, advise Owner of Manager’s intention duly to institute all
steps necessary to cure such default or (ii) shall not duly institute and
thereafter diligently prosecute to completion all such steps, then Owner shall,
in addition to any other remedies available to it at law or in equity, be
entitled to give to Manager a notice of intention to terminate this Agreement at
the expiration of seven (7) days from the date of the giving of such notice,
and, in the event such notice is given, this Agreement shall terminate upon the
expiration of such seven (7) days.

(b) In the event of the dissolution, bankruptcy, reorganization or insolvency of
either party or an assignment by such party for the benefit of creditors, the
other party may terminate this Agreement upon notice to such party.

 

- 18 -

--------------------------------------------------------------------------------

(c) This Agreement shall ipso facto be terminated if (i) PR Cherry Hill Office
GP, LLC or an affiliate of the Pennsylvania Real Estate Investment Trust shall
cease to be the General Partner for any reason, or (ii) Owner shall sell the
Project.

Section 10.02. Final Accounting. Upon any termination of this Agreement, Manager
shall deliver promptly to Owner the following:

(a) Any monies of Owner or any tenant security deposits, or both, held by
Manager with respect to the Project; and

(b) All records, contracts, leases, receipts for deposits, unpaid bills and
other papers or documents pertaining to the Project.

Within thirty (30) days after the termination of this Agreement, Manager shall
deliver to Owner a final accounting reflecting the balance of income and
expenses of the Project as of the date of termination. Owner shall pay Manager
any sum due to Manager as a result of such accounting within thirty (30) days
after its receipt of such final accounting. Any leasing commission due Manager
pursuant to Section 9.02 shall remain due and payable at the times set forth in
Exhibit E. Owner’s obligation to pay any such leasing commission shall survive
the termination of this Agreement.

Section 10.03. Owner’s Assumption of Liability. Upon any termination of this
Agreement, Manager shall assign to Owner or Owner’s nominee all service, supply
and other contracts and agreements pertaining to the Project entered into by
Manager in accordance with this Agreement and thereupon Owner shall be fully
responsible and liable for the performance of all obligations of Manager under
all such contracts and agreements and (subject to Manager’s indemnity pursuant
to Section 11.02) Manager shall have no further responsibility or liability with
respect thereto. Owner shall indemnify and hold harmless Manager with respect to
such

 

- 19 -

--------------------------------------------------------------------------------

contracts in accordance with Section 11.03 hereof. In addition, Owner, as part
of the final accounting referred to in Section 10.02, shall reimburse Manager
for all expenses incurred by Manager in the termination of any employees or
labor contracts at the Project provided such expenses are in line with industry
standards within the vicinity of the Project.

Section 10.04. No Prejudice. Any termination permitted hereunder shall not
prejudice Manager’s right to receive amounts to which Manager is entitled
hereunder on account of services rendered by Manager prior to the effective date
of termination.

ARTICLE 11

MANAGER’S LIABILITY

Section 11.01. Services for Account of Owner. All actions by Manager in
performing the Management Services shall be for the account of Owner. Owner
hereby assumes full responsibility for all costs, expenses and disbursements
incurred by Manager in performance of the Management Services in accordance with
the terms of this Agreement.

Section 11.02. Limitation of Liability; Manager’s Indemnity. Manager shall not
be liable to Owner or to any other person for any act or omission, negligent,
tortuous or otherwise, of Owner or any agent, officer or employee of Owner or of
a third party employed or retained by Owner, or any affiliates of Owner;
provided, however, that Manager shall indemnify and hold harmless Owner from and
against any and all loss, cost, expense, liability or claim which results from
the gross negligence, bad faith or willful misconduct of Manager, its agents,
officers or employees or the failure of the Manager to perform the terms and
conditions of this Agreement on its part to be performed (such indemnity to
survive the expiration or earlier termination of this Agreement).

 

- 20 -

--------------------------------------------------------------------------------

Section 11.03. Owner’s Indemnity. Subject to Section 11.02, Owner shall
indemnify and hold harmless Manager from and against any loss, cost, expense,
liability or claim arising from or connection with Manager’s performance of the
Management Services in accordance with the terms of this Agreement (such
indemnity to survive the expiration or earlier termination of this Agreement).

ARTICLE 12

NOTICES

All notices, approvals, directions and other communications hereunder
(collectively “Notices”) shall be in writing and shall be mailed by registered
or certified mail, postage prepaid if the intended recipient is resident in the
United States, or sent via overnight courier or facsimile in each case at the
address set forth on page 1. All Notices shall be deemed given on the second day
after the day of mailing. Either party may change its address for the receipt of
Notices at any time by giving Notice thereof to the other party. Notwithstanding
the requirement in the preceding paragraph as to the use of registered or
certified mail, any routine reports or other communications under this Agreement
may be sent by first-class mail.

ARTICLE 13

MISCELLANEOUS PROVISIONS

Section 13.01. Status of Property Manager. In the performance of its duties
hereunder, Manager shall be an independent contractor and not an agent of Owner.

Section 13.02. No Assignment or Delegation. Without the prior consent of Owner,
Manager shall not be permitted to assign this Agreement or delegate its duties
hereunder.

Section 13.03. Entire Agreement. This Agreement supersedes all prior agreements
and understandings between the parties with respect to the subject matter
hereof.

 

- 21 -

--------------------------------------------------------------------------------

Section 13.04. Modification. No change or modification of this Agreement shall
be of any force unless such change or modification is in writing and has been
signed by the party to be charged.

Section 13.05. Waivers. No waiver of any breach of any of the terms of this
Agreement shall be effective unless such waiver is in writing and signed by the
party against whom such waiver is claimed. No waiver of any breach shall be
deemed a waiver of any other or subsequent breach.

Section 13.06. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions hereof shall not in any way be affected or impaired
thereby.

Section 13.07. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New Jersey.

Section 13.08. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

Section 13.09. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.

IN WITNESS WHEREOF the parties have executed this Agreement the date and year
first above written.

 

BALA CYNWYD ASSOCIATES, L.P. By:   PR Cherry Hill Office GP, LLC, its general
partner

 

By:   PREIT Associates, L.P., its sole member By:   Pennsylvania Real Estate
Investment Trust, its general partner By:  

 

Name:   Title:  

PREIT-RUBIN, INC.

By:  

 

Name:   Title:  

 

- 22 -

--------------------------------------------------------------------------------

SCHEDULE A

DESCRIPTION OF PROJECT SITE

 

--------------------------------------------------------------------------------

SCHEDULE B

CONTENT OF ANNUAL PLAN

Each Annual Plan shall contain at least the following:

(a) Detailed operating and capital budgets, cost, with respect to each variable
item, in terms of a reasonable range of projected expenditure, and a statement
of any reserves expected to be established or maintained during the ensuing
calendar year.

(b) A schedule of insurance to be carried by or for the benefit of Owner.

(c) The terms of any service contracts respecting the affairs of Owner expected
to be concluded during the ensuing year (which shall including all of the
initial service contracts in the case of the first Annual Plan), and a
comparison of such terms with the terms of any service contracts to be
superseded.

(d) The preventive maintenance program required under Section 3.07 of this
Agreement.

(e) Such other material as Owner may reasonably request.

--------------------------------------------------------------------------------

SCHEDULE C

INCOME

Minimum Rent

Utilities

Repairs & Maintenance

Other

Interest

Miscellaneous

TOTAL INCOME

EXPENSES

SPECIFIC CHARGES

Electric

Chilled Water

After Hours

Repairs & Maintenance

Total Specific Charges

OMC EXPENSES

Cleaning

Cleaning Wages, Taxes & Benefits

Cleaning-Contract Service

Cleaning-Supplies & Materials

Cleaning-Windows

--------------------------------------------------------------------------------

Cleaning-Trash

Cleaning-Miscellaneous

Total Cleaning Expenses

Electrical

Electrical-Contract Service

Electrical-Repairs & Maintenance

Electrical-Supplies & Materials

Electrical-Miscellaneous

Total Electrical Expenses

HVAC

HVAC-Wages, Taxes & Benefits

HVAC-Contract Service

HVAC-Repairs & Maintenance

HVAC-Supplies & Materials

HVAC-Miscellaneous

Total HVAC Expenses

Elevator

Elevator-Contract Service

Elevator-Repairs & Maintenance

Elevator-Miscellaneous

Total Elevator Expenses

General Building

 

- 2 -

--------------------------------------------------------------------------------

General Bldg-Wages, Taxes & (?)

General Bldg-Contract Service

General Bldg-Repairs & Maintenance

General Bldg-Supplies & Materials

General Bldg-Miscellaneous

Total General-Building Expense

Security

Security-Wages, Taxes & Benefits

Security-Contract Service

Security-Repairs & Maintenance

Security-Supplies & Materials

Security-Miscellaneous

Total Security Expenses

Landscaping

Landscaping-Contract Service

Landscaping-Supplies & Materials

Total Landscaping Expenses

Utilities

Electricity

Gas

Steam

Water & Sewer

Total Utility Expenses

 

- 3 -

--------------------------------------------------------------------------------

Administrative

Office Wages, Taxes & Benefits

Professional Fees

Office Expense

Management Fees

Business Taxes-OMC

Miscellaneous

Total Miscellaneous Expenses

Insurance

Insurance-Multi Peril

Insurance-Liability

Insurance-Other

Total Insurance Expense

OMC Exp without R/E Taxes

Real Estate Tax

OMC Exp with R/E Expense

Less Real Estate Tax Reimbursement

LESS OMC Reimbursement

Total OMC & R/E Tax Expense

RECOVERABLE TENANT SERVICES

RTS Costs

RTS Reimbursement

 

- 4 -

--------------------------------------------------------------------------------

Total RTS Expenses

OTHER EXPENSES

Admin Professional Fees

Admin Leasing Costs

Admin Miscellaneous

Total Other Expenses

Total Operating Expenses

Net Income (Loss) before Int. & Dep.

Interest Expense

Rent Expense

Net Income (Loss) before Deprec.

Depreciation

Amortization

Net Income (Loss)

 

- 5 -

--------------------------------------------------------------------------------

SCHEDULE D

LEASING COMMISSION

Owner shall pay to Manager a leasing commission at the rate of 5% of the annual
rental for the first year’s rent, 4% of the second year’s rent, 3% of the third
year’s rent, 2% of the fourth year’s rent, and 1% of the fifth through tenth (or
less) year’s rent, said commission to be paid 75% when the tenant thereunder
occupies any portion of its leased space and 25% one year after the tenant has
occupied any portion of its leased space.

For any Lease which has a term in excess of ten (10) years or if any Lease is
extended pursuant to an option, right or other provision contained in the Lease,
in addition to the commission provided above, Owner shall pay to Manager a
leasing commission at the rate of 1% of the annual rental for the number of
years in the lease term in excess of ten (10) years, said commission to be paid
50% either (i) at the commencement of the eleventh year or (ii) in the case of
an option or other right or provision contained in the Lease, at the
commencement of the period covered by each such option or other right and, in
either case, the balance of 50% within one (1) year thereafter. The commission
provided in this paragraph for years in excess of ten (10) of a Lease shall only
be paid if the tenant under such Lease is in occupancy of its leased space (or,
if not in occupancy, is not in default under its Lease) on the dates such
commission is payable.

The Lease shall be considered extended, and an extension of the Lease shall
exist, whenever the tenant shall lease or use any of the space or other premises
in the building pursuant to any option contained in the Lease.

Commissions shall be computed in accordance with the above rates based upon the
fixed rental set forth in the lease. No commission shall be payable for any
additional rent payable by the tenant by reason of increases in taxes and/or the
costs of maintaining or operating the property at which the lease is made (i.e.
escalations).

--------------------------------------------------------------------------------

Schedule 7.3(a)(ii)

Form of Assignment of Partnership Interests

THIS ASSIGNMENT OF PARTNERSHIP INTERESTS, effective             200    , is made
from                                         (the “Assigning Partner”), to PREIT
Associates, L.P., a Delaware limited partnership (the “UPREIT”).

A. The Assigning Partner is a limited partner of Bala Cynwyd Associates, a
Pennsylvania limited partnership (the “Partnership”), and holds a
            percent (    %) interest in the Partnership (the “Existing
Interest”) pursuant to a limited partnership agreement dated ,
                    2007 (the “Existing Partnership Agreement”).

B. Pursuant to a Contribution Agreement among, inter alia, the Assigning
Partner, the other partners of the Partnership, the UPREIT and Pennsylvania Real
Estate Investment Trust dated ,                     2007 (the “Contribution
Agreement”), the Assigning Partner has agreed to transfer to the UPREIT, for the
consideration referred to in the Contribution Agreement, all or a portion of the
Existing Interest.

NOW, THEREFORE, for and in consideration of the Contribution Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the parties hereby agree
as follows:

1. Transfer and Assignment.

(a) The Assigning Partner hereby transfers and assigns to the UPREIT, free and
clear of all liens, security interests and encumbrances of any type or nature of
the Assigning Partner’s entire             percent Existing Interest. [The
UPREIT hereby acquires and accepts such Existing Interest as a contribution to
the UPREIT pursuant to Section 721(a) of the Internal Revenue Code.]

(b) The Existing Interest includes, without limitation, all right, title and
interest associated with the Existing Interest in and to (i) the capital account
of the Assigning Partner in the Partnership, (ii) distributions by the
Partnership, and (iii) allocable shares with respect to profits and losses of
the Partnership.

2. Representations. Assigning Partner hereby incorporates all of its warranties
and representations set forth in the Contribution Agreement with respect to the
Existing Interest as if set out herein in full, which shall survive the
execution and delivery of this Agreement and which shall be without limitation
on any of the terms, provisions, rights or remedies applicable to the
Contribution Agreement.

3. Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns.

--------------------------------------------------------------------------------

EXECUTED as of the date written above.

ASSIGNING PARTNER:

 

 

 

UPREIT:

 

PREIT ASSOCIATES, L.P.

By:   Pennsylvania Real Estate Investment Trust, its general partner   By:  

 

  Name:  

 

  Title:  

 

 

- 2 -

--------------------------------------------------------------------------------

Schedule 7.3(a)(iii)

Registration Rights Agreement – Class A Unit Holders

--------------------------------------------------------------------------------

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of this             day of             , 2008 by and among Pennsylvania Real
Estate Investment Trust, a Pennsylvania business trust (the “Trust”), and each
of those persons whose names are set forth on Exhibit A hereto (collectively,
the “Holders,” and each individually, a “Holder”).

Background

On             , 2008, the Trust, PREIT Associates, L.P., a Delaware limited
partnership (the “Operating Partnership”), the Holders and certain other parties
entered into that certain Contribution Agreement (the “Contribution Agreement”).

The Contribution Agreement, contains certain call and put option rights pursuant
to which the Holders may acquire, on subsequent dates (each a “Closing Date” and
collectively, the “Closing Dates”), units of Class A Limited Partner Interest
(“Class A Units”) in the Operating Partnership (the “Applicable Units”).

As holders of Class A Units, the Holders have certain redemption rights under
the terms and conditions of the First Amended and Restated Agreement of Limited
Partnership of the Operating Partnership dated as of September 30, 1997 (as
amended from time to time, the “Operating Partnership Agreement”). Under the
Operating Partnership Agreement, a holder of Class A Units that has properly
tendered Class A Units for redemption has the right to receive cash or, at the
election of the Trust, shares of beneficial interest in the Trust, par value
$1.00 per share (“Shares”).

As a condition of consummating the transactions contemplated by the Contribution
Agreement, the Holders have required that the Trust extend to them certain
registration rights in respect of the Shares that they may be entitled to
receive in connection with the redemption of the Applicable Units, all on the
terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

Section 1.1 Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:

“Affiliates” shall mean any person directly or indirectly controlled by,
controlling or under common control with another person, where the term
“control,” for purposes of this definition, means the power to direct the
management of the person in question.

--------------------------------------------------------------------------------

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

“Form S-3” shall mean such form under the Securities Act as is in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Trust with
the SEC.

“Holders” shall mean those persons whose names are set forth on Exhibit A,
together with any other person to whom any Holder assigns the registration
rights granted hereunder in accordance with Section 2.6.

The term “person” shall mean any individual, estate, trust, partnership, limited
liability company, corporation, business trust, unincorporated association,
joint venture or other entity of whatever nature.

The terms “register,” “registered,” and “registration” shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

“Registrable Securities” shall mean (a) any Shares issued or issuable by the
Trust in order to acquire Applicable Units that have been or may be tendered to
the Operating Partnership for redemption; and (b) any additional Shares or other
equity securities of the Trust issued by the Trust in respect of Shares
described in subclause (a) after the issuance of such Shares, in connection with
a stock dividend, stock split, combination, exchange, reorganization,
recapitalization or similar reclassification of the Trust’s securities; provided
that, as to any particular Registrable Securities, such securities shall cease
to constitute Registrable Securities when: (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of thereunder;
(ii) such securities shall have been sold in satisfaction of all applicable
conditions to the resale provisions of Rule 144 under the Securities Act (or any
similar provision then in force); (iii) such securities are eligible to be
publicly sold without limitation as to amount or manner of sale pursuant to Rule
144(k) under the Securities Act (or any successor provision to such Rule); or
(iv) such securities shall have ceased to be issued and outstanding. The term
“Registrable Securities” shall not include the Applicable Units or any other
securities of the Operating Partnership.

“Registration Expenses” shall mean all expenses incurred by the Trust in
complying with its obligations under Article II hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Trust, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.

“SEC” means the United States Securities and Exchange Commission.

 

- 2 -

--------------------------------------------------------------------------------

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

“Selling Expenses” shall mean all underwriting discounts and selling commissions
applicable to a sale of Registrable Securities.

The term “underwriter” shall have the meaning ascribed to such term in
Section 2(11) of the Securities Act, including any person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act.

Section 1.2 Construction. Whenever the context requires, the gender of any word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement.

Section 1.3 Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.

ARTICLE II

REGISTRATION RIGHTS

Section 2.1 Registration of Registrable Securities.

(a) In the event that any Applicable Units are issued by the Operating
Partnership pursuant to the Contribution Agreement, then the Trust shall prepare
and file with the SEC, and use its commercially reasonable efforts to cause to
become effective, within six (6) months following the applicable Closing Date, a
registration statement on Form S-3 (or, if Form S-3 is not then available, on
such form of registration statement as is then available to effect a
registration of all of the Registrable Securities to be so registered) covering
the resale of all of the Shares issuable in connection with the redemption of
the Applicable Units issued to the Holders on the applicable Closing Date.

(b) Notwithstanding the foregoing provisions of this Section 2.1, but subject to
Section 2.7(b), in the event that the Trust is required to prepare and file a
registration statement covering Registrable Securities pursuant to paragraph
(a) above, the Trust shall have the right, upon written notice to the Holders,
to defer the filing or effectiveness of such registration statement for up to
ninety (90) days (the number of days of any such deferral being hereinafter
referred to as the “Registration Deferral Period”) if (i) the Trust is, at such
time, working on an underwritten public offering of its securities for the
account of the Trust and is advised by its managing underwriter that such
offering would in its opinion be materially adversely affected by such a filing;
or (ii) the Trust determines reasonably and in good faith that the filing or
effectiveness of such a registration statement, or the offering of Registrable
Securities pursuant thereto, would require the disclosure of material non-public
information, the disclosure of which at such time could reasonably be expected
to have a material adverse effect on the business or affairs of the Trust or a
material adverse effect on any proposal or plan by the Trust or any of its
subsidiaries to engage in any extraordinary engagement or activity, including,

 

3

--------------------------------------------------------------------------------

without limitation, any material acquisition of assets or any merger,
consolidation, tender offer or similar transaction.

Section 2.2 Obligations of the Trust. Whenever required under Section 2.1 to
effect the registration of any of the Registrable Securities, the Trust shall,
as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use reasonable efforts to (i) cause such registration
statement to become effective in order to permit the sale of the Registrable
Securities by the Holders in accordance with the intended method or methods of
distribution thereof described in such registration statement and (ii) maintain
the effectiveness of such registration statement as to the Registrable
Securities covered thereby until the earlier of (A) the date on which the
Holders no longer hold any of the Registrable Securities covered thereby or any
of the Applicable Units to which the Registrable Securities covered thereby
relate, or (B) the date on which all of the Registrable Securities included in
such registration statement have ceased to constitute Registrable Securities,
after which the Trust may deregister such Registrable Securities;

(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above;

(c) furnish to the Holders such number of copies of the prospectus, including
all amendments and supplements thereto, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;

(d) comply in all material respects with the provisions of the Securities Act
applicable to the Trust with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the intended method or methods of disposition by the Holders;

(e) use reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided,
however, that the Trust shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;

(f) (i) promptly notify the Holders, and, if requested, confirm such
notification in writing, (A) when a prospectus or any prospectus supplement has
been filed with the SEC and when the registration statement or any
post-effective amendment thereto has been filed with and declared effective by
the SEC, (B) of the issuance by the SEC of any stop order or the coming to its
knowledge of the initiation of any proceedings for that purpose, (C) of the
receipt by the Trust of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (D) of the
occurrence of any event that requires the making of any

 

4

--------------------------------------------------------------------------------

changes to the registration statement or related prospectus so that such
documents will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (E) of the Trust’s determination that the filing of a
post-effective amendment to the registration statement shall be necessary or
appropriate; and (ii) upon the occurrence of any event of the kind described in
clauses (B), (C) (but only with respect to the jurisdiction suspending
qualification), (D) or (E), above, as promptly as practicable thereafter, take
such action as shall be necessary to remedy such event to permit the Holders to
continue to offer and dispose of the Registrable Securities, including, without
limitation, preparing and filing with the SEC and furnishing to the Holders a
supplement or amendment to such prospectus so that, as thereafter deliverable to
the purchasers of the Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;

(g) make available to the Holders and any attorney, accountant or other agent or
representative retained by the Holders (collectively, the “Inspectors”), all
financial and other records, pertinent corporate documents and properties of the
Trust, as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Trust’s officers, directors and
employees to supply all information reasonably requested by any such Inspector
in connection with such registration statement, subject, in each case, to such
confidentiality agreements as the Trust shall reasonably request;

(h) use reasonable efforts to cause the Registrable Securities covered by such
registration statement to be listed on the securities exchange or quoted on the
quotation system on which similar securities issued by the Trust are then listed
or quoted;

(i) otherwise use reasonable efforts to cooperate with the SEC and any other
regulatory agencies and take all reasonable actions and execute and deliver or
cause to be executed and delivered all documents reasonably necessary to effect
and maintain the effectiveness of the registration of any Registrable Securities
under this Agreement; and

(j) during the period when a prospectus is required to be delivered under the
Securities Act, promptly file all documents required to be filed with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.

Section 2.3 Obligations of the Holder.

(a) It shall be a condition precedent to the obligation of the Trust to register
the Registrable Securities of any Holder pursuant to Section 2.1 that such
Holder shall furnish to the Trust, upon request, such information regarding
itself, its Registrable Securities and the intended method of disposition of
such Registrable Securities as shall be reasonably required to effect the
registration of such Registrable Securities.

(b) Each Holder shall (i) offer to sell or otherwise distribute the Registrable
Securities in reliance upon a registration contemplated by this Agreement only
after a registration statement shall have been filed with the SEC, (ii) sell or
otherwise distribute the

 

5

--------------------------------------------------------------------------------

Registrable Securities in reliance upon a registration only after a registration
statement has been filed and declared effective under the Securities Act,
(iii) upon the receipt of any notice from the Trust of the occurrence of any
event of the kind described in Section 2.2(f)(i)(B), (C) (but only with respect
to the jurisdiction suspending qualification), (D) or (E), forthwith discontinue
any offer and disposition of the Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such time as
the Trust shall have remedied such event or prepared an appropriate amendment or
supplement to the prospectus covering such Registrable Securities and, if so
directed by the Trust, deliver to the Trust all copies of the defective
prospectus covering such Registrable Securities that are then in such Holder’s
possession or control, (iv) distribute the Registrable Securities in reliance
upon a registration contemplated by this Agreement only in accordance with the
manner of distribution contemplated by the prospectus and (v) report to the
Trust distributions made by such Holder of Registrable Securities pursuant to
the prospectus.

(c) During any period that a registration statement filed pursuant to this
Agreement shall remain effective, no Holder shall (i) effect any stabilization
transactions or engage in any stabilization activity in connection with the
Shares or other equity securities of the Trust in contravention of Regulation M
under the Exchange Act, or (ii) permit any “Affiliated Purchaser” (as that term
is defined in Regulation M under the Exchange Act) to bid for or purchase for
any account in which such Holder has a beneficial interest, or attempt to induce
any other person to purchase, any Shares or other equity securities of the Trust
in contravention of Regulation M under the Exchange Act.

(d) If the Trust is issuing or selling equity securities to the public in an
underwritten offering, and the managing underwriter or underwriters for such
underwritten offering so request, the Holders shall refrain from effecting any
public sale or distribution of Registrable Securities or any securities
convertible into or exchangeable or exercisable for such Registrable Securities,
including a sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, for a period commencing on the tenth (10th) day prior
to the date such underwritten offering commences (such offering being deemed to
commence for this purpose on the later of the effective date for the
registration statement for such offering or, if applicable, the date of the
prospectus supplement for such offering) and ending 90 days after such
underwritten offering commences; provided that all officers and directors of the
Trust and holders of at least five percent (5%) of the Trust’s Shares enter into
similar agreements and subject to any concession (such as early release from
such lock-up) granted to any such officers, directors or holders.

Section 2.4 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration shall be
borne by the Trust. All Selling Expenses incurred in connection with any such
registrations shall be borne by the Holders.

Section 2.5 Indemnification. With respect to Registrable Securities that are
included in a registration statement under Section 2.1:

(a) To the extent permitted by law, the Trust shall indemnify and hold harmless
the Holders, their respective Affiliates, partners, officers, directors,
stockholders and

 

6

--------------------------------------------------------------------------------

agents, and any other person who controls any of the foregoing within the
meaning of the Securities Act or the Exchange Act (collectively, the “Holder
Indemnitees”), against any losses, claims, damages, expenses, judgments or
liabilities (joint or several) to which any Holder Indemnitee may become
subject, including any amount paid in settlement of any litigation commenced or
threatened (unless such settlement is effected without the consent of the Trust,
which consent shall not be unreasonably withheld), and shall promptly reimburse
each Holder Indemnitee, as and when incurred, for any legal or other expenses
incurred by such Holder Indemnitee in connection with investigating any claims
and defending any actions, insofar as such losses, claims, damages, expenses,
judgments or liabilities (or actions in respect thereof) shall arise out of or
shall be based upon (i) any violation or alleged violation by the Trust of the
Securities Act, the Exchange Act or any other securities laws, relating to
action taken or action or inaction required of the Trust in connection with such
offering, (ii) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement (or in any final prospectus
included therein) relating to the offering and sale of the Registrable
Securities, or any amendment thereof or supplement thereto, or in any document
incorporated by reference therein, or (iii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnity agreement contained
in this Section 2.5(a)(ii) and (iii) shall not apply to a Holder in any such
case to the extent that any such loss, claim, damage, expense, judgment,
liability or action arises out of or is based upon any untrue statement or
alleged untrue statement, or any omission or alleged omission, if such statement
or omission shall have been (A) made in reliance upon and in conformity with
information furnished to the Trust in writing by or on behalf of such Holder
Indemnitee for inclusion in such registration statement (including any final
prospectus contained therein), or any amendment thereof or supplement thereto,
or (B) made in any preliminary prospectus and the final prospectus shall have
corrected such statement or omission and a copy of such final prospectus shall
have been delivered to such Holder Indemnitee prior to the time such final
prospectus is required to be delivered by such Holder Indemnitee under
applicable law and such loss, claim, damage, expense, judgment, liability or
action arises out of such Holder’s failure to deliver such final prospectus in
compliance with applicable law.

(b) To the extent permitted by law, each Holder shall indemnify and hold
harmless the Trust, each of its officers and trustees, each person, if any, who
controls the Trust within the meaning of the Securities Act or the Exchange Act
and any other Holder Indemnitee (collectively, the “Trust Indemnitees”), against
any losses, claims, damages, expenses, judgments or liabilities (joint or
several) to which any Trust Indemnitee may become subject, including any amount
paid in settlement of any litigation commenced or threatened (unless such
settlement is effected without the consent of such Holder, which consent shall
not be unreasonably withheld), and shall promptly reimburse each Trust
Indemnitee, as and when incurred, for any legal or other expenses incurred by
such Trust Indemnitee in connection with investigating any claims and defending
any actions, insofar as such losses, claims, damages, expenses, judgments or
liabilities (or actions in respect thereto) shall arise out of or shall be based
upon (i) any violation by such Holder of Section 5 of the Securities Act in
connection with such offering (other than as a result of such a violation by the
Trust or any other person other than such Holder), (ii) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement (or in any final prospectus included therein) relating to the offering
and sale of the Registrable Securities, or any amendment thereof or supplement
thereto,

 

7

--------------------------------------------------------------------------------

or in any document incorporated by reference therein, or (iii) any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the indemnity
agreement contained in this Section 2.5(b)(ii) and (iii) shall only apply in any
such case (A) to the extent that any such loss, claim, damage, expense,
judgment, liability or action arises out of or is based upon an untrue statement
contained in, or a material fact omitted from, information furnished to the
Trust in writing by or on behalf of such Holder for inclusion in the
registration statement (or in any final prospectus included therein), and (B) if
any such untrue statement or material omission is incorporated by the Trust in
any preliminary prospectus, to the extent that such statement or omission shall
not have been corrected in writing by or on behalf of such Holder prior to the
time the final prospectus is required to be delivered by the Trust under
applicable law.

(c) Promptly after receipt by an indemnified party under this Section 2.5 of
notice of the commencement of any action (including any governmental action),
such indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 2.5, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain one separate counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.5 to the extent of such prejudice,
but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.5.

(d) If the indemnification provided for in this Section 2.5 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the circumstances that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

 

8

--------------------------------------------------------------------------------

(e) The obligations of the Trust and the Holders under this Section 2.5 shall
survive completion of any offering of Registrable Securities in a registration
statement and the termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.

Section 2.6 Assignment of Registration Rights. The rights to cause the Trust to
register Registrable Securities pursuant to this Article II may be assigned by a
Holder to a transferee or assignee of Registrable Securities or Applicable Units
that (a) is an Affiliate of such Holder, or (b) is a member of such Holder’s
immediate family or is a trust for the benefit of such Holder or a member of
such Holder’s immediate family; provided, however, that (i) within ten days
after such transfer, the transferring Holder furnishes to the Trust written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, and (ii) such
transferee agrees to be subject to all restrictions set forth in this Agreement.

Section 2.7 Information Blackout.

(a) At any time when a registration statement covering Registrable Securities is
effective, upon written notice from the Trust to the Holders that the Trust has
determined reasonably and in good faith that the sale of Registrable Securities
pursuant to the registration statement would require disclosure of material
non-public information, the disclosure of which at such time could reasonably be
expected to have a material adverse effect on the business or affairs of the
Trust or a material adverse effect on any proposal or plan by the Trust or any
of its subsidiaries to engage in any extraordinary engagement or activity,
including, without limitation, any material acquisition of assets or any merger,
consolidation, tender offer or similar transaction, the Holders shall suspend
sales of the Registrable Securities pursuant to the registration statement until
the earlier of (i) forty-five (45) days after the Trust notifies the Holders of
such good faith determination, or (ii) such time as the Trust notifies the
Holders that such material information has been disclosed to the public or has
ceased to be material or that sales pursuant to the registration statement may
otherwise be resumed (the number of days from such suspension of sales by the
Holders until the day when such sales may be resumed hereunder being hereinafter
referred to as the “Sales Blackout Period”).

(b) In no event shall the Trust be permitted to impose Registration Deferral
Periods or Sales Blackout Periods that, collectively, extend for more than
ninety (90) days in any given twelve (12) month period.

Section 2.8 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations under the Securities Act that may
at any time permit the sale of the Registrable Shares to the public without
registration, at all times that the Trust is subject to the reporting
requirements of the Exchange Act, the Trust shall use its reasonable efforts to:

 

9

--------------------------------------------------------------------------------

(a) make and keep public information available, as those terms are understood
and defined in Rule 144;

(b) file with the SEC, in a timely manner, all reports and other documents
required of the Trust under the Securities Act and the Exchange Act; and

(c) so long as a Holder owns any Registrable Securities (or Applicable Units),
furnish to such Holder forthwith upon request (i) a written statement by the
Trust as to its compliance with the reporting requirements of Rule 144 and of
the Exchange Act, (ii) a copy of the most recent annual or quarterly report of
the Trust, and (iii) such other reports and documents of the Trust as a Holder
may reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any such securities without registration.

ARTICLE

III MISCELLANEOUS

Section 3.1 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania (without giving
effect to any conflicts or choice of law provisions that would cause the
application of the domestic substantive laws of any other jurisdiction). None of
the parties hereto has agreed with or represented to any other party that the
provisions of this section will not be fully enforced in all instances.

Section 3.2 Cumulative Remedies; Failure to Pursue Remedies. The rights and
remedies provided by this Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive its right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise. Except
where a time period is specified, no delay on the part of any party in the
exercise of any right, power, privilege or remedy hereunder shall operate as a
waiver thereof, nor shall any exercise or partial exercise of any such right,
power, privilege or remedy preclude any further exercise thereof or the exercise
of any other right, power, privilege or remedy.

Section 3.3 Amendment and Waiver. Except as otherwise expressly provided herein,
no provision of this Agreement may be amended, modified or waived except upon
the written consent of the Trust and the Holders who own greater than fifty
percent (50%) of the Registrable Securities (including, for this purpose,
Applicable Units) then outstanding owned by all Holders. Notwithstanding the
foregoing, the Trust may amend Exhibit A hereto to reflect dispositions of
Registrable Securities by Holders (including the addition of new Holders as a
result of any permitted assignment of the rights granted hereunder in accordance
with Section 2.6) without obtaining the written consent of the Holders. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.

Section 3.4 Notices. All demands, notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
and shall be personally delivered or sent by facsimile machine (with a
confirmation copy sent by one of the other methods authorized in this section),
commercial (including Federal Express) or U.S. Postal

 

10

--------------------------------------------------------------------------------

Service overnight delivery service, or deposited with the U.S. Postal Service
mailed first class, registered or certified mail, postage prepaid, as follows:

(a) If to the Trust, to:

Pennsylvania Real Estate Investment Trust

The Bellevue

200 S. Broad Street

Philadelphia, PA 19102

Attention:  President

Facsimile:  (215) 546-7311

– With a copy to –

Drinker Biddle & Reath LLP

One Logan Square

18th and Cherry Streets

Philadelphia, PA 19103

Attention:  Howard A. Blum, Esquire

Facsimile:   (215) 988-2757

(b) If to any Holder, to it at its address set forth on Exhibit A hereto.

Notices shall be deemed given upon the earlier to occur of (i) receipt by the
party to whom such notice is directed; (ii) if sent by facsimile machine, the
day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) such notice is sent if sent (as evidenced by the
facsimile confirmed receipt) prior to 5:00 p.m. U.S. Eastern Time, or the day
(other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) after which such notice is sent if sent after 5:00 p.m.
U.S. Eastern Time; (iii) if sent by overnight delivery service, the first
business day (other than a Saturday, Sunday or legal holiday in the jurisdiction
to which such notice is directed) following the day the same is deposited with
the commercial carrier or U.S. Postal Service; or (iv) if sent by first class
mail, registered or certified, postage prepaid, the fifth day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is
directed) following the day the same is deposited with the U.S. Postal Service.
Each party, by notice duly given in accordance herewith, may specify a different
address for the giving of any notice hereunder.

Section 3.5 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or application to
other persons or circumstances, shall not be affected thereby, and each term and
provision of this Agreement shall be enforced to the fullest extent permitted by
law.

Section 3.6 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document, and all counterparts shall be construed together and shall constitute
one instrument. A facsimile or

 

11

--------------------------------------------------------------------------------

photocopied signature shall be deemed to be the functional equivalent of an
original for all purposes.

Section 3.7 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties hereto pertaining to registration
rights and supersedes all prior understandings and agreements pertaining
thereto, whether oral or written.

[The remainder of this page is intentionally left blank]

 

12

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above stated.

 

TRUST:

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST By:  

 

Name:   Title:   HOLDERS:

 

Ronald Rubin

 

George Rubin

 

Joseph Coradino

 

Leonard Shore

--------------------------------------------------------------------------------

EXHIBIT A

SCHEDULE OF HOLDERS

George Rubin

c/o The Rubin Organization, Inc.

200 South Broad Street, 3rd Floor

Philadelphia, PA 19102

Facsimile: (215) 546-7311

Ronald Rubin

c/o The Rubin Organization, Inc.

200 South Broad Street, 3rd Floor

Philadelphia, PA 19102

Facsimile: (215) 546-7311

Joseph Coradino

c/o The Rubin Organization, Inc.

200 South Broad Street, 3rd Floor

Philadelphia, PA 19102

      Facsimile: (215) 546-7311

Leonard Shore

[address]